Document:

Exhibit 4.2

Exhibit 4.2 

TERMS AND CONDITIONS 

OF 

GLOBAL PHILIPS RESTRICTED SHARE RIGHTS PROGRAM 2003 

Grants April 2003, July 2003, October 2003 and February 2004 

Article 1
Definitions 

In this Global Philips Restricted
Share Program 2003 the following definitions shall apply: 

          	1. 	Custody Account:		
               a custody account maintained in the name of a Participant
               other than a Nominee Account. 

               

          	2. 	Date of Grant: 		
               the date at which a Restricted Share Right is granted pursuant
               to this Program.

               

          	3. 	Delivery Date:		
               – in respect of 1 Year Term Restricted Share Rights:
               [......., 2004];

               

          	 	 	 	
– in respect of 2 Year Term Restricted Share Rights: [......, 2005];

               

          	 	 	 	
– in respect of 3 Year Term Restricted Share Rights: [......, 2006].

               

          	4. 	Employing Company:		
               any company within the Philips group of companies and such
               other company as Philips may from time to time designate or approve.

               

          	5. 	Nominee Account:		
               a custody account maintained in the name of a Participant
               established by an administrator designated by Philips.

               

          	6. 	Premium Date:		
               the date which is three years after the applicable Delivery Date.

               

          	7. 	Premium Shares:		
               any Shares (to be) delivered to a Participant pursuant to
               Article 7 hereof.

               

          	8. 	Retainment Period:		
               the period commencing on the Delivery Date applicable to a
               particular Restricted Share Right until the Premium Date applicable to such
               Restricted Share Right. 

               

          	9. 	Participant:		
               an individual who has accepted any Restricted Share Rights under
               this Program.

               

          	10. 	Philips:		
               Koninklijke Philips Electronics N.V.

               

          	11. 	Program:		
this Global Philips Restricted Share Program 2003.

               

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          	12. 	Restricted Share Right:		
the conditional
               right granted to a Participant to receive one Share subject to the terms of this
               Program. Restricted Share Rights will be categorized as “1 Year Term
               Restricted Share Rights”, “2 Year Term Restricted Share Rights”
               or “3 Year Term Restricted Share Rights”, as applicable.

               

          	13. 	Share:		
               a common share of Philips (to be) delivered under this Program. 

               

Article 2 

Grant of Restricted Share Rights 

	  	
Any
Restricted Share Rights may be granted to an eligible individual, subject to the
(acceptance by such individual of the) terms and conditions of this Program. Any
Restricted Share Rights offered to any such individual and the terms and conditions
governing such rights shall be deemed accepted by such individual with effect from the
applicable Date of Grant in case Philips has not received, in accordance with a procedure
established by Philips, a notice of rejection of such rights within fourteen (14) days of
the notice of grant of such rights or such later date as may be determined by Philips. 

Article 3 

Termination of Employment 

               	1. 	
                    Except as provided in Article 3.2 and 3.3 hereof, in case a Participant is no
                    longer employed by any Employing Company as a result of the termination of such
                    Participant’s employment with an Employing Company for any reason
                    whatsoever prior to the applicable Delivery Date, such Participant’s
                    Restricted Share Rights shall be forfeited effective as of the date of
                    termination of such Participant’s employment with the Employing Company
                    without the Participant being entitled to any compensation or any obligation on
                    the part of Philips or any of its subsidiaries unless Philips determines, in its
                    sole discretion, otherwise in writing. Any such determination shall be final,
                    conclusive and binding and may be subject to such conditions as Philips may
                    determine appropriate. 

                    

               	2. 	
                    In case a Participant is no longer employed by any Employing Company as a result
                    of the termination of such Participant’s employment with an Employing
                    Company for reasons of (i) death, (ii) disablement, (iii) legal incapacity, (iv)
                    retirement -including, but not limited to, early retirement- (retirement or
                    early retirement to be defined as termination of service with eligibility for an
                    immediate retirement benefit under a retirement plan of an Employing Company
                    under which such Participant was covered, provided payment of such retirement
                    benefit begins immediately following such termination), or (v) the expiration of
                    a temporary contract of employment, provided such temporary contract of
                    employment has not been extended one or more times, such Participant or, in case
                    of the death or legal incapacity of the Participant, the estate of the
                    Participant or his or her legal representative(s), as the case may be, shall
                    remain entitled to any Restricted Share Rights granted to such Participant prior
                    to the date of such termination subject to, and in accordance with, the terms
                    and conditions of this Program. 

