Document:

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                                                                     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
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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
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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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                                                                         Page 13<PAGE>
                                                                     EXHIBIT 4.3

                                  JAMES HARDIE

              ECONOMIC PROFIT (EP) AND INDIVIDUAL PERFORMANCE (IP)
                                 INCENTIVE PLANS

The following are the terms of the James Hardie Group Economic Profit (EP)
Incentive Plan and Individual Performance (IP) Incentive Plan (the "Plan" or
"Plans").

A. INCENTIVE PLANS

1. PURPOSE OF THE INCENTIVE PLANS

   The purpose of the EP INCENTIVE PLAN is to provide incentive compensation for
   nominated executives and employees of James Hardie Industries N.V. (JHINV)
   and its subsidiary companies, including but not limited to James Hardie
   Building Products (collectively referred to as the "Company"), which directly
   relates their financial reward to an increase in shareholder value. The
   philosophy behind the Plan is that economic value must continue to be created
   in successive years in order for the full potential Incentive to be paid.
   Additionally, this Plan has an Individual Performance component that will be
   paid upon the achievement of specific personal objectives.

   The purpose of the IP INCENTIVE PLAN is to provide incentive compensation for
   nominated employees of the Company who have less direct influence on the
   Company's economic performance. The IP Plan relates participants' financial
   rewards to the achievement of specific individual objectives that benefit the
   Company and indirectly increase EP and shareholder value.

2. DEFINITIONS

   o  BOARD OF DIRECTORS - JHINV's Supervisory Board of Directors.

   o  BONUS - The pay the Company may provide to an employee in addition to the
      agreed base salary. "Bonus" and "Incentive" are used interchangeably
      throughout this document.

   o  BONUS BANK - Two thirds of the amount of EP Bonus Realized over the EP
      Target Bonus in any single year that is credited to each participant for
      potential payment in the following two Plan Years if Company performance
      is sustained, and the participant remains eligible for such payments under
      the terms of the Plan. Participants have no right or interest in the Bonus
      Bank except as described in this Plan document.

   o  BASE SALARY - Participant's annual base salary as of the last day of the
      Plan Year.

   o  CHANGE IN CONTROL - See attachment 1

   o  ECONOMIC PROFIT (EP)= Net Operating Profit After Tax (NOPAT) minus Capital
      Charge

   o  EP/IP % SPLIT - The percentage of the participant's Target Bonus that is
      based on the Company's EP achievement (the EP portion) versus the
      percentage that is based on IP achievement (the IP portion). These
      percentages vary based on the participant's position with the Company.
      These two percentages must total 100%.

                                                                          Page 1
<PAGE>

   o  EP BONUS REALIZED - Dollar amount (positive or negative) that is the
      result of multiplying the EP Bonus Multiple by the dollar amount of the EP
      portion of the participant's bonus at target. This amount is subject to
      the bonus banking mechanism and is not paid except as described in this
      Plan document.

   o  EP BONUS MULTIPLE - Reflects actual Company performance relative to the
      Target EP. (A bonus multiple of 1.0 means 100% of the EP portion of the
      target bonus was realized.) The Multiple will be multiplied by the
      participant's EP portion of the target bonus in order to determine the
      amount of the EP Bonus Realized during the year.

   o  EP TARGET BONUS - The EP portion of the participant's Target Bonus upon
      applying the EP/IP split.

   o  EXPECTED IMPROVEMENT (EI) - The amount the Company's EP needs to improve
      over the previous year in order to attain Target EP.

   o  GMT- Group Management Team comprised of the Company's CEO and direct
      reports

   o  INDIVIDUAL PERFORMANCE (IP) - The participant's performance on the
      specific objectives agreed to during the Plan Year, how the objectives
      were achieved and the participant's ranking within the organization as
      determined by the participant's annual performance review rating.

