Exhibit 10.3

TAX SHARING AGREEMENT

DATED AS OF APRIL 26, 2012

BY AND AMONG

CONOCOPHILLIPS,

CONOCOPHILLIPS COMPANY,

PHILLIPS 66,

AND

PHILLIPS 66 COMPANY

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TABLE OF CONTENTS

 

      Page  

Section 1.        Definition of Terms

     2   

Section 2.        Allocation of Tax Liabilities and Tax Benefits

     13   

Section 2.01      General Rule

     13   

Section 2.02      Federal Tax and Tax Benefits

     13   

Section 2.03      State Tax and Tax Benefits

     15   

Section 2.04      Foreign Tax and Tax Benefits

     16   

Section 2.05      UK Taxes

     17   

Section 2.06      Certain Transaction Taxes and Breaches of Covenant

     18   

Section 2.07      Tax Benefits

     19   

Section 2.08      Special Allocation and Computational Rules

     20   

Section 2.09      Deductible and Includible Tax Payments

     20   

Section 3.        Proration of Taxes for Straddle Periods

     21   

Section 4.        Preparation and Filing of Tax Returns

     21   

Section 4.01      General

     21   

Section 4.02      ConocoPhillips’s Responsibility

     22   

Section 4.03      Phillips 66’s Responsibility

     22   

Section 4.04      Tax Return Filing and Past Practices

     22   

Section 4.05      Consolidated or Combined Tax Returns

     23   

Section 4.06      Right to Review Tax Returns

     23   

Section 4.07      Phillips 66 Carrybacks and Claims for Refund

     25   

Section 4.08      Apportionment of Earnings and Profits and Tax Attributes

     25   

Section 5.        Due Date for Payments and Related Matters

     26   

Section 5.01      General Rule

     26   

 

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Section 5.02      ConocoPhillips Federal Consolidated Income Tax Returns,
ConocoPhillips State Combined Income Tax

                             Returns and State Separate Income Tax Returns

     26   

Section 5.03      Other Taxes

     31   

Section 5.04      Certain Separate Return Income Taxes and Property Taxes

     34   

Section 5.05      Tax-Related Losses

     35   

Section 5.06      Treatment of Payments; Tax Gross Up

     35   

Section 5.07      Late Payments

     35   

Section 6.        Tax-Free Status

     36   

Section 6.01      Tax Opinions/Rulings and Representation Letters

     36   

Section 6.02      Restrictions on Phillips 66 and Phillips 66 Company

     36   

Section 6.03      Procedures Regarding Opinions and Rulings

     39   

Section 6.04      Liability for Tax-Related Losses

     40   

Section 7.        Assistance and Cooperation

     41   

Section 7.01      Assistance and Cooperation

     41   

Section 7.02      Tax Packages and Other Tax Return Information

     41   

Section 7.03      Reliance by ConocoPhillips

     42   

Section 8.        Tax Records

     42   

Section 8.01      Retention of Tax Records

     42   

Section 8.02      Access to Tax Records

     43   

Section 9.        Tax Contests

     43   

Section 9.01      Notice

     43   

Section 9.02      Control of Tax Contests

     43   

 

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Section 10.        Effective Date; Termination of Prior Intercompany Tax
Allocation Agreements

     46   

Section 11.        Survival of Obligations

     46   

Section 12.        Dispute Resolution

     46   

Section 13.        Expenses

     46   

Section 14.        General Provisions

     47   

Section 14.01      Addresses and Notices

     47   

Section 14.02      Binding Effect

     47   

Section 14.03      Waiver

     47   

Section 14.04      Severability

     48   

Section 14.05      Authority

     48   

Section 14.06      Further Action

     48   

Section 14.07      Integration

     48   

Section 14.08      Construction

     48   

Section 14.09      No Double Recovery

     48   

Section 14.10      Counterparts

     49   

Section 14.11      Governing Law

     49   

Section 14.12      Jurisdiction

     49   

Section 14.13      Amendment

     49   

Section 14.14      Phillips 66 Subsidiaries

     49   

Section 14.15      Successors

     49   

Section 14.16      Injunctions

     49   

 

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TAX SHARING AGREEMENT

This TAX SHARING AGREEMENT (this “Agreement”) is entered into as of April 26,
2012, by and among ConocoPhillips, a Delaware corporation (“ConocoPhillips”),
ConocoPhillips Company, a Delaware corporation and a wholly-owned subsidiary of
ConocoPhillips (“ConocoPhillips Company”), Phillips 66, a Delaware corporation
and a wholly-owned subsidiary of ConocoPhillips (“Phillips 66”), and Phillips 66
Company, a Delaware corporation and a wholly-owned subsidiary of ConocoPhillips
Company (“Phillips 66 Company”) (ConocoPhillips and Phillips 66 are sometimes
collectively referred to herein as the “Companies” and, as the context requires,
individually referred to herein as the “Company”).

RECITALS

WHEREAS, the board of directors of ConocoPhillips has determined that it is in
the best interests of ConocoPhillips and its stockholders to create a new
publicly traded company that shall operate the Phillips 66 Business;

WHEREAS, pursuant to the Separation and Distribution Agreement, ConocoPhillips
and Phillips 66 have agreed to create the new publicly traded company by means
of, among other actions, (a) the contribution by ConocoPhillips Company to
Phillips 66 Company of any Phillips 66 Assets held directly by ConocoPhillips
Company in exchange for (i) the assumption by Phillips 66 Company of any
Phillips 66 Liabilities from ConocoPhillips Company, and (ii) a number of shares
of common stock, par value $0.01 per share, of Phillips 66 Company (the
“Internal Contribution”); (b) the distribution, on the Internal Distribution
Date, by ConocoPhillips Company to ConocoPhillips of all the outstanding shares
of common stock, par value $0.01 per share, of Phillips 66 Company (the
“Internal Distribution”); (c) the contribution by ConocoPhillips to Phillips 66
of all the outstanding stock of Phillips 66 Company and any Phillips 66 Assets
held directly by ConocoPhillips in exchange for (i) the assumption by Phillips
66 of any Phillips 66 Liabilities from ConocoPhillips, (ii) a special cash
distribution; and (iii) a number of shares of Phillips 66 Common Stock (the
“Contribution”); and (d) the distribution to holders of shares of ConocoPhillips
Common Stock, through a spin-off, of all the outstanding shares of Phillips 66
Common Stock, as more fully described in the Separation and Distribution
Agreement and the Ancillary Agreements (the “Distribution”);

WHEREAS, as of the date hereof, ConocoPhillips is the common parent of an
affiliated group of corporations, including ConocoPhillips Company, Phillips 66,
and Phillips 66 Company, which has elected to file consolidated Federal Income
Tax Returns;

WHEREAS, as a result of the Distribution, Phillips 66 and its subsidiaries will
cease to be members of the affiliated group (as that term is defined in
Section 1504 of the Code) of which ConocoPhillips is the common parent;

WHEREAS, the parties desire to provide for and agree upon the allocation between
the parties of liabilities for Taxes arising prior to, as a result of, and
subsequent to the Distribution, and to provide for and agree upon other matters
relating to Taxes;

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NOW THEREFORE, in consideration of the mutual agreements contained herein, the
parties hereby agree as follows:

Section 1. Definition of Terms.

For purposes of this Agreement (including the recitals hereof), the following
terms have the following meanings, and capitalized terms used but not otherwise
defined herein shall have the meaning ascribed to them in the Separation and
Distribution Agreement:

“Accounting Cutoff Date” means, with respect to Phillips 66, any date as of the
end of which there is a closing of the financial accounting records for such
entity.

“Accrued” has the meaning set forth in Section 5.02(b)(i)(A) of this Agreement.

“Accrued ConocoPhillips Other Tax Liability” has the meaning set forth in
Section 5.03(b)(ii)(A)of this Agreement.

“Accrued ConocoPhillips State Income Tax Asset” has the meaning set forth in
Section 5.02(b)(ii)(A) of this Agreement.

“Accrued ConocoPhillips State Income Tax Liability” has the meaning set forth in
Section 5.02(b)(ii)(A) of this Agreement.

“Accrued Phillips 66 Federal Income Tax Asset” has the meaning set forth in
Section 5.02(b)(i)(A) of this Agreement.

“Accrued Phillips 66 Income Tax Asset” has the meaning set forth in
Section 5.02(b)(i)(A) of this Agreement.

“Accrued Phillips 66 Other Tax Liability” has the meaning set forth in
Section 5.03(b)(i)(A) of this Agreement.

“Accrued Phillips 66 State Income Tax Asset” has the meaning set forth in
Section 5.02(b)(i)(A) of this Agreement.

“Accrued Phillips 66 Federal Income Tax Liability” has the meaning set forth in
Section 5.02(b)(i)(A) of this Agreement.

“Accrued Phillips 66 Income Tax Liability” has the meaning set forth in
Section 5.02(b)(i)(A) of this Agreement.

“Accrued Phillips 66 State Income Tax Liability” has the meaning set forth in
Section 5.02(b)(i)(A) of this Agreement.

“Active Trade or Business” means the active conduct (as defined in
Section 355(b)(2) of the Code and the regulations thereunder) by (a) Phillips 66
and its “separate affiliated group” (as defined in Section 355(b)(3)(B) of the
Code) of the Refining Active Business (as defined in the Ruling Request) as
conducted immediately prior to the Distribution; and (b) Phillips 66 Company and
its “separate affiliated group” (as defined in Section 355(b)(3)(B) of the Code)
of the Refining Active Business (as defined in the Ruling Request) as conducted
immediately prior to the Internal Distribution.

 

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“Adjustment Request” means any formal or informal claim or request filed with
any Tax Authority, or with any administrative agency or court, for the
adjustment, refund, or credit of Taxes, including (a) any amended Tax return
claiming adjustment to the Taxes as reported on the Tax Return or, if
applicable, as previously adjusted, (b) any claim for equitable recoupment or
other offset, and (c) any claim for refund or credit of Taxes previously paid.

“Affiliate” means any entity that is directly or indirectly “controlled” by
either the person in question or an Affiliate of such person. “Control” means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through ownership
of voting securities, by contract or otherwise. The term Affiliate shall refer
to Affiliates of a person as determined immediately after the Distribution.

“Agreed UK Group Relief Surrenders” means Group Relief Surrenders between
members of one Group and members of the other Group in the amounts and in
respect of the UK Corporation Tax UK Accounting Periods set out in Appendix 1 to
Schedule 2.05 or such other Group Relief Surrenders as fall to be made in
accordance with Paragraph 3 of Schedule 2.05, and any reference to an amendment
to an Agreed UK Group Relief Surrender shall include any amendment or adjustment
to, any withdrawal of and the making of any claim, election, surrender, notice
or consent that is inconsistent with the claims, elections, surrenders, notices
or consents made in respect of such Agreed UK Group Relief Surrender prior to
Closing.

“Agreement” means this Tax Sharing Agreement.

“Ancillary Agreement” has the meaning set forth in the Separation and
Distribution Agreement.

“Benefit Intercompany Payee” has the meaning set forth in Section 2.09 of this
Agreement.

“Benefit Intercompany Payor” has the meaning set forth in Section 2.09 of this
Agreement.

“Board Certificate” has the meaning set forth in Section 6.02(e) of this
Agreement.

“Business Day” means a day other than a Saturday, a Sunday, or a day on which
banking institutions located in Houston, Texas, New York, New York, or London,
England are authorized or obligated by law or executive order to close.

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

“Companies” and “Company” have the meaning provided in the first sentence of
this Agreement.

“Contribution” has the meaning set forth in the recitals.

“ConocoPhillips” has the meaning provided in the first sentence of this
Agreement.

 

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“ConocoPhillips Affiliated Group” means the affiliated group (as that term is
defined in Section 1504 of the Code and Treasury Regulations thereunder) of
which ConocoPhillips is the common parent.

“ConocoPhillips Business” has the meaning provided in the Separation and
Distribution Agreement.

“ConocoPhillips Company” has the meaning provided in the first sentence of this
Agreement.

“ConocoPhillips Federal Consolidated Income Tax Return” means any U.S. Federal
consolidated Tax Return in respect of Federal Income Taxes for the
ConocoPhillips Affiliated Group.

“ConocoPhillips Group” means ConocoPhillips and its Affiliates, excluding any
entity that is a member of the Phillips 66 Group.

“ConocoPhillips Group Transaction Returns” shall have the meaning set forth in
Section 4.04(b) of this Agreement.

“ConocoPhillips Past Practice” has the meaning set forth in Section 4.04(a) of
this Agreement.

“ConocoPhillips Separate Return” means any Separate Return of ConocoPhillips or
any member of the ConocoPhillips Group.

“ConocoPhillips State Combined Income Tax Return” means a consolidated, combined
or unitary State Tax Return in respect of State Income Taxes that actually
includes, by election or otherwise, one or more members of the ConocoPhillips
Group together with one or more members of the Phillips 66 Group.

“ConocoPhillips Tax Attributes” means any Tax Attributes other than Phillips 66
Tax Attributes.

“ConocoPhillips UK Tax Practice” has the meaning set forth in Section 4.04(a) of
this Agreement.

“ConocoPhillips UK Topco” means ConocoPhillips Holdings Limited.

“Controlling Party” means, in the case of any Tax Contest described in
Section 9.02(a) or (b), the Company entitled to control the Tax Contest under
such Section.

“Corresponding Relievable Loss” means a Relievable Loss which may be the subject
of an Agreed UK Group Relief Surrender as set out in Appendix 1 to Schedule 2.05
subject to adjustment as contemplated by Paragraph 3 of Schedule 2.05.

“CTA 2009” means the United Kingdom’s Corporation Tax Act 2009.

“CTA 2010” means the United Kingdom’s Corporation Tax Act 2010.

 

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“Dispute” has the meaning set forth in Section 12 of this Agreement.

“DGCL” means the Delaware General Corporation Law.

“Distribution” has the meaning set forth in the recitals.

“Distribution Date” means the date determined in accordance with Section 3.3(a)
of the Separation and Distribution Agreement on which the Distribution occurs.

“Employee Matters Agreement” has the meaning set forth in the Separation and
Distribution Agreement.

“Excess Foreign Tax Credits” means, for each category of foreign tax credits
under Section 901 of the Code, the excess, if any, of the foreign tax credits
(other than foreign tax credits that are Phillips 66 Tax Attributes) utilized by
the Phillips 66 Business with respect to the ConocoPhillips Federal Consolidated
Income Tax Returns for the Pre-Distribution Periods that end during 2011 or 2012
and any Straddle Period, collectively, taking into account any adjustment
pursuant to a Final Determination of any such Tax Return, as determined pursuant
to and consistent with the ConocoPhillips Past Practice, over the amount of such
foreign tax credits utilized by the Phillips 66 Business as reported on such Tax
Returns (other than any amended Tax Returns), collectively, as determined
pursuant to and consistent with the ConocoPhillips Past Practice.

“Federal Income Tax” means any Tax imposed by Subtitle A of the Code, and any
interest, penalties, additions to tax, or additional amounts in respect of the
foregoing.

“Federal Other Tax” means any Tax imposed by the federal government of the
United States of America other than any Federal Income Taxes, and any interest,
penalties, additions to tax, or additional amounts in respect of the foregoing.

“Federal Tax” means any Federal Income Taxes or Federal Other Taxes.

“Fifty-Percent or Greater Interest” has the meaning ascribed to such term for
purposes of Sections 355(d) and (e) of the Code.

“Final Determination” means the final resolution of liability for any Income Tax
or Other Tax, which resolution may be for a specific issue or adjustment or for
a taxable period, (a) by IRS Form 870 or 870-AD (or any successor forms
thereto), on the later of the date of acceptance by or on behalf of the taxpayer
or the IRS, or by a comparable form under the Laws of a State, local, or foreign
taxing jurisdiction, except that a Form 870 or 870-AD or comparable form shall
not constitute a Final Determination to the extent that it reserves (whether by
its terms or by operation of Law) the right of the taxpayer to file a claim for
refund or the right of the Tax Authority to assert a further deficiency in
respect of such issue or adjustment or for such taxable period (as applicable);
(b) by a decision, judgment, decree, or other order by a court of competent
jurisdiction, which has become final and unappealable; (c) by a closing
agreement or accepted offer in compromise under Sections 7121 or 7122 of the
Code, or a comparable agreement under the Laws of a State, local, or foreign
taxing jurisdiction; (d) by any allowance of a refund or credit in respect of an
overpayment of Income Tax or Other Tax, but only after the

 

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expiration of all periods during which such refund may be recovered (including
by way of offset) by the jurisdiction imposing such Income Tax or Other Tax;
(e) by a final settlement resulting from a treaty-based competent authority
determination; or (f) by any other final disposition, including by reason of the
expiration of the applicable statute of limitations or by mutual agreement of
the parties.

“Foreign Income Tax” means any Tax imposed by any foreign country or any
possession of the United States, or by any political subdivision of any foreign
country or any possession of the United States, which is an income tax as
defined in Treasury Regulation Section 1.901-2, and any interest, penalties,
additions to tax, or additional amounts in respect of the foregoing.

“Foreign Other Tax” means any Tax imposed by any foreign country or any
possession of the United States, or by any political subdivision of any foreign
country or any possession of the United States, other than any Foreign Income
Taxes and Foreign Property Taxes, and any interest, penalties, additions to tax,
or additional amounts in respect of the foregoing.

“Foreign Property Tax” means any real, personal and intangible ad valorem
property Tax imposed by any foreign country or any possession of the United
States, or by any political subdivision of any foreign country or any possession
of the United States, and any interest penalties, additions to tax, or
additional amounts in respect of the foregoing.

“Foreign Tax” means any Foreign Income Taxes, Foreign Property Taxes or Foreign
Other Taxes.

“Group” means the ConocoPhillips Group or the Phillips 66 Group, or both, as the
context requires.

“Group Relief Surrender” means the surrender of Relievable Losses in accordance
with Part 5 of CTA 2010.

“Income Tax” means any Federal Income Tax, State Income Tax or Foreign Income
Tax.

“Indemnification and Release Agreement” has the meaning set forth in the
Separation and Distribution Agreement.

“Indemnitee” has the meaning set forth in Section 5.06(b) of this Agreement.

“Indemnitor” has the meaning set forth in Section 5.06(b) of this Agreement.

“Internal Contribution” has the meaning set forth in the recitals.

“Internal Distribution” has the meaning set forth in the recitals.

“Internal Distribution Date” has the meaning set forth in the Separation and
Distribution Agreement.

“IRS” means the U.S. Internal Revenue Service.

 

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“Joint Return” means any Tax Return of a member of the ConocoPhillips Group or
the Phillips 66 Group that is not a Separate Return.

“Non-Controlling Party” means, in the case of any Tax Contest described in
Section 9.02(a) or (b), the Company not entitled to control the Tax Contest
under such Section.

“Notified Action” has the meaning set forth in Section 6.03(a) of this
Agreement.

“Other Tax” means any Federal Other Tax, State Other Tax, or Foreign Other Tax.

“Payment Date” means (a) with respect to any ConocoPhillips Federal Consolidated
Income Tax Return, the due date (determined without regard to extensions) for
filing the return determined under Section 6072 of the Code and the date the
return is filed, and (b) with respect to any other Tax Return, the corresponding
dates determined under the applicable Tax Law.

“Person” means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization or a governmental entity or any department, agency
or political subdivision thereof, without regard to whether any entity is
treated as disregarded for U.S. Federal Income Tax purposes.

“Phillips 66” has the meaning provided in the first sentence of this Agreement.

“Phillips 66 Business” has the meaning set forth in the Separation and
Distribution Agreement.

“Phillips 66 Capital Stock” means all classes or series of capital stock of
Phillips 66, including (a) the Phillips 66 Common Stock, (b) all options,
warrants and other rights to acquire such capital stock and (c) all instruments
properly treated as stock in Phillips 66 for U.S. Federal Income Tax purposes.

“Phillips 66 Carryback” means any net operating loss, net capital loss, excess
tax credit, or other similar Tax Item of any member of the Phillips 66 Group
which may or must be carried from one Tax Period to another prior Tax Period
under the Code or other applicable Tax Law.

“Phillips 66 Common Stock” has the meaning set forth in the Separation and
Distribution Agreement.

“Phillips 66 Company” has the meaning provided in the first sentence of this
Agreement.

“Phillips 66 Company Capital Stock” means all classes or series of capital stock
of Phillips 66 Company, including (a) the common stock, par value $0.01 per
share, of Phillips 66 Company, (b) all options, warrants and other rights to
acquire such capital stock and (c) all instruments properly treated as stock in
Phillips 66 Company for U.S. Federal Income Tax purposes.

“Phillips 66 Federal Consolidated Income Tax Return” means any U.S. Federal
Income Tax Return for the affiliated group (as that term is defined in
Section 1504 of the Code) of which Phillips 66 is the common parent.

