MACDERMID, INCORPORATED

2001 KEY EXECUTIVE PERFORMANCE EQUITY PLAN

Dated May 21, 2001

 

1. Purposes.

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     The purposes of the MacDermid, Incorporated 2001 Key Executive Performance

Equity Plan (the "Plan") are (i) to enable MacDermid, Incorporated and its

subsidiary corporations (hereinafter referred to, unless the context otherwise

requires, as the "Company") to grant to its key employees, officers, and

directors the means to acquire a proprietary interest in the Company, in order

that such persons will have additional long term financial incentives to

contribute to the Company's growth and profitability; (ii) to enhance the

ability of the Company to attract and retain in its employ and service

individuals of outstanding ability upon whom the success of the Company will

depend; and (iii) to align the interests of the Company's directors, officers,

and key employees with those of its shareholders.

 

2. Administration.

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     The Plan shall be administered by a committee of not fewer than two members

of the Board of Directors (the "Committee") appointed by the Board of Directors

of the Company (the "Board").  Each member of the Committee shall be a

"Non-Employee Director" within the meaning of Rule 16b-3(b) under the Securities

Exchange Act of 1934, as amended (the "Act") and an "outside director" within

the meaning of Section 162(m)(4)(C)(i) of the Internal Revenue Code of 1986, as

amended (the "Code").  The Committee may adopt such rules and regulations as it

may deem necessary or advisable for the administration of the Plan, provided

however that the Committee shall have no authority to take any action if the

authority to take such action, or the taking of such action, would disqualify

the Plan from the exemption provided by Rule 16b-3 under the Act or any

successor provision.

 

3. Grant of Awards.

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     Subject to the terms and provisions of the Plan, options to purchase shares

of Common Stock of the Company shall be granted on behalf of the Company by, and

at the discretion of, the Committee.  Subject to the terms of the Plan, the

Committee may place restrictions on options granted, as the Committee deems

appropriate.  The Committee, from time to time within the limits of the Plan,

shall determine the persons to whom options are to be granted, the number of

shares to be optioned, the manner in which the option price shall be payable and

other conditions and limitations applicable to the exercise of the options.

Options granted under the Plan may be either incentive stock options, within the

meaning of Section 422 of the Code, or non-qualified stock options. Each option

granted under the Plan shall be designated by the Committee at the time the

option is granted as either an incentive stock option or a non-qualified stock

option, provided, however, that in no event shall any individual be granted

options during any single calendar year to acquire more than 1 million shares of

Common Stock of the Company.

 

4.  Shares Subject to the Plan.

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     Subject to adjustment as provided herein, an aggregate of   three

five  (  3    5,000,000)  shares of the Common Stock of the Company (the

"Common  Stock"),  shall  be  available for issuance pursuant to options granted

under the Plan. Such shares may be authorized and unissued shares or shares held

in  the  Company's  treasury.  All  shares  subject  to  options that shall have

terminated  or shall have been forfeited in whole or in part or canceled for any

reason  (other  than  by  surrender for cancellation upon any exercise of all or

part  of  such  options)  shall  be  available  for issuance pursuant to options

granted  subsequently  under  the  Plan.

 

5. Participants.

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     Key employees, as designated by the Committee, officers, and directors of

the Company shall be eligible to receive options and thereby become participants

in the Plan.  Receipt of an option shall in no way be deemed to constitute a

contract or promise of continued employment by the Company or appointment to the

Board.

 

6. Option Price.

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     The price per share at which Common Stock may be purchased upon exercise of

an option under the Plan shall be the fair market value of such shares at the

time the option is granted, adjusted annually on such date as determined by the

Committee for the first six (6) years after the date of option grant based upon

          ----------------------------------------------------------

the S&P Specialty Chemicals Index, or such other index as determined by the

Committee.  For purposes of the Plan, "fair market value" shall mean the average

closing price of the Company's Common Stock on the final five (5) trading days

preceeding the date of grant. The exercise price of any option grant, after the

                              -------------------------------------------------

first six (6) years of annual adjustment as provided for above, shall be fixed

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and no further index based adjustments will be made for the remainder of the

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option period.

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7. Right to Exercise.

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     Except as otherwise provided in Sections 11 and 12 of this Plan, subject to

the Company attaining Owner Earnings and/or Earnings Per Share targets

                                     -------------------------

established by the Committee, options granted under the Plan will first become

exercisable by the grantee, or 'vest,' at the end of the four (4) year period

commencing on the date of grant, provided that in the case of employees the

grantee remains in the continuous employ of the Company from the date of grant

to the end of the four (4) year vesting period.  Notwithstanding the foregoing,

in the event that a grantee retires from the employ of the Company upon normal

retirement at or after the age of sixty (60), (or as otherwise determined by the

Committee), during the four (4) year vesting period, the grantee shall be

deemed, solely for purposes of the foregoing sentence and the second sentence of

Section 8 hereof, to have remained in the continuous employ of the Company on a

full time basis from the date of such retirement until the end of the four (4)

year vesting period. Provided further that if a grantee is terminated without

Cause (as defined herein) during the four (4) year vesting period then the

options shall vest, in a prorated manner, on the date of termination without

Cause and the grantee must exercise, if at all, such vested options only within

ninety (90) days from the date of termination without Cause. The amount of

vested  options  shall  generally  be  determined  by  multiplying the amount of

options  specified  in the option grant by a multiplier based upon the Company's

cumulative  Owner Earnings growth and/or Earnings Per Share growth during

the four (4) year vesting period. The specific multiplier formula and applicable

Owner  Earnings  and/or Earnings Per Share targets shall be determined by

the  Committee  for  each  grant,  provided,  however,  that,  regardless of the

multiplier formula determined by the Committee, in no event shall the multiplier

applicable  in  the  case  of  a  grantee  whose employment is terminated by the

Company  without Cause exceed the number one (1). In the case of a grantee whose

employment was terminated without Cause during the four (4) year vesting period,

options  will  vest on a prorated basis with 25% of the options vesting for each

year  from  the  grant  date  to  the  date  of  termination  without Cause. For

purposes of this Plan, (a) 'Owner Earnings' shall mean the net cash flow

                      ----

generated from operations of the Company, less net capital expenditures during

the corresponding period, or such other calculation as determined by the

Committee, (b) Earnings Per Share shall be as defined by U.S. generally

accepted accounting principles with such adjustments for extra ordinary items as

determined by the Committee in its discretion , and ( c ) a grantee

shall be deemed to have been terminated by the Company without Cause in the

event of any involuntary termination by the Company other than a termination for

any one or more of the following reasons:

 

(i)     the grantee is convicted of or pleads guilty or nolo contendere to any

crime constituting a felony (other than an offense related to the operation of

an automobile that results only in a fine or other non-custodial penalty) or

involving dishonesty or moral turpitude;

 

(ii)     the grantee engages in any activity that amounts to negligence and that

significantly and adversely affects the business affairs or reputation of the

Company;

 

(iii)     the grantee willfully fails to perform his or her duties or performs

such duties in a grossly  negligent manner, which failure or performance

continues for twenty (20) days after written notice from the Company to the

grantee specifying such failure or performance;

 

(iv)     the grantee violates the Company's standard policies, or violates the

law, and such violation creates a substantial liability (actual or potential)

for the Company.

 

8. Exercise Period.

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     Subject to Section 12, the period for exercising an option (the "Exercise

Period") shall begin on the later of (i) the date such option vests, as

determined in accordance with this Plan, and (ii)  the date of approval of the

Plan by the Company's shareholders, and shall end ten (10) years after the date

of grant.  Notwithstanding the foregoing, unless specifically determined

otherwise by the Committee, the Exercise Period shall automatically terminate

ninety (90) days after the grantee ceases to be employed by the Company on a

full time basis, for any reason other than normal retirement at or after the

attainment of age sixty (60) (or as otherwise determined by the Committee).

