Document:

exv4wa

 

Exhibit 4(a)

Employment contract between the Company and G.J. Kleisterlee

The following contract is the employment contract of Mr G.J. Kleisterlee, containing the terms and
conditions of his employment with effect from May 1, 2005. The employment contract filed with the
2003 Form 20-F (and incorporated by reference in the 2004 Form 20-F) contains the arrangements which
apply up to May 1, 2005.

	1.  	Commencement of employment
	 
	   	You are appointed as President/Chief Executive Officer and Chairman of the Board of
Management, and will be in the employment, of Royal Philips
Electronics with effect from May 1, 2005.
	 
	   	The terms and conditions stated in this letter agreement and its annexes replace all terms and
conditions laid down in previous employment agreements and all oral and written understandings
reached with you and any company belonging to the Philips Group.
	 
	2.  	Duration of employment

	 	A.  	The contract of employment (hereinafter referred to as the “Contract”) with the
Company connected with your appointment as President/Chief Executive Officer shall be
entered into for a period of three years and five months commencing on May 1, 2005 and
shall terminate ipso jure, without any notice being required, on October 1, 2008.
	 
	 	B.  	Both parties shall have the right to terminate this agreement before October 1,
2008 as indicated above against the end of a calendar month by giving the other party no
less than six months prior written notice.
	 
	 	C.  	If the Contract is terminated at the request of the Company before October 1, 2008,
other than for a compelling reason (“dringende reden”) within the meaning of Dutch labour
law, I agree with you already now that in that case you shall be entitled to an once-only
payment by way of compensation in the amount of one month of salary as mentioned in
paragraph 3. for every full year of service within the Philips Group, provided that the
maximum is the lower of (a) twelve months, and (b) the number of months to serve before the
first day of the month in which you reach the age of 62. You shall not be entitled to such
payment if the Contract is terminated immediately following a period in which the Company
made industrial disability payments to you under paragraph 9.
	 
	 	D.  	In case of termination of the Contract you will resign ultimately per the effective
date of the termination of the Contract as President/Chief Executive Officer and Chairman
of the Board of Management.

	3.  	Salary
	 
	   	Your annual salary per May 1, 2005 amounts to EUR 1,020,000 (gross), which amount includes
mandatory holiday allowances, to be paid in twelve monthly instalments. Annual review and
subsequent upwards adjustment, if any, of your annual salary, will be determined at the
discretion of the Supervisory Board of the Company and on the advice of the Remuneration
Committee. You shall be informed in writing, on behalf of the Supervisory Board, of any salary
increases awarded to you in this way. Only salary increases determined and approved by the
Supervisory Board will replace the salary amount mentioned above.
	 
	4.  	Annual Incentive
	 
	   	In addition to the salary referred to under 3., you shall be eligible each year for an annual
incentive. This annual incentive shall be determined annually by the Supervisory Board on the
advice of the Remuneration Committee.
	 
	   	The annual incentive to be awarded relates to the preceding financial year and is based on
criteria to be determined annually. You shall be notified in writing of these annual incentive
targets.

	 
	   	The on-target (=100% score) annual incentive percentage amount to be realized by you is
currently set by the Supervisory Board at 80% of your annual salary as mentioned under 3. It can
become 120% of your annual salary if the stretch targets are realized (=150% score).
	 
	   	The actual pay out of the annual incentive is determined by multiplying the annual incentive
score by the Group Incentive Multiplier (varies from 0.8 to 1.2), which is based on the
financial annual incentive target Economic Profit Realized of the Philips Group. So the overall
maximum annual incentive amount to be realized can be 144% of your annual salary.