   o  INTERVAL - The amount by which actual EP needs to exceed Target EP to
      increase the EP Bonus Realized by 100%. Additionally, if the actual EP
      fails to achieve the Target EP by this amount then the EP Bonus Realized
      will decrease by 100%.

   o  JH, THE COMPANY - James Hardie Industries N.V. and its subsidiaries

   o  PERFORMANCE RATING - The A, B+, B, B-, or C rating that each employee
      receives based on performance and ranking within their organization.

   o  PLAN YEAR - April 1st to March 31st, the Company's financial year.

   o  TARGET BONUS - The percentage of the participant's base salary that is
      available for bonus income. This is set annually for each participant.

   o  TARGET EP - The Company's actual EP for the prior Plan Year plus the
      current year's Expected Improvement (EI).

3. ELIGIBILITY

   Eligibility for a bonus plan is limited to nominated executives and key
   employees within the Company. In general, participation in a bonus plan is
   restricted to those employees in salaried exempt positions who are not on a
   Commission plan. Note, however, that not all exempt positions are on a bonus
   plan. Selection of employees for participation in a Plan in any Plan Year
   will be subject to approval of the Chief Executive Officer on the
   recommendation by the relevant Group Management Team (GMT) member and the
   Vice President of Human Resources & Organizational Development.

                                                                          Page 2
<PAGE>

   Eligibility of executives and key employees for inclusion in a Plan does not
   guarantee their participation in any future year. Participation of any
   division/business unit in the Plan will be at the discretion of the Chief
   Executive Officer.

4. BONUS CALCULATION

   The Bonus Calculation is based on two (2) components:

   o  The individual's performance rating (the IP component).

   o  The EP performance of the Company (the EP component).

   THE IP INCENTIVE PLAN IS BASED SOLELY ON THE IP COMPONENT. THE EP INCENTIVE
   PLAN UTILIZES BOTH COMPONENTS. THIS IS THE PRIMARY DIFFERENCE BETWEEN THE TWO
   BONUS PLANS.

   A participant's Target Bonus is a percentage of base salary and is approved
   annually by the VP of Human Resources and Organizational Development.

   (A) IP BONUS

   The IP bonus component is SOLELY based on the individual's performance rating
   at the end of the Plan Year and/or when the individual changes roles during
   the year. The rating is determined by reviewing the individual's achievement
   of his/her individual objectives, how the objectives were achieved, and the
   individual's ranking within the organization.

   The performance rating must be approved by the two levels of management above
   the participant prior to the IP bonus being calculated. At the start of each
   year, the GMT approves the percentage of Target Bonus that each rating pays.

   If the Company does not meet its Target EP, the individual still has the
   ability to earn all of his/her IP award. The total IP Bonus payment to be
   paid for a Plan Year is calculated as follows:

   IP BONUS  =   BASE  X  TARGET  X  IP %  X  PERFORMANCE   X  % OF YR
                SALARY    BONUS %   SPLIT       RATING %       IN PLAN

      Note: If the participant is solely on the IP Incentive Plan, the IP %
      Split is 100% and the calculation above is all that is required to
      determine the final bonus payment.

   (B) EP BONUS:

   The EP Bonus component is based ENTIRELY on the value created by the
   Company's EP.

   At the start of the Plan Year, the Board confirms the Company's global
   "Expected Improvement", "Target EP", and "Interval" for the year. The
   Expected Improvement and Interval have been set for FY04 - FY06 and will be
   reviewed again during FY06.

   The "TARGET EP" is the actual EP for the prior Plan Year plus the current
   year's EI.

                                                                          Page 3
<PAGE>

   The "INTERVAL" is the amount by which actual EP needs to exceed Target EP to
   increase the EP Bonus Realized by 100%. Additionally, if the actual EP fails
   to achieve the Target EP by the Interval amount then the EP Bonus Realized
   will decrease by 100%. The Interval is a critical component in determining
   the EP Bonus Multiple for the year.

