Exhibit
10.23.1


 


ORIGINAL FOR EXECUTION


APPROVED VP, HR
DECEMBER 29, 2005


 


KEY EMPLOYEE DEFERRED COMPENSATION PLAN OF


CONOCOPHILLIPS


 


TITLE I


(Effective
for benefits earned and vested prior to


January
1, 2005)


 


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, of
the Conoco Inc. Global Variable Compensation Deferral Program, and of the
portions of the Conoco Inc. Salary Deferral & Savings Restoration Plan
consisting of Salary Deferral Obligations and Retiree Obligations, and all
deferrals made under any of those plans, programs, or arrangements shall
continue under their terms and the terms of this Plan. Title I of this Plan is
effective with regard to benefits earned and vested prior to January 1, 2005,
while Title II of this Plan is effective with regard to benefits earned or
vested after December 31, 2004. Other than earnings, gains, and losses, no
further benefits shall accrue under Title I of this Plan after December 31,
2004.


 


This Title I of the Plan
is intended (1) to be a “grandfathered” plan pursuant to Code section 409A, as
enacted as part of the American Jobs Creation Act of 2004, and official
guidance issued thereunder, and (2) to be “a plan which is unfunded and is
maintained by an employer primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees”
within the meaning of sections 201(2), 301(a)(3), and 401(a)(1) of ERISA. Notwithstanding
any other provision of this Plan, this Plan shall be interpreted, operated, and
administered in a manner consistent with these intentions.


 

















 


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 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


 


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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.


 


(g)        “Conoco
Inc. Global Variable Compensation Deferral Program” shall mean the Conoco Inc.
Global Variable Compensation Deferral Program, prior to its merger into this
Plan on October 3, 2003.


 


 (h)       “Conoco
Inc. Salary Deferral & Savings Restoration Plan” shall mean the Conoco Inc.
Salary Deferral & Savings Restoration Plan, prior to its merger into this
Plan on October 3, 2003.


 


 (i)         “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.


 


(j)          “Defined
Contribution Makeup Plan” shall mean the Defined Contribution Makeup Plan of
ConocoPhillips, or any similar plan or successor plans.


 


(k)         “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.


 


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(l)          “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,
prior to October 3, 2003, Employee shall not include anyone who is classified
as a Heritage Conoco Employee. On and after October 3, 2003, Employee shall
include anyone who is classified as a Heritage Conoco Employee.


 


(m)        “ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as amended from
time to time, or any successor statute.


 


(n)        “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended and in effect
from time to time, or any successor statute.


 


(o)        “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.


 


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(p)        “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, the Conoco Inc. Global Variable
Compensation Plan, or a similar plan of a Participating Subsidiary, or any
similar or successor plans, or all, as the context may require.


 


(q)        “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.


 


(r)         “Long-Term
Incentive Compensation Plan” shall mean the Long-Term Incentive Compensation
Plan of Phillips Petroleum Company, which was terminated December 31,
1985.


 


(s)         “Long-Term
Incentive Plan” shall mean the ConocoPhillips Performance Share Program, the
ConocoPhillips Restricted Stock Program, the Phillips Petroleum Company
Long-Term Incentive Plan, or a similar or successor plan of any of them,
established under an Omnibus Securities Plan.


 


(t)         “Newhire
Employee” shall mean any Employee who is hired or rehired during a calendar
year.


 


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(u)        “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.


 


(v)        “Participant”
shall mean a person for whom a Deferred Compensation Account is maintained.


 


(w)        “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.


 


(x)         “Plan
Administrator” shall mean the Vice President, Human Resources of the Company,
or his or her successor.


 


(y)        “Potential
Participant” shall mean a person who has received a notice specified in Section
2 or in Section 5 (h).


 


(z)         “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.


 


(aa)       “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.


 


(bb)      “Retiree
Obligations” shall mean obligations to former employees who have retired on


 


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or after the earliest retirement date available under
the Retirement Plan of Conoco and who are Participants in this Plan arising
from deferrals made as participants in the Conoco Inc. Salary Deferral &
Savings Restoration Plan prior to its merger into this Plan.


 


(cc)       “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, with
respect to a Heritage Conoco Employee, the Retirement Plan of Conoco) or of the
applicable retirement plan of a member of the Affiliated Group.


 


(dd)      “Retirement
Income Plan” shall mean the ConocoPhillips Retirement Plan (or, with respect to
a Heritage Conoco Employee, the Retirement Plan of Conoco) or a similar
retirement plan of the Participating Subsidiary pursuant to the terms of which
the Participant retires.


 


(ee)       “Salary
Deferral Obligations” shall mean obligations to Employees who are Participants
in this Plan arising from salary deferrals made as participants in the Conoco
Inc. Salary Deferral & Savings Restoration Plan prior to its merger into
this Plan.


 


 (ff)       “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.


 


(gg)      “Salary”
shall mean the monthly equivalent rate of pay for an Employee before
adjustments for any before-tax voluntary reductions.


 


(hh)      “Stock”
means shares of common stock of ConocoPhillips, par value $.01.


