INTERACTIVE DATA CORP/MA/
EX-10.12 THE PEARSON REWARD PLAN
<DOCUMENT>
<TYPE>EX-10.12
<SEQUENCE>9
<FILENAME>b42118idex10-12.txt
<DESCRIPTION>EX-10.12 THE PEARSON REWARD PLAN
<TEXT>
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                                                                  Exhibit 10.12





                             THE PEARSON REWARD PLAN

<PAGE>


                             THE PEARSON REWARD PLAN

                                    CONTENTS

RULE                                                                        PAGE

1.   DEFINITIONS..............................................................1
2.   GRANT OF AWARDS..........................................................3
3.   PLAN LIMITS..............................................................4
4.   SPECIFIC PROVISIONS RELATING TO PPOS.....................................5
5.   SPECIFIC PROVISIONS RELATING TO PEIS.....................................7
6.   CESSATION OF EMPLOYMENT - PPO AND PEI....................................7
7.   DEATH OF PARTICIPANT - PPO AND PEI.......................................9
8.   GENERAL OFFER FOR THE COMPANY, ETC - PPO AND PEI.........................9
       General Offer..........................................................9
         Scheme of Arrangement...............................................10
           Voluntary Winding-up..............................................11
             Application of condition in rule 4.2............................12
               Exchange of Awards............................................12
9.   ADJUSTMENT OF AWARDS....................................................12
10.  ALLOTMENT OR TRANSFER OF SHARES ON EXERCISE OF AWARDS...................13
11.  RIGHTS ATTACHING TO SHARES ALLOTTED OR TRANSFERRED PURSUANT TO AWARDS...14
12.  AVAILABILITY OF NEW SHARES..............................................14
13.  ADMINISTRATION AND AMENDMENT............................................14
14.  GENERAL.................................................................15
SCHEDULE ONE.................................................................17
  PPOs - Real Growth in Earnings Per Share Performance Target................17
SCHEDULE TWO.................................................................20
  PEI - Free Cash Flow Performance Target....................................20


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                             THE PEARSON REWARD PLAN

PREAMBLE

The Reward Plan has two elements, each of which is driven by objective
performance measures:

-    the Pearson Premium Option (PPO) element. This involves the grant of
     premium priced options at three tiers of share price performance. Each tier
     will provide a reward to Participants only if Pearson achieves the share
     price growth required at each tier over periods of between three and seven
     years from the PPO's grant; and

-    the Pearson Equity Incentive (PEI) element. This involves the grant of
     share awards, which will provide a reward to Participants only if there is
     strong growth in our free cash flow (or, if appropriate, other performance
     measures specified by the Committee) over a three year period from the date
     of the award. Shares which vest must normally be retained for a further two
     years.

DEFINITIONS

1.1  In this Plan, unless the context otherwise requires, the following words
and expressions shall have the following meanings, namely:

ADOPTION DATE means the date of the adoption of the Plan by the Company in
general meeting;

AWARD means a right to receive Shares under the rules of this Plan, comprising
both PPO and PEI elements;

THE COMMITTEE means the personnel committee of the board of directors of the
Company, or other duly authorised committee thereof;

THE COMPANY means Pearson plc;

CONTROL has the meaning given to that word by section 840 of the Taxes Act;

DATE OF GRANT means the date on which an Award is granted;

DEALING DAY means any day on which the London Stock Exchange is open for
business;

EXECUTIVE means any employee or executive director of any member of the Group
who, in the opinion of the Committee, is essential to the Company's future
success;

GRANT PERIOD means the period of 60 days commencing on any of the following:

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(a)  the day on which the Company makes an announcement of its results for the
     last preceding financial year, half year or other period; or

(b)  any day on which the Board resolves that exceptional circumstances exist
     which justify the grant of Awards;

PROVIDED THAT the Grant Period shall be extended by 30 days in relation to the
first Awards made following the Adoption Date;

THE GROUP means the Company the Subsidiaries and MEMBER OF THE GROUP shall be
construed accordingly;

INITIAL AVERAGING PERIOD means twenty consecutive Dealing Days, all of which
fall during a Grant Period, the last of which shall be no more than five Dealing
Days before the Date of Grant;

OPTION PERIOD means, in relation to a PPO, the period commencing on the third
anniversary of the Date of Grant of the PPO and expiring on the tenth such
anniversary;

PARTICIPANT means any individual who holds a subsisting Award (including, where
the context permits, the legal personal representatives of a deceased
Participant);

PEI means a right granted under the Plan to call for Shares without payment;

PEI RETENTION PERIOD means the period of two years after the PEI Vesting Date;

PEI VESTING DATE means the third anniversary of the Date of Grant of the PEI or,
if later, the date of publication of the final set of accounts of the Company
which are relevant to the determination of the applicable performance condition;

THE PLAN means this Plan as amended from time to time;

PPO means a right granted under the Plan to subscribe for or purchase Shares at
the relevant PPO Exercise Price;

PPO EPS TARGET means the secondary performance condition governing the exercise
of PPOs (as set out in Schedule One to these rules);

PPO EXERCISE PRICE means the price per Share payable on the exercise of a PPO as
determined by the Committee (subject to adjustment under rule 9) being:

