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Phillips Petroleum - Key Employee Deferred Compensation Plan of
BOARD OF DIRECTORS AMENDED
December 10, 2001
KEY EMPLOYEE DEFERRED COMPENSATION PLAN OF
PHILLIPS PETROLEUM COMPANY
PURPOSE
The purpose of the Key Employee Deferred Compensation Plan of Phillips Petroleum Company (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.
SECTION 1. Definitions.
(a) "Affiliated Group" shall mean the Company plus other
subsidiaries and affiliates in which it owns 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 the Long Term Incentive
Compensation Plan, or (ii) required to be credited to an
Employee's Deferred Compensation Account pursuant to the
Incentive Compensation Plan, the Long Term Incentive
Compensation Plan, the Strategic Incentive Plan, the Long
Term Incentive Plan, or any similar plans, or any
administrative procedure adopted pursuant thereto, (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 the Incentive Compensation Plan, the Long
Term Incentive Compensation Plan, the Strategic Incentive
Plan, the Long Term Incentive Plan, the Omnibus
Securities Plan, or any similar plans, or any
administrative procedure adopted pursuant thereto, (iv)
credited resulting from a lump sum distribution from any
of the Company's non-
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qualified retirement plans and/or plans which
provide for a retirement supplement, (v)
resulting from the forfeiture of Restricted Stock,
required by the Company, of key employees who become
employees of GPM Gas Corporation, (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, (vii) credited as a
result of an Employee's voluntary reduction of Salary
(viii) credited as a result of an Employee's deferral of
the settlement of a Long Term Performance Unit 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,
but subject to revision under the terms of this Plan.
(c) "Board of Directors" shall mean the board of directors of
the Company.
(d) "Chief Executive Officer (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 Phillips Petroleum Company.
(g) "Deferred Compensation Account" shall mean an account
established and maintained for each Participant in which
is recorded the amounts of Awards deferred by a
Participant, the deemed gains, losses and earnings
accrued thereon and payments made therefrom all in
accordance with the terms of the Plan.
(h) "Defined Contribution Makeup Plan" shall mean the Defined
Contribution Makeup Plan of Phillips Petroleum Company or
any similar plan or successor plans.
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(i) "Disability" shall mean the inability, in the opinion of
the Company's Medical Director, of a Participant, because
of an injury or sickness, to work at a reasonable
occupation which is available with the Company.
(j) "Employee" shall mean any individual or Rehired
Participant who satisfies the conditions of Section 5(j)
who is a salaried employee of the Company or of a
Participating Subsidiary who is eligible to receive an
Award from an Incentive Compensation Plan, has Restricted
Stock and/or Restricted Stock Units or is classified as a
Grade 32P. Employee shall also include Participants who
are employed by a member of the Affiliated Group and
former employees who Retire or are Laid Off and are
eligible to receive a lump sum distribution from non-
qualified retirement plans.
(k) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time or any
successor statute.
(l) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended and in effect from time to time, or any
successor statute.
(m) "Incentive Compensation Plan" shall mean the Incentive
Compensation Plan of the Company, or the Annual Incentive
Compensation Plan of Phillips Petroleum Company, or
similar plan of a Participating Subsidiary, or any
similar or successor plans, or all, as the context may
require.
(n) "Layoff" or "Laid Off" shall mean layoff under the
Phillips Layoff Plan or any similar plan which the
Company, any Participating Subsidiary or a member of the
Affiliated Group may adopt from time to time under the
terms of which the Participant executes and does not
revoke a general release of liability, acceptable to the
Company, Participating Subsidiary or a member of the
Affiliated Group, as applicable, under
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such layoff plan.
(o) "Long-Term Incentive Compensation Plan" shall mean the
Long-Term Incentive Compensation Plan of the Company
which was terminated December 31, 1985.
(p) "Long-Term Incentive Plan" shall mean the Long-Term
Incentive Plan, or similar or successor plan, established
under the Omnibus Securities Plan of Phillips Petroleum
Company.
(q) "Long Term Performance Unit Award" shall mean a
Performance Award as authorized by Section 4.4 of the
Omnibus Securities Plan, or similar or successive plan,
where the applicable administrative procedure for such
award provides that the recipient is eligible to indicate
a preference to defer all or any part of such award.
