Document:

Exhibit
4.2

 

	
  

  	
  CLIFFORD CHANCE LLP

  

 

 

THE
DIAGEO PLC 2009 EXECUTIVE LONG TERM 

INCENTIVE
PLAN

 

 

Approved by shareholders of the Company on 14
October 2009

 

Adopted by the Board of the Company on 26 August 2009

 

The Plan is a discretionary
benefit offered by the Diageo Group for the benefit of its employees.  Its main purpose is to increase the interest
of the employees in Diageo plc’s long-term business goals and performance
through share ownership.  The Plan is an
incentive for the employees’ future performance and commitment to the goals of
the Diageo Group.

 

Shares purchased or received
under the Plan, any cash received under the Plan and any gains obtained under
the Plan are not part of salary for any purpose (except to any extent required
by statute).

 

The Plan is being offered for
the first time in 2009 in selected countries and the board of Diageo plc shall
have the right to decide, in its sole discretion, whether or not further awards
will be granted in the future and to which employees those awards will be
granted.

 

Exercising an Option which
is not a Nil Cost Option under the Plan is an investment opportunity distinct
from any employment contract.  Exercising
an Option which is not a Nil Cost Option entails the risks associated with an
investment.  An individual who exercises
an Option which is not a Nil Cost Option is treated as being aware of such
risks and accepts such risks of his own free will.

 

The detailed rules of
the Plan are set out overleaf.

 

 

CONTENTS

 

	
  Rule

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  Part A
  - HMRC Approved

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Definitions
  And Interpretation

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Eligibility

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Grant Of
  Options

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Limits

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Exercise
  Of Options

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Leavers
  And Deceased Participants

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Takeovers
  And Other Corporate Events

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  Adjustment
  Of Options

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Alterations

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  Miscellaneous

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  Part B
  - Unapproved

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Definitions
  And Interpretation

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Eligibility

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Grant Of
  Awards

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Limits

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Vesting
  Of Awards

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Consequences
  Of Vesting

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Exercise
  Of Options

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  Cash
  Alternative

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Lapse Of
  Awards

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  Leavers
  And Deceased Participants

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  Takeovers
  And Other Corporate Events

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  Adjustment
  Of Awards

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  Alterations

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  Miscellaneous

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  Incentive Stock Options

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  Schedule 1 : Grant Of A Forfeitable Shares Award

  	
   

  	
  44

  
	
   

  	
   

  	
   

  
	
  Schedule 2 : Cash Conditional Awards

  	
   

  	
  45

  
	
   

  	
   

  	
   

  
	
  Schedule 3 : Share Appreciation Rights

  	
   

  	
  46

  
	
   

  	
   

  	
   

  
	
  Schedule 4 : United States Addendum

  	
   

  	
  47

  
	
   

  	
   

  	
   

  
	
  Schedule 5 : Canadian Addendum

  	
   

  	
  49

  

 

 

PART A - HMRC APPROVED

 

1.             DEFINITIONS AND INTERPRETATION

 

1.1           In this Part A of the Plan, unless the context
otherwise requires:

 

“Board” means the board of
directors of the Company (or, on and after the occurrence of a corporate event
described in Rule 11 (Takeovers and
other corporate events), for the purposes of making determinations
under Rule 11, the board of directors of the Company as constituted
immediately before such event occurs) or a duly authorised committee of the
board or a duly authorised person;

 

“Company” means Diageo plc
(registered in England and Wales with registered number 23307);

 

“Control” means control
within the meaning of section 719 of ITEPA;

 

“Grant Date” means the
date on which an Option is granted;

 

“Group Member” means:

 

(a)             a Participating Company or a
body corporate which is the Company’s holding company (within the meaning of
section 1159 of the Companies Act 2006) or a Subsidiary of the Company’s
holding company;

 

(b)            a body corporate which is a
subsidiary undertaking (within the meaning of section 1162 of that Act) of a
body corporate within paragraph (a) above and has been designated by the
Board for this purpose; and

 

(c)             any other body corporate in
relation to which a body corporate within paragraph (a) or (b) above
is able (whether directly or indirectly) to exercise 15% or more of its equity
voting rights and has been designated by the Board for this purpose;

 

“HMRC” means H.M. Revenue &
Customs;

 

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

 

“Listing Rules” means the
Listing Rules published by the UKLA;

 

“London Stock Exchange”
means London Stock Exchange plc or any successor to that company;

 

“Option” means a right to
acquire Shares granted under Part A of the Plan;

 

“Participant” means a
person who holds an Option including his personal representatives;

 

“Participating Company”
means the Company or any Subsidiary;

 

“Plan” means the Diageo
2009 Executive Long Term Incentive Plan as amended from time to time;

 

1

 

“Rule” means a rule of
the Plan;

 

“Schedule 4” means
Schedule 4 to ITEPA;

 

“Shares” means fully paid
ordinary shares in the capital of the Company which satisfy the requirements of
paragraphs 16 to 20 of Schedule 4 (fully
paid up, unrestricted ordinary share capital) unless Rule 5.11
(Shares ceasing to satisfy Schedule 4
requirements) applies;

 

“Subsidiary” means a body
corporate which is a subsidiary (within the meaning of section 1159 of the
Companies Act 2006) of the Company and of which the Company has Control;

 

“Tax Liability” means any
amount of tax or social security contributions for which a Participant would or
may be liable and for which any Group Member or former Group Member would or
may be obliged to (or would or may suffer a disadvantage if it were not to)
account to any relevant authority;

 

“UKLA” means the United
Kingdom Listing Authority;

 

and expressions not defined in Part A of the Plan have the same
meanings as they have in Schedule 4.

 

1.2           Any reference in Part A of the Plan to any enactment
includes a reference to that enactment as from time to time modified, extended
or re-enacted.

 

1.3           Expressions in italics and headings are for guidance only
and do not form part of the Plan.

 

2.             ELIGIBILITY

 

2.1           General
rule on eligibility

 

Subject to Rule 2.3 (Individuals not eligible), an individual is eligible to be
granted an Option only if he is a full-time director or qualifying employee as
defined in Rule 2.2.

 

2.2           Individuals
eligible

 

For the purposes of Rule 2.1:

 

(a)           a
full-time director is an individual who is a director of a Participating
Company (other than a director of the Company) and is obliged to devote not
less than 25 hours a week (excluding meal breaks) to the performance of the
duties of his office or employment with that and any other Participating
Company; and

 

(b)           a
qualifying employee is an employee of a Participating Company (except an
employee who is a director of a Participating Company or a member of the
executive committee).

 

2

 

2.3           Individuals
not eligible

 

An individual is not
eligible to be granted an Option at any time when he is not eligible to
participate in Part A of the Plan by virtue of paragraph 9 of Schedule 4 (material interest in a close company).

 

3.             GRANT OF OPTIONS

 

3.1           Terms
of grant

 

Subject to Rule 3.5 (Timing of grant), Rule 3.7 (Approvals
and consents) and Rule 4 (Limits), the
Board may resolve to grant an Option on:

 

(a)           the
terms set out in Part A of the Plan; and

 

(b)           such
additional terms as the Board may specify

 

to any person who is
eligible to be granted an Option under Rule 2 (Eligibility).

 

3.2           Method
of grant

 

An Option shall be granted
by deed executed by the Company.

 

3.3           Method
of satisfying Options

 

Unless specified to the
contrary by the Board on the Grant Date, an Option may be satisfied:

 

(a)           by
the issue of new Shares; and/or

 

(b)           by
the transfer of treasury Shares; and/or

 

(c)           by
the transfer of Shares (other than the transfer of treasury Shares).

 

The Board may decide to
change the way in which it is intended that an Option may be satisfied after it
has been granted, having regard to the provisions of Rule 4 (Limits).

 

3.4           Option
price

 

The Board shall decide
before an Option is granted the price at which Shares may be acquired by the
exercise of that Option, but the price shall not be less than:

 

(a)           if
Shares are quoted in the London Stock Exchange Daily Official List, the average
of the middle-market quotation of the Shares (as derived from that List) for
the 3 dealing days before the Grant Date (or on such other dealing day(s) as
may be agreed with HMRC) provided such dealing day(s) do not fall within
any period when dealings in Shares are prohibited under the Company’s share
dealing code (unless the proposed grant is permitted by such code);

 

(b)           if Rule 3.4(a) does
not apply, the market value (within the meaning of Part VIII of the
Taxation of Chargeable Gains Act 1992) of Shares, as agreed in 

 

3

 

advance for the purposes of the Plan with HMRC Shares and Assets
Valuation, on the Grant Date (or such other day(s) as may be agreed with HMRC);
and

 

(c)           in
the case of an Option to acquire Shares only by subscription, the nominal value
of those Shares.

 

3.5           Timing
of grant

 

Subject to Rule 3.7 (Approvals and consents), an Option may only be granted:

 

(a)           within
the period of 6 weeks beginning with:

 

(i)            the
day on which the Plan is approved by shareholders of the Company; or

 

(ii)           the
dealing day after the day on which the Company announces its results for any
period; or

 

(b)           at
any other time when the Board considers that circumstances are sufficiently
exceptional to justify its grant

 

but an Option may not be
granted:

 

(c)           under
Part A of the Plan before the day on which Part A of the Plan is
approved by HMRC under Schedule 4; or

 

(d)           after
13 October 2019 (that is, the expiry of the period of 10 years beginning
with the date on which the Plan is approved by shareholders of the Company).

 

3.6           Non-transferability
and bankruptcy

 

An Option granted to any
person:

 

(a)           shall
not be transferred, assigned, charged or otherwise disposed of (except on his
death to his personal representatives) and shall lapse immediately on any
attempt to do so; and

 

(b)           shall
lapse immediately if he is declared bankrupt.

 

3.7           Approvals
and consents

 

The grant of any Option
shall be subject to obtaining any approval or consent required under the
Listing Rules, any relevant share dealing code of the Company, the City Code on
Takeovers and Mergers, or any other relevant UK or overseas regulation or
enactment.

 

4.             LIMITS

 

4.1           5%
in 10 years limit

 

An Option shall not be
granted in any calendar year if, at the time of its proposed Grant Date, it
would cause the number of Shares allocated (as defined in Rule 4.3) in the
period of 10 calendar years ending with that calendar year under the Plan and 

 

4

 

under any other executive
share plan adopted by the Company to exceed such number as represents 5% of the
ordinary share capital of the Company in issue at that time.

 

4.2           10%
in 10 years limit

 

An Option shall not be
granted in any calendar year if, at the time of its proposed Grant Date, it
would cause the number of Shares allocated (as defined in Rule 4.3) in the
period of 10 calendar years ending with that calendar year under the Plan and
under any other employee share plan adopted by the Company to exceed such
number as represents 10% of the ordinary share capital of the Company in issue
at that time.

 

4.3           Meaning
of “allocated”

 

For the purposes of Rules 4.1
and 4.2:

 

(a)           Shares
are allocated:

 

(i)            when
an option, award or other contractual right to acquire unissued Shares or treasury
shares is granted;

 

(ii)           where
Shares are issued or treasury shares are transferred other than in respect of
an option, award or other contractual right to acquire Shares, when those
Shares are issued or treasury shares transferred;

 

(b)           any
Shares which have been issued or which may be issued (or any Shares transferred
out of treasury or which may be transferred out of treasury) to any trustees to
satisfy the exercise of any option, award or other contractual right shall be
treated as “allocated” unless they are already treated as allocated under this
Rule; and

 

(c)           for
the avoidance of doubt, existing Shares other than treasury shares that are
transferred or over which options, awards or other contractual rights are
granted shall not count as “allocated”.

 

4.4           Post-grant
events affecting numbers of “allocated” Shares

 

For the purposes of Rule 4.3:

 

(a)           where:

 

(i)            any
option, award or other contractual right to acquire unissued Shares or treasury
shares is released or lapses (whether in whole or in part); or

 

(ii)           after
the grant of an option, award or other contractual right the Board determines
that:

 

(aa)         where
an amount is normally payable on its exercise it shall be satisfied without
such payment but instead by the payment of cash equal to the gain made on its
exercise; or

 

(bb)         it
shall be satisfied by the transfer of existing Shares (other than Shares
transferred out of treasury)

 

5

 

the unissued Shares or treasury shares which consequently cease to be
subject to the option, award or other contractual right shall not count as
allocated; and

 

(b)           the
number of Shares allocated in respect of an option, award or other contractual
right shall be such number as the Board shall reasonably determine from time to
time.

 

4.5           Changes
to investor guidelines

 

Treasury shares shall cease
to count as “allocated” Shares for the purposes of Rule 4.3 if
institutional investor guidelines cease to require such Shares to be so
counted.

 

4.6           Individual
limit

 

(a)           Subject
to Rule 4.7 (HMRC limit),
the maximum total market value of Shares (calculated as set out in this Rule)
over which Options may be granted to any employee during any financial year of
the Company is 375% of his salary (as defined in this Rule), unless Rule 4.6(b) applies.

 

(b)           If
the Board decides that exceptional circumstances exist in relation to the
recruitment or retention of an employee when the maximum total market value of
Shares over which Options may be granted to that employee during a financial
year of the Company is such higher percentage of his salary (as defined in this
Rule) as the Board may determine.

 

For the purpose of this Rule 4.6:

 

(c)           an
employee’s salary shall be taken
to be his base salary (excluding benefits in kind), expressed as an annual rate
payable by the Participating Companies to him on the Grant Date (or on such
other date as the Board shall reasonably determine).  Where a payment of salary is made in a
currency other than sterling, the payment shall be treated as equal to the equivalent
amount of sterling determined by using any rate of exchange which the Board may
reasonably select; and

 

(d)           the market value of the Shares over which an
Option is granted shall be calculated:

 

(i)            for
an Option, on the days by reference to which the price at which Shares may be
acquired by the exercise of that Option was determined under Rule 3.4 (Option price); and

 

(ii)           for
an option granted under any other share option plan approved by HMRC under
Schedule 4, at the time when it was granted or, in a case where an agreement
relating to the shares has been made under paragraph 22 of Schedule 4, such
earlier time or times as may be provided in that agreement.

 

6

 

4.7           HMRC
limit

 

No person shall be granted
an Option which would, at the time it is granted, cause the total market value
of the Shares (calculated as set out in Rule 4.6(d)) which he may acquire
as a result of options granted to him (and not exercised) under:

 

(a)           Part A
of the Plan; and

 

(b)           any
other share option plan approved under Schedule 4 and established by the
Company or by any associated company of the Company

 

to exceed £30,000 (or such
other limit as may from time to time be imposed by Schedule 4).

 

4.8           Effect
of limits

 

Any Option shall be limited
and take effect so that the limits in this Rule 4 are complied with.

 

5.             EXERCISE OF OPTIONS

 

5.1           General
prohibition on exercise before third anniversary of the Grant Date

 

An Option may only be
exercised on or after the third anniversary of the Grant Date except where Rule 6
(Leavers and deceased Participants), Rule 7.1
(General offers), Rule 7.2 (Compulsory acquisition, schemes of arrangement and winding up)
or Rule 7.3 (Demerger and similar events)
applies.

 

5.2           Exercise
conditions

 

An Option may only be
exercised as permitted by any term specified under Rule 3.1(b).

 

5.3           Restrictions
on exercise:  regulatory and tax issues

 

An Option may not be
exercised unless the following conditions are satisfied:

 

(a)           the
exercise of the Option and the issue or transfer of Shares after such exercise
would be lawful in all relevant jurisdictions and in compliance with the
Listing Rules, any relevant share dealing code of the Company (which, for the
purposes of the Plan shall be deemed to apply to any Participant who ceases to
be a director or employee of a Group Member if such code applied to the
Participant immediately before such cessation), the City Code on Takeovers and
Mergers and any other relevant UK or overseas regulation or enactment;

 

(b)           if a
Tax Liability would arise by virtue of the exercise of the Option, then, unless
the Participant agrees with the Board to fund all or part of the Tax Liability
in a different manner, the Participant authorises the Company to sell or
procure the sale of sufficient Shares on his behalf to ensure that any relevant
Group Member receives the amount required to discharge the Tax Liability;

 

7

 

(c)           the
Participant has entered into such arrangements as the Board requires by way of
agreement or election under Paragraphs 3A and 3B (respectively) of Schedule 1
of the Social Security Contributions and Benefits Act 1992 to satisfy a Group
Member’s liability to social security contributions in respect of the exercise
of the Option; and

 

(d)           if
the Participant will exercise the Option in circumstances which will give rise
to a Tax Liability and the Board requires, the Participant has entered into, or
agreed to enter into, a valid election under Part 7 of ITEPA (Employment income: 
elections to disapply tax charge on restricted securities).

 

For the purposes of this Rule 5.3,
references to Group Member include any former Group Member.

 

5.4           Restriction
on exercise: material interest in a close company

 

A Participant shall not be eligible
to exercise an Option at any time when he is not eligible to participate in Part A
of the Plan by virtue of paragraph 9 of Schedule 4 (material
interest in close company).

 

5.5           Long
stop date for exercise

 

An Option may not in any
circumstances (and regardless of any other Rule) be exercised after the expiry
of 10 years beginning with the Grant Date (or such shorter period beginning
with the Grant Date as the Board may have decided before the grant of that
Option) and if not exercised shall lapse at the end of such period.

 

5.6           Exercise
in whole or in part

 

An Option may be exercised
to the maximum extent possible at the time of exercise or over such fewer
number of Shares as the Participant decides.

 

5.7           Method
of exercise

 

The exercise of any Option
shall be effected in the form and manner prescribed by the Board and subject to
the prior approval of HMRC.  Unless the
Board, acting fairly and reasonably, determines otherwise, any notice of
exercise shall, subject to Rules 5.3 and 5.4 (Restrictions
on exercise), take effect only when the Company receives it,
together with:

 

(a)           payment
of the relevant price at which Shares can be acquired under the Option (or, if
the Board so permits, an undertaking to pay that amount); and

 

(b)           if a
Tax Liability arises and if a Participant decides to satisfy the Tax Liability
other than by selling Shares pursuant to the authority in Rule 5.3(b), an
agreement relating to the payment of the Tax Liability having been entered
into.

 

5.8           Restriction
on use of unissued Shares and treasury shares

 

No Shares may be issued or treasury shares transferred to satisfy the
exercise of any Option to the extent that such issue or transfer would cause
the number of Shares

 

8

 

allocated (as defined in Rule 4.3 (Meaning of “allocated”) and adjusted under
Rule 4.4 (Post-grant events affecting
numbers of “allocated” Shares)) to exceed the limits in Rules 4.1
(5% in 10 years limit) and 4.2 (10% in 10 years limit) except where there
is a variation of share capital of the Company which results in the number of
Shares so allocated exceeding such limits solely by virtue of that variation.

 

5.9           Allotment
and transfer timetable

 

As soon as reasonably practicable after an Option has been exercised
and, in any event, within 30 days of exercise, the Company shall transfer or
procure the transfer to him (or a nominee for him) or, if appropriate, allot to
him (or a nominee for him) the number of Shares in respect of which the Option
has been exercised.

