Document:

exhibit4-3.htm

Exhibit 4.3

 

BT GROUP PLC

BT GROUP INCENTIVE SHARE PLAN

As approved by the Board on 14 April 2011 and approved by ordinary resolution of Shareholders in general meeting on 13 July 2011

Expiry date 13 July 2021

	
  

	
THE RULES OF THE BT GROUP INCENTIVE SHARE PLAN

	
  

	 

	
  

	
CONTENTS

 

	  	  	
Page

	  	  	  
	
1.

	
How the Plan will operate

	
1

	  	  	  
	
2.

	
Performance targets

	
2

	  	  	  
	
3.

	
Limit on the number of Shares which can be issued and Treasury Shares which can be used

	
2

	  	  	  
	
4.

	
Rights in relation to Shares prior to the Vesting of an Award

	
3

	  	  	  
	
5.

	
General offer, scheme of arrangement or voluntary

	  
	
 

	
winding-up of the Company

	
5

	  	  	  
	
6.

	
Ceasing to be in Employment during the Incentive Period

	
8

	  	  	  
	
7.

	
The end of the Incentive Period

	
10

	  	  	  
	
8.

	
Transfer of Shares

	
11

	  	  	  
	
9.

	
Amending the Plan

	
11

	  	  	  
	
10.

	
General

	
12

	  	  	  
	
US Appendix

	  	
15

	  	  	  
	
Definitions Appendix

	  	
19

	  	  	  

 

THE RULES OF THE BT GROUP INCENTIVE SHARE PLAN

	
1.

	
HOW THE PLAN WILL OPERATE

	
1.1

	
Policies set by the Board

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

	
  

	
1.1.1

 

1.1.2

 

1.1.3

 

1.1.4

 

1.1.5

 

1.1.6

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

 

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

 

the Incentive Period for each Award;

 

the maximum amount of an Eligible Executive's Award;

 

how Awards are granted; and

 

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

 

1.2           When Awards will be granted

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

	
1.3

	
Awards personal to Participants

Awards cannot be transferred, assigned, charged or otherwise disposed of.  On the death of a Participant, his Awards can be transmitted to his personal representatives.  A Participant can renounce his Award within 30 days following the Date of Grant and, to the extent renounced, the Award will be treated as if it had never been granted. If a Participant purports to transfer, assign, charge or otherwise dispose of his Award otherwise than as permitted by this Rule 1.3, his Award shall immediately lapse.

	
1.4 

	
How Awards are granted

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

	
1.5  

	
Award certificate

When an Award is granted to a Participant, the Participant will, as soon as administratively practicable, receive an Award certificate specifying the basis on which the Award may Vest in accordance with the Rules, and whether or not the Award is subject to Rule 7.3. An Award certificate will be in such form as the Company may determine from time to time.

2.           PERFORMANCE TARGETS

2.1           Awards and performance targets

An Award will be granted subject to a performance target selected by the Remuneration Committee which will, subject to the relevant provisions under the Rules, have to be met before the Award can Vest.  The grant or Vesting of an Award can be subject to any additional terms and conditions the Company considers appropriate.  The performance target and any additional terms and conditions which the Vesting of an Award is subject to will be specified at the Date of Grant.  If Awards are exchanged under Rule 5.7 the performance target can be varied at the discretion of the Remuneration Committee to take account of this.

If an event or transaction occurs which causes the Company to consider that the performance target subject to which a subsisting Award has been granted is no longer appropriate, the Company may substitute or vary the performance target in such manner (and make such consequential amendments to the rules) as:

(a)           is reasonable in the circumstances; and

(b)           produces a fairer measure of performance and is neither materially more nor less difficult to satisfy.

The subsisting Award shall then take effect subject to the performance target as so substituted or varied.

	
2.2

	
Different performance targets can apply to different Eligible Executives

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

	
3. 

	
LIMIT ON THE NUMBER OF SHARES WHICH CAN BE ISSUED AND TREASURY SHARES WHICH CAN BE USED

	
3.1 

	
The limit for all Shares issued and Treasury Shares used under the Plan

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

	
  

	
3.1.1

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

	
  

	
3.1.2

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

	
3.2 

	
Meaning of allocation and exclusion from these limits

The references in this Rule 3 to the “allocation” of Shares mean, in the case of any share option plan, the placing of unissued Shares or (for so long as UK institutional shareholders recommend) Treasury Shares under option and, in the case of any other Employees’ Share Scheme, the issue and allotment of Shares, or (for so long as UK institutional shareholders recommend) the transfer of Treasury Shares.  For the purposes of the limit in this Rule 3:

	
  

	
3.2.1

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

	
3.2.2  

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

	
3.3 

	
Adjustment to Shares to be taken into account

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

	
3.4  

	
The individual limit

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

	
4.

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

	
4.1

	
Voting rights, dividends and other rights

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

	
  

	
4.1.1

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

	
  

	
4.1.2

	
in the case of any dividend paid in any other circumstances, the Award shall be increased by an appropriate number of Shares unless the Company recommends otherwise

and in either case, the number of shares by which the Award is increased must have, unless Rule 4.3 applies, a Market Value on the date of increase which is as close as possible equal in value to the aggregate dividend (net of any taxes) paid in respect of the same number of Shares as those under the Award.

	
4.2

	
Events which affect the share capital of the Company

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

	
4.3

	
A Variation which is a demerger of the Company

If there is a Variation which is a demerger of the Company, if the Company thinks it appropriate it, or the Trustee on the recommendation of the Company, may adjust an Award so as to be over shares in the Employing Company ("the Adjusted Award").  Each Adjusted Award will be equivalent to the Award which was adjusted ("the Unadjusted Award") prior to the adjustment.  An Adjusted Award will not be regarded as equivalent to an Unadjusted Award unless:

	
  

	
4.3.1

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

	
  

	
4.3.2

	
the total Market Value of the shares the subject of the Unadjusted Award is equal to the total Market Value immediately after the adjustment of the shares the subject of the Adjusted Award, calculated by reference to an averaging of the relevant Market Value, as specified by the Company or as recommended to the Trustee, as the case may be.