 

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“Phillips 66 Group” means Phillips 66 and its Affiliates, as determined
immediately after the Distribution.

“Phillips 66 Restructuring” has the meaning set forth in Section 6.02(f) of this
Agreement.

“Phillips 66 Separate Return” means any Separate Return of Phillips 66 or any
member of the Phillips 66 Group.

“Phillips 66 Tax Attributes” means any Tax Attributes that are attributable to,
or arise with respect to, assets or activities of the Phillips 66 Business,
determined on a “with and without” basis.

“Post-Distribution Period” means any Tax Period beginning after the Distribution
Date, and, in the case of any Straddle Period, the portion of such Straddle
Period beginning the day after the Distribution Date.

“Pre-Distribution Period” means any Tax Period ending on or before the
Distribution Date, and, in the case of any Straddle Period, the portion of such
Straddle Period ending on the Distribution Date.

“Prime Rate” has the meaning set forth in the Separation and Distribution
Agreement.

“Privilege” means any privilege that may be asserted under applicable Law,
including any privilege arising under or relating to the attorney-client
relationship (including the attorney-client and work product privileges), the
accountant-client privilege and any privilege relating to internal evaluation
processes.

“Proposed Acquisition Transaction” means a transaction or series of transactions
(or any agreement, understanding or arrangement, within the meaning of
Section 355(e) of the Code and Treasury Regulation Section 1.355-7, or any other
regulations promulgated thereunder, to enter into a transaction or series of
transactions), whether such transaction is supported by Phillips 66 management
or shareholders, is a hostile acquisition, or otherwise, as a result of which
Phillips 66 would merge or consolidate with any other Person or as a result of
which any Person or any group of related Persons would (directly or indirectly)
acquire, or have the right to acquire, from Phillips 66 and/or one or more
holders of outstanding shares of Phillips 66 Capital Stock, a number of shares
of Phillips 66 Capital Stock that would, when combined with any other changes in
ownership of Phillips 66 Capital Stock pertinent for purposes of Section 355(e)
of the Code, comprise 40% or more of (a) the value of all outstanding shares of
stock of Phillips 66 as of the date of such transaction, or in the case of a
series of transactions, the date of the last transaction of such series, or
(b) the total combined voting power of all outstanding shares of voting stock of
Phillips 66 as of the date of such transaction, or in the case of a series of
transactions, the date of the last transaction of such series. Notwithstanding
the foregoing, a Proposed Acquisition Transaction shall not include (x) the
adoption by Phillips 66 of a shareholder rights plan or (y) issuances by
Phillips 66 that satisfy Safe Harbor VIII (relating to acquisitions in
connection with a person’s performance of services) or Safe Harbor IX (relating
to acquisitions by a retirement plan of an employer) of Treasury Regulation
Section 1.355-7(d). For purposes of determining whether a transaction
constitutes an indirect acquisition, any

 

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recapitalization resulting in a shift of voting power or any redemption of
shares of stock shall be treated as an indirect acquisition of shares of stock
by the non-exchanging shareholders. This definition and the application thereof
is intended to monitor compliance with Section 355(e) of the Code and shall be
interpreted accordingly. Any clarification of, or change in, the statute or
regulations promulgated under Section 355(e) of the Code shall be incorporated
in this definition and its interpretation.

“Relievable Losses” means losses or other amounts eligible for group relief in
accordance with Part 5 of CTA 2010, and any reference to the use of a Relievable
Loss includes the use of a Relievable Loss as an allowance, credit, deduction,
exemption or set off in respect of any tax, or in the computation of any income,
profits or gains for the purposes of any tax, or to obtain a repayment of or
saving of tax.

“Representation Letters” means the representation letters and any other
materials (including, without limitation, a Ruling Request and any related
supplemental submissions to the IRS) delivered or deliverable by ConocoPhillips
and others in connection with the rendering by Tax Advisors, and/or the issuance
by the IRS, of the Tax Opinions/Rulings.

“Responsible Company” means, with respect to any Tax Return, the Company having
responsibility for preparing and filing such Tax Return under this Agreement.

“Retention Date” has the meaning set forth in Section 8.01 of this Agreement.

“Ruling” means the private letter ruling issued by the IRS to ConocoPhillips in
connection with the Transactions.

“Ruling Request” means any letter filed by ConocoPhillips with the IRS
requesting a ruling (including the Ruling) regarding certain tax consequences of
the Transactions (including all attachments, exhibits, and other materials
submitted with such ruling request letter) and any amendment or supplement to
such ruling request letter.

“Section 6.02(e) Acquisition Transaction” means any transaction or series of
transactions that is not a Proposed Acquisition Transaction but would be a
Proposed Acquisition Transaction if the percentage reflected in the definition
of Proposed Acquisition Transaction were 25% instead of 40%.

“Separate Return” means (a) in the case of any Tax Return of any member of the
Phillips 66 Group (including any consolidated, combined or unitary return), any
such Tax Return that does not include any member of the ConocoPhillips Group and
(b) in the case of any Tax Return of any member of the ConocoPhillips Group
(including any consolidated, combined or unitary return), any such Tax Return
that does not include any member of the Phillips 66 Group.

“Separation and Distribution Agreement” means the Separation and Distribution
Agreement, as amended from time to time, by and among ConocoPhillips and
Phillips 66 dated as of April 26, 2012.

“Special Joint Tax Contest” means any Tax Contest with respect to a Joint Return
to which Section 9.02(c)(ii) applies involving a potential adjustment as a
result of which adjustment

 

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Phillips 66 may reasonably be expected to become liable to make any
indemnification payment (or any payment under Section 2.07) of at least the
amount set forth on Schedule 9.02.

“Specified Separate Return” means any Separate Return reflecting both Taxes for
which Phillips 66 is responsible under Section 2 and Taxes for which
ConocoPhillips is responsible under Section 2.

“State” means each State of the United States and the District of Columbia.

“State Income Tax” means any Tax imposed by any State of the United States or by
any political subdivision of any such State which is imposed on or measured by
net income, including state and local franchise or similar Taxes measured by net
income, and any interest, penalties, additions to tax, or additional amounts in
respect of the foregoing.

“State Other Tax” means any Tax imposed by any State of the United States or by
any political subdivision of any such State other than any State Income Taxes
and State Property Tax, and any interest, penalties, additions to tax, or
additional amounts in respect of the foregoing.

“State Property Tax” means any real, personal and intangible ad valorem property
Tax imposed by any State of the United States or by any political subdivision of
any such State, and any interest, penalties, additions to tax, or additional
amounts in respect of the foregoing.

“State Separate Income Tax Return” means a Separate Return in respect of State
Income Taxes.

“State Tax” means any State Income Taxes, State Property Taxes or State Other
Taxes.

“Straddle Period” means any Tax Period that begins on or before and ends after
the Distribution Date.

“Substantial Authority” means “substantial authority” within the meaning of
Section 6662(d)(2)(B) of the Code and Treasury Regulations Section 1.6662-4(d)
(or, in the case of any Taxes not subject to Section 6662(a), an analogous
standard).

“Tax” or “Taxes” means any income, gross income, gross receipts, profits,
capital stock, franchise, withholding, payroll, social security, workers
compensation, unemployment, disability, property, ad valorem, stamp, excise,
severance, occupation, service, sales, use, license, lease, transfer, import,
export, value added, alternative minimum, estimated or other tax (including any
fee, assessment, or other charge in the nature of or in lieu of any tax) imposed
by any governmental entity or political subdivision thereof, and any interest,
penalties, additions to tax, or additional amounts in respect of the foregoing.

“Tax Advisor” means a U.S. tax counsel or accountant of recognized national
standing.

“Tax Attribute” or “Attribute” means a net operating loss, net capital loss,
unused investment credit, unused foreign tax credit, excess charitable
contribution, general business credit, minimum tax credit or any other Tax Item
that could reduce a Tax.

 

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“Tax Authority” means, with respect to any Tax, the governmental entity or
political subdivision thereof that imposes such Tax, and the agency (if any)
charged with the collection of such Tax for such entity or subdivision.

“Tax Benefit” means any refund or reduction in otherwise required Tax payments.

“Tax Contest” means an audit, review, examination, or any other administrative
or judicial proceeding with the purpose or effect of redetermining Taxes
(including any administrative or judicial review of any claim for refund).

“Tax Control” means the definition of “control” set forth in Section 368(c) of
the Code (or in any successor statute or provision), as such definition may be
amended from time to time.

“Tax-Free Status” means the qualification of each of the Internal Contribution
and Internal Distribution, taken together, and the Contribution and
Distribution, taken together, (a) as a reorganization described in Sections
355(a) and 368(a)(1)(D) of the Code, (b) as a transaction in which the stock
distributed thereby is “qualified property” for purposes of Sections 355(d),
355(e) and 361(c) of the Code, and (c) a transaction in which ConocoPhillips,
ConocoPhillips Company, Phillips 66, and Phillips 66 Company, and the
shareholders of ConocoPhillips, recognize no income or gain for Federal Income
Tax purposes pursuant to Sections 355, 361, and 1032 of the Code, other than,
(x) in the case of ConocoPhillips, ConocoPhillips Company, Phillips 66, and
Phillips 66 Company, intercompany items or excess loss accounts taken into
account pursuant to the Treasury Regulations promulgated pursuant to
Section 1502 of the Code, and (y) in the case of shareholders of ConocoPhillips,
any receipt of cash in lieu of fractional shares.

“Tax Intercompany Payee” has the meaning set forth in Section 2.09 of this
Agreement.

“Tax Intercompany Payor” has the meaning set forth in Section 2.09 of this
Agreement.

“Tax Item” means, (a) with respect to any Income Tax, any item of income, gain,
loss, deduction, credit or recapture of credit or any other item that may have
the effect of increasing or decreasing any Income Tax paid or payable, and
(b) with respect to any other Tax, any item that may have the effect of
increasing or decreasing any Tax paid or payable.

“Tax Law” means the Law of any governmental entity or political subdivision
thereof relating to any Tax.

“Tax Opinion” means (a) the opinion of Wachtell, Lipton, Rosen & Katz in
connection with the Contribution and the Distribution, and/or (b) the opinion
(or opinions) of Tax Advisors in connection with the Transactions.

“Tax Opinions/Rulings” means the Tax Opinion (or Tax Opinions) of Tax Advisors
and/or the Ruling (or Rulings) by the IRS deliverable to ConocoPhillips in
connection with the Contribution and the Distribution.

“Tax Packages” has the meaning set forth in Section 7.02(b) of this Agreement.

 

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“Tax Period” means, with respect to any Tax, the period for which the Tax is
reported as provided under the Code or other applicable Tax Law.

“Tax Records” means any Tax Returns, Tax Return workpapers, documentation
relating to any Tax Contests, and any other books of account or records (whether
or not in written, electronic or other tangible or intangible forms and whether
or not stored on electronic or any other medium) required to be maintained under
the Code or other applicable Tax Laws or under any record retention agreement
with any Tax Authority.

“Tax-Related Losses” means (a) all federal, state and local Taxes (including
interest and penalties thereon) imposed pursuant to any settlement, Final
Determination, judgment or otherwise; (b) all accounting, legal and other
professional fees, and court costs incurred in connection with such Taxes; and
(c) all costs, expenses and damages associated with stockholder litigation or
controversies and any amount paid by ConocoPhillips (or any ConocoPhillips
Affiliate) or Phillips 66 (or any Phillips 66 Affiliate) in respect of the
liability of shareholders, whether paid to shareholders or to the IRS or any
other Tax Authority, in each case, resulting from the failure of the Internal
Contribution and Internal Distribution, taken together, or the Contribution and
Distribution, taken together, to have Tax-Free Status.

“Tax Return” means any report of Taxes due, any claim for refund of Taxes paid,
any information return with respect to Taxes, or any other similar report,
statement, declaration, or document required to be filed under the Code or other
Tax Law, including any attachments, exhibits, or other materials submitted with
any of the foregoing, and including any amendments or supplements to any of the
foregoing.

“Transactions” means the Internal Contribution, the Internal Distribution, the
Contribution, the Distribution and the other transactions contemplated by the
Separation and Distribution Agreement.

“Transfer Pricing Adjustment” means any proposed or actual allocation by a Tax
Authority of any Tax Item between or among any member of the ConocoPhillips
Group and any member of the Phillips 66 Group with respect to any
Pre-Distribution Period.

“Treasury Regulations” means the regulations promulgated from time to time under
the Code as in effect for the relevant Tax Period.

“UK Corporation Tax” means corporation tax charged pursuant to section 2 of CTA
2009 and any corresponding tax on profits or gains imposed by a UK Tax Authority
(including, for the absence of doubt, the supplementary charge charged pursuant
to section 330 of CTA 2010).

“UK GPA” means ConocoPhillips UK Topco’s group payment arrangement made pursuant
to section 36 of the United Kingdom’s Finance Act 1998 or section 59F of the
United Kingdom’s Taxes Management Act 1970.

“UK Nominated Company” means ConocoPhillips (U.K.) Limited.

“UK Tax” means Tax imposed, assessed or collected by a UK Tax Authority.

 

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“UK Tax Authority” means any Tax Authority within the United Kingdom.

“UK Tax Document” means UK Tax Returns, and claims, elections, surrenders,
disclaimers, notices and consents for UK Tax purposes.

“UK Tax Return” means any Tax Return required to be made to any UK Tax
Authority.

“United Kingdom” means the United Kingdom of Great Britain and Northern Ireland.

“Unqualified Tax Opinion” means an unqualified “will” opinion of a Tax Advisor,
which Tax Advisor is acceptable to ConocoPhillips, on which ConocoPhillips may
rely to the effect that a transaction will not affect the Tax-Free Status. Any
such opinion must assume that the Internal Contribution, the Internal
Distribution, the Contribution and the Distribution would have qualified for
Tax-Free Status if the transaction in question did not occur.

“VAT” means value added tax imposed pursuant to European Council Directive
2006/112/EC, and any national legislation of a member state of the European
Union giving effect thereto, and any similar sales or turnover tax.

Section 2. Allocation of Tax Liabilities and Tax Benefits.

Section 2.01 General Rule.

(a) Phillips 66 Liability. Phillips 66 shall be liable for, and shall indemnify
and hold harmless the ConocoPhillips Group from and against any liability for,
Taxes which are allocated to Phillips 66 under this Section 2.

(b) ConocoPhillips Liability. ConocoPhillips shall be liable for, and shall
indemnify and hold harmless the Phillips 66 Group from and against any liability
for, Taxes which are allocated to ConocoPhillips under this Section 2.

Section 2.02 Federal Tax and Tax Benefits. Except as provided in Section 2.06,
Federal Income Tax and Federal Other Tax and related Tax Benefits shall be
allocated as follows:

(a) ConocoPhillips Federal Consolidated Income Tax for Pre-Distribution,
Straddle and Certain Post-Distribution Periods.

(i) With respect to any ConocoPhillips Federal Consolidated Income Tax Return
for any Pre-Distribution Period or any Straddle Period, (A) Phillips 66 shall be
responsible for any and all Federal Income Taxes and any reduction in any Tax
Benefit (other than any alternative minimum Tax or reduction in any alternative
minimum Tax Benefit) attributable to, or arising with respect to or as a result
of, assets or activities of the Phillips 66 Business, determined on a “with and
without” basis pursuant to and consistent with the ConocoPhillips Past Practice;
and (B) ConocoPhillips shall be responsible for any and all Federal Income Taxes
and any reduction in any Tax Benefit other than Federal Income Taxes (and any
reduction in Tax Benefits) for which Phillips 66 is responsible pursuant to
Section 2.02(a)(i)(A).

 

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(ii) With respect to any ConocoPhillips Federal Consolidated Income Tax Return
for any Pre-Distribution Period or any Straddle Period, subject to Section 4.07,
Phillips 66 shall be entitled to any Tax Benefit (other than any alternative
minimum Tax Benefit) attributable to, or arising with respect to or as a result
of, assets or activities of the Phillips 66 Business, determined on a “with and
without” basis pursuant to and consistent with the ConocoPhillips Past Practice.
For purposes of the calculations pursuant to this Section 2.02(a)(ii), in any
Pre-Distribution Period or Straddle Period for which both Phillips 66 Tax
Attributes and ConocoPhillips Tax Attributes are available for use, such Tax
Attributes shall be deemed utilized in the order determined pursuant to and
consistent with the ConocoPhillips Past Practice.

(iii) With respect to any ConocoPhillips Federal Consolidated Income Tax Return
for any Post-Distribution Period (other than any Straddle Period), Phillips 66
shall be responsible for any and all Federal Income Taxes and any reduction in
any Tax Benefit (other than any alternative minimum Tax or reduction in any
alternative minimum Tax Benefit), whether in connection with the filing of such
a Tax Return or a Final Determination of such a Tax Return, that would not have
arisen but for the utilization by the Phillips 66 Business for any
Pre-Distribution Period that ends during 2011 or 2012 or any Straddle Period of
Excess Foreign Tax Credits, as determined pursuant to and consistent with the
ConocoPhillips Past Practice.

(b) Separate Return Federal Income Tax. (i) Phillips 66 shall be responsible for
any and all Federal Income Taxes relating to any Phillips 66 Separate Return;
and (ii) except as set forth in Section 2.02(a)(iii), ConocoPhillips shall be
responsible for any and all Federal Income Taxes relating to any ConocoPhillips
Separate Return.

(c) Federal Other Tax.

(i) For all Pre-Distribution Periods and Straddle Periods, (A) with respect to
any and all Federal Other Taxes relating to any Tax Return filed or required to
be filed under applicable Tax Law by any member of the ConocoPhillips Group,
(I) Phillips 66 shall be responsible for any and all Federal Other Taxes
attributable to, or arising with respect to or as a result of, assets or
activities of the Phillips 66 Business; and (II) ConocoPhillips shall be
responsible for any and all other Federal Other Taxes; and (B) with respect to
any and all Federal Other Taxes relating to any Tax Return filed or required to
be filed under applicable Tax Law by any member of the Phillips 66 Group,
(I) ConocoPhillips shall be responsible for any and all Federal Other Taxes
attributable to, or arising with respect to or as a result of, assets or
activities of the ConocoPhillips Business and (II) Phillips 66 shall be
responsible for any and all other Federal Other Taxes.

(ii) For all Post-Distribution Periods (other than any Straddle Periods or
portion thereof), (A) Phillips 66 shall be responsible for any and all Federal
Other Taxes relating to any Phillips 66 Separate Return; and (B) ConocoPhillips
shall be responsible for any and all Federal Other Taxes relating to any
ConocoPhillips Separate Return.

 

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Section 2.03 State Tax and Tax Benefits. Except as provided in Section 2.06,
State Income Tax, State Property Tax, and State Other Tax and related Tax
Benefits shall be allocated as follows:

(a) State Income Tax.

(i) For any Pre-Distribution Period or any Straddle Period, (A) with respect to
any State Income Taxes relating to any ConocoPhillips State Combined Income Tax
Return or any State Separate Income Tax Return filed or required to be filed
under applicable Tax Law by any member of the ConocoPhillips Group, (I) Phillips
66 shall be responsible for any and all State Income Taxes and any reduction in
any Tax Benefit attributable to, or arising with respect to or as a result of,
assets or activities of the Phillips 66 Business, determined as reported on such
Tax Return or as subsequently adjusted pursuant to a Final Determination (which,
for the absence of doubt, means the State Income Taxes computed for the
applicable entity using its respective apportionment factor and allocated to the
Phillips 66 Business pursuant to and consistent with the ConocoPhillips Past
Practice); and (II) ConocoPhillips shall be responsible for any and all State
Income Taxes and any reduction in any Tax Benefit other than State Income Taxes
(and any reduction in Tax Benefits) for which Phillips 66 is responsible
pursuant to Section 2.03(a)(i)(A)(I); and (B) with respect to any State Income
Taxes relating to any ConocoPhillips State Combined Income Tax Return or any
State Separate Income Tax Return filed or required to be filed under applicable
Tax Law by any member of the Phillips 66 Group, (I) ConocoPhillips shall be
responsible for any and all State Income Taxes and any reduction in any Tax
Benefit attributable to, or arising with respect to or as a result of, assets or
activities of the ConocoPhillips Business, determined as reported on such Tax
Return or as subsequently adjusted pursuant to a Final Determination (which, for
the absence of doubt, means the State Income Taxes computed for the applicable
entity using its respective apportionment factor and allocated to the
ConocoPhillips Business pursuant to and consistent with the ConocoPhillips Past
Practice); and (II) Phillips 66 shall be responsible for any and all State
Income Taxes and any reduction in any Tax Benefit other than State Income Taxes
(and any reduction in Tax Benefits) for which ConocoPhillips is responsible
pursuant to Section 2.03(a)(i)(B)(I).