(a)  in the case of a First Tier PPO, 25%,

(b)  in the case of a Second Tier PPO, 50%, and


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(c)  in the case of a Third Tier PPO, 75%,

in excess of the average Share Price over the Initial Averaging Period (PROVIDED
THAT, in the case of any PPO under which Shares are to be issued, the PPO
Exercise Price shall not be less than the nominal value of a Share);

PPO TIER means a tier of PPOs, and FIRST TIER PPO, SECOND TIER PPO and THIRD
TIER PPO shall be construed accordingly;

SALARY MULTIPLE means that multiple of an Executive's basic salary by reference
to which the Committee resolves to make an Award;

SHARE OPTION PLAN means any employee share option plan established by the
Company;

SHARE PRICE means, in relation to a Share on any Dealing Day, the middle market
quotation for a Share as derived from the Daily Official List of The London
Stock Exchange;

SHARES means fully paid and irredeemable ordinary shares of 25p each in the
capital of the Company or shares representing those shares following any
reorganisation of the share capital of the Company;

SUBSIDIARY means any subsidiary of the Company within the meaning of section 736
of the Companies Act 1985 over which the Company has Control;

TAXES ACT means the Income and Corporation Taxes Act 1988; and

TRUSTEE means Mourant & Co or other trustee from time to time of the Pearson plc
Employee Share Ownership Trust.

1.2  Where the context permits the singular shall include the plural and vice
versa. Headings shall be ignored in construing the Plan.

1.3  References to any act shall include any statutory modification, amendment
or re-enactment thereof.

GRANT OF AWARDS

2.1  The Committee may, during a Grant Period, grant Awards to Executives
selected by the Committee in its absolute discretion. For the avoidance of
doubt, no Executive shall have the right or expectation to participate in the
Plan in any year.

2.2  Each Award shall comprise a blend of PPOs and PEI determined at the
discretion of the Committee having regard to the respective values (as
determined for the purposes of these rules) of PPOs and PEI, PROVIDED THAT not
less than 25% and not more than 75% of the aggregate value of the PPO and PEI
elements of the Award will be granted as PPOs and the

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balance as PEI. The Committee shall, in respect of each Executive, set a Salary
Multiple for his or her Award on that occasion, and the aggregate value of the
PPO and PEI elements of the Award shall (as far as practicable) equal that
Salary Multiple.

2.3  The grant of an Award and/or the delivery of Shares upon exercise thereof
shall be conditional on the Executive agreeing to comply with any arrangements
specified by the Company for the payment of taxation and social security
contributions (including without limitation the right to sell on his or her
behalf sufficient Shares to satisfy any taxation or social security
contributions liability on his or her part for which any member of the Group may
be liable) in respect of an Award.

2.4  As soon as practicable after the Date of Grant the Committee shall procure
the issue to such Executive of certificates in respect of each PPO Tier and the
PEI. Such certificates shall be issued under the seal of the Company or
otherwise to take effect as a deed, or may refer to another document evidencing
the legal enforceability of the Award.

2.5  Any Executive to whom an Award is granted may, by notice in writing to the
Company given within 30 days after the Date of Grant, renounce in whole or in
part his or her rights under the Award. In such a case, the Award shall, to the
extent renounced, be treated as never having been granted and (if already
issued) the relevant certificate(s) shall be returned to the Company for
cancellation or amendment. No consideration shall be payable by the Company for
any such renunciation.

2.6  No Award shall be granted under the Plan later than the fifth anniversary
of the Adoption Date.

2.7  Every Award granted hereunder shall be personal to the Participant and,
except to the extent necessary to enable a personal representative to exercise
the Award following the death of a Participant, neither the Award nor the
benefit thereof may be transferred, assigned, charged or otherwise alienated.
Any transfer of an Award otherwise than as permitted under this rule 2.7 shall
cause the Award to lapse.

PLAN LIMITS

3.1  PEI may only be satisfied using existing issued Shares, and the Company
shall provide (and shall procure, where appropriate, that any member of the
Group which employs Participants shall provide) sufficient monies to enable the
Trustee to acquire sufficient Shares to satisfy all PEI. Such monies shall be
provided to the Trustee no later than the date on which the PEI is exercisable.

3.2  PPOs may be satisfied using existing issued Shares (in which case the
provisions of rule 3.1 shall apply mutatis mutandis) or with new Shares


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issued to the Participant at the time of exercise or to the Trustee (in which
case rule 3.3 shall apply).

3.3  No PPO to subscribe for Shares (whether by the Participant or the Trustee)
shall be granted to the extent that the result of that grant would be that the
aggregate number of Shares that could be issued on the exercise of that PPO and
any other PPOs granted at the same time, when added to the number of Shares
that:

(i)   could be issued on the exercise of any other subsisting share options
      granted during the preceding ten years under any Share Option Plan
      (including PPOs under the Plan);

(ii)  have been issued on the exercise of any share options granted during the
      preceding ten years under any Share Option Plan (including PPOs under the
      Plan); and

(iii) have been issued during the preceding ten years under any profit sharing
      or other employee share incentive scheme (not being a Share Option Plan),

would exceed 10 per cent. of the ordinary share capital of the Company for the
time being in issue.

3.4  Reference in this rule 3 to the ISSUE of Shares shall, for the avoidance of
doubt, mean the issue and allotment (but not transfer) of Shares.