 

5.10         Share
rights

 

All Shares allotted under the Plan shall rank equally in all respects
with Shares then in issue except for any rights attaching to such Shares by
reference to a record date before the date of allotment.  Where Shares are transferred under the Plan
after the exercise of an Option, Participants will be entitled to any rights
attaching to such Shares by reference to a record date on or after the date of
such transfer.

 

5.11         Shares
ceasing to satisfy Schedule 4 requirements

 

If at any time the Shares cease to satisfy the requirements of
paragraphs 16 to 20 of Schedule 4 (fully paid up,
unrestricted, ordinary share capital):

 

(a)           an Option may be
exercised regardless of that fact (but subject to the other provisions of the
Plan); and

 

(b)           the Company shall
notify HMRC as soon as practicable (which may withdraw its approval of Part A
of the Plan under Schedule 4).

 

6.             LEAVERS AND DECEASED PARTICIPANTS

 

6.1           Deceased
Participants

 

If a Participant dies at a time when he is a director or employee of a
Group Member, the following provisions apply:

 

(a)           any Option
granted to him that is already capable of exercise at the time of death shall,
subject to Rules 5.3 and 5.4 (Restrictions
on exercise), continue to be capable of exercise by his personal
representatives for a period of 12 months after his death and if not exercised
shall lapse at the end of that period;

 

(b)           any other Option
granted to him may, subject to Rules 5.3 and 5.4 (Restrictions on exercise) and the
remainder of this Rule, be exercised by his personal representatives during the
period of 12 months after his death and if not exercised shall lapse at the end
of that period; and

 

(c)           in both cases (a) and
(b) above the period for exercise shall be shortened if Rule 5.5 (Long stop date for exercise), Rule 7.1
(General offers), Rule 7.2 

 

9

 

(Compulsory
acquisition, schemes of arrangement and winding up) or Rule 7.3
(Demerger and similar events)
applies.

 

For the purposes of this Rule, the Board shall determine the number of
Shares over which the Option becomes exercisable by:

 

(i)            applying any term specified
by the Board on the Grant Date (unless the Board, in exceptional circumstances,
decides otherwise); and

 

(ii)           reducing the number of
Shares pro rata to reflect any unexpired part of the period of 3 years after
the Grant Date as at the time that the Participant ceases to be a director or
employee unless the Board, acting fairly and reasonably, decides that the pro
rata reduction in the number of Shares is inappropriate in any particular case
when it shall increase the number of Shares to such higher number as it decides
(provided that the number does not exceed the number of Shares determined under
paragraph (i) above).

 

6.2           Retirement,
ill-health, injury, disability, redundancy and transfer out of the Group

 

If a Participant ceases to be a director or employee of a Group Member
by reason of:

 

(a)           retirement with
the agreement of his employer;

 

(b)           ill-health,
injury or disability (evidenced to the satisfaction of his employer);

 

(c)           redundancy
(within the meaning of the Employment Rights Act 1996) or any overseas
equivalent; or

 

(d)           his office or
employment being either with a company which ceases to be a Group Member or
relating to a business or part of a business which is transferred to a person
who is not a Group Member

 

the following provisions apply:

 

(e)           any Option
granted to him that is already capable of exercise at the date of cessation
shall, subject to Rules 5.3 and 5.4 (Restrictions
on exercise) and Rule 6.1 (Deceased
Participants), continue to be capable of exercise for a period of 6
months after the date of cessation and if not exercised shall lapse at the end
of that period;

 

(f)            any other Option
granted to him may, subject to Rules 5.3 and 5.4 (Restrictions on exercise), Rule 6.1 (Deceased Participants) and the remainder
of this Rule, be exercised during the period of 6 months after the date of
cessation (or such longer period as the Board may determine not being greater
than 42 months after the Grant Date) and if not exercised shall lapse at the
end of that period; and

 

(g)           in both cases (e) and
(f) above, the period for exercise shall be shortened if Rule 5.5 (Long stop date for exercise), Rule 7.1
(General offers), Rule 7.2 (Compulsory acquisition, schemes of arrangement and
winding up) or Rule 7.3 (Demerger
and similar events) applies.

 

10

 

For the purposes of this Rule, the Board shall determine the number of
Shares over which the Option becomes exercisable by:

 

(i)            applying any term specified
by the Board on the Grant Date (unless the Board, in exceptional circumstances,
decides otherwise); and

 

(ii)           reducing the number of
Shares pro rata to reflect any unexpired part of the period of 3 years after
the Grant Date as at the time that the Participant ceases to be a director or
employee unless the Board, acting fairly and reasonably, decides that the pro
rata reduction in the number of Shares is inappropriate in any particular case
when it shall increase the number of Shares to such higher number as it decides
(provided that the number does not exceed the number of Shares determined under
paragraph (i) above).

 

6.3           Specified
Retirement Age

 

For the purposes of paragraph 35A of Schedule 4, the specified
retirement age shall be 55.

 

6.4           Cessation
of employment in other circumstances

 

If a Participant ceases to be a director or employee of a Group Member
for any reason other than those specified in Rule 6.1 (Deceased Participants), and Rule 6.2 (Retirement, ill-health, injury, disability, redundancy and transfer out
of the Group), the following provisions apply:

 

(a)           any Option
granted to him may not be exercised at all and shall lapse on such cessation
unless the Board, acting fairly and reasonably, decides it may be exercised
under this Rule 6.4;

 

(b)           if the Board
permits the Option to be exercised then it may, subject to Rule 5.3 and Rule 5.4
(Restrictions on exercise), Rule 6.1
(Deceased Participants) and the
remainder of this Rule, be exercised during the period of 6 months after the
date of cessation (or such longer period as the Board may determine not being
greater than 42 months after the Grant Date) and if not exercised shall lapse
at the end of that period; and

 

(c)           the period for
exercise referred to in (b) above shall be shortened if Rule 5.5 (Long stop date for exercise), Rule 7.1
(General offers), Rule 7.2 (Compulsory acquisition, schemes of arrangement and
winding up) or Rule 7.3 (Demerger
and similar events) applies.

 

For the purposes of this Rule, the Board shall determine the number of
Shares over which the Option becomes exercisable by:

 

(i)            applying any term specified
by the Board on the Grant Date (unless the Board, in exceptional circumstances,
decides otherwise); and

 

(ii)           reducing the number of
Shares pro rata to reflect any unexpired part of the period of 3 years after
the Grant Date as at the time that the Participant ceases to be a director or
employee unless the Board, acting fairly and reasonably, decides that the pro
rata reduction in the number of Shares is inappropriate in 

 

11

 

any particular case when it shall increase the number of Shares to such
higher number as it decides (provided that the number does not exceed the
number of Shares determined under paragraph (i) above).

 

6.5           Meaning
of ceasing employment

 

A Participant shall not be treated for the purposes of this Rule 6
as ceasing to be a director or employee of a Group Member until such time as he
is no longer a director or employee of any Group Member.  Any Participant who ceases to be such a
director or employee before exercising an Option in circumstances where he
retains a statutory right to return to work then he shall be treated as not
having ceased to be such a director or employee until such time (if at all) as
he ceases to have such a right to return to work while not acting as an
employee or director.

 

6.6           Death
following cessation of employment

 

If a Participant dies following cessation of employment in
circumstances where his Option did not lapse but it has not become exercisable
by the time of this death, it shall become exercisable immediately on his death
to the extent determined in accordance with Rule 6.1, 6.2 or 6.4.

 

7.             TAKEOVERS AND OTHER CORPORATE EVENTS

 

7.1           General
offers

 

If any person (or any group of persons acting in concert):

 

(a)           obtains Control
of the Company as a result of making a general offer to acquire shares in the
Company; or

 

(b)           having obtained
Control of the Company makes such an offer and such offer becomes unconditional
in all respects

 

the Board shall within 7 days of becoming aware of that event notify
every Participant of it and, subject to Rules 5.3 and 5.4 (Restrictions on exercise), Rule 5.5 (Long stop date of exercise), Rule 6 (Leavers and deceased Participants) and Rule 7.7 (Internal reorganisations), any Option may be exercised
within 1 month (or such longer period not exceeding 6 months as the Board may
permit) of such notification and Rule 7.6 (Reduction in
number of Shares) shall apply.

 

7.2           Compulsory
acquisition, schemes of arrangement and winding up

 

In the event that:

 

(a)           any person
becomes bound or entitled to acquire shares in the Company under sections 979
to 985 of the Companies Act 2006;

 

(b)           under section 899
of the Companies Act 2006 the Court sanctions a compromise or arrangement
proposed for the purposes of or in connection with a Scheme for the
reconstruction of the Company or its amalgamation with any other company or
companies; or

 

12

 

(c)           the Company
passes a resolution for a voluntary winding up of the Company; or

 

(d)           an order is made
for the compulsory winding up of the Company

 

an Option may, subject to Rules 5.3 and 5.4 (Restrictions
on exercise), Rule 5.5 (Long stop date for
exercise), Rule 6 (Leavers and deceased
Participants) and Rule 7.7 (Internal reorganisations),
be exercised within 1 month of such event and Rule 7.6 (Reduction in number of Shares) shall apply, but to the
extent that the Option is not exercised within that period, it shall
(regardless of any other provision of the Plan) lapse at the end of that
period.

 

7.3           Demerger
and similar events

 

If a demerger, special dividend or other similar event (the “Relevant
Event”) is proposed which, in the opinion of the Board, would affect the market
price of Shares to a material extent, then the Board may, at its discretion and
acting fairly and reasonably, decide that the following provisions will apply:

 

(a)           the Board shall,
as soon as reasonably practicable after deciding to apply these provisions,
notify a Participant that, subject to Rules 5.3 and 5.4 (Restrictions on exercise), Rule 5.5 (Long stop date of exercise), and Rule 6
(Leavers and deceased Participants),
his Option may be exercised on such terms as the Board may determine and during
such period preceding the Relevant Event or on the Relevant Event as the Board
may determine but to the extent that the Option is not exercised within that
period, it shall (regardless of any other provision of the Plan) lapse at the
end of that period; and

 

(b)           if an Option is
exercised conditional upon the Relevant Event and such event does not occur
then the conditional exercise shall not be effective and the Option shall
continue to subsist; and

 

(c)           if the Board
decides to allow exercise under this Rule 7.3 then the provisions of Rule 7.6
(Reduction in number of Shares)
shall apply.

 

7.4           Option
rollover: general provisions

 

If any company (the “acquiring company”):

 

(a)           obtains Control of
the Company as a result of making a general offer to acquire:

 

(i)            the whole of the
issued ordinary share capital of the Company (other than that which is already
owned by it) which is made on a condition such that if it is satisfied the
person making the offer will have Control of the Company; or

 

(ii)           all the Shares
(other than those Shares already owned by it); or

 

(b)           obtains Control
of the Company as a result of a compromise or arrangement sanctioned by the
Court under section 899 of the Companies Act 2006; or

 

13

 

(c)           becomes bound or
entitled to acquire shares in the Company under sections 979 to 985 of the
Companies Act 2006

 

any Participant may, at any time within the relevant period specified
under paragraph 26(3) of Schedule 4, by agreement with the acquiring
company, release any Option granted under Part A of the Plan (the “Old Option”) in consideration of the grant to him of an
Option (the “New Option”) which for the
purposes of paragraph 27 of Schedule 4 is equivalent to the Old Option but
relates to shares in a different company (whether the acquiring company itself
or some other company falling within paragraph 16(b) or (c) of
Schedule 4).

 

7.5           Option
rollover: interpretation of Rules

 

Where a New Option is granted under Rule 7.4 (Option
rollover: general provisions) the following terms of Part A of
the Plan shall, in relation to the New Option, be construed as if:

 

(a)           except for the
purposes of the definitions of “Group Member”, “Participating Company” and “Subsidiary”
in Rule 1.1 and the reference to the “Board” in Rule 5.5, the
expression the “Company” were defined as “a company whose shares may be
acquired by the exercise of Options granted under Part A of the Plan”; and

 

(b)           Rule 9.2 (Shareholder approval) were omitted.

 

7.6           Corporate
events:  reduction in number of Shares

 

Where, under any of Rules 7.1 to 7.3 (Corporate
events), an Option would become exercisable, the Board shall
determine the number of Shares over which the Option becomes exercisable by:

 

(a)           applying any term
specified by the Board on the Grant Date (unless the Board decides otherwise);
and

 

(b)           if the Board,
acting fairly and reasonably, decides the number of Shares shall be reduced pro
rata to reflect any unexpired part of the period of 3 years after the Grant
Date.

 

If an Option becomes exercisable under any of Rules 7.1 to 7.3
when the holder of that Option has ceased to be a director or employee of a
Group Member, then the number of Shares over which the Option becomes exercisable
shall be determined under Rule 6.1, 6.2 or 6.4 (whichever is relevant) in
precedence over this Rule.

 

7.7           Internal
reorganisations

 

In the event that:

 

(a)           an offer (as
referred to in Rule 7.1 (General offers))
is made or a compromise or arrangement (as referred to in Rule 7.2(b) (Schemes of arrangement)) is proposed which
is expected to result in the Company becoming controlled by a new company (the “New
Company”);

 

14

 

(b)           at least 75% of
the shares in the New Company will be held by substantially the same persons
who immediately before the offer or proposal was made were shareholders in the
Company; and

 

(c)           the Board and the
New Company agree that this Rule should apply

 

then an Option granted under Part A of the Plan shall not become
exercisable under Rule 7.1 (General offers)
or Rule 7.2 (Compulsory acquisition, schemes of
arrangement and winding up) but may nonetheless be released in
consideration for the grant of a New Option under Rule 7.4 and, if not so
released, shall then automatically lapse at the end of the relevant period
specified in paragraph 26(3) of Schedule 4.

 

8.             ADJUSTMENT OF OPTIONS

 

8.1           General
rule

 

Subject to Rules 8.3 (HMRC approval),
in the event of any variation of the share capital of the Company, the Board
may make such adjustment as it considers appropriate under Rule 8.2 (Method of adjustment).

 

8.2           Method
of adjustment

 

An adjustment made under this Rule shall be to one or more of the
following:

 

(a)           the number of
Shares in respect of which any Option may be exercised;

 

(b)           subject to Rule 8.4
(Adjustment below nominal value),
the price at which Shares may be acquired by the exercise of any Option; and

 

(c)           where any Option
has been exercised but no Shares have been allotted or transferred after such
exercise, the number of Shares which may be so allotted or transferred and the
price at which they may be acquired.

 

8.3           HMRC
approval

 

At a time when Part A of the Plan is approved by HMRC under
Schedule 4, no adjustment under Rule 8.2 (Method of
adjustment) shall be made without the prior approval of HMRC.

 

8.4           Adjustment
below nominal value

 

An adjustment under Rule 8.2 (Method of adjustment)
may reduce the price at which Shares may be subscribed for on the exercise of
an Option to less than their nominal value, but only if and to the extent that
the Board is authorised:

 

(a)           to capitalise
from the reserves of the Company a sum equal to the amount by which the nominal
value of the Shares in respect of which the Option is exercised and which are
to be allotted after such exercise exceeds the price at which the Shares may be
subscribed for; and

 

(b)           to apply that sum
in paying up such amount on such Shares

 

15

 

so that on exercise of any Option in respect of which such a reduction
shall have been made the Board shall capitalise that sum (if any) and apply it
in paying up that amount.

 

9.             ALTERATIONS

 

9.1           General
rule

 

Except as described in Rule 9.2 (Shareholder
approval) and Rule 9.4 (Alterations to
disadvantage of Participants), the Board may at any time alter the
Plan or the terms of any Option.

 

If an alteration is made to a key feature (as defined in paragraph 30(4) of
Schedule 4) of the Plan at a time when Part A of the Plan is approved by
HMRC under Schedule 4, the alteration will not have effect unless and until
either HMRC has approved the alteration or the Board resolves that the
alteration shall take effect even if this causes the Plan to cease to be
approved under Schedule 4.

 

9.2           Shareholder
approval

 

Except as described in Rule 9.3 (Exceptions
to shareholder approval), no alteration to the advantage of an
individual to whom an Option has been or may be granted shall be made under Rule 9.1
(General rule on alterations) to the
provisions concerning:

 

(a)           eligibility;

 

(b)           the individual
limits on participation;

 

(c)           the overall
limits on the issue of Shares or the transfer of treasury Shares;

 

(d)           the basis for
determining a Participant’s entitlement to, and the terms of, Shares provided
under the Plan;

 

(e)           the adjustments
that may be made in the event of any variation of capital; and

 

(f)            the terms of this
Rule 9.2

 

without the prior approval by ordinary resolution of the members of the
Company in general meeting.

 

9.3           Exceptions
to shareholder approval

 

Rule 9.2 (Shareholder approval)
shall not apply to any minor alteration to benefit the administration of the
Plan, to take account of a change in legislation or to obtain or maintain
favourable tax, exchange control or regulatory treatment for Participants or
any Group Member.

 

16

 

9.4           Alterations
to disadvantage of Participants

 

No alteration to the material disadvantage of any Participant shall be
made under Rule 9.1 unless:

 

(a)           the Board shall
have invited every relevant Participant to indicate whether or not he approves
the alteration; and

 

(b)           the alteration is
approved by a majority of those Participants who have given such an indication.

 

10.           MISCELLANEOUS

 

10.1         Employment

 

The rights and obligations of any individual under the terms of his
office or employment with any Group Member shall not be affected by his
participation in the Plan or any right which he may have to participate in
it.  An individual who participates in
the Plan waives any and all rights to compensation or damages in consequence of
the termination of his office or employment for any reason whatsoever (and
regardless of whether such termination is lawful or unlawful) insofar as those
rights arise or may arise from his ceasing to have rights under or be entitled
to exercise any Option as a result of such termination.  Participation in the Plan shall not confer a
right to continued employment upon any individual who participates in it.  The grant of an Option does not imply that
any further Options will be granted nor that a Participant has any right to be
granted any further Options.

 

10.2         Disputes

 

In the event of any dispute or disagreement as to the interpretation of
the Plan, or as to any question or right arising from or relating to the Plan,
the decision of the Board shall be final and binding upon all persons.

 

The exercise of any power or discretion by the Board shall not be open
to question by any person and a Participant or former Participant shall have no
rights in relation to the exercise of or omission to exercise any such power or
discretion.

 

10.3         Share
rights

 

All Shares allotted under the Plan shall rank equally in all respects
with Shares then in issue except for any rights attaching to such Shares by
reference to a record date before the date of the allotment.

 

Where Shares are transferred to Participants (or their nominee),
Participants will be entitled to all rights attaching to such Shares by
reference to a record date on or after the date of such transfer or release of
such restrictions.

