Document:

EX-4.2

 

Exhibit 4.2

 

BRITISH TELECOMMUNICATIONS plc

Issuer

TO

CITIBANK, N.A.

Trustee

 

Supplemental Indenture

Dated as of December 12, 2000

 

$1,100,000,000 Floating Rate Notes due 2003

$3,100,000,000 7 5/8 % Notes due 2005

$3,000,000,000 8 1/8 % Notes due 2010

$2,800,000,000 8 5/8% Notes due 2030

 

 

 

TABLE OF CONTENTS

 

	 	 	 	 	 	 	 
	Table of Contents	 	 	Page	 
	 
	ARTICLE ONE - DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION	 	 	1	 
	 	 	 
	 	 	 	 
	SECTION 101.	 	Definitions.
	 	 	1	 
	 	 	 
	 	 	 	 
	SECTION 102.	 	Terms Defined in the Original Indenture
	 	 	3	 
	 	 	 
	 	 	 	 
	SECTION 103.	 	Effect of Supplemental Indenture
	 	 	3	 
	 	 	 
	 	 	 	 
	SECTION 104.	 	Effect of Headings and Table of Contents
	 	 	3	 
	 	 	 
	 	 	 	 
	SECTION 105.	 	Successor and Assigns
	 	 	3	 
	 	 	 
	 	 	 	 
	SECTION 106.	 	Severability Clause
	 	 	4	 
	 	 	 
	 	 	 	 
	SECTION 107.	 	Benefits of Supplemental Indenture
	 	 	4	 
	 	 	 
	 	 	 	 
	SECTION 108.	 	Governing Law
	 	 	4	 
	 	 	 
	 	 	 	 
	SECTION 109.	 	Agent for Service; Submission to Jurisdiction; Waiver of Immunities
	 	 	4	 
	 	 	 
	 	 	 	 
	ARTICLE TWO - SECURITY FORMS	 	 	4	 
	 	 	 
	 	 	 	 
	SECTION 201.	 	Form of Securities
	 	 	4	 
	 	 	 
	 	 	 	 
	ARTICLE THREE - COVENANTs	 	 	4	 
	 	 	 
	 	 	 	 
	SECTION 301.	 	Negative Pledge
	 	 	4	 
	 	 	 
	 	 	 	 
	SECTION 302.	 	Interest Rate Subject to Adjustment
	 	 	5	 
	 	 	 
	 	 	 	 
	ARTICLE FOUR - CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE	 	 	6	 
	 	 	 
	 	 	 	 
	SECTION 401.	 	Merger, Consolidation and Sale of Substantially of All Assets
	 	 	6	 
	 	 	 
	 	 	 	 
	SECTION 402.	 	Successor Substituted
	 	 	7	 
	 	 	 
	 	 	 	 
	SECTION 403.	 	Substitution of Issuer
	 	 	7	 
	 	 	 
	 	 	 	 
	ARTICLE FIVE - REDEMPTION OF SECURITIES	 	 	8	 
	 	 	 
	 	 	 	 
	SECTION 501.	 	Optional Redemption
	 	 	8	 
	 	 	 
	 	 	 	 
	SECTION 502.	 	Optional Redemption Due to Changes In Tax Treatment
	 	 	8	 
	 	 	 
	 	 	 	 
	EXHIBIT A - FORM OF BEARER SECURITY	 	 	 	 

 

 

     THIS SUPPLEMENTAL INDENTURE, dated as of December 12, 2000, among British Telecommunications
plc, a public limited company duly organized and existing under the laws of England and Wales
(herein called the “Company”), having its principal office at 81 Newgate Street, London EC1A 7AJ,
England and Citibank, N.A., a national banking association duly organized and existing under the
laws of the State of New York, as Trustee (herein called the “Trustee”), having its Corporate Trust
Office at 111 Wall Street, 5th Floor NY, NY 10005, Attention: Citibank Agency & Trust
Services.

RECITALS OF THE COMPANY

     The Company has entered into an indenture dated as of December 12, 2000 (the “Original
Indenture”) in relation to the issuance from time to time of its unsecured debentures, notes or
other evidences of indebtedness (herein called the “Securities”), to be issued in one or more
series as in the Original Indenture provided.

     Pursuant to Section 301 of the Original Indenture, the Company may, from time to time, create
and issue any series of Securities in one or more indentures supplemental to the Original
Indenture.

     The Company has duly authorized the creation and issuance of its $1,100,000,000 principal
amount of its floating rate Notes due 2003 (the “3-year Notes”), $3,100,000,000 principal amount of
its 7 5/8% Notes due 2005 (the “5-year Notes”), $3,000,000,000 principal amount of its 8 1/8% Notes
due 2010 (the “10-year Notes”) and $2,800,000,000 principal amount of its 8 5/8% Notes due 2030
(the “30-year Notes,” and, together with the 3-year Notes, the 5-year Notes and the 10-year Notes,
the “Notes”), and to provide therefore the Company has duly authorized the execution and delivery
of this Supplemental Indenture.

     All things necessary have been done to make the Securities, when executed by the Company and
authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the
Company, and to make this Supplemental Indenture a valid agreement of the Company, each in
accordance with their terms.

     NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:

     For and in consideration of the premises and the purchase of the Securities by the Holders
thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all
Holders of the Securities of any series thereof, as follows:

ARTICLE
ONE - DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

     SECTION 101. Definitions.

     “Base Rate” means LIBOR.

     “Calculation Agent” means Citibank, N.A.

     “Capital Market Indebtedness” means any obligation for the payment of borrowed money which is
in the form of, or represented or evidenced by, a certificate of indebtedness or in the form of, or
represented or evidenced by, Notes, notes or other securities which are, or which the Company has
publicly declared that it intends to have, quoted, listed, dealt in or traded on a stock exchange
or other recognized securities market.

     “Comparable Treasury Issue” means the United States Treasury security or securities selected
by an Independent Investment Banker as having an actual or interpolated maturity comparable to the
remaining term of the Notes to be redeemed that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of corporate debt securities
of a comparable maturity to the remaining term of such Notes.

     “Comparable Treasury Price” means, with respect to any redemption date, (A) the average of the
Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and
lowest such Reference

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Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such quotations.

     “Group” means the Company and its consolidated Subsidiaries.

     “Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the
Trustee after consultation with the Company.

     “Interest Determination Date” relating to a particular Interest Reset Date means the second
New York Business Day preceding the Interest Reset Date; provided, however, that, in the event that
an Interest Determination Date would otherwise be a day that is not a New York Business Day, the
Interest Determination Date shall be the next succeeding day that is a New York Business Day.

     “Interest Period” means the period from and including December 12, 2000, or the last date to
which interest has been paid or made available for payment, to but excluding the payment date.

     “Interest Reset Date” means, with respect to a given year, March 15, June 15, September 15 and
December 15 of such year.

     “LIBOR” means the offered rate appearing on the Telerate LIBOR Page as of 11:00 a.m., London
Time, on the relevant Interest Determination Date, for deposits of U.S. dollars for a period of
three months; provided, however, that:

     (i) if the Telerate LIBOR Page does not appear on Telerate Page 3750 or any such replacement
page or pages, then LIBOR for the new Interest Period shall be determined on the basis of the
rates, at approximately 11:00 a.m., London Time, on the relevant Interest Determination Date, at
which deposits the following kind are offered to prime banks in the London interbank market by four
major banks in that market selected by the Calculation Agent: deposits of U.S. dollars for a period
of three months beginning on the relevant Interest Reset Date, and in a Representative Amount;

     (ii) if fewer than two quotations are provided as described above, LIBOR for the new Interest
Period shall be the arithmetic mean of the rates for loans of the following kind to leading
European banks quoted, at approximately 11:00 a.m., in New York, on that Interest Determination
Date, by three major banks in New York, selected by the Calculation Agent: loans of U.S. dollars
for a period of three months, beginning on the relevant Interest Reset Date, and in a
Representative Amount;

     (iii) if fewer than three banks selected by the Calculation Agent are quoting as described in
clause (ii) above, LIBOR for the new Interest Period will be LIBOR in effect for the prior Interest
Period.

     “Lien” means any mortgage, pledge, hypothecation, charge, assignment, deposit arrangement,
encumbrance, security interest, lien (statutory or other), or preference, priority or other
security or similar agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any agreement to give or grant a Lien or any lease, conditional
sale or other title retention agreement having substantially the same economic effect as any of the
foregoing.

     “New York Business Day” means any day other than a Saturday, Sunday or a day on which banking
institutions in New York, New York, are authorized by law or executive order to close.

     “Record Date” means the first day of each month in which an interest payment is due.

     “Reference Treasury Dealer” means each of Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co. Incorporated, Salomon Smith Barney Inc,. plus two other banks selected by the
Company, or their affiliates which are primary U.S. Government securities dealers, and their
respective successors; provided, however, that if any of the foregoing or their affiliates shall
cease to be a primary U.S. Government securities dealer in The

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City of New York (a “Primary Treasury Dealer”), the Company shall substitute therefor another
Primary Treasury Dealer.

     “Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer
and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Trustee by such Reference Treasury Dealer at 3:30 p.m. New York time on
the third business day preceding such redemption date.

     “Representative Amount” means the amount that, in the Calculation Agent’s judgment, is
representative of a single transaction in the relevant market at the relevant time.

     “Spread” means 1.045%.

     “Subsidiary” means, with respect to any Person, (i) a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by such Person, or by one or
more other Subsidiaries of such Person, or by such Person and one or more other Subsidiaries of
such Person; (ii) any general partnership, joint venture or similar entity, at least 50% of the
outstanding partnership or similar interest of which is owned, directly or indirectly, by such
Person, or by one or more other Subsidiaries of such Person, or by such Person and one or more
other Subsidiaries of such Person; and (iii) any limited partnership of which such Person or any
Subsidiary of such Person is a general partner.

     “Telerate LIBOR Page” means Telerate Page 3750 or any replacement page or pages on which
London interbank rates of major banks for the U.S. dollar are displayed.

     “Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the
semiannual equivalent yield to maturity or interpolated (on a day count basis) of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of
its principal amount) equal to the Comparable Treasury Price for such redemption date.

     SECTION 102. Terms Defined in the Original Indenture

     Terms and expression defined in the Original Indenture shall have the same meaning when used
in this Supplemental Indenture unless otherwise defined herein.

     SECTION 103. Effect of Supplemental Indenture

     (a) This Supplemental Indenture is a supplemental agreement within the meaning of Sections 301
and 901 of the Original Indenture, and the Original Indenture shall be read together with this
Supplemental Indenture and shall have the same effect over the Securities in the same manner as if
the provisions of the Original Indenture and this Supplemental Indenture were contained in the same
instrument; provided, however, that Section 401 in this Supplemental Indenture shall replace
Section 801 in the Original Indenture in its entirety.

     (b) In all other respects, the Original Indenture is confirmed by the parties as supplemented
by the terms of this Supplemental Indenture.

     SECTION 104. Effect of Headings and Table of Contents

     The Article and Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.

     SECTION 105. Successor and Assigns

     All covenants and agreements in this Supplemental Indenture by the Company, the Trustee and
the Holders shall bind their respective successors and assigns, whether so expressed or not.

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     SECTION 106. Severability Clause

     In case any provision in this Supplemental Indenture or in the Securities shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.

     SECTION 107. Benefits of Supplemental Indenture

     Nothing in this Supplemental Indenture or in the Securities shall give to any Person (other
than the parties hereto and their successors hereunder, any Paying Agent and Holders) any benefit
or any legal or equitable right, remedy or claim under this Supplemental Indenture.

