Document:

Exhibit 4.7

 

Dated 14 February 2006

 

    DIAGEO
PLC                                                                                                                (1)

NICHOLAS
ROSE                                                                                                 (2)

 

 

 

SERVICE AGREEMENT

 

Contents

	
  

  	
   

  	
  Clause

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  Definitions and interpretation

  	
   

  	
  3

  
	
  2

  	
   

  	
  Appointment

  	
   

  	
  4

  
	
  3

  	
   

  	
  Duration of the Employment

  	
   

  	
  4

  
	
  4

  	
   

  	
  Scope of the Employment

  	
   

  	
  6

  
	
  5

  	
   

  	
  Hours of work

  	
   

  	
  8

  
	
  6

  	
   

  	
  Place of work

  	
   

  	
  8

  
	
  7

  	
   

  	
  Remuneration

  	
   

  	
  8

  
	
  8

  	
   

  	
  Car

  	
   

  	
  9

  
	
  9

  	
   

  	
  Expenses

  	
   

  	
  9

  
	
  10

  	
   

  	
  Holidays

  	
   

  	
  9

  
	
  11

  	
   

  	
  Sickness benefits

  	
   

  	
  10

  
	
  12

  	
   

  	
  Pension

  	
   

  	
  11

  
	
  13

  	
   

  	
  Other Benefits

  	
   

  	
  11

  
	
  14

  	
   

  	
  Restrictions during the Employment

  	
   

  	
  12

  
	
  15

  	
   

  	
  Confidential information and company documents

  	
   

  	
  12

  
	
  16

  	
   

  	
  Inventions and other intellectual property

  	
   

  	
  13

  
	
  17

  	
   

  	
  Termination

  	
   

  	
  14

  
	
  18

  	
   

  	
  Restrictive covenants

  	
   

  	
  15

  
	
  19

  	
   

  	
  Disciplinary and grievance procedures

  	
   

  	
  17

  
	
  20

  	
   

  	
  Notices

  	
   

  	
  17

  
	
  21

  	
   

  	
  Former contracts of employment

  	
   

  	
  18

  
	
  22

  	
   

  	
  Choice of law and submission to jurisdiction

  	
   

  	
  18

  
	
  23

  	
   

  	
  General

  	
   

  	
  18

  

 

 2
 

 

This Agreement is made on 14 February 2006

Between

(1)                                  Diageo Plc (registered in England and Wales under number 23307) whose registered
office is at 8 Henrietta Place, London, W1G 0NB (Company);
and

(2)                                  Nicholas Rose of Blackhall Barns, 1 Woodland Rise, Sevenoaks, TN15 0HZ (Executive).

It is agreed

1                                         Definitions and interpretation

1.1                                 In this Agreement unless the context otherwise requires the following
expressions have the following meanings:

Board means the board
of directors for the time being of the Company, any authorised director or any
committee of directors for the time being

Chairman means the Chairman of the Board

Confidential Information means details of suppliers and their terms of business, details of
customers and their requirements, the prices charged to and terms of business
with customers, marketing plans and sales forecasts, financial information,
results and forecasts (save to the extent that these are included in published audited
accounts), any proposals relating to the acquisition or disposal of a company
or business or any part thereof or to any proposed expansion or contraction of
activities, details of employees and officers and of the remuneration and other
benefits paid to them, trade secrets, information relating to research
activities, inventions, secret processes, designs, formulae and product lines,
any information which is treated as confidential or which the Executive is told
or ought reasonably to know is confidential and any information which has been
given to the Company or any Group Company in confidence by customers, suppliers
or other persons

Employment means the Executive’s employment under this Agreement

ERA means the
Employment Rights Act 1996 as amended

Group means the
Company and the Group Companies

Group Company means any company which is for the time being a subsidiary or holding
company of the Company and any subsidiary of any such holding company and for
the purposes of this Agreement the terms subsidiary and holding company shall have the meanings ascribed to them by
sections 736 and 736A Companies Act 1985 (and Group
Companies shall be interpreted accordingly)

Intellectual Property means all patents, registered designs, trade marks and service marks (whether
registered or not and including any applications for the foregoing),
copyrights, design rights, semiconductor topography rights, database rights and
all other intellectual property and similar proprietary rights subsisting in
any part of the world (whether or not capable of registration) and including
(without limitation) all such rights in materials, works, prototypes,
inventions, discoveries, techniques, computer programs, source codes, data,
technical, commercial or confidential information, trading, business or brand
names, goodwill or the style of presentation of the goods or services or any
improvement of any of the foregoing and the right to apply for registration or
protection of any of them and in existing applications for the protection of any
of the above

Normal Retirement Date means the Executive’s 62nd birthday

Pension Scheme means the Diageo Pension Scheme

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Remuneration Committee means the Remuneration Committee of the Company from time to time

Salary means the salary referred to in clause 7.1

Sensitive Data means personal data consisting of information as to racial or ethnic
origin; political opinions; religious beliefs or other beliefs of a similar
nature; membership of a trade union (within the meaning of the Trade Union and
Labour Relations (Consolidation) Act 1992); physical or mental health or
condition; sexual life; the commission or alleged commission of any offence or
any proceedings for any offence committed or alleged to have been committed,
including the disposal of such proceedings or the sentence of any court in such
proceedings

Termination Date means the date of the termination of the Employment or, where the
Company exercises its rights under clause 3.7 to require the Executive to
remain at home, the last day on which the Executive was required to work

1.2                                 References to clauses and schedules are unless otherwise stated to
clauses of and schedules to this Agreement.

1.3                                 The headings to the clauses are for convenience only and shall not
affect the construction or interpretation of this Agreement.

2                                         Appointment

2.1                                 The Company appoints the Executive and the Executive agrees to act as
Chief Financial Officer of the Company or in such other capacity of a like
status as the Company from time to time reasonably directs on the terms of this
Agreement.

3                                         Duration of the Employment

3.1                                 The Employment under this Agreement shall commence on [insert date] and,
subject to the provisions of this Agreement, shall continue unless and until
terminated by the Company giving to the Executive not less than 12 months’
notice in writing or by the Executive giving to the Company not less than
6 months’ notice in writing at any time. 
In circumstances in which the Company has served notice, it shall not
require the Executive to work for more than six months during the notice period
and in respect of any such period worked, the Executive will continue to
receive full remuneration and benefits (including bonus entitlement).

3.2                                 Notwithstanding clause 3.1, the Employment shall automatically
terminate when the Executive reaches the Normal Retirement Date.

3.3                                  (a)                                 The Company shall have the discretion to terminate the Employment
lawfully without any notice or on notice less than that required by clause 3.1,
by paying to the Executive a sum equal to 200% (two hundred per cent) of the
Salary in respect of that part of the period of notice in clause 3.1 which
the Company has not given to the Executive (less any appropriate tax and other
statutory deductions) in circumstances not falling within clause 3.3(b).  It is recognised that this sum is deemed to
represent the salary and all other contractual benefits which the Executive
would have received if the period of notice in clause 3.1 which the Company has
not given to the Executive had in fact been given to the Executive.

(b)                                 The Company shall have the discretion to terminate the Employment
lawfully without the notice required by clause 3.1, by paying to the
Executive a sum equal to 100% (one hundred per cent) of the Salary in respect
of the 12 month period of notice required from the Company under clause 3.1
(less any appropriate tax and other statutory deductions) in the event that the
Executive has demonstrated, in the reasonable opinion of the Board, a failure
to perform his duties competently provided always that the Company has given
the Executive prior written notice of such failure specifying in reasonable
detail the basis of the alleged failure and the steps required to remedy the
failure within a reasonable period and he has failed to do so.  Any payment under this clause 3.3(b) shall be
made within 28 days of the termination of the Employment.