SPECIFIC PROVISIONS RELATING TO PPOS

4.1  Prior to granting PPOs, the Committee shall, taking such independent expert
advice as it thinks fit, determine the implied value of the PPO (expressed on a
per Share basis) at the Date of Grant. PPOs shall be valued using the Black
Scholes method of valuation, taking account of the PPO Exercise Prices, certain
variables specified in the Black Scholes model relating to Shares (including the
dividend growth rate and Share price volatility), the period during which PPOs
may be exercised and the risk of forfeiture of PPOs by reason of
non-satisfaction of performance conditions specified in these rules.

4.2  The number of Shares under PPOs granted to a Participant shall be
determined by dividing the Salary Multiple which the Committee wishes to grant
as PPOs by the implied value of the PPOs. Each one third of the number of Shares
(as so determined) shall comprise a PPO Tier as follows:

(a)  First Tier PPOs can only be exercised if the relevant PPO Exercise Price is
     achieved, for twenty consecutive Dealing Days starting no earlier than the
     Date of Grant, within three years of the Date of Grant;


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(b)  Second Tier PPOs can only be exercised if the relevant PPO Exercise Price
     is achieved, for twenty consecutive Dealing Days starting no earlier than
     the Date of Grant, within five years of the Date of Grant;

(c)  Third Tier PPOs can only be exercised if the relevant PPO Exercise Price is
     achieved, for twenty consecutive Dealing Days starting no earlier than the
     Date of Grant, within seven years of the Date of Grant,

and in relation to each PPO Tier, the expiry of the stated number of years shall
be the PPO CUT-OFF DATE.

4.3  In addition to the Share Price exceeding the relevant PPO Exercise Price
(as described in rule 4.2) prior to the PPO Cut-off Date, each PPO Tier will
only become exercisable if the Company achieves the PPO EPS Target (determined
in the manner set out in Schedule One) at some time prior to the expiry of the
Option Period.

4.4  To the extent that the Share Price exceeds the relevant PPO Exercise Price
(as described in rule 4.2) prior to the relevant PPO Cut-off Date and the PPO
EPS Target is met, that PPO Tier can be exercised at any time in the Option
Period (subject to compliance with the rules of the Plan).

4.5  A Participant may exercise a PPO Tier in whole or in part by giving notice
in writing to the Company in the form prescribed by the Committee specifying the
PPO Tier being exercised on that occasion, the number of Shares in respect of
which the PPO is being exercised and enclosing or arranging to provide payment
in full of the aggregate PPO Exercise Price in respect of those Shares. If the
PPO is exercised in respect of some only of the Shares comprised in a PPO Tier,
the Company shall procure the issue of a certificate to the Participant in
respect of the balance or call in the original certificate for endorsement.

4.6  Notwithstanding any other provision in these rules, a PPO Tier shall lapse
automatically on the earliest of:

(a)  the failure of the Share Price to exceed the relevant PPO Exercise Price
     (as described in rule 4.2) prior to the PPO Cut-off Date;

(b)  the expiry of the Option Period;

(c)  the Participant ceasing to be an employee of a member of the Group (save as
     provided in rule 6);

(d)  any of the dates specified in rule 8; and

(e)  the Participant being declared bankrupt or entering into any general
     composition with or for the benefit of his or her creditors.


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SPECIFIC PROVISIONS RELATING TO PEIS

5.1  A PEI consists of a right to call for a number of Shares at any time within
the period of 30 months following the PEI Vesting Date (so that Shares may be
called for during, or on the expiry of, the PEI Retention Period). All PEIs
which have not been called for will lapse at the end of the 30 month period or
at any earlier date on which the rules provide for the PEI Retention Period to
end.

5.2  The number of Shares that may be called for by a Participant under a PEI
shall be determined by the extent to which an objective performance measure is
satisfied by the PEI Vesting Date. The performance measure initially attaching
to PEIs shall consist of the Free Cash Flow Performance Target set out in
Schedule Two to this Plan. If the Committee wishes to do so, it may at the time
of granting a PEI, at its absolute discretion, add a further performance measure
(in relation to a particular business or participant) or impose a performance
measure other than that set out in Schedule Two.

5.3  The number of Shares under a PEI granted to a Participant shall be
determined by dividing the Salary Multiple which the Committee wishes to grant
as PEI by the average Share Price over the Initial Averaging Period. Such number
shall equate to achievement of Target FCF Growth Rate, with a lesser or greater
number of Shares being available on performance between the Lower Range Limit
and Upper Range Limit (as those terms are defined in Schedule Two or specified
in any other performance measure which applies to PEI from time to time) being
achieved.

5.4  A Participant may exercise a PEI (in full only) by giving written notice to
the Company, calling for the Shares to which he or she is entitled.

5.5  Following the vesting of all or part of a PEI on the PEI Vesting Date, the
number of Shares that vest (if any) shall remain subject to the PEI Retention
Period. The Participant shall (by virtue of rule 5.1) be entitled to call for
Shares prior to expiry of the PEI Retention Period and, if he or she does so,
the sale by him or her of sufficient Shares to satisfy any liability to taxation
or social security contributions on his or her part which arises on calling for
Shares shall not constitute a breach of the PEI Retention Period.

CESSATION OF EMPLOYMENT - PPO AND PEI

6.1  Save as otherwise provided in these rules, an Award shall lapse
automatically on the Participant ceasing to be an employee of a member of the
Group.