     SECTION 108. Governing Law

     This Supplemental Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York.

     SECTION 109. Agent for Service; Submission to Jurisdiction; Waiver of Immunities

     (a) By the execution and delivery of this Supplemental Indenture, the Company (1) acknowledges
that it has designated and appointed British Telecommunications plc, 40 East 52nd
Street, New York, NY 10022, attention Jan Vinokour, as its authorized agent upon which process may
be served in any suit or proceeding arising out of or relating to the Securities or this
Supplemental Indenture that may be instituted in any federal or state court in the Borough of
Manhattan in the City of New York, (2) submits to the jurisdiction of any such court in any such
suit or proceeding, and (3) and agrees that service of process upon its authorized agent and
written notice of said service to it (mailed to the Company’s Group Treasurer at its principal
office at BT Centre, 81 Newgate Street, London EC1A 7AJ, England) shall be deemed in every respect
effective service of process upon it in any such suit or proceeding. If for any reason the
Company’s designated agent (or any successor agent for this purpose) shall cease to act as agent
for service of process as provided above, the Company will promptly appoint a successor agent for
this purpose reasonably acceptable to the Trustee. The Company further agrees to take any and all
actions as may be necessary to continue such designation and appointment of such agent in full
force and effect so long as this Supplemental Indenture shall be in full force and effect.

     (b) To the extent that the Company has or hereafter may acquire any immunity from jurisdiction
of any court or from any legal process (whether through service of notice, attachment prior to
judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its
property, the Company hereby irrevocably waives such immunity in respect of its obligations under
this Supplemental Indenture and the Securities, to the extent permitted by law.

ARTICLE
TWO - SECURITY FORMS

     SECTION 201. Form of Securities

     The 3-year Notes shall be substantially in the form set forth in Exhibit A hereto and the
5-year, 10-year and 30-year Notes shall be substantially in the form set forth in Exhibit B hereto.

ARTICLE THREE - COVENANTS

     SECTION 301. Negative Pledge

     The Company shall not, and shall cause its Subsidiaries not to, directly or indirectly,
create, assume or incur or permit to be created, assumed or incurred, any Lien on or with respect
to any of the assets of the Company or any of its Subsidiaries whether now or hereafter owned, to
secure any present or future Capital Markets Indebtedness issued or guaranteed by the Company or
any other Person, unless in each case the Company has made,

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or caused to be made, provision whereby the Notes shall be secured equally and ratably with
such Capital Markets Indebtedness for so long as such Capital Markets Indebtedness shall be so
secured.

     SECTION 302. Interest Rate Subject to Adjustment

     The interest rate payable on the Notes will be subject to adjustment from time to time in the
event of a Step-Up Rating Change or Step-Down Rating Change, as the case may be. A “Step-Up Rating
Change” means the public announcement of a decrease in the rating of the Company’s senior unsecured
debt either to below A3 in the case of Moody’s Investor Service, Inc. or its successor (“Moody’s”)
or to below A- in the case of Standard and Poor’s Rating Services, a division of McGraw-Hill
Companies, Inc., or its successor (“S&P”) (each a “Rating Agency” and together, the “Rating
Agencies”). A “Step-Down Rating Change” means the public announcement of a subsequent increase in
the rating of the Company’s senior unsecured debt by either Moody’s or S&P. A “Rating Change”
means either a “Step-Up Rating Change” or a “Step-Down Rating Change”.

     The Notes shall bear interest at the initial interest rate from their date of issuance to but
excluding the first Interest Payment Date following the date on which a Step-Up Rating Change
occurs such that the rating assigned to the Company’s senior unsecured debt by Moody’s is below A3
or by S&P is below A-. Beginning with the first interest period following the date of such Rating
Change, if any, the interest payable on the 5-year Notes, the 10-year Notes and the 30-year Notes
and the spread applicable to the 3-year Notes shall be increased by 0.25% for each Rating Category
per Rating Agency by which the Rating Agencies have, as of the first day in such interest period,
publicly announced decreases in the ratings of the Company’s senior unsecured debt below A3, in the
case of Moody’s, or below A-, in the case of S&P. In the event of a subsequent Rating Change,
beginning with the first interest period following the date of such Rating Change, if any, the
interest rate payable on the Notes shall be further adjusted such that the interest payable on the
5-year Notes, the 10-year Notes and the 30-year Notes, and the spread applicable to the 3-year
Notes shall be increased by 0.25% for each Rating Category per Rating Agency by which the Rating
Agencies have, as of the first day in such interest period, publicly announced decreases in the
ratings of the Company’s senior unsecured debt below A3, in the case of Moody’s, or below A-, in
the case of S&P. There shall be no limit on the number of times that interest rate adjustments may
be made pursuant to a Rating Change, as the case may be, during the term of the Notes.
Notwithstanding anything in the foregoing to the contrary, at no time during the term of the Notes
will the rate of interest applicable to the Notes be less than the initial interest rate.

     A “Rating Category” shall mean the difference between a particular rating assigned by a Rating
Agency and the next lower rating, as the case may be, that could be ascribed by such Rating Agency.
For example, in the case of Moody’s the difference between Baa1 and Baa2 shall constitute one
Rating Category and in the case of S&P the difference between BBB+ and BBB shall constitute one
Rating Category.

     In the event that either Moody’s or S&P fails to or ceases to assign a rating to the Company’s
senior unsecured debt, the Company shall uses its best efforts to obtain a rating of its senior
unsecured debt from a substitute rating agency that shall be a nationally recognized statistical
rating agency, and references in this Section 302 to either Moody’s of S&P shall be to such
substitute rating agency. In the event that such a rating is not obtained from a substitute rating
agency, then, for the purposes of the foregoing interest rate adjustments, the equivalent of the
ratings assigned by the remaining Rating Agency shall be deemed to be the ratings assigned by the
other Rating Agency.

     Notwithstanding anything in the foregoing to the contrary, should Moody’s or S&P increase the
number of Rating Categories, then any Rating Change will be determined by reference to the Rating
Categories equivalent to the Rating Categories in existence at the date of this Supplemental
Indenture and without regard to any additional Rating Categories.

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ARTICLE FOUR - CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

     SECTION 401. Merger, Consolidation and Sale of Substantially of All Assets

     The Company will not, in any transaction or series of transactions, consolidate with or merge
into any other Person (other than a merger of a Subsidiary into the Company in which the Company is
the continuing corporation or as otherwise permitted by the Notes), or convey, transfer or lease
all or substantially all of its properties and assets, unless:

     (1) the Person formed by such consolidation or into which the Company is merged or the Person
which acquires by conveyance or transfer, or which leases, the properties and assets of the Company
(i) shall be a corporation, partnership or trust, organized and validly existing, and (ii) shall
expressly assume by an indenture supplemental hereto, executed and delivered to the Trustee, in
form reasonably satisfactory to the Trustee, the due and punctual payment of the principal of (and
premium, if any) and interest on all the Securities and the performance of every covenant of this
Indenture on the part of the Company to be performed or observed (substituting references to United
Kingdom in Section 1004 and Section 1108 of the Original Indenture with the jurisdiction of
incorporation or organization of the successor entity);

     (2) immediately after giving effect to such transaction and treating any indebtedness which
becomes an obligation of the Company or a Subsidiary as a result of such transaction as having been
incurred by the Company or such Subsidiary at the time of such transaction, no Event of Default,
and no event which, after notice or lapse of time or both, would become an Event of Default, shall
have happened and be continuing;

     (3) the Person formed by such consolidation or into which the Company is merged or to whom the
Company has conveyed, transferred or leased its properties or assets agrees to indemnify the Holder
of each Security against (a) any tax, assessment or governmental charge imposed on any such Holder
or required to be withheld or deducted from any payment to such Holder as a consequence of such
consolidation, merger, conveyance, transfer or lease and (b) any costs or expenses associated with
such consolidation, merger, conveyance, transfer or lease;

     (4) either the first publicly confirmed ratings for the Notes by Moody’s and S&P following the
consummation of such transaction or transactions, in the case of Moody’s, shall be at least Baa2
and, in the case of S&P, shall be at least BBB or, failing which, each holder of the Notes shall
have the right to require such entity to repurchase all or any of such holder’s Notes at a purchase
price equal to 100% of the principal amount thereof together with accrued but unpaid interest, if
any, through the date of purchase; and

     (5) the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of
Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such transaction, such supplemental indenture
comply with this Article and that all conditions precedent herein provided for relating to such
transaction have been complied with.

     In the event the holders of the Notes are entitled to have the Person formed by such
consolidation or into which the Company is merged or to whom the Company has conveyed, transferred
or leased its properties or assets repurchase all or any of such holder’s Notes, within 30 days
following the transactions described above in clause (4), as the case may be, such Person shall
publish a notice to holders stating: (1) that the Merger Offer is being made pursuant to the
“Merger, Consolidation, Sale of Substantially all of the Assets” covenant and that all the Notes
tendered for payment will be accepted for payment; (2) the purchase price and the purchase date,
which shall be no earlier than 30 days and no later than 60 days after the date of such notice
(“Merger Payment Date”); (3) that any Notes not tendered shall continue to accrue interest; (4)
that, unless the successor entity defaults in the payment of the Merger Payment, all Notes
accepted for payment pursuant to the Merger Offer shall cease to accrue interest from the Merger
Payment Date; and (5) setting forth the other procedures to be followed by holders wishing to
tender their Notes pursuant to such Merger Offer.

     On the Merger Payment Date, such Person will (1) accept for payment Notes or portions thereof
tendered pursuant to the Merger Offer, (2) deposit with the Paying Agent an amount equal to the
Merger Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to
be delivered to the Trustee the Notes so

6

 

accepted together with an Officer’s Certificate stating the amount of the Notes or portions
thereof tendered. The Paying Agent shall promptly remit to each holder of Notes so accepted
payment in an amount equal to the purchase price of such Notes, and the Trustee shall promptly
authenticate and deliver new Notes in principal amount equal to any unpurchased portion of the
Notes so surrendered. The successor Person shall publicly announce the results of the Merger Offer
on or as soon as practicable after the Merger Payment Date.