   At the end of the Plan Year the "EP BONUS MULTIPLE" is calculated to
   determine the amount the EP component will contribute to the EP Bonus
   Realized during that year. This Multiple reflects how well the Company
   performed relative to the EP Target. The EP Multiple is determined as
   follows:

                                    EP - TARGET EP
              EP MULTIPLE  =  1 +   --------------
                                       INTERVAL

   The Plan's EP component has unlimited upside and downside performance
   potential. In other words, the EP Bonus Multiple can be significantly greater
   than one or even a negative number.

   The EP Multiple is used to calculate the EP BONUS REALIZED.

   EP BONUS REALIZED  =  BASE  X  TARGET  X  EP %  X   EP MULTIPLE  X  % OF YR
                        SALARY      %       SPLIT                      IN PLAN

   If the Target EP is exactly achieved, then the EP Bonus Realized is equal to
   1.0x an individual's EP Target Bonus. If actual EP performance is less than
   Target EP (resulting in an EP Bonus Multiple of less than 1), then the EP
   Bonus Realized is less than the individual's EP Target Bonus and may be a
   negative amount.

   Unlike the IP bonus calculation, the EP Bonus Realized, to the extent it
   exceeds EP Target Bonus, is not considered vested and is not available for
   potential payment until after the banking mechanism, explained below, is
   applied.

   (C) EP BONUS BANKING MECHANISM

   The EP bonus includes a banking mechanism that keeps participants focused on
   sustaining EP performance.

   When the Company exceeds its Target EP in any given year, then the EP Bonus
   Realized will be greater than 1x an employee's EP Target Bonus. Under such
   circumstances, 100% of the EP Target Bonus will be considered earned and paid
   in the Plan Year. Any amounts in excess of the employee's EP Target Bonus
   will be treated as follows: 1/3 of the excess will be considered earned and
   paid in the Plan Year; the remaining 2/3 will be credited to the Bonus Bank
   of the employee and is subject to being paid out equally in the following two
   Plan Years provided that Company performance is sustained, and the employee
   continues to meet the eligibility standards set forth herein for additional
   payments. For example, if an employee's EP Target Bonus for FY04 is $10,000
   and the EP Bonus Realized is $40,000, the employee will have earned and will
   be paid $20,000 [$10,000 + $10,000 (1/3 of $30,000 in excess of EP Target
   Bonus)]. The remaining $20,000 will be credited to the employee's Bonus Bank
   and will not be paid or earned unless the Company sustains performance in
   FY05 and FY06 such that the Bonus Bank is not depleted after the banking
   mechanism is applied for those years.

   Thus, if the EP multiple is greater than 1.0, then the total EP Bonus to be
   paid for the Plan Year is as follows:

                                                                          Page 4
<PAGE>

               Bank Balance        EP        EP Bonus Realized - EP Target Bonus
   EP BONUS = scheduled for      + Target +  -----------------------------------
              payment this year    Bonus                      3

   When the Company misses its Target EP in any given year, resulting in an EP
   Bonus Multiple of less than 1.0, funds are subtracted from the employee's
   Bonus Bank, if any, in order to fund the employee's EP Target Bonus for that
   year. The methodology used to fund the bonus from the Bonus Bank in such a
   situation is as follows:

   o  When the EP BONUS MULTIPLE FOR THE YEAR IS GREATER THAN 0 BUT LESS THAN
      1.0, the participant is paid all of his/her EP Bonus Realized in that year
      plus the part of any Bonus Bank (if any) scheduled to be paid that year.
      If the total of these two payments is less than the participant's EP
      Target Bonus for the year, amounts will be taken from the Bonus Bank
      payment scheduled for the following year in order to meet the EP Target
      Bonus; any remaining Bonus Bank will be available for payment in the next
      Plan Year, provided Company performance is sustained. Participants will
      not receive their full EP Target Bonus if there is an insufficient Bonus
      Bank. If all Bank funds are distributed, the participant will start the
      following bonus year without a Bonus Bank.

