Document:

Exhibit 10.6

                              COMMUNITY BANKS, INC.
                            SURVIVOR INCOME AGREEMENT

     THIS  AGREEMENT  is made  this  29th day of  August  , 2002 by and  between
COMMUNITY BANKS, INC., Millersburg,  Pennsylvania, , (the "Company"), and DONALD
F. HOLT (the "Executive").

                                  INTRODUCTION

     To  encourage  the  Executive  to remain an  employee of the  Company,  the
Company is willing to provide  benefits to the  Executive's  beneficiary  if the
Executive  dies  prior  to  terminating  employment.  The  Company  will pay the
benefits from its general assets,  but only so long as one of its general assets
is a life insurance policy on the Executive's life.

                                    AGREEMENT

     The Executive and the Company agree as follows:

                                    Article 1
                             Entitlement to Benefit

     1.1  Pre-Termination  Survivor Income Benefit. If the Executive dies before
otherwise  terminating  employment  with the Company,  and if the Company owns a
life insurance  policy on the  Executive's  life at the time of such death,  the
Company shall pay to the Executive's  designated beneficiary the survivor income
benefit described in Article 2.

     1.2 Disability Continuation.  If the Executive terminates employment due to
disability and then dies before  recovering  from such  disability,  the Company
shall pay to the Executive's  designated beneficiary the survivor income benefit
described in Article 2. Whether the Executive is disabled or has recovered  from
a disability shall be determined by the Company in its sole discretion.

<PAGE>

     1.3 Suicide.  No benefits shall be payable if the Executive commits suicide
within two years after the date of this Agreement.

                                    Article 2
                             Survivor Income Benefit

     2.1 Amount of Benefits.  The survivor income benefit shall be determined in
accordance with the following formula:

                  x = y/(1 - t%)
wherein
                  x    =   the survivor income benefit payable hereunder
                  T% =     the Company's projected marginal tax rate for federal
                           income
                           tax purposes for the year in which the Executive's
                           death
                           occurs and
                  y        = the lesser of (1) three times the
                           Executive's base salary as established by
                           the Company's Board of Directors for the
                           calendar year in which the Executive's death
                           occurs or (2) the life insurance policy
                           proceeds the Company receives due to the
                           Executive's death less the cash surrender
                           value of such policy on the day before the
                           Executive's death

     2.2 Form of Benefits.  The  survivor  income  benefit  shall be paid to the
Executive's  beneficiary  in a  lump  sum  within  sixty  (60)  days  after  the
Executive's death.

                                       2
<PAGE>

                                    Article 3
                                  Beneficiaries

     3.1 Beneficiary  Designations.  The Executive shall designate a beneficiary
by filing a written  designation  with the Company.  The Executive may revoke or
modify  the  designation  at any  time by  filing  a new  designation.  However,
designations  will only be effective if signed by the  Executive and accepted by
the  Company  during  the  Executive's  lifetime.  The  Executive's  beneficiary
designation shall be deemed automatically revoked if the beneficiary predeceases
the  Executive,  or if the  Executive  names a  spouse  as  beneficiary  and the
marriage  is  subsequently  dissolved.  If the  Executive  dies  without a valid
beneficiary designation, all payments shall be made to the Executive's surviving
spouse,  if any,  and if none,  to the  Executive's  surviving  children and the
descendants of any deceased child by right of representation, and if no children
or descendants survive, to the Executive's estate.

     3.2  Facility of Payment.  If a benefit is payable to a minor,  to a person
declared  incompetent,  or to a person  incapable of handling the disposition of
his or her  property,  the Company may pay such benefit to the  guardian,  legal
representative  or person having the care or custody of such minor,  incompetent
person or  incapable  person.  The Company may  require  proof of  incompetency,
minority or guardianship as it may deem appropriate prior to distribution of the
benefit.  Such  distribution  shall  completely  discharge  the Company from all
liability with respect to such benefit.

                                    Article 4
                          Claims and Review Procedures

     4.1 Claims Procedure.  The Company shall notify the Executive's beneficiary
in  writing,  within  ninety  (90) days of his or her  written  application  for
benefits,  of his or her  eligibility or  noneligibility  for benefits under the
Agreement.  If the Company  determines  that the beneficiary is not eligible for
benefits or full benefits,  the notice shall set forth (1) the specific  reasons
for such denial,  (2) a specific reference to the provisions of the Agreement on
which the denial is based,  (3) a description of any  additional  information or
material  necessary  for  the

                                       3
<PAGE>

claimant to perfect his or her claim, and a description of why it is needed, and
(4)  an  explanation  of the  Agreement's  claims  review  procedure  and  other
appropriate information as to the steps to be taken if the beneficiary wishes to
have the claim  reviewed.  If the  Company  determines  that  there are  special
circumstances  requiring  additional time to make a decision,  the Company shall
notify the  beneficiary  of the  special  circumstances  and the date by which a
decision is expected to be made, and may extend the time for up to an additional
ninety-day period.

     4.2 Review  Procedure.  If the beneficiary is determined by the Company not
to be eligible for benefits,  or if the  beneficiary  believes that he or she is
entitled  to greater  or  different  benefits,  the  beneficiary  shall have the
opportunity  to have such claim reviewed by the Company by filing a petition for
review  with the  Company  within  sixty (60) days  after  receipt of the notice
issued by the Company.  Said petition shall state the specific reasons which the
beneficiary  believes  entitle him or her to benefits or to greater or different
benefits.  Within sixty (60) days after  receipt by the Company of the petition,
the Company shall afford the beneficiary (and counsel, if any) an opportunity to
present  his or her  position  to the  Company  orally  or in  writing,  and the
beneficiary (or counsel) shall have the right to review the pertinent documents.
The Company shall notify the  beneficiary  of its decision in writing within the
sixty-day period,  stating specifically the basis of its decision,  written in a
manner  calculated  to  be  understood  by  the  beneficiary  and  the  specific
provisions of the Agreement on which the decision is based.  If,  because of the
need for a hearing, the sixty-day period is not sufficient,  the decision may be
deferred for up to another sixty-day period at the election of the Company,  but
notice of this deferral shall be given to the beneficiary.