     SECTION 402. Successor Substituted

     Upon any consolidation of the Company with, or merger of the Company into, any other Person or
any conveyance, transfer or lease of all or substantially all of the properties and assets of the
Company in accordance with Section 401 of this Supplemental Indenture, the successor Person formed
by such consolidation or into which the Company is merged or to which such conveyance, transfer or
lease is made shall succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Supplemental Indenture and the Original Indenture with the same effect as if
such successor Person had been named as the Company herein, and thereafter, except in the case of a
lease, the predecessor Person shall be relieved of all obligations and covenants under this
Supplemental Indenture, the Original Indenture and the Securities

     SECTION 403. Substitution of Issuer

     The Company may at any time, without the consent of the holders of the Notes, substitute a
parent holding company as substitute obligor (the “Substitute Obligor”) in respect of all
obligations arising from the Notes or under the Indenture, provided

     (1) the Substitute Obligor (i) shall be a corporation, partnership or trust, organized and
validly existing that is concurrently assuming all the Capital Markets Indebtedness of the Company,
and (ii) shall expressly assume by an indenture supplemental hereto, executed and delivered to the
Trustee, in form reasonably satisfactory to the Trustee, in the case of the Company, the due and
punctual payment of the principal of (and premium, if any) and interest on all the Notes and the
performance of every obligation imposed by this Indenture and the Original Indenture on the Company
to be performed or observed (substituting references to United Kingdom in Section 1004 and Section
1108 of the Original Indenture with the jurisdiction of incorporation or organization of the
successor entity);

     (2) immediately after giving effect to such transaction and treating any indebtedness which
becomes an obligation of the Company or a Subsidiary as a result of such transaction as having been
incurred by the Company or such Subsidiary at the time of such transaction, no Event of Default,
and no event which, after notice or lapse of time or both, would become an Event of Default, shall
have happened and be continuing;

     (3) the Substitute Obligor shall agree to indemnify the Holder of each Security against (a)
any tax, assessment or governmental charge imposed on any such Holder or required to be withheld or
deducted from any payment to such Holder as a consequence of such consolidation, merger,
conveyance, transfer or lease and (b) any costs or expenses associated with such consolidation,
merger, conveyance, transfer or lease;

     (4) each stock exchange on which the Notes are listed shall have confirmed that, following the
proposed substitution of the Substitute Obligor, such Notes will continue to be listed on such
stock exchange, and each rating agency that rates the senior unsecured indebteness of the Company
shall have confirmed that, following the proposed substitution of the Substitute Obligor, the
senior unsecured indebtedness, including the Notes, of the Substitute Obligor will have the same or
better rating; and

     (5) the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of
Counsel, each stating that such substitution and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture comply with this Article and that all
conditions precedent herein provided for relating to such transaction have been complied with.

7

 

ARTICLE FIVE - REDEMPTION OF SECURITIES

     SECTION 501. Optional Redemption

     The 5-year Notes, 10-year Notes and 30-year Notes will be redeemable as a whole or in part, at
the option of the Company at any time, at a redemption price equal to the greater of (i) 100% of
the principal amount of such Notes and (ii) the sum of the present values of the remaining
scheduled payments of principal and interest thereon (exclusive of interest accrued to the date of
redemption) discounted to the redemption date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate plus 0.25 per cent. in the case of the
5-year Notes, 0.30 per cent. in the case of the 10-year Notes and 0.375 per cent. in the case of
the 30-year Notes, plus in each case accrued interest thereon to the date of redemption.

     Except to the extent set forth in Section 1108 of the Original Indenture, the 3-year Notes
will not be redeemable as a whole or in part at the option of the Company.

     Notice of any redemption shall be mailed at least 30 days but not more than 60 days before the
redemption date to each holder of Notes to be redeemed. All Notes surrendered for payment or
exchange shall be delivered to the Trustee. The Trustee shall cancel and may destroy all such
Notes surrendered for payment or exchange, in accordance with its note destruction policy;
provided, however, that and if Notes are destroyed, the Trustee shall deliver a certificate of
destruction to the Company. Unless the Company defaults in payment of the redemption price, on and
after the redemption date interest shall cease to accrue on the relevant Notes or portions thereof
called for redemption.

     SECTION 502. Optional Redemption Due to Changes In Tax Treatment

     In the event that the obligations of the Company under the Notes are assumed pursuant to the
terms and conditions of this Supplemental Indenture by any Person ( a “Successor Person”), such
Successor Person shall be entitled to redeem such Notes subject to the terms of Section 1108 of the
Original Indenture, substituting the date of such assumption for the date originally specified for
such redemption pursuant to Sections 301 and 1108 of the Original Indenture.

* * *

     This instrument 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.

8

 

     IN WITNESS WHEREOF, the Company and the Trustee have caused this Supplemental Indenture to be
duly executed on their respective behalves, all as of the day and year first above written.

	 	 	 	 	 	 	 
	 	 	The Common Seal of	 	 
	 	 	BRITISH TELECOMMUNICATIONS plc	 	 
	 	 	hereunto affixed is authenticated by:	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ SJR	 	 
	 

	 	 	 	Stephen John Prior	 	 
	 

	 	 	 	Assistant Company Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	CITIBANK, N.A.	 	 
	 	 	As Trustee	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Wafaa Orfy	 	 
	 

	 	By:
	 	Wafaa Orfy	 	 
	 	 	 	 	 
	 

	 	 	 	Assistant Vice President	 	 

9

 

A-1

Exhibit A

[Form of Bearer Security]

[Form of Face]

British Telecommunications plc

FLOATING RATE NOTES DUE DECEMBER 15, 2003

			
	     	 	 
	No. A-
	 	U.S.$

     British Telecommunications plc, a corporation duly organized and existing under the laws of
England and Wales (herein called the “Company”, which term includes any successor Person under the
Indenture and the Supplemental Indenture referred to on the reverse hereof), for value received,
hereby promises to pay to bearer upon presentation and surrender of this Security the principal sum
of l Thousand United States dollars on December 15, 2003 and to pay interest thereon from December
12, 2000 quarterly in arrears on March 15, June 15, September 15 and December 15 in each year,
commencing March 15, 2001, at the Base Rate plus the Spread (as defined below). Interest on this
Security will be computed on the basis of the actual number of days in each Interest Period (as
defined below) divided by 360.

     This Security will bear interest from December 12, 2000 to the first Interest Reset Date (as
defined below) at the Base Rate equal to LIBOR, as described below, adjusted by adding the spread,
which is 1.045%. Thereafter, this Security will bear interest at a base rate equal to LIBOR, as
adjusted by adding the spread, and as further adjusted (where applicable) pursuant to Section 302
of the Supplemental Indenture. In the event that the date of payment falls on a weekend or on a
legal or bank holiday in New York, interest can be paid on the next day that is a business day in
New York.

     The rate of interest will be reset quarterly by the calculation agent, as described below.
Each date upon which such rate of interest is so reset is hereinafter called an Interest Reset
Date. The Interest Reset Dates with respect to this Security will be March 15, June 15, September
15 and December 15 in each year. The interest rate in effect on any particular day will be the
interest rate determined with respect to the latest interest reset date that occurs on or before
that day, as adjusted (where applicable) as described on the reverse hereof and in Section 302 of
the Supplemental Indenture for interest rate adjustments. If any interest reset date falls on a
weekend or on a legal or bank holiday in New York, interest can be paid on the next day that is a
business day in New York.

     Subject to applicable provisions of law and except as otherwise specified herein, on each
Interest Reset Date the interest rate on this Security will be the rate determined by the
Calculation Agent in accordance with the following paragraphs.

     Determination of LIBOR. The Calculation Agent will determine on each Interest Determination
Date the interest rate with respect to this Security that takes effect on each interest reset date.

     The Base Rate will be equal to LIBOR. LIBOR will be the offered rate appearing on the
Telerate LIBOR Page as of 11:00 a.m., London Time, on the relevant Interest Determination Date, for
deposits of U.S. dollars for a period of three months. The Telerate LIBOR Page is Telerate Page
3750 or any replacement page or pages on which London interbank rates of major banks for the U.S.
dollar are displayed.

     If the Telerate LIBOR Page does not appear on Telerate Page 3750 or any such replacement page
or pages, then LIBOR for the new Interest Period shall be determined on the basis of the rates, at
approximately 11:00 a.m., London Time, on the relevant Interest Determination Date, at which
deposits the following kind are offered to prime banks in the London interbank market by four major
banks in that market selected by the Calculation Agent: deposits of U.S. dollars for a period of
three months beginning on the relevant Interest Reset Date, and in a Representative Amount. The
calculation agent will request the principal London office of each of these banks to

 

 

A-2

provide a quotation of its rate. If at least two quotations are provided, LIBOR for the
relevant interest determination date will be the arithmetic mean of the quotations.

     If fewer than two quotations are provided as described above, LIBOR for the new Interest
Period shall be the arithmetic mean of the rates for loans of the following kind to leading
European banks quoted, at approximately 11:00 a.m., in New York, on that Interest Determination
Date, by three major banks in New York, selected by the Calculation Agent: loans of U.S. dollars
for a period of three months, beginning on the relevant Interest Reset Date, and in a
Representative Amount;

     If fewer than three banks selected by the Calculation Agent are quoting as described in clause
(ii) above, LIBOR for the new Interest Period will be LIBOR in effect for the prior Interest
Period.

     Calculation of Interest. The Calculation Agent will calculate the amount of interest that has
accrued during each interest period; i.e., the period from and including December 12, 2000, or the
last date to which interest has been paid or made available for payment, to bur excluding the
payment date. For each interest period, the Calculation Agent will calculate the amount of accrued
interest by multiplying the face amount of this Security by an accrued interest factor for the
interest period. This factor will equal the sum of the interest factors calculated for each day
during the interest period. The interest factor will equal the sum of the interest factors
calculated for each day during the interest period. The interest factor for each day will be
expressed as a decimal and will be calculated by dividing the interest rate (also expressed as a
decimal) applicable to that day by 360.

     All percentages resulting from any calculation relating to a note will be rounded upward or
downward, as appropriate, to the next higher or lower one hundred-thousandth of a percentage point
(e.g., 9.876541% (or .09876541) being rounded down to 9.87654% (or
..0987654) and 9.876545% (or .09876545) being rounded up to 9.87655%. All amounts used in or resulting from any calculation
will be rounded upward or downward, as appropriate, to the nearest cent.

     Maximum Limits. Notwithstanding the forgoing, the interest rate that accrues on this Security
shall in no event be higher than the maximum rate permitted by New York Law, as the same may be
modified by U.S. law of general application.

     Calculation Agent. The Company has initially appointed Citibank, N.A. as Calculation Agent to
act as such agent with respect to this Security, but the Company may, in its sole discretion,
appoint any other institution to serve as such agent from time to time. The Company will give the
Trustee prompt written notice of any change in any such appointment. Insofar as this Security
provides for any such agent to obtain rates, quotes or other data from a bank, dealer or other
institution for use in making any determination hereunder, such agent may do so from any
institution or institutions of the kind contemplated hereby, notwithstanding that any one or more
of such institutions are affiliates of any such agent.

     All determinations made by the Calculation Agent may be made by such agent in its sole
discretion and, absent manifest error, shall be conclusive for all purposes and binding on the
Holder of this Security and the Company. The Calculation Agent shall not have any liability
therefore.

     The Trustee shall act as Paying Agent with respect to the Securities of this series.

     The Record Date for the payment of interest on this security shall be the first day of the
month in which an interest payment is due.

     The Company, the Trustee and any agent of the Company or the Trustee may treat the bearer
hereof as the owner of this Security for all purposes, whether or not this Security shall be
overdue, and neither the Company nor the Trustee nor any such agent shall be affected by notice to
the contrary.

     Title to the Security shall pass by delivery.

 

 

A-3

     Reference is hereby made to the further provisions of this Security set forth in the Indenture
and the Supplemental Indenture and to the further provisions set forth on the reverse hereof, which
further provisions shall for all purposes have the same effect as if set forth at this place.

     All terms used in this Security which are defined in the Indenture or the Supplemental
Indenture shall have the meanings assigned to them in the Indenture or the Supplemental Indenture.

 

 

A-4

     IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its
corporate seal.

Date:

	 	 	 	 	 
	 

	 	The Common Seal of

BRITISH TELECOMMUNICATIONS plc
hereunto affixed is authenticated by:
	 	 

CERTIFICATE OF AUTHENTICATION

     This is one of the Floating Rate Notes due 2003 described in the within-mentioned Indenture.

	 	 	 	 	 	 	 
	 	 	CITIBANK, N.A.	 	 
	 