1

 

	5.  	Pension Rights
	 
	   	You are entitled to a pension in conformity with the conditions contained in the Pension
Regulations of the Stichting Philips Pensioenfonds (Annex A.), subject to the following
deviations:

	 	–  	in your case (from a pension build up point of view) the pensionable age is 60, with
the conditions being adjusted accordingly. However, it is agreed that you will continue
your employment up to the age of 62, and therefore you will postpone your claim on payment
of pensions to the age of 62, as provided for in the pension regulations of the “Stichting
Philips Pensioenfonds”. During the period of postponement the pension level at age 60 will
be increased according to the actuarial assumptions of the pension fund and the indexation
policy of the pension fund;
	 
	 	–  	the gross basis is your annual gross salary per April 1 of each calendar year, as
mentioned under clause 3. hereof. The 10% increase in the gross basis and eventual
allowances as laid down in article 3. of the pension regulations of the “Stichting Philips
Pensioenfonds” do not apply to members of the Board of Management;
	 
	 	–  	the pension basis is found by deducting from the gross basis such part of the members’
income as is deemed per April 1 to be covered by statutory pension provisions, the
so-called franchise;
	 
	 	–  	with reference to the supplementary pension arrangement laid down in our letter of
November 22, 1999, for you the gross basis as laid down in article 3. of the pension
regulations of the “Stichting Philips Pensioenfonds” is your annual gross salary increased
by 10%.

	6.  	Long-term Incentive Plan
	 
	   	The Supervisory Board, within the framework approved by the Company’s General Meeting of
Shareholders and on the advice of the Remuneration Committee, can decide by discretion to grant
Royal Philips Electronics restricted shares, stock options and/or other equity related
incentives to members of the Board of Management on a year-to-year basis.
	 
	   	The conditions of such incentives, if any, are also approved by the General Meeting of
Shareholders and may be changed on a yearly basis.
	 
	   	You, as a member of the Board of Management, are in principle eligible to participate in such
plan.
	 
	   	For the period you will be a member of the Board of Management you will not be eligible to
participate in any other Philips share purchase or equity related scheme than approved by the
Supervisory Board for members of the Board of Management.
	 
	7.  	Insurances

	 	•  	Accident Insurance
	 
	 	   	You will be covered by a 24-hours accident insurance policy. The maximum sum insured is EUR
907,560. Details of this arrangement are given in Annex B.
	 
	 	•  	Directors and Officers Liability Insurance
	 
	 	   	You will be covered by a Directors and Officers liability insurance with regard to “wrongful
acts”. As of the date hereof, under the terms of the policy, “wrongful acts” include any
actual or alleged breach of trust, breach of duty, neglect, error, misstatement, misleading
statement, omission or other act wrongfully committed by the Assured or any matter claimed
against them solely by reason of their being a member of the Board of Management.

	8.  	Other arrangements
	 
	   	In addition to the main conditions of employment contained in this letter, a number of
additional arrangements shall apply to you. These additional arrangements are contained in Annex
C. Please be informed that the Company reserves the right to change these arrangements should
this be more appropriate from a fiscal point of view.
	 
	9.  	Industrial disability
	 
	   	For a maximum period of 3 years from the start of disablement, but at the very latest up to the
end of the Contract, the balance between your annual salary at the start of the total
disablement and the aggregate amount of any statutory allowances distributed because of your
total disablement, together with allowances distributed for the same reason by the Philips
Pension Fund as referred to under 5. of this letter, will — subject to your compliance with
Company’s directives — be paid by the Company.

The Company shall not be bound to the aforesaid obligation upon your having a claim on third
parties in respect of your disablement.
	 
	   	Upon surrender to the Company by you of such a claim —
insofar as it relates to loss of salary —
an amount equal to the aforesaid balance shall — but for no longer than the period stated in the
previous paragraph — be paid by the Company in advance.
	 
	   	However, should this policy change, the new policy will apply in full to you. No concessions
will be made if the new policy is less favourable than the present policy.

2

 

	10.  	General Terms of Employment of Philips
	 
	   	Annex D contains the General Terms of Employment of the Philips Group, which also apply to you.
As evidence of your approval of the contents of the General Terms of Employment, Annex D will be
signed by you.
	 