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(c)                                  For the avoidance of doubt, the Company’s right to pay in lieu of notice
under this clause 3.3 applies to any notice of termination, including
circumstances in which the Company elects to pay in lieu of notice (or part of
the notice) served by the Executive to terminate the Employment.

(d)                                 In the event that the Company terminates the Employment other than in
accordance with clause 3.1, clause 3.3, clause 3.6 or clause 17 (including, for
the avoidance of doubt, circumstances where the Company gives notice to
terminate the Employment under clause 3.1, has required the Executive to work
for up to six months during the notice period and has not elected to pay in
lieu of the balance of the notice period under clause 3.3), the Company shall
pay to the Executive the amount to which he would have been entitled under
clause 3.3 above had the Company exercised its discretion to terminate the
Employment under that clause.  It is
recognised that the provisions set out in this clause 3.3(d) represent
pre-agreed liquidated damages and reflect a genuine pre-estimate of the loss
that would otherwise be suffered by the Executive and that the Executive is not
required to mitigate his loss in relation to these pre-agreed liquidated
damages.    Any amount payable under this
clause 3.3(d) shall be made in the same manner as the relevant payment under
clause 3.3 (including, for the avoidance of doubt, the provisions of clause
3.4).

(e)                                  This clause 3.3 is without prejudice to the Company’s rights under
clause 17.1.

3.4                                 The Company may at its absolute discretion lawfully make the payment
under clause 3.3(a) by way of:

(a)                                  half the payment being paid within 28 days of the termination of the Employment;
and

(b)                                 the remaining half of the payment being paid in 12 equal monthly
instalments which shall commence in the month following the expiry of that part
of the period of notice in clause 3.1 in respect of which the Company is
paying in lieu, provided that, at the absolute discretion of the Company, such
monthly instalments shall:

(i)                                     cease to be payable upon the Executive commencing new full-time
employment for which his remuneration will, in the reasonable opinion of the
Company, be greater than or broadly comparable with his remuneration under this
Agreement;

(ii)                                  cease to be payable in full but continue to be payable in part upon the
Executive commencing new employment or engagement for which his remuneration
will, in the reasonable opinion of the Company, be significantly lower than his
remuneration under this Agreement in which circumstances the instalments shall
be reduced by any earnings (to the extent that such earnings exceed the
Threshold) payable to the Executive as a result of such new employment during
the period in respect of which he is being paid in lieu.  For the purposes of this sub-clause,
Threshold shall mean an annualised sum of £150,000 (such sum to be increased by
the same percentage increase to Salary as takes place between the date of this
Agreement and the Termination Date), such annualised amount to be pro rated to
reflect the duration of the part of the period of notice in clause 3.1 in
respect of which the Company is paying in lieu. 
For the avoidance of doubt, Threshold shall not include income
associated with the Executive’s one standard non executive appointment held
prior to the Termination Date which income shall be excluded from the
calculation of the Threshold.

3.5                                 Should the Company exercise its discretion to terminate the Employment
pursuant to clause 3.3, all the Executive’s post termination obligations
contained in this Agreement, including in particular the restrictive covenants
in clause 18, shall remain in full force and effect.

3.6                                  (a)                                 If at any time within 12 months of a Corporate Change either the Company
terminates the 

Employment other than pursuant to clause 17.1 and without any notice or on
notice less than that required by clause 3.1 or the Executive resigns for Good
Reason (in either event as a consequence of the Corporate Change),, the Company
shall be obliged to terminate the Employment lawfully by making a payment in
lieu of notice in accordance with clause 3.3 save

 5
 

 

that, in the
event that such payment is made under clause 3.3(a), it is agreed that it shall
be paid as a single lump sum payment within 28 days of the termination of the
Employment.  For the avoidance of doubt,
in the event that the Executive resigns for Good Reason in accordance with this
clause 3.6(a), this shall be treated as a termination of the Employment by the
Company for the purposes of calculating the notice period and the relevant
payment in lieu of notice under this clause 3.6(a).  This clause 3.6(a) shall not apply in the
event that the Executive gives notice to terminate the Employment other than
for Good Reason.

(b)                                 For the purposes of clause 3.6(a)
above Corporate Change means:

(i)                                     the acquisition by the Company or any Group Company of shares in any
other company or any other assets or business which, in the opinion of the Remuneration
Committee (whose determination in respect of such matters shall be final and
binding), constitutes a major acquisition or merger; or

(ii)                                  the Company coming under the control of any person or persons acting in
concert (as those terms are defined for the time being in the City Code on
Takeovers and Mergers) not having control of the Company at the date of this
Agreement.

(c)                                  For the purposes of clause 3.6(a), a Good Reason shall mean
circumstances in which the Executive resigns due to (a) a material diminution
in his status and/or responsibilities and/or (b) a requirement for the
Executive to be located permanently outside the United Kingdom and Eire (which
shall include a requirement for long term extensive commuting to such a
location other than during the six months immediately following the Corporate
Change).

3.7                                 At any time during any period of notice of termination served in
accordance hereunder by the Executive (other than in circumstances in which the
Executive resigns for Good Reason under clause 3.6(a)), the Company shall have
the right at its absolute discretion to assign no, reduced or alternative
duties to the Executive (provided that any such duties shall be consistent with
the Executive’s status) and shall be entitled to require the Executive to act
at the direction of the Company including the right to exclude him from its
premises, and/or remove him from office as a director of the Company and from
any or all offices held by him in the Company or in any other Group Company
(including if appropriate the office of trustee of any of the pension schemes
of the Group) and/or prevent the Executive from discussing its affairs with the
Company’s or any other Group Company’s employees, agents, clients or
customers.  The Executive agrees that during
any period of notice given by either party, he will give the Company or such
person nominated by it all assistance and co-operation in effecting a smooth
and orderly handover of his duties as the Company may require.   If the Company shall exercise its right
under this clause, the Executive’s entitlement to Salary and other contractual
benefits shall continue, subject always to the rules of any relevant scheme or
policy relating to such benefits.  For
the avoidance of doubt, at all times during any period of notice of termination
served in accordance hereunder, the Executive shall continue to be bound by the
same obligations as were owed to the Company prior to the commencement of the
notice period.

3.8                                 For the purposes of the ERA the Executive’s period of continuous
employment began on 15 June 1992.

3.9                                 The Executive represents and warrants that he is not bound by or subject
to any court order, agreement, arrangement or undertaking which in any way
restricts or prohibits him from entering into this Agreement or from performing
his duties under it.

4                                         Scope of the Employment

4.1                                 During the Employment the Executive shall:

(a)                                  devote the whole of his time, attention and skill to the business and
affairs of the Company during the hours of work described in clause 5
except during holidays and periods of absence due to ill health;

(b)                                 faithfully, competently and diligently perform such duties and exercise
such powers consistent with his position as may from time to time be assigned
to or vested in him by the Board. Such

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powers and duties
may exceptionally fall outside the normal ambit of the Executive’s position but
will not be duties inappropriate to the Executive’s status;

(c)                                  use his best endeavours to promote and maintain the interests and
reputation of the Group;

(d)                                 report to the Chief Executive for the time being of the Board (or such
other person being a member of the Board as the Board may from time to time
nominate and notify the Executive);

(e)                                  obey the reasonable and lawful directions of the Board;

(f)                                    comply with all the Company’s rules, regulations, policies and
procedures from time to time in force;

(g)                                 travel to such places (within or outside the United Kingdom) in such
manner and on such occasions as the Company may from time to time reasonably
determine;

(h)                                 refrain from doing or permitting any matter which causes any regulatory
authority in the United Kingdom or elsewhere to withdraw permission or in any
way prevent the Company from employing or otherwise using the services of the
Executive;

(i)                                     not at any time without the prior consent of the Board incur on behalf
of the Company or any Group Company any capital expenditure in excess of such
sum as may be authorised from time to time by the Board or enter into on behalf
of the Company or any Group Company any commitment, contract or arrangement
which is otherwise than in the normal course of business or is outside the
scope of his normal duties or is of an unusual or onerous or long term nature;

(j)                                     not without the prior consent of the Board seek or accept from any
actual or prospective customer, controller or supplier of the Group any gift,
gratuity or benefit which breaches the Company’s Code of Conduct and, in
particular, the provisions of that Code relating to Acceptance of Entertainment
and Gifts.  In case of doubt, the
Executive shall consult the Board in relation to these matters; and

(k)                                  keep the Board at all times promptly and fully informed (in writing if
so requested) of his conduct of the business of the Company and any Group
Company and provide such explanations in connection with it as the Board may
require.

