**Exhibit 10.6**

 

 

 

**LONG-TERM INCENTIVE PLAN**

 

**OF**

 

**CHEVRON PHILLIPS CHEMICAL COMPANY LLC**

 

**(As Amended and Restated Effective January 1,2005)**

 

 

 

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**LONG-TERM INCENTIVE PLAN**

**OF**

**CHEVRON PHILLIPS CHEMICAL COMPANY LLC**

**(As Amended and Restated Effective January 1,2005)**

 

**TABLE OF CONTENTS**

 
| ** ** | ** **                                   | **Page** |
|------------|----------------------------------------------|----------|
|       |                                         |     |
| 1.         | Interpretation  and Definitions              | 1        |
| 2.         | Administration  of Plan.                     | 6        |
| 3.         | Eligibility and  Participation.              | 7        |
| 4.         | Grants and  Settlement of Awards             | 8        |
| 5.         | Payment of  Awards                           | 9        |
| 6.         | Vesting and  Forfeiture.                     | 10       |
| 7.         | Amendments or  Discontinuance                | 10       |
| 8.         | Recapitalization,  Merger, and Consolidation | 11       |
| 9.         | General  Provisions                          | 11       |
|       | Exhibit A “Peer  Companies”   | 13       |

 

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**LONG-TERM INCENTIVE PLAN**

**OF**

**CHEVRON PHILLIPS CHEMICAL COMPANY LLC**

**(As Amended and Restated Effective January 1,2005)**

 

**PURPOSE**

 

The purpose of thisamended and restated Long-Term Incentive Plan (the “Plan”) is to attract,motivate, and retain qualified management personnel by providing to them along-term incentive compensation plan that will provide competitivecompensation opportunities similar to those of comparable companies in thechemical industry, align the interests of key management with the interests ofthe Company’s owners, and encourage the creation of additional owner value.

 

The Plan is intended tobe a “bonus program” within the meaning of Labor Reg. § 2510.3-2(c) and,therefore, is not intended to be subject to the requirements of ERISA.  It is also intended that the Plan comply withthe requirements of Section 409A of the Internal Revenue Code, as added bythe American Jobs Creation Act of 2004 (“Section 409A”).

 

The Plan wasamended and restated effective January 1, 2001.

 

The Plan is, except asotherwise set forth in the document, amended and restated effective January 1,2005.

 

# **1.**                                      Interpretationand Definitions

 

(a)                                  General.

 

(1)                                  Interpretation.  Unless a clear contrary intention appears,for purposes of construction of this Plan and all related Plan Documents:

 

(i)                                     thesingular number includes the plural number and vice versa;

 

(ii)                                  referenceto any person includes such person’s successors and assigns but, if applicable,only if such successors and assigns are permitted by the Plan Documents, andreference to a person in a particular capacity excludes such person in anyother capacity or individually;

 

(iii)                               reference to any genderincludes the other gender;

 

(iv)                              referenceto any Plan Document or any other agreement, document or instrument means theapplicable Plan Document or such other agreement, document or instrument asamended or modified and in effect from time to time in accordance with theterms thereof;

 

(v)                                 referenceto any law means such law as amended, modified, codified, replaced orreenacted, in whole or in part, and in effect from time to time, including rules andregulations promulgated thereunder, and

 

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referenceto any section or other provision of any law means that provision of suchlaw from time to time in effect and constituting the substantive amendment,modification, codification, replacement or reenactment of such section orother provision;

 

(vi)                              referencein any Plan Document to any article, section, appendix, schedule orexhibit means such article or section thereof or appendix, schedule orexhibit thereto;

 

(vii)                           “hereunder”,“hereof”, and words of similar import shall be deemed references to a PlanDocument as a whole and not to any particular article, section or otherprovision thereof;

 

(viii)                        “including”(and with the correlative meaning “include”) means including without limitingthe generality of any description preceding such term;

 

(ix)                                “or”is not exclusive;

 

(x)                                   relativeto the determination of any period of time, “from” means “from and including”and “to” means “to but excluding;” and

 

(xi)                                referencesto days, weeks, months, quarters and years are references to such periods asdetermined by the Gregorian calendar.