	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 

          Authorized Signatory
	 	 

 

 

A-5

[Form of Reverse]

     This Security is one of a duly authorized issue of securities of the Company (herein called
the “Securities”), issued and to be issued in one or more series under an Indenture, dated as of
December 12, 2000 (herein called the “Indenture”), between the Company and Citibank, N.A., as
Trustee (herein called the “Trustee”, which term includes any successor trustee under the
Indenture), and a Supplemental Indenture, dated as of December 12, 2000, between the Company and
the Trustee (the “Supplemental Indenture”) to which Indenture and Supplemental Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders
of the Securities and of the terms upon which the Securities are, and are to be, authenticated and
delivered. This Security is one of the series designated on the face hereof, limited in aggregate
principal amount to U.S.$l. The Securities of this series are issuable as Bearer Securities in the
denomination of U.S.$l.

     The interest rate payable on the Securities will be subject to adjustment from time to time as
set forth in Section 302 the Supplemental Indenture.

     The Company will pay to the Holders of Securities such Additional Amounts as may become
payable under Section 1004 of the Indenture.

     This Security may be redeemed at the option of the Company in whole but not in part at any
time at a redemption price equal to the principal amount thereof plus accrued interest to the date
fixed for redemption if the Company satisfies the Trustee that, as a result of any change in or
amendment to the laws or any regulations or rulings promulgated thereunder of the United Kingdom or
of any political subdivision or taxing authority of or in the United Kingdom or any change in the
application or interpretation of such laws, regulations or rulings, or any change in the official
application or interpretation of, or any execution of or amendment to, any treaty or treaties
affecting taxation to which the United Kingdom is a party, which change, execution or amendment
becomes effective on or after December 12, 2000 the Company has been or will be required to pay
additional amounts with respect to the Securities as described in Section 1004 of the Indenture.
Prior to the giving of notice of redemption of such Securities pursuant to this provision, the
Company will deliver to the Trustee an Officers’ Certificate, stating that the Company is entitled
to effect such redemption and setting forth in reasonable detail a statement of circumstances
showing that the conditions precedent to the right of the Company to redeem such Securities
pursuant to this provision has been satisfied. Such Officers’ Certificate shall attach a
certificate of an independent lawyer or accountant satisfactory to the Trustee in form and content
reasonably satisfactory to the Trustee to the effect that the circumstances required to be
established for this provision pursuant to Section 1108 of the Indenture exist.

          If, pursuant to Section 801(3)(a) of the Indenture, the Company has been or would be required
to pay any additional amounts as therein provided, the Securities may be redeemed at the option of
the Company in whole but not in part, at any time, at a redemption price equal to the principal
amount thereof plus accrued interest to the date fixed for redemption. Prior to the giving of
notice of redemption of such Securities pursuant to this provision, the Company will deliver to the
Trustee an Officers’ Certificate, stating that the Company is entitled to effect such redemption
and setting forth in reasonable detail a statement of circumstances showing that the conditions
precedent to the right of the Company to redeem such Securities pursuant to this provision has been
satisfied.

          Notice of any redemption shall be mailed at least 30 days but not more than 60 days before the
redemption date to each holder of Securities to be redeemed. All Securities surrendered for
payment or exchange shall be delivered to the Trustee. The Trustee shall cancel and may destroy
all such Securities surrendered for payment or exchange, in accordance with its note destruction
policy; provided, however, that and if Securities are destroyed, the Trustee shall deliver a
certificate of destruction to the Company. Unless the Company defaults in payment of the
redemption price, on and after the redemption date interest shall cease to accrue on the relevant
Securities or portions thereof called for redemption.

 

 

A-6

          If an Event of Default with respect to Securities of this series shall occur and be
continuing, the principal of the Securities of this series may be declared due and payable in the
manner and with the effect provided in the Indenture.

     The Indenture permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of the Company and the rights of the Holders of the
Securities under the Indenture at any time by the Company and the Trustee with the consent of the
Holders of
662/3% in principal amount of the Securities at the time Outstanding. The Indenture also
contains provisions permitting the Holders of not less than 662/3% in principal amount of the
Securities at the time Outstanding, on behalf of the Holders of all Securities of such series, to
waive compliance by the Company with certain provisions of the Indenture and not less than a
majority in principal amount of the Securities at the time Outstanding to waive certain past
defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all future Holders of this
Security and any coupon appertaining hereto and of any Security issued in exchange herefor or in
lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

     As set forth in, and subject to, the provisions of the Indenture, no Holder of any Security of
this series or will have any right to institute any proceeding with respect to the Indenture, this
Security or for any remedy thereunder, unless such Holder shall have previously given to the
Trustee written notice of a continuing Event of Default with respect to the Securities of this
series. The Holders of not less than 25% in principal amount of the Outstanding Securities of this
series shall have made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as trustee, and the Trustee shall not have received from the Holders of a
majority in principal amount of the Outstanding Securities of this series a direction inconsistent
with such request and shall have failed to institute such proceeding within 60 days; provided,
however, that such limitations do not apply to a suit instituted by the Holder hereof or any
related coupon for the enforcement of payment of the principal of or any interest on this Security
or payment of such coupon on or after the respective due dates expressed herein or in such coupon.

     No reference herein to the Indenture and no provision of this Security or of the Indenture
shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay
the principal of and any interest (including additional amounts, as described on the face hereof)
on this Security at the times, places and rate, and in the coin or currency, herein prescribed.

     The Indenture, the Supplemental Indenture and the Securities shall be governed by and
construed in accordance with the laws of the State of New York.

 

 

B-1

Exhibit B

[Form of Bearer Security]

[Form of Face]

British Telecommunications plc

l% NOTES DUEl

			
	     	 	 
	No. B-
	 	U.S.$

     British Telecommunications plc, a corporation duly organized and existing under the laws of
England and Wales (herein called the “Company”, which term includes any successor Person under the
Indenture and the Supplemental Indenture referred to on the reverse hereof), for value received,
hereby promises to pay to bearer upon presentation and surrender of this Security the principal sum
of l Thousand United States dollars on l and to pay interest thereon from the date hereof,
semi-annually in arrears on June 15 and December 15 in each year, commencing June 15, 2001, at the
rate of l% per annum, until the principal hereof is paid or made available for payment. Interest
on the Securities will accrue from December 12, 2000. Interest will be computed on the basis of a
360-day year of twelve 30-day months.

     The Trustee shall act as Paying Agent with respect to the Securities of this series.

     The Record Date for the payment of interest on this security shall be the first day of the
month in which an interest payment is due.

     The Company, the Trustee and any agent of the Company or the Trustee may treat the bearer
hereof as the owner of this Security for all purposes, whether or not this Security shall be
overdue, and neither the Company nor the Trustee nor any such agent shall be affected by notice to
the contrary.

     Title to the Security shall pass by delivery.

     Reference is hereby made to the further provisions of this Security set forth in the Indenture
and Supplemental Indenture and to the provisions set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set forth at this place.

     All terms used in this Security which are defined in the Indenture or the Supplemental
Indenture shall have the meanings assigned to them in the Indenture or the Supplemental Indenture.

 

 

B-2

     IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its
corporate seal.

Date:

	 	 	 	 	 
	 

	 	The Common Seal of

BRITISH TELECOMMUNICATIONS plc
hereunto affixed is authenticated by:
	 	 

CERTIFICATE OF AUTHENTICATION

     This is
one of the l % Notes due described in the within-mentioned Indenture.

	 	 	 	 	 	 	 
	 	 	CITIBANK, N.A.	 	 
	 
	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	 	 	          Authorized Signatory	 	 

 

 

B-3

[Form of Reverse]

     This Security is one of a duly authorized issue of securities of the Company (herein called
the “Securities”), issued and to be issued in one or more series under an Indenture, dated as of
December 12, 2000 (herein called the “Indenture”), between the Company and Citibank, N.A., as
Trustee (herein called the “Trustee”, which term includes any successor trustee under the
Indenture), and a Supplemental Indenture, dated as of December 12, 2000, between the Company and
the Trustee (the “Supplemental Indenture”) to which Indenture and Supplemental Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders
of the Securities and of the terms upon which the Securities are, and are to be, authenticated and
delivered. This Security is one of the series designated on the face hereof , limited in aggregate
principal amount to U.S.$l. The Securities of this series are issuable as Bearer Securities in the
denomination of U.S.$l.

     The interest rate payable on the Securities will be subject to adjustment from time to time as
set forth in Section 302 the Supplemental Indenture.

     The Company will pay to the Holders of Securities such Additional Amounts as may become
payable under Section 1004 of the Indenture.

     The Securities will be redeemable as a whole or in part, at the option of the Company at any
time, at a redemption price equal to the greater of (i) 100% of the principal amount of such
Securities and (ii) the sum of the present values of the remaining scheduled payments of principal
and interest thereon (exclusive of interest accrued to the date of redemption) discounted to the
redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Rate plus l per cent. plus accrued interest thereon to the date of redemption.

     The Securities may also be redeemed at the option of the Company in whole but not in part at
any time at a redemption price equal to the principal amount thereof plus accrued interest to the
date fixed for redemption if the Company satisfies the Trustee that, as a result of any change in
or amendment to the laws or any regulations or rulings promulgated thereunder of the United Kingdom
or of any political subdivision or taxing authority of or in the United Kingdom or any change in
the application or interpretation of such laws, regulations or rulings, or any change in the
official application or interpretation of, or any execution of or amendment to, any treaty or
treaties affecting taxation to which the United Kingdom is a party, which change, execution or
amendment becomes effective on or after December 12, 2000 the Company has been or will be required
to pay additional amounts with respect to the Securities as described in Section 1004 of the
Indenture. Prior to the giving of notice of redemption of such Securities pursuant to this
provision, the Company will deliver to the Trustee an Officers’ Certificate, stating that the
Company is entitled to effect such redemption and setting forth in reasonable detail a statement of
circumstances showing that the conditions precedent to the right of the Company to redeem such
Securities pursuant to this provision has been satisfied. Such Officers’ Certificate shall attach a
certificate of an independent lawyer or accountant satisfactory to the Trustee in form and content
reasonably satisfactory to the Trustee to the effect that the circumstances required to be
established for this provision pursuant to Section 1108 of the Indenture exist.

          If, pursuant to Section 801(3)(a) of the Indenture, the Company has been or would be required
to pay any additional amounts as therein provided, the Securities may be redeemed at the option of
the Company in whole but not in part, at any time, at a redemption price equal to the principal
amount thereof plus accrued interest to the date fixed for redemption. Prior to the giving of
notice of redemption of such Securities pursuant to this provision, the Company will deliver to the
Trustee an Officers’ Certificate, stating that the Company is entitled to effect such redemption
and setting forth in reasonable detail a statement of circumstances showing that the conditions
precedent to the right of the Company to redeem such Securities pursuant to this provision has been
satisfied.

          Notice of any redemption shall be mailed at least 30 days but not more than 60 days before the
redemption date to each holder of Securities to be redeemed. All Securities surrendered for
payment or exchange

 

 

B-4

shall be delivered to the Trustee. The Trustee shall cancel and may destroy all such Securities
surrendered for payment or exchange, in accordance with its note destruction policy; provided,
however, that and if Securities are destroyed, the Trustee shall deliver a certificate of
destruction to the Company. Unless the Company defaults in payment of the redemption price, on and
after the redemption date interest shall cease to accrue on the relevant Securities or portions
thereof called for redemption.

     If an Event of Default with respect to Securities of this series shall occur and be
continuing, the principal of the Securities of this series may be declared due and payable in the
manner and with the effect provided in the Indenture.

