Document:

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                                                                  Exhibit 4a(iv)

                                                                  Execution Copy

                            AMENDMENT AGREEMENT NO. 1

                               dated 25 March 2003

                                     between

InCentive Capital AG
c/o Bar & Karrer, Baarerstrasse 8,
CH-6301 Zug, Switzerland                                           ("InCentive")

                                       and

Smith & Nephew plc.
Heron House, 15 Adam Street,                              ("Smith & Nephew plc")
London WC2N 6LA, United Kingdom

                                       and

Smith & Nephew Group Limited
(formerly known as Meadowclean Limited,
to be renamed Smith & Nephew Group plc)             ("Smith & Nephew Group plc")
122 Moulin de la Ratte,
CH-1236 Cartigny, Geneva, Switzerland

                                    Regarding

                   A Transaction Agreement dated 20 March 2003

(A)  Whereas, the parties hereto (the "Parties") entered into a transaction
     agreement dated 20 March 2003 regarding a public tender offer to all
     shareholders of InCentive (the "Transaction Agreement").

(B)  Whereas, Section 3.2(b) of the Transaction Agreement provides that sales by
     InCentive of its treasury shares to non-related third parties shall be
     permitted.

(C)  Whereas, the Parties wish to adapt Section 3.5 of the Transaction Agreement
     accordingly.

<PAGE>

                                      -2-

NOW, THEREFORE, the Parties agree as follows:

1.   The capitalised terms used in this Amendment Agreement No. 1 shall have the
     meanings ascribed to them in the Transaction Agreement.

2.   Section 3.5 of the Transaction Agreement shall be amended by adding the
     words "except as otherwise permitted in Section 3.2(b)" after the words
     "and shall not dispose of any such shares".

3.   This Amendment Agreement No. 1 shall be a part of the Transaction
     Agreement, and, subject to paragraph 2 hereof, all terms and conditions of
     the Transaction Agreement shall remain in full force and effect as set
     forth in the Transacton Agreement.

Smith & Nephew plc

/s/ Christopher J. O'Donnell                   /s/ Peter Hooley
----------------------------------------      ----------------------------------
Name:     Christopher J. O'Donnell            Name:    Peter Hooley
       ---------------------------------             ---------------------------
Title:    Chief Executive                     Title:   Finance Director
       ---------------------------------             ---------------------------

Smith & Nephew Group Limited

/s/ Pierre-Andre Chapatte                      /s/ Antoine Vidts
----------------------------------------      ----------------------------------
Name:    Pierre-Andre Chapatte                Name:    Antoine Vidts
       ---------------------------------             ---------------------------
Title:   Director                             Title:   Director
       ---------------------------------             ---------------------------

InCentive Capital AG

/s/ Rene Braginsky                             /s/ Thomas Wyler
----------------------------------------      ----------------------------------
Name:  Rene Braginsky                         Name:    Thomas Wyler
       ---------------------------------             ---------------------------
Title: Director and Chief Executive           Title:   Member of the Management
       ---------------------------------             ---------------------------
                                                       Board
                                                     ---------------------------<PAGE>

                                                               EXHIBIT 4(c)(vii)

                                    RULES OF

                    THE SMITH & NEPHEW SHARESAVE PLAN (2002)

             -------------------------------------------------------

                         This is a copy of the rules of
                    The Smith & Nephew Sharesave Plan (2002)
                established by resolution of shareholders of the
              Company at its Annual General Meeting on 3 April 2002
              and as initialled by the Chairman for the purposes of
                               identification only

                             ......................
                                    Chairman

             -------------------------------------------------------

                        Inland Revenue Ref No SRS2729/ELW

[LOGO OF PINSENT CURTIS BIDDLE]

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                                    CONTENTS

RULES                                                                       PAGE

1.         Interpretation                                                      1

2.         Invitations to apply for Options                                    6

3.         The Exercise Price                                                  8

4.         Applications for Options                                            8

5.         Acceptance and Scaling-Down of Applications                         9

6.         Grant of Options                                                   10

7.         Issue of Shares                                                    11

8.         Limits on Individual Contributions                                 11

9.         Non-Transferability and Lapse of Options                           12

10.        Relationship with Service Contract                                 12

11.        Exercise of Options                                                13

12.        Manner of Exercise of Options                                      15

13.        Reconstruction or Winding-Up of the Company                        17

14.        Take-over of the Company                                           17

15.        Variation of Share Capital                                         19

16.        Alteration of this Plan                                            20

17.        Service of Documents                                               21

18.        Miscellaneous                                                      21

19.        Jurisdiction                                                       22

20.        Data Protection                                                    22

21.        Third Party Rights                                                 22

<PAGE>

                                    RULES OF
                    THE SMITH & NEPHEW SHARESAVE PLAN (2002)

1.        INTERPRETATION

1.1       In this Plan, the following words and expressions shall have the
          meanings respectively given below:

          "3 year Option"               an Option linked to a 3 year Savings
                                        Contract

          "5 year Option"               an Option linked to a 5 year Savings
                                        Contract and which is not a 7 year
                                        Option

          "7 year Option"               an Option linked to a 5 year Savings
                                        Contract under which the Optionholder
                                        has elected, when applying for such
                                        Savings Contract, that repayments under
                                        the Savings Contract be taken as
                                        including the maximum bonus payable

          "Acquisition Cost"            in relation to the exercise of an
                                        Option, an amount equal to the product
                                        of:

                                        (a)       the maximum number of Shares
                                                  in respect of which that
                                                  Option is then exercised in
                                                  accordance with rule 11; and

                                        (b)       the Exercise Price

          "Announcement Date"           a date of notification to the London
                                        Stock Exchange of the annual or
                                        half-year results of the Company

          "Applicant"                   a person who, in response to an
                                        Invitation, submits an Application

          "Application"                 an application for the grant of an
                                        Option made in accordance with rule 4

          "Application Date"            in relation to any Invitation, such date
                                        (being not less than 14 days after the
                                        date on which that invitation was
                                        issued) as shall be determined by the
                                        Directors to be the last day on which an
                                        application for the grant of an Option
                                        may be submitted in response to
                                        Invitations issued on any occasion

          "Approval Date"               the date on which the Company receives
                                        notice that this Plan has been approved
                                        by the Inland Revenue pursuant to
                                        Schedule 9

                                        1

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          "Associated Company"          any company which, in relation to the
                                        Company, is an associated company as
                                        that term is defined for the purposes of
                                        paragraph 23 of Schedule 9 by section
                                        187(2) of the Taxes Act

          "Auditors"                    the auditors for the time being of the
                                        Company or if there are joint auditors,
                                        such one of them as the Directors may
                                        decide

          "Bonus Date"                  in relation to any Employees' Savings
                                        Contract, the earliest date on which a
                                        bonus is due or, where the Optionholder
                                        has, or has indicated that he intends to
                                        enter into, a 5 year Savings Contract
                                        and has elected that repayments under
                                        that Savings Contract be taken as
                                        including the maximum bonus payable, the
                                        earliest date on which that maximum
                                        bonus is due

          "the Company"                 Smith & Nephew plc (registered in
                                        England no 324357)

          "control"                     the meaning given in section 840 of the
                                        Taxes Act

          "Date of Grant"               in relation to any Option, the date on
                                        which that Option is granted

          "Date of Invitation"          in relation to any Option, the date on
                                        which the invitation to apply for that
                                        Option is issued

