Document:

EXHIBIT 10.40

 

FIRST AMENDMENT

 

TO

 

DISTRIBUTION AGREEMENT

 

 

THIS
FIRST AMENDMENT TO DISTRIBUTION AGREEMENT (the “Amendment”) is made and entered
as of March 5, 2005, between ACCESS BUSINESS GROUP INTERNATIONAL LLC, a
Michigan limited liability company, with its principal place of business at
7575 East Fulton Road, Ada, Michigan 49355 (“Access”) and INTERLEUKIN GENETICS
INC., a Delaware corporation with its principal place of business at 135 Beaver
Street, Waltham, Massachusetts 02452 (“Seller”).

 

WHEREAS,
Access and Seller are parties to that certain Distribution Agreement effective February 26,
2004, whereby Seller agreed to supply Genetic Tests (as defined in such
agreement) to Access for resale to third parties; and

 

WHEREAS,
Access desires to prepay Seller for certain of the Genetic Tests;

 

NOW,
THEREFORE, the parties agree as follows:

 

1.                                       Notwithstanding
Section 3 of the Distribution Agreement, Access shall pay to Seller within
fifteen (15) days of Seller’s receipt of a registration number as required under
the Clinical Laboratory Improvement Act of 1988, as amended, Two Million
Dollars ($2,000,000.00) as an advance payment (the “Payment”) for Genetic Tests
to be shipped to it upon submission of purchase orders to Seller at a later
date in compliance with the Distribution Agreement.  Seller shall credit the Payment in full
toward purchases of Genetic Tests.  The
payment terms for all purchases in excess of the Payment shall be in accordance
with Section 3 of the Distribution Agreement.

 

2.                                       Section 2
of the Distribution Agreement shall be amended and restated in its entirety to
read as follows:

 

“2.                                 Conditions to Purchase. 
The obligations of Access under Section 1 shall be subject to the
receipt by Access of evidence to its reasonable satisfaction that (a) the
Genetic Tests will be performed in a clinical laboratory that has obtained a
registration number as required (the “Required Certifications”) under the
Clinical Laboratory Improvement Act of 1988, as amended (“CLIA”), (b) Seller,
such laboratory, and the Genetic Tests 
to be provided by Seller in such laboratory are each in full compliance
with all applicable industry standards and applicable laws, regulations, and
standards and (c) the distribution of Genetic Tests by Access or its affiliates
shall not, in Access’ reasonable determination, subject Access to a material
risk with respect to product liability. 
Access agrees and acknowledges that, at certain volumes, Seller may
subcontract the Genetic Tests to other laboratories (“Reference Labs”), provided
that any such Reference

 

 

Lab
meet the Required Certifications under CLIA, and Seller provides such
documentation to Access at least thirty (30) days prior to the effectiveness of
any subcontract.”

 

3.                                       This
Amendment does not alter the Distribution Agreement in any other aspect and it
remains in full force and effect.

 

4.                                       This
Amendment may be executed in any number of counterparts, each of which shall be
an original and all of which together shall constitute one and the same
instrument.

 

IN WITNESS WHEREOF,
the parties have entered into this Amendment as of the date first set forth
above.

 

 

	
   

  	
  ACCESS BUSINESS
  GROUP

  INTERNATIONAL LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jay Ertl

  	
   

  
	
   

  	
   

  	
  Jay Ertl

  
	
   

  	
   

  	
  Vice President, Product Supply

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  INTERLEUKIN
  GENETICS INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Fenel Eloi

  	
   

  
	
   

  	
   

  	
  Fenel Eloi

  
	
   

  	
   

  	
  Chief Operating Officer

  

 

2EXHIBIT 10.41

 

SECOND AMENDMENT

 

TO

 

STOCK PURCHASE AGREEMENT

 

 

THIS
SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT (the “Amendment”) is made and
entered as of March 5, 2005, between PYXIS INNOVATIONS INC., a Delaware
corporation (“Investor”), and INTERLEUKIN GENETICS INC., a Delaware corporation
(the “Company”).

 

RECITALS

 

A.                                   Investor
and the Company are parties to that certain Stock Purchase Agreement (herein so
called) made as of March 5, 2003, as amended May 20, 2003, whereby
Investor acquired a controlling equity interest in, and amended existing and
extended additional working capital credit facilities to, the Company, to
enhance the Company’s capabilities for growth and strategic success.

 

B.                                     Investor
desires to extend the term of a working capital facility made available to the
Company, which would otherwise expire on March 5, 2005.

 

C.                                     The
parties desire to extend the term of the restriction on transfer of the
Preferred Stock or any Conversion Shares (as those terms are defined in the
Stock Purchase Agreement) acquired by Investor.

 

The
parties agree as follows:

 

1.                                       Section 2.5.1
of the Stock Purchase Agreement shall be amended and restated in its entirety
as follows:

 

“2.5.1                                                                  Strategic Relationships. 
At any time prior to the fourth anniversary of the date of this
Agreement, upon the request of the Company, Investor shall loan to the Company
up to $1.5 million (in the aggregate); provided that such request may only be
made following the board-approved payment of monies by the Company in
connection with the entry of a new or expanded strategic partnership or
research collaboration with one or more universities, health organizations, or
other thought leaders in genomics.”

 

2.                                       Section 5.2
of the Stock Purchase Agreement shall be amended and restated in its entirety
as follows:

 

“5.2                           Restrictions on Transfer. 
In addition to restrictions imposed upon Investor under the Registration
Rights Agreement, for a period of four years following the date of the Closing,
Investor will not sell or otherwise transfer its Preferred Stock or any
Conversion Shares to any Person who is not an Affiliate of Investor.”

 

 

3.                                       This
Amendment does not alter the Stock Purchase Agreement in any other aspect and
it remains in full force and effect.

 

4.                                       This
Amendment may be executed in any number of counterparts, each of which shall be
an original and all of which together shall constitute one and the same
instrument.

 

IN WITNESS
WHEREOF, the parties have executed this Second Amendment to Stock Purchase
Agreement as of the date first set forth above.

 

 

	
   

  	
  PYXIS
  INNOVATIONS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kim S. Mitchell

  	
   

  
	
   

  	
   

  	
  Kim S. Mitchell

  
	
   

  	
   

  	
  Assistant Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  INTERLEUKIN
  GENETICS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Philip R. Reilly

  	
   

  
	
   

  	
   

  	
  Philip R. Reilly

  
	
   

  	
   

  	
  Chief Executive Officer

  

 

2Exhibit
4.3

 

 

 

Rules of the Imperial
Tobacco Group

International Sharesave Plan

 

 

Imperial Tobacco Group PLC

 

 

CONTENTS

 

	
  CLAUSE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1.

  	
  DEFINITIONS

  	
   

  
	
  2.

  	
  COMMENCEMENT AND TITLE

  	
   

  
	
  3.

  	
  GRANT OF
  OPTION

  	
   

  
	
  4.

  	
  LIMITATIONS ON
  THE ISSUE OF SHARES

  	
   

  
	
  5.

  	
  EXERCISE
  PRICE

  	
   

  
	
  6.

  	
  ALTERATIONS OF SHARE
  CAPITAL

  	
   

  
	
  7.

  	
  EXERCISE
  OF OPTIONS

  	
   

  
	
  8.

  	
  LAPSE OF
  OPTION

  	
   

  
	
  9.

  	
  TAKEOVER AND LIQUIDATION

  	
   

  
	
  10.

  	
  ALLOTMENT
  AND LISTING

  	
   

  
	
  11.

  	
  EMPLOYMENT
  RIGHTS

  	
   

  
	
  12.

  	
  ADMINISTRATION OF THE PLAN

  	
   

  
	
  13.

  	
  TERMINATION OF THE PLAN

  	
   

  
	
  14.

  	
  GENERAL

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 1

  	
   

  
	
  Special International Rules

  	
   

  
	
  Appendix 1

  	
   

  
	
  Appendix 2

  	
   

  
	
  Appendix 3

  	
   

  
	
  Appendix 4

  	
   

  
	
  Appendix
  5

  	
   

  
	
  Appendix
  6

  	
   

  
	
  Appendix
  7

  	
   

  
	
  Appendix
  8

  	
   

  
	
  Appendix
  9

  	
   

  
	
  SCHEDULE 2

  	
   

  
	
  The Imperial Tobacco
  Group UK Sharesave Plan

  	
   

  
	
  SCHEDULE 3

  	
   

  
	
  The Imperial Tobacco
  Group Irish Sharesave Plan

  	
   

  
	
  SCHEDULE 4

  	
   

  
	
  Notional Awards

  	
   

  
	
  Appendix
  1

  	
   

  
	
  Appendix
  2

  	
   

  

 

 

1.              DEFINITIONS

 

In these Rules (unless the context otherwise
requires) the following words and expressions have the following meanings:

 

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

 

“Adoption Date” means the date on which the Plan is adopted by
the Company in general meeting;

 

“ADS” means the American Depositary Shares, each representing two
Shares, evidenced by American Depositary Receipts, which may be issued by
Citibank, N.A., as depositary (the “Depositary”)
pursuant to the Amended and Restated Deposit Agreement, dated as of November 2,
1998, among the Company, the Depositary and all holders and beneficial owners
of American Depositary Shares thereunder;

 

“Application Period” means such period as the Board may, in its
discretion, determine but being a period not more than 60 days from an
Invitation Date (and, for the avoidance of doubt, the Board may apply different
Application Periods to Eligible Employees of Participating Companies in
different jurisdictions);

 

“Associated Company” means any company Controlling or under the
Control of the Company or which is Controlled by the same person or persons as
Control the Company;

 

“Auditors” means the auditors for the time being of the Company;

 

“Board” means the Board of Directors for the time being of the
Company (or the directors present at a duly convened meeting of such Board),
the Remuneration Committee of the Board or any other duly authorised committee
thereof;

 

“Commencement Date” means subject to the approval of the Plan by
shareholders in general meeting, such date as the Board shall, in its
discretion, determine;

 

“Companies Act 1985” means the Companies Act 1985 of England and
Wales;

 

“Company” means Imperial Tobacco Group PLC;

 

“Continuous Service” means the aggregate amount of service with:

 

(a)         any Participating Company (including service
with such company before it became a Participating Company); and

 

(b)         any other company which is or was a Subsidiary
(including service with any such other company before it became a Subsidiary);

 

provided that:

 

(i)          all such service has been continuous; and

 

(ii)         in the case of an employee who is absent from
such employment for any reason for a period during which such employee’s
contract of service subsists, or by reason of maternity leave, and who then
returns to such employment, any such period of absence shall be deemed to have
formed part of such employee’s continuous service;

 

1

 

“Control” means the power of a person to secure:

 

(a)         by the holding of shares or possession of voting
power in or in relation to any company; or

 

(b)         by virtue of any powers conferred by the
articles of association or other document regulating any company,

 

that the affairs of any company are conducted in
accordance with the wishes of that person;

 

“Date of Grant” means the date on which the Grantor passes a
resolution to grant an Option under Rule 3.4 below;

 

“Eligible Employee” means any employee (including a director
holding a salaried employment or office) of a Participating Company who:

 

(a)         on the relevant Date of Grant has achieved such
period of Continuous Service not exceeding five years as the Board shall in
each case on or before the Invitation Date determine;

 

(b)         in the case only of a director holding a
salaried employment or office, usually works at least 25 hours per week
excluding time off permitted for meal breaks;

 

provided that:

 

(i)          at the Invitation Date no notice of termination
of such employment has been served by either the employee concerned or his
employing Participating Company and the employee or director in question has
not ceased to hold office or employment with a Participating Company; and

 

(ii)         the Board may also treat any other employee or
director of a Participating Company, or worker contracted to provide services on
a temporary basis to a Participating Company, who fails to fulfil the relevant
criteria as an Eligible Employee;

 

“Employees’ Share Scheme” has the meaning given to it in section 743 of
the Companies Act 1985;

 