 

(2)                                  **Accounting Terms.**  Ineach Plan Document, unless expressly otherwise provided, accounting terms shallbe construed and interpreted, and accounting determinations and computationsshall be made, in accordance with generally accepted accounting principles.

 

(3)                                  **Conflict in Plan Documents.** If there is any conflict between any two or more Plan Documents, suchPlan Documents shall be interpreted and construed, if possible, so as to avoidor minimize such conflict but, to the extent (and only to the extent) of suchconflict, the Plan Document dealing most specifically with the matter as towhich there is a conflict shall prevail and control.  If it cannot be determined which PlanDocument deals most specifically with a matter as to which there is a conflictthen the Plan shall prevail and control.

 

(b)                                 Definitions.

 

(1)                                  “Board”means the Board of Directors of the Company.

 

(2)                                  “CapitalCharge” means the economic cost of the Total Assets used in the operations ofthe Company, as determined by the Committee from time to time.

 

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(3)                                  “ChemSystems Leader” means reports provided by Nexant Company or other relevantthird party data that review chemical industry performance in various areassuch as cash cost margins and cash cost return on investment. The chemicalindustry may use this data to illustrate their performance compared to theperformance of the rest of the chemical industry, and to identify topperformance in the industry.

 

(4)                                  “Chevron”means Chevron Corporation, or such entity as may be controlled by ChevronCorporation, that directly or indirectly holds a membership interest in theCompany.

 

(5)                                  “Committee”means the Compensation Committee of the Board.

 

(6)                                  “Company”means Chevron Phillips Chemical Company LLC and any successor entity.

 

(7)                                  “ConocoPhillips”means ConocoPhillips, or such entity as may be controlled by ConocoPhillips,that directly or indirectly holds a membership interest in the Company.

 

(8)                                  “Dateof Grant” means the effective date on which a Relative Performance Award or aStrategic Performance Award, as the case may be, is granted to a Participant.

 

(9)                                  “Dateof Termination” means the date on which a Participant ceases to be an Employee.

 

(10)                            “DeferredCompensation Plan” means the Chevron Phillips Chemical Company LP ExecutiveDeferred Compensation Plan.

 

(11)                            “Disability”means the Participant is eligible for, and is continuously receiving disabilityinsurance benefits under the Social Security Act or the Participating Employer’slong-term disability plan.

 

(12)                            “EBITDA”means earnings before interest, taxes, depreciation, and amortization asreported in the financial records of the Company, or the financial records ofany other company, or segment thereof, against whom the performance of theCompany is being compared.

 

(13)                            “EffectiveDate” means, for purposes of this Plan, January 1, 2001.

 

(14)                            “EligibleEmployee” means:

 

(i)                                     inthe case of Strategic Performance Awards, any regular, full-time Employee(including an Employee who is also a director or an officer) who is a pay grade90 or above; and

 

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(ii)                                  inthe case of Relative Performance Awards, any regular, full-time Employee(including an Employee who is also a director or an officer) who is a pay grade93 or above.

 

Notwithstanding anything contained in the Plan to thecontrary, any person who, pursuant to a written contract with a ParticipatingEmployer that provides that he is an independent contractor and not anEmployee, shall be excluded from the definition of Eligible Employee and shallnot be eligible to participate in the Plan during the period such writtencontract is in effect regardless of such person’s reclassification as anEmployee for such period by the Internal Revenue Service for tax withholdingpurposes.  If, during any period, aParticipating Employer has not treated an individual as an Employee and, forthat reason, has not withheld employment taxes with respect to that individual,then that individual shall not be an Eligible Employee for that period, even inthe event that the individual is determined, retroactively, to have been an Employeeduring all or any portion of that period.