(ii) For any Pre-Distribution Period or any Straddle Period, subject to
Section 4.07, (A) with respect to any State Income Taxes relating to any
ConocoPhillips State Combined Income Tax Return or any State Separate Income Tax
Return filed or required to be filed under applicable Tax Law by any member of
the ConocoPhillips Group, (I) Phillips 66 shall be entitled to any Tax Benefit
attributable to, or arising with respect to or as a result of, assets or
activities of the Phillips 66 Business, determined as reported on such Tax
Return or as subsequently adjusted pursuant to a Final Determination (which, for
the absence of doubt, means the Tax Benefit computed for the applicable entity
using its respective apportionment factor and allocated to the Phillips 66
Business pursuant to and consistent with the ConocoPhillips Past Practice); and
(II) ConocoPhillips shall be entitled to any and all Tax Benefits other than Tax
Benefits to which Phillips 66 is entitled under Section 2.03(a)(ii)(A)(I); and
(B) with respect to any State Income Taxes relating to any ConocoPhillips State
Combined Income Tax Return or any State Separate Income Tax Return filed or
required to be filed under applicable Tax Law by any member of the Phillips 66
Group, (I) ConocoPhillips shall be entitled to any Tax Benefit attributable to,
or arising with respect to or as a result of, assets or activities of the
ConocoPhillips Business, determined as reported on such Tax Return or as
subsequently adjusted pursuant to a Final Determination (which, for the absence
of doubt, means the

 

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Tax Benefit computed for the applicable entity using its respective
apportionment factor and allocated to the ConocoPhillips Business pursuant to
and consistent with the ConocoPhillips Past Practice); and (II) Phillips 66
shall be entitled to any and all Tax Benefits other than Tax Benefits to which
ConocoPhillips is entitled under Section 2.03(a)(ii)(B)(I). For purposes of the
calculations pursuant to this Section 2.03(a)(ii), in any Pre-Distribution
Period or Straddle Period for which both Phillips 66 Tax Attributes and
ConocoPhillips Tax Attributes are available for use, such Tax Attributes shall
be deemed utilized in the order determined pursuant to and consistent with the
ConocoPhillips Past Practice.

(b) State Property Tax. (i) Phillips 66 shall be responsible for any and all
State Property Taxes imposed (whether in respect of a period, or a time, before
or after the Distribution) with respect to any property owned by any member of
the Phillips 66 Group immediately after the Distribution; and
(ii) ConocoPhillips shall be responsible for any and all State Property Taxes
imposed with respect to any property owned by any member of the ConocoPhillips
Group immediately after the Distribution or any property formerly owned by any
member of the ConocoPhillips Group or Phillips 66 Group before the Distribution
other than State Property Taxes for which Phillips 66 is responsible pursuant to
Section 2.03(b)(i).

(c) State Other Tax.

(i) For all Pre-Distribution Periods and Straddle Periods, (A) with respect to
any and all State Other Taxes relating to any Tax Return filed or required to be
filed under applicable Tax Law by any member of the ConocoPhillips Group,
(I) Phillips 66 shall be responsible for any and all State Other Taxes
attributable to, or arising with respect to or as a result of, assets or
activities of the Phillips 66 Business; and (II) ConocoPhillips shall be
responsible for any and all other State Other Taxes; and (B) with respect to any
and all State Other Taxes relating to any Tax Return filed or required to be
filed under applicable Tax Law by any member of the Phillips 66 Group,
(I) ConocoPhillips shall be responsible for any and all State Other Taxes
attributable to, or arising with respect to or as a result of, assets or
activities of the ConocoPhillips Business and (II) Phillips 66 shall be
responsible for any and all other State Other Taxes.

(ii) For all Post-Distribution Periods (other than any Straddle Periods or
portion thereof), (A) Phillips 66 shall be responsible for any and all State
Other Taxes relating to any Phillips 66 Separate Return; and (B) ConocoPhillips
shall be responsible for any and all State Other Taxes relating to any
ConocoPhillips Separate Return.

Section 2.04 Foreign Tax and Tax Benefits. Subject to Section 2.05 and except as
provided in Section 2.06, Foreign Income Tax, Foreign Property Tax and Foreign
Other Tax and related Tax Benefits shall be allocated as follows:

(a) Separate Return Foreign Income Tax. (i) Phillips 66 shall be responsible for
any and all Foreign Income Taxes relating to any Phillips 66 Separate Return,
including Foreign Income Tax of Phillips 66 or any member of the Phillips 66
Group imposed by way of withholding by a member of the ConocoPhillips Group; and
(ii) ConocoPhillips shall be responsible for any and all Foreign Income Taxes
relating to any ConocoPhillips Separate Return, including Foreign Income Tax of
ConocoPhillips or any member of the ConocoPhillips Group imposed by way of

 

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withholding by a member of the Phillips 66 Group; provided, however, that, in
any case falling within clause (i) or clause (ii), UK Corporation Tax that is to
be or has been discharged by the UK Nominated Company pursuant to the UK GPA
shall be dealt with in accordance with Paragraph 2.02(a) to Paragraph 2.02(c) of
Schedule 2.05.

(b) Foreign Property Tax. (i) Phillips 66 shall, except, for the absence of
doubt, as regards VAT imposed by a UK Tax Authority to which Paragraph 2.01(b)
of Schedule 2.05 applies (which shall be dealt with in accordance with that
paragraph), be responsible for any and all Foreign Property Taxes imposed
(whether in respect of a period, or a time, before or after the Distribution)
with respect to any property owned by any member of the Phillips 66 Group
immediately after the Distribution; and (ii) ConocoPhillips shall be responsible
for any and all Foreign Property Taxes imposed with respect to any property
owned by any member of the ConocoPhillips Group immediately after the
Distribution or any property formerly owned by any member of the ConocoPhillips
Group or Phillips 66 Group before the Distribution other than Foreign Property
Taxes for which Phillips 66 is responsible pursuant to Section 2.04(b)(i).

(c) Foreign Other Tax.

(i) Subject to Section 2.04(c)(iii), for all Pre-Distribution Periods and
Straddle Periods, (A) with respect to any and all Foreign Other Taxes relating
to any Tax Return filed or required to be filed under applicable Tax Law by any
member of the ConocoPhillips Group, (I) Phillips 66 shall be responsible for any
and all Foreign Other Taxes attributable to, or arising with respect to or as a
result of, assets or activities of the Phillips 66 Business; and (II)
ConocoPhillips shall be responsible for any and all other Foreign Other Taxes;
and (B) with respect to any and all Foreign Other Taxes relating to any Tax
Return filed or required to be filed under applicable Tax Law by any member of
the Phillips 66 Group, (I) ConocoPhillips shall be responsible for any and all
Foreign Other Taxes attributable to, or arising with respect to or as a result
of, assets or activities of the ConocoPhillips Business; and (II) Phillips 66
shall be responsible for any and all other Foreign Other Taxes.

(ii) Subject to Section 2.04(c)(iii), for all Post-Distribution Periods (other
than any Straddle Periods or portion thereof), (A) Phillips 66 shall be
responsible for any and all Foreign Other Taxes relating to any Phillips 66
Separate Return; and (B) ConocoPhillips shall be responsible for any and all
Foreign Other Taxes relating to any ConocoPhillips Separate Return.

(iii) VAT imposed by a UK Tax Authority to which Paragraph 2.01(b) of Schedule
2.05 applies shall be dealt with in accordance with that paragraph.

Section 2.05 UK Taxes. As regards UK Taxes, this Agreement applies as follows:

(a) The provisions of Schedule 2.05 apply to the allocation of UK Taxes and to
other UK Tax matters;

(b) The other provisions of this Agreement also apply to the allocation of UK
Taxes and to other UK Tax matters, except for the following provisions, which,
notwithstanding such provisions, shall not so apply: Section 2.02, Section 2.03,
Section 2.07(b), Section 2.07(c),

 

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Section 2.08, Section 3, Section 4.02(a), Section 4.02(b), Section 4.05,
Section 4.06(a), Section 4.07, Section 4.08, Section 5.02, Section 5.03(b),
Section 5.03(c), Section 5.03(d), Section 5.03(e), Section 5.04(c),
Section 5.05, Section 5.06(a) (except with respect to any Federal or State
Income Tax treatment of any such payments in respect of UK Taxes made by or to
ConocoPhillips, Phillips 66, ConocoPhillips Company, Phillips 66 Company or any
other member of the ConocoPhillips Group or the Phillips 66 Group that is
organized under the laws of the United States or any State), Section 6, and any
schedule other than Schedule 2.05; and

(c) In the event of conflict between the Sections of this Agreement (other than
Schedule 2.05) and the paragraphs of Schedule 2.05, the paragraphs of Schedule
2.05 prevail, save to the extent that the conflict is between the Sections of
this Agreement (other than Schedule 2.05) and paragraph 1 of Schedule 2.05, when
the Sections of this Agreement prevail.

Section 2.06 Certain Transaction Taxes and Breaches of Covenant.

(a) Phillips 66 Liability. Phillips 66 shall be liable for, and shall indemnify
and hold harmless the ConocoPhillips Group from and against any liability for:

(i) Any stamp, sales and use, gross receipts, value-added or other transfer
Taxes imposed by any Tax Authority on any member of the Phillips 66 Group (if
such member is primarily liable for such Tax) on the transfers occurring
pursuant to the Transactions, provided that VAT imposed by a UK Tax Authority to
which Paragraph 2.01(b) of Schedule 2.05 applies shall be dealt with in
accordance with that paragraph and that the consideration given by any member of
the ConocoPhillips Group to any member of the Phillips 66 Group for any
chargeable supply made by a member of the Phillips 66 Group shall, unless the
persons giving and receiving such consideration agree otherwise, be increased by
an amount equal to the VAT chargeable;

(ii) Any Tax resulting from a breach by Phillips 66 of any covenant in this
Agreement, the Separation and Distribution Agreement, the Indemnification and
Release Agreement, or any other Ancillary Agreement; and

(iii) Any Tax-Related Losses for which Phillips 66 is responsible pursuant to
Section 6.04 of this Agreement.

(b) ConocoPhillips Liability. Subject to Paragraph 2.01(b) of Schedule 2.05,
ConocoPhillips shall be liable for, and shall indemnify and hold harmless the
Phillips 66 Group from and against any liability for:

(i) Any stamp, sales and use, gross receipts, value-added or other transfer
Taxes imposed by any Tax Authority on any member of the ConocoPhillips Group (if
such member is primarily liable for such Tax or if the applicable Tax Law is
silent with respect to whether any member of the ConocoPhillips Group, on the
one hand, or any member of the Phillips 66 Group, on the other hand, is
primarily liable for such Tax) on the transfers occurring pursuant to the
Transactions, provided that the consideration given by any member of the
Phillips 66 Group to any member of the ConocoPhillips Group for any chargeable
supply made by a member of the ConocoPhillips Group shall, unless the persons
giving and receiving such consideration agree otherwise, be increased by an
amount equal to the VAT chargeable; and

 

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(ii) Any Tax resulting from a breach by ConocoPhillips of any covenant in this
Agreement, the Separation and Distribution Agreement, the Indemnification and
Release Agreement, or any other Ancillary Agreement.

(c) UK Stamp Duty. For the purposes of Section 2.06(a) and (b), the primary
liability to pay any United Kingdom stamp duty arising on any instrument of
transfer executed pursuant to the Transactions shall be deemed to fall on the
transferee under that instrument.

(d) Wrong Pocket Tax Liabilities. For the absence of doubt, to the extent that
Section 2.4(a) or Section 2.5(c) or (d) of the Separation and Distribution
Agreement apply to the transfer or assignment of any Excluded Assets or Phillips
66 Assets, as applicable, or to the assumption of any Excluded Liabilities or
Phillips 66 Liabilities, as applicable, such provisions shall also apply to
determine the responsibility for any Taxes (other than stamp, sales and use,
gross receipts, value-added or other transfer Taxes imposed by any Tax Authority
on the transfer or assignment of any such Assets or the assumption of such
Liabilities, which shall be governed by Section 2.06(a)(i) and
Section 2.06(b)(i), as applicable) attributable to, or arising with respect to
or as a result of holding such Assets or Liabilities for, or transferring such
Assets or Liabilities to, the member of the Group entitled to such Assets or
responsible for such Liabilities under such provisions.

Section 2.07 Tax Benefits.

(a) Except as set forth in Section 2.07(b), (c), and (d), provided that refunds
(and any interest thereon received from a UK Tax Authority) to which paragraph 2
of Schedule 2.05 applies shall be dealt with in accordance with that paragraph:

(i) Phillips 66 shall be entitled to any refund of or reduction in otherwise
required payments of (and any interest thereon received from the applicable Tax
Authority) Property Taxes, Other Taxes and Foreign Income Taxes for which
Phillips 66 is responsible pursuant to Section 2 and any Tax Benefits (I) to the
extent set forth in Sections 2.02(a)(ii), 2.03(a)(ii) and 2.09(b), (II) relating
to Taxes for which Phillips 66 is responsible pursuant to 2.02(b)(i) or (III)
relating to a Phillips 66 State Separate Income Tax Return for a
Post-Distribution Period (other than a Straddle Period); and

(ii) ConocoPhillips shall be entitled to any refund of or reduction in otherwise
required payments of (and any interest thereon received from the applicable Tax
Authority) Income Taxes, Property Taxes and Other Taxes other than such Tax
Benefits to which Phillips 66 is entitled pursuant to Section 2.07(a)(i).

(iii) If Phillips 66 receives a Tax Benefit to which ConocoPhillips is entitled
pursuant to this Agreement, Phillips 66 shall pay over such Tax Benefit to
ConocoPhillips as provided in Section 5 and 2.09(a)(i); and if ConocoPhillips
receives a Tax Benefit to which Phillips 66 is entitled pursuant to this
Agreement, ConocoPhillips shall pay over such Tax Benefit to Phillips 66 as
provided in Section 5 and 2.09(a)(i).

 

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(b) Refunds Attributable to a Phillips 66 Carryback. For the absence of doubt,
Phillips 66 shall be entitled to any refund of or reduction in otherwise
required payments of any Federal Tax or State Tax, as applicable, with respect
to any Joint Return which refund or reduction is attributable to, and would not
have arisen but for, a Phillips 66 Carryback pursuant to the proviso set forth
in Section 4.07.

(c) Phillips 66 Minimum Tax Credits. Phillips 66 shall pay to ConocoPhillips an
amount equal to the minimum tax credit under Section 53 of the Code allocated to
the Phillips 66 Group by ConocoPhillips pursuant to Section 4.08.

(d) Income Tax Deductions in Respect of Certain Equity Awards and Incentive
Compensation. Solely the member of the Group for which the relevant individual
is currently employed or, if such individual is not currently employed by a
member of the Group, was most recently employed at the time of the vesting,
exercise, disqualifying disposition, payment or other relevant taxable event, as
appropriate, in respect of the equity awards and other incentive compensation
described in Article IV of the Employee Matters Agreement shall be entitled to
claim any Income Tax deduction in respect of such equity awards and other
incentive compensation on its respective Tax Return associated with such event.

Section 2.08 Special Allocation and Computational Rules.

(a) For purposes of Sections 2.02(a), 2.02(c)(i), 2.03(a), 2.03(c)(i), and
2.04(c)(i), any and all Tax Items (including, for the absence of doubt, Tax
Items with respect to intercompany transactions between members of the
ConocoPhillips Group and the Phillips 66 Group) shall be allocated to the assets
and activities of the ConocoPhillips Business, on the one hand, and the assets
and activities of the Phillips 66 Business, on the other hand, as applicable
pursuant to and consistent with the ConocoPhillips Past Practice.

(b) ConocoPhillips shall determine the allocations described in Section 2.08(a),
the Federal Income Taxes or State Income Taxes, as applicable (or Tax Benefits
or reductions in Tax Benefits, as applicable) and any Other Taxes, as
applicable, attributable to, or arising with respect to or as a result of,
assets or activities of the Phillips 66 Business or the ConocoPhillips Business,
the utilization of foreign tax credits under Section 901 by the Phillips 66
Business and the Taxes (or reductions in Tax Benefits) that would not have
arisen but for the utilization of foreign tax credits by the Phillips 66
Business. In connection with any relevant demand for payment under Section 5,
ConocoPhillips shall provide Phillips 66 with written notice containing a
reasonably detailed summary of any such relevant determinations and timely
respond to any reasonable requests from Phillips 66 for additional information
with respect to any such determinations. Notwithstanding anything to the
contrary in this Agreement, such determinations by ConocoPhillips shall, in the
absence of bad faith or clear error, be conclusive.

Section 2.09 Deductible and Includible Tax Payments. Notwithstanding any other
provision in this Agreement, without duplication for any amounts otherwise
required to be paid hereunder (and provided that, for the absence of doubt, this
Section 2.09 shall not apply to payments required to be made pursuant to
Paragraph 2 of Schedule 2.05), (a) in the event that any Company (the “Benefit
Intercompany Payor”) is required to pay over a Tax Benefit to the other Company
(the “Benefit Intercompany Payee”) hereunder, (i) the Benefit Intercompany Payor
shall also pay over to the Benefit Intercompany Payee any interest relating
thereto that is

 

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received (by way of offset or otherwise) by the Benefit Intercompany Payor or
any of its Affiliates from the applicable Tax Authority and (ii) the Benefit
Intercompany Payee shall be required to pay to the Benefit Intercompany Payor
the amount of any Tax (or any reduction in Tax Benefit) actually suffered in
cash by the Benefit Intercompany Payor or any of its Affiliates resulting (on a
“with and without” basis) from the receipt by the Benefit Intercompany Payor or
any of its Affiliates of the Tax Benefit from the applicable Tax Authority and
(b) in the event that any Company (the “Tax Intercompany Payor”) is required to
pay the other Company (the “Tax Intercompany Payee”) hereunder in respect of a
Tax (or reduction in any Tax Benefit), (i) for the absence of doubt, the Tax
Intercompany Payor shall pay to the Tax Intercompany Payee any interest or
penalties relating thereto that is required to be paid (by way of offset or
otherwise) by the Tax Intercompany Payee or any of its Affiliates to the
applicable Tax Authority and (ii) the Tax Intercompany Payee shall be required
to pay to the Tax Intercompany Payor the amount of any Tax Benefit actually
realized in cash by the Tax Intercompany Payee or any of its Affiliates
resulting (on a “with and without” basis) from the payment by the Tax
Intercompany Payee or any of its Affiliates of the Tax to the applicable Tax
Authority (or the reduction in Tax Benefit). Any amounts required to be paid
pursuant to this Section 2.09 shall be calculated or recalculated, as
applicable, in light of any Final Determination or any other facts that may
arise or come to light after a payment is made pursuant to this Section 2.09
that would affect any amount required to be paid pursuant to this Section 2.09,
and an appropriate adjusting payment shall be made (without duplication) by
Phillips 66 or ConocoPhillips, as applicable, such that the aggregate amounts
paid pursuant to this Section 2.09 reflect such recalculated amount.

Section 3. Proration of Taxes for Straddle Periods.

(a) General Method of Proration. In the case of any Straddle Period, Tax Items
shall be apportioned between Pre-Distribution Periods and Post-Distribution
Periods in accordance with the principles of Treasury Regulation
Section 1.1502-76(b) as reasonably interpreted and applied by the Companies. No
election shall be made under Treasury Regulation Section 1.1502-76(b)(2)(ii)
(relating to ratable allocation of a year’s Tax Items). If the Distribution Date
is not an Accounting Cutoff Date, the provisions of Treasury Regulation
Section 1.1502-76(b)(2)(iii) will be applied to ratably allocate the Tax Items
(other than extraordinary items) for the month which includes the Distribution
Date.

(b) Transaction Treated as Extraordinary Item. In determining the apportionment
of Tax Items between Pre-Distribution Periods and Post-Distribution Periods, any
Tax Items relating to the Transactions shall be treated as extraordinary items
described in Treasury Regulation Section 1.1502-76(b)(2)(ii)(C) and shall (to
the extent occurring on or prior to the Distribution Date) be allocated to
Pre-Distribution Periods, and any Taxes related to such items shall be treated
under Treasury Regulation Section 1.1502-76(b)(2)(iv) as relating to such
extraordinary item and shall (to the extent occurring on or prior to the
Distribution Date) be allocated to Pre-Distribution Periods.

Section 4. Preparation and Filing of Tax Returns.

Section 4.01 General. Except as otherwise provided in this Section 4, Tax
Returns shall be prepared and filed when due (including extensions) by the
person obligated to file such Tax Returns under the Code or applicable Tax Law.
The Companies shall provide, and shall cause their Affiliates to provide,
assistance and cooperation to one another in accordance with Section 7 with
respect to the preparation and filing of Tax Returns, including providing
information required to be provided in Section 7.