                    

               	3. 	
                    In case a Participant is no longer employed by any Employing Company as a result
                    of the sale or other divestment of a business, subsidiary, division or other
                    business unit of 

                    

2

               	 	
                    Philips or any part thereof (“Divested Business”),
                    such Participant shall remain entitled to any Restricted Share Rights granted to
                    such Participant prior to the date of the termination of such employment subject
                    to, and in accordance with, the terms and conditions of this Program, provided
                    that such Restricted Share Rights will be forfeited as of the date of
                    termination of the Participant’s employment with the company which acquired
                    the Divested Business from Philips or any of its subsidiaries, without the
                    Participant being entitled to any compensation or any obligation on the part of
                    Philips or its subsidiaries or the transferee or its subsidiaries. 

                    

Article 4 

Non-transferability 

	  	
The
Restricted Share Rights are strictly personal and may not be assigned, transferred (except
by the will or the laws of descent and distribution), pledged, hypothecated, or otherwise
encumbered or disposed of in any manner. The Participant may not engage in any
transactions on any exchange on the basis of any Restricted Shares Rights. Any violation
of the terms of this Article 4 will cause the Restricted Share Rights to become
immediately null and void without further notice and without the Participant being
entitled to any compensation. 

Article 5 

Delivery and Holding of Shares 

               	1. 	
                    Philips may require a Participant to maintain a Nominee Account in connection
                    with this Program. Nothing contained in this Program shall obligate Philips to
                    establish or maintain or cause to establish or maintain a Nominee Account for
                    any Participant. 

                    

               	2. 	
                    Subject to the terms of this Program, Philips will deliver a Share to a
                    Participant on or as soon as reasonably practicable after the relevant Delivery
                    Date. In no event shall Philips have any obligation to deliver any Shares to a
                    Participant prior to the relevant Delivery Date. 

                    

               	3. 	
                    Any Shares to be delivered pursuant to Article 5.2 will be credited to the
                    Nominee Account except if a Participant (i) requests Philips to credit such
                    Shares to a Custody Account or (ii) does not maintain a Nominee Account at the
                    date of delivery of such Shares. In case (i) or (ii) as described in the
                    foregoing sentence applies, the Participant shall be responsible to notify
                    Philips in accordance with a procedure (including the period for notification)
                    established by Philips on the details relating to such Custody Account. In case
                    Philips determines in its sole discretion that the Participant has failed to
                    notify Philips in accordance with such procedure, then the Participant shall be
                    deemed to have requested Philips to sell or cause to sell such Shares. 

                    

               	4. 	
                    Except as may otherwise be approved in writing by Philips in its sole
                    discretion, in case a Participant is no longer employed by any Employing Company
                    for any reason whatsoever, the Participant (or his or her legal representatives)
                    shall withdraw all Shares credited to the Participant’s Nominee Account
                    within two (2) months of the date of such termination. In case the Participant
                    (or his or her legal representatives, as the case may be) fails to comply with
                    the foregoing obligation, then the Participant shall be deemed to have requested
                    Philips to sell or cause to sell such Shares. 

                    

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               	5. 	
                    Each Participant shall comply with any applicable “insider trading”
                    laws and regulations and the Philips’ Rules of Conduct with respect to
                    Inside Information. 

                    

Article 6 

Capital Dilution 

	  	
Philips
may make equitable adjustment or substitution of the number or kind of Shares subject to
the Restricted Shares Rights, as it, in its sole discretion, deems equitable to reflect
any significant corporate event of or by Philips, for example a change in the outstanding
Shares by reason of any stock dividend or split, recapitalization, merger, consolidation,
spin-off, combination or exchange of shares or other corporate change, or any distribution
to holders of Shares other than regular cash dividends. 

