Document:

Exhibit 10.1 to SCANNER TECHNOLOGIES CORPORATION FORM 8-K Dated May 31, 2007

EXHIBIT 10.1

 

SCANNER TECHNOLOGIES CORPORATION

2004 EQUITY INCENTIVE PLAN

(Approved by Shareholders on May 31, 2007)

 

SECTION 1.

DEFINITIONS

 

As used herein, the following terms shall have the meanings indicated below:

 

	
             
 	
            (a)
 	
            “Affiliates” shall mean a Parent or Subsidiary of the Company.
 

 

	
             
 	
            (b)
 	
            “Committee” shall mean a Committee of two or more directors who shall be appointed by and serve at the pleasure of the Board.  If the Company’s securities are registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, then, to the extent necessary for compliance with Rule 16b-3, or any successor provision, each of the members of the Committee shall be a “non-employee director.”  Solely for purposes of this Section 1(a), “non-employee director” shall have the same meaning as set forth in Rule 16b-3, or any successor provision, as then in effect, of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended.
 

 

	
             
 	
            (c)
 	
            The “Company” shall mean Scanner Technologies Corporation, a New Mexico corporation.  
 

 

	
             
 	
            (d)
 	
            “Fair Market Value” as of any date shall mean (i) if such stock is listed on the Nasdaq National Market, Nasdaq SmallCap Market, or an established stock exchange, the price of such stock at the close of the regular trading session of such market or exchange on such date, as reported by The Wall Street Journal or a comparable reporting service, or, if no sale of such stock shall have occurred on such date, on the next preceding day on which there was a sale of stock; (ii) if such stock is not so listed on the Nasdaq National Market, Nasdaq SmallCap Market, or an established stock exchange, the closing price quoted by the OTC Bulletin Board, the National Quotation Bureau, or any comparable reporting service on such date; or (iii) if such stock is not publicly
traded as of such date, the per share value as determined by the Board, or the Committee, in its sole discretion by applying principles of valuation with respect to the Company’s Common Stock.
 

 

	
             
 	
            (e)
 	
            The “Internal Revenue Code” is the Internal Revenue Code of 1986, as amended from time to time.
 

	
             
 	
            (f)
 	
            The “Participant” means (i) an employee of the Company or any Subsidiary to whom an incentive stock option has been granted pursuant to Section 9, (ii) a consultant or advisor to or director, employee or officer of the Company or any Subsidiary to whom a nonqualified stock option has been granted pursuant to Section 10, or (iii) a consultant or advisor to, or director, employee or officer of the Company or any Subsidiary to whom a restricted stock award has been granted pursuant to Section 11.
 

 

	
             
 	
            (g)
 	
            “Parent” shall mean any corporation that owns, directly or indirectly in an unbroken chain, fifty percent (50%) or more of the total voting power of the Company’s outstanding stock.
 

 

	
             
 	
            (h)
 	
            The “Plan” means the Scanner Technologies Corporation 2004 Equity Incentive Plan, as amended from time to time, including the form of Option and Award Agreements as they may be modified by the Board from time to time.    
 

 

	
             
 	
            (i)
 	
            “Stock” shall mean Common Stock of the Company (subject to adjustment as described in Section 13) reserved for incentive and nonqualified stock options and restricted stock awards pursuant to this Plan.
 

 

	
             
 	
            (j)
 	
            A “Subsidiary” shall mean any corporation of which fifty percent (50%) or more of the total voting power of outstanding stock is owned, directly or indirectly in an unbroken chain, by the Company.
 

 

SECTION 2.

PURPOSE

 

The purpose of the Plan is to promote the success of the Company and its Subsidiaries by facilitating the employment and retention of competent personnel and by furnishing incentive to officers, directors, employees, consultants, and advisors upon whose efforts the success of the Company and its Subsidiaries will depend to a large degree.

 

It is the intention of the Company to carry out the Plan through the granting of stock options that will qualify as “incentive stock options” under the provisions of Section 422 of the Internal Revenue Code, or any successor provision, pursuant to Section 9 of this Plan, through the granting of “nonqualified” stock options pursuant to Section 10 of this Plan, and through the granting of restricted stock awards pursuant to Section 11 of this Plan.  The grant of all stock options and restricted stock awards shall, to the extent required, comply with Section 16(b) of the Securities Exchange Act of 1934, the Internal Revenue Code, or any other applicable law or regulation.  In no event shall any stock options become exercisable or the risks of forfeiture on any restricted stock awards lapse prior to the date this Plan is approved by the shareholders of the Company.  If
shareholder approval of this Plan is not obtained within twelve (12) months after the adoption of the Plan by the Board of Directors, any stock options or restricted stock awards previously granted shall be revoked.  

 

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SECTION 3.

EFFECTIVE DATE OF PLAN

 

The Plan shall be effective upon its adoption by the Board of Directors of the Company, subject to approval by the shareholders of the Company as required in Section 2.

 

SECTION 4.

ADMINISTRATION

 

The Plan shall be administered by the Board of Directors of the Company (hereinafter referred to as the “Board”) or by a Committee that may be appointed by the Board from time to time to administer the Plan (collectively referred to as the “Administrator”).  The Administrator shall have all of the powers vested in it under the provisions of the Plan, including but not limited to exclusive authority (where applicable and within the limitations described herein) to determine, in its sole discretion, whether an incentive stock option, nonqualified stock option or restricted stock award shall be granted, the individuals to whom, and the time or times at which, options and awards shall be granted, the number of shares subject to each option or award, the option price, and terms and conditions of each option or award.  The Administrator shall have full power and authority to
administer and interpret the Plan, to make and amend rules, regulations and guidelines for administering the Plan, to prescribe the form and conditions of the respective stock option and restricted stock award agreements (which may vary from Participant to Participant) evidencing each option or award and to make all other determinations necessary or advisable for the administration of the Plan.  The Administrator’s interpretation of the Plan, and all actions taken and determinations made by the Administrator pursuant to the power vested in it hereunder, shall be conclusive and binding on all parties concerned.  

 

No member of the Board or the Committee shall be liable for any action taken or determination made in good faith in connection with the administration of the Plan.  In the event the Board appoints a Committee as provided hereunder, any action of the Committee with respect to the administration of the Plan shall be taken pursuant to a majority vote of the Committee members or pursuant to the written resolution of all Committee members.

 

SECTION 5.

PARTICIPANTS

 

The Administrator shall from time to time, at its discretion and without approval of the shareholders, designate those employees to whom incentive stock options shall be granted pursuant to Section 9 of the Plan; those employees, officers, directors, consultants and advisors of the Company or of any Subsidiary to whom nonqualified stock options shall be granted pursuant to Section 10 of the Plan; and those employees, officers, directors, consultants and advisors of the Company or any Subsidiary to whom restricted stock awards shall be granted pursuant to Section 11 of the Plan; provided, however, that consultants or advisors shall not be eligible to receive stock options or restricted stock awards hereunder unless such consultant or advisor renders bona fide services to the Company or Subsidiary and such services are not in connection with the offer or sale 

 

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of securities in a capital raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities.  The Administrator may grant additional incentive stock options, nonqualified stock options and restricted stock awards under this Plan to some or all Participants then holding options or awards or may grant options and awards solely or partially to new Participants.  In designating Participants, the Administrator shall also determine the number of shares to be optioned or awarded to each such Participant.  The Board may from time to time designate individuals as being ineligible to participate in the Plan.

 

SECTION 6.

STOCK

 

The Stock to be optioned or awarded under this Plan shall consist of authorized but unissued shares of Stock.  Three Million Eight Hundred Thousand (3,800,000) shares of Stock shall be reserved and available for stock options and restricted stock awards under the Plan; provided, however, that the total number of shares of Stock reserved for options and restricted stock awards under this Plan shall be subject to adjustment as provided in Section 13 of the Plan. In the event (i) any portion of an outstanding stock option or restricted stock award under the Plan for any reason expires, (ii) any portion of an outstanding stock option is terminated prior to the exercise of such option, or (iii) any portion of a restricted stock award is terminated prior to the lapsing of any risks of forfeiture on such stock, the shares of Stock allocable to such portion of the option or award shall continue
to be reserved for stock options and restricted stock awards under the Plan and may be optioned or awarded hereunder.

 

SECTION 7.

DURATION OF PLAN

 

Incentive stock options may be granted pursuant to the Plan from time to time during a period of ten (10) years from the effective date of the Plan as defined in Section 3.  Nonqualified stock options and restricted stock awards may be granted pursuant to the Plan from time to time after the effective date of the Plan and until the Plan is discontinued or terminated by the Board.  Any incentive stock option granted during such ten-year period and any nonqualified stock option or restricted stock award granted prior to the termination of the Plan by the Board shall remain in full force and effect until the expiration of the option or award as specified in the written stock option or restricted stock award agreement and shall remain subject to the terms and conditions of this Plan.

 

SECTION 8.

PAYMENT

 

Participants may pay for shares upon exercise of stock options granted pursuant to this Plan with cash, personal check, certified check or, if approved by the Administrator in its sole discretion, previously-owned shares of the Company’s Common Stock valued at such Stock’s then Fair Market Value, or such other form of payment as may be authorized by the Administrator.  The 

 

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Administrator may, in its sole discretion, limit the forms of payment available to the Participant and may exercise such discretion any time prior to the termination of the option granted to the Participant or upon any exercise of the option by the Participant.  “Previously-owned shares” means shares of the Company’s Common Stock which the Participant has owned for at least six (6) months prior to the exercise of the stock option, or for such other period of time as may be required by generally accepted accounting principles.

 

With respect to payment in the form of Common Stock of the Company, the Administrator may require advance approval or adopt such rules as it deems necessary to assure compliance with Rule 16b-3, or any successor provision, as then in effect, of the General Rules and Regulations under the Securities Exchange Act of 1934, if applicable.

 

SECTION 9.

TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS

 

Each incentive stock option granted pursuant to this Section 9 shall be evidenced by a written stock option agreement (the “Option Agreement”).  The Option Agreement shall be in such form as may be approved from time to time by the Administrator and may vary from Participant to Participant; provided, however, that each Participant and each Option Agreement shall comply with and be subject to the following terms and conditions:

 

	
             
 	
            (a)
 	
            Number of Shares and Option Price.  The Option Agreement shall state the total number of shares covered by the incentive stock option.  To the extent required to qualify the Option as an incentive stock option under Section 422 of the Internal Revenue Code, or any successor provision, or under the laws of any other applicable law or regulation, the option price per share shall not be less than one hundred percent (100%) of the Fair Market Value of the Common Stock per share on the date the Administrator grants the option; provided, however, that if a Participant owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of its Parent or any Subsidiary, the option price per share of an incentive stock option granted to such Participant shall not be less than
one hundred ten percent (110%) of the Fair Market Value of the Common Stock per share on the date of the grant of the option.  The Administrator shall have full authority and discretion in establishing the option price and shall be fully protected in so doing.
 

 

	
             
 	
            (b)
 	
            Term and Exercisability of Incentive Stock Option.  The Administrator shall establish in each case the term during which any incentive stock option granted under the Plan may be exercised.  To the extent required to qualify the Option as an incentive stock option under Section 422 of the Internal Revenue Code, or any successor provision, or by the laws of any other applicable law or regulation, in no event shall any incentive stock option be exercisable during a term of more than ten (10) years from the date on which it is granted; provided, however, that if a Participant owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of its Parent or any 
 

 

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Subsidiary, the incentive stock option granted to such Participant shall be exercisable during a term of not more than five (5) years from the date on which it is granted.  The Option Agreement shall state when the incentive stock option becomes exercisable and shall also state the maximum term during which the option may be exercised.  In the event an incentive stock option is exercisable immediately, the manner of exercise of the option in the event it is not exercised in full immediately shall be specified in the Option Agreement.  The Administrator may accelerate the exercise date of any incentive stock option granted hereunder which is not immediately exercisable as of the date of grant.

 

	
             
 	
            (c)
 	
            Withholding.  The Company or its Subsidiary shall be entitled to withhold and deduct from future wages of the Participant all legally required amounts necessary to satisfy any and all withholding and employment-related taxes attributable to the Participant’s exercise of an incentive stock option or a “disqualifying disposition” of shares acquired through the exercise of an incentive stock option as defined in Code Section 421(b).  In the event the Participant is required under the Option Agreement to pay the Company, or make arrangements satisfactory to the Company respecting payment of, such withholding and employment-related taxes, the Board may, in its discretion and pursuant to such rules as it may adopt, permit the Participant to satisfy such obligation, in whole or in part, by electing to have the
Company withhold shares of Common Stock otherwise issuable to the Participant as a result of the option’s exercise having a Fair Market Value equal to the minimum required tax withholding, based on the minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to the supplemental income resulting from the option.  In no event may the Company or any Affiliate withhold shares having a Fair Market Value in excess of such statutory minimum required tax withholding.  The Participant’s election to have shares withheld for this purpose shall be made on or before the date the option is exercised or, if later, the date that the amount of tax to be withheld is determined under applicable tax law.  Such election shall be approved by the Board and otherwise comply with such rules as the Board may adopt to assure compliance with Rule 16b-3, or any successor provision, as then in effect, of the General Rules and Regulations under
the Securities Exchange Act of 1934, if applicable.
 

 

	
             
 	
            (d)
 	
            Other Provisions.  The Option Agreement authorized under this Section 9 shall contain such other provisions as the Administrator shall deem advisable.  Any such Option Agreement shall contain such limitations and restrictions upon the exercise of the option as shall be necessary to ensure that such option will be considered an “incentive stock option” as defined in Section 422 of the Internal Revenue Code or to conform to any change therein.
 

 

 

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SECTION 10.

TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS

 

Each nonqualified stock option granted pursuant to this Section 10 shall be evidenced by a written Option Agreement.  The Option Agreement shall be in such form as may be approved from time to time by the Administrator and may vary from Participant to Participant; provided, however, that each Participant and each Option Agreement shall comply with and be subject to the following terms and conditions:

 

	
             
 	
            (a)
 	
            Number of Shares and Option Price.  The Option Agreement shall state the total number of shares covered by the nonqualified stock option.  Unless otherwise determined by the Administrator, the option price per share shall be one hundred percent (100%) of the Fair Market Value of the Common Stock per share on the date the Administrator grants the option; provided, however, that the option price may not be less than eighty-five percent (85%) of the Fair Market Value of the Common Stock per share on the date of grant.
 

 

	
             
 	
            (b)
 	
            Term and Exercisability of Nonqualified Stock Option.  The Administrator shall establish in each case the term during which any nonqualified stock option granted under the Plan may be exercised.  The Option Agreement shall state when the nonqualified stock option becomes exercisable and shall also state the maximum term during which the option may be exercised.  In the event a nonqualified stock option is exercisable immediately, the manner of exercise of the option in the event it is not exercised in full immediately shall be specified in the Option Agreement.   The Administrator may accelerate the exercise date of any nonqualified stock option granted hereunder which is not immediately exercisable as of the date of grant.
 

 

	
             
 	
            (c)
 	
            Withholding.  The Company or its Subsidiary shall be entitled to withhold and deduct from future wages of the Participant all legally required amounts necessary to satisfy any and all withholding and employment-related taxes attributable to the Participant’s exercise of a nonqualified stock option.  In the event the Participant is required under the Option Agreement to pay the Company or Subsidiary, or make arrangements satisfactory to the Company or Subsidiary respecting payment of, such withholding and employment-related taxes, the Administrator may, in its discretion and pursuant to such rules as it may adopt, permit the Participant to satisfy such obligation, in whole or in part, by delivering shares of the Company’s Common Stock or by electing to have the Company or Subsidiary withhold shares of Common Stock
otherwise issuable to the Participant having a Fair Market Value equal to the minimum required tax withholding, based on the minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to the supplemental income resulting from the exercise of the nonqualified stock option.  In no event may the Company or Subsidiary withhold shares having a Fair Market Value in excess of such statutory minimum required tax withholding.  The Participant’s election to have shares withheld for this purpose shall be made on or before the date the option is exercised or, if later, the date that the amount of tax to be withheld is determined under applicable tax 
 

 

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law.  Such election shall be approved by the Administrator and otherwise comply with such rules as the Administrator may adopt to assure compliance with Rule 16b-3, or any successor provision, as then in effect, of the General Rules and Regulations under the Securities Exchange Act of 1934, if applicable.

