Document:

Exhibit 10.1

ENTERPRISE AGREEMENT NUMBER 4627

This Enterprise Agreement (“EA”), hereinafter referred
to as the “Agreement,” is entered into between Raytheon Company, a Corporation
organized and existing under the laws of the State of Delaware, operating through
its various businesses (hereinafter referred to as “BUYER”) and AML
Communications, a business organized and existing under the laws of the State
of California (hereinafter called “SELLER”).

ARTICLE
1 - DEFINITIONS

1.1                               “Product”
means those items listed in Exhibit A, the “Parts List” covered by the
Agreement.

1.2                               “Customer”
means the Raytheon Customer or end user of the products procured hereunder.

1.3                               “Similar
Quantities” means quantities of products in the amounts/ranges listed in
Exhibit A.

1.5                               “Agreement”
means this agreement and all Exhibits attached hereto and Purchase Orders
issued under this Agreement by BUYER.

1.6                               “Purchase
Order” means BUYER’s purchase order or subcontract issued to the SELLER for the
supply of products listed in Exhibit A  to
this Agreement.

1.7                               “BUYER’s
Authorized Representative” means the specific individual designated by BUYER in
the applicable Purchase Orders issued hereunder, or otherwise, as the
authorized representative for any and all contractual notifications, directions
or changes including but not limited to changes in contractual requirements.

1.8                               “Requirements”
means the actual Customer prime or higher tier contract orders which contain or
require the procurement of the products herein.

1.9                               “BUYER”
means the entity set forth in the preamble above and any Participants, as
defined below, and for the purposes set forth herein.

1.10        “Option
Term” means an extension, at BUYER’s option, to the Term of this agreement.

1.11                         “Participants”
means BUYER, BUYER’s wholly or partially owned subsidiaries and affiliates,
divisions, joint ventures or business units, excluding successors in interest
by divestiture and other specified non-Raytheon activities, if any.  For information regarding Raytheon sites
please visit the Raytheon website at www.Raytheon.com.

ARTICLE 2 - EFFECTIVE DATE, TERM, AND OPTION
PROVISIONS FOR ADDITIONAL TERMS

2.1                               The
period of performance of this Agreement is from 27 August 2004 to 27
August 2007.

2.2                               The
Term of this Agreement shall be for a period of three years.

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2.3                               In
consideration of Buyer’s issuance of this agreement, Seller hereby grants to
Buyer the option to extend this agreement for an additional period of two years
at the same pricing, delivery and terms and conditions of this agreement. Buyer
may, at its sole election, exercise this option at any time prior to the
expiration of the initial term.

ARTICLE 3
– COMMITMENTS, PRICING AND OTHER GENERAL REQUIREMENTS

3.1           Buyer’s and Seller’s
Commitments are as follows:

Buyer and Seller
recognize and agree that Buyer’s needs may fluctuate.  Seller agrees that Buyer has made no
representation, warranty, guarantee or commitment that Buyer shall purchase any
minimum quantity of product under this EA. 
Seller further agrees that any inventories which Seller may establish or
which may otherwise arise from Seller’s performance under this EA shall be at
the sole risk and responsibility of Seller. Buyer has made no representation,
warranty, guarantee or commitment that Buyer shall be obligated to purchase all
or any part of any such inventories.

3.2           All pricing shall be based upon the
pricing structure set forth below:

	
  Term:

  	
   

  	
  Is the period during which an Agreement shall remain
  in force as made or amended by the parties.

  
	
   

  	
   

  	
   

  
	
  Purchase Orders:

  	
   

  	
  Individual Purchase Orders shall be made at any time
  under the terms of this Agreement.

  
	
   

  	
   

  	
   

  
	
  Price:

  	
   

  	
  Pricing shall be as set forth in Exhibit A attached
  hereto and shall be valid for the Term of the Agreement.

  
	
   

  	
   

  	
   

  
	
  Discounts:

  	
   

  	
  The following price discounts shall apply to the
  value of purchase orders, or groups of purchase orders issued simultaneously.
  The dollar value of each individual or simultaneously issued purchase order
  includes those items scheduled for delivery over a maximum of 12 months.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $1,000,001 to $2,000,000

  	
  3%

  
	
   

  	
   

  	
  $2,000,001 to $4,000,000

  	
  5%

  

 

Subject to the terms and
conditions of this Agreement, SELLER agrees to sell products, at the price,
description and quantities set forth in Exhibit A.  BUYER shall have the option to extend the
Term of this Agreement at the pricing of Exhibit A as provided for herein.

.3.3                              SELLER
must comply with the following to remain eligible for the placement of purchase
orders by BUYER under subject Agreement:

3.3.1                      SELLER
remaining financially solvent as determined by BUYER based on an independent
auditor or established public rating firm, such as Dunn & Bradstreet;

3.3.2                      SELLER
remaining compliant with all requirements including, but not limited to, the
technical and delivery requirements of BUYER’s Purchase Order(s) issued under
this Agreement.

3.3.3                      SELLER
and BUYER reaching mutual agreement on any price differences resulting from
changes in scope of work for the products listed in Exhibit A;

3.3.4                      SELLER
maintaining qualification on all parts listed in Exhibit A;

 2
 

3.3.5                      Any
action on part of BUYER’s Customer which would prevent BUYER from procuring any
of the products listed in Exhibit A, including but not limited to, SELLER’s
eligibility to receive Customer contracts.

3.3.6                      SELLER
remaining compliant with all applicable laws, regulations and ordinances.

3.4                                Notwithstanding the above, SELLER agrees
to extend at all times to BUYER and immediately to make any price reductions or
changes to more favorable terms and conditions offered or given by SELLER to
others, including its most favored customer, during the term of this Agreement
for same or similar quantities.  Any
price reductions or changes to more favorable terms and conditions shall be
made effective as of the date of such offering or giving by SELLER and shall be
reflected in a revised Exhibit A.  
Exhibit A contains pricing which shall constitute a baseline from which
discounts and earned volume rebates, if applicable, shall be measured.

In addition to the
foregoing, Buyer reserves the right to market test the pricing of Exhibit A and
at any time during the term of this agreement. If it is objectively determined
that due to market changes or other factors that the products of Exhibit A are
available from suppliers other than Seller at prices below Exhibit A pricing,
Seller agrees to lower its Exhibit A pricing to meet market pricing.  In the event Seller cannot agree to lower its
pricing as provided for herein, Buyer may terminate this agreement without
further liability or obligation to Seller.