 

9. Payment for Shares and Related Matters.

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     Full payment for shares purchased pursuant to the exercise of an option

granted under this Plan, together with the amount of any tax or excise due in

respect of the sale and issue thereof, shall be paid at the time of such

exercise and shall be made in cash or by certified or bank cashier's check or,

in the discretion of the Committee, in whole or in part by delivery of shares of

Common Stock of the Company having a fair market value at the date of such

delivery (determined in a manner approved by the Committee) of not less than the

amount for which payment is being made by delivery of the shares.  The Company

shall issue no certificates for shares until (a)  full payment therefore has

been made and (b)  the participant purchasing such shares provides for payment

to (or withholding by) the Company of all amounts required under then applicable

provisions of the Code and state and local tax laws to be withheld with respect

to such purchase, and a participant shall have none of the rights of a

stockholder until certificates for the shares purchased are issued to him or

her.

 

10.  Nontransferability.

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     Unless specifically determined otherwise by the Committee, no option shall

be assignable or transferable by a participant otherwise than by will or by the

laws of descent and distribution or pursuant to a qualified domestic relations

order as defined by the Internal Revenue Code of 1986, as amended, or Title I of

the Employee Retirement Income Security Act of 1974, or the rules thereunder.

Each option shall be exercisable during the lifetime of a participant only by

such participant, except that, if permissible under applicable law, an option

may also be exercised by the guardian or legal representative of a participant.

 

 

11. Effect of Changes in Common Stock.

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     In the event that the outstanding shares of Common Stock of the Company are

increased or decreased as a result of a stock dividend, stock split,

recapitalization or other means having the same effect, the number of shares

available for issuance under the Plan, the number of shares issuable pursuant to

any outstanding option, and the exercise price of any option outstanding under

the Plan, shall be adjusted as the Committee shall deem appropriate, in its sole

discretion, to preserve unimpaired the rights of the participants.  All

determinations made by the Committee hereunder shall be conclusive and binding

upon the participants.

 

12. Effect of Reorganizations or Change of Control.

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     In case of any one or more reclassifications, changes or exchanges of

outstanding shares of Common Stock (other than as provided in Section 11) or

consolidations of the Company with, or mergers of the Company into, other

corporations, or other recapitalizations or reorganizations (other than

consolidations with a subsidiary in which the Company is the continuing

corporation and which do not result in any reclassifications, changes or

exchanges of outstanding shares of Common Stock), or in case of any one or more

sales or conveyances to another corporation of the property of the Company as an

entirety, or substantially as an entirety, any and all of which are hereinafter

in this Section called "Reorganizations," the Committee shall have the right to

substitute in any previously granted options, the same or similar kind and

amount of securities  and/or property which any participant would then have if

such participant had exercised such option immediately before the first of any

such Reorganizations and continued to hold all securities and property which

came to such participant as a result of that and subsequent Reorganizations,

less all securities and property surrendered or cancelled pursuant to any of

same, the adjustment rights in Section 11 and this Section being continuing and

cumulative.  In any such event, such options may be exercised or converted, to

the extent permitted by their terms, prior to or simultaneously with the

consummation of such Reorganization.  In connection with a Reorganization or in

the event of a change of control (as hereinafter defined), all of the options

granted under the Plan and then outstanding shall become fully exercisable

notwithstanding any provision of the Plan or the applicable option agreement(s)

to the contrary.  In such event, the amount of Owner Earnings and/or Earnings

Per Share assumed for option vesting purposes shall be the maximum Owner

Earnings and/or Earnings Per Share targets then in effect under the Plan.

The Committee, in its discretion, shall determine the appropriate index to

establish the exercise price for such options, and shall consider the potential

economic loss to participants in making such determination to preserve the

rights of the participants.

 

     For purposes of this Plan, a "Change of Control" means (i) the acquisition

by any person or group (within the meaning of Section 13 (d)(3) or 14(d)(2) of

the Act), except for an employee benefit plan sponsored by the Company, of

beneficial ownership (within the meaning of Rule 13d-3 promulgated under the

Act) of 50% or more of (A) the outstanding shares of Common Stock of the

Company, or (B) the combined voting power of the then outstanding voting

securities of the Company that are entitled to vote generally in the election of

directors, or (ii) individuals who as of January 1, 2002 are members of the

Board (or directors whose subsequent nomination or election was approved by a

vote of at least a majority of such incumbents, but excluding any individual

whose initial assumption of office occurs as a result of an actual or threatened

solicitation of proxies or consents other than by the Board to which Regulation

14A promulgated under the Act applies, or other actual or threatened

solicitation of proxies or consents other than by the Board) cease for any

reason to constitute a majority of the Board.

 

13. Effective Date of Plan.

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     Subject to the approval of the shareholders of the Company, the Plan shall

be effective on May 21, 2001.  Prior to such approval, options may be granted

under the Plan expressly subject to such approval.  In the event that the

shareholders do not approve the Plan within twelve months after its adoption,

then the Plan and each option, if any, granted thereunder, shall be null and

void.

 

14. Amendment and Termination; Modification.

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     The Board by resolution at any time may amend, suspend or terminate the

Plan, provided that (i) no such action shall be taken which impairs the rights

of any participant under any outstanding option, without such participant's

consent, and (ii) no amendment shall be made without shareholder approval if

such approval is necessary to comply with any applicable tax or regulatory

requirement, including any requirements for exemptive relief under Section 16(b)

of the Act, or any successor provision.  The Committee may substitute new

options for, or modify the terms of, options previously granted to participants,

including, without limitation, previously granted options having higher exercise

prices, provided that no such action shall be taken which impairs the rights of

any participant under any outstanding option, without such participant's

consent.

 

15. Section 16 Exemption.

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     The Committee shall take all reasonable measures to qualify for the

exemption provided by Rule 16b-3 of the Act, the grant and exercise of options

to acquire Common Stock by the Plan participants who are subject to Section 16

of the Act.  The Committee and the Board shall have no authority to take any

action if the authority to take such action, or the taking of such action, would

disqualify the Plan from the exemption provided by Rule 16b-3 under the Act, and

any successor provision.

 

16. Interpretation.

-------------------

 

     The interpretation and construction of any provision of the Plan and the

adoption of rules and regulations for administering the Plan shall be made by

the Committee.  Determinations made by the Committee with respect to any matter

or provision contained in the Plan shall be made in the Committee's sole

discretion and shall be final, conclusive and binding upon the Company and upon

all participants, their heirs and legal representatives.  Any rule or regulation

adopted by the Committee (whether under the authority of this Section or Section

2 above) shall remain in full force and effect unless and until altered, amended

or repealed by the Committee.

 

<PAGE>

APPENDIX B                    MACDERMID, INCORPORATED

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                           1995 EQUITY INCENTIVE PLAN

 

 

1.     Purposes.  The purposes of the MacDermid, Incorporated 1995 Equity

       ---------

Incentive Plan (the "Plan") are (a) to enable MacDermid, Incorporated and its

subsidiary corporations (hereinafter referred to, unless the context otherwise

requires, as the "Company") to provide to its employees the means to acquire a

proprietary interest in the Company, in order that such persons will have

additional financial incentives to contribute to the Company's growth and

profitability, and (b) to enhance the ability of the Company to attract and

retain individuals of outstanding ability upon whom the success of the Company

will depend.  The Plan is intended to accomplish these goals by enabling the

Company to grant awards ("Awards") in the form of restricted stock, all as more

fully described below.