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

 

	
4.4

	
Claw back

If, subsequent to the grant of an Award, facts become known to the Remuneration Committee which, in the absolute discretion of the Remuneration Committee, would justify a reduction in the number of Shares under the Award, the Remuneration Committee shall have the discretion to reduce the number of Shares under the Award to take account of this.  If the Remuneration Committee exercises its discretion under this Rule 4.4, it shall confirm this in writing to each affected Participant and, if necessary, the Trustee.  For the avoidance of doubt:

	
(i)  

	
if the Remuneration Committee exercises this discretion, the Award shall be deemed to have been granted over the lower number of Shares and the Vesting of the Award in accordance with the Rules will be by reference to this reduced number of Shares; and

	
(ii)  

	
the discretion under this Rule 4.4 shall only be capable of exercise by the Remuneration Committee of the Board of the Company to the extent that there has been no change of Control of the Company.  However if, as a result of any change of Control, the Company has a new holding company which immediately after the change of Control has substantially the same shareholders and proportionate shareholdings as the Company did before, the discretion under this Rule 4.4 shall continue to be capable of exercise by the remuneration committee of the board of directors of the new holding company

	
5.

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

	
5.1

	
General offer

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

	
5.2  

	
The discretion of the Remuneration Committee

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

5.3           Extension to Participants of general offer

	
  

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

	
5.4

	
Scheme of arrangement

	
  

	
If, before an Award has Vested, the court directs that a meeting of the holders of Shares should be convened under Section 899 of the Companies Act 2006 to consider a scheme of arrangement, a Participant’s Award will Vest on the date the scheme of arrangement is sanctioned by the court, but only to the extent specified by the Remuneration Committee in accordance with Rule 5.5.  If however, the purpose and effect of the scheme of arrangement is to create a new holding company for the Company, where such holding company would, following the scheme of arrangement, have substantially the same shareholders and proportionate shareholdings as those of the Company immediately prior to the scheme of arrangement, Rule 5.7 may, with the consent of the Board, apply.  If it does apply, Awards will not Vest under this Rule 5.4.

	
5.5 

	
The discretion of the Remuneration Committee

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

	
5.6

	
Voluntary winding-up

	
  

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

	
5.7

	
The exchange of Awards

	
  

	
If, before an Award has Vested, any company (the “Acquiring Company”) obtains Control of the Company in pursuance of a compromise or arrangement sanctioned by the court under Section 899 of the Companies Act 2006 and the Acquiring Company has agreed that the outstanding Awards may be exchanged under this Rule 5.7, the Company may determine that an Award shall be exchanged under this Rule 5.7. On this basis, Participants’ Awards (“Old Awards”) will be automatically surrendered in consideration of the grant to Participants of new awards (“New Awards”) which, in the opinion of the Company, are equivalent to the Old Awards (before the change of Control) but relate to shares in a different company. The New Awards will not be regarded as equivalent to the Old Awards unless:

	
  

	
5.7.1

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

	
5.7.2  

	
       the total Market Value of the Shares the subject of the Old Awards is equal to the total Market Value immediately after the release of the shares the subject of the New Awards.  The provisions of the Plan will, for this

       purpose be constructed as if the New Awards were granted under the Plan at the same time as the Old Awards.

References to Shares will, in relation to the New Award, be taken as references to shares of the company whose shares are under New Awards.  References to the Company shall be taken to be references to the company whose shares are under the New Awards, where appropriate.  The New Awards will not Vest/lapse if Rule 5 applies following and in respect of the change of Control which led to the grant of the New Awards.  The Company will procure the Trustee’s agreement to any amendment to the applicable employee share ownership trust to give effect to this Rule 5.7.  This Rule 5.7 will only apply if the purpose and effect of the scheme of arrangement is to create a new holding company for the Company and the Board consents, as set out in Rule 5.4.

5.8           Cessation of Employment following a change of Control

If, at any time within the period of 12 months following the date of any change of Control of the Company (other than a change of Control as a consequence of a scheme of arrangement under Section 899 of the Companies Act 2006 the effect of which was to create a new holding company for the Company, where such holding company had, following the scheme of arrangement, substantially the same shareholders and proportionate shareholdings as those of the Company immediately prior to the scheme of arrangement), a Participant’s Employment:

	
  

	
5.8.1

	
is terminated by his employer for a reason other than misconduct or poor performance; or

	
5.8.2  

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

      constitute a material breach of the Participant’s employment contract,

the Participant will be entitled to receive an amount which is equal in value to the difference between the aggregate Market Value of the Shares he became entitled to when his Award Vested under Rule 5.1 or Rule 5.4 and the aggregate Market Value of the Shares he would have become entitled to had the Award Vested at that time as if the performance target had been met in full.  For the purposes of this Rule 5.8, the Market Value used shall be the Market Value of a Share as at the date his Award Vested.  Any amount payable under this Rule 5.8 shall be payable, subject to any deduction required by law to be made, within thirty days after the cessation of Employment concerned and in such currency as the Company shall determine in its absolute discretion.

	
6.

	
CEASING TO BE IN EMPLOYMENT DURING THE INCENTIVE PERIOD

	
6.1

	
Ceasing to be in Employment: generally

	
  

	
Unless otherwise provided in the Rules, if a Participant ceases to be in Employment before the end of the Incentive Period, all his Awards will lapse in full on the date he so ceases. Notwithstanding any other provision in the Rules, no Award may Vest more than ten years after the Date of Grant.