4.2                                 The Company shall be entitled at any time to require the Executive to
perform duties consistent with his role and status not only for the Company but
also for any Group Company including, if so required, acting as a director of
any Group Company.  The Company may at
its sole discretion transfer this Agreement to any Group Company at any time.

4.3                                 Notwithstanding clause 4.1, the Executive shall be entitled to take
up such non-executive appointments as are approved by the Board from time to
time (such approval not to be unreasonably withheld) but only to the extent
that the discharge of his duties under this Agreement is not impaired as a
result.

4.4                                 For the purposes of the Data Protection Act 1998, the Executive consents
to the Company’s processing of personal data, including Sensitive Data, of
which the Executive is the subject details of which are specified in the
Company’s Data Privacy Policy.  In
particular:

(a)                                  The Executive agrees that personal data relating to the Executive which
has been or is in the future obtained by the Group may be held and processed by
the Group either by computer or manually for any purpose relating to the
administration, management and operation of the Executive’s employment, or in
relation to the Group’s legal obligations or business needs.

(b)                                 The Executive hereby agrees that Sensitive Data concerning the Executive
which have been or is in the future obtained by the Group may also be held and
processed as above for the purposes of keeping under review equality of
opportunity and for ensuring the Company’s compliance with any legal
obligations.

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(c)                                  Due to the multinational nature of the Group’s business, it may be
necessary for the Group’s overseas offices to have access to information held
about the Executive in the UK by the Group. 
However, it is only intended that information about the Executive will
be used by the Group’s overseas offices for the purposes of enabling the Group
to deal with personnel issues connected with the Executive’s employment,
including advising relevant statutory authorities in order to obtain a work
permit or visa or assisting in the Executive’s secondment to an overseas office
for payroll purposes.  The Executive
agrees that the Company may, where appropriate, transfer personal information
about the Executive to the Group’s overseas offices.

4.5                                 The Company has implemented a Global Computer Usage, Email and Internet
Policy, Alcohol Policy, Drugs/Solvent Abuse and Dependency Policy, Expenses
Policy and Mobile Phones Policy which the
Executive is obliged to comply with at all times during the Executive’s
employment.  In particular, the Executive’s
attention is drawn to the sections of the Global Computer Usage, Email and
Internet  Policy which indicate that the
Company may from time to time monitor the Executive’s use of its communication
systems, namely its computer systems and telephones.  The Executive acknowledges that the Company
has a legitimate interest in carrying out this monitoring and that, by signing
this Agreement, the Executive consents to it.

5                                         Hours of work

5.1                                 The normal business hours of the Company are 9.00am to 5.00pm,  Monday to Friday.  However, the Executive shall be required to
work such hours as are necessary to fulfil his duties under this
Agreement.  No payment will be made for
any additional hours worked by the Executive.

5.2                                 The Executive recognises that on account of his autonomous decision
taking powers, the duration of his working time is not measured or
predetermined and therefore he falls within the exemption set out in Regulation
20 of the Working Time Regulations 1998 (“the Regulations”) and is thereby
excluded from such Regulations as are referred to in Regulation 20.  Notwithstanding the understanding of the
parties that the Executive is an employee in respect of whom Regulation 20
applies, the Executive agrees that, if the understanding of the parties is
incorrect, he hereby opts out of the 48 hour week limit in Regulation 4, and
that if he wishes to withdraw that opt-out, he will give 3 months’ notice in
writing to that effect.

6                                         Place of work

The Executive’s place of work will initially be the
Company’s offices at 8 Henrietta Place, London, W1G 0NB  but the Company may require the Executive to
work at any other location for such periods as the Company may from time to
time require.

7                                         Remuneration

7.1                                 The Company shall pay to the Executive the Salary at the rate of
£570,000 per annum, on or about the 27th day of each calendar month by credit
transfer to his bank account payable by equal monthly instalments in arrears
(or such other sum as may from time to time be agreed).  The rate of Salary will normally be reviewed
annually on 1st October.

7.2                                 In addition to his Salary, the Executive will be eligible to participate
in such of the following incentive schemes as exist from time to time for
senior executives of the Company, subject always to their respective rules:

 (a)                               Diageo Annual Incentive Plan;

(b)                                 Diageo Senior Executive Share Option Plan;

(c)                                  Diageo Long Term Incentive Plan (The TSR Plan); and/or

(d)                                 Diageo 2001 Share Incentive Plan and Diageo UK Sharesave Scheme 2000.

 8
 

 

The Executive’s participation in such plans and
schemes is at the discretion of the Company.  
If the Company shall make a payment or grant an award under such plans
and/or schemes in any one year, this shall not give rise to a contractual
entitlement to a payment or award in future years.  Further, the Company may at its discretion
reduce the Executive’s participation in the incentive schemes at (b) and (c)
above in the event that he fails to satisfy the minimum shareholding
requirement (based on his salary and length of service) applicable to him which
will be notified to him from time to time.

Without prejudice to the foregoing, the Executive will
be considered (at the sole discretion of the Company) for a bonus in respect of
the then current bonus year in the event that the Employment is terminated by
the Company pursuant to clause 3.1, clause 3.3 and/or clause 3.6.

7.3                                 The Salary shall be inclusive of any fees to which the Executive may be
entitled as a director of the Company or any Group Company.  The Executive agrees to forthwith pay to the
Company or procure that the Company is paid all such fees received by him.

7.4                                 Payment of the Salary to the Executive shall be made either by the
Company or by a Group Company and, if by more than one company, in such
proportions as the Board may from time to time think fit.

7.5                                 The Company shall be entitled to deduct from any sum due to the
Executive under the terms of this Agreement any monies which are owed by the
Executive to the Company.

8                                         Car

8.1                                 (a)                                     Subject to his remaining legally qualified and fit to drive, the Company
shall provide the Executive with a car or cars of a size and type in accordance
with the Company’s car policy as published and amended from time to time.

(b)                                      The Company shall tax and comprehensively insure the car or cars and pay
or reimburse, as appropriate, against receipts or other appropriate evidence as
the Company may require the costs of running, servicing and repairing the car
or cars including all petrol purchased for the main car (but not the second
car) in the United Kingdom.  Any other
running expenses relating to private use of the car or cars shall be the
Executive’s responsibility.  This would
include, for example and not exclusively, parking fines, tolls and car wash
charges.

8.2                                 As an alternative to clause 8.1, the Executive may receive a car
allowance of £16,150 per annum subject to statutory deductions, payable in
equal monthly instalments in arrears. 
This allowance will not increase the Executive’s salary for the purposes
of the pension scheme or otherwise.