3.5                                No
products shall be provided to BUYER by virtue of this Agreement itself.  A Purchase Order by BUYER is required.  The Purchase Order shall identify the
quantity, unit and total purchase order prices, shipping instructions, delivery
dates, and shall refer to this Agreement, applicable terms and conditions and
prime contract flowdowns, if any, and any other requirements.  For Purchase Orders under U.S. Department of
Defense contracts, SELLER shall acknowledge such Purchase Orders within the
time required by the Defense Priorities and Allocation System Regulations (15
CFR 700 et seq.) and as stated in the Purchase Order.

3.6                                In
the event that a part, raw material or component forming any part of any item
set forth in Exhibit A becomes obsolete, is planned for OBSOLESCENCE for any
reason, or the manufacture of any product hereunder is to be discontinued by
SELLER, SELLER shall provide notice as provided for herein to allow BUYER to
purchase sufficient quantities to satisfy life-time requirements or SELLER
shall re-qualify new material in accordance with the forecasted quantities in
Exhibit A.  SELLER shall (1) notify the
BUYER as soon as practicable, but in no event less than six (6) months prior to
any of the above referenced events, and (2) use its best efforts to mitigate
any cost and/or schedule impact to the BUYER.

3.7                                In
the event SELLER cannot satisfy BUYER’s requirements and BUYER is referred to
SELLER’s distribution system, BUYER shall be entitled to “cover” as a remedy
and SELLER shall be liable for any excess cost incurred.

3.8                                BUYER
may, from time to time, elect to add or delete part numbers reflective of
requirements not expressed at the time of Agreement commencement. Upon request
of BUYER, SELLER agrees to quote on and incorporate such part numbers with
prices, terms and conditions no less favorable as those appearing in the
original Agreement.

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3.9.1                       All
shipments within the United States and Canada will be made F.O.B. origin and
freight collect.  Shipments for
destinations outside of the United States and Canada will be F.C.A. and freight
collect.

ARTICLE
4 - NOTICES AND COMMUNICATIONS

4.1                                 All communications and notices from BUYER
to SELLER shall be sent to the address set forth herein:

	
  Company Name:

  	
   

  	
  AML Communications

  
	
  Address:

  	
   

  	
  1000 Avenida Acaso

  
	
   

  	
   

  	
  Camarillo, CA 93012

  
	
  Attention:

  	
   

  	
  Ed McAvoy

  
	
   

  	
   

  	
   

  
	
  E-mail:

  	
   

  	
  emcavoy@amlj.com

  
	
  Phone:

  	
   

  	
  (805) 388-1345, ext. 203

  
	
  Fax:

  	
   

  	
  (805) 484-2191

  

 

4.2                                 All communications and notices from
SELLER to BUYER shall be sent to the address set forth herein.

	
  Raytheon Company

  
	
   

  	
   

  	
  U.S. Mail:

  
	
   

  	
   

  	
  Overnight:

  
	
   

  	
   

  	
  47 Foundry Avenue

  
	
   

  	
   

  	
  Waltham, MA 02453

  
	
  Attention:

  	
   

  	
  Ann F. Purcell, REMS

  
	
   

  	
   

  	
   

  
	
  E-mail:

  	
   

  	
  ann_purcell@Raytheon.com

  
	
  Phone:

  	
   

  	
  (781) 642-2579

  
	
  Fax:

  	
   

  	
  (781) 642-2450

  

 

4.3                                 Each party may change its address or
point of contact from time to time by written notice to the other.

ARTICLE
5 - CONFIGURATION CHANGES

SELLER shall not make any
changes in the manufacture of items to be delivered pursuant to Purchase Orders
issued hereunder in manufacturing processes, materials, design, form, fit or
function or in any other way without prior written notification to BUYER and
BUYER reserves the right to terminate this Agreement and any Purchase Orders
issued hereunder in accordance with Article 8, Expiration/Termination if any
changes by SELLER do not meet BUYER’s approval.

ARTICLE
6 - QUALIFICATION

The BUYER’s requirements
for products set forth in Exhibit A may necessitate the SELLER’s qualification
to selected process, systems or functional requirements.    In the event that the SELLER is not
presently qualified, or qualification is suspended or revoked, 

 4
 

the SELLER shall provide
appropriate qualification test plans and subsequent reports as required by the
BUYER.  Such plans shall be subject to
the BUYER’s approval.  BUYER’s approval
of the SELLER’s test and qualification plan(s) is intended to provide
confidence in the SELLER’s ability to qualify specific products and does not constitute
an opinion or warranty that the SELLER’s plans shall be successful or compliant
to specifications or other requirements. 
The SELLER shall bear all costs for such qualification, including first
article units if required.  Production
orders shall be built in parallel to qualification at the risk of the SELLER,
if such pre-qualification production is required to meet the BUYER’s required
delivery dates.

ARTICLE
7 – PAYMENTS, INVOICING AND DELIVERY

7.1           Payment terms shall be
2% 30, Net 45 days of receipt of invoice.

7.2                                 Invoices
shall be provided electronically and may be provided in one or more of the
electronic formats:

7.2.1        Automation with Exostar
(Supply Pass or Machine Link)

7.2.2        Electronic Data
interchange (EDI)

Invoices at a minimum
shall include BUYER’S Purchase Order, EA Agreement number, part number, unit
price, and quantity.

7.3                                SELLER
shall maintain records of all invoices paid and services provided from the date
of final payment for the term specified in the Enterprise Agreement 4627.

7.4                                Sales
taxes, where applicable, will be billed as a separate line item on the
electronic invoice; however, BUYER shall be responsible for accruing and paying
applicable taxes to the appropriate authorities (local, state and federal).  BUYER will not remit taxes to the SELLER.

7.5                                SELLER
shall comply with the delivery bar-code requirements of Purchase Orders issued
pursuant to this Agreement.

7.6                                Currency.  All transactions will be in U.S. dollars
unless otherwise agreed by the parties.

ARTICLE
8 – EXPIRATION/TERMINATION

BUYER reserves the right
to terminate this Agreement without liability, at BUYER’S election, in the
event of a material breach of this Agreement. 
Notwithstanding its expiration or termination, the pricing and other
terms and conditions of this Agreement in the effect date of Purchase Order
placement shall continue to apply to any Purchase Orders issued by the BUYER
prior to the expiration or termination of the Agreement.

ARTICLE 9 – LIMITATION OF LIABILITY

In
no event shall BUYER be liable to SELLER for any special, including multiple or
punitive, incidental or consequential damages.