(r) "Newhire Employee" shall mean any Employee who is hired
or rehired during a calendar year.
(s) "Participant" shall mean a person for whom a Deferred
Compensation Account is maintained.
(t) "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.
(u) "Plan Administrator" shall mean the Executive Vice
President, Planning, Corporate Relations and Services, or
his successor.
(v) "Potential Participant" shall mean a person who has
received a notice specified in
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Section 2 or in Section 5(h).
(w) "Rehired Participant" shall mean a Participant who
subsequent to Retirement or Layoff is rehired by the
Company and whose employment status is classified as
regular full-time or its equivalent.
(x) "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.
(y) "Retirement" or "Retire", or "Retiring" shall mean
termination of employment with the Company on or after
the earliest early retirement date as defined in the
Retirement Income Plan of Phillips Petroleum Company or
of the applicable retirement plan of a Participating
Subsidiary or a member of the Affiliated Group.
(z) "Retirement Income Plan" shall mean the Retirement Income
Plan of the Company or a similar retirement plan of the
Participating Subsidiary pursuant to the terms of which
the Participant retires.
(aa) "Settlement Date" shall mean the date on which all acts
under the 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.
(bb) "Salary" shall mean the monthly equivalent rate of pay
for an Employee before adjustments for any before-tax
voluntary reductions.
(cc) "Stock" means shares of common stock of the Company, par
value $1.25.
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(dd) "Strategic Incentive Plan" shall mean the Strategic
Incentive Plan portion of the 1986 Stock Plan of the
Company, of the 1990 Stock Plan of the Company, and of
any successor plans of similar nature.
(ee) "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
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September, Employees who are eligible to receive an Award
in the immediately following calendar year under the
Company's or a Participating Subsidiary's Incentive
Compensation Plan will be notified and given the
opportunity, in a manner prescribed by the Plan
Administrator, to indicate a preference concerning
deferral of all or part of such Award.
(b) Restricted Stock and Restricted Stock Units Awards. (i)
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Each year Employees who are or will become 55 years of
age prior to the end of the calendar year or who are over
55 years old and have not previously been notified will
be notified and given the opportunity, in a manner
prescribed by the Plan Administrator, to indicate a
preference concerning the deferral of the receipt of the
value of all or part of the Stock which would otherwise
be delivered to the Employees in the event restrictions
lapse on Restricted Stock and/or Restricted Stock Units
or the settlement of Restricted Stock Units previously
awarded or which may be awarded to the Employees.
(ii) Employees who have been granted a special
Restricted Stock Award and/or Restricted Stock Units
Award by the Compensation Committee, may, in the year
preceding the year in which the restrictions are
scheduled to lapse or the Restricted Stock Units are to
be settled, indicate a preference concerning the deferral
of the value of all or part of the stock which would
otherwise be delivered to the Employees in the next
calendar year when the restrictions lapse on the special
Restricted Stock and /or
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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 will be given an opportunity
within 30 days of being notified of Layoff, in the manner
prescribed by the Plan Administrator, to indicate a
preference concerning the deferral of the receipt of the
values of all or part of the Stock which would be
otherwise be delivered to the Employees in the event
Restricted Stock Units, which have been granted in
exchange for Restricted Stock pursuant to the Exchange
offer initiated by the Company on December 17, 2001, are
settled.
(c) Lump Sum Distribution from Non-Qualified Retirement
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Plans. With respect to the lump sum distribution
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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 for
all or part of the lump sum distribution, if any, to be
considered an Award under this Plan.
(d) Lump Sum from Defined Contribution Makeup Plan.
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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 of
part of such payment.
(e) Salary Reduction. Annually, Employees and Newhire
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Employees on the U.S. dollar payroll may elect, in a
manner prescribed by the Plan Administrator, a voluntary
reduction of Salary for each pay period of the following
calendar year, or for Newhire Employees the remainder of
the calendar year in which they are hired, in which case
the Company will credit a like amount as an Award
hereunder, provided that the amount of such reduction
shall be not less than 2% nor more than a percentage of
the Employee's Salary per pay period such that the
resulting salary that is paid is sufficient to satisfy
all benefit plan deductions, tax deductions, elective
deductions and other deductions required to be withheld
by the Company.