     The Indenture permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of the Company and the rights of the Holders of the
Securities under the Indenture at any time by the Company and the Trustee with the consent of the
Holders of 662/3% in principal amount of the Securities at the time Outstanding. The Indenture also
contains provisions permitting the Holders of not less than 662/3% in principal amount of the
Securities at the time Outstanding, on behalf of the Holders of all Securities of such series, to
waive compliance by the Company with certain provisions of the Indenture and not less than a
majority in principal amount of the Securities at the time Outstanding to waive certain past
defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all future Holders of this
Security and any coupon appertaining hereto and of any Security issued in exchange herefor or in
lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

     As set forth in, and subject to, the provisions of the Indenture, no Holder of any Security of
this series or will have any right to institute any proceeding with respect to the Indenture, this
Security or for any remedy thereunder, unless such Holder shall have previously given to the
Trustee written notice of a continuing Event of Default with respect to the Securities of this
series. The Holders of not less than 25% in principal amount of the Outstanding Securities of this
series shall have made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as trustee, and the Trustee shall not have received from the Holders of a
majority in principal amount of the Outstanding Securities of this series a direction inconsistent
with such request and shall have failed to institute such proceeding within 60 days; provided,
however, that such limitations do not apply to a suit instituted by the Holder hereof or any
related coupon for the enforcement of payment of the principal of or any interest on this Security
or payment of such coupon on or after the respective due dates expressed herein or in such coupon.

   No reference herein to the Indenture and no provision of this Security or of the Indenture
shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay
the principal of and any interest (including additional amounts, as described on the face hereof)
on this Security at the times, places and rate, and in the coin or currency, herein prescribed.

   The Indenture, the Supplemental Indenture and the Securities shall be governed by and
construed in accordance with the laws of the State of New York.EX-4.3

 

Exhibit 4.3

BRITISH TELECOMMUNICATIONS plc

as Issuer

and

Citibank, N.A.

as Book-Entry Depositary

 

DEPOSIT AGREEMENT

Dated as of December 12, 2000

 

 

 

DEPOSIT AGREEMENT

     THIS DEPOSIT AGREEMENT (this “Agreement”) is made as of this 12th day of December,
2000 by and between British Telecommunications plc, a public limited company incorporated in Great
Britain and registered in England and Wales (the “Company”) and Citibank, N.A., a national banking
association, as Book-Entry Depositary (the “Book-Entry Depositary”).

ARTICLE 1

DEFINITIONS AND OTHER GENERAL PROVISIONS

     SECTION 1.01. Definitions.

     The following terms, as used herein, have the following meanings:

     “Additional Amounts” shall have the meaning ascribed to it in the Indenture.

     “Beneficial Owner” means any person owning any beneficial interest in a
Certificateless Depositary Interest but who is not the holder of such Certificateless Depositary
Interest and may include any DTC Participant; it being understood that the term Beneficial Owner
shall not include any agent or financial intermediary holding an interest in a Certificateless
Depositary Interest solely to the extent such interest is held for or on behalf of any Beneficial
Owner.

     “Board Resolution” shall have the meaning ascribed to it in the Indenture.

     “Book-Entry Depositary” means the party named as such in this Agreement until a
successor shall have become such pursuant to Section 3.07 hereof, and thereafter “Book-Entry
Depositary” shall mean such successor or its nominee or the custodian of either.

     “Book-Entry Interests” means an interest or interests in any Certificateless
Depositary Interest issued pursuant to this Agreement which are eligible for trading through DTC’s
book-entry system.

     “Business Day” shall have the meaning ascribed to it in the Indenture.

     “Certificateless Depositary Interest” means an interest in a Global Security of any
series of Securities that (i) shall, at all times, represent the right to receive 100% of the
principal and premium (if any) of, and interest and Additional Amounts, if any, on such Global
Security and the right to receive in certain circumstances the issue of one or more Definitive
Securities representing up to 100% of the principal amount at maturity represented by such Global
Security and (ii) is issued by the Book-Entry Depositary to the Depositary or its nominee.

     “Company” means the party named as such in this Agreement until a successor replaces
it pursuant to the applicable provisions of the Indenture and, thereafter, means the successor.

     “Company Order” and “Company Request” shall have the meanings ascribed to them
in the Indenture.

     “Corporate Trust Office” means the office of the Book-Entry Depositary in The Borough
of Manhattan, The City of New York, at which at any particular time its corporate trust business
shall be principally administered, which at the date hereof is located at 111 Wall Street,
5th Floor NY, NY 10005, Attention: Citibank Agency & Trust Services.

     “Definitive Securities” means definitive Securities in registered form issued pursuant
to the Indenture.

1

 

     “Depositary” means DTC or any successor, in whose name the Certificateless Depositary
Interest is recorded pursuant to Section 2.03 hereof.

     “DTC” means The Depository Trust Company or its nominee.

     “DTC Participants” means institutions that have accounts with DTC or its successors.

     “Event of Default” shall have the meaning ascribed to it in the Indenture.

     “Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

     “Global Security” means a global security in bearer form representing 100% of a series
of Securities issued pursuant to the Indenture.

     “Indenture” means the indenture dated as of December 12, 2000 between the Company and
Citibank, N.A., as Trustee, relating to the Securities as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental thereto entered into
pursuant to the applicable provisions thereof, including for all purposes the provisions of the
Trust Indenture Act that are deemed to be a part of and govern such instrument.

     “Letter of Representations” means a Letter of Representations to DTC from the
Book-Entry Depositary and the Company pertaining to one or more series of Securities.

     “Officers’ Certificate” shall have the meaning ascribed to it in the Indenture.

     “Opinion of Counsel” means a written opinion from legal counsel, who may be counsel to
the Company.

     “Person” means any individual, corporation, partnership, limited liability company,
joint venture, association, joint-stock company, trust, unincorporated organization or government
or any agency or political subdivision thereof or any other entity.

     “Responsible Officer” means, with respect to the Book-Entry Depositary, any officer
assigned to or working in the Book-Entry Depositary’s corporate trust department or, with respect
to a particular corporate trust or agency matter, any other officer to whom such matter is referred
because of his or her knowledge and familiarity with the particular subject.

     “Securities” means any senior debt securities of the Company issued, authenticated and
delivered under the Indenture.

     “Stated Maturity” shall have the meaning ascribed to it in the Indenture.

     “Stated Maturity Record Date” shall have the meaning ascribed to it in Section 2.08.

     “Trust Indenture Act” means the United States Trust Indenture Act of 1939 (15 U.S.C.
§§ 77aaa-77bbbb) as in effect on the date of the Indenture; provided, however, that in the event
the United States Trust Indenture Act of 1939 is amended after such date, “Trust Indenture Act”
means, to the extent required by such amendment, the United States Trust Indenture Act of 1939, as
so amended.

     “Trustee” means the Person acting as Trustee under the Indenture until a successor
Trustee shall have become such pursuant to the applicable provisions of the Indenture, and
“Trustee” shall thereafter mean such successor Trustee.

     SECTION 1.02. Rules of Construction.

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     Unless the context otherwise requires, (1) a term has the meaning assigned to it herein; (2)
any capitalized term not otherwise defined herein shall have the meaning ascribed to it in the
Indenture; (3) “or” is not exclusive; (4) “including” means including without limitation; (5) words
in the singular include the plural and words in the plural include the singular; and (6) the words
“herein”, “hereof” and “hereunder” and other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or other subdivision.

ARTICLE 2

BOOK-ENTRY INTERESTS

     SECTION 2.01. Deposit of the Global securities; Issuance of Certificateless Depositary
Interests.

     The Book-Entry Depositary hereby agrees to accept from time to time custody of the Global
Security of any series and shall act as Book-Entry Depositary in accordance with the terms of this
Agreement. The Book-Entry Depositary shall hold such Global Security at its Corporate Trust Office
in The Borough of Manhattan, The City of New York or at such place or places outside the United
Kingdom as it may determine with the consent of the Company for the purposes of Section 2.03 below
in respect of the Global Security of each series. The Book-Entry Depositary shall issue a
Certificateless Depositary Interest with respect to each series of Securities in accordance with
the Letter of Representations. Nothing in this Agreement shall affect the legal rights of the
holder of any Global Security or the obligations of the Company or the Trustee to such holder.

     SECTION 2.02. Book-Entry System.

     (a) Upon acceptance by DTC of a Certificateless Depositary Interest for entry into its
book-entry settlement system in accordance with the terms of the Letter of Representations,
Book-Entry Interests will be issued by DTC and traded through DTC’s book-entry system, and
ownership of such Book-Entry Interests shall be shown in, and the transfer of such ownership shall
be effected through, records maintained by DTC or its successors or DTC Participants. Book-Entry
Interests shall be transferable only as units in the same authorized denominations as the
Securities to which they correspond.

     (b) Except as provided in Section 2.04, no owner of Book-Entry Interests shall be entitled to
receive a Definitive Security on account of such ownership, and such owner’s interest therein shall
be shown only in accordance with the procedures of DTC as set forth in the Letter of
Representations.

     SECTION 2.03. Transfer of Certificateless Depositary Interests.

     The Company appoints the Book-Entry Depositary as its agent for the sole purpose of
maintaining at the Book-Entry Depositary’s Corporate Trust Office records in which the Book-Entry
Depositary shall record (i) DTC as the initial owner of the Certificateless Depositary Interests,
(ii) the transfer of ownership of the Certificateless Depositary Interest in such Global Security
upon Schedule A of each Global Security, and (iii) the increases and decreases in the principal
amount at maturity represented by the Certificateless Depositary Interests. Ownership of a
Certificateless Depositary Interest cannot be transferred unless such transfer is noted in the
records of the Book-Entry Depositary. The Book-Entry Depositary shall not recognize any transfer
or exchange of ownership of Certificateless Depositary Interests that does not comply with the
provisions of this Section 2.03. Unless and until the Securities of a particular series are
exchanged in whole or in part for other securities of the Company or the Global Security is
exchanged for Definitive Securities, the Certificateless Depositary Interest of such series held by
DTC may not be transferred except as a whole by DTC to a nominee of DTC or any such nominee of DTC
to DTC or another nominee of DTC or by DTC or any such nominee to a successor of DTC or a nominee
of such successor. The Book-Entry Depositary shall treat the Person in whose name a
Certificateless Depositary Interest is recorded in the records of the Book-Entry Depositary as the
owner thereof for all purposes whatsoever and shall not be bound or affected by any notice to the
contrary, other than an order of a court having jurisdiction over the Book-Entry Depositary.

     The foregoing paragraph shall not (i) impose an obligation on the Book-Entry Depositary to
record the interests in or transfers of Book-Entry Interests held by DTC Participants, or Persons
that may hold Book-Entry

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Interests through DTC Participants or (ii) restrict transfers of such Book-Entry Interests
held by DTC Participants or such Persons.

     In connection with the Book-Entry Depositary’s appointment as the Company’s agent under this
Section 2.03, the Company shall have such rights and obligations as regards removal of the
Book-Entry Depositary and appointment of a successor as are specified in Section 3.07 hereof.

     SECTION 2.04. Transfer of the Global Securities.