8.3                                 If the Executive shall be convicted of any offence under the Road
Traffic Acts or become involved in any accident involving the car, he shall
immediately notify the Chief Executive and supply such information in
connection with such conviction or accident as the Chief Executive may request.

8.4                                 The Executive shall use the car or cars only in accordance with the
Company rules from time to time relating to such use and shall not do anything
which would or might void or prejudice any policy of insurance taken out by the
Company in respect of the car or cars.

8.5                                 The Executive shall ensure that at all times when the car or cars are
driven on the road it or they are in the state and condition required by law
and that if so required a current test certificate is in force relating to it.

8.6                                 In order to assist him in the performance of his duties, the Company
shall provide the Executive with the use of a chauffeur and a car as allocated
from time to time from the Company’s car pool.

9                                         Expenses

9.1                                 The Company shall reimburse the Executive in respect of all reasonable
expenses wholly, exclusively and necessarily incurred by him in the proper
performance of his duties, subject to his providing such receipts or other
appropriate evidence as the Company may require.

9.2                                 The Executive will be issued with a company credit card on condition
that he:

 9
 

 

 

(a)                                  takes good care of such card and immediately reports any loss of it to
the Company;

(b)                                 uses the card only for the purposes of the Company’s business or the
business of the Group in accordance with any applicable Company policy; and

(c)                                  returns the card immediately to the Company on request.

10                                  Holidays

10.1                           The Executive shall be entitled, in addition to all Bank and Public
holidays normally observed in England, to 30 working days’ paid holiday in
each holiday year (being the period from 1 January to 31 December).

10.2                           In the respective holiday years in which the Employment commences or
terminates, the Executive’s entitlement to holiday shall accrue on a pro rata
basis for each completed calendar month of service during the relevant year.

10.3                           If, on the termination of the Employment, the Executive has exceeded his
accrued holiday entitlement, the value of such excess, calculated by reference
to clause 10.2 and the Salary, may be deducted by the Company from any
sums due to him.  If the Executive has
any unused holiday entitlement, the Company shall at its discretion either
require the Executive to take such unused holiday during any notice period or
make a payment to him in lieu of it (calculated in accordance with this
clause 10.3), provided always that if the Employment is terminated
pursuant to clause 17.1 then, subject to the Regulations, the Executive shall
not be entitled to any such payment.  For
these purposes, salary in respect of one day’s holiday entitlement shall be
calculated as 1/261 of Salary.

10.4                           Holiday entitlement for one holiday year cannot be carried forward from
one year to the next and failure to take holiday entitlement in the appropriate
holiday year will lead to forfeiture of any accrued holiday not taken without
any right to payment in lieu of it provided always that any days of holiday not
taken at the Company’s written request in one year may be carried forward to
the next year.

11                                  Sickness benefits

11.1                           If the Executive is absent from his duties as a result of sickness or
injury:-

(a)                                  for a period of 6 days or less, he will on his return to work on
request, complete and produce a self-certificate;

(b)                                 for a period of 7 days or more he will, on request, produce medical
certificates;

to the Company in respect of such absence.

11.2                           Subject to clauses 3 and 17, the Company shall continue to pay the
Salary for the first 12 months’ absence on medical grounds in any one
continuous period of absence (or two or more linked periods as determined by
the Social Security Contributions and Benefits Act 1992, as amended from time
to time), provided that the Executive shall from time to time if required:

(a)                                  supply the Company with medical certificates covering any period of
sickness or incapacity exceeding 6 days (including weekends); and

(b)                               undergo at the Company’s expense, by a doctor appointed by the Company,
any medical examination and the Executive hereby authorises such doctor to
disclose to, and discuss with the Company and its medical advisers, the results
of such examinations.

11.3                           Payment in respect of any other or further period of absence shall be at
the Company’s discretion.

11.4                           Any payment to the Executive pursuant to clause 11.2 shall be
subject to set off by the Company in respect of any Statutory Sick Pay and any
Social Security Sickness Benefit or other benefits to which the Executive may
be entitled.

 

 10

 

11.5                           Subject to clause 11.4, when all sick pay entitlement pursuant to
clause 11.2 has been exhausted, no further salary will be payable by the
Company to the Executive until the Executive has returned to active service of
the Company.  In such circumstances,
provided the Company is satisfied that the Executive is not fit to return to
work, the Company will at the request of the Executive apply to the Trustees of
the Pension Plan (“Trustees”) for an ill health early retirement pension for
the Executive and such application shall be dealt with subject to and in
accordance with the rules of the Pension Scheme.  In this regard, the Executive will undergo
such medical examinations and attend such meetings with the Company’s
Occupational Health Department as may be required by the Company and/or the
Trustees.

11.6                           If the Executive’s absence shall be occasioned by the actionable
negligence of a third party in respect of which damages are recoverable, then
the Executive shall:

(a)                                  notify the Company immediately of all the relevant circumstances and of
any claim, compromise, settlement or judgment made or awarded in connection
with it;

(b)                                 give to the Company such information concerning the above matters as the
Company may reasonably require; and

(c)                                  if the Company so requires, refund to the Company any amount received by
him from any such third party provided that the refund shall be no more than
the amount which he has recovered in respect of remuneration.

12                                  Pension

12.1                           During the Employment the Executive shall be eligible for membership of
the Pension Scheme on the basis of benefits under the Senior Executive Tier SE
Section of the Pension Scheme which provide for enhanced pension accrual.  The Executive will be required to make
contributions to the Pension Scheme with effect from April 2006 in accordance
with the rules of the Pension Scheme from time to time.  The Executive’s membership of and pension
benefits under the Pension Scheme will be subject always to the rules of the
Pension Scheme.  Such rules may be amended
from time to time.

12.2                           To the extent that the accrual or value of the Executive’s benefits
under the Pension Scheme:

(a)                                  Is limited by Inland Revenue requirements prevailing until 5 April
2006;or

(b)                                 After 5 April 2006 would exceed the Executive’s individual lifetime
allowance, including relevant enhancement factors (as set out in Part 4,
Chapter 5 of the Finance Act 2004),

the excess will be provided through the Guinness
Unapproved Pension Scheme (“the Unapproved Scheme”) subject to the rules of the
Pension Scheme and the Unapproved Scheme as amended from time to time.  The Executive will be responsible for
the payment of any taxes or charges which may arise in respect of his
benefits under the Pension Scheme and the Unapproved Scheme.  The
Executive agrees to any amendments to the Pension Scheme and the
Unapproved Scheme designed to effect the terms of this clause 12.2.

12.3                           The Pension Scheme is a contracted-out scheme for the purposes of the
Pension Schemes Act 1993.

13                                  Other Benefits

13.1                           During the Employment the Executive shall:

(a)                                  participate in such personal accident insurance and medical expenses
insurance schemes (such participation to include medical expenses cover in
respect of his spouse and dependent children under the age of 18) at such level
as the Company shall (in its absolute discretion) from time to time maintain
for the benefit of the Executive;

(b)                                 be provided with life insurance cover under the Pension Scheme

 11
 

 

 

subject in each case, to the insurer accepting the
Executive for cover under the relevant policy and at normal rates and subject
always to their terms and conditions from time to time in force and provided
always that the provision of such benefits is without prejudice to the Company’s
right at its absolute discretion to terminate the Employment at any time in
accordance with clauses 3 and 17.

13.2                           In accordance with Company policy on medical examination, the Executive
will be entitled to a regular medical examination and test by a medical
practitioner nominated by the Company.

13.3                           The Company will pay for the Executive to receive tax and financial
planning advice from an adviser approved by the Company, with such level of
benefits as the Company shall in its absolute discretion decide.  If the Executive is employed for part of a
calendar year, he will receive a pro rated entitlement.