	11.  	Rules governing Internal and External directorships
	 
	   	For the rules with respect to directorships, which may be amended from time to time, we refer to
Annex E.
	 
	12.  	Rules of conduct with respect to inside information
	 
	   	The Philips’ Rules of Conduct with respect to inside information, which may be amended from time
to time, are applicable to you (Annex F-1). As a member of the Board of Management, the
additional rules for Qualified Insiders, contained in Chapter 3 of said rules of conduct, are
applicable to you.
	 
	   	As Qualified Insider you are prohibited from trading, directly or indirectly in call options,
put options, warrants and similar derivatives of Royal Philips Electronics shares listed on a
stock exchange at any time. Your further are only allowed to trade in any Royal Philips
Electronics securities during the period of ten business days after the publication of
Philips’ annual or quarterly figures.
	 
	   	Moreover, and as a consequence of Netherlands’ legislation, your transactions in Royal Philips
Electronics securities need to be notified to the Netherlands’ Authory for the Financial Market
(“AFM”). We refer to the enclosed letters of Mr Paul Koster dated May 22, 2000 (Annex F-3) and
of the Secretary of the Board of Management dated August 30, 2002 (Annex F-3) and the enclosed
Notification Form (Annex F-4). You may contact [contact detail omitted], Secretary Review
Committee Insider Trading (Corporate Legal Department, tel.no. +31 20 [contact detail omitted])
to get more information and clarification in this respect.

	13.  	General Business Principles
	 
	   	For the General Business Principles, which apply to you, we refer to Annex G
	 
	14.  	Applicable law
	 
	   	All terms of the Employment and this Contract are governed by the laws of the Netherlands.

Parties agree that all the above compensation elements are subject to the corporate governance
framework applicable to members of the Board of Management and can be changed, abolished or
replaced by other elements at any time at the sole discretion of the Supervisory Board of the
Company.

If you agree to these proposals, you are requested to sign both the enclosed copy of this letter
and Annexes C and D and return them to [contact detail omitted], Secretary Remuneration
Committee, Royal Philips Electronics, HBT 10.19, P.O. Box 77900, 1070 MX Amsterdam, Netherlands.

Needless to say, you may contact [contact detail omitted] if you require further information
about these arrangements.

Looking forward to receiving your reply, I remain

	 	 	 
	With kind regards,

	 	Agreed and signed:
	 
	 
	 
	L.C. van Wachem

	 	G.J. Kleisterlee
	(Chairman Supervisory Board)
	 	 

 

Annexes

A. Regulations Philips Pension Fund

B. Accident Insurance

C. Other arrangements

D. General Terms and Conditions

E. Rules governing Internal and External Directorships

F. Rules governing Inside Information

G. General Business Principles

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OTHER ARRANGEMENTS

	1.  	Company car
	 
	   	You are entitled to a leased company car according to the conditions valid for Philips
Executives. In principle, a personal contribution is not required if the monthly lease price
does not exceed the standard lease price of EUR 2,700 excl. VAT at the moment of delivery of
the lease car. The tax consequences arising from the private use of the car are for your own
account.
	 
	2.  	Allowances

	 	Ø  	For entertainment expenses:
	 
	 	   	With respect to your position within Royal Philips Electronics (hereinafter also referred
to as the “Company”) you may be eligible a fixed allowance for business expenses.
Currently the tax-free allowance in your case is EUR 29,042 per annum. This sum is meant
to enable you amongst others to recoup the expenses you incur in entertaining guests on
behalf of the Company.
	 
	 	Ø  	For the use of a home for representative purposes:
	 
	 	   	Members of the Board of Management may be eligible for a tax-free allowance of Euro 6,807
to cover use of their own home for representative purposes. The Dutch tax authorities make
it a condition of this arrangement that members benefiting from the arrangement do not
apply for a tax reduction with respect to the aforementioned costs in their income tax
return.
	 