   o  When a participant HAS A BONUS BANK at the start of the bonus year and the
      EP BONUS MULTIPLE FOR THE YEAR IS LESS THAN 0 (negative), the EP Bonus
      Realized (which will be a negative number) is deducted from any Bonus
      Bank. Additionally, the participant's EP Target Bonus for the year will be
      paid out, to the extent amounts are available, from the Bonus Bank.
      Amounts will be deducted first from Bonus Bank payments scheduled to be
      paid in the current year before reducing Bonus Bank payments scheduled for
      future years. Participants will not receive their full EP Target Bonus if
      there is an insufficient Bonus Bank. If all Bonus Bank is distributed, the
      participant will start the following bonus year without a Bonus Bank.

   o  When a participant DOES NOT HAVE ANY BONUS BANK at the start of the Plan
      Year and the EP BONUS MULTIPLE FOR THE YEAR IS LESS THAN 0 (negative), the
      EP Bonus Realized will be a negative number and no EP bonus will be paid.
      This individual will start the following year without a Bonus Bank, not a
      negative number and no funds are owed back to the Company.

   The amounts in a participant's Bonus Bank represent nothing more than
   potential payments to the participant in the future. These amounts are
   neither earned nor vested until actual Bonus Bank payments are made in
   accordance with the terms of this Plan. Participants have no legal rights to
   Bonus Bank until the banking mechanism is applied for the Plan Year in which
   funds are scheduled to be paid.

5. BONUS PAYMENT

   All bonus payments, less applicable withholdings, will be made on or before
   the end of the third month following the end of the relevant Plan Year.
   Participants must be employed at the end of the Plan Year in order to receive
   any bonus, unless one of the exceptions described in Section B(6), B(7),
   B(11) or B(12) applies.

B. ADMINISTRATION OF THE PLAN

1. DETERMINATION OF INDIVIDUAL BONUS

   (a) Each financial year, the GMT will approve the participant list, the
       Target Bonus levels and EP/IP splits for each participant in the Plan.

                                                                          Page 5
<PAGE>

   (b) Individual Target Bonuses shall be calculated based on the Base salary
      for the participant at the end of the Plan Year.

2. DETERMINATION OF OBJECTIVES

   (a) Target EP

       Target EP and Intervals must be finalized by the Board of Directors at
       the beginning of the Plan Year.

   (b) IP Objectives

       IP Objectives for participants, other than GMT members, shall be approved
       by the next two levels of management. Individual objectives for GMT
       members will be approved by the Board of Directors.

3. PARTICIPANT MATTERS

   The Board of Directors (or designee) shall, in its sole discretion and on
   behalf of the Company, determine all Plan matters with respect to all
   participants.

4. NEW EMPLOYEES AND PROMOTIONS INTO THE PLAN

   New employees or employees promoted during a Plan Year may be offered
   participation in a Plan. Their eligibility for bonuses will be calculated on
   a pro rated basis in the year of entry. This will be approved by the relevant
   GMT member and the Vice President of Human Resources/OD.

   A minimum qualifying period of 3 months of Company employment during a Plan
   Year shall apply unless waived by the Chief Executive Officer (or designee).
   The qualifying period shall be included for purposes of bonus calculation.

5. TRANSFERS AND PROMOTIONS

   The bonus for a participant who is transferred or promoted will be calculated
   in multiple parts, all using the base salary at Plan Year end. The bonus for
   each position will be calculated using the bonus target and performance
   rating for the part of the year the participant was in each position, unless
   designated otherwise in a written transfer agreement.

6. RETIREMENT, DISABILITY OR DEATH

   If during a Plan Year a participant retires(1), becomes totally and
   permanently incapacitated(2) or dies, such participant or their family or
   designee or estate shall receive the full amount of any positive bank
   balance, after any shortfall in EP Bonus Realized (pro-rated with respect for
   the year in which the participant retires, becomes totally and permanently
   incapacitated or dies) has been deducted from the Bank.

