<PAGE>

                                                                     EXHIBIT 4.2

                                                          Allens Arthur Robinson
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                           JAMES HARDIE INDUSTRIES NV
                                ARBN 097 829 895
        Incorporated in The Netherlands with corporate seat in Amsterdam.
                      The liability of members is limited.


                  PETER DONALD MACDONALD 2002 SHARE OPTION PLAN
                                      RULES


1.      PURPOSE, DEFINITIONS AND INTERPRETATION
--------------------------------------------------------------------------------

1.1     These Rules are the rules agreed between James Hardie and the Executive
        and approved by the Board under the Executive Service Agreement.

1.2     In these Rules, the following words and expressions have the meanings
        indicated unless the contrary intention appears:

        AGM means an Annual General Meeting of James Hardie.

        ASX means Australian Stock Exchange Limited or the stock market
        conducted by it, as the context requires.

        ASX MARKET PRICE on a particular day means the closing price of Ordinary
        Shares on the last trading day preceding that day.

        BOARD means the joint board of James Hardie.

        BUSINESS DAY means a day which is a trading day on ASX.

        CHANGE IN CONTROL means:

        (a)     a person obtains Voting Power in James Hardie of at least 30%
                pursuant to a takeover bid for all or a proportion of all of the
                voting shares of James Hardie which is or becomes unconditional;

        (b)     a scheme of arrangement or other merger proposal in relation to
                James Hardie becomes binding on the holders of all of the voting
                shares of James Hardie and by reason of such scheme or proposal
                a person obtains Voting Power in James Hardie of at least 30%;
                or

        (c)     a person becomes beneficial owner of at least 30% of the voting
                shares of James Hardie on issue other than under (a) or (b).

        EXERCISE PRICE means the exercise price of the Option Series, being the
        price equal to the average last traded price of Ordinary Shares sold on
        the ASX on the five trading days


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        immediately before the meeting of shareholders of James Hardie called to
        approve the issue of options under the Plan, as adjusted in accordance
        with Rule 5.

        EXECUTIVE means Peter Donald Macdonald.

        EXECUTIVE SERVICE AGREEMENT means the executive service agreement
        between the Executive and James Hardie to come into effect on 1 November
        2002.

        FAMILY MEMBER means the wife or a child of the Executive, provided that
        such person can not be a resident of The Netherlands.

        FIFTH ANNIVERSARY means five years from the Issue Date.

        GROUP means James Hardie and its subsidiaries as defined in the
        Corporations Act 2001.

        ISSUE DATE means the date the Option Series is issued to the Executive
        under the Plan.

        JAMES HARDIE means James Hardie Industries N.V., with corporate seat at
        Amsterdam, The Netherlands;

        LISTING RULES means the Official Listing Rules of ASX.

        MEDIAN TSR means the middle value of the series comprising the TSR for
        each company comprising the Peer Group.

        NOMINEE means a Family Member or company nominated by an Option holder
        for an issue of an Ordinary Share under Rule 3.1, provided that the
        company nominated can not be a resident of The Netherlands.

        NYSE means the New York Stock Exchange.

        OPTION means options to subscribe for Ordinary Shares granted under the
        Executive Service Agreement and the Plan.

        OPTIONS SERIES means 1,950,000 Options.

        ORDINARY SHARES means ordinary shares in the capital of James Hardie.

        PEER GROUP means the companies in the Peer Group Index or, where no such
        listing is compiled by S&P/ASX, such other comparable companies as the
        Board may determine in its absolute discretion, but always excluding
        James Hardie.

        PEER GROUP INDEX means the companies listed in the S&P/ASX 200 Index at
        the start of the Performance Period, excluding the companies listed in
        the 200 Financials and 200 Property Trust indices.

        PERCENTILE TSR means the TSR of a company in the Peer Group, with the
        company identified by dividing the companies in the Peer Group into a
        hundred equal groups ranked in order of TSR magnitude.


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        PERFORMANCE DATE means:

        (a)     the Third Anniversary; or

        (b)     if at the Third Anniversary Rule 4.6 is not satisfied, on the
                first Business Day of the month which falls between the Third
                Anniversary until the Fifth Anniversary on which Rule 4.6 is
                satisfied.

        PERFORMANCE PERIOD means the period commencing on the Issue Date and
        ending at the relevant Performance Date.

        PLAN means this Peter Donald Macdonald 2002 Share Option Plan.

        RESIDENT means established, domiciled or have residence in a country.

        RULES means the rules of the Plan agreed and approved as described in
        Rule 1.1.