          "Dealing Day"                 a day on which the London Stock Exchange
                                        is open for business

          "Directors"                   the board of directors of the Company or
                                        a duly constituted committee of that
                                        board

          "Electronic Communications"   has the meaning given in section 15 of
                                        the Electronic Communications Act 2000
                                        (but excluding mobile telephone text
                                        messages)

                                        2

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          "Eligible Employee"           any Employee (other than an Employee
                                        precluded from participating in this
                                        Plan by virtue of paragraphs 8 or 26(3)
                                        of Schedule 9) who, in relation to an
                                        Option, either:

                                        (a)       is employed by a Participating
                                                  Company and

                                        (b)       has been continuously employed
                                                  by one or more Participating
                                                  Companies throughout the
                                                  period of three months ending
                                                  with the Date of Grant (or
                                                  such other period immediately
                                                  preceding that date as the
                                                  Directors may from time to
                                                  time determine not being more
                                                  than 5 years) and

                                        (c)       is chargeable to tax in
                                                  respect of his office or
                                                  employment under Case 1 of
                                                  Schedule E or

                                        is nominated by the Directors as an
                                        Eligible Employee for the purposes of
                                        this Plan

          "Employee"                    an employee or Full-time Director of any
                                        Participating Company

          "Employees' Savings Contract" in relation to an Eligible Employee or
                                        an Optionholder, the Savings Contract
                                        entered into by that person in
                                        connection with the grant to him of an
                                        Option (and any reference to "his
                                        Savings Contract" shall be construed
                                        accordingly)

          "the Exercise Price"          in relation to Shares subject to any
                                        Option, the price per Share payable upon
                                        the exercise of that Option

          "Full-time Director"          a director of any Participating Company
                                        who is required to work at least 25
                                        hours per week (exclusive of meal
                                        breaks) disregarding holiday entitlement

          "Grantor"                     in relation to an Option, the Company or
                                        the Relevant Trustee which has granted
                                        or proposes to grant such Option

          "the Group"                   the Company and every other company
                                        which is for the time being a Subsidiary

                                        3

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          "Initial Market Value"        in relation to any Share in respect of
                                        which an Option is to be, or has been,
                                        granted the market value of such a Share
                                        shall (except as otherwise agreed with
                                        the Shares Valuation of the Inland
                                        Revenue) be taken to be the average of
                                        the middle market quotations of a Share
                                        as derived from the Official List for
                                        the three consecutive Dealing Days last
                                        preceding the date of Invitation

          "Invitation"                  an invitation to apply for the grant of
                                        an Option issued in accordance with rule
                                        2

          "Jointly Owned Company"       a company (and any subsidiary as defined
                                        in section 736 of the Companies Act 1985
                                        of such a company) of which the whole of
                                        the issued ordinary share capital is
                                        jointly owned by a member of the Group
                                        and another person (not being a member
                                        of the Group) but which is not a
                                        Subsidiary and is not under the control
                                        of such other person

          "London Stock Exchange"       means London Stock Exchange plc

          "Model Code"                  the code adopted by the Company which
                                        contains provisions similar in purpose
                                        and effect to the provisions of the
                                        Model Code for Securities Transactions
                                        by Directors of Listed Companies issued
                                        by the UK Listing Authority from time to
                                        time

          "Official List"               the daily official list of the London
                                        Stock Exchange

          "Option"                      a right to acquire Shares which is
                                        granted pursuant to and is exercisable
                                        only in accordance with the rules of
                                        this Plan

          "Option Certificate"          a certificate issued by the Grantor
                                        evidencing the grant of an Option

          "Optionholder"                in relation to any Option, the person to
                                        whom that Option has been granted an
                                        Option or, if that person has died, his
                                        Personal Representatives

          "Ordinary Share Capital"      issued share capital of the Company
                                        other than fixed-rate preference shares

          "Participating Company"       a member of the Group to which the
                                        Directors have resolved that this Plan
                                        shall extend

          "Personal Data"               has the meaning it bears for the
                                        purposes of the Data Protection Act 1998

                                        4

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          "Personal Representatives"    in relation to an Optionholder, the
                                        legal personal representatives of the
                                        Optionholder (being either the executors
                                        of his will to whom a valid grant of
                                        probate has been made or if he dies
                                        intestate the duly appointed
                                        administrator(s) of his estate) who have
                                        satisfied the Company of their
                                        appointment as such

          "this Plan"                   The Smith & Nephew Sharesave Plan (2002)
                                        as set out in these rules as amended
                                        from time to time

          "QUEST Trustee"               a Relevant Trustee which is the trustee
                                        of a qualifying employee share ownership
                                        trust (as defined in Schedule 5 of the
                                        Finance Act 1989) established by the
                                        Company

          "Relevant Savings Body"       in relation to an Employee's Savings
                                        Contract, the Savings Body which is a
                                        party to that Contract

          "Relevant Trustee"            the meaning given in article 71(6) of
                                        the Financial Services and Markets Act
                                        2000 (Regulated Activities) Order 2001

          "Repayment Value"             in relation to an Employee's Savings
                                        Contract, the aggregate amount of all
                                        the monthly savings contributions
                                        payable under that Savings Contract
                                        together with the amount of such bonus
                                        as would be due on the Bonus Date

          "Savings Body"                such bank or building society which
                                        operates an SAYE Scheme as is approved
                                        by the Directors for the purposes of
                                        this Plan

          "Savings Contract"            a savings contract entered into under an
                                        SAYE Scheme

          "SAYE Scheme"                 a certified contractual savings scheme
                                        within the meaning of section 326 of the
                                        Taxes Act which has been approved by the
                                        Inland Revenue for the purposes of
                                        Schedule 9

          "Schedule 9"                  Schedule 9 to the Taxes Act

          "Shares"                      fully-paid ordinary shares in the
                                        capital of the Company which satisfy the
                                        conditions set out in paragraphs 10-14
                                        (inclusive) of Schedule 9

          "Subscription Options"        Options which are rights granted by the
                                        Company to subscribe for Shares

                                        5

<PAGE>

          "Subsidiary"                  any company which is for the time being
                                        both a subsidiary (as defined in section
                                        736 of the Companies Act 1985) of the
                                        Company and under the control of the
                                        Company

          "Taxes Act"                   the Income and Corporation Taxes Act
                                        1988

          "UK Listing Authority"        the Financial Services Authority in its
                                        capacity as the competent authority for
                                        the purposes of Part VI of the Financial
                                        Services and Markets Act 2000

          "year"                        a financial year of the Company.

1.2       Words and expressions not defined in this rule 1 have the same
          meanings as in section 185 of the Taxes Act and Schedule 9.

1.3       References to any statutory provisions shall be read and construed as
          references to such provision as amended and re-enacted from time to
          time and no account should be taken of the rule headings which have
          been inserted for ease of reference only.

1.4       If any question, dispute or disagreement arises as to the
          interpretation of this Plan, the decision of the Directors shall
          (except as regards any matter required to be determined by the
          Auditors hereunder) be final and binding upon all persons.

1.5       In any matter in which they are required to act hereunder, the
          Auditors shall be deemed to be acting as experts and not as
          arbitrators and the Arbitration Act of 1996 shall not apply in
          relation to any such matter.

