Document:

Prepared and filed by St Ives Burrups

Exhibit 4.11

BRITISH TELECOMMUNICATIONS PLC

 

THE BT INCENTIVE SHARE PLAN

 

As authorised by the Company in general meeting on 12 July 2000

and as amended in September 2001

 

THE RULES OF THE BT INCENTIVE SHARE PLAN

 

CONTENTS

	 	 	 	Page	 
	1.
	 	How the Plan
      will operate	1	 
	 	 	 	 	 
	2.
	 	Performance
      targets	2	 
	 	 	 	 	 
	3.
	 	Limit on
      the number of Shares which can be issued	2	 
	 	 	 	 	 
	4.
	 	Rights in
      relation to Shares prior to the Vesting of an Award	3	 
	 	 	 	 	 
	5.
	 	General offer,
      scheme of arrangement or voluntary winding-up of the Company	5	 
	 	 	 	 	 
	6.
	 	Ceasing to
      be in Employment during the Incentive Period	7	 
	 	 	 	 	 
	7.
	 	The end of
      the Incentive Period	9	 
	 	 	 	 	 
	8.
	 	Transfer
      of Shares	10	 
	 	 	 	 	 
	9.
	 	Amending
      the Plan	11	 
	 	 	 	 	 
	10.
	 	General	12	 
	 	 	 	 	 
	US Appendix  	17	 
	 	 	 
	Definitions
      Appendix  	18	 

 

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THE RULES OF THE BT INCENTIVE SHARE PLAN

	1.	HOW THE PLAN WILL OPERATE

	 	 
	1.1	Policies set by the Board

	 	 
	 	The Board will set the policies for the Company’s operation and administration of the Plan within the terms of the Rules, which shall include the determination of:

	 	 	 
	 	1.1.1	Eligible Executives who will be eligible from time to time for the grant of an Award;

	 	 	 
	 	1.1.2	the performance target on the Vesting of Awards, and whether or not the performance target has been met;

	 	 	 
	 	1.1.3	the Incentive Period for each Award;

	 	 	 
	 	1.1.4	the maximum amount of an Eligible Executive’s Award;

	 	 	 
	 	1.1.5	how Awards are granted; and

	 	 	 
	 	1.1.6	the extent to which Awards will Vest when Participants cease Employment.

	 	 
	 	The Board can change any of its policies at any time but it cannot change its policies to the detriment of a Participant’s subsisting Awards.

	 	 
	1.2	When Awards will be granted

	 	 
	 	An Award can be granted at any time provided that the Date of Grant of an Award is not during a Close Period.

	 	 
	1.3	Awards personal to Participants

	 	 
	 	Awards cannot be transferred, assigned, charged or otherwise disposed of. On the death of a Participant, his Awards can be transmitted to his personal representatives. A Participant can renounce his Award within 30 days following the Date of Grant and, to the extent
 renounced, the Award will be treated as if it had never been granted.

	 	 
	1.4	How Awards are granted

	 	 
	 	The Company will, from time to time and at its discretion, request the Trustee to grant Awards to one or more recommended Eligible Executives, in accordance with the Rules.

 

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	1.5	Award certificate

	 	 
	 	When an Award is granted to a Participant, the Participant will, as soon as administratively practicable, receive an Award certificate specifying the basis on which the Award may Vest in accordance with the Rules, and whether or not the Award is subject to Rule 7.4.

	 	 
	2.	PERFORMANCE TARGETS

	 	 
	2.1	Awards and performance targets

	 	 
	 	An Award will be granted subject to a performance target selected by the Remuneration Committee which will, subject to the relevant provisions under the Rules, have to be met before the Award can Vest. The grant or Vesting of an Award can be subject to any additional
 terms and conditions the Company considers appropriate. The performance target and any additional terms and conditions which the Vesting of an Award is subject to will be specified at the Date of Grant. If Awards are exchanged under Rule 5.8 the performance target can
 be varied at the discretion of the Remuneration Committee to take account of this.

	 	 
	2.2	Different performance targets can apply to different Eligible Executives

	 	 
	 	Awards can be subject to different performance targets for each Eligible Executive.

	 	 
	3.	LIMIT ON THE NUMBER OF SHARES WHICH CAN BE ISSUED

	 	 
	3.1	The limit for all Shares issued under the Plan

	 	 
	 	The number of Shares which can be allocated under the Plan on any day, when aggregated with the number of Shares allocated in the previous 10 years under:

	 	 	 
	 	3.1.1	any other Employees’ Share Scheme, cannot exceed 10 per cent. of the ordinary issued share capital of the Company from time to time; and

	 	 	 
	 	3.1.2	any other Employees’ Share Scheme operated on a selective basis, cannot exceed 5 per cent. of the ordinary issued share capital of the Company from time to time.

	 	 
	3.2	Meaning of allocation and exclusion from these limits

	 	 
	 	The references in this Rule 3 to the “allocation” of Shares mean, in the case of any share option plan, the placing of unissued Shares under option and, in the

 

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	 	case of any other Employees’ Share Scheme, the issue and allotment of Shares. For the purposes of the limit in this Rule 3:

	 	 	 
	 	3.2.1	Shares where the right to acquire such Shares was released, cancelled or lapsed without being exercised will be ignored; and

	 	 	 
	 	3.2.2	to the extent that the Vesting of Awards is to be satisfied by the transfer of Shares already in issue, those Awards will not be treated as granted over unissued Shares.

	 	 
	3.3	Adjustment to Shares to be taken into account

	 	 
	 	Where Shares issued under the Plan or any other Employees’ Share Scheme of the Company are to be taken into account for the purposes of any of the limits in this Rule 3 and a Variation in the equity share capital of the Company has taken place between the date of issue of
 any such Shares and the date on which any such limit is to be calculated, the number of such Shares which will be taken into account for the purposes of any such limit will be adjusted in such manner as the Company considers appropriate to take account of the Variation.

	 	 
	3.4	The individual limit

	 	 
	 	The Remuneration Committee will, from time to time, set an individual limit on the Market Value (at the Date of Grant) of the Shares the subject of an Award granted to a Participant on an annual basis. This limit cannot be exceeded without the prior approval of the
 Remuneration Committee.

	 	 
	4.	RIGHTS IN RELATION TO SHARES PRIOR TO THE VESTING OF AN AWARD

	 	 
	4.1	Voting rights, dividends and other rights

	 	 
	 	A Participant has no voting rights attaching to the Shares the subject of his Award, nor a right to any dividends nor any other rights attaching to the Shares the subject of such Award prior to the Vesting of the Award in respect of those Shares. However, the Trustee may, on
 the recommendation of the Company, increase a Participant’s Award after any dividend has been paid in relation to the Shares under the Award. Any such increase will be made as follows:

	 	 	 
	 	(a)	in the case of a dividend in specie paid in order to effect a demerger of the Company, such dividend shall be retained or reinvested as appropriate (net of any taxes and, if applicable, associated costs) so that it comprises only shares in the Employing Company; or

 

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	 	(b)	in the case of any dividend paid in any other circumstances, such dividend shall be retained or reinvested as appropriate (net of any taxes and, if applicable, associated costs) so that it comprises only Shares unless the Company recommends otherwise

	 	 
	 	and in either case, where the dividend must be reinvested in accordance with (a) or (b) above, the number of shares resulting from such reinvestment must have, unless Rule 4.3 applies, a Market Value on the date of increase which is as close as possible equal in value to the
 aggregate dividend (net of any taxes) which has been paid in respect of the Shares under a Participant’s Award.

	 	 
	4.2	Events which affect the share capital of the Company

	 	 
	 	Subject to Rule 4.3, if there is a Variation affecting the share capital of the Company prior to the Vesting of an Award, the Trustee will adjust the number of Shares the subject of that Award on the recommendation of the Company. Any Participant whose Award is adjusted
 will be notified in writing of any such adjustment.

	 	 
	4.3	A Variation which is a demerger of the Company

	 	 
	 	If there is a Variation which is a demerger of the Company, a recommendation will be made to the Trustee to adjust an Award so as to be over shares in the Employing Company (“the Adjusted Award”). Each Adjusted Award will be equivalent to the Award which was
 adjusted (“the Unadjusted Award”) prior to the adjustment. An Adjusted Award will not be regarded as equivalent to an Unadjusted Award unless:

	 	 	 
	 	(i)	it is governed by the Rules in effect immediately before the preservation of the Unadjusted Award; and

	 	 	 
	 	(ii)	the total Market Value of the shares the subject of the Unadjusted Award is equal to the total Market Value immediately after the adjustment of the shares the subject of the Adjusted Award, calculated by reference to an averaging of the relevant Market Value, as
 recommended to the Trustee.

	 	 
	 	The provisions of the Plan shall, for this purpose, be construed as if the Adjusted Awards were granted under the Plan at the same time as the Unadjusted Awards. References to the “Company” shall, in relation to the Adjusted Award, be taken as references to the Employing
 Company and references to “Share” shall be taken as references to a share in the Employing Company. The Trustee will agree to any amendment to the applicable employee share ownership trust to give effect to this Rule 4.3.