        THIRD ANNIVERSARY means the day falling three years from the Issue Date
        or, if that day is not a Business Day, the next succeeding Business Day.

        TSR means, in respect of a company, total shareholder returns (including
        dividends and other distributions) of the company being the amount
        calculated according to the procedure set out in Schedule A to these
        Rules.

        TSR RANKING means the percentile ranking of James Hardie amongst the
        Peer Group, ranked in ascending order according to their TSR (being the
        percentage of companies in the Peer Group above which James Hardie
        ranks).

        VOTING POWER has the same meaning as is given to that term in the
        Corporations Act 2001.

1.3     Where any calculation or adjustment made under these Rules produces a
        fraction of a cent or a share, the fraction must be eliminated by
        rounding to the nearest whole number favourable to the holder of these
        Rules.

1.4     Words denoting the singular number only shall include the plural number
        and vice versa.

1.5     Headings have been inserted for ease of reference only and shall not
        affect the interpretation of these Rules.

2.      GRANT OF OPTIONS
--------------------------------------------------------------------------------

2.1     Subject to Rule 9, James Hardie must grant the Option Series to the
        Executive and/or, at his request, to a Nominee, each being an option to
        subscribe for, and be issued, one Ordinary Share. The Options are to be
        granted as soon as possible after the later to occur of the Board
        approving these Rules under Rule 1.1, or shareholder approval is given
        under Rule 9.

2.2     The Options will be granted on the terms of these Rules.


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2.3     Upon grant of an Option, James Hardie must deliver to the Option holder
        a certificate evidencing that Option and setting out the terms of its
        issue and the rights of the Option holder under these Rules.

3.      ENTITLEMENT
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3.1     Each Option entitles the holder upon exercise under these Rules to be
        issued, or at the holder's request to have issued to a Nominee, credited
        as fully paid, one Ordinary Share at an issue price equal to the
        Exercise Price.

3.2     On the exercise of each Option, James Hardie must issue an Ordinary
        Share to the holder or Nominee as requested on the date on which the
        Option is exercised.

3.3     Ordinary Shares issued on the exercise of Options will rank pari passu
        with all existing Ordinary Shares from the date of issue.

3.4     James Hardie must promptly make application for official quotation by
        the ASX of all Ordinary Shares issued on the exercise of Options.

4.      EXERCISE OF OPTIONS
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4.1     An Option is exercisable by the holder delivering to James Hardie's
        Secretary:

        (a)     the certificate for the Option;

        (b)     a notice addressed to James Hardie and signed by the holder of
                the Option stating the number of Options which are to be
                exercised;

        (c)     if required by Dutch law, a notification form for purposes of
                the insider trading notification to the Dutch Securities Board;
                and

        (d)     payment to James Hardie in cleared funds of the Exercise Price
                applicable to all of the Options specified to be exercised.

4.2     If the items listed in Rule 4.1 are delivered in accordance with that
        Rule James Hardie must within 7 days:

        (a)     issue to the Option holder or Nominee as requested fully paid
                Ordinary Shares in respect of the Options which are exercised,
                together with any additional entitlement which has arisen under
                these Rules;

        (b)     enter the Option holder or Nominee as appropriate in the
                register of members as the registered holder of the Ordinary
                Shares so issued;

        (c)     cancel the certificate delivered under Rule 4.1 and issue a
                replacement certificate for any unexercised Options which were
                comprised in the certificate delivered by the Option holder
                under Rule 4.1.

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4.3     Subject to the provisions of Rules 4.4, 4.5 and 4.6, Options become
        exercisable on or after the Third Anniversary.

4.4     If before a Performance Date:

        (a)     there has been a Change in Control of James Hardie; or

        (b)     the Executive's employment is terminated by James Hardie without
                cause; or

        (c)     the Executive dies during the term of the Executive Service
                Agreement; or

        (d)     the Executive's Service Agreement with James Hardie is
                terminated by effluxion of time;

        then Options may be exercised on any date on or after such event
        provided that Rule 4.6 has been satisfied as at the time the event set
        out above occurs.

4.5     An Option not exercised lapses on the first to occur of:

        (a)     ten years from the Issue Date;

        (b)     2 months after the event in Rule 4.4(a) occurs, where a person
                obtains Voting Power in James Hardie of more than 95%, or a
                person becomes beneficial owner of more than 95% of the voting
                shares of James Hardie on issue;

        (c)     18 months after the event in Rule 4.4(a) occurs, where a person
                obtains Voting Power in James Hardie of less than 95%, or a
                person becomes beneficial owner of less than 95% of the voting
                shares of James Hardie on issue;

        (d)     18 months after any of the events set out in Rules 4.4(b) to (d)
                occur; and

        (e)     on the Fifth Anniversary, if Rule 4.6 has never been satisfied.