 

(15)                            “Employee”means any employee of a Participating Employer.

 

(16)                            “ERISA”means the Employee Retirement Income Security Act of 1974, as amended.

 

(17)                            “EVA”or “Economic Value Added” means EBITDA minus any Capital Charge.

 

(18)                            “GeographicDifferences” means the impact of the location of various assets owned by a PeerCompany that causes differences in the financial performance, such as assetsowned in the United States vs. assets owned in Europe, the Middle East or otherareas.

 

(19)                            “Grant”means the award of a Relative Performance Award or a Strategic PerformanceAward, as the case may be, subject to such terms and conditions as may be setforth in a Grant Agreement accompanying such award.  Notwithstanding the foregoing, effective forPerformance Cycles beginning on or after January 1, 2006 Grants ofRelative Performance Awards will no longer be available under the Plan.

 

(20)                            “GrantAgreement” or “Agreement” means the agreement accompanying such Grant whichsets forth the Relative Performance Award or Strategic Performance Award, asapplicable, target amount, the Performance Cycle, vesting and other terms andconditions pertaining to that Grant, as established by the Committee.

 

(21)                            “ParentCompany” means Chevron, ConocoPhillips, and their respective successors.

 

(22)                            “Participant”means an Eligible Employee to whom a Relative Performance Award and/or aStrategic Performance Award, as the case may be, may be granted pursuant to thePlan.

 

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(23)                            “ParticipatingEmployer” means the Company and any direct or indirect subsidiary entity of theCompany which, with the Company’s consent, has adopted the Plan.

 

(24)                            “PeerCompanies” means those chemical companies, or chemical segments thereof,identified in Exhibit A which may be amended from time to time by theCommittee in its discretion.

 

(25)                            “PerformanceCycle” means the continuous period as established in the respective GrantAgreement during which a Relative Performance Award or a Strategic PerformanceAward is earned by a Participant.

 

(26)                            “Plan”means the Long-Term Incentive Plan of Chevron Phillips Chemical Company LLC.

 

(27)                            “PlanDocument” means this Plan, any Grant Agreement executed in respect of anyaward, and any other document defining the rights and liabilities of anyParticipant.

 

(28)                            “RelativePerformance” means any measure established by the Committee in its sole andabsolute discretion that compares the Company’s performance to a group of PeerCompanies. Relative Performance measures considered may include but are notlimited to EBITDA divided by Total Assets; comparison to Chem Systems Leader orother relevant third party data; and/or EVA. The evaluation by the Committee may consider adjustments to normalizeportfolio and Geographic Differences and to account for special events.

 

(29)                            “RelativePerformance Award” or “RPA” means, unless modified by the Committee pursuant tothe authority granted to it herein, an award under the Plan which will be paidto a Participant that rewards Participants for changes in the Company’sRelative Performance compared to a group of Peer Companies.

 

(30)                            “Retirement”means an Eligible Employee’s Termination of Service in connection with theattainment of any applicable early retirement age or normal retirement age asdefined in (i) the Chevron Phillips Chemical Company LP Retirement Plan, (ii) anyretirement plan of any Participating Employer, or (iii) the retirementplan of any Parent Company or any of its respective subsidiaries other thanChevron Phillips Chemical Company LLC. A Participant whose Termination ofService occurs while eligible to retire under any of such plans, but who doesnot elect to immediately commence the receipt of benefits thereunder, shallnevertheless be deemed to have retired under such plan for purposes of thisPlan.

 

(31)                            “StrategicPerformance” means any measure established by the Committee in its sole andabsolute discretion that compares the Company’s performance to the attainmentof internal strategic objectives. Strategic Performance measures may initially

 

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includebut are not limited to gap closure/synergies; major projects; portfoliomanagement; effective management of capital projects; unit cost reductionsversus baseline measurements; reliability versus baseline measurements; andachievement of effective growth goals. The Committee will annually review the internal strategic objectives tobe measured for each succeeding Performance Cycle and may alter, amend orrevise, in its sole and absolute discretion, such measures.