                                    Article 5
                           Conversion to Split Dollar

     If the Executive voluntarily  terminates employment after attaining the age
of  sixty-five  (65) and  completes  ten (10) years of  service,  or  terminates
employment  subsequent  to a change of control (as defined  herein),  unless the
Executive  elects  otherwise by written notice to the Company,  the Split Dollar
Insurance Agreement attached as the Addendum to this

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<PAGE>

Agreement shall  automatically take effect as of the Executive's  termination of
employment.  The Company shall take all actions necessary to implement the Split
Dollar Insurance Agreement.

                                    Article 6
                           Amendments and Termination

     Except as provided in Section 1.4 of this Agreement,  the Company may amend
or  terminate  this  Agreement  at any time  prior to the  Executive's  death by
written notice to the Executive.

                                    Article 7
                                  Miscellaneous

     7.1  Exclusive  Agreement/Binding  Effect.  This  Agreement  is the  entire
agreement between the Company and the Executive, written or oral, related to the
Company's  obligation  to pay any survivor  income  benefits to the  Executive's
beneficiaries  or survivors.  This Agreement  supersedes  all prior  agreements,
understandings and negotiations. This Agreement shall bind the Executive and the
Company,  and their  beneficiaries,  survivors,  executors,  administrators  and
transferees.

     7.2 No Guaranty of Employment.  This Agreement is not an employment  policy
or contract.  It does not give the  Executive the right to remain an employee of
the Company,  nor does it interfere  with the  Company's  right to discharge the
Executive.  It also does not require  the  Executive  to remain an employee  nor
interfere with the Executive's right to terminate employment at any time.

     7.3 Tax Withholding. The Company shall withhold any taxes that are required
to be withheld from the benefits provided under this Agreement.

                                       5
<PAGE>

     7.4  Applicable  Law.  The  Agreement  and all  rights  hereunder  shall be
governed by the laws of the Commonwealth of  Pennsylvania,  except to the extent
preempted by the laws of the United States of America.

     7.5 Unfunded Plan. The beneficiary is a general  unsecured  creditor of the
Company for the payment of benefits under this Agreement. The benefits represent
the mere promise by the Company to pay such benefits.  The beneficiary's  rights
to such  benefits  are not  subject in any manner to  anticipation,  alienation,
sale, transfer, assignment,  pledge, encumbrance,  attachment, or garnishment by
creditors.  Any  insurance  on the  Executive's  life is a general  asset of the
Company to which the Executive and designated  beneficiary  have no preferred or
secured claim.

     IN WITNESS  WHEREOF,  the Executive and a duly  authorized  Company officer
have signed this Agreement.

EXECUTIVE:                                       COMPANY:
                                                 COMMUNITY BANKS, INC.

                                                 By: /s/ Eddie L. Dunklebarger
                                                     --------------------------
/s/ Donald F. Holt                              Title Chairman, President & CEO
-------------------
Donald F. Holt

                                       6
<PAGE>

                            SPLIT DOLLAR ADDENDUM TO
                              COMMUNITY BANKS, INC.
                            SURVIVOR INCOME AGREEMENT

     THIS ADDENDUM is part of the Survivor Income Agreement  between,  COMMUNITY
BANKS, INC., Pennsylvania (the "Company"), DONALD F. HOLT (the "Executive").

                                  INTRODUCTION

     Under the terms of the Survivor Income Agreement  between the Executive and
the Company,  effective  29th day of August,  2002, the parties desire to divide
the death  proceeds of a life  insurance  policy on the  Executive's  life if he
voluntarily  terminates  employment  after age 65 and  completes  (10)  years of
service.

                                    Article 1
                               General Definitions

     The following terms shall have the meanings specified:

     1.1 "Insurer" means the insurance company issuing the life insurance policy
on the life of the insured.

     1.2  "Policy"  or  "Policies"  means the  individual  insurance  policy (or
policies)  adopted  by the  Board of  Directors  for  purposes  of  insuring  an
Executive's life under this plan.

                                    Article 2
                           Policy Ownership/Interests

     2.1 Company Ownership. The Company owns the Policy and shall have the right
to exercise  all  incidents  of  ownership  and to receive the Policy  values in
excess of the Executive's interest described in Section 2.2.

                                       7
<PAGE>

     2.2 Executive's  Interest.  The Executive shall have the right to designate
the  beneficiary  of the death proceeds of the Policy to the extent the proceeds
exceed the cash surrender  value of the Policy on the day before the Executive's
death.  The Executive  shall also have the right to elect and change  settlement
options that may be permitted for such beneficiary.

                                    Article 3
                                    Premiums

     3.1 Premium Payment. The Company shall pay any premiums due on the Policy.

     3.2 Imputed  Income.  The Company shall then impute income to the Executive
in an amount equal to the current term rate for the  Executive's  age multiplied
by the  aggregate  death benefit  payable to the  Executive's  beneficiary.  The
"current term rate" is the minimum amount  required to be imputed under Internal
Revenue Notice 2002-8, or any subsequent applicable authority.

     3.3 Cash Payment. If the Executive's termination of employment occurs after
the Normal  Retirement Date, the Company shall annually pay to the Executive the
amount  necessary to pay the federal and state income taxes  attributable to the
imputed  income and to the  additional  cash payments  under this  sentence.  In
calculating the cash payments, the Company shall use the highest marginal income
tax brackets. The cash payments shall continue until the Executive's death.

                                    Article 4
                                   Assignment

     The Executive may assign without  consideration all interests in the Policy
and in this Addendum to any person, entity, or trust.

                                       8
<PAGE>

                                    Article 5
                                     Insurer

     The Insurer  shall be bound only by the terms of the Policy.  Any  payments
the Insurer makes or actions it takes in accordance  with the Policy shall fully
discharge  it from all  claims,  suits and demands of all  persons.  The Insurer
shall  not be bound by or be deemed to have  notice  of the  provisions  of this
Addendum.

                                    Article 6
                          Claims and Review Procedures

     6.1 Claims Procedure. An Executive or beneficiary  ("claimant") who has not
received  benefits  under this Addendum  that he or she believes  should be paid
shall make a claim for such benefits as follows:

          6.1.1  Initiation - Written Claim.  The claimant  initiates a claim by
     submitting to the Company a written claim for the benefits.

