10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2003

Commission file number 1-5153

Marathon Oil Corporation

(Exact name of registrant as specified in its charter)

Delaware	25-0996816
(State of Incorporation)	(I.R.S. Employer Identification No.)

5555 San Felipe Road, Houston, TX 77056-2723

(Address of principal executive offices)

Tel. No. (713) 629-6600

Securities registered pursuant to Section 12 (b) of the Act:*

Title of Each Class

Common Stock, par value $1.00 Rights to Purchase Series A Junior Preferred Stock (Traded with Common Stock)**

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for at least the past 90 days. Yes þ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes  þ No  ¨

Aggregate market value of Common Stock held by non-affiliates as of June 30, 2003: $8 billion. The amount shown is based on the closing price of the registrant’s Common Stock on the New York Stock Exchange composite tape on that date. Shares of Common Stock held by executive officers and directors of the registrant are not included in the computation. However, the registrant has made no determination that such individuals are “affiliates” within the meaning of Rule 405 under the Securities Act of 1933.

There were 310,648,972 shares of Marathon Oil Corporation Common Stock outstanding as of January 31, 2004.

Documents Incorporated By Reference:

Portions of the registrant’s proxy statement relating to its 2004 annual meeting of stockholders, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, are incorporated by reference to the extent set forth in Part III, Items 10-14 of this report.

 * The Common Stock is listed on the New York Stock Exchange, the Chicago Stock Exchange and the Pacific Stock Exchange.

** The Preferred Stock Purchase Rights expired on January 31, 2003, pursuant to the terms of the Rights Agreement, as amended through January 29, 2003, between Marathon Oil Corporation and National City Bank, as rights agent.

MARATHON OIL CORPORATION

Unless the context otherwise indicates, references in this Form 10-K to “Marathon,” “we,” or “us” are references to Marathon Oil Corporation, its wholly owned and majority owned subsidiaries, and its ownership interest in equity investees (corporate entities, partnerships, limited liability companies and other ventures, in which Marathon exerts significant influence by virtue of its ownership interest, typically between 20 and 50 percent).

TABLE OF CONTENTS

PART I
Item 1. and 2.	Business and Properties	2
Item 3.	Legal Proceedings	24
Item 4.	Submission of Matters to a Vote of Security Holders	26
PART II
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters	26
Item 6.	Selected Financial Data	26
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	52
Item 8.	Consolidated Financial Statements and Supplementary Data	F-1
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	57
Item 9A.	Controls and Procedures	57
PART III
Item 10.	Directors and Executive Officers of The Registrant	58
Item 11.	Executive Compensation	59
Item 12.	Security Ownership of Certain Beneficial Owners and Management	59
Item 13.	Certain Relationships and Related Transactions	59
Item 14.	Principal Accounting Fees and Services	59
PART IV
Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K	60
SIGNATURES		67
GLOSSARY OF CERTAIN DEFINED TERMS		68

Disclosures Regarding Forward-Looking Statements

This annual report on Form 10-K, particularly Item 1. and Item 2. Business and Properties, Item 3. Legal Proceedings, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 7A. Quantitative and Qualitative Disclosures About Market Risk, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements typically contain words such as “anticipates”, “believes”, “estimates”, “expects”, “forecasts”, “plans”, “predicts” or “projects” or variations of these words, suggesting that future outcomes are uncertain. In accordance with “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, these statements are accompanied by cautionary language identifying important factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in the forward-looking statements.

Forward-looking statements with respect to Marathon may include, but are not limited to, levels of revenues, gross margins, income from operations, net income or earnings per share; levels of capital, exploration, environmental or maintenance expenditures; the success or timing of completion of ongoing or anticipated capital, exploration or maintenance projects; volumes of production, sales, throughput or shipments of liquid hydrocarbons, natural gas and refined products; levels of worldwide prices of liquid hydrocarbons, natural gas and refined products; levels of reserves, proved or otherwise, of liquid hydrocarbons or natural gas; the acquisition or divestiture of assets; the effect of restructuring or reorganization of business components; the potential effect of judicial proceedings on the business and financial condition; and the anticipated effects of actions of third parties such as competitors, or federal, state or local regulatory authorities.

PART I

Item 1. and 2. Business and Properties

General

Marathon Oil Corporation was originally organized in 2001 as USX HoldCo, Inc., a wholly owned subsidiary of old USX Corporation. As a result of a reorganization completed in July 2001 (the “Holding Company Reorganization”), USX HoldCo, Inc. (1) became the parent entity of the consolidated enterprise (the former USX Corporation was merged into a subsidiary of USX HoldCo, Inc.) and (2) changed its name to USX Corporation. In connection with the transaction discussed in the next paragraph (the “Separation”), USX Corporation changed its name to Marathon Oil Corporation.

Before December 31, 2001, Marathon had two outstanding classes of common stock: USX-Marathon Group common stock, which was intended to reflect the performance of Marathon’s energy business, and USX-U.S. Steel Group common stock (“Steel Stock”), which was intended to reflect the performance of Marathon’s steel business. On December 31, 2001, Marathon disposed of its steel business through a tax-free distribution of the common stock of its wholly owned subsidiary United States Steel Corporation (“United States Steel”) to holders of Steel Stock in exchange for all outstanding shares of Steel Stock on a one-for-one basis.

In connection with the Separation, Marathon’s certificate of incorporation was amended on December 31, 2001 and, from that date, Marathon has only one class of common stock authorized.

Marathon’s principal operating subsidiaries are Marathon Oil Company and Marathon Ashland Petroleum LLC (“MAP”). Marathon Oil Company and its predecessors have been engaged in the oil and gas business since 1887. MAP is 62-percent owned by Marathon and 38-percent owned by Ashland Inc.

Marathon is engaged in worldwide exploration and production of crude oil and natural gas; domestic refining, marketing and transportation of crude oil and petroleum products primarily through MAP; and other energy related businesses.

Operating Highlights

During 2003, Marathon:

• Realized continued exploration success with nine discoveries offshore Angola, Norway, Gulf of Mexico, and Equatorial Guinea.

• Maintained financial discipline and flexibility:

• Completed non-core asset rationalization program generating proceeds over $1.2 billion;

• Initiated business transformation with projected annual savings of $135 million starting in 2004;

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• Lowered the cash adjusted debt-to-capital ratio to 33 percent at year-end; and

• Increased the quarterly dividend from 23 to 25 cents per share.

• Established and strengthened core areas:

• Achieved 2003 reserve replacement of 124 percent excluding dispositions;

• Established core growth area in Russia with the acquisition of Khanty Mansiysk Oil Corporation (“KMOC”);

• Initiated production from Equatorial Guinea Phase 2A condensate expansion project and continued progress on Phase 2B liquefied petroleum gas (“LPG”) expansion; and

• Acquired interests in three additional Norwegian production licenses.

• Advanced integrated gas strategy:

• Signed heads of agreement with Equatorial Guinea government and GEPetrol covering fiscal terms of a proposed liquefied natural gas (“LNG”) project in Equatorial Guinea;

• Signed letter of understanding with BG Group for long-term LNG offtake agreement for proposed LNG project in Equatorial Guinea; and

• Signed statement of intent with Qatar Petroleum to study a gas-to-liquids (“GTL”), LPG, and condensate project in Qatar.

• Strengthened MAP:

• Commenced an expansion project to increase the capacity of the Detroit, Michigan refinery by 26,000 barrels per day;

• Neared completion of Catlettsburg, Kentucky refinery repositioning project;

• Increased refinery efficiencies and feedstock throughputs at Garyville, Louisiana and Texas City, Texas;

• Enhanced logistics network with the acquisition of an additional interest in the Centennial Pipeline and start-up of the Cardinal Products Pipeline; and

• Pilot Travel Centers acquired 60 Williams travel centers.

Segment and Geographic Information

For operating segment and geographic information, see Note 8 to the Consolidated Financial Statements on page F-20.

Exploration and Production

Marathon is currently conducting exploration and development activities in nine countries. Principal exploration activities are in the United States, Norway, Equatorial Guinea, Angola, and Canada. Principal development activities are in the United States, the United Kingdom, Ireland, Norway, Equatorial Guinea, Gabon, and Russia. Marathon is also pursuing opportunities in north and west Africa and the Middle East.

At year-end 2003, Marathon was producing crude oil and/or natural gas in seven countries, including the United States. Marathon’s worldwide liquid hydrocarbon production, including Marathon’s proportionate share of equity investees’ production, decreased six percent from 2002 levels. Marathon’s 2003 worldwide sales of natural gas production, including Marathon’s proportionate share of equity investees’ production and gas acquired for injection and subsequent resale, decreased approximately five percent from 2002. In total, Marathon’s 2003 worldwide production averaged 389,000 barrels of oil equivalent (“BOE”) per day, including discontinued operations and impacts of acquisitions and dispositions, compared to 412,000 BOE per day in 2002. In 2004, Marathon’s worldwide production is expected to average 365,000 BOE per day, excluding acquisitions and dispositions.

The above projection of 2004 worldwide liquid hydrocarbon production and natural gas volumes is a forward-looking statement. Some factors that could potentially affect timing and levels of production include pricing, supply

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and demand for petroleum products, amount of capital available for exploration and development, regulatory constraints, production decline rates of mature fields, timing of commencing production from new wells, drilling rig availability, future acquisitions or dispositions of producing properties, unforeseen hazards such as weather conditions, acts of war or terrorist acts and the government or military response thereto, and other geological, operating and economic considerations. These factors (among others) could cause actual results to differ materially from those set forth in the forward-looking statement.

United States

Including Marathon’s proportionate share of equity investee production, approximately 57 percent of Marathon’s 2003 worldwide liquid hydrocarbon production and 63 percent of its worldwide natural gas production was produced from U.S. operations. Marathon’s ongoing U.S. strategy is to apply its technical expertise in fields with undeveloped potential, to dispose of interests in non-core properties with limited upside potential and high production costs, and to acquire interests in properties with upside potential.

During 2003, Marathon drilled 21 gross (11 net) exploratory wells of which 15 gross (9 net) wells encountered hydrocarbons. Of these 15 wells, 3 gross (2 net) wells were temporarily suspended or are in the process of completing.

Marathon’s principal U.S. exploration, development, and producing areas are located in the Gulf of Mexico and the states of Texas, New Mexico, Alaska, Wyoming, and Oklahoma.

U.S. Southern Business Unit

Gulf of Mexico – During 2003, Marathon’s share of Gulf of Mexico production averaged 53,500 barrels per day (“bpd”) of liquid hydrocarbons, representing 48 percent of Marathon’s total U.S. liquid hydrocarbon production, and 135 million cubic feet per day (“mmcfd”) of natural gas, representing 18 percent of Marathon’s total U.S. natural gas production. Liquid hydrocarbon production decreased by 9,000 net bpd and natural gas production increased by 32 net mmcfd from the prior year. The decrease in liquid hydrocarbon production is mainly due to natural field decline. The increase in natural gas production is related to a full year of Camden Hills production in 2003 and new production from Petronius drilling, partially offset by other natural field declines. At year-end 2003, Marathon held interests in 10 producing fields and 17 platforms, of which 7 platforms are operated by Marathon.

In 2003, Marathon announced the Neptune-5 discovery, which is located in Atwater Valley Block 574 in 6,215 feet of water. This well was drilled to a total depth of 19,142 feet and encountered more than 500 feet of net oil pay. Although several hydrocarbon-bearing intervals are present, one interval has a gross hydrocarbon column thickness of more than 1,200 feet. Two appraisal sidetrack wells were also drilled. The first sidetrack well, drilled down-dip from the original Neptune-5 location, encountered a similar thickness of net oil pay and penetrated an oil water contact, which extended the gross oil column by approximately 100 feet. The second sidetrack, drilled to an up-dip location, encountered approximately 190 feet of net oil pay in several intervals. Marathon and its partners in the Neptune Unit are integrating the results of this discovery into field development studies. Marathon holds a 30 percent interest in the Neptune Unit.

Also announced in 2003, the Perseus discovery is located on Viosca Knoll Block 830 in 3,376 feet of water, approximately five miles from the existing Petronius platform. The well was drilled to a total depth of 13,134 feet and encountered over 130 net feet of oil pay in the primary targets. The Perseus discovery is expected to begin production in 2004 via an extended reach well currently being drilled from the Petronius platform and extend the plateau of the Petronius production profile. Marathon holds a 50 percent interest in the Perseus discovery and the Petronius development. Petronius is currently producing a gross average of 60,000 bpd and 100 mmcfd.

The Gulf of Mexico continues to be a core area for Marathon with the potential to add new reserves and increase production. At the end of 2003, Marathon had interests in 149 blocks in the Gulf of Mexico, including 90 in the deepwater area.

Permian Basin – The Permian Basin region extends from southeast New Mexico to west Texas. Marathon’s share of production in this region averaged 30,200 bpd and 132 mmcfd in 2003, compared to 32,400 bpd and 146 mmcfd in 2002. The reduction in liquid hydrocarbon and gas production was primarily due to the impact of the disposition of properties.

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In June 2003, MKM Partners L.P. (“MKM”), a joint venture of Marathon and Kinder Morgan Energy Partners L.P. (“Kinder Morgan”), sold its interest in the SACROC unit to Kinder Morgan. Also in June 2003, MKM was dissolved and its interest in the Yates field was distributed to Marathon and Kinder Morgan. In November 2003, Marathon sold its interest in the Yates field to Kinder Morgan. These properties contributed approximately 9,000 net bpd to 2003 production.

East Texas – Production in the East Texas gas fields averaged 73 net mmcfd in 2003 compared to 84 net mmcfd in 2002. The volume decrease was primarily due to property dispositions totaling approximately 11 mmcfd and natural field decline. Active development of the Mimms Creek Field continued in 2003 with Marathon drilling 22 wells. The 2003 drilling program has resulted in Mimms Creek’s net production increasing from 9 net mmcfd to a peak of 17 net mmcfd.

U.S. Northern Business Unit

Alaska – Marathon’s primary focus in Alaska is the expansion of its natural gas business through exploration, development and marketing. Marathon’s share of production from Alaska averaged 166 mmcfd of natural gas in 2002 and 2003.

In September 2003, Marathon began producing gas from its Ninilchik Unit in the Cook Inlet. Production is currently flowing at a gross rate of 41 mmcfd, 21 mmcfd of which is net to Marathon, and is being transported through the recently completed Kenai Kachemak Pipeline, which connects Ninilchik to the existing natural gas pipeline infrastructure serving residential, utility and industrial markets on the Kenai Peninsula, Anchorage and other parts of south-central Alaska. Marathon operates the Ninilchik Unit and holds a 60 percent interest in it and the Kenai Kachemak Pipeline.

Wyoming – Liquid hydrocarbon production for 2003 averaged 21,400 net bpd compared with 22,800 net bpd in 2002. The decrease was primarily attributed to dispositions of approximately 1,000 net bpd of liquids in non-core areas of Wyoming. Average gas production increased to 127 net mmcfd in 2003, compared to 125 net mmcfd in 2002.

In early 2001, Marathon completed the acquisition of Pennaco Energy Inc., creating a new core area of coal bed natural gas production in the Powder River Basin (“PRB”) of Wyoming. Marathon expanded its PRB assets by approximately one-third in May 2002 as a result of the acquisition of the assets owned by its major partner in this basin. Marathon now controls more than 650,000 net acres in northeast Wyoming and southeast Montana and is the largest individual acreage holder in the PRB. During 2003, Marathon drilled approximately 320 wells. For 2003, production rates of coal bed natural gas were 82 net mmcfd, compared to 79 net mmcfd in 2002.

Oklahoma – Gas production for 2003 averaged 96 net mmcfd, compared with 108 net mmcfd in 2002. The decrease in gas production was primarily due to natural field decline. In 2003, Marathon’s southern Anadarko Basin exploration efforts continued to focus on the western extension of the Cement and Marlow fields. Exploration drilling efforts resulted in five discoveries.

International

Including Marathon’s proportionate share of equity investee production, approximately 43 percent of Marathon’s 2003 worldwide liquid hydrocarbon production and 37 percent of its worldwide natural gas production was produced from international operations. During 2003, Marathon drilled 54 gross (36 net) exploratory wells of which 47 gross (32 net) wells encountered hydrocarbons. Of these 47 wells, 21 gross (14 net) wells were temporarily suspended or are in the process of completing.

Europe

U.K. North Sea – Marathon’s primary asset in the U.K. North Sea is the Brae area complex where it is the operator and owns a 42 percent interest in the South, Central, North, and West Brae fields and a 38 percent interest in the East Brae field. The Brae A platform and facilities act as the host for the underlying South Brae field, adjacent Central Brae field and West Brae/Sedgwick fields. The North Brae field, which is produced via the Brae B platform, and the East Brae field are gas-condensate fields. These fields are produced using the gas cycling technique, whereby gas is injected into the reservoir for pressure maintenance, improved sweep efficiency and increased condensate liquid recovery. Although partial cycling continues, the majority of North Brae gas is being transferred to the East Brae reservoir for pressure maintenance and sales.

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Marathon’s share of production from the Brae area averaged 17,500 bpd of liquid hydrocarbons in 2003, compared with 20,100 bpd in 2002. The decrease resulted from the natural decline in existing fields partially offset by successful development and remedial well work. Marathon’s share of Brae gas sales averaged 198 mmcfd in 2002 and 2003. Gas sales continue to be maximized on available capacity within the pipeline system.

The strategic location of the Brae platforms and pipeline infrastructure has generated third-party processing and transportation business since 1986. Currently, there are 19 agreements with third-party fields contracted to use the Brae system. In addition to generating processing and pipeline tariff revenue, this third-party business also has a favorable impact on Brae-area operations by optimizing infrastructure usage and extending the economic life of the facilities.

The Brae group owns a 50 percent interest in the outside-operated Scottish Area Gas Evacuation (“SAGE”) system. The Beryl group owns the other 50 percent. The SAGE pipeline provides transportation for Brae and Beryl area gas and has a total wet gas capacity of approximately 1,000 mmcfd. The SAGE terminal at St. Fergus in northeast Scotland provides processing for gas from the SAGE pipeline and processing for 0.8 bcfd of third party gas from the Britannia field.

During 2003, Marathon and its partners announced the startup of oil and gas production from the Marathon-operated Braemar field in the U.K. North Sea. The field was developed with a single subsea well tied back to the East Brae platform 7.5 miles to the south where liquids and gas are processed. Marathon holds a 26 percent interest in Braemar. Production from the field commenced in September 2003 at an initial condensate rate of 3,700 gross bpd and was increased in January 2004 to approximately 5,300 bpd. In August 2002, a 16-inch pipeline link, Linkline, between the Marathon operated Brae B platform and the outside-operated Miller platform was sanctioned. Marathon has a 19 percent interest in the Linkline. The Linkline will initially be used for transportation of Braemar gas that has been contracted to the Miller group for operational purposes.

As part of the ongoing rationalization of the European Business Unit, Marathon added one new block (16/1) to its inventory, and exited four blocks (22/7,22/22c,16/3d and 16/6a-S). This resulted in an overall reduction of its UK leasehold interests from 24 blocks at the start of 2003 to 21 blocks as of December 31, 2003.

U.K. Atlantic Margin – Marathon has an approximately 30 percent interest in the outside-operated Foinaven area complex. This is made up of a 28 percent interest in the main Foinaven field, 47 percent of East Foinaven and 20 percent of the single well T35 and T25 accumulations. Three successful wells were drilled in 2003. Marathon’s share of production from the Foinaven fields averaged 22,400 bpd of liquid hydrocarbons and 10 mmcfd in 2003, compared to 31,000 net bpd and 9 mmcfd in 2002. Lower production of liquid hydrocarbons was due to a five-month compressor outage, completion failure in two water injection wells, and early water breakthrough in a number of main-field producers. The compressor was returned to service in November 2003 and a remedial program is planned to address the well problems in 2004. In December 2003, production from Foinaven was averaging 25,100 net bpd and 11 net mmcfd.

Ireland – Marathon holds a 100 percent interest in the Kinsale Head, Ballycotton and Southwest Kinsale fields in the Irish Celtic Sea. Natural gas sales were 62 net mmcfd in 2003, compared with 81 net mmcfd in 2002. The decrease in sales is primarily the result of the timing effect associated with annual storage injection versus storage withdrawals for the Kinsale storage facility, and natural field decline.

Marathon further developed the Kinsale Head area in 2003 by drilling and developing an additional subsea gas well. The Greensand subsea gas well is designed to enhance the productivity of the main Kinsale Head natural gas producing Greensand reservoir and has been tied back to Marathon’s existing Kinsale Head Bravo platform. Production began in July 2003.

During 2002, an agreement was entered into with the Seven Heads group to provide gas processing and transportation services, as well as field operating services, for the Seven Heads gas being brought to the Kinsale offshore production facilities beginning in 2003. Production from Seven Heads commenced in December 2003. Under this agreement, Marathon provides capacity to process and transport between 60 mmcfd to 100 mmcfd of Seven Heads gas.

Marathon has an 18.5 percent interest in the Corrib gas development project, located approximately 40 miles off Ireland’s west coast. On April 30, 2003, an Irish planning authority denied the application for the proposed onshore terminal to bring ashore gas from the Corrib field. In late 2003, the project partners submitted a new application to the planning authority. Marathon has reclassified approximately 14 million BOE from proved undeveloped reserves until the terminal application is approved, which is expected to be in late 2004.

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Norway – In the Norwegian North Sea, Marathon’s share of production averaged 1,600 bpd and 16 mmcfd in 2003, compared to 800 bpd and 15 mmcfd in 2002. Marathon owns a 24 percent interest in the Heimdal field and gas-condensate processing center.

Marathon owns a 47 percent interest in the Vale field which is located northeast of the Heimdal field in 374 feet of water. This single subsea well tied back to the Heimdal platform came on line in June 2002. A further exploration well was drilled on this license in 2003 and resulted in an oil discovery called the Klegg field. The Klegg well was drilled to a total depth of 7,799 feet and encountered a gross oil column of approximately 223 feet. An evaluation of development options is underway with a decision expected in 2004.

Marathon has a 20 percent interest in the Byggve/Skirne gas-condensate field, currently in development on license PL102. This two well development is being tied back to the Heimdal platform gas processing center, with first production expected early 2004. Condensate export will be via the Heimdal-Brae-Forties system and gas export from the Heimdal transportation center.

On April 15, 2003, Marathon announced the success of the first well of its 2003 Norwegian continental shelf exploration program on the Kneler prospect in the Alvheim area. Located approximately 140 miles from Stavanger, Norway in 390 feet of water, the Kneler exploration well was drilled to total depth of 7,425 feet and encountered high quality crude oil in a gross oil column of 155 feet with 115 net feet of pay in the Heimdal formation. On May 27, 2003, Marathon announced a second discovery in the Alvheim area on the Boa well. The discovery well is located approximately 4.5 miles northwest of the Kneler discovery. The Boa well was drilled into the Heimdal formation to a total depth of 7,531 feet. This well encountered an 82 foot gross gas column and a 92 foot gross oil column. Marathon and its partners are evaluating several development scenarios for Alvheim, in which Marathon is operator and holds a 65 percent interest. Marathon expects to submit a development plan to the Norwegian authorities during the second quarter of 2004.

In December 2003, Marathon continued to grow its position offshore Norway by acquiring interests in three additional production licenses. Marathon is operator of two of the three licenses with 100 percent working interest (PL.307 and PL.311) and 40 percent in the third (PL.304). Work obligations have been established to promote rapid exploration of these offshore areas.

Netherlands – Divestment of Marathon’s interest in CLAM Petroleum B.V. (“CLAM”) was completed in May 2003.

West Africa

Equatorial Guinea—During 2002, in two separate transactions, Marathon acquired interests totaling 63 percent in the Alba field. Additionally, in these transactions, Marathon acquired a net 52 percent interest in an onshore liquefied petroleum gas processing plant and a 45 percent net interest in an onshore methanol production plant, both held through separate equity method investees.

The large scale Alba field Phase 2 expansion, which began in 2002, made significant progress in 2003. The field development and condensate production expansion portions of the project (Phase 2A) were greater than 90% complete at year end, with completion expected around April 1^st of 2004. Work completed in 2003 included:

• the fabrication and installation of two new offshore platforms,

• installation of production flowlines,

• installation of gas re-injection lines between the offshore platforms and Marathon facilities on Bioko Island,

• drilling and completion of five new development wells,

• tie-back and completion of three pre-drilled wells,

• construction of additional condensate storage tanks on Bioko Island, and

• installation of onshore pipelines and facilities to stabilize and transfer the increased production levels.

As a result of the Phase 2A expansion, gross condensate production had grown from 18,000 to 30,000 bpd (15,800 net) at the end of 2003. At the completion of Phase 2A, gross condensate production will be further increased to approximately 54,000 bpd (30,000 net).

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The second phase of additional development (Phase 2B) includes fabrication and installation of a full process steam LPG cryogenic gas plant and associated storage, marine terminal, and fractionation equipment for propane and heavier gas components. This addition is expected to result in additional gross condensate production of 5,000 (2,600 net) bpd. Additionally, 20,000 (11,600 net) bpd of LPG is expected to be recovered. Phase 2B is expected to be completed near the end of 2004 raising total liquid production to a level of approximately 79,000 bpd.

On July 23, 2003, Marathon announced a natural gas discovery on Block D offshore Equatorial Guinea, where Marathon is operator with a 90 percent interest. The discovery well is on the Bococo prospect, located in 238 feet of water, approximately six miles west of the Alba gas/condensate field. The well was drilled to a depth of 6,110 feet and encountered 185 feet of net gas pay. The well has been suspended for reentry at a later date. The Bococo gas discovery complements three earlier dry gas discoveries on Block D for future development.

Marathon is currently evaluating the results of the recently drilled Deep Luba prospect, which will test for potential resources under the Alba field. This well was drilled from an Alba platform, which could enable early production if successful.

Gabon – Marathon is operator of the Tchatamba South, Tchatamba West and Marin fields with a 56 percent working interest. Production in Gabon averaged 14,700 net bpd of liquid hydrocarbons in 2003, compared with 16,700 net bpd in 2002. The decrease is attributable to the timing of liftings. Development work during 2003 brought production levels at the Tchatamba fields up to the facility capacity of approximately 42,000 gross bpd.

Angola – Offshore Angola, Marathon has a 10 percent working interest in Block 31 and a 30 percent working interest in Block 32. In 2002, Marathon participated in the first ultra-deepwater discovery in Block 31. The discovery, the Plutao 1-A, was drilled to a total depth of 14,607 feet and tested 5,357 bpd through a 48/64–inch choke. In 2003, Marathon announced additional discoveries in Block 31, including the Saturno-1 and Marte-1 wells. The Saturno-1 was drilled to a total depth of 15,444 feet and tested at a maximum rate of 5,000 bpd. The Marte-1 discovery well was drilled to a total depth of 13,756 feet and tested at a maximum rate of 5,200 bpd. Development options for Block 31 are currently being evaluated. Also on Block 31, Marathon has participated in the Venus well, which has reached total depth. Results of the Venus well will be reported upon government approvals.

In 2003, Marathon announced the first discovery on Block 32. The Gindungo-1 well was drilled in a water depth of 4,739 feet and successively tested at rates of 7,400 and 5,700 barrels of light oil per day from two separate zones. Also on Block 32, Marathon has participated in the Canela well located approximately 8 miles south of the Gindungo discovery on Block 32. The Canela well has reached total depth. Results of the Canela well will be reported upon government approvals.

Other International

Russia – On May 13, 2003 Marathon Oil Corporation announced that it had completed the acquisition of KMOC for an aggregate purchase price of approximately $285 million, including the assumption of $31 million in debt. KMOC currently produces approximately 16,000 net bpd in the Khanty Mansiysk region of western Siberia in the Russian Federation.

Western Canada – On October 1, 2003, Marathon completed the sale of the operations in western Canada for $612 million.

Eastern Canada – In 2002, Marathon announced a gas discovery at the Annapolis G-24 deepwater wildcat well approximately 215 miles south of Halifax, Nova Scotia in 5,504 feet of water. The G-24 encountered approximately 100 feet of net gas pay over several zones. Marathon is operator and has a 30 percent interest in the Annapolis lease. In addition, Marathon is operator of the adjacent Empire and Cortland leases with 50 percent and 75 percent interests, respectively. During 2003, 3-D seismic was acquired over both blocks to better define the trend.

Qatar – Marathon and three other companies are parties to a memorandum of understanding to further explore the possibility of developing a portion of the North field offshore Qatar. Marathon and its partners are pursuing technical and commercial discussions with Qatar Petroleum that could lead to a GTL, LPG and condensate project as part of the northern field development.

Libya – Marathon is a member of the Oasis Group, which acquired exploration and production rights in six concessions in the mid-1950s. Marathon has a 16.3 percent interest in these concessions. In 1986, the Oasis Group ceased active participation in the concessions following the imposition of trade sanctions by the U. S. government.

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In 2002, the U. S. State Department reaffirmed the authority of the Oasis Group to hold discussions with representatives of the Libyan National Oil Company and the Libyan government relative to the future of the concessions. Based on the U.S. Government’s recent announcement on February 26, 2004, the Oasis Group is in active discussions with the Libyan National Oil Company concerning the negotiation of terms for their eventual return to the country.

The above discussions include forward-looking statements concerning the Phase 2A and Phase 2B expansion projects, including estimated completion dates, development plans, expected production levels, dates of initial production, which are based on a number of assumptions, including (among others) prices, amount of capital available for exploration and development, worldwide supply and demand for petroleum products, regulatory constraints, reserve estimates, production decline rates of mature fields, reserve replacement rates, drilling rig availability, unforeseen problems arising from construction and other geological, operating and economic considerations. Offshore production and marine operations in areas such as the Gulf of Mexico, the North Sea, the U.K. Atlantic Margin, the Celtic Sea, offshore Nova Scotia and offshore West Africa are also subject to severe weather conditions, such as hurricanes or violent storms or other hazards. In addition, development of new production properties in countries outside the United States may require protracted negotiations with host governments and is frequently subject to political considerations and tax regulations, which could adversely affect the economics of projects. To the extent these assumptions prove inaccurate and/or negotiations and other considerations are not satisfactorily resolved, actual results could be materially different than present expectations.

Reserves

At December 31, 2003, Marathon’s net proved liquid hydrocarbon and natural gas reserves, including its proportionate share of equity investees’ net proved reserves, totaled approximately 1.0 billion BOE, of which 46 percent were located in the United States. (For purposes of determining BOE, natural gas volumes are converted to approximate liquid hydrocarbon barrels by dividing the natural gas volumes expressed in thousands of cubic feet (“mcf”) by six. The liquid hydrocarbon volume is added to the barrel equivalent of gas volume to obtain BOE.)

Proved developed reserves represented 70 percent of total proved reserves as of December 31, 2003, as compared to 78 percent as of December 31, 2002. The decrease primarily reflects the disposition of the Yates field. Of the just over 300 mmboe of proved undeveloped reserves at year-end 2003, only 10 percent have been included as proved reserves for more than two years. On a BOE basis, excluding dispositions, Marathon replaced 124 percent of its 2003 worldwide oil and gas production. Excluding acquisitions and dispositions, Marathon replaced 76 percent of worldwide oil and gas production.

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The following table sets forth estimated quantities of net proved oil and gas reserves at the end of each of the last three years.

Estimated Quantities of Net Proved Oil and Gas Reserves at December 31

	Developed			Developed and Undeveloped
	2003	2002	2001	2003	2002	2001
Liquid Hydrocarbons (Millions of Barrels)
United States	193	226	243	210	245	268
Europe	47	63	69	59	76	88
West Africa	120	113	14	218	203	17
Other International	31	2	—	89	3	—
Total Consolidated Continuing Operations	391	404	326	576	527	373
Equity Investees(a)	2	177	178	2	183	184
Worldwide Continuing Operations	393	581	504	578	710	557
Discontinued Operations(b)	—	9	11	—	10	13
WORLDWIDE	393	590	515	578	720	570
Developed reserves as % of total net proved reserves	68.0%	81.9%	90.4%
Natural Gas (Billions of Cubic Feet)
United States	1,067	1,206	1,308	1,635	1,724	1,793
Europe	421	408	473	484	562	615
West Africa	528	552	—	665	653	—
Total Consolidated Continuing Operations	2,016	2,166	1,781	2,784	2,939	2,408
Equity Investee(c)	—	36	32	—	59	51
Worldwide Continuing Operations	2,016	2,202	1,813	2,784	2,998	2,459
Discontinued Operations(b)	—	290	308	—	379	399
WORLDWIDE	2,016	2,492	2,121	2,784	3,377	2,858
Developed reserves as % of total net proved reserves	72.4%	73.8%	74.2%
Total BOE (Millions of Barrels)
United States	371	427	461	483	532	567
Europe	117	132	148	139	170	190
West Africa	208	205	14	329	312	17
Other International	31	2	—	89	3	—
Total Consolidated Continuing Operations	727	766	623	1,040	1,017	774
Equity Investees(a)	2	183	183	2	193	193
Worldwide Continuing Operations	729	949	806	1,042	1,210	967
Discontinued Operations(b)	—	57	62	—	73	79
WORLDWIDE	729	1,006	868	1,042	1,283	1,046
Developed reserves as % of total net proved reserves	70.0%	78.4%	83.0%

^(a) Represents Marathon’s equity interests in LLC JV Chernogorskoye (“Chernogorskoye”), MKM and CLAM. MKM was dissolved and the Yates interest was sold in 2003. Marathon’s interest in CLAM was sold in 2003.

^(b) Represents Marathon’s western Canadian assets, which were sold in 2003.

^(c) Represents Marathon’s equity interest in CLAM, which was sold in 2003.

The above estimates, which are forward-looking statements, are based on a number of assumptions, including (among others) prices, presently known physical data concerning size and character of the reservoirs, economic recoverability, production experience and other operating considerations. To the extent these assumptions prove inaccurate, actual recoveries could be different than current estimates.

For additional details of estimated quantities of net proved oil and gas reserves at the end of each of the last three years, see “Consolidated Financial Statements and Supplementary Data – Supplementary Information on Oil and Gas Producing Activities – Estimated Quantities of Proved Oil and Gas Reserves” on pages F-45 through F-46. Marathon has filed reports with the U.S. Department of Energy (“DOE”) for the years 2002 and 2001 disclosing the year-end estimated oil and gas reserves. Marathon will file a similar report for 2003. The year-end estimates reported to the DOE are the same as the estimates reported in the Supplementary Information on Oil and Gas Producing Activities.

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Delivery Commitments

Marathon has commitments to deliver fixed and determinable quantities of natural gas to customers under a variety of contractual arrangements.

In Alaska, Marathon has two long-term sales contracts with the local utility companies, which obligates Marathon to supply approximately 213 bcf of natural gas over the remaining life of these contracts, which terminate in 2012 and 2016. In addition, Marathon has a 30 percent ownership interest in a Kenai, Alaska, LNG plant and a proportionate share of the long-term LNG sales obligation to two Japanese utility companies. This obligation is estimated to total 138 bcf through the remaining life of the contract, which terminates March 31, 2009. These commitments are structured with variable-pricing terms. Marathon’s production from various gas fields in the Cook Inlet supply the natural gas to service these contracts. Marathon’s proved reserves and estimated production rates in the Cook Inlet sufficiently meet these contractual obligations.

In the U.K., Marathon has two long-term sales contracts with utility companies, which obligate Marathon to supply approximately 236 bcf of natural gas through September 2009. Marathon’s Brae area production, together with natural gas acquired for injection and subsequent resale, will supply the natural gas to service these contracts. Marathon’s Brae area proved reserves, acquired natural gas contracts and estimated production rates sufficiently meet these contractual obligations. The terms of these gas sales contracts also reflect variable-pricing structures.

Oil and Natural Gas Production

The following tables set forth daily average net production of liquid hydrocarbons and natural gas for each of the last three years:

Net Liquid Hydrocarbons Production^{(a) (b)}

(Thousands of Barrels per Day)	2003	2002	2001
United States(c)	107	117	127
Europe(d)	41	52	46
West Africa(d)	27	25	16
Other International(d)	10	1	—
Total Consolidated Continuing Operations	185	195	189
Equity Investees(d) (e)	6	8	9
Worldwide Continuing Operations	191	203	198
Discontinued Operations(f)	3	4	11
WORLDWIDE	194	207	209
Net Natural Gas Production(b) (g)
(Millions of Cubic Feet per Day)	2003	2002	2001
United States(c)	732	745	793
Europe	262	299	318
West Africa	66	53	—
Total Consolidated Continuing Operations	1,060	1,097	1,111
Equity Investees(h)	13	25	31
Worldwide Continuing Operations	1,073	1,122	1,142
Discontinued Operations(f)	74	104	123
WORLDWIDE	1,147	1,226	1,265

^(a) Includes crude oil, condensate and natural gas liquids.

^(b) Amounts reflect production after royalties, excluding the U.K., Ireland and the Netherlands where amounts shown are before royalties.

^(c) Amounts reflect production from leasehold ownership, after royalties and interests of others.

^(d) Amounts reflect equity tanker liftings and direct deliveries of liquid hydrocarbons. The amounts correspond with the basis for fiscal settlements with governments. Crude oil purchases, if any, from host governments are not included.

^(e) Represents Marathon’s equity interests in Chernogorskoye, MKM and CLAM.

^(f) Amounts represent Marathon’s western Canadian operations, which were sold in 2003.

^(g) Amounts exclude volumes purchased from third parties for injection and subsequent resale of 23 mmcfd in 2003, 4 mmcfd in 2002 and 8 mmcfd in 2001.

^(h) Represents Marathon’s equity interests in CLAM.

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Productive and Drilling Wells

The following tables set forth productive wells and service wells for each of the last three years and drilling wells as of December 31, 2003.

Gross and Net Wells

2003	Productive Wells(a)				Service Wells(b)		Drilling Wells(c)
	Oil		Gas
	Gross	Net	Gross	Net	Gross	Net	Gross	Net
United States	5,580	2,040	4,649	3,555	2,726	834	72	37
Europe	52	14	65	35	27	9	—	—
West Africa	7	4	10	7	1	1	7	3
Other International	109	109	—	—	21	21	6	6
Total Consolidated	5,748	2,167	4,724	3,597	2,775	865	85	46
Equity Investees(d)	96	21	—	—	15	3	—	—
WORLDWIDE	5,844	2,188	4,724	3,597	2,790	868	85	46
2002	Productive Wells(a)				Service Wells(b)
	Oil		Gas
	Gross	Net	Gross	Net	Gross	Net
United States	6,495	2,715	4,577	2,876	2,752	807
Europe	53	20	62	34	26	9
West Africa	6	3	6	4	1	1
Other International	485	226	1,529	1,032	47	16
Total Consolidated	7,039	2,964	6,174	3,946	2,826	833
Equity Investees(d)	2,298	742	85	4	1,002	174
WORLDWIDE	9,337	3,706	6,259	3,950	3,828	1,007
2001	Productive Wells(a)				Service Wells(b)
	Oil		Gas
	Gross	Net	Gross	Net	Gross	Net
United States	6,550	2,415	4,828	2,935	2,852	856
Europe	53	20	63	35	27	9
West Africa	6	3	—	—	—	—
Other International	529	242	1,463	989	44	17
Total Consolidated	7,138	2,680	6,354	3,959	2,923	882
Equity Investees(d)	2,002	609	83	4	1,142	243
WORLDWIDE	9,140	3,289	6,437	3,963	4,065	1,125

^(a) Includes active wells and wells temporarily shut-in. Of the gross productive wells, gross wells with multiple completions operated by Marathon totaled 273, 357, and 341 in 2003, 2002 and 2001, respectively. Information on wells with multiple completions operated by other companies is not available to Marathon.

^(b) Consist of injection, water supply and disposal wells.

^(c) Consists of exploratory and development wells.

^(d) Represents Chernogorskoye in 2003, and MKM and CLAM in 2002 and 2001.

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Drilling Activity

The following table sets forth, by geographic area, the number of net productive and dry development and exploratory wells completed in each of the last three years (references to “net” wells or production indicate Marathon’s ownership interest or share, as the context requires):

Net Productive and Dry Wells Completed^(a)

		2003	2002	2001
United States(b)
Development(c)	– Oil	4	8	10
	– Gas	231	174	751
	– Dry	—	1	1
	Total	235	183	762
Exploratory(d)	– Oil	1	2	2
	– Gas	7	5	9
	– Dry	2	6	8
	Total	10	13	19
	Total United States	245	196	781
International(e)
Development(c)	– Oil	31	2	1
	– Gas	14	28	54
	– Dry	1	3	5
	Total	46	33	60
Exploratory(d)	– Oil	2	—	—
	– Gas	21	20	16
	– Dry	5	3	5
	Total	28	23	21
	Total International	74	56	81
	Total Worldwide	319	252	862

^(a) Includes the number of wells completed during the applicable year regardless of the year in which drilling was initiated. Excludes any wells where drilling operations were continuing or were temporarily suspended as of the end of the applicable year. A dry well is a well found to be incapable of producing hydrocarbons in sufficient quantities to justify completion. A productive well is an exploratory or development well that is not a dry well.

^(b) Includes Marathon’s equity interest in MKM.

^(c) Indicates wells drilled in the proved area of an oil or gas reservoir.