---------
(1)  At age 65 or such other date as the Board of Directors (or designee)
     approves in particular circumstances.
(2)  Suffers from a mental or physical condition which is expected to last at
     least 12 months or result in death, and which, in the opinion of a licensed
     physician, will prevent the employee from engaging in any substantial or
     gainful employment.

                                                                          Page 6

<PAGE>
   The payment under the EP Plan will be made by the end of the third month
   following the relevant Plan Year. Payment for participants solely on the IP
   Plan will be paid at time of their retirement, death or confirmation of total
   and permanent incapacity.

   In the event of a SHORT-TERM DISABILITY OR LEAVE OF ABSENCE (paid or unpaid),
   a participant may be eligible for a full or pro-rated bonus. Any bonus will
   include the first three months of leave as time worked when calculating the
   eligible base salary. For example, if a participant is on approved leave for
   2 months of the Plan Year, their bonus will be calculated using their full
   year's base salary. If a participant is on approved leave for 4 months of the
   Plan Year, their base salary will be prorated and 11 months will be used to
   calculate their bonus at year-end. If a year-end performance rating is not
   available (due to the leave) the IP bonus will utilize the last review rating
   on record.

7. JOB ELIMINATIONS

   A participant, whose employment is terminated as a result of the elimination
   of the participant's position, must have participated in the Bonus Plan for
   at least 1 month during the Plan Year and be employed by the Company for at
   least three months in order to be eligible for a prorated bonus for the Plan
   Year. The prorated bonus will be based on the period served, the EP Bonus
   Multiple as calculated at year end, the participant's bank balance, and the
   participant's most recent performance rating.

   With respect to the EP portion of the individual's Target Bonus, if the EP
   Bonus Multiple is greater than or equal to 1.0, the participant will receive
   the prorated EP Target Bonus, 1/3 of the pro-rated EP Bonus Realized over the
   prorated EP Target Bonus, and the bank balance scheduled to be paid for that
   Plan Year. There will be no payout of any remaining bank balance.

   Where the EP Bonus Multiple is between 0 and 1.0, the participant will
   receive an amount up to the prorated EP Target Bonus, provided such funds are
   available from the prorated EP Bonus Realized, the existing bank balance,
   plus the remaining bank balance scheduled to be paid for that Plan Year
   (after funds to make up the prorated EP Target Bonus shortfall are deducted).
   There will be no payout of any remaining bank balance.

   If the EP Bonus Multiple is less than 0, the negative amount of the prorated
   EP Bonus Realized will be deducted first from any bank balance due to be paid
   in the current Plan Year and, if additional amounts are still needed to
   offset the negative, then secondly from the following year's bank. If there
   is any amount remaining in the bank, the participant's prorated EP Target
   Bonus will be paid from that remaining bank balance. If any bank balance
   scheduled for payment in the current Plan Year is still available after the
   above deductions are made, it will be paid. There will be no payout from any
   remaining bank balance. If the negative EP Bonus Realized is more than the
   total bank balance, no EP bonus will be paid and no negative balances will be
   owed back to the Company.

   A pro rated payment for any EP Plan bonus in the year in which the job
   elimination occurs shall be made at the time when EP Plan bonus payments
   normally are made. Bonuses due to employees who are solely on the IP Plan,
   shall be paid at time of departure.

8. DISCONTINUED PARTICIPATION IN PLAN

   Where an employee has participated in the Plan in previous years, but in the
   current Plan Year their participation is discontinued and they have a
   positive bank balance, then they shall be paid a pro-rated Target EP bonus
   for the period of participation in the Plan, utilizing the EP Bonus Multiple
   earned for that year and the payment from

                                                                          Page 7

<PAGE>

   the bank scheduled for that year. Any bonus for time served while exclusively
   on the IP Plan will be calculated by using the performance rating received
   while on the Plan and the end of year salary unless otherwise specified in
   transfer documents.