 

2.     Administration. The Plan shall be administered by a committee of not

       ---------------

fewer  than  two  members of the Board of Directors of the Company (the "Board).

Each  member  of  the  Committee  shall  be a "non-employee director" within the

meaning  of  Rule 16B-3(c) under the Securities Exchange Act of 1934, as amended

(the  "Act")  and  an  "outside  director"  within  the  meaning  of  Section

162(m)(4)(C)(i)  of  the  Internal Revenue Code of 1986, as amended (the "Code")

and  applicable  Treasury  regulations  thereunder. The Committee may adopt such

rules  and  regulations  as  it  may  deem  necessary  or  advisable  for  the

administration  of  the  Plan. The Committee shall have no authority to take any

action if the authority to take such action, or the taking of such action, would

disqualify  the  Plan from the exemption provided by Rule 16b-3 under the Act or

any  successor  provision.

 

3.     Participants.  All officers, directors and employees of the Company shall

       ------------       -----------------------

be  eligible  to  receive Awards and thereby become participants in the Plan. In

granting  Awards  the  Committee may include or exclude previous participants in

the  Plan as the Committee may determine. Receipt of an Award shall in no way be

deemed  to  constitute  a  consent  to or promise of continued employment by the

Company.

 

4.     Shares Subject to the Plan.  Subject to adjustment as provided herein, an

       --------------------------

aggregate  of  up  to  900,000 shares of the Common Stock, without par value per

share (the "Common Stock"), shall be available for issuance under the Plan. Such

shares  may  be  authorized  and unissued shares or shares held in the Company's

treasury. If any Award in respect of shares of Common Stock is forfeited for any

reason  or  settled  in  a  manner  that results in fewer shares of Common Stock

outstanding  than  were  initially  awarded,  including  without  limitation the

surrender  of  shares  of  Common  Stock in payment of any tax obligation on the

Award,  the  shares  of Common Stock subject to such Award or so surrendered, as

the  case  may  be, to the extent of such forfeiture or decrease, shall again be

available  for  award  under  the  Plan.

 

5.     Grant of Awards.

       ----------------

 

     (a)  Subject to the provisions of the Plan, the Committee may award shares

of  restricted  stock  to a participant under the Plan. A restricted stock Award

entitles  the  recipient  to acquire, for a purchase price equal to or exceeding

par  value,  shares  of  Common  Stock  subject to the restrictions described in

Section  6  below ("Restricted Stock"). A maximum of 50,000 shares of Restricted

Stock  may  be  awarded  by  the  Committee  in  any  year.

 

 

     (b)  Subject to the provisions of the Plan, the Committee shall determine

the  persons  to  whom  Awards  are to be granted, the size of the Award and all

other  terms and conditions of the Award provided however, that in the case of

a  Plan  participant  who  is  also then a participant in a Company annual bonus

plan,  any Award granted by the Committee to such participant shall be comprised

of:

 

  (i)    That number of shares of Restricted Stock having a fair market value

as  of the date of the Award, as determined in good faith by the Committee equal

to  twenty  (20)  percent  of the annual bonus payout awarded to the participant

under  the  applicable  bonus  plan  (such Award to be in lieu of payment of the

allocable  bonus  amount);  plus

        (ii)The additional number of shares, if any, which the Committee in its

sole  discretion  determines is appropriate to award to the participant for long

term  compensation  and  which is a fraction or multiple of the number of shares

awarded to the participant under the immediately preceding clause (i), provided,

further, however, that in no event shall the fair market value of shares awarded

to  any  participant under the preceding clauses (i) and (ii) exceed in any year

one  hundred (100) percent of the annual bonus payout awarded to the participant

under  the  applicable  bonus  plan.

 

6.     Terms of Restricted Stock.

       --------------------------

 

     (a)  A participant who is granted a Restricted Stock Award will have no

rights  with  respect  to such Award unless the participant accepts the Award by

written  instrument delivered or mailed to the Company accompanied by payment in

full  of  the  specified  purchase  price,  if any, of the shares covered by the

Award.  Payment may be by certified or bank check or other instrument acceptable

to  the  Committee.

 

     (b)  A participant who receives Restricted Stock will have all rights of a

stockholder  with  respect  to  the Stock, including voting and dividend rights,

subject to the restrictions described in this Section 6 and any other conditions

imposed  by  the Committee at the time of grant. If the Committee determines so,

certificates evidencing shares of Restricted Stock will remain in the possession

of  the  Company  until  (i)  such shares are free of all restrictions under the

Plan,  and  (ii) the participant provides for payment to (or withholding by) the

Company of all amounts, if any, required under then applicable provisions of the

Code and state and local tax laws to be withheld with respect to the issuance of

such  shares  to  the  participant.

 

     (c)  Except as otherwise specifically provided by the Plan, Restricted

Stock may not be sold, assigned, transferred, pledged or otherwise encumbered or

disposed  of,  except  to  the  Company  (if  the Company agrees to purchase the

shares)  for  an  amount equal to the price paid for the shares, for a period of

four  (4)  years  from  the  date  of  issuance  pursuant to an Award; provided,

however,  that  the  Committee in its sole discretion may determine from time to

time  for any reason to waive in whole or in part the restrictions applicable to

any  shares  prior  to  the  expiration  of  such  four  (4)  year  period.

 

     (d)  If the employment of a holder of shares of Restricted stock is

terminated  for  any  reason other than death, retirement in accordance with the

Company's  qualified  pension  plan  at  or  after attainment of age sixty (60),

permanent  disability or involuntary termination without cause, while the shares

are  subject  to  the  restrictions  described  in  the  immediately  preceding

paragraph,  the  holder shall be required to sell such shares to the Company for

the price paid therefor by the holder, and all rights of the holder with respect

to  such  shares  shall  be immediately canceled, unless the Company declines in

writing  to  purchase  the  shares.

 

     (e)  If the employment of a holder of shares of Restricted Stock is

terminated  for  retirement  in  accordance with the Company's qualified pension

plan  at  or  after attainment of age sixty (60), and the Committee, at any time

while  the  shares  are  subject  to the restrictions described in paragraph (c)

above,  determines  that  the  holder, either before or after termination of the

holder's  employment  by the Company, (i) has committed an act of misconduct for

which he or she could have been discharged for cause by the Company, or (ii) has

engaged  directly  or indirectly, in competition with the Company, whether as an

officer,  employee, agent, proprietor or otherwise of, or by having any material

investment or other material interest in, any business that involves in whole or

in  part  any  product  or  device similar to or competitive with any product or

device  sold  by the Company during the employment of the holder or under active

development  by the Company at the time of the holder's cessation of employment,

the  holder  shall  be required to sell such shares to the Company for the price

paid  therefor  by the holder, and all rights of the holder with respect to such

shares  shall be immediately canceled, unless the Company declines in writing to

purchase  the  shares.

 

     (f)  If the employment of a holder of shares of Restricted Stock is

terminated  due  to  involuntary termination without cause, while the shares are

subject  to  the restrictions described in paragraph (c) above, the restrictions

on such shares shall be deemed to have lapsed in annual installments as follows:

twenty-five  (25)  percent on the first anniversary of the date of award of such

shares  and  twenty-five (25) percent on each of the next three anniversaries of

such  date  (reduced  in  the event of any resulting fraction to the next lowest

whole  number).

 

     (g)  If the employment of a holder of shares of Restricted Stock is

terminated due to death or permanent disability, while the shares are subject to

the  restrictions  described  in  paragraph  (c) above, the restrictions on such

shares shall lapse as of the date of such event, and the holder shall be free to

dispose  of  the  shares  without  further  restriction.