	 	   	The above-mentioned allowances will be paid at the end of each quarter.

	3.  	Holding account for Philips products
	 
	   	You may participate in a scheme in which you are invited to test certain Philips consumer
products that to that extent will be made available to you at your home.
	 
	4.  	Allowance for health insurance premium
	 
	   	If you take out your health insurance with “IAK Verzekeringen”, approximately 50% of the
premium will be refunded by the Company. The amount refunded will be paid monthly with your
salary. This refund is treated for tax purposes as income and is therefore subject to income
tax.

5. Pied-à-terre in the Amsterdam area

The Company will make an apartment in the Amsterdam area available (currently being [detail
omitted], Amsterdam) for the duration of your contract of employment with Royal Philips
Electronics. The costs of gas, water, electricity, heating, telephone and local property
taxes of your apartment/house in the Netherlands are for your own account.

Parties agree that changes in fiscal legislation could make it necessary or desirable for
the Company to change the above arrangements.

     Agreed and signed:

Date:                                G.J. Kleisterlee

4exv4wb

 

Exhibit 4(b)

Employment contract between the Company and P.J. Sivignon

The following contract is the employment contract of Mr P.J. Sivignon, containing the terms and
conditions of his employment from April 1, 2005, or such other date as decided by mutual agreement,
subject to his appointment as member of the Board of Management of the Company by the General
Meeting of Shareholders of the Company.

	 	 	 
	1.
	 	Commencement of employment
	 
	
	 	You will enter the employment of Royal Philips Electronics (hereinafter referred to as the
“Company”), as a member of the Board of Management with effect from April 1, 2005 subject to
appointment by the General Meeting of Shareholders of the Company.

The Supervisory Board and the Meeting of Priority Shareholders undertakes to submit to the
General Meeting of Shareholders to be held on March 31, 2005 a proposal for your appointment as
a member of the Board of Management and Executive Vice-President of Royal Philips Electronics as
of April 1, 2005.

A date other than April 1, 2005 may be decided upon by mutual agreement. If you enter the
employment of the Company earlier than April 1, 2005, you will be appointed a member of the
Group Management Committee with immediate effect.

In case of an earlier or later starting date all references in this contract of employment to
certain dates like April 1, 2005 and April 1, 2009 will be amended accordingly.
	 
	2.
	 	Duration of employment

	 	 	 	 	 
	 
	 	A.	 	The contract of employment (hereinafter referred to as the “Contract”) with the
Company connected with your membership of the Board of Management shall be entered into
for a period of four years commencing on April 1, 2005 and shall terminate ipso jure,
without any notice being required, on April 1, 2009.
	 
	
	 	B.	 	No later than six months before April 1, 2009 (i.e. no later than 42 months after the
starting date of your employment) the parties will discuss a possible extension of the
Contract. The parties agree that the Company at least every four years will review whether
your position, and subsequent Contract, will be continued. The Contract will ultimately be
terminated at the first day of the month following the month in which you have reached the
age of 62.
	 
	
	 	C.	 	Both parties shall have the right to terminate this agreement before April 1, 2009 or
before any later expiration date as indicated above against the end of a calendar month by
giving the other party no less than six months prior written notice.
	 
	
	 	D.	 	If the Contract is terminated at the request of the Company before April 1, 2009, or
before any other expiration date if the Contract has been renewed, other than for a
compelling reason (“dringende reden”) within the meaning of Dutch labour law, we agree
with you already now that in that case you shall be entitled to an once-only payment as
mentioned under 2.E. by way of compensation. In case the maximum of one year’s salary
would be manifestly unreasonable if the Contract is terminated during your first term i.e.
before April 1, 2009, you shall be eligible for a once-only payment not exceeding twice
your annual salary as mentioned in paragraph 3.
	 
