Exhibit 10.42

Amended by Corporate Approval
May 13, 2003

KEY EMPLOYEE DEFERRED COMPENSATION PLAN OF

CONOCOPHILLIPS

PURPOSE

The purpose of the Key Employee Deferred Compensation Plan of ConocoPhillips
(the “Plan”) is to attract and retain key employees by providing them with an
opportunity to defer receipt of cash amounts which otherwise would be paid to
them under various compensation programs or plans by the Company. This Plan is
the continuation of the Key Employee Deferred Compensation Plan of Phillips
Petroleum Company, and all deferrals made thereunder shall continue under their
terms and the terms of this Plan.

SECTION 1. Definitions.

  (a)   “Affiliated Group” shall mean the Company plus other subsidiaries and
affiliates in which it owns, directly or through a subsidiary or affiliate, a 5%
or more equity interest.     (b)   “Award” shall mean the United States cash
dollar amount (i) allotted to an Employee under the terms of an Incentive
Compensation Plan or a Long Term Incentive Plan, or (ii) required to be credited
to an Employee’s Deferred Compensation Account pursuant to an Incentive
Compensation Plan, the Long Term Incentive Compensation Plan, the Strategic
Incentive Plan, a Long Term Incentive Plan, or any similar plans, or any
administrative procedure adopted pursuant thereto, or (iii) credited as a result

 

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      of a Participant’s deferral of the receipt of the value of the Stock which
would otherwise be delivered to an Employee in the event restrictions lapse on
Restricted Stock or Restricted Stock Units or the settlement of Restricted Stock
Units previously awarded or which may be awarded to the Participant pursuant to
an Incentive Compensation Plan, the Long Term Incentive Compensation Plan, the
Strategic Incentive Plan, a Long Term Incentive Plan, an Omnibus Securities
Plan, or any similar plans, or any administrative procedure adopted pursuant
thereto, or (iv) credited resulting from a lump sum distribution from any of the
Company’s non-qualified retirement plans and/or plans which provide for a
retirement supplement, or (v) resulting from the forfeiture of Restricted Stock,
required by Phillips Petroleum Company, of key employees who became employees of
GPM Gas Corporation, or (vi) credited as a result of an Employee’s deferral of
the receipt of the lump sum cash payment from the Employee’s account in the
Defined Contribution Makeup Plan, or (vii) credited as a result of an Employee’s
voluntary reduction of Salary, or (viii) credited as a result of an Employee’s
deferral of a Performance Based Incentive Award, or (ix) any other amount
determined by the Committee to be an Award under the Plan. Sections 2 and 3 of
this Plan shall not apply with respect to Awards included under (ii), (v), and
(ix) above and a participant receiving such an Award shall be deemed, with
respect thereto, to have elected a Section 5(b)(i) payment option — 10 annual
installments commencing about one year after retirement at age 55 or above, but
subject to revision under the terms of this Plan.     (c)   “Board of Directors”
shall mean the board of directors of the Company.     (d)   “Chief Executive
Officer” or “CEO” shall mean the Chief Executive Officer of the Company.     (e)
  “Committee” shall mean the Compensation Committee of the Board of Directors.  
  (f)   “Company” shall mean ConocoPhillips.

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  (g)   “Deferred Compensation Account” shall mean an account established and
maintained for each Participant in which is recorded the amounts of Awards
deferred by a Participant, the deemed gains, losses and earnings accrued thereon
and payments made therefrom all in accordance with the terms of the Plan.    
(h)   “Defined Contribution Makeup Plan” shall mean the Defined Contribution
Makeup Plan of ConocoPhillips, or any similar plan or successor plans.     (i)  
“Disability” shall mean the inability, in the opinion of the Company’s Medical
Director, of a Participant, because of an injury or sickness, to work at a
reasonable occupation that is available with the Company, a Participating
Subsidiary, or another subsidiary of the Company.     (j)   “Employee” shall
mean any individual or Rehired Participant who satisfies the conditions of
Section 5(j) who is a salaried employee of the Company or of a Participating
Subsidiary who is eligible to receive an Award from an Incentive Compensation
Plan, has Restricted Stock and/or Restricted Stock Units, and is classified as a
ConocoPhillips salary grade 19 or above or any equivalent salary grade at a
Participating Subsidiary. Employee shall also include Participants who are
employed by a member of the Affiliated Group and former employees of a member of
the Affiliated Group who Retire or are Laid Off and are eligible to receive a
lump sum distribution from non-qualified retirement plans. Employee shall also
include any individual or Rehired Participant who is hired as a salaried
employee of ConocoPhillips Services Inc. on or after January 1, 2003 and is
classified as a ConocoPhillips salary grade 19 or above or any equivalent salary
grade at a Participating Subsidiary. Notwithstanding the foregoing, Employee
shall not include anyone who is classified as a Heritage Conoco Employee.    
(k)   “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor statute.

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  (l)   “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended and in effect from time to time, or any successor statute.     (m)  
“Heritage Conoco Employee” shall mean an individual employed by Conoco Inc.,
Conoco Pipe Line Company, or Louisiana Gas Systems Inc. prior to January 1,
2003; provided, however, that an individual who has been terminated from
employment with a member of the Affiliated Group at any time and rehired by a
member of the Affiliated Group after January 1, 2003, shall not be considered a
Heritage Conoco Employee for purposes of this Plan.     (n)   “Incentive
Compensation Plan” shall mean the ConocoPhillips Variable Cash Incentive
Program, the Incentive Compensation Plan of Phillips Petroleum Company, or the
Annual Incentive Compensation Plan of Phillips Petroleum Company, the Special
Incentive Plan for Former Tosco Executives, or similar plan of a Participating
Subsidiary, or any similar or successor plans, or all, as the context may
require.     (o)   “Layoff” or “Laid Off” shall mean an applicable termination
of employment by reason of layoff under the Phillips Layoff Plan or the Phillips
Work Force Stabilization Plan, an applicable Qualifying Event (without there
being a Disqualifying Event) under the Conoco Severance Pay Plan, or layoff or
redundancy under any other layoff or redundancy plan which the Company, any
Participating Subsidiary, or any other member of the Affiliated Group may adopt
from time to time. If all or any portion of the benefits under the layoff or
redundancy plan are contingent on the employee’s signing a general release of
liability, such termination shall not be considered as a Layoff for purposes of
this Plan unless the employee executes and does not revoke a general release of
liability, acceptable to the Company, under the terms of such layoff or
redundancy plan.     (p)   “Long-Term Incentive Compensation Plan” shall mean
the Long-Term Incentive Compensation Plan of Phillips Petroleum Company, which
was terminated December 31, 1985.