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(f) Long Term Performance Unit Award. As soon as practicable
--------------------------------
following the grant of a Long Term Performance Unit
Award, Employees will be notified and given the
opportunity, in a manner prescribed by the Plan
Administrator, to indicate a preference concerning
deferral of all or part of such Award.
(g) Performance Based Incentive Award. Each year, during
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September, 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
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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 1 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 1,
the Potential Participant will be deemed to have elected
to receive any ICP award awarded by the Committee.
Such indication of preference, if accepted, becomes
irrevocable on October 1 of the year in which the indication
is submitted to the Committee or CEO, except that, in the
event of any of the following:
i) the Employee is demoted to a job
classification/grade that is no longer eligible
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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,
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. The
Potential Participant shall be notified in writing of the
decision.
(b) Restricted Stock or Restricted Stock Units. If a
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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(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 be received
on or before October 1 of the year in which said Section
2(b) 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 1, 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 October 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. The
Potential Participant shall be notified in writing of the
decision. A deferral of the value of the Restricted Stock
or Restricted
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Stock Units will be paid under the terms of
Section 5(b)(i) hereof - 10 annual installments
commencing about one year after retirement, but subject
to revision under the terms of this Plan. Such approved
indication of preference shall 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.
(c) Lump Sum Distribution from Non-Qualified Retirement
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Plans. If a Potential Participant prefers to defer under
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this Plan all or part of the lump sum distribution to
which 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
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.
(d) Lump Sum from Defined Contribution Makeup Plan. If a
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Potential Participant prefers to defer under this Plan
all or part of the lump sum cash payment to which Section
2(d) pertains, the Potential Participant must indicate
such preference, in a manner prescribed by the Plan
Administrator, (i) if the Potential Participant is
subject to Section 16 of the Exchange Act, to the
Committee or (ii) if the Potential Participant is not
subject to Section 16 of the Exchange Act, to the CEO.
The Potential Participant's preference must be received
in the period beginning 365 days prior to and ending no
less than 90 days prior to the Participant's retirement
date except that if a Potential Participant is notified
of layoff during or after the year in which the
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Potential Participant reaches age 50 and if there is not
at least 120 days between the date the Potential Participant
is notified of layoff and the Potential Participant's
termination date, the Potential Participant's preference
must be received within 30 days of 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, but subject
to revision under the terms of the Plan.
(e) Salary Reduction. If a Potential Participant elects to
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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
November 30 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
November 30 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,
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
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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, but subject to revision under the terms of
the Plan.
(f) Long Term Performance Unit Award. If a Potential
--------------------------------
Participant prefers to defer under this Plan the value of
all or any part of the Long Term Performance Unit Award
to which a notice received under Section 2(f) 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 90 days from the grant date
of the Long Term Performance Unit Award. Such indication
must state the portion of the value of the Long Term
Performance Unit Award the Potential Participant desires
to be deferred. If an indication is not received by 90
days from the grant date of the award, the Potential
Participant will be deemed to have elected not to defer
any portion of the Award. Such indication of preference
becomes irrevocable 90 days from the grant date of the
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. The Potential Participant shall be notified in
writing of the decision. A deferral of the value of the
Long Term Performance Unit Award will be paid under the
terms of Section 5(b) (i) hereof - 10 annual installments
commencing about one year after retirement, but subject
to revision under the terms of this Plan.
(g) Performance Based Incentive Award. The Potential
---------------------------------
Participant who is eligible to
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receive a Performance Based Incentive Award in the
immediately following calendar year, must indicate a
preference, in a manner prescribed by the Plan Administrator,
(i) if the Potential Participant is subject to Section 16 of
the Exchange Act, to the Committee, or (ii) if the Potential
Participant is not subject to Section 16 of the Exchange
Act, to the CEO. The Potential Participant's preference
must be received on or before October 1 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 1, the
Potential Participant will be deemed to have elected to
receive the award as cash. Such indication of preference
becomes irrevocable on October 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
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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(b) and Section
5(h)(2) will be credited at market value of the
underlying Restricted Stock or the shares represented by
the Restricted Stock Units, as applicable, as soon as
practicable, but not later than 30 days after the date as
of which the restrictions lapse. 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 Company
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 Company Stock
during the twelve calendar months preceding the month
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in which the restrictions lapse. The monthly Fair Market
Value of the Company 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(d),
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
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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,
...
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