 

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Section 4.02 ConocoPhillips’s Responsibility. ConocoPhillips has the exclusive
obligation and right to prepare and file, or to cause to be prepared and filed:

(a) ConocoPhillips Federal Consolidated Income Tax Returns for any Tax Periods
ending on, before or after the Distribution Date;

(b) Except for Tax Returns required to be filed under applicable Tax Law by a
member of the Phillips 66 Group, (i) ConocoPhillips State Combined Income Tax
Returns and (ii) any other Joint Returns which ConocoPhillips reasonably
determines are required to be filed (or which ConocoPhillips chooses to be
filed) by the Companies or any of their Affiliates for Tax Periods ending on,
before or after the Distribution Date; provided, however, that if such
ConocoPhillips State Combined Income Tax Return or other Joint Return, as
applicable, has not previously been filed by the Companies or any of their
Affiliates in the applicable jurisdiction, ConocoPhillips shall provide written
notice of such determination to file such ConocoPhillips State Combined Income
Tax Returns or other Joint Returns to Phillips 66; and

(c) ConocoPhillips Separate Returns which ConocoPhillips reasonably determines
are required to be filed by the Companies or any of their Affiliates for Tax
Periods ending on, before or after the Distribution Date.

Section 4.03 Phillips 66’s Responsibility. Phillips 66 shall prepare and file,
or shall cause to be prepared and filed, all Tax Returns required to be filed by
or with respect to members of the Phillips 66 Group other than those Tax Returns
which ConocoPhillips is required to prepare and file under Section 4.02. For the
absence of doubt, the Tax Returns required to be prepared and filed by Phillips
66 under this Section 4.03 shall include (a) any Phillips 66 Federal
Consolidated Income Tax Return for Tax Periods ending after the Distribution
Date and (b) Phillips 66 Separate Returns required to be filed for Tax Periods
ending on, before or after the Distribution Date.

Section 4.04 Tax Return Filing and Past Practices.

(a) General Rule. Except as provided in Section 4.04(b), with respect to any Tax
Return that Phillips 66 has the obligation and right to prepare and file, or
cause to be prepared and filed, under Section 4.03, to the extent Tax Items
reported on such Tax Return might reasonably be expected to affect Taxes (or
rights to Tax Benefits) for which ConocoPhillips is responsible (or to which
ConocoPhillips is entitled) under this Agreement, such Tax Return shall, in the
case of a Tax Return that is not a UK Tax Return, be prepared in accordance with
the past practice of the ConocoPhillips Group in determining accrued assets and
liabilities for cash taxes on the books and records of ConocoPhillips and its
subsidiaries and the past return filing practice of the ConocoPhillips Group
with respect to the relevant Tax Return (including any past accounting methods,
elections and conventions) (the “ConocoPhillips Past Practice”) and, in the case
of a UK Tax Return, on a basis which is consistent with the basis on which UK
Tax Documents already submitted by or on behalf of the relevant taxpayer to HM
Revenue & Customs were prepared and filed (the “ConocoPhillips UK Tax
Practice”), unless (i) any Tax Items with respect to the Tax Returns in question
are not covered by the ConocoPhillips Past Practice or the

 

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ConocoPhillips UK Tax Practice (as relevant) (in which case, with respect to
such Tax Items, such Tax Returns shall be prepared in accordance with reasonable
Tax accounting practices selected by ConocoPhillips), (ii) no Substantial
Authority exists for the ConocoPhillips Past Practice or the ConocoPhillips UK
Tax Practice (as relevant) with respect to any Tax Items reportable on the Tax
Returns in question (in which case, with respect to such Tax Items, such Tax
Returns shall be prepared in accordance with reasonable Tax accounting practices
selected by ConocoPhillips), or (iii) there is no adverse effect to
ConocoPhillips (in which case, the Tax Returns in question shall be prepared in
accordance with reasonable Tax accounting practices selected by Phillips 66).

(b) Reporting of Transactions. The Tax treatment of the Transactions reported on
any Tax Return shall be consistent with the treatment thereof in the Ruling
Requests and the Tax Opinions/Rulings, unless there is no reasonable basis for
such Tax treatment. To the extent there is a Tax treatment relating to the
Transactions which is not covered by the Ruling Requests or the Tax
Opinions/Rulings, the Tax treatment of the Transactions reported on any Tax
Return for which Phillips 66 is the Responsible Party shall be consistent with
that on any Tax Return filed or to be filed by ConocoPhillips or any member of
the ConocoPhillips Group or caused or to be caused to be filed by ConocoPhillips
(“ConocoPhillips Group Transaction Returns”), unless there is no reasonable
basis for such Tax treatment. To the extent there is a Tax treatment relating to
the Transactions which is not covered by the Ruling Requests, the Tax
Opinions/Rulings or ConocoPhillips Group Transaction Returns, the Companies
shall agree on the Tax treatment to be reported on any Tax Return. For this
purpose, the Tax treatment shall be determined by ConocoPhillips and shall be
agreed to by Phillips 66 unless either (i) no Substantial Authority exists for
the technical merits of the position, or (ii) such Tax treatment is inconsistent
with the Tax treatment contemplated in the Ruling Requests, the Tax
Opinions/Rulings and/or the ConocoPhillips Group Transaction Returns. Any
dispute regarding such Tax treatment shall be referred for resolution pursuant
to Section 12, sufficiently in advance of the filing date of such Tax Return
(including extensions) to permit timely filing of the Tax Return.

Section 4.05 Consolidated or Combined Tax Returns. Phillips 66 will elect and
join, and will cause its respective Affiliates to elect and join, in filing any
ConocoPhillips State Combined Income Tax Returns and any Joint Returns that
ConocoPhillips determines are required to be filed or that ConocoPhillips
chooses to file pursuant to Section 4.02(b).

Section 4.06 Right to Review Tax Returns.

(a) ConocoPhillips Federal Consolidated Income Tax Returns and ConocoPhillips
State Combined Income Tax Returns. ConocoPhillips shall make any ConocoPhillips
Federal Consolidated Income Tax Return and ConocoPhillips State Combined Income
Tax Return (other than any such Tax Return for which Phillips 66 is the
Responsible Company) and any workpapers related to any such Tax Return available
for review by Phillips 66, if requested by Phillips 66. ConocoPhillips shall use
its reasonable best efforts to make such Tax Return available to Phillips 66 for
review and comment as required under this paragraph prior to the due date
(including extensions) for filing of such Tax Return. Phillips 66 shall use
reasonable best efforts to respond in writing to ConocoPhillips with any
comments no later than the date on which ConocoPhillips files such Tax Return
with the applicable Tax Authority, provided, however that Phillips 66’s comments
shall be limited to the reporting of any material Tax Item

 

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on such Tax Return with respect to which Phillips 66 reasonably believes that no
Substantial Authority exists for the technical merits of the position.
ConocoPhillips shall reasonably consider such comments with respect to the
reporting of any such material Tax Item on such Return (including considering
whether to revise the reporting of such Tax Item on such Tax Return prior to
filing such Tax Return with the applicable Tax Authority, file an amended Tax
Return with the applicable Tax Authority revising the reporting of such Tax
Item, or pursue an adjustment to the reporting of such Tax Item in connection
with a Tax Contest with respect to such Tax Return or make no change).

(b) Certain Other Joint Returns and Separate Returns. The Responsible Company
with respect to any material Joint Return (other than any ConocoPhillips
Consolidated Federal Income Tax Return or any ConocoPhillips State Combined
Income Tax Return for which ConocoPhillips is the Responsible Company) or
material Separate Return shall make such Tax Return and related workpapers
available for review by the other Company, if requested by the other Company, to
the extent (i) such Tax Return relates to Taxes for which the requesting party
would reasonably be expected to be liable under applicable Tax Law or
responsible under this Agreement, (ii) such Tax Return relates to Taxes and the
requesting party would reasonably be expected to be liable under applicable Tax
Law or responsible under this Agreement in whole or in part for any additional
Taxes owing as a result of adjustments to the amount of such Taxes reported on
such Tax Return, (iii) such Tax Return relates to Taxes for which the requesting
party would reasonably be expected to have a claim for Tax Benefits under this
Agreement, (iv) the requesting party reasonably determines that it must inspect
such Tax Return to confirm compliance with the terms of this Agreement, (v) such
Tax Return relates to an Agreed UK Group Relief Surrender, or (vi) such Tax
Return relates to a Transfer Pricing Adjustment relating to a transaction or
transactions involving a member of the requesting party’s Group. The Responsible
Company shall use its reasonable best efforts to make such Tax Return available
for review and comment as required under this paragraph prior to the due date
(including extensions) for filing of such Tax Return. The requesting party shall
use reasonable best efforts to respond in writing to the Responsible Party with
any comments no later than the date on which the Responsible Party files such
Tax Return with the applicable Tax Authority provided, however that (x) if
ConocoPhillips is the Responsible Company, Phillips 66’s comments shall be
limited to the reporting of any material Tax Item on such Tax Return with
respect to which Phillips 66 reasonably believes that no Substantial Authority
exists for the technical merits of the position and (y) if Phillips 66 is the
Responsible Company, ConocoPhillips’ comments shall be limited to the reporting
of any material Tax Item on such Tax Return with respect to which ConocoPhillips
reasonably believes that no Substantial Authority exists for the technical
merits of the position or the reporting of any Tax Item on such Tax Return in
accordance with this Agreement or the ConocoPhillips Past Practice or
ConocoPhillips UK Tax Practice, as applicable. The Responsible Party shall
reasonably consider such comments with respect to the reporting of any such
material Tax Item on such Return (including considering whether to revise the
reporting of such Tax Item on such Tax Return prior to filing such Tax Return
with the applicable Tax Authority, file an amended Tax Return with the
applicable Tax Authority revising the reporting of such Tax Item, or pursue an
adjustment to the reporting of such Tax Item in connection with a Tax Contest
with respect to such Tax Return or make no change).

 

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(c) Execution of Returns Prepared by Other Party. In the case of any Tax Return
which is required to be prepared and filed by one Company under this Agreement
and which is required by Law to be signed by the other Company or its Affiliate
(or by an authorized representative thereof), the Company which is legally
required to sign such Tax Return (or whose Affiliate is legally required to sign
or an authorized representative thereof) shall not be required to sign such Tax
Return under this Agreement if there is no reasonable basis for the Tax
treatment of any Tax Item reported on the Tax Return or the Tax treatment of any
Tax Item reported on the Tax Return should, in the opinion of a Tax advisor from
a nationally recognized legal, accounting or professional tax services firm,
subject the other Company or its Affiliate (or its authorized representatives)
to material penalties.

Section 4.07 Phillips 66 Carrybacks and Claims for Refund. Phillips 66 hereby
agrees that, unless ConocoPhillips consents in writing, (a) no Adjustment
Request with respect to any Joint Return shall be filed, and (b) any available
elections to waive the right to claim in any Pre-Distribution Period with
respect to any Joint Return any Phillips 66 Carryback arising in a
Post-Distribution Period shall be made, and no affirmative election shall be
made to claim any such Phillips 66 Carryback; provided, however, that the
parties agree that any such Adjustment Request shall be made with respect to any
Phillips 66 Carryback related to Federal Taxes or State Taxes, as applicable,
upon the reasonable request of Phillips 66, if such Phillips 66 Carryback is
necessary to prevent the loss of the Federal and/or State Tax Benefit of such
Phillips 66 Carryback (including, but not limited to, an Adjustment Request with
respect to a Phillips 66 Carryback of a capital loss for Federal and/or State
Tax purposes arising in a Post-Distribution Period to a Pre-Distribution Period)
and such Adjustment Request, based on ConocoPhillips’ sole, reasonable
determination, will cause no Tax detriment to ConocoPhillips, the ConocoPhillips
Group or any member of the ConocoPhillips Group. Any Adjustment Request which
ConocoPhillips consents to make under this Section 4.07 shall be prepared and
filed by the Responsible Company for the Joint Return to be adjusted.

Section 4.08 Apportionment of Earnings and Profits and Tax Attributes.
ConocoPhillips shall in good faith advise Phillips 66 in writing of the portion,
if any, of any earnings and profits, Tax Attribute, overall foreign loss or
other consolidated, combined or unitary attribute which ConocoPhillips
determines shall be allocated or apportioned to the Phillips 66 Group under
applicable Law. Phillips 66 and all members of the Phillips 66 Group shall
prepare all Tax Returns in accordance with such written notice. In the event
that any temporary or final amendments to Treasury Regulations are promulgated
after the date of this Agreement that provide for any election to apply such
regulations retroactively, then any such election shall be made only to the
extent that ConocoPhillips determines to make such election. As soon as
practicable after receipt of a written request from Phillips 66, ConocoPhillips
shall provide copies of any studies, reports, and workpapers supporting the
earnings and profits and other Tax Attributes allocable to Phillips 66. In the
event of a subsequent adjustment to the earnings and profits or any Tax
Attributes determined by ConocoPhillips, ConocoPhillips shall promptly notify
Phillips 66 in writing of such adjustment. For the absence of doubt,
ConocoPhillips shall not be liable to Phillips 66 or any member of the Phillips
66 Group for any failure of any determination under this Section 4.08 to be
accurate under applicable Law.

 

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Section 5. Due Date for Payments and Related Matters.

Section 5.01 General Rule.

(a) The due date for payment of any liability of one Company to the other
Company under this Agreement shall be as follows:

(i) In the case of any liability of one Company to the other Company under
Section 2 for which Section 5.02 through Section 5.07 specify a due date for
payment of such liability, the due date for payment of such liability shall be
as so specified in Section 5.02 through Section 5.07.

(ii) In the case of any liability of one Company to the other Company under
Schedule 2.05 for which Schedule 2.05 specifies a due date for payment of such
liability, the due date for payment of such liability shall be as so specified
in Schedule 2.05.

(iii) In the case of any other liability under this Agreement, the due date for
payment of such liability shall be within the later of (x) 30 days following the
date of receipt of a written notice and demand from ConocoPhillips or Phillips
66, as applicable, for payment of the liability due (provided, in the case of
any liability in respect of a refund, that ConocoPhillips or Phillips 66, as
applicable, is aware of the receipt by the other Group of such refund) and
(y) in the case of any liability in respect of a refund, within 30 days
following the date of receipt of such refund from the relevant Tax Authority
and, in the case of any liability in respect of Taxes payable to the relevant
Tax Authority, the due date for payment of such Taxes to the relevant Tax
Authority.

(b) All payments under this Agreement shall be made by ConocoPhillips directly
to Phillips 66 and by Phillips 66 directly to ConocoPhillips; provided, however,
that if the Companies mutually agree with respect to any such payment, any
member of the ConocoPhillips Group, on the one hand, may make such payment to
any member of the Phillips 66 Group, on the other hand, and vice versa.

Section 5.02 ConocoPhillips Federal Consolidated Income Tax Returns,
ConocoPhillips State Combined Income Tax Returns and State Separate Income Tax
Returns. In the case of (x) any ConocoPhillips Federal Consolidated Income Tax
Return, (y) any ConocoPhillips State Combined Income Tax Return, and (z) any
State Separate Income Tax Return, as applicable, in each case for any
Pre-Distribution Period or any Straddle Period (including, for the absence of
doubt, amended Tax Returns):

(a) Taxes Shown as Due on Tax Return. The Responsible Company shall compute the
amount of Tax required to be paid to the applicable Tax Authority (taking into
account the requirements of Section 4.04) with respect to such Tax Return in
respect of a Payment Date. In the case of any such Tax Return filed or required
to be filed under applicable Tax Law by any member of the ConocoPhillips Group,
ConocoPhillips shall pay (or cause to be paid) such amount to such Tax Authority
on or before such Payment Date (and provide notice and proof of payment to
Phillips 66) and, in the case of any such Tax Return filed or required to be
filed under applicable Tax Law by any member of the Phillips 66 Group, Phillips
66 shall pay (or cause to be paid) such amount to such Tax Authority on or
before such Payment Date (and provide notice and proof of payment to
ConocoPhillips).

 

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(b) Accrual-to-Return Payment.

(i) Tax Returns Filed by ConocoPhillips Group Member. In the case of any such
Tax Return for any Pre-Distribution Tax Period that ends during 2011 or 2012 or
any Straddle Period filed or required to be filed under applicable Tax Law by
any member of the ConocoPhillips Group:

(A) (I) Phillips 66 shall be deemed to have paid ConocoPhillips on the
Distribution Date an amount equal to any liability for cash Federal Income Taxes
or State Income Taxes, as applicable, with respect to such Tax Return to the
extent such Federal Income Taxes (other than alternative minimum Taxes) or State
Income Taxes, as applicable, have been accrued as of the Distribution Date on
the books and records of ConocoPhillips and its subsidiaries (“Accrued”) and
allocated to the Phillips 66 Business (including any member of the Phillips 66
Group) as of the Distribution Date (which accruals and allocations, for the
absence of doubt, (x) may be computed after the Distribution Date as of the
Distribution Date and which shall be recomputed as of the Distribution Date to
take account of any Tax Return that is filed in respect of such Taxes and
(y) shall not include any reserves for financial accounting purposes in respect
of Taxes that may arise upon audit) (with respect to such Federal Income Taxes,
the “Accrued Phillips 66 Federal Income Tax Liability,” and such State Income
Taxes, the “Accrued Phillips 66 State Income Tax Liability” and, collectively,
the “Accrued Phillips 66 Income Tax Liability”); and (II) ConocoPhillips shall
be deemed to have paid Phillips 66 on the Distribution Date an amount equal to
any reduction of Federal Income Taxes or State Income Taxes, as applicable,
otherwise due with respect to such Tax Return to the extent such reduction in
Federal Income Taxes or State Income Taxes, as applicable, has been Accrued and
allocated to the Phillips 66 Business (including any member of the Phillips 66
Group) as of the Distribution Date (which accruals and allocations, for the
absence of doubt, (x) may be computed after the Distribution Date as of the
Distribution Date and which shall be recomputed as of the Distribution Date to
take account of any Tax Return that is filed in respect of such Taxes and
(y) shall not include any reserves for financial accounting purposes in respect
of Taxes that may arise upon audit) (with respect to such Federal Income Taxes,
the “Accrued Phillips 66 Federal Income Tax Asset,” and such State Income Taxes,
the “Accrued Phillips 66 State Income Tax Asset,” and, collectively, the
“Accrued Phillips 66 Income Tax Asset”).

(B) Within 120 days following the earlier of (y) the due date (including
extensions) for filing such Tax Return, or (z) the date on which such Tax Return
is filed:

(I) In the case of any Accrued Phillips 66 Federal Income Tax Liability or
Accrued Phillips 66 State Income Tax Liability, as applicable, with respect to
such Tax Return (1) if Phillips 66 is responsible for Federal Income

 

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Taxes or State Income Taxes, as applicable, shown as due on such Tax Return (for
the absence of doubt, without regard to any estimated, installment, or other
advance payments or minimum tax credits) pursuant to Section 2.02(a) or 2.03(a)
(or if Phillips 66 is neither responsible for any Federal Income Taxes or State
Income Taxes, as applicable, shown as due on such Tax Return nor entitled to any
Tax Benefit with respect to such Tax Return) (for this purpose, determined
without regard to Section 5.02(b)(i)(A)), (x) Phillips 66 shall pay
ConocoPhillips an amount equal to the excess, if any, of the amount of such
Federal Income Taxes or State Income Taxes, as applicable, for which Phillips 66
is responsible, if any, over such Accrued Phillips 66 Federal Income Tax
Liability or Accrued Phillips 66 State Income Tax Liability, as applicable, and
(y) ConocoPhillips shall pay Phillips 66 an amount equal to the excess, if any,
of such Accrued Phillips 66 Federal Income Tax Liability or Accrued Phillips 66
State Income Tax Liability, as applicable, over the amount of such Federal
Income Taxes or State Income Taxes, as applicable, for which Phillips 66 is
responsible, if any; and (2) if Phillips 66 is entitled to any Tax Benefit
(other than any alternative minimum Tax Benefit) with respect to such Tax Return
pursuant to Section 2.02(a)(ii) or Section 2.03(a)(ii), as applicable,
ConocoPhillips shall pay Phillips 66 an amount equal to the sum of such Tax
Benefit to which Phillips 66 is entitled and the amount of any such Accrued
Phillips 66 Federal Income Tax Liability or Accrued Phillips 66 State Income Tax
Liability, as applicable; and

(II) In the case of any Accrued Phillips 66 Federal Income Tax Asset or Accrued
Phillips 66 State Income Tax Asset, as applicable, with respect to such Tax
Return, (1) if Phillips 66 is entitled to any Tax Benefit (other than
alternative minimum Tax Benefit) with respect to such Tax Return pursuant to
Section 2.02(a)(ii) or Section 2.03(a)(ii), as applicable (or if Phillips 66 is
neither entitled to any Tax Benefit with respect to such Tax Return nor
responsible for any Federal Income Taxes or State Income Taxes, as applicable
shown as due on such Tax Return) (for the absence of doubt, without regard to
any estimated, installment, or other advance payments or minimum tax credit)
(for this purpose, determined without regard to Section 5.02(b)(i)(A)),
(x) ConocoPhillips shall pay Phillips 66 an amount equal to the excess, if any,
of the amount of such Tax Benefit to which Phillips 66 is entitled, if any, over
such Accrued Phillips 66 Federal Income Tax Asset or Accrued Phillips 66 State
Income Tax Asset, as applicable; and (y) Phillips 66 shall pay ConocoPhillips an
amount equal to the excess, if any, of such Accrued Phillips 66 Federal Income
Tax Asset or Accrued Phillips 66 State Income Tax Asset, as applicable, over the
amount of any such Tax Benefit, if any; and (2) if Phillips 66 is responsible
for Federal Income Taxes or State Income Taxes, as applicable, shown as due on
such Tax Return (for the absence of doubt, without regard to any estimated,
installment, minimum tax credits or other advance payments) pursuant to
Section 2.02(a) or 2.03(a) (for this purpose, determined without regard to
Section 5.02(b)(i)(A)), Phillips 66 shall pay ConocoPhillips an amount equal to
the sum of the amount of such Federal Income Taxes or State Income Taxes, as
applicable, for which Phillips 66 is responsible and the amount of such Accrued
Phillips 66 Federal Income Tax Asset or Accrued Phillips 66 State Income Tax
Asset, as applicable.