 

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	5.	GENERAL OFFER, SCHEME OF ARRANGEMENT OR VOLUNTARY WINDING-UP OF THE COMPANY

	 	 
	5.1	General offer

	 	 
	 	If, before an Award has Vested, an offeror (either alone or together with any party acting in concert with him) obtains Control of the Company as a result of a general offer to acquire the whole of the issued ordinary share capital of the Company (or such part of it which is not
 at the time owned by the offeror and any party acting in concert with the offeror) a Participant’s Award will Vest as soon as the change of Control takes effect, but only to the extent specified by the Remuneration Committee in accordance with Rule 5.2.

	 	 
	5.2	The discretion of the Remuneration Committee

	 	 
	 	The Remuneration Committee will confirm as soon as practicable after the general offer has been made the minimum extent to which an Award may Vest, to the extent that the performance target has been met up to the change of Control taking effect. Subject to this, the
 Remuneration Committee may decide to take other factors into account, which it believes to be relevant in permitting the Award to Vest beyond the extent to which the performance target has been met.

	 	 
	5.3	Extension to Participants of general offer

	 	 
	 	The Company will use its best endeavours to procure that to the extent a Participant’s Award Vests in accordance with Rule 5.1, the offeror will make an offer to acquire from the Participant his Shares on the same terms as Shares of the same class were acquired under the
 general offer.

	 	 
	5.4	Scheme of arrangement

	 	 
	 	If, before an Award has Vested, the court directs that a meeting of the holders of Shares should be convened under Section 425 of the Companies Act 1985 to consider a scheme of arrangement, a Participant’s Award will Vest on the date the scheme of arrangement is
 sanctioned by the court, but only to the extent specified by the Remuneration Committee in accordance with Rule 5.5. If however, the purpose and effect of the scheme of arrangement is to create a new holding company for the Company, where such holding company would,
 following the scheme of arrangement, have substantially the same shareholders and proportionate shareholdings as those of the Company immediately prior to the scheme of arrangement, Rule 5.7 may, with the consent of the Board, apply. If it does apply, Awards will not
 Vest under this Rule 5.4.

 

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	5.5	The discretion of the Remuneration Committee

	 	 
	 	The Remuneration Committee will confirm as soon as practicable after the date of the court’s direction the minimum extent to which an Award may Vest, to the extent that the performance target has been met up to the date the scheme of arrangement is sanctioned by the
 court. Subject to this, the Remuneration Committee may decide to take other factors into account, which it believes to be relevant in permitting the Award to Vest beyond the extent to which the performance target has been met.

	 	 
	5.6	Voluntary winding-up

	 	 
	 	If there is a resolution for a member’s voluntary winding-up of the Company, the Awards will Vest in full conditionally on the resolution being passed.

	 	 
	5.7	The exchange of Awards

	 	 
	 	If, before an Award has Vested, any company (the “Acquiring Company”) obtains Control of the Company in pursuance of a compromise or arrangement sanctioned by the court under Section 425 of the Companies Act 1985 and the Acquiring Company has agreed that the
 outstanding Awards should continue, the Trustee will, within the Appropriate Period, take such action as is appropriate to acquire shares in the Acquiring Company. On this basis, Participants’ Awards (“Old Awards”) will become awards (“New Awards”) in respect of the
 shares acquired by the Trustee in respect of the Shares subject to the Old Awards. Each New Award will be equivalent to each Old Award before the change of Control. The New Awards will not be regarded as equivalent to the Old Awards unless:

	 	 	 
	 	(i)	they are governed by the Rules in effect immediately before the release of the Old Awards; and

	 	 	 
	 	(ii)	the total Market Value of the Shares the subject of the Old Awards is equal to the total Market Value immediately after the release of the shares the subject of the New Awards. The provisions of the Plan will, for this purpose be constructed as if the New Awards
 were granted under the Plan at the same time as the Old Awards.

	 	 
	 	References to Shares will, in relation to the New Award, be taken as references to shares of the company whose shares are under New Awards. References to the Company shall be taken to be references to the company whose shares are under the New Awards, where
 appropriate. The New Awards will not Vest/lapse if Rule 5 applies following and in respect of the change of Control which led to the grant of the New Awards. The Trustee will agree to any amendment to the applicable employee share ownership trust to give effect to this
 Rule 5.7. This Rule 5.7 is subject to Rule 5.4.

 

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	5.8	Cessation of Employment following a change of Control

	 	 
	 	If, at any time within the period of 12 months following the date of any change of Control of the Company, a Participant’s Employment:

	 	 	 
	 	5.8.1	is terminated by his employer for a reason other than gross misconduct; or

	 	 	 
	 	5.8.2	ceases following the Participant’s resignation because the nature of his duties are such that the Participant believes that he has lesser duties and responsibilities than before the change of Control

	 	 
	 	the Participant will be entitled to receive an amount which is equal in value to the difference between the aggregate Market Value of the Shares he became entitled to when his Award Vested under Rule 5.1 or Rule 5.4 and the aggregate Market Value of the Shares he would
 have become entitled to had the Award Vested at that time as if the performance target had been met in full. For the purposes of this Rule 5.8, the Market Value used shall be the Market Value of a Share as at the date his Award Vested. Any amount payable under this Rule 5.8
 shall be payable, subject to any deduction required by law to be made, within thirty days after the cessation of Employment concerned. This Rule 5.8 will not apply to a Participant’s Award if Rule 5.7 applied to that Award following a scheme of arrangement.

	 	 
	6.	CEASING TO BE IN EMPLOYMENT DURING THE INCENTIVE PERIOD

	 	 
	6.1	Ceasing to be in Employment: generally

	 	 
	 	Unless otherwise provided in the Rules, if a Participant ceases to be in Employment before the end of the Incentive Period, all his Awards will lapse in full on the date he so ceases.

	 	 
	6.2	Ceasing to be in Employment because of death, ill health or disability

	 	 
	 	If a Participant ceases or is to cease to be in Employment before the end of the Incentive Period because of death, ill health or disability:

	 	 	 
	 	6.2.1	in respect of Awards the Incentive Period for which will end less than 12 months from the date the Participant so ceases Employment, those Awards will Vest on the date the Participant so ceases Employment; and

	 	 	 
	 	6.2.2	in respect of all other Awards, the Company may, at its discretion, recommend the Trustee to Vest, as soon as possible, all or part of any Award and/or preserve all or part of any Award to the extent that it is recommended not to Vest immediately. The Award, to the
 extent that

 

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	 	 	it is preserved, must be preserved until the end of the Incentive Period and subject to the Rules. To the extent that the Trustee has not exercised its discretion to Vest or preserve all or part of an Award, it will lapse on the date the Trustee confirms its decision.

	 	 
	6.3	Ceasing to be in Employment because of Redundancy or Retirement

	 	 
	 	If a Participant ceases or is to cease to be in Employment before the end of the Incentive Period because of his Redundancy or Retirement, all his Awards will lapse on the date he so ceases. The Company may, however, at its discretion, recommend the Trustee to Vest, as
 soon as possible, all or part of any Award and/or preserve all or part of any Award to the extent that it is recommended not to Vest immediately. The Award, to the extent that it is preserved, must be preserved until the end of the Incentive Period and subject to the Rules. To
 the extent that the Trustee has not exercised its discretion to Vest or preserve all or part of an Award, it will lapse on the date the Trustee confirms its decision.

	 	 
	6.4	Ceasing to be in Employment because of the sale of a company or business

	 	 
	 	If a Participant ceases to be in Employment before the end of the Incentive Period because the company in the Group which employs him ceases to be a Participating Company or an Associated Company or because of the transfer or sale of the undertaking (or part of the
 undertaking) in which he is employed to a person who is neither a Participating Company nor an Associated Company, all his Awards will lapse on the day he so ceases. The Company may, however, at its discretion, recommend the Trustee to Vest, as soon as possible, all or
 part of any Award and/or preserve all or part of any Award to the extent that it is recommended not to Vest immediately. The Award, to the extent that it is preserved, must be preserved until the end of the Incentive Period and subject to the Rules. To the extent that the
 Trustee has not exercised its discretion to Vest or preserve all or part of an Award, it will lapse on the date the Trustee confirms its decision.

	 	 
	6.5	Circumstances when a performance target will be treated as if it has been waived

	 	 
	 	If a Participant’s Award is to Vest under Rule 6, any performance target which applies to its Vesting will be treated as if it had been waived, unless the Company decides otherwise. If the Company does decide otherwise, Awards will, at the discretion of the Company, and
 when the relevant event in Rule 6 takes place, either lapse in part and/or, to the extent that they do not lapse, they will be preserved or Vest on whatever basis the Company decides.

 

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	6.6	Ceasing to be in Employment in other circumstances

	 	 
	 	If, before the end of the Incentive Period, a Participant gives or is given notice to leave Employment or ceases to be in Employment without any notice having been given in any circumstances other than the ones referred to in Rule 6.2, Rule 6.3 or Rule 6.4, his Award will
 lapse on that date, unless the Company decides otherwise or unless, (being female) she is entitled to exercise and subsequently does exercise the statutory right (or any corresponding contractual right) to resume Employment after an absence due to pregnancy.