6.2  Where a Participant ceases to be an employee of a member of the Group by
reason of:

(a)  injury, disability or ill-health (as determined by the Committee);


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(b)  retirement at or after the date on which he or she is bound to retire under
     his or her contract of employment; or

(c)  any other reason if the Committee so decides in its absolute discretion

then the following provisions shall apply:

(i)  any PPO Tier which is not already exercisable (and has not already lapsed
     or been exercised) at the date the Participant ceases employment shall
     remain in force, and may be exercised (provided the performance conditions
     set out in rules 4.2 and 4.3 are met) at any time up to the first
     anniversary of the relevant PPO Cut-off Date and will then lapse PROVIDED
     THAT, in relation to each PPO Tier, the number of Shares that would have
     been available had the Participant remained in service until the relevant
     PPO Cut-off Date will be scaled down by reference to the fraction A/B where
     A is the number of complete months from the Participant's leaving date to
     the relevant PPO Cut-off Date, and B is the number of complete months from
     the Date of Grant to the relevant PPO Cut-off Date. However, the Committee
     may in its absolute discretion determine (no later than the relevant PPO
     Cut-off Date), that the Participant's entitlement should not be scaled down
     or should be scaled down in part only (the extent of scaling down being
     determined by the Committee in its absolute discretion);

(ii) any PPO Tier which is already exercisable at the date the Participant
     ceases employment may be exercised at any time within the period of six
     months following cessation of employment, and will then lapse PROVIDED THAT
     the Committee may specify a later date (not being later than the expiry of
     the Option Period) on which the relevant PPO Tier shall lapse;

(iii) any PEI which has not already vested or lapsed shall remain in force, and
     a Participant may call for the Shares under the PEI (if and to the extent
     that the relevant performance conditions (being initially those set out in
     Schedule Two) are met) at any time up to the first anniversary of the
     relevant PEI Vesting Date and the PEI will then lapse PROVIDED THAT the
     number of Shares which vest in accordance with Schedule Two shall be
     reduced by the fraction A/B where A is the number of complete months from
     the Participant's leaving date to the relevant PEI Vesting Date, and B is
     the number of complete months from the Date of Grant to the relevant PEI
     Vesting Date. However, the Committee may in its absolute discretion
     determine (no later than the relevant PEI Vesting Date) that the
     Participant's entitlement should not be scaled down or should be scaled
     down in part only (the extent of scaling down being determined by the
     Committee in its absolute discretion). Any Shares which vest under this
     provision shall be subject to the PEI Retention Period unless the


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     Committee determines, in its absolute discretion, that the PEI Retention
     Period should not apply; and

(iv) where a PEI has vested but remains subject to the PEI Retention Period, the
     PEI Retention Period will continue to apply unless the Committee
     determines, in its absolute discretion, that the PEI Retention Period
     should end early.

6.3  For the purposes of rules 6.1 and 6.2 a female Participant shall not be
treated as ceasing to be an employee of a member of the Group if absent from
work wholly or partly because of pregnancy until she ceases to be entitled to
exercise a right to return to work.

DEATH OF PARTICIPANT - PPO AND PEI

7.   If a Participant dies while in service (or at any time after leaving
service when he or she holds an Award at the time of his or her death) the
Committee shall determine in its absolute discretion what proportion (if any) of
an Award may be exercised and the time at which or within which it may be
exercised by his or her legal personal representatives. For the avoidance of
doubt, an Award exercisable under this rule may lapse at an earlier date by
virtue of rule 8.

GENERAL OFFER FOR THE COMPANY, ETC - PPO AND PEI

GENERAL OFFER

8.1  If any person (either alone or together with any person acting in concert
with him or her) obtains Control of the Company as a result of a general offer
to acquire the whole of the share capital of the Company (other than those
Shares which are already owned by him or her and/or any person acting in concert
with him or her), then the following provisions shall apply:

(i)   any PPO Tier which is not already exercisable (and has not already lapsed
      or been exercised) at the date on which the offer becomes unconditional in
      all respects may be exercised (provided the performance condition set out
      in rule 4.2 is met, but whether or not the PPO EPS Target is met) at any
      time within the period referred to in rule 8.2 (and will then lapse);

(ii)  any PPO Tier which is already exercisable at the date on which the offer
      becomes unconditional in all respects may be exercised at any time within
      the period referred to in rule 8.2 (and will then lapse);

(iii) any PEI which has not already vested or lapsed at the date on which the
      offer becomes unconditional in all respects may be exercised within the
      period referred to in rule 8.2 if and to the extent that the relevant
      performance conditions (that is, initially those set out in Schedule Two
      by reference to the Company's most recent published


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      annual accounts or half-yearly accounts if the Committee thinks fit) are
      met over the foreshortened period ending on the date of change of Control
      (and will then lapse). In the event of a change of Control prior to the
      first anniversary of the Date of Grant of a PEI, the Committee may release
      such number of Shares as it thinks fit; and

(iv)  where a PEI has vested but remains subject to the PEI Retention Period,
      the PEI Retention Period will immediately cease, and the Participant may
      call for the Shares at any time within the period of one month from the
      date on which the offer becomes unconditional in all respects. Any PEI
      which is not called for by the end of the one month period will lapse.