 

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(ii) Tax Returns Filed by Phillips 66 Group Member. In the case of any such
ConocoPhillips State Combined Income Tax Return or State Separate Income Tax
Return, as applicable, for any Pre-Distribution Tax Period that ends during 2011
or 2012 or any Straddle Period filed or required to be filed under applicable
Tax Law by any member of the Phillips 66 Group:

(A) (I) ConocoPhillips shall be deemed to have paid Phillips 66 on the
Distribution Date an amount equal to any liability for cash State Income Taxes
with respect to such Tax Return to the extent such State Income Taxes have been
Accrued as of the Distribution Date and allocated to the ConocoPhillips Business
(including any member of the ConocoPhillips Group) as of the Distribution Date
(which accrual and allocation, for the absence of doubt, (x) may be computed
after the Distribution Date as of the Distribution Date and which shall be
recomputed as of the Distribution Date to take account of any Tax Return that is
filed in respect of such Taxes and (y) shall not include any reserves for
financial accounting purposes in respect of Taxes that may arise upon audit)
(with respect to such State Income Taxes, the “Accrued ConocoPhillips State
Income Tax Liability”)); and (II) Phillips 66 shall be deemed to have paid
ConocoPhillips on the Distribution Date an amount equal to any reduction of
State Income Taxes otherwise due with respect to such Tax Return to the extent
such reduction in State Income Taxes has been Accrued and allocated to the
ConocoPhillips Business (including any member of the ConocoPhillips Group) as of
the Distribution Date (which accruals and allocations, for the absence of doubt,
(x) may be computed after the Distribution Date as of the Distribution Date and
which shall be recomputed as of the Distribution Date to take account of any Tax
Return that is filed in respect of such Taxes and (y) shall not include any
reserves for financial accounting purposes in respect of Taxes that may arise
upon audit) (with respect to such State Income Taxes, the “Accrued
ConocoPhillips State Income Tax Asset”).

(B) Within 120 days following the earlier of (y) the due date (including
extensions) for filing such Tax Return, or (z) the date on which such Tax Return
is filed:

(I) In the case of any Accrued ConocoPhillips State Income Tax Liability with
respect to such Tax Return (1) if ConocoPhillips is responsible for any State
Income Taxes shown as due on such Tax Return (for the absence of doubt, without
regard to any estimated, installment, or other advance payments or minimum tax
credits) pursuant to Section 2.03(a) (or if ConocoPhillips is neither
responsible for State Income Taxes shown as due on such Tax Return nor entitled
to any Tax Benefit with respect to such Tax Return) (for this purpose,
determined without regard to Section 5.02(b)(ii)(A)), (x) ConocoPhillips shall
pay Phillips 66 an amount equal to the excess, if any, of the amount of such
State Income Taxes for which ConocoPhillips is responsible, if any, over such
Accrued ConocoPhillips State Income Tax Liability and (y) Phillips 66 shall pay
ConocoPhillips an amount equal to the excess, if any, of such Accrued

 

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ConocoPhillips State Income Tax Liability over the amount of such State Income
Taxes for which ConocoPhillips is responsible, if any; and (2) if ConocoPhillips
is entitled to any Tax Benefit with respect to such Tax Return pursuant to this
Agreement, Phillips 66 shall pay ConocoPhillips an amount equal to the sum of
such Tax Benefit to which ConocoPhillips is entitled and the amount of any such
Accrued ConocoPhillips State Income Tax Liability; and

(II) In the case of any Accrued ConocoPhillips State Income Tax Asset with
respect to such Tax Return, (1) if ConocoPhillips is entitled to any Tax Benefit
with respect to such Tax Return pursuant to this Agreement (or if ConocoPhillips
is neither entitled to any Tax Benefit with respect to such Tax Return nor
responsible for any State Income Taxes shown as due on such Tax Return) (for the
absence of doubt, without regard to any estimated, installment, or other advance
payments or minimum tax credit) (for this purpose, determined without regard to
Section 5.02(b)(ii)(A)), (x) Phillips 66 shall pay ConocoPhillips an amount
equal to the excess, if any, of the amount of such Tax Benefit to which
ConocoPhillips is entitled, if any, over such Accrued ConocoPhillips State
Income Tax Asset; and (y) ConocoPhillips shall pay Phillips 66 an amount equal
to the excess, if any, of such Accrued ConocoPhillips State Income Tax Asset
over the amount of any such Tax Benefit, if any; and (2) if ConocoPhillips is
responsible for State Income Taxes shown as due on such Tax Return (for the
absence of doubt, without regard to any estimated, installment, minimum tax
credits or other advance payments) pursuant to Section 2.03(a) (for this
purpose, determined without regard to Section 5.02(b)(ii)(A)), ConocoPhillips
shall pay Phillips 66 an amount equal to the sum of the amount of such State
Income Taxes for which ConocoPhillips is responsible and the amount of such
Accrued ConocoPhillips State Income Tax Asset.

(c) Phillips 66 Minimum Tax Credits Payment. Within 120 days after the date on
which the ConocoPhillips Federal Consolidated Income Tax Return for the Straddle
Period is filed, Phillips 66 shall pay ConocoPhillips any amount for which
Phillips 66 is responsible pursuant to Section 2.07(c).

(d) Taxes Resulting from Adjustment. In the case of any adjustment pursuant to a
Final Determination with respect to such Tax Return, (A) in the case of any such
Tax Return filed or required to be filed under applicable Tax Law by any member
of the ConocoPhillips Group, ConocoPhillips shall pay (or cause to be paid) to
the applicable Tax Authority when due any additional Tax due with respect to
such Tax Return required to be paid as a result of such adjustment; and (B) in
the case of any such Tax Return filed or required to be filed under applicable
Tax Law by any member of the Phillips 66 Group, Phillips 66 shall pay (or cause
to be paid) to the applicable Tax Authority when due any additional Tax due with
respect to such Tax Return as a result of such adjustment.

(e) Return-to-Adjustment Payments. In the case of any adjustment pursuant to a
Final Determination with respect to such Tax Return, within 30 days following
the later of (x) the date any additional Federal Income Tax or State Income Tax,
as applicable, was paid by ConocoPhillips or Phillips 66, as applicable, with
respect to such Tax Return as a result of such

 

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adjustment (or any Tax Benefit was actually reduced in cash or Tax Benefit is
actually received in cash) or (y) the date of receipt of a written notice and
demand from ConocoPhillips or Phillips 66, as applicable, following such Final
Determination for payment of the amount due:

(i) In the case of any such Tax Return filed or required to be filed under
applicable Tax Law by any member of the ConocoPhillips Group, (A) Phillips 66
shall pay ConocoPhillips (x) any Federal Income Tax or State Income Tax, as
applicable, due with respect to such Tax Return or any reduction in any Tax
Benefit for which Phillips 66 is responsible pursuant to Section 2.02(a) or
2.03(a) as a result of such adjustment and (y) any amount required to be paid by
Phillips 66 to ConocoPhillips pursuant to Section 2.07 with respect to such Tax
Return as a result of such adjustment; and (B) ConocoPhillips shall pay Phillips
66 (x) any reduction in any Tax Benefit for which ConocoPhillips is responsible
pursuant to Section 2.02(a) or 2.03(a) and to which Phillips 66 is entitled
pursuant to Section 2.02(a) or 2.03(a) as a result of such adjustment and
(y) any amount required to be paid by ConocoPhillips to Phillips 66 pursuant to
Section 2.07 with respect to such Tax Return as a result of such adjustment; and

(ii) In the case of any such Tax Return filed or required to be filed under
applicable Tax Law by any member of the Phillips 66 Group, (A) ConocoPhillips
shall pay Phillips 66 (x) any State Income Tax due with respect to such Tax
Return or any reduction in any Tax Benefit for which ConocoPhillips is
responsible pursuant to Section 2.03(a) as a result of such adjustment and
(y) any amount required to be paid by ConocoPhillips to Phillips 66 pursuant to
Section 2.07 with respect to such Tax Return as a result of such adjustment; and
(B) Phillips 66 shall pay ConocoPhillips (x) any reduction in any Tax Benefit
for which Phillips 66 is responsible pursuant to Section 2.03(a) and to which
ConocoPhillips is entitled pursuant to Section 2.03(a) as a result of such
adjustment and (y) any amount required to be paid by Phillips 66 to
ConocoPhillips pursuant to Section 2.07 with respect to such Tax Return as a
result of such adjustment.

Section 5.03 Other Taxes. In the case of any Tax Return with respect to Other
Taxes for the Pre-Distribution Period or Straddle Period (including, for the
absence of doubt, amended Tax Returns):

(a) Taxes Shown as Due on Tax Return. The Responsible Company shall compute the
amount of Tax required to be paid to the applicable Tax Authority (taking into
account the requirements of Section 4.04) with respect to such Tax Return in
respect of a Payment Date. In the case of any such Tax Return filed or required
to be filed under applicable Tax Law by any member of the ConocoPhillips Group,
ConocoPhillips shall pay (or cause to be paid) such amount to such Tax Authority
on or before such Payment Date (and provide notice and proof of payment to
Phillips 66) and, in the case of any such Tax Return filed or required to be
filed under applicable Tax Law by any member of the Phillips 66 Group, Phillips
66 shall pay (or cause to be paid) such amount to such Tax Authority on or
before such Payment Date (and provide notice and proof of payment to
ConocoPhillips).

 

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(b) Accrual-to-Return Payment.

(i) Tax Returns Filed by ConocoPhillips Group Member. In the case of any such
Tax Return for any Pre-Distribution Tax Period that ends during 2011 or 2012 or
any Straddle Period filed or required to be filed under applicable Tax Law by
any member of the ConocoPhillips Group:

(A) Phillips 66 shall be deemed to have paid ConocoPhillips on the Distribution
Date an amount equal to any liability for cash Other Taxes with respect to such
Tax Return to the extent such Other Taxes have been Accrued and allocated to the
Phillips 66 Business (including any member of the Phillips 66 Group) as of the
Distribution Date (which accruals and allocations, for the absence of doubt,
(x) may be computed after the Distribution Date as of the Distribution Date and
which shall be recomputed as of the Distribution Date to take account of any Tax
Return that is filed in respect of such Taxes and (y) shall not include any
reserves for financial accounting purposes in respect of Taxes that may arise
upon audit) (with respect to such Other Taxes, the “Accrued Phillips 66 Other
Tax Liability”).

(B) Subject to Section 5.03(e), within 120 days following the earlier of (y) the
due date (including extensions) for filing such Tax Return, or (z) the date on
which such Tax Return is filed, (x) Phillips 66 shall pay ConocoPhillips an
amount equal to the excess, if any, of the amount of Other Taxes shown as due on
such Tax Return for which Phillips 66 is responsible (for the absence of doubt,
without regard to any estimated, installment or other advance payments) pursuant
to Section 2.02(c)(i), Section 2.03(c)(i), and Section 2.04(c)(i) (for this
purpose, determined without regard to Section 5.03(b)(i)(A)) over any Accrued
Phillips 66 Other Tax Liability with respect to such Tax Return, and
(y) ConocoPhillips shall pay Phillips 66 an amount equal to the excess, if any,
of any Accrued Phillips 66 Other Tax Liability with respect to such Tax Return
over the amount of such Other Taxes for which Phillips 66 is responsible.

(ii) Tax Returns Filed by Phillips 66 Group Member. In the case of any such Tax
Return for any Pre-Distribution Tax Period that ends during 2011 or 2012 or any
Straddle Period filed or required to be filed under applicable Tax Law by any
member of the Phillips 66 Group:

(A) ConocoPhillips shall be deemed to have paid Phillips 66 on the Distribution
Date an amount equal to any liability for cash Other Taxes with respect to such
Tax Return to the extent such Other Taxes have been Accrued and allocated to the
ConocoPhillips Business (including any member of the ConocoPhillips Group) as of
the Distribution Date (which accruals and allocations, for the absence of doubt,
(x) may be computed after the Distribution Date as of the Distribution Date and
which shall be recomputed as of the Distribution Date to take account of any Tax
Return that is filed in respect of such Taxes and (y) shall not include any
reserves for financial accounting purposes in respect of Taxes that may arise
upon audit) (with respect to such Other Taxes, the “Accrued ConocoPhillips Other
Tax Liability”).

(B) Subject to Section 5.03(e), within 120 days following the earlier of (y) the
due date (including extensions) for filing such Tax Return, or (z) the date on
which such Tax Return is filed, (x) ConocoPhillips shall pay Phillips 66 an

 

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amount equal to the excess, if any, of the amount of Other Taxes shown as due on
such Tax Return for which ConocoPhillips is responsible (for the absence of
doubt, without regard to any estimated, installment or other advance payments)
pursuant to Section 2.02(c)(i), Section 2.03(c)(i), and Section 2.04(c)(i) (for
this purpose, determined without regard to Section 5.03(b)(ii)(A)) over any
Accrued ConocoPhillips Other Tax Liability with respect to such Tax Return, and
(y) Phillips 66 shall pay ConocoPhillips an amount equal to the excess, if any,
of any Accrued ConocoPhillips Other Tax Liability with respect to such Tax
Return over the amount of such Other Taxes for which ConocoPhillips is
responsible.

(c) Taxes Resulting from Adjustment. In the case of any adjustment pursuant to a
Final Determination with respect to any such Tax Return for any Pre-Distribution
Periods or any Straddle Periods, (A) in the case of any such Tax Return filed or
required to be filed under applicable Tax Law by any member of the
ConocoPhillips Group, ConocoPhillips shall pay (or cause to be paid) when due
any additional Other Tax required to be paid with respect to such Tax Return as
a result of such adjustment; and (B) in the case of any such Tax Return filed or
required to be filed under applicable Tax Law by any member of the Phillips 66
Group, Phillips 66 shall pay (or cause to be paid) when due any additional Other
Tax required to be paid with respect to such Tax Return as a result of such
adjustment.

(d) Return-to-Adjustment Payments. Subject to Section 5.03(e), in the case of
any adjustment pursuant to a Final Determination with respect to such Tax Return
for any Pre-Distribution Periods or any Straddle Periods, within 30 days
following the later of (i) the date any Other Taxes were paid by ConocoPhillips
or Phillips 66, as applicable, pursuant to Section 5.03(c) with respect to such
Tax Return as a result of such adjustment or (ii) the date of receipt of a
written notice and demand from ConocoPhillips or Phillips 66, as applicable,
following such Final Determination for payment of the amount due:

(i) In the case of any such Tax Return filed or required to be filed under
applicable Tax Law by any member of the ConocoPhillips Group, (A) Phillips 66
shall pay ConocoPhillips (x) any Other Taxes due with respect to such Tax Return
for which Phillips 66 is responsible pursuant to Section 2.02(c)(i),
Section 2.03(c)(i), and Section 2.04(c)(i) as a result of such adjustment and
(y) any amount required to be paid by Phillips 66 to ConocoPhillips pursuant to
Section 2.07(a) with respect to such Tax Return as a result of such adjustment;
and (B) ConocoPhillips shall pay Phillips 66 any amount required to be paid by
ConocoPhillips to Phillips 66 pursuant to Section 2.07(a) as a result of such
adjustment; and

(ii) In the case of any such Tax Return filed or required to be filed under
applicable Tax Law by any member of the Phillips 66 Group, (A) ConocoPhillips
shall pay Phillips 66 (x) any Other Taxes due with respect to such Tax Return
for which ConocoPhillips is responsible pursuant to Section 2.02(c)(i),
Section 2.03(c)(i), and Section 2.04(c)(i) as a result of such adjustment and
(y) any amount required to be paid by ConocoPhillips to Phillips 66 pursuant to
Section 2.07(a) with respect to such Tax Return as a result of such adjustment;
and (B) Phillips 66 shall pay ConocoPhillips any amount required to be paid by
Phillips 66 to ConocoPhillips pursuant to Section 2.07(a) as a result of such
adjustment.

 

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(e) De Minimis Threshold for Other Taxes. Notwithstanding Section 2.02(c),
Section 2.03(c), Section 5.03(b) (except with respect to Foreign Other Taxes),
and Section 5.03(d) (except with respect to Foreign Other Taxes) and except with
respect to any amended Tax Return, in no event shall ConocoPhillips or Phillips
66, as applicable, be liable to pay Phillips 66 or ConocoPhillips, as
applicable, any amount with respect to Other Taxes (other than Foreign Other
Taxes) pursuant to Section 5.03(b) or Section 5.03(d) unless the amount of such
payment otherwise required to be made pursuant to Section 5.03(b) with respect
to the relevant Tax Return (other than any amended Tax Return) or
Section 5.03(d) with respect to the relevant adjustment, as applicable (in each
case, for the absence of doubt, without regard to this Section 5.03(e)), exceeds
$100,000. For the absence of doubt, (i) the foregoing limitation shall apply on
a per Tax Return basis (in the case of any payment otherwise required to be made
pursuant to Section 5.03(b)) or on a per adjustment basis (in the case of any
payment otherwise required to be made pursuant to Section 5.03(d)) and
(ii) ConocoPhillips or Phillips 66, as applicable, shall be liable for the full
amount of any payment to which the foregoing limitation does not apply.

Section 5.04 Certain Separate Return Income Taxes and Property Taxes. In the
case of any (x) Income Taxes with respect to a Separate Return (other than State
Separate Income Tax Returns for Pre-Distribution Periods or Straddle Periods);
and (y) Property Taxes or any refunds of such Taxes:

(a) Taxes Due. Each Company shall pay, or shall cause to be paid, to the
applicable Tax Authority when due (i) except as set forth in Section 5.04(c),
all Income Taxes with respect to such Separate Return; and (ii) all Property
Taxes, in each case for which such Company is responsible pursuant to Section 2.

(b) Refunds. If a Company or any member of such Company’s Group receives a
refund of (i) Income Taxes with respect to such Separate Return; or
(ii) Property Taxes, in each case to which the other Company is entitled
pursuant to Section 2.07, such Company shall pay over such refund to the other
Company within 30 days following the receipt of such refund.

(c) Section 2.02(a)(iii) Taxes. In the case of any ConocoPhillips Federal Income
Tax Return (including, for the absence of doubt, an amended Tax Return) for a
Post-Distribution Period (other than any Straddle Period), within 120 days
following the earlier of (y) the due date (including extensions) for filing such
Tax Return or (z) the date on which such Tax Return is filed, Phillips 66 shall
pay ConocoPhillips the amount for which Phillips 66 is responsible under
Section 2.02(a)(iii) with respect to such Tax Return. In the case of any
adjustment pursuant to a Final Determination with respect to such Tax Return,
within 30 days following the later of (i) the date any additional Federal Income
Tax was paid by ConocoPhillips with respect to such Tax Return as a result of
such adjustment (or any Tax Benefit was actually reduced in cash) or (ii) the
date of receipt of a written notice and demand from ConocoPhillips following
such Final Determination for payment of the amount due, Phillips 66 shall pay
ConocoPhillips the amount for which Phillips 66 is responsible pursuant to
Section 2.02(a)(iii) as a result of such adjustment.

