Exhibit 10.13
Amended by the Board of Directors August 26, 2002
ANNUAL INCENTIVE COMPENSATION PLAN
OF
PHILLIPS PETROLEUM COMPANY
SECTION 1. PURPOSE AND ESTABLISHMENT
The purpose of the Annual Incentive Compensation Plan of Phillips Petroleum
Company (the "Plan") is to benefit the shareholders of Phillips Petroleum
Company by encouraging high levels of performance by individuals whose
performance is a key element in achieving the Company's continued financial and
operational success and to enable the Company to recruit, reward, retain and
motivate all employees to work as a team to achieve the Company's mission of
being the top performer in each of our businesses through the recognition and
reward of such performance on an annual basis when measured against
predetermined annual performance objectives.
The Annual Incentive Compensation Plan of Phillips Petroleum Company is
established effective January 1, 1993.
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SECTION 2. DEFINITIONS
As used in this Plan:
(a) "AWARD" means the grant of cash or any other form of Share based or
non-Share based Award granted pursuant to this Plan.
(b) "AWARD AGREEMENT" means a written agreement between the Company and
a Participant that sets forth the terms, conditions and any
limitations applicable to an Award granted to the Participant.
(c) "BENEFICIARY" means a person or persons designated by a Participant
to receive, in the event of death, any unpaid portion of an Award
held by the Participant. Any Participant may, subject to such
limitations as may be prescribed by the Committee, designate one or
more persons primarily or contingently as beneficiaries in writing
upon forms supplied by and delivered to the Company, and may revoke
such designations in writing. If a Participant fails effectively to
designate a beneficiary, then the Award will be paid in the
following order of priority:
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Surviving spouse
Surviving children in equal shares
To the estate of the Participant.
(d) "BOARD" means the Board of Directors of Phillips Petroleum Company.
(e) "CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, or any successor statute.
(f) "COMMITTEE" means the Compensation Committee of the Board of
ConocoPhillips or any successor committee with substantially the
same responsibilities.
(g) "COMPANY" means Phillips Petroleum Company, a Delaware corporation,
or any successor corporation.
(h) "DISABILITY" shall mean the inability, in the opinion of the
Company's group life insurance carrier, of a Participant, because of
an injury or sickness, to work at a reasonable occupation which is
available with the Company or at any gainful occupation which the
Participant is or
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may become fitted.
(i) "EMPLOYEE" means any individual who is a salaried employee of the
Company or any Participating Subsidiary.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
and in effect from time to time, or any successor statute.
(k) "FAIR MARKET VALUE PER SHARE" in reference to the common stock of
the Company means
(i) the average of the reported highest and lowest sale prices per
share of such stock as reported on the composite tape of the
New York Stock Exchange transactions (or such other reporting
system as shall be selected by the Committee), on the relevant
date; or
(ii) in the absence of reported sales on that date, the average of
the reported highest and lowest sales prices per share on the
last previous day for which there was a reported sale.
(l) "PARTICIPANT" means any Employee who has been designated
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by the Committee to be eligible for an Award under this Plan.
(m) "PARTICIPATING SUBSIDIARY" means 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, and one or more employees of which are
Participants, or are eligible for Awards pursuant to the Plan.
(n) "PERFORMANCE MEASURES" means the criteria which the Committee will
use to evaluate the Company's performance.
(o) "PLAN YEAR" means calendar year.
(p) "RESTRICTED STOCK" means shares of Stock which have certain
restrictions attached to the ownership thereof.
(q) "RETIREMENT" means termination of employment with the Company or a
Participating Subsidiary which qualifies the Employee for Retirement
as that term is defined in the Retirement Income Plan of Phillips
Petroleum Company or of the applicable retirement plan of a
Participating Subsidiary.
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(r) "RULE 16B-3" has the meaning described in Section 12(c).
(s) "SECTION 16" means Section 16 of the Exchange Act or any successor
regulation and the rules promulgated thereunder as they may be
amended from time to time.
(t) "STOCK" mean shares of common stock of ConocoPhillips, par value
$.01.
(u) "STOCK UNIT" means the right to receive a payment equivalent in
value to one share of Stock on the date of payment.
SECTION 3. ELIGIBILITY
Awards may be granted only to Employees who are designated as Participants from
time to time by the Committee. The Committee shall determine which Employees
shall be Participants, the types of Awards to be made to Participants and the
terms, conditions and limitations applicable to the Awards.