	
6.2  

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

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

	
6.2.1  

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

 

	
6.2.2  

	
in respect of all other Awards, the Company may, at its discretion, Vest, or recommend the Trustee to Vest, as soon as possible, all or part of any Award and/or preserve all or part of any Award to the extent that it is not Vested immediately.  The Award, to the extent that it is preserved, must be preserved until the end of the Incentive Period and will continue to be subject to the Rules.  To the extent that the Company or the Trustee has not exercised its discretion to Vest or preserve all or part of an Award, it will lapse on the date the Company, or the Trustee, confirms its decision (as the case may be).

	
6.3  

	
Ceasing to be in Employment because of Redundancy

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

	
6.4

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

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

	
6.5

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

	
  

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

 

	
6.6

	
Ceasing to be in Employment in other circumstances

If, before the end of the Incentive Period, a Participant gives or is given notice to leave Employment or ceases to be in Employment without any notice having been given in any circumstances other than the ones referred to in Rule 6.2, Rule 6.3 or Rule 6.4, his Award will lapse on that date, unless the Company decides otherwise.

	
6.7

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

	
  

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

 

	
6.8

	
Exercising discretion to preserve/Vest

 

 

If the Company or the Trustee decides to exercise any discretion it has under this Rule 6 as regards Vesting or preservation of an Award it must do so not later than the date which is three months after the date the Participant ceases Employment, failing which the Award will be treated as lapsing in full on the date he so ceases.  In the three month period following a Participant ceasing Employment, an Award will not be capable of Vesting under any other provision of the Rules, unless the Company or the Trustee exercises its discretion to preserve an Award.

 

	
6.9

	
The effect of the lapsing of Awards

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

7.           THE END OF THE INCENTIVE PERIOD

	
7.1

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

At the end of the Incentive Period and to the extent that an Award has not already Vested under Rule 5 or Rule 6, the Remuneration Committee, in its absolute discretion, will decide as soon as practically possible to what extent the performance target relevant to each Award has been met.  To the extent that the Remuneration Committee decides that it has been met, the Award will Vest (subject to Rule 7.3) as soon as practically possible following the Remuneration Committee’s decision.  The relevant number of Shares will be transferred as soon as practicable to a Participant who up until the end of the Incentive Period:

7.1.1           was in Employment; or

	
  

	
7.1.2

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

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

	
7.2

	
If the performance target has not been met

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

	
7.3  

	
Deferral of Vesting in respect of specified Participants

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

	
8.  

	
TRANSFER OF SHARES

	
8.1

	
When an Award has Vested

	
  

	
When an Award has Vested, the Participant will be entitled to Shares the subject of that Award.  The number of Shares he is entitled to (which will be transferred to the Participant as soon as reasonably practicable) will depend on any exercise of the Remuneration Committee’s decision under Rule 7.3, and the extent to which any applicable performance target has been met.  It will also be subject to any withholdings in accordance with Rule 8.2 that may be necessary on account of a Participant’s Tax Liability in respect of the Award.

	
8.2

	
Sale of Shares to satisfy a Participant’s Tax Liability

	
  

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

9.           AMENDING THE PLAN

	
9.1 

	
The Company has discretion to amend the Rules

	
  

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

	
9.2 

	
Additional sections

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

	
9.3 

	
No abrogation of existing rights

No amendment will be made under Rule 9.1 which would adversely and materially affect the existing rights of a Participant unless it is made with his consent or by a resolution passed as if the Awards constituted a separate class of share capital and the provisions of the Articles of Association of the Company and of the Companies Act 2006 relating to class meetings (with the necessary amendments) applied to that class.

	
9.4  

	
Shareholder approval

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

	
  

	
9.4.1

	
who can be a Participant; or

	
  

	
9.4.2

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

	
  

	
9.4.3

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

	
  

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

	
10.

	
GENERAL

	
10.1

	
Notices

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

	
10.2

	
Documents sent to shareholders

	
  

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

	
10.3

	
Replacement Award certificates

	
  

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

	
10.4

	
Shares to cover Awards

	
  

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

	
10.5

	
Administration of the Plan

	
  

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

	
10.6

	
Costs of introducing and administering the Plan

	
  

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

	
10.7

	
Termination of the Plan

	
  

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

	
10.8

	
Rights of Participants and Eligible Employees

 

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

 

	
  

	
10.8.1

	
the lapse of any Awards pursuant to the Rules;

 

	
  

	
10.8.2

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

 

	
  

	
10.8.3

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

	
10.9

	
Waiver of any rights

 

	
  

	
Any person who ceases to have the status or relationship of an employee or executive director with the Company or any other company in the Group for any reason whatsoever (whether lawfully or unlawfully) shall not be entitled and shall be deemed irrevocably to have waived any entitlement by way of damages for dismissal or by way of compensation for loss of office or otherwise to any sum, damages, Shares or other benefits to compensate that person for the loss of any rights, benefits or expectations under any Award, the Plan or any instrument executed pursuant to it. If necessary, that person’s terms of employment will be varied accordingly.

 

10.10       The benefit of Rule 10.8 and Rule 10.9

 

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

	
10.11

	
Awards are subject to the Rules

	
  

	
Awards are granted incorporating and subject to the Rules.

	
10.12

	
Articles of Association

	
  

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

	
10.13

	
Governing law

	
  

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

  

  

  

THE BT GROUP INCENTIVE SHARE PLAN

	
  

	
U.S. APPENDIX

	
1.

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

	
2.

	
How U.S. Awards will be granted

	
  

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

	
3.

	
Administration of the U.S. Section

	
  

	
The Company shall (i) administer the U.S. Section, (ii) establish from time to time such rules and regulations as it may deem appropriate for the proper administration of the U.S. Section and (iii) make such determinations under (including, without limitation, factual determinations), and such interpretations of, and take such steps in connection with, the U.S. Section or U.S. Awards as it may deem necessary or advisable.

	
4.