	
	 	E.	 	The once-only payment as referred to under 2 sub D shall equal to the balance between
the amount of once your annual salary as mentioned in paragraph 3 and the total amount of
industrial disability payments (if any) made to you by the Company under paragraph 10 in
the period of three years immediately preceding the effective date of the termination of
the Contract.
	 
	
	 	F.	 	In case of termination of the Contract you will resign ultimately per the effective
date of the termination of the Contract as member of the Board of Management.

 

1

 

	 	 	 
	3.
	 	Salary
	 
	
	 	Your annual salary as of April 1, 2005 shall amount to EUR 475,000 (gross), which amount
includes mandatory holiday allowances, to be paid in twelve monthly instalments.

Annual review and subsequent upwards adjustment, if any, of your annual salary, will be
determined at the discretion of the Supervisory Board of the Company on the proposal of
the President and on the advice of the Remuneration Committee. You shall be informed in
writing, on behalf of the Supervisory Board, of any salary increases awarded to you in
this way. Only salary increases determined and approved by the Supervisory Board will
replace the salary amount mentioned above.
	 
	4.
	 	Application of 30%-rule
	 
	
	 	Based on the information in your résumé, we come to the tentative conclusion that in line with
the present tax provisions a special tax reduction rule (on the basis of art 15a 1k. of the
Dutch Wage Tax Law), the so-called “30%-ruling”, is applicable to you. The Company shall submit
the appropriate application to the tax authorities.
	 
	
	 	The 30%-ruling allows the Company to pay approximately 30% of practically all remuneration as a
tax-free compensation. This means that if and as far as the 30%-ruling is applicable, the
Company will pay to you a tax-free compensation for so-called “extraterritorial costs” in the
amount of 30% of the remuneration that would have been taxable without application of the
30%-ruling. Complementary to such tax-free 30%-compensation, your remuneration will be reduced
accordingly, so that the sum of the tax-free 30%-compensation and such reduced remuneration
equals the remuneration as agreed before application of the 30%-ruling.

The 30%-ruling only applies to so-called income from present employment, which amongst others
includes monthly salaries and bonuses, but excludes (future) pension payments and redundancy
payments. Moreover, under the 30%-ruling you are eligible for a limited taxation also on other
Dutch taxable income you might have.

Since the 30% tax rule is granted by the tax authorities as a temporary benefit, its termination
(after maximum ten years) will not result in any financial obligation on the part of the
Company.

The Philips Corporate Fiscal Department ([contact detail omitted], telephone number + 31 40
[contact detail omitted]) will take care of filing your annual Dutch tax return and is also
prepared to assist and advise you in other tax matters. It is advised that you contact Mr Weert
as soon as possible.

For an explanation, please refer to Annex A.
	 
	5.
	 	Annual Incentive
	 
	
	 	In addition to the salary referred to under 3, you shall be eligible each year for an annual
incentive. This incentive shall be determined annually by the Supervisory Board on the proposal
of the President and on the advice of the Remuneration Committee. The annual incentive to be awarded relates to the preceding financial year and is based on
criteria to be determined annually on the proposal of the President. You shall be notified in
writing of these annual incentive targets.
	 
	
	 	The on-target (= 100% score) annual incentive amount to be realized by you is currently set by
the Supervisory Board at 60% of your annual salary as mentioned under 3. It can become 90% of
your annual salary if the stretch targets are realized (=150% score). The actual pay out of the
annual incentive is determined by multiplying the annual incentive score by the Group Incentive
Multiplier (varies from 0.8 to 1.2), which is based on the financial annual incentive target
Economic Profit Realized of the Philips Group. So the overall maximum annual incentive amount
to be realized can be 108% of your annual salary.
	 