	 	 
	6.7	Change of circumstances of Employment - deferral of Vesting and lapse provisions

	 	 
	 	If a Participant ceases to be in Employment before the end of the Incentive Period, but continues to provide services to the Group or becomes employed by an Associated Undertaking, the Company can decide that the Participant is deemed not to have ceased Employment and
 that his Awards will continue to be held subject to the Rules. Rules 5 to 6 will apply when he subsequently ceases to provide services to the Group, or when he ceases to be employed by an Associated Undertaking and is not re-employed by a member of the Group, or in such
 other circumstances as the Company may determine.

	 	 
	6.8	The effect of the lapsing of Awards

	 	 
	 	To the extent that a Participant’s Award lapses, he is not entitled to any Shares which are the subject of that Award.

	 	 
	7.	THE END OF THE INCENTIVE PERIOD

	 	 
	7.1	Where all or part of the Award is subject to a performance target which has been met

	 	 
	 	At the end of the Incentive Period and to the extent that an Award has not already Vested under Rule 5 or Rule 6, the Remuneration Committee, in its absolute discretion, will decide as soon as practically possible to what extent the performance target relevant to each Award
 has been met. To the extent that the Remuneration Committee decides that it has been met, the Award will Vest (subject to Rule 7.4) as soon as practically possible following the Remuneration Committee’s decision. The relevant number of Shares will be transferred as soon
 as practicable to a Participant who up until the end of the Incentive Period:

	 	 	 
	 	7.1.1	was in Employment; or

	 	 	 
	 	7.1.2	was not in Employment but to whom the Shares can still be transferred because of Rule 6.

 

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	 	If the performance target is one which provides for Vesting in proportion to the extent that the performance target has been met, the Award will Vest in proportion to the extent that the performance target has, in the Remuneration Committee’s view, been met at the end of the
 Incentive Period.

	 	 
	7.2	If the performance target has reached a specified level

	 	 
	 	If the Remuneration Committee decides that the performance target has reached a specified level beyond that which justifies the Vesting of an Award to its full extent, it has the discretion to recommend to the Trustee that when the Shares the subject of a fully Vested Award
 are to be transferred, the Trustee should also transfer a further number of shares equal to up to 100% of the Shares which have Vested.

	 	 
	7.3	If the performance target has not been met

	 	 
	 	If the Remuneration Committee decides that the performance target which applies to an Award has not been met at the end of the Incentive Period, the Awards will lapse on the date the Remuneration Committee so confirms.

	 	 
	7.4	Deferral of Vesting in respect of specified Participants

	 	 
	 	A Participant’s Award may be granted subject to the Remuneration Committee’s discretion to Vest his Award (to the extent that the performance target has been met) as to some, but not all of the Shares the subject of that Award as soon as practicable following the end of the
 Incentive Period. If a Participant’s Award was granted on this basis, the Remuneration Committee will decide at the same time as it exercises its discretion under Rule 7.1 what proportion of the Award will Vest thereafter and when such proportions shall Vest (the “Deferred
 Award”) PROVIDED THAT if a Participant ceases Employment before the Deferred Award has Vested, it shall Vest in full on the date he so ceases Employment. The Remuneration Committee’s decision to postpone the Vesting of all of the Shares under the Award will be
 taken based on the extent to which any awards granted to the Participant under the BT Executive Share Plan and/or the BT Performance Share Plan also vests in the financial year of the Company in which the end of the Incentive Period falls. The Rules will continue to apply
 in respect of any part of an Award which has not yet Vested.

	 	 
	8.	TRANSFER OF SHARES

	 	 
	8.1	When an Award has Vested

	 	 
	 	When an Award has Vested, the Participant will be entitled to Shares the subject of that Award. The number of Shares he is entitled to (which will be transferred to the Participant as soon as reasonably practicable) will depend

 

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	 	on any exercise of the Remuneration Committee’s decision under Rule 7.4, and the extent to which any applicable performance target has been met. It will also be subject to any withholdings in accordance with Rule 8.3 that may be necessary on account of a Participant’s Tax
 Liability in respect of the Award.

	 	 
	8.2	Transfer of Shares in accordance with Rule 7.2

	 	 
	 	If the Trustee decides to transfer Shares to the Participant in accordance with Rule 7.2, the Shares will be subject to any withholdings in accordance with Rule 8.3 that may be necessary on account of a Participant’s Tax Liability.

	 	 
	8.3	Sale of Shares to satisfy a Participant’s Tax Liability

	 	 
	 	Unless the Participant makes arrangements (satisfactory to the Company) to provide payment in respect of his Tax Liability, the Company or any relevant company in the Group will make arrangements to sell on behalf of the Participant such number of Shares the subject of
 the Award which has Vested as is necessary to discharge the Tax Liability.

	 	 
	9.	AMENDING THE PLAN

	 	 
	9.1	The Company has discretion to amend the Rules

	 	 
	 	Subject to the rest of this Rule 9, the Company can amend the Rules at any time. The Trustee will be notified of any amendment to the Rules.

	 	 
	9.2	Additional sections

	 	 
	 	The Company can adopt additional sections of the Rules applicable in any jurisdiction under which Awards may be subject to as additional and/or modified terms and conditions, having regard to any securities, exchange control or taxation laws, which may apply to the
 Participant, the Company, any Participating Company or Associated Company. Any additional sections must conform to the basic principles of the Plan and must not enlarge to the benefit of Participants the limits in the Rules.

	 	 
	9.3	No abrogation of existing rights

	 	 
	 	No amendment will be made under Rule 9.1 which would abrogate or materially affect adversely the existing rights of a Participant unless it is made with his written consent or by a resolution passed as if the Awards constituted a separate class of share capital and the
 provisions of the Articles of Association of the Company and of the Companies Act 1985 relating to class meetings (with the necessary amendments) applied to that class.

 

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	9.4	Shareholder approval

	 	 
	 	No amendment to the advantage of Participants or Eligible Executives (except for an amendment which could be included in an additional section adopted under Rule 9.2) can be made to the provisions in the Rules (if any) relating to:

	 	 	 
	 	9.4.1	who can be a Participant or Eligible Executive; or

	 	 	 
	 	9.4.2	the number of Shares which can be allocated under the Plan; or

	 	 	 
	 	9.4.3	the basis for determining a Participant’s entitlement to and the terms of the Shares and any adjustment in the event of a Variation

	 	 
	 	without the approval by ordinary resolution of the Company in general meeting, except minor amendments to benefit the administration of the Plan, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for
 Participants or Eligible Executives or for a member of the Group.

	 	 
	10.	GENERAL

	 	 
	10.1	Notices

	 	 
	 	Any notice or other communication in connection with the Plan (including, if permitted, Award certificates) can be given by electronic mail or by personal delivery or by post, (in the case of a company, to its registered office and in the case of an individual to his last known
 address) or by any other means which a Participating Company and its employees use to communicate with each other. Where a notice or other communication is given by first-class post, it shall be deemed to have been received 72 hours after it was put into the post properly
 addressed and stamped.

	 	 
	10.2	Documents sent to shareholders

	 	 
	 	Participants may, but are not entitled to, receive copies of any notice or document sent by the Company to the holders of Shares.

	 	 
	10.3	Replacement Award certificates

	 	 
	 	If any Award certificate is worn out, defaced or lost, it can be replaced on such evidence being provided as may be required.

	 	 
	10.4	Shares to cover Awards

	 	 
	 	Enough Shares will be available at all times to satisfy all Awards granted.

 

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	10.5	Administration of the Plan

	 	 
	 	The Plan will be administered in a manner approved by the Company. No individual will have any authority in relation to the Plan unless that authority has been approved in accordance with the policy set by the Board. The Company’s decision on any matter concerning the
 Plan, including whether or not any performance targets in relation to an Award have been met, or the interpretation of the Rules, will be final and binding.

	 	 
	10.6	Costs of introducing and administering the Plan

	 	 
	 	The costs of introducing and administering the Plan will be borne by the Company. However, the Company can require any Participating Company to enter into such arrangement to reimburse the Company for any costs borne by the Company directly or indirectly in respect
 of such Participating Company’s officers or employees.

	 	 
	10.7	Termination of the Plan

	 	 
	 	The Plan will terminate at the end of the Plan Period or at any earlier time the Company shall decide. Termination of the Plan will not affect the subsisting Awards of Participants.

	 	 
	10.8	Rights of Participants and Eligible Employees

	 	 
	 	Participation in the Plan is not pensionable. Nothing in the Plan nor in any instrument executed pursuant to it will confer upon any person any right to continue in the employment of the Group, or will affect the right of the Company or any company in the Group to terminate
 the employment of any person without liability at any time with or without cause, or will impose upon the Group or the Trustee or the Board or their respective agents and employees any liability whatsoever (whether in contract, tort, or otherwise howsoever) in connection
 with:

	 	 	 
	 	10.8.1	the lapse of any Awards pursuant to the Rules;

	 	 	 
	 	10.8.2	the failure or refusal to exercise any discretion under the Rules; and/or

	 	 	 
	 	10.8.3	a Participant ceasing to be a person who has the status or relationship of an employee or executive director with the Company or any other company in the Group for any reason as a result of the termination of the employment relationship with the Company or any
 other company in the Group.