 

	
             
 	
            (d)
 	
            Other Provisions.  The Option Agreement authorized under this Section 10 shall contain such other provisions as the Administrator shall deem advisable.
 

 

SECTION 11.

RESTRICTED STOCK AWARDS

 

Each restricted stock award granted pursuant to the Plan shall be evidenced by a written restricted stock agreement (the “Restricted Stock Agreement”).  The Restricted Stock Agreement shall be in such form as may be approved from time to time by the Administrator and may vary from Participant to Participant; provided, however, that each Participant and each Restricted Stock Agreement shall comply with and be subject to the following terms and conditions:

 

	
             
 	
            (a)
 	
            Number of Shares.  The Restricted Stock Agreement shall state the total number of shares of Stock covered by the restricted stock award.  
 

 

	
             
 	
            (b)
 	
            Risks of Forfeiture.  The Restricted Stock Agreement shall set forth the risks of forfeiture, if any, which shall apply to the shares of Stock covered by the restricted stock award, and shall specify the manner in which such risks of forfeiture shall lapse.  The Administrator may, in its sole discretion, modify the manner in which such risks of forfeiture shall lapse but only with respect to those shares of Stock that are restricted as of the effective date of the modification. 
 

 

	
             
 	
            (c)
 	
            Issuance of Restricted Shares.  The Company shall cause to be issued a stock certificate representing such shares of Stock in the Participant’s name, and shall deliver such certificate to the Participant; provided, however, that the Company shall place a legend on such certificate describing the risks of forfeiture and other transfer restrictions set forth in the Participant’s Restricted Stock Agreement and providing for the cancellation and return of such certificate if the shares of Stock subject to the restricted stock award are forfeited.  
 

 

	
             
 	
            (d)
 	
            Rights as Shareholder.  Until the risks of forfeiture have lapsed or the shares subject to such restricted stock award have been forfeited, the Participant shall be entitled to vote the shares of Stock represented by such stock certificates and shall receive all dividends attributable to such shares, but the Participant shall not have any other rights as a shareholder with respect to such shares.
 

 

	
             
 	
            (e)
 	
            Withholding Taxes.  The Company or its Subsidiary shall be entitled to withhold and deduct from future wages of the Participant all legally required amounts necessary to satisfy any and all withholding and employment-related taxes attributable to the Participant’s restricted stock award.  In the event the Participant is required under the Restricted Stock Agreement to pay the Company or Subsidiary, 
 

 

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or make arrangements satisfactory to the Company or Subsidiary respecting payment of, such withholding and employment-related taxes, the Administrator may, in its discretion and pursuant to such rules as it may adopt, permit the Participant to satisfy such obligations, in whole or in part, by delivering shares of Common Stock, including shares of Stock received pursuant to a restricted stock award on which the risks of forfeiture have lapsed.  Such shares shall have a Fair Market Value equal to the minimum required tax withholding, based on the minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to the supplemental income resulting from the lapsing of the risks of forfeiture on such restricted stock.  In no event may the Participant deliver shares having a Fair Market Value in excess of such statutory minimum required tax
withholding.  The Participant’s election to deliver shares of Common Stock for this purpose shall be made on or before the date that the amount of tax to be withheld is determined under applicable tax law.  Such election shall be approved by the Administrator and otherwise comply with such rules as the Administrator may adopt to assure compliance with Rule 16b-3, or any successor provision, as then in effect, of the General Rules and Regulations under the Securities Exchange Act of 1934, if applicable.

 

	
             
 	
            (f)
 	
            Nontransferability.  No restricted stock award shall be transferable, in whole or in part, by the Participant, other than by will or by the laws of descent and distribution, prior to the date the risks of forfeiture described in the restricted stock agreement have lapsed.  If the Participant shall attempt any transfer of any restricted stock award granted under the Plan prior to such date, such transfer shall be void and the restricted stock award shall terminate.
 

 

	
             
 	
            (g)
 	
            Other Provisions.  The Restricted Stock Agreement authorized under this Section 11 shall contain such other provisions as the Administrator shall deem advisable.  
 

 

SECTION 12.

TRANSFER OF OPTIONS

 

No incentive stock option shall be transferable, in whole or in part, by the Participant other than by will or by the laws of descent and distribution.  During the Participant’s lifetime, only the Participant may exercise the incentive stock option.  If the Participant shall attempt any transfer of any incentive stock option granted under the Plan during the Participant’s lifetime, such transfer shall be void and the incentive stock option, to the extent not fully exercised, shall terminate.

 

No nonqualified stock option shall
be transferred, except that the Administrator may, in its sole discretion, permit the Participant to transfer any or all
nonqualified stock options to any member of the Participant’s “immediate family” as such term is defined in Rule
16a-1(e) promulgated under the Securities Exchange Act of 1934, or any successor provision, or to one or more trusts whose
beneficiaries are members of such Participant’s “immediate family” or partnerships in which such family members are
the only partners; provided, however, that the Participant cannot receive any consideration for the transfer and such transferred
nonqualified stock option shall continue to be subject to the same terms and conditions as were applicable to such nonqualified stock option immediately prior to its transfer.

 

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SECTION 13.

RECAPITALIZATION, SALE, MERGER, EXCHANGE OR LIQUIDATION

 

If, following adoption of this Plan, the Company effects an increase or decrease in the number of shares of Common Stock in the form of a subdivision or consolidation of shares, or the payment of a stock dividend, or effects any other increase or decrease in the number of shares of Common Stock without receipt of consideration by the Company, the number of shares of Option Stock reserved under Section 6 hereof and the number of shares of Option Stock covered by each outstanding option and restricted stock award, and the price per share thereof, shall be appropriately adjusted by the Board to reflect such change.  Additional shares that may be credited pursuant to such adjustment shall be subject to the same restrictions as are applicable to the shares with respect to which the adjustment relates.

 

Unless otherwise provided in the Option or Award Agreement, in the event of an acquisition of the Company through the sale of substantially all of the Company’s assets and the consequent discontinuance of its business or through a merger, consolidation, exchange, reorganization, reclassification, extraordinary dividend, divestiture or liquidation of the Company (collectively referred to as a “transaction”), the Board may provide for one or more of the following:  

 

	
             
 	
            (a)
 	
            the equitable acceleration of the exercisability of any outstanding options and the lapsing of the risks of forfeiture on any restricted stock awards; 
 

 

	
             
 	
            (b)
 	
            the complete termination of this Plan, the cancellation of outstanding options not exercised prior to a date specified by the Board (which date shall give Participants a reasonable period of time in which to exercise the options prior to the effectiveness of such transaction), and the cancellation of any restricted stock awards for which the risks of forfeiture have not lapsed; 
 

 

	
             
 	
            (c)
 	
            that Participants holding outstanding stock options shall receive, with respect to each share of Stock subject to such options, as of the effective date of any such transaction, cash in an amount equal to the excess of the Fair Market Value of such Stock on the date immediately preceding the effective date of such transaction over the option price per share of such options; provided that the Board may, in lieu of such cash payment, distribute to such Participants shares of stock of the Company or shares of stock of any corporation succeeding the Company by reason of such transaction, such shares having a value equal to the cash payment herein; 
 

 

	
             
 	
            (d)
 	
that Participants
holding outstanding restricted stock awards shall receive, with respect to each share of Stock subject to such awards, as of the
effective date of any such transaction, cash in an amount equal to the Fair Market Value of such Stock on the date immediately
preceding the effective date of such transaction; provided that the Board may, in lieu of such cash payment, distribute to such
Participants shares of stock of the Company or shares of stock of any corporation succeeding the
Company by reason of such transaction, such shares having a value equal to the cash payment herein;
 

 

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            (e)
 	
            the continuance of the Plan with respect to the exercise of options which were outstanding as of the date of adoption by the Board of such plan for such transaction and provide to Participants holding such options the right to exercise their respective options as to an equivalent number of shares of stock of the corporation succeeding the Company by reason of such transaction;  and
 

 

	
             
 	
            (f)
 	
            the continuance of the Plan with respect to restricted stock awards for which the risks of forfeiture have not lapsed as of the date of adoption by the Board of such plan for such transaction and provide to Participants holding such awards the right to receive an equivalent number of shares of stock of the corporation succeeding the Company by reason of such transaction.  
 

 

The Board may restrict the rights of or the applicability of this Section 13 to the extent necessary to comply with Section 16(b) of the Securities Exchange Act of 1934, the Internal Revenue Code or any other applicable law or regulation.  The grant of an option or restricted stock award pursuant to the Plan shall not limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge, exchange or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets.

 

SECTION 14.

INVESTMENT PURPOSE

 

No shares of Common Stock shall be issued pursuant to the Plan unless and until there has been compliance, in the opinion of Company’s counsel, with all applicable legal requirements, including without limitation, those relating to securities laws and stock exchange listing requirements.  As a condition to the issuance of Stock to Participant, the Administrator may require Participant to (i) represent that the shares of Stock are being acquired for investment and not resale and to make such other representations as the Administrator shall deem necessary or appropriate to qualify the issuance of the shares as exempt from the Securities Act of 1933 and any other applicable securities laws, and (ii) represent that Participant shall not dispose of the shares of Stock in violation of the Securities Act of 1933 or any other applicable securities laws or any company policies then in effect.  

 

As a further condition to the grant of any stock option or the issuance of Stock to Participant, Participant agrees to the following:

 

	
             
 	
            (a)
 	
            In the event the Company advises Participant that it plans an underwritten public offering of its Common Stock in compliance with the Securities Act of 1933, as amended, and the underwriter(s) seek to impose restrictions under which certain shareholders may not sell or contract to sell or grant any option to buy or otherwise dispose of part or all of their stock purchase rights of the underlying Common Stock, 
 

 

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Participant will not, for a period not to exceed 180 days from the prospectus, sell or contract to sell or grant an option to buy or otherwise dispose of any stock option granted to Participant pursuant to the Plan or any of the underlying shares of Common Stock without the prior written consent of the underwriter(s) or its representative(s).

 

	
             
 	
            (b)
 	
            In the event the Company makes any public offering of its securities and determines in its sole discretion that it is necessary to reduce the number of issued but unexercised stock purchase rights so as to comply with any state’s securities or Blue Sky law limitations with respect thereto, the Board of Directors of the Company shall have the right (i) to accelerate the exercisability of any stock option and the date on which such option must be exercised, provided that the Company gives Participant prior written notice of such acceleration, and (ii) to cancel any options or portions thereof, in reverse chronological order based on the date or dates on which such options or portions thereof would have become exercisable according to the original vesting schedule set forth in the related stock option agreements, which Participant does not exercise prior to
or contemporaneously with such public offering. 
 

 

	
             
 	
            (c)
 	
            In the event of a transaction (as defined in Section 13 of the Plan),  Participant will comply with Rule 145 of the Securities Act of 1933 and any other restrictions imposed under other applicable legal or accounting principles if Participant is an “affiliate” (as defined in such applicable legal and accounting principles) at the time of the transaction, and Participant will execute any documents necessary to ensure compliance with such rules.
 

 

The Company reserves the right to place a legend on any stock certificate issued upon the exercise of an option or upon the grant of a restricted stock award pursuant to the Plan to assure compliance with this Section 14.

 

SECTION 15.

RIGHTS AS A SHAREHOLDER

 

A Participant (or the Participant’s successor or successors) shall have no rights as a shareholder with respect to any shares covered by an incentive stock option or nonqualified stock option until the date of the issuance of a stock certificate evidencing such shares.  No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property), distributions or other rights for which the record date is prior to the date such stock certificate is actually issued (except as otherwise provided in Section 13 of the Plan).

 

SECTION 16.

AMENDMENT OF THE PLAN

 

The Board may from time to time, insofar as permitted by law, suspend or discontinue the Plan or revise or amend it in any respect; provided, however, that no such revision or amendment, 

 

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except as is authorized in Section 13, shall impair the terms and conditions of any stock option or restricted stock award which is outstanding on the date of such revision or amendment to the material detriment of the Participant without the consent of the Participant.  Notwithstanding the foregoing, no such revision or amendment shall (i) increase the number of shares subject to the Plan except as provided in Section 13 hereof, (ii) change the designation of the class of employees eligible to receive stock options or restricted stock awards, (iii) decrease the price at which options may be granted, or (iv) increase the benefits accruing to Participants under the Plan, without the approval of the shareholders of the Company if such approval is required for compliance with the requirements of any applicable law or regulation.  Furthermore, the Plan may not, without the approval of the shareholders, be
amended in any manner that will cause incentive stock options to fail to meet the requirements of Section 422 of the Internal Revenue Code.

 

SECTION 17.

NO OBLIGATION TO EXERCISE OPTION

 

The granting of a stock option shall impose no obligation upon the Participant to exercise such option.  Further, the granting of a stock option or restricted stock award hereunder shall not impose upon the Company or any Subsidiary any obligation to retain the Participant in its employ for any period.

 

 

13HSBC
      Holdings plc

     

    
      
        

      

       

      THE
        RULES

    

    of
      the

    HSBC
      HOLDINGS SAVINGS-RELATED SHARE OPTION PLAN:

    (INTERNATIONAL)

    

    

    

    Amended
      by resolutions of the Remuneration Committee 

    on
      2 August 1996 and 20 February 1998, 

    March
      2001, 29 November 2002. 