	
Addition of consistent provisions: certain rights

	
  

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

	
5.

	
Section 16 compliance

	
  

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

	
6.

	
Right to ADSs

	
  

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

	
7.

	
U.S. Withholding Taxes

	
  

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

	
8.

	
Securities Laws compliance

	
  

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

	
9.

	
Certain Definitions

	
  

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

	
  

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

	
  

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

10.           Amendments to certain provisions of the Rules

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

	
11.

	
Amendments to certain provisions of the Rules to comply with section 409A Internal Revenue Code

Rule 5.8

Rule 5.8 shall be deleted and replaced with the following new Rules 5.8 and 5.9:

"5.8           Cessation of Employment following a change of Control

If, at any time within the period of 12 months following the date of any change of Control of the Company (other than a change of Control as a consequence of a scheme of arrangement under Section 899 of the Companies Act 2006 the effect of which was to create a new holding company for the Company, where such holding company had, following the scheme of arrangement, substantially the same shareholders and proportionate shareholdings as those of the Company immediately prior to the scheme of arrangement), a Participant’s Employment:

	
  

	
5.8.1

	
is terminated by his employer for a reason other than misconduct or poor performance; or

	
  

	
5.8.2

	
ceases following the Participant’s resignation because there has been a material diminution in the authority, duties or responsibilities in respect of the Participant's Employment (a "Material Diminution") compared to before the change of Control

the Participant, subject to Rule 5.9, will be entitled to receive an amount which is equal in value to the difference between the aggregate Market Value of the Shares he became entitled to when his Award Vested under Rule 5.1 or Rule 5.4 and the aggregate Market Value of the Shares he would have become entitled to had the Award Vested at that time as if the performance target had been met in full.  For the purposes of this Rule 5.8, the Market Value used shall be the Market Value of a Share as at the date his Award Vested.  Any amount payable under this Rule 5.8 shall be payable, subject to any deduction required by law to be made, within thirty days after the cessation of Employment concerned.

5.9            Interpretation of Rule 5.8

For the purposes of Rule 5.8.2, a Participant's resignation will not be regarded as being due to a Material Diminution unless:

	
  

	
5.9.1

	
within 90 days of the Material Diminution first arising, the Participant has notified his employer of the Material Diminution; and

	
  

	
5.9.2

	
the Participant's employer has not, within 30 days of the notification under Rule 5.9.1, taken action to ensure that there is no longer a Material Diminution in respect of the Participant's Employment.

Rule 7.3

Rule 7.3 shall be deleted and replaced with the following new Rule 7.3:

“7.3           No Deferral of Compensation is Permitted

The Rules of this Plan and the U.S. Awards made thereunder shall be applied in a manner so as not to constitute a deferral of compensation for purposes of Section 409A of the United States Internal Revenue Code of 1986, as amended and the United States Department of Treasury regulations and other guidance issued thereunder, including any applicable exemptions from the general requirements thereof (collectively, “Section 409”).  In particular, the periods during which holders of U.S. Awards may receive Shares to which they are otherwise entitled shall be compliant with the short-term deferral exemption provided for under the regulations implementing Section 409A.  Accordingly, no U.S. Award shall be paid after the 15th day of the third calendar month following the later of (i) the last day of the fiscal year of the Subsidiary that employs the Participant in which such U.S. Award is no longer subject to a “substantial risk of forfeiture” (as defined for purposes of Section 409A), or (ii) the last day of the calendar year in which such U.S. Award is no longer subject to a substantial risk of forfeiture.”

  

  

  

THE BT GROUP INCENTIVE SHARE PLAN

	
  

	
DEFINITIONS APPENDIX

INTRODUCTION

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

	
  

	
(i)

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

	
  

	
(ii)

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

	
  

	
(iii)

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

1.         DEFINITIONS

	
ADSs

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

 

	
Appropriate Period

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

 

	
Associated Company

	
in relation to the Company:

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

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

	
Associated Undertaking

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

 

	
Award

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

 

	
Board

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

 

	
Close Period

	
a period when the members of the Board of the Company are prohibited from dealing in Shares under the Criminal Justice Act 1993, Part VIII of the Financial Services Market Act 2000 (market abuse) or the Financial Services Authority’s model code on transactions in securities, or under any other statute, regulation or similar code to which the Company is subject;

 

	
Company

	
BT Group plc (registered no. 4190816) unless:

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

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

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

 

	
Control

	
has the meaning given by Section 995 of the Income Tax Act 2007;

 

	
Date of Grant

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

 

	
Dealing Day

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

 

	
Definitions Appendix

	
this appendix which forms part of the Rules;

 

	
Eligible Executive

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

 

	
Employees’ Share Scheme

	
an employees’ share scheme (as defined by Section 1166 of the Companies Act 2006) established by the Company

 

	
Employing Company

	
following a demerger of the Company, the company whose shares are listed on the London Stock Exchange and is the ultimate holding company (as defined in section 1159 of the Companies Act 2006) of:

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

(ii)  where the Participant ceased employment with the Group prior to the demerger, the company which employed the Participant at the time

      that his Award was made;

 

	
Employment

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

 

	
Group

	
Participating Companies and Associated Companies;

 

	
Incentive Period

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

 

	
London Stock Exchange

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

 

	
Market Value

	
in relation to a share on any day, an amount equal to:

(a)  if and so long as the Shares are admitted to trading on the London Stock Exchange, its middle market quotation (as derived from the Daily Official List of the London Stock Exchange) on, at the discretion of the Company, (i) that day, (ii) the Dealing Day immediately preceding that day or (iii) the average middle market quotation of the three Dealing Days immediately preceding that day; and

(b)  subject to (a) above, the market value of a Share as determined in accordance with Part VIII of the Taxation of Chargeable Gains Act 1992 on the Date of Grant (or such earlier date as determined by the Company);

 

	
Participant

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

 