^(d) Includes both wildcat and delineation wells.

^(e) Includes Marathon’s equity interest in Chernogorskoye and CLAM.

Oil and Gas Acreage

The following table sets forth, by geographic area, the developed and undeveloped oil and gas acreage that Marathon held as of December 31, 2003:

Gross and Net Acreage

	Developed		Undeveloped		Developed and Undeveloped
(Thousands of Acres)	Gross	Net	Gross	Net	Gross	Net
United States	3,080	733	4,921	2,182	8,001	2,915
Europe	402	312	1,430	623	1,832	935
West Africa	68	42	3,204	937	3,272	979
Other International	599	599	2,756	2,161	3,355	2,760
Total Consolidated	4,149	1,686	12,311	5,903	16,460	7,589
Equity Investees(a)	47	10	—	—	47	10
WORLDWIDE	4,196	1,696	12,311	5,903	16,507	7,599

^(a) Represents Marathon’s interest in Chernogorskoye.

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Refining, Marketing and Transportation

RM&T operations are primarily conducted by MAP and its subsidiaries, including its wholly owned subsidiaries, Speedway SuperAmerica LLC (“SSA”) and Marathon Ashland Pipe Line LLC.

Refining

MAP owns and operates seven refineries with an aggregate refining capacity of 935,000 barrels of crude oil per day. The table below sets forth the location and daily throughput capacity of each of MAP’s refineries as of December 31, 2003:

In-Use Refining Capacity

(Barrels per Day)
Garyville, LA	232,000
Catlettsburg, KY	222,000
Robinson, IL	192,000
Detroit, MI	74,000
Canton, OH	73,000
Texas City, TX	72,000
St. Paul Park, MN	70,000
TOTAL	935,000

MAP’s refineries include crude oil atmospheric and vacuum distillation, fluid catalytic cracking, catalytic reforming, desulfurization and sulfur recovery units. The refineries have the capability to process a wide variety of crude oils and to produce typical refinery products, including reformulated gasoline. MAP’s refineries are integrated via pipelines and barges to maximize operating efficiency. The transportation links that connect the refineries allow the movement of intermediate products to optimize operations and the production of higher margin products. For example, naphtha may be moved from Texas City to Robinson where excess reforming capacity is available; gas oil may be moved from Robinson to Detroit where excess fluid catalytic cracking unit capacity is available; and light cycle oil may be moved from Texas City to Robinson where excess desulfurization capacity is available.

MAP also produces asphalt cements, polymerized asphalt, asphalt emulsions and industrial asphalts. MAP manufactures petroleum pitch, primarily used in the graphite electrode, clay target and refractory industries. Additionally, MAP manufactures aromatics, aliphatic hydrocarbons, cumene, base lube oil, polymer grade propylene and slack wax.

During 2003, MAP’s refineries processed 917,000 bpd of crude oil and 138,000 bpd of other charge and blend stocks. The following table sets forth MAP’s refinery production by product group for each of the last three years:

Refined Product Yields

(Thousands of Barrels per Day)	2003	2002	2001
Gasoline	567	581	581
Distillates	284	285	286
Propane	21	21	22
Feedstocks and Special Products	93	80	69
Heavy Fuel Oil	24	20	39
Asphalt	72	72	76
TOTAL	1,061	1,059	1,073

Planned maintenance activities requiring temporary shutdown of certain refinery operating units, or turnarounds, are periodically performed at each refinery. MAP initiated major turnarounds at its Catlettsburg, Garyville, and Texas City refineries in 2003.

Technology upgrades and expansions of the fluid catalytic cracking units (“FCCU”) at the Garyville and Texas City refineries were completed during early 2003. These projects have increased combined FCCU capacity by over 20,000 bpd, and resulted in improved yields, reduced operating costs, and enhanced reliability of these facilities.

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At its Catlettsburg, Kentucky refinery, MAP has completed the approximately $440 million multi-year integrated investment program to upgrade product yield realizations and reduce fixed and variable manufacturing expenses. This program involves the expansion, conversion and retirement of certain refinery processing units that, in addition to improving profitability, will allow the refinery to begin producing low-sulfur (TIER 2) gasoline. Project startup was in the first quarter of 2004.

In the fourth quarter of 2003, MAP commenced approximately $300 million in new capital projects for its 74,000 bpd Detroit, Michigan refinery. One of the projects, a $110 million expansion project, is expected to raise the crude oil capacity at the refinery by 35 percent to 100,000 bpd. Other projects are expected to enable the refinery to produce new clean fuels and further control regulated air emissions. Completion of the projects is scheduled for the fourth quarter of 2005. Marathon will loan MAP the funds necessary for these upgrade and expansion projects.

Marketing

In 2003, MAP’s refined product sales volumes (excluding matching buy/sell transactions) totaled 19.8 billion gallons (1,293,000 bpd). Excluding sales related to matching buy/sell transactions, the wholesale distribution of petroleum products to private brand marketers and to large commercial and industrial consumers, primarily located in the Midwest, the upper Great Plains and the Southeast, and sales in the spot market, accounted for approximately 70 percent of MAP’s refined product sales volumes in 2003. Approximately 50 percent of MAP’s gasoline volumes and 91 percent of its distillate volumes were sold on a wholesale or spot market basis to independent unbranded customers or other wholesalers in 2003.

Approximately half of MAP’s propane is sold into the home heating markets and industrial consumers purchase the balance. Propylene, cumene, aromatics, aliphatics, and sulfur are marketed to customers in the chemical industry. Base lube oils and slack wax are sold throughout the United States. Pitch is also sold domestically, but approximately 13 percent of pitch products are exported into growing markets in Canada, Mexico, India, and South America.

MAP markets asphalt through owned and leased terminals throughout the Midwest and Southeast. The MAP customer base includes approximately 900 asphalt-paving contractors, government entities (states, counties, cities and townships) and asphalt roofing shingle manufacturers.

The following table sets forth the volume of MAP’s consolidated refined product sales by product group for each of the last three years:

Refined Product Sales

(Thousands of Barrels per Day)	2003	2002	2001
Gasoline	776	773	748
Distillates	365	346	345
Propane	21	22	21
Feedstocks and Special Products	97	82	71
Heavy Fuel Oil	24	20	41
Asphalt	74	75	78
TOTAL	1,357	1,318	1,304
Matching Buy/Sell Volumes included in above	64	71	45

MAP sells reformulated gasoline in parts of its marketing territory, primarily Chicago, Illinois; Louisville, Kentucky; northern Kentucky; and Milwaukee, Wisconsin. MAP also sells low-vapor-pressure gasoline in nine states.

As of December 31, 2003, MAP supplied petroleum products to approximately 3,900 Marathon and Ashland branded retail outlets located primarily in Michigan, Ohio, Indiana, Kentucky and Illinois. Branded retail outlets are also located in Florida, Georgia, Wisconsin, West Virginia, Minnesota, Tennessee, Virginia, Pennsylvania, North Carolina, South Carolina and Alabama.

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Retail sales of gasoline and diesel fuel were also made through company-operated outlets by SSA. As of December 31, 2003, this subsidiary had 1,775 retail outlets in 9 states that sold petroleum products and convenience-store merchandise and services, primarily under the brand names “Speedway” and “SuperAmerica.” SSA’s revenues from the sale of convenience-store merchandise totaled $2.2 billion in 2003, compared with $2.4 billion in 2002. Profit levels from the sale of such merchandise and services tend to be less volatile than profit levels from the retail sale of gasoline and diesel fuel. During 2003, SSA withdrew from markets in the Southeast when it sold 190 convenience stores located in Florida, South Carolina, North Carolina and Georgia for approximately $140 million plus store inventory.

Pilot Travel Centers LLC (“PTC”), a joint venture with Pilot Corporation (“Pilot”), is the largest operator of travel centers in the United States with approximately 260 locations in 34 states. The travel centers offer diesel fuel, gasoline and a variety of other services, including on-premises brand name restaurants. On February 27, 2003, PTC purchased 60 retail travel centers from the Williams Companies located in 15 states, primarily in the Midwest, Southeast and Southwest. Pilot and MAP each own a 50 percent interest in PTC.

MAP’s retail marketing strategy is focused on SSA’s Midwest operations, additional growth of the Marathon brand, and continued growth for PTC.

Supply and Transportation

MAP obtains the crude oil it processes from negotiated contracts and spot purchases or exchanges. In 2003, MAP’s net purchases of U.S. produced crude oil for refinery input averaged 422,000 bpd, including a net 30,000 bpd from Marathon. In 2003, Canada was the source for 13 percent or 122,000 bpd of crude oil processed and other foreign sources supplied 41 percent or 373,000 bpd of the crude oil processed by MAP’s refineries, including approximately 225,000 bpd from the Middle East. This crude was acquired from various foreign national oil companies, producing companies and traders.

MAP operates a system of pipelines and terminals to provide crude oil to its refineries and refined products to its marketing areas. At December 31, 2003, MAP owned, leased, or had an ownership interest in approximately 3,073 miles of crude oil trunk lines and 3,850 miles of product trunk lines. MAP owns a 47 percent interest in LOOP LLC (“LOOP”), which is the owner and operator of the only U.S. deepwater oil port, located 18 miles off the coast of Louisiana; a 50 percent interest in LOCAP LLC, which owns a crude oil pipeline connecting LOOP and the Capline system; and a 37 percent interest in the Capline system, a large diameter crude oil pipeline extending from St. James, Louisiana to Patoka, Illinois.

MAP also has a 33 percent ownership interest in Minnesota Pipe Line Company, which owns a crude oil pipeline in Minnesota. Minnesota Pipe Line Company provides MAP with access to crude oil common carrier transportation from Clearbrook, Minnesota to Cottage Grove, Minnesota, which is in the vicinity of MAP’s St. Paul Park, Minnesota refinery.

On February 10, 2003, MAP increased its ownership in Centennial Pipeline LLC from 33 percent to 50 percent and as of December 31, 2003, MAP and Texas Eastern Products Pipeline Company, L.P. own Centennial Pipeline LLC 50 percent each. The Centennial Pipeline system connects Gulf Coast refineries with the Midwest market.

In the fourth quarter 2003, a MAP subsidiary, Ohio River Pipe Line LLC, completed the construction of the Cardinal Products Pipeline, which extends from Kenova, West Virginia to Columbus, Ohio. The first deliveries from the pipeline occurred in late December 2003. The pipeline is an interstate common carrier pipeline and is expected to initially move approximately 36,000 bpd of refined petroleum into the central Ohio region. The pipeline, which has a capacity of up to 80,000 bpd, is expected to provide a stable, cost effective supply of gasoline, diesel and jet fuel to this market.

MAP’s 88 light product and asphalt terminals are strategically located throughout the Midwest, upper Great Plains and Southeast. These facilities are supplied by a combination of pipelines, barges, rail cars and/or trucks. MAP’s marine transportation operations include towboats and barges that transport refined products on the Ohio, Mississippi and Illinois rivers, their tributaries and the Intercoastal Waterway. MAP also leases and owns rail cars in various sizes and capacities for movement and storage of petroleum products and a large number of tractors, tank trailers and general service trucks.

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The above RM&T discussions include forward-looking statements concerning anticipated completion of refinery projects and the operation of the Cardinal Products Pipeline. Some factors that could potentially cause actual results for the refinery projects to differ materially from present expectations include (among others) price of petroleum products, levels of cash flow from operations, unforeseen problems arising from construction, regulatory approval constraints and unforeseen hazards such as weather conditions and delays in construction. Some factors that could affect the pipeline system include the price of petroleum products and other supply issues. This forward-looking information may prove to be inaccurate and actual results may differ from those presently anticipated.

Other Energy Related Businesses

Marathon operates other businesses that market and transport its own and third-party natural gas, crude oil and products manufactured from natural gas, such as LNG and methanol, primarily in the United States, Europe and West Africa. Some of these businesses, as well as other business projects under development, comprise Marathon’s integrated gas strategy.

Marathon owns an interest in the following pipeline systems: a 29 percent interest in Odyssey Pipeline LLC and a 28 percent interest in Poseidon Oil Pipeline Company, LLC (both Gulf of Mexico crude oil pipeline systems); a 24 percent interest in Nautilus Pipeline Company, LLC and a 24 percent interest in Manta Ray Offshore Gathering Company, LLC (both Gulf of Mexico natural gas pipeline systems); a 17 percent interest in Explorer Pipeline Company (a light product pipeline system extending from the Gulf of Mexico to the Midwest); and a 6 percent interest in Wolverine Pipe Line Company (a light product pipeline system extending from Chicago, IL to Toledo, OH). None of these refined product systems are part of MAP. Marathon also holds interests in some smaller offshore Gulf of Mexico oil pipeline systems.

Marathon owns a 34 percent ownership interest in the Neptune natural gas processing plant located in St. Mary Parish, Louisiana, which commenced operations on March 20, 2000. The plant has the capacity to process 300 mmcfd of natural gas, which is supplied by the Nautilus pipeline system, and is being expanded to 600 mmcfd capacity effective early 2004.

In addition to the sale of its own oil and natural gas production, Marathon purchases oil and gas from third party producers and marketers for resale.

Marathon owns a 30 percent interest in a Kenai, Alaska, natural gas liquefication plant and two 87,500 cubic meter tankers used to transport LNG to customers in Japan. Feedstock for the plant is supplied from a portion of Marathon’s natural gas production in the Cook Inlet. From the first production in 1969, the LNG has been sold under a long-term contract with two of Japan’s largest utility companies. Marathon has a 30 percent participation in this contract, which will continue through March 31, 2009. LNG deliveries totaled 66 gross bcf (22 net bcf) in 2003.

On January 3, 2002, Marathon acquired a 45 percent interest in a methanol plant located in Malabo, Equatorial Guinea from CMS Energy. Feedstock for the plant is supplied from a portion of Marathon’s natural gas production in the Alba field. Methanol production totaled 836,000 gross metric tons (376,000 net metric tons) in 2003. Production from the plant is used to supply customers in Europe and the U.S.

In August 2002, Marathon acquired the rights to deliver up to 58 bcf of LNG annually to the Elba Island LNG terminal near Savannah, Georgia. The contract has a 17-year term with an option to extend for an additional five-year period. The agreement provides for the right to deliver LNG under a put option with the capacity owner of the facility and, under certain conditions, take redelivery of natural gas for onward sale to third parties.

Marathon’s Atlantic Basin integrated gas activity centers around the monetization of Marathon’s gas reserves from the Alba field. This proposed project would involve construction of a 3.4 million metric tonnes per year LNG facility located on Bioko Island, Equatorial Guinea, with startup currently projected for late 2007. In the second quarter of 2003, Marathon, the Government of Equatorial Guinea, and GEPetrol, the national oil company of Equatorial Guinea, signed a heads of agreement on fiscal terms and conditions for the development of the LNG facility. In addition, Marathon signed a letter of understanding with BG Gas Marketing, Ltd. (“BGML”), a subsidiary of BG Group plc, under which BGML would purchase the LNG plant’s production for a period of 17 years. BGML has stated its intent to deliver the LNG primarily to the LNG receiving terminal in Lake Charles, Louisiana, where it would be regasified and delivered into the Gulf Coast natural gas pipeline grid. The provisions of the letter of understanding are subject to a definitive purchase and sale agreement, which the parties expect to finalize in the second quarter of 2004.

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In the Pacific Basin, one of the integrated gas projects Marathon has been pursuing, the Tijuana Regional Energy Center, will not proceed. Marathon has been unable to make significant progress on this project, principally due to the lack of local and regional support that would be necessary to obtain land use and other key permits. More recently, the Baja California State Government announced plans to expropriate land, on which Marathon and its partners held options to purchase, that would have been the site for the proposed project.

Marathon has been engaged in GTL research and development since the early 1990s with the goal of creating a process and facility capable of converting natural gas into ultra-clean diesel fuel. Currently, Marathon is participating in a GTL demonstration plant at the Port of Catoosa near Tulsa, Oklahoma. Dedicated during the fourth quarter of 2003, this complex is part of the Department of Energy’s Ultra-Clean Fuels Program. This GTL technology development is being pursued in conjunction with Marathon’s proposed Qatar GTL project.

In the first quarter of 2004, Marathon will realign its segment reporting. A new segment, Integrated Gas, will be introduced and the Other Energy Related Businesses (“OERB”) segment will be eliminated. Of the business activities discussed above, the Gulf of Mexico crude oil pipeline systems, crude oil marketing activities and the Catoosa demonstration plant will be reported in the Exploration and Production segment. The refined products pipeline systems will be reported in the Refining, Marketing and Transportation segment. The remaining activities will comprise the Integrated Gas segment which will consist of LNG facilities, certain midstream gas plants and pipelines, non-equity natural gas marketing activity, and continued execution of other integrated gas strategies in the Atlantic and Pacific Basins, which may or may not be connected to Marathon’s E&P activity. For further information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Outlook” on page 47.

The above OERB discussion contains forward looking statements concerning the plans for a LNG facility and a LNG offtake transaction. Factors that could affect the plans for the LNG plant and LNG offtake transaction include the successful negotiation and execution of definitive purchase and sale agreements for gas supply and LNG offtake, board approval of the transactions, approval of the LNG project by the Government of Equatorial Guinea, unforeseen difficulty in negotiation of definitive agreements among project participants, inability or delay in obtaining necessary government and third-party approvals, unanticipated changes in market demand or supply, competition with similar projects, environmental issues, availability or construction of sufficient LNG vessels, and unforeseen hazards such as weather conditions. The foregoing factors (among others) could cause actual results to differ materially from those set forth in the forward-looking statements.

Competition and Market Conditions

Strong competition exists in all sectors of the oil and gas industry and, in particular, in the exploration and development of new reserves. Marathon competes with major integrated and independent oil and gas companies for the acquisition of oil and gas leases and other properties, for the equipment and labor required to develop and operate those properties and in the marketing of oil and natural gas to end-users. Many of Marathon’s competitors have financial and other resources greater than those available to Marathon. As a consequence, Marathon may be at a competitive disadvantage in bidding for the rights to explore for oil and gas. Acquiring the more attractive exploration opportunities frequently requires competitive bids involving front-end bonus payments or commitments-to-work programs. Marathon also competes in attracting and retaining personnel, including geologists, geophysicists and other specialists. Based on industry sources, Marathon believes it currently ranks eighth among U.S.-based petroleum corporations on the basis of 2002 worldwide liquid hydrocarbon and natural gas production.

Marathon through MAP must also compete with a large number of other companies to acquire crude oil for refinery processing and in the distribution and marketing of a full array of petroleum products. MAP believes it ranks fifth among U.S. petroleum companies on the basis of crude oil refining capacity as of January 1, 2004. MAP competes in four distinct markets – wholesale, spot, branded and retail distribution—for the sale of refined products and believes it competes with about 40 companies in the wholesale distribution of petroleum products to private brand marketers and large commercial and industrial consumers; about 80 companies in the sale of petroleum products in the spot market; 11 refiner/marketers in the supply of branded petroleum products to dealers and jobbers; and approximately 275 petroleum product retailers in the retail sale of petroleum products. Marathon competes in the convenience store industry through SSA’s retail outlets. The retail outlets offer consumers gasoline, diesel fuel (at selected locations) and a broad mix of other merchandise and services. Some locations also have on-premises brand-name restaurants such as Subway^™. Marathon also competes in the travel center industry through its 50 percent ownership in PTC.

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Marathon’s operating results are affected by price changes in crude oil, natural gas and petroleum products, as well as changes in competitive conditions in the markets it serves. Generally, results from production operations benefit from higher crude oil and natural gas prices while refining and marketing margins may be adversely affected by crude oil price increases. Market conditions in the oil and gas industry are cyclical and subject to global economic and political events and new and changing governmental regulations.

The Separation

On December 31, 2001, pursuant to an Agreement and Plan of Reorganization dated as of July 31, 2001 (“Reorganization Agreement”), Marathon completed the Separation, in which:

• its wholly owned subsidiary United States Steel LLC converted into a Delaware corporation named United States Steel Corporation and became a separate, publicly traded company; and

• USX Corporation changed its name to Marathon Oil Corporation.

As a result of the Separation, Marathon and United States Steel are separate companies, and neither has any ownership interest in the other. Thomas J. Usher is chairman of the board of both companies, and, as of December 31, 2003, four of the ten remaining members of Marathon’s board of directors are also directors of United States Steel.

In connection with the Separation and pursuant to the Plan of Reorganization, Marathon and United States Steel have entered into a series of agreements governing their relationship after the Separation and providing for the allocation of tax and certain other liabilities and obligations arising from periods before the Separation. The following is a description of the material terms of two of those agreements.

Financial Matters Agreement

Under the financial matters agreement, United States Steel has assumed and agreed to discharge all Marathon’s principal repayment, interest payment and other obligations under the following, including any amounts due on any default or acceleration of any of those obligations, other than any default caused by Marathon:

• obligations under industrial revenue bonds related to environmental projects for current and former U.S. Steel Group facilities, with maturities ranging from 2009 through 2033;

• sale-leaseback financing obligations under a lease for equipment at United States Steel’s Fairfield Works facility, with the lease term extending to 2012, subject to extensions;

• obligations relating to various lease arrangements accounted for as operating leases and various guarantee arrangements, all of which were assumed by United States Steel; and

• certain other guarantees.

The financial matters agreement also provides that, on or before the tenth anniversary of the Separation, United States Steel will provide for Marathon’s discharge from any remaining liability under any of the assumed industrial revenue bonds. United States Steel may accomplish that discharge by refinancing or, to the extent not refinanced, paying Marathon an amount equal to the remaining principal amount of all accrued and unpaid debt service outstanding on, and any premium required to immediately retire, the then outstanding industrial revenue bonds. $2 million of the industrial revenue bonds are scheduled to mature in the period extending through December 31, 2009.

Under the financial matters agreement, United States Steel shall have the right to exercise all of the existing contractual rights under the lease obligations assumed from Marathon, including all rights related to purchase options, prepayments or the grant or release of security interests. United States Steel shall have no right to increase amounts due under or lengthen the term of any of the assumed lease obligations without the prior consent of Marathon other than extensions set forth in the terms of the assumed lease obligations.

The financial matters agreement also requires United States Steel to use commercially reasonable efforts to have Marathon released from its obligations under a guarantee Marathon provided with respect to all United States Steel’s obligations under a partnership agreement between United States Steel, as general partner, and General Electric Credit Corporation of Delaware and Southern Energy Clairton, LLC, as limited partners. United States Steel may dissolve the partnership under certain circumstances including if it is required to fund

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accumulated cash shortfalls of the partnership in excess of $150 million. In addition to the normal commitments of a general partner, United States Steel has indemnified the limited partners for certain income tax exposures.

The financial matters agreement requires Marathon to use commercially reasonable efforts to take all necessary action or refrain from acting so as to assure compliance with all covenants and other obligations under the documents relating to the assumed obligations to avoid the occurrence of a default or the acceleration of the payment obligations under the assumed obligations. The agreement also obligates Marathon to use commercially reasonable efforts to obtain and maintain letters of credit and other liquidity arrangements required under the assumed obligations.

United States Steel’s obligations to Marathon under the financial matters agreement are general unsecured obligations that rank equal to United States Steel’s accounts payable and other general unsecured obligations. The financial matters agreement does not contain any financial covenants, and United States Steel is free to incur additional debt, grant mortgages on or security interests in its property and sell or transfer assets without our consent.

Tax Sharing Agreement

Marathon and United States Steel have a tax sharing agreement that applies to each of their consolidated tax reporting groups. Provisions of this agreement include the following:

• for any taxable period, or any portion of any taxable period, ended on or before December 31, 2001, unpaid tax sharing payments will be made between Marathon and United States Steel generally in accordance with the general tax sharing principles in effect before the Separation;

• no tax sharing payments will be made with respect to taxable periods, or portions thereof, beginning after December 31, 2001; and

• provisions relating to the tax and related liabilities, if any, that result from the Separation ceasing to qualify as a tax-free transaction and limitations on post-Separation activities that might jeopardize the tax-free status of the Separation.

Under the general tax sharing principles in effect before the Separation:

• the taxes payable by each of the Marathon Group and the U.S. Steel Group were determined as if each of them had filed its own consolidated, combined or unitary tax return; and

• the U.S. Steel Group would receive the benefit, in the form of tax sharing payments by the parent corporation, of the tax attributes, consisting principally of net operating losses and various credits, that its business generated and the parent used on a consolidated basis to reduce its taxes otherwise payable.

In accordance with the tax sharing agreement, at the time of the Separation, Marathon made a preliminary settlement with United States Steel of approximately $440 million as the net tax sharing payments owed to it for the year ended December 31, 2001 under the pre-Separation tax sharing principles.

The tax sharing agreement also addresses the handling of tax audits and contests and other matters respecting taxable periods, or portions of taxable periods, ended before December 31, 2001.

In the tax sharing agreement, each of Marathon and United States Steel promised the other party that it:

• would not, before January 1, 2004, take various actions or enter into various transactions that might, under section 355 of the Internal Revenue Code of 1986, jeopardize the tax-free status of the Separation; and

• would be responsible for, and indemnify and hold the other party harmless from and against, any tax and related liability, such as interest and penalties, that results from the Separation ceasing to qualify as tax-free because of its taking of any such action or entering into any such transaction.

The prescribed actions and transactions include:

• the liquidation of Marathon or United States Steel; and

• the sale by Marathon or United States Steel of its assets, except in the ordinary course of business.

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In case a taxing authority seeks to collect a tax liability from one party that the tax sharing agreement has allocated to the other party, the other party has agreed in the sharing agreement to indemnify the first party against that liability.

Even if the Separation otherwise qualified for tax-free treatment under section 355 of the Internal Revenue Code, the Separation may become taxable to Marathon under section 355(e) of the Internal Revenue Code if capital stock representing a 50 percent or greater interest in either Marathon or United States Steel is acquired, directly or indirectly, as part of a plan or series of related transactions that include the Separation. For this purpose, a “50 percent or greater interest” means capital stock possessing at least 50 percent of the total combined voting power of all classes of stock entitled to vote or at least 50 percent of the total value of shares of all classes of capital stock. To minimize this risk, both Marathon and United States Steel agreed in the tax sharing agreement that they would not enter into any transactions or make any change in their equity structures that could cause the Separation to be treated as part of a plan or series of related transactions to which those provisions of section 355(e) of the Internal Revenue Code may apply. If an acquisition occurs that results in the Separation being taxable under section 355(e) of the Internal Revenue Code, the agreement provides that the resulting corporate tax liability will be borne by the party involved in that acquisition transaction.

Although the tax sharing agreement allocates tax liabilities relating to taxable periods ending on or prior to the Separation, each of Marathon and United States Steel, as members of the same consolidated tax reporting group during any portion of a taxable period ended on or prior to the date of the Separation, is jointly and severally liable under the Internal Revenue Code for the federal income tax liability of the entire consolidated tax reporting group for that year. To address the possibility that the taxing authorities may seek to collect all or part of a tax liability from one party where the tax sharing agreement allocates that liability to the other party, the agreement includes indemnification provisions that would entitle the party from whom the taxing authorities are seeking collection to obtain indemnification from the other party, to the extent the agreement allocates that liability to that other party. Marathon can provide no assurance, however, that United States Steel will be able to meet its indemnification obligations, if any, to Marathon that may arise under the tax sharing agreement.

Obligations Associated with the Separation as of December 31, 2003

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Obligations Associated with the Separation of United States Steel” on page 43 for a discussion of Marathon’s obligations associated with the Separation.

Environmental Matters

Marathon maintains a comprehensive environmental policy overseen by the Corporate Governance and Nominating Committee of Marathon’s Board of Directors. Marathon’s Health, Environment and Safety organization has the responsibility to ensure that Marathon’s operating organizations maintain environmental compliance systems that are in accordance with applicable laws and regulations. The Health, Environment and Safety Management Committee, which is comprised of officers of Marathon, is charged with reviewing its overall performance with various environmental compliance programs. Marathon also has an Emergency Management Team, composed of senior management, which oversees the response to any major emergency environmental incident involving Marathon or any of its properties.

Marathon’s businesses are subject to numerous laws and regulations relating to the protection of the environment. These environmental laws and regulations include the Clean Air Act (“CAA”) with respect to air emissions, the Clean Water Act (“CWA”) with respect to water discharges, the Resource Conservation and Recovery Act (“RCRA”) with respect to solid and hazardous waste treatment, storage and disposal, the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) with respect to releases and remediation of hazardous substances and the Oil Pollution Act of 1990 (“OPA-90”) with respect to oil pollution and response. In addition, many states where Marathon operates have similar laws dealing with the same matters. These laws and their associated regulations are subject to frequent change and many of them have become more stringent. In some cases, they can impose liability for the entire cost of cleanup on any responsible party without regard to negligence or fault and impose liability on Marathon for the conduct of others or conditions others have caused, or for Marathon’s acts that complied with all applicable requirements when we performed them. The ultimate impact of complying with existing laws and regulations is not always clearly known or determinable, due in part to the fact that certain implementing regulations for some environmental laws have not yet been finalized or, in some instances, are undergoing revision. These environmental laws and regulations, particularly the 1990

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Amendments to the CAA and its implementing regulations, new water quality standards and stricter fuel regulations, could result in increased capital, operating and compliance costs.

For a discussion of environmental capital expenditures and costs of compliance for air, water, solid waste and remediation, see “Management’s Discussion and Analysis of Environmental Matters, Litigation and Contingencies” on page 45 and “Legal Proceedings” on page 24.

Air

Of particular significance to MAP are EPA regulations that require reduced sulfur levels in the manufacture of gasoline and on-road diesel fuel starting in 2004 and 2006, respectively. Marathon estimates that MAP’s combined capital costs to achieve compliance with these rules could amount to approximately $900 million, which includes costs that could be incurred as part of other refinery upgrade projects, between 2002 and 2006. Some factors that could potentially affect MAP’s gasoline and diesel fuel compliance costs include obtaining the necessary construction and environmental permits, completion of project detailed engineering, and project construction and logistical considerations.

The U.S. EPA has finalized new and revised National Ambient Air Quality Standards (“NAAQS”) for fine particulate emissions (PM2.5) and ozone. In connection with these new standards, EPA will designate certain areas as “nonattainment,” meaning that the air quality in such areas do not meet the NAAQS. To address these nonattainment areas EPA has proposed a rule called the Interstate Air Quality Rule (“IAQR”) that will require significant reductions of SO2 and NOx emissions in numerous states. All of Marathon’s refinery operations are located within these affected states. If this rule is finalized, it could have a significant impact on Marathon’s operations as well as the operations of many of Marathon’s competitors. At this time, Marathon cannot determine whether the IAQR will be finalized or whether it will be substantially changed before it is final. As a result, Marathon cannot presently reasonably estimate the financial impact of such a rule.

Water

Marathon maintains numerous discharge permits as required under the National Pollutant Discharge Elimination System program of the CWA and has implemented systems to oversee its compliance efforts. In addition, Marathon is regulated under OPA-90, which amended the CWA. Among other requirements, OPA-90 requires the owner or operator of a tank vessel or a facility to maintain an emergency plan to respond to releases of oil or hazardous substances. Also, in case of such releases OPA-90 requires responsible companies to pay resulting removal costs and damages, provides for civil penalties and imposes criminal sanctions for violations of its provisions.

Additionally, OPA-90 requires that new tank vessels entering or operating in U.S. waters be double hulled and that existing tank vessels that are not double-hulled be retrofitted or removed from U.S. service, according to a phase-out schedule. As of December 31, 2003, all of the barges used in MAP’s river transportation operations meet the double-hulled requirements of OPA-90.

Marathon operates facilities at which spills of oil and hazardous substances could occur. Several coastal states in which Marathon operates have passed state laws similar to OPA-90, but with expanded liability provisions, including provisions for cargo owner responsibility as well as ship owner and operator responsibility. Marathon has implemented emergency oil response plans for all of its components and facilities covered by OPA-90.

Solid Waste

Marathon continues to seek methods to minimize the generation of hazardous wastes in its operations. RCRA establishes standards for the management of solid and hazardous wastes. Besides affecting waste disposal practices, RCRA also addresses the environmental effects of certain past waste disposal operations, the recycling of wastes and the regulation of underground storage tanks (“USTs”) containing regulated substances. Since the EPA has not yet promulgated implementing regulations for all provisions of RCRA and has not yet made clear the practical application of all the implementing regulations it has promulgated, the ultimate cost of compliance with this statute cannot be accurately estimated. In addition, new laws are being enacted and regulations are being adopted by various regulatory agencies on a continuing basis, and the costs of compliance with these new rules can only be broadly appraised until their implementation becomes more accurately defined.

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Remediation

Marathon owns or operates certain retail outlets where, during the normal course of operations, releases of petroleum products from USTs have occurred. Federal and state laws require that contamination caused by such releases at these sites be assessed and remediated to meet applicable standards. The enforcement of the UST regulations under RCRA has been delegated to the states, which administer their own UST programs. Marathon’s obligation to remediate such contamination varies, depending on the extent of the releases and the stringency of the laws and regulations of the states in which it operates. A portion of these remediation costs may be recoverable from the appropriate state UST reimbursement fund once the applicable deductible has been satisfied. Accruals for remediation expenses and associated reimbursements are established for sites where contamination has been determined to exist and the amount of associated costs is reasonably determinable.

As a general rule, Marathon and Ashland retained responsibility for certain remediation costs arising out of the prior ownership and operation of businesses transferred to MAP. Such continuing responsibility, in certain situations, may be subject to threshold or sunset agreements, which gradually diminish this responsibility over time.

Properties

The location and general character of the principal oil and gas properties, refineries and gas plants, pipeline systems and other important physical properties of Marathon have been described previously. Except for oil and gas producing properties, which generally are leased, or as otherwise stated, such properties are held in fee. The plants and facilities have been constructed or acquired over a period of years and vary in age and operating efficiency. At the date of acquisition of important properties, titles were examined and opinions of counsel obtained, but no title examination has been made specifically for the purpose of this document. The properties classified as owned in fee generally have been held for many years without any material unfavorably adjudicated claim.

The basis for estimating oil and gas reserves is set forth in “Consolidated Financial Statements and Supplementary Data – Supplementary Information on Oil and Gas Producing Activities – Estimated Quantities of Proved Oil and Gas Reserves” on pages F-45 through F-46.

Property, Plant and Equipment Additions

For property, plant and equipment additions, see “Management’s Discussion and Analysis of Financial Condition, Cash Flows and Liquidity – Capital Expenditures” on page 40.

Employees

Marathon had 27,007 active employees as of December 31, 2003, including 23,556 MAP employees. Of the total number of MAP employees, 17,139 were employees of Speedway SuperAmerica LLC, most of whom were employees at retail marketing outlets.

Certain hourly employees at the Catlettsburg and Canton refineries are represented by the Paper, Allied-Industrial, Chemical and Energy Workers International Union under labor agreements that expire on January 31, 2006. The same union represents certain hourly employees at the Texas City refinery under a labor agreement that expires on March 31, 2006. The International Brotherhood of Teamsters represents certain hourly employees at the St. Paul Park and Detroit refineries under labor agreements that are scheduled to expire on May 31, 2006 and January 31, 2007, respectively.

Available Information

General information about Marathon, including the Corporate Governance Principles and Charters for the Audit Committee, Compensation Committee, Corporate Governance and Nominating Committee, and Committee on Financial Policy, can be found at www.marathon.com. In addition, Marathon’s Code of Business Conduct and Code of Ethics for Senior Financial Officers is available on the website at www.marathon.com/Values/ Corporate_Governance/. Marathon’s Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as any amendments and exhibits to those reports, are available free of charge through the website as soon as reasonably practicable after the reports are filed or furnished with the SEC. These documents are also available in hard copy, free of charge, by contacting Marathon’s Investor Relations office. Information contained on Marathon’s website is not incorporated into this Form 10-K or other securities filings.

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Item 3. Legal Proceedings

Marathon is the subject of, or a party to, a number of pending or threatened legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relating to the environment. Certain of these matters are included below in this discussion. The ultimate resolution of these contingencies could, individually or in the aggregate, be material. However, management believes that Marathon will remain a viable and competitive enterprise even though it is possible that these contingencies could be resolved unfavorably.

Natural Gas Royalty Litigation

Marathon was served in two qui tam cases, which allege that federal and Indian lessees violated the False Claims Act with respect to the reporting and payment of royalties on natural gas and natural gas liquids. The first case, U.S. ex rel Jack J. Grynberg v. Alaska Pipeline Co., et al. is primarily a gas measurement case, and the second case, U.S. ex rel Harrold E. Wright v. Agip Petroleum Co. et al, is primarily a gas valuation case. These cases assert that false claims have been filed by lessees and that penalties, damages and interest total more than $25 billion. The Department of Justice has announced that it would intervene or has reserved judgment on whether to intervene against specified oil and gas companies and also announced that it would not intervene against certain other defendants including Marathon. The matters are in the discovery phase and Marathon intends to vigorously defend these cases.

Powder River Basin Arbitration

The U.S. Bureau of Land Management (“BLM”) completed a multi-year review of potential environmental impacts from coal bed methane development on federal lands in the Powder River Basin in Montana and Wyoming. The Agency’s Record of Decision (“ROD”) was signed on April 30, 2003 supporting increased coal bed methane development. Plaintiff environmental and other groups filed four suits in May 2003 in the U.S. District Court for the District of Montana against the BLM alleging the Agency’s environmental impact review was not adequate. Plaintiffs seek a court order enjoining coal bed methane development on federal lands in the Powder River Basin until BLM conducts additional studies on the environmental impact. Marathon has been allowed to intervene as a party in all four of the cases. As the lawsuits to delay energy development in the Powder River Basin progress through the courts, BLM continues to process permits to drill under the ROD. In January 2004, the Court over protests of Plaintiffs, transferred to the District Court of Wyoming, portions of two of the cases dealing with the sufficiency of the environmental impact review as to lands in Wyoming.

Environmental Proceedings

The following is a summary of proceedings involving Marathon that were pending or contemplated as of December 31, 2003, under federal and state environmental laws. Except as described herein, it is not possible to predict accurately the ultimate outcome of these matters; however, management’s belief set forth in the first paragraph under Item 3. “Legal Proceedings” above takes such matters into account.

Claims under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and related state acts have been raised with respect to the cleanup of various waste disposal and other sites. CERCLA is intended to facilitate the cleanup of hazardous substances without regard to fault. Potentially responsible parties (“PRPs”) for each site include present and former owners and operators of, transporters to and generators of the substances at the site. Liability is strict and can be joint and several. Because of various factors including the difficulty of identifying the responsible parties for any particular site, the complexity of determining the relative liability among them, the uncertainty as to the most desirable remediation techniques and the amount of damages and cleanup costs and the time period during which such costs may be incurred, Marathon is unable to reasonably estimate its ultimate cost of compliance with CERCLA.

Projections, provided in the following paragraphs, of spending for and/or timing of completion of specific projects are forward-looking statements. These forward-looking statements are based on certain assumptions including, but not limited to, the factors provided in the preceding paragraph. To the extent that these assumptions prove to be inaccurate, future spending for, or timing of completion of environmental projects may differ materially from those stated in the forward-looking statements.

At December 31, 2003, Marathon had been identified as a PRP at a total of 9 CERCLA waste sites. Based on currently available information, which is in many cases preliminary and incomplete, Marathon believes that its liability for cleanup and remediation costs in connection with all but one of these sites will be under $1 million per site, and most will be under $100,000. Marathon believes that its liability for cleanup and remediation costs in connection with the one remaining site will be under $4 million.

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In addition, there are four sites where Marathon has received information requests or other indications that it may be a PRP under CERCLA but where sufficient information is not presently available to confirm the existence of liability.

There are also 125 additional sites, excluding retail marketing outlets, related to Marathon where remediation is being sought under other environmental statutes, both federal and state, or where private parties are seeking remediation through discussions or litigation. Of these sites, 16 were associated with properties conveyed to MAP by Ashland which has retained liability for all costs associated with remediation. Based on currently available information, which is in many cases preliminary and incomplete, Marathon believes that its liability for cleanup and remediation costs in connection with 15 of these sites will be under $100,000 per site, 43 sites have potential costs between $100,000 and $1 million per site, 16 sites may involve remediation costs between $1 million and $5 million per site, 7 sites have incurred remediation costs of more than $5 million per site, and one additional site has the potential to exceed $5 million. There are 27 sites with insufficient information to estimate future remediation costs.

There is one site that involves a remediation program in cooperation with the Michigan Department of Environmental Quality at a closed and dismantled refinery site located near Muskegon, Michigan. During the next 10 to 20 years, Marathon anticipates spending less than $7 million at this site. Expenditures in 2003 were approximately $225,000, and expenditures in 2004 will be approximately $500,000. Ongoing work at this site is subject to approval by the Michigan Department of Environmental Quality (“MDEQ”), and a risk-based closure strategy is being developed and will be approved by the MDEQ.

MAP has had a pending enforcement matter with the Illinois Environmental Protection Agency and the Illinois Attorney General’s Office since 2002 concerning MAP’s self-reporting of possible emission exceedences and permitting issues related to storage tanks at its Robinson, Illinois refinery. MAP has had periodic discussions with Illinois officials regarding this matter and more discussions are anticipated in 2004.