 

17

 

10.4         Notices

 

Any notice or other communication under or in connection with the Plan
may be given:

 

(a)           by personal
delivery or by post, in the case of a company to its registered office, and in
the case of an individual to his last known address, or, where he is a director
or employee of a Group Member, either to his last known address or to the
address of the place of business at which he performs the whole or
substantially the whole of the duties of his office or employment; or

 

(b)           in an electronic
communication to their usual business address or such other address for the
time being notified for that purpose to the person giving the notice; or

 

(c)           by such other
method as the Board determines.

 

10.5         Third
parties

 

No third party has any right under the Contracts (Rights of Third
Parties) Act 1999 to enforce any term of the Plan.

 

10.6         Benefits
not pensionable

 

Benefits provided under the Plan shall not be pensionable.

 

10.7         Data
Protection

 

Each Participant consents to the collection, processing and transfer of
his personal data for any purpose relating to the operation of the Plan.  This includes:

 

(a)           providing
personal data to any Group Member and any third party such as trustees of any
employee benefit trust, administrators of the Plan, registrars, brokers and any
of their respective agents;

 

(b)           processing of
personal data by any such Group Member or third party;

 

(c)           transferring
personal data to a country outside the European Economic Area (including a
country which does not have data protection laws equivalent to those prevailing
in the European Economic Area); and

 

(d)           providing
personal data to potential purchasers of the Company, the Participant’s
employer or the business in which the Participant works.

 

10.8         Governing
law

 

The Plan and all Options shall be governed by and construed in
accordance with the law of England and Wales and the Courts of England and
Wales have exclusive jurisdiction to hear any dispute.

 

18

 

PART B - UNAPPROVED

 

1.             DEFINITIONS AND INTERPRETATION

 

1.1           In this Part B of the Plan, unless the context
otherwise requires:

 

“ADS”
means an American Depositary Share being an authorised depositary security
representing for the time being 4 Shares in the Company and being evidenced by
an authorised depositary receipt issued by the Bank and quoted on the New York
Stock Exchange;

 

“Award”
means a Conditional Award, a Forfeitable Shares Award or an Option;

 

“Bank”
means The Bank of New York Mellon or such other bank as the Company may from
time to time appoint to issue authorised depositary receipts;

 

“Board”
means the board of directors of the Company (or, on and after the occurrence of
a corporate event described in Rule 11 (Takeovers
and other corporate events), for the purposes of making
determinations under Rule 11, the board of directors of the Company as
constituted immediately before such event occurs) or a duly authorised
committee of the board or a duly authorised person;

 

“Company”
means Diageo plc (registered in England and Wales with registered number
23307);

 

“Conditional
Award” means a conditional right to acquire Shares or ADSs granted
under the Plan;

 

“Control” means
control within the meaning of section 995 of the Income Tax Act 2007;

 

“Dividend
Equivalent” means a benefit calculated by reference to dividends
paid on Shares as described in Rule 3.6;

 

“Early
Vesting Date” means either:

 

(a)             the date of
cessation of employment of a Participant in the circumstances referred to in Rules 10.1
(Deceased Participants) and 10.2
(Retirement, ill-health, injury, disability,
redundancy and transfer out of the Group); or

 

(b)            a date of
notification referred to in Rule 11.1 (General
offers), the date of the relevant event referred to in Rule 11.2
(Schemes of arrangement and winding up)
or the date of Vesting referred to in Rule 11.3 (Demergers and similar events);

 

“Exercise
Period” means the period referred to in Rule 6.2 during which
an Option may be exercised;

 

“Forfeitable
Shares” means Shares or ADSs comprised in a Forfeitable Shares Award
which are subject to certain restrictions and forfeiture under the Plan;

 

19

 

“Forfeitable
Shares Award” means the transfer of the beneficial interest in
Forfeitable Shares to a Participant and the subsequent holding of that interest
in accordance with the Plan;

 

“Grant Date”
means the date on which an Award is granted;

 

“Group
Member” means:

 

(a)             a Participating
Company or a body corporate which is the Company’s holding company (within the
meaning of section 1159 of the Companies Act 2006) or a Subsidiary of the
Company’s holding company;

 

(b)            a body corporate
which is a subsidiary undertaking (within the meaning of section 1162 of that
Act) of a body corporate within paragraph (a) above and has been
designated by the Board for this purpose; and

 

(c)             any other body
corporate in relation to which a body corporate within paragraph (a) or (b) above
is able (whether directly or indirectly) to exercise 15% or more of its equity
voting rights and has been designated by the Board for this purpose;

 

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

 

“Listing Rules”
means the Listing Rules published by the UKLA;

 

“London
Stock Exchange” means London Stock Exchange plc or any successor to
that company;

 

“New York Stock Exchange”
means The New York Stock Exchange, Inc.;

 

“Nil Price
Option” means an Option, the Option Price of which is nil or a
nominal amount;

 

“Normal
Vesting Date” means the date on which an Award vests under Rule 5.1
(Timing of Vesting:  Normal Vesting Date);

 

“Option”
means a right to acquire Shares or ADSs granted under the Plan which is
designated as an option by the Board under Rule 3.2 (Type of Award);

 

“Option
Price” means the amount, if any, payable on the exercise of an
Option;

 

“Participant”
means a person who holds an Award including his personal representatives;

 

“Participating
Company” means the Company or any Subsidiary;

 

“Plan”
means the Diageo 2009 Executive Long Term Incentive Plan as amended from time
to time;

 

“Rule”
means a rule of the Plan;

 

“Shares”
means fully paid ordinary shares in the capital of the Company;

 

20

 

“Subsidiary”
means a body corporate which is a subsidiary (within the meaning of section
1159 of the Companies Act 2006) of the Company;

 

“Tax
Liability” means any amount of tax or social security contributions
for which a Participant would or may be liable and for which any Group Member
or former Group Member would or may be obliged to (or would or may suffer a
disadvantage if it were not to) account to any relevant authority;

 

“UKLA”
means the United Kingdom Listing Authority;

 

“US Participant”
means a Participant who (i) is resident in the United States of America on
the Grant Date or (ii) who becomes subject to US taxation prior to
exercise or Vesting of an Award;

 

“Vest”
means:

 

(a)             in relation to a
Conditional Award, a Participant becoming entitled to have Shares or ADSs
transferred to him (or his nominee) subject to the Rules;

 

(b)            in relation to an
Option, it becoming exercisable;

 

(c)             in relation to a
Forfeitable Shares Award, the restrictions imposed on the Forfeitable Shares
under the Plan ceasing to apply

 

and Vesting shall be construed
accordingly;

 

“Vested
Shares” means those Shares in respect of which an Award Vests.

 

1.2           Any reference in Part B of the Plan to any enactment
includes a reference to that enactment as from time to time modified, extended
or re-enacted.

 

1.3           Expressions in italics and headings are for guidance only
and do not form part of the Plan.

 

2.             ELIGIBILITY

 

An individual is eligible to be granted an Award only if he is an
employee or an executive director of a Participating Company (excluding an
executive director of the Company or members of the executive committee).

 

3.             GRANT OF AWARDS

 

3.1           Terms
of grant

 

Subject to Rule 3.8 (Timing of grant),
Rule 3.10 (Approvals and consents) and Rule 4
(Limits), the Board may resolve to grant
an Award on:

 

(a)           the terms set out
in Part B of the Plan; and

 

(b)           such additional
terms as the Board may specify

 

to any person who is eligible to be granted an Award under Rule 2
(Eligibility).

 

21

 

3.2           Type
of Award

 

On or before the Grant Date, the Board shall determine whether an Award
shall be a Conditional Award, an Option or a Forfeitable Shares Award.  If the Board does not specify the type of an
Award on or before the Grant Date then an Award shall be a Conditional Award.  An Award granted to an employee who is not a
US Participant shall be to acquire Shares unless the Board specifies on or
before the Grant Date that the Award shall be to acquire ADSs.

 

3.3           Grant
of Award to US Participant

 

An Award granted under Rule 3.1 (Terms of
Grant) to a US Participant, shall be subject to the provisions of
Schedule 4 (United States Addendum)
to the Plan and shall not take the form of an Option under which the Option
Price is less than the price calculated under Rules 3.5 (a), (b) or (c) (Option Price).

 

3.4           Method
of grant

 

An Award shall be granted as follows:

 

(a)           a Conditional
Award or an Option shall be granted by deed executed by the Company;

 

(b)           if an Award is an
Option, the Board shall determine the Option Price (if any) on or before the
Grant Date provided that in relation to a Nil Price Option the Board may reduce
or waive such Option Price on or prior to the exercise of the Option;

 

(c)           a Forfeitable
Shares Award shall be granted by the procedure set out in Schedule 1 to the
Plan.

 

3.5           Option
price

 

Where an Option (other than a Nil Price Option) is granted with an
Option Price under Rule 3.4(b), the Board shall decide before an Option is
granted the price at which Shares or ADSs may be acquired by the exercise of
that Option, but the price shall not be less than:

 

(a)           if Shares are
quoted in the London Stock Exchange Daily Official List, the average of the
middle-market quotation of the Shares (as derived from that List) for the 3
dealing days before the Grant Date (or on such other dealing day(s) as the
Board may decide) provided such dealing day(s) do not fall within any
period when dealings in Shares are prohibited under the Company’s share dealing
code (unless the proposed grant is permitted by such code);

 

(b)           if the Option is
granted over ADSs, the average of the closing prices of the ADSs on the New
York Stock Exchange for the 3 New York Stock Exchange trading days before the
Grant Date;

 

(c)           if Rule 3.5(a) or
(b) (as appropriate) does not apply, the market value of the Shares or
ADSs as determined by the Board; or

 

22

 

(d)           in the case of an
Option to acquire Shares only by subscription, the nominal value of those
Shares.

 

3.6           Treatment
of Dividends

 

The Board may:

 

(a)           decide at any
time that a Participant (or his nominee) shall be entitled to receive a benefit
determined by reference to the value of all or any of the dividends (including
the dividend tax credit unless the Board decides otherwise) that would have
been paid on the Vested Shares or ADSs in respect of dividend record dates
occurring during the period between the Grant Date and the date of Vesting and
may further decide that such benefit shall be provided in cash and/or shares
and/or ADSs. The Board may decide to exclude the value of all or part of any special
dividend from the amount of the Dividend Equivalent; or

 

(b)           grant an Award on
terms whereby the number of Shares or ADSs comprised in the Award shall
increase by deeming dividends (excluding special dividends, unless the Board
decides otherwise) paid on the Shares or ADSs from the Grant Date to Vesting to
have been reinvested in additional Shares or ADSs on such terms (as to the
inclusion or exclusion of any dividend tax credit, the price at which any
additional Shares or ADSs shall be deemed to have been purchased or otherwise)
as the Board shall decide.

 

This Rule shall not apply in the case of a Forfeitable Shares
Award under which a Participant is entitled to receive dividends or in the case
of an Option with an Option Price calculated under Rule 3.5 (Option Price).

 

3.7           Method
of satisfying Awards

 

Unless specified to the contrary by the Board on the Grant Date, an
Award may be satisfied:

 

(a)           by the issue of
new Shares; and/or

 

(b)           by the transfer
of treasury Shares; and/or

 

(c)           by the transfer of
Shares (other than the transfer of treasury Shares); or

 

(d)           in the case of an
Award granted to a US Participant, by the issue or transfer of ADSs.

 

The Board may decide to change the way in which it is intended that an
Award granted as a Conditional Award or an Option may be satisfied after it has
been granted, having regard to the provisions of Rule 4 (Limits).

 

23

 

3.8           Timing
of grant

 

Subject to Rule 3.9 (Approvals and consents),
an Award may only be granted:

 

(a)           within the period
of 6 weeks beginning with:

 

(i)            the day on which
the Plan is approved by shareholders of the Company; or

 

(ii)           the dealing day
after the date on which the Company announces its results for any period; or

 

(b)           at any other time
when the Board considers that circumstances are sufficiently exceptional to
justify its grant

 

but an Award may not be granted after 13 October 2019 (that is,
the expiry of the period of 10 years beginning with the date on which the Plan
is approved by shareholders of the Company).

 

3.9           Non-transferability
and bankruptcy

 

An Award granted to any person:

 

(a)           shall not be
transferred, assigned, charged or otherwise disposed of (except on his death to
his personal representatives) and shall lapse immediately on any attempt to do
so; and

 

(b)           shall
lapse immediately if he is declared bankrupt.

 

3.10         Approvals
and consents

 

The grant of any Award shall be subject to obtaining any approval or
consent required under the Listing Rules, any relevant share dealing code of
the Company, the City Code on Takeovers and Mergers, the listing rules of
the New York Stock Exchange, or any other UK or overseas regulation or
enactment.

 

4.             LIMITS

 

4.1           5%
in 10 years limit

 

An Award shall not be granted in any calendar year if, at the time of
its proposed Grant Date, it would cause the number of Shares allocated (as
defined in Rule 4.3) in the period of 10 calendar years ending with that
calendar year under the Plan and under any other executive share plan adopted
by the Company to exceed such number as represents 5% of the ordinary share
capital of the Company in issue at that time.

 

4.2           10%
in 10 years limit

 

An Award shall not be granted in any calendar year if, at the time of
its proposed Grant Date, it would cause the number of Shares allocated (as
defined in Rule 4.3) in the period of 10 calendar years ending with that
calendar year under the Plan and 

 

24

 

under any other employee share plan adopted by the Company to exceed
such number as represents 10% of the ordinary share capital of the Company in
issue at that time.

 

4.3           Meaning
of “allocated”

 

For the purposes of Rules 4.1 and 4.2:

 

(a)           Shares are
allocated:

 

(i)            when an option,
award or other contractual right to acquire unissued Shares or treasury shares
is granted;

 

(ii)           where Shares are
issued or treasury shares are transferred otherwise than pursuant to an option,
award or other contractual right to acquire Shares, when those Shares are
issued or treasury shares transferred;

 

(b)           any Shares which
have been issued or which may be issued (or any Shares transferred out of
treasury or which may be transferred out of treasury) to any trustees to
satisfy the exercise of any option, award or other contractual right shall
count as “allocated” unless they are already treated as allocated under this
Rule; and

 

(c)           for the avoidance
of doubt, existing Shares other than treasury shares that are transferred or
over which options, awards or other contractual rights are granted shall not
count as “allocated”.

 

4.4           Post-grant
events affecting numbers of “allocated” Shares

 

For the purposes of Rule 4.3:

 

(a)           where:

 

(i)            any option, award
or other contractual right to acquire unissued Shares or treasury shares is
released or lapses (whether in whole or in part); or

 

(ii)           after the grant
of an option, award or other contractual right the Board determines that:

 

(aa)         where an amount
is normally payable on its exercise it shall be satisfied without such payment
but instead by the payment of cash equal to the gain made on its exercise; or

 

(bb)         it shall be
satisfied by the transfer of existing Shares (other than Shares transferred out
of treasury)

 

the unissued Shares or treasury shares which
consequently cease to be subject to the option, award or other contractual
right shall not count as “allocated”; and

 

(b)           the number of
Shares allocated in respect of an option, award or other contractual right
shall be such number as the Board shall reasonably determine from time to time.

 

25

 

4.5           Changes
to investor guidelines

 

Treasury shares shall cease to count as “allocated” Shares for the
purposes of Rule 4.3 if institutional investor guidelines cease to require
such Shares to be so counted.

 

4.6           Individual
limit

 

(a)           The maximum total
market value of Shares or ADSs (calculated as set out in this Rule) over which
Awards may be granted to any employee during any financial year of the Company
is 375% of his salary (as defined in this Rule), unless Rule 4.6(b) applies.

 

(b)           If the Board
decides that exceptional circumstances exist in relation to the recruitment or
retention of an eligible employee then the maximum total market value of Shares
or ADSs (calculated as set out in this Rule) over which Awards may be granted
to that employee during a financial year of the Company is such higher
percentage of his salary (as defined in this Rule) as the Board may determine.

 

For the purpose of this Rule 4.6:

 

(i)            an employee’s salary shall be taken to be his base salary
(excluding benefits in kind), expressed as an annual rate payable by the
Participating Companies to him on the Grant Date (or on such other date as the
Board shall reasonably determine).  Where
a payment of salary is made in a currency other than sterling, the payment
shall be treated as equal to the equivalent amount of sterling determined by
using any rate of exchange which the Board may reasonably select; and

 

(ii)           the market value of the Shares or ADSs over
which an Award is granted shall be taken to be, for Shares, an amount equal to
the middle-market quotation of Shares (as derived from the London Stock
Exchange Daily Official List) on the Grant Date or, for ADSs, the closing price
of an ADS on the New York Stock Exchange on the dealing day before the Grant
Date or, if the Board so determines, the average of the middle market
quotations of a Share or closing price of an ADS for the 3 dealing days before
the Grant Date.

 

4.7           Effect
of limits

 

Any Award shall be limited and take effect so that the limits in this Rule 4
are complied with.

 

Where the grant of an Option under Part A of the Plan is limited
solely by virtue of Rule 4.7 of that Part (HMRC limit)
the grant shall be effective under this Part B of the Plan subject to the
limits set out in this Part.

 

4.8           Restriction
on use of unissued Shares and treasury shares

 

No Shares may be issued or treasury shares transferred to satisfy the
Vesting of any Conditional Award or the exercise of any Option to the extent
that such issue or transfer would cause the number of Shares allocated (as
defined in Rule 4.3 and adjusted under Rule 4.4) to exceed the limits
in Rules 4.1 (5% in 10 years limit)
and 

 

26

 

4.2 (10% in 10 years limit) except
where there is a variation of share capital of the Company which results in the
number of Shares so allocated exceeding such limits solely by virtue of that
variation.

 

5.             VESTING OF AWARDS

 

5.1           Timing
of Vesting:  Normal Vesting Date

 

Subject to Rule 5.3 (Restrictions on Vesting:
regulatory and tax issues), an Award shall Vest on the later of:

 

(a)           the third
anniversary of the Grant Date (or such other date as the Board shall determine
at the Grant Date as the date of Vesting); and

 

(b)           the date on which
the Board determines whether any condition imposed on the Vesting of the Award
has been satisfied (in whole or part)

 

except where earlier Vesting occurs on an Early Vesting Date under Rule 10
(Leavers) or Rule 11 (Takeovers and other corporate events).

 

5.2           Extent
of Vesting

 

An Award shall only Vest:

 

(a)           as permitted by
any term or condition imposed on the Vesting of the Award; and

 

(b)           in relation to
Vesting before the Normal Vesting Date, as permitted by Rules 10.1 (Deceased Participants), 10.2 (Retirement, ill-health, injury, disability,
redundancy and transfer out of the Group), 10.3 (Cessation of employment in other circumstances)
and 11.5 (Reduction in number of Vested
Shares).