	6.
	 	Pension Rights
	 
	
	 	You are entitled to a pension in conformity with the conditions contained in the Pension
Regulations of the “Stichting Philips Pensioenfonds” (“Eindloonreglement” – Final Pay Plan –
see Annex B.), subject to the following deviations:

	 	 	 	 	 
	 
	 	Ø	 	in your case (from a pension build up point of view) the pensionable age is
60, with the conditions being adjusted accordingly. If both parties, at the request of
the Company, agree that you will continue your employment up to the age of 62, you will
postpone your claim on payment of pensions to the age of 62, as provided for in the
pension regulations of the “Stichting Philips Pensioenfonds”. During the period of
postponement the pension level at age 60 will be increased according to the actuarial
assumptions of the pension fund and the indexation policy of the pension fund;
	 
	
	 	Ø	 	the gross basis is your annual gross salary per April 1 of each calendar
year, as mentioned under paragraph 3. hereof. The 10% increase in the gross basis and
eventual allowances as laid down in article 1.3 of the pension regulations of the
“Stichting Philips Pensioenfonds” do not apply to members of the Board of Management;
	 
	
	 	Ø	 	the pension basis is found by deducting from the gross basis such part of
the members’ income as is deemed per April 1 to be covered by statutory pension
provisions, the so-called franchise.

	 	 	 
	

	 	As discussed in your meeting with [contact detail omitted] you are aware of the possible
change of the current final pay plan into a different pension plan. Parties agree that such
changes may effect your pension rights if decided by the Supervisory Board, on the advice of
the Remuneration Committee.

 

2

 

	 	 	 
	7.
	 	Long Term Incentive Plan
	 
	
	 	The Supervisory Board, within the framework approved by the Company’s General Meeting of
Shareholders and on the advice of the Remuneration Committee, can decide by discretion to grant
Royal Philips Electronics restricted shares, stock options and/or other equity related
incentives to members of the Board of Management on a year-to-year basis. The conditions of
such incentives, if any, are also approved by the General Meeting of Shareholders and may be
changed on a yearly basis.
	 
	
	 	You, as a member of the Board of Management, are in principle eligible to participate in such
plan.

For 2005 the maximum number -based on a full-time employment- of restricted shares and stock
options for a member of the Board of Management is set at 10,667 restricted shares and 32,000
stock options.
	 
	
	 	The Long Term Incentive Plan is designed to stimulate long-term investment in Philips shares. To
further align the interests of members of the Board of Management and shareholders, restricted
shares granted to the Members of the Board of Management shall be retained for a period of least
five years or until at least the end of employment, if this period is shorter.
	 
	
	 	For the period you will be a member of the Board of Management you will not be eligible to
participate in any other Philips share purchase or equity related scheme than approved by the
Supervisory Board for members of the Board of Management.
	 
	8.
	 	Insurances

	 	 	 	 	 
	 
	 	Ø	 	Accident insurance

You will be covered by a 24-hours accident insurance policy. The maximum sum insured is EUR
907,560. Details of this arrangement are given in Annex C.
	 
	
	 	Ø	 	Directors and Officers Liability Insurance

	
	 	 	 	You will be covered by a Directors and Officers liability insurance with regard to “wrongful
acts”. As of the date hereof, under the terms of the policy, “wrongful acts” include any
actual or alleged breach of trust, breach of duty, neglect, error, misstatement, misleading
statement, omission or other act wrongfully committed by the Assured or any matter claimed
against them solely by reason of their being a member of the Board of Management.

	 	 	 
	9.
	 	Additional arrangements
	 
	
	 	In addition to the main conditions of employment contained in this letter, a number of
additional arrangements shall apply to you. These additional arrangements are contained in
Annex D. Please be informed that the Company reserves the right to change these arrangements
should this be more appropriate from a fiscal point of view.
	 
	
	 	Specific arrangements with respect to relocation to the Netherlands

The specific arrangements with respect to your relocation to the Netherlands are laid down in
Annex D.
	 