“Exercise Price” means the price per Share at which a
Participant may acquire Shares pursuant to the Plan (as determined in
accordance with Rule 5);

 

“Grantor” means either the Board or the Trustee;

 

“Group” means the Company and its Subsidiaries from time to time;

 

“Imperial Tobacco Group Sharesave Scheme” means the Imperial Tobacco Group Sharesave
Scheme adopted on 14 August 1996, as amended from time to time;

 

“Internal Reorganisation” means a compromise or arrangement or offer
(including the circumstances set out in Rule 9.2) which, in the reasonable
opinion of the Board, having regard to the shareholdings in the Company and any
acquiring company before and after the compromise or arrangement and/or the
consideration given for the acquisition of the Shares and/or any other matter
which it considers relevant, is in the nature of an internal reorganisation or
reconstruction of the Company;

 

“Invitation Date” means the date upon which invitations to apply
for Options are issued by the Board, being a date within 42 days after the
Commencement Date and thereafter within 28 days after the date of public
announcement of the annual or half-yearly results 

 

2

 

of the Group or at any other time at which the
board resolves that it is appropriate to grant options;

 

“Local Currency Equivalent” means in relation to an amount denominated in GB
pounds sterling, the equivalent value in the local currency of a Participant’s
country of employment (or such other currency as the Board may permit from time
to time under the Savings Plan) at such exchange rate as the Board shall in its
discretion designate on or before the Invitation Date;

 

“London Stock Exchange” means the London Stock Exchange plc or any
successor company or body carrying on the business of the London Stock Exchange
plc;

 

“Normal Repayment Date” means in relation to any Participant the first
day of the month following the date on which the Participant makes, or should
have made, the final specified contribution (as defined in Rule 3.3) to the
Savings Plan and for this purpose the starting date of the Savings Plan shall
be the first day of the month following that in which the first such specified
contribution is made to the Savings Plan;

 

“Option” means a right to acquire Shares, or ADSs, granted pursuant
to the Plan;

 

“Participant” means a person who holds a Subsisting Option or (where the
context admits) his personal representatives;

 

“Participating Company” means any member of the Group which the Board
has designated as such for the time being;

 

“Plan” means the Imperial Tobacco Group International Sharesave
Plan as amended from time to time;

 

“Relevant Multiple” means such number of monthly contributions to a
Savings Plan as the Board may, in its discretion, invite Eligible Employees to
make in connection with the grant of an Option under the Plan, and, where the
context admits or requires, the number of such contributions to which a
particular Participant shall have committed himself;

 

“Repayment” means in relation to a Savings Plan, the amount of the contributions
repayable and, where relevant, of any bonus and/or interest payable under the
Savings Plan;

 

“Rules” means these rules as from time to time amended in
accordance with their provisions by the Board or by the Company;

 

“Savings Plan” means any savings plan or arrangement which has been
approved by the Board in its absolute discretion for the purposes of the Plan;

 

“Schedule 3” means Schedule 3 to the Act;

 

“Share” means a fully paid ordinary share in the capital of the
Company;

 

“Specified Age” means 60;

 

“Subsidiary” means any company in relation to which the Company:

 

(a)         holds a majority of the voting rights; or

 

(b)         is a member and has the right to appoint or
remove a majority of its board of directors; or

 

(c)         is a member and controls alone, pursuant to an
agreement with other shareholders or members, a majority of the voting rights
in it;

 

3

 

and includes any other company which is a Subsidiary
as defined above of a company which is itself a Subsidiary of the Company;

 

“Subsisting Option” means an Option to the extent that it has
neither lapsed nor been exercised;

 

“Trustee” means the trustee or trustees for the time being of any
employee trust established by the Company wholly or partly for the benefit of
all or most of the persons for the time being employed by or holding office
with the Group or any Participating Company or Companies which has been
designated by the Board as a trust out of which Options may be granted.

 

Where the context so permits the singular shall
include the plural and vice versa and the masculine gender shall include the
feminine.  Any reference to a statutory
provision includes a reference to that provision as for the time being amended
or re-enacted and shall include any regulations or other subordinate
legislation made under it.

 

2.              COMMENCEMENT AND TITLE

 

The Plan shall commence on the Commencement Date
and shall be known as the Imperial Tobacco Group International Sharesave Plan.

 

3.              GRANT OF OPTION

 

3.1            On or prior to an Invitation Date the Board in
its absolute discretion may decide to invite applications for the grant of
Options.  Such invitations shall be issued
in such form as the Board may prescribe from time to time including by way of electronic
communication.

 

3.2            Where applications are invited, the Board shall
determine whether or not invitations shall be sent to all Eligible Employees
(and, for the avoidance of doubt, the Board may send invitations to Eligible
Employees of Participating Companies in one jurisdiction but not to Eligible
Employees of Participating Companies in other jurisdictions) and any such
invitations must state:

 

(a)         the Exercise Price or the method by which the
Exercise Price for the Shares will be notified to Eligible Employees; and

 

(b)         the date being the last day of the Application
Period by which applications for the grant of Options must have been received
by the Board or such person as the Board may direct being not more than 60 days
after the Invitation Date; and

 

(c)         the Relevant Multiple or Multiples.

 

3.3            Applications for Options under the Plan shall be
in such form as the Board may prescribe from time to time and each:

 

(a)         must be accompanied by a duly completed
application form to enter into a Savings Plan under which the applicant will
agree to make the Relevant Multiple of such specified contributions being not
less than £5 (or its Local Currency Equivalent) per month or such other sum as
the Board may in its discretion determine nor (when aggregated with
contributions made under any other subsisting Savings Plan and/or under any
other savings contract linked to the Imperial Tobacco Group Sharesave Scheme)
more than £250 (or its Local Currency Equivalent) per month or such higher sum
as may be permitted by statute for UK Inland Revenue approved SAYE option
schemes, from time to time at the Invitation Date to secure on the Normal
Repayment Date, as nearly as may be, Repayments of an amount equal to that for
which Shares may be acquired under his Option if exercised in full; and

 

4

 

(b)         shall empower the Board or any person authorised
by it:

 

(i)          to amend the amount of the specified
contribution referred to in Rule 3.3(a) above to such lesser sum as shall
secure on the Normal Repayment Date, as nearly as may be, Repayments of an
amount equal to that for which Shares may be acquired by the Participant in the
event that the number of Shares for which an Eligible Employee applies for an
Option has to be reduced in accordance with Rule 3.4 below;

 

(ii)         to deduct from the Participant’s pay such
contribution as shall be specified by the Participant pursuant to Rule 3.3(a)
above or as may be amended pursuant to Rule 3.3(b)(i) above and pay the same on
behalf of the Participant in discharge of the Participant’s obligations under
the Savings Plan provided that where such deductions are not permissible under the
laws or regulations of the country of employment of a Participant the Board
may, in its discretion, require the Participant to furnish to the Board such
evidence in such form and manner as may be acceptable to it of the payment of
such contributions in accordance with the Savings Plan as shall be specified by
the Participant pursuant to Rule 3.3(a) or as may be amended pursuant to Rule 3.3(b)(i)
above.

 

3.4            Within 60 days of the date pursuant to Rule 5.1(a)
below by reference to which the Exercise Price was determined (including the
case where the number of Shares over which an Option is to be granted is
determined by Rule 3.4(a) below) and subject to the limitations and conditions
contained in the Plan, Options shall by resolution of the Grantor be granted to
each Eligible Employee who has made a valid application in respect of that
number of Shares as would have an aggregate Exercise Price not exceeding the
Relevant Multiple of the sterling equivalent of the Eligible Employee’s
proposed monthly contributions to the Savings Plan as at the Invitation Date:

 

Save that:

 

(a)         the Board may (but shall not be obliged to) make
such adjustments to the number of Shares placed under an Option as it may in
its absolute discretion determine to be appropriate taking into account the
actual and anticipated rate of interest applicable to the Eligible Employee’s
Savings Plan contributions and the actual and anticipated rate of exchange
between the savings currency and sterling (if savings are expected to be
retained in a currency other than sterling) over the period of the savings
contract and such other factor or factors, if any, as the Board may consider to
be relevant; and

 

(b)         where the Board in its discretion considers that
it is desirable to limit the number of Shares in respect of which Options are
granted in relation to any invitation the monthly savings contribution chosen
by each applicant under the Savings Plan shall be reduced in such manner as the
Board may, in its discretion, determine (provided that all Eligible Employees
shall be treated on a similar basis without regard to differences among
Eligible Employees in respect of remuneration, length of service or any other
factor) to the extent necessary so as to reduce the aggregate number of Shares
applied for to or as near to as shall be practicable without exceeding the said
limitation.

 

3.5            No payment will be required from a Participant
on the grant of an Option.  Each
Participant will be issued with a certificate in the form from time to time
determined by the Board.

 

3.6            No Option shall be capable of being transferred
by a Participant.

 

3.7            No Option shall be granted more than ten years
after the Adoption Date.

 

5

 

3.8            The reference in Rule 3.4 above to the sterling
equivalent of any amount means the sterling equivalent determined by the Board
by reference to such published rate of exchange between GB pounds sterling and
the relevant currency as may be available to the Board on or about the
Invitation Date and which the Board determines in its discretion to be
appropriate.

 

3.9            The Board may (but shall not be obliged to)
invite those Participants whose contributions to a Savings Plan are made in a local
currency to adjust the rate at which they contribute to the Savings Plan at any
time and from time to time during the life of that Savings Plan if the Board
considers that it may be in the interests of those Participants to do so in the
light of relative rates of exchange, interest rates or any other factor.  No Participant shall be obliged to adjust the
rate of contribution should the opportunity to do so be offered.

 

3.10          Where an Eligible Employee does not receive an
application for Options and/or any other information connected with any such
application as a result of an accidental act or omission on the part of the
Board or any person authorised by it in relation to the issue and/or
distribution of such documents, that shall not affect the validity of any other
matters pertaining to the Plan.

 

3.11          For the purposes of Rules 3.1 and 3.2 above, an
invitation shall be sufficiently given if delivered to an Eligible Employee
personally or sent to him at his place of work by electronic mail or facsimile
transmission or sent by prepaid post addressed to the Eligible Employee at his
address last known to the Company (including any address supplied by the
relevant Participating Company or any Subsidiary as being his address) or sent
through the Company’s internal postal service and such application made
pursuant to an invitation shall be sufficiently given if returned to the
Company or its duly appointed agent in person or sent by electronic mail or
facsimile transmission to the Company or its duly appointed agent or sent by
prepaid post addressed to the Company or returned to the Company through the
Company’s internal postal service duly completed by the Eligible Employee on or
before such date as shall be specified in the invitation but in any event no
application shall be duly received until the original signed application is
actually received by the Company or its duly appointed agent prior to the expiry
of the Application Period (unless the Company directs otherwise).

 

4.              LIMITATIONS ON THE ISSUE OF SHARES

 

Subject to Rule 6 below, no Option shall be
granted on any Date of Grant or proposed Date of Grant if, as a result:

 

(a)         the aggregate number of Shares (including Shares
represented by ADSs) acquired or which may be acquired during the ten years
preceding such Date of Grant under the Plan and all other Employees’ Share Schemes
established by the Company would exceed ten per cent. of the issued ordinary
share capital of the Company on that Date of Grant; or

 

(b)         the aggregate number of Shares (including Shares
represented by ADSs) acquired or which may be acquired during the preceding
five years under the Plan and all other Employees’ Share Schemes would exceed five
per cent. of the issued ordinary share capital of the Company on that Date of
Grant;

 

provided that, for the avoidance of doubt,
Shares (including Shares represented by ADSs) which shall have been the subject
of grants which lapse shall not be taken into account for the purposes of this
Rule 4.