4.6     The Options are only exercisable if at the relevant Performance Date or,
        if Rule 4.4 applies, at the time indicated in that Rule:

        (a)     for 1,462,500 Options, the TSR for James Hardie is equal to or
                above the Median TSR (where the top performing company is at the
                100th Percentile); and

        (b)     for up to 487,500 Options, 19,500 Options for each 1% increment
                in James Hardies' TSR Ranking above the Median TSR.

5.      ANTI DILUTION PROVISIONS
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5.1     PARTICIPATION IN NEW ISSUES

        Subject to the provisions of Rules 5.2 and 5.3, the holder of an Option
        may participate in new issues of securities of James Hardie to holders
        of Ordinary Shares if the Option is exercised before the record date for
        determining entitlements to the issue. James Hardie must give 7 Business
        Days' notice of any new issue to the holder before the record date for
        determining


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        entitlements to the issue in accordance with the Listing Rules, so as to
        permit the holder to exercise any Option which, on its terms, may be
        exercised before that record date.

5.2     BONUS ISSUES

        If:

        (a)     James Hardie makes a bonus issue or bonus issues, of shares or
                other securities pro rata to holders of Ordinary Shares; and

        (b)     for any reason an Option has not been exercised before the
                record date for determining entitlements to that bonus issue:

        then:

        (c)     that Option, if and when exercised, entitles the holder to
                receive the bonus issues in respect of Ordinary Shares resulting
                from exercise of the Option, as if the Option had been exercised
                and the Ordinary Shares issued before the record date applicable
                to the first bonus issue.

5.3     RIGHTS ISSUES

        If:

        (a)     James Hardie makes an offer of Ordinary Shares pro rata to all
                or substantially all holders of Ordinary Shares for a
                subscription price which is less than the then Market Price
                (defined below); and

        (b)     for any reason an Option has not been exercised before the
                record date for determining entitlements to the rights issue:

        then:

        (c)     the Exercise Price must be reduced by an amount calculated as:

                O' = O - E[P - (S+D)]
                             N +1

                O' = the new exercise price of the option.

                O  = the old exercise price of the option.

                E  = the number of underlying securities into which one option
                     is exercisable.

                NOTE: E is one unless the number has changed because of a bonus
                issue.

                P  = the average market price per security (weighted by
                     reference to volume) of the underlying securities during
                     the 5 trading days ending on the day before the ex rights
                     date or ex entitlements date.

                S  = the subscription price for a security under the pro rata
                     issue.

                D  = the dividend due but not yet paid on the existing
                     underlying securities (except those to be issued under the
                     pro rata issue).
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                N  = the number of securities with rights or entitlements
                     that must be held to receive a right to one new security.

5.4     NOTIFICATION

        James Hardie must notify the Option holder and the ASX within one month
        after the record date for a pro rata bonus or rights issue of the
        adjustment to the number of Ordinary Shares over which each Option
        exists and the adjustment to the Exercise Price.

5.5     CAPITAL RECONSTRUCTIONS

        If the issued ordinary capital of James Hardie is reconstructed then
        the:

        (a)     entitlement to securities attaching to each Option; and

        (b)     Exercise Price;

        must each be reconstructed in the same proportion as the issued ordinary
        capital of James Hardie is reconstructed, and in a manner which does not
        result in any additional benefits being conferred nor any adverse
        consequences being imposed on the holder which are not conferred or
        imposed on shareholders of James Hardie (subject to the same provisions
        with respect to rounding of entitlements as sanctioned by the meeting of
        shareholders approving the reconstruction of capital) but in all other
        respects the terms for the exercise of Options will remain unchanged.

5.6     In particular, if:

        (a)     James Hardie makes a return of capital to the holders of
                Ordinary Shares then the Exercise Price must accordingly be
                reduced by the amount of the capital returned in respect of each
                such Ordinary Share;

        (b)     the Ordinary Shares in James Hardie are subdivided or
                consolidated into Ordinary Shares of a different amount:

                (i)     the number of Options immediately prior to such
                        reconstruction must be correspondingly adjusted to a
                        number equivalent to the number of Ordinary Shares which
                        would have resulted to the holder by virtue of the
                        reconstruction if, immediately prior to the
                        reconstruction, the holder had been registered as the
                        holder of all of the Ordinary Shares which would have
                        been issued to the holder on exercise of all the
                        Options; and

                (ii)    the Exercise Price must be adjusted so that it bears the
                        same proportion to the Exercise Price as the total
                        number of issued Ordinary Shares immediately prior to
                        the reconstruction bears to the total number of issued
                        Ordinary Shares immediately after the reconstruction.