ARTICLE
10 -  REPRESENTATIONS

SELLER represents and
warrants to the BUYER that SELLER is, and shall continue to be in compliance
with all applicable Federal, State and Local laws, regulations and 

 5
 

ordinances and further
represents and warrants to BUYER that the Exhibit A pricing fairly reflects
manufacturing, selling and delivery cost savings resulting from quantity sales
of products derived as a result of SELLER’s normal course of business, and that
such prices are reasonably available to all other buyers under like conditions
and similar circumstances.

ARTICLE
11 - RETURN OF PRODUCT

11.1                          Products
may be returned for Buyer’s convenience with Seller’s prior written approval
and Seller shall issue Buyer:  (1) credit
only; or (2) credit and replace; or (3) credit and advanced replacement in the
amount(s) negotiated between Buyer and Seller at the time Seller authorizes the
return of said merchandise.  Returned
products shall be shipped to Seller’s nearest (local) warehouse and the cost of
shipping shall be borne by Buyer.

11.2                          Seller
agrees that product rejected in Buyer’s Receiving Inspection and Test shall
have a maximum turnaround of two (2) working days on Return Material
Authorizations (RMAs). Returned products shall be shipped per Seller’s
instructions and the cost of shipping shall be borne by Seller.

ARTICLE
12 – GENERAL TERMS AND CONDITIONS OF PURCHASE

12.1                           SELLER
shall furnish the material called for by this Agreement in accordance with all
applicable provisions set forth in this Agreement and the following documents,
which shall be binding and incorporated by reference in every Purchase Order
under this Agreement:

12.1.1                Exhibit
A – Parts Price List, Exhibit B – Supplier Diversity Program Data Worksheet,
Exhibit C – Foreign Offset Worksheet, Exhibit D – Annual Certifications and
Representations

12.1.2                EDI,
if applicable, to be provided by each Raytheon site.

12.1.3                Terms
and Conditions of Purchase and other applicable documents as set forth in 12.2
below.

12.2         Applicable Documents

12.2.1                General
Terms and Conditions of Purchase TC-001 (10/03)

12.2.2                Terms
and Conditions of Purchase, Supplement 1 - Government Contract Provisions (FAR)
TC-002 (10/03)

12.2.3                Terms
and Conditions of Purchase, Supplement 2 - Government Contract Provisions
(DFARS) TC-003 (10/03)

12.2.4                Prime
or higher tier Contract Flowdown Terms and Conditions, incorporated in purchase
orders issued pursuant to this Agreement.

12.2.5     (Other Documents attached to this Agreement)

12.3                          All
specifications, exhibits, drawings or other documents that are referenced in
this Agreement but are not attached hereto, are hereby incorporated by
reference.

12.4         Order
Of Precedence

Any
conflict between documents incorporated herein and the provisions of any
Purchase 

 6
 

Order
shall be resolved by application of the following order of precedence, the
first taking precedence over the last:

12.4.1 Terms and
Conditions of the Agreement listed in 12.1 and 12.2.

12.4.2
Terms and Conditions of Purchase Orders issued pursuant to the Agreement

12.4.3 Written
provisions on the face of the Purchase Order

12.4.4 Statements
of Work to the Purchase Order, if applicable.

12.4.5 Drawings
and specifications and standards of BUYER

ARTICLE
13 - PURCHASE ORDERS AND CONTRACTUAL AUTHORITY

13.1                          Purchase
Orders may be made as issued and accepted in hard copy or electronically
without written documentation provided BUYER and SELLER execute a separate
agreement for Electronic Data Interchange (EDI).

13.2                          All
Purchase Orders issued under this Agreement shall incorporate this Agreement by
reference by the inclusion of the following statement:

“This Purchase Order is
subject to the terms and conditions of Raytheon Enterprise Agreement No. 4627,
which is incorporated by reference herein as if fully set forth below.”

The failure of BUYER to
include this statement in its Purchase Order(s) shall not affect the
applicability of the Agreement to such Purchase Order(s).  Each Purchase Order, though subject to the
provisions of this Agreement, shall be a separate order between BUYER and
SELLER.

13.3                          SELLER
shall not require minimum quantity purchase requirements unless so identified
under Exhibit A.

13.4                          This
Agreement shall be amended only by mutual agreement signed by the parties.  A change issued under the “Changes” clause of
the Terms and Conditions of Purchase Orders shall not be deemed an amendment to
this Agreement.

13.5                          Suppliers
having more than one manufacturing location shall identify a single sales point
as the Raytheon Account Management Office.

13.6                          Packaging,
packing and marking requirements shall be specified in each Purchase Order.

13.7                          Unless
specified otherwise in the Purchase Order itself, BUYER shall not be liable for
any commitments, costs incurred or obligations in connection with a Purchase
Order prior to  its award.

ARTICLE
14 -  REPORT OF PURCHASES

The SELLER shall maintain
a cumulative record of all Purchase Orders placed by the BUYER hereunder and
shall provide written reports to the BUYER of the cumulative purchases under
this Agreement within twenty (20) days after the 2nd and 4th quarter of the calendar year beginning at the
end of the 2nd and 4th quarter (July and January) in which this
Agreement is first effective.  Seller
shall submit reports identifying third party Participant’s utilization of Buyer’s
EA.  Reports shall be forwarded to Buyer
with 

 7
 

purchases as identified
in this Article 15.

ARTICLE
15 – VERIFICATION AND AUDIT

15.1                         Buyer
shall have the right to inspect and audit Seller’s books, records, and catalogs
pertaining to this EA and work hereunder, at all reasonable times, with five
(5) days notice, for the purpose of determining the correctness and propriety
of amounts billed by the Seller. The required records shall be maintained, by
Seller, for a period of not less than four (4) years after expiration of this
EA or three (3) years after final payment of any purchase order/release
hereunder, which ever is longer.

15.2                         Seller
shall assign his most cognizant personnel to assist Buyer’s auditor in
identifying and accumulating data pertinent in the performance of the audit.

15.3                         Seller
shall maintain an Accounts Receivable record wherein billings submitted under
this EA shall be accumulated and reconciled monthly to their general ledger
control account and to the report required under Article 14.

15.4                         The audit
shall be conducted on a sample basis consisting of a mutually agreed upon
percentage of the total dollars invoiced for the period selected for the audit.
If any such inspection or audit discloses any errant pricing resulting in
overpayment by Buyer, the amount thereof, including extrapolation of the
overpayment, shall be refunded to Buyer promptly upon demand.