Article 7 

Premium Restricted Share Rights 

	  	
At
a Premium Date, Philips will deliver a number of Premium Shares which is equal to 20%
(twenty percent) of the number of Shares pursuant to the Restricted Share Rights acquired
by a Participant which are held by the Participant at, and are subject to, such Premium
Date. The foregoing obligation shall be subject further to the requirements that: (i) the
Participant is still employed by an Employing Company at the relevant Premium Date and
(ii) such Shares have been deposited on the Participant’s Nominee Account during the
entire Retainment Period in order to enable Philips to monitor whether Participant has
retained the Shares during such period. Philips will not be required pursuant to the
foregoing to deliver a fraction for a Premium Share but instead the number of Premium
Shares shall be rounded downward to the next whole Share. The Participant shall not be
entitled to any compensation for such fraction of a Premium Share not delivered by Philips
pursuant to the foregoing. 

Article 8 

Costs and Taxes 

               	1. 	
                    All costs of delivering any Shares, including, but not limited to, any Premium
                    Shares, under this Program to a Nominee Account of a Participant shall be borne
                    by Philips. All costs of delivering any Shares, including, but not limited to,
                    any Premium Shares, under this Program to a Custody Account and any other costs
                    connected with the Shares shall be borne by the Participant. 

                    

               	2. 	
                    Any and all taxes, duties, levies, charges or social security contributions
                    (“Taxes”) which arise under any applicable national, state, local or
                    supra-national laws, rules or regulations, whether already effective on the date
                    of grant of any Restricted Shares Rights or becoming effective thereafter, and
                    any changes or modifications therein and termination thereof which may result
                    for the Participant in connection with this Program (including, but not limited
                    to, the grant of the Restricted Shares Rights, the ownership of the Restricted
                    Shares Rights and/or the delivery of any Shares under this Program, the
                    ownership and/or the sale of any Shares acquired under this Program) shall be
                    for the sole risk and account of the Participant. 

                    

               	3. 	
                    Philips shall have the right to cause to be deducted from any salary payment or
                    other sums due by Philips or any of its subsidiaries to Participant, or
                    requiring the Participant or beneficiary of the Participant, to pay to Philips
                    an amount necessary to settle any Taxes determined by Philips necessary to be
                    withheld in connection with this Program 

                    

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                    (including, but not limited to, the
                    grant of the Restricted Shares Rights or the delivery of any Shares (including
                    Premium Shares) under this Program). 

                    

               	4. 	
                    Philips shall not be required to deliver any Shares, or to transfer or cause to
                    be transferred any Shares from a Nominee Account to a Custody Account, until
                    Philips has received an amount, or the Participant has made such arrangements,
                    required by Philips necessary to satisfy any withholding of any Taxes and/or
                    costs to be borne by the Participant hereunder as determined by Philips. 

                    

Article 9 

Dividend Payment on Shares 

	  	
Philips
is entitled, in its sole discretion, to determine the manner in which dividend on any
Shares acquired by a Participant pursuant to this Program and deposited on the Nominee
Account at the applicable record date, is paid to such Participant, including, but not
limited to the payment of dividend by means of a dividend reinvestment plan pursuant to
which the dividend will be reinvested in the purchase of Shares. 

Article 10 

General Provisions 

               	1. 	
                    Philips shall have the authority to interpret this Program, to establish, amend,
                    and rescind any rules and regulations relating to this Program, to determine the
                    terms and conditions of any agreements entered into hereunder, and to make all
                    other determinations necessary or advisable for the administration of this
                    Program. Philips shall further have the authority to, in its sole discretion,
                    waive the requirement pursuant to Article 7 that the Shares have been and are
                    deposited on the Nominee Account during the entire Retainment Period. Such
                    waiver may be subject to such conditions as Philips may establish in its sole
                    discretion. 

                    

               	2. 	
                    No Participant shall have any rights or privileges of shareholders (including
                    the right to receive dividends and to vote) with respect to Shares to be
                    delivered pursuant to Restricted Share Rights until such Shares are actually
                    delivered to such Participant in accordance with Article 5 of this Program. The
                    Shares delivered shall carry the same rights as common shares of Philips traded
                    on Euronext Amsterdam, or the New York Stock Exchange if applicable, on the day
                    on which these are delivered. 

                    

               	3. 	
                    The (value of) Restricted Share Rights granted to, or Shares acquired by, a
                    Participant pursuant to such Restricted Share Right under this Program shall not
                    be considered as compensation in determining a Participant’s benefits under
                    any benefit plan of an Employing Company, including but not limited to, group
                    life insurance, long-term disability, family survivors, or any retirement,
                    pension or savings plan. 