8.2  Following a change of Control pursuant to rule 8.1 any Award which has not
been exercised (including non-exercise by reason of performance conditions not
being met) shall lapse on the earlier of the following dates:

(a)  two months from the date on which the offer becomes unconditional in all
     respects; and

(b)  one month after the date on which any person becomes bound or entitled to
     acquire Shares under sections 428 to 430F of the Companies Act 1985.

SCHEME OF ARRANGEMENT

8.3  If a court shall direct that a meeting of the holders of Shares be convened
pursuant to section 425 of the Companies Act 1985 for the purposes of
considering a scheme of arrangement involving the reconstruction of the Company
or its amalgamation with any other company or companies then (unless rule 8.4
applies) a Participant may take the following action conditionally on either the
scheme of arrangement being approved by the shareholders' meeting or sanctioned
by the court (as determined by the Committee in its absolute discretion) (the
RELEVANT CONDITION), between the date of the court's direction and twelve noon
on the day immediately preceding the date for which the shareholders' meeting
(the RELEVANT DATE) is convened:

(i)   any PPO Tier which is not already exercisable (and has not already lapsed
      or been exercised) at the Relevant Date may be exercised (provided the
      performance condition set out in rule 4.2 is met, but whether or not the
      PPO EPS Target is met) may be conditionally exercised;

(ii)  any PPO Tier which is already exercisable at the Relevant Date may be
      conditionally exercised;

(iii) any PEI which has not already vested or lapsed at the Relevant Date may be
      conditionally exercised if and to the extent that the relevant performance
      conditions (that is, initially those set out in Schedule


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      Two by reference to the Company's most recent published annual accounts or
      half-yearly accounts if the Committee thinks fit) are met over the
      foreshortened period ending on the Relevant Date. If the Relevant Date
      occurs prior to the first anniversary of the Date of Grant of a PEI, the
      Committee may release such number of Shares as it thinks fit; and

(iv)  where a PEI has vested but remains subject to the PEI Retention Period,
      the PEI Retention Period will cease immediately prior to the scheme of
      arrangement becoming effective, and the Participant shall be treated in
      like manner as a Shareholder in respect of those Shares.

Any Award not exercised by twelve noon on the Relevant Date shall cease to be
exercisable between that time and the first date on which it can be determined
whether or not the relevant condition is satisfied. If the Relevant Condition is
not satisfied, Awards shall continue. If the Relevant Condition is satisfied
Awards shall, without prejudice to the operation of rule 8.7, lapse
automatically on the date on which the scheme of arrangement is sanctioned by
the court.

Where new Shares would be issued on exercise of a PPO, the Committee shall
endeavour to procure that, provided a Participant has conditionally exercised
his or her PPO as described above prior to twelve noon on the Relevant Date, the
scheme of arrangement shall be extended to such Participant as if each Share in
respect of which the PPO was conditionally exercised had been allotted and
issued to him or her by that time.

8.4  Awards shall not without the consent of the Committee be exercisable under
rule 8.3 if the purpose and effect of the scheme of arrangement is to create a
new holding company for the Company, such company having substantially the same
shareholders and proportionate shareholdings as those of the Company immediately
prior to the scheme of arrangement. In that event, the Committee shall endeavour
to procure that an exchange of Awards is effected under rule 8.7.

VOLUNTARY WINDING-UP

8.5  If notice is duly given of a resolution for a voluntary winding-up of the
Company then a Participant may takes the following action within the period of
two months from the date of the resolution, failing which exercise the Awards
shall lapse automatically:

(i)   any PPO Tier which is not already exercisable (and has not already lapsed
      or been exercised) may be exercised (provided the performance condition
      set out in rule 4.2 is met, but whether or not the PPO EPS Target is met);

(ii)  any PPO Tier which is already exercisable may be exercised;


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(iii) any PEI which has not already vested or lapsed may be exercised if and to
      the extent that the relevant performance conditions (that is, initially
      those set out in Schedule Two by reference to the Company's most recent
      published annual accounts or half-yearly accounts if the Committee thinks
      fit) are met over the foreshortened period ending on the winding-up. In
      the event of a winding-up prior to the first anniversary of the Date of
      Grant of a PEI, the Committee may release such number of Shares as it
      thinks fit; and

(iv)  where a PEI has vested but remains subject to the PEI Retention Period,
      the PEI Retention Period will immediately cease in the event of a
      winding-up, and the Shares subject to the PEI Retention Period shall be
      released immediately.

APPLICATION OF CONDITION IN RULE 4.2

8.6  In determining whether the condition in rule 4.2 is met when applying rules
8.1, 8.3 and 8.5, it shall be sufficient for the Share Price to have exceeded
the relevant PPO Exercise Price on a single Dealing Day (and not for twenty
Dealing Days).

EXCHANGE OF AWARDS

8.7  If any company (the ACQUIRING COMPANY) obtains Control of the Company as a
result of an event referred to in rules 8.1 or 8.3, each Participant may, at any
time within one month of the change of Control, with the agreement of the
Acquiring Company, release any PPO Tier or PEI which has not lapsed (the OLD
RIGHT) in consideration of the grant to him or her of a new award, which in the
opinion of the Committee and the Acquiring Company is equivalent to the Old
Right but relates to shares in a different company (whether the Acquiring
Company itself or another company its group).