1.6       Words denoting the masculine gender shall include the feminine.

1.7       Words denoting the singular shall include the plural and vice versa.

2.        INVITATIONS TO APPLY FOR OPTIONS

2.1       Subject to the following provisions of this rule 2, the Company may
          from time to time issue, or procure the issue, to all persons who are
          or are expected to be Eligible Employees, invitations to apply for the
          grant of Options.

2.2       Invitations may be issued:

          2.2.1     in the period of 42 days after the Approval Date, and
                    thereafter,

          2.2.2     in the period of 42 days beginning with the fourth Dealing
                    Day following an Announcement Date

          or, if the Company is restricted by statute, order or regulation
          (including any regulation, order or requirement imposed on the Company
          by the London Stock Exchange or any other regulatory authority) from
          issuing invitations in any such period, at any time in the period of
          42 days beginning with the date on which such restriction is removed;
          and

          2.2.3     at any other time if the Directors consider the
                    circumstances to be exceptional unless the Company is or
                    would then be so restricted from issuing invitations at that
                    time.

                                        6

<PAGE>

2.3       Invitations may be issued in writing or by Electronic Communication or
          in the form of notices, advertisements, circulars or otherwise for the
          general attention of Employees and to which the particular attention
          of individual Employees is drawn by notices issued with pay and salary
          advice slips SAVE THAT an invitation may not be issued to an Eligible
          Employee by Electronic Communication unless that person is known by
          his Employer Company to have personal access during his normal
          business hours to information sent to him by Electronic Communication.

2.4       Each such invitation shall:

          2.4.1     be in the same terms as all other such invitations issued on
                    the same occasion;

          2.4.2     invite the person to whom it is addressed to apply for such
                    one or more (as the Directors shall specify) 3 year Option,
                    5 year Option and/or 7 year Option;

          2.4.3     specify the form and manner in which each such person may
                    apply for any such Option;

          2.4.4     identify the Savings Body;

          2.4.5     state the minimum amount of monthly savings contribution
                    which may be made under a Savings Contract (which shall not
                    be less than (pound)5 or, if the Directors so determine,
                    such other minimum amount as is permitted under the terms of
                    the relevant Savings Contract);

          2.4.6     state the maximum amount of monthly savings contribution
                    which may be made by an Optionholder (being such sum as is
                    mentioned in rule 8.2);

          2.4.7     if the Company so determines, include a statement that, if
                    it becomes necessary to scale-back applications pursuant to
                    rule 5, such scaling-back shall, in the first instance,
                    apply to every application in relation to which the amount
                    of monthly savings contribution proposed to be made is
                    greater than such lesser amount as is specified in the
                    invitation;

          2.4.8     if the Company so determines, include a statement that, if
                    it becomes necessary to scale-back applications pursuant to
                    rule 5, all applications for 7 year Options may be accepted
                    on the basis that they are deemed to be applications for 5
                    year Options and that, in this event, every corresponding
                    application for a 5 year Savings Contract shall be deemed to
                    be made and shall be accepted by the Relevant Savings Body
                    on the basis that, in each such case, the Applicant will be
                    deemed not to have elected for repayments to be taken as
                    including the maximum bonus payable;

          2.4.9     specify the Application Date

          and shall otherwise be in such form as the Company shall determine.

2.5       On any occasion on which invitations are issued, the Directors may in
          their discretion (and acting with the consent of the Grantor where
          appropriate) determine and announce the maximum number of Shares in
          respect of which Options will be granted in response to applications
          made pursuant to the invitations issued on that occasion.

2.6       No invitation may be issued after 3 April 2012.

                                        7

<PAGE>

3.        THE EXERCISE PRICE

3.1       Subject to any adjustment in accordance with rule 15, the price per
          Share payable upon the exercise of Options granted on any occasion
          shall be determined by the Grantor but shall be not less than 80%
          (rounded up to the nearest whole penny) of the Initial Market Value of
          a Share.

3.2       Subject to rule 15, the Exercise Price shall be the same in relation
          to all Options granted on the same occasion and, in relation to
          Subscription Options, shall not in any event be less than the nominal
          value of a Share.

3.3       The Directors (acting with the consent of the QUEST Trustee) may from
          time to time direct and notify the Optionholder in writing that the
          Exercise Price shall be payable, and the Optionholder shall pay the
          Exercise Price to the QUEST Trustee (as mentioned in rule 12.4).

4.        APPLICATIONS FOR OPTIONS

4.1       Any Eligible Employee to whom an Invitation has been issued may apply
          for an Option by submitting to the person specified in the Invitation
          an application in writing which:

          4.1.1     is received at such address as is stipulated in the
                    Invitation not later than the Application Date;

          4.1.2     specifies the amount of the savings contributions proposed
                    to be paid each month under the Employee's Savings Contract
                    (or, if more than one, each such Savings Contract) and
                    authorises the Applicant's employer (from time to time) to
                    deduct such amount (or such lesser amount as may be
                    determined pursuant to rule 5) from his pay;

          4.1.3     if the terms of the Invitation so permit, indicates whether
                    or not the Applicant applies for one or more 3 year Option
                    and/or one or more 5 year Option and/or one or more 7 year
                    Option;

          4.1.4     includes or is accompanied by an application for a Savings
                    Contract linked to each such Option in a form approved by
                    the Relevant Savings Body;

          4.1.5     otherwise complies with such terms and conditions as may
                    have been specified in the Invitation;

          4.1.6     is subject to the Applicant being an Eligible Employee at
                    the Date of Grant;

          4.1.7     provides that the Applicant agrees to accept and be bound by
                    the rules of this Plan;

          4.1.8     authorises the transfer and process of the Applicant's
                    Personal Data for the purposes of the administration of this
                    Plan;

          4.1.9     is duly completed and signed by the Applicant

          and is otherwise in such form as the Directors may determine.

                                        8

<PAGE>

4.2       Subject to rule 5, the total number of Shares in respect of which any
          application for an Option shall be made shall be the whole number of
          Shares for which the Acquisition Cost payable would be as nearly as
          may be equal to, but not exceed, the amount which would be the
          Repayment Value of the Employee's Savings Contract if the amount of
          each of the contributions payable under that Savings Contract (or
          under each such Savings Contract) was equal to the maximum amount
          specified by the Applicant in his application.

5.        ACCEPTANCE AND SCALING-DOWN OF APPLICATIONS

5.1       Subject to the following provisions of this rule 5, each application
          for an Option shall be accepted to the extent of the total number of
          Shares in respect of which that application is made (as mentioned in
          rule 4.2).

5.2       If the total number of Shares in respect of which applications for
          Options have been made on that occasion would result in any of the
          limits in rules 2.5 or 7 being exceeded then the number of Shares in
          respect of which each application for an Option is accepted shall be
          reduced in accordance with the following provisions of this rule 5.

5.3       If the Invitation included such statement as is mentioned in rule
          2.4.8, and subject to rules 5.8 and 5.9, the number of Shares in
          respect of which each application for an Option is made shall be
          determined on the basis that the amount of monthly savings
          contribution to be made under such Savings Contract is reduced to the
          amount so specified.

5.4       If, after the application of rule 5.3, the total number of shares in
          respect of which applications for Options are deemed to have been made
          on that occasion exceeds any of the limits in rules 2.5 or 7 then each
          application for a 7 year Option shall be deemed to be an application
          for a 5 year Option (and the corresponding application(s) for one or
          more 5 year Savings Contract linked to such Option shall be deemed to
          be made and shall be accepted by the Relevant Savings Body on the
          basis that, in each such case, the Applicant has not elected for
          repayments to be taken as including the maximum bonus).