 

(32)                            “StrategicPerformance Award” or “SPA” means, unless modified by the Committee pursuant tothe authority granted to it herein, an award which will be paid to aParticipant for Company’s Strategic Performance compared to the internalstrategic objectives established by the Committee.

 

(33)                            “Terminationof Service” occurs when a Participant ceases to serve as an Employee for anyreason.

 

(34)                            “TotalAssets” means the sum of current and long-term assets owned by a company.

 

# **2.**                                      Administrationof the Plan

 

(a)                                  ThePlan shall be administered by the Committee.

 

(b)                                 Notwithstandingany other provision of the Plan, the Plan shall be interpreted, operated andadministered in a manner consistent with Section 409A.

 

(c)                                  TheCommittee may establish, from time to time and at any time, subject to thelimitations of the Plan as set forth herein, such rules and regulationsand amendments and supplements thereto, as it deems necessary to comply withapplicable law and for the proper administration of the Plan.

 

(d)                                 TheCommittee’s interpretation and construction of the provisions of the Plan and rules andregulations adopted by the Committee shall be final.  No member of the Committee or the Board shallbe liable for any action taken, or determination made, in respect of the Planin good faith.

 

(e)                                  Themembers of the Committee may retain counsel, employ agents, and provide forsuch clerical, accounting and consulting services as they may require incarrying out the provisions of the Plan; and may allocate among themselves ordelegate to other persons all or such portion of their duties under the Plan asthey in their sole discretion, shall decide. Each member of the Committee and each member of the Board shall be fullyjustified in relying upon or acting in good faith upon any opinion, report, orinformation furnished in connection with the Plan by any accountant, counsel,or other specialist so retained (including financial officers of the Company,whether or not such persons are Participants in the Plan).

 

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(f)                                    ThisPlan may be adopted by such subsidiary entities of the Company as the Board orCommittee may approve, whereupon such entities shall become ParticipatingEmployers.

 

(g)                                 TheCommittee shall periodically evaluate the effectiveness of the Plan in meetingthe purposes for which the Plan was adopted. Subject to the limitations andrequirements of Section 7 and Section 409A, the Committee, based onsuch an evaluation, may in its sole and absolute discretion, add a new optionalform of Grant, eliminate an optional form of Grant, modify the terms of anexisting form of Grant, or offer one form of Grant in exchange for an existingGrant made to a Participant for a Performance Cycle.  Any exchange of an existing Grant for a newGrant under the Plan shall be for good and valuable consideration and subjectto consent of the Participant and the provisions of Section 7 and Section 409A.

 

**3.****                                      Eligibilityand Participation**

 

(a)                                  TheCommittee, upon its own action, may grant, but shall not be required to grant,Relative Performance Awards and/or Strategic Performance Awards (collectively,the “Award” or “Awards”) to any Eligible Employee.  Grants may be made by the Committee at anytime and from time to time to new Eligible Employees, or to then EligibleEmployees, or to a greater or lesser number of Eligible Employees, as theCommittee shall determine. Notwithstanding any other provision of this Plan to the contrary,effective for Performance Cycles beginning on or after January 1, 2006Grants of Relative Performance Awards will no longer be available under thePlan.

 