	
Participating Company

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

 

	
Plan

	
the BT Group Incentive Share Plan constituted by the Rules;

 

	
Plan Period

	
the period starting on the date on which the shareholders of BT Group plc approve in general meeting the adoption of the Plan and ending on the tenth anniversary of that date;

 

	
Redundancy

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

 

	
Remuneration Committee

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

 

	
Rules

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

 

	
Share

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

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

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

 

	
Subsidiary

	
a company which in relation to the Company is a company as defined by Section 1159 of and Schedule 6 to the Companies Act 2006;

 

	
Tax Liability

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

 

	
Treasury Share

	
a Share held by the Company in treasury in accordance with Sections 724 to 732 of the Companies Act 2006;

 

	
Trustee

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

 

	
Variation

	
means:

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

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

 

             (b) any other variation;

 

(ii) a demerger of the Company

 

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

 

	
Vest, Vested or Vesting

	
in relation to an Award, the point at which a Participant becomes absolutely entitled to all or some of the Shares the subject of that Award provided that if this would be on a day which is in a Close Period, the day on which that Award vests will be the first Dealing Day following the end of the Close Period.Unassociated Document

 

Exhibit 4.4

 

BT GROUP PLC

BT GROUP DEFERRED BONUS PLAN

As approved by the Board on 14 April 2011 and approved by ordinary resolution of Shareholders in general meeting on 13 July 2011.

Expiry date 13 July 2021

  

  

  

THE RULES OF THE BT GROUP DEFERRED BONUS PLAN

	
Contents

	
Page

	  	  
	
How the Deferred Bonus Plan will operate

	
3

	  	  
	
Limit on the number of Shares which can be used

	
3

	  	  
	
No rights to or in relation to Shares under the Deferred Bonus Award during the Deferred Period

	
4

	  	  
	
General offer, scheme of arrangement or voluntary winding-up of the Company during the Deferred Period

	
6

	  	  
	
Ceasing to be in Employment during the Deferred Period

	
7

	  	  
	
The Vesting of the Deferred Bonus Awards

	
9

	  	  
	
Definitions Appendix

	
10

	  	  
	
General Provisions Appendix

	
15

	  	  
	
US Appendix

	
18

 

 

  

  

  

1.           HOW THE DEFERRED BONUS PLAN WILL OPERATE

1.1           Policies set by a Committee

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

1.1.1 the Eligible Executives who will be entitled to participate;

1.1.2 the extent of Eligible Executives' participation;

1.1.3 the Deferred Period for each Deferred Bonus Award; and

1.1.4 how Deferred Bonus Awards are granted.

1.2           The Deferred Bonus Award

An Eligible Executive who has been awarded a Bonus may be granted a Deferred Bonus Award, which may be granted subject to such additional conditions as the Committee may determine or recommend, as the case may be.

1.3            When Deferred Bonus Awards will be granted

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

1.4           Awards personal to Participants

Deferred Bonus Awards cannot be transferred, assigned, charged or otherwise disposed of. On the death of a Participant, his Deferred Bonus Award(s) can Vest in accordance with Rule 5.2. If a Participant purports to transfer, assign, charge or otherwise dispose of his Deferred Bonus Award otherwise than as permitted by this Rule 1.4, his Deferred Bonus Award shall immediately lapse.

1.5           Rights of Participants during the Deferred Period

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

	
2.  

	
LIMIT ON THE NUMBER OF SHARES WHICH CAN BE USED

2.1           The limit for all Shares used under the Deferred Bonus Plan

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

	
  

	
2.1.1

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

	
  

	
2.1.2

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

2.2           Meaning of allocation and exclusion from these limits

The references in this Rule 2 to the “allocation” of Shares mean, in the case of any share option plan, the placing of unissued Shares or (for so long as UK institutional shareholders recommend) Treasury Shares under option and, in the case of any other Employees’ Share Scheme, the issue and allotment of Shares or (for so long as UK institutional shareholders recommend) the transfer of Treasury Shares.  For the purposes of the limit in this Rule 2:

	
  

	
2.2.1

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

	
  

	
2.2.2

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

2.3           Adjustment to Shares to be taken into account

Where Treasury Shares transferred, or Shares issued, under the Deferred Bonus Plan or any other Employees’ Share Scheme of the Company are to be taken into account for the purposes of any of the limits in this Rule 2 and a Variation in the equity share capital of the Company has taken place between the date of transfer or issue of any such Shares and the date on which any such limit is to be calculated, the number of such Shares which will be taken into account for the purposes of any such limit will be adjusted in such manner as the Company considers appropriate to take account of the Variation.

2.4           The Individual limit

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

	
3.

	
NO RIGHTS TO OR IN RELATION TO SHARES UNDER THE DEFERRED BONUS AWARD DURING THE DEFERRED PERIOD

3.1           No voting rights

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

3.2           Dividends

A Participant has no rights to any dividends or any other rights attaching to the Shares the subject of his Deferred Bonus Award during the Deferred Period. However, the Company, or the Trustee on the recommendation of the Company, may increase the number of Shares the subject of a Deferred Bonus Award after any dividend has been paid in relation to the Shares.  Any such increase shall be effected by doing the following:

	
3.2.1

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

	
3.2.2

	
in the case of any dividend paid in any other circumstances (including a scrip election), increase the Deferred Bonus Award by an appropriate number of Shares, unless the Committee recommends otherwise, and in either case, the number of Shares by which the Deferred Bonus Award is increased must have, unless Rule 3.4 applies, a Market Value on the date of increase which is as close as possible equal in value to the aggregate dividend (net of any taxes) paid in respect of the same number of Shares as those under the Deferred Bonus Award.