                    

               	4. 	
                    Nothing contained in this Program or in any grant made or Agreement entered into
                    pursuant hereto shall confer upon any Participant any right to be retained in
                    employment with any Employing Company, or to be entitled to any remuneration or
                    benefits not set forth in this Program or interfere with or limit in any way
                    with the right of the Company or any of its subsidiaries to terminate such
                    Participant’s employment or to discharge or retire a Participant at any
                    time. 

                    

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               	5. 	
                    If a provision of this Program is deemed illegal or invalid, the illegality or
                    invalidity shall not affect the remaining parts of this Program, this Program
                    shall be construed as if the illegal or invalid provisions had not been included
                    in this Program. 

                    

               	6. 	
                    Where the context requires, words in either gender shall include also the other
                    gender. 

                    

               	7. 	
                    This Program shall be governed by and construed in accordance with the laws of
                    The Netherlands, without regard to its principles of conflict of laws. 

                    

·   ·   ·   ·   ·

Delivery Date Schedule 

	 	1 Year Term 	2 Year Term 	3 Year Term
	April 15, 2003	April 15, 2004	April 15, 2005	April 18, 2006
	July 15, 2003 	July 15, 2004 	July 15, 2005 	July 17, 2006
	October 14, 2003 	October 14, 2004 	October 14, 2005 	October 16, 2006
	February 10, 2004 	February 10, 2005 	February 10, 2006 	February 12, 2007

6Exhibit 4.3

Exhibit 4.3 

TERMS AND CONDITIONS

OF

GLOBAL PHILIPS STOCK OPTION PROGRAM 2003

-grants April 2003, July 2003, October 2003, and February 2004-

Article 1

Definitions

In this Global Philips Stock Option Program 2003 the following definitions
shall apply:

	1. 		Closing Price:	the price of a Share with dividend, if any, at the closing of
     the Official Segment of Euronext Amsterdam N.V.’s stock market
     (“Euronext Amsterdam”) as published in the Official Price List of this
     stock exchange.

	2. 		Custody Account:	a custody account maintained in the name of a Participant
     other than a Nominee Account.

	3. 		Date of Grant:	the date at which the Option is granted to the Option Holder,
     for the respective grants of the Program being:

		- grant April 2003:	the date of publication of the first quarter results
     2003, i.e., April 15, 2003;

		- grant July 2003:	the date of publication of the half
year results 2003, i.e. July 15, 2003;

		- grant October 2003:	the date of publication of the third quarter results
2003, i.e. October 14, 2003;

		- grant February 2004:	the date of publication of the annual results 2003, i.e.
February 10, 2004;

	4.		Employing Company:	any company within the Philips group of companies and such
other company as Philips may from time to time designate or approve.

	5.		Grant Price:	the price to be paid by the Option Holder to acquire a Share
upon exercising an Option. Such price will be equal to the Closing Price on the
applicable Date of Grant.

	6.		Nominee Account:	a custody account maintained in the name of a Participant
established by an administrator designated by Philips.

	7.		Option:	a right granted by Philips under the Program to acquire one
Share subject to the terms and conditions thereof.

	8.		Option Holder:	a person holding any Options.

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	9.		Option Period:	the term for which an Option is granted as specified in
Article 3 (subject to any extension as set forth in Article 4.3).

	10.		Philips:	Koninklijke Philips Electronics N.V.

	11.		Program:	the Global Philips Stock Option Program 2003.

	12.		Share:	a common share of Philips.

Article 2

Acquisition of Options

Any Options may be granted to an eligible individual as per the applicable
Date of Grant, subject to the (acceptance by such individual of the) terms and
conditions of this Program. Any Options offered to any such individual and the
terms and conditions governing such Options shall be deemed accepted by such
individual with effect from the applicable Date of Grant in case Philips has not
received, in accordance with a procedure established by Philips, a notice of
rejection of such Options within fourteen (14) days of the notice of grant of
the Options or such later date as may be determined by Philips. 

Article 3

Restrictions on Exercise and Option Period

	1. 	  	Options shall not be exercisable before the third
anniversary of the Date of Grant. Unvested and lapsed Options cannot be
exercised.