          6.1.2 Timing of Company  Response.  The Company  shall respond to such
     claimant  within  90  days  after  receiving  the  claim.  If  the  Company
     determines  that  special   circumstances   require   additional  time  for
     processing  the claim,  the  Company can extend the  response  period by an
     additional 90 days by notifying  the claimant in writing,  prior to the end
     of the initial  90-day  period that an additional  period is required.  The
     notice of extension must set forth the special  circumstances  and the date
     by which the  Company  expects  to render  its  decision.  6.1.3  Notice of
     Decision. If the Company denies part or all of the claim, the Company shall
     notify the claimant in writing of such denial.  The Company shall write the
     notification in a manner  calculated to be understood by the claimant.  The
     notification shall be set forth:

               6.1.3.1 The specific reasons for the denial,

                                       9
<PAGE>

               6.1.3.2 A reference to the specific  provisions  of the Agreement
          on which the denial is based,

               6.1.3.3 A description of any  additional  information or material
          necessary for the claimant to perfect the claim and an  explanation of
          why it is needed,

               6.1.3.4 An explanation of the Agreement's  review  procedures and
          the time limits applicable to such procedures, and

               6.1.3.5  A  statement  of the  claimant's  right to bring a civil
          action  under  ERISA  section  502(a)  following  an  adverse  benefit
          determination on review.

                                    Article 7
                           Amendments and Termination

     The  Company may amend this  Addendum at any time prior to the  Executive's
death by  written  notice to the  Executive.  Either  party may  terminate  this
Addendum  at any time prior to the  Executive's  death by written  notice to the
other party.

     Upon  termination of this  Addendum,  the Executive may purchase the Policy
from the Company for an amount equal to the Policy's cash surrender  value as of
the date of the  termination,  provided the  purchase is completed  within sixty
(60) days of notification by the Company.

                                       10
<PAGE>

                                    Article 8
                                  Miscellaneous

     8.1 Binding Effect. This Addendum shall bind the Executive and the Company,
their beneficiaries,  survivors, executors,  administrators and transferees, and
any Policy beneficiary.

     8.2 No Guaranty of Employment. This Addendum is not an employment policy or
contract.  It does not give the Executive the right to remain an employee of the
Company,  nor does it  interfere  with the  Company's  right  to  discharge  the
Executive.  It also does not require  the  Executive  to remain an employee  nor
interfere with the Executive's right to terminate employment at any time.

     8.3 Applicable Law. The Addendum and all rights hereunder shall be governed
by and  construed  according to the laws of the  Commonwealth  of  Pennsylvania,
except to the extent preempted by the laws of the United States of America.

     8.4 Administration. The Company shall have powers which are
necessary to administer this plan, including but not limited to:

          (a)  Interpreting  the  provisions of the Agreement and Addendum;

          (b)  Establishing  and  revising  the  method  of  accounting  for the
     Agreement and Addendum;

          (c) Maintaining a record of benefit payments; and

          (d)  Establishing   rules  and  prescribing  any  forms  necessary  or
     desirable to administer the Agreement and Addendum.

     8.5  Named  Fiduciary.  The  Company  shall  be  named  fiduciary  and plan
administrator  under this Plan. It may delegate to others certain aspects of the
management and

                                       11
<PAGE>

operational   responsibilities   including  the  service  of  advisors  and  the
delegation of ministerial duties to qualified individuals.

     The parties'  signatures  on the Survivor  Income  Agreement  witness their
agreement to the terms of this Addendum.

                                       12Exhibit 10(b)

Exhibit 10(b)

ANADARKO PETROLEUM CORPORATION

1999 STOCK INCENTIVE PLAN

PERFORMANCE SHARE AGREEMENT

 

        THIS AGREEMENT between Anadarko Petroleum Corporation (the "Company") and James. T. Hackett ("Employee").

W I T N E S S E T H:

ARTICLE 1

GRANT

         1.1     Grant.  The Company hereby agrees to grant and issue to Employee pursuant to the Company's 1999 Stock Incentive Plan (the "Plan") and subject further to the terms and conditions herein set forth, shares of the $0.10 par value common stock of the Company ("Performance Shares").  The Performance Shares will be issued as hereinafter provided in Employee's name upon the Company's achievement of pre-determined objectives for a specified performance period.  In no event shall Employee be issued more than 160,000 Performance Shares pursuant to this Agreement.

ARTICLE 2

PRE-DETERMINED PROVISIONS

         2.1     Performance Periods. Pursuant to this Agreement, there will be two separate performance periods.  The two-year period beginning on December 3, 2003 and ending December 2, 2005 will be the first performance period (the "Performance Period 1") and the four-year period beginning on December 3, 2003 and ending December 2, 2007 will be the second performance period (the "Performance Period 2"), collectively the "Performance Period(s)".

         2.2     Performance Awards.  A target of 40,000 Performance Shares, up to a maximum of 80,000 Performance Shares, may be earned by and issued to Employee for Performance Period 1 and a target of 40,000 Performance Shares, up to a maximum of 80,000 Performance Shares, may be earned by and issued to Employee for Performance Period 2.  In no event may more than 160,000 Performance Shares be earned by or issued to Employee for the two Performance Periods.

         2.3     Peer Companies.  For the Performance Periods, the following companies are the peer companies ("Peer Companies") to be used in the award determination.  Any Peer Company that ceases to be a publicly traded entity on a recognized stock exchange during the Performance Period will be removed from the Peer Company list.  The Compensation and Benefits Committee (the "Committee") may evaluate for inclusion or exclusion any Peer Company that merges with or is acquired by another Peer Company during the Performance Period.  No companies may be added to the list during the Performance Period.

        Amerada Hess Corporation

        Apache Corporation

        Burlington Resource Inc.

        ConocoPhillips

        Devon Energy Corporation

        EOG Resources Inc.

        Kerr-McGee Corporation

        Marathon Oil Corporation

        Noble Energy Inc.