 

5.3           Restrictions
on Vesting: regulatory and tax issues

 

An Award shall not Vest unless and until the following conditions are
satisfied:

 

(a)           the Vesting of
the Award, and the issue or transfer of Shares or ADSs after such Vesting would
be lawful in all relevant jurisdictions and in compliance with the Listing
Rules, any relevant share dealing code of the Company (which, for the purposes
of the Plan shall be deemed to apply to any Participant who ceases to be a
director or employee of a Group Member if such code applied to the Participant
immediately before such cessation), the City Code on Takeovers and Mergers and
any other relevant UK or overseas regulation or enactment;

 

(b)           if, on the
Vesting of the Award, a Tax Liability would arise by virtue of such Vesting,
then the Participant authorises the Company to sell or procure the sale of
sufficient Shares or ADSs on his behalf to ensure that any relevant Group
Member receives the amount required to discharge the Tax Liability except to
the extent that he agrees with the Board to fund all or part of the Tax
Liability in a different manner;

 

27

 

(c)           the Participant
has entered into such arrangements as the Board requires (and where permitted
in the relevant jurisdiction) to satisfy a Group Member’s liability to social
security contributions in respect of the Vesting of the Award; and

 

(d)           where the Board
requires, the Participant has entered into, or agreed to enter into, a valid
election under Part 7 of ITEPA (Employment
income:  elections to disapply tax charge
on restricted securities) or any similar arrangement in any overseas
jurisdiction.

 

For the purposes of this Rule 5.3, references to Group Member
include any former Group Member.

 

5.4           Tax
liability before Vesting

 

If a Participant will, or is likely to, incur any Tax Liability before
the Vesting of an Award then that Participant must enter into arrangements
acceptable to any relevant Group Member to ensure that it receives the amount
of such Tax Liability.  If no such
arrangement is made then the Participant shall be deemed to have authorised the
Company to sell or procure the sale of sufficient of the Shares or ADSs subject
to his Award on his behalf to ensure that the relevant Group Member receives
the amount required to discharge the Tax Liability and the number of Shares or
ADSs subject to his Award shall be reduced accordingly.

 

For the purposes of this Rule 5.4, references to Group Member
include any former Group Member.

 

5.5           Change
of jurisdiction

 

If a Participant relocates to another jurisdiction before his Award
Vests and, as a result of the relocation, the Participant or any Group Member
would be subject to additional tax or social security on the Vesting of the
Award or the Vesting of the Award in that other jurisdiction would be subject
to any regulatory restriction, approval or consent, the Board may determine
that the Award may:

 

(a)           Vest on such
terms and during such period preceding the date on which the Participant
relocates as the Board may determine; or

 

(b)           be released by
the Participant for a Cash Conditional Award granted under Schedule 2.

 

6.             CONSEQUENCES OF VESTING

 

6.1           Conditional
Awards

 

On or as soon as reasonably practicable after the Vesting of a
Conditional Award and, in any event, within 30 days of Vesting, the Board
shall, subject to Rule 5(3)(b) (Payment of Tax Liability)
and any arrangement made under Rule 5.3(c) (Restrictions
on Vesting: regulatory and tax issues), transfer or procure the
transfer of the Vested Shares or ADSs to the Participant (or a nominee for
him).

 

28

 

6.2           Options

 

An Option shall, subject to Rule 7.1 (Restrictions
on the exercise of an Option: regulatory and tax issues), be
exercisable in respect of Vested Shares or ADSs as follows:

 

(a)           in the case of a
Nil Price Option, for a period of 12
months beginning with the date on which the Option Vests; or

 

(b)           in the case of
any other Option, until the expiry of 10 years beginning with the Grant Date

 

and, if any Option remains unexercised at the end of the relevant
period set out above, the Option shall then lapse unless it lapses earlier
under Rule 10.3 (Cessation of employment in
other circumstances), Rule 11.1 (General
offers), Rule 11.2 (Schemes of arrangement and
winding up) or Rule 11.3 (Demergers and similar
events).

 

If a Nil Price Option is not exercised during the last 30 days of the
Exercise Period because of any regulatory restrictions referred to in Rule 7.1(a),
the Board may extend the period during which the Nil Price Option may be
exercised so as to permit the Nil Price Option to be exercised as soon as those
restrictions cease to apply.

 

6.3           Forfeitable
Shares Award

 

On the Vesting of a Forfeitable Shares Award, the Vested Shares or ADSs
shall cease to be subject to the restrictions imposed on the Forfeitable Shares
under the Plan and the Board shall, subject to Rule 5.3(b) (Payment of Tax Liability) and any arrangement made under Rule 5.3(c) (Restrictions on Vesting: regulatory and tax issues),
transfer or procure the transfer of:

 

(a)           the legal title
to the Vested Shares or ADSs; and/or

 

(b)           any documents of
title relating to the Vested Shares or ADSs

 

to the Participant (or a nominee for him) on or as soon as reasonably
practicable after Vesting.

 

6.4           Dividend
equivalent

 

If the Board decided at any time under Rule 3.6 (Treatment of Dividends) that a Participant would be entitled
to the Dividend Equivalent in relation to Shares or ADSs under their Award,
then the provision of the Dividend Equivalent to the Participant shall be made
as soon as practicable after Vesting and:

 

(a)           in the case of a
cash payment, shall be subject to such deductions (on account of tax or similar
liabilities) as may be required by law or as the Board may reasonably consider
to be necessary or desirable;

 

(b)           in the case of a
provision of Shares or ADSs, Rule 5.3 (Restrictions
on Vesting: regulatory and tax issues) shall apply as if such
provision was the Vesting of an Award.

 

29

 

7.             EXERCISE OF OPTIONS

 

7.1           Restrictions
on the exercise of an Option: regulatory and tax issues

 

An Option which has Vested may not be exercised unless the following
conditions are satisfied:

 

(a)           the exercise of
the Option and the issue or transfer of Shares or ADSs after such exercise
would be lawful in all relevant jurisdictions and in compliance with the
Listing Rules, any relevant share dealing code of the Company (which, for the
purposes of the Plan shall be deemed to apply to any Participant who ceases to
be a director or employee of a Group Member if such code applied to the
Participant immediately before such cessation), the City Code on Takeovers and
Mergers and any other relevant UK or overseas regulation or enactment;

 

(b)           if, on the
exercise of the Option, a Tax Liability would arise by virtue of such exercise,
then the Participant authorises the Company to sell or procure the sale of
sufficient Shares or ADSs on his behalf to ensure that any relevant Group
Member receives the amount required to discharge the Tax Liability except to
the extent that the Participant agrees with the Board to fund all or part of
the Tax Liability in a different manner;

 

(c)           the Participant
has entered into such arrangements as the Board requires (and where permitted
in the relevant jurisdiction) to satisfy a Group Member’s liability to social
security contributions in respect of the exercise of the Option; and

 

(d)           where the Board
requires, the Participant has entered into, or agreed to enter into, a valid
election under Part 7 of ITEPA (Employment
income:  elections to disapply tax charge
on restricted securities) or any similar arrangement in any overseas
jurisdiction.

 

For the purposes of this Rule 7.1, references to Group Member
include any former Group Member.

 

7.2           Long
stop date for exercise

 

An Option may not in any circumstances (and regardless of any other
Rule) be exercised after the expiry of 10 years beginning with the Grant Date
(or such shorter period beginning with the Grant Date as the Board may have
decided before the grant of that Option) and if not exercised shall lapse at
the end of such period.

 

7.3           Exercise
in whole or part

 

An Option may be exercised to the maximum extent possible at the time
of exercise or over such fewer number of Shares or ADSs as the Participant
decides.

 

7.4           Method
of exercise

 

The exercise of any Option shall be effected in the form and manner
prescribed by the Board.  Unless the
Board, acting fairly and reasonably determines otherwise, any 

 

30

 

notice of exercise shall, subject to Rule 7.1 (Restrictions on the exercise of an Option: regulatory and tax issues),
take effect only when the Company receives it, together with payment of any
relevant Option Price (or, if the Board so permits, an undertaking to pay that
amount) and, if a Participant decides to satisfy the Tax Liability other than
by selling Shares or ADSs pursuant to the authority in Rule 7.1(b), an
agreement relating to the payment of the Tax Liability having been entered
into.

 

7.5           Transfer
or allotment timetable

 

As soon as reasonably practicable after an Option has been exercised
and, in any event, within 30 days of exercise, the Company shall, subject to Rule 7.1(b) (Payment of Tax Liability) and any arrangement made under Rule 7.1(c) (Restrictions on exercise: regulatory and tax issues),
transfer or procure the transfer to him (or a nominee for him) or, if
appropriate, allot to him (or a nominee for him) the number of Shares or ADSs
in respect of which the Option has been exercised.

 

8.             CASH ALTERNATIVE

 

8.1           Board
determination

 

Where a Conditional Award Vests or where an Option has been exercised
and Vested Shares or ADSs have not yet been allotted or transferred to the
Participant (or his nominee), the Board may determine that, in substitution for
his right to acquire such number of Vested Shares or ADSs as the Board may
decide (but in full and final satisfaction of his right to acquire those Shares
or ADSs), he shall be paid by way of additional employment income a sum equal
to the cash equivalent (as defined in Rule 8.2) of that number of Shares
or ADSs in accordance with the following provisions of this Rule 8.

 

8.2           Limitation
on the application of Rule 8.1

 

Rule 8.1 shall not apply in relation to an Award made to a
Participant in any jurisdiction where the presence of Rule 8.1 would
cause:

 

(a)           the grant of the
Award to be unlawful or for it to fall outside any applicable securities law
exclusion or exemption; or

 

(b)           adverse tax or
social security contributions consequences for the Participant or any Group
Member as determined by the Board

 

provided that this Rule 8.2 shall apply only if its application
would prevent the occurrence of a consequence referred to in (a) or (b) above.

 

8.3           Cash
equivalent

 

For the purpose of this Rule 8, the cash equivalent of a Share or
ADS is:

 

(a)           in the case of a
Conditional Award, the market value of a Share or ADS on the day when the Award
Vests;

 

31

 

(b)           in the case of an
Option, the market value of a Share or ADS on the day when the Option is
exercised reduced by the Option Price in respect of that Share or ADS.

 

Market value on any day shall be determined as follows:

 

(i)            if on the day of Vesting or
exercise, Shares are quoted in the London Stock Exchange Daily Official List,
the middle-market quotation of a Share, as derived from that List, on that day;
or

 

(ii)           in the case of an Award
granted to a US Participant, if on the day of Vesting or exercise, ADSs are
quoted on the New York Stock Exchange, the closing price of an ADS on the
dealing day before that date; or

 

(iii)          if Shares or ADSs are not so
quoted, such value of a Share or ADS as the Board reasonably determines.

 

8.4           Payment
of cash equivalent

 

Subject to Rule 8.5 (Share alternative),
as soon as reasonably practicable after the Board has determined under Rule 8.1
that a Participant shall be paid a sum in substitution for his right to acquire
any number of Vested Shares or ADSs:

 

(a)           the Company shall
pay to him or procure the payment to him of that sum in cash; and

 

(b)           if he has already
paid the Company for those Shares or ADSs, the Company shall return to him the
amount so paid by him.

 

8.5           Share
alternative

 

If the Board so decides, the whole or any part of the sum payable under
Rule 8.3 shall, instead of being paid to the Participant in cash, be
applied on his behalf:

 

(a)           in subscribing
for Shares or issuing ADSs at a price equal to the market value by reference to
which the cash equivalent is calculated; or

 

(b)           in purchasing
such Shares or ADSs; or

 

(c)           partly in one way
and partly in the other

 

and the Company shall allot or transfer to him (or his nominee) or
procure the transfer to him (or his nominee) of the Shares so subscribed for,
ADSs so issued or Shares or ADSs purchased.

 

8.6           Deductions

 

There shall be deducted from any payment under this Rule 8 such
amounts (on account of tax or similar liabilities) as may be required by law or
as the Board may reasonably consider to be necessary or desirable.

 

32

 

9.             LAPSE OF AWARDS

 

An Award shall lapse:

 

(a)           in accordance
with the Rules; or

 

(b)           to the extent it
does not Vest under these Rules.

 

On the lapse of all or any part of a Forfeitable Shares Award, the
beneficial interest (and, if appropriate, the legal interest) of the
Forfeitable Shares in respect of which such Award has lapsed shall be
transferred for no (or nominal) consideration to any person specified by the
Board.

 

10.           LEAVERS AND DECEASED PARTICIPANTS

 

10.1         Deceased
Participants

 

If a Participant dies at a time when he is a director or employee of a
Group Member before the Normal Vesting Date then, subject to Rule 5.3 (Restrictions on Vesting: regulatory and tax issues) and the
remainder of this Rule, his Award shall Vest on the date of cessation.  In the case of an Option, the Option may be
exercised by the Participant’s personal representatives during the period of 12
months (or, at the Board’s discretion in exceptional circumstances, up to 18
months) after his death and if not exercised shall lapse at the end of that
period.

 

For the purposes of this Rule, the Board shall determine the number of
Shares or ADSs which Vest by:

 

(i)            applying any condition
imposed on the Vesting of Awards (unless the Board, in exceptional
circumstances, decides otherwise); and

 

(ii)           reducing the number of
Shares or ADSs pro rata to reflect any unexpired part of the period of 3 years
after the Grant Date (or such other period set by the Board under Rule 5.1(b))
as at the time that the Participant ceases to be a director or employee unless
the Board, acting fairly and reasonably, decides that the pro rata reduction in
the number of Shares or ADSs is inappropriate in any particular case when it
shall increase the number of Shares or ADSs to such higher number as it decides
(provided that the number does not exceed the number of Shares or ADSs
determined under paragraph (i) above).

 

10.2         Retirement,
ill-health, injury, disability, redundancy and transfer out of the Group

 

If a Participant ceases to be a director or employee of a Group Member
before the Normal Vesting Date by reason of:

 

(a)           retirement with
the agreement of his employer;

 

(b)           ill-health,
injury or disability (evidenced to the satisfaction of his employer);

 

(c)           redundancy
(within the meaning of the Employment Rights Act 1996) or any overseas
equivalent; or

 

33

 

(d)           his office or
employment being with either a company which ceases to be a Group Member or
relating to a business or part of a business which is transferred to a person
who is not a Group Member

 

subject to Rule 5.3 (Restrictions on Vesting:
regulatory and tax issues), Rule 11 (Takeovers
and other corporate events) and the remainder of this Rule, his
Award shall Vest on the date of cessation. 
In the case of an Option, the Participant may exercise the Option during
the period of 12 months (or, at the Board’s discretion in exceptional
circumstances, up to 18 months) after it Vests and if not exercised the Option
shall lapse at the end of that period.

 

For the purposes of this Rule, the Board shall determine the number of
Shares or ADSs which Vest by:

 

(i)            applying any condition
imposed on the Vesting of Awards (unless the Board, in exceptional
circumstances, decides otherwise) and any other factors considered by the Board
to be relevant to reduce the number of Shares or ADSs which Vest; and

 

(ii)           reducing the number of
Shares or ADSs pro rata to reflect any unexpired part of the period of 3 years
after the Grant Date (or such other period set by the Board under Rule 5.1(b))
as at the time that the Participant ceases to be a director or employee unless
the Board, acting fairly and reasonably, decides that the pro rata reduction in
the number of Shares or ADSs is inappropriate in any particular case when it
shall increase the number of Shares or ADSs to such higher number as it decides
(provided that the number does not exceed the number of Shares or ADSs
determined under paragraph (i) above).

 

10.3         Cessation
of employment in other circumstances

 

If a Participant ceases to be a director or employee of a Group Member
for any reason other than those specified in Rule 10.1 (Deceased Participants) and Rule 10.2 (Retirement, ill-health, injury, disability, redundancy and transfer out
of the Group) then any Award held by him shall lapse immediately on
such cessation unless the Board, acting fairly and reasonably, decides that his
Award shall Vest.  If the Board permits
an Award to Vest, Vesting shall, subject to Rule 5.3 (Restrictions
on Vesting: regulatory and tax issues), Rule 11 (Takeovers and other corporate events) and the remainder of
this Rule, occur on the date of cessation. 
In the case of an Option, the Participant may exercise the Option during
the period of 12 months (or, at the Board’s discretion in exceptional
circumstances, up to 18 months) after it Vests and if not exercised the Option
shall lapse at the end of that period.

 

For the purposes of this Rule, the Board shall determine the number of
Shares or ADSs which Vest by:

 

(i)            applying any condition
imposed on the Vesting of Awards (unless the Board, in exceptional
circumstances, decides otherwise) and any other factors considered by the Board
to be relevant to reduce the number of Shares or ADSs which Vest; and

 

34

 

(ii)           reducing the number of
Shares or ADSs pro rata to reflect any unexpired part of the period of 3 years
after the Grant Date (or such other period set by the Board under Rule 5.1(b))
as at the time that the Participant ceases to be a director or employee unless
the Board, acting fairly and reasonably, decides that the pro rata reduction in
the number of Shares or ADSs is inappropriate in any particular case when it
shall increase the number of Shares or ADSs to such higher number as it decides
(provided that the number does not exceed the number of Shares or ADSs
determined under paragraph (i) above).

 

10.4         Meaning
of ceasing employment

 

A Participant shall not be treated for the purposes of this Rule 10
as ceasing to be a director or employee of a Group Member until such time as he
is no longer a director or employee of any Group Member.  Any Participant who ceases to be such a
director or employee before the Vesting of his Award in circumstances where he
retains a statutory right to return to work then he shall be treated as not
having ceased to be such a director or employee until such time (if at all) as
he ceases to have such a right to return to work while not acting as an
employee or director.

 

10.5         Death
following cessation of employment

 

If a Participant dies following cessation of employment in
circumstances where his Award did not lapse but it has not Vested by the time
of his death, it shall Vest immediately on his death to the extent determined
by reference to the time of cessation in accordance with Rule 10.1, 10.2
or 10.3.

 

11.           TAKEOVERS AND OTHER CORPORATE EVENTS

 

11.1         General
offers

 

If any person (or group of persons acting in concert):

 

(a)           obtains Control
of the Company as a result of making a general offer to acquire shares in the
Company; or

 

(b)           having obtained
Control of the Company makes such an offer and such offer becomes unconditional
in all respects

 

the Board shall within 7 days of becoming aware of that event notify
every Participant of it and, subject to Rule 11.4 (Internal
reorganisations), the following provisions shall apply:

 

(i)            subject to Rule 5.3 (Restrictions on Vesting: regulatory and tax issues),
all Awards shall Vest on the date of such notification if they have not then
Vested and Rule 11.5 (Reduction in
number of Vested Shares) shall apply; and

 

(ii)           any Option may, subject to Rule 7.1
(Restrictions on exercise) be
exercised within 1 month (or such longer period as the Board may permit) of
such notification, but to the extent that an Option is not exercised within
that period, that Option shall (regardless of any other provision of the Plan)
lapse at the end of that period.