ARTICLE
16 - ANNUAL CERTIFICATIONS AND REPRESENTATIONS

Seller agrees to
provide BUYER with Annual Certifications and Representations that shall be
solicited by BUYER on an annual basis during the term of this EA. (Exhibit D)

ARTICLE
17 - THIRD PARTY PROCUREMENTS

17.1                         Seller agrees to extend the pricing set
forth in Exhibit A to Buyer’s subcontractors, affiliates and subsidiaries, both
domestic and international, as Buyer may from time to time designate
(hereinafter referred to as “Participant”). Prior to the extension of the
pricing set forth in Exhibit A, Participant shall be required to provide EA
Seller a signed copy of a Third Party Non-Disclosure Agreement as provided to
Participant by BUYER.  This EA pricing is
to be extended to Participant by Seller, as directed by Buyer, as follows:

17.1.1                            Supplies/services
acquired by Participant for the direct benefit of Raytheon and its affiliates
or subsidiaries.

17.1.2                            Supplies/services
acquired by Participant for the direct benefit of Raytheon and its affiliates
or subsidiaries, as well as for any other of Participant’s work which is not in
direct or indirect competition with Raytheon or its affiliates.”

17.2                          Participant
shall specify Buyer’s EA number on its orders. Seller agrees that Buyer shall
have no responsibility or liability with respect to any purchase orders issued
other than by the Buyer hereunder.

17.3                          The
parties agree that for all such additional designated Participants, the FOB
point shall 

 8
 

be F.O.B. Origin at such time as Participant’s
purchase orders are placed.

17.4                         Unless
otherwise agreed to by Buyer in writing, Buyer shall not be responsible for
costs of any export or import licenses, transportation, duties, taxes, or any
other costs or requirements incidental to such designated Participant’s
purchase of supplies/services from Seller. 
Arrangement for such costs or requirements shall be made between the
affected parties as required at the time such transactions are initiated.

17.5                         Seller
agrees to pass on the provisions of paragraph 17.1 above, to any company where
Buyer has set up “kitting” arrangements for Seller’s parts.  This would include non-franchised Kitters or
Distributors as designated by Buyer.

ARTICLE 18 -  SUPPLIER DIVERSITY
PROGRAM

18.1                         Raytheon
is committed to the utilization of Small Businesses and encourages the use of
Small Businesses whenever and wherever possible.  SUPPLIER is encouraged to utilize Small
Businesses in the manufacture and distribution of SUPPLIER’s products and
Services, and support Raytheon’s Company policy, which includes goals outlined
in Exhibit “D” –Supplier Diversity Program Data Worksheet.

18.2                          Small business types include:

Small business

Woman-Owned Small
business

Certified Small
Disadvantaged business

Certified Small
Woman-owned Disadvantaged business

Historically Black
Colleges & Universities and Minority Institutions

Veteran-Owned
business

Service Disabled
Veteran-Owned business

Native American
Indian Owned

Certified HUBZone
business

Minority Owned business

18.3                         Where
SUPPLIERS’s utilizes Small Businesses as distributors, SUPPLIER is requested to
offer pricing to such distributors in order that Raytheon may purchase from
these distributors at the same price(s) as those identified in this Agreement.

18.4                         For these
purposes, the term “Small Business” shall mean a U.S. firm, including its
affiliates, that is independently owned and operated, is not dominant in its
field, and has been categorized by the United States Small Business
Administration as “Small” in accordance with 13 CFR Part 121, Small Business
Size Standards and shall include those certified as a Small Disadvantaged
Business pursuant to National Defense Authorization Act, Public Law 99-681 of
1987, and/or a Woman Owned Small Business pursuant to the Federal Acquisition
Streamlining Act, Public Law 103-355 of 1994, and/or a Hub-Zone Business
pursuant to the Hub Zone Empowerment, 
Public Law 101-135 of 1997, and/or a business owned by a disabled
veteran pursuant to the Disabled Veteran / Veteran Requirement, Public Law
93-237 of 1999.

ARTICLE  19 - FOREIGN OFFSETS

19.1                         In consideration of the issuance of this
Agreement and in order to aid BUYER in meeting its offset obligations, SELLER
agrees:

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19.1.1                to
use its best efforts to cooperate with BUYER in the fulfillment of any offset
program obligation, inclusive of the negotiation of specific goals or obligations
for BUYER’s offset credit; and

19.1.2                to
report the value and nature of foreign procurement activity and negotiate in
good faith in order for Buyer to obtain indirect offset credits accumulated by
SELLER during the Term of this Agreement. (Exhibit C)

ARTICLE
20 - SUPPLIER CONTINUOUS IMPROVEMENT PROGRAM

The SELLER agrees to
participate, as appropriate, in BUYER’s Supplier Improvement Programs as may be
defined further.

ARTICLE
21 -  BUSINESS TO BUSINESS (B2B)
E-COMMERCE

Raytheon Company has selected Exostar, the Aerospace & Defense
Exchange, as our e-Procurement solution. 
The SELLER agrees to register as a Trading Partner on Exostar and take
the necessary actions to become activated in order to be able to accept
electronic transactions from Raytheon through Exostar.  The SELLER agrees to become active on Exostar
by (date).

ARTICLE 22 – RAYTHEON COMMERCIAL
OFFERINGS 

Supplier agrees, and the
account manager shall take the responsibility, to facilitate appropriate
introductions to decisions makers within AML Communications who have the
responsibility for purchasing certain like goods and services offered by
Raytheon. Raytheon personnel shall be given the opportunity to present our
offerings in the following areas:

22.1         Raytheon Learning
Institute, including Raytheon Professional Services

22.2         Raytheon Consortium

22.3         Raytheon Silent Runner

22.4         Raytheon Six Sigma
Training

22.5         Raytheon Aircraft

There
are contact names and or Raytheon websites for you to contact the appropriate
Raytheon personnel to discuss your interest in any of the offerings presented
herein.

22.1                           Raytheon Learning Institute

At Raytheon Learning Institute, we provide a wide
range of learning solutions and services to Raytheon Company and its customers
and suppliers. It is our goal to help organizations compete in today’s rapidly
changing competitive business environment.

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Our mission is to provide
learning solutions and services that produce bottom-line results. We provide
quality training and consulting services at sites worldwide. Our training and
services include:

 

 

	
  Leadership

  	
   

  	
  Six Sigma

  
	
  Benchmarking

  	
   

  	
  Statistics

  
	
  Communication

  	
   

  	
  Engineering

  
	
  Adult Learning

  	
   

  	
  Workplace Education

  
	
  Organizational
  Work Redesign

  	
   

  	
  Teams and Empowerment

  
	
  Program /
  Project Management

  	
   

  	
  Solution Workshops

  

 

In addition to learning solutions, we provide
consulting services that help identify your company’s opportunities for
improvement. We design performance-based, cost-effective solutions that are
tied to your corporate strategic goals. Then we provide comprehensive
evaluation strategies to validate the results and follow up with appropriate
course offerings or assistance with strategic deployment issues.