5.7     ISSUE OF SECURITIES IN OTHER CORPORATIONS

        If any offer is made to the holders of Ordinary Shares, either pro rata
        to their existing holdings of Ordinary Shares or on a preferential or
        any other basis, for the subscription or purchase of


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        shares or securities of any company other than James Hardie by way of
        cash subscription, James Hardie must use its best endeavours to procure
        that there is made to each holder of Options an offer on terms which
        corresponds with the offer the holder would have received had each
        option been exercised and Ordinary Shares issued.

5.8     OTHER ADJUSTMENTS

        If any reconstruction or alteration to the share capital or other
        securities of James Hardie, or the rights attaching to them, occurs so
        that for any reason, in the opinion of James Hardie or the Executive,
        the application of the earlier provisions of this Rule 5 does not
        provide for adjustments which are fair and equitable, James Hardie or
        the Executive may request that James Hardie and the Executive negotiate
        in good faith with a view to determining any appropriate adjustments. If
        such a request is made by James Hardie or the Executive and a conclusion
        has not been negotiated which is satisfactory to James Hardie and the
        Executive within a period of two months after that request is made,
        either James Hardie or the Executive may request that the matter be
        determined under Rule 7.

6.      MISCELLANEOUS
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6.1     James Hardie must send to the holder of Options all reports and accounts
        required to be laid before shareholders of James Hardie in general
        meeting, and all notices of general meetings of shareholders, as if the
        Option holder was a shareholder.

6.2     If Options are exercised simultaneously then the holder may aggregate
        the number of Ordinary Shares or fractions of Ordinary Shares or other
        securities to which the holder is entitled to subscribe under those
        Options. Fractions in the aggregate number only will be disregarded in
        determining the total entitlement to subscribe.

6.3     James Hardie must give notice to a holder of any adjustment to the
        number of Ordinary Shares or other securities which the holder is
        entitled to subscribe for on exercise of an Option, and of any
        adjustment to the Exercise Price payable on the exercise of an Option.

6.4     In spite of anything else in these Rules, the exercise of Options and
        disposal of the resulting Ordinary Shares is subject to:

        (a)     the insider trading rules imposed by law; and

        (b)     the securities transactions rules which James Hardie and the
                Executive have agreed to apply to the Executive.

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7.      DETERMINATION BY EXPERTS
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7.1     If either James Hardie or the Executive makes a request under Rule 5.8
        that a matter be determined under this Rule, the following provisions
        apply.

7.2     Each of James Hardie and the Executive must within 14 days after the
        request is made, appoint an expert and request that the matter be
        determined by agreement between the experts respectively appointed by
        them, after receiving any submissions which either James Hardie or the
        Executive might wish to make.

7.3     If the experts appointed by James Hardie and the Executive are not able
        to reach agreement within one month after their appointment, then either
        James Hardie or the Executive may request that the matter be determined
        by a third expert to be selected by the experts appointed by each of
        James Hardie and the Executive and may request that the third expert
        make a decision on the matter as soon as practicable after receiving any
        submissions which either James Hardie or the Executive might wish to
        make. If the experts appointed by James Hardie and the Executive are not
        able to agree upon a third expert to be appointed under this Rule within
        seven days after being requested to do so, then the third expert must be
        appointed by the President for the time being of the Securities
        Institute of Australia.

7.4     The decision of any experts or expert made under this Rule is, in the
        absence of manifest error, to be conclusive and binding on James Hardie
        and the Executive and the holder of Options. James Hardie and the
        Executive must each pay one half of the costs and expenses of any third
        expert appointed in making a determination. The expert or experts will
        be appointed as experts and not as arbitrators, and the procedures for
        determination of a matter referred to the experts are to be decided by
        the experts in their absolute discretion.

8.      NOTICES
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8.1     James Hardie must give notices to the holders of Options in the manner
        prescribed by the Constitution of James Hardie for the giving of notices
        to shareholders of James Hardie, and the relevant provisions of James
        Hardie's articles of association apply, with all necessary modification
        to notices to holders.