    18
      November 2005 and 20 November 2006

    and
      further amended by the Company in general meeting 

    on
      26 May 2000 

    and
      27 May 2005

    

    
      
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Rules
      of the HSBC Holdings Savings-Related Share Option Plan:

    (International)

    

    CONTENTS

    

      
        	
                Rule
                  

              	
                 

              	
                Page
                  No

              
	
                 

              	
                 

              	
                 

              
	
                 

              	
                 

              	
                 

              
	
                 1

              	
                 DEFINITIONS

              	
                 2

              
	 	 	 
	
                 2

              	
                 INVITATION
                  OF APPLICATIONS

              	
                 9

              
	 	 	 
	
                 3

              	
                 SCALING
                  DOWN

              	
                 11

              
	 	 	 
	
                4

              	
                GRANT
                  OF OPTIONS

              	
                11

              
	 	 	 
	
                 5 

              	
                 NUMBER
                  OF SHARES IN RESPECT OF WHICH OPTIONS MAY BE GRANTED 

              	
                 12 

              
	 	 	 
	
                 6 

              	
                 RIGHTS
                  OF EXERCISE 

              	
                 14 

              
	 	 	 
	
                 7 

              	
                 TAKEOVER,
                  RECONSTRUCTION AND AMALGAMATION, AND LIQUIDATION 

              	
                 19 

              
	 	 	 
	
                 8 

              	
                 MANNER
                  OF EXERCISE 

              	
                 21 

              
	 	 	 
	
                 9 

              	
                 ISSUE
                  OF SHARES 

              	
                 22 

              
	 	 	 
	
                 10 

              	
                 ADJUSTMENTS 

              	
                 22 

              
	 	 	 
	
                 11 

              	
                 ADMINISTRATION 

              	
                 23 

              
	 	 	 
	
                 12 

              	
                 ALTERATIONS 

              	
                 24 

              
	 	 	 
	
                 13 

              	
                 GENERAL 

              	
                 26 

              
	 	 	 
	
                 14 

              	
                 GOVERNING
                  LAW 

              	
                 27 

              
	 	 	 
	
                 15 

              	
                 SECTION
                  423 OPTIONS 

              	
                 30 

              
	
                 

              	 	 

      

      

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

    

     

    Rules
      of the HSBC Holdings Savings-Related Share Option Plan:
      (International)

    

    
      	1	
              Definitions

            

    

    

    
      
        In
          this
          Plan, the following words and expressions shall, where the context so permits,
          have the meanings set forth below:

      

    

    

    
      	 	
              “Acquiring
                Company” 

            	
              the
                person mentioned in Rules 7(1)(a), 7(1)(b) or 7(1)(d) being a company
                within the meaning of Section 832 of ICTA; 

            
	 	 	 
	 	
              “the
                Act” 

            	
              the
                Income Tax (Earnings and Pensions) Act 2003; 

            
	 	 	 
	 	
              “Associated
                Company” 

            	
              the
                meaning given by paragraph 47 of the Schedule; 

            
	 	 	 
	 	
              “the
                Auditors” 

            	
              the
                auditors for the time being of the Company acting as experts and
                not as
                arbitrators; 

            
	 	 	 
	 	
              “the
                Committee” 

            	
              the
                Remuneration Committee or other duly authorised committee of the
                Board of
                Directors of the Company which fulfils the same
                function;

            
	 	 	 
	 	
              “the
                Company” 

            	
              save
                as provided in Rule 7(3) HSBC Holdings plc registered in England
                under no
                617987; 

            
	 	 	 
	 	
              “Continuous
                Employment” 

            	
              the
                meaning ascribed by Chapter 1 of Part XIV of the Employment Rights
                Act
                1996; 

            

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    
      	 	
              “Control”
                

            	
              the
                meaning ascribed by Section 840 of ICTA; 

            
	 	 	 
	 	
              “Date
                of Grant” 

            	
              the
                date an Option is granted under the Plan; 

            
	 	 	 
	 	
              “Dealing
                Day” 

            	
              a
                day on which The London Stock Exchange is open for the transaction
                of
                business;

            
	 	 	
               

            
	 	
              “Eligible
                Employee” 

            	
              any
                director or employee of a Participating Company excluding any director
                or
                employee of a Participating Company eligible to participate in the
                HSBC
                Holdings Savings- Related Share Option Plan (UK); and any other director
                or employee who at the time when an Option is granted was a director
                or
                employee of a Participating Company but who at the Repayment Date
                is a
                director or employee of a Subsidiary which is not a Participating
                Company;

            
	 	 	 
	 	
              “Exercise
                Price” 

            	
              the
                total amount payable in the appropriate Local Currency on the exercise
                of
                an Option, whether in whole or in part, being an amount equal to
                the
                relevant Option Price multiplied by the number of Shares in respect
                of
                which the Option is to be exercised;

            
	 	 	
               

            
	 	
              “Grant
                Period” 

            	
              a
                period of three calendar months commencing on the Dealing Day
                following

            

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

      
        	 	 	
                (1) 
                   a day on which the HSBC Holdings Savings-Related Share Option Plan
                  or any amendment thereto is approved by the Inland Revenue under
                  the Act;
                  or

              
	 	 	
                 

              
	 	 	
                (2) 
                   a day on which the Company makes an announcement of its results
                  for
                  any year, half-year or other period or issues any prospectus, listing
                  particulars or other document containing equivalent information
                  relating
                  to Shares; or

              
	 	 	
                 

              
	 	 	
                (3) 
                   a day on which an announcement is made of a new sharesave prospectus
                  in the UK;

              
	 	 	
                 

              
	 	
                “Holding
                  Company” 

              	
                in
                  relation to the Acquiring Company, a company falling within the
                  definition
                  in Section 736 of the Companies Act 1985;

              
	 	 	
                 

              
	 	
                “Hong
                  Kong Stock Exchange” 

              	
                The
                  Stock Exchange of Hong Kong Limited; 

              
	 	 	 
	 	
                “ICTA”
                  

              	
                the
                  Income and Corporation Taxes Act 1988; 

              
	 	 	 
	 	
                “Local
                  Currency” 

              	
                such
                  lawful currency as the Committee shall determine to be appropriate
                  for the
                  purposes of granting an Option to an Eligible Employee;

              
	 	
                 

              	
                 

              
	 	
                “the
                  Local Currency Equivalent” 

              	
                an
                  amount of money in the Local Currency equivalent to such amount
                  in pounds
                  sterling calculated by using an exchange rate as quoted by a HSBC
                  Group
                  company on the relevant day

              

      

    

    

       

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    
      
        	 	 	 
	 	 	
                subject
                  to annual revaluation as appropriate based on exchange rate
                  movements;

              
	 	 	 
	 	
                “Market
                  Value” 

              	
                the
                  average of the middle market quotations of a Share (as derived
                  from the
                  Daily Official List of The London Stock Exchange) for the five
                  Dealing
                  Days immediately preceding the date of the relevant invitation
                  made under
                  Rule 2(1) provided that such days fall within the Grant
                  Period;

              
	 	 	 
	 	
                “Maximum
                  Contribution”
                  

              	
                under
                  all Savings Contracts the Local Currency Equivalent
                  at the date of an invitation pursuant to Rule 2 of the lesser
                  of:

              
	 	 	
              
	 	 	
                (1) 
                   £250 per month; and

              
	 	 	 
	 	 	
                (2)  
                  the maximum amount specified in paragraph 25(3)(a) of the Schedule;
                  and

              
	 	 	 
	 	 	
                (3) 
                   such maximum contribution as may be determined from time to time
                  by
                  the Committee;

              
	 	 	 
	 	 	
                subject,
                  in addition, to the Maximum Contribution per Eligible Employee
                  participating in the Plan not exceeding any limit per annum or
                  per any
                  other period applicable from time to time to such Eligible Employee,
                  under
                  foreign exchange or securities laws or regulations in the jurisdiction
                  in
                  which he is resident;

              

      

    

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    

      
        	 	
                “Minimum
                  Contribution” 

              	
                in
                  relation to any invitation to participate in the Plan and Options
                  granted
                  in respect of such invitation whichever of the Local Currency Equivalent
                  of £5 or any other such sum as the Committee shall determine as the
                  minimum Monthly Contribution. 

              
	 	 	 
	 	
                “Monthly
                  Contributions” 

              	
                monthly
                  contributions in Local Currency or any currency agreed by the Committee
                  agreed to be paid by an Option Holder under his Savings Contract
                  the value
                  of which is determined for the purpose of Rule 2(6) at the Local
                  Currency
                  Equivalent on the relevant date of an invitation pursuant to Rule
                  2(1);
                  

              
	 	 	
                 

              
	 	
                “Option”
                  

              	
                a
                  right to subscribe for Shares pursuant to the Plan; 

              
	 	 	
                 

              
	 	
                “Option
                  Holder” 

              	
                a
                  person to whom an Option which has neither lapsed nor been exercised
                  has
                  been granted (or, as the context requires, his personal representatives);
                  

              
	 	 	 
	 	
                “Option
                  Price” 

              	
                the
                  price per Share in pounds sterling (or in the Local Currency at
                  the
                  applicable exchange rate which is the exchange rate determined
                  by the
                  Company as at 11:00am (UK time) on the working day preceding the
                  relevant
                  invitation date under Rule 2(1) (where appropriate and applicable)),
                  as
                  determined by the Committee, at which an Eligible Employee may
                  subscribe
                  for
                  Shares in respect of which an Option has been granted to him, being
                  not
                  less than:

              

      

    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    
      
        	 	 	
                 

              
	 	 	
                (1)  
                  80% of the Market Value of a Share; or

              
	 	 	
                 

              
	 	 	
                (2) 
                   if greater, the nominal value of a share,

              
	 	 	
                 

              
	 	 	
                subject
                  to any adjustment pursuant to Rule 10(1);

              
	 	 	
                 

              
	 	
                “Participating
                  Company” 

              	
                (1) 
                   the
                  Company; and 

              
	 	 	
                 

              
	 	 	
                (2)  
                  any
                  other company which is both a Subsidiary of the Company and under
                  the
                  Control of the Company unless it is a company which for the time
                  being the
                  Committee determine should not participate;

              
	 	 	
                 

              
	 	
                “the
                  Plan”

              	
                the
                  HSBC Holdings Savings-Related Share Option Plan: (International)
                  in its
                  present form, or as from time to time amended in accordance with
                  the
                  Rules; 

              
	 	 	
                 

              
	 	
                “Repayment
                  Date” 

              	
                such
                  date (or dates) determined by the Committee, being at least twelve
                  months
                  after the commencement of the Savings Contract, on which the Savings
                  Contract is due for repayment; 

              
	 	 	
                 

              

      

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

    

    

      
        	 	
                “Rules”
                  

              	
                the
                  rules of this Plan as amended from time to time; 

              
	 	 	
                 

              
	 	
                “Savings
                  Authority” 

              	
                a
                  building society or bank recognised by the Committee from time
                  to time for
                  the purpose of receiving Monthly Contributions under Savings Contracts;
                  

              
	 	 	
                 

              
	 	
                “Savings
                  Contract” 

              	
                a
                  contract for monthly savings with the Savings Authority;
                  

              
	 	 	
                 

              
	 	
                “the
                  Schedule” 

              	
                Schedule
                  3 to the Act; 

              
	 	 	
                 

              
	 	
                “Share”
                  

              	
                save
                  as provided in Rule 7(3) an ordinary share in the Company and
                  “Shareholder” shall be construed accordingly; 

              
	 	 	
                 

              
	 	
                “Subsidiary”
                  

              	
                the
                  meaning given to it in Section 736 of the Companies Act 1985;
                  

              
	 	 	
                 

              
	 	
                “US
                  Code” 

              	
                the
                  US Internal Revenue Code of 1986; 

              
	 	 	
                 

              
	 	
                “US
                  Participant” 

              	
                a
                  US citizen or US resident alien who is subject to section 409A
                  of the US
                  Code. 

              

      

    

     

    
      	 	
              References
                to any statutory provision are to that provision as amended or re-enacted
                from time to time, and, unless the context otherwise requires, words
                in
                the singular shall include the plural (and vice
                versa)
                and words importing the masculine shall include the feminine (and
                vice
                versa).

            

    

    

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    
      	2	
              Invitation
                of Applications

            

    

    

    
      	
            	(1)	
              Applications
                for the grant of Options under the Plan shall be invited only during
                a
                Grant Period and only if the Committee so determines in its absolute
                discretion. Invitations to apply for Options on any occasion shall
                be made
                in accordance with the Rules and on equivalent terms to all Eligible
                Employees save that where any limitation or restriction is required
                to
                comply with legislation or regulations in any jurisdiction the terms
                offered to Eligible Employees in any such jurisdiction may be varied
                to
                the extent of such limitation or
                restriction.

            

    

    

    
      	
            	(2)	
              Invitations
                shall be made in such form as determined by the Committee and shall
                include details of the following matters which shall be determined
                by the
                Committee:

            

    

    

    
      	
            	(a)	
              the
                Option Price; 

            

    

    

    
      	
            	(b)	
              the
                latest date during the Grant Period by which applications must be
                received, being not earlier than 14 days after the date of the invitation;
                

            

    

    

    
      	
            	(c)	
              the
                Minimum Contribution and the Maximum Contribution including where
                relevant
                any additional constraints on the Maximum Contribution applicable
                to the
                jurisdiction of the Eligible Employee or Participating Company;
                and

            

    

    

    
      	
            	(3)	
              Each
                invitation shall be accompanied by:

            

    

    

    
      
        
          	
                	(a)	
                  a
                    proposal form for a Savings Contract;

                

        

      

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    
      	
            	(b)	
              an
                application form; and

            

    

    

    
      
        
          	
                	(c)	
                  such
                    other documentation as may be required to comply with regulations
                    or laws
                    relating to tax, social security, employment or securities or
                    for
                    completion of a Savings
                    Contract.

                

        

      

    

    

    
      	
            	(4)	
              An
                application form shall be in such form as the Committee may from
                time to
                time prescribe save that it shall provide for the applicant to
                state:

            

    

    

    
      	 	 	
              (a)

            	
              the
                Monthly Contributions (being a multiple of a single unit in the Local
                Currency Equivalent and not less than the Local Currency Equivalent
                of the
                Minimum Contribution) which he wishes to make under the related Savings
                Contract; 

            

    

    

    
      	 	 	
              (b)

            	
              that
                his proposed Monthly Contributions (when taken together with any
                Monthly
                Contributions he makes under any other Savings Contract) will not
                exceed
                the Maximum Contribution applicable to him;
                and;

            

    

    

    
      	 	 	
              (c)

            	
              if
                the Committee has provided for various Repayment Dates under the
                Savings
                Contract, such Repayment Date as the applicant may elect. If the
                Committee
                does not specify a choice of Repayment Dates, the applicant may only
                elect
                for the Repayment Date as specified by the
                Committee.

            

    

    

    
      	 	
              (5)

            	
              Each
                application shall provide that, in the event of scaling down in accordance
                with Rule 3, the Committee is authorised by the applicant either
                to alter
                his application by reducing the amount of his Monthly Contributions
                to the
                extent of such scaling down or to withdraw his application, as the
                case
                may be.

            

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    
      	
            	(6)	
              Each
                application shall be deemed to be for an Option over such number
                of Shares
                as can be subscribed at the Option Price as an option granted under
                the
                HSBC Holdings Savings-Related Share Option Plan (UK) where the savings
                contracts involve the equivalent value of Monthly
                Contributions.

            

    

    

    
      	3	
              Scaling
                Down

            

    

    

    
      	 	
              To
                the extent that valid applications are received in excess of any
                maximum
                number of Shares which may be determined by the Committee or the
                limitations in Rule 5, then the Committee shall scale down applications
                to
                the extent necessary by:

            

    

    

    
      	 	
              (1)

            	
              reducing
                the proposed Monthly Contributions in excess of the Local Currency
                Equivalent of the Minimum Contribution pro rata, and then, so far
                as
                necessary, selecting by lot; or

            

    

    

    
      	 	
              (2)

            	
              pro
                rating all applications, provided that if the Local Currency Equivalent
                of
                the Monthly Contributions of any Eligible Employee would thereby
                be
                reduced below the Minimum Contribution his application shall be deemed
                to
                be to make a Monthly Contribution of the Local Currency Equivalent
                of the
                Minimum Contribution, and then, so far as necessary selecting by
                lot;
                or

            

    

    

    
      	 	
              (3)

            	
              in
                any other manner determined by the Committee not inconsistent with
                the
                Plan.

            

    

    

    
      	4	
              Grant
                of Options

            

    

    

    
      	
            	(1)	
              No
                Option shall be granted after whichever is the earlier
                of:

            

    

    

    
      	 	 	
              (a)

            	
              60
                days (or 72 days in the event that applications are scaled down under
                Rule
                3) after any day by reference to which the Option Price was fixed;
                and

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    
      	
            	(b)	
              the
                last day of the applicable Grant
                Period.

            

    

    

    
      	
            	(2)	
              No
                Option shall be granted to a person unless at the Date of Grant he
                is an
                Eligible Employee.

            

    

    

    
      	
            	(3)	
              The
                Company shall issue to each Option Holder an option certificate (“an
                Option Certificate”) in such form as the Committee may from time to time
                prescribe. Each Option Certificate shall specify the Date of Grant
                of the
                Option, the number of Shares over which the Option is granted and
                the
                Option
                Price
                and if Shares are only to be distributed on a specified date, or
                pursuant
                to a fixed schedule, following the exercise of the Option, that date
                or
                schedule.

            

    

    

    
      	
            	(4)	
              Except
                as otherwise provided in these Rules, every Option shall be personal
                to
                the Option Holder to whom it is granted and shall not be transferred,
                assigned or charged. Each Option Certificate shall carry a statement
                to
                this effect.

            

    

    

    
      	
            	(5)	
              No
                amount shall be payable by an Option Holder in respect of the grant
                of an
                Option.