3.3           Events which affect the share capital of the Company

Subject to Rule 3.4, if there is a Variation during the Deferred Period affecting the equity share capital of the Company, the number of Shares the subject of a Deferred Bonus Award may be adjusted on the Company's determination if it thinks it appropriate, or recommendation to the Trustee. Participants will be notified in writing of any adjustment to the number of Shares the subject of their Deferred Bonus Awards.

3.4           A Variation which is a demerger of the Company

If there is a Variation which is a demerger of the Company, the Company if it thinks it appropriate, or the Trustee on the recommendation of the Company, may adjust a Deferred Bonus Award  so as to be over shares in the Employing Company ("the Adjusted Award"). Each Adjusted Award will be equivalent to the Deferred Bonus Award which was adjusted ("the Unadjusted Award") prior to the adjustment. An Adjusted Award will not be regarded as equivalent to an Unadjusted Award unless:

	
3.4.1

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

	
3.4.2

	
the total Market Value of the shares the subject of the Unadjusted Award Is equal to the total Market Value immediately after the adjustment of the shares the subject of the Adjusted Award, calculated by reference to an averaging of the relevant Market Value, as specified by the Company or as recommended to the Trustee, as the case may be.

The provisions of the Deferred Bonus Plan shall, for this purpose, be construed as if the Adjusted Awards were granted under the Deferred Bonus Plan at the same time as the Unadjusted Awards.

References to the "Company" shall, in relation to the Adjusted Award, be taken as references to the Employing Company and references to "Share" shall be taken as references to a full-paid share in the Employing Company. The Company will procure the Trustee’s agreement to any amendment to the applicable employee share ownership trust to give effect to this Rule 3.4.

	
3.5

	
Claw back

If, subsequent to the grant of a Deferred Bonus Award, facts become known to the Committee which, in the absolute discretion of the Committee, would justify a reduction in the number of Shares under the Deferred Bonus Award, the Committee shall have the discretion to reduce the number of Shares under the Deferred Bonus Award to take account of this.  If the Committee exercises its discretion under this Rule 3.5, it shall confirm this in writing to each affected Participant and, if necessary, the Trustee.  For the avoidance of doubt:

 

	
(i)  

	
if the Committee exercises this discretion, the Deferred Bonus Award shall be deemed to have been granted over the lower number of Shares and the Vesting of the Deferred Bonus Award in accordance with the Rules will be by reference to this reduced number of Shares; and

 

	
(ii)  

	
the discretion under this Rule 3.5 shall only be capable of exercise by the Committee of the Board of the Company to the extent that there has been no change of Control of the Company.  However if, as a result of any change of Control, the Company has a new holding company which immediately after the change of Control has substantially the same shareholders and proportionate shareholdings as the Company did before, the discretion under this Rule 3.5 shall continue to be capable of exercise by the remuneration committee of the board of directors of the new holding company.

 

	
4.

	
GENERAL OFFER, SCHEME OF ARRANGEMENT OR VOLUNTARY, WINDING-UP OF THE COMPANY DURING THE DEFERRED PERIOD.

4.1           General offer

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

4.2           Extension to Participants of general offer

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

4.3           Scheme of arrangement

4.3.1           Subject to Rule 4.3.2, if during the Deferred Period the court sanctions under Section 899 of the Companies Act 2006 a compromise or arrangement for the purposes of or in connection with a scheme for the reconstruction of the Company or its amalgamation with any other company or companies, the Deferred Bonus Awards will Vest immediately after the Court has sanctioned the compromise or arrangement.

4.3.2           If the purpose and effect of the scheme of arrangement is to create a new holding company for the Company, where such holding company would, following the scheme of arrangement, have substantially the same shareholders and proportionate shareholdings as those of the Company immediately prior to the scheme of arrangement, Rules 4.3.3 to 4.3.4 shall apply and the Deferred Bonus Awards shall not Vest under Rule 4.3.1.

4.3.3           Where Rule 4.3.2 applies and any company (the "Acquiring Company") obtains Control of the Company in pursuance of a compromise or arrangement sanctioned by the court under Section 899 of the Companies Act 2006 then:

(i) the Trustee, to the extent that it has granted a Deferred Bonus Award, will take such action as is appropriate to acquire shares in the Acquiring Company;

(ii) all outstanding Deferred Bonus Awards ("Old Awards") shall be  automatically surrendered in consideration of the grant to the Participants of new awards ("New Awards") which, in the opinion of the Company, are equivalent to the Old Awards (on the basis set out in Rule 4.3.4 below) but relate to shares in a different company; and

(iii) to the extent that the Company has granted a Deferred Bonus Award, the Participant's Old Award will automatically be surrendered in consideration of the grant to the Participant of a New Award which, in the opinion of the Company, is equivalent to the Old Award (on the basis set out in Rule 4.3.4 below) but relates to shares in a different company.

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

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

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

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

	
5.  

	
CEASING TO BE IN EMPLOYMENT DURING THE DEFERRED PERIOD

5.1           Ceasing to be in Employment: generally

Unless otherwise provided in the Rules, if a Participant ceases to be in Employment before the end of the Deferred Period, all his Deferred Bonus Awards will lapse in full on the date he so ceases.  Notwithstanding any other provision in the Rules, no Deferred Bonus Award may Vest more than ten years after the Date of Grant.

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

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

	
5.2.1

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

	
5.2.2

	
in respect of all other Deferred Bonus Awards, the Company may, at its discretion, Vest, or recommend the Trustee to Vest, as soon as possible, all or part of any Deferred Bonus Award and/or preserve all or part of any Deferred Bonus Award to the extent that it is not Vested immediately. The Deferred Bonus Award, to the extent that it is preserved, must be preserved until the end of the Deferred Period and will continue to be subject to the Rules.  To the extent that the Company (or, if applicable, the Trustee) has not exercised its discretion to Vest or preserve all or part of a Deferred Bonus Award, it will lapse on the date the Company (or, if applicable, the Trustee) confirms its decision.