 

35

 

11.2         Compulsory
acquisition, schemes of arrangement and winding up

 

In the event that:

 

(a)           any person
becomes bound or entitled to acquire shares in the Company under sections 979
to 985 of the Companies Act 2006;

 

(b)           under section 899
of the Companies Act 2006 the Court sanctions a compromise or arrangement
proposed for the purposes of or in connection with a Scheme for the
reconstruction of the Company or its amalgamation with any other company or
companies; or

 

(c)           the Company
passes a resolution for a voluntary winding up of the Company; or

 

(d)           an order is made
for the compulsory winding up of the Company

 

all Awards shall, subject to Rule 5.3 (Restrictions
on Vesting: regulatory and tax issues), and Rule 11.4 (Internal reorganisations) Vest on the date of such event if
they have not then Vested and Rule 11.5 (Reduction in
number of Vested Shares) shall apply.

 

If an event described in this Rule occurs then an Option may,
subject to Rule 7.1 (Restrictions on exercise)
and Rule 11.4 (Internal reorganisations),
be exercised within 1 month (or such longer period as the Board may permit) of
such event, but to the extent that the Option is not exercised within that
period, it shall (regardless of any other provision of the Plan) lapse at the
end of that period.

 

11.3         Demerger
and similar events

 

If a demerger, special dividend or other similar event (the “Relevant
Event”) is proposed which, in the opinion of the Board, would affect the market
price of Shares to a material extent, then the Board may, at its discretion,
decide that the following provisions will apply:

 

(a)           the Board shall,
as soon as reasonably practicable after deciding to apply these provisions,
notify a Participant that, subject to earlier lapse under Rule 10 (Leavers), his Award Vests and, if
relevant, his Option may be exercised on such terms as the Board may determine
and during such period preceding the Relevant Event or on the Relevant Event as
the Board may determine;

 

(b)           if an Award
Vests, or an Option is exercised, conditional upon the Relevant Event and such
event does not occur then the conditional Vesting or exercise shall not be
effective and the Award shall continue to subsist; and

 

(c)           if the Board
decides that an Award Vests under this Rule 11.3 then the date of that
Vesting shall be the Early Vesting Date and the provisions of Rule 11.5 (Reduction in number of Vested Shares)
shall apply.

 

36

 

11.4         Internal
reorganisations

 

In the event that:

 

(a)           an offer (as
referred to in Rule 11.1 (General
offers)) is made or a compromise or arrangement (as referred to in Rule 11.2(a) (Schemes of arrangement)) is proposed which
is expected to result in the Company becoming controlled by a new company (the “New
Company”); and

 

(b)           at least 75% of
the shares in the New Company will be held by substantially the same persons
who immediately before the offer or proposal was made were shareholders in the
Company; and

 

(c)           the Board and the
New Company agree that this Rule should apply

 

then an Award shall not Vest under Rule 11.1 or Rule 11.2 but
shall be automatically surrendered in consideration for the grant of a new
award which the Board determines is equivalent to the Award it replaces except
that it will be over shares in the New Company or some other company.

 

The Rules will apply to any new award granted under this Rule 11.4
as if references to Shares or ADSs were references to shares over which the new
award is granted and references to the Company were references to the company
whose shares are subject to the new award.

 

11.5         Corporate
events: reduction in number of Vested Shares or ADSs

 

If an Award Vests under any of Rules 11.1 to 11.3 (Corporate Events), the Board shall determine the number of
Vested Shares or ADSs of that Award by:

 

(a)           applying any
condition imposed on the Vesting of Awards (unless the Board decides
otherwise); and

 

(b)           if the Board,
acting fairly and reasonably, decides the number of Shares or ADSs shall be
reduced pro rota to reflect any unexpired part of the period of 3 years after
the Grant Date (or such shorter period set by the Board under Rule 5.1
(b)).

 

If an Award Vests under any of Rules 11.1 to 11.3 when the holder
of that Award has ceased to be a director or employee of a Group Member, then
the number of Shares or ADSs which Vest shall be determined under Rule 10.1,
10.2 or 10.3 (whichever is relevant) in precedence over this Rule.

 

12.           ADJUSTMENT OF AWARDS

 

12.1         General
rule

 

In the event of:

 

(a)           any variation of
the share capital of the Company; or

 

37

 

(b)           a demerger,
special dividend or other similar event which affects the market price of
Shares or ADSs to a material extent

 

the Board may make such adjustments as it considers appropriate under Rule 12.2
(Method of adjustment).

 

12.2         Method
of adjustment

 

An adjustment made under this Rule shall be to one or more of the
following:

 

(a)           the number of Shares
or ADSs comprised in an Award;

 

(b)           subject to Rule 12.3
(Adjustment below nominal value),
the Option Price; and

 

(c)           where any Award
has Vested or Option has been exercised but no Shares or ADSs have been
transferred or allotted after such Vesting or exercise, the number of Shares or
ADSs which may be so transferred or allotted and (if relevant) the price at
which they may be acquired.

 

12.3         Adjustment
below nominal value

 

An adjustment under Rule 12.2 (Method of adjustment)
may reduce the price at which Shares may be subscribed for on the exercise of
an Option to less than their nominal value, but only if and to the extent that
the Board is authorised:

 

(a)           to capitalise
from the reserves of the Company a sum equal to the amount by which the nominal
value of the Shares in respect of which the Option is exercised and which are
to be allotted after such exercise exceeds the price at which the Shares may be
subscribed for; and

 

(b)           to apply that sum
in paying up such amount on such Shares

 

so that on exercise of any Option in respect of which such a reduction
shall have been made the Board shall capitalise that sum (if any) and apply it
in paying up that amount.

 

13.           ALTERATIONS

 

13.1         General
rule on alterations

 

Except as described in Rule 13.2 (Shareholder
approval) and Rule 13.4 (Alterations to
disadvantage of Participants), the Board may at any time alter the
Plan or the terms of any Award granted under it.

 

13.2         Shareholder
approval

 

Except as described in Rule 13.3 (Exceptions
to shareholder approval), no alteration to the advantage of an
individual to whom an Award has been or may be granted shall be made under Rule 13.1
(General rule on alternations) to
the provisions concerning:

 

(a)           eligibility;

 

38

 

(b)           the individual
limits on participation;

 

(c)           the overall
limits on the issue of Shares or the transfer of treasury Shares;

 

(d)           the basis for
determining a Participant’s entitlement to, and the terms of, Shares or ADSs or
cash provided under the Plan;

 

(e)           the adjustments
that may be made in the event of any variation of capital; and

 

(f)            the terms of this
Rule 13.2

 

without the prior approval by ordinary resolution of the members of the
Company in general meeting.

 

13.3         Exceptions
to shareholder approval

 

Rule 13.2 (Shareholder approval)
shall not apply to any minor alteration to benefit the administration of the
Plan, to take account of a change in legislation or to obtain or maintain
favourable tax, exchange control or regulatory treatment for Participants or
any Group Member.

 

13.4         Alterations
to disadvantage of Participants

 

No alteration to the material disadvantage of any Participant shall be
made under Rule 13.1 unless:

 

(a)           the Board shall
have invited every relevant Participant to indicate whether or not he approves
the alteration; and

 

(b)           the alteration is
approved by a majority of those Participants who have given such an indication.

 

14.           MISCELLANEOUS

 

14.1         Employment

 

The rights and obligations of any individual under the terms of his
office or employment with any Group Member shall not be affected by his
participation in the Plan or any right which he may have to participate in
it.  An individual who participates in
the Plan waives any and all rights to compensation or damages in consequence of
the termination of his office or employment for any reason whatsoever (and
regardless of whether such termination is lawful or unlawful) insofar as those
rights arise or may arise from him ceasing to have rights under an Award as a
result of such termination. 
Participation in the Plan shall not confer a right to continued
employment upon any individual who participates in it.  The grant of any Award does not imply that
any further Award will be granted nor that a Participant has any right to
receive any further Award.

 

39

 

14.2         Disputes

 

In the event of any dispute or disagreement as to the interpretation of
the Plan, or as to any question or right arising from or relating to the Plan,
the decision of the Board shall be final and binding upon all persons.

 

The exercise of any power or discretion by the Board shall not be open
to question by any person and a Participant or former Participant shall have no
rights in relation to the exercise of or omission to exercise any such power or
discretion.

 

14.3         Share
rights

 

All Shares allotted under the Plan shall rank equally in all respects
with Shares then in issue except for any rights attaching to such Shares by
reference to a record date before the date of the allotment.

 

Where Vested Shares are transferred to Participants (or their nominee)
or, in the case of Forfeitable Shares, released from their restrictions under
the Plan, Participants will be entitled to all rights attaching to such Shares
by reference to a record date on or after the date of such transfer or release
of such restrictions.

 

14.4         Notices

 

Any notice or other communication under or in connection with the Plan
may be given:

 

(a)           by personal
delivery or by post, in the case of a company to its registered office, and in
the case of an individual to his last known address, or, where he is a director
or employee of a Group Member, either to his last known address or to the
address of the place of business at which he performs the whole or substantially
the whole of the duties of his office or employment; or

 

(b)           in an electronic
communication to their usual business address or such other address for the
time being notified for that purpose to the person giving the notice; or

 

(c)           by such other method
as the Board determines.

 

14.5         Third
parties

 

No third party has any rights under the Contracts (Rights of Third
Parties) Act 1999 to enforce any term of the Plan.

 

14.6         Benefits
not pensionable

 

Benefits provided under the Plan shall not be pensionable.

 

40

 

14.7         Data
protection

 

Each Participant consents to the collection, processing and transfer of
his personal data for any purpose relating to the operation of the Plan.  This includes:

 

(a)           providing personal
data to any Group Member and any third party such as trustees of any employee
benefit trust, administrators of the Plan, registrars, brokers and any of their
respective agents;

 

(b)           processing of
personal data by any such Group Member or third party;

 

(c)           transferring
personal data to a country outside the European Economic Area (including a
country which does not have data protection laws equivalent to those prevailing
in the European Economic Area); and

 

(d)           providing
personal data to potential purchasers of the Company, the Participant’s
employer or the business in which the Participant works.

 

14.8         Governing
law

 

The Plan and all Awards shall be governed by and construed in
accordance with the law of England and Wales and the Courts of England and
Wales have exclusive jurisdiction to hear any dispute.

 

15.           INCENTIVE STOCK OPTIONS

 

15.1         Definitions

 

In this Rule:

 

“Incentive
Stock Option” or “ISO”
means an Option as defined in and satisfying the requirements of section 422 of
the Code;

 

“Code”
means the United States Internal Revenue Code of 1986 (as amended);

 

“Market
Value” at any date means the fair market value of the number of ADSs
on that date, as reasonably determined by the Board, provided that if on such
date the ADSs are listed on the New York Stock Exchange, the fair market value
shall be not less than the closing price of such ADSs on the Grant Date;

 

“Non-Qualified
Stock Option” means an Option which is not an Incentive Stock
Option.

 

15.2         Grant
of Incentive Stock Option

 

The Board may grant an ISO over ADSs to any US Participant upon the
terms set out in the Plan and subject to the additional terms and conditions in
this Rule provided that the US Participant is an employee of:

 

(a)           the Company; or

 

41

 

(b)           a “subsidiary
corporation” (as defined in section 424(f) of the Code) with respect to
the Company; or

 

(c)           a “parent
corporation” (as defined in section 424(e) of the Code) with respect to
the Company.

 

15.3         Option
price for Incentive Stock Option

 

(a)           Subject to Rule 15.4,
the Option Price for an ADS subject to an ISO granted under this Rule may
not be less than the Market Value of the ADS on the Grant Date.

 

(b)           A person who,
within the meaning of section 422(b)(6) of the Code, is deemed to own
shares in the Company possessing more than 10% of the total combined voting
power of all classes of shares of the Company (or of its parent or subsidiary
corporations within the meaning of section 424 of the Code) shall be eligible
to receive an ISO only if the Option Price of an ADS is at least 110% of the
Market Value of the ADS on the Grant Date and only if the term of the Option
does not exceed 5 years.

 

15.4         Individual
Limit

 

(a)           The aggregate
Market Value determined at the Grant Date of the number of ADSs with respect to
which ISOs first become exercisable by any US Participant in any calendar year
under the Plan (or any other stock option required to be taken into account
under section 422(d) of the Code) shall not exceed US $100,000.

 

(b)           To the extent
that this US $100,000 limit is exceeded, an ISO will be treated as a
Non-Qualified Stock Option.

 

(c)           Each Option that
is intended to be granted as an ISO shall so indicate that, and to what extent,
the Option is intended to be an ISO.

 

15.5         Leavers

 

Section 421(a) of the Code will not apply to an ISO unless it
is exercised no more than:

 

(a)           12 months after
the date of termination of employment because of total and permanent disability
(as defined in Code section 22(e)(3)); or

 

(b)           3 months after
the date of termination of employment for any reason other than that described
in paragraph (a) and death.

 

15.6         Other
Dispositions

 

(a)           Section 421(a) of
the Code will not apply to ADSs acquired upon exercise of ISOs if such ADSs are
disposed of in a disqualifying disposition within the meaning of section 422 of
the Code by a US Participant within either 2 years from the Grant Date of such
Option or 1 year from the transfer of the ADSs to 

 

42

 

satisfy such Option, or in any other disqualifying
disposition within the meaning of section 422 of the Code.

 

(b)           If a
disqualifying disposition occurs, the US Participant shall be required to
notify the Company in writing as soon as practicable of the date and terms of
the disposition and, if the Company (or any affiliate) has a tax withholding
obligation, the US Participant shall pay to the Company (or affiliate) an
amount equal to any withholding tax the Company (or affiliate) is required to
pay as a result of the disqualifying disposition.

 

15.7         Maximum
Aggregate Number of Shares Underlying ADSs

 

The maximum aggregate number of Shares underlying the ADSs with respect
to ISOs which may be issued under the Plan is 50,000,000.

 

15.8         Modifications

 

Any modification, extension or renewal of an ISO shall be subject to
the terms of Treasury Regulation 1.424-1.

 

15.9         Miscellaneous

 

Notwithstanding any other provisions of the Plan, the Company will not
be required to issue or cause to be issued any ADSs if at such time such issuance
would violate the United States Federal Securities laws or any other laws of
the United States or any state of the United States.  In addition, the holder of any ADSs issued in
connection with the Plan agrees not to sell or transfer such ADSs in violation
of the United States Federal Securities laws or any other laws of the United
States or any state of the United States. 
The Company shall have the right in its sole discretion to modify the
terms of the Plan at any time and from time to time as it deems necessary or
appropriate to ensure or facilitate such compliance and to include appropriate
legends on any Options or ADSs issued or caused to be issued in connection with
the Plan.

 

43

 

SCHEDULE 1: 
GRANT OF A FORFEITABLE SHARES AWARD

 

On or before the grant of a Forfeitable Shares Award, each employee
selected for such an Award must enter into an agreement with the Company under
the terms of which the employee agrees both in respect of the Shares or ADSs
comprised in the Award at the Grant Date and any additional Shares or ADSs that
may become subject to the Award under Rule 3.4 (Treatment of Dividends):

 

(a)         to have full
beneficial ownership of the Shares or ADSs;

 

(b)         unless the Board
decides otherwise to waive his right to all cash and scrip dividends on his
Forfeitable Shares until Vesting;

 

(c)         that he will not
assign, transfer, charge or otherwise dispose of any Forfeitable Shares or any
interest in such Forfeitable Shares until Vesting save as otherwise required by
the Rules;

 

(d)         if required by
the Board, to enter into any elections under Part 7 of ITEPA and any
election to transfer, or any agreement to pay, secondary Class 1 National
Insurance contributions in relation to his Forfeitable Shares; and

 

(e)         to sign any
documentation to give effect to the terms of the Forfeitable Shares Award.

 

The date of such agreement shall be the Grant Date of the Forfeitable
Shares Award.

 

On the Grant Date (or as soon as practicable after the payment date of
the relevant dividend in the case of additional Shares or ADSs that are to
become subject to the Forfeitable Shares Award under Rule 3.4 (Treatment of Dividends)) either the legal
ownership of the Forfeitable Shares shall be held on the Participant’s behalf by
a nominee as chosen from time to time by the Board or the Participant shall
deposit the share certificate (or any other document of title) relating to the
Forfeitable Shares together with a signed but otherwise uncompleted instrument
of transfer with such person as the Board may from time to time decide.

 

44

 

SCHEDULE 2: 
CASH CONDITIONAL AWARDS

 

The Rules of Part B of the Plan shall apply to a right (a “Cash Conditional Award”) to receive a cash
sum granted or to be granted under this Schedule as if it was a Conditional
Award, except as set out in this Schedule. 
Where there is any conflict between the Rules and this Schedule,
the terms of this Schedule shall prevail.

 

1.             The Board may
grant or procure the grant of a Cash Conditional Award.

 

2.             Each Cash
Conditional Award shall relate to a given number of notional Shares or ADSs.

 

3.             On the Vesting of
the Cash Conditional Award, the holder of that Award shall be entitled to a
cash sum which shall be equal to the “Cash
Value” of the notional Vested Shares or ADSs, where the Cash Value
of a notional Share or ADS is the market value of a Share or ADS on the date of
Vesting of the Cash Conditional Award. 
For the purposes of this Schedule, the market value of a Share or ADS on
any day shall be determined in accordance with Rule 8.3 (Cash equivalent).

 

4.             The cash sum
payable under paragraph 3 above shall be paid by the employer of the
Participant as soon as practicable after the Vesting of the Cash Conditional
Award, net of any deductions (on account of tax or similar liabilities) as may
be required by law.

 

5.             For the avoidance
of doubt, a Cash Conditional Award shall not confer any right on the holder of
such an Award to receive Shares or ADSs or any interest in Shares or ADSs.

 

45

 

SCHEDULE 3: 
SHARE APPRECIATION RIGHTS

 

A Share Appreciation Right (“SAR”)
may be granted under this Schedule.  The Rules of
Part B of the Plan shall apply to a SAR as if it were an Option, except as
set out in this Schedule.  Where there is
any conflict between the Rules and this Schedule, the terms of this
Schedule shall prevail.

 

1.             Before the grant
of a SAR, the Board shall determine a “base
price” for each Share or ADS under the SAR.  The base price shall be subject to the same
restrictions as an Option Price set out in Rule 3.5 of Part B of the
Plan.  There shall be no amount payable
on the exercise of a SAR.

 

2.             Subject to
paragraph 7 below, within 30 days after a SAR has been exercised by a
Participant, the Board shall procure the transfer to him (or a nominee for him)
or, if appropriate, allot to him (or a nominee for him) the number of Shares or
ADSs which shall have an aggregate market
value (as defined in paragraph 5 below) as near as possible equal to
(but not exceeding) the notional gain
(as defined in paragraph 4 below).

 

3.             The notional gain is the amount by which the
aggregate market value of the
number of Shares or ADSs in respect of which the SAR is exercised exceeds the
aggregate base price (as
calculated in accordance with paragraph 1 above) of that number of Shares or
ADSs.