 

5.              EXERCISE PRICE

 

5.1            Subject to Rule 6 below, the Exercise Price
shall be such amount expressed in GB pounds sterling (or in such other currency
or currencies as the Board shall specify) in the case of 

 

6

 

Options for Shares as
the Board shall determine being an amount not less than the greater of:

 

(a)         subject to Rule 5.2 below, 80 per cent. of the
middle market quotation per Share as derived from the Daily Official List of
the London Stock Exchange for the dealing day immediately preceding the
Invitation Date; and

 

(b)         in the case only of an Option to subscribe for
Shares, the nominal value of a Share.

 

5.2            For the purposes of an Option granted at any
time at which there shall be no dealings in the Shares, the Exercise Price
shall be not less than 80 per cent. of such sum as may be determined by the
Board to be the market value of a Share at that time.

 

5.3            For the avoidance of doubt, the Board may set a
different Exercise Price for Eligible Employees of Participating Companies in
one jurisdiction from those of another jurisdiction notwithstanding that
invitations may be sent out to all such Eligible Employees on the same
Invitation Date, but any such Exercise Price must fulfil the requirements of
Rule 5.1 above.

 

6.              ALTERATIONS OF SHARE CAPITAL

 

In the event of:

 

(a)         any variation in the share capital of the
Company whether by way of capitalisation of profits or reserves or by way of
rights or any consolidation or sub-division or reduction of capital, or
otherwise;

 

(b)         the Company paying a capital dividend;

 

(c)         a demerger of any company within, or business
owned by, the Group; or

 

(d)         in any other circumstances similarly affecting
Options granted under the Plan;

 

then the number of Shares subject to any
Subsisting Option, the Exercise Price and, where an Option has been exercised
but, as at the date of the variation of capital referred to above, no Shares
have been allotted or transferred pursuant to such exercise, the number of
Shares which may be so allotted or transferred and the price at which they may
be acquired, may be adjusted by the Board in such manner and with effect from
such date as the Board may determine to be appropriate provided always that:

 

(i)          no such adjustment shall take effect until it
has been referred to the Auditors and the Auditors have certified in writing to
the Board that the adjustment is, in their opinion, fair and reasonable; and

 

(ii)         the Exercise Price of an Option to subscribe for
Shares shall not be adjusted below the nominal value of a Share unless:

 

(A)        the Board is authorised to capitalise from the
reserves of the Company a sum equal to the amount by which the nominal value of
the Shares subject to the Option exceeds the aggregate adjusted Exercise Price;
and

 

(B)         the Board shall resolve to capitalise and apply
such sum on exercise of that Option.

 

7.              EXERCISE OF OPTIONS

 

7.1            The extent to which an Option may be exercised
shall be:

 

7

 

(a)         where exercise takes place on or after the Normal
Repayment Date related to the Option, in full or at the Board’s discretion, in
part; and

 

(b)         where exercise takes place earlier than the
Normal Repayment Date related to the Option (the “Early
Exercise Date”), in respect of such number of shares as may be
acquired with the number of specified contributions (plus any interest accrued
under the Savings Plan) which shall have been made on or before such Early
Exercise Date, subject to the maximum number of Shares under Option.

 

7.2            An Option shall be exercisable during the period
mentioned in Rule 7.4 below in respect of all or some of the Shares over which
it was granted by the Participant delivering to the Secretary of the Company at
its registered office (or otherwise as may be notified to Participants from
time to time) a written notice in the form prescribed by the Board from time to
time specifying the number of Shares in respect of which the Option is
exercised together with a remittance for that number of Shares calculated by
reference to the Exercise Price.  The
date of exercise of the Option shall be the date of receipt by the Company or
the Trustee (acting as agent of the Company) of such notice and payment.

 

7.3            It is a condition of the exercise of an Option
under the Plan that the Participant shall withdraw all sums due by way of
Repayment under the Savings Plan to which he has contributed in relation to the
Option.  If upon the exercise of an
Option the Repayment then due to a Participant under his Savings Plan is less
than the amount required to pay for all the Shares in respect of which it may
be exercised pursuant to Rule 7.1 above the Participant may add to the
Repayment up to a maximum of such sum as shall be necessary to pay for all such
Shares.  If the Repayment shall exceed
the amount required to exercise the Option to the extent possible (or to the
extent to which it is in fact exercised, if lower) such excess shall be paid to
the Participant provided that if the excess is less than the Exercise Price per
Share or such lower sum as the Board may determine such excess may be donated to
such charity or charities as the Board may in its discretion determine.

 

7.4            Save as otherwise provided, an Option may not be
exercised until the Normal Repayment Date. 
Subject only to the provisions of Rule 7.7 below, no Option may be
exercised later than six months after the Normal Repayment Date.

 

7.5            An Option shall cease to be exercisable upon the
Participant ceasing to be an employee or director of any member of the Group
(so as to hold no such employment or office) except where his so ceasing is by
reason of:

 

(a)         his retirement on reaching the Specified Age or
such other age at which he is bound to retire in accordance with the terms of
his employment; or

 

(b)         injury, disability or redundancy or his office
or employment either being in a company which ceases to be a Subsidiary or
relating to a business or part of a business which is transferred to a person
who or which is neither a Subsidiary nor a Group company; or

 

(c)         his leaving service at any time other than at a
time specified in sub-paragraph (a) or (b) above, provided that such event
occurs not earlier than three years from the Date of Grant of the Option;

 

in any of which circumstances the Option may be
exercised at any time during the period of six months from the date on which he
so ceases to be an employee or director of any member of the Group
notwithstanding that the Normal Repayment Date shall not have occurred.

 

7.6            For the purposes of Rule 7.5 above and Rule 9
below (but for no other purpose):

 

8

 

(a)         a Participant shall not be regarded as having
ceased to hold office or employment by reason of:

 

(i)          his being or becoming employed by a company
which ceases to be or is not a Participating Company but is nevertheless an
Associated Company or is under the Control of the Company; or

 

(ii)         his ceasing to be employed full-time but
continuing to be employed on a part-time basis; and

 

(b)         a Participant shall be regarded as ceasing to
hold office or employment when he holds no employment with any of the Company,
any Associated Company and any company Controlled by the Company.

 

7.7            In the event of the death of a Participant prior
to the Normal Repayment Date the Option may be exercised by his personal representatives
at any time during the period of twelve months commencing on the date of his
death (but not later) and the personal representatives shall be entitled to do
so notwithstanding that the Normal Repayment Date has not occurred and in the
event of the death of a Participant within six months commencing on the Normal
Repayment Date his personal representatives may exercise the Option at any time
within twelve months commencing on the Normal Repayment Date.

 

7.8            A Participant who reaches the Specified Age
prior to the Normal Repayment Date but continues to hold the office or
employment by virtue of which he is eligible to participate in the Plan may
exercise the Option within six months after the date of his reaching the
Specified Age.

 

7.9            If an Option becomes exercisable under any
provision of the Plan before the Normal Repayment Date it shall be exercisable
only to the extent permitted by Rules 7.1 and 7.3 above.  The Repayment made under the Savings Plan
entered into on the grant of an Option shall exclude any contributions made
direct by the Participant except to the extent that such are made pursuant to
any special arrangements relating to absence from employment or to the extent
permitted by the Board.  For the
avoidance of doubt, any Repayment under the Savings Plan shall exclude the
Repayment of any contributions made in advance under the Savings Plan the due
date for payment of which falls or would have fallen more than one month after
the date on which Repayment is made.

 

7.10          An Option shall be exhausted and automatically
cancelled immediately after it is first exercised notwithstanding that it shall
not have been exercised in respect of all of the Shares over which the Option
was granted.

 

8.              LAPSE OF OPTION

 

A Participant’s Option shall lapse and cease to
be exercisable:

 

(a)         upon the expiry of any of the periods for
exercise under the provisions of Rule 7 above and Rule 9 below, whichever shall
first occur;

 

(b)         if the Participant omits seven or more times to
make a monthly payment due under his Savings Plan or gives notice under the
Savings Plan requiring Repayment before the Normal Repayment Date unless such
non-payment or notice is in consequence of his ceasing to be an Eligible
Employee by virtue of one of the causes mentioned in Rules 7.5 or 7.7 above or
in the circumstances of Rules 7.8 above or Rule 9 below; or

 

(c)         if the Participant makes payments to a bank
account under his own control and fails to provide evidence as specified by the
Board that all contributions have been made to, and no withdrawals have been
made from, the account.

 

9

 

9.              TAKEOVER AND LIQUIDATION

 

9.1            If any person obtains Control of the Company as
a result of making:

 

(a)         a general offer to acquire the whole of the issued
share capital of the Company (not otherwise held or contracted to be acquired
by the offeror) which is made on a condition such that if it is satisfied the
person making the offer will have Control of the Company; or

 

(b)         a general offer to acquire all the shares in the
Company which are of the same class as the Shares (including the Shares
represented by ADSs);

 

then any Subsisting Option may be exercised
within six months of the time when the person making the offer has obtained
Control of the Company and any condition subject to which the offer is made has
been satisfied.

 

9.2            If under section 425 of the Companies Act 1985
the Court sanctions a compromise or arrangement scheme which leads to a third
party obtaining the ultimate control of the Company, any Subsisting Option may
be exercised within six months of the Court sanctioning the compromise or
arrangement provided that this Rule 9.2 shall not apply in the circumstances of
an Internal Reorganisation, unless the Acquiring Company fails to make an offer
to Participants to release Subsisting Options in accordance with Rule 9.4 below
within one week of the Court’s sanction under this Rule and in which case this
Rule shall apply as if the Court had sanctioned the scheme on the day following
the end of the period of one week mentioned above.

 

9.3            If any person becomes bound or entitled to
acquire shares in the Company under sections 428 to 430 of the Companies Act
1985 any Subsisting Option may be exercised at any time when that person
remains so bound or entitled.

 

9.4            If as a result of the events specified in Rules
9.1 or 9.2 above a company has obtained Control of the Company, or if a company
has become bound or entitled as mentioned in Rule 9.3 above, any Participant
may by agreement with that other company (the “Acquiring
Company”) within the Appropriate Period as defined in paragraph 38(3)
of Schedule 3 release any Subsisting Option of his in consideration of the
grant of a new Option (the “New Option”)
which satisfies the following conditions:

 

(a)         the New Option shall be over shares in the
Acquiring Company or another company which satisfies paragraph (b) or (c) of paragraph
18 of Schedule 3 in relation to the Acquiring Company and shall satisfy the
conditions specified in paragraphs 18 to 22 inclusive of Schedule 3;

 

(b)         the New Option shall be a right to acquire such
number of such shares in the Acquiring Company (or such other company) as shall
have on the grant of the New Option an aggregate market value equal to the
aggregate market value of the Shares subject to the Option immediately before
its release and for this purpose market value shall be ascertained by the
application of Rule 5.1(a) above as at the date of release of the Option and
grant of the New Option;

 

(c)         the New Option shall have an Exercise Price such
that the aggregate price payable on complete exercise equals the aggregate
price which would have been payable on complete exercise of the Option; and

 

(d)         the New Option shall be otherwise identical in
terms to the Option

 

AND the New Option shall, for all other purposes
of this Plan, be treated as having been acquired at the same time as the Option
in consideration of the release of which it is granted.  With effect from the release of any Option
pursuant to Rules 6, 7.1, 7.2 and 7.3, this Rule 9 and Rule 10 of this Plan shall
in relation to the New Option be construed as if 

 

10

 

references therein to “the Company” were
references to the Acquiring Company or, as the case may be, such other company
and all the Rules (other than Rules 3 to 5 inclusive) shall in relation to the
New Option be construed as if references therein to Shares were references to
shares in the Acquiring Company or, as the case may be, such other company in
respect of whose shares the New Option is granted.

 

9.5            If the Company passes a resolution for voluntary
winding up, any Subsisting Option may be exercised within six months of the
passing of the resolution.

 

9.6            For the purposes of this Rule 9 a person shall
be deemed to have obtained Control of a Company if he and others acting in
concert with him have together obtained Control of it.

 

9.7            The exercise of an Option pursuant to the
preceding provisions of this Rule 9 shall be subject to the provisions of Rule
7 above.