(b)                                 If,during a Performance Cycle, a regular, full-time Employee is promoted to a paygrade of 90 or above, the Employee becomes eligible to participate in thePlan.  If the Eligible Employee isotherwise selected by the Committee to participate in the Plan, the EligibleEmployee will receive a Grant of a Relative Performance Award and/or aStrategic Performance Award for the most recent, active Performance Cycle.  Such Award will be prorated for the periodwhich begins on the date of promotion and ends as of the end of the applicablePerformance Cycle.  If, during a PerformanceCycle, an individual is hired as an Employee in a pay grade of 90 or above, theEmployee becomes eligible to participate in the Plan.  If the Eligible Employee is otherwiseselected by the Committee to participate in the Plan, the Eligible Employee willreceive a Grant of a Relative Performance Award and/or a Strategic PerformanceAward for the most recent, active Performance Cycle.  Such Award will be prorated for the periodwhich begins on the date of employment and ends as of the end of the applicablePerformance Cycle.  Notwithstanding theforegoing, when a regular, full-time Employee is hired in a pay grade of 90 orabove, the CEO will have the authority to give prorated Awards for all activePerformance Cycles when required for competitive reasons.  In the event a Participant is demoted to apay grade lower than 90, outstanding Strategic Performance Awards will beprorated for all active Performance Cycles to which such outstanding Awardsapply.  For this purpose, the prorationperiod will begin as of the Date of Grant for each applicable outstanding Awardand will end on the effective date of the

 

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Employee’s demotion. Outstanding Relative PerformanceAwards will not be subject to such proration in the event the Participant isdemoted to a pay grade lower than 93.

 

# **4.**                                      Grants andSettlement of Awards

 

(a)                                  EachGrant shall be evidenced by a Grant Agreement executed by the Participant insuch form and with such terms and conditions, as the Committee may from time totime determine. The rights of a Participant with respect to any Grant shall atall times be subject to the terms and conditions set forth in the GrantAgreement relating thereto and in the Plan Documents. Except as required bythis Plan, different Grants need not contain terms or conditions similar to anyGrant made prior thereto or contemporaneously therewith.  The Committee’s determinations under the Plan(including determinations of which Eligible Employees, if any, are to receiveGrants, the form, amount and timing of such Grants, the terms and provisions ofsuch Grants and the agreements evidencing same) need not be uniform and may bemade by it selectively among Eligible Employees who receive, or are eligible toreceive, Grants under the Plan.

 

(b)                                 EachPerformance Cycle, subject to the other limitations set forth in the Plan, mayextend for a period of up to three (3) years from the Date of Grant.  The length of each Performance Cycle shall bedetermined by the Committee at the time of Grant; provided, however, if no termis established by the Committee the term of the Performance Cycle shall bethree (3) years from the Date of Grant.

 

(c)                                  Withrespect to the Relative Performance Award, at the beginning of each PerformanceCycle, the Committee shall establish the Participant’s Relative PerformanceAward target amount.  The Committee shallalso determine the Relative Performance measures for the PerformanceCycle.  Moreover, the RelativePerformance Award target amount and the Relative Performance measures shall beset forth in writing within ninety (90) days of the beginning of eachPerformance Cycle.

 

At the end of each Performance Cycle, the Committeeshall evaluate the Company’s Relative Performance in comparison to the group ofPeer Companies to establish what percentage of the Participant’s RelativePerformance Award target amount will be awarded the Participant.  The percentage may range from 0% to 200%. Anyresultant Relative Value Award may be further adjusted as a result of theapplication of the provisions in Section 4(e) or by the Committee inits sole and absolute discretion either in individual cases or in theaggregate.  Notwithstanding anythingcontained in the Plan to the contrary, in no event shall any RelativePerformance Award be awarded to any Participant for a Performance Cycle if theaward is not based on the Company’s favorable performance as compared with thegroup of Peer Companies.

 

(d)                                 Withrespect to the Strategic Performance Award, at the beginning of each PerformanceCycle, the Committee shall establish the Participant’s Strategic PerformanceAward target amount.  The Committee shallalso determine the Strategic Performance measures for the Performance Cycle.Moreover, the Strategic Performance Award target amount and the StrategicPerformance measures shall be set forth in writing within ninety (90) days ofthe beginning of each Performance Cycle.