 

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	10.9	Waiver of any rights

	 	 
	 	Any person who ceases to have the status or relationship of an employee or executive director with the Company or any other company in the Group for any reason as a result of dismissal (lawful or otherwise) shall not be entitled and shall be deemed irrevocably to have
 waived any entitlement by way of damages for dismissal or by way of compensation for loss of office or otherwise to any sum, damages, Shares or other benefits to compensate that person for the loss of any rights, benefits or expectations under any Award, the Plan or any
 instrument executed pursuant to it.

	 	 
	10.10	The Benefit of Rule 10.8 and Rule 10.9

	 	 
	 	The benefit of Rule 10.8 and Rule 10.9 is given for the Company and/or the Trustee (where the Award was not granted by the Company), as appropriate for itself and as trustee and agent of the Company (if the benefit is given for the Trustee), and of all the Company’s
 Subsidiaries or any of its Associated Companies or Associated Undertakings. To the extent that the Company, any Subsidiary, Associated Company or Associated Undertaking of the Company is not party to the grant of an Award, the Company and/or the Trustee, as
 appropriate, will hold the benefit of Rule 10.8 and Rule 10.9 on trust and as agent for each of them and the Company and/or the Trustee may, at their respective discretion, assign the benefit of this Rule 10.10 to any of them.

	 	 
	10.11	Awards are subject to the Rules

	 	 
	 	Awards are granted incorporating and subject to the Rules.

	 	 
	10.12	Articles of association

	 	 
	 	Any Shares acquired on the Vesting of Awards are subject to the Articles of Association of the Company as amended from time to time.

	 	 
	10.13	Governing law

	 	 
	 	The Rules are governed by and interpreted in accordance with the law of England. Each Participant, the Company and any other Participating Company or Associated Company submits to the jurisdiction of the English courts in relation to anything arising under the Plan. The
 Company may, in its absolute discretion, determine that another law may apply to the application of the Plan outside the United Kingdom.

 

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BT INCENTIVE SHARE PLAN

APPENDIX I

U.S. SECTION

	1.	This Appendix I constitutes the part of the Plan that will govern the grant of Awards to United States Participants (the “U.S. Awards”). It incorporates all the Rules as set forth above as modified in accordance with the provisions of this Appendix I).

	 	 
	2.	How U.S. Awards will be granted

	 	 
	 	All U.S. Awards will be evidenced by an instrument(s) in such form or forms as may from time to time be approved by the Company.

	 	 
	3.	Administration of the U.S. Section

	 	 
	 	The Company shall (i) administer the U.S. Section, (ii) establish from time to time such rules and regulations as it may deem appropriate for the proper administration of the U.S. Section and (iii) make such determinations under, and such interpretations of, and take such steps
 in connection with, the U.S. Section or U.S. Awards as it may deem necessary or advisable.

	 	 
	4.	Addition of consistent provisions: certain rights

	 	 
	 	Any U.S. Award may be subject to any other provision imposed by the Company that is consistent with the purpose and intent of this Appendix I. During the Incentive Period, a Participant may, in the sole authority and discretion of the Company, and subject to such terms,
 conditions and limitations as the Board may determine from time to time in its sole authority and discretion, have voting and dividend rights with respect to such Participant’s U.S. Award if a certificate relating to the underlying Shares or ADSs has been issued in the
 Participant’s name.

	 	 
	5.	Section 16 compliance

	 	 
	 	If any officer, director or shareholder of the Company receives a U.S. Award and therefore becomes subject to Section 16 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company shall take all appropriate action to ensure that such U.S.
 Awards under this Appendix I are exempt from Section 16(b) under the Exchange Act.

 

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	6.	Right to ADSs

	 	 
	 	The Company shall arrange for any U.S. Award to constitute a right to or with respect to ADSs rather than Shares, in which case references to “Shares” in the Plan shall be deemed to be reference to “ADSs”, as the context may require.

	 	 
	7.	U.S. Withholding Taxes

	 	 
	 	It shall be a condition to the obligation of the Company to deliver Shares or ADSs pursuant to any U.S. Award granted to a Participant under the Plan that the Participant pays to the Company (or the Subsidiary that employs the Participant) such amount as may be required by
 the Company or such Subsidiary for the purpose of satisfying any liability for any U.S. Federal, state or local taxes of any kind required to be withheld with respect of the U.S. Award. Any U.S. Award granted under the Plan to a Participant may require the Company or permit
 the Participant to elect, in accordance with any applicable rules established by the Company, to withhold or to pay all or part of the amount of such withholding taxes in Shares or ADSs. Such election may be denied by the Company in its sole discretion, or may be made
 subject to certain conditions specified by the Company. Any payments made in cash under the Plan are the subject of all U.S. Federal, state or local taxes of any kind required to be withheld with respect to them.

	 	 
	8.	Securities Laws compliance

	 	 
	 	No Shares or ADSs may be issued or transferred in connection with a U.S. Award unless the Company shall have determined that such issuance, transfer or settlement is in compliance with or pursuant to an exemption from all applicable U.S. Federal and state securities laws.

	 	 
	9.	Certain Definitions

	 	 
	 	For the purposes of the U.S. Awards, the following terms shall have the following meanings, notwithstanding any contrary provisions in the Plan:–

	 	 
	 	“Market Value” in relation to an ADS means an amount equal to half way between the high and low sales prices of ADSs recorded on the New York Stock Exchange on the applicable valuation date.

	 	 
	 	“Normal Retirement” means retiring from Employment on or reaching the age of 60.

	 	 
	10.	Amendments to certain provisions of the Rules

	 	 
	 	In Rule 6.6, the words “being female” shall be deleted and replaced by the words “he or she”.

 

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	 	In Rule 10.1 “72 hours” shall be deleted and replaced by “7 Dealing Days”.

 

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THE BT INCENTIVE SHARE PLAN

DEFINITIONS APPENDIX

	INTRODUCTION

	 	 
	The
        words and expressions used in the Rules which have capital letters have
        the meanings set out below. In the Rules:

	 	 	 
	 	(i)	the headings are for the sake of convenience only and should be ignored when construing the Rules;

	 	 	 
	 	(ii)	reference to any statutory provisions are to those provisions as amended, extended or re-enacted from time to time, and include any subordinate legislation made under them; and

	 	 	 
	 	(iii)	unless the context requires otherwise, words in the singular include the plural and vice versa and words imputing either gender include both genders.

	 	 
	1.   DEFINITIONS

	 	 
	ADSs	American depositary shares each representing ten ordinary shares in the Company;

	 	 
	Appropriate Period	means any time before midday on the day immediately before the date for which the shareholders’ meeting is convened;

	 	 
	Associated Company	in relation to the Company:

	 	 	 
	 	(i)	any company which has Control of the Company; or

	 	 	 
	 	(ii)	any company (other than a Participating Company) which is under the Control of any company referred to in (i) above;

	 	 
	Associated Undertaking	a company or partnership in which the Company has an interest through a shareholding or otherwise;

 

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	Award	a contingent right to acquire Shares under the Plan which has been granted or is proposed to be granted under the Plan;

	 	 
	Board	the board of directors for the time being of the Company or a duly authorised committee of it;

	 	 
	Close Period	a period when the members of the Board of the Company are prohibited from dealing in Shares under the Criminal Justice Act 1993, or the Financial Services Authority model code on transactions in securities, or under any other
 statute, regulation or similar code to which the Company is subject;

	 	 
	the Company	British Telecommunications plc (registered no. 1800000) unless:

	 	 	 
	 	(i)	Rule 4.3 operates, in which case it shall mean the Employing Company; or

	 	 	 
	 	(ii)	Rule 5.7 operates, in which case it shall mean the company referred to in Rule 5.7

	 	 
	 	which, in all cases, for the purposes of the Rules, may act through the Board or through any two employees of the Group authorised to act in accordance with the policies established under Rule 1;

	 	 
	Control	has the meaning given by Section 840 of the Taxes Act;

	 	 
	Date of Grant	in relation to an Award, the date on which that Award is granted;

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

	 	 
	Definitions Appendix	this appendix which forms part of the Rules;

	 	 
	Eligible Executive	any person (including one who is a director of the Company) who, at the Date of Grant, is an employee of the Company or a Subsidiary;

	 	 
	Employees’ Share Scheme	an employees’ share scheme (as defined by Section 743 of the Companies Act 1985) established by the Company;

 

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	Employing Company	means, following a demerger of the Company, the company whose shares are listed on the London Stock Exchange and is the ultimate holding company (as defined in section 736 of the Companies Act 1985) of:

	 	 	 
	 	(i)	the business within which the Participant is employed; or

	 	 	 
	 	(ii)	where the Participant ceased employment with the Group prior to the demerger, the company which employed the Participant at the time that his Award was made;