 

4.             For the purposes
of this Schedule the market value
of a Share or ADS is:

 

(a)           if Shares are
quoted in the London Stock Exchange Daily Official List, the middle market
quotation of a Share (as derived from that List) on the day before the day on
which the SAR is exercised; or

 

(b)           if ADSs are
quoted on the New York Stock Exchange, the closing price of the ADS on the New
York Stock Exchange on the day before the day on which the SAR is exercised;

 

(c)           where Shares are
not so quoted, such value on the day on which the SAR is exercised as the
Board, acting fairly and reasonably, shall decide.

 

5.             Shares or ADSs
may only be allotted to a Participant (or a nominee for him) who exercises his
SAR to the extent that the Board is authorised to capitalise from the reserves
of the Company a sum equal to at least the aggregate nominal value of the
Shares to be allotted to satisfy the exercise of the SAR and to apply that sum
in paying up such amount on such Shares.

 

6.             If the Board so
decides, the whole or any part of the
notional gain determined under paragraph 4 above shall, instead of
being delivered to the Participant (or his nominee) in Shares or ADSs under paragraph
3 above, be paid in cash.

 

7.             Any payment of
cash under paragraph 6 above will be subject to deduction of such amount (on
account of tax and similar liabilities) as may be required by law or as the
Board may reasonably consider to be necessary or desirable.

 

46

 

SCHEDULE 4: UNITED STATES ADDENDUM

 

This Addendum (the “US Addendum”) shall apply for all US Participants
who are eligible to receive Awards pursuant to Rule 2 of Part B
(Unapproved) of the Plan and, to the extent applicable and permissible to HMRC,
Part A of the Plan (HMRC Approved). In the event that a Participant
becomes a US Participant after the grant of an Award, such Award is modified in
a manner consistent with this US Addendum.

 

1.             The purpose of
this US Addendum is to ensure that Awards granted to US Participants under the
Plan comply, as applicable, with the requirements of section 409A of the United
States Code Internal Revenue Code of 1986, as amended (the “US Tax Code”) and
the regulations thereunder. Notwithstanding the foregoing, this US Addendum
should be interpreted and applied in a manner consistent with other legal
requirements in the relevant jurisdictions, including, but not limited to,
applicable securities laws.  Provisions of
this US Addendum may be amended pursuant to Rule 13 of Part B of the
Plan to take into account changes in the US Tax Code, including changes made to
section 409A of the US Tax Code and the regulations thereunder.

 

2.             Words and phrases
in this US Addendum shall have the same meaning as defined in Rule 1.1 of Part B
of the Plan (or Rule 1.1 of Part A of the Plan where applicable)
except as provided below. Notwithstanding the foregoing, for purposes of this
US Addendum, save where expressly stated otherwise, the term “the Plan” shall
include Part A of the Plan to the extent any Options are granted under Part A
to Participants who become US Participants.

 

3.             Except as noted
in this US Addendum, the Rules described in the Plan apply to Awards
granted under the Plan.

 

4.             This US Addendum
shall apply as of the effective date of the Plan.

 

SECTION 409A
COMPLIANCE

 

5.             Notwithstanding
anything in the Plan to the contrary, Awards granted to a US Participant shall
be subject to the following, as applicable:

 

(a)           Options granted
to US Participants are intended to satisfy the nonstatutory stock option
exemption provided in Treasury Regulation § 1.409A-1(b)(5)(i)(A), unless the
Options are designated as Incentive Stock Options under Rule 15.

 

(b)           An Option granted
to a US Participant shall be granted with an Option Price determined in
accordance with Rule 3.5 of the Plan, provided that in no event will the
Option Price be less than “fair market value” on the Grant Date as defined in
Treasury Regulation § 1.409A-1(b)(5). To the extent a Participant who has been
granted an Option becomes subject to US taxation and such Option is determined
to have been granted with an Option Price less than fair market value on the
Grant Date, as so defined, such Option shall be exercisable only as follows: (a) if
such Option is Vested in the year the Participant becomes subject to US
taxation, such Option shall be exercisable only in the first calendar year
after the year in which the Participant becomes subject to US taxation, and (b) if
such Option is not Vested in the year the 

 

47

 

Participant becomes subject to US taxation, such
Option shall be exercisable only in the first calendar year after the year in
which the substantial risk of forfeiture (within the meaning of section 409A of
the US Tax Code) lapses.

 

(c)           Adjustments made
pursuant to Rule 12 of Part B of the Plan with respect to any Award
(other than an Option designated as an Incentive Stock Option) issued to or
held by a US Participant shall be made in accordance with Treasury Regulation §
1.409A-1(b)(5).

 

(d)           No Nil Price
Options shall be granted to US Participants.

 

(e)           Notwithstanding
anything in the Plan to the contrary, payment with respect to any US
Participant who Vests in a Conditional Award, or Cash Conditional Award (as
described in Schedule 2 of the Plan) or who becomes entitled to a Dividend
Equivalents (as defined in Rule 6.4 of the Plan) shall be made no later
than 21⁄2 months following the end of the calendar year in which such Award or
Dividend Equivalent Vests.

 

(f)            Notwithstanding
anything in the Plan to the contrary, Rule 10.2 (a) (Retirement with the agreement of his employer) will not
apply to Conditional Awards or Cash Conditional Awards held by US
Participants.  Where an individual
retires in such circumstances, Rule 10.3 (Cessation of
employment in other circumstances) shall apply ignoring the
reference to retirement.

 

48

 

SCHEDULE 5: CANADIAN ADDENDUM

 

The Company currently has employees in Canada.  The Company has been advised that
certain provisions within the Plan may result in adverse tax consequences for
employees subject to tax in Canada on employment income. This addendum (the “Canadian
Addendum”) shall therefore apply to participants in the Plan who are subject to
tax in Canada on employment income (“Canadian Participants”).

 

The Canadian Addendum is intended to ensure that, notwithstanding any
provisions of the Plan to the contrary, the Company will settle Awards made to
Canadian Participants using treasury or newly issued Shares and will not
satisfy such Awards in cash or market purchased Shares held in a trust.

 

1.             Employees in
Canada are not eligible to receive Awards under Part A (HMRC Approved) of
the Plan.

 

2.             Words and
expressions not otherwise defined in this Canadian Addendum shall have the same
meaning as they have in Rule 1.1 of Part B (Unapproved) of the Plan.

 

3.             Part B of
the Plan will apply to Awards granted under this Canadian Addendum but in the
event of any conflict between the Plan and this Canadian Addendum, the terms of
this Canadian Addendum shall prevail.

 

4.             Notwithstanding
any provisions of the Plan to the contrary, Awards granted to Canadian
Participants shall only be satisfied using newly issued Shares or treasury
Shares held by the Company.

 

5.             For the avoidance
of doubt, no Shares granted to Canadian Participants shall be transferred to or
from a trustee in respect of the Awards granted under this Canadian Addendum.

 

6.             Rule 3.7(c) of
Part B of the Plan (Transfer
of Shares (other than the transfer of treasury Shares)) shall not apply.

 

7.             Rule 8 of Part B
of the Plan (Cash
Alternative) shall not apply and it shall not be
possible to satisfy Awards granted under the Plan to Canadian Participants
using cash.

 

49Exhibit 4.3

 

	
  

  	
   

  	
  CLIFFORD CHANCE LLP

  

 

	
   

  	
   

  	
   

  

 

THE DIAGEO PLC
2009 DISCRETIONARY INCENTIVE PLAN

	
   

  	
   

  	
   

  

 

Approved by
shareholders of the Company on 14 October 2009

 

Adopted by the
Board of the Company on 26 August 2009

 

The Plan is a
discretionary benefit offered by the Diageo Group for the benefit of its
employees.  Its main purpose is to
increase the interest of the employees in Diageo plc’s long-term business goals
and performance through share ownership. 
The Plan is an incentive for the employees’ future performance and
commitment to the goals of the Diageo Group.

 

Shares
purchased or received under the Plan, any cash received under the Plan and any
gains obtained under the Plan are not part of salary for any purpose (except to
any extent required by statute).

 

The Plan is
being offered for the first time in 2009 in selected countries and the board of
Diageo plc shall have the right to decide, in its sole discretion, whether or
not further awards will be granted in the future and to which employees those
awards will be granted.

 

The detailed rules of
the Plan are set out overleaf.

 

 

CONTENTS

 

	
  Rule

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Definitions And Interpretation

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Eligibility

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Grant Of Awards

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Limits

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Vesting Of Awards

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Consequences Of Vesting

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Exercise Of Options

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  Cash Alternative

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Lapse Of Awards

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  Leavers And Deceased Participants

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  Takeovers And Other Corporate Events

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  Adjustment Of Awards

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  Alterations

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  Miscellaneous

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  Schedule 1

  	
  : GRANT OF A FORFEITABLE SHARES AWARD

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Schedule 2

  	
  : CASH CONDITIONAL AWARDS

  	
   

  	
  24

  
						

 

 

1.                                 DEFINITIONS AND INTERPRETATION

 

1.1                           In the Plan, unless the
context otherwise requires:

 

“ADS” means an American Depositary Share
being an authorised depositary security representing for the time being 4
Shares in the Company and being evidenced by an authorised depositary receipt
issued by the Bank and quoted on the New York Stock Exchange;

 

“Award” means
a Conditional Award, a Forfeitable Shares Award or an Option;

 

“Bank” means The Bank of New York Mellon or
such other bank as the Company may from time to time appoint to issue
authorised depositary receipts;

 

“Board” means the board of directors of the
Company (or, on and after the occurrence of a corporate event described in Rule 11
(Takeovers and other corporate events),
for the purposes of making determinations under Rule 11, the board of
directors of the Company as constituted immediately before such event occurs)
or a duly authorised committee of the Board or a duly authorised person;

 

“Company” means Diageo plc (registered in England and Wales with
registered number 23307);

 

“Conditional Award” means a conditional right to acquire Shares or
ADSs granted under the Plan;

 

“Control” means control within the meaning of section 995 of
the Income Tax Act 2007;

 

“Dividend Equivalent” means a benefit
calculated by reference to dividends paid on Shares as described in Rule 3.5;

 

“Early Vesting Date” means either:

 

(a)                                      the date of cessation of
employment of a Participant in the circumstances referred to in Rules 10.1
(Deceased Participants) and 10.2
(Ill-health, injury, disability, redundancy
and transfer out of the Group); or

 

(b)                                     a date of notification referred
to in Rule 11.1 (General offers),
the date of the relevant event referred to in Rule 11.2 (Schemes of arrangement and winding up) or
the date of Vesting referred to in Rule 11.3 (Demergers and similar events);

 

“Exercise Period” means the period referred to in Rule 6.2
during which an Option may be exercised;

 

“Forfeitable Shares” means Shares or ADSs
comprised in a Forfeitable Shares Award which are subject to certain
restrictions and forfeiture under the Plan;

 

“Forfeitable Shares Award” means the
transfer of the beneficial interest in Forfeitable Shares to a Participant and
the subsequent holding of that interest in accordance with the Plan;

 

1

 

“Grant Date” means the date on which an
Award is granted;

 

“Group Member” means:

 

(a)                                      a Participating Company or a
body corporate which is the Company’s holding company (within the meaning of
section 1159 of the Companies Act 2006) or a Subsidiary of the Company’s
holding company;

 

(b)                                     a body corporate which is a
subsidiary undertaking (within the meaning of section 1162 of that Act) of a
body corporate within paragraph (a) above and has been designated by the
Board for this purpose; and

 

(c)                                      any other body corporate in
relation to which a body corporate within paragraph (a) or (b) above
is able (whether directly or indirectly) to exercise 15% or more of its equity
voting rights and has been designated by the Board for this purpose;

 

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

 

“Listing Rules” means the Listing Rules published by the
UKLA;

 

“London Stock Exchange” means London Stock
Exchange plc or any successor to that company;

 

“New York Stock Exchange” means The New York Stock Exchange, Inc.;

 

“Normal Vesting
Date”
means the date or dates on which an Award vests under Rule 5.1 (Timing of Vesting: 
Normal Vesting Date);

 

“Option” means a right to acquire Shares or
ADSs granted under the Plan which is designated as an option by the Board under
Rule 3.2 (Type of Award);

 

“Option Price” means the amount, if any, payable on the
exercise of an Option;

 

“Participant” means a person who holds an
Award including his personal representatives;

 

“Participating Company” means the Company or
any Subsidiary;

 

“Performance Condition” means a condition
related to performance which is specified by the Board under Rule 3.1 (Terms of grant)
and which may relate to corporate and/or personal performance;

 

“Plan” means the Diageo 2009 Discretionary
Incentive Plan as amended from time to time;

 

“Rule” means a rule of the Plan;

 

“Shares” means fully paid ordinary shares in
the capital of the Company;

 

“Subsidiary” means a body corporate which is
a subsidiary (within the meaning of section 1159 of the Companies Act 2006) of
the Company;

 

2

 

“Tax Liability” means any amount of tax or
social security contributions for which a Participant would or may be liable
and for which any Group Member or former Group Member would or may be obliged
to (or would or may suffer a disadvantage if it were not to) account to any
relevant authority;

 

“UKLA” means the United Kingdom Listing
Authority;

 

“US Participant” means a Participant who is resident in the
United States of America on the Grant Date;

 

“Vest” means:

 

(a)                                      in relation to a Conditional
Award, a Participant becoming entitled to have Shares or ADSs transferred to
him (or his nominee) subject to the Rules;

 

(b)                                     in relation to an Option, it
becoming exercisable;

 

(c)                                      in relation to a Forfeitable
Shares Award, the restrictions imposed on the Forfeitable Shares under the Plan
ceasing to apply

 

and Vesting shall be construed accordingly;

 

“Vested Shares” means those Shares in respect of which an Award
Vests.

 

1.2                           Any reference in the Plan to
any enactment includes a reference to that enactment as from time to time
modified, extended or re-enacted.

 

1.3                           Expressions in italics and
headings are for guidance only and do not form part of the Plan.

 

2.                                 ELIGIBILITY

 

An individual
is eligible to be granted an Award only if he is an employee of a Participating
Company (excluding an executive director of the Company).

 

3.                                 GRANT OF AWARDS

 

3.1                           Terms of grant

 

Subject to Rule 3.7
(Timing of
grant), Rule 3.9
(Approvals and consents) and Rule 4
(Limits), the Board may resolve to grant
an Award on:

 

(a)                                      the terms set out in the Plan;
and

 

(b)                                     such additional terms (whether
a Performance Condition and/or any other terms) as the Board may specify

 

to any person
who is eligible to be granted an Award under Rule 2 (Eligibility).

 

3.2                           Type of Award

 

On or before
the Grant Date, the Board shall determine whether an Award shall be a
Conditional Award, an Option or a Forfeitable Shares Award.  If the Board does not

 

3

 

specify the
type of an Award on or before the Grant Date then an Award shall be a
Conditional Award.  An Award granted to
an employee who is not a US Participant shall be to acquire Shares unless the
Board specifies on or before the Grant Date that the Award shall be to acquire
ADSs.

 

3.3                           Grant of Award to US
Participant

 

Where an Award
is granted under Rule 3.1 (Terms of
Grant) to a US Participant, it shall take the form of a Conditional
Award and shall be to acquire ADSs and not Shares.

 

3.4                           Method of grant

 

An Award shall
be granted as follows:

 

(a)                                      a Conditional Award or an
Option shall be granted by deed executed by the Company;

 

(b)                                     if an Award is an Option, the
Board shall determine the Option Price (if any) on or before the Grant Date
provided that the Board may reduce or waive such Option Price on or prior to
the exercise of the Option;

 

(c)                                      a Forfeitable Shares Award
shall be granted by the procedure set out in Schedule 1 to the Plan.

 

3.5                           Treatment of Dividends

 

The Board may:

 

(a)                                      decide at any time that a
Participant (or his nominee) shall be entitled to receive a benefit determined
by reference to the value of all or any of the dividends (including the
dividend tax credit unless the Board decides otherwise) that would have been
paid on the Vested Shares or ADSs in respect of dividend record dates occurring
during the period between the Grant Date and the date of Vesting and may
further decide that such benefit shall be provided in cash and/or Shares and/or
ADSs. The Board may decide to exclude the value of all or part of any special
dividend from the amount of the Dividend Equivalent; or

 

(b)                                       grant an Award on terms
whereby the number of Shares or ADSs comprised in the Award shall increase by
deeming dividends (excluding special dividends, unless the Board decides
otherwise) paid on the Shares or ADSs from the Grant Date to Vesting to have
been reinvested in additional Shares or ADSs on such terms (as to the inclusion
or exclusion of any dividend tax credit, the price at which any additional
Shares or ADSs shall be deemed to have been purchased or otherwise) as the
Board shall decide.

 

This Rule shall
not apply in the case of a Forfeitable Shares Award under which a Participant
is entitled to receive dividends.

 

3.6                           Method of satisfying
Awards

 

Unless
specified to the contrary by the Board on the Grant Date, an Award may be
satisfied:

 

4

 

(a)                                      by the issue of new Shares;
and/or

 

(b)                                     by the transfer of treasury
Shares; and/or

 

(c)                                      by the transfer of Shares
(other than the transfer of treasury Shares); or

 

(d)                                     in the case of an Award
granted to a US Participant, by the issue or transfer of ADSs.

 

The Board may
decide to change the way in which it is intended that an Award granted as a
Conditional Award or an Option may be satisfied after it has been granted,
having regard to the provisions of Rule 4 (Limits).

 

3.7                           Timing of grant

 

Subject to Rule 3.9
(Approvals and consents), an Award may
only be granted:

 

(a)                                      within the period of 6 weeks
beginning with:

 

(i)                        the day on which the Plan is
approved by shareholders of the Company; or

 

(ii)                     the dealing day after the date on which the
Company announces its results for any period; or

 

(b)                                     at any other time when the
Board considers that circumstances are sufficiently exceptional to justify its
grant

 

but an Award may
not be granted after 13 October 2019 (that is, the expiry of the period of
10 years beginning with the date on which the Plan is approved by shareholders
of the Company).

 

3.8                           Non-transferability
and bankruptcy

 

An
Award granted to any person:

 

(a)                                      shall not be transferred,
assigned, charged or otherwise disposed of (except on his death to his personal
representatives) and shall lapse immediately on any attempt to do so; and

 

(b)                                     shall lapse immediately if he
is declared bankrupt.

 

3.9                           Approvals and
consents

 

The grant of
any Award shall be subject to obtaining any approval or consent required under
the Listing Rules, any relevant share dealing code of the Company, the City
Code on Takeovers and Mergers, the listing rules of the New York Stock
Exchange, or any other UK or overseas regulation or enactment.

 

4.                                 LIMITS

 

4.1                           5% in 10 years limit

 

An Award shall
not be granted in any calendar year if, at the time of its proposed Grant Date,
it would cause the number of Shares allocated (as defined in Rule 4.3) in
the period

 

5

 

of 10 calendar
years ending with that calendar year under the Plan and under any other
executive share plan adopted by the Company to exceed such number as represents
5% of the ordinary share capital of the Company in issue at that time.