The Kentucky Natural Resources and Environmental Cabinet issued the MAP Catlettsburg, Kentucky Refinery a Notice of Violation (“NOV”) regarding the Tank 845 rupture which occurred in November of 1999. The tank rupture caused the tank’s contents to be released onto the ground and adjoining retention area. MAP resolved this matter in 2003 for a civil penalty of $120,000 and the entering of an agreed Administrative Order.

In 2000, the Kentucky Natural Resources and Environmental Cabinet sent Marathon Ashland Pipe Line LLC a NOV seeking a civil penalty associated with a pipeline spill earlier that year in Winchester, Kentucky. MAP has settled this NOV in the form of an Agreed-to Administrative Order which was finalized and entered in January 2002 and required payment of a $170,000 penalty and reimbursement of past response costs up to $131,000.

In July, 2002, Marathon received a Notice of Enforcement from the State of Texas for alleged excess air emissions from its Yates Gas Plant and production operations on its Kloh lease. The Notices did not compute a penalty or fine for these pending enforcement actions; a tentative settlement for under $200,000 in civil penalties and a Supplemental Environmental Project has been reached and awaits full Commission approval.

In May, 2003, Marathon received a Consolidated Compliance Order & Notice or Potential Penalty from the State of Louisiana for alleged various air permit regulatory violations. This matter has been resolved in principle with the State for a civil penalty of under $150,000 and awaits formal closure with the State.

During the third quarter of 2003, a MAP subsidiary, Ohio River Pipe Line LLC (“ORPL”), entered into Director’s Final Findings and Orders with the Ohio Environmental Protection Agency (“OEPA”). The OEPA had alleged ORPL violations of a stormwater permit and pollution prevention plan during construction of the Cardinal Products Pipeline. The Findings and Orders required compliance with the permit, plan and other requirements, and payment of a $104,738 civil penalty.

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Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters

The principal market on which the Company’s common stock is traded is the New York Stock Exchange. Information concerning the high and low sales prices for the common stock as reported in the consolidated transaction reporting system and the frequency and amount of dividends paid during the last two years is set forth in “Selected Quarterly Financial Data (Unaudited)” on page F-41.

As of January 31, 2004, there were 61,404 registered holders of Marathon common stock.

The Board of Directors intends to declare and pay dividends on Marathon common stock based on the financial condition and results of operations of Marathon Oil Corporation, although it has no obligation under Delaware law or the Restated Certificate of Incorporation to do so. In determining its dividend policy with respect to Marathon common stock, the Board will rely on the financial statements of Marathon. Dividends on Marathon common stock are limited to legally available funds of Marathon.

On January 29, 2003, Marathon amended the Rights Agreement, dated as September 28, 1999, as amended, between Marathon and National City Bank, as successor rights agent. The Rights Agreement was amended so that the Rights to Purchase Series A Junior Preferred Stock expired on January 31, 2003, more than six years earlier than initially specified in the plan.

Item 6. Selected Financial Data

See page F-49 through F-51.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Marathon Oil Corporation (“Marathon”) is engaged in worldwide exploration and production of crude oil and natural gas; domestic refining, marketing and transportation of crude oil and petroleum products primarily through its 62 percent owned subsidiary, Marathon Ashland Petroleum LLC (“MAP”); and other energy related businesses. The Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with Items 1. and 2. Business and Properties, Item 6. Selected Financial Data and Item 8. Financial Statements and Supplementary Data.

Certain sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations include forward-looking statements concerning trends or events potentially affecting the businesses of Marathon. These statements typically contain words such as “anticipates,” “believes,” “estimates,” “expects,” “targets”, “plan,” “project,” “could,” “may,” “should,” “would” or similar words indicating that future outcomes are uncertain. In accordance with “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, these statements are accompanied by cautionary language identifying important factors, though not necessarily all such factors, which could cause future outcomes to differ materially from those set forth in the forward-looking statements.

Unless specifically noted, amounts for MAP do not reflect any reduction for the 38 percent interest held by Ashland Inc. (“Ashland”).

Overview

Marathon’s overall operating results depend on the profitability of its exploration and production (“E&P”) and refining, marketing and transportation (“RM&T”) segments.

Exploration and Production

E&P segment revenues correlate closely with prevailing prices for crude oil and natural gas. The increase in Marathon’s E&P segment revenues during 2003 tracked the increase in prices for these commodities. The robust prices for crude oil during 2003 were caused in part by increased demand in strengthening economies, particularly in the United States and the Far East, reduced crude oil inventories, as well as civil and political unrest and military actions in various oil exporting countries. The average spot price during 2003 for West Texas Intermediate (WTI), a benchmark crude oil, was $31.06 per barrel – up from an average of $26.16 in 2002 – and ended the year at $32.47.

Natural gas prices were significantly higher in 2003 as compared to 2002. A significant portion of Marathon’s United States lower 48 natural gas production is sold at bid week prices, making this indicator particularly important. The average quarterly bid week prices for 2003 were $6.58, $5.40, $4.97 and $4.58, respectively for the first to fourth quarter. Natural gas prices in Alaska are largely contractual, while natural gas production there is seasonal in nature, trending down during the second and third quarters and increasing during the fourth and first quarters. The other major gas-producing region for Marathon is Europe, where a large portion of Marathon’s gas sales are at contractual prices, making them less subject to European price volatility.

For additional information on price risk management, see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” on page 52.

E&P segment income during 2003 was impacted by slightly lower oil-equivalent production – down approximately 6 percent from 2002 levels. 2004 production is expected to decrease about 6 percent from 2003 levels mainly due to sales of non-core properties during 2003. Marathon estimates its 2004 production will average approximately 365,000 barrels of oil equivalent per day (“BOEPD”), excluding the impact of any additional acquisitions or dispositions. While production is expected to remain relatively flat through 2005, significant production growth is expected starting in 2006 from known projects in new core areas and recent exploration successes. Total production is anticipated to grow by more than 3 percent on an average annual basis between 2003 and 2008.

Projected production levels for liquid hydrocarbons and natural gas are based on a number of assumptions, including (among others) prices, supply and demand, regulatory constraints, reserve estimates, production decline rates for mature fields, reserve replacement rates, drilling rig availability and geological and operating considerations. These assumptions may prove to be inaccurate. Prices have historically been volatile and have frequently been driven by unpredictable changes in supply and demand resulting from fluctuations in economic activity and political developments in the world’s major oil and gas producing areas, including OPEC member

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countries. Any substantial decline in such prices could have a material adverse effect on Marathon’s results of operations. A decline in such prices could also adversely affect the quantity of liquid hydrocarbons and natural gas that can be economically produced and the amount of capital available for exploration and development.

E&P operations are subject to various hazards, including acts of war or terrorist acts and the governmental or military response thereto, explosions, fires and uncontrollable flows of oil and gas. Offshore production and marine operations in areas such as the Gulf of Mexico, the North Sea, the U.K. Atlantic Margin, the Celtic Sea, offshore Nova Scotia and offshore West Africa are also subject to severe weather conditions such as hurricanes or violent storms or other hazards. Development of new production properties in countries outside the United States may require protracted negotiations with host governments and are frequently subject to political considerations, such as tax regulations, which could adversely affect the economics of projects.

Refining, Marketing and Transportation

MAP refines, markets and transports crude oil and petroleum products, primarily in the Midwest, the upper Great Plains and southeastern United States. RM&T segment income primarily reflects MAP’s income from operations which depends largely on the refining and wholesale marketing margin, refinery throughputs, retail marketing margins for gasoline, distillates and merchandise, and the profitability of its pipeline transportation operations.

The refining and wholesale marketing margin is the difference between the wholesale prices of refined products sold and the cost of crude oil and other feedstocks refined, the cost of purchased products and manufacturing costs. MAP is a purchaser of crude oil in order to satisfy throughput requirements of its refineries. As a result, its refining and wholesale marketing margin could be adversely affected by rising crude oil and other feedstock prices that are not recovered in the marketplace. The crack spread, which is a measure of the difference between spot market gasoline and distillate prices and spot market crude costs, is an industry indicator of refining margins. In addition to changes in the crack spread, MAP’s refining and wholesale marketing margin is impacted by the types of crude oil processed, the wholesale selling prices realized for all the products sold and the level of manufacturing costs. MAP processes significant amounts of sour crude oil which enhances its competitive position in the industry as sour crude oil typically can be purchased at a discount to sweet crude oil. As crude oil production increases in the coming years, heavy, sour crude oil production growth is expected to outpace sweet crude oil production growth , which may translate into higher sour crude oil discounts going forward. Over the last three years, approximately 60% of the crude oil throughput at MAP’s refineries has been sour crude oil. Sales of asphalt increase during the highway construction season in MAP’s market area which is primarily in the second and third calendar quarters. The selling price of asphalt is dependant on the cost of crude oil, the price of alternative paving materials and the level of construction activity in both the private and public sectors. Changes in manufacturing costs from period to period are primarily dependant on the level of maintenance activities at the refineries and the price of purchased natural gas. The refining and wholesale marketing margin has been historically volatile and varies with the level of economic activity in the various marketing areas, the regulatory climate, logistical capabilities and the available supply of refined products and raw materials.

For additional information on price risk management, see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” on page 52.

Additionally, the retail marketing gasoline and distillate margin, the difference between the ultimate price paid by consumers and the wholesale cost of the refined products, including secondary transportation, plays an important part in downstream profitability. Retail gasoline and distillate margins have been historically volatile, but tend to be countercyclical to the refining and wholesale marketing margin. Factors affecting the retail gasoline and distillate margin include competition, seasonal demand fluctuations, the available wholesale supply, the level of economic activity in the marketing areas and weather situations that impact driving conditions. Gross margins on merchandise sold at retail outlets tend to be less volatile than the gross margin from the retail sale of gasoline and diesel fuel. Factors affecting the gross margin on retail merchandise sales include consumer demand for merchandise items, the impact of competition and the level of economic activity in the marketing areas. The profitability of MAP’s pipeline transportation operations is primarily dependant on the volumes shipped through the pipelines. The volume of crude oil that MAP transports is directly affected by the supply of, and refiner demand for, crude oil in the markets served directly by MAP’s crude oil pipelines. Key factors in this supply and demand balance are the production levels of crude oil by producers, the availability and cost of alternative transportation modes, and the refinery and transportation system maintenance levels. The throughput of the refined products that MAP transports is directly affected by the production level of, and user demand for, refined products in the markets served by MAP’s refined product pipelines. In most of MAP’s markets, demand for gasoline peaks during

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the summer driving season, which extends from May through September, and declines during the fall and winter months. The seasonal pattern for distillates is the reverse of this, helping to level overall movements on an annual basis. As with crude, other transportation alternatives and maintenance levels influence refined product movements.

Environmental regulations, particularly the 1990 amendments to the Clean Air Act, have imposed (and are expected to continue to impose) increasingly stringent and costly requirements on refining and marketing operations that may have an adverse effect on margins and financial condition. Refining, marketing and transportation operations are subject to business interruptions due to unforeseen events such as explosions, fires, crude oil or refined product spills, inclement weather or labor disputes. They are also subject to the additional hazards of marine operations, such as capsizing, collision and damage or loss from severe weather conditions.

Other Energy Related Businesses

Marathon operates other businesses that market and transport its own and third-party natural gas, crude oil and products manufactured from natural gas, such as liquefied natural gas (“LNG”) and methanol, primarily in the United States, Europe and West Africa. The profitability of these operations depends largely on commodity prices, volume deliveries, margins on resale gas, and demand. Methanol spot pricing is very volatile largely because global methanol demand is only 30 millions tons and any one major unplanned shutdown or new addition can have a significant impact on the supply-demand balance. Other energy related businesses (“OERB”) operations could be impacted by unforeseen events such as explosions, fires, product spills, inclement weather or availability of LNG vessels. They are also subject to the additional hazards of marine operations, such as capsizing, collision and damage or loss from severe weather conditions.

Management’s Discussion and Analysis of Critical Accounting Estimates

The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at year end and the reported amounts of revenues and expenses during the year. Actual results could differ from the estimates and assumptions used.

Certain accounting estimates are considered to be critical if a) the nature of the estimates and assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change; and b) the impact of the estimates and assumptions on financial condition or operating performance is material.

Estimated Net Recoverable Quantities of Oil and Gas

Marathon uses the successful efforts method of accounting for its oil and gas producing activities. The successful efforts method inherently relies upon the estimation of proved reserves, both developed and undeveloped. The existence and the estimated amount of proved reserves affect, among other things, whether or not certain costs are capitalized or expensed, the amount and timing of costs depleted or amortized into income and the presentation of supplemental information on oil and gas producing activities. Both the expected future cash flows to be generated by oil and gas producing properties and the expected future taxable income available to realize the value of deferred tax assets, which are discussed further below, rely in part on estimates of net recoverable quantities of oil and gas.

Marathon’s estimation of net recoverable quantities of oil and gas is a highly technical process performed primarily by in-house reservoir engineers and geoscience professionals. During 2003, approximately 35 percent of Marathon’s total proved reserves were prepared, reviewed or validated by third-party petroleum engineering consultants. The results of these third-party reviews were consistent with Marathon’s proved reserve estimates.

Proved reserves are the estimated quantities of oil and gas that geologic and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Estimates of proved reserves are subject to change, either positively and negatively, as additional information becomes available and as contractual, economic and political conditions change. During 2003, net revisions of previous estimates increased total proved reserves by 40 million BOE as a result of 97 million BOE in positive revisions which were partially offset by 57 million BOE in negative revisions.

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Proved developed reserves represented 70 percent of total proved reserves as of December 31, 2003, as compared to 78 percent as of December 31, 2002. The decrease primarily reflects the disposition of the Yates field. Of the just over 300 mmboe of proved undeveloped reserves at year-end 2003, only 10 percent have been included as proved reserves for more than two years.

Costs incurred for the periods ended December 31, 2003, 2002, and 2001 relating to the development of proved undeveloped oil and gas reserves, including Marathon’s proportionate share of equity investees’ costs incurred, were $780 million, $404 million, and $365 million. As of December 31, 2003, estimated future development costs relating to the development of proved undeveloped oil and gas reserves for the years 2004 through 2006 are projected to be $324 million, $149 million, and $126 million.

Expected Future Cash Flows Generated by Certain Oil and Gas Producing Properties

Marathon must estimate the expected future cash flows to be generated by its oil and gas producing properties to evaluate the possible need to impair the carrying value of those properties. For purposes of impairment evaluation, long-lived assets must be grouped at the lowest level for which independent cash flows can be identified, which is called an “asset group”. An impairment of any one of Marathon’s five largest producing property asset groups could have a material impact on the presentation of financial condition, changes in financial condition or results of operations. Those asset groups – the Alba field offshore Equatorial Guinea, the coal bed natural gas properties of the Powder River Basin, the Brae Area Complex offshore the United Kingdom, Petronius development in the Gulf of Mexico, and Potanay field in the Russian Federation – comprise approximately 49 percent of Marathon’s total proved oil and gas reserves. The expected future cash flows from these asset groups require assumptions about matters such as the prevailing level of future oil and gas prices, estimated recoverable quantities of oil and gas, expected field performance and the political environment in the host country.

Long-lived asset groups held and used in operations must be impaired when the carrying value is not recoverable and exceeds the fair value. Recoverability of the carrying values is determined by comparison with the undiscounted expected future cash flows to be generated by those groups. As of December 31, 2003, no impairment in the value of the Alba field, Powder River Basin, Brae Area Complex, Petronius development or the Potanay field was indicated.

Expected Future Taxable Income

Marathon must estimate its expected future taxable income to assess the realizability of its deferred income tax assets. As of December 31, 2003, Marathon reported net deferred tax assets of $1.155 billion, which represented gross assets of $1.731 billion net of valuation allowances of $576 million.

Numerous assumptions are inherent in the estimation of future taxable income, including assumptions about matters that are dependent on future events, such as future operating conditions (particularly as related to prevailing oil and gas prices) and future financial conditions. The estimates and assumptions used in determining future taxable income are consistent with those used in Marathon’s internal budgets, forecasts and strategic plans.

In determining its overall estimated future taxable income for purposes of assessing the need for additional valuation allowances, Marathon considers proved and risk-adjusted probable and possible reserves related to its existing producing properties, as well as estimated quantities of oil and gas related to undeveloped discoveries if, in the judgment of Marathon management, it is likely that development plans will be approved in the foreseeable future. In assessing the propriety of releasing an existing valuation allowance, Marathon considers the preponderance of evidence concerning the realization of the impaired deferred tax asset.

Additionally, Marathon must consider any prudent and feasible tax planning strategies that might minimize the amount of deferred tax liabilities recognized or the amount of any valuation allowance recognized against deferred tax assets, if management has the ability to implement these strategies and the expectation of implementing these strategies if the forecasted conditions actually occurred. The principal tax planning strategy available to Marathon relates to the permanent reinvestment of the earnings of foreign subsidiaries. Assumptions related to the permanent reinvestment of the earnings of foreign subsidiaries are reconsidered annually to give effect to changes in Marathon’s portfolio of producing properties and in its tax profile.

Marathon’s deferred tax assets include $450 million relating to Norwegian net operating loss carryforwards (“NOLs”). Marathon has established a valuation allowance of $420 million against these NOLs. Currently, Marathon generates income from the Heimdal and Vale fields in the Norwegian North Sea. Marathon acquired

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additional interests in Norway in each of the last three years. These interests currently have no proved reserves and generate no income, although some interests hold undeveloped discoveries. To the extent that these interests demonstrate the capability to generate future taxable income, Marathon may be able to release some or all of its $420 million valuation allowance in future periods.

Net Realizable Value of Receivables from United States Steel

As described further in “Management’s Discussion and Analysis of Financial Condition, Cash Flows and Liquidity – Obligations Associated with the Separation of United States Steel” on page 43, Marathon remains obligated (primarily or contingently) for certain debt and other financial arrangements for which United States Steel has assumed responsibility for repayment under the terms of the Separation. As of December 31, 2003, Marathon has reported receivables from United States Steel of $613 million, representing the amount of principal and accrued interest on Marathon debt for which United States Steel has assumed responsibility for repayment. Marathon must assess the realizability of these receivables, based on its expectations of United States Steel’s ability to satisfy its obligations. To make this assessment, Marathon must rely on public information about United States Steel. As of December 31, 2003, Marathon has judged the entire receivable to be realizable.

Marathon may continue to be exposed to the risk of nonpayment by United States Steel on a significant portion of this receivable until December 31, 2011. Of the $613 million, $469 million, or 77 percent, relates to industrial revenue bonds that are due in 2011 or later. The Financial Matters Agreement between Marathon and United States Steel provides that, on or before the tenth anniversary of the Separation, which is December 31, 2011, United States Steel will provide for Marathon’s discharge from any remaining liability under any of the assumed industrial revenue bonds.

As of December 31, 2003, Marathon’s cash-adjusted debt-to-capital ratio (which includes debt for which United States Steel has assumed responsibility for repayment) was 33 percent. The assessment of Marathon’s liquidity and capital resources may be impacted by expectations concerning United States Steel’s ability to satisfy its obligations.

If the debt for which United States Steel has assumed responsibility for repayment were excluded from the computation, Marathon’s cash-adjusted debt-to-capital ratio as of December 31, 2003 would have been approximately 28 percent. On the other hand, if the receivable from United States Steel had been written off as unrealizable, the cash-adjusted debt-to-capital ratio as of December 31, 2003 would have been approximately 34 percent. (If United States Steel were unable to satisfy its obligations, other adjustments in addition to the write-off of the receivable may be necessary.)

Net Realizable Value of Inventories

Generally accepted accounting principles require that inventories be carried at lower of cost or market. Accordingly, when the cost basis of Marathon’s inventories of liquid hydrocarbons and refined petroleum products exceed market value, Marathon establishes an inventory market valuation (“IMV”) reserve to reduce the cost basis of its inventories to net realizable value. Adjustments to the IMV reserve result in noncash charges or credits to income from operations.

When Marathon Oil Company was acquired in March 1982, prices of liquid hydrocarbons and refined petroleum products were at historically high levels. In applying the purchase method of accounting, inventories of liquid hydrocarbons and refined petroleum products were revalued by reference to current prices at the time of acquisition. This became the new LIFO cost basis of the inventories.

When Marathon acquired the crude oil and refined petroleum product inventories associated with Ashland’s RM&T operations on January 1, 1998, Marathon established a new LIFO cost basis for those inventories. The acquisition cost of these inventories lowered the overall average cost of the combined RM&T inventories. As a result, the price threshold at which an IMV reserve will be recorded was also lowered.

Since the prices of liquid hydrocarbons and refined petroleum products do not correlate perfectly, there is no absolute price threshold below which an IMV adjustment will be recognized. However, generally, Marathon will establish an IMV reserve when crude oil prices fall below $20 per barrel. As of December 31, 2003, with the WTI spotprice at $32.47 per barrel, no IMV reserve was needed.

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Contingent Liabilities

Marathon accrues contingent liabilities for income and other tax deficiencies, environmental remediation, product liability claims and litigation claims when such contingencies are probable and estimable. Marathon’s in-house legal counsel regularly assesses these contingent liabilities. In certain circumstances, outside legal counsel is utilized. For additional information on contingent liabilities, see “Management’s Discussion and Analysis of Environmental Matters, Litigation and Contingencies” on page 45.

Pensions and Other Postretirement Benefit Obligations

Accounting for these benefit obligations involves assumptions related to:

• discount rate for measuring the present value of future plan obligations

• expected long-term rates of return on plan assets

• rate of future increases in compensation levels

• health care cost projections

Marathon develops its demographics and utilizes the work of outside actuaries to assist in the measurement of these obligations. In determining the discount rate, Marathon reviews market yields on high-quality corporate debt. The asset rate of return assumption considers the asset mix of the plans, targeted at 75% equity securities and 25% debt securities, past performance and other factors. Compensation increase assumptions are based on historical experience and anticipated future management actions. Marathon reviews actual recent cost trends and projected future trends in establishing health care cost trend rates.

Of the assumptions used to measure the December 31, 2003 obligations and estimated 2004 net periodic benefit cost, the discount rate has the most significant effect on the periodic benefit costs reported for the plans. A .25% basis point decrease in the discount rate of 6.25% for domestic and 5.40% for international would increase pension and other postretirement plan expense by approximately $12 million and $3 million, respectively.

Estimated Fair Value of Asset Retirement Obligations

The fair value of an asset retirement obligation must be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. For Marathon, asset retirement obligations primarily relate to the abandonment of oil and gas producing facilities. Asset retirement obligations include costs to dismantle and relocate or dispose of production platforms, gathering systems, wells and related structures and restoration costs of land and seabed. Estimates of these costs are developed for each property based upon the type of production structure, depth of water, reservoir characteristics, depth of the reservoir, market demand for equipment, currently available procedures and consultations with construction and engineering professionals. Because these costs typically extend many years into the future, estimating these future costs is difficult and requires management to make estimates and judgments that are subject to future revisions based upon numerous factors, including future retirement costs, future recoverable quantities of oil and gas, future inflation rates, the credit-adjusted risk-free interest rate, changing technology and the political and regulatory environment.

Marathon’s estimation of asset retirement obligations and retirement dates is primarily performed by in-house engineers in consultation with in-house legal and environmental experts. Due to the inherent uncertainties in asset retirement obligations and retirement dates, these estimates are subject to potentially substantial changes, either positively or negatively, as additional information becomes available and as contractual, legal, environmental, economic and technological conditions change.

While assets such as refineries, crude oil and product pipelines, and marketing assets have asset retirement obligations, certain of those obligations are not recognized since the fair value cannot be estimated due to the uncertainty of the settlement date of the obligation.

Marathon’s estimates of the ultimate asset retirement obligations are based on estimates in current dollars, inflated to the estimated date of retirement by an annual inflation factor. Sensitivity analysis of the incremental effects of a hypothetical 1% increase in the inflation rate would have resulted in an approximately $28 million increase in the fair value of the asset retirement obligations at December 31, 2003, and an approximately $5 million decrease in 2003 income from operations.

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Estimated Fair Value of Non-Exchange Traded Derivative Contracts

Marathon fairly values all derivative instruments. Derivative instruments are used to manage risk throughout Marathon’s different businesses. These risks relate to commodities, interest rates and to a lesser extent our exposure to foreign currency fluctuations. Marathon uses derivative instruments that are exchange traded and non-exchange traded. Non-exchange traded instruments are referred to as over-the-counter (“OTC”) instruments.

The fair value of exchange traded instruments is based on existing market quotes derived from major exchanges such as the New York Merchantile Exchange. The fair value for OTC instruments such as options and swap agreements is developed through the use of option-pricing models or third party market quotes. The option-pricing models incorporate assumptions related to market volatility, current market price, strike price, interest rates and time value. Marathon utilizes purchased software option-pricing tools, similar to the Black-Scholes model, to fairly value its options related to commodity-based risks. OTC swap agreements are used to manage our exposure to interest rates. Marathon obtains third party dealer quotes to mark-to-market these financial instruments. In addition, Marathon has developed an internal pricing model which takes into consideration the specific contract terms and the forward market for interest rates. This tool is used to test the reasonableness of the third party dealer quotes associated with the OTC swap agreements.

Marathon also fairly values two natural gas long term delivery commitment contracts in the United Kingdom that are accounted for as derivative instruments and recognizes the change in fair value of those contracts on a quarterly basis within income from operations. The fair value is derived from published market data such as the Heren Report that captures the market-based natural gas activity in the United Kingdom. Currently, an 18 month forward pricing curve is utilized as this represents approximately 90% of the market liquidity in that region.

For additional information on market risk sensitivity, see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” on page 52.

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Management’s Discussion and Analysis of Income and Operations

Revenues for each of the last three years are summarized in the following table:

(In millions)	2003			2002			2001
E&P	$	3,990		$	3,711		$	4,245
RM&T		34,514			26,399			27,247
OERB		3,209			2,122			2,062
Segment revenues		41,713			32,232			33,554
Elimination of intersegment revenues		(750	)		(937	)		(728	)
Elimination of sales to United States Steel		–			–			(30	)
Total revenues	$	40,963		$	31,295		$	32,796
Items included in both revenues and costs and expenses:
Consumer excise taxes on petroleum products and merchandise	$	4,285		$	4,250		$	4,404
Matching crude oil and refined product buy/sell transactions settled in cash:
E&P	$	222		$	289		$	454
RM&T		6,936			4,191			3,797
Total buy/sell transactions	$	7,158		$	4,480		$	4,251

E&P segment revenues increased by $279 million in 2003 from 2002 and decreased by $534 million in 2002 from 2001. The 2003 increase was primarily due to higher worldwide natural gas and liquid hydrocarbon prices. This increase was partially offset by lower liquid hydrocarbon and natural gas volumes. The decrease in 2002 was primarily due to lower worldwide natural gas prices and lower liquid hydrocarbon and natural gas volumes, partially offset by higher worldwide liquid hydrocarbon prices. Derivative gains (losses) totaled $(176) million in 2003, compared to $52 million in 2002 and $85 million in 2001. Derivatives included losses of $66 million in 2003, compared to gains of $18 million in 2002, related to long-term gas contracts in the United Kingdom that are accounted for as derivative instruments and marked-to-market.

RM&T segment revenues increased by $8.115 billion in 2003 from 2002 and decreased by $848 million in 2002 from 2001. The 2003 increase primarily reflected higher refined product selling prices and volumes and increased matching crude oil buy/sell transaction volumes and prices. The decrease in 2002 was primarily due to lower refined product prices.

OERB segment revenues increased by $1.087 billion in 2003 from 2002 and $60 million in 2002 from 2001. The increase in 2003 is a result of higher natural gas and liquid hydrocarbon prices and increased natural gas and crude oil marketing activity. The increase in 2002 reflected a favorable effect from increased natural gas and crude oil marketing activity partially offset by lower natural gas prices. Derivative gains (losses) totaled $19 million in 2003, compared to $(8) million in 2002 and $(29) million in 2001.

For additional information on segment results, see discussion on income from operations on page 36.

Income from equity method investments decreased by $108 million in 2003 and increased by $19 million in 2002 from 2001. The decrease in 2003 is due to a $124 million loss on the dissolution of MKM Partners L.P., partially offset by increased earnings of other equity method investments due to higher natural gas and liquid hydrocarbons prices. For further discussion of the dissolution of MKM Partners L.P., see Note 13 to the Consolidated Financial Statements. The increase in 2002 is primarily the result of increased earnings in other equity method investments due to higher liquid hydrocarbons prices.

Net gains on disposal of assets increased by $99 million in 2003 from 2002 and $23 million in 2002 from 2001. During 2003, Marathon sold its interest in CLAM Petroleum B.V., interests in several pipeline companies, Yates field and gathering system, SSA stores primarily in Florida, South Carolina, North Carolina and Georgia, and certain fields in the Big Horn Basin of Wyoming. Results from 2002 include the sale of various SSA stores and the sale of San Juan Basin assets. Results from 2001 include the sale of various SSA stores and various domestic producing properties.

Gain (loss) on ownership change in MAP reflects the effects of contributions to MAP of certain environmental capital expenditures and leased property acquisitions funded by Marathon and Ashland. In accordance with MAP’s limited liability company agreement, in certain instances, environmental capital

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expenditures and acquisitions of leased properties are funded by the original contributor of the assets, but no change in ownership interest may result from these contributions. An excess of Ashland funded improvements over Marathon funded improvements results in a net gain and an excess of Marathon funded improvements over Ashland funded improvements results in a net loss.

Cost of revenues increased by $8.718 billion in 2003 from 2002 and $367 million in 2002 from 2001. The increases in the OERB segment were primarily a result of higher natural gas and liquid hydrocarbon costs. The increases in the RM&T segment primarily reflected higher acquisition costs for crude oil, refined products, refinery charge and blend feedstocks and increased manufacturing expenses.

Selling, general and administrative expenses increased by $107 million in 2003 from 2002 and $125 million in 2002 from 2001. The increase in 2003 was primarily a result of increased employee benefits (caused by increased pension expense resulting from changes in actuarial assumptions and a decrease in realized returns on plan assets) and other employee related costs. Also, Marathon changed assumptions in the health care cost trend rate from 7.5% to 10%, resulting in higher retiree health care costs. Additionally, during 2003, Marathon recorded a charge of $24 million related to organizational and business process changes. The increase in 2002 primarily reflected increased employee related costs.

Inventory market valuation reserve is established to reduce the cost basis of inventories to current market value. The 2002 results of operations include credits to income from operations of $71 million, reversing the IMV reserve at December 31, 2001. For additional information on this adjustment, see “Management’s Discussion and Analysis of Critical Accounting Estimates – Net Realizable Value of Inventories” on page 31.

Net interest and other financial costs decreased by $82 million in 2003 from 2002, following an increase of $96 million in 2002 from 2001. The decrease in 2003 is primarily due to an increase in capitalized interest related to increased long-term construction projects, the favorable effect of interest rate swaps, the favorable effect of interest on tax deficiencies and increased interest income on investments. The increase in 2002 was primarily due to higher average debt levels resulting from acquisitions and the Separation. Additionally, included in net interest and other financing costs are foreign currency gains of $13 million and $8 million for 2003 and 2002 and losses of $5 million for 2001.

Loss from early extinguishment of debt in 2002 was attributable to the retirement of $337 million aggregate principal amount of debt, resulting in a loss of $53 million. As a result of the adoption of Statement of Financial Accounting Standards No. 145 “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections” (“SFAS No. 145”), the loss from early extinguishment of debt that was previously reported as an extraordinary item (net of taxes of $20 million) has been reclassified into income before income taxes. The adoption of SFAS No. 145 had no impact on net income for 2002.

Minority interest in income of MAP, which represents Ashland’s 38 percent ownership interest, increased by $129 million in 2003 from 2002, following a decrease of $531 million in 2002 from 2001. MAP income was higher in 2003 compared to 2002 as discussed below in the RM&T segment. MAP income was significantly lower in 2002 compared to 2001 as discussed below in the RM&T segment.

Provision for income taxes increased by $215 million in 2003 from 2002, following a decrease of $458 million in 2002 from 2001, primarily due to $720 million increase and $1.356 billion decrease in income before income taxes. The effective tax rate for 2003 was 36.6% compared to 42.1% and 37.1% for 2002 and 2001. The higher rate in 2002 was due to the United Kingdom enactment of a supplementary 10 percent tax on profits from the North Sea oil and gas production, retroactively effective to April 17, 2002. In 2002, Marathon recognized a one-time noncash deferred tax adjustment of $61 million as a result of the rate increase.

The following is an analysis of the effective tax rate for the periods presented:

	2003		2002		2001
Statutory tax rate	35.0	%	35.0	%	35.0	%
Effects of foreign operations (a)	(0.4	)	5.6		(0.7	)
State and local income taxes after federal income tax effects	2.2		3.9		3.0
Other federal tax effects	(0.2	)	(2.4	)	(0.2	)
Effective tax rate	36.6	%	42.1	%	37.1	%

^(a) The deferred tax effect related to the enactment of a supplemental tax in the U.K. increased the effective tax rate 7.0 percent in 2002.

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Discontinued operations in 2003 primarily relates to Marathon’s E&P operations in western Canada, which were sold in 2003 for a gain of $278 million, including a tax benefit of $8 million. Also, included in 2003 results is an $8 million adjustment to a tax liability due to United States Steel Corporation. Results for 2002 and 2001 have been restated to reflect the western Canadian operations as discontinued. Results for 2001 also include the net loss attributed to Steel Stock, adjusted for certain corporate administrative expenses and interest expense (net of income tax effects), and the loss on disposition of United States Steel Corporation, which is the excess of the net investment in United States Steel over the aggregate fair market value of the outstanding shares of the Steel Stock at the time of the Separation.

Cumulative effect of changes in accounting principles of $4 million, net of a tax provision of $4 million, in 2003 represents the adoption of Statement of Financial Accounting Standards No. 143 “Accounting for Asset Retirement Obligations” (“SFAS No. 143”), in which Marathon recognized in income the cumulative effect of recording the fair value of asset retirement obligations. The $13 million gain, net of a tax provision of $7 million, in 2002 represents the adoption of subsequently issued interpretations by the Financial Accounting Standards Board (“FASB”) of Statement of Financial Accounting Standards No. 133 “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”) in which Marathon must recognize in income the effect of changes in the fair value of two long-term natural gas sales contracts in the United Kingdom. The $8 million loss, net of a tax benefit of $5 million, in 2001 was an unfavorable transition adjustment related to the initial adoption of SFAS No. 133.

Net income increased by $805 million in 2003 from 2002 and by $359 million in 2002 from 2001, primarily reflecting the factors discussed above.

Income from operations for each of the last three years is summarized in the following table:

(In millions)	2003			2002			2001
E&P
Domestic	$	1,128		$	687		$	1,122
International		359			351			229
E&P segment income		1,487			1,038			1,351
RM&T		770			356			1,914
OERB		73			78			62
Segment income		2,330			1,472			3,327
Items not allocated to segments:
Administrative expenses(a)		(203	)		(194	)		(187	)
Business transformation costs(b)		(24	)		–			–
Inventory market valuation adjustments(c)		–			71			(71	)
Gain (loss) on ownership change in MAP		(1	)		12			(6	)
Gain on offshore lease resolution with U.S. Government		–			–			59
Gain on asset dispositions(d)		106			24			–
Loss on dissolution of MKM Partners L.P.(e)		(124	)		–			–
Contract settlement(f)		–			(15	)		–
Separation costs(g)		–			–			(14	)
Total income from operations	$	2,084		$	1,370		$	3,108

^(a) Includes administrative expenses related to Steel Stock of $25 million for 2001.

^(b) See Note 11 to the Consolidated Financial Statements for a discussion of business transformation costs.

^(c) The IMV reserve reflects the extent to which the recorded LIFO cost basis of inventories of liquid hydrocarbons and refined petroleum products exceeds net realizable value.

^(d) The net gain in 2003 represents a gain on the disposition of interest in CLAM Petroleum B.V. and certain fields in the Big Horn Basin of Wyoming and SSA stores in Florida, North Carolina, South Carolina and Georgia. In 2002, represents gain on exchange of certain oil and gas properties with XTO Energy, Inc.

^(e) See Note 13 to the Consolidated Financial Statements for a discussion of the dissolution of MKM Partners L.P.

^(f) In 2002 represents a settlement arising from the cancellation of the Cajun Express rig contract on July 5, 2001.

^(g) Represents costs related to the Separation from United States Steel.

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Average Volumes and Selling Prices

(Dollars in millions, except as noted)	2003		2002		2001
OPERATING STATISTICS
Net Liquid Hydrocarbon Production (mbpd)(a)(b)
United States		106.5		116.0		126.3
Equity Investee (MKM)		4.4		8.5		9.4
Total United States		110.9		124.5		135.7
Europe		41.5		51.9		46.2
Other International		10.0		1.0		–
West Africa		27.1		25.3		16.0
Equity Investee(c)		1.2		–		.1
Total International(d)		79.8		78.2		62.3
Worldwide continuing operations		190.7		202.7		198.0
Discontinued operations		3.1		4.4		11.0
Worldwide		193.8		207.1		209.0
Net Natural Gas Production (mmcfd)(b)(e)
United States		731.6		744.8		793.1
Europe		285.9		303.5		326.4
West Africa		65.9		53.3		–
Equity Investee (CLAM)		12.4		24.8		30.7
Total International		364.2		381.6		357.1
Worldwide continuing operations		1,095.8		1,126.4		1150.2
Discontinued operations		74.1		103.9		122.8
Worldwide		1,169.9		1,230.3		1273.0
Total production (mboepd)		388.8		412.2		421.2
Average Sales Prices (excluding derivative gains and losses)
Liquid Hydrocarbons ($ per bbl)(a)
United States	$	26.92	$	22.18	$	20.62
Equity Investee (MKM)		29.45		24.65		23.37
Total United States		27.02		22.35		20.81
Europe		28.50		24.40		23.49
Other International		18.33		26.98		–
West Africa		26.29		22.62		24.36
Equity investee(c)		13.72		15.87		28.28
Total International		26.24		23.85		23.74
Worldwide continuing operations		26.70		22.93		21.73
Discontinued operations		28.96		23.29		21.26
Worldwide	$	26.73	$	22.94	$	21.71
Natural Gas ($ per mcf)
United States	$	4.53	$	2.87	$	3.69
Europe		3.35		2.67		2.78
West Africa		.25		.24		–
Equity Investee (CLAM)		3.69		3.05		3.38
Total International		2.80		2.35		2.83
Worldwide continuing operations		3.95		2.70		3.42
Discontinued operations		5.43		3.30		4.17
Worldwide	$	4.05	$	2.75	$	3.49
MAP:
Refined Products Sales Volumes (mbpd)(f)		1,357.0		1,318.4		1,304.4
Matching buy/sell volumes included in refined product sales volumes (mbpd)		64.0		70.7		45.0
Refining and Wholesale Marketing Margin(g)(h)	$	0.0601	$	0.0387	$	0.1167

^(a) Includes crude oil, condensate and natural gas liquids.

^(b) Amounts reflect production after royalties, excluding the U.K., Ireland and the Netherlands where amounts are before royalties.

^(c) Includes activity from CLAM and Chernogorskoye.

^(d) Represents equity tanker liftings and direct deliveries.

^(e) Includes gas acquired for injection and subsequent resale of 23.4, 4.4 and 8.1 mmcfd in 2003, 2002 and 2001, respectively.

^(f) Total average daily volumes of all refined product sales to MAP’s wholesale, branded and retail (SSA) customers.

^(g) Per gallon

^(h) Sales revenue less cost of refinery inputs, purchased products and manufacturing expenses, including depreciation.

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Domestic E&P income increased by $441 million in 2003 from 2002 following a decrease of $435 million in 2002 from 2001. The increase in 2003 was primarily due to higher natural gas and liquid hydrocarbon prices, lower dry well expense and a $25 million favorable contract settlement, partially offset by lower liquid hydrocarbon and natural gas volumes and derivative losses. The decrease in 2002 was primarily due to lower natural gas prices, lower volumes, lower derivative gains and higher dry well expense, partially offset by higher liquid hydrocarbon prices. Derivative gains (losses) totaled $(91) million in 2003, compared to $32 million in 2002 and $85 million in 2001.

Marathon’s domestic average liquid hydrocarbons price excluding derivative activity was $27.02 per barrel (“bbl”) in 2003, compared with $22.35 per bbl in 2002 and $20.81 per bbl in 2001. Average gas prices were $4.53 per thousand cubic feet (“mcf”) excluding derivative activity in 2003, compared with $2.87 per mcf in 2002 and $3.69 per mcf in 2001.

Domestic net liquid hydrocarbons production decreased 11 percent to 111 thousand barrels per day (“mbpd”) in 2003, as a result of natural declines mainly in the Gulf of Mexico and dispositions. Net natural gas production averaged 732 million cubic feet per day (“mmcfd”), down 2 percent from 2002.

Domestic net liquid hydrocarbons production decreased 8 percent to 125 mbpd in 2002, as a result of natural declines principally in the Gulf of Mexico and dispositions. Net natural gas production averaged 745 mmcfd, down 6 percent from 2001.