            

    

    

    
      	
            	(6)	
              No
                discounted Options may be granted to US Participants under Rule 4
                unless
                such Options are granted on terms which comply with subparagraph
                (A) and,
                where relevant subparagraph (B), of paragraph (2) of section 409A(a)
                paragraph (2) of the US Code.

            

    

    

    
      	5	
              Number
                of Shares in Respect of which Options may be
                Granted

            

    

    

    
      	
            	(1)	
              10%
                overall limit

            

    

     

    The
      maximum number of Shares which may become issuable pursuant to the grant of
      options on any day, when added to the number of Shares issuable pursuant to
      the
      grant of options in the preceding ten years under this Plan and any other
      employees’ share plan adopted by the Company, shall not exceed ten per cent
      (10%) of the Shares in issue immediately prior to that day.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (2)

            	
              Hong
                Kong Stock Exchange limits

            

    

     

    
      	
            	(a)	
              Subject
                to Rules 10 (adjustment) and 12 (alterations), the maximum number
                of
                Shares which may become issuable pursuant to the grant of options,
                when
                added to the number of Shares issuable pursuant to the grant of options
                under this Plan and, after 27 May 2005, under any other employees’ share
                plan adopted by the Company, shall not exceed 1,119,000,000 being
                ten per
                cent (10%) of the Shares in issue on 18 March 2005;
                and

            

    

     

    
      	
            	(b)	
              The
                limit on the number of Shares which may be issued upon exercise of
                all
                outstanding options granted and yet to be exercised under this Plan
                and
                any other employees’ share plan adopted by the Company shall not exceed
                30% of the Shares in issue from time to time. No options may be granted
                under any employees’ share plan adopted by the Company if it would result
                in this limit being exceeded.

            

    

     

    
      	
            	(3)	
              Exclusion
                of certain Shares 

            

    

    

    For
      the
      purpose of Rules 5(1) and 5(2):

    

    
      	
            	(a)	
              any
                Shares other than Treasury shares within Rule 5 which are already
                in issue
                when placed under option; and

            

      	 	 	 

      	 	
              (b)

            	
              any
                Shares comprised in any option which has lapsed or been surrendered,
                shall
                be disregarded

            

    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    
      	
            	(4)	
              Interpretation
                of plan limits

            

    

     

    For
      the
      purposes of this Rule: “employees’
      share plan” has the same meaning as “employees’ share scheme” in section 743 of
      the Companies Act 1985.

     

    
      	
            	(5)	
              Hong
                Kong Stock Exchange requirement: 1%
                per Participant limit

            

    

     

    The
      total
      number of Shares issued and to be issued to any Option Holder on the exercise
      of
      Options granted to him in any 12 month period shall not exceed 1% of the Shares
      in issue.

     

    
      	
            	(6)	
              Inclusion
                of certain other Shares

            

    

     

    For
      the
      purposes of Rule [5], any Shares which are treasury shares within sections
      162A
      to 162G Companies Act 1985 shall be treated as though they are unissued
      Shares.

     

    
      	6	
              Rights
                of Exercise

            

    

    

    
      	 	
              (1)

            	
              (a)

            	
              Save
                as provided in Rules 6(2),
                6(3), 6(6) and 7,
                an Option may be exercised only during the relevant period specified
                below
                commencing with the Repayment Date under the relevant Savings Contract.
                However, where the Savings Contract is for a period of 12 months
                the
                relevant period of six months specified below shall be reduced to
                a period
                of three months commencing with the Repayment Date under the relevant
                Savings Contract; and

            

    

    

    
      	 	
              (b)

            	
              save
                as provided in Rules 6(2)(a) and 6(2)(b), an Option shall not be
                exercisable later than six months after the Repayment Date;
                and

            

    

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (c)

            	
              save
                as provided in Rule 6(2)
                an Option may only be exercised by an Option Holder whilst he is
                a
                director or employee of a Participating Company;
                and

            

    

     

    
      	 	
              (d)

            	
              notwithstanding
                anything else in these Rules, the Committee may, at any time prior
                to the
                exercise of an Option, shorten the period during which the Option
                may be
                exercised if the Committee considers such shortening to be necessary
                or
                desirable to comply with or take account of any proposed or existing
                legislation in any country or territory or to obtain or maintain
                favourable tax, exchange control or regulatory treatment for the
                Option
                Holder or for any Participating Company;
                and

            

    

    

    
      	 	 	
              (e)

            	
              the
                maximum number of Shares that may be subscribed on the exercise of
                an
                Option shall be limited to the number of Shares that may be subscribed
                at
                the Option Price with the amount of the proceeds of the Savings Contract,
                including interest accrued on the savings save that where such proceeds
                are insufficient to subscribe for all the Shares in respect of which
                the
                Option is exercisable because of exchange rate or interest rate
                fluctuations the Option Holder may provide additional funds to subscribe
                for all the Shares.

            

      	 	 	 	 

    

    
      	 	
              (2)

            	
              Subject
                to Rule 6(1)(d), an Option may be exercised by an Option Holder or
                his
                personal representatives within the periods specified in relation
                to the
                applicable circumstances set out below. However, where the Savings
                Contract is for a period of 12 months the period of six months specified
                below shall be reduced to a period of three months. For the avoidance
                of
                doubt, this will not apply to the period of twelve months specified
                in
                Rules 6(2)(a) and 6(2)(b) below. 

            

    

    

    
      	 	
              (a)

            	
              within
                12 months following the date of his death if such death occurs before
                the
                Repayment Date; or

            

    

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 

    

    
      	 	
              (b)

            	
              within
                12 months following the Repayment Date in the event of his death
                within
                six months after the Repayment Date;
                or

            

    

    

    
      	 	
              (c)

            	
              within
                six months following his ceasing to hold the office or employment
                by
                virtue of which he is eligible to participate in the Plan by reason
                of
                being unable to work on account of any injury or disability, being
                made
                redundant or on retirement on reaching age 60 or any other age at
                which he
                is bound to retire in accordance with the terms of his contract of
                employment; or 

            

    

    

    
      	 	
              (d)

            	
              within
                six months following his ceasing to hold such office or employment
                by
                virtue of which he is eligible to participate in the Plan by reason
                of (i)
                the Company ceasing to have Control of the company for which he worked
                or
                (ii) the transfer of the business or part of the business in which
                he
                works to a person who is neither an Associated Company nor a Subsidiary;
                or

            

    

    

    
      	 	
              (e)

            	
              within
                six months following his ceasing, more than three years after the
                Date of
                Grant of the Option, to hold such office or employment by reason
                of early
                retirement with the consent of the employing company, or by reason
                of
                pregnancy,

            

    

    

    
      	 	 	
              and
                for the purposes of the Plan (and, in particular, Rule 6(5)(e)),
                a woman
                who is on maternity leave by reason of pregnancy or confinement and
                who
                exercises her right to return to work in accordance with the Employment
                Relations Act 1999 (or equivalent legislation in the jurisdiction
                in which
                she is employed) before exercising an Option shall be treated as
                not
                having ceased to hold such office or employment. If she does not
                so
                exercise her right to return to work she will be regarded as having
                ceased
                to hold such office or employment on the last day on which she is
                entitled
                to return to work.

            

    

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (3)

            	
              An
                Option may also be exercised by an Option Holder within six months
                following the date he reaches age 60 if he continues after that date
                to
                hold the office or employment by virtue of which he is eligible to
                participate in the Plan.

            

    

    

    
      	 	
              (4)

            	
              No
                person shall be treated for the purposes of Rules 6(1)(c), 6(2)(c),
                6(2)(d) and 6(5)(e) as ceasing to hold an office or employment by
                virtue
                of which he is eligible to participate in the Plan until he ceases
                to hold
                any office or employment in the Company or any Associated Company
                of the
                Company or any company of which the Company has Control. For the
                purpose
                of this Rule the definition of Associated Company carries the amended
                meaning given by paragraph 35 of the
                Schedule.

            

    

    

    
      	 	
              (5)

            	
              An
                Option shall lapse upon the occurrence of the earliest of the following
                events:

            

    

    

    
      	
            	(a)	
              subject
                to (b) below, six months after the Repayment Date;
                or

            

    

    

    
      	
            	(b)	
              where
                the Option Holder dies:

            

    

    

    
      	 	 	
              (i)

            	
              before
                the Repayment Date, 12 months after the date of death;
                or

            

    

    

    
      	 	
              (ii)

            	
              in
                the period of six months after the Repayment Date, 12 months after
                the
                Repayment Date;

            

    

    

    
      	 	
              (c)

            	
              the
                expiry of any of the applicable periods specified in Rules 6(2)(c)
                6(2)(d)
                and 6(2)(e) save that, if at the time any of such applicable periods
                expire, time is running under Rules 6(2)(a) or 6(2)(b), the Option
                shall
                not lapse by reason of this Rule 6(5)(c) until the expiry of the
                period in
                Rules 6(2)(a) or 6(2)(b); or

            

    

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (d)

            	
              the
                expiry of any of the periods of exercise specified in Rules
                7(2)(b),
                7(2)(c)
                and 7(2)(d)
                save with regard to any Option which is rolled over pursuant to Rule
                7(3);
                or

            

    

    

    
      	 	
              (e)

            	
              the
                date on which an Option Holder ceases to be a director or employee
                of any
                Participating Company or any Associated Company of the Company for
                any
                reason other than those specified in Rule 6(2);
                or

            

    

    

    
      	 	
              (f)

            	
              the
                date on which a resolution is passed, or an order is made by the
                Court,
                for the compulsory winding-up of the Company;
                or

            

    

    

    
      	 	
              (g)

            	
              the
                date on which the Option Holder does or omits to do anything, as
                a result
                of which he is deprived of the legal or beneficial ownership of the
                Option; or

            

    

    

    
      	 	
              (h)

            	
              subject
                to Rule 7(3),
                where Rule 7(1)(a)
                applies, six weeks from the date on which the person referred to
                therein
                who obtains Control of the Company is first entitled to give, in
                connection with the offer referred to therein, a valid notice to
                acquire
                compulsorily any Shares pursuant to Section 429 of the Companies
                Act 1985;
                or

            

    

     

    
      	 	
              (i)

            	
              any
                date on which the period during which an Option may be exercised
                terminates as a result of a determination by the Committee pursuant
                to
                Rule 6(1)(d).

            

      	 	 	 

    

    
      	 	
              (j)

            	
              the
                date on which an Option Holder is granted an “option” under the HSBC
                Holdings Savings Related Share Option Plan (UK), to the extent that
                his
                monthly contribution in respect of such option, when taken together
                with
                his Monthly Contribution under the Plan, exceeds the Maximum Contribution
                . For the avoidance of doubt, the options held by an Option Holder
                under
                the Plan with the highest Option Price will lapse
                first.

            

    

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    
      
        	
              	(6)	
                The
                  Committee may, at any time, decide in relation to any Option, that
                  when
                  that Option becomes exercisable on the Repayment Date, it will
                  be
                  exercised automatically on any date selected by the Committee which
                  is
                  after the Repayment Date if, on the Trading Day immediately preceding
                  that
                  date, the middle
                  market quotation of a Share (as derived from the Daily Official
                  List of
                  The London Stock Exchange)
                  exceeds the Option Price by more than an amount selected by the
                  Committee.
                  In such circumstances:

              

      

    

    

    
      	
            	(a)	
              the
                necessary form of instruction shall be deemed to have been given
                on the
                selected date; and

            

    

    

    
      	
            	(b)	
              the
                Option Holder will be deemed to have instructed that the proceeds
                of his
                Savings Contract, including interest accrued on the savings be applied
                to
                the exercise of the Option; and

            

    

    

    
      	
            	(b)	
              the
                Option will be exercised to the extent described in Rule
                6(1)(e).

            

    

    

    To
      the
      extent that the Option is not exercised as described in this Rule 6(6), it
      shall
      continue in effect and/or lapse in accordance with the rest of Rule
      6.

    

    
      	7	
              Takeover,
                Reconstruction and Amalgamation, and
                Liquidation

            

    

     

    
      	
            	(1)	
              This
                Rule shall apply where:

            

    

    

    
      	 	
              (a)

            	
              any
                person obtains Control of the Company as a result of making either
                a
                general offer to acquire the whole of the Company's issued share
                capital
                (other than any shares already owned by the Holding Company or any
                Subsidiary of the Holding Company) and which is made on a condition
                such
                that if it is satisfied the offeror will have such Control, or a
                general
                offer to acquire all the shares in the Company which are of the same
                class
                as the Shares; or

            

    

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    
      	 	
              (b)

            	
              any
                person 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)

            	
              without
                any person obtaining Control of the Company, the Court sanctions
                a scheme
                of arrangement affecting the Shares under Section 425 of the Companies
                Act
                1985; or

            

    

    

    
      	 	
              (d)

            	
              any
                person becomes bound or entitled to acquire Shares in the Company
                under
                Sections 428 to 430 of the Companies Act 1985;
                or

            

    

    

    
      	 	
              (e)

            	
              a
                resolution is passed for the voluntary winding-up of the
                Company,

            

    

    

    
      	 	 	
              and
                for the purpose of this Rule 7
                (except Rule 7(3))
                a
                person shall be deemed to have obtained Control of the Company if
                he and
                others acting in concert with him have together obtained
                Control.

            

    

    

    
      	 	
              (2)

            	
              Subject
                to Rules 6(1)(d) and 6(5) an Option may be exercised during any of
                the
                following periods:

            

    

    

    
      	 	
              (a)

            	
              in
                relation to Rule 7(1)(a),
                within six months of the date Control is so obtained and any condition
                subject to which the offer is made is satisfied (or until the expiry
                of
                the period mentioned in (c) below, if earlier);
                or

            

    

    

    
      	 	
              (b)

            	
              in
                relation to Rules 7(1)(b)
                and 7(1)(c),
                until six months after the date the Court sanctions the scheme of
                arrangement; or

            

    

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    
      	(c)  	
              in
                relation to Rule 7(1)(d),
                during any period in which the person remains so bound or entitled;
                or

            

    

    

    
      	(d)  	
              in
                relation to Rule 7(1)(e),
                within six months of the passing of the
                resolution.

            

    

    

    
      
        	
              	 (3)	
                Notwithstanding
                  anything to the contrary in these Rules, where any person mentioned
                  in
                  Rules 7(1)(a),
                  7(1)(b)
                  or
                  7(1)(d)
                  is
                  a company an Option Holder may, by agreement with the Acquiring
                  Company,
                  and within the appropriate period mentioned in Rules 7(2)(a),
                  7(2)(b)
                  and 7(2)(c),
                  release his Option under the Plan (“the Old Option”) in consideration of
                  the grant to him of a new Option (“the New Option”) which within the
                  meaning ascribed by paragraph 39(4) of the Schedule, is equivalent
                  to the
                  Old Option but relates to Shares in a different company (whether
                  the
                  Acquiring Company or some other company). With effect from the
                  date of
                  release references in Rules, 7,
                  8,
                  9,
                  10,
                  11 and 13 (and, in relation to expressions used in those Rules,
                  in Rule 1)
                  to “the Company” and “Shares” in the Company shall, in relation to the New
                  Option, be construed as references to the Acquiring Company and
                  Shares in
                  the Acquiring Company or some other company as the case may
                  be.

              

      

    

    

    8  Manner
      of Exercise

     

    
      	(1)  	
              An
                Option may only be exercised during the periods specified in Rules
                6
                and 7.
                Exercise may be in whole or in part, and, subject to Rule 6(6) shall
                be by
                the delivery to the secretary of the Company or his duly appointed
                agent
                of the necessary form of instruction duly completed and signed by
                the
                Option Holder, together with a remittance for the Exercise Price
                payable
                in respect of the Shares over which the Option is to be exercised.
                The
                relevant Shares shall be allotted within 28 days following such
                delivery.