     The Book-Entry Depositary shall hold the Global Security of any series of Securities in
custody for the benefit of the Depositary. The Book-Entry Depositary shall not transfer or lend
any Global Security or any interest therein except that (i) a Global Security may be exchanged in
whole or in part, pursuant to Section 305 of the Indenture, (ii) a Global Security may be exchanged
or replaced pursuant to Sections 306 of the Indenture, (iii) any Global Security may be delivered
to the Trustee for cancellation pursuant to Section 309 of the Indenture and (iv) any Global
Security may be transferred to a successor Book-Entry Depositary appointed in accordance with
Section 307 hereof. Notwithstanding the foregoing, the Book-Entry Depositary shall not under any
circumstances surrender or deliver any Global Security to the Depositary.

     The Book-Entry Depositary shall promptly notify the Depositary that the corresponding Global
Securities will be exchanged in whole or in part for Definitive Securities pursuant to Section 305
of the Indenture in the event of each of the following: (i) the Book-Entry Depositary notifies the
Company and the Trustee in writing under Section 307 hereof that it is unwilling or unable to
continue as Book-Entry Depositary and no successor Book-Entry Depositary has been appointed by the
Company within 120 days of such notification, (ii) DTC notifies the Book-Entry Depositary that it
is unwilling or unable to continue as Depositary with respect to the Certificateless Depositary
Interests or if at any time it is unable to or ceases to be a clearing agency registered under the
Exchange Act and a successor Depositary registered as a clearing agency under the Exchange Act is
not appointed by the Book-Entry Depositary at the written request of the Company within 120 days,
(iii) in the event of a winding-up of the Company, the Company fails to make a payment on the
Securities when due, or an Event of Default (as defined in the Indenture) on the Securities has
occurred and is continuing, or (iv) if the Company at its option and in its sole discretion
determines pursuant to Section 305 of the Indenture that any or all series of Global Securities
should be exchanged (in whole but not in part) for Definitive Securities, the Book-Entry Depositary
shall promptly notify the Depositary that the corresponding Global Securities will be exchanged in
whole or in part for Definitive Securities pursuant to Section 305 of the Indenture. Definitive
Securities shall be issued in such names and amounts as the Depositary shall specify upon
cancellation of the corresponding Certificateless Depositary Interest and all Book-Entry Interests
with respect thereto. The Book-Entry Depositary agrees, for the benefit of the Trustee and holders
of Book-Entry Interests, that it will promptly surrender the corresponding Global Securities held
by it to the Trustee in connection with such exchange for cancellation pursuant to Section 309 of
the Indenture.

     Delivery of Definitive Securities pursuant to this Section 2.04 shall be made free of any fees
of the Book-Entry Depositary to the Depositary or Beneficial Owner with respect thereto.

     SECTION 2.05. Cancellation.

     If a Global Security is surrendered for payment or for redemption or purchase of Securities
evidenced thereby or for exchange for Definitive Securities to any Person other than the Trustee,
such Global Security shall, subject to Section 2.07, be delivered to the Trustee for cancellation.

     SECTION 2.06. Payments in Respect of a Certificateless Depositary Interest and Global
Security.

     (a) Whenever the Book-Entry Depositary shall receive from any Paying Agent appointed under the
Indenture any payment on a Global Security, including any payments of Additional Amounts, the
amount so received shall be distributed promptly to the Depositary entitled thereto, on the
corresponding payment date for such Global Security. So long as DTC is the Depositary, such
payments shall be made in accordance with the Letter of Representations.

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     (b) The Book Entry Depositary shall forward to the Company and the Trustee or their agents
such information from its records as the Company may reasonably request to enable the Company and
the Trustee or their agents to file necessary reports with governmental agencies, and the Book
Entry Depositary, the Company and the Trustee or their agents may (but shall not be required to)
file any such reports necessary to obtain benefits under any applicable tax treaties for the
Depositary or Beneficial Owners of Book-Entry Interests.

     (c) None of the Company, the Trustee, the Book-Entry Depositary or any agent of the Company or
the Trustee or the Book-Entry Depositary will have any responsibility or liability for any aspect
of the records relating to payments made by the Depositary (or its direct or indirect participants)
on account of Book-Entry Interests or for maintaining, supervising or reviewing any records
relating to such Book-Entry Interests.

     (d) Notwithstanding any other provision of this Agreement, the Book-Entry Depositary shall be
required to pay to the Depositary only amounts (including Additional Amounts) received by the
Book-Entry Depositary under the Global Security of any series.

     SECTION 2.07. Redemption of Security and Book-Entry Interest.

     In the event that the Company exercises any right of redemption under the Indenture and the
terms of the Securities of any series in respect of all or any part of a Global Security, the
Book-Entry Depositary shall promptly upon receipt of the redemption price deliver such Global
Security to the Trustee and request the Trustee to endorse Schedule A to such Global Security to
reflect the reduction in the principal amount at maturity of such Global Security as a result of
such redemption. In addition, the Book-Entry Depositary shall notify the Depositary of the
principal amount at maturity redeemed and of a corresponding reduction of the same principal amount
at maturity of the corresponding Certificateless Depositary Interest. The Book-Entry Depositary
shall pay all such amounts received by it in connection with such redemption to the Depositary.

     SECTION 2.08. Record Date.

     Whenever (i) any payment is to be made in respect of any Global Security, (ii) the Book-Entry
Depositary shall receive notice of any action to be taken by the holder of the Global Security of
any series or (iii) the Book-Entry Depositary otherwise deems it appropriate in respect of any
other matter, the Book-Entry Depositary shall fix a record date for the determination of the holder
of the Certificateless Depositary Interest who shall be entitled to receive payment in respect
thereof, to take any such action or to act in respect of any such matter, which record date shall
be the same date as that fixed with respect to the corresponding holder of the Global Security or
holders, if any, of Definitive Securities under the Indenture provided, however,
that the Book-Entry Depository shall initially fix the Business Day immediately preceding each
Stated Maturity as the record date with respect to payments of interest and principal relating to
the Certificateless Depositary Interests and the Book-Entry Interests (the “Stated Maturity Record
Date”); provided, further, that in the event the Book-Entry Depositary changes the
Stated Maturity Record Date, the Book-Entry Depositary shall give notice to the Depositary and
owners of Book-Entry Interests pursuant to Section 4.02 of this Agreement 30 days prior to such new
Stated Maturity Record Date. Subject to the provisions of this Agreement, only the Depositary in
whose name a Certificateless Depositary Interest is recorded in the records of the Book-Entry
Depositary at the close of business on such record date shall be entitled to receive any such
payment, to give instructions as to such action or to act in respect of any such matter.

     SECTION 2.09. Action in Respect of a Certificateless Depositary Interest.

     (a) Not later than 10 days after receipt by the Book-Entry Depositary of notice of any
solicitation of consents or request for a waiver or other action by the holder of the Global
Security of any series of Securities under the Indenture or under this Agreement, the Book-Entry
Depositary shall mail to the Depositary a notice containing (i) such information as is contained in
the notice received, (ii) a statement that the Depositary at the close of business on a specified
recorded date (established in accordance with Section 2.08 hereof) will be entitled, subject to the
provisions of or governing such Certificateless Depositary Interest or Global Security, to instruct
the Book-Entry Depositary as to the consent, waiver or other action, if any, pertaining to this
Agreement or the Indenture and (iii) a statement as to the manner in which such instructions may be
given. Upon the written request of the Depositary received on or before the date established by
the Book-Entry Depositary for such purpose, the Book-Entry

5

 

Depositary shall endeavor insofar as practicable and permitted under the provisions of this
Agreement or the Indenture, as the case may be, to take such action regarding the requested
consent, waiver or other action in respect of all or only a portion of the principal amount at
maturity of such Certificateless Depositary Interest or Global Security, as the case may be, with
respect to which instructions in accordance with any instructions set forth in such request have
been received. In addition, the Book-Entry Depositary will forward to the Depositary, or, based
upon instructions received from the Depositary, to owners of Book-Entry Interests, all materials
pertaining to any such solicitation, request, offer or other action. The Book-Entry Depositary
agrees that the Depositary may grant proxies or otherwise authorized DTC Participants (or Persons
owning Book-Entry Interests through such DTC Participants) to provide such instructions to the
Book-Entry Depositary so that it may exercise any rights of a holder or take any other action which
a holder is entitled to take under the Indenture. The Book-Entry Depositary shall not itself
exercise any discretion in the granting of consents of waivers or the taking of any other action in
respect of a Global Security. Without prejudice to Section 2.06(c), the records of the Depositary
shall, absent manifest error, be conclusive evidence of the owners of the Book-Entry Interests and
the principal amount at maturity represented by such Book-Entry Interests.

     (b) Not later than 10 days after receipt by the Book-Entry Depositary of any notice of
redemption with respect of the Securities pursuant to Section 1102 of the Indenture, the Book-Entry
Depositary shall mail to the Depositary a notice containing (i) the information contained in such
notice of redemption and (ii) a statement that the Securities called for redemption must be
surrendered pursuant to the terms of the Indenture, in order to collect the redemption price. So
long as DTC is the Depositary, such notice shall also comply with the Letter of Representations.

     SECTION 2.10. Changes Affecting a Global Security.

     Upon any reclassification of Securities of any series, or upon any recapitalization,
reorganization, merger, assumption or consolidation or sale of assets affecting the Company or to
which the Company is a party, any securities that shall be received by the Book-Entry Depositary in
exchange for or in respect of the Global Security relating to such series of Securities shall be
treated as a new Global Security or as part of such Global Security under this Agreement and any
corresponding Certificateless Depositary Interest shall thenceforth represent such Global Security,
including such new securities so received.

     SECTION 2.11. Report.

     The Book-Entry Depositary shall promptly send to the Depositary a copy of any notices, reports
and other communications received relating to the Company or any series of Securities.

     SECTION 2.12. Additional Amount.

     At least 10 days prior to the first date on which withholding from any payment on the Global
Security on account of taxes would be required under applicable law or payment of Additional
Amounts would be required to be made pursuant to Section 1004 of the Indenture, and at least 10
days prior to any subsequent such date if there has been any change with respect to such matters,
the Company will furnish the Book-Entry Depositary with an Officers’ Certificate that shall specify
the amount, if any, required to be withheld on such payments and the amount of Additional Amounts
payable, net of amounts to which the Depositary or any owner of such Book-Entry Interest is not
entitled. The Book-Entry Depositary shall have no responsibility for determining whether the
Depositary or any owner of a Book-Entry Interest is entitled to the payment of Additional Amounts,
but shall be entitled to rely conclusively for this purpose on the Officers’ Certificate or on
certifications from the Depositary. Notwithstanding anything to the contrary provided above, the
Book-Entry Depositary shall pay or cause to be paid Additional Amounts only out of funds that shall
be received by it from the Company for that purpose.

ARTICLE 3

THE BOOK-ENTRY DEPOSITARY

     SECTION 3.01. Certain Duties and Responsibilities.

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     (a) The Book-Entry Depositary undertakes to exercise good faith and reasonable care in the
performance of such duties and only such duties are specifically set forth in this Agreement.

     (b) No provision of this Agreement shall be construed to relieve the Book-Entry Depositary
from liability for its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that the duties and obligations of the Book-Entry Depositary with respect to the
Certificateless Depositary Interest and the Global Security of any series shall be determined
solely by the express provisions of this Agreement and the Book-Entry Depositary shall not be
liable except for the performance of such duties and obligations as are specifically set forth in
this Agreement, and no implied covenants or obligations shall be read into this Agreement against
the Book-Entry Depositary.