   Any remaining bank balance will be paid equally over 2 years at the regular
   time bonuses are paid provided Company performance is sustained and the
   participant remains eligible for such payments under the terms of the Plan.
   If Company performance is not sustained (i.e., EP Bonus Multiples are less
   than 1.0), existing bank balances will be reduced, using the same methodology
   as if the participant remained on the EP plan. A pro rata payment for any
   bonus in the year in which the discontinuation of plan participation occurs
   shall be made at the regular time when bonus payments are made for that Plan
   Year.

9. TERMINATION AT THE INITIATIVE OF THE COMPANY (EXCLUDING JOB ELIMINATIONS)

   Participants shall not be entitled to any bonus (including a pro-rated bonus)
   or bonus bank in the event that they are terminated by the Company prior to
   the end of the Plan Year (March 31) for reasons other than job elimination or
   divestment (see section 11 below).

10. RESIGNATION

   If a participant resigns prior to the end of the Plan Year (March 31), the
   participant shall not be entitled to any bonus (including a pro-rated bonus)
   or payment of any bonus bank balance for the Plan Year in which the
   resignation occurs. If a participant resigns after the end of the Plan Year
   but before the bonus is paid, the participant is eligible to receive his/her
   bonus only for the Plan Year that just ended. There will be no payout of any
   remaining bank balance that otherwise potentially would be paid out in
   subsequent years.

11. DIVESTMENTS

   If a participant's employment is terminated as a result of the sale of a
   business unit, entity, or subsidiary of James Hardie Industries N.V. during
   the Plan Year, then the IP bonus will be determined using the participant's
   base salary at the time of divestment, and the participant's most recent
   performance rating. The final EP bonus calculation will be determined at the
   end of the Plan Year, and the bonus banking mechanism will be utilized. There
   will be no payments of any remaining bank balance that otherwise potentially
   would be paid out in subsequent years

   The pro-rata payment for EP Plan bonus in the year in which the business
   divestment occurs shall be made at the regular time when EP Plan bonus
   payments are made. Bonuses due to employees solely on the IP Plan shall be
   paid at time of the termination resulting from divestment.

12. CHANGE IN CONTROL

   If during a Plan Year there is a change in control (see Attachment 1) of
   James Hardie Industries N.V., and the Plan is thereafter discontinued,
   participants will receive a prorated bonus for the Plan Year plus the full
   amount of any positive bank balance after any negative bonus (prorated for
   the Plan Year in which the Plan is discontinued) has been deducted from the
   Bank. This payment will be made within 90 days of the Plan's discontinuation.

13. POST-EMPLOYMENT MISCONDUCT

   Notwithstanding any other provision of the Plan or any other agreement, in
   the event

                                                                          Page 8

<PAGE>

   that a Participant's post-employment conduct breaches any agreement
   (including, but not limited to, confidentiality and/or non-competition
   agreements), he or she shall not be entitled to any pro rated bonus or any
   bonus bank payment for which he or she otherwise would be eligible under this
   Plan.

14. NO GUARANTEE

   Nothing in this Plan is intended to alter the at will status of the Company's
   employees. Participation in the Plan is no guarantee that a bonus under the
   Plan will be paid. The success of the Company, its business units and
   individual employees, as measured by the achievement of EP and Individual
   Performance (IP), shall determine the extent to which participants shall be
   entitled to receive bonuses.

   Nothing in the terms and conditions of the Plan shall prevent the Company
   from canceling or amending the Plan at any time.

   In the event the Company decides to cancel the Plan, participants will
   receive the pro-rated bonus for the Plan Year plus the full amount of any
   positive bank balance, after any negative earned bonus (pro-rated for the
   Plan Year in which the Plan is discontinued) has been deducted from the Bank.
   This payment will be made within 90 days of the Plan's cancellation.

15. GENERAL PROVISIONS

   (a) Withholding of Taxes

       The Company shall have the right to withhold taxes and other amounts,
       which, in the opinion of the Company, are required to be withheld by law
       with respect to any amount due or paid to participants under the Plan.