Our instructors and consultants have many years of
on-the-job experience in their specific area of expertise and are recognized
subject matter experts. All instructors must complete stringent certification
requirements before qualifying as classroom instructors. They bring a variety
of job experiences, real-world applications, and insight to enhance the
learning process and ensure instruction is targeted to meet your needs.

For more information, please visit RLI’s Internet site
at: www.raytheon.com/hrs/rli/ or contact Dave Letts at

972-344-0761 or Joe Rios at 817-619-9798.

22.2         Raytheon
Consortium

Supplier will allow Raytheon the opportunity to offer
the rates, rate guarantees and discounts to members of Raytheon’s Consortium
Program provided these Raytheon partners meet certain criteria mutually agreed
upon. The volume attained from the Raytheon partner and any and all subsequent
partners to this arrangement will be added to the Raytheon volume attained for
purposes of calculating the rebate amounts to Raytheon. Supplier agrees to
negotiate a fee payment structure in good faith with Raytheon in consideration
of Raytheon’s efforts to bring the supplier new business opportunities. Each
opportunity/referral and the realization of business for the supplier will be
negotiated on a case by case basis. For more information, please contact Jennifer Pueschner at 520-760-8264 or Jennifer_L_Pueschner@raytheon.com.

22.3         Silent Runner

Silent Runner, a wholly owned subsidiary of Raytheon
Company, provides patented network security analysis products to government
entities and the Fortune 1000 worldwide using technology never before available
to the private sector. The end result of more than four years of R&D by
Raytheon, SilentRunner® solves the challenges involved with cost-effectively safeguarding
intellectual assets. By providing a one-of-a-kind 3-D picture of network
communications, SilentRunner® makes it easy to spot malicious and anomalous
network behavior such as insiders gone bad, the spread of macro viruses, and
identifying sources of internal and external attacks. For more information,
visit www.silentrunner.com/ or 703-391-2913.

 11
 

22.4         Raytheon
Six Sigma 

Raytheon
Six Sigma (R6s) is a knowledge-based process that Raytheon is using internally
and with our key suppliers to maximize customers value and grow our business.
More than just a cost reduction methodology, we are using R6S to improve
product quality, decrease cycle times and to enhance on-time delivery.

The principles of
R6S are to:

·                  Specify value in the eyes of the
customer

·                  Identify the value stream, eliminate
waste and variation

·                  Make value flow at the pull of the
customer

·                  Involve, align and empower employees

·                  Continuously
improve knowledge in the pursuit of perfection

Raytheon has developed a process called R6S With Suppliers,
extending the power of this methodology to our key suppliers. After a detailed
collection of data on current and projected costs and defect levels, a workshop
is conducted at the supplier’s facility to assess and prioritize potential
areas of improvement. Each potential improvement project will be assessed for
feasibility, implementation cost and projected payback. The workshops are
co-led by R6S Experts and key supplier personnel. Raytheon customers may join
the workshop. These workshops have been found to be extremely effective in
focusing participants from both companies and linking R6S tools to product cost
drivers, using a structured methodology that creates demonstrated success. For
more information, please contact rjblair@raytheon.com or
972-344-0742

22.5                           Raytheon Aircraft  

The Raytheon Aircraft
group of companies provides aircraft and aviation services for the world’s
business, special mission and commuter aviation markets.

Raytheon Aircraft
Company builds and supports business jets, turboprops, and piston-powered
aircraft for business transportation and personal flying. The line of business
jet aircraft include the Hawker Horizon super mid-size business jet, the
mid-size Hawker 800XP, the Beechjet 400A light jet, and the entry-level Premier
I business jet. Turboprop aircraft include the Beech King Air 350, B200 and
C90B models, and the Beech 1900D Airliner. Piston aircraft include the Beech
Baron 58, Beech Bonanza B36 and A36 models. In addition, the company is also
building the T-6A for the world’s primary pilot training markets, including the
United States, Canada and Greece.

Raytheon Aircraft
Charter and Management Company provides first-class aircraft management and
domestic and international charter services with a nationwide fleet of aircraft.

Raytheon Aircraft
Services, Inc. is a network of fixed base operations providing business
aviation services at airports throughout North America and in the United
Kingdom. For more information, visit Raytheon website: www.raytheonaircraft.com or 316-676-5034

 12
 

ARTICLE
23 - ENTIRE AGREEMENT

This is the entire
Agreement between the Parties relative to the purchase of the products set
forth in Exhibit A hereto; it supersedes any prior or contemporaneous written
or oral agreements thereof and may not be amended or modified except by
subsequent agreement in writing by duly authorized officers or representatives
of the Parties.

Agreed
to this 26 day of August, 2004.

	
  RAYTHEON COMPANY

  	
   

  	
  AML
  COMMUNICATIONS

  
	
   

  	
   

  	
   

  
	
  Ann F. Purcell

  	
   

  	
  Ed McAvoy

  
	
  Name

  	
   

  	
  Name

  
	
   

  	
   

  	
   

  
	
  REMS Agreement Manager

  	
   

  	
  Vice President of Marketing

  
	
  Title

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature

  	
   

  	
  Signature

  

 

 13Exhibit 4.3

Rules of the Imperial Tobacco Group

International
Sharesave Plan

Imperial Tobacco Group
PLC

CONTENTS

	
  CLAUSE

  	
   

  	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  DEFINITIONS

  	
   

  	
  1

  
	
  2.

  	
   

  	
  COMMENCEMENT AND TITLE

  	
   

  	
  4

  
	
  3.

  	
   

  	
  GRANT OF OPTION

  	
   

  	
  4

  
	
  4.

  	
   

  	
  LIMITATIONS ON THE ISSUE OF SHARES

  	
   

  	
  6

  
	
  5.

  	
   

  	
  EXERCISE PRICE

  	
   

  	
  7

  
	
  6.

  	
   

  	
  ALTERATIONS OF SHARE CAPITAL

  	
   

  	
  7

  
	
  7.

  	
   

  	
  EXERCISE OF OPTIONS

  	
   

  	
  8

  
	
  8.

  	
   

  	
  LAPSE OF OPTION

  	
   

  	
  9

  
	
  9.

  	
   

  	
  TAKEOVER AND LIQUIDATION

  	
   

  	
  10

  
	
  10.

  	
   

  	
  ALLOTMENT AND LISTING

  	
   

  	
  11

  
	
  11.