        Occidental Petroleum Corporation

        Pioneer Natural Resources

        Unocal Corporation

    

         2.4     Performance Objectives.  The number of Performance Shares to be earned by and issued to Employee for a Performance Period will be determined at the end of such Performance Period by comparing the Company's total shareholder return ("TSR") over the Performance Period to the TSRs of the Peer Companies' for the same Performance Period.  For purposes of such comparison, TSR will be calculated as follows:

Average per share Stock Price for the last 60 Business Days of the Performance Period

minus

Average per share Stock Price for the 60 Business Days preceding the beginning of the Performance Period

plus

Dividends (cash or stock) paid per share over the Performance Period

the above total of which is divided by

Average per share Stock Price for the 60 Business Days preceding the beginning of the Performance Period

          Stock Price is defined as the average of the high and low prices for the day and will be adjusted for stock splits, spin-offs, mergers or any other corporate securities transaction affecting Stock Price, as determined by the Committee.

          Business Days are defined as any days the New York Stock Exchange is open and shares of stock are actively traded.

         2.5     Award Determination.  At the end of each Performance Period, the Peer Companies and the Company shall be ranked together based on their TSR for the Performance Period from the highest TSR being number 1 to the lowest TSR being the number of Peer Companies, including the Company, remaining in the group at the end of the Performance Period.  Based on the Company's relative TSR rank amongst the Peer Companies for the Performance Period, Employee will be issued Performance Shares as determined by the Company's percentile rank as follows:

                (i)     Performance Period 1.

                         (A)     For Performance Period 1, if the Company's relative TSR rank is equal to or above the 50th percentile of the Peer Companies, Employee will have earned and the Company will issue to Employee a number of Performance Shares equal to 40,000 multiplied by two times the Company's percentile rank as determined under the matrices of Exhibit A.  If the Company's relative TSR rank is equal to or greater than the 25th percentile but less than the 50th percentile of the Peer Companies, Employee will have earned and the Company will issue to Employee a number of Performance Shares equal to 40,000 multiplied by one times the Company's percentile rank as determined under the matrices of Exhibit A.

                         (B)     For Performance Period 1, if the Company's relative TSR rank is equal to or greater than the 25th percentile and the Company's TSR is less than the TSR of the Peer Company immediately above the Company in the relative ranking by not more than one percentage point, then the payouts for both rankings (the Company's ranking, as determined under the matrices of Exhibit A, and the ranking of the Peer Company immediately above the Company in the relative ranking, as determined under the matrices of Exhibit A) will be averaged to determine the number of Performance Shares which will be earned by and issued to the Employee.

                         (C)     For Performance Period 1, if the Company's relative TSR rank falls directly below the relative TSR rank of a Peer Company whose rank represents the first payout level for Performance Period 1 in which the number of shares earned is greater than zero (as depicted in the matrices of Exhibit A, based on the number of Peer Companies included under Section 2.3 of this Agreement) and the Company's TSR is less than the TSR of such Peer Company by not more than five percentage points, then the Company will issue to Employee a number of Performance Shares equal to 40,000 multiplied by the percentile rank of the first payout level.  Such award may be reduced by the Committee, in its discretion, but in no event be increased above the first payout level.

               (ii)     Performance Period 2.

 

                         (A)     For Performance Period 2, if the Company's relative TSR rank is equal to or above the 50th percentile of the Peer Companies, Employee will have earned and the Company will issue to Employee a number of Performance Shares equal to 40,000 multiplied by two times the Company's percentile rank as determined under the matrices of Exhibit B.

                         (B)     For Performance Period 2, if the Company's relative TSR rank is equal to or greater than the 50th percentile and the Company's TSR is less than the TSR of the Peer Company immediately above the Company in the relative ranking by not more than one percentage point, then the payouts for both rankings (the Company's ranking, as determined under the matrices of Exhibit B, and the ranking of the Peer Company immediately above the Company in the relative ranking, as determined under the matrices of Exhibit B) will be averaged to determine the number of Performance Shares which will be earned by and issued to the Employee.

                         (C)     For Performance Period 2, if the Company's relative TSR rank falls directly below the relative TSR rank of a Peer Company whose rank represents the first payout level for Performance Period 2 in which the number of shares earned is greater than zero (as depicted in the matrices of Exhibit B, based on the number of Peer Companies included under Section 2.3 of this Agreement) and the Company's TSR is less than the TSR of such Peer Company by not more than five percentage points, then the Company will issue to Employee a number of Performance Shares equal to 40,000 multiplied by two times the percentile rank of the first payout level.  Such award may be reduced by the Committee, in its discretion, but in no event be increased above the first payout level.

     Any Performance Shares which are not earned in a Performance Period cannot be carried over to be re-earned in a subsequent Performance Period.

         2.6     Payout of Award.  Performance Shares earned for a Performance Period will only be issued to Employee following the Committee's formal review and certification of the actual TSR performance results for the Performance Period. 

 

         2.7     Termination without Cause or Good Reason.  If Employee's employment is terminated in a Without Cause Termination or a Good Reason Termination, as defined in Article 2, Sections 2.2 and 2.3 of Employee's Employment Agreement with the Company, dated February 5, 2004, before the end of either or both of the Performance Period(s), the Company will issue to Employee a pro rata number of Performance Shares, at target level, for the incomplete Performance Period(s).  For purposes of the foregoing, the parties to this Agreement concur that such pro rata number of Performance Shares will be determined as follows:

                 (i)     If the employment termination occurs in Performance Period 1, the Company shall issue to Employee the sum of A) for Performance Period 1, Performance Shares equal to 40,000 multiplied by a fraction, the numerator of which is the total number of completed and partial calendar months of employment (rounded to the next whole month) with the Company and the denominator of which is 24; and B) for Performance Period 2, Performance Shares equal to 40,000 multiplied by a fraction, the numerator of which is the total number of completed and partial calendar months of employment (rounded to the next whole month) with the Company and the denominator of which is 48.  (See Exhibit C).

                 (ii)     If the employment termination occurs following the completion of Performance Period 1 (i.e. on or after December 3, 2005), the Company shall issue to Employee Performance Shares equal to 40,000 multiplied by a fraction, the numerator of which is the total number of completed and partial calendar months of employment (rounded to the next whole month) with the Company and the denominator of which is 48.  (See Exhibit C).