13.4                           The Executive will be provided with a taxable product allowance not
exceeding £1,250 (including VAT) per annum. 
If the Executive is employed for part of a full calendar year, he will
receive a pro rated allowance.

13.5                           The Company shall pay on the Executive’s behalf the annual subscription
fees for one professional body relevant to the Employment

14                                  Restrictions during the Employment

14.1                           During the Employment the Executive shall not directly or indirectly be
employed, engaged, concerned or interested:

in any activity which the Board reasonably considers
may be, or become, harmful to the interests of the Company or of any Group
Company or which might reasonably be considered to interfere with the
performance of the Executive’s duties under this Agreement.

14.2                           Clause 14.1 shall not apply:

(a)                                  to the Executive holding (directly or through nominees) investments
listed on the Official List of London Stock Exchange plc or in respect of which
dealing takes place in the Alternative Investment Market or any recognised
stock exchange as long as he does not hold more than 3 per cent of the
issued shares or other securities of any class of any one company; or

(b)                                 to any act undertaken by the Executive with the prior written consent of
the Board; or

(c)                                  to any interest permitted by clause 4.3.

14.3                           The Executive shall comply with every rule of law (including but not
limited to the insider dealing provisions contained in Part V of the Criminal
Justice Act 1993), the UK Listing Authority’s listing rules’ Model Code for
transactions in securities by directors of listed companies, certain employees
and persons connected with them and every regulation of the Company for the
time being in force in relation to dealings in shares or other securities of
the Company or any Group Company.  Under
Rule 6 of the Model Code, the person to whom notice should be given and from
whom acknowledgement must be received before the Executive may deal in
securities shall be the Company Secretary of the Company from time to time or
such other person as shall be notified to the Executive.  The Executive also acknowledges that under
the provisions of the Model Code the Executive must seek to ensure compliance
with the Model Code by persons connected with the Executive (within the meaning
of section 346 of the Companies Act 1985) including, without limitation, the
Executive’s spouse and dependent children, and by investment managers acting on
the Executive’s behalf or on behalf of connected persons.  The Executive undertakes to procure that
dealings by or on behalf of such persons are in compliance with the Model Code.

15                                  Confidential information and company documents

15.1                           The Executive shall neither during the Employment (except in the proper
performance of his duties or for the purpose of obtaining legal, accountancy or
pension advice or with the express written consent

 12
 

 

of the Board) nor
at any time (without limit) after the termination of the Employment except in
compliance with an order of a competent court, the Inland Revenue or any
regulatory authority:

(a)                                  divulge or communicate to any person, company, business entity or other
organisation;

(b)                                 use for his own purposes or for any purposes other than those of the
Company or any Group Company; or

(c)                                  through any failure to exercise due care and diligence, permit or cause
any unauthorised disclosure of

any Confidential Information.  These restrictions shall cease to apply to
any information which shall become available to the public generally otherwise
than through any breach by the Executive of the provisions of this Agreement or
other default of the Executive.

15.2                           The Executive acknowledges that all books, notes, memoranda, records,
lists of customers and suppliers and employees, correspondence, documents,
computer and other discs and tapes, data listings, codes, designs and drawings
and other documents and material whatsoever (whether made or created by the
Executive or otherwise) relating to the business of the Company or any Group Company
(and any copies of the same):

(a)                                  shall be and remain the property of the Company or the relevant Group
Company; and

(b)                                 shall be handed over by the Executive to the Company or to the relevant
Group Company on demand and in any event on the termination of the Employment
and the Executive shall certify that all such property has been handed over on
request by the Board.

Provided that following the termination of the
Employment, the Executive shall be provided with reasonable access to Board
Minutes and agendas of the Company or any Group Company relating to a period
during which he was a director of the 
Company or such Group Company which shall nevertheless remain
confidential.

16                                  Inventions and other intellectual property

16.1                           The parties foresee that the Executive may make inventions or create
other Intellectual Property in the course of his duties and agree that in this
respect the Executive has a special responsibility to further the interests of
the Company and any Group Company.

16.2                           Any invention, improvement, design, process, information, copyright
work, computer program, trade mark, trade name or get-up, work or other output
(Work) made, created or discovered by
the Executive during the Employment (whether capable of being patented or
registered or not and whether or not made or discovered in the course of the
Employment) in conjunction with or in any way affecting or relating to the
business of the Company or of any Group Company or capable of being used or
adapted for use in or in connection with such business, together with all
Intellectual Property subsisting therein, (collectively Intellectual
Property Rights) shall be disclosed immediately to the Company and
shall (subject to sections 39 to 43 Patents Act 1977) belong to and
be the absolute property of the Company or such Group Company as the Company
may direct and the Executive hereby assigns to the Company with full title
guarantee and by way of present assignment of future rights, all such
copyright, database rights, design rights (and any other Intellectual Property
capable of assignment by way of present assignment of future rights) which may
fall within the definition of the Intellectual Property Rights absolutely for
the full term of those rights.

16.3                           If and whenever required so to do by the Company the Executive shall at
the expense of the Company or such Group Company as the Company may direct:

(a)                                  apply or join with the Company or such Group Company in applying for
patent or other protection or registration in the United Kingdom and in any
other part of the world for any Intellectual Property Rights; and

 13
 

 

(b)                                 execute all instruments and do all things necessary for vesting all
Intellectual Property Rights (including such patent or other protection or
registration when so obtained) and all right, title and interest to and in them
absolutely, with full title guarantee and as sole beneficial owner, in the
Company or such Group Company or in such other person as the Company may
specify.

16.4                           The Executive irrevocably and unconditionally waives all rights under
Chapter IV of Part I Copyright Designs and Patents Act 1988 in
connection with his authorship of any existing or future copyright work in the
course of the Employment, in whatever part of the world such rights may be
enforceable including, without limitation:

(a)                                  the right conferred by section 77 of that Act to be identified as
the author of any such work; and

(b)                                 the right conferred by section 80 of that Act not to have any such
work subjected to derogatory treatment.

16.5                           The Executive irrevocably appoints the Company to be his Attorney in his
name and on his behalf to execute any such instrument or do any such thing and
generally to use his name for the purpose of giving to the Company the full
benefits of this clause.  A certificate in
writing in favour of any third party signed by any director or by the Secretary
of the Company that any instrument or act falls within the authority conferred
by this Agreement shall be conclusive evidence that such is the case.

16.6                           Nothing in this clause 16 shall be construed as restricting the
rights of the Executive or the Company under sections 39 to 43
Patents Act 1977.

17                                  Termination

17.1                           Notwithstanding any other provisions of this Agreement, in any of the
following circumstances the Company may terminate the Employment summarily by
serving written notice on the Executive to that effect.  In such event the Executive shall not be
entitled to any further payment from the Company except such sums as shall have
accrued due at the date of service of such notice. The circumstances are if the
Executive:

(a)                                  is guilty of any gross misconduct or gross incompetence;

(b)                                 commits any serious breach of this Agreement , or any wilful neglect or
unreasonable refusal to discharge his duties provided that if such breach is
capable of remedy, he shall have failed to remedy it within such reasonable
period as is specified in a written notice from the Company pointing out the
breach and requiring it to be remedied;

(c)                                  repeats or continues (after warning) any breach of this Agreement;

(d)                                 is guilty of any fraud, dishonesty or conduct tending to bring himself,
the Company or any Group Company into disrepute;

(e)                                  commits any act of bankruptcy or takes advantage of any statute for the
time being in force offering relief for insolvent debtors;

(f)                                    is convicted of any criminal offence (other than minor offences under
the Road Traffic Acts or the Road Safety Acts for which a fine or non-custodial
penalty is imposed) which might reasonably be thought to affect adversely the
performance of his duties;

(g)                                 is disqualified from holding office in the Company or in any other
company by reason of any order made under the Company Directors
Disqualification Act 1986 or any other enactment or is found to have committed
any serious disciplinary offence by any professional or other body, which
undermines the confidence of the Board in his continued employment with the
Company; or

 14
 

 

(h)                                 resigns other than at the request of the Company or otherwise ceases to
be or becomes prohibited by law from being a director of the Company, otherwise
than at the Company’s request.