  	
   

  	
  EMPLOYMENT RIGHTS

  	
   

  	
  11

  
	
  12.

  	
   

  	
  ADMINISTRATION OF THE PLAN

  	
   

  	
  12

  
	
  13.

  	
   

  	
  TERMINATION OF THE PLAN

  	
   

  	
  14

  
	
  14.

  	
   

  	
  GENERAL

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULE 1

  	
   

  	
  15

  
	
  Special International Rules

  	
   

  	
  15

  
	
  Appendix 1

  	
   

  	
  16

  
	
  Appendix 2

  	
   

  	
  17

  
	
  Appendix 3

  	
   

  	
  18

  
	
  Appendix 4

  	
   

  	
  19

  
	
  Appendix 5

  	
   

  	
  23

  
	
  Appendix 6

  	
   

  	
  24

  
	
  Appendix 7

  	
   

  	
  27

  
	
  Appendix 8

  	
   

  	
  28

  
	
  Appendix 9

  	
   

  	
  29

  
	
  SCHEDULE 2

  	
   

  	
  33

  
	
  The Imperial Tobacco Group UK Sharesave Plan

  	
   

  	
  33

  
	
  SCHEDULE 3

  	
   

  	
  34

  
	
  The Imperial Tobacco Group Irish Sharesave Plan

  	
   

  	
  34

  
	
  SCHEDULE 4

  	
   

  	
  35

  
	
  Notional Awards

  	
   

  	
  35

  
	
  Appendix 1

  	
   

  	
  37

  
	
  Appendix 2

  	
   

  	
  38

  
							

 

 

1.                                           DEFINITIONS

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

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

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

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

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

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

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

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

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

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

“Company” means Imperial Tobacco Group PLC;

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

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

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

provided that:

(i)                              all such service has been continuous; and

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

 1
 

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

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

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

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

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

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

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

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

provided
that:

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

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

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

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

“Grantor” means either the Board or the Trustee;

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

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

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

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

 2
 

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

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

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

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

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

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

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

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

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

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

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

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

“Schedule 3” means Schedule 3 to the Act;

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

“Specified Age” means 60;

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

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

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

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

 3
 

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

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

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

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

2.                                           COMMENCEMENT AND TITLE

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

3.                                           GRANT OF OPTION

1.1                                     On or prior to an Invitation Date the Board in its
absolute discretion or the employer of any Eligible Employee with the consent
of the Board may decide to invite applications for the grant of Options.  Such invitations shall be issued in such form
as the Board or, where the Board has consented to invitations being made by the
employer of an Eligible Employee, the employer of an Eligible Employee with the
consent of the Board may prescribe from time to time including by way of
electronic communication.

1.2                                     Where applications are invited, the Board shall
determine whether or not invitations shall be sent to all Eligible Employees
(and, for the avoidance of doubt, the Board may send or consent, in accordance
with Rule 3.1, to the sending of invitations to Eligible Employees of
Participating Companies in one jurisdiction but not to Eligible Employees of
Participating Companies in other jurisdictions) and any such invitations must
state:

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

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

(c)                            the Relevant Multiple or Multiples.

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

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

 4
 

equal to that for which Shares may be acquired under
his Option if exercised in full; and

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

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

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

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

Save
that:

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

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

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

 5
 

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

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

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

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

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

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

4.                                           LIMITATIONS ON THE ISSUE OF SHARES

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

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

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

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

 6
 

5.                                           EXERCISE PRICE

1.1                                     Subject to Rule 6 below, the Exercise Price shall be
such amount expressed in GB pounds sterling (or in such other currency or
currencies as the Board shall specify) in the case of Options for Shares as the
Board shall determine being an amount not less than the greater of:

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

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

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

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

6.                                           ALTERATIONS OF SHARE CAPITAL

In the event of:

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

(b)                           the Company paying a capital dividend;

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

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

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

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

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

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

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

 7
 

7.                                           EXERCISE OF OPTIONS

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

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

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

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

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

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

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

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

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

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

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

 8
 

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

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

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

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

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

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

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

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

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

8.                                           LAPSE OF OPTION

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

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

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

 9
 

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

9.                                           TAKEOVER AND LIQUIDATION

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

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

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

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

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

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

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

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

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

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

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

 10
 

AND the New Option shall, for all other purposes of
this Plan, be treated as having been acquired at the same time as the Option in
consideration of the release of which it is granted.  With effect from the release of any Option
pursuant to Rules 6, 7.1, 7.2 and 7.3, this Rule 9 and Rule 10 of this Plan
shall in relation to the New Option be construed as if references therein to “the
Company” were references to the Acquiring Company or, as the case may be, such
other company and all the Rules (other than Rules 3 to 5 inclusive) shall in
relation to the New Option be construed as if references therein to Shares were
references to shares in the Acquiring Company or, as the case may be, such
other company in respect of whose shares the New Option is granted.

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

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

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

1.8                                     Any Option shall lapse if:

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

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

10.                                     ALLOTMENT AND LISTING

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

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

11.                                     EMPLOYMENT RIGHTS

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

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

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

(b)                           no damages or compensation shall be payable in consequence
of the termination of such office or employment (whether or not in
circumstances giving rise to a claim

 11
 

for wrongful or unfair dismissal) or for any other
reason whatsoever to compensate him for the loss of any rights the Participant
would otherwise have had (actual or prospective) under the Plan howsoever
arising but for such termination; and

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

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

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

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

12.                                     ADMINISTRATION OF THE PLAN

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

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

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

(i)                              eligibility;

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

(iii)                        the maximum entitlement of any one Participant;

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

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

 12

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 13
 

13.                                     TERMINATION OF THE PLAN

The Plan may be terminated at any time by the Board or
by the Company in general meeting but in any event shall terminate on the tenth
anniversary of the Adoption Date and on such termination no further Options
shall be granted, but the subsisting rights of Participants shall not be
affected by such termination.

14.                                     GENERAL

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

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

1.3                                     The Company, the Trustee or any person which is or was
a Participant’s employer may withhold any amount and make any arrangements it
considers necessary to meet any liability of the Participant to taxation or
social security contributions in connection with the benefits delivered under
the Plan. These arrangements may include the sale on behalf of the Participant
of any Shares acquired by a Participant under the Plan. It is a condition of
the exercise of any Option that the Participant agrees to any withholding or
other arrangement (including, for the avoidance of doubt, any sale of Shares on
behalf of the Participant) in accordance with this Rule 14.3.