International E&P income increased by $8 million in 2003 from 2002 and $122 million in 2002 from 2001. The increase in 2003 was a result of higher natural gas and liquid hydrocarbon prices and higher liquid hydrocarbon volumes partially offset by lower natural gas volumes and derivative losses. The increase in 2002 was a result of higher production volumes and higher derivative gains partially offset by lower natural gas prices. Derivative gains (losses) totaled $(85) million in 2003, compared to $20 million in 2002 and $ – million in 2001. Derivatives included losses of $66 million in 2003, compared to gains of $18 million in 2002, related to long-term gas contracts in the United Kingdom that are accounted for as derivative instruments and marked-to-market.

Marathon’s international average liquid hydrocarbons price excluding derivative activity was $26.24 per bbl in 2003, compared with $23.85 per bbl and $23.74 per bbl in 2002 and 2001. Average gas prices were $2.80 per mcf excluding derivative activity in 2003, compared with $2.35 per mcf and $2.83 per mcf in 2002 and 2001.

International net liquid hydrocarbons production increased 2 percent to 80 mbpd in 2003 primarily due to the acquisition of KMOC, partially offset by lower production in the U.K. Net natural gas production averaged 364 mmcfd, down 5 percent from 2002, primarily from lower production in Ireland and the disposition of Marathon’s interest in CLAM Petroleum B.V. This decrease was partially offset by increased production in Equatorial Guinea.

International net liquid hydrocarbons production increased 26 percent to 78 mbpd in 2002 primarily due to the acquisition of interests in Equatorial Guinea and increased production in the U.K. Net natural gas production averaged 382 mmcfd, up 7 percent from 2001, primarily due to higher production in Equatorial Guinea partially offset by lower production in the U.K.

RM&T segment income increased by $414 million in 2003 from 2002 following a decrease of $1.558 billion in 2002 from 2001. The 2003 increase was primarily due to an improved refining and wholesale marketing margin, as well as a higher gasoline and distillate retail gross margin partially offset by higher administrative expenses. The refining and wholesale marketing margin in 2003 averaged 6.0 cents per gallon, versus 2002 level of 3.9 cents. The gasoline and distillate gross margin for its retail business, was 12.3 cents per gallon in 2003, as compared to 10.1 cents per gallon in 2002. The higher administrative expenses were due primarily to higher employee related costs. In 2002, the refining and wholesale marketing margin was severely compressed as crude oil costs increased while average refined product prices decreased. The refining and wholesale marketing margin in 2002 averaged 3.9 cents per gallon, versus 2001 level of 11.7 cents.

Derivative losses, which are included in the refining and wholesale marketing margin, were $162 million in 2003 as compared to losses of $124 million and gains of $210 million in 2002 and 2001. These derivative losses were generally incurred to mitigate the price risk of certain crude oil and other feedstock purchases and to protect carrying values of excess inventories.

Gains on the sale of SSA stores included in segment income were $8 million, $37 million, and $23 million for 2003, 2002, and 2001.

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OERB segment income decreased by $5 million in 2003 from 2002 and increased by $16 million in 2002 from 2001. The 2003 results include a gain of $34 million on the sale of Marathon’s interest in two refined product pipeline companies and earnings of $30 million from Marathon’s equity investment in the Equatorial Guinea methanol plant, which were offset by an impairment charge of $22 million on an equity method investment and a loss of $17 million on the termination of two tanker operating leases. The increase in 2002 reflected a favorable effect of $26 million from increased margins in gas marketing activities and mark-to-market valuation changes in associated derivatives and earnings of $11 million from Marathon’s equity investment in the Equatorial Guinea methanol plant, partially offset by predevelopment costs associated with emerging integrated gas projects.

Management’s Discussion and Analysis of Financial Condition, Cash Flows and Liquidity

Financial Condition

Current assets increased $1.561 billion from year-end 2002, primarily due to an increase in cash and cash equivalents and receivables. The increase in cash and cash equivalents was mainly due to approximately $1.256 billion in non-core asset sales in 2003. The increase in receivables was mainly due to higher year-end commodity prices.

Current liabilities increased $548 million from year-end 2002, primarily due to an increase in accounts payable, long-term debt due within one year and payroll and benefits payable, partially offset by a decrease in accrued taxes and interest. The increase in accounts payable was due to higher priced year-end crude purchases at MAP. The increase in payroll and benefits payable is primarily due to liabilities related to equity based compensation as a result of an increase in Marathon’s stock price.

Investments and long-term receivables decreased $311 million from year-end 2002, primarily due to the dissolution of MKM Partners L.P. and the sale of interest in CLAM Petroleum B.V. in 2003.

Net property, plant and equipment increased $440 million from year-end 2002. The increase in E&P international is due to the construction of the Alba field Phase 2A expansion project in Equatorial Guinea and the acquisition of KMOC, partially offset by the disposition of properties in western Canada. The increase in RM&T is primarily due to the Catlettsburg, Kentucky refinery repositioning project and construction of the Cardinal Products Pipeline, partially offset by sales of SSA stores. The increase in OERB is primarily due to the purchase of a 30% interest in two LNG tankers which Marathon previously leased and project development costs associated with Phase 3 in Equatorial Guinea. Net property, plant and equipment for each of the last two years is summarized in the following table:

(In millions)	2003		2002
E&P
Domestic	$	2,608	$	2,720
International		3,351		3,186
Total E&P		5,959		5,906
RM&T		4,492		4,234
OERB		181		67
Corporate		198		183
Total	$	10,830	$	10,390

Goodwill decreased $18 million from year-end 2002, primarily due to the disposition of properties in western Canada.

Long-term debt at December 31, 2003 was $4.085 billion, a decrease of $325 million from year-end 2002. See “Liquidity and Capital Resources” on page 41, for further discussions.

Asset retirement obligations increased $167 million from year-end 2002 primarily due to the adoption of SFAS No. 143 on January 1, 2003 and the acquisition of KMOC, partially offset by disposition of properties in western Canada.

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Cash Flows

Net cash provided from operating activities (for continuing operations) totaled $2.678 billion in 2003, compared with $2.336 billion in 2002 and $2.749 billion in 2001. The increase in 2003 mainly reflects the effects of higher worldwide natural gas and liquid hydrocarbons prices and a higher refining and wholesale marketing margin. Additionally in 2003, MAP made cash contributions to its pension plans of $89 million. The decrease in 2002 mainly reflects the effects of lower refined product margins and lower prices for natural gas.

Net cash provided from operating activities (for discontinued operations) totaled $83 million in 2003, compared with $69 million in 2002 and $887 million in 2001. This is primarily related to Marathon’s E&P operations in western Canada sold in 2003. Also included in 2001 is the business of United States Steel.

Capital expenditures for each of the last three years are summarized in the following table:

(In millions)	2003		2002		2001
E&P(a)
Domestic	$	342	$	416	$	537
International		629		403		294
Total E&P		971		819		831
RM&T		772		621		591
OERB		133		49		4
Corporate		16		31		107
Total	$	1,892	$	1,520	$	1,533

^(a) Amounts exclude the acquisitions of KMOC in 2003, the Equatorial Guinea interests in 2002 and Pennaco in 2001.

Capital expenditures in 2003 totaled $1.892 billion compared with $1.520 billion and $1.533 billion in 2002 and 2001, excluding the acquisitions of KMOC in 2003, Equatorial Guinea interests in 2002 and Pennaco in 2001. The $372 million increase in 2003 mainly reflected increased spending in the RM&T segment at the Catlettsburg refinery and on the Cardinal Products Pipeline and in the E&P segment in West Africa and Norway. The increase in OERB is due to the purchase of 30% interest in two LNG tankers which Marathon previously leased and project development costs associated with Phase 3 in Equatorial Guinea. The $13 million decrease in 2002 mainly reflected decreased spending in the E&P segment offset by increased spending in the RM&T segment. The decrease in the E&P segment was primarily due to the drilling of fewer gas wells in the United States in 2002 partially offset by higher capital expenditures for completion of a pipeline in Gabon, for a pipeline construction contract in Ireland and for development expenditures in Equatorial Guinea. The increase in the RM&T segment in 2002 was attributable to increased spending on the multi-year integrated investment program at MAP’s Catlettsburg refinery and construction of the Cardinal Products Pipeline in 2002, partially offset by lower capital expenditures for SSA retail outlets and completion of the Garyville coker construction in 2001. The decrease in corporate in 2002 was primarily due to the implementation of SAP financial and operations software in 2001.

Acquisitions included cash payments of $252 million in 2003 for the acquisition of KMOC, $1.160 billion in 2002 for the acquisitions of Equatorial Guinea interests and $506 million in 2001 for the acquisition of Pennaco. For further discussion of acquisitions, see Note 5 to the Consolidated Financial Statements.

Cash from disposal of assets was $1.256 billion, including the disposal of discontinued operations, in 2003, compared with $146 million in 2002 and $83 million in 2001. In 2003, proceeds were primarily from the disposition of Marathon’s E&P properties in western Canada, Yates field and gathering system, interest in CLAM Petroleum B.V., SSA stores, interest in several pipeline companies and certain fields in the Big Horn Basin of Wyoming. In 2002, proceeds were primarily from the disposition of various SSA stores and the sale of San Juan Basin assets. In 2001, proceeds were primarily from the sale of certain Canadian assets, SSA stores, and various domestic producing properties.

Net cash used in financing activities totaled $888 million in 2003, compared with net cash provided of $88 million in 2002 and net cash used of $1.290 billion in 2001. The decrease was due to activity in 2002 primarily associated with financing the acquisitions of Equatorial Guinea interests of $1.160 billion. This was partially offset by the $295 million repayment of preferred securities in 2002 that became redeemable or were converted to a right to receive cash upon the Separation. In early January 2002, Marathon paid $185 million to retire the 6.75% Convertible Quarterly Income Preferred Securities and $110 million to retire the 6.50% Cumulative Convertible Preferred Stock. Additionally, distributions to the minority shareholder of MAP were $262 million in 2003,

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compared to $176 million and $577 million in 2002 and 2001. The cash used in 2001 primarily reflects distributions to the minority shareholder of MAP, dividends paid and the redemption of the 8.75 percent Cumulative Monthly Income Preferred Shares.

Derivative Instruments

See “Quantitative and Qualitative Disclosures About Market Risk” on page 52, for a discussion of derivative instruments and associated market risk.

Dividends to Stockholders

On January 25, 2004, the Marathon Board of Directors declared a dividend of 25 cents per share on Marathon’s common stock, payable March 10, 2004, to stockholders of record at the close of business on February 18, 2004.

Liquidity and Capital Resources

Marathon’s main sources of liquidity and capital resources are internally generated cash flow from operations, committed and uncommitted credit facilities, and access to both the debt and equity capital markets. Marathon’s ability to access the debt capital market is supported by its investment grade credit ratings. Because of the liquidity and capital resource alternatives available to Marathon, including internally generated cash flow, Marathon’s management believes that its short-term and long-term liquidity is adequate to fund operations, including its capital spending program, repayment of debt maturities for the years 2004, 2005, and 2006, and any amounts that may ultimately be paid in connection with contingencies.

Marathon’s senior unsecured debt is currently rated investment grade by Standard and Poor’s Corporation, Moody’s Investor Services, Inc. and Fitch Ratings with ratings of BBB+, Baa1, and BBB+, respectively.

Marathon has a committed $1.354 billion long-term revolving credit facility that terminates in November 2005 and a committed $575 million 364-day revolving credit facility that terminates in November 2004. At December 31, 2003, there were no borrowings against these facilities. At December 31, 2003, Marathon had no commercial paper outstanding under the U.S. commercial paper program that is backed by the long-term revolving credit facility. Additionally, Marathon has other uncommitted short-term lines of credit totaling $200 million, of which no amounts were drawn at December 31, 2003.

MAP has a $190 million revolving credit agreement with Ashland that expires in March 2004 and is expected to be renewed until March 2005. As of December 31, 2003, MAP did not have any borrowings against this facility.

In 2002, Marathon filed a new universal shelf registration statement with the Securities and Exchange Commission registering $2.7 billion aggregate amount of common stock, preferred stock and other equity securities, debt securities, trust preferred securities and/or other securities, including securities convertible into or exchangeable for other equity or debt securities. As of December 31, 2003, no securities had been offered under this shelf registration statement.

Marathon held cash and cash equivalents of $1.396 billion at December 31, 2003, compared to $488 million at December 31, 2002. The increase primarily reflects proceeds from asset sales in the fourth quarter of 2003. Marathon expects to utilize a substantial portion of this cash to fund operations, including its capital and investment program, and to repay debt in 2004.

Marathon’s cash-adjusted debt-to-capital ratio (total-debt-minus-cash to total-debt-plus-equity-minus-cash) was 33 percent at December 31, 2003, compared to 45 percent at year-end 2002. This includes approximately $605 million of debt that is serviced by United States Steel.

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The table below provides aggregated information on Marathon’s obligations to make future payments under existing contracts as of December 31, 2003:

Summary of Contractual Cash Obligations

(Dollars in millions)	Total		2004		2005- 2006		2007- 2008		Later Years
Short and long-term debt (a)	$	4,181	$	258	$	308	$	850	$	2,765
Sale-leaseback financing (includes imputed interest) (a)		107		11		22		31		43
Capital lease obligations (a)		155		18		24		29		84
Operating lease obligations (a)		378		89		127		52		110
Operating lease obligations under sublease (a)		77		19		20		17		21
Purchase obligations:
Crude, refinery feedstock and refined products contracts (b)		7,743		5,874		1,856		13		—
Transportation and related contracts		1,071		138		407		147		379
Contracts to acquire property, plant and equipment		565		486		72		3		4
LNG facility operating costs (c)		230		14		27		27		162
Service and materials contracts (d)		188		89		56		23		20
Unconditional purchase obligations (e)		67		5		11		11		40
Commitments for oil and gas exploration (non-capital) (f)		32		8		24		—		—
Total purchase obligations		9,896		6,614		2,453		224		605
Other long-term liabilities reflected on the Consolidated Balance Sheet:
Accrued LNG facility operating costs (c)		22		3		5		5		9
Employee benefit obligations (g)		2,082		152		338		379		1,213
Total other long-term liabilities		2,104		155		343		384		1,222
Total contractual cash obligations(h)	$	16,898	$	7,164	$	3,297	$	1,587	$	4,850

^(a) Upon the Separation, United States Steel assumed certain debt and lease obligations. Such amounts have been included in the above table to reflect the fact that Marathon remains primarily liable.

^(b) The majority of 2004’s contractual obligations to purchase crude oil, refinery feedstock and refined products relate to contracts to be satisfied within the first 180 days of the year.

^(c) Marathon has acquired the right to deliver to the Elba Island LNG re-gasification terminal 58 bcf of natural gas per year. The agreement’s primary term ends in 2021. Pursuant to this agreement, Marathon has also bound itself to a commitment to pay for a portion of the operating costs of the LNG re-gasification terminal.

^(d) Services and materials contracts include contracts to purchase services such as utilities, supplies and various other maintenance and operating services.

^(e) Marathon is a party to a long-term transportation services agreement with Alliance Pipeline. This agreement is used by Alliance Pipeline to secure its financing. This arrangement represents an indirect guarantee of indebtedness. Therefore, this amount has also been disclosed as a guarantee. See Note 28 to the consolidated financial statements for a complete discussion of Marathon’s guarantee.

^(f) Commitments for oil and gas exploration (non-capital) include estimated costs within contractually obligated exploratory work programs that are subject to immediate expense, such as geological and geophysical costs.

^(g) Marathon has employee benefit obligations consisting of pensions and other post retirement benefits including medical and life insurance. Marathon has estimated projected funding through 2013 with the exception of the pension plan for employees in Ireland where only 2004 information was included.

^(h) Includes $733 million of contractual cash obligations that have been assumed by United States Steel. For additional information, see “Management’s Discussion and Analysis of Financial Condition, Cash Flows and Liquidity – Obligations Associated with the Separation of United States Steel – Summary of Contractual Cash Obligations Assumed by United States Steel” on page 44.

Contractual cash obligations for which the ultimate settlement amounts are not fixed and determinable have been excluded from the above table. These include derivative contracts that are sensitive to future changes in commodity prices and other factors.

Marathon management’s opinion concerning liquidity and Marathon’s ability to avail itself in the future of the financing options mentioned in the above forward-looking statements are based on currently available information. To the extent that this information proves to be inaccurate, future availability of financing may be adversely affected. Factors that affect the availability of financing include the performance of Marathon (as measured by various factors including cash provided from operating activities), the state of worldwide debt and equity markets, investor perceptions and expectations of past and future performance, the global financial climate, and, in

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particular, with respect to borrowings, the levels of Marathon’s outstanding debt and credit ratings by rating agencies.

Off Balance Sheet Arrangements

Off-balance sheet arrangements comprise those arrangements that may potentially impact Marathon’s liquidity, capital resources and results of operations, even though such arrangements are not recorded as liabilities under generally accepted accounting principles. Although off-balance sheet arrangements serve a variety of Marathon’s business purposes, Marathon is not dependent on these arrangements to maintain its liquidity and capital resources; nor is management aware of any circumstances that are reasonably likely to cause the off-balance sheet arrangements to have a material adverse effect on liquidity and capital resources.

Marathon has provided various forms of guarantees to unconsolidated affiliates, United States Steel and certain lease contracts. These arrangements are described in Note 28 to the Consolidated Financial Statements.

Marathon is a party to agreements that would require Marathon to purchase, under certain circumstances, the interests in MAP and in Pilot Travel Centers LLC (“PTC”) not currently owned. These put/call agreements are described in Note 28 to the Consolidated Financial Statements.

Nonrecourse Indebtedness of Investees

Certain equity investees of Marathon have incurred indebtedness that Marathon does not support through guarantees or otherwise. If Marathon were obligated to share in this debt on a pro rata basis, its share would have been approximately $307 million as of December 31, 2003. Of this amount, $173 million relates to PTC. If any of these equity investees default, Marathon has no obligation to support the debt. Marathon’s partner in PTC has guaranteed $157 million of the total PTC debt.

Obligations Associated with the Separation of United States Steel

On December 31, 2001, Marathon disposed of its steel business through a tax-free distribution of the common stock of its wholly owned subsidiary United States Steel to holders of its USX—U. S. Steel Group class of common stock (“Steel Stock”) in exchange for all outstanding shares of Steel Stock on a one-for-one basis (the “Separation”).

Marathon remains obligated (primarily or contingently) for certain debt and other financial arrangements for which United States Steel has assumed responsibility for repayment under the terms of the Separation. United States Steel’s obligations to Marathon are general unsecured obligations that rank equal to United States Steel’s accounts payable and other general unsecured obligations. If United States Steel fails to satisfy these obligations, Marathon would become responsible for repayment. Under the Financial Matters Agreement, United States Steel has all of the existing contractual rights under the leases assumed from Marathon, including all rights related to purchase options, prepayments or the grant or release of security interests. However, United States Steel has no right to increase amounts due under or lengthen the term of any of the assumed leases, other than extensions set forth in the terms of any of the assumed leases.

As of December 31, 2003, Marathon has identified the following obligations totaling $699 million that have been assumed by United States Steel:

• $470 million of industrial revenue bonds related to environmental improvement projects for current and former United States Steel facilities, with maturities ranging from 2009 through 2033. Accrued interest payable on these bonds was $8 million at December 31, 2003.

• $76 million of sale-leaseback financing under a lease for equipment at United States Steel’s Fairfield Works, with a term extending to 2012, subject to extensions. There was no accrued interest payable on this financing at December 31, 2003.

• $59 million of obligations under a lease for equipment at United States Steel’s Clairton cokemaking facility, with a term extending to 2012, subject to extensions. There was no accrued interest payable on this financing at December 31, 2003.

• $72 million of operating lease obligations, of which $54 million was in turn assumed by purchasers of major equipment used in plants and operations divested by United States Steel.

• A guarantee of United States Steel’s $14 million contingent obligation to repay certain distributions from its 50 percent owned joint venture PRO-TEC Coating Company.

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• A guarantee of all obligations of United States Steel as general partner of Clairton 1314B Partnership, L.P. to the limited partners. United States Steel has reported that it currently has no unpaid outstanding obligations to the limited partners. For further discussion of the Clairton 1314B guarantee, see Note 3 to the Consolidated Financial Statements.

Of the total $699 million, obligations of $613 million and corresponding receivables from United States Steel were recorded on Marathon’s consolidated balance sheet (current portion—$20 million; long-term portion—$593 million). The remaining $86 million was related to off-balance sheet arrangements and contingent liabilities of United States Steel.

The table below provides aggregated information on the portion of Marathon’s obligations to make future payments under existing contracts that have been assumed by United States Steel as of December 31, 2003:

Summary of Contractual Cash Obligations Assumed by United States Steel

(Dollars in millions)	Total		2004		2005- 2006		2007- 2008		Later Years
Contractual obligations assumed by United States Steel
Long-term debt	$	470	$	–	$	–	$	–	$	470
Sale-leaseback financing (includes imputed interest)		107		11		22		31		43
Capital lease obligations		84		13		13		19		39
Operating lease obligations		18		5		10		3		–
Operating lease obligations under sublease		54		12		11		10		21
Total contractual obligations assumed by United States Steel	$	733	$	41	$	56	$	63	$	573

Each of Marathon and United States Steel, as members of the same consolidated tax reporting group during taxable periods ended on or before December 31, 2001, is jointly and severally liable for the federal income tax liability of the entire consolidated tax reporting group for those periods. Marathon and United States Steel have entered into a tax sharing agreement that allocates tax liabilities relating to taxable periods ended on or before December 31, 2001. The agreement includes indemnification provisions to address the possibility that the taxing authorities may seek to collect a tax liability from one party where the tax sharing agreement allocates that liability to the other party. In 2003, in accordance with the terms of the tax sharing agreement, Marathon paid $16 million to United States Steel in connection with the settlement with the Internal Revenue Service of the consolidated federal income tax returns of USX Corporation for the years 1992 through 1994.

United States Steel reported in its Form 10-K for the year ended December 31, 2003, that it has significant restrictive covenants related to its indebtedness including cross-default and cross-acceleration clauses on selected debt that could have an adverse effect on its financial position and liquidity. However, United States Steel management believes that its liquidity will be adequate to satisfy its obligations for the foreseeable future. During periods of weakness in the manufacturing sector of the U.S. economy, United States Steel believes that it can maintain adequate liquidity through a combination of deferral of nonessential capital spending, sale of non-strategic assets and other cash conservation measures.

Transactions with Related Parties

Marathon owns a combined 63.3% working interest in the Alba field. Marathon owns a net 52.2% interest in an onshore liquefied petroleum gas processing plant through an equity method investee, Alba Plant LLC. Additionally, Marathon owns a 45% net interest in an onshore methanol production plant through an equity method investee, Atlantic Methanol Production Company LLC (“AMPCO”). Marathon sells its marketed natural gas from the Alba field to Alba Plant LLC and AMPCO. AMPCO uses the natural gas to manufacture methanol and sells the methanol through AMPCO Marketing LLC.

MAP’s related party sales to its 50% equity method investee, PTC, consists primarily of refined petroleum products which accounted for approximately 2% of its total sales revenue for 2003. PTC is the largest travel center network in the United States and operates 257 travel centers nationwide. MAP also sells refined petroleum products consisting mainly of petrochemicals, base lube oils, and asphalt to Ashland which owns a 38% interest in MAP. MAP’s sales to Ashland accounted for approximately 1% of its total sales revenue for 2003. Management believes that these transactions were conducted under terms comparable to those with unrelated parties.

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Management’s Discussion and Analysis of Environmental Matters, Litigation and Contingencies

Marathon has incurred and will continue to incur substantial capital, operating and maintenance, and remediation expenditures as a result of environmental laws and regulations. To the extent these expenditures, as with all costs, are not ultimately reflected in the prices of Marathon’s products and services, operating results will be adversely affected. Marathon believes that substantially all of its competitors are subject to similar environmental laws and regulations. However, the specific impact on each competitor may vary depending on a number of factors, including the age and location of its operating facilities, marketing areas, production processes and whether or not it is engaged in the petrochemical business or the marine transportation of crude oil and refined products.

Marathon’s environmental expenditures for each of the last three years were^(a):

(In millions)	2003		2002		2001
Capital	$	331	$	128	$	90
Compliance
Operating & maintenance		243		205		213
Remediation(b)		44		45		22
Total	$	618	$	378	$	325

^(a) Amounts are determined based on American Petroleum Institute survey guidelines and include 100 percent of MAP.

^(b) These amounts include spending charged against remediation reserves, where permissible, but exclude noncash provisions recorded for environmental remediation.

Marathon’s environmental capital expenditures accounted for 17 percent of total capital expenditures in 2003, eight percent in 2002, and six percent in 2001.

Marathon accrues for environmental remediation activities when the responsibility to remediate is probable and the amount of associated costs can be reasonably estimated. As environmental remediation matters proceed toward ultimate resolution or as additional remediation obligations arise, charges in excess of those previously accrued may be required.

Marathon has been notified that it is a potentially responsible party (“PRP”) at nine waste sites under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) as of December 31, 2003. In addition, there are 4 sites where Marathon has received information requests or other indications that Marathon may be a PRP under CERCLA but where sufficient information is not presently available to confirm the existence of liability. At many of these sites, Marathon is one of a number of parties involved and the total cost of remediation, as well as Marathon’s share thereof, is frequently dependent upon the outcome of investigations and remedial studies.

There are also 125 additional sites, excluding retail marketing outlets, related to Marathon where remediation is being sought under other environmental statutes, both federal and state, or where private parties are seeking remediation through discussions or litigation. Of these sites, 16 were associated with properties conveyed to MAP by Ashland for which Ashland has retained liability for all costs associated with remediation.

New or expanded environmental requirements, which could increase Marathon’s environmental costs, may arise in the future. Marathon intends to comply with all legal requirements regarding the environment, but since not all of them are fixed or presently determinable (even under existing legislation) and may be affected by future legislation, it is not possible to predict all of the ultimate costs of compliance, including remediation costs that may be incurred and penalties that may be imposed.

Marathon’s environmental capital expenditures are expected to be approximately $415 million or 20% of capital expenditures in 2004. Predictions beyond 2004 can only be broad-based estimates, which have varied, and will continue to vary, due to the ongoing evolution of specific regulatory requirements, the possible imposition of more stringent requirements and the availability of new technologies, among other matters. Based upon currently identified projects, Marathon anticipates that environmental capital expenditures will be approximately $425 million in 2005; however, actual expenditures may vary as the number and scope of environmental projects are revised as a result of improved technology or changes in regulatory requirements and could increase if additional projects are identified or additional requirements are imposed.

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New Tier 2 gasoline and on-road diesel fuel rules require substantially reduced sulfur levels for gasoline and diesel starting in 2004 and 2006, respectively. The combined capital costs to achieve compliance with the gasoline and diesel regulations could amount to approximately $900 million over the period between 2002 and 2006 and includes costs that could be incurred as part of other refinery upgrade projects. This is a forward-looking statement. Costs incurred through December 31, 2003, were approximately $205 million. Some factors (among others) that could potentially affect gasoline and diesel fuel compliance costs include obtaining the necessary construction and environmental permits, completion of project detailed engineering, and project construction and logistical considerations.

MAP has had a pending enforcement matter with the Illinois Environmental Protection Agency and the Illinois Attorney General’s Office since 2002 concerning MAP’s self-reporting of possible emission exceedences and permitting issues related to storage tanks at its Robinson, Illinois refinery. MAP has had periodic discussions with Illinois officials regarding this matter and more discussions are anticipated in 2004.

During 2001, MAP entered into a New Source Review consent decree and settlement of alleged Clean Air Act (“CAA”) and other violations with the U. S. Environmental Protection Agency covering all of MAP’s refineries. The settlement committed MAP to specific control technologies and implementation schedules for environmental expenditures and improvements to MAP’s refineries over approximately an eight-year period. The total one-time expenditures for these environmental projects is approximately $330 million over the eight-year period, with about $170 million incurred through December 31, 2003. The impact of the settlement on ongoing operating expenses is expected to be immaterial. In addition, MAP has nearly completed certain agreed upon supplemental environmental projects as part of this settlement of an enforcement action for alleged CAA violations, at a cost of $9 million. MAP believes that this settlement will provide MAP with increased permitting and operating flexibility while achieving significant emission reductions.

Other Contingencies

Marathon is a defendant along with many other refining companies in over forty recently filed cases in thirteen states alleging methyl tertiary-butyl ether (MTBE) contamination in groundwater. The plaintiffs generally are water providers or governmental authorities and they allege that refiners, manufacturers and sellers of gasoline containing MTBE are liable for manufacturing a defective product and that owners and operators of retail gasoline sites have allowed MTBE to be discharged into the groundwater. Several of these lawsuits allege contamination that is outside of Marathon’s marketing area. A few of the cases seek approval as class actions. Many of the cases seek punitive damages or treble damages under a variety of statutes and theories. Marathon has stopped producing MTBE at its refineries. The potential impact of these recent cases and future potential similar cases is uncertain. Marathon intends to vigorously defend these cases.

Marathon is the subject of, or a party to, a number of pending or threatened legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relating to the environment. The ultimate resolution of these contingencies could, individually or in the aggregate, be material to Marathon. However, management believes that Marathon will remain a viable and competitive enterprise even though it is possible that these contingencies could be resolved unfavorably to Marathon. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources”.

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Outlook

Realignment of Business Segments

In January 2004, Marathon changed its business segments to fully reflect all the operations of the integrated gas strategy within a single segment. In the first quarter of 2004, Marathon will realign its segment reporting and introduce a new business segment, Integrated Gas. This segment will initially include Marathon’s Alaska LNG operations, Equatorial Guinea methanol operations, and natural gas marketing and transportation activities, along with expenses related to the continued development of an integrated gas business. Crude oil marketing and transportation activities, previously reported in other energy related businesses, will be reported in the exploration and production segment. Refined product transportation activities not included in MAP, also previously reported in other energy related businesses, will be reported in the refining, marketing and transportation segment. The following represents unaudited information for the realigned operating segment for the previous three years:

(In millions)	Exploration and Production		Refining, Marketing and Transportation		Integrated Gas			Total
2003
Revenues:
Customer	$	4,394	$	33,508	$	2,140		$	40,042
Intersegment(a)		405		97		108			610
Related parties		12		909		–			921
Total revenues	$	4,811	$	34,514	$	2,248		$	41,573
Segment income (loss)	$	1,514	$	819	$	(3	)	$	2,330
Income from equity method investments		50		82		21			153
Depreciation, depletion and amortization(b)		755		375		12			1,142
Impairments(c)		3		–		–			3
Capital expenditures(c)		973		772		131			1,876
2002
Revenues:
Customer	$	3,894	$	25,384	$	1,148		$	30,426
Intersegment(a)		583		146		69			798
Related parties		–		869		–			869
Total revenues	$	4,477	$	26,399	$	1,217		$	32,093
Segment income	$	1,077	$	372	$	23		$	1,472
Income from equity method investments		75		48		14			137
Depreciation, depletion and amortization(b)		769		364		3			1,136
Impairments(c)		13		–		–			13
Capital expenditures(c)		820		621		48			1,489
2001
Revenues:
Customer	$	4,357	$	26,778	$	1,214		$	32,349
Intersegment(a)		496		21		68			585
United States Steel(a)		21		1		8			30
Related parties		–		447		–			447
Total revenues	$	4,874	$	27,247	$	1,290		$	33,411
Segment income	$	1,379	$	1,927	$	21		$	3,327
Income from equity method investments		71		41		6			118
Depreciation, depletion and amortization(b)		824		345		1			1,170
Impairments(c)		–		1		–			1
Capital expenditures(c)		834		591		1			1,426

^(a) Management believes intersegment transactions and transactions with United States Steel were conducted under terms comparable to those with unrelated parties.

^(b) Differences between segment totals and Marathon totals represent impairments and amounts related to corporate administrative activities.

^(c) Differences between segment totals and Marathon totals represent amounts related to corporate administrative activities.

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Capital, Investment and Exploration Budget

Marathon’s has approved a capital, investment and exploration expenditure budget of approximately $2.26 billion for 2004. The primary focus of the 2004 budget is to find additional oil and gas reserves, develop existing fields, strengthen RM&T assets and continue implementation of the integrated gas strategy through Phase 3 in Equatorial Guinea. The budget includes worldwide production capital spending of $810 million primarily in Equatorial Guinea, Russia, Norway and the Gulf of Mexico. The worldwide exploration and exploitation budget of $302 million includes plans to drill 11 significant exploration wells in Angola, Equatorial Guinea, Norway, the Gulf of Mexico and Nova Scotia. Exploitation activities will focus on projects primarily in the United States. The budget includes $788 million for RM&T projects, primarily for refinery upgrade projects for the production of low sulfur gasoline and diesel fuel and the Detroit refinery expansion. The integrated gas budget of $263 million is primarily for the development of the LNG project on Bioko Island in Equatorial Guinea. The remaining $96 million balance is designated for corporate activities and capitalized interest.

Exploration and Production

The outlook regarding Marathon’s upstream revenues and income is largely dependent upon future prices and volumes of liquid hydrocarbons and natural gas. Prices have historically been volatile and have frequently been affected by unpredictable changes in supply and demand resulting from fluctuations in worldwide economic activity and political developments in the world’s major oil and gas producing and consuming areas. Any significant decline in prices could have a material adverse effect on Marathon’s results of operations. A prolonged decline in such prices could also adversely affect the quantity of crude oil and natural gas reserves that can be economically produced and the amount of capital available for exploration and development.

Marathon estimates its 2004 and 2005 production will average 365,000 BOEPD, excluding the effect of any acquisitions or dispositions. Marathon replaced 124 percent of production, excluding dispositions, during 2003. Also during the year, the company divested non-core upstream assets with 274 million BOE of proved reserves. Excluding acquisitions and dispositions, Marathon replaced approximately 76 percent of production. At year end, Marathon had proved reserves of 1.042 billion BOE.

Exploration

Major exploration activities, which are currently underway or under evaluation, include:

• Angola, where Marathon recently participated in the drilling of the Venus exploration well on Block 31 and the Canela well on Block 32. Plans are to participate in two to four additional exploration wells in this area during 2004;

• Norway, where Marathon has interests in twelve licenses in the Norwegian sector of the North Sea and plans to drill two exploration wells during 2004, one of which is anticipated to be in the Alvheim area;

• Gulf of Mexico, where Marathon plans to participate in two deepwater and two shelf exploration wells during 2004;

• Equatorial Guinea, where Marathon is currently evaluating the results of recent drilling in the Deep Luba prospect, which will test for potential resources under the Alba field and plans to drill one or two additional exploration wells in 2004;

• Eastern Canada, where Marathon plans to drill one exploration well on the Annapolis lease during 2004.

Production

In Equatorial Guinea, Marathon’s Phase 2A expansion project came on-stream during the fourth quarter. This project began producing less than 15 months after its approval and less than two years since Marathon’s acquisition of its interests in Equatorial Guinea. By year-end 2003, gross condensate production had grown from 18,000 to 30,000 bpd. The Phase 2B LPG expansion project is on schedule with an expected start-up near the end of 2004. Full LPG production of 20,000 bpd gross (11,600 bpd net) is expected in early 2005. Phase 2A and Phase 2B full condensate production of 59,000 bpd gross (32,600 bpd net to Marathon) is expected in early 2005.

In Russia, Marathon’s acquisition of KMOC in 2003 resulted in additional proved reserves of approximately 95 million BOE. Current net daily production of 16,000 net bpd from these operations is expected to increase to more than 60,000 net bpd within five years.

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In Norway, Marathon is evaluating development options associated with the exploration success in Alvheim and Klegg. Marathon and its partners are evaluating several development scenarios for Alvheim, in which Marathon is operator and holds a 65 percent interest. Marathon expects to submit a development plan to the Norwegian authorities during the second quarter of 2004. Marathon holds a 47 percent interest in Klegg and expects a development plan to be approved in 2004. Production from these combined developments is expected to reach more than 50,000 net bpd during 2007. On February 23, 2004, Marathon and its Alvheim project partners announced the signing of a purchase and sale agreement to acquire a multipurpose shuttle tanker.

In the Gulf of Mexico, Marathon and its partners in the Neptune Unit are integrating the results of this discovery into field development studies and plan to spud another appraisal well on this discovery during the first quarter of 2004. Marathon holds a 30 percent interest in the Neptune Unit.

In December 2003, Marathon and its partners, in the Corrib project offshore Ireland, submitted a new planning application to construct an onshore gas terminal for the Corrib natural gas discovery. Final planning approval for the onshore terminal is expected by the end of 2004.

In Qatar, Marathon and three other companies are exploring the possibility of developing a portion of the North field offshore Qatar, including infrastructure for gas processing facilities and a GTL plant.

In Wyoming’s Powder River Basin, Marathon plans to drill approximately 400 coal bed natural gas wells in 2004.

The above discussion includes forward-looking statements with respect to the timing and levels of Marathon’s worldwide liquid hydrocarbon and natural gas production, the exploration drilling program, possible additional resources, the Phase 2B LNG expansion project, the possibility of an equipment purchase, and the expected date for final planning approval for an onshore terminal. Some factors that could potentially affect worldwide liquid hydrocarbon and natural gas production, the exploration drilling program and possible additional resources include acts of war or terrorist acts and the governmental or military response, pricing, supply and demand for petroleum products, amount of capital available for exploration and development, occurrence of acquisitions or dispositions of oil and gas properties, regulatory constraints, timing of commencing production from new wells, drilling rig availability, achieving definitive agreements among project participants, inability or delay in obtaining necessary government and third party approvals and permits, unforeseen hazards such as weather conditions and other geological, operating and economic considerations. Factors that could affect the Phase 2B LPG expansion project include unforeseen problems arising from construction and unforeseen hazards such as weather conditions. Factors affecting the possibility of the equipment purchase include the partners’ approval of the development of the Alvheim area and the subsequent approval of a plan of development and operation by the Norwegian authorities. The final planning approval for the onshore terminal is contingent upon governmental approval. The foregoing factors (among others) could cause actual results to differ materially from those set forth in the forward-looking statements.

Refining, Marketing and Transportation

Marathon’s RM&T segment income is largely dependent upon the refining and wholesale marketing margin for refined products, the retail gross margin for gasoline and distillates, and the gross margin on retail merchandise sales. The refining and wholesale marketing margin reflects the difference between the wholesale selling prices of refined products and the cost of raw materials refined, purchased product costs and manufacturing expenses. Refining and wholesale marketing margins have been historically volatile and vary from the impact of competition and with the level of economic activity in the various marketing areas, the regulatory climate, the seasonal pattern of certain product sales, crude oil costs, manufacturing costs, the available supply of crude oil and refined products, and logistical constraints. The retail gross margin for gasoline and distillates reflects the difference between the retail selling prices of these products and their wholesale cost, including secondary transportation. Retail gasoline and distillate margins have also been historically volatile, but tend to be countercyclical to the refining and wholesale marketing margin. Factors affecting the retail gasoline and distillate margin include competition, seasonal demand fluctuations, the available wholesale supply, the level of economic activity in the marketing areas and weather situations that impact driving conditions. The gross margin on retail merchandise sales tends to be less volatile than the retail gasoline and distillate margin. Factors affecting the gross margin on retail merchandise sales include consumer demand for merchandise items, the impact of competition and the level of economic activity in the marketing area.

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MAP has completed the approximately $440 million multi-year Catlettsburg, Kentucky, refinery repositioning project. This major operations improvement project includes the deactivation of the existing, old fluid catalytic cracking unit (FCCU) and the conversion and expansion of the existing atmospheric residue catalytic cracking unit into an FCCU. This project is expected to increase the value of the refined products produced at Catlettsburg, improve cost efficiency and enable the refinery to meet new low sulfur gasoline standards. Project startup was in the first quarter of 2004.

MAP has commenced approximately $300 million in new capital projects for its 74,000 bpd Detroit, Michigan refinery. One of the projects, a $110 million expansion project, is expected to raise the crude oil capacity at the refinery by 35 percent to 100,000 bpd. Other projects are expected to enable the refinery to produce new clean fuels and further control regulated air emissions. Completion of the projects are scheduled for the fourth quarter of 2005. Marathon will loan MAP the funds necessary for these upgrade and expansion projects.

A MAP subsidiary, Ohio River Pipe Line LLC (“ORPL”), completed a 150-mile refined product pipeline from Kenova, West Virginia to Columbus, Ohio in late 2003. The pipeline is an interstate common carrier pipeline. The pipeline is known as Cardinal Products Pipeline and is expected to initially move about 36,000 bpd of refined petroleum into the central Ohio region. The pipeline, which has a capacity of up to 80,000 bpd, is expected to provide a stable, cost effective supply of gasoline, diesel and jet fuels to this market.

Overlapping planned maintenance projects, including investments in the “Tier 2” ultra-low sulfur gasoline production upgrades, will reduce MAP’s 935,000 bpd crude oil capacity such that it expects to process about 775,000 bpd of crude oil in the first quarter of 2004. MAP expects its average crude oil throughput for the total year 2004 to be at or above historical levels.

The above discussion includes forward-looking statements with respect to the Detroit capital projects and the Cardinal Products Pipeline system. Some factors that could affect the Detroit construction projects include availability of materials and labor, permitting approvals, unforeseen hazards such as weather conditions, and other risks customarily associated with construction projects. Factors that could impact the Cardinal Products Pipeline include the price of petroleum products and other supply issues. These factors (among others) could cause actual results to differ materially from those set forth in the forward-looking statements.