5.5       If, after the application of rule 5.4, the total number of shares in
          respect of which applications for Options are deemed to have been made
          on that occasion exceeds any of the limits in rules 2.5 or 7 then the
          number of Shares in respect of which each application for an Option
          shall be accepted shall be further reduced as nearly as may be on a
          proportionate basis to the extent necessary to ensure that none of
          those limits is exceeded (and the amount of monthly savings
          contributions to be made under the Savings Contracts linked to each
          such Option shall be reduced accordingly) SAVE THAT the number of
          Shares in respect of which any application for an Option shall be
          accepted shall not be reduced below the number for which the
          Acquisition Cost payable would be as nearly as may be equal to, but
          not exceed, the Repayment Value of the Employee's Savings Contract
          linked to that Option if the monthly savings contributions under each
          such Savings Contract were (pound)5 or such other minimum amount per
          month specified in the Invitation (the "Minimum Number of Shares").

5.6       The provisions of rule 5.5 shall, if necessary, be applied repeatedly
          until either none of the limits in rules 2.5 and/or 7 will be exceeded
          or the number of Shares in respect of which each application for an
          Option would be accepted is reduced to the Minimum Number of Shares.

                                        9

<PAGE>

5.7       If, notwithstanding the provisions of rules 5.2 to 5.6 (inclusive),
          any one or more of the limits in rules 2.5 and 7 would still be
          exceeded then the selection of applications for acceptance shall be
          made by the Directors on the basis that each application (after
          adjustment as mentioned above) has an equal chance of selection for
          acceptance.

5.8       If on any occasion an Applicant has applied for more than one 3 year
          Option or for more than one 5 year Option or for more than one 7 year
          Option then, in applying the provisions of this rule 5 the number of
          Shares in respect of which applications have been received from such
          Applicant for all such 3 year Options (or, as the case may be, all
          such 5 year or 7 year Options) shall first be aggregated and treated
          as if a single application for such an Option had been received in
          respect of the aggregate number of such Shares.

5.9       Having, in the case of an Applicant who has applied for more than one
          3 year Option (or, as the case may be, more than one 5 year or 7 year
          Option) identified the maximum aggregate number of Shares in respect
          of which such applications may be accepted, such number of Shares
          shall be divided by the number of Options for which such Applicant had
          applied and the monthly contributions to be made in respect of each
          Savings Contract for which an application has been made shall be
          identified and such applications shall be deemed to have been made,
          and shall be accepted, on that basis PROVIDED THAT if in consequence
          the amount of monthly contributions to be made under any such Savings
          Contract would be less than the minimum amount specified pursuant to
          rule 2.4.5 then the number of Savings Contracts for which applications
          shall be deemed to have been made by such Applicant, and shall be
          accepted, shall be reduced so as to ensure that the monthly
          contributions to be made in each case is not less than that minimum
          amount.

5.10      As soon as reasonably practicable after the Application Date in
          relation to Invitations issued on any occasion, the Directors (acting
          with the consent of the Grantor where appropriate) shall:

          5.10.1    determine the maximum number of Shares in respect of which
                    each application may be accepted; and

          5.10.2    cause each application for a Savings Contract to be
                    submitted to the Relevant Savings Body.

6.        GRANT OF OPTIONS

6.1       An Option may be granted by the Company or, if the Company has agreed,
          a Relevant Trustee.

6.2       An Option shall not be granted to any person who is not an Eligible
          Employee at the Date of Grant.

6.3       Subject to the following provisions of this rule 6, Options for which
          Invitations are issued on any occasion shall be granted within the
          period of 30 days beginning with the first of the three days by
          reference to which the Initial Market Value is determined on that
          occasion.

6.4       The Grantor (or, if the Grantor is the Company, the Directors) shall
          pass a resolution granting to each Applicant who is an Eligible
          Employee an Option to acquire the whole number of Shares for which the
          Acquisition Cost payable would be as nearly as possible equal to, but
          not exceed, the amount which would be the Repayment Value of the
          Employee's Savings Contract, and the date of such resolution shall be
          the Date of Grant.

                                       10

<PAGE>

6.5       If on any occasion it is necessary to reduce the number of Shares in
          respect of which any applications are accepted then rule 6.3 shall
          take effect as if the reference therein to a period of 30 days was a
          reference to 42 days.

6.6       No payment shall be required in respect of the grant of any Option.

6.7       As soon as reasonably practicable after the Date of Grant, the Grantor
          shall issue to each Optionholder an Option Certificate in such form as
          it may determine which specifies:

          6.7.1     the Grantor;

          6.7.2     the Date of Grant;

          6.7.3     the number of Shares in respect of which the Option is
                    granted; and

          6.7.4     the Exercise Price.

6.8       No Option shall be granted before the date on which this Plan is
          approved by the Inland Revenue pursuant to Schedule 9.

7.        ISSUE OF SHARES

7.1       The Company may issue Shares to a Relevant Trustee for the purpose of
          enabling the Relevant Trustee to satisfy its obligation to transfer
          Shares to Optionholders upon the exercise of Options.

7.2       The number of Shares in respect of which Subscription Options may be
          granted on a given day in any year, when added to:

          7.2.1     the number of Shares in respect of which Subscription
                    Options have previously been granted (and which, if not
                    exercised, have not ceased to be exercisable); and

          7.2.2     the number of Shares issued and the number of Shares in
                    respect of which any rights to subscribe for Shares have
                    previously been granted (and which have neither been
                    exercised nor ceased to be exercisable) under any other
                    employee share option or share incentive plan

          in that year and the nine preceding years may not exceed such number
          of Shares as represents 10 per cent of the Ordinary Share Capital on
          that day.

7.3       The total number of Shares in respect of which Options may be granted
          in response to applications made by Eligible Employees pursuant to
          Invitations issued on any occasion may not exceed the maximum (if any)
          determined and published by the Grantor on that occasion pursuant to
          rule 2.5.

7.4       To the extent that a Relevant Trustee has purchased Shares to be
          transferred to Optionholders in satisfaction of any Subscription
          Options, the Shares over which such Options are held shall be left out
          of account for the purposes of this rule 7.

8.        LIMITS ON INDIVIDUAL CONTRIBUTIONS

8.1       The aggregate amount of an Employee's monthly savings contributions
          under his Savings Contract, when added to the aggregate amount of his
          monthly savings contributions under any other Savings Contracts may
          not at any time exceed the sum specified in rule 8.2.

                                       11

<PAGE>

8.2       The sum mentioned in rule 8.1 is (pound)250 or such other amount as is
          specified in the relevant Savings Contract or such other maximum
          amount (not exceeding such other maximum amount per month specified
          from time to time in paragraph 24(2)(a) of Schedule 9) as the Grantor
          may determine SAVE THAT if on any occasion the Grantor shall determine
          for these purposes a sum ("the new limit") which is less than the
          maximum aggregate of the monthly contributions applicable on any
          previous occasion then that determination shall be made without
          prejudice to any Option previously granted to an Optionholder or to
          any Employee's Savings Contract previously entered into by any
          Optionholder if the aggregate monthly savings contributions payable by
          that Optionholder under such Savings Contract would thereby exceed the
          new limit.