Any delay by the Company in exercising such right of
termination shall not constitute a waiver of it.  The proper exercise by the Company of its
right of termination under this clause is without prejudice to any other rights
or remedies which it or any Group Company may have or be entitled to exercise
against the Executive.

17.2                           If at any time the Executive is unable to perform his duties properly
because of ill health accident or otherwise for a period or periods totalling
at least 12 months, or becomes incapable by reason of mental disorder of
managing and administering his property and affairs, then the Company may in
its absolute discretion terminate the Employment by giving him not less than
three months’ written notice to that effect provided that:

(a)                                  if at any time during the currency of such a notice the Executive shall
provide a medical certificate satisfactory to the Board to the effect that he
has fully recovered his physical and/or mental health and that no recurrence of
illness or incapacity can reasonably be anticipated, the Company shall withdraw
the notice unless, by that date, a replacement for the Executive has been
appointed; and

(b)                                 subject to and in accordance with the rules of the Pension Scheme, the
Executive qualifies for an early retirement pension by reason of Partial
Incapacity or Total Incapacity (as those terms are defined under the Pension
Scheme).

17.3                           If the Company believes that it may be entitled to terminate the
Employment, whether pursuant to clause 17.1 or otherwise, or if the
Company believes it is necessary in order to investigate a complaint against
the Executive, it shall be entitled (but without prejudice to its right
subsequently to terminate the Employment on the same or any other ground) to
suspend the Executive on full pay and exclude him from the Group’s premises for
so long as it may think fit.

17.4                           On the termination of the Employment or upon the Company having
exercised its rights under clause 3.7 or if requested to do so by the
Company in circumstances where the Executive has been prevented from performing
his duties through long term sickness (for a period of 12 months), the
Executive shall:

(a)              at the request of the Company resign from office as a director of the
Company and all offices held by him in any Group Company and shall transfer to
the Company without payment or as the Company may direct any qualifying shares
held by him as nominee for the Company provided however that such resignation
shall be without prejudice to any claims which the Executive may have against
the Company or any Group Company arising out of the termination of the
Employment; and

(b)             immediately deliver to the Company all materials within the scope of
clause 15.2, any Company car, mobile telephone or other Company equipment
in his possession and all keys, credit cards, and other property of or relating
to the business of the Company or of any Group Company which may be in his
possession or under his power or control but excluding, in the event that the
Company exercises its rights under clause 3.7, any Company car, mobile
telephone or other Company equipment provided to the Executive for his benefit
during the Employment

and the Executive irrevocably authorises the Company
to appoint any person in his name and on his behalf to sign any documents and
do any things necessary or requisite to give effect to his obligations under
this clause 17.4.

17.5                           If the Employment shall be terminated (otherwise than in circumstances
constituting a Corporate Change under clause 3.6) for the purpose of
reorganisation, reconstruction or amalgamation for whatever reason and the
Executive is offered employment with any concern or undertaking resulting from
such reorganisation, reconstruction or amalgamation on terms and conditions
which as a whole

 15
 

 

are no less
favourable than the terms of this Agreement, then he shall have no claim
against the Company in respect of the termination of the Employment.

17.6                           The Executive shall not at any time during any period when he is
required to cease the performance of his duties under clause 3.7 or after the
Termination Date make any public statement in relation to the Company or any
Group company or any of their officers or employees.  The Executive shall not without the Company’s
consent after the termination of the Employment represent himself as being
employed by or connected with the Company or any Group company.

18                                  Restrictive covenants

18.1                           The Executive will not (without the previous consent in writing of the
Board) for the period of 9 months immediately after the Termination Date
whether as principal or agent, and whether alone or jointly with, or as a
director, manager, partner, shareholder, employee or consultant of any other
person, firm, company or organisation directly or indirectly:

(a)                                  be engaged, concerned or interested in the businesses of Allied Domecq
Plc, Anheuser-Busch Cos Inc, Bacardi Limited, Brown-Forman, Carlsberg A/S,
Heineken NV, Inbev, Pernod-Ricard, SAB Miller or Scottish and Newcastle
Plc.  The Company may notify the
Executive from time to time of additions to the foregoing list of companies,
such additions being businesses which are similar to and compete with any
business being carried on by the Company or by any Group Company;

(b)                                 in competition with the Company or any Group Company negotiate with,
solicit business from or entice away from the Company or any Group Company (or
endeavour to do any of the foregoing) the business of any person, firm, company
or organisation who or which to his knowledge is and has been a customer of (or
who had regular business dealings with) the Company or with any Group Company
during the period of 12 months immediately preceding the Termination Date and
with whom he had direct dealings or personal contact or for whom he was
responsible on behalf of the Company or any Group Company in the course of the
Employment during that period, so as to harm the goodwill or otherwise damage
the business of the Company or of any other Group Company;

(c)                                  in competition with the Company or any Group Company undertake to
provide any service or manufacture or supply any product similar to those with
which he was concerned in the course of the Employment during the period of 12
months immediately preceding the Termination Date to or for any person who is
or was a customer or supplier to (or who had regular business dealings with)
the Company or any other Group Company during the period of 12 months
immediately preceding the Termination Date and with whom he had direct dealings
or personal contact or for whom he was responsible on behalf of the Company or
any Group Company in the course of the Employment during that period.

For the purposes of clauses 18.1(b) and clause
18.1(c), customer shall include any third party
with whom the Company or any Group Company was (during the said period) in
negotiation in respect of the provision of goods or services;

(d)                                 interfere or seek to interfere with the supply to the Company or any
Group Company of any goods or services by any supplier who during the period of
12 months immediately preceding the Termination Date shall have supplied goods
or services to the Company or any Group Company and with whom the Executive has
had business dealings, nor will he interfere or seek to interfere with the
terms on which such supply during such period as aforesaid has been made;

(e)                                  solicit or entice away or endeavour to solicit or entice away from the
Company or any Group Company any person who is an employee of or otherwise
works for the Company or any Group Company and:

(i)                                     who is at the Termination Date or was within the period of 12 months
immediately preceding that date part of the senior management of the Company or
any other Group Company; or

 16
 

 

(ii)                                  who by reason of their knowledge of trade secrets or confidential
information of the Company or any Group Company or knowledge or influence over
the clients, customers or suppliers of the Company or any Group Company is
likely to be able to assist or benefit a business which competes or proposes to
compete with the Company or any Group Company.

Provided
that this clause 18.1(e) shall only apply to employees with whom the Executive
had personal dealings in period of 12 months preceding the Termination Date;

(f)                                    employ or engage for the provision of work or services any person who is
an employee of or otherwise works for the Company or any Group Company and:

(i)                                     who is at the Termination Date or was within the period of 6 months
immediately preceding that date part of the senior management of the Company or
any other Group Company; or

(ii)                                  who by reason of their knowledge of trade secrets or confidential
information of the Company or any Group Company or knowledge or influence over
the clients, customers or suppliers of the Company or any Group Company is
likely to be able to assist or benefit a business which competes or proposes to
compete with the Company or any Group Company.

Provided that this clause 18.1(f) shall only apply to
employees with whom the Executive had personal dealings in period of 6 months
preceding the Termination Date.