   (b) Expenses

       All expenses and costs in connection with the adoption and administration
       of the Plan shall be borne by the Company.

   (c) Limitation on Rights

       Except as expressly granted pursuant to the Plan, nothing in the Plan
       shall be deemed to give any employee any contractual or other right to
       participate in the benefits of the Plan. No award to any such participant
       in any Plan Year shall be deemed to create a right to receive any award
       or to participate in the benefits of the Plan in any subsequent Plan
       Year.

16. LIMITATIONS

   (a) No Right to Continued Employment

       Neither the establishment of the Plan nor the payment of a bonus under it
       shall be deemed to constitute an express or implied contract of
       employment for any participant for any period of time or in any way
       abridge the rights of the Company to determine the terms and conditions
       of employment or to terminate the employment of any employee in
       accordance with law.

                                                                          Page 9
<PAGE>

   (b) No Vested Rights

       Except as expressly provided herein, no employee or other person shall
       have any claim of right (legal, equitable, or otherwise) to any bonus or
       bonus Bank. No officer or employee of the Company or any other person
       shall have any authority to make representations or agreements to the
       contrary. No interest conferred herein to a participant shall be
       assignable.

   (c) Not Part of Other Benefits

       The benefits provided in this Plan shall not be deemed a part of any
       other benefit provided by Company to its employees.

   (d) Other Plans

       Nothing contained in the Plan shall limit the Company's power to grant
       non-Plan bonuses to employees of Company, whether or not they are
       participants in this Plan.

   (e) No Interest

       Under no circumstances will interest accrue on any bonus Bank or other
       amounts potentially payable to any participant.

17. EXCLUSION OF BONUSES FROM BENEFIT CALCULATIONS

   Bonuses shall be excluded from an employee's compensation for the purpose of
   calculating other aspects of the employee's personal benefit and compensation
   packages, such as, for example, superannuation, contribution levels to 401k,
   leave entitlements and vehicle entitlements.

   Bonuses shall also be excluded from an employee's compensation for the
   purpose of calculating any form of severance or separation due to the
   employee under applicable law, policy or contract.

18. UNFUNDED PLAN

   This Plan is unfunded. Nothing in the Plan shall create or be deemed to
   create a trust or separate fund of any kind, or a fiduciary relationship
   between the Company (or any of its subsidiaries) and any participant.

19. AUTHORITY OF THE BOARD OF DIRECTORS

   Full power and authority to interpret and administer this Plan shall be
   vested in the Board of Directors, which shall have the sole authority to
   create or alter terms for the Plan. The Board of Directors may from time to
   time make such decisions and adopt such terms for implementing the Plan as it
   deems appropriate for the Plan or any participant under the Plan. Any
   decision taken by the Board of Directors arising out of or in connection with
   the construction, administration, interpretation and effect of the Plan shall
   be final, conclusive and binding upon all participants and any person
   claiming under or through them. The Board of Directors may delegate its power
   with respect to the Plan from time to time as it so determines.

20. ALTERATIONS TO PLAN

   The Board of Directors may at any time by resolution revoke, add to or vary
   any of the provisions of the Plan or all or any of the rights or obligations
   of the Participants in connection with the plan.

                                                                         Page 10

<PAGE>

21. PLAN TERMS

   In all cases the terms as set forth in the Plan document shall take
   precedence over any other document issued in connection with the Plan.

