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EXHIBIT 4
[Place/Date]
[Name]
[Address]
Dear [Name],
We have pleasure in notifying you herewith of the terms of employment and other
arrangements that apply to you with effect from your appointment as of [Date] as
a member of the Board of Management and [Title] of Koninklijke Philips
Electronics N.V. ("Company").
1. COMMENCEMENT OF EMPLOYMENT
You will enter the employment of Philips as a member of the Board of
Management and Executive Vice-President with effect from [Date]. [If
applicable: The Contract of Employment between you and Philips, dated
[Date], will cease to exist as of [Date]].
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 ("Contract") with the Company
connected with your membership of the Board of Management
shall be entered into for a period of five years commencing on
[Date] and shall terminate ipso jure, without any notice being
required, on [Date].
B No later than six months before [Date] the parties will
discuss a possible extension of the Contract for a period to
be agreed upon. If applicable, the parties will do the same
each six months prior to any possible future expiration date
of the Contract. The Contract will not be extended for any
period following the first day of the month in which you have
reached the age of 62.
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[Name] [Date]
C Both parties shall have the right to terminate this agreement
before [Date] or before any later expiration date as indicated
above against the end of a calender 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 [Date] 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, or
if the Company does not wish to renew the Contract per [Date],
I agree with you already now that in that case you shall be
entitled to an once-only payment as mentioned under 2.F. by
way of compensation.
E If the Company does not wish to renew the Contract, after this
has already been renewed once or more, you shall be entitled
to as many times your monthly salary as mentioned in paragraph
3 as you still have months to serve before reaching the age of
62, with a maximum of the amount of the once-only payment as
mentioned under 2.F.
F The once-only payment as referred to under 2 sub D and E shall
be equal to the balance between the amount of twice 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.
G In case of termination of the Contract you will resign per the
effective date of the termination of the Contract as member of
the Board of Management.
3. SALARY
Your annual salary as of [Date] shall amount to NLG [amount] (gross),
to be paid in 12 monthly instalments. On the proposal of the President,
the Supervisory Board on the advice of the Remuneration Committee will
decide each year at its November/December meeting whether this salary
should be increased. You shall be informed in writing, on behalf of the
Supervisory Board, of any salary increases awarded to you in this way.
The increased salary will then replace the sum mentioned above.
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[Name] [Date]
4. BONUS
In addition to the salary referred to under 3., you shall be eligible
each year for a bonus. This bonus shall be determined annually by the
Supervisory Board on the proposal of the President and on the advice of
the Remuneration Committee. The bonus 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 bonus targets.
The maximum bonus attainable by you shall amount to 50% of your annual
salary as mentioned under 3.
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 E.), on the understanding that in your case - from
a pension build up point of view - the pensionable age is 60, with the
conditions being adjusted accordingly. As members of the Board of
Management may remain in employment up to the age of 62, they will
postpone their claim on payment of pensions to the age of 62, as
provided for in the Pension Fund by-laws. The gross basis is your
annual gross salary, as mentioned under clause 3. hereof. The 10%
increase in the gross basis as laid down in article 3 of the by-laws of
Philips Pension Fund does not apply to members of the Board of
Management.
In addition to your statutory retirement pension entitlement, the
Supervisory Board has the firm intention to grant you a supplementary
pension, as expressed in the enclosed letter (Annex B.).
6. ADDITIONAL PENSION PLAN
Separately from the pension plan referred to under 5., you shall be
given the opportunity to participate in an additional pension plan in
the form of a so- called "C policy" which the Company has taken out
with the insurance company Nationale-Nederlanden N.V. of Rotterdam.
You may allocate your bonus or a part thereof, up to the maximum
amounts permitted, for this purpose.
The appended pension letter (Annex C.) states the conditions attached
to this pension plan.
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[Name] [Date]
7. STOCK OPTIONS
The Supervisory Board on the advice of the Remuneration Committee can
decide by discretion to grant Philips Electronics stock options to
members of the Board of Management on a year to year basis.
You, as a member of the Board of Management, are in principle eligible
to participate in such plan.
For [Year] the maximum number of stock options for a member of the
Board of Management is set at [number]. You have already been informed
on the grant of the [number] stock options to you.
The conditions of the stock options have to be decided each year by the
Supervisory Board.
8. ACCIDENT INSURANCE
You will be covered by a 24-hours accident insurance policy. The
maximum sum insured is NLG 2,000,000. Details of this arrangement are
given in Annex F.
9. 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 A.
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 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 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.
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[Name] [Date]
10. INDUSTRIAL DISABILITY (CONTINUED)
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 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.
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 G.
13. RULES OF CONDUCT GOVERNING INSIDE INFORMATION
Philips' Rules of Conduct with respect to inside information, which may
be amended from time to time, are applicable to you (Annex H.).
We also refer to the enclosed letters from Mr D.G. Eustace (Annex I.)
as well as to the letter from Mr J.A.J. Schmitz dated 13 February 1998
(Annex J.).
14. APPLICABLE LAW
All terms of the Employment and this Contract are governed by the laws
of the Netherlands. You and we irrevocably agree that any legal suit,
action or proceeding arising out or based upon this Contract or the
terms of your Employment or the transactions contemplated hereby may be
instituted in any court in the Netherlands and irrevocably waive any
objection which you or we may now or hereinafter have to the laying of
venue of any such proceeding, and irrevocably submit to the exclusive
jurisdiction of such courts in personam, generally and unconditionally
with respect to any suit, action or proceeding.
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[Name] [Date]
If you agree to these proposals, you are requested to sign both the enclosed
copy of this letter and Annex D. and return them to Mr R.W. Vermeer, Philips
International B.V., Corporate HRM / Management Conditions and Remuneration,
Building VP-1, P.O. Box 218, 5600 MD Eindhoven, Netherlands.
Needless to say, you may contact Mr Vermeer if you require further information
about these arrangements.
Looking forward to receiving your reply, we remain
With kind regards,
[Name]
(Chairman Supervisory Board)
AGREED AND SIGNED
[Name]
Enclosures:
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A. Other arrangements
B. Letter regarding supplementary pension
C. C-policy
D. General Terms and Conditions
E. By-laws of the Philips Pension Fund
F. Accident Insurance
G. Rules governing Internal and External Directorships
H. Rules governing Inside Information
I. Letters of Mr D.G. Eustace dated 15 April 1997, 5 April 1996 and 6
September 1995
J. Letter of Mr J.A.J. Schmitz dated 13 February 1998
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