         2.8     Change of Control.  If a Change of Control, as defined in the Plan, occurs during either or both of the Performance Period(s), the Company shall issue to Employee Performance Shares for the incomplete Performance Period(s) as follows:

                 (i)     If the Change of Control occurs in Performance Period 1, the Company shall issue to Employee 160,000 Performance Shares; and

                 (ii)     If the Change of Control occurs following the completion of Performance Period 1 (i.e. on or after December 3, 2005), the Company shall issue to Employee 80,000 Performance Shares. 

         2.9     Death or Disability.  If Employee's employment is terminated by reason of either death or disability pursuant to either of Section 2.2(i) or 2.2(ii) of Employee's Employment Agreement with the Company, dated February 5, 2004, before the end of either or both of the Performance Period(s), the Company will issue to Employee a pro rata number of Performance Shares, at target level, for the incomplete Performance Period(s).  For purposes of the foregoing, the parties to this Agreement concur that such pro rata number of Performance Shares will be determined as follows:

                 (i)     If the employment termination occurs in Performance Period 1, the Company shall issue to Employee the sum of A) for Performance Period 1, Performance Shares equal to 40,000 multiplied by a fraction, the numerator of which is the total number of completed and partial calendar months of employment (rounded to the next whole month) with the Company and the denominator of which is 24; and B) for Performance Period 2, Performance Shares equal to 40,000 multiplied by a fraction, the numerator of which is the total number of completed and partial calendar months of employment (rounded to the next whole month) with the Company and the denominator of which is 48.  (See Exhibit C.)

                 (ii)     If the employment termination occurs following the completion of Performance Period 1 (i.e. on or after December 3, 2005), the Company shall issue to Employee Performance Shares equal to 40,000 multiplied by a fraction, the numerator of which is the total number of completed and partial calendar months of employment (rounded to the next whole month) with the Company and the denominator of which is 48.  (See Exhibit C).

                Notwithstanding the foregoing, the Committee may, in its sole discretion, increase the number of Performance Shares to be transferred to Employee pursuant to this Section 2.9 up to a total of Performance Shares equal to 160,000 if such termination occurs in Performance Period 1 and a maximum of 80,000 Performance Shares if such termination occurs following the completion of Performance Period 1 (i.e. on or after December 3, 2005).

ARTICLE 3

MISCELLANEOUS

         3.1     Tax Withholding.  Employee may be required to pay to the Company, and the Company shall have the right and is hereby authorized to withhold from any payment made under this Agreement or from any other compensation or other amount owing to Employee, the amount (in cash, Performance Shares, other securities, other Awards or other property) of any applicable withholding taxes due in connection to any Performance Shares granted hereunder and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes.  In the case of payments made hereunder in the form of Performance Shares, at the Committee's discretion Employee may be required to pay to the Company the amount of any taxes required to be withheld with respect to such Shares or, in lieu thereof, the Company shall have the right to retain (or Employee may be offered the opportunity to elect to tender in accordance with rules established by the Committee) the number of Performance Shares whose aggregate Fair Market Value equals the amount required to be withheld.

         3.2     No Assignment.  The right of the Employee or any other person claiming under the Employee to payments, issuance of Performance Shares or other benefits under this Agreement may not be assigned, transferred, pledged, anticipated, commuted or encumbered nor shall said payments, Performance Share issuance rights or other benefits be subject to seizure for payments of any debts or judgments of Employee or any person claiming under Employee or be transferable by operation of law in advance of any payment or issuance of Performance Shares hereunder.  Notwithstanding the foregoing there are no restrictions on the assignment, alienation, pledge, attachment, sale, transfer or encumbrance of any Performance Shares that have been issued to Employee.

         3.3     Ownership and Possession.  Employee shall not have any rights as a stockholder with respect to any Performance Shares granted hereunder.

         3.4     Binding Effect.  This Agreement shall be binding upon and inure to the benefit of any successor to the Company and all persons lawfully claiming under Employee.

         3.5     No Rights to Continued Employment.  Neither this Agreement nor the Plan shall be construed as giving Employee any right to continue in the employ of the Company or any of its Affiliates.

         3.6     Governing Law.  This Agreement and the legal relations between the parties shall be governed by and construed in accordance with the laws of the State of Texas and applicable Federal law.

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by an officer thereunder duly authorized, and Employee has executed this Agreement.

               ANADARKO PETROLEUM CORPORATION

               By: _____________________________________                                     

               Name:  Richard A. Lewis                                                     Date

               Title:   Vice President, Human Resources

 

               EMPLOYEE

                _________________________________________                                    

                James T. Hackett                                                               Date

 

 

 

 

 

	
EXHIBIT A

	
	
	
	
	
	
	
	
	
	
	
	
	
	

	
Example TSR Performance Matrix for Performance Period 1

	
December 3, 2003 - December 2, 2005

	
For 13 companies:
	
	
	
	
	
	
	
	
	
	
	
	

	
Anadarko Relative TSR Rank
	
1
	
2
	
3
	
4
	
5
	
6
	
7
	
8
	
9
	
10*
	
11*
	
12
	
13

	
Percentile Rank
	
100%
	
92%
	
83%
	
75%
	
67%
	
58%
	
50%
	
42%
	
33%
	
25%
	
17%
	
8%
	
0%

	
Payout as % of Target
	
200%
	
184%
	
166%
	
150%
	
134%
	
116%
	
100%
	
42%
	
33%
	
25%
	
0%
	
0%
	
0%

	
Payout No. Shares
	
80,000
	
73,600
	
66,400
	
60,000
	
53,600
	
46,400
	
40,000
	
16,800
	
13,200
	
10,000
	
0
	
0
	
0

	
* If Anadarko's Relative TSR rank is 11 and Anadarko's actual TSR is within 5% of the TSR of the company whose Relative TSR rank is 10, the Employee will receive a number of Performance Shares equal to 40,000 multiplied by 25%, provided, however, that the Committee may reduce such payout to Employee, in its discretion.