SECTION 4. PERFORMANCE MEASURES
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As soon as practicable after the beginning of the year the Committee shall
determine the Performance Measures for the Plan Year and shall advise
Participants of the Performance Measures. The Performance Measures may include
corporate, group, business unit and Staff objectives. The objectives may include
a combination of financial and/or operational criteria and may be measured
solely against internal targets or in comparison to the performance of an
industry peer group or both. The Committee shall establish a threshold
Performance Measure applicable to overall financial performance of the Company
which must be achieved before Awards for the Plan Year will be granted.
SECTION 5. DETERMINATION OF AWARDS
Following the completion of the Plan Year, the Committee will review the
Company's performance with respect to the Performance Measures, and in its sole
judgment, determine the amount and manner of Awards to be granted to eligible
Employees. No Awards will be granted if the threshold Performance Measure
established under Section 4 is not achieved.
SECTION 6. PAYMENT OF AWARDS
(a) Each Award may be made at the discretion of the Committee either in
cash, in Stock, in Restricted Stock, in Stock
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Units, or in another form as determined by the Committee and may be
made partly in one form and partly in one or more other forms. In
the case of an Award in Stock, Restricted Stock, or Stock Units, the
number shall be determined by using the Fair Market Value Per share
of Stock on the date of the Award, provided, however, that no
Employee whose acquisition of Stock, Restricted Stock, Stock Units
or other form of Award would be subject to the provisions of Section
16 of the Exchange Act shall be eligible to receive an Award
otherwise than in cash, and the Committee shall grant Awards to such
persons only in cash, unless prior to the grant of any such Award
all action necessary to qualify such award for the exemption under
Rule 16b-3 shall have been taken.
(b) The payment of any Award shall be subject to such obligations or
conditions as the Committee may specify in making or recommending
the Award, but Awards need not be evidenced by Award Agreements.
(c) Part or all of a cash Award may be deferred by a Participant under
the terms of the Key Employee Deferred Compensation Plan of Phillips
Petroleum Company or any successor plan thereto.
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(d) Any Award payable in Stock or Restricted Stock may, in the
discretion of the Committee, be paid part or all in cash, on each
date on which payment in Stock or Restricted Stock would otherwise
have been made, in an amount equal to the Fair Market Value per
share of Stock on each such date, multiplied by the number of shares
of Stock or Restricted Stock which would otherwise have been paid on
such date.
(e) Awards may be granted in Restricted Stock that is issued to a
Participant and is subject to such terms, conditions and
restrictions as the Committee deems appropriate, which may include
restrictions upon the sale, assignment, transfer or other
disposition of the Restricted Stock and the requirement of
forfeiture of the Restricted Stock upon termination of employment
under certain specified conditions. The Committee may provide for
the lapse of any such term or condition or waive any term or
condition based on such factors or criteria as the Committee may
determine. The Participant shall have, with respect to awards of
Restricted Stock, all of the rights of a shareholder of the Company,
including the right to vote the Restricted Stock and the rights to
receive any cash or stock dividend on such Stock.
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(f) Awards may be granted in Stock Units that are subject to such terms
and conditions as the Committee deems appropriate. The number of
Stock Units awarded with respect to any Award shall be the number
determined by using the Fair Market Value per share of Stock on the
date of the Award. Any Award made in Stock Units may, in the
discretion or the recommendation of the Committee, be paid in shares
of Stock on each date on which payment in cash would otherwise be
made.
(g) In lieu of the foregoing forms of payment of Awards, the Committee
may specify or recommend any other form of payment which it
determines to be of substantially equivalent economic value to the
cash value of the Award including, without limitation, forms
involving payments to a trust or trusts for the benefit of one or
more Participants.
(h) Each payment of an Award that is to be made in cash shall be from
the general funds of the Company or the Participating Subsidiary
making the payment.
(i) In the event the Participant resigns during the Plan Year or before
Awards are paid for the Plan Year, no Awards shall be made to that
Participant, provided, that the
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Committee may, in its sole discretion, determine that an Award shall
be made with respect to the period of time during which the
Participant was an Employee.