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  (q)   “Long-Term Incentive Plan” shall mean the ConocoPhillips Performance
Share Program, the Phillips Petroleum Company Long-Term Incentive Plan, or a
similar or successor plan of either of them, established under an Omnibus
Securities Plan.     (r)   “Newhire Employee” shall mean any Employee who is
hired or rehired during a calendar year.     (s)   “Omnibus Securities Plan”
shall mean the Omnibus Securities Plan of Phillips Petroleum Company, the 2002
Omnibus Securities Plan of Phillips Petroleum Company, the 1998 Stock and
Performance Incentive Plan of ConocoPhillips, the 1998 Key Employee Stock Plan
of ConocoPhillips, or a similar or successor plan of any of them.     (t)  
“Participant” shall mean a person for whom a Deferred Compensation Account is
maintained.     (u)   “Participating Subsidiary” shall mean a subsidiary of the
Company, of which the Company beneficially owns, directly or indirectly, more
than 50% of the aggregate voting power of all outstanding classes and series of
stock, where such subsidiary has adopted one or more plans making participants
eligible for participation in this Plan and one or more Employees of which are
Potential Participants.     (v)   “Plan Administrator” shall mean the Vice
President Human Resources of the Company, or his successor.     (w)   “Potential
Participant” shall mean a person who has received a notice specified in
Section 2 or in Section 5 (h).     (x)   “Rehired Participant” shall mean a
Participant who, subsequent to Retirement or Layoff, is rehired by the Company,
or any subsidiary of the Company, and whose employment status is classified as
regular full-time or its equivalent.

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  (y)   “Restricted Stock” and “Restricted Stock Units” shall mean respectively
shares of Stock and units each of which shall represent a hypothetical share of
Stock, which have certain restrictions attached to the ownership thereof or the
delivery of shares pursuant thereto.     (z)   “Retirement” or “Retire” or
“Retiring” shall mean termination of employment with the Company or any
subsidiary of the Company on or after the earliest early retirement date at age
55 or above as defined in the ConocoPhillips Retirement Plan or of the
applicable retirement plan of a member of the Affiliated Group.     (aa)  
“Retirement Income Plan” shall mean the ConocoPhillips Retirement Plan or a
similar retirement plan of the Participating Subsidiary pursuant to the terms of
which the Participant retires.     (bb)   “Settlement Date” shall mean the date
on which all acts under an Incentive Compensation Plan or the Long-Term
Incentive Compensation Plan or actions directed by the Committee, as the case
may be, have been taken which are necessary to make an Award payable to the
Participant.     (cc)   “Salary” shall mean the monthly equivalent rate of pay
for an Employee before adjustments for any before-tax voluntary reductions.    
(dd)   “Stock” means shares of common stock of ConocoPhillips, par value $.01.  
  (ee)   “Strategic Incentive Plan” shall mean the Strategic Incentive Plan
portion of the 1986 Stock Plan of Phillips Petroleum Company, of the 1990 Stock
Plan of Phillips Petroleum Company, of the Phillips Petroleum Company Omnibus
Securities Plan, and of any successor plans of similar nature.

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  (ff)   “Trustee” shall mean the trustee of the grantor trust established by
the Trust Agreement between the Company and Wachovia Bank, N.A. dated as of
June 1, 1998, or any successor trustee.

SECTION 2. Notification of Potential Participants.

  (a)   Incentive Compensation Plan. Each year, during October, Employees who
are eligible to receive an Award in the immediately following calendar year
under an Incentive Compensation Plan will be notified and given the opportunity,
in a manner prescribed by the Plan Administrator, to indicate a preference
concerning deferral of all or part of such Award.     (b)   Restricted Stock and
Restricted Stock Units Lapsing. (i) Each year during October, Employees who are
or will be 55 years of age or older prior to the end of the calendar year will
be notified and given the opportunity, in a manner prescribed by the Plan
Administrator to indicate a preference to delay the lapsing of the restrictions
on part or all of the shares of Restricted Stock and/or Restricted Stock Units
previously awarded or which may be awarded to the Employee under an Incentive
Compensation Plan, the Long Term Incentive Compensation Plan, a Long-Term
Incentive Plan, or the Strategic Incentive Plan in the event the Compensation
Committee takes action in the following calendar year to lapse restrictions on
Restricted Stock and/or Restricted Stock Units and/or settle Restricted Stock
Units.         (ii) Each year during October, Employees who have been granted a
special Restricted Stock Award and/or Restricted Stock Unit Award will be
notified and given the opportunity, in a manner prescribed by the Plan
Administrator to indicate a preference to delay the lapsing of the restrictions
on part or all of the shares of Restricted Stock and/or Restricted Stock Units
when the restrictions lapse on the Special Restricted Stock and/or Restricted
Stock Units or the Restricted Stock Units are settled based on the terms of the
Special Restricted Stock and/or Restricted Stock Unit Awards in the following
year.