	
For 12 companies:
	
	
	
	
	
	
	
	
	
	
	

	
Anadarko Relative TSR Rank
	
1
	
2
	
3
	
4
	
5
	
6
	
7
	
8
	
9*
	
10*
	
11
	
12

	
Percentile Rank
	
100%
	
91%
	
82%
	
73%
	
64%
	
55%
	
46%
	
36%
	
27%
	
18%
	
9%
	
0%

	
Payout as % of Target
	
200%
	
182%
	
164%
	
146%
	
128%
	
110%
	
46%
	
36%
	
27%
	
0%
	
0%
	
0%

	
Payout No. Shares
	
80,000
	
72,800
	
65,600
	
58,400
	
51,200
	
44,000
	
18,400
	
14,400
	
10,800
	
0
	
0
	
0

	
* If Anadarko's Relative TSR rank is 10 and Anadarko's actual TSR is within 5% of the TSR of the company whose Relative TSR rank is 9, the Employee will receive a number of Performance Shares equal to 40,000 multiplied by 27%, provided, however, that the Committee may reduce such payout to Employee, in its discretion.

	
For 11 companies:
	
	
	
	
	
	
	
	
	
	

	
Anadarko Relative TSR Rank
	
1
	
2
	
3
	
4
	
5
	
6
	
7
	
8*
	
9*
	
10
	
11

	
Percentile Rank
	
100%
	
90%
	
80%
	
70%
	
60%
	
50%
	
40%
	
30%
	
20%
	
10%
	
0%

	
Payout as % of Target
	
200%
	
180%
	
160%
	
140%
	
120%
	
100%
	
40%
	
30%
	
0%
	
0%
	
0%

	
Payout No. Shares
	
80,000
	
72,000
	
64,000
	
56,000
	
48,000
	
40,000
	
16,000
	
12,000
	
0
	
0
	
0

	
* If Anadarko's Relative TSR rank is 9 and Anadarko's actual TSR is within 5% of the TSR of the company whose Relative TSR rank is 8, the Employee will receive a number of Performance Shares equal to 40,000 multiplied by 30%, provided, however, that the Committee may reduce such payout to Employee, in its discretion.

	
For 10 companies:
	
	
	
	
	
	
	
	
	

	
Anadarko Relative TSR Rank
	
1
	
2
	
3
	
4
	
5
	
6
	
7*
	
8*
	
9
	
10

	
Percentile Rank
	
100%
	
89%
	
78%
	
67%
	
56%
	
45%
	
33%
	
22%
	
11%
	
0%

	
Payout as % of Target
	
200%
	
178%
	
156%
	
134%
	
112%
	
45%
	
33%
	
0%
	
0%
	
0%

	
Payout No. Shares
	
80,000
	
71,200
	
62,400
	
53,600
	
44,800
	
18,000
	
13,200
	
0
	
0
	
0

	
* If Anadarko's Relative TSR rank is 8 and Anadarko's actual TSR is within 5% of the TSR of the company whose Relative TSR rank is 7, the Employee will receive a number of Performance Shares equal to 40,000 multiplied by 33%, provided, however, that the Committee may reduce such payout to Employee, in its discretion.

	
For 9 companies:
	
	
	
	
	
	
	
	

	
Anadarko Relative TSR Rank
	
1
	
2
	
3
	
4
	
5
	
6
	
7*
	
8*
	
9

	
Percentile Rank
	
100%
	
88%
	
75%
	
63%
	
50%
	
38%
	
25%
	
13%
	
0%

	
Payout as % of Target
	
200%
	
176%
	
150%
	
126%
	
100%
	
38%
	
25%
	
0%
	
0%

	
Payout No. Shares
	
80,000
	
70,400
	
60,000
	
50,400
	
40,000
	
15,200
	
10,000
	
0
	
0

	
* If Anadarko's Relative TSR rank is 8 and Anadarko's actual TSR is within 5% of the TSR of the company whose Relative TSR rank is 7, the Employee will receive a number of Performance Shares equal to 40,000 multiplied by 25%, provided, however, that the Committee may reduce such payout to Employee, in its discretion.

	
For 8 companies:
	
	
	
	
	
	
	

	
Anadarko Relative TSR Rank
	
1
	
2
	
3
	
4
	
5
	
6*
	
7*
	
8

	
Percentile Rank
	
100%
	
86%
	
72%
	
57%
	
43%
	
29%
	
14%
	
0%

	
Payout as % of Target
	
200%
	
172%
	
144%
	
114%
	
43%
	
29%
	
0%
	
0%

	
Payout No. Shares
	
80,000
	
68,800
	
57,600
	
45,600
	
17,200
	
11,600
	
0
	
0

	
* If Anadarko's Relative TSR rank is 7 and Anadarko's actual TSR is within 5% of the TSR of the company whose Relative TSR rank is 6, the Employee will receive a number of Performance Shares equal to 40,000 multiplied by 29%, provided, however, that the Committee may reduce such payout to Employee, in its discretion.

	
For 7 companies:
	
	
	
	
	
	

	
Anadarko Relative TSR Rank
	
1
	
2
	
3
	
4
	
5*
	
6*
	
7

	
Percentile Rank
	
100%
	
83%
	
67%
	
50%
	
33%
	
17%
	
0%

	
Payout as % of Target
	
200%
	
166%
	
134%
	
100%
	
33%
	
0%
	
0%

	
Payout No. Shares
	
80,000
	
66,400
	
53,600
	
40,000
	
13,200
	
0
	
0

	
* If Anadarko's Relative TSR rank is 6 and Anadarko's actual TSR is within 5% of the TSR of the company whose Relative TSR rank is 5, the Employee will receive a number of Performance Shares equal to 40,000 multiplied by 33%, provided, however, that the Committee may reduce such payout to Employee, in its discretion.

	
For 6 companies:
	
	
	
	
	

	
Anadarko Relative TSR Rank
	
1
	
2
	
3
	
4*
	
5*
	
6

	
Percentile Rank
	
100%
	
80%
	
60%
	
40%
	
20%
	
0%

	
Payout as % of Target
	
200%
	
160%
	
120%
	
80%
	
0%
	
0%

	
Payout No. Shares
	
80,000
	
64,000
	
48,000
	
32,000
	
0
	
0

	
* If Anadarko's Relative TSR rank is 5 and Anadarko's actual TSR is within 5% of the TSR of the company whose Relative TSR rank is 4, the Employee will receive a number of Performance Shares equal to 40,000 multiplied by 80%, provided, however, that the Committee may reduce such payout to Employee, in its discretion.