 

9.8            Any Option shall lapse if:

 

(a)         it shall not have been exercised by the expiry
of any time limit for exercise set out in this Rule 9, whichever shall expire
first; and

 

(b)         no agreement for the release of the Option shall
have been entered into by the expiry of the first Appropriate Period to
commence pursuant to Rule 9.4 above.

 

10.            ALLOTMENT AND LISTING

 

10.1          Subject to receipt of the appropriate remittance
and notice of exercise, Shares to be acquired pursuant to the exercise of an
Option will be allotted or transferred not later than 45 days after the
exercise of the Option and will rank pari passu in all respects with the Shares
in issue on the date of exercise save that they will not rank for any dividend
or other distribution paid or made by reference to the date (known as the
record date) on which entitlement to the dividend or distribution is fixed by
reference to the Company’s register of members if that date falls prior to the
date of exercise of the Option.

 

10.2          If the Shares are listed on the London Stock
Exchange at the date of allotment of any Shares pursuant to the Plan the
Company will apply to the London Stock Exchange for permission for such Shares
so allotted to be admitted to the Official List.  An application may be postponed at the
discretion of the Board until application can be made in respect of such number
of Shares as the Board consider appropriate.

 

11.            EMPLOYMENT RIGHTS

 

11.1          This Plan shall not form part of any contract of
employment between any member of the Group and any employee of any such company
and the rights and obligations of any individual under the terms of his office
or employment with any member of the Group shall not be affected by his
participation in the Plan or any right which he may have to participate
therein.

 

11.2          Participation in the Plan shall be on the
express condition that:

 

(a)         neither it nor cessation of participation shall
afford any individual under the terms of his office or employment with any
member of the Group any additional or other rights to compensation or damages;

 

(b)         no damages or compensation shall be payable in
consequence of the termination of such office or employment (whether or not in
circumstances giving rise to a claim for wrongful or unfair dismissal) or for
any other reason whatsoever to compensate him for the loss of any rights the
Participant would otherwise have had (actual or prospective) under the Plan
howsoever arising but for such termination; and

 

11

 

(c)         the Participant shall be deemed irrevocably to
have waived any such rights to which he may otherwise have been entitled.

 

11.3          No individual shall have any claim against a
member of the Group arising out of his not being admitted to participation in
the Plan which (for the avoidance of all if any doubt) is governed entirely by
the Rules of the Plan.

 

11.4          No Participant shall be entitled to claim
compensation from any member of the Group in respect of any sums paid by him
pursuant to the Plan or for any diminution or extinction of his rights or
benefits (actual or otherwise) under any Option held by him consequent upon the
lapse for any reason of any Option held by him or otherwise in connection with
the Plan and each member of the Group shall be entirely free to conduct its
affairs as it sees fit without regard to any consequences under, upon or in
relation to the Plan or any Option or Participant.

 

11.5          By accepting the grant of an Option under the
Plan, the Eligible Employee shall authorise and consent to the collection,
processing, transfer (including to countries outside the European Economic
Area) and retention of his personal data for use in connection with the
operation and implementation of the Plan by the Company, any Member of the
Group, the Trustee and/or any third party as may be retained by the Board from
time to time to administer the Plan.

 

12.            ADMINISTRATION OF THE PLAN

 

12.1          The Board may make and vary such regulations
(not being inconsistent with the Plan) as it thinks fit for the administration
and implementation of the Plan.  The
Board’s decision on any matter concerning the Plan or its interpretation (including
the rectification of errors or mistakes of procedure or otherwise) (other than
a matter to be certified by the Auditors) shall be final and binding.  In any matter in which they are required to
act hereunder, the Auditors shall be deemed to be acting as experts and not as
arbitrators and their decision shall be binding and final.

 

12.2          The Board shall be entitled by resolution to
amend all or any of the provisions of the Plan as the Board thinks fit except
that no alteration shall be made:

 

(a)         to the advantage of Participants to any of the
provisions of the Plan relating to:

 

(i)          eligibility;

 

(ii)         the limitations on the number or amount of Shares,
cash or other benefits subject to the Plan;

 

(iii)        the maximum entitlement of any one Participant;

 

(iv)        the basis for determining a Participant’s
entitlement to, and the terms of, Shares, cash or other benefits to be provided
under the Plan and for the adjustment thereof (if any) in the event of a
capitalisation issue, rights issue or open offer, sub-division or consolidation
of Shares or reduction of capital or any other variation of capital;

 

without the
prior sanction of an ordinary resolution of the Company in general meeting
except for minor amendments to benefit the administration of the Plan and
amendments to obtain or maintain favourable tax, exchange control or regulatory
treatment for Participants in the Plan or for any member of the Group; or

 

(b)         to any rights already accrued to any Participant
which would be to the disadvantage of such Participant, without the prior
consent of the majority of the affected Participants first having been obtained.

 

12

 

12.3          Written notice of any alteration made in
accordance with Rule 12.2 above shall be given to all Participants.

 

12.4          The Company shall keep available sufficient
issued and/or unissued Shares (including Shares to be represented by ADSs) in
the capital of the Company to satisfy the exercise in full of all Options for
the time being remaining capable of being exercised.

 

12.5          Participants shall be sent copies of any
document having a material effect on their rights at the same time as such
document is sent to holders of Shares.

 

12.6          Unless otherwise provided in these Rules, any
notice or other communication under or in connection with the Plan may be
given:

 

(a)         by the Company to an Eligible Employee or
Participant either personally or sent to him at his place of work by electronic
mail or by post addressed to the address last known to the Company (including
any address supplied by the relevant Participating Company or any Subsidiary)
or sent through the Company’s internal postal service; and

 

(b)         to the Company either personally or by post to
the Company Secretary (or its duly appointed agent).

 

Items sent by post shall be pre-paid and shall
be entirely at the Eligible Employee’s risk. 
Any notice or other communication to the Company shall not be deemed to
have been duly received until it is actually received by the Company or its
duly appointed agent (unless the Company directs otherwise).

 

12.7          The Company shall bear the costs of setting up
and administering the Plan.  However, the
Company may require any Participating Company to reimburse the Company for any
costs borne by the Company directly or indirectly in respect of such
Participating Company’s officers or employees.

 

12.8          The Company shall maintain all necessary books
of account and records relating to the Scheme.

 

12.9          The Board shall be entitled to authorise any
person to execute on behalf of a Participant, at the request of the
Participant, any document relating to the Plan, in so far as such document is
required to be executed pursuant hereto.

 

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

 

12.11        The provisions of the Company’s Articles of
Association for the time being in force with regard to the service of notices
upon members of the Company shall apply mutatis mutandis to any notice to be
given by the Company to Participants.

 

12.12        Notwithstanding anything to the contrary
contained herein, the Board may at any time and from time to time by resolution
and without further formality amend the Plan in such manner as the Board may
consider necessary or desirable in order to comply with, take advantage of, or
otherwise in connection with any taxation, legal, regulatory or other rule,
law, guideline, regulation or other provision of or prevailing in any
jurisdiction in which this Plan is or is intended to be operated provided that
no such amendment shall be made to the advantage of Participants save as
specified in Rule 12.2(a) above without the prior approval of the Company in
general meeting.

 

13.            TERMINATION OF THE PLAN

 

The Plan may be terminated at any time by the
Board or by the Company in general meeting but in any event shall terminate on
the tenth anniversary of the Adoption Date

 

13

 

and on such termination no further Options shall
be granted, but the subsisting rights of Participants shall not be affected by
such termination.

 

14.            GENERAL

 

14.1          Any Participating Company may provide money to
the Trustee or any other person authorised by the Board to enable them or him
to acquire Shares to be held for the purposes of the Plan, or enter into any
guarantee or indemnity for those purposes, to the extent not prohibited by section
151 of the Companies Act 1985.

 

14.2          The Plan shall be subject to, governed and
construed in accordance with English law and for the avoidance of doubt,
notwithstanding any translation of the Plan rules, the English version of the
Plan rules shall prevail at all times.

 

14

 

SCHEDULE 1

 

Special International Rules

 

The Rules of the Plan apply with and subject to the
following amendments and provisions which have been adopted by the Board
pursuant to Rule 12.7 for the purposes of the operation of the Plan in the
jurisdictions specified below:

 

Australia
(Appendix 1)

 

Bosnia
(Appendix 2)

 

Czech
Republic (Appendix 3)

 

France
(Appendix 4)

 

Germany
(Appendix 5)

 

Italy (Appendix
6)

 

Netherlands
(Appendix 7)

 

New Zealand
(Appendix 8)

 

United States
(Appendix 9)

 

The Rules of the Plan apply in the jurisdictions specified
below:

 

Greece

 

Hong Kong

 

Hungary

 

Kazakhstan

 

Kyrgyz
Republic

 

Poland

 

Russia

 

Singapore

 

Slovakia

 

Slovenia

 

Spain

 

Taiwan

 

Turkey

 

United Arab
Emirates

 

15

 

Appendix 1

 

IMPERIAL TOBACCO GROUP INTERNATIONAL
SHARESAVE PLAN

 

APPENDIX FOR AUSTRALIA

 

The purpose of this appendix is to specify the
terms and conditions under which the Plan is to be modified in its application
to any Option granted or to be granted to a person resident for tax purposes in
Australia.

 

Words or phrases defined in the Plan shall bear
the same meaning in this Appendix 1 except as otherwise provided.

 

Rule 1

 

	
  “Specified Age”

  	
  in Rule 1 shall be deleted.

  
	
   

  	
   

  
	
  Rule 7.5(a)

  	
  delete the words “on reaching Specified Age or such other
  age at which he is bound to retire in accordance with the terms of his
  employment”.

  
	
   

  	
   

  
	
  Rule 7.8 

  	
  shall be deleted and Rules 7.9 and 7.10 and any references
  thereto shall be re-numbered accordingly.

  
	
   

  	
   

  
	
  Any grant made pursuant to Rule 3 of the Plan
  shall, notwithstanding anything to the contrary contained in the Plan, be a
  grant of that number of Options, each being an option to acquire one Share,
  as may be determined by the Board and any reference in the Plan to ‘an Option’
  shall, where the context requires, be deemed to be a reference to such
  Options and so that:

   

  (a)         the number of such Options shall, for the
  purposes of Rule 3.4, be that number as would have an aggregate Exercise Price
  not exceeding the Relevant Multiples of the sterling equivalent of the
  Eligible Employee’s proposed monthly contributions to the Savings Plan as at
  the invitation date;

   

  (b)         if any adjustment is to be made by the Board
  pursuant to Rule 6 of the Plan, the Board may, in its discretion, cancel any
  subsisting Options granted to any relevant employee (whereupon any such
  Options shall lapse), may amend the price at which any Subsisting Option may
  be exercised or may arrange for the grant to any Participant of additional
  Options on such terms as to maturity and exercise price as the Board shall
  determine, subject always to the proviso in Rule 6;

   

  (c)         for the purposes of Rule 7.2 of the Plan, all
  or some of the Options may be exercised by the Participant on the terms set
  out in that Rule 7.2;

   

  (d)         Rule 7.10 of the Plan shall be deleted and
  replaced with the following:

   

  “7.10        An Option shall be exhausted and automatically
  cancelled immediately after any of the Options are first exercised
  notwithstanding that all Options granted shall not have been exercised.”; and

   

  (e)         subject always to the conditions in Rule 9.4,
  any grant of a New Option for the purposes of Rule 9.4 of the Plan shall also
  be deemed to be a grant of such number of New Options as shall give the employees
  a right to acquire the total number of shares in the Acquiring Company
  calculated in accordance with paragraph (b) of that Rule.  Any references to a new Option in that Rule
  9.4 shall be deemed to be a reference to the New Options.

  

 

16

 

Appendix 2

 

IMPERIAL TOBACCO GROUP INTERNATIONAL
SHARESAVE PLAN

 

APPENDIX FOR BOSNIA

 

The purpose of this appendix is to specify the
terms and conditions under which the Plan is to be modified in its application
to any Option granted or to be granted to a person resident for tax purposes in
Bosnia.