 

   (h)  The restrictions imposed under this Section 6 shall apply as well to all

shares  or  other  securities issued in respect of shares in connection with any

stock  split,  reverse  stock  split,  stock  dividend,  recapitalization,

reclassification,  spin-off, split-off, merger, consolidation or reorganization.

Any  stock  certificate issued in respect of shares awarded under the Plan shall

be  registered  in  the  name  of the participant, and shall bear an appropriate

legend  referring  to  the terms, conditions and restrictions applicable to such

shares.

 

7.     Conditions to Effectiveness of the Plan.  The Plan shall not become

       ----------------------------------------

effective,  and any Awards granted under the Plan shall not be effective, unless

and  until  the  Plan  shall  have been duly approved by the shareholders of the

Company.

 

8.     Amendment and Termination. The Board by resolution at any time may amend,

       -------------------------

suspend or terminate the Plan, provided that (a) no such action shall be taken

which impairs the rights of any participant under any outstanding Award, without

such participant's consent, and (b) no amendment shall be made without

shareholder approval if such approval is necessary  to comply with any

applicable tax or regulatory requirement, including any requirements for

exemptive relief under Section 16(b) of the Act, or any successor provision.

 

9.     Effect of Changes in Common Stock.  If the Company shall combine,

       ----------------------------------

subdivide  or  reclassify  the  shares of Common Stock which have been or may be

awarded  under the Plan, or shall declare thereon any dividend payable in shares

of  Common  Stock,  or shall take any other action of a similar nature affecting

the  Common  Stock,  then  the  number  and class of shares of stock as to which

Awards may thereafter be granted (in the aggregate and to any participant) shall

be appropriately adjusted and, in the case of each Award outstanding at the time

of  any  such action, the number and class of shares subject to such Award shall

likewise  be  appropriately adjusted, all to such extent as may be determined by

the  Committee  in  its  sole  discretion,  with  the approval of counsel, to be

necessary  to  preserve unimpaired the rights of the participant. Each and every

such  determination  shall  be  conclusive  and  binding  upon the participants.

 

10.     Effect of Reorganizations.  In case of any one or more

        --------------------------

reclassifications, changes or exchanges of outstanding shares of common Stock or

other stock (other than as provided in Section 11), or consolidations of the

Company with, or mergers of the Company into, other corporations, or other

recapitalizations or reorganizations (other than consolidations with a

subsidiary in which the Company is the continuing corporation and which do not

result in any reclassifications, changes or exchanges of shares of the Company),

or in case of any one or more sales or conveyances to any other corporation of

the property of the Company as an entirety, or substantially as an entirety, any

and all of which are hereinafter in this Section called "Reorganizations," a

participant shall have the right, upon any subsequent receipt of shares pursuant

to an Award, to acquire the same kind and amount of securities and property

which such participant would then have if such participant had received such

shares immediately before the first of any such Reorganizations and continued to

hold all securities and property which came to such participant as a result of

that and subsequent Reorganizations, less all securities and property

surrendered or canceled pursuant to any of the same, the adjustment rights in

Section 9 and this Section 10 being continuing and cumulative.

     Notwithstanding any provision of Section 6 or any foregoing provision of

this  Section  10  to  the  contrary,  the  Committee  shall  have  the right in

connection with any Reorganization, upon not less than thirty (30) days' written

notice  to  the participants, to terminate all outstanding Awards. In connection

with  such  termination, the Committee in its discretion, prior to the effective

date  of  the  reorganization,  may  remove  the  restrictions  from some or all

outstanding  shares  of  Restricted  Stock.

 

11.     Change in Control.  In the event that at any time after the effective

        ------------------

date  of  the  Plan  the  Company  shall  have  a  "Principal  Stockholder,"  as

hereinafter  defined,  then  notwithstanding  anything to the contrary contained

herein,  upon  the  date such event occurs, all restrictions imposed pursuant to

Section  6  with  respect to shares shall immediately lapse, unless the Board by

unanimous  vote  of  members  who  served as directors before such event and who

constitute  at  least  fifty-one (51) percent of the Board determines otherwise.

 

     For purposes of this Section 11, (a) the term "Principal Stockholder" means

any corporation, person or other entity ("person") owning beneficially, directly

or  indirectly,  shares  of  the  capital  stock of the Company entitled to cast

twenty-five  percent  (25%) or more of the votes at the time entitled to be cast

generally  in  the election of Directors by all of the outstanding shares of all

classes  of capital stock of the Company (other than any such shares held by any

qualified  employee  benefit  plan  maintained  by  the Company), considered for

purposes  of  this Section 11 as one class; (b) in determining such ownership, a

person shall be deemed to be the beneficial owner of any shares of capital stock

of  the  Company  which  are  beneficially owned, directly or indirectly, by any

other person (i) with which it or its "affiliate" or "associate," as hereinafter

defined,  has  any  agreement,  arrangement or understanding for the purposes of

acquiring,  holding, voting or disposing of capital stock of the company or (ii)

which  is  its  "affiliate" or "associate;"(c) a person shall be deemed to be an

"affiliate"  of, or affiliated with, a specified person if such person directly,

or indirectly through one or more intermediaries, controls, or is controlled by,

or  is  under  common  control  with,  the  person  specified;  and (d) the term

"associate"  used  to indicate a relationship with any person shall mean (A) any

corporation  or  organization  (other  than the Company or any subsidiary of the

Company)  of  which  such  person  is  an  officer or partner or is, directly or

indirectly,  the  beneficial  owner of ten percent (10%) or more of any class of

equity  security,  (B)  any  trust  or  other  estate in which such person has a

substantial  beneficial interest or as to which such person serves as trustee or

in  a similar fiduciary capacity, and (C) any relative or spouse of such person,

or  any  relative  of  such  spouse,  who  has  the  same  home  as such person.

 

12.     General Provisions.

        -------------------

 

     (a)  Notwithstanding any other provision of the Plan, to the extent

required  to qualify for the exemption provided by Rule 16b-3 under the Act, and

any successor provision, any Common Stock or other equity security offered under

the  Plan  to  a  person subject to Section 16 of the Act may not be sold for at

least  six  months  after  acquisition.

 

     (b)  Each Award under the Plan shall be evidenced by a writing delivered to

the  participant specifying the terms and conditions thereof and containing such

other  terms  and conditions not inconsistent with the provisions of the Plan as

the  Committee  considers  necessary or advisable to achieve the purposes of the

Plan or comply with applicable tax or regulatory laws and accounting principles.

 

     (c)  The terms of each Award need not be identical, and the Committee need

not  treat participants uniformly. Except as otherwise provided by the Plan or a

particular  Award, any determination with respect to an Award may be made by the

Committee  at  the  time  of  award  or  at  any  time  thereafter.

 

     (d)  No Award may be transferred other than by will or by the laws of

descent  and  distribution.

 

     (e)  When a participant purchases Restricted Stock pursuant to an Award for

a  price  equal  to  the par value of the Restricted Stock, the Committee in its

discretion  may  determine  that  such price has been satisfied by past services

rendered  by  the  participant.

 

13.     Interpretation.  The interpretation and construction of any provision of

        ---------------

the Plan and the adoption of rules and regulations for administering the Plan

shall be made by the Committee.  Determinations made by the Committee with

respect to any matter or provision contained in the Plan shall be final,

conclusive and binding upon the Company and upon all participants, their heirs

and legal representatives.  Any rule or regulation adopted by the Committee

(whether under the authority of this Section or Section 2 above) shall remain in

full force and effect unless and until altered, amended or repealed by the

Committee.