5.3           Ceasing to be in Employment because of Redundancy

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

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

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

5.5           Ceasing to be in Employment in other circumstances

If, before the end of the Deferred Period, a Participant gives or is given notice to leave Employment or ceases to be in Employment without any notice having been given in any circumstances other than the ones referred to in Rule 5.2, Rule 5.3 or Rule 5.4, his Deferred Bonus Award will lapse on that date, unless the Company or the Trustee (as the case may be) decides otherwise.

	
5.6

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

If a Participant ceases to be in Employment before the end of the Deferred Period, but continues to provide services to the Group or becomes employed by an Associated Undertaking, the Company may, at its discretion, decide, or recommend the Trustee to decide, that the Participant is deemed not to have ceased Employment and that his Deferred Bonus Awards will continue to be held subject to the Rules. Rules 4 to 5 will apply when he subsequently ceases to provide services to the Group, or when he ceases to be employed by an Associated Undertaking and is not re-employed by a member of the Group or in such other circumstances as the Company or the Trustee may determine (as the case may be).

5.7           Exercising discretion to preserve/Vest

If the Company or the Trustee decides to exercise any discretion it has under this Rule 5 as regards Vesting or preservation of a Deferred Bonus Award it must do so not later than the date which is three months after the date the Participant ceases Employment, failing which the Deferred Bonus Award will be treated as lapsing in full on the date he so ceases.  In the three month period following a Participant ceasing Employment, a Deferred Bonus Award will not be capable of Vesting under any other provision of the Rules, unless the Company exercises its discretion to preserve a Deferred Bonus Award.

5.8           The effect of the lapsing of Deferred Bonus Awards

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

6.           THE VESTING OF THE DEFERRED BONUS AWARDS

6.1           At the end of the Deferred Period

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

6.1.1 still in Employment; or

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

6.2           The transfer of Shares

The Shares the subject of a Deferred Bonus Award which has Vested will be transferred subject to any withholdings that may be necessary on account of a Participant's Tax Liability in respect of the Deferred Bonus Award. The Company or any relevant company in the Group will be entitled to pay that Tax Liability by selling such number of Shares the subject of the Deferred Bonus Award which has Vested as is necessary to discharge the Tax Liability and transfer the balance of those Shares to the Participant or as he may direct.

BT Group Deferred Bonus Plan

Definitions Appendix

Introduction

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

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

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

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

Definitions

ADSs

American depository shares each representing ten Shares in the Company;

Associated Company

in relation to the Company:

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

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

Associated Undertaking

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

Board

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

Bonus

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

Close Period

a period when the members of the Board of the Company are prohibited from dealing in Shares under the Criminal Justice Act 1993, Part VIII of the Financial Services Market Act 2000 (market abuse) or the Financial Services Authority’s model code on transactions in securities, or under any other statute, regulation or similar code to which the Company is subject;

Committee

a duly authorised committee of the Board;

Company

BT Group plc (registered no. 4190816) unless:

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

(ii) Rule 4.3.4 operates, in which case it shall mean the company referred to in Rule 4.3.4, which, in all cases, for the purposes of the Rules, may act through the Board or through any employee of the Group authorised to act in accordance with the policies established under Rule 1;

Control

has the meaning given by Section 995 of the Income Tax Act 2007;

Date of Grant

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

Dealing Day

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

Deferred Bonus Award

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

Deferred Bonus Plan

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

Deferred Bonus Plan Rules

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

Deferred Period

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

Definition Appendix

this appendix which forms part of the Rules;

Eligible Executive

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

Employees' Share Scheme

an employees' share scheme (as defined by Section 1166 of the Companies Act 2006) established by the Company;

Employing Company

following a demerger of the Company, the company whose shares are listed on the London Stock Exchange and which is the ultimate holding company (as defined in Section 1159 of the Companies Act 2006) of:

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

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

Employment

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

General Provisions Appendix

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

Group

Participating Companies and Associated Companies;

London Stock Exchange

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

Market Value

in relation to a share on any day, an amount equal to:

(a) if and so long as the Shares are admitted to trading on the London Stock Exchange, its middle market quotation (as derived from the Daily Official List of the London Stock Exchange) on, at the discretion of the Company, (i) that day, (ii) the Dealing Day immediately preceding that day or (iii) the average middle market quotation of the three Dealing Days immediately preceding that day;

(b) subject to (a) above, the market value of a Share as determined in accordance with Part VIII of the Taxation of Chargeable Gains Act 1992 on the Date of Grant (or such earlier date as determined by the Company);

Participant

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

Participating Company

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

Plan Period

the period starting on the date on which the shareholders of BT Group plc approved in general meeting the adoption of the BT Group Deferred Bonus Plan and ending on the tenth anniversary of that date;

Redundancy

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

Rules

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

Share

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

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

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

Subsidiary

a company which in relation to the Company is a company as defined by Section 1159 of and Schedule 6 to the Companies Act 2006;

Tax Liability

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

Treasury Share

a Share held by the Company in treasury in accordance with Sections 724 to 732 of the Companies Act 2006;

Variation

means:

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

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

(b) any other variation;

(ii) a demerger of the Company

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

Vest, Vested or Vesting

in relation to a Deferred Bonus Award, the point at which a Participant becomes absolutely entitled to all or some of the Shares the subject of that Deferred Bonus Award, provided that if this would be on a day which is in a Close Period, the day on which that Deferred Bonus Award vests will be the first Dealing Day following the end of the Close Period.

  

  

  

BT Group Deferred Bonus Plan

General Provisions Appendix

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

1. AMENDING THE PLAN

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

1.2 No amendment will be made under Rule 1.1 which would adversely and materially affect the existing rights of a Participant unless it is made with his consent or by a resolution passed as if the Deferred Bonus Awards constituted a separate class of share capital and the provisions of the Articles of Association of the Company and of the Companies Act 2006 relating to class meetings (with the necessary amendments) applied to that class.