 14
 

SCHEDULE 1

Special
International Rules

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

Australia (Appendix 1)

Bosnia (Appendix 2)

Czech Republic (Appendix 3)

France (Appendix 4)

Germany (Appendix 5)

Italy (Appendix 6)

Netherlands (Appendix 7)

New Zealand (Appendix 8)

United States (Appendix 9)

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

Greece

Hong Kong

Hungary

Kyrgyz Republic

Russia

Singapore

Slovakia

Slovenia

Spain

Taiwan

Turkey

United Arab Emirates

 15
 

Appendix
1

IMPERIAL
TOBACCO GROUP INTERNATIONAL SHARESAVE PLAN

APPENDIX
FOR AUSTRALIA

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

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

Rule 1

	
  “Specified Age”

  	
   

  	
  in Rule 1 shall be deleted.

  
	
   

  	
   

  	
   

  
	
  Rule 7.5(a)

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 7.8

  	
   

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

  

 

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

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

 

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

 

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

 

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

 

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

 

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

 16
 

 

Appendix
2

IMPERIAL
TOBACCO GROUP INTERNATIONAL SHARESAVE PLAN

APPENDIX
FOR BOSNIA

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

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

Rule 1

	
  “Specified Age”

  	
   

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

  

 

 17
 

 

Appendix
3

IMPERIAL
TOBACCO GROUP INTERNATIONAL SHARESAVE PLAN

APPENDIX
FOR CZECH REPUBLIC

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

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

	
  Rule 3.3(b)

  	
   

  	
  this rule shall be deleted and replaced with

  
	
   

  	
   

  	
   

  
	
   

  	
   

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

  
				

 

 18
 

Appendix
4

IMPERIAL
TOBACCO GROUP INTERNATIONAL SHARESAVE PLAN

APPENDIX
FOR FRANCE

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

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

Rule 1

	
  “Eligible Employee”

  	
   

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

   

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

  
	
   

  	
   

  	
   

  
	
  “Participant”

  	
   

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

  
	
   

  	
   

  	
   

  
	
  “Specified Age”

  	
   

  	
  shall be deleted;

  
	
   

  	
   

  	
   

  
	
  “Subsidiary”

  	
   

  	
  the following paragraph shall be added to this
  definition;

   

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

  
	
   

  	
   

  	
   

  
	
  Rule 3.4

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 3.7

  	
   

  	
  shall be amended to read:

   

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

  

 

 19
 

 

	
  Rule 5.1(a)

  	
   

  	
  shall be deleted and replaced with the following
  wording:

   

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

  
	
   

  	
   

  	
   

  
	
  Rule 5.2

  	
   

  	
  shall be deleted and replaced with the following
  wording:

   

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

  
	
   

  	
   

  	
   

  
	
  Rule 6

  	
   

  	
  shall be deleted and replaced with the following
  wording:

   

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

  
	
   

  	
   

  	
   

  
	
  Rule 7.5

  	
   

  	
  shall be deleted and replaced with the following:

   

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

   

  (a)   redundancy (licenciement pour motif
  économique);

   

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

   

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

   

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

   

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

  
	
   

  	
   

  	
   

  
	
   

  	
   

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

  

 

 20
 

 

	
  

  	
   

  	
  Date shall not have
  occurred.

  
	
   

  	
   

  	
   

  
	
  Rule 7.7

  	
   

  	
  shall be amended to read as follows:

   

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

  
	
   

  	
   

  	
   

  
	
  Rule 7.8

  	
   

  	
  shall be deleted in its entirety;

  
	
   

  	
   

  	
   

  
	
  Rule 8(b)

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 9

  	
   

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

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “9.  Takeover and Liquidation

   

  9.1   In the event of:

   

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

   

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

   

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

   

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

   

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

  
	
   

  	
   

  	
   

  
	
   

  	
   

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

   

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

   

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

  
	
   

  	
   

  	
   

  
	
   

  	
   

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

  

 

 21
 

 

	
  Rule 12

  	
   

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

   

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

   

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

   

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

   

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

  
	
   

  	
   

  	
   

  
	
  Rule 13

  	
   

  	
  The following words
  shall be added to this Rule:

   

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

  
	
   

  	
   

  	
   

  
	
  Rule 14.2

  	
   

  	
  The following wording
  shall be added to this Rule:

   

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

  

 

 22
 

Appendix
5

IMPERIAL
TOBACCO GROUP INTERNATIONAL SHARESAVE PLAN

APPENDIX
FOR GERMANY

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

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

Rule 1

	
  “Specified Age”

  	
   

  	
  shall be deleted.

  
	
   

  	
   

  	
   

  
	
  Rule
  7.5(a)

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule
  7.8

  	
   

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

  

 

 23
 

Appendix
6

IMPERIAL
TOBACCO GROUP INTERNATIONAL SHARESAVE PLAN

APPENDIX
FOR ITALY

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

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

Rule 1

	
  “Eligible Employee”

  	
   

  	
  shall be amended to read:

   

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

  
	
   

  	
   

  	
   

  
	
  “Participant”

  	
   

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

  
	
   

  	
   

  	
   

  
	
  “Specified
  Age”

  	
   

  	
  shall be deleted;

  
	
   

  	
   

  	
   

  
	
  “Subsidiary”

  	
   

  	
  shall be replaced as follows:

   

  “means any company in
  relation to which the Company:

   

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

   

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

   

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

   

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

  
	
   

  	
   

  	
   

  
	
  Rule 6

  	
   

  	
  shall be deleted and replaced with the following
  wording:

   

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

  

 

 24
 

 

	
  

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule
  7.5

  	
   

  	
  shall be deleted and replaced with:

   

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

   

  (a)           redundancy; or

   

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

   

  (c)           invalidity; or

   

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

   

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

   

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

  
	
   

  	
   

  	
   

  
	
  Rule
  7.6(a)

  	
   

  	
  shall be replaced with the following wording:

   

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

   

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

   

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

   

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

  

 

 25
 

 

	
  

  	
   

  	
  the Company.”

  
	
   

  	
   

  	
   

  
	
  Rule 7.7

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule
  7.8

  	
   

  	
  shall be deleted in its entirety;

  
	
   

  	
   

  	
   

  
	
  Rule
  8(b)

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 9

  	
   

  	
  the following words shall be added to this Rule:

   

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

  

 

 26
 

 

Appendix
7

IMPERIAL
TOBACCO GROUP INTERNATIONAL SHARESAVE PLAN

APPENDIX
FOR NETHERLANDS

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

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

	
  Rule 1

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  “Eligible
  Employee”

  	
   

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

  
	
   

  	
   

  	
   

  
	
  “Specified
  Age”

  	
   

  	
  shall be deleted;

  
	
   

  	
   

  	
   

  
	
  Rule
  7.5(a)

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule
  7.8

  	
   

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

  

 

 27
 

Appendix
8

IMPERIAL
TOBACCO GROUP INTERNATIONAL SHARESAVE PLAN

APPENDIX
FOR NEW ZEALAND

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

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

Rule 1

	
  “Specified Age”

  	
   

  	
  shall be deleted.