	10.
	 	Industrial disability
	 
	
	 	For a maximum period of 3 years from the start of disablement, but at the very latest up to the
end of the Contract, the balance between your annual salary at the start of the total (100%)
disablement and the aggregate amount of any statutory allowances distributed because of your
total disablement, together with allowances distributed for the same reason by the “Stichting
Philips Pensioenfonds” as referred to under 6. of this letter, will — subject to your
compliance with Company’s directives — be paid by the Company.
	 
	
	 	The Company shall not be bound to the aforesaid obligation upon your having a claim on third
parties in respect of your disablement.

Upon surrender to the Company by you of such a claim — insofar as it relates to loss of salary
- an amount equal to the aforesaid balance shall — but for no longer than the period stated in
the previous paragraph — be paid by the Company in advance.
	 
	
	 	However, should this policy change, the new policy will apply in full to you. No concessions
will be made if the new policy is less favourable than the present policy.
	 
	11.
	 	General Terms of Employment of Philips
	 
	
	 	Annex E contains the General Terms of Employment of the Philips Group, which also apply to you.

As evidence of your approval of the contents of the General Terms of Employment, Annex E will
be signed by you.

 

3

 

	 	 	 
	12.
	 	Rules governing Internal and External directorships
	 
	
	 	For the rules with respect to directorships, which may be amended from time to time, we refer
to Annex F.

In view of the increased focus on potential conflicts of interest of top executives, also
business interests of your spouse might have an impact on Philips.

We therefore request you to inform [contact detail omitted] of any directorships or other business
interests of your spouse that in your opinion could be relevant for Philips, e.g. because Philips
has a business relation with a company your spouse has an interest in.
	 
	13.
	 	Rules of conduct with respect to inside information
	 
	
	 	The Philips’ Rules of Conduct with respect to inside information, which may be amended from
time to time, are applicable to you (Annex G-1). As a member of the Board of Management, the
additional rules for Qualified Insiders, contained in Chapter 3 of said rules of conduct, are
also applicable to you.
	 
	
	 	As Qualified Insider you are prohibited from trading, directly or indirectly in call options,
put options, warrants and similar derivatives of Royal Philips Electronics shares listed on a
stock exchange at any time. Your further are only allowed to trade in any Royal Philips
Electronics securities during the period of ten business days after the publication of Philips’
annual or quarterly figures.
	 
	
	 	Moreover, and as a consequence of Netherlands’ legislation, your transactions in Royal Philips
Electronics securities need to be notified to the Netherlands’ Authory for the Financial Market
(“AFM”). We refer to the enclosed letters of Mr Paul Koster dated 22 May 2000 (Annex G-2) and of
the Secretary of the Board of Management dated 30 August 2002 (Annex G-3) and the enclosed
Notification Form (Annex G-4). You may contact [contact detail omitted], Secretary Review
Committee Insider Trading (Corporate Legal Department, tel. no. +31 20 [contact detail omitted])
to get more information and clarification in this respect.
	 
	14.
	 	General Business Principles
	 
	
	 	For the General Business Principles, which apply to you, we refer to Annex H.
	 
	15.
	 	Applicable law
	 
	
	 	All terms of the Employment and this Contract are governed by the laws of the Netherlands.

Parties agree that all the above compensation elements are subject to the corporate governance
framework applicable to members of the Board of Management and can be changed, abolished or
replaced by other elements at any time at the sole discretion of the Supervisory Board of the
Company.

If you agree to these proposals, you are requested to sign both the enclosed copy of this letter
and Annexes D and E, complete the Personal Data Form (Annex I) and return the documents to [contact
detail omitted], Secretary Remuneration Committee, Royal Philips Electronics, HBT 10.19, P.O. Box
77900, 1070 MX Amsterdam, Netherlands. 

Needless to say, you may contact [contact detail omitted] if you require further information
about these arrangements.

Looking forward to receiving your reply, we remain

With kind regards,

L.C. van Wachem

(Chairman Supervisory Board)

Agreed and signed:

P.J. Sivignon

	 	 	 
	Enclosures:
	A.