Integrated Gas

Marathon continues to make progress on its Phase 3 expansion project in Equatorial Guinea. To commercialize the significant gas resources in Equatorial Guinea’s Alba field, Marathon, the Government of Equatorial Guinea and GEPetrol, the national oil company of Equatorial Guinea, have signed a heads of agreement on a package of fiscal terms and conditions for the development of the LNG project on Bioko Island. Marathon and GEPetrol plan to develop a 3.4 million metric tonnes per year LNG plant, with start up currently projected for late 2007. Marathon and GEPetrol have also signed a letter of understanding (LOU) with a subsidiary of BG Group plc (“BGML”) under which BGML would purchase the LNG plant’s production for a period of 17 years on an FOB Bioko Island basis with pricing linked principally to the Henry Hub index. The LNG would be targeted primarily to a receiving terminal in Lake Charles, Louisiana, where it would be regasified and delivered into the Gulf Coast natural gas pipeline grid. The provisions of the LOU are subject to a definitive purchase and sale agreement which the parties expect to finalize by the second quarter of 2004. Pending final approval of all commercial and governmental agreements, a final investment decision is expected to be concluded by second quarter 2004.

The above discussion contains forward-looking statements with respect to the estimated construction and startup dates of a LNG liquefaction plant and related facilities and the purchase of LNG by BGML. Factors that could affect the purchase of LNG by BGML and the estimated construction and startup dates of the LNG liquefaction plant and related facilities include, without limitation, the successful negotiation and execution of a definitive purchase and sale agreement for LNG supply, board approval of the transactions, approval of the LNG project by the Government of Equatorial Guinea, unforeseen difficulty in negotiation of definitive agreements among project participants, inability or delay in obtaining necessary government and third-party approvals, arranging sufficient financing, unanticipated changes in market demand or supply, competition with similar projects, environmental issues, availability or construction of sufficient LNG vessels, and unforeseen hazards such as weather conditions. The foregoing factors (among others) could cause actual results to differ materially from those set forth in the forward-looking statements.

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Corporate Matters

Marathon has announced organizational and business process changes to increase efficiency, profitability and shareholder value and to achieve projected annual pretax savings of more than $135 million, including $70 million related to MAP. It is anticipated that most of these changes will be completed during the first half 2004, and will result in pretax charges of approximately $75 million ($10 million of which is related to MAP), including benefit plan curtailment and settlement effects of $24 million. Approximately $24 million of the estimated $75 million charges has been recorded in 2003, with the remainder to be recognized when incurred during the first half 2004.

Marathon expects that pension and other postretirement plan expense in 2004 will increase approximately $65 million from 2003 levels, of which approximately $21 million relates to MAP. The total includes $34 million related to pension plan settlements as a result of the business transformation. MAP, and Marathon’s foreign subsidiaries expect to contribute approximately $93 million and $22 million to the funded pension plans in 2004.

The above discussion includes forward-looking statements with respect to projected annual cost savings from organizational and business process improvements, the projected completion time for implementation of the changes and pension and other postretirement plan expenses. Factors, but not necessarily all factors, that could adversely affect these expected results include possible delays in consolidating the U.S. production organization, future acquisitions or dispositions, technological developments, actions of government or other regulatory bodies in areas affected by these organizational changes, unforeseen hazards, regulatory impacts, and other economic or political considerations. The foregoing factors (among others) could cause actual results to differ materially from those set forth in the forward-looking statements.

Accounting Standards Not Yet Adopted

An issue currently on the Emerging Issues Task Force (“EITF”) agenda, Issue No. 03-S “Applicability of FASB Statement No. 142, Goodwill and Other Intangible Assets, to Oil and Gas Companies,” will address how oil and gas companies should classify the costs of acquiring contractual mineral interests in oil and gas properties on the balance sheet. The EITF is considering an alternative interpretation of Statement of Financial Accounting Standard No. 142 “Goodwill and Other Intangible Assets” that mineral or drilling rights or leases, concessions or other interests representing the right to extract oil or gas should be classified as intangible assets rather than oil and gas properties. Management believes that our current balance sheet classification for these costs is appropriate under generally accepted accounting principles. If a reclassification is ultimately required, the estimated amount of the leasehold acquisition costs to be reclassified would be $2.3 billion and $2.4 billion at December 31, 2003 and 2002. Should such a change be required, there would be no impact on our previously filed income statements (or reported net income), statements of cash flow or statements of stockholders’ equity for prior periods. Additional disclosures related to intangible assets would also be required.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Management Opinion Concerning Derivative Instruments

Management has authorized the use of futures, forwards, swaps and options to manage exposure to market fluctuations in commodity prices, interest rates, and foreign currency exchange rates.

Marathon uses commodity-based derivatives to manage price risk related to the purchase, production or sale of crude oil, natural gas, and refined products. To a lesser extent, Marathon is exposed to the risk of price fluctuations on natural gas liquids and on petroleum feedstocks used as raw materials.

Marathon’s strategy has generally been to obtain competitive prices for its products and allow operating results to reflect market price movements dictated by supply and demand. Marathon will use a variety of derivative instruments, including option combinations, as part of the overall risk management program to manage commodity price risk within its different businesses. As market conditions change, Marathon evaluates its risk management program and could enter into strategies that assume market risk whereby cash settlement of commodity-based derivatives will be based on market prices.

Marathon’s E&P segment primarily uses commodity derivative instruments to selectively lock in realized prices on portions of its future production when deemed advantageous to do so.

Marathon’s RM&T segment primarily uses commodity derivative instruments to mitigate the price risk of certain crude oil and other feedstock purchases, to protect carrying values of excess inventories, to protect margins on fixed-price sales of refined products and to lock-in the price spread between refined products and crude oil. MAP recently expanded its trading strategies (through the use of sold options) to take advantage of opportunities in the commodity markets.

Marathon’s OERB segment is exposed to market risk associated with the purchase and subsequent resale of natural gas. Marathon uses commodity derivative instruments to mitigate the price risk on purchased volumes and anticipated sales volumes.

Marathon uses financial derivative instruments to manage interest rate and foreign currency exchange rate exposures. As Marathon enters into derivatives, assessments are made as to the qualification of each transaction for hedge accounting.

Management believes that use of derivative instruments along with risk assessment procedures and internal controls does not expose Marathon to material risk. However, the use of derivative instruments could materially affect Marathon’s results of operations in particular quarterly or annual periods. Management believes that use of these instruments will not have a material adverse effect on financial position or liquidity.

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Commodity Price Risk

Sensitivity analyses of the incremental effects on income from operations (“IFO”) of hypothetical 10 percent and 25 percent changes in commodity prices for open derivative commodity instruments as of December 31, 2003 and December 31, 2002, are provided in the following table:^(a)

(In millions)
	Incremental Decrease in IFO Assuming a Hypothetical Price Change of(a)
	2003						2002
Derivative Commodity Instruments(b)(c)	10%			25%			10%			25%
Crude oil(d)	$	28.3	(e)	$	87.9	(e)	$	42.3	(e)	$	141.8	(e)
Natural gas(d)		29.1	(e)		73.5	(e)		39.5	(e)		120.3	(e)
Refined products(d)		3.6	(e)		9.1	(e)		1.5	(e)		6.5	(e)

^(a) Marathon remains at risk for possible changes in the market value of derivative instruments; however, such risk should be mitigated by price changes in the underlying hedged item. Effects of these offsets are not reflected in the sensitivity analyses. Amounts reflect hypothetical 10% and 25% changes in closing commodity prices, excluding basis swaps, for each open contract position at December 31, 2003 and 2002. Marathon evaluates its portfolio of derivative commodity instruments on an ongoing basis and adds or revises strategies to reflect anticipated market conditions and changes in risk profiles. Marathon is also exposed to credit risk in the event of nonperformance by counterparties. The creditworthiness of counterparties is subject to continuing review, including the use of master netting agreements to the extent practical. Changes to the portfolio after December 31, 2003, would cause future IFO effects to differ from those presented in the table.

^(b) Net open contracts for the combined E&P and OERB segments varied throughout 2003, from a low of 24,375 contracts at October 8 to a high of 52,470 contracts at October 17, and averaged 37,068 for the year. The number of net open contracts for the RM&T segment varied throughout 2003, from a low of 30 contracts at July 19 to a high of 23,412 contracts at December 4, and averaged 9,850 for the year. The derivative commodity instruments used and hedging positions taken will vary and, because of these variations in the composition of the portfolio over time, the number of open contracts by itself cannot be used to predict future income effects.

^(c) The calculation of sensitivity amounts for basis swaps assumes that the physical and paper indices are perfectly correlated. Gains and losses on options are based on changes in intrinsic value only.

^(d) The direction of the price change used in calculating the sensitivity amount for each commodity reflects that which would result in the largest incremental decrease in IFO when applied to the derivative commodity instruments used to hedge that commodity.

^(e) Price increase.

E&P Segment

At December 31, 2003 the following commodity derivative contracts were outstanding. All contracts currently qualify for hedge accounting unless noted.

Contract Type(a)	Period	Daily Volume(b)	% of Estimated Production(b)		Average Price
Natural Gas
Option collars	January – December 2004	23 mmcfd	2	%	$7.15 - $4.25 mcf
Swaps	January – December 2004	50 mmcfd	5	%	$5.02 mcf
Crude Oil
Option collars	2004	44 mbpd	23	%	$29.67 - $24.26 bbl

^(a) These contracts may be subject to margin calls above certain limits established by counterparties.

^(b) Volumes and percentages are based on the estimated production on an annualized basis.

Derivative gains (losses) included in the E&P segment were $(176) million, $52 million and $85 million for 2003, 2002 and 2001. Losses of $66 million and gains of $18 million are included in segment results for 2003 and 2002, respectively, on long-term gas contracts in the United Kingdom that are accounted for as derivative instruments and marked-to-market. Additionally, losses of $8 million and gains of $23 million from discontinued cash flow hedges are included in segment results for 2003 and 2002. The discontinued cash flow hedge amounts were reclassified from accumulated other comprehensive income (loss) as it was no longer probable that the original forecasted transactions would occur.

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RM&T Segment

Marathon’s RM&T operations primarily use derivative commodity instruments to mitigate the price risk of certain crude oil and other feedstock purchases, to protect carrying values of excess inventories, to protect margins on fixed price sales of refined products and to lock-in the price spread between refined products and crude oil. Derivative instruments are used to mitigate the price risk between the time foreign and domestic crude oil and other feedstock purchases for refinery supply are priced and when they are actually refined into salable petroleum products. In addition, natural gas options are in place to manage the price risk associated with approximately 60% of the anticipated natural gas purchases for refinery use through the first quarter of 2004 and 50% through the second quarter of 2004. Derivative commodity instruments are also used to protect the value of excess refined product, crude oil and LPG inventories. Derivatives are used to lock in margins associated with future fixed price sales of refined products to non-retail customers. Derivative commodity instruments are used to protect against decreases in the future crack spreads. Within a limited framework, derivative instruments are also used to take advantage of opportunities identified in the commodity markets. Derivative gains (losses) included in RM&T segment income for each of the last two years are summarized in the following table:

Strategy (In Millions)	2003			2002
Mitigate price risk	$	(112	)	$	(95	)
Protect carrying values of excess inventories		(57	)		(41	)
Protect margin on fixed price sales		5			11
Protect crack spread values		6			1
Trading activities		(4	)		–
Total net derivative losses	$	(162	)	$	(124	)

Generally, derivative losses occur when market prices increase, which are offset by gains on the underlying physical commodity transaction. Conversely, derivative gains occur when market prices decrease, which are offset by losses on the underlying physical commodity transaction.

OERB Segment

Marathon has used derivative instruments to convert the fixed price of a long-term gas sales contract to market prices. The underlying physical contract is for a specified annual quantity of gas and matures in 2008. Similarly, Marathon will use derivative instruments to convert shorter term (typically less than a year) fixed price contracts to market prices in its ongoing purchase for resale activity; and to hedge purchased gas injected into storage for subsequent resale. Derivative gains (losses) included in OERB segment income were $19 million, $(8) million and $(29) million for 2003, 2002 and 2001. OERB’s trading activity gains (losses) of $(7) million, $4 million and $(1) million in 2003, 2002 and 2001 are included in the aforementioned amounts.

Other Commodity Risk

Marathon is subject to basis risk, caused by factors that affect the relationship between commodity futures prices reflected in derivative commodity instruments and the cash market price of the underlying commodity. Natural gas transaction prices are frequently based on industry reference prices that may vary from prices experienced in local markets. For example, New York Mercantile Exchange (“NYMEX”) contracts for natural gas are priced at Louisiana’s Henry Hub, while the underlying quantities of natural gas may be produced and sold in the western United States at prices that do not move in strict correlation with NYMEX prices. To the extent that commodity price changes in one region are not reflected in other regions, derivative commodity instruments may no longer provide the expected hedge, resulting in increased exposure to basis risk. These regional price differences could yield favorable or unfavorable results. OTC transactions are being used to manage exposure to a portion of basis risk.

Marathon is subject to liquidity risk, caused by timing delays in liquidating contract positions due to a potential inability to identify a counterparty willing to accept an offsetting position. Due to the large number of active participants, liquidity risk exposure is relatively low for exchange-traded transactions.

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Interest Rate Risk

Marathon is subject to the effects of interest rate fluctuations affecting the fair value of certain financial instruments. A sensitivity analysis of the projected incremental effect of a hypothetical 10 percent decrease in interest rates is provided in the following table:

(In millions)
	December 31, 2003				December 31, 2002
Financial Instruments(a)	Fair Value(b)		Incremental Increase in Fair Value(c)		Fair Value(b)		Incremental Increase in Fair Value(c)
Financial assets:
Investments and long-term receivables	$	186	$	–	$	223	$	–
Interest rate swap agreements	$	4	$	16	$	12	$	8
Financial liabilities:
Long-term debt(d)(e)	$	4,740	$	176	$	5,008	$	194

^(a) Fair values of cash and cash equivalents, receivables, notes payable, accounts payable and accrued interest approximate carrying value and are relatively insensitive to changes in interest rates due to the short-term maturity of the instruments. Accordingly, these instruments are excluded from the table.

^(b) See Note 17 and 18 to the Consolidated Financial Statements for carrying value of instruments.

^(c) For long-term debt, this assumes a 10% decrease in the weighted average yield to maturity of Marathon’s long-term debt at December 31, 2003 and 2002. For interest rate swap agreements, this assumes a 10% decrease in the effective swap rate at December 31, 2003.

^(d) Includes amounts due within one year.

^(e) Fair value was based on market prices where available, or current borrowing rates for financings with similar terms and maturities.

At December 31, 2003 and 2002, Marathon’s portfolio of long-term debt was substantially comprised of fixed rate instruments. Therefore, the fair value of the portfolio is relatively sensitive to effects of interest rate fluctuations. This sensitivity is illustrated by the $176 million increase in the fair value of long-term debt assuming a hypothetical 10 percent decrease in interest rates. However, Marathon’s sensitivity to interest rate declines and corresponding increases in the fair value of its debt portfolio would unfavorably affect Marathon’s results and cash flows only to the extent that Marathon would elect to repurchase or otherwise retire all or a portion of its fixed-rate debt portfolio at prices above carrying value.

Marathon has initiated a program to manage its exposure to interest rate movements by utilizing financial derivative instruments. The primary objective of this program is to reduce Marathon’s overall cost of borrowing by managing the fixed and floating interest rate mix of the debt portfolio. Beginning in 2002, Marathon entered into several interest rate swap agreements, designated as fair value hedges, which effectively resulted in an exchange of existing obligations to pay fixed interest rates for obligations to pay floating rates. The following table summarizes, by individual debt instrument, the interest rate swap activity as of December 31, 2003:

Floating Rate to be Paid	Fixed Rate to be Received		Notional Amount ($Millions)		Swap Maturity	Fair Value ($Millions)
Six Month LIBOR +4.226%	6.650	%	$	300	2006	$	1
Six Month LIBOR +1.935%	5.375	%	$	450	2007	$	6
Six Month LIBOR +3.285%	6.850	%	$	400	2008	$	3
Six Month LIBOR +2.142%	6.125	%	$	200	2012	$	(6	)

55

Foreign Currency Exchange Rate Risk

Marathon has a program to manage its exposure to foreign currency exchange rates by utilizing forward contracts. The primary objective of this program is to reduce Marathon’s exposure to movements in the foreign currency markets by locking in foreign currency rates. As of December 31, 2003, Marathon had no open contracts.

Credit Risk

Marathon has significant credit risk exposure to United States Steel arising from the Separation. That exposure is discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Obligations Associated with the Separation of United States Steel” on page 43.

Safe Harbor

Marathon’s quantitative and qualitative disclosures about market risk include forward-looking statements with respect to management’s opinion about risks associated with the use of derivative instruments. These statements are based on certain assumptions with respect to market prices and industry supply of and demand for crude oil, natural gas, refined products and other feedstocks. To the extent that these assumptions prove to be inaccurate, future outcomes with respect to Marathon’s hedging programs may differ materially from those discussed in the forward-looking statements.

56

Item 8. Consolidated Financial Statements and Supplementary Data

   MARATHON OIL CORPORATION  

Index to 2003 Consolidated Financial Statements and Supplementary Data
	Page
Management’s Report	F-1
Audited Consolidated Financial Statements:
Report of Independent Auditors	F-1
Consolidated Statement of Income	F-2
Consolidated Balance Sheet	F-4
Consolidated Statement of Cash Flows	F-5
Consolidated Statement of Stockholders’ Equity	F-6
Notes to Consolidated Financial Statements	F-8
Selected Quarterly Financial Data (Unaudited)	F-41
Principal Unconsolidated Investees (Unaudited)	F-41
Supplementary Information on Oil and Gas Producing Activities (Unaudited)	F-42
Five-Year Operating Summary	F-49
Five-Year Selected Financial Data	F-51

Management’s Report

The accompanying consolidated financial statements of Marathon Oil Corporation and its consolidated subsidiaries (Marathon) are the responsibility of management and have been prepared in conformity with accounting principles generally accepted in the United States of America. They necessarily include some amounts that are based on best judgments and estimates. The financial information displayed in other sections of this report is consistent with these financial statements.

Marathon seeks to assure the objectivity and integrity of its financial records by careful selection of its managers, by organizational arrangements that provide an appropriate division of responsibility and by communications programs aimed at assuring that its policies and methods are understood throughout the organization.

Marathon has a comprehensive formalized system of internal accounting controls designed to provide reasonable assurance that assets are safeguarded and that financial records are reliable. Appropriate management monitors the system for compliance, and the internal auditors independently measure its effectiveness and recommend possible improvements thereto. In addition, as part of their audit of the financial statements, Marathon’s independent auditors, who are elected by the stockholders, review and test the internal accounting controls selectively to establish a basis of reliance thereon in determining the nature, extent and timing of audit tests to be applied.

The Board of Directors pursues its oversight role in the area of financial reporting and internal accounting control through its Audit Committee. This Committee, composed solely of independent directors, regularly meets (jointly and separately) with the independent auditors, management and internal auditors to monitor the proper discharge by each of their responsibilities relative to internal accounting controls and the consolidated financial statements.

Clarence P. Cazalot, Jr.	Janet F. Clark	Albert G. Adkins
President and Chief Executive Officer	Senior Vice President and Chief Financial Officer	Vice President– Accounting and Controller

Report of Independent Auditors

To the Stockholders of Marathon Oil Corporation:

In our opinion, the accompanying consolidated financial statements appearing on pages F-2 through F-40 present fairly, in all material respects, the financial position of Marathon Oil Corporation and its subsidiaries (Marathon) at December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of Marathon’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2 to the financial statements, Marathon changed its methods of accounting for asset retirement costs, stock-based compensation and the effects of early extinguishment of debt in 2003.

As discussed in Note 2 to the financial statements, Marathon changed its method for accounting for certain long-term natural gas sales contracts in 2002.

As discussed in Note 3 to the financial statements, on December 31, 2001, Marathon distributed its steel business to the holders of USX-U.S. Steel Group common stock and has accounted for this business as a discontinued operation.

PricewaterhouseCoopers LLP

Houston, Texas

February 25, 2004

F-1

Consolidated Statement of Income

(Dollars in millions)	2003			2002			2001
Revenues and other income:
Sales and other operating revenues (including consumer excise taxes)	$	40,042		$	30,426		$	32,349
Sales to related parties		921			869			447
Income from equity method investments		29			137			118
Net gains on disposal of assets		166			67			44
Gain (loss) on ownership change in Marathon Ashland Petroleum LLC		(1	)		12			(6	)
Other income		77			44			110
Total revenues and other income		41,234			31,555			33,062
Costs and expenses:
Cost of revenues (excludes items shown below)		32,109			23,391			23,024
Purchases from related parties		187			178			158
Consumer excise taxes		4,285			4,250			4,404
Depreciation, depletion and amortization		1,175			1,176			1,187
Selling, general and administrative expenses		946			839			714
Other taxes		299			255			269
Exploration expenses		149			167			127
Inventory market valuation charges (credits)		–			(71	)		71
Total costs and expenses		39,150			30,185			29,954
Income from operations		2,084			1,370			3,108
Net interest and other financing costs		186			268			172
Loss from early extinguishment of debt		–			53			–
Minority interest in income of Marathon Ashland Petroleum LLC		302			173			704
Income from continuing operations before income taxes		1,596			876			2,232
Provision for income taxes		584			369			827
Income from continuing operations		1,012			507			1,405
Discontinued operations		305			(4	)		(1,240	)
Income before cumulative effect of changes in accounting principles		1,317			503			165
Cumulative effect of changes in accounting principles		4			13			(8	)
Net income	$	1,321		$	516		$	157

The accompanying notes are an integral part of these consolidated financial statements.

F-2

Income Per Common Share

(Dollars in millions, except per share data)	2003		2002		2001
MARATHON COMMON STOCK
Income from continuing operations applicable to Common Stock	$	1,012	$	507	$	1,404
Net income applicable to Common Stock	$	1,321	$	516	$	377
Per Share Data
Basic and diluted:
Income from continuing operations	$	3.26	$	1.63	$	4.54
Net income	$	4.26	$	1.66	$	1.22
STEEL STOCK
Net loss applicable to Steel Stock	$	–	$	–	$	(243	)
Per Share Data
Basic:
Net loss	$	–	$	–	$	(2.73	)
Diluted:
Net loss	$	–	$	–	$	(2.74	)

See Note 7 for a description and computation of income per common share.

The accompanying notes are an integral part of these consolidated financial statements.

F-3

Consolidated Balance Sheet

(Dollars in millions) December 31	2003			2002
Assets
Current assets:
Cash and cash equivalents	$	1,396		$	488
Receivables, less allowance for doubtful accounts of $5 and $6		2,463			1,807
Receivables from United States Steel		20			9
Receivables from related parties		47			38
Inventories		1,953			1,984
Other current assets		161			153
Total current assets		6,040			4,479
Investments and long-term receivables, less allowance for doubtful accounts of $10 and $14		1,323			1,634
Receivables from United States Steel		593			547
Property, plant and equipment – net		10,830			10,390
Prepaid pensions		181			201
Goodwill		256			274
Intangibles		118			119
Other noncurrent assets		141			168
Total assets	$	19,482		$	17,812
Liabilities
Current liabilities:
Accounts payable	$	3,352		$	2,841
Payables to United States Steel		4			28
Payables to related parties		17			16
Payroll and benefits payable		230			198
Accrued taxes		247			307
Accrued interest		85			108
Long-term debt due within one year		272			161
Total current liabilities		4,207			3,659
Long-term debt		4,085			4,410
Deferred income taxes		1,489			1,445
Employee benefit obligations		984			847
Asset retirement obligations		390			223
Payables to United States Steel		8			7
Deferred credits and other liabilities		233			168
Total liabilities		11,396			10,759
Minority interest in Marathon Ashland Petroleum LLC		2,011			1,971
Commitments and contingencies		–			–
Stockholders’ Equity
Common Stock issued – 312,165,978 shares at December 31, 2003 and 2002 (par value $1 per share, authorized 550,000,000 shares)		312			312
Common Stock held in treasury – 1,744,370 shares at December 31, 2003 and 2,292,986 shares at December 31, 2002		(46	)		(60	)
Additional paid-in capital		3,033			3,032
Retained earnings		2,897			1,874
Accumulated other comprehensive loss		(112	)		(69	)
Unearned compensation		(9	)		(7	)
Total stockholders’ equity		6,075			5,082
Total liabilities and stockholders’ equity	$	19,482		$	17,812

The accompanying notes are an integral part of these consolidated financial statements.

F-4

Consolidated Statement of Cash Flows

(Dollars in millions)	2003			2002			2001
Increase (decrease) in cash and cash equivalents
Operating activities:
Net income	$	1,321		$	516		$	157
Adjustments to reconcile to net cash provided from operating activities:
Cumulative effect of changes in accounting principles		(4	)		(13	)		8
Loss (income) from discontinued operations		(305	)		4			1,240
Deferred income taxes		71			77			(147	)
Minority interest in income of Marathon Ashland Petroleum LLC		302			173			704
Loss from early extinguishment of debt		–			53			–
Depreciation, depletion and amortization		1,175			1,176			1,187
Pension and other postretirement benefits – net		68			87			33
Inventory market valuation charges (credits)		–			(71	)		71
Exploratory dry well costs		55			91			54
Net gains on disposal of assets		(166	)		(67	)		(44	)
Impairment of investments		129			–			–
Changes in: Current receivables		(671	)		(103	)		124
Inventories		33			(53	)		(68	)
Accounts payable and other current liabilities		496			614			(544	)
All other – net		174			(148	)		(26	)
Net cash provided from continuing operations		2,678			2,336			2,749
Net cash provided from discontinued operations		83			69			887
Net cash provided from operating activities		2,761			2,405			3,636
Investing activities:
Capital expenditures		(1,892	)		(1,520	)		(1,533	)
Acquisitions		(252	)		(1,160	)		(506	)
Disposal of discontinued operations		612			54			(147	)
Disposal of assets		644			146			83
Restricted cash – withdrawals		146			91			67
– deposits		(108	)		(123	)		(62	)
Investments – contributions		(34	)		(111	)		(8	)
– loans and advances		(91	)		–			(6	)
– returns and repayments		42			5			10
All other – net		(19	)		–			5
Investing activities of discontinued operations		(29	)		(48	)		(147	)
Net cash used in investing activities		(981	)		(2,666	)		(2,244	)
Financing activities:
Commercial paper and revolving credit arrangements – net		(131	)		(375	)		(51	)
Other debt – borrowings		–			1,828			537
– repayments		(208	)		(604	)		(646	)
Redemption of preferred stock of subsidiary		–			(185	)		(223	)
Preferred stock repurchased		–			(110	)		–
Treasury common stock – proceeds from issuances		17			2			12
– purchases		(6	)		(7	)		(1	)
Dividends paid – Common Stock		(298	)		(285	)		(284	)
– Steel Stock		–			–			(49	)
– Preferred stock		–			–			(8	)
Distributions to minority shareholder of Marathon Ashland Petroleum LLC		(262	)		(176	)		(577	)
Net cash provided from (used in) financing activities		(888	)		88			(1,290	)
Effect of exchange rate changes on cash:
Continuing operations		8			4			(3	)
Discontinued operations		8			–			(1	)
Net increase (decrease) in cash and cash equivalents		908			(169	)		98
Cash and cash equivalents at beginning of year		488			657			559
Cash and cash equivalents at end of year	$	1,396		$	488		$	657

The accompanying notes are an integral part of these consolidated financial statements.

F-5

Consolidated Statement of Stockholders’ Equity

	Dollars in millions									Shares in thousands
	2003			2002			2001			2003		2002		2001
Preferred stock:
6.50% Cumulative Convertible:
Balance at beginning of year	$	–		$	–		$	2		–		–		2,413
Repurchased		–			–			–		–		–		(9	)
Converted into Steel Stock		–			–			–		–		–		(1	)
Exchanged for debt		–			–			–		–		–		(195	)
Converted to right to receive cash at Separation		–			–			(2	)	–		–		(2,208	)
Balance at end of year	$	–		$	–		$	–		–		–		–
Common stocks:
Common Stock:
Balance at beginning of year	$	312		$	312		$	312		312,166		312,166		312,166
Balance at end of year	$	312		$	312		$	312		312,166		312,166		312,166
Steel Stock:
Balance at beginning of year	$	–		$	–		$	89		–		–		88,767
Issued for:
Employee stock plans		–			–			–		–		–		430
Conversion of preferred stock		–			–			–		–		–		1
Distributed to United States Steel shareholders		–			–			(89	)	–		–		(89,198	)
Balance at end of year	$	–		$	–		$	–		–		–		–
Securities exchangeable solely into Common Stock:
Balance at beginning of year	$	–		$	–		$	–		–		–		281
Exchanged for Common Stock		–			–			–		–		–		(281	)
Balance at end of year	$	–		$	–		$	–		–		–		–
Treasury common stocks, at cost:
Common Stock:
Balance at beginning of year	$	(60	)	$	(74	)	$	(104	)	(2,293	)	(2,771	)	(3,900	)
Repurchased		(6	)		(7	)		(1	)	(219	)	(297	)	(27	)
Reissued for:
Exchangeable Shares		–			–			7		–		–		281
Employee stock plans		20			19			24		768		727		875
Non-employee directors deferred compensation plan		–			2			–		–		48		–
Balance at end of year	$	(46	)	$	(60	)	$	(74	)	(1,744	)	(2,293	)	(2,771	)
Steel Stock:
Balance at beginning of year	$	–		$	–		$	–		–		–		–
Repurchased		–			–			–		–		–		(20	)
Reissued for employee stock plans		–			–			–		–		–		18
Distributed to United States Steel		–			–			–		–		–		2
Balance at end of year	$	–		$	–		$	–		–		–		–

(Table continued on next page)

F-6

	Stockholders’ Equity									Comprehensive Income
(Dollars in millions)	2003			2002			2001			2003			2002			2001
Additional paid-in capital:
Balance at beginning of year	$	3,032		$	3,035		$	4,676
Treasury Common Stock reissued		1			(3	)		4
Steel Stock issued		–			–			8
Steel Stock distributed to United States		–
Steel shareholders		–			–			(1,526	)
Exchangeable Shares exchanged for Common Stock		–			–			(9	)
6.50% Preferred stock converted to right to receive cash at Separation		–			–			(118	)
Balance at end of year	$	3,033		$	3,032		$	3,035
Unearned compensation:
Balance at beginning of year	$	(7	)	$	(10	)	$	(8	)
Change during year	$	(2	)		3			(11	)
Transferred to United States Steel		–			–			9
Balance at end of year	$	(9	)	$	(7	)	$	(10	)
Retained earnings:
Balance at beginning of year	$	1,874		$	1,643		$	1,847
Net income		1,321			516			157		$	1,321		$	516		$	157
Excess redemption value over carrying value of preferred securities		–			–			(20	)
Dividends paid on:
Preferred stock		–			–			(8	)
Common Stock (per share: $.96 in 2003 $.92 in 2002 and $.92 in 2001)		(298	)		(285	)		(284	)
Steel Stock (per share: $.55 in 2001)		–			–			(49	)
Balance at end of year	$	2,897		$	1,874		$	1,643
Accumulated other comprehensive income (loss)(a):
Minimum pension liability adjustments:
Balance at beginning of year	$	(47	)	$	(14	)	$	(21	)
Changes during year		(46	)		(33	)		(13	)		(46	)		(33	)		(13	)
Reclassified to income		–			–			20			–			–			20
Balance at end of year	$	(93	)	$	(47	)	$	(14	)
Foreign currency translation adjustments:
Balance at beginning of year	$	(1	)	$	(3	)	$	(29	)
Changes during year		(3	)		2			(3	)		(3	)		2			(3	)
Reclassified to income		–			–			29			–			–			29
Balance at end of year	$	(4	)	$	(1	)	$	(3	)
Deferred gains (losses) on derivative instruments:
Balance at beginning of year	$	(21	)	$	51		$	–
Cumulative effect adjustment		–			–			(8	)		–			–			(8	)
Reclassification of the cumulative effect adjustment into income		3			(1	)		23			3			(1	)		23
Changes in fair value		62			(36	)		34			62			(36	)		34
Reclassification to income		(59	)		(35	)		2			(59	)		(35	)		2
Balance at end of year	$	(15	)	$	(21	)	$	51
Total balances at end of year	$	(112	)	$	(69	)	$	34
Total comprehensive income										$	1,278		$	413		$	241
Total stockholders’ equity	$	6,075		$	5,082		$	4,940
(a) Related income tax provision (credit) on changes and reclassifications during the year:		2003			2002			2001
Minimum pension liability adjustments	$	(25	)	$	(18	)	$	(7	)
Foreign currency translation adjustments		(2	)		2			–
Net deferred gains (losses) on derivative instruments		3			(39	)		27

The accompanying notes are an integral part of these consolidated financial statements.

F-7

Notes to Consolidated Financial Statements

1. Summary of Principal Accounting Policies

Basis of presentation — Marathon Oil Corporation was originally organized in 2001 as USX HoldCo, Inc., a wholly owned subsidiary of USX Corporation. As a result of a reorganization completed in July 2001, USX HoldCo, Inc. (1) became the parent entity of the consolidated enterprise (the former USX Corporation was merged into a subsidiary of USX HoldCo, Inc.) and (2) changed its name to USX Corporation. In connection with the transaction discussed in the next paragraph (the Separation), USX Corporation changed its name to Marathon Oil Corporation. The accompanying consolidated financial statements reflect Marathon Oil Corporation and its subsidiaries as the continuation of the consolidated enterprise.

Prior to December 31, 2001, Marathon had two outstanding classes of common stock: USX-Marathon Group common stock (Common Stock), which was intended to reflect the performance of Marathon’s energy business, and USX—U.S. Steel Group common stock (Steel Stock), which was intended to reflect the performance of Marathon’s steel business. As described further in Note 3, on December 31, 2001, Marathon disposed of its steel business through a tax-free distribution of the common stock of its wholly owned subsidiary United States Steel Corporation (United States Steel) to holders of Steel Stock in exchange for all outstanding shares of Steel Stock on a one-for-one basis.

In connection with the Separation, Marathon’s certificate of incorporation was amended on December 31, 2001 and, from that date, Marathon has only one class of common stock authorized.

Marathon is engaged in worldwide exploration and production of crude oil and natural gas; domestic refining, marketing and transportation of crude oil and petroleum products primarily through its 62 percent owned consolidated subsidiary Marathon Ashland Petroleum LLC (MAP); and other energy related businesses.

Principles applied in consolidation — These consolidated financial statements include the accounts of the businesses comprising Marathon.

The assets and liabilities of MAP are consolidated in these financial statements and minority interest representing 38 percent of the carrying value of the net assets of MAP has been recognized. Under certain circumstances, the MAP Limited Liability Company Agreement requires unanimous approval of certain matters brought to the MAP Board of Managers. Marathon does not believe that the rights of the minority shareholder of MAP are substantive because the likelihood of those rights being triggered is remote.

Investments in unincorporated oil and gas joint ventures and undivided interests in certain pipelines, gas processing plants and liquefied natural gas (LNG) tankers are consolidated on a pro rata basis.

Investments in entities over which Marathon has significant influence are accounted for using the equity method of accounting and are carried at Marathon’s share of net assets plus loans and advances. Differences in the basis of the investment and the separate net asset value of the investee, if any, are amortized into income in accordance with the remaining useful life of the underlying assets.

Investments in companies whose stock is publicly traded are carried at market value. The difference between the cost of these investments and market value is recorded in other comprehensive income (net of tax). Investments in companies whose stock has no readily determinable fair value are carried at cost.

Income from equity method investments represents Marathon’s proportionate share of income from equity method investments. Other income includes dividend income from other investments. Dividend income is recognized when dividend payments are received.

Gains or losses from a change in ownership of a consolidated subsidiary or an unconsolidated investee are recognized in the period of change.

Use of estimates — The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at year-end and the reported amounts of revenues and expenses during the year. Items subject to such estimates and assumptions include the carrying value of property, plant and equipment, goodwill, intangibles, equity method investments and non-exchange traded derivative contracts; valuation allowances for receivables, inventories and deferred income tax assets; environmental remediation liabilities; liabilities for potential tax deficiencies and potential litigation claims and settlements; assets and obligations related to employee benefits; and the classification of gains or losses on cash flow hedges of forecasted transactions. Actual results could differ from the estimates and assumptions used.

Income per common share — Basic net income (loss) per share is calculated by adjusting net income for dividend requirements of preferred stock and is based on the weighted average number of common shares outstanding. Diluted net income (loss) per share assumes exercise of stock options and warrants and conversion of convertible debt and preferred securities, provided the effect is not antidilutive.

F-8

Segment information — Marathon’s operations consist of three reportable operating segments:

• Exploration and Production (“E&P”)—explores for and produces crude oil and natural gas on a worldwide basis;

• Refining, Marketing and Transportation (“RM&T”)—refines, markets and transports crude oil and petroleum products, primarily in the Midwest, the upper Great Plains and southeastern United States through MAP; and

• Other Energy Related Businesses (“OERB”)—markets and transports its own and third-party natural gas, crude oil and products manufactured from natural gas, such as liquefied natural gas and methanol, primarily in the United States, Europe and West Africa.

Management has determined that these are its operating segments because these are the components of Marathon (i) that engage in business activities from which revenues are earned and expenses are incurred, (ii) whose operating results are regularly reviewed by Marathon’s chief operating decision maker to make decisions about resources to be allocated and assess performance and (iii) for which discrete financial information is available. The chief operating decision maker (“CODM”) is responsible for performing the functions within Marathon of allocating resources to and assessing performance of Marathon’s operating segments. Information on assets by segment is not provided because it is not reviewed by the CODM. The CODM is also the manager over each of the segments. In this role, he is responsible for allocating resources within the segments, reviewing financial results of components within the segments, and assessing the performance of the components. The components within the segments that are separately reviewed and assessed by the CODM in his role as segment manager are aggregable with other components in the same segment because they have similar economic characteristics.

Segment income represents income from operations allocable to operating segments. Marathon corporate general and administrative costs are not allocated to operating segments. These costs primarily consist of employment costs (including pension effects), professional services, facilities and other related costs associated with corporate activities. Inventory market valuation adjustments and gain (loss) on ownership change in MAP also are not allocated to operating segments. Additionally, certain nonoperating or infrequently occurring items are not allocated to operating segments (see segment income reconcilement table on page F-21).

Revenue recognition — Revenues are recognized when products are shipped or services are provided to customers and the sales price is fixed or determinable and collectibility is reasonably assured. Costs associated with revenues are recorded in costs of revenues.

Marathon recognizes revenues from the production of oil and gas in the United States when title is transferred. Outside the United States, revenues are recognized at the time of lifting. Royalties on the production of oil and gas are either paid in cash or settled through the delivery of volumes. Marathon includes royalties in its revenue and cost of revenues when settlement of royalties is paid in cash, while settlement of royalties based on the delivery of volumes are excluded from revenue and cost of revenues.

Rebates from vendors are recognized as a reduction to cost of revenues when the initiating transaction occurs. Incentives that are derived from contractual provisions are accrued based on past experience and recognized within cost of revenues.

Matching buy/sell transactions settled in cash are recorded in both revenues and costs of revenues as separate sales and purchase transactions.

Marathon follows the sales method of accounting for gas production imbalances and would recognize a liability if the existing proved reserves were not adequate to cover the current imbalance situation.

Cash and cash equivalents — Cash and cash equivalents include cash on hand and on deposit and investments in highly liquid debt instruments with maturities generally of three months or less.

Inventories — Inventories are carried at lower of cost or market. Cost of inventories is determined primarily under the last-in, first-out (LIFO) method.

The inventory market valuation reserve reflects the extent that the recorded LIFO cost basis of crude oil and refined products inventories exceeds net realizable value. The reserve is decreased to reflect increases in market prices and inventory turnover and increased to reflect decreases in market prices. Changes in the inventory market valuation reserve result in noncash charges or credits to costs and expenses.

Derivative instruments — Marathon uses commodity-based derivatives and financial instrument related derivatives to manage its exposure to commodity price risk, interest rate risk or foreign currency risk. As market conditions change, Marathon may use selective derivative instruments that assume market risk in exchange for an upfront premium. Management has authorized the use of futures, forwards, swaps and combinations of options, including written or net written options, related to the purchase, production or sale of crude oil, natural gas and refined products, fair value of certain assets and liabilities, future interest expense and also certain business transactions denominated in foreign currencies. Changes in the fair value of all derivatives are recognized immediately in income, within revenues, other income, costs of revenues or net interest and other financing costs,

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unless the derivative qualifies as a hedge of future cash flows or certain foreign currency exposures. Cash flows related to the use of derivatives are classified in operating activities with the underlying hedged transaction.

For derivatives qualifying as hedges of future cash flows or certain foreign currency exposures, the effective portion of any changes in fair value is recognized in a component of stockholders’ equity called other comprehensive income and then reclassified to income, within revenues, costs of revenues or net interest and other financing costs, when the underlying anticipated transaction occurs. Any ineffective portion of such hedges is recognized in income as it occurs. For discontinued cash flow hedges prospective changes in the fair value of the derivative are recognized in income. Any gain or loss accumulated in other comprehensive income at the time a hedge is discontinued continues to be deferred until the original forecasted transaction occurs. However, if it is determined that the likelihood of the original forecasted transaction occurring is no longer probable, the entire gain or loss accumulated in other comprehensive income is immediately reclassified into income.