     (c) The Book-Entry Depositary shall not be liable with respect to any action taken or omitted
to be taken by it in good faith in accordance with the direction of the Depositary relating to the
time, method and place of conducting any proceeding for any remedy available to the Book-Entry
Depositary, or exercising any power conferred upon the Book-Entry Depositary, under this Agreement.

     (d) No provision of this Agreement shall require the Book-Entry Depositary to expand or risk
its own funds or otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers.

     (e) Whether or not therein expressly so provided, every provision of this Agreement relating
to the conduct or affecting the liability of or affording protection to the Book-Entry Depositary
shall be subject to the provisions of this Section.

     SECTION 3.02. Certain Rights of Book-Entry Depositary. Subject to the provisions of
Section 3.01 hereof:

     (a) the Book-Entry Depositary may rely and shall be protected from any liability associated
with or arising out of acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, coupon, security, or other paper or document, whether in its original or facsimile
form, believed by it to be genuine and to have been signed or presented by the proper party or
parties;

     (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced
by an Officers’ Certificate, a Company Order or Company Request, and any action or resolution of
the Board of Directors of the Company shall be sufficiently evidenced by a Board Resolution;

     (c) the Book-Entry Depositary may consult with counsel of its selection and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and protection with
respect to any action taken, suffered or omitted by it hereunder in good faith and in reliance
thereon in accordance with such advice or Opinion of Counsel;

     (d) the Book-Entry Depositary shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Book-Entry Depositary, in its discretion, may make reasonable further inquiry or
investigation into such facts or matters related to the issuance of any Global Security, and if the
Book-Entry Depositary shall determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company, at reasonable times during
normal business hours and upon reasonable notice, personally or by agent or attorney at the sole
cost of the Company and shall incur no liability or additional liability of any kind by reason of
such inquiry or investigation;

     (e) the Book-Entry Depositary may execute any of the powers hereunder or perform any duties
hereunder either directly or by or through agents or attorneys and the Book-Entry Depositary shall
not be responsible for any misconduct or negligence on the part of any agent (other than an officer
or employee of the Book-Entry Depositary) or attorney appointed with due care by it hereunder;

7

 

     (f) the Book-Entry Depositary shall be under no obligation to exercise any of the rights or
powers vested in it by this Agreement at the request, order or direction of the Depositary, unless
the Depositary shall have offered to the Book-Entry Depositary security or indemnity satisfactory
to it against the costs, expenses and liabilities that might be incurred by it in compliance with
such request, order or direction;

     (g) the Book-Entry Depositary shall not be liable for any action taken or omitted by it in
good faith and reasonably believed by it to be authorized or within the discretion, rights or
powers conferred upon it by this Agreement; and

     (h) whenever in the administration of its duties under this Agreement the Book-Entry
Depositary shall deem it necessary or desirable that a matter be proved or established prior to
taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect
thereof be herein specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Book-Entry Depositary, be deemed to be conclusively proved and established by an
Officers’ Certificate delivered to the Book-Entry Depositary.

     SECTION 3.03. Not Responsible for Recitals or Issuance of Securities.

     The recitals contained in the Indenture and in any Security, except the Trustee’s certificates
of authentication, shall be taken as the statements of the Company, and the Book-Entry Depositary
assumes no responsibility for their correctness. The Book-Entry Depositary makes no
representations as to the validity or sufficiency of this Agreement or of any Global Security or of
any offering materials and the performance and observance by the Company of its obligations under
any Global Security or the recoverability of any sum of interest or principal due or to become due
from the Company in respect of any Global Security. The Book-Entry Depositary shall at no time be
liable for any act, default or omission of the Company under or in respect of any Security. The
Book-Entry Depositary shall not be accountable for the use or application by the Company of the
proceeds with respect to any Security. The Book-Entry Depositary shall at no time have any
responsibility for, or obligation or liability in respect of, the financial condition,
creditworthiness, affairs, status or nature of the Company.

     SECTION 3.04. Money Held in Trust.

     Money held by the Book-Entry Depositary in trust hereunder need not be segregated from other
funds held by the Book-Entry Depositary, except to the extent required by law, and except that if
the Book-Entry Depositary acts as paying agent with respect to any Securities, money held in such
capacity shall be segregated from the money held in its capacity as Book-Entry Depositary. The
Book-Entry Depositary shall be under no obligation to invest or pay interest on any money received
by it hereunder, except as otherwise agreed in writing with the Company.

     SECTION 3.05. Compensation and Reimbursement. The Company agrees:

     (a) to pay to the Book-Entry Depositary from time to time such compensation as agreed between
them in writing for all services rendered by it hereunder (which compensation shall not be limited
by any provision of law with regard to the compensation of a trustee of an express trust);

     (b) to reimburse the Book-Entry Depositary and any predecessor Book-Entry Depositary upon its
request for all expenses, disbursements and advances incurred or made by the Book-Entry Depositary
in accordance with any provision of this Agreement (including the reasonable compensation and the
expenses and disbursements of its agents and counsel but excluding any ordinary administrative
expenses and any overhead expense), except any such expense, disbursement or advance as may be
attributable to its gross negligence or willful misconduct; and

     (c) to fully indemnify each of the Book-Entry Depositary and any predecessor Book-Entry
Depositary for, and to hold it harmless against, any and all loss, liability, claim, damage or
expense incurred without gross negligence or willful misconduct on its part, arising out of or in
connection with the acceptance or administration of this Agreement and its duties hereunder,
including the costs and expenses of defending itself against or investigating any claim of
liability in connection with the exercise or performance of any of its powers or duties hereunder.

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     The Book-Entry Depositary shall notify the Company in writing of the commencement of any
action or lien in respect of which indemnification may be sought promptly after the Book-Entry
Depositary becomes aware of such commencement (provided that the failure to make such notification
shall not affect the Book-Entry Depositary’s rights hereunder). The Book-Entry Depositary shall
not compromise or settle any such action or claim without the written consent of the Company, which
consent shall not be unreasonably withheld.

     The obligations of the Company under this Section to compensate and indemnify the Book-Entry
Depositary and any predecessor Book-Entry Depositary and to pay or reimburse the Book-Entry
Depositary and any predecessor Book-Entry Depositary for expenses, including reasonable attorney’s
fees, disbursements and advances shall survive the repayment of any Security, resignation or
removal of the Book-Entry Depositary and satisfaction, discharge or other termination of this
Agreement.

     SECTION 3.06. Book-Entry Depositary Required; Eligibility.

     At all times when there is a Book-Entry Depositary hereunder, such Book-Entry Depositary shall
be a corporation organized and doing business under the laws of the United States of America, any
State thereof or the District of Columbia, having, together with its parent, a combined capital and
surplus of at least $150,000,000, subject to supervision or examination by Federal, State or
District of Columbia authority, willing to act on reasonable terms. Such corporation shall have
its principal place of business in the Borough of Manhattan, The City of New York, if there be such
a corporation in such location willing to act upon reasonable and customary terms and conditions.
If such corporation, or its parent, publishes reports of condition at least annually, pursuant to
law or to the requirements of the aforesaid supervising or examining authority, then for the
purposes of the Section, the combined capital and surplus of such corporation shall be deemed to be
its combined capital and surplus as set forth in its most recent report of condition so published.
The Book-Entry Depositary and the Company shall have executed a Letter of Representations to DTC
acceptable in form and substance to DTC and the Company with respect to the Certificateless
Depositary Interests. The Book-Entry Depositary hereunder shall at all times be the Trustee under
the Indenture, subject to receipt of an Opinion of Counsel that the same Person is precluded by law
from acting in such capacities. If at any time the Book-Entry Depositary shall cease to be
eligible in accordance with the provisions of the Section, it shall resign immediately in the
manner and with the effect hereinafter specified in this Article.

     SECTION 3.07. Resignation and Removal: Appointment of Successor.

     (a) No resignation or removal of the Book-Entry Depositary and, in the case of (i) below, no
appointment of a successor Book-Entry Depositary pursuant to this Article shall become effective
until (i) the acceptance of appointment by the successor Book-Entry Depositary in accordance with
the applicable requirements of Section 3.08 hereof or (ii) the issuance of Definitive Securities
with respect to all outstanding Securities in accordance with Section 2.04 hereof.

     (b) The Book-Entry Depositary may resign at any time by giving written notice thereof to the
Company and the Depositary, in accordance with Section 4.01 and Section 4.04 hereof, not less than
60 days prior to the effective date of such resignation. The Book-Entry Depositary may be removed
at any time upon not less than 90 days’ notice by the filing with it of an instrument in writing
signed on behalf of the Company and specifying such removal and the date when it is intended to
become effective.

     (c) If at any time

     (1) the Book-Entry Depositary shall cease to be eligible under Section 3.06 hereof and
shall fail to resign after written request therefor by the Company or by the Depositary, or

     (2) the Book-Entry Depositary shall become incapable of acting with respect to any
Certificateless Depositary Interest or shall be adjudged a bankrupt or insolvent, or a
receiver or liquidator of the Book-Entry Depositary or of its property shall be appointed or
any public officer shall take charge or control of the Book-Entry Depositary or of its
property or affairs for the purpose of rehabilitation, conservation of liquidation,

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then, in any such case, (i) the Company, by Board Resolution, may immediately remove the Book-Entry
Depositary and appoint a successor Book-Entry Depositary or (ii) the Depositary or Book-Entry
Depositary may, on behalf of itself and all others similarly situated, petition at the expense of
the Company any court of competent jurisdiction for the removal of the Book-Entry Depositary and
the appointment of a successor Book-Entry Depositary or Book-Entry Depositaries unless Definitive
Securities have been issued with respect to all outstanding Securities in accordance with the
Indenture. Such court may thereupon, after such notice, if any, as it may deem proper and
prescribe, remove the Book-Entry Depositary and appoint a successor Book-Entry Depositary.

     (d) If the Book-Entry Depositary shall resign, be removed or become incapable of acting, or if
a vacancy shall occur in the office of Book-Entry Depositary for any cause, the Company, by Board
Resolution, shall promptly appoint a successor Book-Entry Depositary (other than the Company) and
shall comply with the applicable requirements of Section 3.08 hereof. If no successor Book-Entry
Depositary with respect to all Global Securities shall have been so appointed by the Company and
accepted appointment in the manner required by Section 3.08, the Depositary or Book-Entry
Depositary may, on behalf of itself and all others similarly situated, at the expense of the
Company, petition any court of competent jurisdiction for the appointment of a successor Book-Entry
Depositary unless Definitive Securities have been issued with respect to all outstanding Securities
in accordance with the Indenture.

     (e) The Company shall give, or shall cause such successor Book-Entry Depositary to give,
notice of each resignation and each removal of a Book-Entry Depositary and each appointment of a
successor Book-Entry Depositary to the Depositary in accordance with Section 4.02 hereof. Each
notice shall include the name of the successor Book-Entry Depositary and the address of its
Corporate Trust Office. If the Company fails to give notice within ten days after acceptance of
appointment by the successor Book-Entry Depositary, the successor Book-Entry Depositary shall cause
such notice to be given at the expense of the Company.

     SECTION 3.08. Acceptance of Appointment by Successor.