	
In the event there are less than six companies remaining at the end of the performance period, a matrix will be developed in the same format as above to determine relative payout, if any, under the plan.  Based on the number of companies remaining, inclusive of Anadarko, the "Percentile Rank" will be calculated (using recognized mathematical formulas) for each eligible company position.  The "Payout as % of Target" will be based on the "Percentile Rank" and determined as follows: 1) if the "Percentile Rank" is equal to or greater than 50%, the "Payout as % of Target" will be equal to the "Percentile Rank" times 2; 2) if the "Percentile Rank" is less than 50% but equal to or greater than 25%, the "Payout as % of Target" will be equal to "Percentile Rank" times 1; and 3) if the "Percentile Rank" is less than 25%, the "Payout as % of Target" will be equal  to 0%.  The "Payout No. Shares" will be calculated by multiplying the "Payout as % of Target" times 40,000 shares. 

 

 

	
EXHIBIT B

	
Example TSR Performance Matrix for Performance Period 2

	
December 3, 2003 - December 2, 2007

	
For 13 companies:
	
	
	
	
	
	
	
	
	
	
	
	

	
Anadarko Relative TSR Rank
	
1
	
2
	
3
	
4
	
5
	
6
	
7*
	
8*
	
9
	
10
	
11
	
12
	
13

	
Percentile Rank
	
100%
	
92%
	
83%
	
75%
	
67%
	
58%
	
50%
	
42%
	
33%
	
25%
	
17%
	
8%
	
0%

	
Payout as % of Target
	
200%
	
184%
	
166%
	
150%
	
134%
	
116%
	
100%
	
0%
	
0%
	
0%
	
0%
	
0%
	
0%

	
Payout No. Shares
	
80,000
	
73,600
	
66,400
	
60,000
	
53,600
	
46,400
	
40,000
	
0
	
0
	
0
	
0
	
0
	
0

	
* If Anadarko's Relative TSR rank is 8 and Anadarko's actual TSR is within 5% of the TSR of the company whose Relative TSR rank is 7, the Employee will receive a number of Performance Shares equal to 40,000 multiplied by 100%, provided, however, that the Committee may reduce such payout to Employee, in its discretion.

	
For 12 companies:
	
	
	
	
	
	
	
	
	
	
	
	

	
Anadarko Relative TSR Rank
	
1
	
2
	
3
	
4
	
5
	
6*
	
7*
	
8
	
9
	
10
	
11
	
12
	

	
Percentile Rank
	
100%
	
91%
	
82%
	
73%
	
64%
	
55%
	
46%
	
36%
	
27%
	
18%
	
9%
	
0%
	

	
Payout as % of Target
	
200%
	
182%
	
164%
	
146%
	
128%
	
110%
	
0%
	
0%
	
0%
	
0%
	
0%
	
0%
	

	
Payout No. Shares
	
80,000
	
72,800
	
65,600
	
58,400
	
51,200
	
44,000
	
0
	
0
	
0
	
0
	
0
	
0
	

	
* If Anadarko's Relative TSR rank is 7 and Anadarko's actual TSR is within 5% of the TSR of the company whose Relative TSR rank is 6, the Employee will receive a number of Performance Shares equal to 40,000 multiplied by 110%, provided, however, that the Committee may reduce such payout to Employee, in its discretion.

	
For 11 companies:
	
	
	
	
	
	
	
	
	
	
	
	

	
Anadarko Relative TSR Rank
	
1
	
2
	
3
	
4
	
5
	
6*
	
7*
	
8
	
9
	
10
	
11
	
	

	
Percentile Rank
	
100%
	
90%
	
80%
	
70%
	
60%
	
50%
	
40%
	
30%
	
20%
	
10%
	
0%
	
	

	
Payout as % of Target
	
200%
	
180%
	
160%
	
140%
	
120%
	
100%
	
0%
	
0%
	
0%
	
0%
	
0%
	
	

	
Payout No. Shares
	
80,000
	
72,000
	
64,000
	
56,000
	
48,000
	
40,000
	
0
	
0
	
0
	
0
	
0
	
	

	
* If Anadarko's Relative TSR rank is 7 and Anadarko's actual TSR is within 5% of the TSR of the company whose Relative TSR rank is 6, the Employee will receive a number of Performance Shares equal to 40,000 multiplied by 100%, provided, however, that the Committee may reduce such payout to Employee, in its discretion.

	
For 10 companies:
	
	
	
	
	
	
	
	
	
	
	
	

	
Anadarko Relative TSR Rank
	
1
	
2
	
3
	
4
	
5*
	
6*
	
7
	
8
	
9
	
10
	
	
	

	
Percentile Rank
	
100%
	
89%
	
78%
	
67%
	
56%
	
45%
	
33%
	
22%
	
11%
	
0%
	
	
	

	
Payout as % of Target
	
200%
	
178%
	
156%
	
134%
	
112%
	
0%
	
0%
	
0%
	
0%
	
0%
	
	
	

	
Payout No. Shares
	
80,000
	
71,200
	
62,400
	
53,600
	
44,800
	
0
	
0
	
0
	
0
	
0
	
	
	

	
* If Anadarko's Relative TSR rank is 6 and Anadarko's actual TSR is within 5% of the TSR of the company whose Relative TSR rank is 5, the Employee will receive a number of Performance Shares equal to 40,000 multiplied by 112%, provided, however, that the Committee may reduce such payout to Employee, in its discretion.