 

4.2                           10% in 10
years limit

 

An Award shall
not be granted in any calendar year if, at the time of its proposed Grant Date,
it would cause the number of Shares allocated (as defined in Rule 4.3) in
the period of 10 calendar years ending with that calendar year under the Plan
and under any other employee share plan adopted by the Company to exceed such
number as represents 10% of the ordinary share capital of the Company in issue
at that time.

 

4.3                           Meaning of “allocated”

 

For the
purposes of Rules 4.1 and 4.2:

 

(a)                                      Shares are allocated:

 

(i)                        when an option, award or other
contractual right to acquire unissued Shares or treasury shares is granted;

 

(ii)                     where Shares are issued or treasury shares
are transferred otherwise than pursuant to an option, award or other
contractual right to acquire Shares, when those Shares are issued or treasury
shares transferred;

 

(b)                                     any Shares which have been
issued or which may be issued (or any Shares transferred out of treasury or
which may be transferred out of treasury) to any trustees to satisfy the
exercise of any option, award or other contractual right shall count as “allocated”
unless they are already treated as allocated under this Rule; and

 

(c)                                      for the avoidance of doubt, existing Shares other than
treasury shares that are
transferred or over which options, awards or other contractual rights are
granted shall not count as “allocated”.

 

4.4                           Post-grant
events affecting numbers of “allocated” Shares

 

For the
purposes of Rule 4.3:

 

(a)                                      where:

 

(i)                        any option, award or other
contractual right to acquire unissued Shares or treasury shares is released or
lapses (whether in whole or in part); or

 

(ii)                     after the grant of an option, award or
other contractual right the Board determines that:

 

(aa)      where an amount is normally payable on its
exercise it shall be satisfied without such payment but instead by the payment
of cash equal to the gain made on its exercise; or

 

(bb)    it shall be satisfied by the transfer of existing
Shares (other than Shares transferred out of treasury)

 

6

 

the unissued
Shares or treasury shares which consequently cease to be subject to the option,
award or other contractual right shall not count as “allocated”; and

 

(b)                                     the number of Shares allocated
in respect of an option, award or other contractual right shall be such number
as the Board shall reasonably determine from time to time.

 

4.5                           Changes to
investor guidelines

 

Treasury
shares shall cease to count as “allocated” Shares for the purposes of Rule 4.3
if institutional investor guidelines cease to require such Shares to be so
counted.

 

4.6                           Individual limit

 

(a)                                      The maximum total market value
of Shares or ADSs (calculated as set out in this Rule) over which Awards may be
granted to any employee during any financial year of the Company is 200% of his
salary (as defined in this Rule), unless Rule 4.6(b) applies.

 

(b)                                     If the Board decides that
exceptional circumstances exist, then the maximum total market value of Shares
or ADSs (calculated as set out in this Rule) over which Awards may be granted
to an employee during a financial year of the Company is such higher percentage
of his salary (as defined in this Rule) as the Board may determine.

 

For the
purposes of this Rule 4.6:

 

(i)                                         an employee’s salary shall be taken to be his base salary
(excluding benefits in kind), expressed as an annual rate payable by the
Participating Companies to him on the Grant Date (or on such other date as the
Board shall reasonably determine).  Where
a payment of salary is made in a currency other than sterling, the payment
shall be treated as equal to the equivalent amount of sterling determined by
using any rate of exchange which the Board may reasonably select; and

 

(ii)                                      the market value of the Shares or ADSs over which an Award is
granted shall be taken to be, for Shares, an amount equal to the middle-market
quotation of Shares (as derived from the London Stock Exchange Daily Official
List) on the Grant Date or, for ADSs, the closing price of an ADS on the New
York Stock Exchange on the dealing day before the Grant Date or, if the Board
so determines, the average of the middle market quotations of a Share or
closing price of an ADS for the 3 dealing days before the Grant Date.

 

4.7                           Effect of limits

 

Any Award
shall be limited and take effect so that the limits in this Rule 4 are
complied with.

 

4.8                           Restriction on use of
unissued Shares and treasury shares

 

No Shares may
be issued or treasury shares transferred to satisfy the Vesting of any
Conditional Award or the exercise of any Option to the extent that such issue
or transfer

 

7

 

would cause
the number of Shares allocated (as defined in Rule 4.3 and adjusted under Rule 4.4)
to exceed the limits in Rules 4.1 (5%
in 10 years limit) and 4.2 (10%
in 10 years limit) except where there is a variation of share
capital of the Company which results in the number of Shares so allocated
exceeding such limits solely by virtue of that variation.

 

5.                                 VESTING OF AWARDS

 

5.1                           Timing of
Vesting:  Normal Vesting Date

 

Subject to Rule 5.3
(Restrictions on Vesting: regulatory and tax
issues), an Award shall Vest on the later of:

 

(a)                                      the date on which the
Board determines whether or not any Performance Condition and any other
condition imposed on the Vesting of the Award has been satisfied (in whole or
part); and

 

(b)                                     in accordance with the
Vesting schedule determined by the Board at the Grant Date

 

except where
earlier Vesting occurs on an Early Vesting Date under Rule 10 (Leavers) or Rule 11 (Takeovers and other corporate events).

 

5.2                           Extent of Vesting

 

An Award shall
only Vest to the extent:

 

(a)                                      that any Performance Condition
is satisfied on the Normal Vesting Date (or each Normal Vesting Date, if there
is more than one) or, if appropriate, the Early Vesting Date;

 

(b)                                     as permitted by any other term
or condition imposed on the Vesting of the Award; and

 

(c)                                      in relation to Vesting before
the Normal Vesting Date(s), as permitted by Rules 10.1 (Deceased Participants), 10.2 (Ill-health, injury, disability, redundancy and
transfer out of the Group), 10.3 (Cessation
of employment in other circumstances) and 11.5 (Reduction in number of Vested Shares).

 

5.3                           Restrictions on Vesting:
regulatory and tax issues

 

An Award shall
not Vest unless and until the following conditions are satisfied:

 

(a)                                      the Vesting of the Award, and
the issue or transfer of Shares or ADSs after such Vesting would be lawful in
all relevant jurisdictions and in compliance with the Listing Rules, any
relevant share dealing code of the Company (which, for the purposes of the Plan
shall be deemed to apply to any Participant who ceases to be a director or
employee of a Group Member if such code applied to the Participant immediately
before such cessation), the City Code on Takeovers and Mergers and any other
relevant UK or overseas regulation or enactment;

 

8

 

(b)                                     if, on the Vesting of the
Award, a Tax Liability would arise by virtue of such Vesting, then the
Participant authorises the Company to sell or procure the sale of sufficient
Shares or ADSs on his behalf to ensure that any relevant Group Member receives
the amount required to discharge the Tax Liability except to the extent that he
agrees with the Board to fund all or part of the Tax Liability in a different
manner;

 

(c)                                      the Participant has entered
into such arrangements as the Board requires (and where permitted in the
relevant jurisdiction) to satisfy a Group Member’s liability to social security
contributions in respect of the Vesting of the Award; and

 

(d)                                     where the Board requires, the
Participant has entered into, or agreed to enter into, a valid election under Part 7
of ITEPA (Employment income:  elections to disapply tax charge on
restricted securities) or any similar arrangement in any overseas
jurisdiction.

 

For the
purposes of this Rule 5.3, references to Group Member include any former
Group Member.

 

5.4                           Tax liability before
Vesting

 

If a
Participant will, or is likely to, incur any Tax Liability before the Vesting
of an Award then that Participant must enter into arrangements acceptable to
any relevant Group Member to ensure that it receives the amount of such Tax
Liability.  If no such arrangement is
made then the Participant shall be deemed to have authorised the Company to
sell or procure the sale of sufficient of the Shares or ADSs subject to his
Award on his behalf to ensure that the relevant Group Member receives the
amount required to discharge the Tax Liability and the number of Shares or ADSs
subject to his Award shall be reduced accordingly.

 

For the
purposes of this Rule 5.4, references to Group Member include any former
Group Member.

 

5.5                           Change of jurisdiction

 

If a Participant relocates to another
jurisdiction before his Award Vests and, as a result of the relocation, the
Participant or any Group Member would be subject to additional tax or social
security on the Vesting of the Award or the Vesting of the Award in that other
jurisdiction would be subject to any regulatory restriction, approval or
consent, the Board may determine that the Award may:

 

(a)                                      Vest on such terms and during
such period preceding the date on which the Participant relocates as the Board
may determine; or

 

(b)                                     be released by the Participant
for a Cash Conditional Award granted under Schedule 2.

 

9

 

6.                                 CONSEQUENCES OF VESTING

 

6.1                           Conditional
Awards

 

On or as soon
as reasonably practicable after the Vesting of a Conditional Award and, in any
event, within 30 days of Vesting, the Board shall, subject to Rule 5(3)(b) (Payment of Tax Liability) and any
arrangement made under Rule 5.3(c) (Restrictions
on Vesting: regulatory and tax issues), transfer or procure the
transfer of the Vested Shares or ADSs to the Participant (or a nominee for
him).

 

6.2                           Options

 

An Option
shall, subject to Rule 7.1 (Restrictions
on the exercise of an Option: regulatory and tax issues), be
exercisable in respect of Vested Shares or ADSs for a period of 12 months beginning with the date on which the
Option Vests and, if unexercised at the end of that period, the Option shall
then lapse unless it lapses earlier under Rule 10.3 (Cessation of employment in other circumstances),
Rule 11.1 (General offers),
Rule 11.2 (Schemes of arrangement and
winding up) or Rule 11.3 (Demergers
and similar events).

 

If an Option
is not exercised during the last 30 days of the Exercise Period because of any
regulatory restrictions referred to in Rule 7.1(a), the Board may extend
the period during which the Option may be exercised so as to permit the Option
to be exercised as soon as those restrictions cease to apply.

 

6.3                           Forfeitable Shares Award

 

On the Vesting
of a Forfeitable Shares Award, the Vested Shares or ADSs shall cease to be
subject to the restrictions imposed on the Forfeitable Shares under the Plan
and the Board shall, subject to Rule 5.3(b) (Payment of Tax Liability) and any
arrangement made under Rule 5.3(c) (Restrictions
on Vesting: regulatory and tax issues), transfer or procure the
transfer of:

 

(a)                                      the legal title to the Vested
Shares or ADSs; and/or

 

(b)                                     any documents of title
relating to the Vested Shares or ADSs

 

to the
Participant (or a nominee for him) on or as soon as reasonably practicable
after Vesting.

 

6.4                           Dividend
equivalent

 

If the Board
decided at any time under Rule 3.4(a) (Treatment of Dividends) that a Participant would be entitled
to the Dividend Equivalent in relation to Shares or ADSs under their Award,
then the provision of the Dividend Equivalent to the Participant shall be made
as soon as practicable after Vesting and:

 

(a)                                      in the case of a cash payment,
shall be subject to such deductions (on account of tax or similar liabilities)
as may be required by law or as the Board may reasonably consider to be
necessary or desirable;

 

10

 

(b)                                     in the case of a provision of
Shares or ADSs, Rule 5.3 (Restrictions
on Vesting: regulatory and tax issues) shall apply as if such
provision was the Vesting of an Award.

 

7.                                 EXERCISE OF OPTIONS

 

7.1                           Restrictions
on the exercise of an Option: regulatory and tax issues

 

An Option
which has Vested may not be exercised unless the following conditions are
satisfied:

 

(a)                                      the exercise of the Option and
the issue or transfer of Shares or ADSs after such exercise would be lawful in
all relevant jurisdictions and in compliance with the Listing Rules, any
relevant share dealing code of the Company (which, for the purposes of the Plan
shall be deemed to apply to any Participant who ceases to be a director or
employee of a Group Member if such code applied to the Participant immediately
before such cessation), the City Code on Takeovers and Mergers and any other
relevant UK or overseas regulation or enactment;

 

(b)                                     if, on the exercise of the
Option, a Tax Liability would arise by virtue of such exercise, then the
Participant authorises the Company to sell or procure the sale of sufficient
Shares or ADSs on his behalf to ensure that any relevant Group Member receives
the amount required to discharge the Tax Liability except to the extent that
the Participant agrees with the Board to fund all or part of the Tax Liability
in a different manner;

 

(c)                                      the Participant has entered
into such arrangements as the Board requires (and where permitted in the
relevant jurisdiction) to satisfy a Group Member’s liability to social security
contributions in respect of the exercise of the Option; and

 

(d)                                     where the Board requires, the
Participant has entered into, or agreed to enter into, a valid election under Part 7
of ITEPA (Employment income:  elections to disapply tax charge on
restricted securities) or any similar arrangement in any overseas
jurisdiction.

 

For the
purposes of this Rule 7.1, references to Group Member include any former
Group Member.

 

7.2                           Exercise in whole or part

 

An Option may
be exercised to the maximum extent possible at the time of exercise or over
such fewer number of Shares or ADSs as the Participant decides.

 

7.3                           Method of
exercise

 

The exercise
of any Option shall be effected in the form and manner prescribed by the
Board.  Unless the Board, acting fairly
and reasonably determines otherwise, any notice of exercise shall, subject to Rule 7.1
(Restrictions on the exercise of an Option:
regulatory and tax issues), take effect only when the Company
receives it, together with payment of any relevant Option Price (or, if the
Board so permits, an undertaking to pay

 

11

 

that amount)
and, if a Participant decides to satisfy the Tax Liability other than by
selling Shares or ADSs pursuant to the authority in Rule 7.1(b), an
agreement relating to the payment of the Tax Liability having been entered
into.

 

7.4                           Transfer or
allotment timetable

 

As soon as
reasonably practicable after an Option has been exercised and, in any event,
within 30 days of exercise, the Company shall, subject to Rule 7.1(b) (Payment of Tax Liability) and any
arrangement made under Rule 7.1(c) (Restrictions
on exercise: regulatory and tax issues), transfer or procure the
transfer to him (or a nominee for him) or, if appropriate, allot to him (or a
nominee for him) the number of Shares or ADSs in respect of which the Option
has been exercised.

 

8.                                 CASH ALTERNATIVE

 

8.1                           Board
determination

 

Where a
Conditional Award Vests or where an Option has been exercised and Vested Shares
or ADSs have not yet been allotted or transferred to the Participant (or his
nominee), the Board may determine that, in substitution for his right to
acquire such number of Vested Shares or ADSs as the Board may decide (but in
full and final satisfaction of his right to acquire those Shares or ADSs), he
shall be paid by way of additional employment income a sum equal to the cash
equivalent (as defined in Rule 8.2) of that number of Shares or ADSs in
accordance with the following provisions of this Rule 8.

 

8.2                           Limitation on
the application of Rule 8.1

 

Rule 8.1
shall not apply in relation to an Award made to a Participant in any
jurisdiction where the presence of Rule 8.1 would cause:

 

(a)                                      the grant of the Award to be
unlawful or for it to fall outside any applicable securities law exclusion or
exemption; or

 

(b)                                     adverse tax or social security
contributions consequences for the Participant or any Group Member as
determined by the Board

 

provided that
this Rule 8.2 shall apply only if its application would prevent the
occurrence of a consequence referred to in (a) or (b) above.

 

8.3                           Cash
equivalent

 

For the
purpose of this Rule 8, the cash equivalent of a Share or ADS is:

 

(a)                                      in the case of a Conditional
Award, the market value of a Share or ADS on the day when the Award Vests;

 

(b)                                     in the case of an Option, the
market value of a Share or ADS on the day when the Option is exercised reduced
by the Option Price in respect of that Share or ADS.

 

12

 

Market
value on any day shall be determined as follows:

 

(i)                                         if on the day of Vesting or
exercise, Shares are quoted in the London Stock Exchange Daily Official List,
the middle-market quotation of a Share, as derived from that List, on that day;
or

 

(ii)                                      in the case of an Award
granted to a US Participant, if on the day of Vesting or exercise, ADSs are
quoted on the New York Stock Exchange, the closing price of an ADS on the
dealing day before that date; or

 

(iii)                                   if Shares or ADSs are not so
quoted, such value of a Share or ADS as the Board reasonably determines.

 

8.4                           Payment of cash equivalent

 

Subject to Rule 8.5
(Share alternative), as soon as
reasonably practicable after the Board has determined under Rule 8.1 that
a Participant shall be paid a sum in substitution for his right to acquire any
number of Vested Shares or ADSs:

 

(a)                                      the Company shall pay to him
or procure the payment to him of that sum in cash; and

 

(b)                                     if he has already paid the
Company for those Shares or ADSs, the Company shall return to him the amount so
paid by him.

 

8.5                           Share alternative

 

If the Board
so decides, the whole or any part of the sum payable under Rule 8.3 shall,
instead of being paid to the Participant in cash, be applied on his behalf:

 

(a)                                      in subscribing for Shares or
issuing ADSs at a price equal to the market value by reference to which the
cash equivalent is calculated; or

 

(b)                                     in purchasing such Shares or
ADSs; or

 

(c)                                      partly in one way and partly
in the other

 

and the
Company shall allot or transfer to him (or his nominee) or procure the transfer
to him (or his nominee) of the Shares so subscribed for, ADS so issued or
Shares or ADSs purchased.

 

8.6                           Deductions

 

There shall be
deducted from any payment under this Rule 8 such amounts (on account of
tax or similar liabilities) as may be required by law or as the Board may
reasonably consider to be necessary or desirable.

 

13

 

9.                                 LAPSE OF AWARDS

 

An
Award shall lapse:

 

(a)                                      in accordance with the Rules;
or

 

(b)                                     to the extent it does not Vest
under these Rules.

 

On the lapse
of all or any part of a Forfeitable Shares Award, the beneficial interest (and,
if appropriate, the legal interest) of the Forfeitable Shares in respect of
which such Award has lapsed shall be transferred for no (or nominal)
consideration to any person specified by the Board.

 

10.                           LEAVERS AND DECEASED PARTICIPANTS

 

10.1                     Deceased
Participants

 

If a
Participant dies at a time when he is a director or employee of a Group Member
before the Normal Vesting Date (or the next Normal Vesting Date where there is
more than one) then, subject to Rule 5.3 (Restrictions
on Vesting: regulatory and tax issues) and the remainder of this
Rule, his Award shall Vest on the date of cessation.

 

For the
purposes of this Rule, the Board shall determine the number of Shares or ADSs
which Vest by:

 

(i)                                         applying any Performance
Condition (unless the Board, in exceptional circumstances, decides otherwise)
and any condition imposed on the Vesting of Awards; and

 

(ii)                                      reducing the number of Shares
or ADSs pro rata to reflect any unexpired part of the period over which the
Award would otherwise Vest as at the time that the Participant ceases to be a
director or employee unless the Board, acting fairly and reasonably, decides
that the pro rata reduction in the number of Shares or ADSs is inappropriate in
any particular case when it shall increase the number of Shares or ADSs to such
higher number as it decides (provided that the number does not exceed the
number of Shares or ADSs determined under paragraph (i) above).