 

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Section 5.05 Tax-Related Losses. Phillips 66 shall pay ConocoPhillips the amount
of any Tax-Related Losses for which Phillips 66 is responsible under
Section 6.04:

(a) In the case of Tax-Related Losses described in clause (a) of the definition
of “Tax-Related Losses,” no later than two Business Days prior to the date COP
files, or causes to be filed, the applicable Tax Return for the year of the
Internal Contribution, Internal Distribution, Contribution or Distribution, as
applicable (provided that if such Tax-Related Losses arise pursuant to a Final
Determination described in clause (a), (b) or (c) of the definition of “Final
Determination,” then Phillips 66 shall pay ConocoPhillips no later than two
Business Days after the date of such Final Determination); and

(b) In the case of Tax-Related Losses described in clause (b) or (c) of the
definition of “Tax-Related Losses,” no later than two Business Days after the
date ConocoPhillips pays such Tax-Related Losses.

Section 5.06 Treatment of Payments; Tax Gross Up.

(a) Treatment of Payments. In the absence of any change in Tax treatment under
the Code or other applicable Tax Law and except as provided in Section 5.06(b),
any payments made by a Company under this Agreement shall be reported for Tax
purposes by the payor and the recipient as distributions or capital
contributions, as appropriate, occurring immediately before the Distribution
(but only to the extent that the payment does not relate to a Tax allocated to
the payor in accordance with Section 1552 of the Code or the regulations
thereunder or Treasury Regulation Section 1.1502-33(d) (or under corresponding
principles of other applicable Tax Laws)) or as payments of an assumed or
retained liability.

(b) Treatment of Interest Payments Under This Agreement. Anything herein to the
contrary notwithstanding, to the extent one Company (the “Indemnitor”) makes a
payment of interest to another Company (the “Indemnitee”) under this Agreement
with respect to the period from the date that the Indemnitee made a payment of a
Tax to a Tax Authority to the date that the Indemnitor reimbursed the Indemnitee
for such Tax payment, the interest payment shall be treated as interest expense
to the Indemnitor (deductible to the extent provided by Law) and as interest
income by the Indemnitee (includible in income to the extent provided by Law).
The amount of the payment shall not be adjusted to take into account any
associated Tax Benefit to the Indemnitor or increase in Tax to the Indemnitee.

(c) Tax Gross Up. If (i) notwithstanding the manner in which any payment under
this Agreement is reported, there is an adjustment to the Tax liability of a
Company as a result of its receipt of a payment pursuant to this Agreement or
(ii) any deduction or withholding is required by Law to be made from any payment
(other than an interest payment) under this Agreement, such payment shall be
appropriately adjusted so that the amount of such payment, reduced by the amount
of all Income Taxes payable with respect to the receipt thereof or the amount of
all deduction or withholding required by Law with respect to such payment, as
applicable (in each case, taking into account all correlative Tax Benefits
resulting from the payment of such Income Taxes), shall equal the amount of the
payment which the Company receiving such payment would otherwise be entitled to
receive pursuant to this Agreement.

Section 5.07 Late Payments. Any amount owed by one party to another party under
this Agreement which is not paid when due shall bear interest at the Prime Rate
plus five percent, compounded semiannually, from the due date of the payment to
the date paid. To the extent interest required to be paid under this
Section 5.07 duplicates interest required to be paid under any other provision
of this Agreement, interest shall be computed at the higher of the interest rate
provided under this Section 5.07 or the interest rate provided under such other
provision.

 

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Section 6. Tax-Free Status.

Section 6.01 Tax Opinions/Rulings and Representation Letters.

(a) Each of Phillips 66 and ConocoPhillips hereby represents and agrees that
(i) it has or will read the Representation Letters deliverable to Wachtell,
Lipton, Rosen & Katz in connection with the rendering of the Tax Opinion prior
to the date submitted and has or will read the Representation Letters (including
the Ruling Request) delivered to the IRS in connection with obtaining the Ruling
prior to the date of this Agreement and (ii) subject to any qualifications
therein, all information contained in such Representation Letters and Rulings
that concerns or relates to such Company or any member of its Group will be
true, correct and complete.

(b) Phillips 66, Phillips 66 Company, ConocoPhillips, and ConocoPhillips Company
acknowledge that the Tax Opinions/Rulings and the Representation Letters may not
yet have been obtained or submitted. Phillips 66, Phillips 66 Company,
ConocoPhillips, and ConocoPhillips Company shall use their commercially
reasonable efforts and shall cooperate in good faith to finalize the
Representation Letters for the Distribution as soon as possible hereafter and to
cause the same to be submitted to the Tax Advisors, the IRS or such other
governmental authorities as ConocoPhillips shall deem necessary or desirable and
shall take such other commercially reasonable actions as may be necessary or
desirable to obtain the Tax Opinions/Rulings in order to confirm the Tax-Free
Status.

Section 6.02 Restrictions on Phillips 66 and Phillips 66 Company.

(a) Phillips 66 and Phillips 66 Company agree that they will not take or fail to
take, or permit any Phillips 66 Affiliate or Phillips 66 Company Affiliate, as
applicable, to take or fail to take, any action where such action or failure to
act would be inconsistent with or cause to be untrue any material, information,
covenant or representation in any Representation Letters or Tax
Opinions/Rulings. Phillips 66 and Phillips 66 Company agree that they will not
take or fail to take, or permit any Phillips 66 Affiliate or Phillips 66 Company
Affiliate, as applicable, to take or fail to take, any action which prevents or
could reasonably be expected to prevent (i) the Tax-Free Status, or (ii) any
transaction contemplated by the Separation and Distribution Agreement which is
intended by the parties to be tax-free (including, but not limited to, those
transactions which the IRS has ruled qualify for tax-free treatment in the
Ruling) from so qualifying, including, (x) in the case of Phillips 66, issuing
any Phillips 66 Capital Stock that would prevent the Distribution from
qualifying as a tax-free distribution within the meaning of Section 355 of the
Code; and (y) in the case of Phillips 66 Company, issuing any Phillips 66
Company Capital Stock that would prevent the Internal Distribution from
qualifying as a tax-free distribution within the meaning of Section 355 of the
Code.

(b) Pre-Distribution Period. During the period from the date hereof until the
completion of the Distribution, Phillips 66 and Phillips 66 Company shall not
take any action (including, in the case of Phillips 66, the issuance of Phillips
66 Capital Stock) or permit any Phillips 66 Affiliate or Phillips 66 Company
Affiliate directly or indirectly controlled by Phillips 66 or Phillips 66
Company, as applicable, to take any action if, as a result of taking such
action, (i)

 

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Phillips 66 could have a number of shares of Phillips 66 Capital Stock (computed
on a fully diluted basis or otherwise) issued and outstanding, including by way
of the exercise of stock options (whether or not such stock options are
currently exercisable) or the issuance of restricted stock, that could cause
ConocoPhillips to cease to have Tax Control of Phillips 66; or (ii) Phillips 66
Company could have a number of shares of Phillips 66 Company Capital Stock
(computed on a fully diluted basis or otherwise) issued and outstanding,
including by way of the exercise of stock options (whether or not such stock
options are currently exercisable) or the issuance of restricted stock, that
could cause ConocoPhillips Company to cease to have Tax Control of Phillips 66
Company.

(c) Each of Phillips 66 and Phillips 66 Company agrees that, from the date
hereof until the first day after the two-year anniversary of the Distribution
Date, it will (i) maintain its status as a company engaged in the Active Trade
or Business for purposes of Section 355(b)(2) of the Code and (ii) not engage in
any transaction that would result in it ceasing to be a company engaged in the
Active Trade or Business for purposes of Section 355(b)(2) of the Code, in each
case, taking into account Section 355(b)(3) of the Code.

(d) Phillips 66 agrees that, from the date hereof until the first day after the
two-year anniversary of the Distribution Date, it will not (i) enter into any
Proposed Acquisition Transaction or, to the extent Phillips 66 has the right to
prohibit any Proposed Acquisition Transaction, permit any Proposed Acquisition
Transaction to occur (whether by (A) redeeming rights under a shareholder rights
plan, (B) finding a tender offer to be a “permitted offer” under any such plan
or otherwise causing any such plan to be inapplicable or neutralized with
respect to any Proposed Acquisition Transaction, or (C) approving any Proposed
Acquisition Transaction, whether for purposes of Section 203 of the DGCL or any
similar corporate statute, any “fair price” or other provision of Phillips 66’s
charter or bylaws or otherwise), (ii) merge or consolidate with any other Person
or liquidate or partially liquidate or cause or permit Phillips 66 Company to
merge or consolidate with any other Person or liquidate or partially liquidate,
(iii) in a single transaction or series of transactions sell or transfer (other
than sales or transfers of inventory in the ordinary course of business) all or
substantially all of the assets that were transferred to Phillips 66 as part of
the Contribution or to Phillips 66 Company as part of the Internal Contribution
or sell or transfer (or cause or permit to be transferred) 60% or more of the
gross assets of the Active Trade or Business or 60% or more of the consolidated
gross assets of Phillips 66 and its Affiliates (such percentages to be measured
based on fair market value as of the Distribution Date) or sell or transfer any
of the shares of Phillips 66 Company, (iv) redeem or otherwise repurchase
(directly or through a Phillips 66 Affiliate) any Phillips 66 stock, or rights
to acquire stock, except to the extent such repurchases satisfy
Section 4.05(1)(b) of Revenue Procedure 96-30 (as in effect prior to the
amendment of such Revenue Procedure by Revenue Procedure 2003-48), (v) amend its
certificate of incorporation (or other organizational documents), or take any
other action, whether through a stockholder vote or otherwise, affecting the
voting rights of Phillips 66 Capital Stock (including, without limitation,
through the conversion of one class of Phillips 66 Capital Stock into another
class of Phillips 66 Capital Stock) or (vi) take any other action or actions
(including any action or transaction that would be reasonably likely to be
inconsistent with any representation made in the Representation Letters or the
Tax Opinions/Rulings) which in the aggregate (and taking into account any other
transactions described in this subparagraph (d)) would be reasonably likely to
have the effect of causing or permitting one or more persons (whether or not
acting in concert) to acquire directly

 

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or indirectly stock representing a Fifty-Percent or Greater Interest in Phillips
66 or Phillips 66 Company or otherwise jeopardize the Tax-Free Status, unless
prior to taking any such action set forth in the foregoing clauses (i) through
(vi), (x) Phillips 66 shall have requested that ConocoPhillips obtain a Ruling
in accordance with Section 6.03(b) and (d) of this Agreement to the effect that
such transaction will not affect the Tax-Free Status and ConocoPhillips shall
have received such a Ruling in form and substance satisfactory to ConocoPhillips
in its sole and absolute discretion, which discretion shall be exercised in good
faith solely to preserve the Tax-Free Status (and in determining whether a
Ruling is satisfactory, ConocoPhillips may consider, among other factors, the
appropriateness of any underlying assumptions and management’s representations
made in connection with such Ruling), (y) Phillips 66 shall provide
ConocoPhillips with an Unqualified Tax Opinion in form and substance
satisfactory to ConocoPhillips in its sole and absolute discretion, which
discretion shall be exercised in good faith solely to preserve the Tax-Free
Status (and in determining whether an opinion is satisfactory, ConocoPhillips
may consider, among other factors, the appropriateness of any underlying
assumptions and management’s representations if used as a basis for the opinion
and ConocoPhillips may determine that no opinion would be acceptable to
ConocoPhillips) or (z) ConocoPhillips shall have waived the requirement to
obtain such Ruling or Unqualified Tax Opinion.

(e) Certain Issuances of Phillips 66 Capital Stock. If Phillips 66 proposes to
enter into any Section 6.02(e) Acquisition Transaction or, to the extent
Phillips 66 has the right to prohibit any Section 6.02(e) Acquisition
Transaction, proposes to permit any Section 6.02(e) Acquisition Transaction to
occur, in each case, during the period from the date hereof until the first day
after the two-year anniversary of the Distribution Date, Phillips 66 shall
provide ConocoPhillips, no later than ten days following the signing of any
written agreement with respect to the Section 6.02(e) Acquisition Transaction,
with a written description of such transaction (including the type and amount of
Phillips 66 Capital Stock to be issued in such transaction) and a certificate of
the Board of Directors of Phillips 66 to the effect that the Section 6.02(e)
Acquisition Transaction is not a Proposed Acquisition Transaction or any other
transaction to which the requirements of Section 6.02(d) apply (a “Board
Certificate”).

(f) Phillips 66 Restructuring. Phillips 66 and Phillips 66 Company shall not
engage in, cause or permit any internal restructuring (including by making or
revoking any election under Treasury Regulation Section 301.7701-3) involving
Phillips 66 or Phillips 66 Company and/or any of their subsidiaries or any
contribution, sale or other transfer of any of the assets directly or indirectly
transferred to Phillips 66 as part of the Contribution, transferred to Phillips
66 Company as part of the Internal Contribution, or otherwise transferred to
Phillips 66 or Phillips 66 Company, as applicable, or any of their subsidiaries
in connection with the Transaction (any such action, a “Phillips 66
Restructuring”) during or with respect to any Tax Period (or portion thereof)
ending on or prior to 6 months following the Distribution Date without obtaining
the prior written consent of ConocoPhillips (such prior written consent not to
be unreasonably withheld). Phillips 66 or Phillips 66 Company, as applicable,
shall provide written notice to ConocoPhillips describing any Phillips 66
Restructuring proposed to be taken during or with respect to any Tax Period (or
portion thereof) ending on or prior to 6 months following the Distribution Date
and shall consult with ConocoPhillips regarding any such proposed actions.

 

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(g) Distributions by Foreign Phillips 66 Subsidiaries. Until January 1st of the
calendar year immediately following the calendar year in which the Distribution
occurs, Phillips 66 shall neither cause nor permit any foreign subsidiary of
Phillips 66 to enter into any transaction or take any action that would be
considered under the Code to constitute the declaration or payment of a dividend
(including pursuant to Section 304 of the Code) without obtaining the prior
written consent of ConocoPhillips (such prior written consent not to be
unreasonably withheld).

Section 6.03 Procedures Regarding Opinions and Rulings.

(a) If Phillips 66 notifies ConocoPhillips that it desires to take one of the
actions described in clauses (i) through (vi) of Section 6.02(d) (a “Notified
Action”), ConocoPhillips and Phillips 66 shall reasonably cooperate to attempt
to obtain the Ruling or Unqualified Tax Opinion referred to in Section 6.02(d),
unless ConocoPhillips shall have waived the requirement to obtain such Ruling or
Unqualified Tax Opinion.

(b) Rulings or Unqualified Tax Opinions at Phillips 66’s Request. ConocoPhillips
agrees that at the reasonable request of Phillips 66 pursuant to
Section 6.02(d), ConocoPhillips shall cooperate with Phillips 66 and use its
reasonable best efforts to seek to obtain, as expeditiously as possible, a
Ruling from the IRS or an Unqualified Tax Opinion for the purpose of permitting
Phillips 66 to take the Notified Action. Further, in no event shall
ConocoPhillips be required to file any Ruling Request under this Section 6.03(b)
unless Phillips 66 represents that (i) it has read the Ruling Request, and
(ii) all information and representations, if any, relating to any member of the
Phillips 66 Group, contained in the Ruling Request documents are (subject to any
qualifications therein) true, correct and complete. Phillips 66 shall reimburse
ConocoPhillips for all reasonable costs and expenses incurred by the
ConocoPhillips Group in obtaining a Ruling or Unqualified Tax Opinion requested
by Phillips 66 within ten Business Days after receiving an invoice from
ConocoPhillips therefor.

(c) Rulings or Unqualified Tax Opinions at ConocoPhillips’ Request.
ConocoPhillips shall have the right to obtain a Ruling or an Unqualified Tax
Opinion at any time in its sole and absolute discretion. If ConocoPhillips
determines to obtain a Ruling or an Unqualified Tax Opinion, Phillips 66 shall
(and shall cause each Affiliate of Phillips 66 to) cooperate with ConocoPhillips
and take any and all actions reasonably requested by ConocoPhillips in
connection with obtaining the Ruling or Unqualified Tax Opinion (including,
without limitation, by making any representation or covenant or providing any
materials or information requested by the IRS or Tax Advisor; provided that
Phillips 66 shall not be required to make (or cause any Affiliate of Phillips 66
to make) any representation or covenant that is inconsistent with historical
facts or as to future matters or events over which it has no control).
ConocoPhillips and Phillips 66 shall each bear its own costs and expenses in
obtaining a Ruling or an Unqualified Tax Opinion requested by ConocoPhillips.

(d) Phillips 66 hereby agrees that ConocoPhillips shall have sole and exclusive
control over the process of obtaining any Ruling, and that only ConocoPhillips
shall apply for a Ruling. In connection with obtaining a Ruling pursuant to
Section 6.03(b), (i) ConocoPhillips shall keep Phillips 66 informed in a timely
manner of all material actions taken or proposed to be taken by ConocoPhillips
in connection therewith; (ii) ConocoPhillips shall (A) reasonably in advance of
the submission of any Ruling Request documents provide Phillips 66 with a draft
copy thereof, (B) reasonably consider Phillips 66’s comments on such draft copy,
and (C) provide Phillips 66

 

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with a final copy; and (iii) ConocoPhillips shall provide Phillips 66 with
notice reasonably in advance of, and Phillips 66 shall have the right to attend,
any formally scheduled meetings with the IRS (subject to the approval of the
IRS) that relate to such Ruling. Neither Phillips 66 nor any Phillips 66
Affiliate directly or indirectly controlled by Phillips 66 shall seek any
guidance from the IRS or any other Tax Authority (whether written, verbal or
otherwise) at any time concerning the Contribution, the Distribution, the
Internal Contribution, the Internal Distribution (including the impact of any
transaction on the Contribution, the Distribution, the Internal Contribution or
the Internal Distribution) or any transaction referred to in
Section 6.02(a)(ii).

Section 6.04 Liability for Tax-Related Losses.

(a) Notwithstanding anything in this Agreement, the Separation and Distribution
Agreement, the Indemnification and Release Agreement, or any other Ancillary
Agreement to the contrary, subject to Section 6.04(b), Phillips 66 shall be
responsible for, and shall indemnify and hold harmless ConocoPhillips,
ConocoPhillips Company, each of their Affiliates and each of their respective
officers, directors and employees from and against, one hundred percent
(100%) of any Tax-Related Losses that are attributable to or result from any one
or more of the following: (i) the acquisition (other than pursuant to the
Internal Contribution, the Internal Distribution, the Contribution, or the
Distribution) of all or a portion of the stock and/or assets of Phillips 66
and/or its subsidiaries by any means whatsoever by any Person, (ii) any
negotiations, understandings, agreements or arrangements by Phillips 66 with
respect to transactions or events (including, without limitation, stock
issuances, pursuant to the exercise of stock options or otherwise, option
grants, capital contributions or acquisitions, or a series of such transactions
or events) that cause the Internal Distribution or the Distribution to be
treated as part of a plan pursuant to which one or more Persons acquire directly
or indirectly stock of Phillips 66 Company or Phillips 66, as applicable,
representing a Fifty-Percent or Greater Interest therein, (iii) any action or
failure to act by Phillips 66 after the Distribution (including, without
limitation, any amendment to Phillips 66’s certificate of incorporation (or
other organizational documents), whether through a stockholder vote or
otherwise) affecting the voting rights of Phillips 66 stock or Phillips 66
Company stock (including, without limitation, through the conversion of one
class of Phillips 66 Capital Stock or Phillips 66 Company Capital Stock,
respectively, into another class of Phillips 66 Capital Stock or Phillips 66
Company Capital Stock, respectively), (iv) any act or failure to act by Phillips
66, Phillips 66 Company, or any Phillips 66 Affiliate described in Section 6.02
(regardless whether such act or failure to act is covered by a Ruling,
Unqualified Tax Opinion or waiver described in clause (x), (y) or (z) of
Section 6.02(d), a Board Certificate described in Section 6.02(e) or a consent
described in Section 6.02(f) or (g)) or (v) any breach by Phillips 66 of its
agreement and representation set forth in Section 6.01(a).

(b) For purposes of calculating the amount and timing of any Tax-Related Loss
for which Phillips 66 is responsible under this Section 6.04, Tax-Related Losses
shall be calculated by assuming that ConocoPhillips, ConocoPhillips Company, the
ConocoPhillips Affiliated Group and each member of the ConocoPhillips Group
(I) pay Tax at the highest marginal corporate Tax rates in effect in each
relevant taxable year and (II) have no Tax Attributes in any relevant taxable
year.

 

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Section 7. Assistance and Cooperation.

Section 7.01 Assistance and Cooperation.