8.3       The Company may determine that, in relation to the grant of Options on
          any occasion, the amount of any monthly contribution which would have
          been made by any such Applicant in the calendar month in which falls
          the Date of Grant of such Options under the terms of a Savings
          Contract which has been cancelled or allowed by the Applicant to lapse
          shall be counted in applying to that Applicant the limit in rule 8.1.

9.        NON-TRANSFERABILITY AND LAPSE OF OPTIONS

9.1       During his lifetime only the individual to whom an Option is granted
          may exercise that Option.

9.2       An Option shall immediately cease to be exercisable if:

          9.2.1     it is transferred or assigned (other than to Personal
                    Representatives of the Optionholder), mortgaged, charged or
                    otherwise disposed of by the Optionholder;

          9.2.2     the Optionholder is adjudged bankrupt or an interim order is
                    made because he intends to propose a voluntary arrangement
                    to his creditors under the Insolvency Act 1986;

          9.2.3     the Optionholder makes or proposes a voluntary arrangement
                    under the Insolvency Act 1986, or any other scheme or
                    arrangement in relation to his debts, with his creditors or
                    any section of them; or

          9.2.4     the Optionholder is not, or ceases for any other reason
                    (except his death) to be, the sole legal and beneficial
                    owner of the Option free from encumbrances or would not,
                    upon the exercise of the Option, be the sole legal and
                    beneficial owner of the Shares thereby acquired, free from
                    encumbrances.

10.       RELATIONSHIP WITH SERVICE CONTRACT

10.1      The grant of an Option does not form part of the Optionholder's
          entitlement to remuneration or benefits pursuant to his contract of
          employment nor does the existence of a contract of employment between
          any person and any present or past member of the Group or Associated
          Company or Jointly Owned Company, give such person any right or
          entitlement to have an Option granted to him in respect of any number
          of Shares or any expectation that an Option might be granted to him or
          that he will be invited to apply for the grant of an Option whether
          subject to any conditions or at all.

10.2      Neither the existence of this Plan nor the fact that an individual has
          on any occasion been granted an Option (or been invited to apply for
          the grant of an Option) shall give such individual any right
          entitlement or expectation that he has or will in future have any such
          right entitlement or expectation to participate in this Plan by being
          granted an Option (or invited to apply for the grant of an Option) on
          any other occasion.

                                       12

<PAGE>

10.3      The rights and obligations of an Optionholder under the terms of his
          contract of employment with any present or past member of the Group or
          Associated Company or Jointly Owned Company shall not be affected by
          the grant of an Option or his participation in this Plan.

10.4      An Optionholder shall not be entitled to any compensation or damages
          for any loss or potential loss which he may suffer by reason of being
          unable to exercise an Option in consequence of the loss or termination
          of his office or employment with any present or past member of the
          Group or Associated Company or Jointly Owned Company for any reason
          whatsoever (whether or not such termination is ultimately held to be
          wrongful or unfair).

11.       EXERCISE OF OPTIONS

11.1      Subject to the following provisions of this rule 11.1 and rules 13 and
          14, an Option shall only be exercisable within the period of 6 months
          after the Bonus Date and, if not then exercised, shall lapse and cease
          to be exercisable at the end of that period.

11.2      If an Optionholder dies, his Personal Representatives may exercise
          that Option:

          11.2.1    if he dies before the Bonus Date, to the extent permitted by
                    rule 11.10.2 during the period of 12 months commencing on
                    the date of his death; or

          11.2.2    if he dies within the period of 6 months after the Bonus
                    Date, to the extent permitted by rule 11.10.1 during the
                    period of 12 months commencing on the Bonus Date

          and if it is not then exercised that Option shall lapse and cease to
          be exercisable at the end of such 12-month period.

11.3      If an Optionholder ceases to be an Employee by reason of:

          11.3.1    injury or disability (evidenced to the satisfaction of the
                    Directors);

          11.3.2    dismissal by reason of redundancy (within the meaning of the
                    Employment Rights Act 1996);

          11.3.3    retirement on reaching either age 65 or any other age at
                    which he is bound to retire in accordance with the terms of
                    his contract of employment;

          11.3.4    the company with which he holds office or employment by
                    virtue of which he is eligible to participate in this Plan
                    ceasing to be a Subsidiary; or

          11.3.5    the fact that the office or employment by virtue of which he
                    is eligible to participate in this Plan relates to a
                    business or part of a business which is transferred to a
                    person which is neither an Associated Company nor a
                    Subsidiary

          then (without prejudice to any rights the Optionholder has under the
          Employees' Saving Contract to make independent arrangements with the
          Savings Body to continue to make Contributions following cessation of
          his employment) his Option may be exercised, to the extent permitted
          by rule 11.10.2 only, during the period of 6 months commencing on the
          date on which the Optionholder shall have ceased to be an Employee,
          and if it is not then exercised that Option shall lapse and cease to
          be exercisable at the end of that period.

                                       13

<PAGE>

11.4      If, before an Option has lapsed or otherwise been exercised, the
          Optionholder attains age 65 but remains an Employee he may exercise
          the Option, to the extent permitted by rule 11.10.2, during the period
          of six months commencing on his attaining such age. If it is not then
          exercised, the Option shall lapse and cease to be exercisable at the
          end of that period.

11.5      Subject to rule 11.6, if at any time an Optionholder ceases to be an
          Employee otherwise than as mentioned in rules 11.2, 11.3 or 11.7, any
          Option which he holds shall lapse and cease to be exercisable upon
          such cessation.

11.6      No Optionholder shall be treated for the purposes of rules 11.3 or
          11.5 as ceasing to be an Employee until he no longer holds any office
          or employment in:

          11.6.1    a Participating Company;

          11.6.2    any Associated Company;

          11.6.3    any other company of which the Company has control; or

          11.6.4    a Jointly Owned Company.

11.7      If, at the Bonus Date, an Optionholder holds an office or employment
          in a company which is not a Participating Company but is:

          11.7.1    an Associated Company;

          11.7.2    any other company of which the Company has control; or

          11.7.3    a Jointly Owned Company

          then the Optionholder may exercise an Option within the period of six
          months after the Bonus Date and if it is not then exercised it shall
          lapse and cease to be exercisable at the end of that period.

11.8      If the Optionholder obtains repayment of the contributions under his
          Savings Contract the relevant Option shall immediately cease to be
          exercisable unless, immediately before the repayment, such Option is
          exercisable by reason of rules 11.1, 11.3, 11.4, 13 or 14.

11.9      Except as provided in rule 11.2, no Option shall be capable of being
          exercised later than six months after the Bonus Date.

11.10     An Option may only ever be exercised in respect of such number of
          Shares as is mentioned below:

          11.10.1   if the Option is exercisable pursuant to rule 11.1, 11.2.2
                    or 11.7, the maximum number of Shares in respect of which it
                    shall subsist;

          11.10.2   if the Option is exercisable pursuant to rules 11.2.1, 11.3,
                    11.4 or to rules 13 or 14, that number of Shares for which
                    the Acquisition Cost payable is most nearly equal to but
                    does not exceed the aggregate amount of contributions paid
                    under the Employee's Savings Contract (excluding the amount
                    of any monthly contribution the due date of payment of which
                    is more than one calendar month after the date on which
                    repayment is made under the Employee's Savings Contract)
                    together with the amount of any bonus or interest received
                    or due thereunder as at that date or (if less) the maximum
                    number of Shares in respect of which the Option shall
                    subsist; or

                                       14

<PAGE>

          11.10.3   in either case, such lesser number of Shares as the
                    Optionholder may specify in the notice of exercise given
                    pursuant to rule 12.1.