	2. 	  	In principle, the Option Period is ten (10) years running
from the Date of Grant, subject to this paragraph 2 and to Article 4. Upon
request of the Option Holder exercising Options pursuant to Article 6, the
Option Period for the Options being exercised will be limited to the period from
the Date of Grant up to, and including, the date Philips receives the above
request in accordance with a procedure established by Philips, provided that the
Option Period is at least three years.

	3.	 	In principle, Options may only be exercised (subject to a
minimum of ten (10) units) at the last day of the prevailing Option Period,
subject to this Article 3 and Article 4.

	4.	 	Subject to this Article 3 and Article 4, Members of the
Group Management Committee of Philips, the Head of Corporate Control and the
Head of Corporate Treasury, may only exercise Options during the period of ten
business days after publication of Philips’ annual or quarterly results.

Article 4

Termination of Employment

	1.	 	Except as provided in Article 4.2, 4.3 and 4.4 hereof, in
case an Option Holder is no longer employed by any Employing Company as a result
of the termination of such Option Holder’s employment with an Employing
Company for any reason whatsoever during the applicable Option Period, any
Options held by such Option Holder at the date of such termination shall be
forfeited effective as of the date of termination of such Option Holder’s
employment with the Employing Company without the Option Holder

2

		 	being entitled to any compensation or any obligation on the
part of Philips or any of its subsidiaries unless Philips determines, in its
sole discretion, otherwise in writing. Any such determination shall be final,
conclusive and binding and may be subject to such conditions as Philips may
determine appropriate.

	2.	 	In case an Option Holder is no longer employed by any
Employing Company during the applicable Option Period as a result of the
termination of such Option Holder’s employment with an Employing Company
for reasons of (i) disablement, (ii) retirement –including, but not limited
to, early retirement- (retirement or early retirement to be defined as
termination of service with eligibility for an immediate retirement benefit
under a retirement plan of an Employing Company under which such Option Holder
was covered, provided payment of such retirement benefit begins immediately
following such termination), or (iii) the expiration of a temporary contract of
employment, provided such temporary contract of employment has not been extended
one or more times, any Options held by such Option Holder at the date of
termination shall, to the extent such Options were exercisable at the date of
such termination, remain exercisable in accordance with Article 3, provided that
in such case the Option Period will expire upon the earlier of (a) ten (10)
years from the Date of Grant or (b) five (5) years from the date of such
termination.

	3.	 	In case an Option Holder is no longer employed by any
Employing Company during the applicable Option Period as a result of the
termination of such Option Holder’s employment with an Employing Company
for reasons of (i) death or (ii) legal incapacity of the Option Holder, the
Options shall remain exercisable during the Option Period in accordance with
Article 3, provided that in the event the remaining Option Period as from the
date of termination shall be less than twelve (12) months, then such Options
shall be exercisable for a period of twelve (12) months as of the date of such
termination and the Option Period shall be deemed extended accordingly and
provided further that the Options shall only be exercisable in the manner as set
forth in Article 9.

	4.	 	In case an Option Holder is no longer employed by any
Employing Company during the applicable Option Period as a result of the sale or
other divestment of a business, subsidiary, division or other business unit of
Philips or any part thereof (“Divested Business”), any Options held by
such Option Holder at the date of such termination shall remain exercisable in
accordance with the terms and conditions of this Program, provided that the
Option Period will expire upon the earlier of (a) ten (10) years as from the
Date of Grant or (b) five (5) years as from the date of such termination, and
provided further that such Options will be forfeited as of the date of
termination of the Option Holder’s employment with the company which
acquired the Divested Business from Philips or any of its subsidiaries, without
the Option Holder being entitled to any compensation or any obligation on the
part of Philips or its subsidiaries or the transferee or its subsidiaries.

Article 5

Non-transferability 

The Options are strictly personal, and may not be assigned, transferred
(except that, in case of death of the Option Holder during the Option Period,
any Options held by the Option Holder at the date of his death shall pass to his
heirs or legatees), pledged, hypothecated, or otherwise encumbered or disposed
of in any manner. The Option Holder may not engage in any transactions on any
exchange on the basis of any Options. Any violation of the terms of this Article
5 will cause the Options to become immediately null and void without further
notice and without the Option Holder being entitled to any compensation.