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      (iii) Such indication of preference as outlined in (i) above may be made
within 60 days of the amendment of this Plan providing for the notice; provided,
however, that such indication of preference must be made no later than June 6,
2003 for such Awards that would otherwise be lapsed or settled later in 2003.  
  (c)   Restricted Stock and Restricted Stock Unit Awards Deferral. (i) Each
year, during October, Employees who are or will be 55 years of age or older
prior to the end of the calendar year will be notified and given the
opportunity, in a manner prescribed by the Plan Administrator, to indicate a
preference concerning the deferral of the receipt of the value of all or part of
the Stock which would otherwise be delivered to the Employees in the event,
during the following calendar year, the Compensation Committee takes action to
lapse restrictions on Restricted Stock and/or Restricted Stock Units and/or
settle Restricted Stock Units previously awarded or which may be awarded to the
Employees under an Incentive Compensation Plan, the Long Term Incentive
Compensation Plan, a Long Term Incentive Plan, or the Strategic Incentive Plan.
        (ii) Employees who have been granted a special Restricted Stock Award
and/or Restricted Stock Units Award may, in the year preceding the year in which
the restrictions are scheduled to lapse or the Restricted Stock Units are to be
settled, indicate a preference concerning the deferral of the value of all or
part of the stock which would otherwise be delivered to the Employees in the
next calendar year when the restrictions lapse on the special Restricted Stock
and /or Restricted Stock Units or the Restricted Stock Units are settled based
on the terms of the special Restricted Stock Awards and/or Restricted Stock
Units Awards.         (iii) Employees who are Laid Off during or after the year
they reach age 50 may no later than 30 days after being notified of Layoff, in
the manner prescribed by the Plan

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      Administrator, indicate a preference concerning the deferral of the
receipt of the value of all or part of the Stock which would be otherwise be
delivered to the Employees in the event Restricted Stock Units, which have been
granted in exchange for Restricted Stock pursuant to the Exchange offer
initiated by the Company on December 17, 2001, are settled.         (iv) Such
indication of preference as outlined in (i) above may be made within 60 days of
the amendment of this Plan providing for the notice; provided, however, that
such indication of preference must be made no later than June 6, 2003 for such
Awards that would otherwise be lapsed or settled later in 2003.     (d)   Lump
Sum Distribution from Non-Qualified Retirement Plans. With respect to the lump
sum distribution permitted from the Company’s non-qualified retirement plans
and/or plans which provide for a retirement supplement, Employees may indicate,
in a manner prescribed by the Plan Administrator, a preference concerning
deferral of all or part of such lump sum distribution.     (e)   Lump Sum from
Defined Contribution Makeup Plan. Employees who will receive a lump sum cash
payment from their account under the Defined Contribution Makeup Plan, may
indicate, in a manner prescribed by the Plan Administrator, a preference
concerning deferral of all or part of such payment.     (f)   Salary Reduction.
Annually, Employees and Newhire Employees on the U.S. dollar payroll may elect,
in a manner prescribed by the Plan Administrator, a voluntary reduction of
Salary for each pay period of the following calendar year, or for Newhire
Employees the remainder of the calendar year in which they are hired, in which
case the Company will credit a like amount as an Award hereunder, provided that
the amount of such voluntary reduction shall not be less than 2% nor more than a
percentage of the Employee’s Salary per pay period such that the resulting
salary that is paid is sufficient to satisfy all benefit plan deductions, tax
deductions, elective deductions, and other deductions required to be withheld by
the Company.

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  (g)   Performance Based Incentive Award. Each year, during October, Employees
who are eligible to receive a Performance Based Incentive Award in the
immediately following calendar year will be notified and given the opportunity,
in a manner prescribed by the Plan Administrator, to indicate a preference for
the award to be paid as cash, deferred to their KEDCP account or issued as
Restricted Stock or a combination of cash, deferred compensation and Restricted
Stock.

SECTION 3. Indication of Preference or Election to Defer Award.

  (a)   Incentive Compensation Plan. If a Potential Participant prefers to defer
under this Plan all or any part of the Award to which a notice received under
Section 2(a) pertains, the Potential Participant must indicate such preference,
in a manner prescribed by the Plan Administrator, (i) if the Potential
Participant is subject to Section 16 of the Exchange Act, to the Committee, or
(ii) if the Potential Participant is not subject to Section 16 of the Exchange
Act, to the CEO. The Potential Participant’s preference must be received on or
before October 31 of the year in which said Section 2(a) notice was received.
Such indication must state the portion of the Award the Potential Participant
desires to be deferred. If an indication is not received by October 31, the
Potential Participant will be deemed to have elected to receive and not to defer
any such Incentive Compensation Plan award.         Such indication of
preference, if accepted, becomes irrevocable on November 1 of the year in which
the indication is submitted to the Committee or CEO, except that, in the event
of any of the following:

  i)   the Employee is demoted to a job classification/grade that is no longer
eligible to receive an Award from an Incentive Compensation Plan,     ii)   the
Employee’s employment status is classified to a status other than regular
full-time or its equivalent, or     iii)   the Employee is receiving Unavoidable
Absence Benefits (UAB) pay such that the pay received is less than his/her pay
had been prior to being on UAB,

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      the Employee can request, subject to approval by the Plan Administrator,
that his/her indication of preference to defer, whether approved or not, be
revoked for that Incentive Compensation Plan Award.         The Committee or
CEO, as applicable, shall consider such indication of preference as submitted
and shall decide whether to accept or reject the preference expressed.     (b)  
Restricted Stock and Restricted Stock Unit Awards Lapsing.
If a Potential Participant prefers to delay the lapsing of the restrictions on
part or all of the shares of Restricted Stock and/or Restricted Stock Units to
which a notice received under Section 2(b) pertains, the Potential Participant
must indicate such preference in a manner prescribed by the Plan Administrator,
(i) if the Potential Participant is subject to Section 16 of the Exchange Act,
to the Committee, or (ii) if the Potential Participant is not subject to
Section 16 of the Exchange Act, to the CEO. The Potential Participant’s
preference must state the percentage of the shares and/or units on which the
lapsing is to be delayed. If an indication is not received by October 31, the
Potential Participant will be deemed to have elected to have the restrictions
lapsed if the Compensation Committee takes action to lapse restrictions or as
specified under the terms of the Special Restricted Stock and/or Restricted
Stock Unit Awards. If the Potential Participant prefers to delay the lapsing of
the restrictions on part or all of the shares of Restricted Stock or Restricted
Stock Units awarded under an Incentive Compensation Plan, the Long Term
Incentive Compensation Plan, a Long Term Incentive Plan, or Strategic Incentive
Plan, those shares and/or units will be subject to another indication of
preference in the following year. If the Potential Participant prefers to delay
the lapsing of the restrictions on part or all of the shares of Restricted Stock
or Restricted Stock Units from Special Stock Awards, those shares and/or units
will remain restricted and the Employee will receive a notice to indicate a
preference for such shares when the Employee is or will be 55 years of age or
older prior to the end of the calendar year as specified in Section 2(b)(i).