11.11     No Option may be exercised by (or by the Personal Representatives of)
          any Optionholder who is (or at the date of his death was):

          11.11.1   not an Employee (unless the Option is or was at the date of
                    his death exercisable pursuant to rules 11.2, 11.3 or 11.7);
                    or

          11.11.2   ineligible to participate in the Plan at that time by virtue
                    of paragraph 8 of Schedule 9.

11.12     In deciding whether and when to exercise an Option, an Optionholder
          shall have regard to the Model Code.

12.       MANNER OF EXERCISE OF OPTIONS

12.1      An Option shall be exercised only by the Optionholder giving notice in
          writing to the Company, or to such person at such address as may from
          time to time be notified to Optionholders by the Grantor, which:

          12.1.1    is given at any time when the Option is exercisable;

          12.1.2    states that the Option is being exercised in respect of all
                    the Shares in respect of which it is then capable of being
                    exercised or otherwise specifies the number of Shares in
                    respect of which the Option is being exercised in accordance
                    with rule 11.10;

          12.1.3    is accompanied by a duly completed application to the
                    Relevant Savings Body for payment of the Repayment Value of
                    the Employee's Savings Contract;

          12.1.4    unless the Directors otherwise permit, is accompanied by the
                    Option Certificate relating to that Option;

          and is otherwise in such form as the Company may determine and notify
          to the Optionholder.

12.2      Subject to rule 12.9, not later than 30 days after the date on which
          the Grantor shall have received the Acquisition Cost the Grantor shall
          either allot and issue (if the Grantor is the Company), or procure the
          transfer, to the Optionholder of the number of Shares in respect of
          which the Option is then exercised and as soon as reasonably
          practicable thereafter:

          12.2.1    if at that time Shares are listed on the Official List,
                    procure that Shares allotted to the Optionholder are
                    admitted to the Official List; and

          12.2.2    issue or procure the issue of a definitive share certificate
                    or such other acknowledgement of shareholding as is
                    prescribed from time to time in respect of the Shares so
                    allotted or transferred.

12.3      If the amount received by the Grantor is greater than the Acquisition
          Cost of the Shares in relation to which the Optionholder has served a
          notice of exercise under rule 12.1, the Grantor shall procure
          repayment of the excess amount to the Optionholder.

                                       15

<PAGE>

12.4      If the Directors have made a direction pursuant to rule 3.3 then, when
          an Option is exercised, the QUEST Trustee may, and shall if so
          directed by the Directors:

          12.4.1    apply any amount of the Exercise Price received from the
                    Optionholder (pursuant to rule 3.3), together with such
                    other amount as the QUEST Trustee may received by way of
                    contribution from the Company (or, the Participating Company
                    with which the Optionholder holds office or employment or,
                    if he has ceased to hold office or employment with any
                    participating company, the Company or the Subsidiary with
                    which he last held office or employment), in subscribing for
                    shares at such price (being not less than the Exercise
                    Price) as the Company may determine; and

          12.4.2    within 30 days after receiving the Exercise Price, transfer
                    such Shares to Optionholders (or to such other persons as
                    are mentioned in rule 12.7) in satisfaction of their rights
                    under the terms of their Options

          and insofar as shares are subscribed and transferred to any
          Optionholder in such manner upon the exercise of an Option, the
          Company shall be discharged from all liability to issue such Shares to
          such Optionholder.

12.5      If a Subscription Option is exercised, the Directors may within 7 days
          of the date of exercise request the QUEST Trustee to transfer
          sufficient Shares to the Optionholder to satisfy the Option in full
          and if the QUEST Trustee is able and willing to satisfy such Option in
          full the Shares shall be transferred to the Optionholder within 30
          days of the date of exercise and the Company shall pay over the
          Acquisition Cost to the QUEST Trustee when the Shares are transferred
          and pay the appropriate stamp duty on behalf of the Optionholder in
          respect of the transfer. If the QUEST Trustee is unable or unwilling
          to satisfy the Option in full, rule 12.2 shall apply as if the
          Directors had not requested the Trustee to satisfy the Option.

12.6      The QUEST Trustee may exercise such of its powers and duties as are
          appropriate to give effect to the arrangements mentioned in rules 3.3,
          12.4 and 12.5.

12.7      The Grantor may, if the Optionholder so requests in writing, allot and
          issue or transfer some or all of such Shares to:

          12.7.1    a nominee of the Optionholder provided that beneficial
                    ownership of such Shares shall be vested in the
                    Optionholder; or

          12.7.2    to an account manager (or his nominee) of an individual
                    savings account on terms that such Shares shall be in the
                    beneficial ownership of the Optionholder notwithstanding
                    that title to such Shares shall be vested in the account
                    manager or his nominee or jointly in one of them and the
                    Optionholder

          and for the purposes of this rule the terms 'account manager' and
          'individual savings account' shall have the meanings they bear in the
          Individual Savings Account Regulations 1998 (SI 1998/1870).

12.8      All Shares allotted or transferred upon the exercise of any Option
          shall rank equally in all respects with the Shares for the time being
          in issue save as regards any rights attaching to such Shares by
          reference to a record date prior to the date of such allotment or
          transfer.

                                       16

<PAGE>

12.9      The allotment or transfer of Shares pursuant to the exercise of an
          Option shall be subject to the Memorandum and Articles of Association
          of the Company and to any necessary consents of any governmental or
          other authorities (whether in the United Kingdom or elsewhere) under
          any enactments or regulations from time to time in force and it shall
          be the responsibility of the Optionholder to comply with any
          requirements to be fulfilled in order to obtain or obviate the
          necessity for any such consent.

13.       RECONSTRUCTION OR WINDING-UP OF THE COMPANY

13.1      If the court sanctions a compromise or arrangement proposed for the
          purposes of or in connection with a scheme for the reconstruction of
          the Company or its amalgamation pursuant to section 425 of the
          Companies Act 1985 the Optionholder shall be entitled to exercise his
          Option to the extent permitted by rule 11.10.2 during the period of 6
          months commencing on the date on which the court sanctions the
          compromise or arrangement, and thereafter the Option shall lapse and
          cease to be exercisable.

13.2      If notice is given to the holders of Shares of a resolution for the
          voluntary winding-up of the Company, notice of the same shall be given
          to all Optionholders and each Optionholder shall be entitled to
          exercise his Option to the extent permitted by rule 11.10.2 at any
          time within the period of six months commencing on the date on which
          the resolution is passed.

13.3      All Options shall immediately lapse and cease to be exercisable upon
          the commencement of a winding-up of the Company.

14.       TAKE-OVER OF THE COMPANY

14.1      If, as a result of either:

          14.1.1    a general offer to acquire the whole of the Ordinary Share
                    Capital which is made on a condition such that if it is
                    satisfied the person making the offer will have control of
                    the Company; or

          14.1.2    a general offer to acquire all the shares in the Company of
                    the same class as the Shares

          the Company shall come under the control of another person or persons,
          then the Grantor shall as soon as reasonably practicable thereafter
          notify every Optionholder accordingly and the Optionholder shall be
          entitled to exercise his Option to the extent permitted by rule
          11.10.2 within 6 months of the date when the person making the offer
          has obtained control of the Company and any condition subject to which
          the offer is made has been satisfied (but not in any event more than 6
          months after the Bonus Date) and to the extent the Option has not been
          exercised it shall upon the expiration of that period cease to be
          exercisable and shall only remain in existence for the purpose of
          forming the subject of an offer (if any) made pursuant to rule 14.3
          and shall lapse upon the expiry of the "appropriate period" as defined
          in rule 14.4 if such offer is made but is not accepted by the
          Optionholder.