 

Words or phrases defined in the Plan shall bear
the same meaning in this Appendix 2 except as otherwise provided

 

Rule 1

 

	
  “Specified Age”

  	
   

  	
  shall be amended by deleting “60” and
  replacing it with “65 years and 20 years of paying social security and
  pension contributions (the “insurance record”)
  or 40 years of insurance record regardless of the age, unless otherwise
  agreed between the Participant and his employer;”

  

 

17

 

Appendix 3

 

IMPERIAL TOBACCO GROUP INTERNATIONAL
SHARESAVE PLAN

 

APPENDIX FOR CZECH REPUBLIC

 

The purpose of this appendix is to specify the
terms and conditions under which the Plan is to be modified in its application
to any Option granted or to be granted to a person resident for tax purposes in
the Czech Republic.

 

Words or phrases defined in the Plan shall bear
the same meaning in this Appendix 3 except as otherwise provided.

 

	
  Rule 3.3(b)

  	
   

  	
  this rule shall be deleted and replaced with 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “shall
  include an undertaking of the Participant to execute an agreement with
  his/her employer on deductions from such Participant’s salary (“Agreement on Deductions”) subject to the confirmation of
  the eligibility of the Participant by the employer. The Agreement on
  Deductions shall further include a joint obligation of the contracting
  parties to conclude an amendment to the Agreement on Deductions in the event
  of any of the circumstances specified in Rule 3.4. In particular, in the
  event that the number of Shares for which an Eligible Employee applies for an
  Option has to be reduced in accordance with Rule 3.4, the parties shall be
  required under this provision to conclude an amendment regarding reduction of
  the amount of regular monthly deductions from salary without undue delay of
  their notification in writing by the Company that such reduction has been
  approved by the Board.”

  

 

18

 

Appendix 4

 

IMPERIAL TOBACCO GROUP INTERNATIONAL
SHARESAVE PLAN

 

APPENDIX FOR FRANCE

 

The purpose of this appendix is to specify the
terms and conditions under which the Plan is to be modified so as to conform
with articles L225-177 to L225-186 of the French Code de Commerce as amended
(the “Code”) and an administrative
regulation (the “Instruction”) dated 6 May 1988,
reference N-3-88 and various articles of the French Tax Code, to the extent
required under French law in order to: (i) ensure that Options may be granted
to Eligible Employees who are French residents for tax purposes (“French Eligible Employees”) under the Plan; and (ii) obtain
the most favourable tax and social security treatment of the Plan available
under French law from the perspective of the Group and any French Eligible
Employee.

 

Words or phrases defined in the Plan shall bear
the same meaning in this Appendix 4 except as otherwise provided.

 

Rule 1

 

	
  “Eligible Employee”

   

   

  	
  Sub-paragraph (ii) shall be deleted and replaced with the
  following:

   

  “and the
  employee does not own on the relevant Date of Grant more than ten per cent.
  of the share capital of the Company”;

  
	
   

  	
   

  
	
  “Participant” 

  	
  shall be amended by deleting the words “personal
  representatives” and replacing them with the words “héritiers (heirs)”;

  
	
   

  	
   

  
	
  “Specified Age” 

  	
  shall be deleted;

  
	
   

  	
   

  
	
  “Subsidiary” 

  	
  the following paragraph shall be added to this definition;

   

  “Furthermore,
  a French company will only be deemed to be a subsidiary if, in addition to
  the conditions set out above, it is a company in which the Company holds
  directly or indirectly, at least ten per cent. of the share capital and/or
  voting rights”;

  
	
   

  	
   

  
	
  Rule 3.4

  	
  shall be amended by deleting the words “60 days of the
  date pursuant to Rule 5.1(a) below by reference to which the Exercise Price
  was determined” and replacing them with the words “Within 60 days of the
  dealing day immediately preceding the Invitation Date”;

  
	
   

  	
   

  
	
  Rule 3.7

  	
  shall be amended to read:

   

  “No Option
  will be granted more than 38 months after the Adoption Date.  No Option will be granted (i) during the
  period of 20 dealing days on the London Stock Exchange immediately following
  the payment of any cash dividend or stock dividend or the record date for any
  such dividend, (ii) during the ten dealing days on the London Stock Exchange
  both preceding and following the date on which the consolidated accounts of
  the Company (or if consolidated accounts are not drawn up, the annual
  accounts) are made public, and (iii) during the period elapsing between the
  date on which the corporate bodies of the Company are made aware of
  information which, if made public, could have a significant impact on the
  market price of the shares of the Company, and the date which is ten dealing
  days after the date on which such information is made public.”;

  

 

19

 

	
   

  	
   

  
	
  Rule 5.1(a)

  	
  shall be deleted and replaced with the following wording:

   

  “subject to
  Rule 5.2, 80 per cent. of the average middle market quotation per Share as
  derived from the Daily Official List of the London Stock Exchange for the 20
  dealing days immediately preceding the Date of Grant.”; and

  
	
   

  	
   

  
	
  Rule 5.2

  	
  shall be deleted and replaced with the following wording:

   

  “For the
  purposes of an Option granted at any time at which there shall be no dealings
  in the Shares, the Exercise Price shall be not less than such sum as may be
  determined by the Board, in accordance with the valuation rules set forth in
  article L225-177 of the Code, to be the market value of a Share on the Date
  of Grant.”; 

  
	
   

  	
   

  
	
  Rule 6 

  	
  shall be deleted and replaced with the following wording:

   

  “In
  principle the Exercise Price shall not be modified during the life of the
  Option.  However, in the event of any
  alteration in the issued share capital of the Company (whether by way of
  capitalisation of profits or reserves or any sub-division or reduction of
  capital, or any other operation envisaged by article L225-181 of the Code),
  then the number of Shares subject to any Subsisting Option and the Exercise
  Price may be adjusted by the Board in such manner and with effect from such
  date as the Board may deem appropriate in order to comply with article L225-181.”;

  
	
   

  	
   

  
	
  Rule 7.5 

  	
  shall be deleted and replaced with the following:

   

  “An Option
  shall cease to be exercisable upon the Participant ceasing to be an employee
  or director of any member of the Group (so as to hold no such employment or
  office) except where his so ceasing is by reason of any of the following
  circumstances:

   

  (a)     redundancy (licenciement pour motif
  économique);

   

  (b)    his being required by his employer to take retirement (mise
  à la retraite), or his taking retirement, in both cases, in circumstances
  where he is entitled to a full pension (retraite à taux plein) and has
  reached an age at which he is entitled to exercise his pension rights (l’âge
  d’ouverture des droits à la retraite);

   

  (c)     invalidity corresponding to the second or third category
  specified in article L341-4 of the Code de la Sécurité Sociale;

   

  (d)    his office or employment being either in a company which
  ceases to be a Subsidiary or relating to a business or part of a business
  which is transferred to a person who or which is neither a Subsidiary nor a
  Group company;

   

  (e)     his leaving service for any reason other than specified in
  sub-paragraph (a) to (d), at a time not earlier than three years from the
  Date of Grant.

  
	
   

  	
   

  
	
   

  	
  In cases of
  (a), (b), (c), (d) and (e), the Option may be exercised at any time during
  the period of six months from the date on which the Participant ceases to be
  an employee or director of any member of the Group notwithstanding that the
  Normal Repayment 

  

 

20

 

	
   

  	
  Date shall
  not have occurred.

  
	
   

  	
   

  
	
  Rule 7.7 

  	
  shall be amended to read as follows:

   

  “In the
  event of the death of a Participant, the Option may be exercised by his heirs
  (héritiers) at any time during the period of six months commencing on the
  date of his death (but not later) and the relevant héritiers (heirs) shall be
  entitled to do so notwithstanding that the Normal Repayment Date has not
  occurred.  For the avoidance of doubt, in
  the event of the death of the Participant prior to the Normal Repayment Date the
  provisions of Rule 7.1(b) above shall apply”;

  
	
   

  	
   

  
	
  Rule 7.8 

  	
  shall be deleted in its entirety;

  
	
   

  	
   

  
	
  Rule 8(b) 

  	
  shall be amended by deleting the reference to “Rule 7.8
  above” in the final line;

  
	
   

  	
   

  
	
  Rule 9

  	
  shall be deleted in its entirety and replaced with the
  following:

  
	
   

  	
   

  
	
   

  	
  “9.   Takeover and Liquidation

   

  9.1    In the event of:

   

  (a)         a change of Control of the Company in
  accordance with Rule 9.2;

   

  (b)         the Court sanctioning a compromise or arrangement,
  scheme under section 425 Companies Act 1985;

   

  (c)         a person becoming bound or entitled to acquire
  Shares pursuant to sections 428-430 of the Companies Act 1985;

   

  (d)         the passing of a resolution for the voluntary
  winding up of the Company;

   

  (e)         an appropriate offer or proposal shall be made
  to the French resident Participants in respect of any Subsisting Options.

  
	
   

  	
   

  
	
   

  	
  9.2    A person obtains control of the Company as a
  result of making:

   

  (a)         a general offer to acquire the whole of the
  issued share capital of the Company (not otherwise held or contracted to be
  acquired by the offeror) which is made on the condition such that if it is
  satisfied the person making the offer will have the Control of the Company;
  or

   

  (b)         a general offer to acquire all the shares in
  the Company which are of the same class as the Shares (including the Shares
  represented by the ADS).

  
	
   

  	
   

  
	
   

  	
  9.3    For the purposes of this Rule 9 a person shall be deemed
  to have obtained Control of a Company if he and others acting in concert with
  him have together obtained Control of it.”;

  

 

21

 

	
  Rule 12 

  	
  Rule 12.2(b) shall be amended to read as follows:

   

  “to any rights already accrued to any Participant which
  would be to the disadvantage of such Participant, without prior consent of
  such Participant.”

   

  The following wording shall be added to the end of this
  Rule:

   

  “12.13     In order to ensure the most favourable treatment for the
  Group (as a first priority) and for the French Eligible Employees (as a
  second priority) in terms of taxes, social security charges and all similar
  duties whatsoever, under French law from time to time in force, the Board
  may, in accordance with article L225-177 of the Code, impose an interdiction
  de revente immédiate (“Compulsory Holding Period”) during which the Shares
  acquired on exercise of any Option may not be sold by the French Eligible
  Employee (except in circumstances where such sale will not undermine a
  favourable regime otherwise applying, including for example those circumstances
  specified in article 91 ter of Annexe II of the Tax Code).  The Compulsory Holding Period may in no
  circumstances exceed three years from the date of exercise of the relevant
  Option.

   

  Furthermore, the Board may require the French Eligible
  Employees to expressly undertake to respect a Compulsory Holding Period, and,
  in the event of breach of this undertaking, to indemnify their French
  employing company and any member of the Imperial Tobacco Group in respect of
  all charges, expenses or liability of any nature whatsoever incurred by such
  entities as a result of such breach.”

  
	
   

  	
   

  
	
  Rule 13 

  	
  The following words shall be added to this Rule:

   

  “Furthermore,
  no further Options will be granted by the Board more than 38 months after the
  Adoption Date unless authorisation is given by the Company in general meeting
  for the Board to do so.  Such
  authorisation may be granted for a further period of up to 38 months.”;

  
	
   

  	
   

  
	
  Rule 14.2 

  	
  The following wording shall be added to this Rule:

   

  “, although for the purposes of Options granted to French
  Eligible Employees, the terms and conditions of the Plan shall be interpreted
  in accordance with French law, where necessary in order to ensure compliance
  with the Code, the Instruction and the relevant articles of the Tax Code, to
  the extent required under French law in order to ensure the most favourable
  tax treatment of the Plan from the perspective of the Group, as a first
  priority, and the French Eligible Employees, as a second priority.”