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  (c)   Restricted Stock or Restricted Stock Unit Deferral. If a Potential
Participant prefers to defer under this Plan the value of all or any part of the
Restricted Stock or Restricted Stock Units to which a notice received under
Section 2(c) pertains, the Potential Participant must indicate such preference,
in a manner prescribed by the Plan Administrator, (i) if the Potential
Participant is subject to Section 16 of the Exchange Act, to the Committee, or
(ii) if the Potential Participant is not subject to Section 16 of the Exchange
Act, to the CEO. The Potential Participant’s preference must be received on or
before October 31 of the year in which said Section 2(c) notice was received.
Such indication must state the portion of the value of the Restricted Stock or
Restricted Stock Units the Potential Participant desires to be deferred. If an
indication is not received by October 31, the Potential Participant will be
deemed to have elected to receive any shares or units for which the restrictions
are lapsed. Such indication of preference becomes irrevocable on November 1 of
the year in which the indication is submitted to the Committee or CEO. The
Committee or CEO, as applicable, shall consider such indication of preference as
submitted and shall decide whether to accept or reject the preference expressed.
A deferral of the value of the Restricted Stock or Restricted Stock Units will
be paid under the terms of Section 5(b)(i) hereof — 10 annual installments
commencing about one year after Retirement at age 55 or above, but subject to
revision under the terms of this Plan. Such approved indication of preference
shall also apply to any Restricted Stock Units granted in exchange for shares of
Restricted Stock pursuant to the Exchange offer initiated by the Company on
December 17, 2001.     (d)   Lump Sum Distribution from Non-Qualified Retirement
Plans. If a Potential Participant prefers to defer under this Plan all or part
of the lump sum distribution to which Section 2(d) pertains, the Potential
Participant must indicate such preference, in a manner prescribed by the Plan
Administrator, (i) if the Potential Participant is subject to Section 16 of the
Exchange Act, to the Committee or (ii) if the Potential Participant is not
subject to Section 16 of the Exchange Act, to the CEO. The Potential
Participant’s preference must be received in the period beginning 90 days prior
to and ending no less than 30 days prior to the date of commencement of

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      retirement benefits under such plans. Such indication must state the
portion of the lump sum distribution the Potential Participant desires to be
deferred. The Committee or CEO, as applicable, shall consider such indication of
preference as submitted and shall decide whether to accept or reject the
preference expressed as soon as practicable. Such indication of preference, if
accepted, becomes irrevocable on the date of such acceptance.     (e)   Lump Sum
from Defined Contribution Makeup Plan. If a Potential Participant prefers to
defer under this Plan all or part of the lump sum cash payment to which Section
2(e) pertains, the Potential Participant must indicate such preference, in a
manner prescribed by the Plan Administrator, (i) if the Potential Participant is
subject to Section 16 of the Exchange Act, to the Committee or (ii) if the
Potential Participant is not subject to Section 16 of the Exchange Act, to the
CEO. The Potential Participant’s preference must be received in the period
beginning 365 days prior to and ending no less than 90 days prior to the
Participant’s retirement date at age 55 or above except that if a Potential
Participant is notified of layoff during or after the year in which the
Potential Participant reaches age 50, the Potential Participant’s preference
must be received no later than 30 days after being notified of layoff. Such
indication must state the portion of the lump sum payment the Potential
Participant desires to be deferred. The Committee or CEO, as applicable, shall
consider such indication of preference as submitted and shall decide whether to
accept or reject the preference expressed as soon as practicable. Such
indication of preference, if accepted, becomes irrevocable on the date of such
acceptance. A deferral of the lump sum from the Defined Contribution Makeup Plan
will be paid under the terms of Section 5(b)(i) hereof — 10 annual installments
commencing about one year after retirement at age 55 or above, but subject to
revision under the terms of the Plan.     (f)   Salary Reduction. If a Potential
Participant elects to voluntarily reduce Salary and receive an Award hereunder
in lieu thereof, the Potential Participant must make an election, in the manner
prescribed by the Plan Administrator, which must be received on or before
October 31 prior to the beginning of the calendar year of the elected

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      deferral or for Newhire Employees as soon as practicable within a 30-day
period after their first day of employment or reemployment. Such election must
be in writing signed by the Potential Participant, and must state the amount of
the salary reduction the Potential Participant elects. Such election becomes
irrevocable on October 31 prior to the beginning of the calendar year or for
Newhire Employees after the 30-day period after their first day of employment or
reemployment, except that in the event of any of the following:

  i)   the Employee is demoted to a job classification/grade that is no longer
eligible to receive an Award from an Incentive Compensation Plan,     ii)   the
Employee’s employment status is classified to a status other than regular
full-time or its equivalent, or     iii)   the Employee is receiving Unavoidable
Absence Benefits (UAB) pay such that the pay received is less than his/her pay
had been prior to being on UAB,

      the Employee can request, subject to approval by the Plan Benefits
Administrator, that his/her election to voluntarily reduce his/her salary be
revoked for the remainder of the calendar year.         An Award in lieu of
voluntarily reduced salary will be paid under the terms of Section 5(b)(i)
hereof — 10 annual installments commencing about one year after retirement at
age 55 or above, but subject to revision under the terms of the Plan.     (g)  
Performance Based Incentive Award. The Potential Participant who is eligible to
receive a Performance Based Incentive Award in the immediately following
calendar year, must indicate a preference, in a manner prescribed by the Plan
Administrator, (i) if the Potential Participant is subject to Section 16 of the
Exchange Act, to the Committee, or (ii) if the Potential Participant is not
subject to Section 16 of the Exchange Act, to the CEO. The Potential
Participant’s preference must be received on or before October 31 of the year in
which said Section 2(g) notice was received. Such indication must state the
portion of the award the Potential Participant desires to be in cash, the
portion to be deferred and the portion to be in Restricted Stock. If an

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      indication is not received by October 31 the Potential Participant will be
deemed to have elected to receive the award as cash. Such indication of
preference becomes irrevocable on November 1 of the year in which the indication
is submitted to the Committee or CEO. The Committee or CEO, as applicable, shall
consider such indication of preference as submitted and shall decide whether to
accept or reject the preference expressed.