 

 

 

 

 

 

                        ANADARKO PETROLEUM CORPORATION

 

                          1999 STOCK INCENTIVE PLAN

 

                               JANUARY 1, 1999

 

SECTION 1. Purpose.

 

     The purpose of the 1999 Stock Incentive Plan is to promote the interests of

Anadarko Petroleum Corporation and its stockholders by (i) attracting and

retaining employees of the Company and its affiliates; (ii) motivating such

employees by means of performance-related incentives to achieve longer-range

performance goals; and (iii) enabling such employees to participate in the

long-term growth and financial success of the Company.

 

SECTION 2. Definitions.

 

     As used in the Plan, the following terms shall have the meanings set forth

below:

 

          "Affiliate" shall mean (i) any entity that, directly or through one or

     more intermediaries, is controlled by the Company and (ii) any entity in

     which the Company has a significant equity interest, as determined by the

     Committee.

 

          "Award" shall mean any Option, Stock Appreciation Right, Restricted

     Stock, Performance Award or Stock Compensation.

 

          "Award Agreement" shall mean any agreement, contract, or other

     instrument or document evidencing any Award, which may, but need not, be

     executed or acknowledged by a Participant.

 

          "Board" shall mean the Board of Directors of the Company.

 

          "Change of Control" shall have the meaning set forth in Section 8.

 

          "Code" shall mean the Internal Revenue Code of 1986, as amended from

     time to time.

 

          "Committee" shall mean the Compensation and Benefits Committee of the

     Board.

 

          "Company" shall mean Anadarko Petroleum Corporation, a Delaware

     corporation.

 

          "Employee" shall mean any employee of the Company or any Affiliate.

 

          "Exchange Act" shall mean the Securities Exchange Act of 1934, as

     amended.

 

          "Exercise Price" shall mean the price determined under Section

     6(a)(i).

 

          "Fair Market Value" shall mean, as of any given date, the mean between

     the highest and lowest reported sales prices of a Share on the New York

     Stock Exchange Composite Tape.

 

          "Incentive Stock Option" shall mean an option granted under Section

     6(a) that is intended to meet the requirements of Section 422 of the Code

     or any successor provision thereto.

 

          "Mature Shares" shall mean Shares held by a Participant for a period

     of at least six months.

 

          "Non-Qualified Stock Option" shall mean an option granted under

     Section 6(a) that is not intended to be an Incentive Stock Option.

 

          "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock

     Option.

 

          "Participant" shall mean any Employee granted an Award under the Plan.

 

          "Performance Award" shall mean any right granted under Section 6(d).

 

          "Person" shall mean any individual, corporation, partnership,

     association, joint-stock company, trust, unincorporated organization,

     government or political subdivision thereof or other entity.

 

          "Plan" shall mean the 1999 Stock Incentive Plan.

 

          "Restricted Stock" shall mean any Share, prior to the lapse of

     restrictions thereon, granted under Section 6(c).

 

          "SEC" shall mean the Securities and Exchange Commission or any

     successor thereto.

 

          "Shares" shall mean the common shares of the Company, $0.10 par value.

 

          "Stock Appreciation Right" shall mean any right granted under Section

     6(b).

 

          "Stock Compensation" shall mean any right granted under Section 6(e).

 

SECTION 3. Administration.

 

     The Plan shall be administered by the Committee. Subject to the terms of

the Plan and applicable law, and in addition to other express powers and

authorizations conferred on the Committee by the Plan, the Committee shall have

full power and authority to:

 

          (i) designate Participants;

 

          (ii) determine the type or types of Awards to be granted to a

     Participant;

 

          (iii) determine the number of Shares to be covered by, or with respect

     to which payments, rights, or other matters are to be calculated in

     connection with, Awards;

 

          (iv) determine the terms and conditions of any Award;

 

          (v) determine whether, to what extent, and under what circumstances

     Awards may be settled or exercised in cash, Shares, other securities, other

     Awards or other property, or cancelled, forfeited, or suspended and the

     method or methods by which Awards may be settled, exercised, cancelled,

     forfeited, or suspended;

 

          (vi) determine whether, to what extent, and under what circumstances

     cash, Shares, other securities, other Awards, other property, and other

     amounts payable with respect to an Award shall be deferred either

     automatically or at the election of the holder thereof or of the Committee;

 

          (vii) interpret and administer the Plan and any instrument or

     agreement relating to, or Award made under, the Plan;

 

          (viii) establish, amend, suspend, or waive such rules and regulations

     and appoint such agents as it shall deem appropriate for the proper

     administration of the Plan; and

 

          (ix) make any other determination and take any other action that the

     Committee deems necessary or desirable for the administration of the Plan.

 

     Unless otherwise expressly provided in the Plan, all designations,

determinations, interpretations, and other decisions under or with respect to

the Plan or any Award shall be within the sole discretion of the Committee, may

be made at any time and shall be final, conclusive, and binding upon all

Persons, including the Company, any Affiliate, any Participant, any holder or

beneficiary of any Award, any shareholder and any Employee.

 

     Notwithstanding the foregoing, the Committee is not authorized to reprice

or cancel and reissue Options.

 

SECTION 4. Shares Available for and Limitations of Awards.

 

     (a) Shares Available. Subject to the specified limitations and adjustment

as provided in this Section 4:

 

          (i) The maximum number of Shares with respect to Awards, which may be

     granted as specified in Section 6 of the Plan, shall be 4,000,000.

 

          (ii) The maximum aggregate number of Shares that may be granted as

     Restricted Stock shall be 800,000 Shares.

 

     The Committee shall determine the appropriate methodology for calculating

the number of Shares issued pursuant to the Plan.

 

     If, after the effective date of the Plan, any Shares covered by an Award

granted under the Plan, or to which such an Award relates, are forfeited, or if

an Award otherwise terminates or is cancelled without the delivery of Shares or

of other consideration, then the Shares covered by such Award, or to which such

Award relates, or the number of Shares otherwise counted against the aggregate

number of Shares with respect to which Awards may be granted, to the extent of

any such forfeiture, termination or cancellation, shall again be, or shall

become Shares with respect to which Awards may be granted. In the event that any

Option or other Award granted hereunder is exercised through the delivery of

Shares, the number of Shares available for Awards under the Plan shall be

increased by the number of Shares surrendered.

 

     (b) Section 162(m) Requirements. To the extent Awards are intended to

qualify as performance-based compensation under Section 162(m) of the Code, the

following additional limitations are imposed under the Plan, subject to

adjustments as provided in this Section 4.

 

          (i) The maximum aggregate number of Shares that may be granted as

     Options and Stock Appreciation Rights to any one individual over the term

     of the Plan shall be 1,500,000 Shares.

 

          (ii) The maximum aggregate number of Shares that may be granted as

     Restricted Stock Awards to any one individual over a performance period

     shall be 500,000 Shares.

 

          (iii) The maximum aggregate number of Shares that may be granted as

     Performance Awards to any one individual over a performance period shall be

     300,000 Shares.

 

     (c) Sources of Shares Deliverable Under Awards. Any Shares delivered

pursuant to an Award may consist, in whole or in part, of authorized and

unissued Shares or treasury Shares.

 

     (d) Adjustments. In the event that the Committee determines that any

dividend or other distribution (whether in the form of cash, Shares, other

securities, or other property), recapitalization, stock split, reverse stock

split, reorganization, merger, consolidation, split-up, spin-off, combination,

repurchase, or exchange of Shares or other securities of the Company, issuance

of warrants or other rights to purchase Shares or other securities of the

Company, or other similar corporate transaction or event affects the Shares such

that an adjustment is determined by the Committee to be appropriate in order to

prevent dilution or enlargement of the benefits or potential benefits intended

to be made available under the Plan, then the Committee shall, in such manner as

it may deem equitable, adjust any or all of (i) the number and type of Shares

(or other securities or property) with respect to which Awards may be granted,

(ii) the number and type of Shares (or other securities or property) subject to

outstanding Awards, and (iii) the grant or exercise price with respect to any

Award or, if deemed appropriate, make provision for a cash payment to the holder

of an outstanding Award; provided, that the number of Shares subject to any

Award denominated in Shares shall always be a whole number.