ADJUSTMENT OF AWARDS

9.    In the event of:

(i)   any variation in the share capital or reserves of the Company (including,
      without limitation, by way of capitalisation or rights issue or any
      consolidation, sub-division or reduction); or

(ii)  the implementation by the Company of a demerger or the payment by the
      Company of a super-dividend which would otherwise materially affect the
      value of an Award,

then

(a)   in relation to PPOs, the PPO Exercise Price, the number of Shares
      comprised in a PPO and the PPO EPS Target shall be adjusted in


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      such manner as the Committee shall determine in its absolute discretion;

(b)   in relation to PEI, the number of Shares subject to the PEI and the
      performance conditions to which the PEI is subject shall be adjusted in
      such manner as the Committee shall determine in its absolute discretion.

PROVIDED THAT:

(aa)  in relation to both PPOs and PEI, no adjustment shall be made pursuant to
      this rule unless and until the auditors for the time being of the Company
      (acting as experts not arbitrators) shall confirm in writing to the
      Committee that such adjustment is in their opinion fair and reasonable;
      and

(bb)  in the case of PPOs, no adjustment shall be made pursuant to this rule
      which would increase the aggregate amount payable on exercise of any PPO
      Tier at the relevant PPO Exercise Price.

ALLOTMENT OR TRANSFER OF SHARES ON EXERCISE OF AWARDS

10.1 Subject to any necessary consents, to payment being made for the Shares and
to compliance by the Participant with the terms of the Plan, not later than 30
days after receipt of any valid notice of exercise, the Company shall either
allot and issue, or procure the transfer of, Shares to the Participant (or to
his or her nominee). The Company shall (unless the Shares are to be issued in
uncertificated form) as soon as practicable deliver to the Participant (or his
or her nominee) a definitive share certificate or other evidence of title in
respect of such Shares.

10.2 The Company shall not be obligated to issue or deliver Shares in connection
with any Award or take any other action under the Plan in a transaction subject
to the requirements of any applicable securities law, any requirement under any
listing agreement between the Company and any securities exchange or automated
quotation system or any other law, regulation or contractual obligation of the
company until the Company is satisfied that such laws, regulations, and other
obligations of the Company have been complied with in full. The Company may
require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of Shares under the Plan. Certificates representing Shares will be
subject to such stop-transfer orders and other restrictions as may be applicable
under such laws, regulations and other obligations of the Company, and a legend
or legends may be placed thereon to reflect such restrictions.


                                                                         Page 13
<PAGE>

RIGHTS ATTACHING TO SHARES ALLOTTED OR TRANSFERRED PURSUANT TO AWARDS

11.1 All Shares allotted or transferred upon the exercise of an Option shall
rank pari passu in all respects with the Shares in issue at the date of exercise
save as regards any rights attaching to such Shares by reference to a record
date prior to the date of exercise.

11.2 Any Shares acquired on exercise of Awards shall be subject to the articles
of association of the Company from time to time.

AVAILABILITY OF NEW SHARES

12.1 The Company shall at all times keep available for issue sufficient
authorised but unissued Shares to permit the exercise of all unexercised PPOs
under which Shares may be allotted or shall otherwise procure that Shares are
available for transfer in satisfaction of the exercise of PPOs.

12.  If and so long as the Shares are listed on the Official List of The London
Stock Exchange, the Company will, at its expense, make application to The London
Stock Exchange for admission to the Official List of Shares allotted on the
exercise of any PPO.

ADMINISTRATION AND AMENDMENT

13.1 The decision of the Committee shall be final and binding in all matters
relating to the Plan and it may at any time discontinue the grant of further
Awards or amend any of the provisions of the Plan in any way it thinks fit:
PROVIDED THAT:

(a)   the Committee shall not make any amendment that would materially prejudice
      the interests of existing Participants except with the prior consent or
      sanction of Participants who, if they exercised their Awards in full,
      would thereby become entitled to not less than three-quarters of all the
      Shares which would fall to be allotted or transferred upon exercise in
      full of all outstanding Awards; and

(b)   no amendment to the advantage of Executives or Participants may be made
      to:

      (i)   the definition of EXECUTIVE in rule 1.1;

      (ii)  the limit on the number of Shares available for issue under the
            Plan;

      (iii) the basis for determining the number of Shares comprised in either
            the PPO or PEI element of an Executive's Award;

      (iv)  the terms of Shares to be provided under the Plan; and

      (v)   the adjustment provisions of rule 9 of the Plan


                                                                         Page 14
<PAGE>

      without the prior approval of the Company in general meeting except in the
      case of minor amendments to benefit the administration of the Plan, to
      take account of a change in legislation or developments in the law
      affecting the Plan or to obtain or maintain favourable tax, exchange
      control or regulatory treatment for Executives and Participants or any
      member of the Group; and

(c)   without prejudice to any provision of the Plan which provides for the
      lapse of an Award, the Committee may not cancel an Award unless the
      Participant agrees in writing to such cancellation.

13.2 Notwithstanding any other provision of the Plan, the Committee may
establish appendices to the Plan for the purpose of granting Awards to
Executives who are or may become primarily liable to tax outside the United
Kingdom on their remuneration, subject to such modifications as may be necessary
or desirable to take account of overseas tax, exchange control or securities
laws provided that any Shares made available under such appendices shall count
towards the limit set out in rule 3 hereof.