SECTION 4. Deferred Compensation Accounts.

  (a)   Credit for Deferral. Amounts deferred pursuant to Section 3(a) and
Section 5(h)(1) will be credited to the Participant’s Deferred Compensation
Account as soon as practicable, but not less than 30 days after the Settlement
Date of the Incentive Compensation Plan. Amounts deferred pursuant to Section
3(c) and Section 5(h)(2) will be credited, as applicable, as soon as
practicable, but not later than 30 days after the date as of which the
restrictions lapse at the market value of the underlying Restricted Stock or the
shares represented by the Restricted Stock Units awarded under an Incentive
Compensation Plan, the Long Term Incentive Compensation Plan, a Long Term
Incentive Plan or a Strategic Incentive Plan Performance Period which began
prior to January 1, 2003. For this purpose, the market value of the underlying
Restricted Stock or the shares represented by the Restricted Stock Units, as
applicable, shall be based on the higher of (i) the average of the high and low
selling prices of the Stock on the date the restrictions lapse or the last
trading day before the day the restrictions lapse if such date is not a trading
day or (ii) the average of the high three monthly Fair Market Values of the
Stock during the twelve calendar months preceding the month in which the
restrictions lapse. The monthly Fair Market Value of the Stock is the average of
the daily Fair Market Value of the Stock for each trading day of the month.    
    The market value of the underlying Restricted Stock or the shares
represented by the Restricted Stock Units awarded under a Long Term Incentive
Plan Performance Period or an Incentive Compensation Plan that began on or after
January 1, 2003 and for the Special Stock Awards issued on October 22, 2002
shall be the monthly

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      average Fair Market Value of the Stock during the calendar month preceding
the month in which the restrictions lapse or shares are to be delivered as
applicable. The monthly average Fair Market Value of the Stock is the average of
the daily Fair Market Value of the Stock for each trading day of the month.    
    The daily Fair Market Value of the Stock shall be deemed equal to the
average of the high and low selling prices of the Stock on the New York Stock
Exchange.         Amounts deferred pursuant to Section 3(e) and 3(f) and
Section 5(h)(3) will be credited to the Participant’s Deferred Compensation
Account as soon as practicable, but not later than 30 days after the cash
payment would have been made had it not been deferred. Amounts deferred pursuant
to other provisions of this Plan shall be credited as soon as practicable but
not later than 30 days after the date the Award would otherwise be payable.    
(b)   Designation of Investments. The amount in each Participant’s Deferred
Compensation Account shall be deemed to have been invested and reinvested from
time to time, in such “eligible securities” as the Participant shall designate.
Prior to or in the absence of a Participant’s designation, the Company shall
designate an “eligible security” in which the Participant’s Deferred
Compensation Account shall be deemed to have been invested until designation
instructions are received from the Participant. Eligible securities are those
securities designated by the Chief Financial Officer of the Company, or his
successor. The Chief Financial Officer of the Company may include as eligible
securities, stocks listed on a national securities exchange, and bonds, notes,
debentures, corporate or governmental, either listed on a national securities
exchange or for which price quotations are published in The Wall Street Journal
and shares issued by investment companies commonly known as “mutual funds”. The
Participant’s Deferred Compensation Account will be adjusted to reflect the
deemed gains, losses, and earnings as though the amount deferred was actually
invested and reinvested in the eligible securities for the Participant’s
Deferred Compensation Account.

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      Notwithstanding anything to the contrary in this section 4(b), in the
event the Company (or any trust maintained for this purpose) actually purchases
or sells such securities in the quantities and at the times the securities are
deemed to be purchased or sold for a Participant’s Deferred Compensation
Account, the Account shall be adjusted accordingly to reflect the price actually
paid or received by the Company for such securities after adjustment for all
transaction expenses incurred (including without limitation brokerage fees and
stock transfer taxes).         In the case of any deemed purchase not actually
made by the Company, the Deferred Compensation Account shall be charged with a
dollar amount equal to the quantity and kind of securities deemed to have been
purchased multiplied by the fair market value of such security on the date of
reference and shall be credited with the quantity and kind of securities so
deemed to have been purchased. In the case of any deemed sale not actually made
by the Company, the account shall be charged with the quantity and kind of
securities deemed to have been sold, and shall be credited with a dollar amount
equal to the quantity and kind of securities deemed to have been sold multiplied
by the fair market value of such security on the date of reference. As used in
this paragraph “fair market value” means in the case of a listed security the
closing price on the date of reference, or if there were no sales on such date,
then the closing price on the nearest preceding day on which there were such
sales, and in the case of an unlisted security the mean between the bid and
asked prices on the date of reference, or if no such prices are available for
such date, then the mean between the bid and asked prices to the nearest
preceding day for which such prices are available.         The Chief Financial
Officer of the Company may also designate a third party to provide services that
may include record keeping, Participant accounting, Participant communication,
payment of installments to the Participant, tax reporting, and any other
services specified by the Company in agreement with such third party.

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  (c)   Payments. A Participant’s Deferred Compensation Account shall be debited
with respect to payments made from the account pursuant to this Plan as of the
date such payments are made from the account. The payment shall be made as soon
as practicable, but no later than 30 days, after the installment payment date.  
      If any person to whom a payment is due hereunder is under legal disability
as determined in the sole discretion of the Plan Administrator, the Plan
Administrator shall have the power to cause the payment due such person to be
made to such person’s guardian or other legal representative for the person’s
benefit, and such payment shall constitute a full release and discharge of the
Company, the Plan Administrator, and any fiduciary of the Plan.     (d)  
Statements. At least one time per year the Company or the Company’s designee
will furnish each Participant a written statement setting forth the current
balance in the Participant’s Deferred Compensation Account, the amounts credited
or debited to such account since the last statement and the payment schedule of
deferred Awards and deemed gains, losses, and earnings accrued thereon as
provided by the deferred payment option selected by the Participant.