            

    

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    
      
        	
              	 (2)	
                The
                  Company, or any relevant Participating Company, will be entitled
                  to
                  withhold and the Option Holder will be obligated to pay the amount
                  of any
                  tax or social security contributions or other regulatory payments
                  payable
                  by or on behalf of such an Option Holder in connection with the
                  Option
                  exercise. The Committee may establish appropriate procedures to
                  provide
                  for any such payment.

              

      

    

     

    9  Issue
      of Shares

    

    
      	 	
               (1)

            	
              Shares
                allotted under this Plan shall rank equally in all respects with
                the
                Shares for the time being in issue save as regards any rights attaching
                to
                such Shares by reference to a record date prior to the date of allotment,
                and in the case of a transfer of existing Shares, the transferee
                shall not
                acquire any rights by reference to a record date prior to the date
                of such
                transfer.

            

    

     

    
      	 	
               (2)
                

            	
              The
                Company shall use its best endeavours to procure that as soon as
                practicable after the allotment of any Shares pursuant to the Plan
                application shall be made to the relevant stock exchanges and other
                regulatory authorities for the listing and trading of the
                Shares.

            

    

     

    10  Adjustments

    

    
      	(1)  	
              The
                number of Shares over which an Option is granted and the Option
                Price
                thereof, and the limits in Rule 5 on the number of Shares issuable
                under
                the Plan shall be adjusted in such manner as the Committee shall
                determine
                to prevent enlargement or dilution of rights following any capitalisation
                issue, subdivision, consolidation or reduction of share capital and
                in
                respect of any discount element in any rights issue or other variation
                of
                share capital, no adjustment made pursuant to this Rule 10(1)
                shall have the effect of reducing the Option
                Price
                below the nominal value of a Share.

            

    

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

       

    

    
      	(2)  	
              The
                Committee may take such steps as they may consider necessary to notify
                Option Holders of any adjustment made under Rules 10(1)
                and to call in, cancel, endorse, issue or reissue any Option Certificate
                consequent upon such adjustment. An
                adjustment in respect of Options may only be made under this Rule
                if the
                proportion of the Shares subject to that Option is the same both
                immediately before and immediately after that adjustment and (other
                than
                in the case of a bonus issue) the Company’s Auditors have confirmed to the
                Committee in writing that this is the
                case.

            

    

    

    11  Administration

    

    
      	(1)  	
              Notices
                or documents required to be given to an Eligible Employee or to an
                Option
                Holder shall either be delivered to him
                by

            

    

    

    
      	(a)  	
              hand;
                

            

    

    

    
      	(b)  	
              sending
                them to him at his last known address according to the information
                provided by him. Notices sent by post shall be deemed to have been
                given
                on the day following the date of posting;
                or

            

    

    

    
      	(c)  	
              sending
                them by facsimile, email or any form of electronic means acceptable
                to the
                Committee to the Option Holder’s last known facsimile number or email
                address. Notices sent by this method of communication shall be deemed
                to
                have been given at the time of
                despatch.

            

    

    

    
      	(2)  	
              The
                Company may distribute to Option Holders copies of any notice or
                document
                sent by the Company to its shareholders
                generally.

            

    

    

    
      	(3)  	
              The
                Company shall at all times keep available sufficient unissued Shares
                to
                satisfy the exercise of all Options which have neither lapsed nor
                been
                exercised taking account of any other obligations of the Company
                to allot
                unissued Shares.

            

    

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    
      	(4)  	
              The
                Committee may make such regulations for the administration of the
                Plan as
                they deem fit, provided that no regulation shall be valid to the
                extent it
                is inconsistent with these Rules. 

            

    

    

    
      	(5)  	
              All
                determinations and decisions made by the Committee pursuant to the
                provisions of the Plan and all related orders or resolutions of the
                Committee shall be final, conclusive and
                binding.

            

    

     

    
      
        	
              	 (6)	
                The
                  Company will bear the cost of introducing and operating the Plan
                  (including but not limited to stamp duty, stamp duty reserve tax
                  and any
                  other costs relating to the issue of Shares upon the exercise of
                  Options).
                  However, the Company may require any Participating Company to reimburse
                  the Company for any Plan costs borne by the Company, directly or
                  indirectly, in respect of that Participating Company's officers
                  or
                  employees.

              

      

    

     

    12  Alterations

     

    
      	(1)  	
              Amendments
                to the advantage of Option
                Holders

            

    

     

    Subject
      to Rule 10, this Plan may be amended by the Committee in any way, provided
      that
      no
      alteration to the advantage of Option Holders or Eligible Employees may be
      made
      to the provisions relating to:

     

    (a)  the
      persons to whom Options may be made;

     

    
      (b)      
        the
        limits on the number of Shares in respect of which Options may be
        made;

    

     

    (c)  the
      maximum individual entitlements for Option Holders;

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

       

    

    
      (d)      
        the
        basis
        for determining Option Holders’ entitlements to, and the terms of, Shares to be
        provided under this Plan;

    

     

    (e)  the
      periods during which Options may be exercised;

     

    (f)  any
      rights attaching to Shares comprised in Options;

     

    
      
        	
              	(g)	
                the
                  adjustment of Options in the event of a bonus or rights issue,
                  open offer,
                  sub-division or consolidation of Shares or reduction of capital
                  or any
                  other variation of capital;

              

      

    

     

    (h)  Rule
      13
      (1) (termination of this Plan); and

     

    (i) 
this
      Rule
      12.

     

    without
      the prior approval of the Company’s Shareholders in general meeting except for
      minor amendments which the Committee considers necessary or desirable in order
      to benefit the administration of the Plan, to take account of a change in the
      applicable legislation in any country or territory or to obtain or maintain
      favourable tax, exchange control or regulatory treatment for Option Holders
      or
      any Group Company.

     

    
      	(2)  	
              Hong
                Kong Stock Exchange requirement

            

    

     

    In
      relation to Options, the provisions of this Plan relating to the matters set
      out
      in Rule 17.03 of the listing rules of the Hong Kong Stock Exchange cannot be
      altered to the advantage of Option Holders without the prior approval of the
      Company’s Shareholders in general meeting and the Hong Kong Stock Exchange, and
      any other alterations to the provisions of the Plan relating to Options which
      are of a material nature, or any change to the terms of subsisting Options,
      must
      be approved by the Company’s Shareholders in general meeting except where the
      alterations take effect automatically under the terms of this Plan.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    

    
      	13  	
              General

            

    

    

    
      	(1)  	
              The
                Plan shall terminate on 27 May 2015 or at any earlier time by resolution
                of the Committee. Termination of the Plan shall be without prejudice
                to
                the subsisting rights of Option
                Holders.

            

    

    

    
      
        
          	
                	 (2)	
                  If
                    an Eligible Employee or an Option Holder shall cease for any
                    reason
                    including as a result of being wrongfully or unfairly dismissed
                    to be in
                    the employment of the company or any of its Subsidiaries, he
                    shall not be
                    entitled, by way of compensation for loss of office or employment
                    or
                    otherwise howsoever, to any sum or any benefit to compensate
                    him for any
                    consequential loss or curtailment of any right or benefit accrued
                    or in
                    prospect under the Plan, and any such loss or curtailment shall
                    not form
                    part of any claim for damages for breach of any contract of employment
                    of
                    any Eligible Employee or Option Holder or compensation for unfair
                    dismissal or any other claim
                    whatsoever.

                

        

      

    

     

    
      	
            	 (3)	
              Data
                protection

            

    

     

    By
      participating in the Plan the Option Holders consent to the holding and
      processing of personal data provided by them to the Company or other Group
      Company by which they are employed for all purposes relating to the operation
      of
      this Plan. These include, but are not limited to:

     

    
      	(a)  	
              administering
                and maintaining Option Holders’
records;

            

    

     

    
      	(b)  	
              providing
                information to the trustees of any employee benefit trust, registrars,
                brokers or third party administrators of the
                Plan;

            

    

     

    
      	(c)  	
              providing
                information to future potential or actual acquirers of the Company
                or the
                Group Company or undertaking in which Option Holders are employed;
                and

            

    

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    
      	(d)  	
              transferring
                information about Option Holders to any country or
                territory.

            

    

    

    
      	
            	 14	
              Governing
                Law

            

    

    

    This
      Plan
      is governed by and shall be construed in accordance with the laws of England
      and
      the parties to any dispute relating to the Plan shall submit to the exclusive
      jurisdiction of the High Court of England.

    

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
      1

     

    MALTA

    

    
      	1.  	
              The
                Rules shall apply to Eligible Employees resident in Malta subject
                to
                paragraph 2 below.

            

    

    

    
      	2.  	
              In
                Rule 1, the definition of Maximum Contribution shall be replaced
                with the
                following:

            

    

     

    
      	
              “Maximum
                Contribution”

            	
              under
                all Savings Contracts the Local Currency Equivalent at the date of
                an
                invitation pursuant to Rule 2 of the lesser of: 

            

    

    

    (1) £250
      per
      month; and

    

    (2) the
      maximum amount specified in paragraph 25(3)(a) of the Schedule; and

    

    
      (3) such
        maximum contribution as may be determined from time to time by the Committee,

    

    

    subject,
      in addition, to the Maximum Contribution per Eligible Employee participating
      in
      the Plan not exceeding the limit per annum applicable from time to time to
      such
      Eligible Employee, in relation to foreign currency investments, by order of
      the
      Central Bank of Malta

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      2

    

    USA

    

    Rules
      for
      the operation of the HSBC Savings-Related Share Option Plan: (International)
      (“the Plan”) for Option Holders either resident in the United States of America
      (“the USA Section”) or otherwise selected by the Committee.

    

    
      	A.1	
              These
                rules are made under the terms of the Plan. The Rules apply to Option
                Holders of the HSBC Group in the USA except to the extent modified
                by this
                Schedule. The USA Section will apply to any Option Holder who is
                employed
                in the USA on any date when an invitation to apply for an Option
                is made
                under the Plan.

            

    

    

    
      	A.2	
              Rule
                8(1) of the Plan shall not apply to the USA Section. The following
                provision shall be substituted for Rule
                8(1):

            

    

    

    
      	 	
              “8

            	
              Manner
                of Exercise

            

    

    

    
      	 	
              (1)

            	
              An
                Option may only be exercised during the periods specified in Rules
                6 and
                7. Exercise may be in whole or in part, and shall be by the delivery
                to
                the secretary of the Company or his duly appointed agent of a notice
                of
                exercise in the prescribed form duly completed and signed by the
                Option
                Holder, together with a remittance for the Exercise Price payable
                in
                respect of the Shares over which the Option is to be exercised. Upon
                exercise, Shares shall be allotted within 28 days following such
                delivery.”

            

    

    

    
      	A.3	
              The
                following is added as Rule 15 of the Plan to apply to the USA Section
                and
                for the purposes of this USA Section, where any conflict arises between
                the provisions of the Plan and the USA Section, the terms of the
                USA
                Section will prevail:

            

    

    

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    

    “15 Code
      Section 423:
      the HSBC US Employee Stock Plan

    

    The
      following Rules shall apply to the grant of any options over Shares under the
      Plan to Section 423 Eligible Employees that are intended to comply with Code
      Section 423.

    

    (1)  Definitions

    

    For
      purposes of this Rule 15, the following words and expressions shall, where
      the
      context so permits, have the meanings set forth below:

    

    
      	(a)  	
              “Account”
                means a recordkeeping account maintained for a Participant to which
                payroll deductions, if applicable, shall be
                credited.

            

    

    

    
      	(b)  	
              “Code”
                means the USA Internal
                Revenue Code of 1986, as amended.

            

    

    

    
      	(c)  	
              “Section
                423 Eligible Employee” means an Employee eligible to participate in the
                Plan and receive a Section 423 Option in accordance with Rule
                15(2).

            

    

    

    
      	
            	 (d)	
              “Section
                423 Option” means an option to purchase Shares as determined by the
                Committee in its or their sole discretion that is granted to a Section
                423
                Eligible Employee in accordance with this Rule 15 and Code Section
                423.

            

    

    

    
      	(e)  	
              “Cut-Off
                Date” means the date established by the Committee from time to time by
                which enrollment forms must be received prior to an Enrollment
                Date.

            

    

    

    
      	 (f)  	
              The
                “Plan” means the HSBC US Employee Stock Plan constituted by the Rules of
                the HSBC Holdings Savings-Related Share Option Plan: (International)
                as
                modified by A.3 of this Schedule 2.

            

    

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    
      	(g)  	
              “Effective
                Date” means the date the Plan was adopted by the Committee, subject to
                the
                approval of the Company’s Shareholders within one (1) year of such
                date.

            

    

    

    
      	(h)  	
              “Eligible
                Employee” means any US tax paying active employee of a participating
                Company.

            

    

    

    
      	(i)  	
              “Enrollment
                Date” means the first Trading Day of a Savings
                Period.

            

    

    

    
      	(j)  	
              “Fair
                Market Value” means, as of any applicable date, the
                average of the middle market quotations of a Share (as derived from
                the
                Daily Official List of The London Stock Exchange) for the five Dealing
                Days immediately
                prior to such applicable date.

            

    

    

    
      	(k)  	
              “Date
                of Grant” as defined in Rule 1 of the
                Plan.

            

    

    

    
      	(l)  	
              “Grant
                Price” means the Fair Market Value of a Share as of the Date of Grant for
                a Section 423 Option.

            

    

    

    
      	(m)  	
              “Participant”
                means a Section 423 Eligible Employee who has enrolled in the Plan
                pursuant to Rule 15(3).

            

    

    

    
      	(n)  	
              “Exercise
                Date” with respect to a Savings Period means the last Trading Day in such
                Savings Period.

            

    

    

    
      	(o)  	
              “Exercise
                Date Price” means the Fair Market Value of a Share on the applicable
                Exercise Date.

            

    

    

    
      	(p)  	
              “Savings
                Period” means the savings period designated by the Committee; provided
                that each period shall in no event end later than: (i) five (5) years
                from
                the date the Section 423 Option is granted if the Purchase Price
                is to be
                not less than eighty-five percent (85%) of the Fair Market Value
                of the
                Shares on the Exercise Date; or (ii) otherwise, twenty-seven (27)
                months
                from the Date of Grant.

            

    

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    
      	(q)  	
              “Option
                Price” means the price designated by the Committee, at which each Share
                may be purchased under any Section 423 Option, but in no event less
                than
                eighty-five percent (85%) of the lesser
                of:

            

    

    

    (i) The
      Grant
      Price, as defined in Rule 15(1)(l); and

    

    (ii) The
      Exercise Date Price, as defined in Rule 15(1)(o)

    

    
      	(r)  	
              “Trading
                Day” means “Dealing
                Day” (a day on which The London Stock Exchange is open for the transaction
                of business).

            

    

    

    
      	(2)  	
              Eligibility

            

    

    

    No
      Eligible
      Employee shall be granted a Section 423 Option:

    

    
      	(i)  	
              If,
                immediately after the grant, such Employee would own, and/or hold
                outstanding options to purchase stock possessing five percent (5%)
                or more
                of the total combined voting power or value of all classes of stock
                of the
                Company or of any parent or subsidiary of the Company within the
                meaning
                of Code Section 423; or

            

    

    

    
      	(ii)  	
              Which
                permits the Employee’s rights to purchase stock under all employee stock
                purchase plans, as defined in Code Section 423, of the Company and
                its
                subsidiaries to accrue at a rate which exceeds twenty-five thousand
                dollars (USD $25,000) of fair market value of the stock (determined
                at the
                time such Section 423 Option is granted), as applicable, for each
                calendar
                year in which such stock option is outstanding at any
                time;

            

    

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    
      	(iii)  	
              If
                the Employee’s customary employment does not meet certain requirements for
                length of employment determined by the Company or the Committee from
                time
                to time; provided, however, that any such requirement for length
                of
                employment shall comply with Code Section 423;
                or

            

    

    

    
      	(iv)  	
              If
                the Employee is prohibited by the laws of a country or territory
                (of whose
                law he is subject) from participating in the
                Plan.