18.2                           For the avoidance of doubt, none of the restrictions contained in
clause 18.1 shall prohibit any activities by the Executive which are not
in direct or indirect competition with any business being carried on by the
Company or any Group Company at the Termination Date.

18.3                           Nothing in clause 18.1 shall preclude the Executive from holding
(directly or through nominees) investments listed on the Official List of
London Stock Exchange plc or in respect of which dealing takes place in the
Alternative Investment Market or any recognised stock exchange as long as he
does not hold more than 3 per cent of the issued shares or other
securities of any class of any one company.

18.4                           At no time after the Termination Date shall the Executive directly or
indirectly represent himself as being interested in or employed by or in any
way connected with the Company or any Group Company, other than as a former
employee of the Company.

18.5                           The Executive agrees that, having regard to all the circumstances, the
restrictions contained in this clause are reasonable and necessary for the
protection of the Company or of any Group Company and that they do not bear
harshly upon him and the parties agree that:

(a)                                  each restriction shall be read and construed independently of the other
restrictions so that if one or more are found to be void or unenforceable as an
unreasonable restraint of trade or for any other reason the remaining
restrictions shall not be affected; and

(b)                                 if any restriction is found to be void but would be valid and
enforceable if some part of it were deleted, that restriction shall apply with
such deletion as may be necessary to make it valid and enforceable.

18.6                           The Executive hereby enters into covenants in the same terms as those
contained in clause 18.1 to 18.5 above which shall apply in the event that the
Company terminates the Executive’s employment unlawfully.

19                                  Disciplinary and grievance procedures

19.1                           If the Executive wishes to obtain redress of any grievance relating to
the Employment or is dissatisfied with any reprimand, suspension or other
disciplinary step taken by the Company, he may apply in writing to the Chief
Executive, setting out the nature and details of any such grievance or

 17
 

 

dissatisfaction.  Should the Executive wish to appeal against
any grievance decision, he should submit his appeal in writing to the Chairman
whose decision shall be final.  The
provisions of this clause shall not apply in any event, to any action taken by
the Company under clause 17.1 or clause 3.7.

19.2                           There are no specific disciplinary rules which apply to the Executive
and any disciplinary matters affecting him will be dealt with by the Chief
Executive.  Should the Executive wish to
appeal against any disciplinary action, he should submit his appeal in writing
to the Chairman whose decision on such appeal shall be final.

19.3                           The provisions of clauses 19.1 and 19.2 do not form part of the
Executive’s contract of employment.

20                                  Notices

20.1                           Any notice or other document to be given under this Agreement shall be
in writing and may be given personally to the Executive or to the Secretary of
the Company (as the case may be) or may be sent by first class post or other
fast postal service or by facsimile transmission to, in the case of the
Company, its registered office for the time being and in the case of the
Executive either to his address shown on the face of this Agreement or to his
last known place of residence.

20.2                           Any such notice shall (unless the contrary is proved) be deemed served
when in the ordinary course of the means of transmission it would first be
received by the addressee in normal business hours.  In the case of first class post, this shall
be deemed to be no later than two working days after posting. In proving such service
it shall be sufficient to prove, where appropriate, that the notice was
addressed properly and posted, or that the facsimile transmission was
despatched.

21                                  Former contracts of employment

21.1                           This Agreement shall be in substitution for any previous contracts,
whether by way of letters of appointment, agreements or arrangements, whether
written, oral or implied, relating to the employment of the Executive, which
shall be deemed to have been terminated by mutual consent as from the date of
this Agreement and the Executive acknowledges that he has no outstanding claims
of any kind against the Company or any Group Company in respect of any such
contract.

21.2                           For the avoidance of doubt, this clause shall not affect benefits which
have already accrued to the Executive prior to the date hereof under any
pre-existing scheme or arrangement by virtue of which he was entitled to
benefits.

22                                  Choice of law and submission to jurisdiction

22.1                           This Agreement shall be governed by and interpreted in accordance with English
law.

22.2                           The parties submit to the exclusive jurisdiction of the English courts
but this Agreement may be enforced by the Company in any court of competent
jurisdiction.

23                                  General

23.1                           The expiration or termination of this Agreement shall not prejudice any
claim which either party may have against the other in respect of any
pre-existing breach of or contravention of or non-compliance with any provision
of this Agreement nor shall it prejudice the coming into force or the
continuance in force of any provision of this Agreement which is expressly or
by implication intended to or has the effect of coming into or continuing in
force on or after such expiration or termination.

23.2                           No failure or delay by the Company in exercising any right, power or privilege
under this Agreement shall operate as a waiver thereof nor shall any single or
partial exercise by the Company of any right, power or privilege preclude any
further exercise thereof or the exercise of any other right, power or
privilege.

23.3                           There are no collective agreements directly affecting the Executive’s
employment.

 18
 

 

23.4                           This Agreement constitutes the written statement of the terms of
employment of the Executive provided in compliance with Part I of the ERA.

23.5                           A person who is not a party to this Agreement has no right under the
Contracts (Rights of Third Parties) Act 1999 to enforce any term of this
Agreement but this does not affect any right or remedy of a third party which
exists or is available apart from that Act.

 

	
  Executed as a deed by

  	
  )

  	
  /s/ Lord Blyth

  	
   

  
	
  the Company

  	
  )

  	
  Director

  
	
  acting by two
  directors or by a

  	
  )

  	
   

  	
   

  
	
  director and its
  secretary

  	
  )

  	
  /s/ Susanne Bunn

  	
   

  
	
   

  	
  )

  	
  Company Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Executed as a
  deed by

  	
  )

  	
   

  	
   

  
	
  the Executive

  	
  )

  	
   

  	
   

  
	
  in the presence
  of

  	
  )

  	
  /s/ Nicholas C. Rose

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/ Hilary Carr

  	
   

  	
   

  	
   

  	
   

  
	
  Signature of
  witness

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name: Hilary
  Carr

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address: 19
  Little Chester Street

  	
   

  	
   

  	
   

  
	
   

  	
  London SW 1X 7AP

  	
   

  	
   

  	
   

  
							

 

 19Exhibit 4.1

AvalonBay Communities, Inc

Issuer

to

U.S. Bank National Association

Trustee

 

Fourth
Supplemental Indenture

Dated as of
September 18, 2006

 

Medium-Term
Notes Due Nine Months or More

from Date of Issue

 

FOURTH SUPPLEMENTAL INDENTURE, dated as of September
18, 2006 (the “Supple­mental Inden­ture”), between AVALONBAY COMMUNITIES, INC.,
a corporation orga­nized under the laws of the State of Maryland (herein called
the “Company”), and U.S. BANK NATIONAL ASSOCIATION, a national banking
association organized and existing under the laws of the United States, as
successor trustee (in such capacity, the “Trustee”) under the Senior Indenture
defined below, having a place of business at 100 Wall Street  New York, NY 10005.

RECITALS OF THE
COMPANY

The Company hereby states as follows:

The Company has heretofore delivered to the State
Street Bank and Trust Company (the “Original Trustee”), in its capacity as
original trustee thereunder, an Indenture dated as of January 16, 1998 (the “Senior
Indenture”) by and between the Company (formerly known as Bay Apartment
Communities, Inc.) and the Original Trustee (as to which U.S. Bank National
Association now serves as successor in the capacity of Trustee), together with
a First Supplemental Indenture dated as of January 20, 1998, a Second
Supplemental Indenture dated as of July 7, 1998, a Third Supplemental Indenture
dated as of December 21, 1998, and an Amended and Restated Third Supplemental
Indenture dated as of July 10, 2000, the forms of which have been filed with
the Securi­ties and Ex­change Commis­sion (the “Commission”) under the
Securities Act of 1933, as amended, and incorporated by reference as exhibits
to the Company’s Registra­tion Statement on Form S-3 (Regis­tration No.
333-132435), providing for the issuance from time to time of Senior Debt
Securities of the Company (the “Securities”) in an unlimited aggregate
principal amount, including a series of debt securities entitled “Medium-Term
Notes Due Nine Months or More from Date of Issue” (the “MTNs”).