	 	 
	Employment	employment as an employee of a Participating Company or an Associated Company;

	 	 
	Group	Participating Companies and Associated Companies;

	 	 
	Incentive Period	in relation to an Award, the period (which cannot be less than three years) specified at the Date of Grant, during which the performance target which the Award is subject to is measured;

	 	 
	London Stock Exchange	the London Stock Exchange Limited (or any successor body carrying on the business of the London Stock Exchange) or, where the context so requires, the New York Stock Exchange or any other exchange on which the Shares are
 listed or traded;

	 	 
	Market Value	in relation to a share on any day, an amount equal to its middle market quotation (as derived from the Daily Official List of the London Stock Exchange) on, at the discretion of the Company, that day or the Dealing Day immediately
 preceding that day or the average middle market quotation of the three Dealing Days immediately preceding that day;

	 	 
	Participant	an Eligible Executive to whom an Award has been granted, or (where the context requires) his personal representatives;

	 	 
	Participating Company	the Company and any Subsidiary designated by the Board as a Participating Company;

 

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	Plan	the BT Incentive Share Plan constituted by the Rules;

	 	 
	Plan Period	the period starting on the date on which the Plan is approved by the Company in general meeting and ending on the tenth anniversary of that date;

	 	 
	Redundancy	ceasing to be in Employment because the Company has decided that there is no longer any requirement or there is a reduced requirement for the Participant to perform the work which he previously performed;

	 	 
	Remuneration Committee	the duly authorised remuneration committee of the Board all of whose members are non-executive directors;

	 	 
	Retirement	normal retirement at or after any age at which the Participant is bound to retire under the terms of his contract of employment (or such other date as the Company may determine);

	 	 
	Rules	the rules of the Plan, including the Definitions Appendix, as amended from time to time;

	 	 
	Share	a fully paid ordinary share in the capital of the Company unless:

	 	 	 
	 	(i)	Rule 4.3 operates, in which case it shall mean a fully paid ordinary shares in the capital of the Employing Company; or

	 	 	 
	 	(ii)	Rule 5.7 operates, in which case it shall mean a fully paid ordinary in the capital of the company referred to in Rule 5.7;

	 	 
	Subsidiary	a company which in relation to the Company is a company as defined by Section 736 of the Companies Act 1985;

	 	 
	Taxes Act	the Income and Corporation Taxes Act 1988;

	 	 
	Tax Liability	in relation to a Participant, the amount of all taxes and/or national insurance contributions or any other contribution which any company in the Group is required to, or may account for and on behalf of or, if permitted, in respect of that
 Participant’s Award;

 

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	Trustee	the trustee from time to time of an employee share ownership trust established by the Company as an Employees’ Share Scheme;

	 	 
	Variation	means:

	 	 	 
	 	(i)	in relation to the equity share capital of the Company:

	 	 	 	 
	 	 	(a)	a capitalisation issue, an offer or invitation made by way of rights, a subdivision, a consolidation or reduction; or

	 	 	 	 
	 	 	(b)	any other variation;

	 	 	 
	 	(ii)	a demerger of the Company

	 	 
	 	which would, in the opinion of the Company, justify an adjustment to any Award;

	 	 
	Vest, Vested or Vesting	in relation to an Award, the point at which a Participant becomes absolutely entitled to all or some of the Shares the subject of that Award.

 

22Prepared and filed by St Ives Burrups

 
Exhibit 4.12

THE BT DEFERRED BONUS PLAN

THE RULES, 2001

AS ADOPTED ON 22ND JUNE, 1998

AND AMENDED ON 23RD JANUARY, 2001 AND 20TH FEBRUARY, 2001

AND IN AUGUST 2001 AND SEPTEMBER 2001

 

	CONTENTS
	 

	Rule
	Page	 
	1.     How
        the Deferred Bonus Plan will operate
	1	 
	2.     Limit
        on participation by Eligible Executive
	1	 
	3.     No
        rights to or in relation to Shares under the Deferred Bonus Award before
        Vesting
	2	 
	4.     General
        offer, scheme of arrangement or voluntary winding-up of the Company before
        Vesting
	3	 
	5.     Ceasing
        to be in Employment before Vesting
	4	 
	6.     The
        Vesting of the Deferred Bonus Awards
	6	 
	 	 	 
	Definitions
        Appendix
	8	 
	General
        Provisions Appendix
	12	 
	US
        Appendix
	14	 

 

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	1.	HOW THE DEFERRED BONUS PLAN WILL OPERATE

	 	 
	1.1	Policies set by a Committee

	 	 
	 	A Committee will set the policies for the Company’s operation and administration of the Deferred Bonus Plan within the terms of the Deferred Bonus Plan Rules, including the policies in relation to the following:

	 	 	 
	 	1.1.1	the Eligible Executives who will be entitled to participate;

	 	 	 
	 	1.1.2	the extent of Eligible Executives’ participation;

	 	 	 
	 	1.1.3	the Deferred Period for each Deferred Bonus Award; and

	 	 	 
	 	1.1.4	how Deferred Bonus Awards are granted.

	 	 
	 	The Committee can change any of its policies at any time, but it cannot change its policies to the detriment of a Participant’s subsisting Deferred Bonus Awards.

	 	 
	1.2	The Deferred Bonus Award

	 	 
	 	An Eligible Executive who has been awarded a Bonus may be recommended for the grant of a Deferred Bonus Award.

	 	 
	1.3	When Deferred Bonus Awards will be granted

	 	 
	 	The Date of Grant of a Deferred Bonus Award can be at any time but not during a Close Period of the Company. A Participant who has been granted a Deferred Bonus Award will be sent, as soon as administratively practicable, a certificate confirming its grant and the terms
 on which it is granted.

	 	 
	1.4	Awards personal to Participants

	 	 
	 	Deferred Bonus Awards cannot be transferred, assigned, charged or otherwise disposed of. On the death of a Participant, his Deferred Bonus Award(s) can Vest in accordance with Rule 5.1.

	 	 
	1.5	Rights of Participants before Vesting

	 	 
	 	A Participant has no rights of ownership, beneficial or otherwise, in respect of the Shares the subject of his Deferred Bonus Award prior to the Vesting of the Deferred Bonus Award.

	 	 
	2.	LIMIT ON PARTICIPATION BY ELIGIBLE EXECUTIVE

	 	 
	 	The number of Shares the subject of a Deferred Bonus Award will be calculated by reference to the amount of the Bonus awarded to the Eligible Executive, such that the Market Value at the Date of Grant of those Shares is no greater than a maximum percentage of the Bonus
 agreed by the Committee from time to time.

 

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	3.	NO RIGHTS TO OR IN RELATION TO SHARES UNDER THE DEFERRED BONUS AWARD BEFORE VESTING

	 	 
	3.1	No voting rights

	 	 
	 	A Participant has no voting rights attaching to the Shares the subject of his Deferred Bonus Award prior to the Vesting of the Deferred Bonus Award.

	 	 
	3.2	Dividends

	 	 
	 	A Participant has no rights to any dividends or any other rights attaching to the Shares the subject of his Deferred Bonus Award prior to the Vesting of the Deferred Bonus Award. However, the Company will recommend that a Deferred Bonus Award be increased after any
 dividend has been paid in relation to the Shares under the Deferred Bonus Award. The Trustee shall effect such increase by doing the following:

	 	 	 
	 	(a)	in the case of a dividend in specie paid in order to effect a demerger of the Company, retain or reinvest the dividend as appropriate so that it comprises only shares in the Employing Company (net of any taxes and, if applicable, associated costs); or

	 	 	 
	 	(b)	in the case of any dividend paid in any other circumstances (including a scrip election), retain or reinvest the dividend as appropriate so that it comprises only Shares, unless the Committee recommends otherwise.

	 	 
	3.3	Events which affect the share capital of the Company

	 	 
	 	Subject to Rule 3.4, if there is a Variation affecting the equity share capital of the Company prior to the Vesting of the Deferred Bonus Award, the number of Shares the subject of a Deferred Bonus Award may be adjusted on the recommendation of the Company. Participants
 will be notified in writing of any adjustment to the number of Shares the subject of their Deferred Bonus Awards.

	 	 
	3.4	A Variation which is a demerger of the Company

	 	 
	 	If there is a Variation which is a demerger of the Company, a recommendation will be made to the Trustee for a Deferred Bonus Award to be adjusted so as to be over shares in the Employing Company (“the Adjusted Award”). Each Adjusted Award will be equivalent to the
 Award which was adjusted (“the Unadjusted Award”) prior to the adjustment. An Adjusted Award will not be regarded as equivalent to an Unadjusted Award unless:

	 	 	 
	 	(i)	it is governed by the Rules in effect immediately before the preservation of the Unadjusted Award; and

	 	 	 
	 	(ii)	the total Market Value of the shares the subject of the Unadjusted Award is equal to the total Market Value immediately after the adjustment of the shares the subject of the Adjusted Award, calculated by reference to an averaging of the relevant Market Value, as
 recommended to the Trustee.