 

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At the end of each Performance Cycle, the Committeeshall evaluate the Company’s Strategic Performance in comparison to theStrategic Performance measures established by the Committee to establish whatpercentage of the Participant’s Strategic Performance Award target amount willbe awarded the Participant.  Thepercentage may range from 0% to 200%. Any resultant Strategic Performance Award may be further adjusted as aresult of the application of the provisions in Section 4(e) or by theCommittee in its sole and absolute discretion either in individual cases or inthe aggregate.  Notwithstanding anythingcontained in the Plan to the contrary, in no event shall any StrategicPerformance Award be awarded to any Participant for a Performance Cycle if theaward is not based on the Company’s favorable performance as compared to theStrategic Performance measures established by the Committee.

 

(e)                                  Notwithstandinganything contained in this Plan document to the contrary, in the event that anyParticipant engages in any activity which the Committee judges to bedetrimental to any Participating Employer, or otherwise fails to perform hisobligations as a regular, full-time Employee, the Committee may cancel orreduce the Relative Performance Value Award or Strategic Performance ValueAward in whole or in part at any time prior to payment of the Award.

 

**5.****                                      Paymentof Awards**

 

(a)                                  Uponfinal determination by the Committee of a Participant’s right to receive adistribution of a Relative Performance Award or Strategic Performance Award,the distribution shall be paid in cash as a lump sum as soon as practicableafter such final determination by the Committee.

 

For Performance Cycles beginning on or after January 1,2003, upon final determination by the Committee of a Participant’s right toreceive a distribution of a Relative Performance Award or a StrategicPerformance Award (or a pro rata portion thereof), the distribution shall bepaid in cash as a lump sum: (1) with respect to the Relative PerformanceAward, on May 10 of the year following the end of the Performance Cycle inquestion; and (2) with respect to the Strategic Performance Award, on March 22of the year following the end of the Performance Cycle in question; provided,however that if a payment date occurs on a Saturday, Sunday or bank holiday, payment will be made the nextfollowing business day.

 

(b)                                 Ifa Participant is eligible to participate in the Deferred Compensation Plan,then the Participant may voluntarily elect to defer receipt of his Award and tocause such amount to be credited to his account with the Deferred CompensationPlan.  The rules and proceduresgoverning the Deferred Compensation Plan shall govern and be binding upon anyParticipants who elect to make such deferrals.

 

Deferral and distribution elections shall be made inaccordance with Section 409A and the terms of the Deferred CompensationPlan.  Specifically, irrevocableelections by Participants of the time and form of payment of the StrategicPerformance Award and

 

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RelativePerformance Award under the Deferred Compensation Plan shall be made no laterthan the date that is six (6) months before the end of the applicablePerformance Cycle in accordance with the Proposed Treasury Regulation section 1.409A-2(a)(7) andsubsequent guidance.

 

**6.****                                      Vestingand Forfeiture**

 

(a)                                  AParticipant will be vested in his Strategic Performance Award or RelativePerformance Award, as the case may be, at the end of the Performance Cycleapplicable to said Award provided the Participant is an Eligible Employee atthe end of said Performance Cycle.

 

(b)                                 Exceptas provided in the Plan Document, upon a Participant’s Termination of Service,the Participant’s outstanding Grants of Strategic Performance Awards orRelative Performance Awards, as the case may be, and all rights thereunder shallterminate on the Date of Termination; provided, however, that if a Participant’sTermination of Service is due to Retirement, transfer to a Parent Company,Disability, or death, said forfeiture shall not occur, and the Participantshall be vested on the Date of Termination in each outstanding StrategicPerformance Award or Relative Performance Award.  Each outstanding Strategic Performance Awardwill be prorated for the active Performance Cycle to which such outstandingAward applies.  For this purpose, theproration period will begin as of the Date of Grant for each applicableoutstanding Strategic Performance Award and will end on the Participant’s Dateof Termination. Except in the case of Termination of Service due to transfer toa Parent Company, outstanding Relative Performance Awards will not be subjectto such proration.