  
	
   

  	
   

  	
   

  
	
  Rule
  7.5(a)

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule
  7.8

  	
   

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

  

 

 28

Appendix
9

IMPERIAL
TOBACCO GROUP INTERNATIONAL SHARESAVE PLAN

APPENDIX
FOR THE UNITED STATES OF AMERICA

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

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

Rule 1

	
  “Exercise Price”

  	
   

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

  
	
   

  	
   

  	
   

  
	
  “Option”

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 3.2(a)

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 3.2(b)

  	
   

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

   

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

  
	
   

  	
   

  	
   

  
	
  Rule 3.3(a)

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 3.3(b)(i)

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 3.4

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 3.4(a)

  	
   

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

   

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

  
	
   

  	
   

  	
   

  
	
  Rule 3.4(i) and (ii)

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 5.1

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 5.1(a)

  	
   

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

  

 

 29
 

 

	
  Rule 5.1(b)

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 5.2

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 6

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 6(ii)

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 7.2

  	
   

  	
  shall be deleted and replaced with the following:

   

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

  
	
   

  	
   

  	
   

  
	
  Rule 7.3

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 7.4

  	
   

  	
  delete the last sentence of Rule 7.4.

  
	
   

  	
   

  	
   

  
	
  Rule 7.5

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 7.7

  	
   

  	
  shall be replaced with the following:

   

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

  
	
   

  	
   

  	
   

  
	
  Rule 7.8

  	
   

  	
  shall not be applicable.

  
	
   

  	
   

  	
   

  
	
  Rule 7.10

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 9.1

  	
   

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

  

 

 30
 

 

	
  

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 9.2

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 9.3

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 9.4(b)

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 9.5

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Rule 10.2

  	
   

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

   

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

  
	
   

  	
   

  	
   

  
	
  Rule 10.4

  	
   

  	
  insert a new Rule 10.4 as set out below:

   

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

  
	
   

  	
   

  	
   

  
	
  Rule 14.1

  	
   

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

  

 

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

 31
 

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

 

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

 32
 

 

SCHEDULE 2

The
Imperial Tobacco Group UK Sharesave Plan

 33
 

SCHEDULE 3

The
Imperial Tobacco Group Irish Sharesave Plan

 34
 

SCHEDULE 4

Notional
Awards

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 35
 

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

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

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

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

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

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

 36
 

Appendix
1

THE
IMPERIAL TOBACCO GROUP INTERNATIONAL SHARESAVE PLAN – NOTIONAL AWARDS

Belgium

Canada

Kazakhstan

Macedonia

Poland

Serbia

Ukraine

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

Canada (Appendix
2)

 37
 

Appendix
2

IMPERIAL
TOBACCO GROUP INTERNATIONAL SHARESAVE PLAN – NOTIONAL AWARDS

APPENDIX
FOR CANADA

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

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

Section 1

	
  “Award”

  	
   

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

  
	
   

  	
   

  	
   

  
	
  “Notional Gain”

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Section 5

  	
   

  	
  is deleted and replaced with the following:

  

 

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

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

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

 38
 

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

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

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

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

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

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

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

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

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

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

 39
 

SPECIMEN

THE IMPERIAL TOBACCO GROUP

INTERNATIONAL SHARESAVE PLAN (the
“Plan”)

 

INVITATION

(on Company headed notepaper)

Dear
Colleague,

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

Enclosed
are:

1.                                           a booklet which explains how the Plan works;

2.                                           an application for a share option;

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

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

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

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

Yours
sincerely

 

[Company
Secretary]

 40
 

SPECIMEN

THE IMPERIAL TOBACCO GROUP PLC

INTERNATIONAL SHARESAVE PLAN

 

SHARE OPTION APPLICATION

	
  To:

  	
  The Plan Administrator

  
	
   

  	
   

  
	
  PLEASE USE BLOCK CAPITALS

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  SURNAME

  	
  MR/MRS/MISS/MS

  
	
   

  	
   

  
	
  FIRST NAMES

  	
   

  
	
   

  	
   

  
	
  HOME ADDRESS

  	
   

  
	
   

  	
   

  
	
   

  	
  POSTCODE

  
	
   

  	
   

  
	
  PLACE OF EMPLOYMENT

  	
   

  
			

 

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

NOTES:                                                   (1)         Contributions
must be not less than £5 per month and the aggregate contributions to be made
in any month under this contract and any other contract(s) linked to this Plan
into which you have previously entered must not be more than £250.  For weekly paid employees, a quarter of the
monthly amount will be deducted weekly until the equivalent of [36/60] monthly
payments have been made, (or the equivalent sums at the Date of Grant in the
currency of your country of employment).

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

PLEASE
READ AND SIGN

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

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

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

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

 41
 

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

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

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

	
  SIGNATURE

  	
   

  	
  DATE

  

 

 42
 

SPECIMEN

THE IMPERIAL TOBACCO GROUP

INTERNATIONAL SHARESAVE PLAN

 

OPTION CERTIFICATE

	
  Name of Option Holder

  
	
   

  	
   

  
	
  Address of Option Holder

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Post Code

  
	
   

  	
   

  
	
  Option Certificate Number

  	
   

  
	
   

  	
   

  
	
  Number of shares granted under this option

  	
   

  
	
   

  	
   

  
	
  Date of grant

  	
   

  
				

 

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

Signed
on behalf of

	
  

  	
  Director

  	
  Secretary

  

 

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

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

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

 43
 

SPECIMEN

[Reverse of Certificate]

THE IMPERIAL TOBACCO GROUP

INTERNATIONAL SHARESAVE PLAN

 

FORM OF EXERCISE OF OPTION

	
  To:

  	
   

  	
  The Company Secretary

  
	
   

  	
   

  	
  Imperial Tobacco Group PLC

  

 

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

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

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

Personal
Details

	
  SURNAME

  	
  MR/MRS/MISS/MS

  
	
   

  	
   

  
	
  FIRST NAMES

  	
   

  
	
   

  	
   

  
	
  HOME ADDRESS

  	
   

  	
   

  
	
   

  	
   

  	
  POST CODE

  
	
   

  	
   

  
	
  SIGNATURE

  	
  DATE

  

 

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

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

 44

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