	 	 
	 	The provisions of the Deferred Bonus Plan shall, for this purpose, be construed as if the Adjusted Awards were granted under the Deferred Bonus Plan at the same time as the Unadjusted Awards. References to the “Company” shall, in relation to the Adjusted Award, be taken
 as references to the Employing Company and references to “Share” shall be taken as

 

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	 	references to a share in the Employing Company. The Trustee will agree to any amendment to the applicable employee share ownership trust to give effect to this Rule 3.4.

	 	 
	4.	GENERAL OFFER, SCHEME OF ARRANGEMENT OR VOLUNTARY WINDING-UP OF THE COMPANY BEFORE VESTING

	 	 
	4.1	General offer

	 	 
	 	If prior to the Vesting of the Deferred Bonus Award any person (together with any person acting in concert with that person, if relevant) obtains Control of the Company as result of making an offer to acquire Shares which is either unconditional or was made on a condition
 which has been satisfied so that the person making the offer (together with any person acting in concert with that person, if relevant) has Control of the Company, the Deferred Bonus Awards will Vest on the day that person obtains Control of the Company.

	 	 
	4.2	Extension to Participants of general offer

	 	 
	 	The Company will use its best endeavours to procure that if the Shares the subject of the Deferred Bonus Awards which have Vested under Rule 4.1 were not the subject of the general offer, the offeror will make an offer to acquire from the Participant his Shares on the same
 terms as Shares of the same class were acquired under the general offer.

	 	 
	4.3	Scheme of arrangement

	 	 	 
	 	4.3.1	Subject to Rule 4.3.2, if prior to the Vesting of the Deferred Bonus Award the court sanctions under section 425 of the Companies Act 1985 a compromise or arrangement for the purposes of or in connection with a scheme for the reconstruction of the Company or
 its amalgamation with any other company or companies, the Deferred Bonus Awards will Vest immediately after the Court has sanctioned the compromise or arrangement.

	 	 	 
	 	4.3.2	If the purpose and effect of the scheme of arrangement is to create a new holding company for the Company, where such holding company would, following the scheme of arrangement, have substantially the same shareholders and proportionate shareholdings as
 those of the Company immediately prior to the scheme of arrangement, Rules 4.3.2 to 4.3.5 shall apply and the Deferred Bonus Awards shall not Vest under Rule 4.3.1.

	 	 	 
	 	4.3.3	Where Rule 4.3.2. applies and any company (the “Acquiring Company”) obtains Control of the Company in pursuance of a compromise or arrangement sanctioned by the court under Section 425 of the Companies Act 1985 then (i) the Trustee will take such
 action as is appropriate to acquire shares in the Acquiring Company; and (ii) all outstanding Deferred Bonus Awards (“Old Awards”) shall be redesignated as awards (“New Awards”) over the shares in the Acquiring Company acquired by the Trustee so that the
 New Awards will be equivalent (on the basis set out in Rule 4.3.4. below) to the Old Awards, save that a New Award redesignated from an Old Award that was granted before 20th February, 2001 will have the additional rights set out in Rule 4.3.5.

	 	 	 
	 	4.3.4	The New Awards will not be regarded as equivalent to the Old Awards unless:

 

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	 	 	(i)	they are governed by the Rules in effect immediately before the redesignation of the Old Awards; and

	 	 	 	 
	 	 	(ii)	immediately after the redesignation, the total Market Value of the Shares the subject of the Old Awards is equal to the total Market Value of the shares the subject of the New Awards. The provisions of the Deferred Bonus Plan will, for this purpose, be construed
 as if the New Awards were granted at the same time as the Old Awards.

	 	 	 
	 	 	References to Shares will, in relation to the New Awards, be taken as references to shares of the company whose shares are under the New Awards. References to the Company shall, where appropriate, be taken to be references to the company whose shares are under
 the New Awards.

	 	 	 
	 	4.3.5	Notwithstanding any provision to the contrary in the Rules, a New Award redesignated from an Old Award that was granted before 20th February, 2001:

	 	 	 	 
	 	 	(i)	shall not lapse unless the Participant ceases to be in Employment before the end of the Deferred Period due to gross misconduct and shall, accordingly, always Vest in full on the date determined under Rule 6 or, if earlier, following a recommendation made by
 the Company pursuant to Rule 5.1 or 5.4; and

	 	 	 	 
	 	 	(ii)	on Vesting and at the time of transfer of any Shares pursuant to Rule 6.1, the Participant shall, unless he is a Participant to whom Rule 6.2 applies, also be entitled to receive, subject to any withholdings that may be necessary on account of all taxes and/or
 national insurance contributions, an amount equal to the amount (if any) by which the Market Value of the Shares subject to an Old Award at the date the court sanctions the compromise or arrangement under section 425 of the Companies Act 1985 is greater
 than the Market Value of the shares the subject of the New Award on Vesting.

	 	 
	5.	CEASING TO BE IN EMPLOYMENT BEFORE VESTING

	 	 
	5.1	Ceasing to be in Employment
        because of death, retirement, Redundancy, injury or disability

	 	 
	 	If a Participant ceases to be in Employment before the date on which the Deferred Bonus Award would Vest in accordance with Rule 6 because of death, normal retirement, Redundancy, injury or disability or because the company in the Group which employs the Participant
 ceases to be a Participating Company or an Associated Company or because of the transfer or sale of the undertaking or part of the undertaking in which the Participant is employed to a person who is neither a Participating Company nor an Associated Company, the Company
 will recommend before the cessation of Employment (subject to Rule 5.2) whether or not any Deferred Bonus Awards of the Participant should Vest. The Company may recommend that:

	 	 	 
	 	5.1.1	all his Deferred Bonus Awards will Vest; or

 

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	 	5.1.2	his Deferred Bonus Awards will not Vest until the date on which the Deferred Bonus Award would vest in accordance with Rule 6, and subject to such terms as the Company may recommend;

	 	 	 
	 	5.1.3	some or part of his Deferred Bonus Awards will Vest on the day he so ceases with the balance either immediately lapsing or Vesting on the date on which the Deferred Bonus Award would Vest in accordance with Rule 6; or

	 	 	 
	 	5.1.4	all his Deferred Bonus Awards will lapse on the day he so ceases,

	 	 
	 	in any case provided that the Company does not dispute the reason for the Participant ceasing to be in Employment. This Rule 5.1 is subject to Rule 4.3.5 and Rule 5.3.

	 	 
	5.2	Death

	 	 
	 	If a Participant ceases to be in Employment before the date on which the Deferred Bonus Award would Vest in accordance with Rule 6 because of death, the Company will make its recommendation within 30 days of notification to it of the death of the Participant.

	 	 
	5.3	Cessation at end of notice period

	 	 
	 	If, after 1st April, 2001 but (i) before the end of the Deferred Period of a Deferred Bonus Award, a Participant ceases to be in Employment following termination of his Employment by the relevant member of the Group for a reason other than gross misconduct, breach of
 contract or serious shortfall in performance, or (ii) after the Deferred Period the Participant ceases to be in Employment following termination of his Employment by the relevant member of the Group for a reason other than a gross misconduct or breach of contract, but in
 either case the Participant would not have so ceased to be in Employment before the Deferred Bonus Award would Vest in accordance with Rule 6 had the Participant served his full contractual notice period, that Deferred Bonus Award will Vest in accordance with Rule 6.

	 	 
	5.4	Ceasing to be in Employment in other circumstances

	 	 
	 	Subject to Rule 4.3.5 and Rule 5.3 and unless Rule 6.3 applies after the Deferred Period, if, (i) before the end of the Deferred Period, a Participant gives or is given notice to leave Employment, or ceases to be in Employment without any notice having been given, in any
 circumstances other than the ones referred to in Rule 5.1, or (ii) after the Deferred Period either his Employment is terminated by the relevant member of the Group for a reason other than gross misconduct or breach of contract, in either case his Deferred Bonus Award will
 lapse on the date his Employment ceases, unless the Company has recommended otherwise before the date of cessation of Employment or unless, (being female) she is entitled to exercise and subsequently does exercise the statutory right (or any corresponding contractual
 right) to resume Employment after an absence due to pregnancy. For the avoidance of doubt, this Rule 5.4 shall take precedence over Rule 6.3 during the Deferred Period. If, following the end of the Deferred Period the Participant resigns but his Deferred Bonus Award does
 not Vest in accordance with Rule 6.3.2, it will lapse.

	 	 
	5.5	Change of circumstances of Employment – deferral of Vesting and lapse provisions

	 	 
	 	If a Participant ceases to be in Employment but continues to provide services to the Group as a member of the Board or otherwise or becomes employed by an Associated Undertaking, the Company can decide that the Participant is deemed not to have ceased Employment
 and that

 

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	 	his Deferred Bonus Awards will continue to be held subject to the Rules. Rules 4 to 6 will apply when he subsequently ceases to provide services to the Group, or when he ceases to be employed by an Associated Undertaking or a member of the Group or in such other
 circumstances as the Company may determine, with such modifications as are necessary.