 

SECTION 5. Eligibility.

 

     Any Employee of the Company shall be eligible to be designated a

Participant.

 

SECTION 6.  Awards.

 

     (a) Options. The Committee shall have authority to award Options subject to

the following terms and conditions and such additional terms and conditions as

the Committee shall determine are not inconsistent with the provisions of the

Plan.

 

          (i) Exercise Price. The purchase price per Share purchasable under an

     Option shall be determined by the Committee at the time each Option is

     granted; provided, however, that the purchase price per Share shall not be

     less than 100% of Fair Market Value on the date of grant, except in the

     case of Options

 

     that are granted in assumption of, or in substitution for, outstanding

     awards previously granted by (i) a company acquired by the Company or one

     or more of its Affiliates, or (ii) a company with which the Company or one

     or more of its Affiliates combines.

 

          (ii) Time and Method of Exercise. Options shall be exercisable in

     accordance with such terms and conditions and during such periods as may be

     established by the Committee.

 

          (iii) Payment of Option Exercise Price. The payment of the Exercise

     Price of an Option granted under this Section 6 shall be subject to the

     following:

 

             (A) The full Exercise Price for Shares purchased upon the exercise

        of any Option shall be paid at the time of such exercise (except that,

        in the case of an exercise arrangement approved by the Committee and

        described in subsection (C) below, payment may be made as soon as

        practicable after the exercise).

 

             (B) The Exercise Price shall be payable in cash or by tendering

        Mature Shares (by either actual delivery of Mature Shares or by

        attestation, with such Shares valued at Fair Market Value as of the day

        of exercise), or in any combination thereof, as determined by the

        Committee.

 

             (C) The Committee may permit a Participant to elect to pay the

        Exercise Price upon the exercise of an Option by authorizing a third

        party to sell Shares (or a sufficient portion of the Shares) acquired

        upon exercise of the Option and remit to the Company a sufficient

        portion of the sale proceeds to pay the entire Exercise Price and any

        tax withholding resulting from such exercise.

 

          (iv) Incentive Stock Options. The terms of any Incentive Stock Option

     granted under the Plan shall comply in all respects with the provisions of

     Section 422 of the Code, or any successor provision, and any regulations

     promulgated thereunder.

 

     (b) Stock Appreciation Rights. The Committee shall have authority to award

Stock Appreciation Rights which shall consist of a right to receive the excess

of the Fair Market Value over the Exercise Price. Subject to the following

conditions, a Stock Appreciation Right may be granted in tandem with another

Award, in addition to another Award, or freestanding and unrelated to another

Award. A Stock Appreciation Right granted in tandem with or in addition to

another Award may be granted either at the same time as such other Award or at a

later time.

 

          (i) Grant Price. The grant price of a Stock Appreciation Right shall

     be determined by the Committee; provided, however, that the grant price

     shall not be less than 100% of Fair Market Value on the date of grant or on

     the date of original grant of any related Award, except in case of Awards

     granted in assumption of, or in substitution for, outstanding awards

     previously granted by (i) a company acquired by the Company or one or more

     of its Affiliates, or (ii) a company with which the Company or one or more

     of its Affiliates combines.

 

          (ii) Other Terms and Conditions. The Committee may impose such

     conditions or restrictions on the exercise of any Stock Appreciation Right

     as it shall deem appropriate.

 

     (c) Restricted Stock. The Committee shall have authority to award

Restricted Stock subject to such conditions, restrictions and contingencies as

the Committee shall determine, including but not limited to the following terms

and conditions.

 

          (i) Dividends. Unless otherwise determined by the Committee,

     Restricted Stock Awards shall provide for the payment of dividends during

     the Restricted Period. Dividends paid on Restricted Stock may be paid

     directly to the Participant, may be subject to risk of forfeiture and/or

     transfer restrictions during any period established by the Committee, all

     as determined by the Committee in its discretion.

 

          (ii) Registration. Any Restricted Stock may be evidenced in such

     manner, as the Committee shall deem appropriate, including, without

     limitation, book-entry registration or issuance of a stock certificate or

     certificates. In the event any stock certificate is issued in respect of

     Restricted Stock granted under the Plan, such certificate shall be

     registered in the name of the Participant and shall bear an appropriate

     legend referring to the terms, conditions, and restrictions applicable to

     such Restricted Stock.

 

     Unrestricted Shares, evidenced in such manner as the Committee shall deem

     appropriate, shall be issued to the holder of Restricted Stock promptly

     after the applicable restrictions have lapsed or otherwise been satisfied.

 

          (iii) Transfer Restrictions. During the applicable restriction period,

     Restricted Stock will be subject to the limitations on transfer as provided

     in Section 6(f)(iii).

 

          (iv) Performance Based. The Committee may, subject to the terms of the

     Plan, establish at the time a Restricted Stock Award is granted the

     performance period, the performance goals pursuant to which the

     restrictions on the Restricted Stock Award will lapse and establish the

     schedule or schedules setting forth the portion of the Restricted Stock

     Award which will be earned or forfeited based on the degree of achievement,

     or lack thereof, of the performance goals at the end of the relevant

     performance period. The performance goals shall be based on one or more of

     the following criteria as determined by the Committee: (i) the Company's

     total shareholder return compared to peer companies' total shareholder

     return; (ii) cost of finding; (iii) reserve replacement; (iv) production;

     (v) reserves; (vi) cash flow; and, (vii) net income. During any performance

     period, the Committee shall have authority to adjust the performance goals

     in such manner as the Committee, in its sole discretion, deems appropriate

     with respect to such performance period.

 

          (v) Vesting. Non-performance based Restricted Stock Awards will not be

     100% vested prior to three years from the date of grant. Performance based

     Restricted Stock Awards will not vest prior to one year from the date of

     grant.

 

     (d) Performance Awards. The Committee shall have authority to grant

Performance Awards, which shall consist of a right denominated or payable in

Shares and shall confer on the holder thereof compensation rights based upon the

achievement of performance goals.

 

          (i) Terms and Conditions. Subject to the terms of the Plan, the

     Committee shall establish at the time a Performance Award is granted the

     performance period (which shall not be less than one year), the performance

     goals pursuant to which a Participant may earn and be entitled to a payment

     under such Performance Award and establish the schedule or schedules

     setting forth the portion of the Performance Award which will be earned or

     forfeited based on the degree of achievement, or lack thereof, of the

     performance goals at the end of the relevant performance period. The

     performance goals shall be based on one or more of the following criteria

     as determined by the Committee: (i) the Company's total shareholder return

     compared to peer companies' total shareholder return; (ii) cost of finding;

     (iii) reserve replacement; (iv) production; (v) reserves; (vi) cash flow;

     and (vii) net income. During any performance period, the Committee shall

     have authority to adjust the performance goals in such manner as the

     Committee, in its sole discretion, deems appropriate with respect to such

     performance period.

 

          (ii) Payment of Performance Awards. Performance Award compensation

     payments may be paid in a lump sum or in installments, in cash, Shares or

     in any combination thereof, following the close of the performance period

     or, in accordance with procedures established by the Committee, on a

     deferred basis.