GENERAL

14.1 Any member of the Group may provide money to the trustees of any trust or
any other person to enable them or him or her to acquire Shares to be held for
the purposes of the Plan, or enter into any guarantee or indemnity for those
purposes, to the extent not prohibited by section 151 of the Companies Act 1985.

14.2 The rights and obligations of a Participant under the terms and conditions
of his or her office or employment shall not be affected by his or her
participation in the Plan or any expectation or right which (notwithstanding
rule 2.1) he or she believes he or she may have to participate in the Plan. An
individual who participates in the Plan waives all and any rights to
compensation or damages in consequence of the termination of his or her office
or employment with any company for any reason whatsoever insofar as those rights
arise, or may arise, from his or her ceasing to have rights under or be entitled
to exercise any Award under the Plan as a result of such termination or from the
loss or diminution in value of such rights or entitlements. If necessary, the
Participant's terms of employment shall be deemed to be varied accordingly.

14.3 The existence of any Award shall not affect in any way the right or power
of the Company or its shareholders to make or authorise any or all adjustments,
recapitalisations, reorganisations or other changes in the Company's capital
structure, or any merger or consolidation of the Company, or any issue of
shares, bonds, debentures, preferred or prior preference stocks ahead of or
convertible into, or otherwise affecting the Shares or the rights thereof, or
the dissolution or liquidation of the Company or any sale or transfer of all or
any part of its assets or business,


                                                                         Page 15
<PAGE>

or any other corporate act or proceeding, whether of a similar character or
otherwise.

14.4 Any notice or other document required to be given under or in connection
with the Plan may be delivered to a Participant or sent by post to him or her at
his or her home address according to the records of his or her employing company
or such other address as may appear to the Company to be appropriate. Notices
sent by post shall be deemed to have been given on the day following the date of
posting. Any notice or other document required to be given to the Company under
or in connection with the Plan may be delivered or sent by post to it at its
registered office (or such other place or places as the Committee may from time
to time determine and notify to Participants).

14.5 Benefits under the Plan shall not be pensionable.

14.6 The Company, or where the Committee so directs any Subsidiary, shall pay
the appropriate stamp duty on behalf of Participants in respect of any transfer
of Shares on the exercise of Awards.

14.7 These rules shall be governed by, and construed in accordance with, the
laws of England.


                                                                         Page 16
<PAGE>

                                  SCHEDULE ONE

           PPOS - REAL GROWTH IN EARNINGS PER SHARE PERFORMANCE TARGET

In addition to exceeding to PPO Exercise Price, a PPO Tier shall only be
exercisable if at the Accounts Date of the Company following the expiry of a
Prescribed Period relating to a PPO, the percentage growth in the Company's
Annualised EPS over that Prescribed Period (comparing the Base Year with the
Latest Year) is an average of at least 3 per cent. per annum greater than the
percentage increase, if any, in the RPI Index, as adjusted (if appropriate)
pursuant to paragraphs 3 and 4 below, over that Prescribed Period.

The following provisions apply for the purposes of determining whether the
conditions set out in this Schedule has been satisfied.

1.   In this Schedule, unless the context otherwise requires, the following
words and expressions shall have the following meanings, namely:

ACCOUNTS means the consolidated accounts of the Company for a Financial Year;

ACCOUNTS DATE means the date on which the Accounts are published;

ANNUALISED EPS means Earnings per Share (adjusted proportionately upwards or
downwards in a case where the relevant Financial Year is greater than or less
than one calendar year);

AUDITORS means the auditors for the time being of the Company (acting as experts
not arbitrators);

BASE YEAR means, in relation to the Company, the Financial Year ending
immediately before the start of the Prescribed Period;

EARNINGS PER SHARE means, for any Financial Year of the Company, the earnings
per ordinary share of the Company calculated in accordance with Financial
Reporting Standard No. 3 issued by the Accounting Standards Board Limited or any
modification thereto provided that to ensure comparability of Financial Years of
the Company within a Prescribed Period and for the Base Year the Committee may:

(a)  adjust the figure for earnings per share as calculated in accordance with
     the relevant accounting standard to arrive at a figure which reflects the
     underlying business performance of the Group (and may, without limitation,
     adjust by excluding any or all extraordinary or exceptional items from the
     earnings per share calculation);

(b)  adjust the figure for any tax charge to ensure that the deduction for
     taxation in respect of the Latest Year shall be at the average tax rate
     applicable to the Base Year; and


                                                                         Page 17
<PAGE>

(c)  ensure that the relevant accounting standards are applied on a consistent
     basis in respect of years falling within any Prescribed Periods and for the
     Base Year;

FINANCIAL YEAR means an accounting reference period as defined in accordance
with section 224 of the Companies Act 1985;

LATEST YEAR means, in relation to the Company, the latest Financial Year in a
Prescribed Period for which Accounts have been published;

PRESCRIBED PERIOD means any period of three consecutive Financial Years, the
first of which shall not in any event be earlier than the Financial Year
starting immediately before the Date of Grant of the relevant PPO; and

RPI INDEX means the Index of Retail Prices (All Items) published the UK
Government.

2.   As at each Accounts Date of the Company following the expiry of a
Prescribed Period, the Committee shall calculate the percentage growth between
the Annualised EPS for its Base Year and for its Latest Year and shall determine
whether that percentage growth is an average of at least 3 per cent. per annum
above the percentage increase, if any, in the RPI Index, as adjusted (if
appropriate) pursuant to paragraphs 3 and 4 below, over that Prescribed Period.

