CONOCOPHILLIPS
ANNUAL INCENTIVE COMPENSATION PLAN OF PHILLIPS
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<TYPE>EX-10.13
<SEQUENCE>7
<FILENAME>h03367exv10w13.txt
<DESCRIPTION>ANNUAL INCENTIVE COMPENSATION PLAN OF PHILLIPS
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                                                                   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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