  

 

22

 

Appendix 5

 

IMPERIAL TOBACCO GROUP INTERNATIONAL
SHARESAVE PLAN

 

APPENDIX FOR GERMANY

 

The purpose of this appendix is to specify the
terms and conditions under which the Plan is to be modified in its application
to any Option granted or to be granted to a person resident for tax purposes in
Germany.

 

Words or phrases defined in the Plan shall bear
the same meaning in this Appendix 5 except as otherwise provided.

 

Rule 1

 

	
  “Specified Age”

  	
   

  	
  shall be deleted.

  
	
   

  	
   

  	
   

  
	
  Rule 7.5(a)

  	
   

  	
  delete the words “on reaching Specified Age or such other
  age at which he is bound to retire in accordance with the terms of his
  employment”.

  
	
   

  	
   

  	
   

  
	
  Rule 7.8

  	
   

  	
  shall be deleted and Rules 7.9 and 7.10 and any references
  thereto shall be re-numbered accordingly.

  

 

23

 

Appendix 6

 

IMPERIAL TOBACCO GROUP INTERNATIONAL
SHARESAVE PLAN

 

APPENDIX FOR ITALY

 

The purpose of this appendix is to specify the
terms and conditions under which the Plan is to be modified as to conform with
the provisions of the Italian Civil Code and to various provisions of the
Presidential Decree 22 December 1986, no. 917 (the Italian Consolidated Tax Act
“ICTA”) in order to obtain the most
favourable tax treatment of the Plan available under Italian law from the
perspective of the Group and any Italian Eligible Employee

 

Words or phrases defined in the Plan shall bear
the same meaning in this Appendix 6 except as otherwise provided.

 

Rule 1

 

	
  “Eligible Employee”

  	
  shall be amended to read:

   

  “any
  employee of a Participating Company which has a salaried employment on a
  permanent basis and any “collaboratore
  coordinato e continuativo” (including a director) of a
  Participating Company at the Invitation Date PROVIDED HOWEVER THAT at the
  Invitation Date no notice of termination of such employment has been served
  by either the employee concerned or his employing Participating Company. Such
  rule would also apply in respect of any “collaboratore
  coordinato e continuativo” (including a director) of a
  Participating Company”;

  
	
   

  	
   

  
	
  “Participant” 

  	
  shall be amended by deleting the words “personal
  representatives” and replacing them with the words “eredi (heirs)”;

  
	
   

  	
   

  
	
  “Specified Age” 

  	
  shall be deleted;

  
	
   

  	
   

  
	
  “Subsidiary” 

  	
  shall be replaced as follows:

   

  “means any company in relation to which the Company:

   

  (a)  holds a majority of the voting rights in the
  ordinary shareholders’ meeting; or

   

  (b)  has sufficient voting rights in the ordinary
  shareholders’ meeting to exercise a prevailing influence therein; or

   

  (c)  exercises a prevailing influence on the
  company by virtue of specific negotiable agreements;

   

  in accordance with the requirements of Article 2359 of the
  Italian Civil Code. Such definition also includes any other company which is
  a subsidiary as defined above of a company which is itself a subsidiary of
  the Company”.

  
	
   

  	
   

  
	
  Rule 6 

  	
  shall be deleted and replaced with the
  following wording:

   

  “In principle the Exercise Price shall not be modified
  during the life of the Option. However, in the event of any alteration in the
  issued share capital of the Company (by way of one of the operations
  envisaged by the Italian Civil Code) then the Exercise Price may be adjusted
  by the Board in such manner and with effect from such

  

 

24

 

	
  Rule 7.5

  	
  date as the Board may deem appropriate in order to comply
  with the provisions of the Italian Civil Code”

   

  shall be deleted and replaced with:

   

  “7.5      An Option shall cease to be exercisable upon
  the Participant ceasing to be an employee or a “collaboratore coordinato e
  continuativo” of any member of the Group (so as to hold no such employment or
  office) except where his so ceasing is by reason of any of the following
  circumstances:

   

  (a)         redundancy; or

   

  (b)         his being required by his employer to take
  retirement or his taking retirement, in both cases, in circumstances where he
  is entitled to a full pension and has reached an age at which he is entitled
  to exercise his pension rights; or

   

  (c)         invalidity; or

   

  (d)         his office or employment being either in a
  company which ceases to be a Subsidiary or relating to a business or part of
  a business which is transferred to a person who or which is neither a
  Subsidiary nor a Group company; or

   

  (e)         his leaving service at any time other than
  that specified in sub-paragraph (a) to (d) above, provided that such event
  occurs not earlier than three years from the Date of Grant;

   

  in any of which circumstances the Option may be exercised
  at any time during the period of six months from the date on which he so
  ceases to be an employee or a “collaboratore
  coordinato e continuativo” of any member of the Group
  notwithstanding that the Normal Repayment Date shall not have occurred.

  
	
   

  	
   

  
	
  Rule 7.6(a) 

  	
  shall be replaced with the following wording:

   

  “7.6      For the purposes of Rule 7.5 above and Rule 9
  below (but for no other purpose):

   

  (a)         a Participant shall not be regarded as having
  ceased to hold office or employment by reason of:

   

  (i)          his being or becoming employed or a “collaboratore coordinato e continuativo” by a company
  which ceases to be or is not a Participating Company but is nevertheless an
  Associated Company or is under the Control of the Company; and

   

  (b)         a Participant shall be regarded as ceasing to
  hold office or employment when he holds no employment or no agreement of “collaboratore coordinato e continuativo” with any of the
  Company, any Associated Company and any company controlled by the Company.”

  

 

25

 

	
  Rule 7.7 

  	
  shall be amended by deleting the words “personal
  representatives” and replacing them with the words “eredi (heirs)”;

  
	
   

  	
   

  
	
  Rule 7.8 

  	
  shall be deleted in its entirety;

  
	
   

  	
   

  
	
  Rule 8(b) 

  	
  shall be amended by deleting the wording “or
  in the circumstances of Rule 7.8 above” in the final line;

  
	
   

  	
   

  
	
  Rule 9 

  	
  the following words shall be added to this
  Rule:

   

  “(b)      any other operation envisaged by the Italian
  Civil Code for the acquisition of control”;

  

 

 

26

 

Appendix 7

 

IMPERIAL TOBACCO GROUP INTERNATIONAL
SHARESAVE PLAN

 

APPENDIX FOR NETHERLANDS

 

The purpose of this appendix is to specify the
terms and conditions under which the Plan is to be modified in its application
to any option granted or to be granted to a person resident for tax purposes in
the Netherlands.

 

Words or phrases defined in the Plan shall bear the
same meaning in this Appendix 7 except as otherwise provided.

 

	
  Rule 1

   

  “Eligible Employee”

  	
   

   

  delete the words “in the case only of a
  director holding a salaried employment or office, usually works at least 25
  hours per week excluding time off permitted for meal breaks”;

  
	
   

  	
   

  
	
  “Specified Age”

  	
  shall be deleted;

  
	
   

  	
   

  
	
  Rule 7.5(a)

  	
  delete the words “on reaching specified age or
  such other age at which he is bound to retire in accordance with the terms of
  his employment”;

  
	
   

  	
   

  
	
  Rule 7.8

  	
  shall be deleted and Rules 7.9 and 7.10 and
  any references thereto shall be re-numbered accordingly;

  

 

27

 

Appendix 8

 

IMPERIAL TOBACCO GROUP INTERNATIONAL
SHARESAVE PLAN

 

APPENDIX FOR NEW ZEALAND

 

The purpose of this appendix is to specify the
terms and conditions under which the Plan is to be modified in its application
to any Option granted or to be granted to a person resident for tax purposes in
New Zealand.

 

Words or phrases defined in the Plan shall bear
the same meaning in this Appendix 8 except as otherwise provided.

 

Rule 1

 

	
  “Specified Age” 

  	
  shall be deleted.

  
	
   

  	
   

  
	
  Rule 7.5(a)

  	
  delete the words “on reaching Specified Age or such other
  age at which he is bound to retire in accordance with the terms of his
  employment”.

  
	
   

  	
   

  
	
  Rule 7.8

  	
  shall be deleted and Rules 7.9 and 7.10 and any references
  thereto shall be re-numbered accordingly.

  

 

28

 

Appendix 9

 

IMPERIAL TOBACCO GROUP INTERNATIONAL
SHARESAVE PLAN

 

APPENDIX FOR THE UNITED STATES OF AMERICA

 

The purpose of this appendix is to specify the
terms and conditions under which the Plan is to be modified in its application
to any Option granted or to be granted to a person resident for tax purposes in
the United States of America.

 

Words or phrases defined in the Plan shall bear
the same meaning in this Appendix 9 except as otherwise provided.

 

Rule 1

 

	
  “Exercise Price”

  	
  the price per Share or price per ADS at which a
  participant may acquire Shares or ADSs pursuant to the Plan (as determined in
  accordance with Rule 5).

  
	
   

  	
   

  
	
  “Option” 

  	
  a right to acquire Shares, or ADSs, granted pursuant to
  the Plan.

  
	
   

  	
   

  
	
  Rule 3.2(a)

  	
  insert “or the ADSs, if applicable,” after the words “Exercise
  Price for the Shares”.

  
	
   

  	
   

  
	
  Rule 3.2(b)

  	
  insert as a new Rule 3.2(b) the following and
  re-number Rule 3.2(b) and 3.2(c) as 3.2(c) and 3.2(d) respectively.

   

  “(b)         whether the Shares to be issued upon the exercise of
  Options may be delivered in the form of ADSs; 
  and”

  
	
   

  	
   

  
	
  Rule 3.3(a)

  	
  insert the words “or ADSs, if applicable,” after the word “Shares”
  in the penultimate line.

  
	
   

  	
   

  
	
  Rule 3.3(b)(i)

  	
  insert the words “or ADSs, if applicable,” after the word “Shares”
  in lines 4 and 5.

  
	
   

  	
   

  
	
  Rule 3.4

  	
  insert the words “or ADSs, if applicable,” after the word “Shares”
  in line 2.

  
	
   

  	
   

  
	
  Rule 3.4(a)

  	
  insert the following words after “Invitation Date” in the
  final line:

   

  “and, if permitted by the relevant invitations, Options
  shall be granted to the Eligible Employee in respect of that number of ADSs
  as would have an aggregate Exercise Price not exceeding the Relevant Multiple
  of the Eligible Employee’s proposed monthly dollar contributions to the
  Savings Plan as at the Date of Grant;”

  
	
   

  	
   

  
	
  Rule 3.4(i) and (ii)

  	
  insert the words “or ADSs, if applicable,” after the word “Shares”
  wherever that word occurs.

  
	
   

  	
   

  
	
  Rule 5.1

  	
  in line 3 insert the words “or expressed in dollars in the
  case of Options for ADSs” after the words “in the case of Options for Shares”

  
	
   

  	
   

  
	
  Rule 5.1(a)

  	
  insert after the words “Invitation Date” in the final
  line, the words “or eighty per cent. of the closing price per ADS as derived
  from the New York Stock Exchange Consolidated Tape on the trading day
  immediately preceding the Invitation Date in the case of Options for ADS;”

  

 

29

 

	
  Rule 5.1(b) 

  	
  insert at the end of this rule “or the nominal value of
  the Shares represented by ADS in the case of Options for ADSs”.

  
	
   

  	
   

  
	
  Rule 5.2 

  	
  insert after the word “Shares” in line 2 “or ADSs, if
  applicable” and after the words “market value of a Share” in the last line “or
  ADS, respectively”.

  
	
   

  	
   

  
	
  Rule 6 

  	
  insert in the first line in the paragraph after “(d)” the
  words “or ADSs, if applicable,” after the words “the number of Shares”.

  
	
   

  	
   

  
	
  Rule 6(ii) 

  	
  insert after the words “nominal value of a Share”, in line
  2 “and the Exercise price of an Option to subscribe for ADS shall not be
  adjusted below the aggregate nominal value of the Shares represented by such
  ADSs”.