	 	30% ruling
	B.

	 	Summary main conditions Philips Pension Fund
	C.

	 	Accident Insurance
	D.

	 	Other arrangements
	E.

	 	General Terms and Conditions
	F.

	 	Rules governing Internal and External Directorships
	G.

	 	Rules governing Inside Information
	H.

	 	General Business Principles
	I.

	 	Personal Data Form

 

4

 

OTHER ARRANGEMENTS

	 	 	 
	1.
	 	Company car
	 
	
	 	You are entitled to a leased company car according to the conditions valid for Philips
Executives. In principle, a personal contribution is not required if the monthly lease price
does not exceed the standard lease price of EUR 2,300 excl. VAT at the moment of delivery of
the lease car. The tax consequences arising from the private use of the car are for your own
account.
	 
	2.
	 	Allowances

	 	 	 	 	 
	 
	 	Ø	 	For entertainment expenses:

With respect to your position within Royal Philips Electronics (hereinafter also referred to
as the “Company”) you may be eligible a fixed allowance for business expenses. Currently the
tax-free allowance in your case is EUR 23,920 per annum. This sum is meant to enable you
amongst others to recoup the expenses you incur in entertaining guests on behalf of the
Company.
	 
	
	 	Ø	 	For the use of a home for representative purposes:

Members of the Board of Management may be eligible for a tax-free allowance of Euro 6,800 to
cover use of their own home for representative purposes. The Dutch tax authorities make it a
condition of this arrangement that members benefiting from the arrangement do not apply for a
tax reduction with respect to the aforementioned costs in their income tax return.
	
	 	 	 	 
	
	 	 	 	The above-mentioned allowances will be paid at the end of each quarter.

	 	 	 
	3.
	 	Holding account for Philips products
	 
	
	 	You may participate in a scheme in which you are invited to test certain Philips consumer
products that to that extent will be made available to you at your home.
	 
	4.
	 	Allowance for health insurance premium
	 
	
	 	If you take out your health insurance with “IAK Verzekeringen”, approximately 50% of the
premium will be refunded by the Company. The amount refunded will be paid monthly with your
salary. This refund is treated for tax purposes as income and is therefore subject to income
tax.
	 
	5.
	 	Purchase of an apartment/house in the Amsterdam area
	 
	
	 	The Company will put at your disposal an apartment in the Amsterdam area ([detail omitted])
free of rent for the first 6 months of your employment. After that period the Company will
compensate you the rent costs (with a maximum of EUR 2,500 per month net) for another 6
months. In case you purchase an apartment or house in the Amsterdam area within 24 months
after your date of employment with Royal Philips Electronics, the Company will pay you a
once-only amount of ten percent of the purchase price with a maximum of EUR 100,000 (net).
The Company shall not reimburse any loss made on the (future) sale of your apartment or house
in the Netherlands.
	 
	
	 	The costs of gas, water, electricity, heating, telephone and local property taxes of your
apartment/house in the Netherlands are for your own account.
	 
	
	 	You shall receive a once-only relocation allowance of EUR 46,000 net, towards the cost of
installation. Due to tax regulations this allowance can only be paid out when you and your
family actually have moved to a non-furnished apartment or house in the Amsterdam region.
	 
	
	 	The once-only relocation allowance will be based on the fiscal maximum amount.

 

5

 

	 	 	 
	6.
	 	Cost of moving household effects
	 
	
	 	The costs of moving your household effects from Paris to the Amsterdam area shall be borne by
the Company.
	 
	
	 	The International Forwarding Department will look after the forwarding of your personal
belongings. Please contact Mrs. [contact detail omitted].

Parties agree that changes in fiscal legislation could make it necessary or desirable for the
Company to change the above arrangements.
	 
	 
	
	 	Agreed and signed:

	 	 	 	 
	 
	 
	 
	 
	 	 	Date:	P.J. Sivignon

 

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