22. ARBITRATION

   All claims, disputes, questions, or controversies arising out of or relating
   to this Plan, will be resolved exclusively in final and binding arbitration
   in accordance with the Arbitration Rules and Procedures, or successor rules
   then in effect, of Judicial Arbitration & Mediation Services, Inc. ("JAMS").
   The arbitration will be conducted and administered in Orange County,
   California by JAMS or, in the event JAMS is not available or does not then
   conduct arbitration proceedings, a similarly reputable arbitration
   administrator. The employee and the Company will select a mutually
   acceptable, neutral arbitrator from among the JAMS panel of arbitrators.
   Except as provided by this Agreement, the Federal Arbitration Act will govern
   the administration of the arbitration proceedings. The arbitrator will apply
   the substantive law (and the law of remedies, if applicable) of the State of
   California, or federal law, as applicable, and the arbitrator is without
   jurisdiction to apply any different substantive law. The employee and the
   Company will each be allowed to engage in adequate discovery, the scope of
   which will be determined by the arbitrator consistent with the nature of the
   claim[s] in dispute. The arbitrator will have the authority to entertain a
   motion to dismiss and/or a motion for summary judgment by any party and will
   apply the standards governing such motions under the Federal Rules of Civil
   Procedure. The arbitrator will render a written award and supporting opinion
   that will set forth the arbitrator's findings of fact and conclusions of law.
   Judgment upon the award may be entered in any court of competent
   jurisdiction. The Company will pay the arbitrator's fees, as well as all
   administrative fees, associated with the arbitration. Each party will be
   responsible for paying its own attorneys' fees and costs (including expert
   witness fees and costs, if any).

                                                                         Page 11
<PAGE>

                                  ATTACHMENT 1
              ECONOMIC PROFIT (EP) AND INDIVIDUAL PERFORMANCE (IP)
                                 INCENTIVE PLANS

"CHANGE IN CONTROL" means the following and shall be deemed to occur if any of
the following events occurs:

            (i) Any Person becomes the beneficial owner (within the meaning of
      applicable securities laws) of 30% or more of either the then outstanding
      shares of Common Stock or the combined voting power of the Company's then
      outstanding securities entitled to vote generally in the election of
      directors; or

            (ii) Individuals who, as of the Effective Date hereof, constitute
      the Board (the "INCUMBENT BOARD"), cease for any reason to constitute at
      least a majority of the Board, provided that any individual who becomes a
      member of the Board after the effective date hereof whose election, or
      nomination for election by the Company's shareholders, is approved by a
      vote of at least a majority of the directors then comprising the Incumbent
      Board shall be considered to be a member of the Incumbent Board unless
      that individual was nominated or elected by any person, entity or group
      (as defined above) having the power to exercise, through beneficial
      ownership, voting agreement and/or proxy, twenty percent (20%) or more of
      either the outstanding shares of Common Stock or the combined voting power
      of the Company's then outstanding voting securities entitled to vote
      generally in the election of directors, in which case that individual
      shall not be considered to be a member of the Incumbent Board unless such
      individual's election or nomination for election by the Company's
      shareholders is approved by a vote of at least two-thirds of the directors
      then comprising the Incumbent Board; or

            (iii) Consummation by the Company of the sale or other disposition
      by the Company of all or substantially all of the Company's assets or a
      Reorganization of the Company with any other person, corporation or other
      entity, other than a

                  (A) Reorganization that would result in the voting securities
      of the Company outstanding immediately prior thereto (or, in the case of a
      Reorganization that is preceded or accomplished by an acquisition or
      series of related acquisitions by any Person, by tender or exchange offer
      or otherwise, of voting securities representing 5% or more of the combined
      voting power of all securities of the Company, immediately prior to such
      acquisition or the first acquisition in such series of acquisitions)
      continuing to represent, either by remaining outstanding or by being
      converted into voting securities of another entity, more than 50% of the
      combined voting power of the voting securities of the Company or such
      other entity outstanding immediately after such Reorganization (or series
      of related transactions involving such a Reorganization), or

                  (B) Reorganization effected to implement a re-capitalization
      or re-incorporation of the Company (or similar transaction) that does not
      result in a material change in beneficial ownership of the voting
      securities of the Company or its successor; or

            (iv) Resolution of the shareholders of the Company or a court order
      of the competent Dutch court to liquidate the Company or the liquidation
      of the Company on any other ground for liquidation pursuant to applicable
      law.

                                                                         Page 12

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