3

Article 6

Exercise of Options

	1. 	  	In order to exercise Options which are exercisable in
accordance with this Program, the Option Holder must notify Philips in
accordance with a procedure determined by Philips. The notice shall state:

			(a)	the Date of Grant of the Options he wishes to exercise;

			(b)	
     if applicable, the confirmation that the Option Holder wants to limit the Option
     Period pursuant to Article 3, paragraph 2;

     

			(c)	
          the number of Options to be exercised; and

          

			(d)	
     whether Shares to be obtained upon such exercise: 

     

	 	 	 	–	
be sold, on behalf of the Option Holder, as soon as possible and the revenue deducted by
the Grant Price, multiplied by the number of Options so being exercised, and further
costs, be paid to the Option Holder at a bank account indicated by him in accordance with
a procedure determined by Philips; or 	  

	 	 	 	–	
be delivered to the Option Holder as provided for in paragraphs 2, 3, 4 and 5 below.

	  	
Such
notice shall be accompanied by the payment in full of the Grant Prise, multiplied by the
number of Options so being exercised. Such payment shall be made: (a) in cash, (b) through
simultaneous sale through a broker of Shares acquired on exercise, subject to it being
permitted under the applicable regulations, (c) through additional methods prescribed by
Philips or (d) by a combination of any such method. 

	2. 	  	
                    Philips may require an Option Holder to maintain a Nominee Account in connection
                    with this Program. Nothing contained in this Program shall obligate Philips to
                    establish or maintain or cause to establish or maintain a Nominee Account for
                    any Option Holder. 

                    

	3. 	  	
                    Subject to the terms of this Program, Philips will deliver a Share to a
                    Participant on or as soon as reasonably practicable after the exercise of an
                    Option. In no event shall Philips have any obligation to deliver any Shares to
                    an Option Holder prior to the exercise of Options. 

                    

	4. 	  	
                    Any Shares to be delivered pursuant to Article 5.1 will be credited to the
                    Nominee Account except if an Option Holder (i) requests Philips to credit such
                    Shares to a Custody Account or (ii) does not maintain a Nominee Account at the
                    date of delivery of such Shares. In case (i) or (ii) as described in the
                    foregoing sentence applies, the Option Holder shall be responsible to notify
                    Philips in accordance with a procedure (including the period for notification)
                    established by Philips on the details relating to such Custody Account. In case
                    Philips determines in its sole discretion that the Option Holder has failed to
                    notify Philips in accordance with such procedure, then the Option Holder shall
                    be deemed to have requested Philips to sell or cause to sell such Shares.

                    

4

	5. 	  	
                    Except as may otherwise approved in writing by Philips in its sole discretion,
                    in case an Option Holder is no longer employed by any Employing Company for any
                    reason whatsoever, the Option Holder (or his or her legal representatives) shall
                    withdraw all Shares credited to the Option Holder’s Nominee Account within
                    two (2) months of the date of such termination. In case the Option Holder (or
                    his or her legal representatives, as the case may be) fails to comply with the
                    foregoing obligation, then the Option Holder shall be deemed to have requested
                    Philips to sell or cause to sell such Shares. 

                    

	6. 	  	
                    The Option Holder who has “Inside Information” according to the
                    Philips’ Rules of Conduct with respect to Inside Information is prohibited
                    from the exercise of Options and the sale of Shares acquired pursuant to the
                    exercise of any Options. 

                    

Article 7 

Capital Dilution 

Philips may make equitable adjustment
or substitution of (a) the number or kind of Shares subject to the Options, and/or (b) the
Grant Price, as it, in its sole discretion, deems equitable to reflect any significant
corporate event of or by Philips, for example a change in the outstanding Shares by reason
of any stock dividend or split, recapitalization, merger, consolidation, spin-off,
combination or exchange of shares or other corporate change, or any distribution to
holders of Shares other than regular cash dividends. 

The effect of the adjustment or
substitution shall be to preserve both the aggregate difference and the aggregate ratio
between the Grant Price and the fair market value of the Shares to be acquired upon
exercise of the Options. The Option Holder shall be notified promptly of such adjustment
or substitution. 

Article 8 

Costs and Taxes 

	1. 	  	
               All costs of delivering any Shares to the Option Holder upon exercise of any
               Options shall be born by Philips.