SECTION 5. Payments from Deferred Compensation Accounts.

  (a)   Election of Method of Payment for an Incentive Compensation Plan Award.
At the time a Potential Participant submits an indication of preference to defer
all or any part of an Award under an Incentive Compensation Plan as provided in
Section 3(a) above, the Potential Participant shall also elect in a manner
prescribed by the Plan Administrator, which of the payment options, provided for
in Paragraph (b) of this Section, shall apply to the deferred portion of said
Award adjusted for any deemed gains, losses and earnings accrued thereon
credited to the (b) Participant’s Deferred Compensation Account under this Plan.
Subject to Paragraphs (e), (g), and (h) of this Section, if the Committee or
CEO, as appropriate, accepts the

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      Potential Participant’s indication of preference, the election of the
method of payment of the amount deferred shall become irrevocable.

  (b)   Payment Options. A Potential Participant may elect to have the deferred
portion of an Incentive Compensation Plan Award adjusted for any deemed gains,
losses, and earnings accrued thereon paid:

  (i)   (Post-Retirement) in 10 annual installments, the payment of the first of
such installments to commence on the first day of the first calendar quarter
which is on or after the first anniversary of the Potential Participant’s first
day of Retirement at age 55 or above, or     (ii)   (Pre-Retirement) in annual
installments of not less than 5 nor more than 10, in semi-annual installments of
not less than 10 nor more than 20, or in quarterly installments of not less than
20 nor more than 40. The first of such installments to commence, as soon as
practicable after any date specified by the Potential Participant, so long as
such date is the first day of a calendar quarter, is on or after the Settlement
Date, is at least one year from the date the payout option was elected, and is
prior to the date the Potential Participant will attain the Participant’s Normal
Retirement Date under the terms of the Retirement Income Plan.

  (c)   Election of Method of Payment of the Value of Restricted Stock and
Restricted Stock Units. As provided in Section 3(c) above, a deferral of the
value of all or part of the Restricted Stock or Restricted Stock Units will be
considered payment option (b)(i) of this Section subject to Paragraphs (e) and
(g) of this Section.     (d)   Election of Method of Payment of a Lump Sum
Distribution from Non-Qualified Retirement Plans. At the time a Potential
Participant submits an indication of preference to defer all or part of the lump
sum distribution as provided in Section 3(d) above, the Potential Participant
shall also elect in a manner prescribed by the Plan

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      Administrator which payment option shall apply to the deferred lump sum
adjusted for any gains, losses and earnings to be accrued thereon credited to
the Participant’s Deferred Compensation Account under this Plan. The payment
options are annual installments of not less than 1 nor more than 15, semi-annual
installments of not less than 2 nor more than 30, or quarterly installments of
not less than 4 nor more than 60. The first installment to commence as soon as
practicable after any date specified by the Potential Participant, so long as
such date is the first day of a calendar quarter and is at least one year and
not later than five years from the date the payout option was elected. Subject
to Paragraph (g) of this Section, if the Committee or CEO, as appropriate,
accepts the Potential Participant’s indication of preference, the election of
the method of payment of the amount deferred shall become irrevocable.     (e)  
Payment Option Revisions. If a Section 5(b)(i) payment option applies to any
part of the balance of a Participant’s Deferred Compensation Account, the
Participant may revise such payment option as follows:

  (i)   Prior to Retirement. The Participant at any time during a period
beginning 365 days prior to and ending 90 days prior to the date the Participant
Retires at age 55 or above may, with respect to the total of all amounts subject
to such payment option at the time of the Participant’s retirement at age 55 or
above, in the manner prescribed by the Plan Administrator, revise such payment
option and elect one of the payment options specified in (e)(iv) of this Section
to apply to such total amount in place of such payment option.     (ii)   Upon
Layoff. If a Participant who is eligible to Retire or who is Laid Off during or
after the year in which the Participant reaches age 50 is notified of Layoff,
the Participant may, no later than 30 days after being notified of Layoff, in
the manner prescribed by the Plan Administrator, revise such payment option and
elect one of the payment options specified in (e)(iv) of this Section to apply
to such total amount in place of such payment option.

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  (iii)   If Disabled. The Participant may at any time during a period from the
date of the beginning of the qualifying period for the Company’s Long Term
Disability Plan or similar plan to no later than 90 days prior to the end of
such period, or within 30 days of the amendment of this Plan providing for such
election, in the manner prescribed by the Plan Administrator, revise such
payment option and elect one of the payment options specified in (e)(iv) of this
Section to apply to the total of all amounts subject to such payment option;
provided, however, that after the payments have begun, such payments may be made
in a different manner if, the Participant due to an unanticipated emergency
caused by an event beyond the control of the Participant results in financial
hardship to the Participant, so request and the CEO gives written consent to the
method of payment requested.     (iv)   Payment Options After Revision. If a
Participant revises a Section 5(b)(i) payment option as specified in (e)(i),
(e)(ii) or (e)(iii) of this Section, the Participant may select payments in
annual installments of not less than 1 nor more than 15, in semi-annual
installments of not less than 2 nor more than 30, or in quarterly installments
of not less than 4 nor more than 60 with the first installment to commence, as
soon as practicable following any date specified by the Participant so long as
such date is the first day of a calendar quarter, is on or after the
Participant’s first day of Retirement at age 55 or above or the first day the
Participant is no longer an Employee following Layoff, is at least one year and
no more than five years from the date the payment option was revised.

  (f)   Installment Amount. The amount of each installment shall be determined
by dividing the balance in the Participant’s Deferred Compensation Account as of
the date the installment is to be paid, by the number of installments remaining
to be paid (inclusive of the current installment).