	
For 9 companies:
	
	
	
	
	
	
	
	
	
	
	
	

	
Anadarko Relative TSR Rank
	
1
	
2
	
3
	
4
	
5*
	
6*
	
7
	
8
	
9
	
	
	
	

	
Percentile Rank
	
100%
	
88%
	
75%
	
63%
	
50%
	
38%
	
25%
	
13%
	
0%
	
	
	
	

	
Payout as % of Target
	
200%
	
176%
	
150%
	
126%
	
100%
	
0%
	
0%
	
0%
	
0%
	
	
	
	

	
Payout No. Shares
	
80,000
	
70,400
	
60,000
	
50,400
	
40,000
	
0
	
0
	
0
	
0
	
	
	
	

	
	
	
	
	
	
	
	
	
	
	
	
	
	

	
* If Anadarko's Relative TSR rank is 6 and Anadarko's actual TSR is within 5% of the TSR of the company whose Relative TSR rank is 5, the Employee will receive a number of Performance Shares equal to 40,000 multiplied by 100%, provided, however, that the Committee may reduce such payout to Employee, in its discretion.

	
For 8 companies:
	
	
	
	
	
	
	
	
	
	
	
	

	
Anadarko Relative TSR Rank
	
1
	
2
	
3
	
4*
	
5*
	
6
	
7
	
8
	
	
	
	
	

	
Percentile Rank
	
100%
	
86%
	
72%
	
57%
	
43%
	
29%
	
14%
	
0%
	
	
	
	
	

	
Payout as % of Target
	
200%
	
172%
	
144%
	
114%
	
0%
	
0%
	
0%
	
0%
	
	
	
	
	

	
Payout No. Shares
	
80,000
	
68,800
	
57,600
	
45,600
	
0
	
0
	
0
	
0
	
	
	
	
	

	
* If Anadarko's Relative TSR rank is 5 and Anadarko's actual TSR is within 5% of the TSR of the company whose Relative TSR rank is 4, the Employee will receive a number of Performance Shares equal to 40,000 multiplied by 114%, provided, however, that the Committee may reduce such payout to Employee, in its discretion.

	
For 7 companies:
	
	
	
	
	
	
	
	
	
	
	
	

	
Anadarko Relative TSR Rank
	
1
	
2
	
3
	
4*
	
5*
	
6
	
7
	
 
	
	
	
	
	

	
Percentile Rank
	
100%
	
83%
	
67%
	
50%
	
33%
	
17%
	
0%
	
 
	
	
	
	
	

	
Payout as % of Target
	
200%
	
166%
	
134%
	
100%
	
0%
	
0%
	
0%
	
 
	
	
	
	
	

	
Payout No. Shares
	
80,000
	
66,400
	
53,600
	
40,000
	
0
	
0
	
0
	
 
	
	
	
	
	

	
* If Anadarko's Relative TSR rank is 5 and Anadarko's actual TSR is within 5% of the TSR of the company whose Relative TSR rank is 4, the Employee will receive a number of Performance Shares equal to 40,000 multiplied by 100%, provided, however, that the Committee may reduce such payout to Employee, in its discretion.

	
For 6 companies:
	
	
	
	
	
	
	
	
	
	
	
	

	
Anadarko Relative TSR Rank
	
1
	
2
	
3*
	
4*
	
5
	
6
	
 
	
	
	
	
	
	

	
Percentile Rank
	
100%
	
80%
	
60%
	
40%
	
20%
	
0%
	
 
	
	
	
	
	
	

	
Payout as % of Target
	
200%
	
160%
	
120%
	
0%
	
0%
	
0%
	
 
	
	
	
	
	
	

	
Payout No. Shares
	
80,000
	
64,000
	
48,000
	
0
	
0
	
0
	
 
	
	
	
	
	
	

	
* If Anadarko's Relative TSR rank is 4 and Anadarko's actual TSR is within 5% of the TSR of the company whose Relative TSR rank is 3, the Employee will receive a number of Performance Shares equal to 40,000 multiplied by 120%, provided, however, that the Committee may reduce such payout to Employee, in its discretion.

	
	
	
	
	
	
	
	
	
	
	
	
	
	

	
In the event there are less than six companies remaining at the end of the performance period, a matrix will be developed in the same format as above to determine relative payout, if any, under the plan.  Based on the number of companies remaining, inclusive of Anadarko, the "Percentile Rank" will be calculated (using recognized mathematical formulas) for each eligible company position.  The "Payout as % of Target" will be based on the "Percentile Rank" and determined as follows: 1) if the "Percentile Rank" is equal to or greater than 50%, the "Payout as % of Target" will be equal to the "Percentile Rank" times 2; and 2) if the "Percentile Rank" is less than 50%, the "Payout as % of Target" will be equal to 0%.  The "Payout No. Shares" will be calculated by multiplying the "Payout as % of Target" times 40,000 shares. 

 

 

	
EXHIBIT C

	
	
	
	

	
Sample Calculations of Prorata Number of Performance Shares

	
For a "Without Cause Termination", a "Good Reason Termination", Death or Disability

	
(refer to Sections 2.7 and 2.9)

	
	
	
	

	
Employee Terminates during Performance Period 1 on December 20, 2004

	
	
	
	

	
Performance Period
	
Target Shares
	
Fraction
	
Prorata # of Performance Shares Issued

	
Performance Period 1
	
40,000 
	
0.54 
	
21,600 

	
Calculation Explanation
	
Target Shares
	
13 months / 24 months (rounded to 2 decimals)
	
40,000 * .54 = 21,600

	
 
	
 
	
 
	
 

	
Performance Period 2
	
40,000 
	
0.27 
	
10,800 

	
Calculation Explanation
	
Target Shares
	
13 months / 48 months (rounded to 2 decimals)
	
40,000 * .27 = 10,800

	
 
	
 
	
 
	
 

	
Total Prorata Performance Shares
	
 
	
32,400 

	
	
	
	

	
Employee Terminates during Performance Period 2 on June 15, 2006

	
	
	
	

	
Performance Period
	
Target Shares
	
Fraction
	
Prorata # of Performance Shares Issued

	
Performance Period 1
	
n/a
	
n/a
	
n/a

	
Calculation Explanation
	
-
	
-
	
-

	
 
	
 
	
 
	
 

	
Performance Period 2
	
40,000 
	
0.65 
	
26,000 

	
Calculation Explanation
	
Target Shares
	
31 months / 48 months (rounded to 2 decimals)
	
40,000 * .65 = 26,000

	
 
	
 
	
 
	
 

	
Total Prorata Performance Shares
	
 
	
 
	
26,000

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