For derivatives designated as hedges of the fair value of recognized assets, liabilities or firm commitments, changes in the fair value of both the hedged item and the related derivative are recognized immediately in income, within revenues, costs of revenues or net interest and other financing costs, with an offsetting effect included in the basis of the hedged item. The net effect is to reflect in income the extent to which the hedge is not effective in achieving offsetting changes in fair value.

For derivative instruments that are classified as trading, changes in the fair value are recognized immediately within revenues as part of other income. Any premium received is amortized into income based on the underlying settlement terms of the derivative position. All related effects of a trading strategy, including physical settlement of the derivative position, are reflected within other income.

Property, plant and equipment — Marathon uses the successful efforts method of accounting for oil and gas producing activities. Costs to acquire mineral interests in oil and gas properties, to drill and equip exploratory wells that find proved reserves, and to drill and equip development wells are capitalized. Costs to drill exploratory wells that do not find proved reserves, geological and geophysical costs, and costs of carrying and retaining unproved properties are expensed.

Capitalized costs of producing oil and gas properties are depreciated and depleted by the units-of-production method. Support equipment and other property, plant and equipment are depreciated over their estimated useful lives.

Marathon evaluates its oil and gas producing properties for impairment of value on a field-by-field basis or, in certain instances, by logical grouping of assets if there is significant shared infrastructure, using undiscounted future cash flows based on total proved and risk-adjusted probable and possible reserves. Oil and gas producing properties deemed to be impaired are written down to their fair value, as determined by discounted future cash flows based on total proved and risk-adjusted probable and possible reserves or, if available, comparable market values. Unproved oil and gas properties that are individually significant are periodically assessed for impairment of value, and a loss is recognized at the time of impairment. Other unproved properties are amortized over their remaining holding period.

For property, plant and equipment unrelated to oil and gas producing activities, depreciation is computed on the straight-line method over their estimated useful lives, which range from 3 to 42 years.

When property, plant and equipment depreciated on an individual basis are sold or otherwise disposed of, any gains or losses are reflected in income. Gains on disposal of property, plant and equipment are recognized when earned, which is generally at the time of closing. If a loss on disposal is expected, such losses are recognized when the assets are reclassified as held for sale. Proceeds from disposal of property, plant and equipment depreciated on a group basis are credited to accumulated depreciation, depletion and amortization with no immediate effect on income.

Goodwill — Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired, primarily from the acquisitions of the Equatorial Guinea interests and Pennaco Energy, Inc. Annually, Marathon assesses the carrying amount of goodwill by testing for impairment. The impairment test requires allocating goodwill and other assets and liabilities to reporting units. Marathon has determined the components of the E&P segment have similar economic characteristics and therefore, aggregates the components into a single reporting unit. As a result, goodwill has been assigned to the E&P segment. The fair value of each reporting unit is determined and compared to the book value of the reporting unit. If the fair value of the reporting unit is less than the book value, including goodwill, then the recorded goodwill is impaired down to its implied fair value with a charge to expense.

Intangible assets — Intangible assets consists of deferred marketing costs, intangible contract rights, proprietary information, and unrecognized pension plan prior service costs. The marketing costs incurred in the RM&T segment relate to refurbishment of various branded jobber locations. These marketing costs are amortized over 5-10 years depending on the term of the associated marketing agreement. Additionally, Marathon has intangibles in OERB associated with the acquisition of a contractual right to utilize the Elba Island LNG terminal in Savannah, Georgia. These rights are being amortized over the expected life of the contract.

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Major maintenance activities — Marathon incurs planned major maintenance costs primarily for refinery turnarounds. Such costs are expensed in the same annual period as incurred; however, estimated annual turnaround costs are recognized in income throughout the year on a pro rata basis.

Environmental remediation liabilities — Environmental remediation expenditures are capitalized if the costs mitigate or prevent future contamination or if the costs improve environmental safety or efficiency of the existing assets. Marathon provides for remediation costs and penalties when the responsibility to remediate is probable and the amount of associated costs can be reasonably estimated. The timing of remediation accruals coincides with completion of a feasibility study or the commitment to a formal plan of action. Remediation liabilities are accrued based on estimates of known environmental exposure and are discounted when the estimated amounts are reasonably fixed and determinable. If recoveries of remediation costs from third parties are probable, a receivable is recorded.

Asset retirement obligations — The fair value of asset retirement obligations are recognized in the period in which they are incurred if a reasonable estimate of fair value can be made. For Marathon, asset retirement obligations primarily relate to the abandonment of oil and gas producing facilities. Asset retirement obligations include costs to dismantle and relocate or dispose of production platforms, gathering systems, wells and related structures and restoration costs of land and seabed, including those leased. Estimates of these costs are developed for each property based upon the type of production structure, depth of water, reservoir characteristics, depth of the reservoir, market demand for equipment, currently available procedures and consultations with construction and engineering professionals. Depreciation of capitalized asset retirement cost and accretion of asset retirement obligations are recorded over time. The depreciation will generally be determined on a units-of-production basis, while the accretion to be recognized will escalate over the life of the producing assets. Asset retirement obligations have not been recognized for certain refinery, crude oil and product pipeline and marketing assets because the fair value cannot be estimated due to the uncertainty of the settlement date of the obligation.

Deferred taxes — Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases as reflected in Marathon’s filings with the respective taxing authority. The realization of deferred tax assets is assessed periodically based on several interrelated factors. These factors include Marathon’s expectation to generate sufficient future taxable income including future foreign source income, tax credits, operating loss carryforwards, and management’s intent regarding the permanent reinvestment of the income from certain foreign subsidiaries.

Pensions and other postretirement benefits — Marathon has noncontributory defined benefit pension plans covering substantially all domestic employees, international employees located in Ireland, Norway and the United Kingdom, and most MAP employees. In addition, several excess benefits plans exist covering domestic employees within defined regulatory compensation limits. Benefits under these plans are based primarily upon years of service and final average pensionable earnings. MAP also participates in a multiemployer plan that provides coverage for less than 5% of its employees. The benefits provided include both pension and health care.

Marathon also has defined benefit retiree health care and life insurance plans covering most employees upon their retirement. Health care benefits are provided through comprehensive hospital, surgical and major medical benefit provisions or through health maintenance organizations, both subject to various cost sharing features. Amendments made to Marathon’s retiree health care plan, in the fourth quarter 2003, reduced the other postretirement benefit obligation by approximately $97 million (see Note 24). Life insurance benefits are provided to certain nonunion and union represented retiree beneficiaries. Other postretirement benefits have not been prefunded. Marathon uses a December 31 measurement date for its plans.

Stock-based compensation — The Marathon Oil Corporation 2003 Incentive Compensation Plan (the “Plan”) authorizes the Compensation Committee of the Board of Directors of Marathon to grant stock options, stock appreciation rights, stock awards, cash awards and performance awards to employees. The Plan also allows Marathon to provide equity compensation to its non-employee directors of its Board of Directors. The Plan was approved by Marathon’s shareholders on April 30, 2003. No more than 20,000,000 shares of common stock may be issued under the Plan, and no more than 8,500,000 of those shares may be used for awards other than stock options or stock appreciation rights. Shares subject to awards that are forfeited, terminated, expire unexercised, settled in cash, exchanged for other awards, tendered to satisfy the purchase price of an award, withheld to satisfy tax obligations or otherwise lapse again become available for awards.

The Plan replaced the 1990 Stock Plan, the Non-Officer Restricted Stock Plan, the Non-Employee Director Stock Plan, the deferred stock benefit provision of the Deferred Compensation Plan for Non-Employee Directors, the Senior Executive Officer Annual Incentive Compensation Plan, and the Annual Incentive Compensation Plan (collectively, the “Prior Plans”). No new grants will be made from the Prior Plans on or after April 30, 2003, with the exception of a maximum of 262,500 shares that may be required to be granted in order to fulfill the terms of officers’ performance-based restricted stock awards under the 1990 Plan. Any other awards previously granted under the Prior Plans shall continue to vest and/or be exercisable in accordance with their original terms and conditions.

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Stock options represent the right to purchase shares of stock at the fair market value of the stock on the date of grant. Certain options are granted with a tandem stock appreciation right, which allows the recipient to instead elect to receive cash and/or common stock equal to the excess of the fair market value of shares of common stock, as determined in accordance with the plan, over the option price of shares. Most stock options granted under the Plan vest ratably over a three-year period and all expire 10 years from the date they are granted.

The Compensation Committee grants stock-based Performance Awards to officers under the Plan. The stock-based Performance Awards represent shares of common stock that are subject to forfeiture provisions and restrictions on transfer. Those restrictions may be removed if certain pre-established performance measures are met. The stock-based Performance Awards granted under the Plan generally vest over a thirty-three month service period.

Marathon also grants restricted stock to certain non-officer employees under the Plan. Participants are awarded restricted stock by the Salary and Benefits Committee based on their performance within certain guidelines. The restricted stock awards vest in one-third increments over a three-year period, contingent upon the recipient’s continued employment. Prior to vesting, the restricted stock recipients have the right to vote such stock and receive dividends thereon. The nonvested shares are not transferable and are retained by Marathon until they vest.

Unearned compensation is charged to equity when restricted stock and performance shares are granted. Compensation expense is recognized over the balance of the vesting period and is adjusted if conditions of the restricted stock or performance share grant are not met. Amounts related to the performance-based restricted stock awards under the 1990 Plan are subsequently adjusted for changes in the market value of the underlying stock.

Effective January 1, 2003, Marathon applied the fair value based method of accounting to future grants and any modified grants for stock-based compensation. All prior outstanding and unvested awards continue to be accounted for under the intrinsic value method. The following net income and per share data illustrates the effect on net income and net income per share if the fair value method had been applied to all outstanding and unvested awards in each period.

(In millions, except per share data)	2003			2002			2001
Net income applicable to Common Stock
As reported	$	1,321		$	516		$	377
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		23			5			5
Deduct: Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects		(17	)		(16	)		(11	)
Pro forma net income applicable to Common Stock	$	1,327		$	505		$	371
Basic and diluted net income per share
– As reported	$	4.26		$	1.66		$	1.22
– Pro forma	$	4.28		$	1.63		$	1.20

The above pro forma amounts were based on a Black-Scholes option-pricing model, which included the following information and assumptions:

(In millions, except per share data)	2003			2002			2001
Weighted-average grant-date exercise price per share	$	25.58		$	28.12		$	32.52
Expected annual dividends per share	$	.97		$	.92		$	.92
Expected life in years		5			5			5
Expected volatility		34	%		35	%		34	%
Risk free interest rate		3.0	%		4.5	%		4.9	%
Weighted-average grant-date fair value of options granted during the year, as calculated from above	$	5.37		$	7.79		$	9.45

Concentrations of credit risk – Marathon is exposed to credit risk in the event of nonpayment by counterparties, a significant portion of which are concentrated in energy related industries. The creditworthiness of customers and other counterparties is subject to continuing review, including the use of master netting agreements, where appropriate. While no single customer accounts for more than 10% of annual revenues, Marathon has significant exposures to United States Steel arising from the Separation. These exposures are discussed in Note 3.

Reclassifications – Certain reclassifications of prior years’ data have been made to conform to 2003 classifications.

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2. New Accounting Standards

Effective January 1, 2003, Marathon adopted Statement of Financial Accounting Standards No. 143 “Accounting for Asset Retirement Obligations” (“SFAS No. 143”). This statement requires that the fair value of an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The present value of the estimated asset retirement cost is capitalized as part of the carrying amount of the long-lived asset. Previous accounting standards used the units-of-production method to match estimated future retirement costs with the revenues generated from the producing assets. In contrast, SFAS No. 143 requires depreciation of the capitalized asset retirement cost and accretion of the asset retirement obligation over time. The depreciation will generally be determined on a units-of-production basis over the life of the field, while the accretion to be recognized will escalate over the life of the producing assets, typically as production declines.

For Marathon, asset retirement obligations primarily relate to the abandonment of oil and gas producing facilities. While assets such as refineries, crude oil and product pipelines, and marketing assets have retirement obligations covered by SFAS No. 143, certain of those obligations are not recognized since the fair value cannot be estimated due to the uncertainty of the settlement date of the obligation.

The transition adjustment related to adopting SFAS No. 143 on January 1, 2003, was recognized as a cumulative effect of a change in accounting principle. The cumulative effect on net income of adopting SFAS No. 143 was a net favorable effect of $4 million, net of tax of $4 million. At the time of adoption, total assets increased $120 million, and total liabilities increased $116 million. The amounts recognized upon adoption are based upon numerous estimates and assumptions, including future retirement costs, future recoverable quantities of oil and gas, future inflation rates and the credit-adjusted risk-free interest rate. Changes in asset retirement obligations during the year were:

(In millions)	2003			Pro forma 2002(a)
Asset retirement obligations as of January 1	$	339		$	316
Liabilities incurred during 2003(b)		32			–
Liabilities settled during 2003(c)		(42	)		–
Accretion expense (included in depreciation, depletion and amortization)		20			23
Revisions of previous estimates		41			–
Asset retirement obligations as of December 31	$	390		$	339

^(a) Pro forma data as if SFAS No. 143 had been adopted on January 1, 2002. If adopted, income before cumulative effect of changes in accounting principles for 2002 would have been increased by $1 million and there would have been no impact on earnings per share.

^(b) Includes $12 million related to the acquisition of Khanty Mansiysk Oil Corporation in 2003.

^(c) Includes $25 million associated with assets sold in 2003.

In the second quarter of 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 145 “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections” (“SFAS No. 145”). Effective January 1, 2003, Marathon adopted the provisions relating to the classification of the effects of early extinguishment of debt in the consolidated statement of income. As a result, losses of $53 million from the early extinguishment of debt in 2002, which were previously reported as an extraordinary item (net of tax of $20 million), have been reclassified into income before income taxes. The adoption of SFAS No. 145 had no impact on net income for 2002.

Effective January 1, 2003, Marathon adopted Statement of Financial Accounting Standards No. 146 “Accounting for Exit or Disposal Activities” (“SFAS No. 146”). SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. There were no impacts upon the initial adoption of SFAS No. 146.

Effective January 1, 2003, Marathon adopted the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 “Accounting for Stock-Based Compensation” (“SFAS No. 123”). Statement of Financial Accounting Standards No. 148 “Accounting for Stock-Based Compensation – Transition and Disclosure” (“SFAS No. 148”), an amendment of SFAS No. 123, provides alternative methods for the transition of the accounting for stock-based compensation from the intrinsic value method to the fair value method. Marathon has applied the fair value method to grants made, modified or settled on or after January 1, 2003. The impact on Marathon’s 2003 net income was not materially different than under previous accounting standards.

The FASB issued Statement of Financial Accounting Standards No. 149 “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” on April 30, 2003. The Statement is effective for derivative contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The adoption of this Statement did not have an effect on Marathon’s financial position, cash flows or results of operations.

The FASB issued Statement of Financial Accounting Standards No. 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” on May 30, 2003. The adoption of this Statement, effective July 1, 2003, did not have a material effect on Marathon’s financial position or results of operations.

Effective January 1, 2003, FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”), requires the fair-value

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measurement and recognition of a liability for the issuance or modification of certain guarantees. There were no cumulative effect adjustments necessary upon the initial adoption of FIN 45. Enhanced disclosure requirements apply to both new and existing guarantees subject to FIN 45. See Note 28 for outstanding guarantees.

FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46R”), identifies certain off-balance sheet arrangements that meet the definition of a variable interest entity (“VIE”). The primary beneficiary of a VIE is the party that is exposed to the majority of the risks and/or returns of the VIE. The primary beneficiary is required to consolidate the VIE. In addition, more extensive disclosure requirements apply to the primary beneficiary, as well as other significant investors. FIN 46R was effective immediately for VIE’s created after January 31, 2003. For special-purposes entities (“SPEs”) created prior to February 1, 2003, FIN 46R is effective at the first interim or annual reporting period ending after December 15, 2003, or December 31, 2003 for Marathon. For non-SPE’s created prior to February 1, 2003, FIN 46R is effective for Marathon as of March 31, 2004. The adoption of this interpretation did not and is not expected to have any effect on Marathon’s financial statements.

The FASB issued Statement of Financial Accounting Standard Statement No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits”, effective for interim periods beginning after December 15, 2003. This statement retains the disclosure requirements contained in SFAS Statement No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits”, which it replaces, but requires additional disclosures about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. Certain required disclosures of information relating to foreign plans and estimated future benefit payments of all defined benefit plans have a delayed effective date for fiscal years ending after June 15, 2004. Marathon has elected earlier application of the entire disclosure provisions of this Statement.

On January 12, 2004, the FASB released FASB Staff Position No. FAS 106-1 (“FSP 106-1”) “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” (“the Act”). Due to uncertainties as to the effect of the provisions of the Act and certain accounting issues raised by the Act that are not addressed by Statement of Financial Accounting Standards No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions”, FSP 106-1 allows plan sponsors to elect a one-time deferral of the accounting for the Act. Marathon has elected to apply the one-time deferral until further guidance is provided by the FASB or the remeasurement of plan assets and obligations occurs subsequent to January 31, 2004. Accordingly, any measures of accumulated postretirement benefit obligation or net periodic postretirement benefit cost in the financial statements and accompanying notes does not reflect the effects of the Act on Marathon’s plans.

Effective January 1, 2003, Marathon adopted Emerging Issues Task Force (“EITF”) Abstract No. 02-16 “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor” (“EITF 02-16”), which requires rebates from vendors to be recorded as reductions to cost of revenues. Restatement of prior year results is permitted but not required. Rebates from vendors of $159 million for 2003 are recorded as a reduction to cost of revenues. Rebates from vendors of $169 million and $149 million for 2002 and 2001 are recorded in sales and other operating revenues. There was no effect on net income related to the adoption of EITF 02-16.

At the May 2003 EITF meeting, a consensus was reached on EITF Abstract No. 01-8, “Determining Whether an Arrangement Is a Lease” (“EITF 01-8”). This guidance, under certain conditions, modifies the accounting for agreements that historically have not been considered leases. EITF 01-8 is effective for all arrangements that are agreed upon, committed to, or modified after July 1, 2003. The adoption of EITF 01-08 did not have a material effect on Marathon’s financial position or results of operations.

Since the issuance of Statement of Financial Accounting Standards No. 133 “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”), as amended by SFAS Nos. 137 and 138, FASB has issued several interpretations. As a result, Marathon has recognized in income the effect of changes in the fair value of two long-term natural gas sales contracts in the United Kingdom. As of January 1, 2002, Marathon recognized a favorable cumulative effect of a change in accounting principle of $13 million, net of tax of $7 million.

3. Information about United States Steel

The Separation – On December 31, 2001, in a tax-free distribution to holders of Steel Stock, Marathon exchanged the common stock of United States Steel for all outstanding shares of Steel Stock on a one-for-one basis. The net assets of United States Steel at Separation were approximately the same as the net assets attributable to Steel Stock immediately prior to the Separation, except for a value transfer of $900 million in the form of additional net debt and other financings retained by Marathon. During the last six months of 2001, United States Steel completed a number of financings so that, upon Separation, the net debt and other financings of United States Steel as a separate legal entity would approximate the net debt and other financings attributable to Steel Stock. At December 31, 2001, the net debt and other financings of United States Steel was $54 million less than the net debt and other financings attributable to the Steel Stock, adjusted for the value transfer and certain one-time items related to the Separation. On February 6, 2002, United States Steel made a payment to Marathon of $54 million, plus applicable interest, to settle this difference.

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In connection with the Separation, Marathon and United States Steel entered into a number of agreements, including:

Financial Matters Agreement – Marathon and United States Steel have entered into a Financial Matters Agreement that provides for United States Steel’s assumption of certain industrial revenue bonds and certain other financial obligations of Marathon. The Financial Matters Agreement also provides that, on or before the tenth anniversary of the Separation, United States Steel will provide for Marathon’s discharge from any remaining liability under any of the assumed industrial revenue bonds.

Under the Financial Matters Agreement, United States Steel has all of the existing contractual rights under the leases assumed from Marathon, including all rights related to purchase options, prepayments or the grant or release of security interests. However, United States Steel has no right to increase amounts due under or lengthen the term of any of the assumed leases, other than extensions set forth in the terms of any of the assumed leases.

United States Steel is the sole general partner of Clairton 1314B Partnership, L.P. (Clairton 1314B), which owns certain cokemaking facilities formerly owned by United States Steel. Marathon has guaranteed to the limited partners all obligations of United States Steel under the partnership documents. The Financial Matters Agreement requires United States Steel to use commercially reasonable efforts to have Marathon released from its obligations under this guarantee. United States Steel may dissolve the partnership under certain circumstances, including if it is required to fund accumulated cash shortfalls of the partnership in excess of $150 million. In addition to the normal commitments of a general partner, United States Steel has indemnified the limited partners for certain income tax exposures.

The Financial Matters Agreement requires Marathon to use commercially reasonable efforts to assure compliance with all covenants and other obligations to avoid the occurrence of a default or the acceleration of the payment on the assumed obligations.

United States Steel’s obligations to Marathon under the Financial Matters Agreement are general unsecured obligations that rank equal to United States Steel’s accounts payable and other general unsecured obligations. The Financial Matters Agreement does not contain any financial covenants and United States Steel is free to incur additional debt, grant mortgages on or security interests in its property and sell or transfer assets without Marathon’s consent.

Tax Sharing Agreement – Marathon and United States Steel have entered into a Tax Sharing Agreement that reflects each party’s rights and obligations relating to payments and refunds of income, sales, transfer and other taxes that are attributable to periods beginning prior to and including the Separation Date and taxes resulting from transactions effected in connection with the Separation.

The Tax Sharing Agreement incorporates the general tax sharing principles of the former tax allocation policy. In general, Marathon and United States Steel, will make payments between them such that, with respect to any consolidated, combined or unitary tax returns for any taxable period or portion thereof ending on or before the Separation Date, the amount of taxes to be paid by each of Marathon and United States Steel will be determined, subject to certain adjustments, as if the former groups each filed their own consolidated, combined or unitary tax return. The Tax Sharing Agreement also provides for payments between Marathon and United States Steel for certain tax adjustments that may be made after the Separation. Other provisions address, but are not limited to, the handling of tax audits, settlements and return filing in cases where both Marathon and United States Steel have an interest in the results of these activities.

A preliminary settlement for the calendar year 2001 federal income taxes, which would have been made in March 2002 under the former tax allocation policy, was made immediately prior to the Separation at a discounted amount to reflect the time value of money. Under the preliminary settlement for calendar year 2001, United States Steel received approximately $440 million from Marathon immediately prior to Separation arising from the application of the tax allocation policy. This policy provided that United States Steel would receive the benefit of tax attributes (principally net operating losses and various tax credits) that arose out of its business and which were used on a consolidated basis.

Additionally, pursuant to the Tax Sharing Agreement, Marathon and United States Steel have agreed to protect the tax-free status of the Separation. Marathon and United States Steel each covenant that during the two-year period following the Separation, it will not cease to be engaged in an active trade or business. Each party has represented that there is no plan or intention to liquidate such party, take any other actions inconsistent with the information and representations set forth in the ruling request filed with the IRS or sell or otherwise dispose of its assets (other than in the ordinary course of business) during the two-year period following the Separation. To the extent that a breach of a representation or covenant results in corporate tax being imposed, the breaching party, either Marathon or United States Steel, will be responsible for the payment of the corporate tax.

In the fourth quarter 2003, in accordance with the terms of the tax sharing agreement, Marathon paid $16 million to United States Steel in connection with the settlement with the Internal Revenue Service of the consolidated federal income tax returns of USX Corporation for the years 1992 through 1994. Included in discontinued operations in 2003 is an $8 million adjustment to the liabilities to United States Steel under this tax sharing agreement.

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Relationship between Marathon and United States Steel after the Separation – As a result of the Separation, Marathon and United States Steel are separate companies, and neither has any ownership interest in the other. Thomas J. Usher is chairman of the board of both companies, and as of December 31, 2003, four of the ten remaining members of Marathon’s board of directors are also directors of United States Steel.

Sales to United States Steel in 2003 and 2002 were $31 million and $14 million, primarily for natural gas. Purchases from United States Steel in 2003 and 2002 were $14 million and $12 million, primarily for raw materials. Management believes that transactions with United States Steel were conducted under terms comparable to those with unrelated parties.

In the fourth quarter of 2002, Marathon cancelled the unvested restricted stock awards held by certain former officers and provided each with an appropriate cash settlement. The total cost of the settlement was $5 million.

Discontinued operations presentation – Marathon has accounted for the business of United States Steel as a discontinued operation. The loss from discontinued operations for the period ended December 31, 2001 includes the net loss attributable to Steel Stock for the year, adjusted for corporate administrative expenses and interest expense (net of income tax effects) which may not be allocated to discontinued operations under generally accepted accounting principles and the loss on disposition of United States Steel, which is the excess of the net investment in United States Steel over the aggregate fair market value of the outstanding shares of the Steel Stock at the time of the Separation. Because operating and investing activities are separately identifiable to each of Marathon and United States Steel, such amounts have been separately disclosed in the statement of cash flows. Financing activities were managed on a centralized, consolidated basis. Therefore they have been reflected on a consolidated basis in the statement of cash flows.

Transactions related to invested cash, debt and related interest and other financing costs, and preferred stock and related dividends were attributed to discontinued operations based on the cash flows of United States Steel for the periods presented and the initial capital structure attributable to Steel Stock. However, certain limitations on the amount of interest expense allocated to discontinued operations are required by generally accepted accounting principles. Corporate general and administrative costs were allocated to discontinued operations based upon utilization. Other corporate general and administrative costs attributable to Steel Stock that were allocated using methods which considered certain measures of business activities, such as employment, investments and revenues, are not permitted to be classified as discontinued operations under generally accepted accounting principles. Income taxes were allocated to discontinued operations in accordance with Marathon’s tax allocation policy. In general, such policy provided that the consolidated tax provision and related tax payments or refunds were allocated to discontinued operations based principally upon the financial income, taxable income, credits, preferences and other amounts directly related to United States Steel.

The results of operations of United States Steel, subject to the limitations described above, have been reclassified as discontinued operations for all periods presented in the Consolidated Statement of Income and are summarized as follows:

(In millions)	2001
Revenues and other income	$	6,375
Costs and expenses		6,755
Loss from operations		(380	)
Net interest and other financing costs		101
Loss before income taxes		(481	)
Credit for estimated income taxes		(312	)
Net loss	$	(169	)

The computation of the loss on disposition of United States Steel on December 31, 2001 was as follows:

(In millions)
Market value of Steel Stock (89,197,740 shares of stock issued and outstanding at $18.11 per share)	$	1,615
Less:
Net investment in United States Steel		2,564
Costs associated with the Separation, net of tax		35
Loss on disposition of United States Steel	$	(984	)

Amounts receivable from or payable to United States Steel arising from the Separation – As previously discussed, Marathon remains primarily obligated for certain financings for which United States Steel has assumed responsibility for repayment under the terms of the Separation. When United States Steel makes payments on the principal of these financings, both the receivable and the obligation will be reduced.

F-16

At December 31, 2003 and 2002, amounts receivable or payable to United States Steel were included in the balance sheet as follows:

(In millions) December 31	2003		2002
Receivables:
Current:
Receivables related to debt and other obligations for which United States Steel has assumed responsibility for repayment	$	20	$	9
Noncurrent:
Receivables related to debt and other obligations for which United States Steel has assumed responsibility for repayment (a)	$	593	$	547
Payables:
Current:
Income tax settlement and related interest payable	$	4	$	28
Noncurrent:
Reimbursements payable under nonqualified employee benefit plans	$	8	$	7

^(a) Increase is due to the extension of an operating lease for equipment at United States Steel’s Clairton Works cokemaking facility which is now accounted for as a capital lease.

Marathon remains primarily obligated for $72 million of operating lease obligations assumed by United States Steel, of which $54 million has in turn been assumed by other third parties that had purchased plants and operations divested by United States Steel.

In addition, Marathon remains contingently liable for certain obligations of United States Steel. See Note 28 for additional details on these guarantees.

4. Related Party Transactions

Related parties include:

• Ashland Inc. (Ashland), which holds a 38 percent ownership interest in MAP, a consolidated subsidiary.

• Equity method investees.

Management believes that transactions with related parties were conducted under terms comparable to those with unrelated parties.

Revenues from related parties were as follows:

(In millions)	2003		2002		2001
Ashland	$	258	$	218	$	237
Equity investees:
Pilot Travel Centers LLC (PTC)		635		645		210
Other		28		6		–
Total	$	921	$	869	$	447

Related party sales to Ashland and PTC consist primarily of petroleum products.

Purchases from related parties were as follows:

(In millions)	2003		2002		2001
Ashland	$	24	$	33	$	29
Equity investees		163		145		129
Total	$	187	$	178	$	158

Receivables from related parties were as follows:

(In millions) December 31	2003		2002
Ashland	$	22	$	18
Equity investees:
PTC		16		16
Other		9		4
Total	$	47	$	38

F-17

Payables to related parties were as follows:

(In millions) December 31	2003		2002
Ashland	$	1	$	3
Equity investees		16		13
Total	$	17	$	16

MAP has a $190 million uncommitted revolving credit agreement with Ashland. Interest on borrowings is based on defined short-term borrowing rates. At December 31, 2003 and 2002, there were no borrowings against this facility. Interest paid to Ashland for borrowings under this agreement was less than $1 million for 2003, 2002 and 2001.

5. Business Combinations

On May 12, 2003, Marathon acquired Khanty Mansiysk Oil Corporation (“KMOC”) for $285 million, including the assumption of $31 million in debt. KMOC is currently developing nine oil fields in the Khanty-Mansiysk region of western Siberia in the Russian Federation. Results of operations for 2003 include the results of KMOC from May 12, 2003. The allocation of purchase price is preliminary, pending the finalization of certain contingencies. There was no goodwill associated with the purchase.

The following table summarizes the preliminary allocation of the purchase price to the assets acquired and liabilities assumed at the date of acquisition:

(In millions)
Cash	$	2
Receivables		10
Inventories		3
Investments and long-term receivables		19
Property, plant and equipment		323
Other assets		4
Total assets acquired	$	361
Current liabilities	$	20
Long-term debt		31
Asset retirement obligations		12
Deferred income taxes		42
Other liabilities		2
Total liabilities assumed	$	107
Net assets acquired	$	254

During 2002, in two separate transactions, Marathon acquired interests in the Alba Field offshore Equatorial Guinea, West Africa, and certain other related assets.

On January 3, 2002, Marathon acquired certain interests from CMS Energy Corporation for $1.005 billion. Marathon acquired three entities that own a combined 52.4% working interest in the Alba Production Sharing Contract and a net 43.2% interest in an onshore liquefied petroleum gas processing plant through an equity method investee. Additionally, Marathon acquired a 45.0% net interest in an onshore methanol production plant through an equity method investee. Results of operations for 2002 include the results of the interests acquired from CMS Energy from January 3, 2002.

On June 20, 2002, Marathon acquired 100% of the outstanding stock of Globex Energy, Inc. (“Globex”) for $155 million. Globex owned an additional 10.9% working interest in the Alba Production Sharing Contract and an additional net 9.0% interest in the onshore liquefied petroleum gas processing plant. Globex also held oil and gas interests offshore Australia, which were sold on October 28, 2003. Results of operations include the results of the interests acquired from Globex from June 20, 2002.

The CMS and Globex allocations of purchase price are final. The goodwill arising from the allocations was $175 million, which was assigned to the E&P segment. Significant factors that resulted in the recognition of goodwill include: the ability to acquire an established business with an assembled workforce and a proven track record and a strategic acquisition in a core geographic area.

Additionally, the purchase price allocated to equity method investments was $224 million higher than the underlying net assets of the investees. This excess will be amortized over the expected useful life of the underlying assets except for $81 million of goodwill relating to equity method investments.

F-18

The following table summarizes the allocation of the purchase price to the assets acquired and liabilities assumed at the date of acquisitions:

(In millions)
Receivables	$	24
Inventories		10
Investments and long-term receivables		463
Property, plant and equipment		661
Goodwill (none deductible for income tax purposes)		175
Other noncurrent assets		3
Total assets acquired	$	1,336
Current liabilities	$	33
Deferred income taxes		143
Total liabilities assumed	$	176
Net assets acquired	$	1,160

In the first quarter 2001, Marathon acquired Pennaco Energy, Inc. (Pennaco), a natural gas producer. Marathon acquired 87% of the outstanding stock of Pennaco through a tender offer completed on February 7, 2001 at $19 a share. On March 26, 2001, Pennaco was merged with a wholly owned subsidiary of Marathon. Under the terms of the merger, each share not held by Marathon was converted into the right to receive $19 in cash. The total cash purchase price of Pennaco was $506 million. The acquisition was accounted for under the purchase method of accounting. The goodwill totaled $70 million. Goodwill amortization ceased upon adoption of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” on January 1, 2002. Results of operations for 2001 include the results of Pennaco from February 7, 2001.

The following unaudited pro forma data for Marathon includes the results of operations of the above acquisitions giving effect to them as if they had been consummated at the beginning of the periods presented. The pro forma data is based on historical information and does not necessarily reflect the actual results that would have occurred nor is it necessarily indicative of future results of operations. Included in the amounts for 2002 are approximately $3 million (net of tax of $2 million) or $0.01 per share of nonrecurring legal and employee benefit costs incurred by Globex related to the acquisition.

(In millions, except per share amounts)	2003		2002
Revenues and other income	$	41,257	$	31,648
Income from continuing operations		1,005		502
Net income		1,314		511
Per share amounts applicable to Common Stock Income from continuing operations – basic and diluted		3.24		1.63
Net income – basic and diluted		4.23		1.65

6. Discontinued Operations

On October 1, 2003, Marathon sold its exploration and production operations in western Canada for $612 million. This divestiture decision was made as part of Marathon’s strategic plan to rationalize noncore oil and gas properties. The results of these operations have been reported separately as discontinued operations in Marathon’s Consolidated Statement of Income. The sale resulted in a gain of $278 million, including a tax benefit of $8 million, which has been reported in discontinued operations. Revenues applicable to the discontinued operations totaled $188 million, $165 and $60 million for 2003, 2002, and 2001, respectively. Pretax income (loss) from discontinued operations totaled $66 million, $(4) million and $(155) million for 2003, 2002 and 2001, respectively. See Note 3 for discontinued operations related to the separation of United States Steel.

F-19

7. Income Per Common Share

	2003				2002						2001
(Dollars in millions, except per share data)	Basic		Diluted		Basic			Diluted			Basic			Diluted
COMMON STOCK
Income from continuing operations	$	1,012	$	1,012	$	507		$	507		$	1,405		$	1,405
Excess redemption value of preferred securities		–		–		–			–			(1	)		(1	)
Income from continuing operations applicable to Common Stock		1,012		1,012		507			507			1,404			1,404
Expenses included in income from continuing operations applicable to Steel Stock		–		–		–			–			41			41
Income (loss) from discontinued operations		305		305		(4	)		(4	)		(1,071	)		(1,071	)
Expenses included in loss on disposition of United States Steel applicable to Steel Stock		–		–		–			–			11			11
Cumulative effect of change in accounting principle		4		4		13			13			(8	)		(8	)
Net income applicable to Common Stock	$	1,321	$	1,321	$	516		$	516		$	377		$	377
Shares of common stock outstanding (thousands):
Average number of common shares outstanding		310,129		310,129		309,792			309,792			309,150			309,150
Effect of dilutive securities – stock options		–		197		–			159			–			360
Average common shares including dilutive effect		310,129		310,326		309,792			309,951			309,150			309,510
Per share:
Income from continuing operations	$	3.26	$	3.26	$	1.63		$	1.63		$	4.54		$	4.54
Income (loss) from discontinued operations	$	.99	$	.99	$	(.01	)	$	(.01	)	$	(3.46	)	$	(3.46	)
Cumulative effect of change in accounting principle	$	.01	$	.01	$	.04		$	.04		$	(.03	)	$	(.03	)
Net income	$	4.26	$	4.26	$	1.66		$	1.66		$	1.22		$	1.22
STEEL STOCK
Loss from discontinued operations	$	–	$	–	$	–		$	–		$	(169	)	$	(169	)
Expenses included in loss from continuing operations applicable to Steel Stock		–		–		–			–			(41	)		(41	)
Expenses included in loss on disposition of United States Steel applicable to Steel Stock		–		–		–			–			(11	)		(11	)
Preferred stock dividends		–		–		–			–			(8	)		(8	)
Loss on redemption of preferred securities		–		–		–			–			(14	)		(14	)
Net loss applicable to Steel Stock	$	–	$	–	$	–		$	–		$	(243	)	$	(243	)
Shares of common stock outstanding (thousands):
Average common shares including dilutive effect		–		–		–			–			89,058			89,058
Per share:
Loss from discontinued operations	$	–	$	–	$	–		$	–		$	(1.90	)	$	(1.90	)
Net loss	$	–	$	–	$	–		$	–		$	(2.73	)	$	(2.74	)

8. Segment Information

Revenues by product line were:

(In millions)	2003		2002		2001
Refined products	$	24,092	$	19,729	$	20,841
Merchandise		2,395		2,521		2,506
Liquid hydrocarbons		10,500		6,517		6,502
Natural gas		3,796		2,362		2,801
Transportation and other products		180		166		146
Total	$	40,963	$	31,295	$	32,796

F-20

The following represents information by operating segment:

(In millions)	Exploration and Production		Refining, Marketing and Transportation		Other Energy Related Businesses		Total
2003
Revenues:
Customer	$	3,445	$	33,508	$	3,089	$	40,042
Intersegment(a)		533		97		120		750
Related parties		12		909		–		921
Total revenues	$	3,990	$	34,514	$	3,209	$	41,713
Segment income	$	1,487	$	770	$	73	$	2,330
Income from equity method investments(b)		37		82		34		153
Depreciation, depletion and amortization(c)		751		375		16		1,142
Impairments(d)		3		–		–		3
Capital expenditures(e)		971		772		133		1,876
2002
Revenues:
Customer	$	2,999	$	25,384	$	2,043	$	30,426
Intersegment(a)		712		146		79		937
Related parties		–		869		–		869
Total revenues	$	3,711	$	26,399	$	2,122	$	32,232
Segment income	$	1,038	$	356	$	78	$	1,472
Income from equity method investments		51		48		38		137
Depreciation, depletion and amortization(c)		766		364		6		1,136
Impairments(d)		13		–		–		13
Capital expenditures(e)		819		621		49		1,489
2001
Revenues:
Customer	$	3,594	$	26,778	$	1,977	$	32,349
Intersegment(a)		630		21		77		728
United States Steel(a)		21		1		8		30
Related parties		–		447		–		447
Total revenues	$	4,245	$	27,247	$	2,062	$	33,554
Segment income	$	1,351	$	1,914	$	62	$	3,327
Income from equity method investments		59		41		18		118
Depreciation, depletion and amortization(c)		821		345		4		1,170
Impairments(d)		–		1		–		1
Capital expenditures(e)		831		591		4		1,426

^(a) Management believes intersegment transactions and transactions with United States Steel were conducted under terms comparable to those with unrelated parties.

^(b) Excludes a $124 million loss on the dissolution of MKM Partners L.P., which was not allocated to segments. See Note 13.

^(c) Differences between segment totals and Marathon totals represent impairments and amounts related to corporate administrative activities.

^(d) Excludes impairments of undeveloped oil and gas properties.

^(e) Differences between segment totals and Marathon totals represent amounts related to corporate administrative activities.

The following reconciles segment income to income from operations as reported in Marathon’s consolidated statement of income:

(In millions)	2003			2002			2001
Segment income	$	2,330		$	1,472		$	3,327
Items not allocated to segments:
Administrative expenses(a)		(203	)		(194	)		(187	)
Business transformation costs		(24	)		–			–
Inventory market valuation adjustments		–			71			(71	)
Gain (loss) on ownership change in MAP		(1	)		12			(6	)
Gain on offshore lease resolution with U.S. Government		–			–			59
Gain on asset disposition		106			24			–
Loss on dissolution of MKM Partners L.P.		(124	)		–			–
Contract settlement		–			(15	)		–
Separation costs		–			–			(14	)
Total income from operations	$	2,084		$	1,370		$	3,108

^(a) Includes administrative expenses related to Steel Stock of $25 million for 2001.

F-21

Geographic Area:

The information below summarizes the operations in different geographic areas. Transfers between geographic areas are at prices that approximate market.

		Revenues
(In millions)	Year	Within Geographic Areas		Between Geographic Areas			Total			Assets(a)
United States	2003 2002 2001	$	39,377 29,930 31,468	$	–   –   –		$	39,377 29,930 31,468		$	8,061 7,904 8,033
Canada	2003 2002 2001		413 265 364		1,218 917 871			1,631 1,182 1,235			24 485 498
United Kingdom	2003 2002 2001		849 916 848		–   –   –			849 916 848			1,215 1,316 1,534
Equatorial Guinea	2003 2002 2001		119 82 –		–   –   –			119 82 –			1,656 1,018 –
Other Foreign Countries	2003 2002 2001		205 102 116		134 153 134			339 255 250			1,049 1,144 474
Eliminations	2003 2002 2001		–   –   –		(1,352 (1,070 (1,005	) ) )		(1,352 (1,070 (1,005	) ) )		–   –   –
Total	2003 2002 2001	$	40,963 31,295 32,796	$	–   –   –		$	40,963 31,295 32,796		$	12,005 11,867 10,539

(a) Includes property, plant and equipment and investments.