            

    

    

    unless
      his or her participation is required as a matter of local law or
      regulation.

    

    
      	(3)  	
              Enrollment

            

    

    

    Any
      Section 423 Eligible Employee may enroll in the Plan with regard to Section
      423
      Options to be granted pursuant to this Rule 15 for any future Savings
      Period
      by
      completing and signing an Enrollment election form or by such other means as
      the
      Committee shall prescribe and submitting such Enrollment election as prescribed
      on or before the Cut-Off Date with respect to such Savings
      Period.

    

    
      	
            	(4)	
              Grant
                of Section 423 Options on
                Enrollment

            

    

     

    Enrollment
      by a Section 423 Eligible Employee in the Plan with regard to Section 423
      Options as of an Enrollment Date will constitute the grant by the Company to
      such Participant of a Section 423 Option on such Enrollment Date.

    

    
      	
            	(5)	
              Exercise,
                Purchase and Expiry

            

    

    

    
      	 	
              (i)

            	
              A
                Section 423 Option shall expire, if not sooner terminated in accordance
                with the Plan, on the earliest to occur of: (a) any date specified
                in Rule
                15(5)(iii); (b) the completion of the purchase of Shares under the
                Option
                under Rule 15(6); or (c) the date on which participation of such
                Participant in the Plan under this Rule 15 terminates for any
                reason.

            

    

    

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

       

    

    
      
        	
              	
                (ii)

              	
                If
                  the Exercise Date Price exceeds the Option Price of a Section 423
                  Option,
                  it shall be exercised automatically to purchase on the Exercise
                  Date the
                  number of Shares that the funds accumulated in the Participant’s Account
                  as of such Exercise Date will purchase at the applicable Option
                  Price;
                  

              

      

    

    

    
      	
            	(iii)	
              If
                the Option Price exceeds the Exercise Date Price of a Section 423
                Option,
                the Option shall not be exercised automatically and, at any time
                in the
                three months following the Exercise Date, the Participant may either
                exercise the Section 423 Option in accordance with Rule 8 or request
                in
                writing that any payment amounts be returned to him, together with
                any
                interest due. The Section 423 Option will expire, to the extent not
                exercised, on the earlier of the date three months after the Exercise
                Date
                or and any payment amounts together with any interest due will be
                returned
                to the Participant.

            

    

    

    
      	
            	(6)	
              Payment

            

    

    

    Shares
      to
      be purchased upon exercise of a Section 423 Option shall be paid for using
      the
      payroll deductions, the terms and conditions of which are designated by the
      Company, which have accumulated during the applicable Savings
      Period.

    

    Payment
      amounts shall be credited to a Participant’s Account under Rule 15 of this Plan.
      All payment amounts may be used by the Company for any purpose and, unless
      required to do so by law or regulation, the Company shall have no obligation
      to
      segregate funds. 

    

    
      	
            	(7)	
              Holding
                Period

            

    

    

    If
      Shares
      are purchased by a Participant pursuant to Rule 15(5)(ii) or (iii), then, the
      Company shall deposit such Shares in a nominee account for a period of twelve
      (12) months, and within a reasonable time after such period, the Company shall
      deliver or cause to be delivered to the Participant a certificate or
      certificates for the whole number of Shares purchased by the Participant.

    

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

       

    

    If
      any
      law or applicable regulation of the United States of America’s Securities and
      Exchange Commission or other body having jurisdiction shall require that the
      Company take any action in connection with the Shares being purchased under
      the
      Section 423 Option, delivery of the certificate or certificates for such Shares
      shall be postponed until the necessary action shall have been
      completed.

    

    
      	
            	(8)	
              Withdrawal
                from the Plan and Termination of
                Employment

            

    

     

    
      	
            	(i)	
              Withdrawal
                from the Plan: 

            

    

    

    A
      Participant may withdraw from the Plan in full (but not in part) during any
      Savings Period by delivering a notice of withdrawal (in a manner prescribed
      by
      the Committee) at any time up to but not including the fifteen (15) days prior
      to the Exercise Date next following the date such notice of withdrawal is
      delivered, or at such shorter time in advance of such Exercise Date as the
      Committee may permit. 

    

    If
      notice
      of withdrawal is timely received, all funds then accumulated in the
      Participant’s Account shall not be used to purchase Shares as of the next
      following Exercise
      Date,
      but
      shall instead be distributed to the Participant as soon as administratively
      feasible. 

    

    A
      Participant who has withdrawn during a Savings Period may not return funds
      to
      the Company during the same Savings Period and require the Company to apply
      those funds to the purchase of Shares. Any Section 423 Eligible Employee who
      has
      withdrawn from the Plan under this Rule 15 may, however, re-enroll in the Plan
      with regard to Rule 15 on the next subsequent Enrollment Date, if
      any.

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

     

    
      	
            	(ii)	
              Termination
                of Employment: 

            

    

    

    In
      compliance with the requirements of Code Section 423, Participation in the
      Plan
      under this Rule 15 terminates immediately when a Participant ceases to be
      employed by the Company or any Subsidiary Company for any reason whatsoever
      or
      otherwise ceases to be a Section 423 Eligible Employee, and such terminated
      Participant’s outstanding Options shall thereupon terminate. 

    

    As
      soon
      as administratively feasible after termination of participation, the Company
      shall pay to the Participant or his/her beneficiary or legal representative
      any
      amounts accumulated in the Participant’s Account at the time of termination of
      participation.

    

    
      	
            	(9)	
              Restrictions
                on Transfer

            

    

    

    Section
      423 Options granted under the Plan to a Participant may not be exercised during
      the Participant’s lifetime other than by the Participant. Neither amounts
      credited to a Participant’s Account nor any rights with respect to the exercise
      of a Section 423 Option or to receive Shares under the Plan may be assigned,
      transferred, pledged, or otherwise disposed of in any way by the Participant
      other than by will or the laws of descent and distribution. Any such attempted
      assignment, transfer, pledge, or other disposition shall be without effect,
      except that the Company or the Committee may treat such act as an election
      to
      withdraw from the Plan in accordance with Rule 15(8)(i).

    

    
      
        
          	
                	(10)	
                  Retirement
                    and Welfare Plans

                

        

      

    

    

    No
      Section 423 Options granted under this Plan, or Shares, or cash paid pursuant
      to
      the exercise of such options may be included as “compensation” for purposes of
      computing the benefits payable to any Participant under any retirement plan
      (whether qualified or non-qualified) or welfare benefit plans of the Company
      or
      any Subsidiary unless such other plan expressly provides that such compensation
      shall be taken into account in computing a Participant’s benefits.

    

    
      
        
          
          

        

        
          36

          
            

          

        

         

      

    

     

    Schedule
      3

    HSBC
      Holdings plc

     

    
      
        

      

       

    

    THE
      RULES

    of
      the

    HSBC
      HOLDINGS SAVINGS-RELATED SHARE OPTION SCHEME: (INTERNATIONAL) : IRISH
      SCHEME

    

    Approved
      by Irish Revenue Commissioners on 28 March 2000

    Adopted
      by the Remuneration Committee on 25 February 2000 and amended 29 November
      2002

     

    
      
 

    
      
        
          
          

        

        
          38

          
            

          

        

        
          
          

        

      

    

    

    Rules
      of the HSBC Holdings Savings Related Share Option Scheme: 

    Overseas
      Section: Irish Scheme

    CONTENTS

    
       

      
        	
                Rule

              	 	
                Page
                  No

              
	 	
                 

              	
                 

              
	
                1.

              	
                DEFINITIONS

              	
                1

              
	 	
                 

              	
                 

              
	
                2.

              	
                INVITATION
                  OF APPLICATIONS

              	
                7

              
	 	
                 

              	
                 

              
	
                3.

              	
                SCALING
                  DOWN

              	
                9

              
	 	
                 

              	
                 

              
	
                4.

              	
                GRANT
                  OF OPTIONS

              	
                10

              
	 	
                 

              	
                 

              
	
                5.

              	
                NUMBER
                  OF SHARES IN RESPECT OF WHICH OPTIONS MAY BE
                  GRANTED

              	
                11

              
	 	
                 

              	
                 

              
	
                6.

              	
                RIGHTS
                  OF EXERCISE

              	
                13

              
	 	
                 

              	
                 

              
	
                7.

              	
                TAKEOVER,
                  RECONSTRUCTION AND AMALGAMATION, AND LIQUIDATION

              	
                16

              
	 	
                 

              	
                 

              
	
                8.

              	
                MANNER
                  OF EXERCISE

              	
                18

              
	 	
                 

              	
                 

              
	
                9.

              	
                ISSUE
                  OF SHARES

              	
                19

              
	 	
                 

              	
                 

              
	
                10.

              	
                ADJUSTMENTS

              	
                19

              
	 	
                 

              	
                 

              
	
                11.

              	
                ADMINISTRATION

              	
                20

              
	 	
                 

              	
                 

              
	
                12.

              	
                ALTERATIONS

              	
                21

              
	 	
                 

              	
                 

              
	
                13.

              	
                GENERAL

              	
                24

              

      

    

    
       

    

    
      
        
          
          

        

        
          39

          
            

          

        

         

      

    

     

    Rules
      of the HSBC Holdings Savings-Related Share Option Scheme: Overseas Section:
      Irish Scheme

    

    
      	1	
              Definitions

            

    

    

    
      
        In
          this
          Scheme, the following words and expressions shall, where the context so
          permits,
          have the meanings set forth below:

        
          

            
              	 	
                      “Acquiring
                        Company”

                    	 	
                      the
                        person mentioned in Rules 7(1)((a), 7(1)(b), 7(1)(c) or 7(1)(d)
                        being a
                        company within the meaning of Section 832 of the UK Income
                        and Corporation
                        Taxes Act 1988;

                    
	 	 	 	 
	 	
                      “the
                        Act”

                    	 	
                      the
                        Taxes Consolidation Act 1997

                    
	 	 	 	 
	 	
                      “Associated
                        Company”

                    	 	
                      the
                        meaning given to it by paragraph 1(1) of Schedule 12A to
                        the
                        Act;

                    
	 	 	 	 
	 	
                      “the
                        Auditors”

                    	 	
                      the
                        auditors for the time being of the Company acting as experts
                        and not as
                        arbitrators;

                    
	 	 	 	 
	 	
                      “Certified
                        Contractual Savings
                        Scheme”

                    	 	
                      the
                        meaning given to it by Section 519C(4) of the Act

                    
	 	 	 	 
	 	
                      “the
                        Committee”

                    	 	
                      the
                        Remuneration Committee or other duly authorised committee
                        of the Board of
                        Committee of the Company which fulfils the same
                        function;

                    

            

             

            
              
                
                

              

              
                1

                
                  

                

              

              
                
                

              

            

             

            
              	 	
                      “the
                        Company”

                    	 	
                      save
                        as provided in Rule 7(3) HSBC Holdings plc registered in
                        England under no
                        617987;

                    
	 	 	 	 
	 	
                      “Control”

                    	 	
                      except
                        as otherwise provided in the Rules, has the meaning ascribed
                        by Section
                        840 of the UK Income and Corporation Taxes Act 1988;

                    
	 	 	 	 
	 	
                      “Date
                        of Grant”

                    	 	
                      the
                        date an Option is granted under the Scheme;

                    
	 	 	 	 
	 	
                      “Dealing
                        Day”

                    	 	
                      a
                        day on which The London Stock Exchange is open for
                        business;

                    
	 	 	 	 
	 	
                      “Eligible
                        Employee”

                    	 	
                      means
                        any person who:

                    
	 	 	 	 
	 	 	 	
                      i)  
                          a)    is an employee of any Participating
                        Company, including a full-time director

                    
	 	 	 	 
	 	 	 	
                      (b) 
                        is chargeable to tax under Schedule E in respect of that
                        employment,
                        and

                    
	 	 	 	 
	 	 	 	
                      (c)  
                        who had on the date of the relevant issue of the relevant
                        invitations
                        pursuant to Rule 2(1) been such an employee or director continuously
                        for a
                        period of 6 months or,

                    
	 	 	 	 
	 	 	 	
                      (ii)  
                        is any other employee or director of a Participating Company,
                        nominated by
                        the Committee to be an Eligible
                        Employee.

                    

            

             

            
              
                
                

              

              
                2

                
                  

                

              

              
                
                

              

            

             

            
              	 	 	 	
                      Provided
                        that no person shall be an Eligible Employee if that person
                        is ineligible
                        to participate in the Scheme by virtue of paragraph 8, Schedule
                        12A to the
                        Act.

                    
	 	 	 	 
	 	
                      “Exercise
                        Price”

                    	 	
                      the
                        total amount payable in Euro on the exercise of an Option,
                        whether in
                        whole or in part, being an amount equivalent to the relevant
                        Share Price
                        calculated at the Sterling-Euro exchange rate on the [London
                        Interbank lending market]
                        at the close of business on the last Dealing Day preceding
                        the date on
                        which the Committee issue the invitation to apply for that
                        Option
                        multiplied by the number of Shares in respect of which the
                        Option is to be
                        exercised;

                    
	 	 	 	 
	 	
                      “Grant
                        Period”

                    	 	
                      a
                        period of 3 calendar months commencing on the Dealing Day
                        following

                    
	 	 	 	 
	 	 	 	
                      (1)      a
                        day on which the Scheme or any amendment thereto is approved
                        in writing by
                        the Revenue Commissioners under the Act; or

                    
	 	 	 	 
	 	 	 	
                      (2)      a
                        day on which the Company makes an announcement of its results
                        for any
                        year, half-year or other period or issues any prospectus,
                        listing
                        particulars or other document containing equivalent information
                        relation
                        to Shares; or

                    

            

             

            
              
                
                

              

              
                3

                
                  

                

              

              
                
                

              

            

             

            
              	 	 	 	
                      (3)      a
                        day on which any announcement is made of modifications to
                        be made to the
                        Act or an announcement is made by the Qualifying Savings
                        Institution of a
                        new savings-related share option prospectus;

                    
	 	 	 	 
	 	
                      “Holding
                        Company”

                    	 	
                      in
                        relation to the Acquiring Company, a company falling within
                        the definition
                        in Section 736 of the UK Companies Act 1985;

                    
	 	 	 	 
	 	
                      “Market
                        Value”

                    	 	
                      in
                        relation to a Share on any day:

                    
	 	 	 	 
	 	 	 	
                      (1)      
                        save as mentioned in (2) below, its market value as determined
                        in
                        accordance with section 548 of the Act or

                    
	 	 	 	 
	 	 	 	
                      (2)     
                        if and so long as the Shares are listed on The London Stock
                        Exchange, the
                        average of its middle market quotations (as derived from
                        the Daily
                        Official List of The London Stock Exchange) for the five
                        Dealing Days
                        falling within the Grant Period immediately preceding the
                        date of the
                        relevant invitation made under Rule 2(1);

                    
	 	 	 	 
	 	
                      “Maximum
                        Contribution”

                    	 	
                      €320
                        or such other amount as specified in paragraph 25(2)(a) of
                        Schedule 12A to
                        the Act, as the Committee shall determine as the maximum
                        monthly
                        contribution;

                    

            

             

            
              
                
                

              

              
                4

                
                  

                

              

              
                
                

              

            

             

            
              	 	
                      “Minimum
                        Contribution”

                    	 	
                      €12
                        or such other amount, not being more than €12, or such minimum sum as
                        specified in paragraph 25(2)(b) of Schedule 12A to the Act,
                        as the
                        Committee shall determine as the minimum monthly
                        contribution.