 

(c)                                  Notwithstandingthe foregoing, in the event a Participant: (1) takes a leave of absencefrom the Company for personal reasons or as a result of entry into the ArmedForces of the United States, or (2) terminates employment for reasonswhich, in the judgment of the Committee, are deemed to be specialcircumstances, the Committee may consider such circumstances and may take suchaction (to the extent consistent with Section 409A) in respect of therelated Grant and Grant Agreement as it may deem appropriate under thecircumstances, including extending the rights of a Participant to continueparticipation in the Plan beyond his Date of Termination; provided in no eventmay participation be extended beyond the term of the Performance Cycle.

 

**7.****                                      Amendmentor Discontinuance**

 

Subjectto the limitations set forth in this Section 7, the Board may at any timeand from time to time, without the consent of the Participants, alter, amend, revise,suspend, or discontinue the Plan in whole or in part.  Any such amendment shall, to the extentdeemed necessary or advisable by the Committee, be applicable to anyoutstanding Grants theretofore awarded under the Plan, notwithstanding anycontrary provisions contained in any Grant Agreement.  In the event of any such amendment to thePlan, the holder of any Grant outstanding under the Plan shall, upon request ofthe Committee and as a condition to the exercisability thereof, execute aconforming amendment in the form

 

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prescribedby the Committee to any Grant Agreement relating thereto.  Notwithstanding anything contained in thisPlan to the contrary, unless required by law, no action contemplated or permittedby this Section 7 shall adversely affect any rights of Participants orobligations of the Company to Participants with respect to any Awardtheretofore granted under the Plan without the consent of the affectedParticipant.

 

# **8.**                                      Recapitalization,Merger, and Consolidation

 

The existence of this Plan and the Awards grantedhereunder shall not affect in any way the right or power of the Company orthose entities holding membership interests in the Company to make or authorizeany or all adjustments, reorganizations, or other changes in the Company’scapital structure and its business, or any merger or consolidation of theCompany, or the dissolution or liquidation of the Company, or any sale ortransfer of all or part of its assets or business, or any other corporate actor proceeding, whether of a similar character or otherwise.

 

# **9.**                                      GeneralProvisions

 

(a)                                  StrategicPerformance Awards and Relative Performance Awards shall be nontransferable andnonassignable, except that any such Grant may be transferred (1) to suchbeneficiary as the Participant may designate in the event of death, Disabilityor other incapacity, or (2) by testamentary instrument or by the laws ofdescent and distribution. The Committee shall prescribe the form and manner inwhich beneficiary designations shall be made, revoked or amended. Any validbeneficiary designation on file with the Company shall take priority over anyconflicting provision of any testamentary or similar instrument.

 

(b)                                 Theestablishment of the Plan shall not confer any legal rights upon any Employeeor other person to continued employment, nor shall it interfere with the rightof any Participating Employer (which right is hereby reserved) to discharge anyEmployee and to treat****him****without regard to the effect which that treatment mighthave upon him****as a Participant or potentialParticipant.

 

(c)                                  Neitherthe adoption of this Plan nor any action of the Board or the Committee shall bedeemed to give any person any right to be granted an award or any other rightsexcept as may be evidenced by a Grant Agreement, or any amendment thereto, dulyauthorized by the Committee and executed on behalf of the Company, and thenonly to the extent and upon the terms and conditions expressly set forththerein.

 

(d)                                 TheCompany shall have the right to deduct from all amounts hereunder paid in cash,any federal, state, local, or other taxes required by law to be withheld withrespect to such payments.

 

(e)                                  THEVALIDITY, CONSTRUCTION AND EFFECT OF THE PLAN, ANY PLAN DOCUMENTS, AND ANYACTIONS TAKEN OR RELATING TO THE PLAN SHALL BE DETERMINED IN ACCORDANCE WITHTHE LAWS OF THE STATE

 

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OF TEXAS APPLICABLE TO CONTRACTS MADE AND TO BEPERFORMED WITHIN SUCH STATE.