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

2. GENERAL

2.1 Notices

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

2.2 Documents sent to shareholders

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

2.3 Replacement Deferred Bonus Award certificates

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

2.4 Administration of the Deferred Bonus Plan

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

2.5 Costs of introducing and administering the Deferred Bonus Plan

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

2.6 Termination of the Deferred Bonus Plan

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

2.7 Rights of Participants and Eligible Employees

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

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

2.7.2 the failure or refusal to exercise any discretion under the Rules; and/or BT Group Deferred Bonus Plan General Provisions Appendix

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

2.8 Waiver of any rights

Any person who ceases to have the status or relationship of an employee or executive director with the Company or any other member of the Group for any reason whatsoever (whether lawfully or unlawfully) shall not be entitled and shall be deemed irrevocably to have waived any entitlement by way of damages for dismissal or by way of compensation for loss of office or otherwise to any sum, damages, shares or other benefits to compensate that person for the loss of any rights, benefits or expectations under any Deferred Bonus Award, the Plan or any instrument executed pursuant to it. If necessary, the Participant’s terms of employment will be varied accordingly.

2.9 The benefit of Rule 2.7 and Rule 2.8

The benefit of Rule 2.7 and Rule 2.8 is given for the Company and/or the Trustee (where the Deferred Bonus Award was not granted by the Company), as appropriate for itself and as trustee and agent of the Company (if the benefit is given for the Trustee), and of all the Company's Subsidiaries or any of its Associated Companies or Associated Undertakings. To the extent that the Company, any Subsidiary or Associated Company or Associated Undertaking of the Company is not party to the grant of a Deferred Bonus Award, the Company and/or the Trustee, as appropriate, will hold the benefit of Rule 2.7 and Rule 2.8 on trust and as agent for each of them and the Company and/or the Trustee may, at their respective discretion, assign the benefit of this Rule 2.9 to any of them.

2.10 Deferred Bonus Awards are subject to the Rules

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

2.11 Articles of Association

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

2.12 Governing Law

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

  

  

  

BT Group Deferred Bonus Plan

US Appendix

1. Introduction

This Appendix constitutes the part of the Deferred Bonus Plan that will govern the grant of Deferred Bonus Awards to United States participants (the "U.S. Awards"). It incorporates all the Rules (as set forth above as modified in accordance with the provisions of this Appendix).

2. How U.S. Awards will be granted

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

3. Administration of the U.S. Appendix

The Company shall (i) administer the U.S. Appendix, (ii) establish from time to time such rules and regulations as it may deem appropriate for the proper administration of the U.S. Appendix and (iii) make such determinations under (including, without limitation, factual determinations), and such interpretations of, and take such steps in connection with, the U.S. Appendix or U.S. Awards as it may deem necessary or advisable.

4. Addition of consistent provisions

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

5. Section 16 compliance

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

6. Right to ADSs: certain restrictions

The Company may arrange for any U.S. Award to constitute a right to receive ADSs rather than Shares, in which case references to "Shares" in the Deferred Bonus Plan shall be deemed to be reference to"ADSs", as the context may require. In its discretion and upon such terms and conditions as it may implement from time to time, the Company may arrange for any U.S. Award relating to Shares to be satisfied in the form of ADSs and for any U.S. Award relating to ADSs to be satisfied in the form of Shares. Notwithstanding any contrary provisions in the Deferred Bonus Plan, the Company may also, in its discretion and upon such terms and conditions as it may implement from time to time, make U.S. Awards subject to such additional conditions during the Deferred Period as may be necessary to effect a tax deferral for U.S. Federal and state income tax purposes. In furtherance of the foregoing if, before the end of the Deferred Period, a Participant who has been granted a U.S. Award gives or is given notice to leave Employment, or ceases to be in Employment without any notice having been given, in any circumstances other than those referred to in Rule 5.2, his US Award will lapse on the date that his Employment ceases, unless the Company determines otherwise, in its sole discretion, due to extraordinary circumstances involving severe financial hardship.

7. U.S. withholding taxes

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

8. Securities laws compliance

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

9. Termination of employment

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

10. Certain definitions

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

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

"Normal Retirement" means retirement after attaining age 65; and

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

11. Compliance with Internal Revenue Code Section 409A

The Rules of the Deferred Bonus Plan and the U.S. Awards made thereunder shall comply with and be interpreted in accordance with Section 409A of the Internal Revenue Code of 1986, as amended and the United States Department of Treasury regulations and other guidance issued thereunder (collectively, “Section 409A”).  Each payment in a series of payments provided to a Participant under a U.S. Award will be deemed a “separate payment” for purposes of Section 409A.  Any Shares or other amounts payable shall be transferred or paid with the 90 day period following a payment event.  If any Shares or other amount payable under a U.S. Award upon a termination of employment is determined by the Company to constitute nonqualified deferred compensation for purposes of Section 409A (after taking into account the short-term deferral exception and the involuntary separation pay exception of the regulations promulgated under Section 409A which are hereby incorporated by reference), such Shares or other amount shall not be paid unless and until the Participant’s termination of employment also constitutes a “separation from service” for purposes of Section 409A.  In the event that the Participant is determined by the Company to be a “specified employee” for purposes of Section 409A at the time of his separation from service and Shares or other amounts are payable as a result of the Participant’s separation from service, then any payments of nonqualified deferred compensation (after giving effect to any exemptions available under Section 409A) otherwise payable to the Participant during the first six (6) months following his separation from service shall be delayed and paid in a lump sum upon the earlier of (x) the Participant’s date of death, or (y) the first day of the seventh month following the Participant’s separation from service, and the balance of the installments (if any) will be payable in accordance with their original schedule.

BT Group plc

Registered Office:

81 Newgate Street London EC1A 7AJ

Registered in England and Wales

No. 4190816

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