(j) In the event the Participant transfers to a non-participating
subsidiary or otherwise becomes ineligible prior to the end of the
Plan Year, the Participant may remain a Participant for the purpose
of all Awards which shall have been made prior to the Participant's
transfer or prior to the Participant becoming ineligible or are to
be made, but in such later case, only with respect to the period of
time during which the Participant was an eligible Participant.
(k) In the event the Participant terminates employment by reason of
Disability, the Participant may remain a Participant for the purpose
of all Awards which shall have been made prior to the Participant's
Disability or are to be made, but in such later case, only with
respect to the period of time prior to the Disability.
(l) In the event the Participant terminates employment by Retirement,
the Participant may remain a Participant for the purpose of all
Awards which shall have been made
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prior to Retirement or are to be made, but in such later case, only
with respect to the period of time during which the Participant was
an Employee.
(m) In the event of the death of a Participant to whom an Award is to be
or shall have been made, the Award or any portion thereof remaining
unpaid may be paid to such Participant's Beneficiary either in the
manner in which payment would have been made had the Participant not
died or in such other manner as may be determined by the Committee.
SECTION 7. ADMINISTRATION
(a) The Plan and all Awards granted pursuant thereto shall be
administered by the Committee so as to permit the Plan to comply
with Rule 16b-3. A majority of the members of the Committee shall
constitute a quorum. The vote of a majority of a quorum shall
constitute action by the Committee.
(b) To the extent permitted by Section 12, the Committee is authorized
to
(i) determine which Employees shall be Participants in
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the Plan and which form of Awards shall be granted to
Participants,
(ii) establish, amend and rescind rules, regulations and guidelines
relating to this Plan as it deems appropriate,
(iii) interpret and administer this Plan, Awards and Award
Agreements,
(iv) establish, modify and terminate terms and conditions of Award
Agreements,
(v) grant waivers and accelerations of Plan, Award and Award
Agreement restrictions and
(vi) take any other action necessary for the proper administration
and operation of the Plan, all of which shall be executed in
accordance with the objectives of this Program.
(c) The Committee may delegate to the officers or employees of the
Company the authority to carry out any of its responsibilities under
and described in this Plan, under such conditions or limitations as
the Committee may
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establish, other than its authority with regard to Participants who
are subject to Section 16.
(d) Determinations of the Committee and its designees shall be final,
binding and conclusive on the Company, its Participating
Subsidiaries, shareholders, Employees and Participants. No member of
the Committee or any of its designees shall be personally liable for
any action or determination made in good faith with respect to this
Program, any Award, or any Award Agreement.
SECTION 8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
Subject to any required action by the shareholders of ConocoPhillips, in the
event of a reorganization, recapitalization, stock split, stock dividend,
exchange of Stock, combination of Stock, merger, consolidation or any other
changes in corporate structure of ConocoPhillips affecting the Stock, or in the
event of a sale by ConocoPhillips of all or a significant part of its assets, or
any distribution to ConocoPhillips' shareholders other than a normal cash
dividend, the Committee may make appropriate adjustment in the number, kind,
price and value of Stock authorized by this Plan and any adjustments to
outstanding Awards as it determines appropriate so as to prevent dilution or
enlargement of rights.
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SECTION 9. CHANGE OF CONTROL
(a) In the event of a Change of Control, all restrictions and other
limitations applicable to any Restricted Stock shall lapse, and such
Restricted Stock shall become free of all restrictions and become fully
vested and transferable to the full extent of the original grant.