(a) General. Each of the Companies shall cooperate (and cause its respective
Affiliates to cooperate) with the other Company and with the other Company’s
agents, representatives or advisors, including accounting firms and legal
counsel, in connection with Tax matters relating to the Companies and their
Affiliates including (i) preparation and filing of Tax Returns, (ii) determining
the liability for and amount of any Taxes due (including estimated Taxes) or the
right to and amount of any refund of Taxes, (iii) determining any amounts
required to be paid pursuant to this Agreement, (iv) examinations of Tax
Returns, and (v) any administrative or judicial proceeding in respect of Taxes
assessed or proposed to be assessed or claims for refunds. Such cooperation
shall include, without limitation, (x) preparing Tax Packages and providing
information and documents as provided in Section 7.02, (y) making all
information and documents in their possession relating to the other Company and
its Affiliates available to such other Company as provided in Section 8, and
(z) making available to the other Company, as reasonably requested and
available, personnel (including officers, directors, employees and agents of the
Companies or their respective Affiliates) responsible for preparing,
maintaining, and interpreting information and documents relevant to Taxes, and
personnel reasonably required as witnesses or for purposes of providing
information or documents in connection with any administrative or judicial
proceedings relating to Taxes. In the event that a member of the ConocoPhillips
Group, on the one hand, or a member of the Phillips 66 Group, on the other hand,
suffers a Tax detriment as a result of a Transfer Pricing Adjustment, the
Companies shall cooperate pursuant to this Section 7 to seek any competent
authority relief that may be available with respect to such Transfer Pricing
Adjustment.

(b) Confidentiality. Any information or documents provided under this Section 7
shall be kept confidential by the Company receiving the information or
documents, except as may otherwise be necessary in connection with the filing of
Tax Returns or in connection with any administrative or judicial proceedings
relating to Taxes. Notwithstanding any other provision of this Agreement or any
other agreement, (i) neither ConocoPhillips nor any ConocoPhillips Affiliate
shall be required to provide Phillips 66 or any Phillips 66 Affiliate or any
other Person access to or copies of any information or procedures (including the
proceedings of any Tax Contest) other than information or procedures that relate
solely to Phillips 66, the business or assets of Phillips 66 or any Phillips 66
Affiliate and (ii) in no event shall ConocoPhillips or any ConocoPhillips
Affiliate be required to provide Phillips 66, any Phillips 66 Affiliate or any
other Person access to or copies of any information if such action could
reasonably be expected to result in the waiver of any Privilege. In addition, in
the event that ConocoPhillips determines that the provision of any information
to Phillips 66 or any Phillips 66 Affiliate could be commercially detrimental,
violate any Law or agreement or waive any Privilege, the parties shall use
reasonable best efforts to permit compliance with their respective obligations
under this Section 7 in a manner that avoids any such harm or consequence.

Section 7.02 Tax Packages and Other Tax Return Information.

(a) General. Phillips 66, Phillips 66 Company, ConocoPhillips, and
ConocoPhillips Company acknowledge that time is of the essence in relation to
any request for information, assistance or cooperation made by ConocoPhillips or
Phillips 66 pursuant to Section 7.01 or this

 

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Section 7.02. Phillips 66, Phillips 66 Company, ConocoPhillips, and
ConocoPhillips Company acknowledge that failure to conform to the deadlines set
forth herein or reasonable deadlines otherwise set by ConocoPhillips or Phillips
66 could cause irreparable harm.

(b) Tax Packages. Phillips 66 (if ConocoPhillips is the Responsible Company with
respect to the applicable Tax Returns) or ConocoPhillips (if Phillips 66 is the
Responsible Company with respect to the applicable Tax Returns) shall provide to
the Responsible Company a package containing information and documents relating
to its Group required by the Responsible Company to prepare and file the
applicable Tax Returns (“Tax Packages”). Phillips 66 or ConocoPhillips, as
applicable, shall provide such Tax Packages (i) containing information or
documents in such form as the Responsible Company reasonably requests (or, in
the absence of such request, in such form as historically provided to the
Responsible Company for the purposes of preparing and filing the applicable Tax
Returns) and (ii) in sufficient time for the Responsible Company to file the
applicable Tax Returns on a timely basis.

Section 7.03 Reliance by ConocoPhillips. If any member of the Phillips 66 Group
supplies information to a member of the ConocoPhillips Group in connection with
a Tax liability and an officer of a member of the ConocoPhillips Group signs a
statement or other document under penalties of perjury in reliance upon the
accuracy of such information, then upon the written request of such member of
the ConocoPhillips Group identifying the information being so relied upon, the
chief financial officer of Phillips 66 (or any officer of Phillips 66 as
designated by the chief financial officer of Phillips 66) shall certify in
writing that to his or her knowledge (based upon consultation with appropriate
employees) the information so supplied is accurate and complete. Each of
Phillips 66 and Phillips 66 Company agrees to indemnify and hold harmless each
member of the ConocoPhillips Group and its directors, officers and employees
from and against any fine, penalty, or other cost or expense of any kind
attributable to a member of the Phillips 66 Group having supplied, pursuant to
this Section 7, a member of the ConocoPhillips Group with inaccurate or
incomplete information in connection with a Tax liability.

Section 8. Tax Records.

Section 8.01 Retention of Tax Records. Each Company shall preserve and keep all
Tax Records exclusively relating to the assets and activities of its Group for
Pre-Distribution Periods, and ConocoPhillips shall preserve and keep all other
Tax Records relating to Taxes of the Groups for Pre-Distribution Tax Periods,
for so long as the contents thereof may become material in the administration of
any matter under the Code or other applicable Tax Law, but in any event until
the later of (a) the expiration of any applicable statutes of limitations, or
(b) seven years after the Distribution Date (such later date, the “Retention
Date”). After the Retention Date, each Company may dispose of such Tax Records
upon 90 days’ prior written notice to the other Company. If, prior to the
Retention Date, a Company reasonably determines that any Tax Records which it
would otherwise be required to preserve and keep under this Section 8 are no
longer material in the administration of any matter under the Code or other
applicable Tax Law and the other Company agrees, then such first Company may
dispose of such Tax Records upon 90 days’ prior notice to the other Company. Any
notice of an intent to dispose given pursuant to this Section 8.01 shall include
a list of the Tax Records to be disposed of describing in reasonable detail each
file, book, or other record accumulation being disposed. The notified Company
shall have the opportunity, at its cost and expense, to copy or remove, within
such 90-

 

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day period, all or any part of such Tax Records. If, at any time prior to the
Retention Date, Phillips 66 or Phillips 66 Company determines to decommission or
otherwise discontinue any computer program or information technology system used
to access or store any Tax Records, then Phillips 66 or Phillips 66 Company may
decommission or discontinue such program or system upon 90 days’ prior notice to
ConocoPhillips and ConocoPhillips shall have the opportunity, at its cost and
expense, to copy, within such 90-day period, all or any part of the underlying
data relating to the Tax Records accessed by or stored on such program or
system.

Section 8.02 Access to Tax Records. The Companies and their respective
Affiliates shall make available to each other for inspection and copying during
normal business hours upon reasonable notice all Tax Records (and, for the
avoidance of doubt, any pertinent underlying data accessed or stored on any
computer program or information technology system) in their possession and shall
permit the other Company and its Affiliates, authorized agents and
representatives and any representative of a Taxing Authority or other Tax
auditor direct access during normal business hours upon reasonable notice to any
computer program or information technology system used to access or store any
Tax Records, in each case to the extent reasonably required by the other Company
in connection with the preparation of Tax Returns or financial accounting
statements, audits, litigation, or the resolution of items under this Agreement.

Section 9. Tax Contests.

Section 9.01 Notice. Each of the Companies shall provide prompt notice to the
other Company of any written communication from a Tax Authority regarding any
pending or threatened Tax audit, assessment or proceeding or other Tax Contest
of which it or its Affiliate becomes aware related to Taxes for Tax Periods for
which it is indemnified by the other Company hereunder. Such notice shall attach
copies of the pertinent portion of any written communication from a Tax
Authority and contain factual information (to the extent known) describing any
asserted Tax liability in reasonable detail and shall be accompanied by copies
of any notice and other documents received from any Tax Authority in respect of
any such matters; provided, however, that the Indemnitor shall not be relieved
of its obligations hereunder by reason of any failure by the Indemnitee to so
notify except to the extent the Indemnitor was materially harmed by such
failure.

Section 9.02 Control of Tax Contests.

(a) Separate Returns. In the case of any Tax Contest with respect to any
Separate Return for any Pre-Distribution Period or any Straddle Period:

(i) If the Tax Contest relates exclusively to Taxes for which Phillips 66 is
responsible under Section 2, Phillips 66 shall have exclusive control over such
Tax Contest, except insofar as ConocoPhillips shall have exclusive control over
such Tax Contest pursuant to Section 9.02(a)(ii)(B) and subject to
Section 9.02(c)(i) and (d) below; and

(ii) If the Tax Contest relates (A) exclusively to Taxes for which
ConocoPhillips is responsible under Section 2, (B) exclusively to Taxes for
which Phillips 66 is responsible under Section 2 and ConocoPhillips determines
in good faith that Phillips 66 has failed to defend diligently such Tax Contest,
or (C) to Taxes for which both ConocoPhillips and

 

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Phillips 66 are responsible under Section 2, ConocoPhillips shall (in the case
of Tax Contests described in Section 9.02(a)(ii)(B), at ConocoPhillips’ option)
have exclusive control over the Tax Contest, subject to Section 9.02(c)(i) and
(d) below.

(b) Joint Returns. In the case of any Tax Contest with respect to any
ConocoPhillips Federal Consolidated Income Tax Return, ConocoPhillips State
Combined Income Tax Return or other Joint Return, in each case, for any
Pre-Distribution Period or Straddle Period, ConocoPhillips shall have exclusive
control over the Tax Contest, including exclusive authority with respect to any
settlement of such Tax liability, subject to Section 9.02(c)(ii) below.

(c) Settlement Rights and Certain Other Rights.

(i) Separate Returns. In the case of any Tax Contest with respect to any
Separate Return, the Controlling Party shall have the sole right to contest,
litigate, compromise and settle any such Tax Contest without obtaining the prior
consent of the Non-Controlling Party; provided, however, that if Phillips 66 is
the Controlling Party with respect to any Tax Contest with respect to any
Separate Return which Tax Contest would reasonably be expected to have an
adverse impact on ConocoPhillips, Phillips 66 shall not compromise or settle
such Tax Contest without obtaining the prior consent of ConocoPhillips. Unless
waived by the parties in writing, in connection with any potential adjustment in
such Tax Contest (x) with respect to any Separate Return as a result of which
adjustment the Non-Controlling Party may reasonably be expected to become liable
to make any indemnification payment (or any payment under Section 2.07) to the
Controlling Party under this Agreement or (y) with respect to any Specified
Separate Return: (A) the Controlling Party shall keep the Non-Controlling Party
informed in a timely manner of all actions taken or proposed to be taken by the
Controlling Party with respect to such potential adjustment in such Tax Contest;
(B) the Controlling Party shall provide the Non-Controlling Party copies of any
written materials relating to such potential adjustment in such Tax Contest
received from any Tax Authority; (C) the Controlling Party shall consult with
the Non-Controlling Party before submitting any written materials prepared or
furnished in connection with such potential adjustment in such Tax Contest and
shall offer the Non-Controlling Party a reasonable opportunity to comment before
submitting any such written materials; and (D) the Controlling Party shall
timely provide the Non-Controlling Party with copies of any correspondence or
filings submitted to any Tax Authority or judicial authority in connection with
such potential adjustment in such Tax Contest. The failure of the Controlling
Party to take any action specified in the preceding sentence with respect to the
Non-Controlling Party shall not relieve the Non-Controlling Party of any
liability and/or obligation which it may have to the Controlling Party under
this Agreement except to the extent that the Non-Controlling Party was
materially harmed by such failure, and in no event shall such failure relieve
the Non-Controlling Party from any other liability or obligation which it may
have to the Controlling Party.

(ii) Joint Returns. In the case of any Tax Contest with respect to Joint
Returns, the Controlling Party shall have the sole right to contest, litigate,
compromise and settle any such Tax Contest without obtaining the prior consent
of the Non-Controlling Party. Unless waived by the parties in writing, in
connection with any potential adjustment in such Tax Contest as a result of
which adjustment the Non-Controlling Party may

 

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reasonably be expected to become liable to make any indemnification payment (or
any payment under Section 2.07) to the Controlling Party under this Agreement:
(A) the Controlling Party shall keep the Non-Controlling Party informed in a
timely manner of all actions taken or proposed to be taken by the Controlling
Party with respect to such potential adjustment in such Tax Contest; (B) the
Controlling Party shall provide the Non-Controlling Party copies of any written
materials relating to such potential adjustment in such Tax Contest received
from any Tax Authority; and (C) the Controlling Party shall consult with the
Non-Controlling Party before submitting any written materials prepared or
furnished in connection with such potential adjustment in such Tax Contest.
Phillips 66 shall not be entitled to attend meetings or teleconferences with the
Tax Authority in connection with any Tax Contest with respect to any Joint
Returns, except that, in connection with any Special Joint Tax Contest, Phillips
66 shall be entitled to attend such portion of any meeting or teleconference as
pertains to Phillips 66. The failure of the Controlling Party to take any action
specified in the second preceding sentence with respect to the Non-Controlling
Party shall not relieve the Non-Controlling Party of any liability and/or
obligation which it may have to the Controlling Party under this Agreement
except to the extent that the Non-Controlling Party was materially harmed by
such failure, and in no event shall such failure relieve the Non-Controlling
Party from any other liability or obligation which it may have to the
Controlling Party. ConocoPhillips shall be entitled to permit Phillips 66 to
conduct any portion of a Special Joint Tax Contest on such terms and conditions
as ConocoPhillips shall determine in its sole discretion.

(d) Tax Contest Participation. In the case of any Tax Contest with respect to
any Separate Return, unless waived by the parties in writing, the Controlling
Party shall provide the Non-Controlling Party with written notice reasonably in
advance of, and the Non-Controlling Party shall have the right to attend, any
formally scheduled meetings with Tax Authorities or hearings or proceedings
before any judicial authorities in connection with any potential adjustment in a
Tax Contest pursuant to which the Non-Controlling Party may reasonably be
expected to become liable to make any indemnification payment (or any payment
under Section 2.07) to the Controlling Party under this Agreement or with
respect to any Specified Separate Return. The failure of the Controlling Party
to provide any notice specified in this Section 9.02(d) to the Non-Controlling
Party shall not relieve the Non-Controlling Party of any liability and/or
obligation which it may have to the Controlling Party under this Agreement
except to the extent that the Non-Controlling Party was materially harmed by
such failure, and in no event shall such failure relieve the Non-Controlling
Party from any other liability or obligation which it may have to the
Controlling Party.

(e) Power of Attorney. Each member of the Phillips 66 Group shall execute and
deliver to ConocoPhillips (or such member of the ConocoPhillips Group as
ConocoPhillips shall designate) any power of attorney or other similar document
reasonably requested by ConocoPhillips (or such designee) in connection with any
Tax Contest (as to which ConocoPhillips is the Controlling Party) described in
this Section 9.

 

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Section 10. Effective Date; Termination of Prior Intercompany Tax Allocation
Agreements.

This Agreement shall be effective as of the date hereof. As of the date hereof,
(a) all prior intercompany Tax allocation agreements shall be terminated, and
(b) amounts due under such agreements as of the date hereof shall be settled
before the Distribution Date. Upon such termination and settlement, no further
payments by or to ConocoPhillips, Phillips 66 or any member of their respective
Group, with respect to such agreements shall be made, and all other rights and
obligations resulting from such agreements between the Companies and their
Affiliates shall cease at such time. The prior practice of ConocoPhillips of
creating intercompany obligations in respect of Tax allocations with respect to
the Phillips 66 Business shall be terminated effective immediately prior to the
Distribution on the Distribution Date, and amounts due under any such remaining
intercompany obligations shall be settled in the ordinary course.

Section 11. Survival of Obligations.

The representations, warranties, covenants and agreements set forth in this
Agreement shall be unconditional and absolute and shall remain in effect without
limitation as to time.

Section 12. Dispute Resolution.

The Companies mutually desire that friendly collaboration will continue between
them. Accordingly, they will try, and they will cause their respective Group
members to try, to resolve in an amicable manner all disagreements and
misunderstandings relating to their respective rights and obligations under this
Agreement, including any amendments hereto. In furtherance thereof, in the event
of any dispute, controversy or claim arising out of or relating to this
Agreement, including the validity, interpretation, breach or termination thereof
(a “Dispute”), the Tax departments of the Companies shall negotiate in good
faith to resolve the Dispute. If such good faith negotiations do not resolve the
Dispute, then the Dispute shall be resolved in accordance with the procedures
set forth in Article IV of the Indemnification and Release Agreement, which
shall be the sole and exclusive procedures for the resolution of any such
Dispute unless otherwise specified in Article IV of the Indemnification and
Release Agreement. Notwithstanding anything to the contrary in this Agreement,
the Indemnification and Release Agreement, the Separation and Distribution
Agreement or any other Ancillary Agreement, ConocoPhillips and Phillips 66 are
the only members of their respective Group entitled to commence a dispute
resolution procedure under this Agreement, and each of ConocoPhillips and
Phillips 66 will cause its respective Group members not to commence any dispute
resolution procedure other than through such party as provided in this
Section 12.

Section 13. Expenses.

Except as otherwise provided in this Agreement, each party and its Affiliates
shall bear their own expenses incurred in connection with preparation of Tax
Returns, Tax Contests, and other matters related to Taxes under the provisions
of this Agreement.

 

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Section 14. General Provisions.

Section 14.01 Addresses and Notices. Each party giving any notice required or
permitted under this Agreement will give the notice in writing and use one of
the following methods of delivery to the party to be notified, at the address
set forth below (except that any notice involving an amount at issue less than
$100,000, individually, shall be sent to the designee of the General Tax Officer
of the other Company, rather than the address below) or another address of which
the sending party has been notified in accordance with this Section 14.01:
(a) personal delivery; (b) facsimile or telecopy transmission with a reasonable
method of confirming transmission; (c) commercial overnight courier with a
reasonable method of confirming delivery; (d) pre-paid, United States of America
certified or registered mail, return receipt requested; or (e) electronic mail
with a reasonable method of confirming receipt. Notice to a party is effective
for purposes of this Agreement only if given as provided in this Section 14.01
and shall be deemed given on the date that the intended addressee actually
receives the notice.

 

If to ConocoPhillips or ConocoPhillips Company:

 

ConocoPhillips

600 North Dairy Ashford

Houston, Texas 77079

Attention: General Tax Officer

Facsimile: 281-293-2852

Email: ben.j.clayton@conocophillips.com

  

with a copy to:

 

ConocoPhillips

600 North Dairy Ashford

Houston, Texas 77079

Attention: Chief Financial Officer

Facsimile: 281-293-6311

Email: jeff.w.sheets@conocophillips.com

If to Phillips 66 or Phillips 66 Company:

 

Phillips 66

600 North Dairy Ashford

Houston, Texas 77079

Attention: General Tax Officer

Facsimile: 281-293-2852

Email: audrey.l.miller@P66.com

  

with a copy to:

 

Phillips 66

600 North Dairy Ashford

Houston, Texas 77079

Attention: Chief Financial Officer

Facsimile: 281-293-3793

Email: greg.g.maxwell@P66.com

A party may change the address for receiving notices under this Agreement by
providing written notice of the change of address to the other parties.

Section 14.02 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their successors and assigns.

Section 14.03 Waiver. The parties may waive a provision of this Agreement only
by a written waiver signed by the party intended to be bound by the waiver. A
party is not prevented from enforcing any right, remedy or condition in the
party’s favor because of any failure or delay in exercising any right or remedy
or in requiring satisfaction of any condition, except to the extent that the
party specifically waives the same in writing. A written waiver given for one
matter or occasion is effective only in that instance and only for the purpose
stated. A waiver once given is not to be construed as a waiver for any other
matter or occasion. Any enumeration of a party’s rights and remedies in this
Agreement is not intended to be exclusive, and a party’s rights and remedies are
intended to be cumulative to the extent permitted by Law and include any rights
and remedies authorized in Law or in equity.

 

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Section 14.04 Severability. If any provision of this Agreement is determined to
be invalid, illegal or unenforceable, the remaining provisions of this Agreement
remain in full force, if the essential terms and conditions of this Agreement
for each party remain valid, binding and enforceable.

Section 14.05 Authority. Each of the parties represents to the other that (a) it
has the corporate or other requisite power and authority to execute, deliver and
perform this Agreement, (b) the execution, delivery and performance of this
Agreement have been duly authorized by all necessary corporate or other action,
(c) it has duly and validly executed and delivered this Agreement, and (d) this
Agreement is a legal, valid and binding obligation, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Laws affecting creditors’ rights
generally and general equity principles.