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  (g)   Death of Participant. Upon the death of a Participant, the Participant’s
beneficiary or beneficiaries designated in accordance with Section 6, or in the
absence of an effective beneficiary designation, the surviving spouse, surviving
children (natural or adopted) in equal shares, or the Estate of the deceased
Participant, in that order of priority, shall receive payments in accordance
with the payment option selected by the Participant, if death occurred after
such payments had commenced; or if death occurred before payments have
commenced, the beneficiary may select payments in annual installments of not
less than 1 nor more than 15, in semi-annual installments of not less than 2 nor
more than 30, or in quarterly installments of not less than 4 nor more than 60
with the first installment to commence, as soon as practicable following any
date specified by the beneficiary so long as such date is the first day of a
calendar quarter and is at least one year and no more than five years from the
date the payment option is selected and is not later than the date the deceased
Participant would have been age 65; provided, however, such payments may be made
in a different manner if the beneficiary or beneficiaries entitled to receive or
receiving such payments, due to an unanticipated emergency caused by an event
beyond the control of the beneficiary or beneficiaries that results in financial
hardship to the beneficiary or beneficiaries, so requests and the CEO gives
written consent to the method of payment requested.     (h)   Disability of
Participant. In the event a Participant or Employee becomes disabled, the
individual may, in the period from the date of the beginning of the qualifying
period for the Company’s Long Term Disability Plan to no later than 90 days
prior to the end of such period, or within 30 days of the amendment of this Plan
providing for such election, indicate a preference, in a manner prescribed by
the Plan Administrator, for any of the following:

  1)   to defer part or all of any Incentive Compensation Plan Award the
Employee is eligible to receive in the immediately following calendar year,

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  2)   to defer part or all of the value of the Stock which would otherwise be
delivered to the Employee when the restrictions lapse on any Restricted Stock or
Restricted Stock Units or Restricted Stock Units are settled,     3)   to defer
part or all of the value from their account under the Defined Contribution
Makeup Plan which would otherwise be paid as a lump sum to the Participant.

      Such indications of preference shall be subject to approval by the
Committee if the Potential Participant is subject to Section 16 of the Exchange
Act or by the CEO if the Potential Participant is not subject to Section 16 of
the Exchange Act. The Committee or CEO, as applicable, shall consider such
indication or preference as submitted and shall decide whether to accept or
reject the preference expressed.         Such indications of preference, if
accepted, become irrevocable on the date of such acceptance. A deferral of any
amount will be paid under the terms of Section 5(b)(i) hereof — ten (10) annual
installments, but subject to revision as specified under the terms of this Plan.
    (i)   Termination of Employment.
In the event a Participant’s employment with the Company, any Participating
Subsidiary, or any other subsidiary of the Company terminates for any reason
other than death, Retirement at age 55 or above, Disability, or Layoff during or
after the year in which the Participant reaches age 50, the entire balance of
the Participant’s Deferred Compensation Account shall be paid to the Participant
in one lump sum as soon as practicable after the date the Participant terminates
employment, except that a Participant who becomes employed by a member of the
Affiliated Group immediately after terminating employment with the Company or
Participating Subsidiary shall not receive their benefit under the Plan until
the Participant terminates employment from the Affiliated Group; provided,
however, the Committee, in its sole discretion, may elect to make such payments
in the amounts and on such schedule as it may determine.

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  (j)   Rehire of Participant.
In the event a Participant is a Rehired Participant, he/she will be eligible to
receive notifications as specified in Section 2 and will be eligible to submit
an Indication of Preference or Election to Defer as specified in Section 3, if
the Participant agrees to the suspension of payments from his/her Deferred
Compensation Account during the period of reemployment by the Company. Upon
termination of reemployment, such payments shall resume on the same schedule as
was in effect at the time the Participant previously Retired or was Laid Off.

SECTION 6. Special Provisions for Former ARCO Alaska Employees.

Notwithstanding any provisions to the contrary, in order to comply with the
terms of the Master Purchase and Sale Agreement (“Sale Agreement”) by which the
Company acquired certain Alaskan assets of Atlantic Richfield Company (“ARCO”),
a Participant who was eligible to participate in the ARCO employee benefit plans
immediately prior to becoming an Employee and who was not employed by ARCO
Marine, Inc. (a “former ARCO Alaska employee”) may, in a manner prescribed by
the Plan Administrator, indicate a preference or make an election to:

  a)   voluntarily reduce salary and receive an Award in the amount of the
reduction credited to, at the Employee’s election, (i) an account under this
Plan, or (ii) for so long as the ARCO Executive Deferral Plan will accept such
deferrals of salary, but not beyond December 31, 2001, an account under the ARCO
Executive Deferral Plan.     b)   defer any Award payable to a former ARCO
employee who is involuntarily terminated prior to April 18, 2002 in lieu of a
target ARCO Annual Incentive Plan (AIP) award, and at the Employee’s election
credit the Award to (i) an account under this Plan, or (ii) to the ARCO
Executive Deferral Plan.

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  c)   defer the Final ARCO Supplemental Executive Retirement Plan
(SERP) benefit that will be calculated as of the earlier of April 17, 2002 or
the date the former ARCO employee voluntarily or involuntarily terminates
employment from the Company or any Participating Subsidiary to the ARCO
Executive Deferral Plan.     d)   defer the value of the restricted stock
granted on July 31, 2000 to an account under this Plan when the restrictions
lapse on July 31, 2001, July 31, 2002 and July 31, 2002. Such indications of
preference shall be made in July of the year preceding the calendar year when
the restrictions are scheduled to lapse or as soon as practicable after July 31,
2000 for the restrictions on the shares that are to be lapsed on July 31, 2001.
    e)   all indications of preference in Section 6(a), (b) and (c) are subject
to approval by the Compensation Committee if the Employee is subject to
Section 16 of the Exchange Act and by the CEO if the Employee is not subject to
Section 16 of the Exchange Act.     f)   for a former ARCO Alaska employee who
was classified as a grade 7 or 8 under ARCO’s job classification system and was
eligible under ARCO’s Executive Deferral Plan to voluntarily reduce salary and
defer the amount of the voluntary salary reduction and who was classified as a
grade 31 or below at that time under Phillips Petroleum Company’s job
classification system, make an annual election to voluntarily reduce salary and
defer the amount of the voluntary salary reduction for salary received from
July 31, 2000 through December 31, 2000 and for the five years from 2001 through
2005 and receive a salary deferral credit under this Plan.