 

(f)                                    TheCompany will require any successor (whether direct or indirect, by purchase,merger, consolidation or otherwise) to all or substantially all of the businessand/or assets of the Company, expressly to assume and agree to perform theCompany’s obligations under this Plan in the same manner and to the same extentthat the Company would be required to perform them if no such succession hadtaken place.

 

(g)                                 ThePlan shall be unfunded. Neither the Company, any Participating Employer, theCommittee, nor the Board shall be required to segregate any assets or secureany liability that may at any time be represented by Grants made pursuant tothe Plan.

 

(h)                                 ThePlan shall have a term of ten (10) years from its Effective Date.  After termination of the Plan, no futureGrants may be made, but Grants made before that date will continue to beeffective in accordance the terms and conditions of the respective GrantAgreement.

 

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**EXHIBIT A**

 

**PEER COMPANIES**

 

Thefollowing companies, or the chemicals segments thereof, shall be the initialcomparator companies for purposes of Relative Performance Awards:

 

1.                                       TheDow Chemical Company

 

2.                                       Borealis(polyolefins & chemicals segment)

 

3.                                       NOVAChemicals Corporation

 

4.                                       EquistarChemicals, LP

 

5.                                       ExxonMobilCorporation (chemicals segment)

 

6.                                       BP,p.l.c. (chemicals segment)

 

7.                                       RoyalDutch/Shell Group (chemicals segment)

 

ChemSystems Data or other relevant third-party data may also be used to determinerelative performance.

 

**THIS EXHIBIT AMAY BE MODIFIED FROM TIME TO TIME BY THE COMMITTEE IN ITS SOLE ANDABSOLUTE DISCRETION.**

 

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**AMENDMENT NUMBER ONETO THELONG-TERM INCENTIVE PLAN OF**

**CHEVRONPHILLIPS CHEMICAL COMPANY LLC**

 

WHEREAS, effective January 1, 2001, ChevronPhillips Chemical Company LLC (the “Company”) established the Long-TermIncentive Plan of Chevron Phillips Chemical Company LLC (the “Plan”);

 

WHEREAS, the Plan was subsequently amendedand restated effective January 1, 2001, and effective January 1, 2005; and

 

WHEREAS, pursuant to Section 7 of the Plan,the Company reserves the right at any time and from time to time to amend thePlan in whole or in part;

 

NOW, THEREFORE, BE IT RESOLVED,

 

1.             Effective January 1, 2005, Section 6(b) isamended in its entirety as follows:

 

(b)                                 Ifa Participant becomes Disabled or has a Termination of Service due toRetirement, transfer to a Parent Company, or death, the Participant shall bevested in each outstanding Strategic Performance Award or Relative PerformanceAward, as the case may be, when the Participant is placed on Disability or onthe Participant’s Date of Termination, as applicable.  Each outstanding Strategic Performance Awardwill be prorated for the active Performance Cycle to which such outstandingaward applies.  For this purpose, theproration period will begin as of the Date of Grant for each applicableoutstanding Strategic Performance Award and will end when the Participant isplaced on Disability or on the Participant’s Date of Termination, asapplicable.  Except in the case ofTermination of Service due to transfer to a Parent Company, outstandingRelative Performance Awards will not be subject to such proration.  If a Participant terminates employment forany reason other than Retirement, transfer to a Parent Company, or death, thenthe Participant’s outstanding Grants of Strategic Performance Awards orRelative Performance Awards, as the case may be, and all rights thereundershall be forfeited.

 

IN WITNESS WHEREOF, Chevron Phillips ChemicalCompany LLC has caused this Amendment Number One to be executed this 24 day ofFebruary 2006.

 
| ** ** | ** ** |   | **CHEVRON  PHILLIPS CHEMICAL  COMPANY LLC** |
|------------|------------|--------|---------------------------------------------|
|       |       |   |                                        |   |
|       |       |   | By:                                         | *James L. Gallogy* |
|       |       |   | Its:                                        | President and Chief  Executive Officer |

 

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