14.2      If at any time any person becomes entitled or bound to acquire Shares
          under sections 428 to 430F of the Companies Act 1985 the Optionholder
          shall be entitled to exercise his Option to the extent permitted in
          rule 11.10.2 at any time when that person remains so entitled or bound
          (but not in any event more than 6 months after the Bonus Date) and to
          the extent the Option has not been exercised it shall upon the
          expiration of that period cease to be exercisable and shall only
          remain in existence for the purpose of forming the subject of an offer
          (if any) made pursuant to rule 14.3 and shall lapse upon the expiry of
          the "appropriate period" as defined in rule 14.4 if such offer is made
          but is not accepted by the Optionholder.

                                       17

<PAGE>

14.3      If any company (in this rule referred to as the "acquiring company"):

          14.3.1    obtains control of the Company as a result of making a
                    general offer:

                    (a)  to acquire the whole of the Ordinary Share Capital of
                         the Company which is made on a condition such that if
                         it is satisfied the person making the offer will have
                         control of the Company; or

                    (b)  to acquire all the shares in the Company which are of
                         the same class as the Shares;

          14.3.2    obtains control of the Company in pursuance of a compromise
                    or arrangement sanctioned by the court made under section
                    425 of the Companies Act 1985; or

          14.3.3    becomes bound or entitled to acquire Shares under sections
                    428 to 430F (inclusive) of the Companies Act 1985

          an Optionholder may, at any time within the "appropriate period" as
          mentioned in rule 14.4, by agreement with the acquiring company,
          release his rights under his Option in consideration of the grant to
          him of rights to acquire shares in the acquiring company or any other
          company falling within sub-paragraphs (b) and (c) of paragraph 10 of
          Schedule 9 (read and construed as if references in those provisions to
          the Company were references to the acquiring company) PROVIDED THAT:

                    (a)  such rights will be exercisable only in accordance with
                         the provisions of this Plan as it had effect
                         immediately before the release of the rights referred
                         to above (read and construed as mentioned in rule
                         14.5);

                    (b)  the shares to which the new rights relate satisfy the
                         provisions of paragraphs 10 to 14 of Schedule 9;

                    (c)  the total market value, immediately before such
                         release, of the Shares in respect of which the Option
                         then subsists is equal to the total market value,
                         immediately after such grant, of the shares in respect
                         of which new rights are granted to the Optionholder;
                         and

                    (d)  the total amount payable by the Optionholder for the
                         acquisition of shares upon exercise of the new rights
                         is equal to the total amount that would have been
                         payable for the acquisition of Shares upon exercise of
                         the Option.

14.4      In rule 14.3 the "appropriate period" means:

          14.4.1    in a case falling within rule 14.3.1 the period of six
                    months beginning with the time when the person making the
                    offer has obtained control of the Company and any condition
                    or conditions subject to which the offer is made has or have
                    been satisfied or waived;

          14.4.2    in a case falling within rule 14.3.2 the period of six
                    months beginning with the time when the court sanctions the
                    compromise or arrangement; and

          14.4.3    in a case falling within rule 14.3.3 the period during which
                    the acquiring company remains bound or entitled as mentioned
                    in that paragraph.

14.5      For the purposes mentioned in rule (a) of the proviso to rule 14.3,
          the provisions of this Plan shall be read and construed as if:

                                       18

<PAGE>

          14.5.1    references to "the Company", except for the purposes of the
                    definitions of Jointly Owned Company and Participating
                    Company and rule 16.2, were references to the company in
                    respect of whose shares the new rights are granted;

          14.5.2    references to "Shares" were references to such shares;

          14.5.3    reference to "Option" were references to such rights;

          14.5.4    references to "Optionholder" were references to the persons
                    to whom such rights are granted;

          14.5.5    references to "Ordinary Share Capital" were references to
                    the ordinary share capital (other than fixed rate preference
                    shares) of such company;

          14.5.6    references to the "Directors", except for the purposes of
                    rule 16.2, were references to the directors of such company;
                    and

          14.5.7    references to the "Exercise Price" were references to the
                    price per share payable upon the exercise of such new
                    rights.

14.6      Rights granted pursuant to rule 14.3 shall be regarded for the
          purposes of section 185 to the Taxes Act and Schedule 9 and for the
          purposes of the subsequent application of the provisions of this Plan
          as having been granted on the Date of Grant of the corresponding
          rights released as mentioned in rule 14.3.

14.7      Apart from rules 14.3 and 14.4 a person shall be deemed to have
          control of a company if he and others acting in concert with him have
          together obtained control of it.

15.       VARIATION OF SHARE CAPITAL

15.1      In the event of any alteration of the Ordinary Share Capital by way of
          a capitalisation or rights issue or by way of sub-division,
          consolidation, reduction or any other variation in the share capital
          of the Company, the Grantor may make such adjustment as it considers
          appropriate:

          15.1.1    to the aggregate number of Shares subject to any Option;

          15.1.2    to the Exercise Price; and/or

          15.1.3    if an Option has been exercised but no Shares have been
                    allotted or transferred, to the number of Shares which may
                    be so allotted or transferred and the Acquisition Cost
                    relating to such Shares

          PROVIDED THAT:

                    (a)  no such adjustment shall be made without the prior
                         approval of the Board of Inland Revenue;

                    (b)  except in the case of a subdivision, consolidation or
                         capitalisation issue, any such adjustment must be
                         confirmed in writing by the Auditors to be in their
                         opinion fair and reasonable;

                    (c)  the aggregate Acquisition Cost payable by an
                         Optionholder on the exercise of all his Options shall
                         not be materially altered;

                                       19

<PAGE>

                    (d)  except insofar as the Directors (on behalf of the
                         Company) agree to capitalise the Company's reserves and
                         apply the same at the time of exercise in paying up the
                         difference between the Exercise Price and the nominal
                         value of the Shares, the Exercise Price in relation to
                         any Subscription Option shall not be reduced below the
                         nominal value of a Share; and

                    (e)  the number of Shares as so adjusted shall be rounded
                         down to the nearest whole number and the Exercise Price
                         as so adjusted shall be rounded up to the nearest whole
                         penny.

15.2      As soon as reasonably practicable after making any adjustment pursuant
          to rule 15.1 the Grantor shall give notice in writing thereof to every
          Optionholder affected thereby.

16.       ALTERATION OF THIS PLAN

16.1      Before this Plan is first approved by the Board of Inland Revenue, the
          Directors may make any alteration or addition to these rules as may be
          necessary or appropriate to take account of comments of the UK Listing
          Authority and to ensure that this Plan is so approved.