The Company wishes to amend Section 101 and the first
paragraph of Section 303 of the Senior Indenture as set forth below.

The Company also wishes to amend, with respect to all
issuances of MTNs on or after the date of this Fourth Supplemental Indenture,
Section 2.4(1) of the Third Amended and Restated Indenture as set forth below.

The Company intends in all other respects to continue
the Third Amended and Restated Supplemental Indenture in full force and effect
except as expressly set forth in this Fourth Supplemental Indenture.

Section 901(5) of the Senior Indenture provides that
the Company and the Trustee may enter into an indenture supplemental to the
Senior Indenture to change or eliminate any of the provisions of the Senior
Indenture, subject to certain limitations with respect to outstanding
Securities.  This Fourth Supplemental
Indenture does not affect any outstanding Securities.

The Trustee is willing to enter into this Fourth
Supplemental Indenture at the Company’s request, subject to compliance with
Section 901 of the Senior Indenture, as applicable.

Section 901(7) of the Senior Indenture provides for
the Company and the Trustee to enter into an indenture supplemental to the
Senior Indenture to establish the form or terms of Securities of any series as
provided by Sections 201 and 301 of the Senior Indenture.

The Board of Directors of the Company has previously
duly adopted resolu­tions authorizing the Company to execute and deliver this
Supple­mental Indenture.

 

All the conditions and requirements necessary to make
this Fourth Supplemental Indenture, when duly executed and delivered, a valid
and binding agreement in accor­dance with its terms and for the purposes herein
expressed, have been performed and fulfilled.

NOW, THEREFORE, THIS FOURTH SUPPLEMENTAL INDENTURE
WITNESSETH:

For and in consideration of the premises and the
purchase of each of the series of Securities provided for herein by the Holders
thereof, it is mutually covenanted and agreed, for the equal and proportionate
benefit of all Holders of the Notes (as defined in the Amended and Restated
Third Supplemental Indenture referred to above) or of any series thereof, as
follows:

ARTICLE ONE

SECTION 1.1.  Amendment
of Section 101 of the Senior Indenture.

The definitions of “Company Request” and “Company
Order” and “Officers’ Certificate” in Section 101 of the Senior Indenture are
hereby amended and restated in their entirety so as to read as follows:

“Company Request” and “Company Order”
mean, respectively, a written request or order signed in the name of the
Company by its Chairman of the Board, the President, the Chief Executive
Officer, the Chief Financial Officer or a Vice President and by its Treasurer,
an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company,
and delivered to the Trustee.

“Officers’ Certificate” means a certificate
signed by the Chairman of the Board, the President, the Chief Executive
Officer, the Chief Financial Officer or a Vice President and by its Treasurer,
an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company
and delivered to the Trustee.

SECTION 1.2.  Amendment
of the first paragraph of Section 303 of the Senior Indenture.

The first paragraph of Section 303 of the Senior
Indenture is hereby amended and restated in its entirety so as to read as
follows:

Section 303. Execution, Authentication, Delivery
and Dating.

The Securities and any coupons appertaining thereto
shall be executed on behalf of the Company by its Chairman of the Board, its
President, its Chief Executive Officer, its Chief Financial Officer or one of
its Vice Presidents, under its corporate seal reproduced thereon, and attested
by its Treasurer, its Assistant Treasurer, its Secretary or one of its
Assistant Secretaries.  The signature of
any of these officers on the Securities and coupons may be manual or facsimile
signatures of the present or any future such authorized officer and may be
imprinted or otherwise reproduced on the Securities.

SECTION 1.3.  Amendment
of Section 2.4(1) of the Amended and Restated Third Supplemental Indenture.

Section 2.4(1) of the Amended and Restated Third
Supplemental Indenture is hereby amended and restated in its entirety, so as to
read as follows; provided, however, that such amendment and restatement shall apply
only to and for the benefit of MTNs issued on or after the 

 

date of  this Fourth Supplemental Indenture; and
provided, further, however, that all MTNs issued prior to the date of this
Fourth Supplemental Indenture shall continue to have the benefit of, and the
Company shall continue to be bound by and shall comply with, the terms of
Section 2.4(1) of the Amended and Restated Third Supplemental Indenture as
existing and in effect immediately prior to the date of the Fourth Supplemental
Indenture:

SECTION 2.4  Limitations
on Incurrence of Indebtedness.

(1)  The Company
will not, and will not permit any Subsidiary to, incur any Indebtedness if,
immediately after giving effect to the incurrence of such additional
Indebtedness and the application of the proceeds thereof, the aggregate
principal amount of all outstanding Indebtedness of the Company and its
Subsidiaries on a consolidated basis determined in accordance with GAAP is
greater than 65% of the sum of (without duplication) (i) the Total Assets of the
Company and its Subsidiar­ies as of the end of the calendar quarter covered in
the Company’s Annual Report on Form 10-K or Quarterly Report on Form 10-Q,
as the case may be, most recently filed with the Commission (or, if such filing
is not permitted under the Exchange Act, with the Trustee) prior to the
incurrence of such additional Indebtedness and (ii) the purchase price of any
real estate assets or mortgages receiv­able acquired, and the amount of any
securities offering proceeds received (to the extent that such proceeds were
not used to acquire real estate assets or mortgages receivable or used to
reduce Indebtedness), by the Company or any Subsidiary since the end of such
calendar quarter, including those proceeds obtained in connection with the incurrence
of such additional Indebtedness.

ARTICLE TWO

MISCELLANEOUS
PROVISIONS

SECTION 2.1.  Ratification
of Senior Indenture.

Except as expressly modified or amended hereby, the
Senior Indenture, as heretofore amended by the supplemental indentures referred
to above, continues in full force and effect and is in all respects confirmed
and preserved.

SECTION 2.2.  Governing
Law.

This Supplemental Indenture and each Note shall be
governed by and construed in accordance with the laws of the State of New
York.  This Supple­men­tal Inden­ture is
subject to the provisions of the Trust Indenture Act of 1939, as amended, and
shall, to the extent applicable, be governed by such provisions.

SECTION 2.3.  Counterparts.

This Supplemental Indenture may be executed in any number
of counter­parts, each of which so executed shall be deemed to be an original,
but all such counter­parts shall together constitute but one and the same
instrument.

[Signature page
follows.]

 

 

IN WITNESS WHEREOF, 
the parties hereto have caused this Fourth Supple­mental Indenture to be
duly executed by their respective officers hereunto duly autho­rized, all as of
the day and year first written above.

 

	
  

  	
   

  	
  AVALONBAY COMMUNITIES, INC.

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/  Thomas J. Sargeant

  
	
   

  	
   

  	
   

  	
   

  	
  Thomas J. Sargeant

  
	
   

  	
   

  	
   

  	
   

  	
  Chief Financial Officer

  

 

	
  Attest:

  	
  /s/ Edward M. Schulman

  	
   

  	
   

  
	
   

  	
  Edward M. Schulman

  	
   

  	
   

  
	
   

  	
  Secretary

  	
   

  	
   

  

 

 

	
  

  	
   

  	
  U.S. BANK NATIONAL ASSOCIATION,

  as Trustee

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/  Wendy Kumar

  
	
   

  	
   

  	
   

  	
   

  	
  K. Wendy Kumar

  
	
   

  	
   

  	
   

  	
   

  	
  Vice President

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