  
	
   

  	
   

  
	
  Rule 7.2

  	
  shall be deleted and
  replaced with the following:

   

  “An Option shall be exercisable during the
  period mentioned in Rule 7.4 below in respect of all of the Shares or ADSs,
  if applicable, over which it was granted by the Participant delivering to the
  Secretary of the Company at its registered office (or otherwise as may be
  notified to Participants from time to time) a remittance for that number of
  Shares or ADSs, if applicable, calculated by reference to the Exercise
  Price.  The date of exercise of the
  Option shall be the date the Company or the Trustee (acting as agent of the
  Company) is deemed to have received such payment.”

  
	
   

  	
   

  
	
  Rule 7.3

  	
  insert the words “or ADSs, if applicable,” after the word “Shares”
  wherever that word occurs.

  
	
   

  	
   

  
	
  Rule 7.4

  	
  delete the last sentence of Rule 7.4.

  
	
   

  	
   

  
	
  Rule 7.5

  	
  replace the words “may be exercised at any time during the
  period of six months from the date on which he ceases to be an employee or
  director of any member of the Group notwithstanding that the Normal Repayment
  Date shall not have occurred” with the words “will be exercised or lapse in
  accordance with the provisions of Appendix 9 of the Plan.  The Participant’s ceasing to be an employee
  or director of any member of the Group by reasons set out in Rule 7.5(i),
  (ii) or (iii) shall be an Early Exercise Date.  This provision shall be administered in
  accordance with Section 409A of the United States Internal Revenue Code and
  any guidance issued thereunder.” 

  
	
   

  	
   

  
	
  Rule 7.7

  	
  shall be replaced with the following:

   

  “The date of the death of the Participant will be
  considered an Early Exercise Date and any Options will be exercised or lapse
  in accordance with Appendix 9 of the Plan.”

  
	
   

  	
   

  
	
  Rule 7.8

  	
  shall not be applicable.

  
	
   

  	
   

  
	
  Rule 7.10 

  	
  insert the words “or ADSs, if applicable,” after the word “Shares”.

  
	
   

  	
   

  
	
  Rule 9.1

  	
  replace the words “may be exercised within six months of
  the time when the person making the offer has obtained Control of the Company
  and any condition subject to which the offer is made has been satisfied” with
  the words “will be exercised or lapse in accordance with the provisions of
  Appendix 9 of the Plan.  The date when the
  person making the offer has obtained Control of the Company and any 

  

 

30

 

	
   

  	
  condition subject to which the offer is made has been
  satisfied will be considered an Early Exercise Date, but only if it constitutes
  a change in ownership or effective control of the Company under Section 409A
  of the United States Internal Revenue Code and any guidance issued
  thereunder.” 

  
	
   

  	
   

  
	
  Rule 9.2

  	
  replace the words “may be exercised within six months of
  the Court sanctioning the compromise or arrangement” with the words “will be
  exercised or lapse in accordance with Appendix 9 of the Plan, and the
  effective date of the compromise or arrangement will be considered an Early
  Exercise Date, but only if it constitutes a change in ownership or effective
  control of the Company under Section 409A of the United States Internal
  Revenue Code and any guidance issued thereunder.”  

  
	
   

  	
   

  
	
  Rule 9.3

  	
  insert the words “, but only if it constitutes a change in
  ownership or effective control of the Company under Section 409A of the
  United States Internal Revenue Code and any guidance issued thereunder”
  immediately following the word “entitled.”

  
	
   

  	
   

  
	
  Rule 9.4(b)

  	
  insert the words “or ADSs, if applicable,” after the words
  “Shares” in line 4.

  
	
   

  	
   

  
	
  Rule 9.5

  	
  replace the words “may be exercised within six months of
  the passing of the resolution” with the words “will be exercised or lapse in
  accordance with Appendix 9 of the Plan, and the date which constitutes a
  change in ownership or effective control of the Company under Section 409A of
  the United States Internal Revenue Code and any guidance issued thereunder
  will be considered an Early Exercise Date.” 

  
	
   

  	
   

  
	
  Rule 10.2

  	
  insert a new Rule 10.2 as set out below after Rule 10.1
  and re-designate Rule 10.2 as Rule 10.3:

   

  “10.2       Subject to receipt of the appropriate remittance, in the
  event ADSs are to be acquired pursuant to the exercise of an Option, ADSs
  will be transferred not later than 45 days after the exercise of the Option
  and will rank pari passu in all respects with the ADSs in issue on the date
  of exercise save that they will not rank for any dividend or other
  distribution paid or made by reference to the date (known as the ADS record
  date) on which entitlement to the dividend or distribution is fixed by the
  Depositary if that date falls prior to the date of exercise of the Option.”

  
	
   

  	
   

  
	
  Rule 10.4

  	
  insert a new Rule 10.4 as set out below:

   

  “10.4       If the ADSs are listed on the New York Stock Exchange,
  Inc. at the date of transfer of ADSs pursuant to the Plan the Company will,
  if required, apply to the New York Stock Exchange, Inc. for permission for
  such ADSs so transferred to be listed on the New York Stock Exchange, Inc.”.

  
	
   

  	
   

  
	
  Rule 14.1 

  	
  insert the words “or ADSs, if applicable” after the word “Shares”
  in line 2.

  

 

Notwithstanding any provision to the contrary, the exercise
date for an Option granted to a Participant covered under this Appendix 9 shall
be a date certain following the Participant’s Normal Repayment Date (or Early
Exercise Date, where applicable) (collectively referred to herein as “Determination
Date”), and any Option payable with an Exercise Price less than Fair Market
Value

 

31

 

on the date certain shall be automatically exercised.  Any Option payable with an Exercise Price
greater than Fair Market Value on the date certain shall automatically
lapse.  No Participant covered by this
Appendix 9 shall make any election or exercise discretion with respect to the
exercise or lapse of any applicable Option. 
Unless otherwise provided in the invitation issued for the Option in
accordance with Rules 3.1 or 3.2 of the Plan, the date certain shall be the
date 30 days following the Participant’s Determination Date.  For purposes of this paragraph, “Fair Market
Value” means the closing price per ADS as derived from the New York Stock
Exchange Consolidated Tape on the trading day immediately preceding the date
certain.

 

Any Participant’s contributions held under a Savings Plan
attributable to a Participant’s Option which lapse in accordance with the
preceding paragraph shall automatically be paid to the Participant in
accordance with the terms of the Plan.

 

32

 

SCHEDULE 2

 

The Imperial
Tobacco Group UK Sharesave
Plan

 

33

 

SCHEDULE 3

 

The Imperial
Tobacco Group Irish Sharesave
Plan

 

34

 

SCHEDULE 4

 

Notional Awards

 

The rules governing Notional Awards (the “Phantom Plan”) shall be constituted by the rules of the
Plan save as the same (including the definitions used) are modified by the
terms of this schedule 4, as set out below.

 

In relation to any invitation made under the
Plan, the terms of this schedule 4 shall, unless otherwise determined by the
Board, apply in respect of Eligible Employees resident in each of the
jurisdictions (“Relevant Employees”) specified in Appendix 1 to this schedule
4:

 

1.              In this Phantom Plan the following terms shall have the
following meanings:

 

“Award” the sum paid or to be paid to a Relevant Employee by way of
remuneration in accordance with this Plan on the exercise of a Notional Award
being the difference between the Exit Price and the Notional Exercise Price for
each Share in respect of which the Notional Award is exercised;

 

“Exit Price” the middle market price of a Share as derived from the
London Stock Exchange Daily Official List for the dealing day immediately
preceding that on which a Notional Award is exercised;

 

“Notional Award” the notional right to acquire at the Notional
Exercise Price Shares in accordance with the terms of the Plan;

 

“Notional Gain” the sum paid or to be paid to a Relevant
Employee by way of remuneration in accordance with this Plan on the exercise of
a Notional Award being the difference between the Exit Price and the Notional
Exercise Price for each Share in respect of which the Notional Award is
exercised, but only if the Exit Price is higher than the Notional Exercise
Price;

 

“Notional Exercise Price” the price per Share at which a Participant may
acquire Shares the subject of a Notional Award calculated in accordance with
Rule 5 of the Plan;

 

“Subsisting Notional Award” a Notional Award to the extent that it has
neither lapsed nor been exercised;

 

2.              In Rules 3, 8, 9, 11, 12 and 13 of the Plan references to Option,
Exercise Price, and Eligible Employee shall be replaced by references to
Notional Award, Notional Exercise Price, and Relevant Employee respectively.

 

3.              In respect of each grant of Notional Awards, the Board shall
identify those Relevant Employees to whom Notional Awards shall be granted and
shall grant the Notional Award(s) in the same manner as provided in Rule 3.4 of
the Plan.  For the avoidance of doubt,
Rule 3.4(c) of the Plan shall apply to the grant of Notional Awards as it does
for the grant of Options under the Plan. 
The Relevant Employee will be given a certificate stating the Notional
Exercise Price and the number of Shares subject to the Notional Award.

 

4.              In Rule 4, for the purposes of calculating the limits
contained therein, the aggregate number of Shares shall include the number of
Shares the subject of Notional Awards.

 

5.              The Notional Award shall be capable of being exercised in
all respects in the same manner as an Option in accordance with Rule 7 of the
Plan save that no payment or remittance is due as provided in Rules 7.1 and 7.2
and provided that the Notional Award may only be exercised in full where
exercise occurs on or after Normal Repayment Date.

 

6.              Rule 7.3 shall be deleted and replaced with the following:

 

35

 

“7.3       The exercise of a Notional Award under the Phantom
Plan shall be subject to the following conditions (a) that the Participant
shall withdraw all sums due by way of Repayment under the Savings Plan to which
he has contributed in relation to the Notional Award and (b) that the
Participant provides the Company with evidence in such form as it may require,
of his Savings Plan and the Repayments due to him under the Savings Plan.

 

7.              Rule 9.4 and 10 of the Plan shall not apply in relation to
the Notional Awards.

 

8.              Within 30 days of receipt of the appropriate notice in
accordance with Rule 7 the Board shall procure payment to the Relevant Employee
of the Notional Gain attributable to the Shares in respect of which the
Notional Award has been exercised.

 

9.              There shall be made from any payment under Rule 8 of the
Phantom Plan such deductions (on account of tax, national insurance
contributions, social security contributions or similar liabilities) as may be
required by law or as the Company may reasonably consider to be necessary or
desirable.

 

10.            If there is an adjustment to Options pursuant to Rule 6 of
the Plan, an adjustment confirmed by the Auditors in writing to be in their
opinion an equivalent adjustment shall be made to Notional Awards.

 

11.            Payments under Rule 8 of the Phantom Plan will not be
pensionable.

 

36

 

Appendix 1

 

THE IMPERIAL TOBACCO GROUP INTERNATIONAL SHARESAVE
PLAN – NOTIONAL AWARDS

 

Belgium

 

Canada

 

Macedonia

 

Serbia

 

Ukraine

 

The Rules of the Plan apply with and subject to
the following amendments and provisions which have been adopted by the Board
pursuant to Rule 12.7 for the purposes of the operation of the Plan in the
jurisdiction specified below:

 

Canada (Appendix 2)

 

37

 

Appendix 2

 

IMPERIAL TOBACCO GROUP INTERNATIONAL
SHARESAVE PLAN – NOTIONAL AWARDS

 

APPENDIX FOR CANADA

 

The purpose of this appendix is to specify the
terms and conditions under which the Phantom Plan is to be modified in its
application to any Notional Award granted or to be granted to a person resident
for tax purposes in Canada.

 

Words or phrases defined in the Phantom Plan
shall bear the same meaning in this Appendix 2 except as otherwise provided.

 

Section 1

 

	
  “Award” 

  	
  delete the
  word “remuneration” after the words “to be paid to a Relevant Employee by way
  of” and replace with the phrase “a bonus or similar payment in respect of services
  rendered by the Relevant Employee”, and add the phrase “, but only if the
  Exit Price is higher than the Notional Exercise Price” after the words “in
  respect of which the Notional Award is exercised”.