 

10.2                     Ill-health,
injury, disability, redundancy and transfer out of the Group

 

If a
Participant ceases to be a director or employee of a Group Member before the
Normal Vesting Date (or the next Normal Vesting Date where there is more than
one) by reason of:

 

(a)                                      ill-health, injury or
disability (evidenced to the satisfaction of his employer);

 

(b)                                     redundancy (within the meaning
of the Employment Rights Act 1996) or any overseas equivalent; or

 

(c)                                      his office or employment being
with either a company which ceases to be a Group Member or relating to a
business or part of a business which is transferred to a person who is not a
Group Member

 

14

 

subject to Rule 5.3
(Restrictions on Vesting: regulatory and tax
issues), Rule 11 (Takeovers
and other corporate events) and the remainder of this Rule, his
Award shall Vest on the date of cessation.

 

For the
purposes of this Rule, the Board shall determine the number of Shares or ADSs
which Vest by:

 

(i)                                         applying any Performance
Condition (unless the Board, in exceptional circumstances, decides otherwise),
any condition imposed on the Vesting of Awards and any other factors considered
by the Board to be relevant to reduce the number of Shares or ADSs which Vest;
and

 

(ii)                                      reducing the number of Shares
or ADSs pro rata to reflect any unexpired part of the period over which the
Award would otherwise Vest as at the time that the Participant ceases to be a
director or employee unless the Board, acting fairly and reasonably, decides
that the pro rata reduction in the number of Shares or ADSs is inappropriate in
any particular case when it shall increase the number of Shares or ADSs to such
higher number as it decides (provided that the number does not exceed the
number of Shares or ADSs determined under paragraph (i) above).

 

10.3                     Cessation of
employment in other circumstances

 

If a Participant
ceases to be a director or employee of a Group Member for any reason other than
those specified in Rule 10.1 (Deceased
Participants) and Rule 10.2 (Ill-health,
injury, disability, redundancy and transfer out of the Group) then
any Award held by him shall lapse immediately on such cessation unless the
Board, acting fairly and reasonably, decides that his Award shall Vest.  If the Board permits an Award to Vest,
Vesting shall, subject to Rule 5.3 (Restrictions
on Vesting: regulatory and tax issues), Rule 11 (Takeovers and other corporate events) and
the remainder of this Rule, occur on the date of cessation.

 

For the
purposes of this Rule, the Board shall determine the number of Shares or ADSs
which Vest by:

 

(i)                                         applying any Performance
Condition (unless the Board, in exceptional circumstances, decides otherwise),
any condition imposed on the Vesting of Awards and any other factors considered
by the Board to be relevant to reduce the number of Shares or ADSs which Vest;
and

 

(ii)                                      reducing the number of Shares
or ADSs pro rata to reflect any unexpired part of the period over which the
Award would otherwise Vest as at the time that the Participant ceases to be a
director or employee unless the Board, acting fairly and reasonably, decides
that the pro rata reduction in the number of Shares or ADSs is inappropriate in
any particular case when it shall increase the number of Shares or ADSs to such
higher number as it decides (provided that the number does not exceed the
number of Shares or ADSs determined under paragraph (i) above).

 

15

 

10.4                     Meaning of ceasing employment

 

A Participant
shall not be treated for the purposes of this Rule 10 as ceasing to be a
director or employee of a Group Member until such time as he is no longer a
director or employee of any Group Member. 
Any Participant who ceases to be such a director or employee before the
Vesting of his Award in circumstances where he retains a statutory right to
return to work then he shall be treated as not having ceased to be such a
director or employee until such time (if at all) as he ceases to have such a
right to return to work while not acting as an employee or director.

 

10.5                     Death
following cessation of employment

 

If a
Participant dies following cessation of employment in circumstances where his
Award did not lapse but it has not Vested by the time of his death, it shall
Vest immediately on his death to the extent determined by reference to the time
of cessation in accordance with Rule 10.1 or 10.2.

 

11.                           TAKEOVERS AND OTHER CORPORATE EVENTS

 

11.1                     General
offers

 

If any person
(or group of persons acting in concert):

 

(a)                                      obtains Control of the Company
as a result of making a general offer to acquire shares in the Company; or

 

(b)                                     having obtained Control of the
Company makes such an offer and such offer becomes unconditional in all
respects

 

the Board
shall within 7 days of becoming aware of that event notify every Participant of
it and, subject to Rule 11.4 (Internal reorganisations),
the following provisions shall apply:

 

(i)                                         subject to Rule 5.3 (Restrictions on Vesting: regulatory and tax issues),
all Awards shall Vest on the date of such notification if they have not then
Vested, provided that or to the extent that any Performance Condition is
satisfied on the occurrence of such an event, and Rule 11.5 (Reduction in number of Vested Shares)
shall apply; and

 

(ii)                                      any Option may, subject to Rule 7.1
(Restrictions on exercise) be
exercised within 1 month of the date of such notification, but to the extent
that an Option is not exercised within that period, that Option shall
(regardless of any other provision of the Plan) lapse at the end of that
period.

 

11.2                     Schemes of
arrangement and winding up

 

In the
event that:

 

(a)                                      a compromise or arrangement is
sanctioned by the Court under section 899 of the Companies Act 2006 in
connection with or for the purposes of a change in Control of the Company; or

 

(b)                                     the Company passes a
resolution for a voluntary winding up of the Company; or

 

16

 

(c)                                      an order is made for the
compulsory winding up of the Company

 

all Awards shall, subject to Rule 5.3
(Restrictions on Vesting: regulatory and tax
issues), and Rule 11.4 (Internal
reorganisations) Vest on the date of such event if they have not
then Vested, provided that or to the extent that any Performance Condition is
satisfied on the occurrence of such an event and Rule 11.5 (Reduction in number of Vested Shares)
shall apply.

 

If an event described in this Rule occurs
then an Option may, subject to Rule 7.1 (Restrictions
on exercise) and Rule 11.4 (Internal
reorganisations), be exercised within 1 month of such event, but to
the extent that the Option is not exercised within that period, it shall
(regardless of any other provision of the Plan) lapse at the end of that
period.

 

11.3                     Demerger and
similar events

 

If a demerger,
special dividend or other similar event (the “Relevant Event”) is proposed
which, in the opinion of the Board, would affect the market price of Shares to
a material extent, then the Board may, at its discretion, decide that the
following provisions will apply:

 

(a)                                      the Board shall, as soon as
reasonably practicable after deciding to apply these provisions, notify a
Participant that, subject to earlier lapse under Rule 10 (Leavers), his Award Vests provided that or
to the extent that any Performance Condition is satisfied on the occurrence of
such a Relevant Event and, if relevant, his Option may be exercised on such
terms as the Board may determine and during such period preceding the Relevant
Event or on the Relevant Event as the Board may determine;

 

(b)                                     if an Award Vests, or an
Option is exercised, conditional upon the Relevant Event and such event does
not occur then the conditional Vesting or exercise shall not be effective and
the Award shall continue to subsist; and

 

(c)                                      if the Board decides that an
Award Vests under this Rule 11.3 then the date of that Vesting shall be
the Early Vesting Date and the provisions of Rule 11.5 (Reduction in number of Vested Shares)
shall apply.

 

11.4                     Internal
reorganisations

 

In the event
that:

 

(a)                                      an offer (as referred to in Rule 11.1
(General offers)) is made or a
compromise or arrangement (as referred to in Rule 11.2(a) (Schemes of arrangement and winding up)) is
proposed which is expected to result in the Company becoming controlled by a
new company (the “New Company”); and

 

(b)                                     at least 75% of the shares in
the New Company will be held by substantially the same persons who immediately
before the offer or proposal was made were shareholders in the Company; and

 

(c)                                      the Board and the New Company
agree that this Rule should apply

 

17

 

then an Award
shall not Vest under Rule 11.1 or Rule 11.2 but shall be
automatically surrendered in consideration for the grant of a new award which
the Board determines is equivalent to the Award it replaces except that it will
be over shares in the New Company or some other company.

 

The Rules will
apply to any new award granted under this Rule 11.4 as if references to
Shares or ADSs were references to shares over which the new award is granted
and references to the Company were references to the company whose shares are
subject to the new award.

 

11.5                     Corporate
events: reduction in number of Vested Shares or ADSs

 

If an
Award Vests under any of Rules 11.1 to 11.3 (Corporate Events), the Board shall determine the number of
Vested Shares or ADSs of that Award by:

 

(a)                                      applying any Performance
Condition (unless the Board, in exceptional circumstances, decides otherwise)
and any other condition imposed on the Vesting of Awards; and

 

(b)                                     if the Board, acting fairly
and reasonably, decides the number of Shares or ADSs shall be reduced pro rota
to reflect any unexpired part of the period over which the Award would
otherwise Vest or on such other basis as the Board may reasonably decide.

 

If an Award
Vests under any of Rules 11.1 to 11.3 when the holder of that Award has
ceased to be a director or employee of a Group Member, then the number of
Shares or ADSs which Vest shall be determined under Rule 10.1, 10.2 or
10.3 (whichever is relevant) in precedence over this Rule.

 

12.                           ADJUSTMENT OF AWARDS

 

12.1                     General rule

 

In the event
of:

 

(a)                                      any variation of the share
capital of the Company; or

 

(b)                                     a demerger, special dividend
or other similar event which affects the market price of Shares or ADSs to a
material extent

 

the Board may
make such adjustments as it considers appropriate under Rule 12.2 (Method of adjustment).

 

12.2                     Method of adjustment

 

An adjustment
made under this Rule shall be to one or more of the following:

 

(a)                                      the number of Shares or ADSs
comprised in an Award;

 

(b)                                     subject to Rule 12.3 (Adjustment below nominal value), the
Option Price; and

 

(c)                                      where any Award has Vested or
Option has been exercised but no Shares or ADSs have been transferred or
allotted after such Vesting or exercise, the

 

18

 

number of
Shares or ADSs which may be so transferred or allotted and (if relevant) the
price at which they may be acquired.

 

12.3                     Adjustment
below nominal value

 

An adjustment
under Rule 12.2 (Method of adjustment)
may reduce the price at which Shares may be subscribed for on the exercise of
an Option to less than their nominal value, but only if and to the extent that
the Board is authorised:

 

(a)                                      to capitalise from the
reserves of the Company a sum equal to the amount by which the nominal value of
the Shares in respect of which the Option is exercised and which are to be
allotted after such exercise exceeds the price at which the Shares may be
subscribed for; and

 

(b)                                     to apply that sum in paying up
such amount on such Shares

 

so that on
exercise of any Option in respect of which such a reduction shall have been
made the Board shall capitalise that sum (if any) and apply it in paying up
that amount.

 

13.                           ALTERATIONS

 

13.1                     General rule on
alterations

 

Except as
described in Rule 13.2 (Shareholder approval),
and Rule 13.4 (Alterations to
disadvantage of Participants), the Board may at any time alter the
Plan or the terms of any Award granted under it.

 

13.2                     Shareholder approval

 

Except as
described in Rule 13.3 (Exceptions to
shareholder approval), no alteration to the advantage of an
individual to whom an Award has been or may be granted shall be made under Rule 13.1
(General rule on alternations)
to the provisions concerning:

 

(a)                                      eligibility;

 

(b)                                     the individual limits on
participation;

 

(c)                                      the overall limits on the
issue of Shares or the transfer of treasury Shares;

 

(d)                                     the basis for determining a
Participant’s entitlement to, and the terms of, Shares or ADSs or cash provided
under the Plan;

 

(e)                                      the adjustments that may be
made in the event of any variation of capital; and

 

(f)                                        the terms of this Rule 13.2

 

without the
prior approval by ordinary resolution of the members of the Company in general
meeting.

 

19

 

13.3                     Exceptions to
shareholder approval

 

Rule 13.2
(Shareholder approval) shall not
apply to:

 

(a)                                      any minor alteration to
benefit the administration of the Plan, to take account of a change in
legislation or to obtain or maintain favourable tax, exchange control or
regulatory treatment for Participants or any Group Member; or

 

(b)                                     any alteration relating to any
Performance Condition made under Rule 13.5.

 

13.4                     Alterations
to disadvantage of Participants

 

No alteration
to the material disadvantage of any Participant (other than to any Performance
Condition) shall be made under Rule 13.1 unless:

 

(a)                                      the Board shall have invited
every relevant Participant to indicate whether or not he approves the
alteration; and

 

(b)                                     the alteration is approved by
a majority of those Participants who have given such an indication.

 

14.                           MISCELLANEOUS

 

14.1                     Employment

 

The rights and
obligations of any individual under the terms of his office or employment with
any Group Member shall not be affected by his participation in the Plan or any
right which he may have to participate in it. 
An individual who participates in the Plan waives any and all rights to
compensation or damages in consequence of the termination of his office or
employment for any reason whatsoever (and regardless of whether such
termination is lawful or unlawful) insofar as those rights arise or may arise
from him ceasing to have rights under an Award as a result of such
termination.  Participation in the Plan
shall not confer a right to continued employment upon any individual who
participates in it.  The grant of any
Award does not imply that any further Award will be granted nor that a
Participant has any right to receive any further Award.

 

14.2                     Disputes

 

In the event
of any dispute or disagreement as to the interpretation of the Plan, or as to
any question or right arising from or relating to the Plan, the decision of the
Board shall be final and binding upon all persons.

 

The exercise
of any power or discretion by the Board shall not be open to question by any
person and a Participant or former Participant shall have no rights in relation
to the exercise of or omission to exercise any such power or discretion.

 

14.3                     Share rights

 

All Shares
allotted under the Plan shall rank equally in all respects with Shares then in
issue except for any rights attaching to such Shares by reference to a record
date before the date of the allotment.

 

20

 

Where Vested
Shares are transferred to Participants (or their nominee) or, in the case of
Forfeitable Shares, released from their restrictions under the Plan,
Participants will be entitled to all rights attaching to such Shares by
reference to a record date on or after the date of such transfer or release of
such restrictions.

 

14.4                     Notices

 

Any notice or
other communication under or in connection with the Plan may be given:

 

(a)                                      by personal delivery or by
post, in the case of a company to its registered office, and in the case of an
individual to his last known address, or, where he is a director or employee of
a Group Member, either to his last known address or to the address of the place
of business at which he performs the whole or substantially the whole of the
duties of his office or employment; or

 

(b)                                     in an electronic communication
to their usual business address or such other address for the time being
notified for that purpose to the person giving the notice; or

 

(c)                                      by such other method as the
Board determines.

 

14.5                     Third parties

 

No third party
has any rights under the Contracts (Rights of Third Parties) Act 1999 to
enforce any term of the Plan.

 

14.6                     Benefits not
pensionable

 

Benefits
provided under the Plan shall not be pensionable.

 

14.7                     Data
protection

 

Each
Participant consents to the collection, processing and transfer of his personal
data for any purpose relating to the operation of the Plan.  This includes:

 

(a)                                      providing personal data to any
Group Member and any third party such as trustees of any employee benefit
trust, administrators of the Plan, registrars, brokers and any of their
respective agents;

 

(b)                                     processing of personal data by
any such Group Member or third party;

 

(c)                                      transferring personal data to
a country outside the European Economic Area (including a country which does
not have data protection laws equivalent to those prevailing in the European
Economic Area); and

 

(d)                                     providing personal data to
potential purchasers of the Company, the Participant’s employer or the business
in which the Participant works.

 

21

 

14.8                     Governing law

 

The Plan and
all Awards shall be governed by and construed in accordance with the law of
England and Wales and the Courts of England and Wales have exclusive
jurisdiction to hear any dispute.

 

22

 

SCHEDULE 1 : GRANT OF A FORFEITABLE SHARES
AWARD

 

On or before
the grant of a Forfeitable Shares Award, each employee selected for such an
Award must enter into an agreement with the Company under the terms of which
the employee agrees both in respect of the Shares or ADSs comprised in the Award
at the Grant Date and any additional Shares or ADSs that may become subject to
the Award under Rule 3.4 (Treatment of
Dividends):

 

(a)                            to have full beneficial
ownership of the Shares or ADSs;

 

(b)                           unless the Board decides
otherwise to waive his right to all cash and scrip dividends on his Forfeitable
Shares until Vesting;

 

(c)                            that he will not assign,
transfer, charge or otherwise dispose of any Forfeitable Shares or any interest
in such Forfeitable Shares until Vesting save as otherwise required by the Rules;

 

(d)                           if required by the Board, to
enter into any elections under Part 7 of ITEPA and any election to
transfer, or any agreement to pay, secondary Class 1 National Insurance
contributions in relation to his Forfeitable Shares; and

 

(e)                            to sign any documentation to
give effect to the terms of the Forfeitable Shares Award.

 

The date of
such agreement shall be the Grant Date of the Forfeitable Shares Award.

 

On the Grant
Date (or as soon as practicable after the payment date of the relevant dividend
in the case of additional Shares or ADSs that are to become subject to the
Forfeitable Shares Award under Rule 3.4 (Treatment
of Dividends)) either the legal ownership of the Forfeitable Shares
shall be held on the Participant’s behalf by a nominee as chosen from time to
time by the Board or the Participant shall deposit the share certificate (or
any other document of title) relating to the Forfeitable Shares together with a
signed but otherwise uncompleted instrument of transfer with such person as the
Board may from time to time decide.

 

23

 

SCHEDULE 2 : CASH CONDITIONAL AWARDS

 

The Rules of
the Plan shall apply to a right (a “Cash
Conditional Award”) to receive a cash sum granted or to be granted
under this Schedule as if it was a Conditional Award, except as set out in this
Schedule.  Where there is any conflict
between the Rules and this Schedule, the terms of this Schedule shall
prevail.

 

1.                                 The Board may grant or procure
the grant of a Cash Conditional Award.

 

2.                                 Each Cash Conditional Award
shall relate to a given number of notional Shares or ADSs.

 

3.                                 On the Vesting of the Cash
Conditional Award, the holder of that Award shall be entitled to a cash sum
which shall be equal to the “Cash Value”
of the notional Vested Shares or ADSs, where the Cash Value of a notional Share
or ADS is the market value of a Share or ADS on the date of Vesting of the Cash
Conditional Award.  For the purposes of
this Schedule, the market value of a Share or ADS on any day shall be determined
in accordance with Rule 8.3 (Cash equivalent).

 

4.                                 The cash sum payable under
paragraph 3 above shall be paid by the employer of the Participant as soon as
practicable after the Vesting of the Cash Conditional Award, net of any
deductions (on account of tax or similar liabilities) as may be required by
law.

 

5.                                 For the avoidance of doubt, a
Cash Conditional Award shall not confer any right on the holder of such an
Award to receive Shares or ADSs or any interest in Shares or ADSs.

 

24

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