Section 14.06 Further Action. The parties shall execute and deliver all
documents, provide all information, and take or refrain from taking action as
may be necessary or appropriate to achieve the purposes of this Agreement,
including the execution and delivery to the other parties and their Affiliates
and representatives of such powers of attorney or other authorizing
documentation as is reasonably necessary or appropriate in connection with Tax
Contests (or portions thereof) under the control of such other parties in
accordance with Section 9.

Section 14.07 Integration. This Agreement, together with each of the exhibits
and schedules appended hereto, constitutes the final agreement between the
parties, and is the complete and exclusive statement of the parties’ agreement
on the matters contained herein. All prior and contemporaneous negotiations and
agreements between the parties with respect to the matters contained herein are
superseded by this Agreement, as applicable. In the event of any inconsistency
between this Agreement and the Separation and Distribution Agreement, or any of
the Ancillary Agreements (other than this Agreement), with respect to matters
addressed herein, the provisions of this Agreement shall control.

Section 14.08 Construction. The language in all parts of this Agreement shall in
all cases be construed according to its fair meaning and shall not be strictly
construed for or against any party. The captions, titles and headings included
in this Agreement are for convenience only, and do not affect this Agreement’s
construction or interpretation. Unless otherwise indicated, all “Section”
references in this Agreement are to sections of this Agreement.

Section 14.09 No Double Recovery. No provision of this Agreement shall be
construed to provide an indemnity or other recovery for any costs, damages, or
other amounts for which the damaged party has been fully compensated under any
other provision of this Agreement or under any other agreement or action at Law
or equity. Unless expressly required in this Agreement, a party shall not be
required to exhaust all remedies available under other agreements or at Law or
equity before recovering under the remedies provided in this Agreement.

 

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Section 14.10 Counterparts. The parties may execute this Agreement in multiple
counterparts, each of which constitutes an original as against the party that
signed it, and all of which together constitute one agreement. This Agreement is
effective upon delivery of one executed counterpart from each party to the other
party. The signatures of the parties need not appear on the same counterpart.
The delivery of signed counterparts by facsimile or email transmission that
includes a copy of the sending party’s signature is as effective as signing and
delivering the counterpart in person.

Section 14.11 Governing Law. The internal Laws of the State of Delaware (without
reference to its principles of conflicts of Law) govern the construction,
interpretation and other matters arising out of or in connection with this
Agreement and each of the exhibits and schedules hereto and thereto (whether
arising in contract, tort, equity or otherwise).

Section 14.12 Jurisdiction. If any dispute arises out of or in connection with
this Agreement, except as expressly contemplated by another provision of this
Agreement, the parties irrevocably (and the parties will cause each other member
of their respective Group to irrevocably) (a) consent and submit to the
exclusive jurisdiction of federal and state courts located in Delaware,
(b) waive any objection to that choice of forum based on venue or to the effect
that the forum is not convenient, and (c) WAIVE TO THE FULLEST EXTENT PERMITTED
BY LAW ANY RIGHT TO TRIAL OR ADJUDICATION BY JURY.

Section 14.13 Amendment. Except as otherwise expressly provided herein with
respect to the Schedules hereto, the parties may amend this Agreement only by a
written agreement signed by each party to be bound by the amendment and that
identifies itself as an amendment to this Agreement.

Section 14.14 Phillips 66 Subsidiaries. If, at any time, Phillips 66 acquires or
creates one or more subsidiaries that would have been includable in the Phillips
66 Group had they been acquired or created immediately after the Distribution,
they shall be subject to this Agreement and all references to the Phillips 66
Group herein shall thereafter include a reference to such subsidiaries.

Section 14.15 Successors. This Agreement shall be binding on and inure to the
benefit of any successor by merger, acquisition of assets, or otherwise, to any
of the parties hereto (including but not limited to any successor of
ConocoPhillips, ConocoPhillips Company, Phillips 66, or Phillips 66 Company
succeeding to the Tax attributes of either under Section 381 of the Code), to
the same extent as if such successor had been an original party to this
Agreement.

Section 14.16 Injunctions. The parties acknowledge that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with its specific terms or were otherwise breached. The
parties hereto shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof in any court having jurisdiction, such remedy being
in addition to any other remedy to which they may be entitled at Law or in
equity.

 

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IN WITNESS WHEREOF, each party has caused this Agreement to be executed on its
behalf by a duly authorized officer on the date first set forth above.

 

CONOCOPHILLIPS     PHILLIPS 66 By:  

/s/ Ryan M. Lance

    By:  

/s/ Greg C. Garland

Name:   Ryan M. Lance     Name:   Greg C. Garland Title:   Chairman, President
and Chief Executive Officer     Title:   Chairman, President and Chief Executive
Officer CONOCOPHILLIPS COMPANY     PHILLIPS 66 COMPANY By:  

/s/ Ben J. Clayton

    By:  

/s/Audrey L. Miller

Name:   Ben J. Clayton     Name:   Audrey L. Miller Title:   General Tax Officer
    Title:   Assistant Tax Administration Officer

 

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UK TAX

SCHEDULE 2.05

Part A: UK Tax Matters

Paragraph 1. General Principle.

Save as expressly provided in this Agreement, and without prejudice to the
rights and obligations contained in this Schedule, each member of the
ConocoPhillips Group and each member of the Phillips 66 Group shall be
responsible for discharging any UK Tax Liability that may fall on it and shall
be entitled to any UK Relief arising to it, and none of the parties to this
Agreement indemnifies or otherwise agrees to make payment to, or to procure the
making of payment to, the other in relation thereto.

Paragraph 2. Management of Pre-Distribution UK Tax Affairs.

Paragraph 2.01. VAT Grouping.

(a) ConocoPhillips shall procure that (if one has not already been made) an
application shall be made to HM Revenue & Customs pursuant to section 43B of the
Value Added Tax Act 1994 for the exclusion of each member of the Phillips 66
Group that has previously been a member of ConocoPhillips UK Topco’s VAT group
from the bodies corporate treated as members of ConocoPhillips UK Topco’s VAT
group and for such exclusion to take effect from the time of the Distribution
or, if HM Revenue & Customs do not permit this, at the earliest date following
the Distribution permitted.

(b) Phillips 66 shall contribute, or shall procure that each member of the
Phillips 66 Group which was a member of ConocoPhillips UK Topco’s VAT group
contributes, to the representative member of such VAT group such proportion of
any VAT for which the representative member is accountable as is properly
attributable to supplies, acquisitions and importations (“supplies”) made by
each member of the Phillips 66 Group whilst a member of ConocoPhillips UK
Topco’s VAT group (less such amount of deductible input tax as is properly
attributable to such supplies), such contribution to be made in cleared funds on
the day which is the later of 30 days after demand is made therefor, and four
Business Days before the day on which the representative member is required to
account for such VAT to HM Revenue & Customs. ConocoPhillips shall pay, or shall
procure that there is paid, to Immingham CHP LLP (on behalf of itself and each
other relevant member of the Phillips 66 Group) an amount equivalent to such
proportion of any repayment of VAT received by the representative member from HM
Revenue & Customs or of any credit obtained by reference to an excess of
deductible input tax over output tax that is properly attributable to supplies
made to and by members of the Phillips 66 Group whilst members of ConocoPhillips
UK Topco’s VAT group (but excluding any part of such repayment or credit that is
attributable to interest payable by HM Revenue & Customs), promptly after its
receipt by, or offset against a liability of, the representative member.
Phillips 66 shall provide such information as may be required to enable the
representative member to make the returns and provide the information required
to be provided for VAT purposes.

 

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Paragraph 2.02 . Group Payment Arrangement.

(a) ConocoPhillips shall procure that the UK Nominated Company will, in
accordance with the UK GPA, give notice to HM Revenue & Customs to the effect
that all members of the Phillips 66 Group will cease from the Distribution to be
members of the same group of companies as the UK Nominated Company within the
meaning of section 36 of the Finance Act 1998 or section 59F of the Taxes
Management Act 1970.

(b) Phillips 66 shall procure that each member of the Phillips 66 Group which
was a member of the UK GPA contributes to the UK Nominated Company, within 30
days after written demand is made therefor (or, if later, four Business Days
before the amount becomes due and payable to HM Revenue & Customs), an amount
equal to any instalment of UK Corporation Tax which is to be or has been
discharged by the UK Nominated Company on behalf of the member of the Phillips
66 Group in question pursuant to the UK GPA (including, without limitation,
through payment of a balance of monies payable pursuant to the UK GPA) as
certified by the UK Nominated Company (but, for the avoidance of doubt, not
including any amount in respect of interest payable in respect of any such
instalment of UK Corporation Tax to HM Revenue & Customs), provided that no such
contribution shall be made to the extent that such contribution was made prior
to or at the time of the Distribution.

(c) ConocoPhillips shall:

(i) procure that the UK Nominated Company shall, to the extent that it has not
made such payment prior to the Distribution, pay to HM Revenue & Customs when
the relevant amount is due and payable to HM Revenue & Customs (or promptly
following receipt of the contribution by the relevant member of the Phillips 66
Group in respect of the relevant amount, if such contribution is received after
the date when the relevant amount is due and payable to HM Revenue & Customs) an
amount equal to any amount contributed after the Distribution to the UK
Nominated Company by any member of the Phillips 66 Group pursuant to the UK GPA
in respect of any instalment of UK Corporation Tax;

(ii) procure that the UK Nominated Company shall (subject to paragraph (iii)
below) apportion to the relevant member of the Phillips 66 Group each amount
contributed before or after the Distribution to the UK Nominated Company by any
member of the Phillips 66 Group pursuant to the UK GPA in respect of any
instalment of UK Corporation Tax (a “Contributed Amount”), such apportionment to
be made by reference to the instalment or instalments of UK Corporation Tax in
respect of which the Contributed Amount was paid; and

(iii) within 30 days after the relevant UK Corporation Tax has finally been
apportioned, pay, or procure that there is paid, to the relevant member of the
Phillips 66 Group an amount equal to any excess of any Contributed Amount in
respect of any instalment of UK Corporation Tax over the amount of UK
Corporation Tax finally apportioned to that member of the Phillips 66 Group in
respect of that instalment (for the avoidance of doubt, taking no account of any
interest payable by HM Revenue & Customs in respect of such excessive
Contributed Amount).

 

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Paragraph 3. Group Relief Surrenders between the Groups.

Paragraph 3.01. ConocoPhillips and Phillips 66 shall procure that after the
Distribution no claim, election, surrender, notice or consent is made in respect
of any Group Relief Surrender by a member of the ConocoPhillips Group to a
member of the Phillips 66 Group (or vice versa) other than pursuant to this
Paragraph 3.

Paragraph 3.02. Subject to the remainder of this Paragraph 3, ConocoPhillips and
Phillips 66 shall use all reasonable endeavors to procure that each Agreed UK
Group Relief Surrender referred to in Appendix 1 shall be made (and not later
amended) or, if made prior to the Distribution, shall not be amended.

Paragraph 3.03. No payment shall be made by the company receiving an Agreed UK
Group Relief Surrender, or by any other member of its Group, for any Agreed UK
Group Relief Surrender (including for any increase in the amount of any Agreed
UK Group Relief Surrender in accordance with Paragraph 3.05); and no payment
shall be made by a company surrendering an Agreed UK Group Relief Surrender, or
any member of its Group, in respect of any tax liability falling on a company
receiving such Agreed UK Group Relief Surrender because the amount of such
Agreed UK Group Relief Surrender is reduced in accordance with Paragraph 3.04.

Paragraph 3.04. If the amount of any Corresponding Relievable Loss is certified
by the person to whom that loss arises to be in fact less than the amount given
for that Corresponding Relievable Loss in Appendix 1, then the amount of any
Agreed UK Group Relief Surrender in respect of that Corresponding Relievable
Loss will be reduced accordingly. Any necessary allocation of the reduction
shall be determined by Phillips 66 (if the reduction is in a Corresponding
Relievable Loss assumed to be surrendered to more than one member of the
Phillips 66 Group) or by ConocoPhillips (if the reduction is in a Corresponding
Relievable Loss assumed to be surrendered to more than one member of the
ConocoPhillips Group).

Paragraph 3.05. If a person who is a member of a Group has a Corresponding
Relievable Loss in respect of a UK Accounting Period referred to in Appendix 1
which is in fact greater than a Corresponding Relievable Loss assumed for that
member in Appendix 1, the amount thereof shall be certified by that person as
soon as reasonably practicable to Phillips 66 (where the person with the
Corresponding Relievable Loss is a member of the ConocoPhillips Group) or to
ConocoPhillips (where the person with the Corresponding Relievable Loss is a
member of the Phillips 66 Group) and an Agreed UK Group Relief Surrender in
respect of that Corresponding Relievable Loss may, if requested by Phillips 66
or ConocoPhillips, as the case may be, for the other Group, be increased or made
(including as an additional Group Relief Surrender to another member of the
other Group) but only to the extent that the amount of the Corresponding
Relievable Loss that exceeds the amount set out for that Corresponding
Relievable Loss in Appendix 1 cannot be used by the person to whom that
Corresponding Relievable Loss arises, or by another member of the same UK Tax
Group, other than in a UK Accounting Period of that person subsequent to the UK
Accounting Period in which that Corresponding Relievable Loss arises.

 

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Paragraph 3.06. Subject to the other provisions of this Paragraph 3, if a
company which is a member of a UK Tax Group has lower profits available to be
relieved by a Group Relief Surrender than are assumed by Appendix 1 then
Phillips 66 (in the case of the Phillips 66 UK Tax Group) or ConocoPhillips (in
the case of the ConocoPhillips UK Tax Group) may require that a Group Relief
Surrender of all or part of the Corresponding Relievable Loss in question is
reallocated to another member of the same UK Tax Group.

Paragraph 3.07. ConocoPhillips and Phillips 66 shall each use all reasonable
endeavors as respects its Group to procure that claims, adjustments, elections,
surrenders, notices, consents (including adjustments to any of these) and other
procedural matters required to give effect to this Paragraph 3 shall occur,
within applicable UK Time Limits.

Paragraph 4. Other Surrenders and Similar Matters.

Paragraph 4.01. Transfer Pricing. Subject to its compliance with Section 4.06(b)
of this Agreement, no balancing or other payment shall be made by any member of
either Group to a member of the other Group in respect of any Transfer Pricing
Adjustment or compensating adjustment in respect of a UK Accounting Period
ending on or before, or commencing before and ending after, the Distribution,
including in respect of any alteration to any such Transfer Pricing Adjustment.

Paragraph 4.02. Surrenders. No Non Group Relief Surrender shall be made after
the Distribution by any member of either Group to a member of the other Group in
respect of which no claim, election, surrender, notice or consent has been made
on or prior to the Distribution.

Paragraph 4.03. Rollover and Holdover Relief. ConocoPhillips and Phillips 66
shall procure that after the Distribution no claim for Rollover Relief or
Holdover Relief shall be made by a member of one Group in respect of any
chargeable gains of a member of the other Group, other than pursuant to this
Paragraph 4.03. ConocoPhillips and Phillips 66 shall use all reasonable
endeavors to procure that (a) the claims for Rollover Relief and Holdover Relief
listed in Part A of Appendix 2 (if any) shall be made and not later amended and
(b) adjustments, elections, surrenders, notices, consents (including adjustments
to any of these) and other procedural matters required to give effect to such
claims shall occur, within applicable UK Time Limits. ConocoPhillips and
Phillips 66 shall procure that no amendment is made to the claims for Rollover
Relief or Holdover Relief made prior to the Distribution and listed in Part B of
Appendix 2. Each member of each Group shall be responsible for discharging any
UK Tax Liability arising in connection with a claim for Rollover Relief or
Holdover Relief made prior to the Distribution or pursuant to this Paragraph
4.03 that may fall on it.

Paragraph 4.04. Worldwide Debt Cap. ConocoPhillips and Phillips 66 agree that
prior to the Distribution no member of either Group has been subject to any
Worldwide Debt Cap Disallowance, and that no payments shall be, or have been,
made in respect of any Worldwide Debt Cap Disallowance by any member of either
Group to any member of the other Group in respect of any UK Accounting Period
ending on or before, or commencing before and ending after, the Distribution.

Paragraph 4.05. Existing Arrangements. Any agreement, arrangement or
understanding existing prior to the Distribution in respect of transfer pricing,
Non Group Relief Surrenders, Rollover Relief or Holdover Relief or Worldwide
Debt Cap Disallowances is (subject to Paragraph 4.03) terminated as regards the
period from the Distribution forwards as between members of the Phillips 66
Group and members of the ConocoPhillips Group and no claims or payments shall be
made in connection therewith.

 

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Part B: Definitions and Interpretation

Paragraph 1. Definitions.

In this Schedule the following definitions shall have the following meanings:

“ConocoPhillips UK Tax Group” means ConocoPhillips UK Topco and any other
company or companies (other than any member of the Phillips 66 Group) treated
after the Distribution as a member or members of the same group as, or as
otherwise connected or associated in any way with, ConocoPhillips UK Topco for
any UK Tax purpose;

“Contributed Amount” has the meaning set forth in Paragraph 2.02(c)(ii) of this
Schedule 2.05.

“Holdover Relief” means holdover relief available in accordance with sections
152 and 154 TCGA (as extended by sections 175 and 179B TCGA and/or following any
election pursuant to section 179A TCGA), and any reference to an amendment to a
claim for Holdover Relief shall include any amendment or adjustment to, any
withdrawal of and the making of any claim, election, surrender, notice or
consent that is inconsistent with the claims, elections, surrenders, notices or
consents made in respect of such claim for Holdover Relief prior to the
Distribution;

“Non Group Relief Surrender” means:

(a) the notional transfer of any asset or reallocation of a gain or loss in
accordance with section 171A or section 179A of the TCGA; and/or

(b) the surrender of eligible unrelieved foreign tax (EUFT) in accordance with
The Double Taxation Relief (Surrender of Relievable Tax Within a Group)
Regulations 2001 (S.I. 2001 No. 1163); and/or

(c) any reallocation of a chargeable realization gain in accordance with section
792 of CTA 2009;

“Phillips 66 UK Tax Group” means Phillips 66 UK Topco and any other company or
companies treated after the Distribution as a member or members of the same
group as, or as otherwise connected or associated in any way with, Phillips 66
UK Topco for any UK Tax purpose;

“Phillips 66 UK Topco” means U.K. Phillips 66 Limited;

“Relief” includes, unless the context otherwise requires, any Tax Benefits and
any allowance, credit, deduction, exemption or set off in respect of any tax or
relevant to the computation of any income, profits or gains for the purposes of
any tax, or any right to or actual repayment of or saving of tax, and any
reference to the use or set off of a Relief shall be construed accordingly;

 

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“Rollover Relief” means rollover relief available in accordance with section 152
TCGA (as extended by sections 175 and 179B TCGA and/or following any election
pursuant to section 179A TCGA), and any reference to an amendment to a claim for
Rollover Relief shall include any amendment or adjustment to, any withdrawal of
and the making of any claim, election, surrender, notice or consent that is
inconsistent with the claims, elections, surrenders, notices or consents made in
respect of such claim for Rollover Relief prior to the Distribution;

“Taxes Act” means the Income and Corporation Taxes Act 1988;

“TCGA” means the Taxation of Chargeable Gains Act 1992;

“TIOPA” means the Taxation (International and other Provisions) Act 2010;

“UK Accounting Period” means any period by reference to which any income,
profits or gains, or any other amounts relevant for the purposes of UK Tax, are
measured or determined;

“UK Relief” means a Relief relating to UK Tax;

“UK Tax Group” means either of the Phillips 66 UK Tax Group or the
ConocoPhillips UK Tax Group;

“UK Tax Liability” means a liability to make or suffer an actual payment of UK
Tax;

“UK Time Limit” means the latest date on which a UK Tax document can be executed
or delivered to a relevant UK Tax Authority either without incurring interest or
a penalty, or in order to ensure that such UK Tax document is effective; and

“Worldwide Debt Cap Disallowance” means a disallowance under Chapter 3 of Part 7
of TIOPA.

Paragraph 2. Interpretation

Paragraph 2.01 General. In this Schedule:

(a) persons shall be treated as “connected” if they are connected within the
meaning of section 1122 of CTA 2010;

(b) references to legislation are references to legislation of the United
Kingdom; and

(c) references to provisions of the Corporation Taxes Acts shall, where
relevant, be construed as references to the corresponding provisions of the
Taxes Act or a Finance Act that the provisions referred to replace,

 

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Paragraph 2.02. Part A: Paragraph References. References in the main body of
this Agreement and in Part A of this Schedule to paragraphs of this Schedule
are, unless otherwise stated, references to paragraphs in Part A of this
Schedule.

 

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