                    
	 	 	 	 
	 	
                      “Monthly
                        Contributions”

                    	 	
                      monthly
                        contributions agreed to be paid by an Option Holder under
                        his Savings
                        Contract;

                    
	 	 	 	 
	 	
                      “Option”

                    	 	
                      a
                        right to subscribe for Shares pursuant to the Scheme;

                    
	 	 	 	 
	 	
                      “Option
                        Holder”

                    	 	
                      a
                        person to whom an Option has been granted (or, as the context
                        requires,
                        his personal representatives);

                    
	 	 	 	 
	 	
                      “Option
                        Price”

                    	 	
                      the
                        price per Share in Euro, as determined by the Committee,
                        at which an
                        Eligible Employee may subscribe for Shares in respect of
                        which an Option
                        has been granted to him, being not less than:

                    
	 	 	 	 
	 	 	 	
                      (1)      
                        80% of the Market Value of a Share; or

                    
	 	 	 	 
	 	 	 	
                      (2)      if
                        greater, and Shares are to be subscribed, the nominal value
                        of a Share,
                        subject to any adjustment pursuant to Rule
                        10(1);

                    

            

             

            
              
                
                

              

              
                5

                
                  

                

              

              
                
                

              

            

             

            
              	 	
                      “Participating
                        Company”

                    	 	
                      (1)       the
                        Company; and

                    
	 	 	 	 
	 	 	 	
                      (2)      any
                        other company for the time being designated by the Committee
                        as a
                        Participating Company, being a company which is under the
                        control of the
                        Company within the meaning of section 432 of the Act;

                    
	 	 	 	 
	 	
                      “Pensionable
                        Age”

                    	 	
                      has
                        the meaning given to that expression in Section 2 of the Social Welfare
                        Consolidation) Act 1993;

                    
	 	 	 	 
	 	
                      “Qualifying
                        Savings Institution”

                    	 	
                      means
                        any of the persons defined in section 519(C) of the Act for
                        the purpose of
                        receiving monthly contributions under the Savings
                        Contract;

                    
	 	 	 	 
	 	
                      “Repayment
                        Date”

                    	 	
                      the
                        date under the Savings Contract on which the total value
                        of the Savings
                        Contract is due for repayment.

                    
	 	 	 	 
	 	
                      “Rules”

                    	 	
                      the
                        rules of this Scheme as amended from time to
                        time;

                    

            

             

            
              
                
                

              

              
                6

                
                  

                

              

              
                
                

              

            

             

            
              	 	
                      “Savings
                        Contract”

                    	 	
                      a
                        contract for monthly savings with a Qualifying Savings Institution
                        under a
                        Certified Contractual Savings Scheme;

                    
	 	 	 	 
	 	
                      “the
                        Scheme”

                    	 	
                      the
                        HSBC Holdings Savings-Related Share Option Scheme Irish Section
                        in its
                        present form, or as from time to time amended in accordance
                        with the
                        Rules;

                    
	 	 	 	 
	 	
                      “Share”

                    	 	
                      save
                        as provided in Rule 7(3) an ordinary share in the Company
                        which complies
                        with the provisions of paragraphs 10 to 15 inclusive of Schedule
                        12A to
                        the Act and “Shareholder” shall be construed
                        accordingly;

                    
	 	 	 	 
	 	
                      “Subsidiary”

                    	 	
                      the
                        meaning given to it in Section 736 of the UK Companies Act
                        1985;

                    

            

          

        

         

      

    

    
      
        References
          in these Rules are to Irish statutory provisions as specified and those
          provisions as amended or re-enacted from time to time, unless otherwise
          specifically provided, and, unless the context otherwise requires, words
          in the
          singular shall include the plural (and vice
          versa)
          and
          words importing the masculine shall include the feminine (and vice
          versa).

      

    

    

    
      
        	2	
                Invitation
                  of Applications

              

      

    

    

    
      
        	
              	(1)	
                Applications
                  for the grant of Options under the Scheme shall be invited only
                  during a
                  Grant Period and only if the Committee so determines in its absolute
                  discretion. Invitations to apply for Options on any occasion shall
                  be made
                  in accordance with the Rules and on identical terms to all Eligible
                  Employees save that where any limitation or restriction is required
                  to
                  comply with legislation or regulations in any jurisdiction the
                  terms
                  offered to Eligible Employees in any such jurisdiction may be varied
                  to
                  the extent of such limitation or
                  restriction.

              

      

    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    
      
        	
              	(2)	
                Invitations
                  shall be made in writing and shall include details of the following
                  matters which shall be determined by the Committee in accordance
                  with the
                  Rules: 

              

      

    

    

    
      	
            	(a)	
              
                the
                  Option Price;

              

            

    

    

    
      	 	 	
              (b)

            	
              the
                latest date during the Grant Period by which applications must be
                received, being not earlier than 14 days after the date of the invitation;
                

            

    

    

    
      	 	 	
              (c)

            	
              the
                Maximum Contribution and Minimum Contribution;
                and

            

    

    

    
      	 	 	
              (d)

            	
              whether
                the repayment to be made under the Savings Contract shall be taken
                as
                including any bonus or any interest accrued at the Repayment Date
                or, in
                the case of early exercise, the relevant
                date.

            

    

    

    
      
        	
              	(3)	
                Each
                  invitation shall be accompanied
                  by:

              

      

    

    

    
      
        	
              	(a)	
                a
                  proposal form for a Savings Contract;

              

      

    

    

    
      
        	
              	(b)	
                an
                  application form; and

              

      

    

     

    
      	 	
              (c)

            	
              such
                other documentation as may be required to comply with regulations
                or laws
                relating to tax, social security, employment or securities or for
                completion of a Savings Contract.

            

    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    
      
        	
              	(4)	
                An
                  application form shall be in such form as the Committee may from
                  time to
                  time prescribe save that it shall provide for the applicant to
                  state:

              

      

    

    

    
      	 	 	
              (a)

            	
              the
                Monthly Contributions (being a multiple of €1 and not less than the
                Minimum Contribution) which he wishes to make under the Related Savings
                Contract; 

            

    

    

    
      	 	 	
              (b)

            	
              that
                his proposed Monthly Contributions (when taken together with any
                Monthly
                Contributions he makes under any other Savings Contract) will not
                exceed
                the Maximum Contribution applicable to him;
                and;

            

    

    

    
      	 	 	
              (c)

            	
              if
                the Savings Contract provides the Eligible Employee with a choice
                of
                Repayment Dates, the Eligible Employee’s choice in that
                respect.

            

    

    

    
      
        	
              	(5)	
                Each
                  application shall provide that, in the event of scaling down in
                  accordance
                  with Rule 3, the Committee is authorised by the applicant either
                  to alter
                  his application by reducing the amount of his Monthly Contributions
                  or to
                  withdraw his application, as the case may be, to the extent of
                  such
                  scaling down.

              

      

    

    

    
      	
            	(6)	
              Each
                application shall be deemed to be for an Option over such number
                of Shares
                as can be subscribed at the Option Price with the total value of
                the
                Savings Contract.

            

    

    

    
      	3	
              Scaling
                Down

            

    

    

    
      	 	
              To
                the extent that valid applications are received in excess of any
                maximum
                number of Shares which may be determined by the Committee or the
                limitations in Rule 5, then the Committee shall scale down applications
                to
                the extent necessary by:

            

    

    

    
      	 	
              (1)

            	
              reducing
                the proposed Monthly Contributions in excess of the Minimum Contribution
                pro rata, and then so far as necessary, selecting by lot;
                or

            

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (2)

            	
              pro
                rating all applications, provided that if the Monthly Contributions
                of any
                Eligible Employee would thereby be reduced below the Minimum Contribution,
                he shall be deemed to have applied to make a Monthly Contribution
                of the
                Minimum Contribution, and then so far as necessary selecting by lot;
                or

            

    

    

    
      	 	
              (3)

            	
              in
                any other manner determined by the Committee not inconsistent with
                the
                Scheme.

            

    

    

    
      	4	
              Grant
                of Options

            

    

    

    
      
        	
              	(1)	
                No
                  Option shall be granted after whichever is the earlier
                  of:-

              

      

    

    

    
      	 	 	
              (a)

            	
              30
                days (or 42 days in the event that applications are scaled down under
                Rule
                3) after any day by reference to which the Option Price was fixed;
                and

            

    

    

    
      	
            	(b)	
              the
                last day of the applicable Grant
                Period.

            

    

    

    
      
        	
              	(2)	
                No
                  Option shall be granted to a person unless at the Date of Grant
                  he is an
                  Eligible Employee.

              

      

    

    

    
      
        	
              	(3)	
                The
                  Company shall issue to each Option Holder an option certificate
                  (“an
                  Option Certificate”) in such form as the Committee may from time to time
                  prescribe. Each Option Certificate shall specify the Date of Grant
                  of the
                  Option, the number of Shares over which the Option is granted and
                  the
                  Option Price.

              

      

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    
      
        	
              	(4)	
                Except
                  as otherwise provided in these Rules, every Option shall be personal
                  to
                  the Option Holder to whom it is granted and shall not be transferred,
                  assigned or charged. Each Option Certificate shall carry a statement
                  to
                  this effect.

              

      

    

    

    
      
        	
              	(5)	
                No
                  amount shall be payable by an Option Holder in respect of the grant
                  of an
                  Option.

              

      

    

    

    
      	5	
              Number
                of Shares in Respect of which Options may be
                Granted

            

    

    

    
      	
            	(1)	
              10%
                overall limit

            

    

     

    The
      maximum number of Shares which may become issuable pursuant to the grant of
      options on any day, when added to the number of Shares issuable pursuant to
      the
      grant of options in the preceding ten years under this Scheme and any other
      employees’ share plan adopted by the Company, shall not exceed ten per cent
      (10%) of the Shares in issue immediately prior to that day.

     

    
      	
            	(2)	
              Hong
                Kong Stock Exchange limits

            

    

     

    
      
        	
              	(a)	
                Subject
                  to Rules 10 (adjustment) and 12 (alterations), the maximum number
                  of
                  Shares which may become issuable pursuant to the grant of options,
                  when
                  added to the number of Shares issuable pursuant to the grant of
                  options
                  under this Scheme and, after 27 May 2005, under any other employees’ share
                  plan adopted by the Company, shall not exceed 1,119,000,000 being
                  ten per
                  cent (10%) of the Shares in issue on 18 March 2005;
                  and.

              

      

    

     

    
      	
            	(b)	
              The
                limit on the number of Shares which may be issued upon exercise of
                all
                outstanding options granted and yet to be exercised under this Scheme
                and
                any other employees’ share plan adopted by the Company shall not exceed
                30% of the Shares in issue from time to time. No options may be granted
                under any employees’ share plan adopted by the Company if it would result
                in this limit being exceeded.

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    
      	
            	(3)	
              Exclusion
                of certain Shares 

            

    

    

    For
      the
      purpose of Rules 5(1) and 5(2):

    

    
      	
            	(a)	
              any
                Shares which are already in issue when placed under option;
                and

            

    

    

    
      	 	 	
              (b)

            	
              any
                Shares comprised in any option which has lapsed or been
                surrendered,

            

    

    

    shall
      be
      disregarded

     

    
      	
            	(4)	
              Interpretation
                of plan limits

            

    

     

    For
      the
      purposes of this Rule: “employees’ share plan” has the same meaning as
“employees’ share scheme” in section 743 of the UK Companies Act
      1985.

     

    
      	
            	(5)	
              Hong
                Kong Stock Exchange requirement: 1%
                per Participant limit

            

    

     

    The
      total
      number of Shares issued and to be issued to any Option Holder on the exercise
      of
      Options granted to him in any 12 month period shall not exceed 1% of the Shares
      in issue.

    

    
      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

    

     

    
      	6	
              Rights
                of Exercise

            

    

    

    
      	 	
              (1)

            	
              (a)

            	
              Save
                as provided in Rules 6(2), 6(3) and 7, an Option may be exercised
                only
                during the relevant period specified below commencing with the Repayment
                Date under the relevant Savings Contract;
                and

            

    

    

    
      	 	 	
              (b)
                

            	
              save
                as provided in Rules 6(2)(a) and 6(2)(b), an Option shall not be
                exercisable later than six months after the Repayment Date;
                and

            

    

     

    
      	
            	(c)	
              save
                as provided in Rule 6(2), an Option may only be exercised by an Option
                Holder whilst he is a director or employee of a Participating Company;
                and

            

    

    

    
      	 	 	
              (d)

            	
              an
                Option may not be exercised by an Option Holder at any time when
                he is
                prohibited from such exercise by virtue of the provisions of Paragraph
                8
                of Schedule 12A to the Act (material interest in a close company)
                or, in
                the case of personal representatives when the Option Holder would
                have
                been so prohibited; and

            

    

    

    
      	
            	(e)	
              the
                maximum number of Shares that may be subscribed on the exercise of
                an
                Option shall be limited to the number of Shares that may be subscribed
                at
                the Option Price with the amount of the proceeds of the Savings Contract,
                including any bonus and interest accrued on the
                savings.

            

    

    

    
      
        	
              	(2)	
                An
                  Option may be exercised by an Option Holder or personal representative
                  within the periods specified in relation to the applicable circumstances
                  set out below:

              

      

    

    

    
      
        	
              	(a)	
                within
                  12 months following the date of his death if such death occurs
                  before the
                  Repayment Date; or

              

      

    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    
      
        	
              	(b)	
                within
                  12 months following the Repayment Date in the event of his death
                  within
                  six months after the Repayment Date;
                  or

              

      

    

    

    
      
        	
              	(c)	
                within
                  six months following his ceasing to hold the office or employment
                  by
                  virtue of which he is eligible to participate in the Scheme by
                  reason of
                  injury, disability, redundancy within the meaning of the Redundancy
                  Payments Acts 1967 - 1991 of Ireland or retirement on reaching
                  Pensionable
                  Age; or

              

      

    

    

    
      
        	
              	(d)	
                within
                  six months following his ceasing to hold such office or employment
                  by
                  virtue of which he is eligible to participate in the Scheme by
                  reason of
                  (i) the Company ceasing to have Control of the company for which
                  he worked
                  or (ii) the transfer of the business or part of the business in
                  which he
                  works to a person who is neither an Associated Company nor a Subsidiary;
                  or

              

      

    

    

    
      
        	
              	(e)	
                within
                  six months following his ceasing, more than three years after the
                  Date of
                  Grant of the Option, to hold such office or employment by reason
                  of
                  retirement prior to Pensionable Age with the consent of the employing
                  company,

              

      

    

    

    
      	 	 	
              and
                for the purposes of the Scheme (and, in particular, Rule 6(5)(e),
                a woman who leaves employment due to pregnancy or confinement in
                circumstances where she has a right to return to work under the Irish
                Maternity Protection Act, 1994 shall be deemed to have remained in
                employment until such time as she is no longer capable of exercising
                a
                right to return to work and not to have ceased to have been employed
                if
                she exercises that right.

            

    

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (3)

            	
              An
                Option may also be exercised by an Option Holder within six months
                following the date he reaches Pensionable Age if he continues after
                that
                date to hold the office or employment by virtue of which he is eligible
                to
                participate in the Scheme.

            

    

    

    
      
        	
              	(4)	
                No
                  person shall be treated for the purposes of Rules 6(1)(c), 6(2)(c),
                  6(2)(d) and 6(5)(e) as ceasing to hold an office or employment
                  by virtue
                  of which he is eligible to participate in the Scheme until he ceases
                  to
                  hold any office or employment in the Company or any Associated
                  Company of
                  the Company or any company of which the Company has Control. For
                  the
                  purpose of this Rule the definition of Associated Company carries
                  the
                  amended meaning given by paragraph 1(1) of Schedule 12A to the
                  Act.