  
	
  “Notional Gain”

  	
  delete the
  word “remuneration” after the words “to be paid to a Relevant Employee by way
  of” and replace with the phrase “a bonus or similar payment in respect of
  services rendered by the Relevant Employee”.

   

   

  
	
  Section 5

  	
  is deleted
  and replaced with the following:

  

 

5.             (a)           The Notional Award shall be capable of being exercised in
all respects in the same manner as an Option in accordance with Rule 7 of the
Plan save that no payment or remittance is due as provided in Rules 7.1 and 7.2,
and provided that, notwithstanding any other provision of the Plan or the
Phantom Plan, no amount in respect of an Award or a Notional Gain shall be paid
to a Relevant Employee later than the end of the calendar year which is the
third calendar year immediately following the end of the calendar year of the
Date of Grant.

 

(b)          Rule 7.4 shall be deleted and replaced with the
following:

 

“7.4       Save as otherwise provided, an Award may not be
exercised until the Normal Repayment date. No Award (including for greater
certainty a Subsisting Award) may be exercised later than 6 months after the
Normal Repayment Date or November 15th in the calendar year of the Normal
Repayment Date, whichever is earlier, and all Awards in respect of which the
Exit Price is higher than the Notional Exercise Price which are not already exercised
shall be deemed to be exercised on November 15th in the calendar year of the
Normal Repayment date, and for this purpose the Participant must elect to add
to the Repayment for the purposes of Rule 7.3 by November 30th of the calendar
year of the Normal Repayment Date. [NTD: The dates within this
Appendix may be changed at Imperial’s discretion as long as all cash awards are
distributed to employees in Canada by December 31 in the third calendar
following date of grant (e.g. if grant made in 2004, award must be paid by
December 31 2007.) We have tried to ensure that there is sufficient time
between the Normal Repayment Date, the exercise and the distribution of the
award]. For greater certainty, all Awards (including Subsisting Awards)
in respect of which the Exit Price is equal to or less than the Notional
Exercise Price shall not be deemed to be exercised pursuant to this Rule 7.4.

 

38

 

(c)           Rule 7.5 shall be amended by adding the phrase “or
by November 15th in the calendar year of the Normal Repayment Date (except to
the extent that such Award is deemed to be exercised in accordance with Rule 7.4),
whichever is earlier” after the words “notwithstanding that the Normal
Repayment Date shall not have occurred”.

 

(d)          Rule 7.7 shall be amended by adding the phrase “,
but in any event the personal representatives shall not be entitled to exercise
the Award (except to the extent that such Award is deemed to be exercised in
accordance with Rule 7.4) later than November 15th in the calendar year of the
Normal Repayment Date” after the words “within twelve months commencing on the
Normal Repayment Date”.

 

(e)           Rule 7.8 shall be amended by adding the phrase “or
by November 15th in the calendar year of the Normal Repayment Date (except to
the extent that such Award is deemed to be exercised in accordance with Rule 7.4),
whichever is earlier” after the words “within six months after the date of his
reaching the Specified Age”.

 

(f)           Rule 8(b) shall be amended by adding “provided
that in no event shall the Normal Payment Date occur later than November 1 of
the calendar year which is the third calendar year immediately following the
end of the calendar year of the Date of Grant”, to be added after the words “above
or Rule 9 below”.

 

(g)          Rule 9.1 shall be amended by adding the phrase “,
but in any event not later than November 15th of the calendar year of the
Normal Repayment Date (except to the extent that such Award is deemed to be
exercised in accordance with Rule 7.4)” after the words “is made had been
satisfied”.

 

(h)          Rule 9.3 shall be amended by adding the phrase “,
but in any event not later than November 15th of the calendar year of the
Normal Repayment Date (except to the extent that such Award is deemed to be
exercised in accordance with Rule 7.4)” after the words “of the Court
sanctioning the compromise or arrangement”.

 

(i)            Rule 9.4 shall be amended by adding the phrase “,
but in any event not later than November 15th of the calendar year of the
Normal Repayment Date (except to the extent that such Award is deemed to be
exercised in accordance with Rule 7.4)” after the words “that person remains so
bound or entitled”.

 

(j)            Rule 9.4 shall be amended by adding the phrase “,
but in any event not later than November 15th of the calendar year of the
Normal Repayment Date, “ after the words “as defined in paragraph 38(3) of Schedule
3”.

 

(k)           Rule 9.5 shall be deleted and replaced with the following:

 

“9.5       If the Company passes a resolution for voluntary
winding up, any Subsisting Award may be exercised at any time within six months
of the passing of the resolution or by November 15th of the calendar year of
the Normal Repayment Date in respect of such Subsisting Award (except to the
extent that such Subsisting Award is deemed to be exercised in accordance with
Rule 7(D)), whichever is earlier.

 

39

 

SPECIMEN

 

THE IMPERIAL TOBACCO GROUP

 

INTERNATIONAL SHARESAVE PLAN (the “Plan”)

 

 

INVITATION

 

(on Company headed notepaper)

 

 

Dear Colleague,

 

 

The Directors of Imperial Tobacco Group PLC
invite you to apply for an option to acquire ordinary shares in Imperial
Tobacco Group PLC (the “Company”) under the Rules of the above Plan.

 

Enclosed are:

 

1.              a booklet which explains how the Plan works;

 

2.              an application for a share option;

 

3.              [[an application to open a savings account with [                 ]];

 

You should read these documents carefully before
deciding to commit yourself to participating. 
If you are in any doubt about any feature of the Plan, please contact •.

 

Under the Rules you are entitled to take out a
savings contract, with a monthly contribution of up to £250 or its equivalent
in your local or other agreed currency. 
If you wish, however, you can take out a contract, depending upon the
frequency of your salary payments, for any amount up to the maximum, subject to
a minimum contribution of £5 per month (or the equivalent sum at the Date of
Grant in the currency of your country of employment).

 

If you would like to join the Plan you should
complete and sign the attached Share Option Application [and savings account
application forms].  THESE MUST BE
RETURNED TO • NOT LATER THAN [     PM]
ON [         ].  IT WILL NOT BE POSSIBLE TO CONSIDER
APPLICATIONS RECEIVED AFTER THAT DATE.

 

Yours sincerely

 

 

[Company Secretary]

 

40

 

SPECIMEN

 

THE IMPERIAL TOBACCO GROUP PLC

 

INTERNATIONAL SHARESAVE PLAN

 

 

SHARE OPTION APPLICATION

 

 

To:                         The Plan Administrator

 

PLEASE USE BLOCK CAPITALS

 

	
   

  	
   

  

 

 

	
  SURNAME

  	
   

  	
  MR/MRS/MISS/MS

  	
   

  
	
   

  	
   

  
	
  FIRST NAMES

  	
   

  
	
   

  	
   

  
	
  HOME
  ADDRESS

  	
   

  
	
   

  	
   

  
	
   

  	
  POSTCODE

  	
   

  
	
   

  	
   

  	
   

  
	
  PLACE OF
  EMPLOYMENT

  	
   

  
										

 

I wish to save [£      ]
per month (between £5 and £250) for 36 months (or the equivalent sums at the
Date of Grant in the currency of my country of employment)

 

	
  NOTES:

  	
   

  	
  (1)

  	
   

  	
  Contributions must be
  not less than £5 per month and the aggregate contributions to be made in any
  month under this contract and any other contract(s) linked to this Plan into
  which you have previously entered must not be more than £250. For weekly paid
  employees, a quarter of the monthly amount will be deducted weekly until the
  equivalent of [36/60] monthly payments have been made, (or the equivalent
  sums at the Date of Grant in the currency of your country of employment).

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (2)

  	
   

  	
  The Normal Repayment
  Date may be postponed if you miss any contributions.

  

 

PLEASE READ AND SIGN

 

•              I hereby apply for an option over ordinary
shares in the capital of Imperial Tobacco Group PLC, the cost of which will be
met from repayments and any additional sums under the savings contract for
which a proposal form is attached.

 

•              I hereby declare that I am applying for an
option on my own behalf and not as a trustee or nominee for any other
person(s).

 

•              I hereby authorise the Company to submit my savings
application to [           ]
on my behalf and to make the corresponding deductions from my pay.

 

•              I authorise the Company Secretary to make such
adjustments to the amount to be saved by me under the savings contract referred
to above as may be necessary if my application is scaled down in accordance
with the Rules of the Plan and the number of shares allotted to me is less than
the number of shares which I have 

 

41

 

applied for, further I authorise the Company
to submit such amended savings application to [         ].

 

•              I understand that if I am granted an option it
will be subject to the Rules of the Plan, by which I agree to be bound.  A copy of the Rules of the Plan is available
for inspection at [              ].

 

Unless the context otherwise requires terms defined in the
Rules of the Plan shall have the same meaning herein.

 

	
  SIGNATURE

  	
   

  	
  DATE

  

 

42

 

SPECIMEN

 

THE IMPERIAL TOBACCO GROUP

 

INTERNATIONAL SHARESAVE PLAN

 

OPTION CERTIFICATE

 

	
  Name of
  Option Holder

  	
   

  	 

	
   

  	
   

  
	
  Address of
  Option Holder

  	
   

  
	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
   

  	
   Post Code

  	
   

  
	
   

  	
   

  	
   

  
	
  Option
  Certificate Number 

  	
   

  	
   

  
	
   

  
	
  Number of
  shares granted under this option 

  	
   

  	
   

  
	
   

  
	
  Date of
  grant 

  	
   

  	
   

  
												

 

This is to certify that the above named person
was on the above date granted an option as specified for ordinary shares of
[  ]p each in the capital of Imperial
Tobacco Group PLC (the “Company”) at an exercise price of [     ]p per share upon and subject to the terms
of The Imperial Tobacco Group International Sharesave Plan.

 

Signed on behalf of

 

	
   

  	
  Director

  	
   

  	
   

  	
    Secretary

  

 

NOTES:                  (1)           The option cannot be assigned or transferred.

 

(2)           In order to exercise your option complete the
Form of Exercise printed overleaf and send it together with a cheque for the
relevant exercise price of the shares and evidence of the amount repaid under
your savings contract to the Company Secretary of the Company.

 

THIS DOCUMENT MUST BE RETAINED.  PLEASE KEEP IT IN A SAFE PLACE.  This certificate is issued as a matter of
record only and is not a document of title.

 

43

 

SPECIMEN

 

[Reverse of Certificate]

 

THE IMPERIAL TOBACCO GROUP

 

INTERNATIONAL SHARESAVE PLAN

 

 

FORM OF EXERCISE OF OPTION

 

	
  To:

  	
  The Company Secretary

  
	
   

  	
  Imperial Tobacco Group
  PLC

  

 

(In order to exercise your option you should
complete, sign and return this document to the Company Secretary at the above
address.)

 

1.              I wish to exercise the option referred to on the reverse
Option Certificate in respect of [          ]
ordinary shares.  (Insert the number of
shares in respect of which the option is exercised.  If you do not wish to exercise the option for
all the shares shown on the attached certificate you may exercise options for a
lesser number.

 

2.              I enclose a cheque for £           in
favour of Imperial Tobacco Group PLC being the total exercise price payable
under this option for the above specified number of ordinary shares together
with evidence of the amount repaid to me under my savings contract.

 

Personal Details

 

	
  SURNAME

  	
   

  	
   MR/MRS/MISS/MS

  	
   

  	
   

  
	
   

  	
   

  
	
  FIRST NAMES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  HOME
  ADDRESS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  POST CODE

  
	
   

  	
   

  
	
  SIGNATURE

  	
   

  	
   DATE

  	
   

  	
   

  
												

 

NOTE:                   This option may be exercised only by the person
to whom it was granted or their personal representative(s).

 

IF YOU ARE IN ANY DOUBT, PLEASE CONTACT YOUR/THE
PLAN ADMINISTRATOR

 

44

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