     (a) In case of the appointment hereunder of a successor Book-Entry Depositary, every such
successor Book-Entry Depositary so appointed shall execute, acknowledge and deliver to the Company
and to the retiring Book-Entry Depositary an instrument accepting such appointment, and thereupon
the resignation or removal of the retiring Book-Entry Depositary shall become effective and such
successor Book-Entry Depositary, without any further act, deed or conveyance, shall become vested
with all the rights, powers, agencies and duties of the retiring Book-Entry Depositary, with like
effect as if originally named as Book-Entry Depositary hereunder; provided, however, on the request
of the Company or the successor Book-Entry Depositary, such retiring Book-Entry Depositary shall,
upon payment of all amounts due and payable to it pursuant to Section 3.05 hereof, execute and
deliver an instrument transferring to such successor Book-Entry Depositary all the rights and
powers of the retiring Book-Entry Depositary and shall duly assign, transfer and deliver to such
successor Book-Entry Depositary all property and money held by such retiring Book-Entry Depositary
hereunder and shall deliver each Global Security to the successor.

     (b) Upon request of any such successor Book-Entry Depositary, the Company shall execute any
and all instruments necessary for more fully and certainly vesting in and confirming to such
successor Book-Entry Depositary all such rights, powers and agencies referred to in paragraph (a)
of this Section.

     (c) No successor Book-Entry Depositary shall accept its appointment unless at the time of such
acceptance such successor Book-Entry Depositary shall be eligible under this Article.

     (d) Upon acceptance of appointment by any successor Book-Entry Depositary as provided in this
Section, the Company shall give notice thereof to the Depositary in accordance with Section 4.02
hereof. If the acceptance of appointment is substantially contemporaneous with the resignation of
the Book-Entry Depositary, the notice called for by the preceding sentence may be combined with the
notice called for by Section 3.07 hereof. If the Company fails to give such notice within 15 days
after acceptance of appointment by the successor Book-Entry Depositary, the successor Book-Entry
Depositary shall promptly cause such notice to be given at the expense of the Company.

10

 

     SECTION 3.09. Merger, Conversion, Consolidation or Succession to Business.

     Any corporation into which the Book-Entry Depositary may be merged or converted or with which
it may be consolidated, or any corporation resulting from any merger, conversion or consolidation
to which the Book-Entry Depositary shall be a party, or any corporation succeeding to all or
substantially all the corporate trust or agency business of the Book-Entry Depositary, shall be the
successor of the Book-Entry Depositary hereunder, without the execution or filing of any paper or
any further act on the part of any of the parties hereto, provided that such corporation shall be
otherwise eligible under this Article. Written notice of any merger, conversion, consolidation or
sale shall forthwith be given to the Company and the Depositary.

     SECTION 3.10. May Hold Securities; Other Dealings.

     The Book-Entry Depositary may own and deal in any class of securities of the Company and its
affiliates and in the Securities and Book-Entry Interests. The Book-Entry Depositary may enter
into other dealings with the Company of any nature whatsoever.

     SECTION 3.11. Notice of Default.

     Within 10 days after the occurrence of any Event of Default under the Indenture with respect
to any Series of Securities (a “Securities Default”) of which a Responsible Officer of the
Book-Entry Depositary has actual knowledge, the Book-Entry Depositary shall transmit by mail to the
Depositary in the manner provided in Section 4.02 hereof, notice of such Securities Default, unless
such Securities Default shall have been cured or waived.

ARTICLE 4

MISCELLANEOUS PROVISIONS

     SECTION 4.01. Notices to Book-Entry Depositary or Company.

     Any request, demand, authorization, direction, notice, consent, or waiver or other document
provided or permitted by this Agreement to be made upon, given or furnished to, or filed with,

     (a) the Book-Entry Depositary by the Depositary, the Trustee or the Company shall be
sufficient for every purpose hereunder (unless otherwise herein expressly provided) if made, given,
furnished or filed in writing and delivered or mailed and received, first-class postage prepaid, to
the Book-Entry Depositary at its Corporate Trust Office, Attention: Citibank Agency & Trust
Services, or at any other address previously furnished in writing by the Book-Entry Depositary to
the Depositary, the Trustee and the Company, or

     (b) the Company, by the Book-Entry Depositary shall be sufficient for every purpose hereunder
(unless otherwise herein expressly provided) if made, given, furnished or filed in writing and
delivered or mailed and received, first-class postage prepaid to the Company, BT Centre, 81 Newgate
Street, London EC1A 7AJ, England, Attention: Ann Louise Holding, or at any other address
previously furnished in writing to the Book-Entry Depositary by the Company.

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     SECTION 4.02. Notice to Depositary and Owners; Waiver.

     Where this Agreement provides for notice to the Depositary or owners of Book-Entry Interests
of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided
or as provided in the Letter of Representations) if in writing and mailed first-class postage
prepaid, to the Depositary at the address notified to the Book-Entry Depositary, in each case not
later than the latest date, and not earlier than the earliest date, prescribed for the giving of
such notice. Where this Agreement provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waiver of notice by the Depositary shall be filed
with the Book-Entry Depositary, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.

     If by reason of the suspension of regular mail service or for any other reason it shall be
impracticable to give such notice by mail, then such notification as shall be made with the
approval of the Book-Entry Depositary shall constitute a sufficient notification for every purpose
hereunder.

     SECTION 4.03. Effect of Heading and Table of Contents.

     The Article and Section headings herein are for convenience only and shall not affect the
construction hereof.

     SECTION 4.04. Successors and Assigns.

     All covenants and agreements in this Agreement by the Company shall bind its successors and
assigns, whether so expressed or not.

     SECTION 4.05. Separability Clause.

     In case any provision in this Agreement or in any series of Securities shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the remaining provisions
hereof and thereof shall not in any way be affected or impaired thereby.

     SECTION 4.06. Benefits of Agreement.

     Nothing in this Agreement, any series of Securities, or the Indenture, express or implied,
shall give to any Person, other than the parties hereto and their successors hereunder, any
benefits or any legal or equitable right, remedy or claim under this Agreement. The owners from
time to time of the Book-Entry Interests shall be parties to this Agreement and shall be bound by
all of the terms and conditions hereof and of the Indenture and the corresponding series of
Securities, by their acceptance of delivery of the Book-Entry Interests.

     SECTION 4.07. Governing Law.

     This Agreement shall be governed by, and constructed in accordance with, the laws of the State
of New York without regard to the applicable principles of conflicts of laws to the extent that the
application of the laws of another jurisdiction would be required thereby.

     SECTION 4.08. Jurisdiction.

     By the execution and delivery of this Agreement, the Company (i) acknowledges that it has, by
separate written instrument, irrevocably designated and appointed CT Corporation System as its
authorized agent upon which process may be served in any suit or proceeding arising out of this
Agreement that may be instituted in any federal or state court in the Borough of Manhattan, The
City of New York, and acknowledges that CT Corporation System has accepted such designation, (ii)
submits to the jurisdiction of any such court in any such suit or proceeding, and waives any
objection which it may now or hereafter have to the laying of venue or any such proceeding or any
claim of inconvenient forum and (iii) agrees that service of process upon CT Corporation System and
written notice of

12

 

said service to the Company (mailed or delivered to the Company’s General Counsel at the
Company’s principal office) shall be deemed in every respect effective service of process upon it
in any such suit or proceeding. The Company further agrees to take any and all action, including
the execution and filing of any and all such documents and instruments, as may be necessary to
continue such designation and appointment of CT Corporation System in full force and effect so long
as this Agreement shall be in full force and effect. To the extent that the Company has or
hereafter may acquire any immunity from jurisdiction of any court or from any legal process
(whether through service of notice, attachment prior to judgment, attachment in aid of execution of
otherwise) with respect to itself or its property, the Company hereby irrevocably waives such
immunity in respect of its obligations under this Agreement to the fullest extent permitted by law.

     SECTION 4.09. Counterparts.

     This Agreement may be executed in any number of counterparts by the parties hereto on separate
counterparts, each of which, when so executed and delivered, shall be deemed an original, but all
such counterparts shall together constitute one and the same instrument.

     SECTION 4.10. Inspection of Agreement.

     A copy of this Agreement shall be available upon prior written request at all reasonable times
during normal business hours at the Corporate Trust Office of the Book-Entry Depositary for
inspection by any owner of Book-Entry Interests.

     SECTION 4.11. Satisfaction and Discharge.

     This Agreement upon a Company Request shall cease to be of further effect with respect to
Securities of any series, and the Book-Entry Depositary, at the expense of the Company, shall
execute proper instruments acknowledging satisfaction and discharge of this Agreement, when (i)
with respect to the Securities of any series the Indenture has been satisfied and discharge
pursuant to the provisions thereof or Definitive Securities have been issued and the corresponding
Global Securities have been canceled in accordance with the provisions of Section 2.04 or 2.05,
(ii) the Company has paid or caused to be paid all sums payable hereunder by the Company with
respect to the Securities of such series and (iii) the Company has delivered to the Book-Entry
Depositary an Officers’ Certificate and an Opinion of Counsel, stating that all conditions
precedent herein provided relating to the satisfaction and discharge of this Agreement with respect
to the Securities of such series have been complied with.

     SECTION 4.12. Amendments.

     The Company and the Book-Entry Depositary may amend this Agreement without the consent of the
Depositary or the owners of Book-Entry Interests:

     (a) to cure any ambiguity, omission, defect or inconsistency;

     (b) to add to the convents and agreements of the Book-Entry Depositary or the Company;

     (c) to evidence or effectuate the assignment of the Book-Entry Depositary’s rights and duties
to a qualified successor, as provided herein;

     (d) to comply with any requirements of the U.S. Securities Act of 1933, as amended, the
Exchange Act, the U.S. Investment Company Act of 1940, as amended, the Trust Indenture Act or any
other applicable law, rule or regulation; or

     (e) to modify, alter, amend or supplement this Agreement in any other manner that is not
adverse to the Depositary or the owners of Book-Entry Interests.

     No amendment that adversely affects the Depositary may be made to this Agreement without the
consent of the Depositary.

13

 

     SECTION 4.13. Book-Entry Depositary to Execute Amendments.

     The Book-Entry Depositary shall duly execute and deliver any amendment authorized pursuant to
Section 4.12 if the amendment does not affect the rights, duties, liabilities or immunities of the
Book-Entry Depositary. If it does, the Book-Entry Depositary may but need not execute and deliver
such amendment. In executing and delivering such amendment the Book-Entry Depositary shall be
entitled to receive indemnity reasonably satisfactory to it and to receive, and shall be fully
protected in reasonably relying upon, an Officers’ Certificate (which need only cover the matters
set forth in clause (a) below) and an Opinion of Counsel stating that:

     (a) such amendment is authorized or permitted by this Agreement;

     (b) the Company has all necessary corporate power and authority to execute and deliver the
amendment and that the execution, delivery and performance of such amendment has been duly
authorized by all necessary corporate action;

     (c) the execution, delivery and performance of the amendment do not conflict with, or result
in the breach of or constitute a default under any of the terms, conditions or provisions of (i)
this Agreement, (ii) the Memorandum and Articles of Association of the Company or (iii) any law or
regulation applicable to the Company; and

     (d) such amendment has been duly and validly executed and delivered by the Company, and this
Agreement together with such amendment constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency or similar laws affecting creditors’ rights generally and general equitable
principles.

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     IN WITNESS whereof the parties have caused this Agreement to be duly executed on the date
first written above.

	 	 	 	 	 	 	 
	 	 	BRITISH TELECOMMUNICATONS plc	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Andrew Longden
 

	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Name: Andrew Longden	 	 
	 

	 	 	 	Title: Group Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	Citibank, N.A.	 	 
	 	 	as Book-Entry Depositary	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Wafaa Orfy	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Name: Wafaa Orfy	 	 
	 

	 	 	 	Title: Assistant Vice President	 	 

15

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