	 	 
	5.6	The effect of the lapsing of Deferred Bonus Awards

	 	 
	 	A Participant will not be entitled to the Shares the subject of his Deferred Bonus Award to the extent that it lapses.

	 	 
	6.	THE VESTING OF THE DEFERRED BONUS AWARDS

	 	 
	6.1	At the end of the Deferred Period

	 	 
	 	Subject to Rule 6.2, at the end of the Deferred Period, the Deferred Bonus Award will Vest and the Shares the subject of it will be transferred as soon as reasonably practicable to a Participant who at the end of the Deferred Period is:

	 	 	 
	 	6.1.1	still in Employment; or

	 	 	 
	 	6.1.2	is not still in Employment but is a Participant to whom the Shares can still be transferred because of Rule 4, Rule 5 or Rule 6.3.

	 	 
	6.2	Deferred Vesting

	 	 
	 	In the case of a Participant who is the Chief Executive of the Company, his Deferred Bonus Awards will Vest on the next Dealing Day immediately following the 1st January next following the end of the Deferred Period, subject to Rule 6.3.

	 	 
	6.3	Cessation in circumstances referred to under Rule 6.2

	 	 
	 	If a Participant who is the Chief Executive of the Company ceases to be in Employment before any of his Deferred Bonus Awards have Vested under Rule 6.2:

	 	 	 
	 	6.3.1	following termination of Employment by the relevant member of the Group for gross misconduct or breach of contract his Deferred Bonus Awards will lapse on the date he so ceases; or

	 	 	 
	 	6.3.2	because the Participant has terminated his Employment, his Deferred Bonus Award will not Vest until the end of the period of three months following the date of termination of his Employment and then only if he has not commenced employment with any UK
 telecommunications company in the FTSE 100.

	 	 
	6.4	The transfer of Shares

	 	 
	 	The Shares the subject of a deferred Bonus Award which has Vested will be transferred subject to any withholdings that may be necessary on account of a Participant’s Tax Liability in respect of the Deferred Bonus Award. The Company or any relevant company in the Group
 will be entitled to pay that Tax Liability by selling such number of Shares the subject

 

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	 	of the Deferred Bonus Award which has Vested as is necessary to discharge the Tax Liability and transfer the balance of those Shares to the Participant or as he may direct.

 

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	BT Deferred Bonus Plan Definitions Appendix

	 	 
	 	Introduction

	 	 
	 	The words and expressions used in the Rules which have capital letters have the meanings set out below and are incorporated in the Rules. In the Rules:

	 	 	 
	 	(i)	the headings are for the sake of convenience only and should be ignored when construing the Rules;

	 	 	 
	 	(ii)	reference to any statutory provisions are to those provisions as amended, extended or re-enacted from time to time, and include any subordinate legislation made under them; and

	 	 	 
	 	(iii)	unless the context requires otherwise, words in the singular include the plural and vice versa and words imputing either gender include both genders.

	 	 
	1.	Definitions

	 	 
	 	Associated Company

	 	 
	 	in relation to the Company:

	 	 	 
	 	(i)	any company which has Control of the Company; or

	 	 	 
	 	(ii)	any company (other than a Participating Company) which is under the Control of any company referred to in (i) above;

	 	 
	 	Associated Undertaking

	 	 
	 	a company or partnership in which the Company has an interest through a shareholding or otherwise;

	 	 
	 	Board

	 	 
	 	the board of directors for the time being of the Company or a duly authorised committee of it;

	 	 
	 	Bonus

	 	 
	 	the bonus awarded to an Eligible Executive in respect of his Employment in a period not exceeding the length of the relevant financial year of the Company;

	 	 
	 	Close Period

	 	 
	 	a period when the members of the Board of the Company are prohibited from dealing in Shares under the London Stock Exchange model code on transactions in securities or under any other similar code which the Company is subject to;

 

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	 	Committee

	 	 
	 	a duly authorised committee of the Board;

	 	 
	 	the Company

	 	 
	 	British Telecommunications plc (registered no. 1800000), unless:

	 	 	 
	 	(i)	Rule 3.4 operates, in which case it shall mean the Employing Company; or

	 	 	 
	 	(ii)	Rule 4.3.4 operates, in which case it shall mean the company referred to in Rule 4.3.4

	 	 
	 	which, in all cases, for the purposes of the Rules, may act through the Board or through any employee of the Group authorised to act in accordance with the policies established under Rule 1 of the Rules;

	 	 
	 	Control

	 	 
	 	has the meaning given by Section 840 of the Income and Corporation Taxes Act;

	 	 
	 	Date of Grant

	 	 
	 	in relation to a Deferred Bonus Award, the date on which that Award is granted;

	 	 
	 	Dealing Day

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

	 	 
	 	Deferred Bonus Award

	 	 
	 	a contingent right to Shares which has been granted or is proposed to be granted to a Participant under the Deferred Bonus Plan in respect of service and/or performance in a period not exceeding the length of the relevant financial year of the Company;

	 	 
	 	Deferred Bonus Plan

	 	 
	 	the BT Deferred Bonus Plan constituted by the Deferred Bonus Plan Rules;

	 	 
	 	Deferred Bonus Plan Rules

	 	 
	 	the rules of the Deferred Bonus Plan as amended from time to time;

	 	 
	 	Deferred Period

	 	 
	 	in relation to a Deferred Bonus Award the period (which cannot be less than three years) specified at the Date of Grant of the Deferred Bonus Award and at the end of which, unless Rule 6.2 applies, the Deferred Bonus Award may Vest provided that for the purposes of Rule 4
 and Rule 5 the Deferred Period will end when a Deferred Bonus Award has Vested in accordance with those Rules;

 

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	 	Definitions Appendix

	 	 
	 	this appendix which forms part of the Rules;

	 	 
	 	Eligible Executive

	 	 
	 	any person who at the Date of Grant is an employee of the Company or a Subsidiary;

	 	 
	 	Employing Company

	 	 
	 	means, following a demerger of the Company, the company whose shares are listed on the London Stock Exchange and which is the ultimate holding company (as defined in section 736 of the Companies Act 1985) of

	 	 	 
	 	(i)	the business within which the Participant is employed; or

	 	 	 
	 	(ii)	where the Participant ceased employment with the Group prior to the demerger, the company which employed the Participant at the time that his Deferred Bonus Award was made;

	 	 
	 	Employment

	 	 
	 	employment as an employee of a Participating Company or an Associated Company;

	 	 
	 	General Provisions Appendix

	 	 
	 	the appendix containing general provisions which form part of the Rules;

	 	 
	 	Group

	 	 
	 	Participating Companies and Associated Companies;

	 	 
	 	London Stock Exchange

	 	 
	 	the London Stock Exchange Limited (or any successor body carrying on the business of the London Stock Exchange) or any other exchange on which the Shares are listed or traded;

	 	 
	 	Market Value

	 	 
	 	in relation to a share on any day, an amount equal to its middle market quotation (as derived from the Daily Official List of the London Stock Exchange) on, at the discretion of the Company, that day or the Dealing Day immediately preceding that day or the average middle
 market quotation of the three Dealing Days immediately preceding that day;

	 	 
	 	Participant

	 	 
	 	in relation to the Deferred Bonus Plan a person to whom a Deferred Bonus Award has been granted, or in either case (where the context requires) his personal representatives;

	 	 
	 	Participating Company

	 	 
	 	the Company or any Subsidiary with employees who are Participants;

 

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	 	Redundancy

	 	 
	 	redundancy within the meaning of the Employment Rights Act 1996;

	 	 
	 	Rules

	 	 
	 	the rules of the Deferred Bonus Plan;

	 	 
	 	Share

	 	 
	 	a fully paid ordinary share in the capital of the Company unless:

	 	 	 
	 	(i)	Rule 3.4 operates, in which case it shall mean a fully paid ordinary share in the capital of the Employing Company; or

	 	 	 
	 	(ii)	Rule 4.3.4 operates, in which case it shall mean a fully paid ordinary share in the capital of the company referred to in Rule 4.3.4;

	 	 
	 	Subsidiary

	 	 
	 	a company which in relation to the Company is a company as defined by Section 736 of the Companies Act 1985;

	 	 
	 	Tax Liability

	 	 
	 	in relation to a Participant, the amount of all taxes and/or national insurance contributions or any other contribution which any company in the Group is required to account for in respect of a Deferred Bonus Award;

	 	 
	 	Variation

	 	 
	 	in relation to the equity share capital of the Company:

	 	 	 
	 	(i)	a capitalisation issue, an offer or invitation made by way of rights, a subdivision, a consolidation or reduction; or

	 	 	 
	 	(ii)	any other variation;

	 	 
	 	which the Company thinks justifies an amendment to a Deferred Bonus Award;

	 	 
	 	Vest or Vesting

	 	 
	 	in relation to a Deferred Bonus Award, the point at which a Participant becomes absolutely entitled to all or some of the Shares the subject of that Deferred Bonus Award under the terms of the Rules.

 

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	BT Deferred Bonus Plan General Provisions Appendix

	 	 
	 	These provisions apply to the Deferred Bonus Plan and are incorporated in the Rules. 