16.2      The Directors may, at any time thereafter, alter or add to the rules
          of this Plan in any respect PROVIDED THAT:

          16.2.1    no alteration or addition to any provision of this Plan
                    shall take effect until approved by the Board of Inland
                    Revenue;

          16.2.2    no such alteration or addition shall be made to the
                    advantage of existing or new Optionholders to the provisions
                    relating to eligibility to participate, the overall
                    limitations on the issue of new Shares, the individual
                    limitations on Option grants under this Plan and the basis
                    for determining an Optionholders' rights to acquire Shares
                    and the adjustment of such rights in the event of variation
                    of the Ordinary Share Capital without the prior approval by
                    ordinary resolution of the shareholders of the Company SAVE
                    THAT the provisions of this rule 16.2.2 shall not apply to
                    the extent that such alteration or addition is in the
                    opinion of the Directors a minor amendment which is
                    necessary or appropriate:

                    (a)  to benefit the administration of this Plan;

                    (b)  to take account of any change in legislation; or

                    (c)  to maintain Inland Revenue approval of this Plan or
                         obtain or maintain favourable tax, exchange control or
                         regulatory treatment for Optionholders or for the
                         Company or for any Subsidiary; and

          16.2.3    if in relation to any Options the Grantor is not the
                    Company, no alteration or addition shall be made to the
                    terms of such Options without the approval of the Grantor.

16.3      As soon as reasonably practicable after making any such alteration or
          addition the Directors shall give notice in writing thereof to every
          Optionholder (if any) affected thereby.

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<PAGE>

17.       SERVICE OF DOCUMENTS

17.1      Except as otherwise provided in this Plan, any notice or document to
          be given by, or on behalf of, the Company or other Grantor or the
          Administrator to any person in accordance or in connection with this
          Plan shall be duly given:

          17.1.1    by sending it through the post in a pre-paid envelope to the
                    address last known to the Company to be his address and, if
                    so sent, it shall be deemed to have been duly given on the
                    date of posting; or

          17.1.2    if he holds office or employment with any member of the
                    Group or any Associated Company, by delivering it to him at
                    his place of work or by sending to him a facsimile
                    transmission or Electronic Communication addressed to him at
                    his place of work and if so sent it shall be deemed to have
                    been duly given at the time of transmission SAVE THAT a
                    notice or document shall not be duly given by Electronic
                    Communication unless that person is known by his Employer
                    Company to have personal access during his normal business
                    hours to information sent to him by Electronic
                    Communication.

17.2      Any notice or document so sent to an Employee or Optionholder shall be
          deemed to have been duly given notwithstanding that such Optionholder
          is then deceased (and whether or not the Company or other Grantor has
          notice of his death) except where his Personal Representatives have
          established their title to the satisfaction of the Company and
          supplied to the Company an address to which documents are to be sent.

17.3      Any notice in writing or document to be submitted or given to the
          Grantor, the Company or the Administrator in accordance or in
          connection with this Plan may be delivered, sent by post, facsimile
          transmission or Electronic Communication but shall not in any event be
          duly given unless:

          17.3.1    it is actually received (or, in the case of an Electronic
                    Communication, opened) by the secretary of the Company or
                    such other individual as may from time to time be nominated
                    by the Company and whose name and address is notified to
                    Optionholders; and

          17.3.2    if given by Electronic Communication, it includes a
                    digitally encrypted signature of the Optionholder.

17.4      For the purposes of this Plan, an Electronic Communication shall be
          treated as not having been duly made or received if it contains, or is
          accompanied by a warning or caution that it could contain or be
          subject to, a virus or other computer programme which could alter
          damage or interfere with any computer software or Electronic
          Communication.

18.       MISCELLANEOUS

18.1      The Company shall at all times keep available sufficient authorised
          but unissued Shares to satisfy the exercise in full of all the
          Subscription Options for the time being remaining capable of being
          exercised under this Plan.

18.2      No Option to purchase existing Shares shall be granted by any person
          unless that person beneficially owns such Shares at the Date of Grant
          or the Directors are satisfied that sufficient Shares will be made
          available to satisfy the exercise in full of all Options granted or to
          be granted by that person.

                                       21

<PAGE>

18.3      The Directors may from time to time make and vary such rules and
          regulations not inconsistent herewith and establish such procedures
          for the administration and implementation of this Plan as they think
          fit.

18.4      In any matter in which they are required to act hereunder, the
          Auditors shall be deemed to be acting as experts and not as
          arbitrators and the Arbitration Acts of 1996 shall not apply in
          relation to any such matter.

18.5      The Company shall not be obliged to provide Optionholders with copies
          of any notices, circular or other documents sent to holders of Shares.

18.6      The costs of the administration and implementation of this Plan shall
          be borne by the Company.

19.       JURISDICTION

19.1      This Plan shall be governed by and construed in all respects in
          accordance with English law.

19.2      In applying for the grant of an Option an Eligible Employee shall be
          deemed to submit to the exclusive jurisdiction of the English courts
          as regards any claim legal action or proceedings arising out of this
          Plan and to waive any objection to such proceedings taking place in
          the English courts on the grounds of venue or on the grounds that such
          proceedings have been brought in an inconvenient forum.

20.       DATA PROTECTION

20.1      By accepting the grant of an Option the Optionholder shall agree and
          consent to:

          20.1.1    the collection, use and processing by any member of the
                    Group, the Savings Body and any Relevant Trustee of Personal
                    Data relating to the Optionholder, for all purposes
                    reasonably connected with the administration of this Plan
                    and the subsequent registration of the Optionholder or any
                    other person as a holder of Shares acquired pursuant to the
                    exercise of an Option;

          20.1.2    any member of the Group, the Savings Body and any Relevant
                    Trustee transferring Personal Data to or between any of such
                    persons for all purposes reasonably connected with the
                    administration of this Plan;

          20.1.3    the use of such Personal Data by any such person for such
                    purposes; and

          20.1.4    the transfer to and retention of such Personal Data by any
                    third party for such purposes.

21.       THIRD PARTY RIGHTS

21.1      Except as otherwise expressly stated to the contrary, neither this
          Plan nor the grant of any Option nor the U.K. Contracts (Rights of
          Third Parties) Act 1999 shall have the effect of giving any third
          party any rights under this Plan and that Act shall not apply to this
          Plan or to the terms of any Option granted under it.

                                       22

<PAGE>

           (FORM OF OPTION CERTIFICATE INITIALLY PROPOSED TO BE USED)
                    THE SMITH & NEPHEW SHARESAVE PLAN (2002)

                                  ("the Plan")

                               OPTION CERTIFICATE

THIS DOCUMENT IS IMPORTANT. A form of notice for use by the Optionholder for the
exercise of the option is set out overleaf.

Name of Optionholder               Number of Smith & Nephew plc ordinary shares

Address of Optionholder            Exercise Price per share       ______________

_________________________________

_________________________________ Maximum total acquisition cost  ______________

_________________________________

_________________________________
                                   Type of Option:        3 year Option/

                                                          5 year Option/

Date of Grant _____________________                       7 year Option

THIS IS TO CERTIFY that the Optionholder named above was on the above date
granted in accordance with the Plan an option [to acquire/to subscribe for]* the
above number of Ordinary Shares of 12-2/9p each in the capital of Smith & Nephew
plc at the above price per share. The option is personal to the Optionholder and
may not be transferred, assigned, mortgaged, pledged or otherwise disposed of by
him. The option is exercisable subject to and in accordance with the rules of
the Plan.

                     ---------------------------------------

                     for and on behalf of Smith & Nephew plc

*delete as appropriate

                                       23

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