 

     (e) Stock Compensation. The Committee shall have authority to make an Award

in lieu of all or a portion of the cash compensation payable under any

compensation program of the Company. The number and type of Shares to be

distributed, as well as the terms and conditions of any such Awards, shall be

determined by the Committee.

 

     (f) General.

 

          (i) Awards May Be Granted Separately or Together. Awards may, in the

     discretion of the Committee, be granted either alone or in addition to, in

     tandem with, or in substitution for any other Award granted under the Plan

     or any award granted under any other plan of the Company or any Affiliate.

     Awards granted in addition to or in tandem with other Awards or awards

     granted under any other plan of the Company or any Affiliate may be granted

     either at the same time as or at a different time from the grant of such

     other Awards or awards.

 

          (ii) Forms of Payment by Company Under Awards. Subject to the terms of

     the Plan and of any applicable Award Agreement, payments or transfers to be

     made by the Company or an Affiliate upon the grant, exercise or payment of

     an Award may be made in such form or forms as the Committee shall

     determine, including, without limitation, cash, Shares, other securities,

     other Awards or other property, or any combination thereof, and may be made

     in a single payment or transfer, in installments, or on a deferred basis,

     in each case in accordance with rules and procedures established by the

     Committee. Such rules and procedures may include, without limitation,

     provisions for the payment or crediting of reasonable interest on

     installment or deferred payments.

 

          (iii) Limits on Transfer of Awards.

 

             (A) Each Award, and each right under any Award, shall be

        exercisable only by the Participant during the Participant's lifetime,

        or, if permissible under applicable law, by the Participant's guardian

        or legal representative or by a transferee receiving such Award pursuant

        to a qualified domestic relations order (a "QDRO") as determined by the

        Committee.

 

             (B) Except as otherwise provided by the Committee, Awards under the

        Plan are not transferable except as designated by the participant by

        will or by the laws of descent and distribution.

 

          (iv) Term of Awards. The term of each Award shall be for such period

     as may be determined by the Committee; provided, that in no event shall the

     term of any Incentive Stock Option exceed a period of ten years from the

     date of its grant.

 

          (v) Share Certificates. All certificates for Shares or other

     securities of the Company or any Affiliate delivered under the Plan

     pursuant to any Award or the exercise thereof shall be subject to such stop

     transfer orders and other restrictions as the Committee may deem advisable

     under the Plan or the rules, regulations, and other requirements of the

     Securities and Exchange Commission, any stock exchange upon which such

     Shares or other securities are then listed, and any applicable Federal or

     state laws, and the Committee may cause a legend or legends to be put on

     any such certificates to make appropriate reference to such restrictions.

 

          (vi) Consideration for Grants. Awards may be granted for no cash

     consideration or for such consideration as the Committee determines

     including, without limitation, such minimal cash consideration as may be

     required by applicable law.

 

          (vii) Delivery of Mature Shares or other Securities and Payment by

     Participant of Consideration. No Shares or other securities shall be

     delivered pursuant to any Award until payment in full of any amount

     required to be paid is received by the Company pursuant to the Plan or the

     applicable Award Agreement. Such payment may be made by such method or

     methods and in such form or forms as the Committee shall determine,

     including, without limitation, cash, Mature Shares, other securities, other

     Awards or other property, or any combination thereof; provided that the

     combined value, as determined by the Committee, of all cash and cash

     equivalents and the Fair Market Value of any such Shares or other property

     so tendered to the Company, as of the date of such tender, is at least

     equal to the full amount required to be paid pursuant to the Plan or the

     applicable Award Agreement to the Company.

 

SECTION 7. Amendment and Termination.

 

     Except to the extent prohibited by applicable law and unless otherwise

expressly provided in an Award Agreement or in the Plan:

 

     (a) Amendments to the Plan. The Board may amend, alter, suspend,

discontinue, or terminate the Plan without the consent of any shareholder,

Participant, other holder or beneficiary of an Award, or other Person; provided

that notwithstanding any other provision of the Plan or any Award Agreement,

without the approval of the stockholders of the Company no such amendment,

alteration, suspension, discontinuation, or termination shall be made that

would:

 

          (i) increase the total number of Shares available for Awards under the

     Plan, except as provided in Section 4(d);

 

          (ii) permit Awards encompassing rights to purchase Shares to be

     granted with per Share grant, exercise or purchase prices of less than the

     Fair Market Value of a Share on the date of grant thereof, except as

     otherwise permitted under Section 6;

 

          (iii) permit a change in the class of employees eligible to receive

     Awards; or

 

          (iv) materially increase the benefits accruing to Participants under

     the Plan.

 

     (b) Amendments to Awards. The Committee may amend any Award theretofore

granted, provided no change in any Award shall reduce the benefit to Participant

without the consent of such Participant. Notwithstanding the foregoing, the

Committee is not authorized to reprice or cancel and reissue Options.

 

     (c) Adjustment of Awards. The Committee is authorized to make adjustments

in the terms and conditions of, and the criteria included in, Awards in

recognition of unusual or nonrecurring events (including, without limitation,

the events described in Section 4(d)) affecting the Company, any Affiliate, or

the financial statements of the Company or any Affiliate, or of changes in

applicable laws, regulations, or accounting principles, whenever the Committee

determines that such adjustments are appropriate in order to prevent dilution or

enlargement of the benefits or potential benefits intended to be made available

under the Plan.

 

SECTION 8. Change of Control.

 

     (a) Notwithstanding any other provision of the Plan to the contrary, in the

event of a Change of Control and as of the date such Change of Control is

determined to have occurred:

 

          (i) Any Options and Stock Appreciation Rights outstanding as of the

     date of the Change of Control, and which are not then exercisable and

     vested, shall become fully exercisable and vested.

 

          (ii) The restrictions applicable to any Restricted Stock Award as of

     the date of the Change of Control which is not performance based shall

     lapse and such Restricted Stock shall become free of all restrictions and

     become fully vested and transferable.

 

          (iii) Except as otherwise set forth in a Participant's Award

     Agreement, as of the date of the Change of Control, the restrictions

     applicable to any Performance Award and any performance-based Restricted

     Stock Award granted pursuant to Section 6(c)(iv) or Section 6(d) shall

     become free of all restrictions and become fully vested and transferable.

 

     (b) In addition to the Board's authority set forth in Sections 7(c) and

8(a), in order to maintain the Participants' rights in the event of any Change

of Control, the Board, as constituted before such Change of Control, is hereby

authorized, and has sole discretion, as to any Award, either at the time such

Award is made hereunder or any time thereafter, to take any one or more of the

following actions: (i) provide for the purchase of any such Award for an amount

of cash equal to the amount that could have been attained upon the exercise of

such Award or realization of the Participant's rights had such Award been

currently exercisable or payable; (ii) make such adjustment to any such Award

then outstanding as the Board deems appropriate to reflect such Change of

Control; or (iii) cause any such Award then outstanding to be assumed, or new

rights substituted therefor, by the acquiring or surviving corporation after

such Change of Control. The Board may, in its discretion, include such further

provisions and limitations in any Award Agreement, as it may deem equitable and

in the best interests of the Company.