(b) A "Change of Control" shall mean:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d) or 14(d)(2) of the Exchange Act (a
"Person")) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either (a) the
then outstanding shares of common stock of ConocoPhillips (the
"Outstanding Company Common Stock") or (b) the combined voting power
of the then outstanding voting securities of ConocoPhillips entitled
to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of
this subsection (i), the following acquisitions shall not constitute
a Change of Control: (A) any acquisition directly from
ConocoPhillips, (B) any acquisition by ConocoPhillips, (C) any
acquisition by any employee
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benefit plan (or related trust) sponsored or maintained by
ConocoPhillips or any corporation controlled by ConocoPhillips or
(D) any acquisition pursuant to a transaction which complies with
clauses (A), (B) and (C) of subsection (iii) of this Section 9(b);
or
(ii) Individuals who, as of August 26, 2002, constitute the Board of
Directors of ConocoPhillips (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of Directors
of ConocoPhillips (the "CP Board"); provided, however, that any
individual becoming a director subsequent to August 26, 2002, whose
election, or nomination for election by ConocoPhillips'
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the CP Board; or
(iii) Approval by the shareholders of ConocoPhillips of a reorganization,
merger or consolidation or sale or other
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disposition of all or substantially all of the assets of
ConocoPhillips or the acquisition of assets of another entity (a
"Corporate Transaction"), in each case, unless, following such
Corporate Transaction, (A) all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Corporate Transaction beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns
ConocoPhillips or all or substantially all of ConocoPhillips' assets
either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately
prior to such Corporate Transaction of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case
may be, (B) no Person (excluding any employee benefit plan (or
related trust) of ConocoPhillips or such corporation resulting from
such Corporate Transaction) beneficially own, directly or
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indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the then
outstanding voting securities of such corporation except to the
extent that such ownership existed prior to the Corporate
Transaction and (C) at least a majority of the members of the board
of directors of the corporation resulting from such Corporate
Transaction were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the CP
Board, providing for such Corporate Transaction; or
(iv) Approval by the shareholders of ConocoPhillips of a complete
liquidation or dissolution of ConocoPhillips.
SECTION 10. RIGHTS OF EMPLOYEES
(a) Status as an eligible Employee shall not be construed as a
commitment that any Award will be made under the Plan to such
eligible Employee or to eligible Employees generally.
(b) Nothing contained in the Plan (or in any other documents
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related to this Plan or to any Award) shall confer upon any Employee
or Participant any right to continue in the employ or other service
of the Company or constitute any contract or limit in any way the
right of the Company to change such person's compensation or other
benefits or to terminate the employment of such person with or
without cause.
SECTION 11. COMPLIANCE WITH APPLICABLE LEGAL REQUIREMENTS
No certificate for Stock distributable pursuant to this Plan shall be issued and
delivered unless the issuance of such certificate complies with all applicable
legal requirements including, without limitation, compliance with the provisions
of applicable state securities laws, the Securities Act of 1933, as amended from
time to time or any successor statute, the Exchange Act and the requirements of
the exchanges on which the Stock may, at the time, be listed.
SECTION 12. AMENDMENTS AND TERMINATION
(a) The Committee or the Board, as appropriate, may, insofar as
permitted by law, from time to time, suspend or terminate this Plan
or revise or amend it in any respect whatsoever; provided, however,
unless the Committee or the Board, as
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appropriate, specifically otherwise provides, any revision or
amendment that would cause this Plan to fail to comply with any
requirement of applicable law, regulation or rule if such amendment
were not approved by the shareholders of ConocoPhillips shall not be
effective unless and until the approval of the shareholders of
ConocoPhillips is obtained.
(b) Subject to the terms and conditions and within the limitations of
this Plan, the Committee may amend, cancel, modify or extend
outstanding Awards granted under this Plan, but no such action taken
after a Change of Control, at the request of a third party seeking
to effect a Change of Control, or otherwise in connection with or in
anticipation of a Change of Control, may adversely affect the rights
of any Participant with respect to any outstanding award without
such Participant's consent.
(c) This Plan is intended to comply with Rule 16b-3 promulgated by the
Securities and Exchange Commission as now in force or as such
regulation or successor regulation shall be hereafter amended ("Rule
16b-3") with respect to Participants who are subject to Section 16
of the Exchange Act. Should the requirements of Rule 16b-3 change,
the Board or the Committee, as appropriate, may
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amend the program to comply with the requirements of the amended
Rule 16b-3 or its successor provision or provisions.
SECTION 13. UNFUNDED PLAN
The Plan shall be unfunded. Neither the Company nor the Board of Directors shall
be required to segregate any assets that may, at any time, be represented by
Awards made pursuant to the Plan. Neither the Company, the Committee, nor the
Board of Directors shall be deemed to be a trustee of any amounts to be paid
under the Plan.
SECTION 14. LIMITS OF LIABILITY
(a) Any liability of the Company to any Participant with respect to an
Award shall be based solely upon contracted obligations created by
the Plan and the Award Agreement.
(b) Neither the Company nor any member of the Board of Directors or of
the Committee, nor any person participating in any determination of
any question under the Plan, or in the interpretation,
administration or application of the Plan, shall have any liability
to any party for any action taken or not taken, in good faith under
the
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Plan.
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