               

	2. 	  	
               Any and all taxes, duties, levies, charges or social security contributions
               (“Taxes”) which arise under any applicable national, state, local or
               supra-national laws, rules or regulations, whether already effective on the Date
               of Grant or becoming effective thereafter, and any changes or modifications
               therein and termination thereof which may result for the Option Holder in
               connection with this Program (including, but not limited to, the grant, the
               ownership and/or the exercise of the Options, and/or the delivery, ownership
               and/or the sale of any Shares acquired under this Program) shall be for the sole
               risk and account of the Option Holder. 

               

	3. 	  	
               Philips shall have the right to cause to be deducted from any salary payment or
               other sums due by Philips or any of its subsidiaries to an Option Holder, or
               requiring the Option Holder or beneficiary of the Option Holder, to pay to
               Philips an amount necessary to settle any Taxes determined by Philips necessary
               to be withheld in connection with this Program (including, but not limited to,
               the grant of the Options or the delivery of any Shares under this Program). 

               

	4. 	  	
               Philips shall not be required to deliver any Shares, or to transfer or cause to
               be transferred any Shares from a Nominee Account to a Custody Account, until
               Philips has received an amount, or the Option Holder has made such arrangements,
               required by Philips necessary to satisfy any withholding of any Taxes and/or
               costs to be borne by the Option Holder hereunder as determined by Philips.

               

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Article 9 

Cash Alternative 

Philips, upon receipt of a notice, as
referred to in Article 6.1 hereof to exercise any Option, may advise an Option Holder
resident outside the Netherlands to request in writing an amount in cash as an alternative
to Shares. Upon such request the Option Holder is entitled to receive an amount in Euro or
in U.S. Dollars, as indicated by the Option Holder, equal to the Closing Price on the date
of receipt of such request minus the Grant Price, multiplied by the number of Options so
being exercised. Further, any costs to be paid and any applicable Taxes shall be deducted
from the amount to be received by the Option Holder. If on the date of receipt of the
notice Shares have not been traded on of Euronext Amsterdam the Closing Price will be that
of the first subsequent trading day on of Euronext Amsterdam. The same method is being
used for calculating the cash amount to which heirs and legatees of an Option Holder are
entitled in accordance with Article 4.3. 

Article 10 

General Provisions 

	1. 	  	
               Philips shall have the authority to interpret this Program, to establish, amend,
               and rescind any rules and regulations relating to this Program, to determine the
               terms and conditions of any agreements entered into hereunder, and to make all
               other determinations necessary or advisable for the administration of this
               Program. 

               

	2. 	  	
               No Option Holder shall have any rights or privileges of shareholders (including
               the right to receive dividends and to vote) with respect to Shares to be
               delivered pursuant to the exercise of any Options until such Shares are actually
               delivered to such Option Holder in accordance with Article 6 of this Program.
               The Shares delivered shall carry the same rights as common shares of Philips
               traded on Euronext Amsterdam, or the New York Stock Exchange if applicable, on
               the day on which these are delivered.

               

	3. 	  	
               The (value of) Options granted to, or Shares acquired by, an Option Holder
               pursuant to such Options under this Program shall not be considered as
               compensation in determining an Option Holder’s benefits under any benefit
               plan of an Employing Company, including but not limited to, group life
               insurance, long-term disability, family survivors, or any retirement, pension or
               savings plan. 

               

	4. 	  	
               Nothing contained in this Program or in any grant made or Agreement entered into
               pursuant hereto shall confer upon any Option Holder any right to be retained in
               employment with any Employing Company, or to be entitled to any remuneration or
               benefits not set forth in this Program or interfere with or limit in any way
               with the right of the Company or any of its subsidiaries to terminate such
               Option Holder’s employment or to discharge or retire a Option Holder at any
               time. 

               

	5. 	  	
               If a provision of this Program is deemed illegal or invalid, the illegality or
               invalidity shall not affect the remaining parts of this Program, this Program
               shall be construed as if the illegal or invalid provisions had not been included
               in this Program. 

               

	6. 	  	
               Where the context requires, words in either gender shall include also the other
               gender. 

               

	7. 	  	
               This Program shall be governed by and construed in accordance with the laws of
               The Netherlands, without regard to its principles of conflict of laws. 

               

·   ·   ·   ·   ·

6

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