9. Other Items

Net interest and other financing costs

(In millions)	2003			2002		2001
Interest and other financial income:
Interest income	$	39		$	12	$	29
Foreign currency adjustments		13			8		(5	)
Total		52			20		24
Interest and other financing costs:
Interest incurred(a)		282			288		203
Less interest capitalized		41			16		26
Net interest		241			272		177
Interest on tax issues		(13	)		9		(2	)
Financing costs on preferred stock of subsidiary		–			–		11
Other		10			7		10
Total		238			288		196
Net interest and other financing costs	$	186		$	268	$	172

^(a) Excludes $34 million and $28 million paid by United States Steel in 2003 and 2002 on assumed debt.

Foreign currency transactions

Aggregate foreign currency gains (losses) were included in the income statement as follows:

(In millions)	2003			2002			2001
Net interest and other financing costs	$	13		$	8		$	(5	)
Provision for income taxes		(15	)		(10	)		8
Aggregate foreign currency gains (losses)	$	(2	)	$	(2	)	$	3

F-22

10. Income Taxes

Provisions (credits) for income taxes were:

	2003							2002							2001
(In millions)	Current		Deferred			Total		Current		Deferred			Total		Current		Deferred			Total
Federal	$	280	$	95		$	375	$	105	$	(26	)	$	79	$	706	$	(96	)	$	610
State and local		56		(4	)		52		21		33			54		86		16			102
Foreign		177		(20	)		157		166		70			236		182		(67	)		115
Total	$	513	$	71		$	584	$	292	$	77		$	369	$	974	$	(147	)	$	827

A reconciliation of federal statutory tax rate (35%) to total provisions follows:

(In millions)	2003			2002			2001
Statutory rate applied to income before income taxes	$	559		$	307		$	781
Effects of foreign operations:
Remeasurement of deferred taxes due to legislated changes(a)		–			61			–
All other, including foreign tax credits		(7	)		(12	)		(16	)
State and local income taxes after federal income tax effects		35			34			66
Credits other than foreign tax credits		(6	)		(11	)		(9	)
Effects of partially owned companies		(6	)		(6	)		(5	)
Adjustment of prior years’ federal income taxes		17			(1	)		3
Other		(8	)		(3	)		7
Total provisions	$	584		$	369		$	827

^(a) Represents a one-time deferred tax charge as a result of the enactment of a supplemental tax in the United Kingdom.

Deferred tax assets and liabilities resulted from the following:

(In millions) December 31	2003			2002
Deferred tax assets:
Net operating loss carryforwards (expiring in 2021)	$	–		$	6
Capital loss carryforwards (expiring in 2008)		67			–
State tax loss carryforwards (expiring in 2004 through 2021)		131			150
Foreign tax loss carryforwards(a)		479			442
Expected federal benefit for:
Crediting certain foreign deferred income taxes		307			331
Deducting state and foreign deferred income taxes		45			54
Employee benefits		301			259
Contingencies and other accruals		179			172
Investments in subsidiaries and equity investees		96			50
Other		126			121
Valuation allowances:
Federal		(67	)		–
State		(73	)		(78	)
Foreign		(436	)		(404	)
Total deferred tax assets(b)		1,155			1,103
Deferred tax liabilities:
Property, plant and equipment		2,014			1,947
Inventory		317			358
Prepaid pensions		96			78
Other		145			141
Total deferred tax liabilities		2,572			2,524
Net deferred tax liabilities	$	1,417		$	1,421

^(a) Includes $450 million for Norway which has no expiration date. The remainder expire 2004 through 2008.

^(b) Marathon expects to generate sufficient future taxable income to realize the benefit of the deferred tax assets. In addition, the ability to realize the benefit of foreign tax credits is based upon certain assumptions concerning future operating conditions (particularly as related to prevailing oil prices), income generated from foreign sources and Marathon’s tax profile in the years that such credits may be claimed.

F-23

Net deferred tax liabilities were classified in the consolidated balance sheet as follows:

(In millions) December 31	2003		2002
Assets:
Other current assets	$	37	$	–
Other noncurrent assets		35		35
Liabilities:
Accrued taxes		–		11
Deferred income taxes		1,489		1,445
Net deferred tax liabilities	$	1,417	$	1,421

The consolidated tax returns of Marathon for the years 1995 through 2001 are under various stages of audit and administrative review by the IRS. Marathon believes it has made adequate provision for income taxes and interest which may become payable for years not yet settled.

Pretax income from continuing operations included $453 million, $372 million and $257 million attributable to foreign sources in 2003, 2002 and 2001, respectively.

Undistributed income of certain consolidated foreign subsidiaries at December 31, 2003, amounted to $450 million. No provision for deferred U.S. income taxes has been made for these subsidiaries because Marathon intends to permanently reinvest such income in those foreign operations. If such income were not permanently reinvested, a deferred tax liability of $158 million would have been required.

See Note 3 for a discussion of the Tax Sharing Agreement between Marathon and United States Steel.

11. Business Transformation

During the third quarter of 2003, Marathon implemented an organizational realignment plan and business process improvements to further enable Marathon to focus and execute on its core business strategies by providing superior long-term value growth. This program includes streamlining Marathon’s business processes and services, realigning reporting relationships to reduce costs across all organizations, consolidating organizations in Houston and reducing the workforce.

During 2003, Marathon recorded $24 million of business transformation related costs against earnings, including $22 million in general and administrative expense and $2 million loss on assets held for sale. These charges included employee severance and benefit costs related to the elimination of approximately 400 regular employees, the majority of which were engaged in operations around the United States, relocation costs related to consolidating organizations in Houston, a pension curtailment loss, a postretirement plan curtailment gain, and fixed asset related costs.

The table below sets forth the significant components and activity in the business transformation program during 2003:

(In millions)	Business Transformation Charges (Gain)			Non-Cash Charges (Gain)			Cash Payments		Accrued Liabilities Balance at December 31, 2003
Employee severance and termination benefits	$	25		$	–		$	13	$	12
Pension plan curtailment loss		6			6			–		–
Relocation costs		5			–			–		5
Fixed asset related costs		4			2			1		1
Retiree health care plan curtailment gain		(16	)		(16	)		–		–
Total	$	24		$	(8	)	$	14	$	18

An additional charge of $51 million is expected to be incurred in 2004, including $34 million related to pension settlement.

12. Inventories

(In millions)	December 31	2003		2002
Liquid hydrocarbons and natural gas		$	674	$	689
Refined products and merchandise			1,151		1,186
Supplies and sundry items			128		109
Total		$	1,953		1,984

The LIFO method accounted for 91% and 92% of total inventory value at December 31, 2003 and 2002, respectively. Current acquisition costs were estimated to exceed the above inventory values at December 31, 2003, by approximately $655 million. Cost of revenues was reduced and income from operations was increased by $11 million in 2003, less than $1 million in 2002, and $17 million in 2001 as a result of liquidations of LIFO inventories.

F-24

13. Investments and Long-Term Receivables

(In millions)	December 31	2003		2002
Equity method investments		$	1,172	$	1,444
Other investments			3		33
Receivables due after one year			91		67
VAT receivable			13		–
Derivative assets			34		41
Deposits of restricted cash			5		43
Other			5		6
Total		$	1,323	$	1,634

Summarized financial information of investees accounted for by the equity method of accounting follows:

(In millions)	2003		2002		2001
Income data – year:
Revenues and other income	$	7,006	$	5,541	$	2,824
Operating income		435		329		332
Net income		319		264		257
Balance sheet data – December 31:
Current assets	$	619	$	537
Noncurrent assets		3,727		3,732
Current liabilities		641		548
Noncurrent liabilities		1,172		1,083

Marathon’s carrying value of its equity method investments is $96 million higher than the underlying net assets of investees. This basis difference is being amortized into expenses over the remaining useful lives of the underlying net assets.

Dividends and partnership distributions received from equity investees were $188 million in 2003, $114 million in 2002 and $95 million in 2001.

On June 30, 2003, Marathon Oil Corporation and Kinder Morgan Energy Partners, L.P. (“Kinder Morgan”) dissolved MKM Partners L.P. which had oil and gas production operations in the Permian Basin of Texas. Marathon held an 85% noncontrolling interest in the partnership. Prior to the dissolution of the partnership, Kinder Morgan acquired MKM Partners L.P.’s 12.75% interest in the SACROC unit for an undisclosed amount. The partnership recorded a loss on the disposal of SACROC of $19 million, of which Marathon’s share was $17 million. Also prior to the dissolution, Marathon recorded a $107 million impairment of its investment in MKM Partners L.P. due to an other-than-temporary decline in the fair value of the investment. The total loss recognized by Marathon related to the dissolution of MKM Partners L.P. was $124 million. The partnership’s interest in the Yates field was distributed to Marathon and Kinder Morgan upon dissolution.

14. Property, Plant and Equipment

(In millions)	December 31	2003		2002
Production		$	14,319	$	14,050
Refining			3,822		3,441
Marketing			1,926		2,047
Transportation			1,688		1,589
Other			438		340
Total			22,193		21,467
Less accumulated depreciation, depletion and amortization			11,363		11,077
Net		$	10,830	$	10,390

Property, plant and equipment includes gross assets acquired under capital leases of $49 million and $8 million at December 31, 2003 and 2002, with related amounts in accumulated depreciation, depletion and amortization of $2 million and $1 million at December 31, 2003 and 2002.

On November 3, 2003, Marathon sold its 42.45% interest in the Yates field and its 100% interest in the Yates gathering system to Kinder Morgan for $229 million and recognized a loss of $8 million. This divestiture decision was made as part of Marathon’s strategic plan to rationalize noncore oil and gas properties. The Yates field and gathering system consisted of assets of $240 million of property, plant and equipment and asset retirement obligations of $3 million.

F-25

During 2002, Marathon acquired additional interests in coalbed natural gas assets in the Powder River Basin of northern Wyoming and southern Montana from XTO Energy, Inc. (XTO) in exchange for certain oil and gas properties in eastern Texas and northern Louisiana. Additionally, 100 million cubic feet per day of long-term gas transportation capacity was released to Marathon by the original owner of the Powder River Basin interests. On July 1, 2002, Marathon completed this transaction by selling its production interests in the San Juan Basin of New Mexico to XTO for $42 million. Marathon recognized a gain of $24 million in 2002 related to this transaction.

15. Goodwill

The changes in the carrying amount of goodwill for the years ended December 31, 2003 and 2002, are as follows:

(In millions)	Exploration and Production			Refining, Marketing and Transportation		Total
Balance as of January 1, 2002	$	75		$	21	$	96
Goodwill acquired during the year		178			–		178
Balance as of December 31, 2002	$	253		$	21	$	274
Purchase price adjustment		(3	)		–		(3	)
Goodwill allocated to sale of western Canada operations		(15	)		–		(15	)
Balance as of December 31, 2003	$	235		$	21	$	256

The E&P segment tests for impairment in the second quarter of each year. The RM&T segment tests for impairment in the fourth quarter of each year. No impairment in the carrying value has been deemed necessary.

16. Intangible Assets

Intangible assets as of December 31, 2003, are as follows:

(In millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortized intangible assets
Branding agreements	$	53	$	19	$	34
Elba Island delivery rights		42		2		40
Other		40		23		17
Total	$	135	$	44	$	91
Unamortized intangible assets
Unrecognized prior service costs	$	23	$	–	$	23
Other		4		–		4
Total	$	27	$	–	$	27

Amortization expense related to intangibles during 2003 and 2002 totaled $12 million and $10 million, respectively. Estimated amortization expense for the years 2004-2008 is $12 million, $11 million, $11 million, $7 million and $5 million, respectively.

F-26

17. Derivative Instruments

The following table sets forth quantitative information by category of derivative instrument at December 31, 2003 and 2002. These amounts are reflected on a gross basis by individual derivative instrument. The amounts exclude the variable margin deposit balances held in various brokerage accounts. Marathon did not have any foreign currency contracts in place at December 31, 2003 and 2002.

	2003					2002
(In millions) December 31	Assets(a)		(Liabilities)(a)			Assets(a)		(Liabilities)(a)
Commodity Instruments
Fair Value Hedges(b):
OTC commodity swaps	$	17	$	(1	)	$	5	$	–
Cash Flow Hedges(c):
Exchange-traded commodity futures	$	–	$	–		$	3	$	(1	)
OTC commodity swaps		20		(26	)		3		(2	)
OTC commodity options		2		(23	)		12		(53	)
Non-Hedge Designation:
Exchange-traded commodity futures	$	94	$	(98	)	$	24	$	(58	)
Exchange-traded commodity options		5		(11	)		9		(11	)
OTC commodity swaps		61		(38	)		54		(32	)
OTC commodity options		5		(4	)		13		(9	)
Nontraditional Instruments(d)	$	70	$	(90	)	$	91	$	(39	)
Financial Instruments
Fair Value Hedges:
OTC interest rate swaps(e)	$	11	$	(7	)	$	12	$	–

^(a) The fair value and carrying value of derivative instruments are the same. The fair value amounts for OTC positions are determined using option-pricing models or dealer quotes. The fair values of exhange-traded positions are based on market quotes derived from major exchanges. The fair value of interest rate swaps is based on dealer quotes. Marathon’s consolidated balance sheet is reflected on a net asset/(liability) basis by brokerage firm, as permitted by the master netting agreements.

^(b) There was no ineffectiveness associated with fair value hedges for 2003 or 2002 because the hedging instrument and the existing firm commitment contracts are priced on the same underlying index. Certain derivative instruments used in the fair value hedges mature between 2004 and 2008.

^(c) The ineffective portion of changes in the fair value for cash flow hedges, on a before tax basis, for December 31, 2003 and 2002 was less than $1 million. In addition, during 2003 and 2002, losses of $8 million and gains of $23 million was recognized in revenues, respectively, as the result of a discontinuation of a portion of a cash flow hedge related to natural gas production. Of the $15 million recorded in OCI as of December 31, 2003, $17 million is expected to be reclassified to income in 2004.

^(d) Nontraditional derivative instruments are created due to netting of physical receipts and delivery volumes with the same counterparty. Also included in this category are long-term natural gas contracts in the United Kingdom in which underlying physical contract price is currently less than other available market prices.

^(e) The fair value amounts are based on dealer quotes. These fair value amounts exclude accrued interest amounts not yet settled. As of December 31, 2003 and 2002, accrued interest approximated $7 million and $1 million respectively. The net fair value of the OTC interest rate swaps as of December 31, 2003 and 2002 of $4 million and $12 million respectively, is included in long-term debt (see Note 20).

F-27

18. Fair Value of Financial Instruments

Fair value of the financial instruments disclosed herein is not necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement. The following table summarizes financial instruments, excluding derivative financial instruments disclosed in Note 17, by individual balance sheet account. Marathon’s financial instruments at December 31, 2003 and 2002 were:

	2003				2002
(In millions) December 31	Fair Value		Carrying Amount		Fair Value		Carrying Amount
Financial assets:
Cash and cash equivalents	$	1,396	$	1,396	$	488	$	488
Receivables		2,510		2,510		1,845		1,845
Receivables from United States Steel		549		613		382		556
Investments and long-term receivables		186		117		223		149
Total financial assets	$	4,641	$	4,636	$	2,938	$	3,038
Financial liabilities:
Accounts payable	$	3,369	$	3,369	$	2,857	$	2,857
Payables to United States Steel		12		12		35		35
Accrued interest		85		85		108		108
Long-term debt (including amounts due within one year)		4,740		4,181		5,008		4,486
Total financial liabilities	$	8,206	$	7,647	$	8,008	$	7,486

Fair value of financial instruments classified as current assets or liabilities approximates carrying value due to the short-term maturity of the instruments. Fair value of investments and long-term receivables was based on discounted cash flows or other specific instrument analysis. Fair value of long-term debt instruments was based on market prices where available or current borrowing rates available for financings with similar terms and maturities. Fair value of the receivables from United States Steel were estimated using market prices for United States Steel debt assuming the industrial revenue bonds are redeemed on or before the tenth anniversary of the Separation per the Financial Matters Agreement.

Marathon has a commitment to extend credit to Syntroleum Corporation (Syntroleum) that is described further in Note 28. It is not practicable to estimate the fair value because there are no quoted market prices available for transactions that are similar in nature.

19. Short-Term Debt

In November 2003, Marathon entered into a $575 million 364-day revolving credit agreement, which terminates in November 2004. Interest is based on defined short-term market rates. During the term of the agreement, Marathon is obligated to pay a facility fee on total commitments, which at December 31, 2003, was 0.10%. At December 31, 2003, there were no borrowings against this facility. Marathon has other uncommitted short-term lines of credit totaling $200 million, bearing interest at short-term market rates determined at the time of a request for borrowings against such facility. At December 31, 2003, there were no borrowings against these facilities.

MAP has a $190 million revolving credit agreement with Ashland Inc. that terminates in March 2004, as discussed in Note 4. At December 31, 2003, there were no borrowings against this facility.

F-28

20. Long-Term Debt

(In millions) December 31	2003			2002
Marathon Oil Corporation:
Revolving credit facility due 2005(a)	$	–		$	–
Commercial paper(a)		–			100
9.625% notes due 2003		–			150
7.200% notes due 2004		251			300
6.650% notes due 2006		300			300
5.375% notes due 2007(b)		450			450
6.850% notes due 2008		400			400
6.125% notes due 2012(b)		450			450
6.000% notes due 2012(b)		400			400
6.800% notes due 2032(b)		550			550
9.375% debentures due 2012		163			163
9.125% debentures due 2013		271			271
9.375% debentures due 2022		81			81
8.500% debentures due 2023		123			123
8.125% debentures due 2023		229			229
6.570% promissory note due 2006(b)		15			21
Series A Medium term notes due 2022		3			3
4.750% – 6.875% Obligations relating to Industrial Development and Environmental Improvement Bonds and Notes due 2009 – 2033(c)		494			494
Sale-leaseback financing due 2003 – 2012(d)		76			81
Capital lease obligation due 2012(e)		59			–
Consolidated subsidiaries:
All other obligations, including capital lease obligations due 2004 – 2018		47			6
Total(f)(g)		4,362			4,572
Unamortized discount		(9	)		(13	)
Fair value adjustments on notes subject to hedging(h)		4			12
Amounts due within one year		(272	)		(161	)
Long-term debt due after one year	$	4,085		$	4,410

^(a) Marathon has a $1,354 million 5-year revolving credit agreement that terminates in November 2005. Interest on the facility is based on defined short-term market rates. During the term of the agreement, Marathon is obligated to pay a variable facility fee on total commitments, which at December 31, 2003 was 0.125%. At December 31, 2003, there were no borrowings against this facility. Commercial paper is supported by the unused and available credit on the 5-year facility and, accordingly, is classified as long-term debt.

^(b) These notes contain a make whole provision allowing Marathon the right to repay the debt at a premium to market price.

^(c) United States Steel has assumed responsibility for repayment of $470 million of these obligations.

^(d) This sale-leaseback financing arrangement relates to a lease of a slab caster at United States Steel’s Fairfield Works facility in Alabama with a term through 2012. Marathon is the primary obligor under this lease. Under the Financial Matters Agreement, United States Steel has assumed responsibility for all obligations under this lease. This lease is an amortizing financing with a final maturity of 2012, subject to additional extensions.

^(e) This obligation relates to a lease of equipment at United States Steel’s Clairton Works cokemaking facility in Pennsylvania with a term through 2012. Marathon is the primary obligor under this lease. Under the Financial Matters Agreement, United States Steel has assumed responsibility for all obligations under this lease. This lease is an amortizing financing with a final maturity of 2012, subject to additional extensions. This equipment has been subleased to Clairton 1314B, L.P. through July 2, 2004.

^(f) Required payments of long-term debt for the years 2005-2008 are $16 million, $315 million, $474 million and $417 million, respectively. Of these amounts, payments assumed by United States Steel are $7 million, $11 million, $21 million and $14 million, respectively.

^(g) In the event of a change in control of Marathon, as defined in the related agreements, debt obligations totaling $1,837 million at December 31, 2003, may be declared immediately due and payable.

^(h) See Note 17 for information on interest rate swaps.

F-29

21. Deferred Credits and Other Liabilities

Deferred credits and other liabilities included the following:

(In millions) December 31	2003		2002
Deferred credits:
Deferred revenue on gas supply contracts	$	27	$	36
Deferred credits on crude oil contracts		30		29
Deferred gain on formation of Centennial Pipeline LLC		12		12
Other deferred credits		1		7
Other liabilities:
Environmental remediation liabilities		82		51
Accrued LNG facility costs		22		15
Derivative liabilities		22		–
Indemnification payable		9		–
Guarantees		4		–
Royalties payable		–		6
Other		24		12
Total deferred credits and other liabilities	$	233	$	168

22. Preferred Securities Formerly Outstanding

USX Capital LLC, a former wholly owned subsidiary of Marathon, had sold 10,000,000 shares (carrying value of $250 million) of 8³/4% Cumulative Monthly Income Preferred Shares (MIPS) (liquidation preference of $25 per share) in 1994. On December 31, 2001, USX Capital LLC called for redemption all of the outstanding MIPS. In December 2001, $27 million of MIPS were exchanged for debt securities of United States Steel. At the redemption date, USX Capital LLC paid $25.18 per share reflecting the redemption price of $25 per share, plus a cash payment for accrued but unpaid dividends through the redemption date. After the redemption date, the MIPS ceased to accrue dividends and only represented the right to receive the redemption price.

In 1997, Marathon exchanged approximately 3.9 million, $50 face value, 6.75% Convertible Quarterly Income Preferred Securities of USX Capital Trust I (QUIPS), a Delaware statutory business trust, for an equivalent number of shares of its 6.50% Cumulative Convertible Preferred Stock (6.50% Preferred Stock). In December 2001, $12 million of QUIPS were exchanged for debt securities of United States Steel. At the time of Separation, all outstanding QUIPS became redeemable at their face value plus accrued but unpaid distributions. The QUIPS were included in the net investment in United States Steel. In early January 2002, Marathon paid $185 million to retire the QUIPS.

Marathon had issued 6.50% Preferred Stock and prior to the Separation, had 2,209,042 shares (stated value of $1.00 per share; liquidation preference of $50.00 per share) outstanding. In December 2001, $10 million of 6.50% Preferred Stock were exchanged for debt securities of United States Steel. At the time of Separation, all outstanding shares of the 6.50% Preferred Stock were converted into the right to receive $50.00 in cash. In early January 2002, Marathon paid $110 million to retire the 6.50% Preferred Stock.

In 1998, in conjunction with the acquisition of Tarragon Oil and Gas Limited, Marathon issued 878,074 Exchangeable Shares, which were exchangeable solely on a one-for-one basis into Common Stock. Holders of Exchangeable Shares were entitled to receive dividend payments equivalent to dividends declared on Common Stock. The Exchangeable Shares were exchangeable at any time at the option of holder, could be called for early redemption under certain circumstances and were automatically redeemable on August 11, 2003. The remaining outstanding Exchangeable Shares were redeemed early in exchange for Common Stock on August 11, 2001.

F-30

23. Supplemental Cash Flow Information

(In millions)	2003			2002			2001
Net cash provided from operating activities from continuing operations included:
Interest and other financing costs paid (net of amount capitalized)	$	254		$	258		$	165
Income taxes paid to taxing authorities		537			173			437
Income tax settlements paid to United States Steel		16			7			819
Commercial paper and revolving credit arrangements–net:
Commercial paper – issued	$	4,733		$	10,669		$	389
– repayments		(4,833	)		(10,569	)		(465	)
Credit agreements – borrowings		3			3,700			925
– repayments		(34	)		(4,175	)		(750	)
Ashland credit agreements – borrowings		182			266			112
– repayments		(182	)		(266	)		(112	)
Other credit arrangements – net		–			–			(150	)
Total	$	(131	)	$	(375	)	$	(51	)
Non cash investing and financing activities:
Common Stock issued for dividend reinvestment and employee stock plans	$	4		$	9		$	23
Common Stock issued for Exchangeable Shares		–			–			9
Capital expenditures for which payment has been deferred		–			–			29
Asset retirement costs capitalized		61			–			–
Liabilities assumed in connection with capital expenditures		–			10			–
Debt payments assumed by United States Steel		5			4			–
Capital lease obligations:
Asset acquired		41			–			–
Assumed by United States Steel		59			–			–
Disposal of assets:
Exchange of Steel Stock for net investment in United States Steel		–			–			1,615
Exchange of oil and gas producing properties for Powder River Basin assets		–			42
Notes received in asset disposal transactions		–			5			–
Liabilities assumed in acquisitions:
KMOC		107			–			–
Equatorial Guinea interests		–			179			–
Pennaco		–			–			309
Net assets contributed to joint ventures		42			–			571
Joint venture dissolution		212			–			–
Preferred stocks exchanged for debt		–			–			49
Liabilities assumed by buyer of discontinued operations		212			–			–

F-31

24. Pensions and Other Postretirement Benefits

The following summarizes the obligations and funded status for plans other than those sponsored by MAP:

	Pension Benefits												Other Benefits
	2003						2002						2003			2002
(In millions)	U.S.			Int’l			U.S.			Int’l(a)
Change in benefit obligations
Benefit obligations at January 1	$	455		$	156		$	430					$	433		$	374
Service cost		23			7			17						6			5
Interest cost		31			11			27						27			25
Plan amendment		–			–			–						(97	)		–
Actuarial losses		64			93			7						52			55
Curtailments		1			–			–						(4	)		–
Benefits paid		(34	)		(5	)		(26	)					(30	)		(26	)
Benefit obligations at December 31	$	540		$	262		$	455					$	387		$	433
Change in plan assets
Fair value of plan assets at January 1	$	413		$	104		$	502
Actual return on plan assets		81			32			(48	)
Employer contribution		–			8			–
Trustee distributions(b)		–			–			(18	)
Benefits paid from plan assets		(31	)		(5	)		(23	)
Fair value of plan assets at December 31	$	463		$	139		$	413
Funded status of plans at December 31(c)	$	(77	)	$	(123	)	$	(42	)	$	(48	)	$	(387	)	$	(433	)
Unrecognized net transition asset		(4	)		–			(6	)		–			–			–
Unrecognized prior service costs (benefits)		20			–			27			–			(81	)		(3	)
Unrecognized net losses		230			114			216			48			162			122
Prepaid (accrued) benefit cost	$	169		$	(9	)	$	195		$	–		$	(306	)	$	(314	)
Amounts recognized in the statement of financial position:
Prepaid benefit cost	$	181		$	–		$	201		$	–		$	–		$	–
Accrued benefit liability		(21	)		(93	)		(20	)		(32	)		(306	)		(314	)
Accumulated other comprehensive income(d)		9			84			14			32			–			–
Prepaid (accrued) benefit cost	$	169		$	(9	)	$	195		$	–		$	(306	)	$	(314	)

The accumulated benefit obligation for all defined benefit pension plans was $658 million and $488 million at December 31, 2003 and 2002, respectively. Other Benefits in the above table is not applicable to Marathon’s foreign subsidiaries.

^(a) The reconciliations of the change in benefit obligations and fair value of plan assets for 2002 were not available for the international plans. The benefit obligation and fair value of plan assets at December 31, 2002 were $156 million and $104 million, respectively.

^(b) Represents transfers of excess pension assets to fund retiree health care benefits accounts under Section 420 of the Internal Revenue Code.

^(c) Includes several plans that have accumulated benefit obligations in excess of plan assets:

	December 31
	2003					2002
	U.S.			Int’l		U.S.			Int’l
Projected benefit obligations	$	(35	)	(262	)	$	(26	)	$	(143	)
Accumulated benefit obligations		(21	)	(233	)		(19	)		(127	)
Fair value of plan assets		–		139			–			95

^(d) Excludes income tax effects.

F-32

The following summarizes the obligations and funded status for those plans sponsored by MAP:

	Pension Benefits						Other Benefits
(In millions)	2003			2002			2003			2002
Change in benefit obligations
Benefit obligations at January 1	$	831		$	727		$	295		$	216
Service cost		64			49			15			11
Interest cost		59			47			19			15
Actuarial losses		144			49			21			56
Benefits paid		(47	)		(41	)		(4	)		(3	)
Benefit obligations at December 31	$	1,051		$	831		$	346		$	295
Change in plan assets
Fair value of plan assets at January 1	$	356		$	440
Actual return on plan assets		75			(43	)
Employer contribution		89			–
Benefits paid from plan assets		(47	)		(41	)
Fair value of plan assets at December 31	$	473		$	356
Funded status of plans at December 31(a)		(578	)	$	(475	)	$	(346	)	$	(295	)
Unrecognized net transition asset		(3	)		(5	)		–			–
Unrecognized prior service costs (credits)		21			22			(33	)		(40	)
Unrecognized net losses		411			323			98			82
Accrued benefit cost	$	(149	)	$	(135	)	$	(281	)	$	(253	)
Amounts recognized in the statement of financial position:
Accrued benefit liability	$	(248	)	$	(197	)	$	(281	)	$	(253	)
Intangible asset		23			24			–			–
Accumulated other comprehensive loss(b)		76			38			–			–
Accrued benefit cost	$	(149	)	$	(135	)	$	(281	)	$	(253	)

The accumulated benefit obligation for all defined benefit pension plans was $721 million and $553 million at December 31, 2003 and 2002, respectively.

^(a) All MAP plans have accumulated benefit obligations in excess of plan assets:

	December 31
	2003			2002
Projected benefit obligations	$	(1,051	)	$	(831	)
Accumulated benefit obligations		(721	)		(553	)
Fair value of plan assets		473			356
(b)    Excludes the effects of minority interest and income taxes.

The following information disclosed thru page F-35 relates to the plans sponsored by Marathon and MAP.

	Pension Benefits												Other Benefits
	2003						2002			2001			2003			2002			2001
(In millions)	U.S.			Int’l
Components of net periodic benefit cost
Service cost	$	87		$	7		$	66		$	55		$	21		$	16		$	14
Interest cost		90			11			74			68			46			40			42
Expected return on plan assets		(84	)		(7	)		(100	)		(107	)		–			–			–
Amortization – net transition gain		(4	)		–			(4	)		(4	)		–			–			–
– prior service costs (credits)		5			–			5			5			(10	)		(8	)		(7	)
– actuarial loss		32			5			7			–			12			4			4
Multi-employer and other plans(a)		2			–			7			5			2			2			–
Curtailment and termination losses (gains)		6	(b)		1			–			3			(16	)(b)		–			–
Net periodic benefit cost(c)	$	134		$	17		$	55		$	25		$	55		$	54		$	53

^(a) International net periodic pension cost of $5 million and $3 million for years ending 2002 and 2001, respectively, were disclosed in the aggregate as other plans.

^(b) Includes business transformation costs.

^(c) Includes MAP’s net periodic pension cost of $106 million, $54 million, $38 million and other benefits cost of $34 million, $23 million and $17 million for 2003, 2002, and 2001 respectively.

F-33

	Pension Benefits												Other Benefits
	2003				2002				2001				2003	2002	2001
	U.S.		Int’l		U.S.		Int’l		U.S.		Int’l
Increase in minimum liability included in other comprehensive income, excluding tax effects and minority interest	$	33	$	52	$	31	$	32	$	4	$	–	N/A	N/A	N/A

Plan Assumptions

	Pension Benefits												Other Benefits
	2003				2002				2001				2003		2002		2001
	U.S.		Int’l		U.S.		Int’l		U.S.		Int’l
Weighted-average assumptions used to determine benefit obligation at December 31:
Discount Rate	6.25	%	5.40	%	6.50	%	6.75	%	7.00	%	6.00	%	6.25	%	6.50	%	7.00	%
Rate of compensation increase	4.50	%	4.50	%	4.50	%	4.25	%	5.00	%	4.50	%	4.50	%	4.50	%	5.00	%
Weighted average actuarial assumptions used to determine net periodic benefit cost for years ended December 31:
Discount rate	6.50	%	5.50	%	7.00	%	6.00	%	7.50	%	6.00	%	6.50	%	7.00	%	7.50	%
Expected long-term return on plan assets	9.00	%	7.00	%	9.50	%	7.52	%	9.50	%	6.85	%	N/A		N/A		N/A
Rate of compensation increase	4.50	%	4.25	%	5.00	%	4.50	%	5.00	%	4.50	%	4.50	%	5.00	%	5.00	%

Expected Long-Term Return on Plan Assets

U.S. Plans

Historical markets are studied and long-term historical relationships between equities and fixed income are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Certain components of the asset mix are modeled with various assumptions regarding inflation, debt returns and stock yields. Peer data and historical returns are reviewed to check for reasonability and appropriateness.

International Plans

The overall expected long-term return on plan assets is derived as the weighted average of the expected returns on the different asset classes, weighted by holdings as of year end. The long term rate of return on equity investments is assumed to be 2.5% greater than the yield on local government stock. Expected returns on debt securities are taken directly at market yields and cash is taken at the local currency base rate.

Assumed health care cost trend rates at December 31:

	2003		2002
Health care cost trend rate assumed for next year	9.5	%	10.0	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	5	%	5	%
Year that the rate reaches the ultimate trend rate	2012		2012

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan.

A one-percentage-point change in assumed health care cost trend rates would have the following effects:

(In millions)	1-Percentage- Point Increase		1-Percentage- Point Decrease
Effect on total of service and interest cost components	$	12	$	(9	)
Effect on other postretirement benefit obligations		104		(84	)

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Plan Assets

The pension plans weighted-average asset allocations at December 2003 and 2002, by asset category are as follows:

	Plan Assets at December 31
	2003				2002
Asset Category	U.S.		Int’l		U.S.		Int’l
Equity securities	77	%	76	%	77	%	73	%
Debt securities	22	%	23	%	22	%	24	%
Real estate	1	%	–		1	%	1	%
Other	–		1	%	–		2	%
Total	100	%	100	%	100	%	100	%

Plan Investment Policies and Strategies

U.S. Plans

The investment policy reflects the funded status of the plan and the future ability of the Company to make further contributions. Historical performance results and future expectations suggest that common stocks will provide higher total investment returns than fixed-income securities over a long-term investment horizon. As a result, equity investments will likely continue to exceed 50% of the value of the fund. Accordingly, bond and other fixed income investments will comprise the remainder of the fund. Short term investments shall reflect the liquidity requirements for making pension payments. Management of the plans’ assets is delegated to the United States Steel and Carnegie Pension Fund. Investments are diversified by industry and type, limited by grade and maturity. The policy prohibits investments in any securities in the steel industry and allows derivatives subject to strict guidelines. Investment performance and risk is measured and monitored on an ongoing basis through quarterly investment meetings and periodic asset and liability studies.

International Plans

The investment policy is guided by the objective of achieving over the long-term a return on the investments which is consistent with assumptions made by the actuary in determining the funding requirements of the plans. The target asset allocation of 70% equities, 25% debt securities and 5% cash and the unitized pool approach meets this objective and controls and various risks to which the plans’ assets are exposed including matching the timing of estimated future obligations to the maturities of the plans’ assets. The day-to-day management of the plans’ assets are delegated to several professional investment managers. The spread of assets by type and the investment managers’ policies on investing in individual securities within each type provides adequate diversification of investments. The use of derivatives by the investment managers is permitted and plan specific, subject to strict guidelines. Investment performance and risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews and periodic asset and liability studies.

Cash Flows

Contributions

MAP, and Marathon’s foreign subsidiaries expect to contribute approximately $93 million and $22 million to the funded pension plans in 2004. Marathon is not required to make a cash contribution to the funded domestic pension plan in 2004. Cash contributions that are expected to be paid from the general assets of the company for both the unfunded pension and postretirement benefit plans are expected to be approximately $2 million and $35 million, respectively in 2004.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

	Pension Benefits						Other Benefits
	U.S.				Int’l
	MOC		MAP				MOC		MAP
2004(a)	$	27	$	36	$	5	$	27	$	8
2005		28		45		5		29		9
2006		28		48		5		29		11
2007		30		56		5		26		13
2008		33		59		6		26		15
Years 2009-2013		203		394		32		139		123

^(a) Excludes the potential payments relating to business transformation.

Marathon also contributes to several defined contribution plans for eligible employees. Contributions to these plans, which for the most part are based on a percentage of the employees’ salary, totaled $37 million in 2003, $37 million in 2002 and $35 million in 2001.

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25. Stock-Based Compensation Plans

The following is a summary of stock option activity:

	Shares		Price(a)
Balance December 31, 2000	6,113,620		26.50
Granted	1,642,395		32.52
Exercised	(961,480	)	21.70
Canceled	(64,430	)	30.11
Balance December 31, 2001	6,730,105		28.62
Granted	1,763,500		28.12
Exercised	(242,155	)	27.58
Canceled	(186,840	)	24.50
Balance December 31, 2002	8,064,610		28.70
Granted	1,729,800		25.58
Exercised	(642,265	)	24.48
Canceled	(145,765	)	30.27
Balance December 31, 2003(b)	9,006,380		28.33

^(a) Weighted-average exercise price.

^(b) Of the options outstanding as of December 31, 2003, 1,715,200 and 7,291,180 were outstanding under the 2003 Incentive Compensation Plan and 1990 Stock Plan, respectively.

The following table represents stock options at December 31, 2003:

	Outstanding					Exercisable
Range of Exercise Prices	Number of Shares Under Option	Weighted-Average Remaining Contractual Life		Weighted-Average Exercise Price		Number of Shares Under Option	Weighted-Average Exercise Price
$17.00 – 23.41	644,700	3.8	years	$	21.88	444,700	$	21.19
25.50 – 26.91	2,866,400	8.2			25.54	1,166,200		25.55
28.12 – 34.00	5,495,280	6.5			30.62	5,480,280		30.62
Total	9,006,380	6.9			28.33	7,091,180		25.37

The following table presents information on restricted stock grants:

	2003		2002		2001
2003 Incentive Compensation Plan:(a)
Number of shares granted		293,710		–		–
Weighted-average grant-date fair value per share	$	26.01	$	–	$	–
1990 Stock Plan:(b)
Number of shares granted		39,960		170,028		205,346
Weighted-average grant-date fair value per share	$	25.52	$	27.84	$	31.30
Non Officers’ plan:(c)
Number of shares granted		–		332,210		541,808
Weighted-average grant-date fair value per share	$	–	$	24.27	$	29.36
Special Restricted Stock Program:(d)
Number of shares granted		–		93,730		–
Weighted-average grant-date fair value per share	$	–	$	27.77	$	–

^(a) Of the shares granted under the 2003 Incentive Compensation Plan, none have vested and 38,700 have been cancelled or forfeited. In addition to the shares, 810 restricted stock units have been granted to international participants under the plan. Thus, as of December 31, 2003, 255,010 shares and 810 units were outstanding under the plan.

^(b) Of the shares granted under the 1990 Stock Plan, 389,793 have vested and 287,166 have been cancelled or forfeited. Thus, as of December 31, 2003, 148,400 shares were outstanding under the plan.

^(c) Of the shares granted under the Non-Officer Plan since 2001, 255,208 have vested and 84,816 have been cancelled or forfeited. In addition to the shares, 73,390 restricted stock units have been granted to international participants under the plan, none have vested and 9,180 have been cancelled or forfeited. Thus, as of December 31, 2003, 533,994 shares and 64,210 units were outstanding under the plan.

^(d) Of the shares granted under the Special Restricted Stock Program, 5,960 shares have been cancelled or forfeited. In addition to the shares, 6,360 restricted stock units were granted to international participants pursuant to this program. All shares and units granted under the program vested on January 23, 2003, and no additional shares will be granted.

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Marathon maintains an equity compensation program for its non-employee directors under the Plan. Pursuant to the program, non-employee directors must defer 50% of their annual retainers in the form of common stock units. In addition, the program provides each non-employee director with a matching grant of up to 1,000 shares of common stock upon his or her initial election to the board if he or she purchases an equivalent number of shares within 60 days of joining the board. Common stock units are book entry units equal in value to a share of stock. During 2003, 15,799 shares of stock were issued; during 2002, 14,472 shares of stock were issued and during 2001, 12,358 shares of stock were issued.

26. Stockholder Rights Plan

In 2002, the Marathon’s stockholder rights plan (the Rights Plan), was amended due to the Separation. In January 2003, the expiration date of the Rights Plan was accelerated to January 31, 2003.

27. Leases

Marathon leases a wide variety of facilities and equipment under operating leases, including land and building space, office equipment, production facilities and transportation equipment. Most long-term leases include renewal options and, in certain leases, purchase options. Future minimum commitments for capital lease obligations (including sale-leasebacks accounted for as financings) and for operating lease obligations having remaining noncancelable lease terms in excess of one year are as follows:

(In millions)	Capital Lease Obligations		Operating Lease Obligations
2004	$	29	$	108
2005		20		80
2006		26		67
2007		34		38
2008		26		31
Later years		127		131
Sublease rentals		–		(77	)
Total minimum lease payments		262	$	378
Less imputed interest costs		81
Present value of net minimum lease payments included in long-term debt	$	181

In connection with past sales of various plants and operations, Marathon assigned and the purchasers assumed certain leases of major equipment used in the divested plants and operations of United States Steel. In the event of a default by any of the purchasers, United States Steel has assumed these obligations; however, Marathon remains primarily obligated for payments under these leases. Minimum lease payments under these operating lease obligations of $54 million have been included above and an equal amount has been reported as sublease rentals.