              

      

    

    

    
      
        	
              	(5)	
                An
                  Option shall lapse upon the occurrence of the earliest of the following
                  events:

              

      

    

    

    
      
        	
              	(a)	
                subject
                  to (b) below, six months after the Repayment Date;
                  or

              

      

    

    

    
      
        	
              	(b)	
                where
                  the Option Holder dies:

              

      

    

    

    
      
        	
              	(i)	
                before
                  the Repayment Date, 12 months after the date of death;
                  or

              

      

    

    

    
      
        	
              	(ii)	
                in
                  the period of six months after the Repayment Date, 12 months after
                  the
                  Repayment Date;

              

      

    

    

    
      	
            	(c)	
              the
                expiry of any of the applicable periods specified in Rules 6(2)(c),
                6(2)(d) and 6(2)(e), save that, if at the time any of such applicable
                periods expire, time is running under Rules 6(2)(a) or 6(2)(b), the
                Option
                shall not lapse by reason of this Rule 6(5)(c) until the expiry of
                the
                periods in Rules 6(2)(a) or 6(2)(b);
                or

            

    

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    
      	
            	(d)	
              the
                expiry of any of the periods of exercise specified in Rules
                7(2)(b),
                7(2)(c)
                and 7(2)(d)
                save with regard to any Option which is rolled-over pursuant to Rule
                7(3);
                or

            

    

    

    
      
        	
              	(e)	
                the
                  date on which an Option Holder ceases to be a director or employee
                  of any
                  Participating Company for any reason other than those specified
                  in Rule
                  6(2); or

              

      

    

    

    
      
        	
              	(f)	
                the
                  date on which a resolution is passed, or order is made by the Court,
                  for
                  the compulsory winding-up of the Company;
                  or

              

      

    

    

    
      
        	
              	(g)	
                the
                  date on which the Option Holder does or omits to do anything, as
                  a result
                  of which he is deprived of the legal or beneficial ownership of
                  the
                  Option.

              

      

    

    

    
      	7	
              Takeover,
                Reconstruction and Amalgamation, and
                Liquidation

            

    

    

    
      
        	
              	(1)	
                This
                  Rule shall apply where:

              

      

    

    

    
      
        	
              	(a)	
                any
                  person obtains Control of the Company as a result of making either
                  a
                  general offer to acquire the whole of the Company's issued share
                  capital
                  (other than any shares already owned by the Holding Company or
                  any
                  Subsidiary of the Holding Company) and which is made on a condition
                  that
                  if it is satisfied the offeror will have such Control, or a general
                  offer
                  to acquire all the shares in the Company which are of the same
                  class as
                  the Shares; or

              

      

    

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

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

              

      

    

    

    
      
        	
              	(c)	
                without
                  any person obtaining Control of the Company, the Court sanctions
                  a scheme
                  of arrangement affecting the Shares under Section 425 of the UK
                  Companies
                  Act 1985; or

              

      

    

    

    
      
        	
              	(d)	
                any
                  person becomes bound or entitled to acquire Shares in the Company
                  under
                  Sections 428 to 430 of the UK Companies Act 1985;
                  or

              

      

    

    

    
      
        	
              	(e)	
                a
                  resolution is passed for the voluntary winding-up of the
                  Company,

              

      

    

    

    
      	 	 	
              and
                for the purpose of this Rule 7
                (except Rule 7(3))
                a
                person shall be deemed to have obtained Control of the Company if
                he and
                others acting in concert with him have together obtained
                Control.

            

    

    

    
      
        	
              	(2)	
                Subject
                  to Rule 6(5) an Option may be exercised during any of the following
                  periods:

              

      

    

    

    
      
        	
              	(a)	
                in
                  relation to Rule 7(1)(a),
                  within six months of the date Control is so obtained and any condition
                  subject to which the offer is made is satisfied (or until the expiry
                  of
                  the period mentioned in (c) below, if earlier);
                  or

              

      

    

    

    
      
        	
              	(b)	
                in
                  relation to Rules 7(1)((b)
                  and 7(1)(c),
                  until the six months after the date the Court sanctions the scheme
                  of
                  arrangement; or

              

      

    

    

    
      
        	
              	(c)	
                in
                  relation to Rule 7(1)(d),
                  during any period the person remains so bound or entitled;
                  or

              

      

    

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    
      
        	
              	(d)	
                in
                  relation to Rule 7(1)(e),
                  within six months of the passing of the
                  resolution.

              

      

    

    

    
      
        	
              	(3)	
                Notwithstanding
                  anything to the contrary in these Rules, where any person mentioned
                  in
                  Rules 7(1)(a),
                  7(1)(b),
                  7(1)(c) or 7(1)(d)
                  is
                  a company an Option Holder may, by agreement with the Acquiring
                  Company,
                  and within the appropriate period mentioned in Rules 7(2)(a),
                  7(2)(b)
                  and 7(2)(c),
                  release his Option under the Scheme (“the Old Option”) in consideration of
                  the grant to him of a new Option (“the New Option”) which within the
                  meaning ascribed by paragraph 16(3) of Schedule 12A to the Act,
                  is
                  equivalent to the Old Option but relates to Shares in a different
                  company
                  (whether the Acquiring Company or some other company falling within
                  paragraph 11 of Schedule 12A to the Act).

              

      

    

     

    
      	
            	(4)	
              With
                effect from the date of release references in Rules 7,
                8,
                9,
                10,
                11
                and 13
                (and, in relation to expressions used in those Rules, in Rule 1)
                to “the Company” and “Shares” in the Company shall, in relation to the New
                Option, be construed as references to the Acquiring Company and Shares
                in
                the Acquiring Company or some other company as the case may
                be.

            

    

    

    
      	8	
              Manner
                of Exercise

            

    

    

    
      	 	
              An
                Option may only be exercised during the periods specified in Rules
                6
                and 7.
                Exercise may be in whole or in part, and shall be by the delivery
                to the
                secretary of the Company or his duly appointed agent of a notice
                of
                exercise in the prescribed form duly completed and signed by the
                Option
                Holder, together with a remittance for the Exercise Price payable
                in
                respect of the Shares over which the Option is to be exercised and
                evidence that the monies remitted constitutes the amount repaid under
                the
                relevant Savings Certificate. The relevant Shares shall be allotted
                within
                28 days following such delivery.

            

    

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    
      	9	
              Issue
                of Shares

            

    

    

    
      
        	
              	(1)	
                Shares
                  issued pursuant to the Scheme shall rank pari
                  passu in
                  all respects with the Shares then in issue, except that they will
                  not rank
                  for any rights attaching to Shares by reference to a record date
                  preceding
                  the date of exercise.

              

      

    

    

    
      
        	
              	(2)	
                The
                  Company shall use its best endeavours to procure that as soon as
                  practicable after the allotment of any Shares pursuant to the Plan
                  application shall be made to relevant stock exchanges and other
                  regulatory
                  authorities for the listing and trading of the
                  Shares.

              

      

    

    

    
      	10	
              Adjustments

            

    

    

    
      
        	
              	(1)	
                The
                  number of Shares over which an Option is granted, the Option Price
                  thereof, and the limits in Rule 5
                  on
                  the number of Shares issuable under the Scheme shall subject to
                  the prior
                  written approval of the Revenue Commissioners be adjusted in such
                  manner
                  as the Committee shall determine (and the Auditors shall confirm
                  in
                  writing to be in their opinion fair and reasonable) following any
                  capitalisation issue, subdivision, consolidation or reduction of
                  share
                  capital and in respect of any discount element in any rights issue
                  or
                  other variation of share capital to the intent that (as nearly
                  as may be
                  without involving fractions of a Share or an Option Price calculated
                  to
                  more than two places of decimals) the Exercise Price payable in
                  respect of
                  an Option shall remain unchanged but the number of Shares issuable
                  under
                  the Scheme and any other employees' share scheme shall take account
                  of any
                  such event, provided that no adjustment made pursuant to this Rule
                  10(1)
                  shall have the effect of reducing the Option Price below the nominal
                  value
                  of a Share.

              

      

    

    

    
      
        	
              	(2)	
                Any
                  adjustment made to the Option Price of unissued Shares which would
                  have
                  the effect of reducing the Option Price to less than the nominal
                  value of
                  the Share shall only be made if and to the extent that the Committee
                  are
                  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 Option Price. The
                  Committee
                  may apply such sum in paying up such amount on such Shares so that
                  on the
                  exercise of any Option in respect of which such a reduction shall
                  have
                  been made, the Committee shall capitalise such sum (if any) and
                  apply the
                  same in paying up such amount as
                  aforesaid.

              

      

    

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    
      
        	
              	(3)	
                The
                  Committee may take such steps as they may consider necessary to
                  notify
                  Option Holders of any adjustment made under Rules 10(1)
                  and to call in, cancel, endorse, issue or reissue any Option Certificate
                  consequent upon such
                  adjustment.

              

      

    

    

    
      	11	
              Administration

            

    

    

    
      
        	
              	(1)	
                Notices
                  or documents required to be given to an Eligible Employee or to
                  an Option
                  Holder shall either be delivered to him
                  by

              

      

    

    

    
      
        	
              	(a)	
                hand;
                  

              

      

    

    

    
      
        	
              	(b)	
                sending
                  them to him at his last known address according to the information
                  provided by him. Notices sent by post shall be deemed to have been
                  given
                  on the day following the date of posting;
                  or

              

      

    

    

    
      
        	
              	(c)	
                sending
                  them by facsimile, email or any form of electronic means acceptable
                  to the
                  Committee to the Option Holder’s last known facsimile number or email
                  address. Notices sent by this method of communication shall be
                  deemed to
                  have been given at the time of
                  despatch.

              

      

    

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    
      
        	
              	(2)	
                The
                  Company may distribute to the Option Holders copies of any notice
                  or
                  document sent by the Company to its Shareholders
                  generally.

              

      

    

    

    
      
        	
              	(3)	
                The
                  Company shall at all times keep available sufficient unissued Shares
                  will
                  be available to satisfy the exercise of all Options which have
                  neither
                  lapsed nor been exercised taking account of any other obligations
                  of the
                  Company to allot unissued
                  Shares.

              

      

    

    

    
      
        	
              	(4)	
                The
                  Committee may make such regulations for the administration of the
                  Scheme
                  as it deems fit, provided that no regulation shall be valid to
                  the extent
                  it is inconsistent with these
                  Rules.

              

      

    

    

    
      
        	
              	(5)	
                The
                  decision of the Committee in any dispute relating to an Option
                  or the due
                  exercise thereof or any other matter in respect of the Scheme shall
                  be
                  final and conclusive subject to the certification of the Auditors
                  having
                  been obtained when so required by Rule 10(1).

              

      

    

     

    
      
        	
              	(6)	
                The
                  costs of introducing and administering the Scheme shall be borne
                  by the
                  Company.

              

      

    

    

    
      	12	
              Alterations

            

    

    

    
      
        	
              	(1)	
                Subject
                  to Rules 12(2) below, the Committee may alter the Rules of this
                  Irish
                  Section in any way they see fit provided that no alteration shall
                  be made
                  at a time when this Scheme is approved by the Revenue Commissioners
                  under
                  Schedule 12A to the Act without prior written approval of the Revenue
                  Commissioners.

              

      

    

    

    
      
        	
              	(2)	
                Where
                  the alteration is to the advantage of Option Holders (present and
                  future)
                  and it relates to:

              

      

    

    

    
      
        	
              	(a)	
                the
                  following definitions set out in Rule 1:
                  “Eligible Employee”; “Exercise Price”; “Grant Period”; “Market Value”;
                  “Maximum Contribution”; “Share” and “Option Price”;
                  or

              

      

    

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    
      
        	
              	(b)	
                Rule
                  2(1)
                  (invitation of applications);
                  or

              

      

    

    

    
      
        	
              	(c)	
                Rule
                  2(4) (application forms); or

              

      

    

    

    
      
        	
              	(d)	
                Rule
                  3
                  (scaling down of Options); or

              

      

    

    

    
      
        	
              	(e)	
                Rule
                  4(1)
                  (period for grant of Options);
                  or

              

      

    

    

    
      
        	
              	(f)	
                Rule
                  4(2)
                  (restriction on grant of Options to Eligible Employees);
                  or

              

      

    

    

    
      
        	
              	(g)	
                Rule
                  4(4)
                  (the non-transferability of an Option);
                  or

              

      

    

    

    
      
        	
              	(h)	
                Rule
                  4(5)
                  (grant of Option without payment);
                  or

              

      

    

    

    
      
        	
              	(i)	
                Rule
                  5
                  (number of Shares over which Options may be granted in aggregate
                  under the
                  Scheme); or

              

      

    

    

    
      
        	
              	(j)	
                Rule
                  6
                  (rights of exercise); or

              

      

    

    

    
      
        	
              	(k)	
                Rule
                  7
                  (rights upon a takeover, reconstruction or amalgamation, or on
                  voluntary
                  liquidation); or

              

      

    

    

    
      
        	
              	(l)	
                Rule
                  9
                  (issue of Shares); or

              

      

    

    

    
      
        	
              	(m)	
                Rule
                  10
                  (adjustments to Options); or

              

      

    

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    
      
        	
              	(n)	
                this
                  Rule 12;
                  or

              

      

    

    

    
      
        	
              	(o)	
                Rule
                  13
                  (termination of Scheme),

              

      

    

    

    
      	 	 	
              it
                will not be effective unless
                either:

            

    

    

    
      
        	
              	(i)	
                it
                  is made with the prior sanction of an ordinary resolution of the
                  Company
                  in general meeting; or

              

      

    

    

    
      
        	
              	(ii)	
                it
                  is made by the Committee as an amendment which it considers necessary
                  or
                  desirable to comply with or take account of the provisions of any
                  proposed
                  or existing legislation, or to take account of the occurrence of
                  any
                  takeover or reconstruction of the Company, or to obtain or maintain
                  favourable tax treatment of any Shares or interests in Shares acquired
                  or
                  held under the Scheme or any rights to acquire such Shares or interests,
                  provided any such amendment does not affect the basic structure
                  of the
                  Scheme.

              

      

    

    

    
      
        	
              	(3)	
                No
                  alteration may be made which would abrogate or adversely affect
                  the
                  subsisting rights of Option Holders unless such alteration is
                  made:

              

      

    

    

    
      
        	
              	(a)	
                with
                  the consent in writing of such number of Option Holders as hold
                  Options
                  over 75 per cent of the Shares which would be issued if all Options
                  granted and subsisting were exercised and Shares issued;
                  or

              

      

    

    

    
      
        	
              	(b)	
                by
                  a resolution at a meeting of Option Holders by a majority of not
                  less than
                  75 per cent of the Option Holders who attend and vote either in
                  person or
                  by proxy. For the purposes of this Rule 12(3)(b)
                  the Option Holders shall be treated as the holders of a separate
                  class of
                  share capital and the provisions of the articles of association
                  of the
                  Company relating to class meetings shall apply mutatis
                  mutandis.

              

      

    

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    
      
        	
              	(4)	
                Written
                  notice of any amendment made in accordance with this Rule 12
                  shall be given to all Option
                  Holders.

              

      

    

    

    
      
        	13	
                General

              

      

    

    

    
      
        	
              	(1)	
                The
                  Scheme shall terminate on the tenth anniversary of the date on
                  which the
                  Scheme is approved by the Company in General Meeting or at any
                  earlier
                  time by the passing of a resolution by the Committee. Termination
                  of the
                  Scheme shall be without prejudice to the subsisting rights of Option
                  Holders.

              

      

    

    

    
      
        	
              	(2)	
                If
                  an Option Holder shall cease for any reason to be in the service
                  of a
                  Participating Company, he shall not be entitled, by way of compensation
                  for loss of office or otherwise howsoever, to any sum or any benefit
                  to
                  compensate him for the loss of any right or benefit accrued or
                  in prospect
                  under the Scheme 

              

      

    

    

    
      
        	
              	(3)	
                The
                  Scheme shall be governed by, and construed in accordance with,
                  Irish
                  law.

              

      

    

     

    
      
        
        

      

      
        24

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