 


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(ii)         “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.


 


(jj)         “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 (in one percent increments) 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 following 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 (in one percent increments) 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, the Strategic
Incentive Plan, or an Omnibus Securities 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


 


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opportunity,
in a manner prescribed by the Plan Administrator to indicate a preference to
delay the lapsing of the restrictions on part (in one percent increments) 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.


 


(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
(in one percent increments) 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, the Strategic Incentive Plan, or an Omnibus Securities 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 (in one percent increments) 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


 


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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 Administrator, indicate a preference concerning the deferral of the receipt
of the value of all or part (in one percent increments) 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 (in one percent increments) 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 (in one percent increments) 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


 


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the
Company will credit a like amount as an Award hereunder, provided that the
amount of such voluntary reduction shall not be less than 1% nor more than 50%
of the Employee’s Salary per pay period (and may be further limited by the Plan
Administrator 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).


 


(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:


 


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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 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


 


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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).


 


(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


 


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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 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.


 


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(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 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


 


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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 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.


 


16

















 


The
market value of the underlying Restricted Stock or the shares represented by
the Restricted Stock Units awarded under a Long Term Incentive Plan, under an
Incentive Compensation Plan that began on or after January 1, 2003, under an
Omnibus Securities Plan (with regard to awards made on or after January 1,
2003), and for the Special Stock Awards issued on October 22, 2002, shall be
the monthly 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,


 


17

















 


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.


 


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.


 


18

















 


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.


 


(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


 


19

















 


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 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 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 1 to 15 annual installments, in 2 to 30
semi-annual installments, or in 4 to 60 quarterly installments, the payment of
the first of any of such installments to commence on the first day of the first
calendar quarter which is on or after the first anniversary of (x) the
Potential Participant’s first day of Retirement at age 55 or above (or at age
50 or above for a Heritage Conoco Employee who was employed by Conoco Inc. or
its affiliates on August 30, 2002 if such Heritage Conoco Employee is eligible
for early retirement under the Retirement Plan of Conoco) or (y) the Potential
Participant’s first day of Layoff at age 50 or above, or


 


(ii)           (Date Certain) with regard only to the deferred portion of
an Incentive Compensation Award, in 1 to 15 annual installments, in 2 to 30
semi-annual installments, or in 4 to 60 quarterly installments, the payment of
the first of any of such installments to commence on the first day of calendar
quarter which is designated by the Participant, is at least one year after the
date on which the election is made, and is not later than the 65th
birthday of the Participant; provided, however, that in the event of
termination of employment from the Affiliated Group by a Heritage Conoco
Employee who had made deferral of amounts from the Conoco Inc. Global Variable
Compensation Plan, the balance


 


20

















 


of
such deferred amounts (adjusted for earnings, gains, and losses) shall be paid
in a lump sum as soon as practicable after termination, notwithstanding an
installment election made pursuant to this Paragraph, or


 


(iii)          (Pre-Retirement) otherwise, in a lump sum paid as soon as
practicable following the Participant’s termination from employment with the
Affiliated Group.


 


(iv)          In the event that no election is properly and
timely made with regard to the time and method of payment under Section 5(b)(i)
or (ii), payment shall be made in 10 annual installments, the payment of the
first of any of such installments to commence on the first day of the first
calendar quarter which is on or after the first anniversary of (x) the Potential
Participant’s first day of Retirement at age 55 or above (or at age 50 or above
for a Heritage Conoco Employee who was employed by Conoco Inc. or its
affiliates on August 30, 2002 if such Heritage Conoco Employee is eligible for
early retirement under the Retirement Plan of Conoco) or (y) the Potential
Participant’s first day of Layoff at age 50 or above.


 


(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 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


 


21

















 


than
2 nor more than 30, or quarterly installments of not less than 4 nor more than
60. The first installment shall 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.


 


(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


 


22

















 


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).


 


(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


 


23

















 


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,


(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, or


(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


 


24

















 


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.


 


(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.


 


25

















 


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:


 


(a)         To
reduce voluntarily 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; or


 


(b)        To
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; or


 


(c)         To
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; or


 


(d)        To
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, 2003; provided that 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; or


 


26

















 


(e)         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, to 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.


 


All indications of preference in Sections
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.


 


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 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,


 


27

















 


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;


 


(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


 


28

















 


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.


 


SECTION 10.  Employment not
Affected by Plan.


 


Participation or nonparticipation in this Plan shall neither adversely
affect any person’s employment status nor 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


 


29

















 


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 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.


 


30

















 


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
Existing Restatement of the Plan.


 


This Plan was amended and restated effective as of
October 3, 2003, but with provisions added in the preamble and below to
indicate the separation of Title I and Title II of the Plan to comply with Code
section 409A.


 


Executed this 29th
day of December
2005, effective as of January 1, 2005, with respect to benefits earned and
vested prior to January 1, 2005.


 


 


	
  /s/ Carin S. Knickel

  	
   

  
	
  Carin S. Knickel

  
	
  Vice President, Human Resources

  



 


31