 

     (c) A "Change of Control" shall be deemed to occur if:

 

          (i) any individual, entity or group (within the meaning of Section

     13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") acquires 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 the Company (the "Outstanding Company Common Stock") or (B) the

     combined voting power of the then outstanding voting securities of the

     Company 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: (1) any acquisition directly from the

     Company, (2) any acquisition by the Company, (3) any acquisition

 

     by any employee benefit plan (or related trust) sponsored or maintained by

     the Company or any corporation controlled by the Company or (4) any

     acquisition pursuant to a transaction which complies with clauses (A), (B)

     and (C) of subsection (iii) of this Section (c); or

 

          (ii) individuals who, as of the effective date of the Plan, constitute

     the Board (the "Incumbent Board") cease for any reason to constitute at

     least a majority of the Board; provided, however, that any individual

     becoming a director subsequent to the effective date of the Plan whose

     election, or nomination for election by the Company's stockholders, 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 Board; or

 

          (iii) approval by the stockholders of the Company of a reorganization,

     merger or consolidation or sale or other disposition of all or

     substantially all of the assets of the Company or the acquisition of assets

     of another entity (a "Business Combination"), in each case, unless,

     following such Business Combination, (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 Business Combination 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 Business Combination (including, without limitation, a

     corporation which as a result of such transaction owns the Company or all

     or substantially all of the Company's assets either directly or through one

     or more subsidiaries) in substantially the same proportions as their

     ownership, immediately prior to such Business Combination 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 the Company or such corporation resulting from such

     Business Combination) beneficially own, directly or indirectly, 20% or more

     of, respectively, the then outstanding shares of common stock of the

     corporation resulting from such Business Combination 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 Business

     Combination, and (C) at least a majority of the members of the board of

     directors of the corporation resulting from such Business Combination were

     members of the Incumbent Board at the time of the execution of the initial

     agreement, or of the action of the Board, providing for such Business

     Combination; or

 

          (iv) approval by the stockholders of the Company of a complete

     liquidation or dissolution of the Company.

 

SECTION 9. General Provisions.

 

     (a) No Rights to Awards. No Employee, Participant or other Person shall

have any claim to be granted any Award, and there is no obligation for

uniformity of treatment of Employees, Participants, or holders or beneficiaries

of Awards. The terms and conditions of Awards need not be the same with respect

to each recipient.

 

     (b) Delegation. Subject to the terms of the Plan and applicable law, the

Committee may delegate to one or more officers or managers of the Company or any

Affiliate, or to a committee of such officers or managers, the authority,

subject to such terms and limitations as the Committee shall determine, to grant

Awards to, or to cancel, modify or waive rights with respect to, or to alter,

discontinue, suspend, or terminate Awards held by Participants who are not

officers or directors of the Company for purposes of Section 16 of the Exchange

Act, or any successor Section thereto, or who are otherwise not subject to such

Section.

 

     (c) Tax Withholding. The Company or any Affiliate is hereby authorized to

withhold from any Award, from any payment due or transfer made under any Award

or under the Plan or from any compensation or other amount owing to a

Participant the amount (in cash, Shares, other securities, other Awards or other

 

property) of any applicable withholding taxes in respect of an Award, its

exercise, the lapse of restrictions thereon, or any payment or transfer under an

Award or under the Plan 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.

 

     (d) No Limit on Other Compensation Arrangements. Nothing contained in the

Plan shall prevent the Company or any Affiliate from adopting or continuing in

effect other compensation arrangements (subject to shareholder approval of such

other arrangement, if such approval is required), and such arrangements may be

either generally applicable or applicable only in specific cases.

 

     (e) No Right to Employment. The grant of an Award shall not be construed as

giving a Participant the right to be retained in the employ of the Company or

any Affiliate. Further, the Company or an Affiliate may at any time dismiss a

Participant from employment, free from any liability or any claim under the

Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.

 

     (f) Governing Law. The validity, construction, and effect of the Plan and

any rules and regulations relating to the Plan shall be determined in accordance

with the laws of the State of Texas and applicable Federal law.

 

     (g) Severability. If any provision of the Plan or any Award is or becomes

or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as

to any Person or Award, or would disqualify the Plan or any Award under any law

deemed applicable by the Committee, such provision shall be construed or deemed

amended to conform to applicable laws, or if it cannot be construed or deemed

amended without, in the determination of the Committee, materially altering the

intent of the Plan or the Award, such provision shall be stricken as to such

jurisdiction, Person or Award and the remainder of the Plan and any such Award

shall remain in full force and effect.

 

     (h) Other Laws. The Committee may refuse to issue or transfer any Shares or

other consideration under an Award if, acting in its sole discretion, it

determines that the issuance of transfer or such Shares or such other

consideration might violate any applicable law or regulation or entitle the

Company to recover the same under Section 16(b) of the Exchange Act, and any

payment tendered to the Company by a Participant, other holder or beneficiary in

connection with the exercise of such Award shall be promptly refunded to the

relevant Participant, holder or beneficiary.

 

     (i) No Trust or Fund Created. Neither the Plan nor any Award shall create

or be construed to create a trust or separate fund of any kind or a fiduciary

relationship between the Company or any Affiliate and a Participant or any other

Person. To the extent that any Person acquires a right to receive payments from

the Company or any Affiliate pursuant to an Award, such right shall be no

greater than the right of any unsecured general creditor of the Company or any

Affiliate.

 

     (j) No Fractional Shares. No fractional Shares shall be issued or delivered

pursuant to the Plan or any Award, and the Committee shall determine whether

cash, other securities, or other property shall be paid or transferred in lieu

of any fractional Shares or whether such fractional Shares or any rights thereto

shall be cancelled, terminated, or otherwise eliminated.

 

     (k) Headings. Headings are given to the Sections and subsections of the

Plan solely as a convenience to facilitate reference. Such headings shall not be

deemed in any way material or relevant to the construction or interpretation of

the Plan or any provision thereof.

 

SECTION 10. Effective Date of the Plan.

 

     The Plan shall be effective as of the date of its approval by the Board,

subject to its approval by the stockholders of the Company.

 

SECTION 11. Term of the Plan.

 

     No Award shall be granted under the Plan ten years after approval by the

Board. However, unless otherwise expressly provided in the Plan or in an

applicable Award Agreement, any Award theretofore granted may, and the authority

of the Board or the Committee to amend, alter, adjust, suspend, discontinue, or

terminate any such Award or to waive any conditions or rights under any such

Award shall, extend beyond such date.

 

 

 

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                                  AMENDMENT TO

                            1999 STOCK INCENTIVE PLAN

 

         WHEREAS, ANADARKO PETROLEUM CORPORATION (the "Company") has heretofore

adopted the 1999 STOCK INCENTIVE PLAN as amended (the "Plan"); and

 

         WHEREAS, the Company desires to amend the Plan:

 

         NOW, THEREFORE, the Plan shall be amended, subject to stockholder

approval, as of July 1, 2000.

 

         1.       Section 4 (a) (i) shall be amended by replacing the number

                  "4,000,000" with the number "14,000,000".

 

         2.       Section 4 (a) (ii) shall be amended by replacing the number

                  "800,000" with the number "2,800,000".

 

         3.       Section 4 (b) (i) shall be amended by replacing the number

                  "1,500,000" with the number "2,500,000".

 

         4.       Section 4 (b) (iii) shall be amended by replacing the number

                  "300,000" with the number "500,000".

 

         5.       Section 6 (c) (v) shall be amended by having the first

                  sentence replaced in its entirety with the following:

 

                         "Non-performance based Restricted Stock Awards will not

                  be 100% vested prior to three years from the date of grant

                  except for Restricted Stock Awards that may be vested earlier

                  due to (i) disability, (ii) death, (iii) termination of

                  employment due to a reduction in force, job abolishment or at

                  the convenience of the Company or (iv) with the consent of the

                  Committee, retirement."

 

         2.       As amended hereby, the Plan is specifically ratified and

                  reaffirmed.

 

         IN WITNESS WHEREOF, the parties hereto have caused these presents to be

executed this 2nd day of April, 2000.

 

                                        ANADARKO PETROLEUM CORPORATION

 

 

                                        By:

                                           -------------------------------------

                                           Charles G. Manley

                                           Senior Vice President, Administration

 

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