SECTION 7. Designation of Beneficiary.

Each Participant shall designate a beneficiary or beneficiaries to receive the
entire balance of the Participant’s Deferred Compensation Account by giving
signed written notice of such designation to the Plan Administrator. The
Participant may from time to time change or

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cancel any previous beneficiary designation in the same manner. The last
beneficiary designation received by the Plan Administrator shall be controlling
over any prior designation and over any testamentary or other disposition. After
acceptance by the Plan Administrator of such written designation, it shall take
effect as of the date on which it was signed by the Participant, whether the
Participant is living at the time of such receipt, but without prejudice to the
Company or the CEO on account of any payment made under this Plan before receipt
of such designation.

SECTION 8. Nonassignability.

The right of a Participant, or beneficiary, or other person who becomes entitled
to receive payments under this Plan, shall not be assignable or subject to
garnishment, attachment or any other legal process by the creditors of, or other
claimants against, the Participant, beneficiary, or other such person.

SECTION 9. Administration.

(a)   The Plan Administrator may adopt such rules, regulations, and forms as
deemed desirable for administration of the Plan and shall have the discretionary
authority to allocate responsibilities under the Plan to such other persons as
may be designated.   (b)   Any claim for benefits hereunder shall be presented
in writing to the Plan Administrator for consideration, grant or denial. In the
event that a claim is denied in whole or in part by the Plan Administrator, the
claimant, within ninety days of receipt of said claim by the Plan Administrator,
shall receive written notice of denial. Such notice shall contain:

  (1)   a statement of the specific reason or reasons for the denial;     (2)  
specific references to the pertinent provisions hereunder on which such denial
is based;

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  (3)   a description of any additional material or information necessary to
perfect the claim and an explanation of why such material or information is
necessary; and     (4)   an explanation of the following claims review procedure
set forth in paragraph (c) below.

(c)   Any claimant who feels that a claim has been improperly denied in whole or
in part by the Plan Administrator may request a review of the denial by making
written application to the Trustee. The claimant shall have the right to review
all pertinent documents relating to said claim and to submit issues and comments
in writing to the Trustee. Any person filing an appeal from the denial of a
claim must do so in writing within sixty days after receipt of written notice of
denial. The Trustee shall render a decision regarding the claim within sixty
days after receipt of a request for review, unless special circumstances require
an extension of time for processing, in which case a decision shall be rendered
within a reasonable time, but not later than 120 days after receipt of the
request for review. The decision of the Trustee shall be in writing and, in the
case of the denial of a claim in whole or in part, shall set forth the same
information as is required in an initial notice of denial by the Plan
Administrator, other than an explanation of this claims review procedure. The
Trustee shall have absolute discretion in carrying out its responsibilities to
make its decision of an appeal, including the authority to interpret and
construe the terms hereunder, and all interpretations, findings of fact, and the
decision of the Trustee regarding the appeal shall be final, conclusive and
binding on all parties.   (d)   Compliance with the procedures described in
paragraphs (b) and (c) shall be a condition precedent to the filing of any
action to obtain any benefit or enforce any right which any individual may claim
hereunder. Notwithstanding anything to the contrary in the Plan, these
paragraphs (b), (c) and (d) may not be amended without the written consent of a
seventy-five percent (75%) majority of Participants and Beneficiaries and such
paragraphs shall survive the termination of this Plan until all benefits accrued
hereunder have been paid.

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SECTION 10. Employment not Affected by Plan.

Participation or nonparticipation in this Plan shall neither adversely affect
any person’s employment status, or confer any special rights on any person other
than those expressly stated in the Plan. Participation in the Plan by an
Employee of the Company or of a Participating Subsidiary shall not affect the
Company’s or the Participating Subsidiary’s right to terminate the Employee’s
employment or to change the Employee’s compensation or position.

SECTION 11. Determination of Recipients of Awards.

The determination of those persons who are entitled to Awards under an Incentive
Compensation Plan and any other such plans shall be governed solely by the terms
and provisions of the applicable plan, and the selection of an Employee as a
Potential Participant or the acceptance of an indication of preference to defer
an Award hereunder shall not in any way entitle such Potential Participant to an
Award.

SECTION 12. Method of Providing Payments.

  (a)   Nonsegregation. Amounts deferred pursuant to this Plan and the crediting
of amounts to a Participant’s Deferred Compensation Account shall represent the
Company’s unfunded and unsecured promise to pay compensation in the future. With
respect to said amounts, the relationship of the Company and a Participant shall
be that of debtor and general unsecured creditor. While the Company may make
investments for the purpose of measuring and meeting its obligations under this
Plan such investments shall remain the sole property of the Company subject to
claims of its creditors generally, and shall not be deemed to form or be
included in any part of the Deferred Compensation Account.     (b)   Funding. It
is the intention of the Company that this Plan shall be unfunded for federal tax
purposes and for purposes of Title I of ERISA; provided, however, that the

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      Company may establish a grantor trust to satisfy part or all of its Plan
payment obligations so long as the Plan remains unfunded for federal tax
purposes and for purposes of Title I of ERISA.

SECTION 13. Amendment or Termination of Plan.

Subject to Paragraph 9(d), the Company reserves the right to amend this Plan
from time to time or to terminate the Plan entirely, provided, however, that no
amendment may affect the balance in a Participant’s account on the effective
date of the amendment. No Participant shall participate in a decision to amend
or terminate this Plan. In the event of termination of the Plan, the Chief
Executive Officer, in his sole discretion, may elect to pay to the Participant
in one lump sum as soon as practicable after termination of the Plan, the
balance then in the Participant’s account.

SECTION 14. Miscellaneous Provisions.

  (a)   Except as otherwise provided herein, the Plan shall be binding upon the
Company, its successors and assigns, including but not limited to any
corporation which may acquire all or substantially all of the Company’s assets
and business or with or into which the Company may be consolidated or merged.  
  (b)   This Plan shall be construed, regulated, and administered in accordance
with the laws of the State of Texas except to the extent that said laws have
been preempted by the laws of the United States.

SECTION 15. Effective Date of the Plan.

This Plan is amended and restated effective as of April 1, 2003.

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