	 	 
	1.	Amending the Deferred Bonus Plan

	 	 
	1.1	Subject to Rule 1.2, the Company can amend the Rules at any time by resolution of the remuneration committee or such other committee as the board may decide from time to time.

	 	 
	1.2	No amendment will be made under Rule 1.1 which would abrogate or materially affect adversely the existing rights of a Participant unless it is made with his written consent or by a resolution passed as if the Deferred Bonus Awards constituted a separate class of share capital
 and the provisions of the Articles of Association of the Company and of the Companies Act 1985 relating to class meetings (with the necessary amendments) applied to that class.

	 	 
	1.3	The Company can adopt additional sections of the Rules applicable in any jurisdiction under which Deferred Bonus Awards may be subject to additional and/or modified terms and conditions, having regard to any securities, exchange control or taxation laws, which may
 apply to the Participant or, any member of the Group. Any additional sections must conform to the basic principles of the Deferred Bonus Plan and must not enlarge to the benefit of Participants any limits in the Rules.

	 	 
	2.	General

	 	 
	2.1	Notices

	 	 
	 	Any notice or other communication in connection with the Deferred Bonus Plan can be given by personal delivery, by post, (in the case of a company, to its registered office and in the case of an individual to his last known address) or by any other means which a Participating
 Company and its employees use to communicate with each other. Where a notice or other communication is given by first-class post, it shall be deemed to have been received 72 hours after it was put into the post properly addressed and stamped.

	 	 
	2.2	Documents sent to shareholders

	 	 
	 	Participants may but are not entitled to receive copies of any notice or document sent by the Company to the holders of Shares.

	 	 
	2.3	Replacement Deferred Bonus Award certificates

	 	 
	 	If any Deferred Bonus Award certificate is worn out, defaced or lost, it can be replaced on such evidence being provided as may be required.

	 	 
	2.4	Administration of the Deferred Bonus Plan

	 	 
	 	The Deferred Bonus Plan will be administered in a manner approved by the Company. No individual will have any authority in relation to the Deferred Bonus Plan unless that authority has been approved in accordance with the policy set by the appropriate Committee. The
 Company’s decision on any matter concerning the Deferred Bonus Plan or the interpretation of the Rules will be final and binding.

	 	 
	2.5	Costs of introducing and administering the Deferred Bonus Plan

 

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	 	The costs of introducing and administering the Deferred Bonus Plan will be borne by the Company. However, the Company can require any Participating Company to enter into such arrangement to reimburse the Company for any costs borne by the Company directly or
 indirectly in respect of such Participating Company’s officers or employees.

	 	 
	2.6	Termination of the Deferred Bonus Plan

	 	 
	 	The Deferred Bonus Plan will terminate when the Company shall decide. Termination of the Deferred Bonus Plan will not affect the subsisting rights of Participants.

	 	 
	2.7	Rights of Participants and Eligible Employees

	 	 
	 	Nothing in the Deferred Bonus Plan nor in any instrument executed pursuant to it will confer on any person any right to continue in Employment, or will affect the right of the Company or any member of the Group to terminate the Employment of any person without liability
 at any time with or without cause, or will impose upon the Group, the Board, or any other person any liability whatsoever (whether in contract, tort, or otherwise howsoever) in connection with:

	 	 	 
	 	2.7.1	the lapsing of any Deferred Bonus Awards pursuant to the Rules;

	 	 	 
	 	2.7.2	the failure or refusal to exercise any discretion under the Rules; and/or

	 	 	 
	 	2.7.3	a Participant ceasing to be a person who has the status or relationship of an employee or executive director with the Company or any other member of the Group for any reason whatever as a result of the termination of the employment relationship with the
 Company or any other member of the Group.

	 	 
	2.8	Any person who ceases to have the status or relationship of an employee or executive director with the Company or any other member of the Group for any reason as a result of dismissal shall not be entitled and shall be deemed irrevocably to have waived any entitlement by
 way of damages for dismissal or by way of compensation for loss of office or otherwise to any sum, damages, shares or other benefits to compensate that person for the loss of any rights, benefits or expectations under any Deferred Bonus Award, the Plan or any instrument
 executed pursuant to it.

	 	 
	2.9	Deferred Bonus Awards are subject to the Rules

	 	 
	 	Deferred Bonus Awards are granted incorporating and subject to the Rules.

	 	 
	2.10	Articles of Association

	 	 
	 	Any Shares acquired on the Vesting of Deferred Bonus. Awards are subject to the Articles of Association of the Company as amended from time to time.

	 	 
	2.11	Governing Law

	 	 
	 	The Rules are governed by and interpreted in accordance with the law of England. Each Participant, the Company and any other Participating Company or Associated Company submits to the jurisdiction of the English courts in relation to anything arising under the Deferred
 Bonus Plan.

 

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	BT Deferred Bonus Plan US appendix

	 	 
	1.	This Appendix constitutes the part of the Deferred Bonus Plan that will govern the grant of Awards to United States participants (the “US Awards”). It incorporates all the rules of the Deferred Bonus Plan (as set forth above as modified in accordance with the provisions of
 this Appendix).

	 	 
	2.	How US Awards will be granted

	 	 
	 	All US Awards will be evidenced by an instrument(s) in such form or forms as may from time to time be approved by the Company.

	 	 
	3.	Administration of the US Appendix

	 	 
	 	The Company shall (i) administer the US Appendix, (ii) establish from time to time such rules and regulations as it may deem appropriate for the proper administration of the US Appendix and (iii) make such determinations under, and such interpretations of, and take such
 steps in connection with, the US Appendix or US Awards as it may deem necessary or advisable.

	 	 
	4.	Addition of consistent provisions

	 	 
	 	Any US Award may be subject to any other provision imposed by the Company that is consistent with the purpose and intent of the US Appendix.

	 	 
	5.	Section 16 compliance

	 	 
	 	If any securities of the Company should become subject to Section 16 of the US Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company shall take all appropriate action to ensure that the US Appendix complies with Rule 16(b)-3 under the
 Exchange Act.

	 	 
	6.	Right to ADSs: Certain Restrictions

	 	 
	 	The Company may arrange for any US Award to constitute a right to receive ADSs rather than Shares, in which case references to “Shares” in the Deferred Bonus Plan shall be deemed to be reference to “ADSs”, as the context may require. In its discretion and upon such
 terms and conditions as it may implement from time to time, the Company may arrange for any US Award relating to Shares to be satisfied in the form of ADSs and for any US Award relating to ADSs to be satisfied in the form of Shares. Notwithstanding any contrary
 provisions in the Deferred Bonus Plan, the Company may also, in its discretion and upon such terms and conditions as it may implement from time to time, make US Awards subject to such additional conditions during the Deferred Period as may be necessary to effect a tax
 deferral for US Federal income tax purposes. In furtherance of the foregoing and notwithstanding any provision of Rule 5.3 to the contrary, if, before the end of the Deferred Period, a Participant who has been granted a US Award gives or is given notice to leave Employment,
 or ceases to be in Employment without any notice having been given, in any circumstances other than those referred to in Rule 5.1, his US Award will lapse on the date that his Employment ceases, unless the Company determines otherwise due to extraordinary circumstances
 involving severe financial hardship.

 

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	7.	US Withholding Taxes

	 	 
	 	It shall be a condition to the obligation of the Company to deliver Shares or ADSs pursuant to any US Award under the Deferred Bonus Plan that the recipient of it pay to the Company (or the Subsidiary that employs the Participant) such amount as may be required by the
 Company or such Subsidiary for the purpose of satisfying any liability for any US Federal, state or local taxes of any kind required to be withheld with respect thereto. Any US Award granted under the Deferred Bonus Plan may require the Company or permit the recipient of
 such Award to elect, in accordance with any applicable rules established by the Company, to withhold or to pay all or part of the amount of such withholding taxes in Shares of ADSs. Such election may be denied by the Company in its sole discretion, or may be made subject
 to certain conditions specified by the Company.

	 	 
	8.	Securities Laws compliance

	 	 
	 	No Shares or ADSs may be transferred in connection with a US Award unless the Company shall have determined that such transfer is in compliance with or pursuant to an exemption from all applicable US Federal and state securities laws.

	 	 
	9.	Termination of employment

	 	 
	 	Any provision in the Rules of the Deferred Bonus Plan relating to the consequences of a Participant’s termination of employment due to injury or disability shall only apply in the case of disability (as defined below).

	 	 
	10.	Certain Definitions

	 	 
	 	For purposes of the US Awards, the following terms shall have the following meanings, notwithstanding any contrary provisions in the Deferred Bonus Plan

	 	 
	 	“Disability” has the meaning specified in Section 22(e)(3) of the US Internal Revenue Code of 1986, as amended.

	 	 
	 	“Normal Retirement” means retirement after attaining age 65.

	 	 
	 	“Redundancy” will mean ceasing to be in Employment because the Company has decided that there is no longer any requirement or there is a reduced requirement for the Participant to perform the work which he previously performed.

 

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