8.2     Whenever adjustments are made to:

        (a)     the Exercise Price;

        (b)     the entitlement to Ordinary Shares on exercise of Options; or

        (c)     these Rules,

        James Hardie must give notice of the adjustment to each Option holder.


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9.      SHAREHOLDER APPROVAL
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        The grant of Options under these Rules is conditional on approval by
        ordinary resolution at a general meeting of James Hardie as specified in
        the Executive Service Agreement and as required by the ASX Listing
        Rules.

10.     AMENDMENTS
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        These Rules may not be varied without the prior consent in writing of
        James Hardie and the Executive.

11.     DUTCH LAW
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        The Options and other securities under this Plan are not and will not be
        offered to persons who are resident or domiciled in The Netherlands.
        This Plan, any offer of Options or other securities under this Plan and
        each announcement thereof (i) will state that no offer is being made to
        residents of The Netherlands and (ii) will comply with the laws and
        regulations of any State where persons to whom the offer is made are
        resident.


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SCHEDULE A

                               CALCULATION OF TSR


The TSR for each company in the Peer Group over the Performance Period shall be
calculated in accordance with the following procedure:


<TABLE>
<CAPTION>
           Explanation                                Example
<S>        <C>                                        <C>    <C>    <C>        <C>
Step 1     Calculate the average daily closing        Suppose average closing price at
           price of an ordinary share of a company    end of Performance Period is
           over the 5 days immediately preceding      $9.00.
           the end of the Performance Period.

Step 2     Work out the average daily closing price   Suppose average closing price at
           of an ordinary share of a company over     start of Performance Period is
           the 5 days immediately preceding the       $6.00.
           start of the Performance Period.

Step 3     Divide the result from Step 1 by the       9.00 / 6.00 = 1.50
           result from Step 2.

Step 4     Divide each dividend (including all cash   YEAR   PRICE   DIVIDEND  DIVIDEND
           payments for capital reductions, special                              YIELD
           dividends etc) paid on an ordinary share   ----   -----  ---------- --------
           of the same company during the             1      6.50   12.0 cents  1.8462%
           Performance Period by the price of an
           ordinary share of the same company on      2      7.50   12.0 cents  1.6000%
           the date of payment of the respective
           dividend.  Each of these amounts is the    3      8.50   12.0 cents  1.4118%
           "dividend yield".

Step 5     Add 1.0 to each of the dividend yields     YEAR           RESULT
           for the Performance Period.  Each of       ----          --------
           these amounts is a result.                 1             1.018462

                                                      2             1.016000

                                                      3             1.014118

Step 6     Multiply each of the results in Step 5     1.018462 x 1.016000 x 1.014118=
           together.                                  1.049365

Step 7     Multiply the result from Step 3 by the     1.50 x 1.049365 = 1.574048
           result from Step 6.

Step 8     Subtract 1.0 from the result from Step 7.  1.574048 - 1.00 = 0.574048

Step 9     Multiply the result from Step 8 by 100.    0. 574048 x 100 = 57.4048%
</TABLE>



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SCHEDULE B

                          NOTICE OF EXERCISE OF OPTION


                             APPLICATION FOR SHARES

                           JAMES HARDIE INDUSTRIES NV

                                (ACN 000 009 263)


<TABLE>
        <S>                <C>                      <C>
        I/We apply for     No. of Shares               Amount Payable
        Ordinary Shares    ....................     $...................
        Full Application                            $...................
        Money Payable
</TABLE>

<TABLE>
<S>                    <C>                  <C>                 <C>
Please fill in the     I/We lodge Full      $                   Complete your
full Application       Application Money                        cheque made out
Money Payable from                                              to James Hardie
Section A above                                                 Industries NV for
                                                                this amount,
                                                                attach it to this
                                                                application form
                                                                and send it to
</TABLE>


                              Given name/s  Surname/s   Tax file No or exemption
                              ------------------------  ------------------------
Complete full name details    Applicant
for Ordinary Shares
                              ------------------------  ------------------------


                          ------------------------------------------------------
Complete address for
Ordinary Shares
                          ------------------------------------------------------
                          No & Street

                          ------------------------------------------------------
                          Suburb or City        State                 Postcode

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


                          ------------------------------------------------------
Telephone details         Home                  Work          Contact name
                          ------------------------------------------------------


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                          ------------------------------------------------------
                          (  )                  (  )
                          ------------------------------------------------------


The applicant agrees to be bound by the Constitution of James Hardie Industries
NV and the Rules of the Option Plan under which these options are granted.


--------------------------------
Signature


--------------------------------
Name of applicant



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