3.   Where a Financial Year within a Prescribed Period or the Base Year is
greater than or less than one calendar year, the percentage increase in the RPI
Index for that Financial Year shall be adjusted proportionately upwards or
downwards as appropriate in order to secure that such percentage increase is
annualised in a manner consistent with the Annualised EPS.

4.   For the purposes of paragraph 2 the Committee shall make such adjustments
as they may consider appropriate to take account of any intervening capital
reorganisation of the Company including, without limitation, any capitalisation
issue, rights issue, sub-division or consolidation of share capital, reduction
of capital or demerger within the meaning of section 213 to 218 of the Taxes Act
and any modifications to the relevant accounting standard.

5.   If the composition of the RPI Index changes or the RPI Index is replaced by
another similar index, the Committee may make such adjustments to any
calculations using the RPI Index (or any replacement index) as they consider to
be fair and reasonable.

6.   The Auditors shall confirm in writing to the Board:

(a)  that calculations made by the Board in accordance with this Schedule are
     correct; and


                                                                         Page 18
<PAGE>

(b)  where an adjustment has been made by the Board under paragraph 4, that such
     adjustment is in their opinion fair and reasonable.


                                                                         Page 19
<PAGE>

                                  SCHEDULE TWO

                     PEI - FREE CASH FLOW PERFORMANCE TARGET

1.   In this Schedule, unless the context otherwise requires, the following
words and expressions shall have the following meanings, namely:

BASE YEAR means, in relation to the Company, the Financial Year ending
immediately before the start of the Test Period;

FCF GROWTH RATE means, in relation to a Share over any Test Period, the increase
in Free Cash Flow expressed as a compound annual rate;

FREE CASH FLOW means the operating cashflow of the Company (expressed on a per
Share basis), as stated in the Company's accounts for each relevant Financial
Year, less tax liabilities on operating activities and interest paid (subject to
adjustment under paragraph 6 below);

FINANCIAL YEAR means an accounting reference period as defined in accordance
with section 224 of the Companies Act 1985;

LATEST YEAR means, in relation to the Company, the latest Financial Year in a
Prescribed Period;

LOWER RANGE LIMIT means, in relation to any PEI, the FCF Growth Rate at which
50% of the PEI will vest;

PRESCRIBED PERIOD means, in relation to any PEI, the period of three consecutive
Financial Years commencing with the Financial Year starting immediately before
the Date of Grant of the relevant PEI;

TARGET FCF GROWTH RATE means, in relation to any PEI, the FCF Growth Rate at
which 100% of the PEI will vest; and

UPPER RANGE LIMIT means, in relation to any PEI, the FCF Growth Rate at which
150% of the PEI will vest.

2. When granting any PEI, the Committee shall, in its absolute discretion,
determine (and notify to the Participant) the Target FCF Growth Rate (and Lower
Range Limit and Upper Range Limits) that shall apply to the PEI.

3. At the end of the Prescribed Period, or as soon as is reasonably practicable
thereafter, the Committee shall calculate the FCF Growth Rate between the Free
Cash Flow for its Base Year and for its Latest Year and shall determine whether
that FCF Growth Rate has achieved a FCF Growth Rate between the Lower Range
Limit and the Upper Range Limit.

4. Where a Financial Year within a Prescribed Period or the Base Year is greater
than or less than one calendar year, the FCF Growth Rate shall be adjusted
proportionately upwards or downwards as appropriate in order to


                                                                         Page 20
<PAGE>

secure that the FCF Growth Rate is calculated in a manner consistent with Free
Cash Flow.

5.   A PEI shall vest to the extent of the percentage in the right-hand column
below according to the FCF Growth Rate achieved for the relevant Prescribed
Period, as indicated in the left-hand column below (but, for the avoidance of
doubt, the remainder of a PEI shall not vest and shall lapse in respect of the
Shares comprised in the unvested portion):

FCF GROWTH RATE                    PERCENTAGE OF PEI WHICH VESTS

At or above Upper Range Limit      150% of Shares comprised in PEI

At Target FCF Growth Rate          100% of Shares comprised in PEI

At Lower Range Limit               50% of Shares comprised in PEI

Below Lower Range Limit            0% of Shares comprised in PEI

6.   A PEI award may be exercised on a straight-line basis where FCF Growth Rate
is between the Lower Range Limit and the Upper Range Limit (Target FCF Growth
Rate being the mid-point of that range).

7.   In the event of a major revision to the Company's long-term capital
expenditure plans or material acquisitions or disposals of businesses by the
Company, the Committee may adjust Free Cash Flow in order to achieve
year-on-year comparability.

8.   The Free Cash Flow Performance Target set out in this Schedule Two may be
calculated at an earlier date than that set out in paragraph 3 above if any
event set out in rule 8 of the Plan applies. In such circumstances the Free Cash
Flow Performance Target shall be calculated in accordance with the relevant
sub-rate within rule 8 which is applicable.

9.   As soon as practicable following determination of the Performance Target,
the Committee shall notify the Participant of the extent to which (if at all)
the PEI is exercisable.


                                                                         Page 21

</TEXT>
</DOCUMENT>