Of the $181 million present value of net minimum capital lease payments, $135 million was related to obligations assumed by United States Steel under the Financial Matters Agreement. Of the $378 million total minimum operating lease payments, $18 million was assumed by United States Steel under the Financial Matters Agreement.

During 2003, Marathon purchased two LNG tankers to transport LNG primarily from Kenai, Alaska to Tokyo, Japan which were previously leased. A $17 million charge was recorded on the termination of the two tanker operating leases.

Operating lease rental expense was:

(In millions)	2003			2002			2001
Minimum rental	$	182	(a)	$	196	(a)	$	159
Contingent rental		15			13			13
Sublease rentals		(9	)		(11	)		(11	)
Net rental expense	$	188		$	198		$	161

^(a) Excludes $23 million and $24 million paid by United States Steel in 2003 and 2002 on assumed leases.

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28. Contingencies and Commitments

Marathon is the subject of, or party to, a number of pending or threatened legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relating to the environment. Certain of these matters are discussed below. The ultimate resolution of these contingencies could, individually or in the aggregate, be material to Marathon’s consolidated financial statements. However, management believes that Marathon will remain a viable and competitive enterprise even though it is possible that these contingencies could be resolved unfavorably.

Environmental matters – Marathon is subject to federal, state, local and foreign laws and regulations relating to the environment. These laws generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation of hazardous waste disposal sites. Penalties may be imposed for noncompliance. At December 31, 2003 and 2002, accrued liabilities for remediation totaled $117 million and $84 million, respectively. It is not presently possible to estimate the ultimate amount of all remediation costs that might be incurred or the penalties that may be imposed. Receivables for recoverable costs from certain states, under programs to assist companies in cleanup efforts related to underground storage tanks at retail marketing outlets, were $86 million and $72 million at December 31, 2003 and 2002, respectively.

On May 11, 2001, MAP entered into a consent decree with the U.S. Environmental Protection Agency which commits it to complete certain agreed upon environmental projects over an eight-year period primarily aimed at reducing air emissions at its seven refineries. The court approved this consent decree on August 28, 2001. The total one-time expenditures for these environmental projects is approximately $330 million over the eight-year period, with about $170 million incurred through December 31, 2003. In addition, MAP has nearly completed certain agreed upon supplemental environmental projects as part of this settlement of an enforcement action for alleged Clean Air Act violations, at a cost of $9 million. MAP believes that this settlement will provide MAP with increased permitting and operating flexibility while achieving significant emission reductions.

Guarantees – Marathon and MAP have issued the following guarantees:

(In millions)	Term	Maximum Potential Undiscounted Payments as of December 31, 2003(m)
Indebtedness of equity investees:
LOCAP commercial paper(a)	Perpetual-Loan Balance Varies	$	23
LOOP Series 1991A Notes(a)	2008		7
LOOP Series 1992A Notes(a)	2008		34
LOOP Series 1992B Notes(a)	2004		9
LOOP Series 1997 Notes(a)	2017		13
LOOP revolving credit agreement(a)	Perpetual-Loan Balance Varies		25
LOOP Series 2003(a)	2004-2023		81
Centennial Pipeline Notes(b)	2008-2024		70
Centennial Pipeline revolving credit agreement(b)	2004-Loan Balance Varies		5
Miscellaneous	Varies		2
Other:
United States Steel/PRO-TEC Coating Company (c)	2004-2008		14
United States Steel/Clairton 1314B(c)	2004-2012		610
Centennial Pipeline catastrophic event(d)	Indefinite		50
Alliance Pipeline(e)	2004-2015		67
Kenai Kochemak Pipeline LLC(f)	2004-2017		15
Pilot Travel Centers Surety Bonds(g)	(g)		10
Corporate assets(h)	(h)		14
Canada(i)	Indefinite		568
Globex(j)	2004-2006		16
Yates(k)	Indefinite		228
Mobile transportation equipment leases(l)	2004-2008		7
Miscellaneous	Varies		5

^(a) Marathon holds interests in an offshore oil port, LOOP LLC (“LOOP”), and a crude oil pipeline system, LOCAP LLC (“LOCAP”). Both LOOP and LOCAP have secured various project financings with throughput and deficiency (“T&D”) agreements. A T&D agreement creates a potential obligation to advance funds in the event of a cash shortfall. When these rights are assigned to a lender to secure financing, the T&D is considered to be an indirect guarantee of indebtedness. Under the agreements, Marathon is required to advance funds if the investees are unable to service debt. Any such advances are considered prepayments of future transportation charges. The terms of the agreements vary but tend to follow the terms of the underlying debt. In April 2003, LOOP refinanced $81 million for certain of its series of outstanding bonds subject to these T&D agreements. The refinancing consisted of changes to maturity dates, as well as interest rates. Although certain series were paid down and new series issued, the total principal outstanding changed by only $2 million. Assuming non-payment by the investees, the maximum potential amount of future payments under the guarantees is estimated to be $193 million and $197

F-38

million at December 31, 2003 and 2002, respectively. Included in these amounts is a LOOP revolving credit facility of $25 million at December 31, 2003 and 2002, and a LOCAP revolving credit facility of $20 million and $25 million at December 31, 2003 and 2002, respectively. The undrawn portion of the revolving credit facilities is $35 million and $28 million as of December 31, 2003 and 2002, respectively.

^(b) MAP holds an interest in a refined products pipeline, Centennial Pipeline LLC (“Centennial”), and has guaranteed the repayment of Centennial’s outstanding balance under a Master Shelf Agreement and Revolver, which expires in 2024. The guarantee arose in order to obtain adequate financing. Prior to expiration of the guarantee, MAP could be relinquished from responsibility under the guarantee should Centennial meet certain financial tests. If Centennial defaults on its outstanding balance, the estimated maximum potential amount of future payments is $75 million at December 31, 2003 and 2002.

^(c) Marathon has guaranteed United States Steel’s contingent obligation to repay certain distributions from its 50 percent-owned joint venture, PRO-TEC Coating Company (“PRO-TEC”). Should PRO-TEC default under its agreements and should United States Steel be unable to perform under its guarantee, Marathon is required to perform on behalf of United States Steel. The maximum potential payout is estimated at $14 million and $18 million at December 31, 2003 and 2002, respectively. Additionally, United States Steel is the sole general partner of Clairton 1314B Partnership, L.P., which owns certain cokemaking facilities formerly owned by United States Steel. Marathon has guaranteed to the limited partners all obligations of United States Steel under the partnership documents. In addition to the commitment to fund operating cash shortfalls of the partnership discussed in Note 3, United States Steel, under certain circumstances, is required to indemnify the limited partners if the partnership product sales fail to qualify for the credit under Section 29 of the Internal Revenue Code. United States Steel has estimated the maximum potential amount of this indemnity obligation at December 31, 2003, including interest and tax gross-up, is approximately $610 million. Furthermore, United States Steel under certain circumstances has indemnified the partnership for environmental obligations. The maximum potential amount of this indemnity obligation is not estimable.

^(d) The agreement between Centennial and its members allows each member to contribute cash in lieu of Centennial procuring separate insurance in the event of third-party liability arising from a catastrophic event. There is an indefinite term for the agreement and each member is to contribute cash in proportion to its ownership interest, up to a maximum amount of $50 million and $33 million at December 31, 2003 and 2002, respectively. In February 2003, Marathon’s ownership interest in Centennial increased from 33% to 50%. As a result of this modification to the Centennial catastrophic event guarantee, MAP recorded a $4 million obligation during 2003.

^(e) Marathon is a party to a long-term transportation services agreement with Alliance Pipeline L.P. (“Alliance”). The agreement requires Marathon to pay minimum annual charges of approximately $5 million through 2015. The payments are required even if the transportation facility is not utilized. As this contract has been used by Alliance to secure its financing, the arrangement qualifies as an indirect guarantee of indebtedness. This agreement runs through 2015 and has a maximum potential payout of $67 million and $70 million at December 31, 2003 and 2002, respectively. As a result of the Canadian sale discussed below, Husky Oil Operations Limited (“Husky”) has indemnified Marathon for any claims related to these guarantees.

^(f) Kenai Kachemak Pipeline LLC (“KKPL”) was organized in late 2002. Marathon is an equity investor in KKPL, holding a 60%, noncontrolling interest. In April 2003, Marathon guaranteed KKPL’s performance to properly construct, operate, maintain and abandon the pipeline in accordance with the Alaska Pipeline Act and the Right of Way Lease Agreement with the State of Alaska. The major obligations covered under the guarantee include maintaining the right-of-way, satisfying any liabilities caused by operation of the pipeline, and providing for the abandonment costs. Obligations that could arise under the guarantee would vary according to the circumstances triggering payment but the maximum potential payment is estimated at $15 million at Dec. 31, 2003.

^(g) Marathon has engaged in a general agreement of indemnity with a surety bond provider for the execution of all surety bonds and has executed certain of these bonds on behalf of Pilot Travel Centers LLC (“PTC”). In the event of a demand on a bond by an obligee, Marathon is required to repay the surety bond provider. The bonds issued have been placed mainly for tax liability, licenses for liquor and lottery, workers’ compensation self-insurance, utility services, and for underground storage tank financial responsibility. Most surety bonds carry a one-year term, renewable annually, though a few bonds are for longer than a year. Accordingly, the maximum potential payment associated with these bonds continues to decrease as more bonds are cancelled and replaced with PTC’s own surety bond provider. Should Marathon have to pay any amounts under the remaining surety bonds, the PTC LLC agreement provides that each partner will bear their proportionate share of any amounts paid. As of December 31, 2003 and 2002, the maximum potential amount of future payment under the guarantee is estimated to be $10 million and $43 million, respectively.

^(h) Marathon provides a guarantee of the residual value of certain leased corporate assets.

⁽ⁱ⁾ In conjunction with the sale of certain Canadian assets to Husky during 2003, Marathon guaranteed Husky with regards to unknown environmental obligations and inaccuracies in representations, warranties, covenants and agreements by Marathon. These indemnifications are part of the normal course of doing business and selling assets. Per the Purchase and Sale agreement, the maximum potential amount of future payments associated with these guarantees is $568 million.

^(j) During 2003 Marathon also sold certain assets associated with its interest in Globex Far East Pty, Ltd. Marathon indemnified the purchaser from unknown environmental liabilities and inaccuracies by Marathon in representations, warranties, covenants and agreements. The maximum potential amount of future payments under the guarantees of $16 million is specified in the Purchase and Sale agreement. The term of this guarantee is three years.

^(k) As discussed in Note 14, Marathon sold its interest in the Yates field and gathering system to Kinder Morgan. In accordance with this transaction, Marathon indemnified Kinder Morgan from inaccuracies in Marathon’s representations, warranties, covenants and agreement. There is not a specified term on these guarantees and the maximum potential amount of future cash payments is estimated at $228 million.

^(l) These leases contain terminal rental adjustment clauses which provide that MAP will indemnify the lessor to the extent that the proceeds from the sale of the asset at the end of the lease falls short of the specified minimum percent of original value.

^(m) $325 million represents guarantees made by MAP and $35 million represents the undrawn portion of revolving credit facilities.

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Contract commitments – At December 31, 2003 and 2002, Marathon’s contract commitments to acquire property, plant and equipment totaled $565 million and $443 million, respectively.

Commitments to extend credit – In May 2002, Marathon signed a Participation Agreement with Syntroleum in connection with the ultra-clean fuels production and demonstration project sponsored by the U.S. Department of Energy. In connection with this project, Marathon agreed to provide funding pursuant to a $21 million secured promissory note between Marathon and Syntroleum. The promissory note will bear interest at a rate of 8% per year. The promissory note is secured by a mortgage and security agreement in the assets of the project. In the event of a default by Syntroleum, the mortgage and security agreement provides Marathon access for project completion. As of December 31, 2003, Marathon had advanced Syntroleum $21 million under this commitment.

Put/call agreements – In connection with the 1998 formation of MAP, Marathon and Ashland entered into a Put/Call, Registration Rights and Standstill Agreement (the Put/Call Agreement). The Put/Call Agreement provides that at any time after December 31, 2004, Ashland will have the right to sell to Marathon all of Ashland’s ownership interest in MAP, for an amount in cash and/or Marathon debt or equity securities equal to the product of 85% (90% if equity securities are used) of the fair market value of MAP at that time, multiplied by Ashland’s percentage interest in MAP. Payment could be made at closing, or at Marathon’s option, in three equal annual installments, the first of which would be payable at closing. At any time after December 31, 2004, Marathon will have the right to purchase all of Ashland’s ownership interests in MAP, for an amount in cash equal to the product of 115% of the fair market value of MAP at that time, multiplied by Ashland’s percentage interest in MAP.

As part of the formation of PTC, MAP and Pilot Corporation (Pilot) entered into a Put/Call and Registration Rights Agreement (Agreement). The Agreement provides that any time after September 1, 2008, Pilot will have the right to sell its interest in PTC to MAP for an amount of cash and/or Marathon, MAP or Ashland equity securities equal to the product of 90% (95% if paid in securities) of the fair market value of PTC at the time multiplied by Pilot’s percentage interest in PTC. At any time after September 1, 2011, under certain conditions, MAP will have the right to purchase Pilot’s interest in PTC for an amount of cash and/or Marathon, MAP or Ashland equity securities equal to the product of 105% (110% if paid in securities) of the fair market value of PTC at the time multiplied by Pilot’s percentage interest in PTC.

29. Accounting Standards Not Yet Adopted

An issue currently on the EITF agenda, Issue No. 03-S “Applicability of FASB Statement No. 142, Goodwill and Other Intangible Assets, to Oil and Gas Companies,” will address how oil and gas companies should classify the costs of acquiring contractual mineral interests in oil and gas properties on the balance sheet. The EITF is considering an alternative interpretation of Statement of Financial Accounting Standard No. 142 “Goodwill and Other Intangible Assets” that mineral or drilling rights or leases, concessions or other interests representing the right to extract oil or gas should be classified as intangible assets rather than oil and gas properties. Management believes that our current balance sheet classification for these costs is appropriate under generally accepted accounting principles. If a reclassification is ultimately required, the estimated amount of the leasehold acquisition costs to be reclassified would be $2.3 billion and $2.4 billion at December 31, 2003 and 2002. Should such a change be required, there would be no impact on our previously filed income statements (or reported net income), statements of cash flow or statements of stockholders’ equity for prior periods. Additional disclosures related to intangible assets would also be required.

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Selected Quarterly Financial Data (Unaudited)

	2003									2002
(In millions, except per share data)	4th Qtr.		3rd Qtr.			2nd Qtr.		1st Qtr.		4th Qtr.			3rd Qtr.		2nd Qtr.			1st Qtr.
Revenues	$	11,034	$	10,253		$	9,643	$	10,033	$	8,478		$	8,397	$	8,034		$	6,386
Income from operations		353		658			526		547		370			360		467			173
Income from continuing operations		199		293			235		285		196			81		172			58
Income (loss) from discontinued operations		286		(12	)		13		18		(2	)		6		(4	)		(4	)
Income before cumulative effect of changes in accounting principle		485		281			248		303		194			87		168			54
Net income		485		281			248		307		194			87		168			67
Common Stock data:
Net income		485		281			248		307		194			87		168			67
– Per share – basic and diluted		1.57		.90			.80		.99		.62			.28		.54			.22
Dividends paid per share		.25		.25			.23		.23		.23			.23		.23			.23
Price range of Common Stock(a):
– Low		28.91		25.01			22.56		20.20		19.00			21.30		25.71			27.08
– High		33.37		29.42			27.00		24.04		23.05			26.65		29.82			30.02

^(a) Composite tape.

Principal Unconsolidated Investees (Unaudited)

Company	Country	December 31, 2003 Ownership		Activity
Alba Plant LLC	Cayman Islands	52	%(a)	Liquified Petroleum Gas
Atlantic Methanol Production Company, LLC	United States	45	%	Methanol Production
Centennial Pipeline LLC	United States	50	%(b)	Pipeline & Storage Facility
Kenai Kachemak Pipeline, LLC	United States	60	%(a)	Natural Gas Transmission
Kenai LNG Corporation	United States	30	%	Natural Gas Liquification
LLC JV Chernogorskoye	Russian Federation	22	%	Oil and Gas Production
LOCAP LLC	United States	50	%(b)	Pipeline & Storage Facilities
LOOP LLC	United States	47	%(b)	Offshore Oil Port
Manta Ray Offshore Gathering Company, LLC	United States	24	%	Natural Gas Transmission
Minnesota Pipe Line Company	United States	33	%(b)	Pipeline Facility
Nautilus Pipeline Company, LLC	United States	24	%	Natural Gas Transmission
Odyssey Pipeline LLC	United States	29	%	Pipeline Facility
Pilot Travel Centers LLC	United States	50	%(b)	Travel Centers
Poseidon Oil Pipeline Company, LLC	United States	28	%	Crude Oil Transportation
Southcap Pipe Line Company	United States	22	%(b)	Crude Oil Transportation

^(a) Represents a noncontrolling interest.

^(b) Represents the ownership interest held by MAP.

F-41

Supplementary Information on Oil and Gas Producing Activities (Unaudited)

The Supplementary Information on Oil and Gas Producing Activities is presented in accordance with Statement of Financial Accounting Standards No. 69, “Disclosures about Oil and Gas Producing Activities”. Included as supplemental information are capitalized costs related to oil and gas producing activities, costs incurred in oil and gas property acquisition, exploration and development activities and results of operations for oil and gas producing activities. These tables include excess purchase price associated with equity investments and reflect data related only to oil and gas producing activities. Supplemental information is also provided for estimated quantities of proved oil and gas reserves, standardized measure of discounted future net cash flows relating to proved oil and gas reserve quantities and a summary of changes therein.

The supplemental information for consolidated subsidiaries is disclosed by the following geographic areas: the United States; Europe, which primarily includes activities in the United Kingdom, Ireland and Norway; West Africa, which primarily includes activities in Angola, Equatorial Guinea and Gabon; and Other International, which includes activities in Nova Scotia, Russian Federation and other international locations outside of Europe and West Africa. Equity Investees include Marathon’s equity share of the oil and gas producing activities of companies that are accounted for by the equity method. This includes Alba Plant LLC, CLAM Petroleum B.V, Kenai Kachemak Pipeline, LLC, LLC JV Chernogorskoye and MKM Partners L.P. No oil or gas reserves are attributed to ownership in Alba Plant LLC or Kenai Kachemak Pipeline, LLC.

Capitalized Costs and Accumulated Depreciation, Depletion and Amortization

(In millions)             December 31	United States		Europe		West Africa		Other Int’l.		Continuing Operations		Discontinued Operations
2003(a)
Capitalized costs:
Proved properties	$	6,158	$	5,288	$	1,147	$	119	$	12,712	$	–
Unproved properties		615		301		326		268		1,510		–
Total		6,773		5,589		1,473		387		14,222		–
Accumulated depreciation, depletion and amortization
Proved properties		4,128		3,922		144		17		8,211		–
Unproved properties		37		–		9		–		46		–
Total		4,165		3,922		153		17		8,257		–
Net capitalized costs	$	2,608	$	1,667	$	1,320	$	370	$	5,965	$	–
2002
Capitalized costs:
Proved properties	$	6,032	$	5,116	$	792	$	41	$	11,981	$	769
Unproved properties		653		197		287		20		1,157		65
Total		6,685		5,313		1,079		61		13,138		834
Accumulated depreciation, depletion and amortization:
Proved properties		3,933		3,641		101		11		7,686		354
Unproved properties		34		1		9		–		44		2
Total		3,967		3,642		110		11		7,730		356
Net capitalized costs	$	2,718	$	1,671	$	969	$	50	$	5,408	$	478

Marathon’s share of equity investee’s net capitalized costs was $276 million and $574 million at December 31, 2003 and 2002, respectively. The decrease from 2003 primarily reflects the disposition of CLAM Petroleum B.V. and the dissolution of MKM Partners, L.P.

^(a) Includes capitalized asset retirement costs and the associated accumulated amortization.

Costs Incurred for Property Acquisition, Exploration and Development^(a)

(In millions)	United States		Europe		West Africa		Other Int’l.		Consolidated		Equity Investees		Continuing Operations		Discontinued Operations
2003
Property acquisition:
Proved	$	1	$	1	$	–	$	66	$	68	$	11	$	79	$	–
Unproved		5		3		1		244		253		–		253		–
Exploration		114		35		53		29		231		–		231		17
Development		266		148		352		33		799		114		913		26
Capitalized asset retirement costs(b)		9		47		3		14		73		–		73		–
2002
Property acquisition:
Proved	$	–	$	–	$	341	$	24	$	365	$	67	$	432	$	–
Unproved		2		105		294		2		403		92		495		–
Exploration		184		10		24		40		258		4		262		27
Development		273		100		126		1		500		41		541		39
2001
Property acquisition:
Proved	$	231	$	–	$	–	$	–	$	231	$	–	$	231	$	1
Unproved		395		24		69		3		491		–		491		19
Exploration		190		20		7		25		242		8		250		31
Development		356		205		3		–		564		19		583		49

^(a) Includes costs incurred whether capitalized or expensed.

^(b) Includes the effect of foreign currency fluctuations, and excludes $161 million cumulative effect of adopting SFAS No. 143.

F-42

Supplementary Information on Oil and Gas Producing Activities (Unaudited) CONTINUED

Results of Operations for Oil and Gas Producing Activities

(In millions)	United States			Europe			West Africa			Other Int’l.			Consolidated			Equity Investees			Total
2003: Revenues and other income:
Sales	$	1,081		$	662		$	139		$	43		$	1,925		$	86		$	2,011
Transfers		1,120			20			127			24			1,291			–			1,291
Other income(a)		(88	)		65			(1	)		–			(24	)		(16	)		(40	)
Total revenues		2,113			747			265			67			3,192			70			3,262
Expenses:
Production costs		(410	)		(136	)		(55	)		(53	)		(654	)		(24	)		(678	)
Transportation costs(b)		(120	)		(32	)		(5	)		(3	)		(160	)		(2	)		(162	)
Exploration expenses		(88	)		(18	)		(15	)		(27	)		(148	)		–			(148	)
Depreciation, depletion and amortization(c) (d)		(437	)		(227	)		(42	)		(12	)		(718	)		(16	)		(734	)
Impairments		(3	)		–			–			–			(3	)		–			(3	)
Administrative expenses		(43	)		(17	)		(4	)		(36	)		(100	)		–			(100	)
Total expenses		(1,101	)		(430	)		(121	)		(131	)		(1,783	)		(42	)		(1,825	)
Other production-related income (losses)(e)		1			26			–			–			27			1			28
Results before income taxes(f)		1,013			343			144			(64	)		1,436			29			1,465
Income taxes (credits)(g)		352			122			4			(27	)		451			11			462
Results of continuing operations	$	661		$	221		$	140		$	(37	)	$	985		$	18		$	1,003
Results of discontinued operations	$	–		$	–		$	–		$	41		$	41		$	–		$	41
2002: Revenues and other income:
Sales	$	538		$	720		$	86		$	10		$	1,354		$	115		$	1,469
Transfers		1,210			34			128			–			1,372			–			1,372
Other income(a)		21			–			–			2			23			–			23
Total revenues		1,769			754			214			12			2,749			115			2,864
Expenses:
Production costs		(365	)		(145	)		(48	)		(5	)		(563	)		(32	)		(595	)
Transportation costs(b)		(106	)		(34	)		(2	)		–			(142	)		(1	)		(143	)
Exploration expenses		(130	)		(10	)		(9	)		(18	)		(167	)		–			(167	)
Depreciation, depletion and amortization		(436	)		(251	)		(41	)		(2	)		(730	)		(25	)		(755	)
Impairments		(13	)		–			–			–			(13	)		–			(13	)
Administrative expenses		(41	)		(29	)		(2	)		(38	)		(110	)		–			(110	)
Contract settlement		(15	)		–			–			–			(15	)		–			(15	)
Total expenses		(1,106	)		(469	)		(102	)		(63	)		(1,740	)		(58	)		(1,798	)
Other production-related income (losses)(e)		1			(4	)		–			–			(3	)		1			(2	)
Results before income taxes(f)		664			281			112			(51	)		1,006			58			1,064
Income taxes (credits)(g)		237			87			36			(18	)		342			20			362
Results of continuing operations	$	427		$	194		$	76		$	(33	)	$	664		$	38		$	702
Results of discontinued operations	$	–		$	–		$	–		$	(16	)	$	(16	)	$	–		$	(16	)
2001: Revenues and other income:
Sales	$	871		$	706		$	8		$	1		$	1,586		$	49		$	1,635
Transfers		1,235			–			134			–			1,369			69			1,438
Other income(a)		68			–			–			–			68			–			68
Total revenues		2,174			706			142			1			3,023			118			3,141
Expenses:
Production costs		(349	)		(114	)		(26	)		(2	)		(491	)		(34	)		(525	)
Transportation costs(b)		(97	)		(52	)		(1	)		–			(150	)		(1	)		(151	)
Exploration expenses		(90	)		(8	)		(5	)		(26	)		(129	)		–			(129	)
Depreciation, depletion and amortization		(458	)		(272	)		(35	)		–			(765	)		(13	)		(778	)
Impairments		–			–			–			(1	)		(1	)		–			(1	)
Administrative expenses		(38	)		(4	)		(2	)		(52	)		(96	)		–			(96	)
Total expenses		(1,032	)		(450	)		(69	)		(81	)		(1,632	)		(48	)		(1,680	)
Other production-related income (losses)(e)		3			(24	)		–			–			(21	)		1			(20	)
Results before income taxes(f)		1,145			232			73			(80	)		1,370			71			1,441
Income taxes (credits)(g)		389			69			26			(26	)		458			25			483
Results of continuing operations	$	756		$	163		$	47		$	(54	)	$	912		$	46		$	958
Results of discontinued operations	$	–		$	–		$	–		$	(91	)	$	(91	)	$	–		$	(91	)

^(a) Includes net gains (losses) on asset dispositions and, in 2001, gain on lease resolution with U.S. Government.

^(b) Includes the cost to prepare and move liquid hydrocarbons and natural gas to their points of sale.

^(c) Excludes the cumulative effect on net income of the adoption of SFAS No. 143.

^(d) Includes accretion of interest on asset retirement obligations.

^(e) Includes revenues, net of associated costs, from third-party activities that are an integral part of Marathon’s production operations which may include the processing and/or transportation of third-party production, and the purchase and subsequent resale of gas utilized in reservoir management.

^(f) Includes items not allocated to the E&P segment and the results of using derivative instruments to manage commodity and foreign currency risks. Excludes corporate overhead, interest, currency gains and losses, non-operating items included in income from equity method investments and E&P segment items not related to oil and gas producing activities.

^(g) Computed by adjusting results before income taxes by permanent differences and multiplying the result by the 35% statutory rate and adjusting for applicable tax credits

F-43

Supplementary Information on Oil and Gas Producing Activities (Unaudited) CONTINUED

Results of Operations for Oil and Gas Producing Activities

The following reconciles results for oil and gas producing activities from continuing operations to E&P segment income:

(In millions)	2003			2002			2001
Results before income taxes	$	1,465		$	1,064		$	1,441
Items excluded from results for oil and gas producing activities:
Marketing expenses and technology costs		(3	)		(13	)		(17	)
Nonoperating items included in income from equity method investments		(9	)		(6	)		(11	)
Other		(5	)		2			(3	)
Items not allocated to E&P segment income:
Gain on asset disposition		(85	)		(24	)		–
Contract settlement					15			–
Gain on offshore lease resolution with U.S. government		–			–			(59	)
Loss on joint venture dissolution		124			–			–
E&P segment income	$	1,487		$	1,038		$	1,351

Average Production Costs^(a)

	United States		Europe		West Africa		Other Int’l.		Consolidated		Equity Investees		Continuing Operations
2003	$	4.92	$	4.35	$	3.98	$	14.56	$	4.95	$	8.37	$	5.03
2002		4.17		4.03		3.81		14.95		3.90		6.92		4.22
2001		3.70		3.18		4.54		—		3.62		6.29		3.72

^(a) Computed using production costs, excluding transportation costs, as disclosed in the Results of Operations for Oil and Gas Activities and as defined by the Securities and Exchange Commission. Natural gas volumes were converted to barrels of oil equivalent (BOE) using a conversion factor of six mcf of natural gas to one barrel of oil.

Average Sales Prices

	United States		Europe		West Africa		Other Int’l.		Consolidated		Equity Investees		Continuing Operations		Discontinued Operations
(excluding derivative gains and losses)
2003: Liquid hydrocarbons (per bbl)	$	26.92	$	28.50	$	26.29	$	18.33	$	26.72	$	25.91	$	26.70	$	28.96
Natural gas (per mcf)(a)		4.53		3.32		.25		–		3.96		3.70		3.96		5.43
2002: Liquid hydrocarbons (per bbl)	$	22.18	$	24.40	$	22.62	$	26.98	$	22.86	$	24.59	$	22.93	$	23.29
Natural gas (per mcf)(a)		2.87		2.66		.24		–		2.69		3.05		2.70		3.30
2001: Liquid hydrocarbons (per bbl)	$	20.62	$	23.49	$	24.36	$	–	$	21.65	$	23.41	$	21.73	$	21.26
Natural gas (per mcf)(a)		3.69		2.77		–		–		3.43		3.39		3.42		4.17
(including derivative gains and losses)
2003: Liquid hydrocarbons (per bbl)	$	26.09	$	27.27	$	26.29	$	18.33	$	25.96	$	25.75	$	25.96	$	28.96
Natural gas (per mcf)(a)		4.31		2.63		.25		–		3.62		3.70		3.63		5.43
2002: Liquid hydrocarbons (per bbl)	$	21.83	$	24.53	$	22.62	$	26.98	$	22.68	$	24.59	$	22.76	$	23.39
Natural gas (per mcf)(a)		3.05		2.82		.24		–		2.84		3.05		2.84		3.30
2001: Liquid hydrocarbons (per bbl)	$	21.00	$	23.49	$	24.36	$	–	$	21.90	$	23.41	$	21.97	$	21.26
Natural gas (per mcf)(a)		3.92		2.77		–		–		3.59		3.39		3.59		4.17

^(a) Excludes the resale of purchased gas utilized in reservoir management.

F-44

Supplementary Information on Oil and Gas Producing Activities (Unaudited) CONTINUED

Estimated Quantities of Proved Oil and Gas Reserves

Marathon’s estimated net proved liquid hydrocarbon (oil, condensate, and natural gas liquids) and gas reserves and the changes thereto for the years 2003, 2002 and 2001 are shown in the following tables. Estimates of the proved reserves have been prepared by internal asset teams including reservoir engineers and geoscience professionals, except the estimated proved gas reserves for the U.S. Powder River Basin that are estimated by the independent petroleum consultants of Netherland, Sewell and Associates, Inc. Reserve estimates are periodically reviewed by the Corporate Reserves Group to assure that rigorous professional standards and the reserves definitions prescribed by the U.S. Securities and Exchange Commission (SEC) are consistently applied throughout the company.

Proved reserves are the estimated quantities of oil and gas that geologic and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Estimates of proved reserves are subject to changes, either positively or negatively, as additional information becomes available and contractual, economic and political conditions change.

Marathon’s net proved reserve estimates have been adjusted as necessary to reflect all contractual agreements, royalty obligations and interests owned by others at the time of the estimate. Only reserves that are estimated to be recovered during the term of the current contract, unless there is a clear and consistent history of contract extension, have been included in the proved reserve estimate. Reserves from properties governed by Production Sharing Contracts have been calculated using the “economic interest” method prescribed by the SEC. Reserves that are not currently considered proved, that may result from extensions of currently proved areas, or that may result from applying secondary or tertiary recovery processes not yet tested and determined to be economic, are excluded. Purchased natural gas utilized in reservoir management and subsequently resold is also excluded. Marathon does not have any quantities of oil and gas reserves subject to long-term supply agreements with foreign governments or authorities in which Marathon acts as producer.

Proved developed reserves are the quantities of oil and gas expected to be recovered through existing wells with existing equipment and operating methods. In some cases, proved undeveloped reserves may require substantial new investments in additional wells and related facilities. Production volumes shown are sales volumes, net of any products consumed during production activities.

(Millions of barrels)	United States		Europe		West(a) Africa		Other Int’l		Consolidated		Equity Investees		Continuing Operations		Discontinued Operations
Liquid Hydrocarbons
Proved developed and undeveloped reserves:
Beginning of year – 2001	458		108		23		–		589		–		589		128
Purchase of reserves in place(b)	8		–		–		–		8		–		8		–
Exchange of reserves in place(c)	(191	)	–		–		–		(191	)	191		–		–
Revisions of previous estimates	14		(3	)	–		–		11		(3	)	8		–
Improved recovery	13		–		–		–		13		–		13		–
Extensions, discoveries and other additions	12		–		–		–		12		–		12		1
Production	(46	)	(17	)	(6	)	–		(69	)	(4	)	(73	)	(4	)
Sales of reserves in place(b)	–		–		–		–		–		–		–		(112	)
End of year – 2001	268		88		17		–		373		184		557		13
Purchase of reserves in place(b)	–		–		107		3		110		–		110		–
Revisions of previous estimates	16		4		1		–		21		2		23		–
Improved recovery	2		–		–		–		2		–		2		–
Extensions, discoveries and other additions	4		3		87		–		94		–		94		–
Production	(42	)	(19	)	(9	)	–		(70	)	(3	)	(73	)	(2	)
Sales of reserves in place(b)	(3	)	–		–		–		(3	)	–		(3	)	(1	)
End of year – 2002	245		76		203		3		527		183		710		10
Purchase of reserves in place(b)	–		–		–		64		64		2		66		–
Exchange of reserves in place(d)	173		–		–		–		173		(173	)	–		–
Revisions of previous estimates	–		(4	)	25		11		32		–		32		–
Improved recovery	4		–		–		4		8		–		8		–
Extensions, discoveries and other additions	10		2		–		14		26		–		26		–
Production	(39	)	(15	)	(10	)	(4	)	(68	)	(2	)	(70	)	(1	)
Sales of reserves in place(b)	(183	)	–		–		(3	)	(186	)	(8	)	(194	)	(9	)
End of year – 2003	210		59		218		89		576		2		578		–
Proved developed reserves:
Beginning of year – 2001	414		74		18		–		506		–		506		39
End of year – 2001	243		69		14		–		326		178		504		11
End of year – 2002	226		63		113		2		404		177		581		9
End of year – 2003	193		47		120		31		391		2		393		–

^(a) Consists of estimated reserves from properties governed by production sharing contracts.

^(b) The net positive or negative balance of proved reserves acquired or relinquished in property trades within the same geographic area is reported within purchases of reserves in place or sales of reserves in place, respectively.

^(c) Reserves represent the contribution of certain mineral interests to MKM Partners L.P., a joint venture accounted for under the equity method of accounting.

^(d) Reserves represent the transfer of certain mineral interests upon the dissolution of MKM Partners L.P.

F-45

Supplementary Information on Oil and Gas Producing Activities (Unaudited) C O N T I N U E D

Estimated Quantities of Proved Oil and Gas Reserves (continued)

(Billions of cubic feet)	United States		Europe		West(a) Africa		Consolidated		Equity Investees		Continuing Operations		Discontinued Operations
Natural Gas
Proved developed and undeveloped reserves:
Beginning of year – 2001	1,914		614		–		2,528		89		2,617		477
Purchase of reserves in place(b)	223		–		–		223		–		223		–
Revisions of previous estimates	(267	)	(12	)	–		(279	)	(27	)	(306	)	3
Improved recovery	10		–		–		10		–		10		–
Extensions, discoveries and other additions	210		126		–		336		–		336		48
Production(c)	(289	)	(113	)	–		(402	)	(11	)	(413	)	(45	)
Sales of reserves in place(b)	(8	)	–		–		(8	)	–		(8	)	(84	)
End of year – 2001	1,793		615		–		2,408		51		2,459		399
Purchase of reserves in place(b)	–		–		571		571		–		571		9
Revisions of previous estimates	48		4		–		52		3		55		(20	)
Improved recovery	–		–		–		–		–		–		–
Extensions, discoveries and other additions	156		46		101		303		14		317		32
Production(c)	(272	)	(103	)	(19	)	(394	)	(9	)	(403	)	(38	)
Sales of reserves in place(b)	(1	)	–		–		(1	)	–		(1	)	(3	)
End of year – 2002	1,724		562		653		2,939		59		2,998		379
Purchase of reserves in place(b)	7		–		–		7		–		7		–
Revisions of previous estimates	20		(7	)	36		49		1		50		–
Improved recovery	–		–		–		–		–		–		–
Extensions, discoveries and other additions	161		24		–		185		–		185		8
Production(c)	(267	)	(95	)	(24	)	(386	)	(5	)	(391	)	(27	)
Sales of reserves in place(b)	(10	)	–		–		(10	)	(55	)	(65	)	(360	)
End of year – 2003	1,635		484		665		2,784		–		2,784		–
Proved developed reserves:
Beginning of year – 2001	1,421		563		–		1,984		52		2,036		381
End of year – 2001	1,308		473		–		1,781		32		1,813		308
End of year – 2002	1,206		408		552		2,166		36		2,202		290
End of year – 2003	1,067		421		528		2,016		–		2,016		–

^(a) Consists of estimated reserves from properties governed by production sharing contracts.

^(b) The net positive or negative balance of proved reserves acquired or relinquished in property trades within the same geographic area is reported within purchases of reserves in place or sales of reserves in place, respectively.

^(c) Excludes the resale of purchased gas utilized in reservoir management.

Standardized Measure of Discounted Future Net Cash Flows and Changes Therein Relating to Proved Oil and Gas Reserves

Estimated discounted future net cash flows and changes therein were determined in accordance with Statement of Financial Accounting Standards No. 69. Certain information concerning the assumptions used in computing the valuation of proved reserves and their inherent limitations are discussed below. Marathon believes such information is essential for a proper understanding and assessment of the data presented.

Future cash inflows are computed by applying year-end prices of oil and gas relating to Marathon’s proved reserves to the year-end quantities of those reserves. Future price changes are considered only to the extent provided by contractual arrangements in existence at year-end.

The assumptions used to compute the proved reserve valuation do not necessarily reflect Marathon’s expectations of actual revenues to be derived from those reserves or their present worth. Assigning monetary values to the estimated quantities of reserves, described on the preceding page, does not reduce the subjective and ever-changing nature of such reserve estimates.

Additional subjectivity occurs when determining present values because the rate of producing the reserves must be estimated. In addition to uncertainties inherent in predicting the future, variations from the expected production rate also could result directly or indirectly from factors outside of Marathon’s control, such as unintentional delays in development, environmental concerns, changes in prices or regulatory controls.

The reserve valuation assumes that all reserves will be disposed of by production. However, if reserves are sold in place or subjected to participation by foreign governments, additional economic considerations also could affect the amount of cash eventually realized.

Future development and production, transportation and administrative costs are computed by estimating the expenditures to be incurred in developing and producing the proved oil and gas reserves at the end of the year, based on year-end costs and assuming continuation of existing economic conditions.

Future income tax expenses are computed by applying the appropriate year-end statutory tax rates, with consideration of future tax rates already legislated, to the future pretax net cash flows relating to Marathon’s proved oil and gas reserves. Permanent differences in oil and gas related tax credits and allowances are recognized.

Discount was derived by using a discount rate of 10 percent a year to reflect the timing of the future net cash flows relating to proved oil and gas reserves.

F-46

Supplementary Information on Oil and Gas Producing Activities (Unaudited) C O N T I N U E D

Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves (continued)

(In millions)	United States			Europe			West Africa			Other Int’l.			Consolidated			Equity Investees			Total
December 31, 2003:
Future cash inflows	$	13,331		$	3,955		$	4,471		$	1,593		$	23,350		$	35		$	23,385
Future production, transportation and administrative costs		(4,919	)		(1,050	)		(1,161	)		(827	)		(7,957	)		(19	)		(7,976	)
Future development costs		(758	)		(435	)		(175	)		(229	)		(1,597	)		(1	)		(1,598	)
Future income tax expenses		(2,612	)		(870	)		(780	)		(163	)		(4,425	)		(5	)		(4,430	)
Future net cash flows		5,042			1,600			2,355			374			9,371			10			9,381
10% annual discount for estimated timing of cash flows		(1,789	)		(301	)		(1,112	)		(168	)		(3,370	)		(2	)		(3,372	)
Standardized measure of discounted future net cash flows relating to proved oil and gas reserves(a)	$	3,253		$	1,299		$	1,243		$	206		$	6,001		$	8		$	6,009
December 31, 2002:
Future cash inflows	$	12,994		$	4,256		$	4,136		$	83		$	21,469		$	5,652		$	27,121
Future production, transportation and administrative costs		(5,103	)		(1,218	)		(1,097	)		(30	)		(7,448	)		(1,465	)		(8,913	)
Future development costs		(650	)		(351	)		(324	)		(4	)		(1,329	)		(333	)		(1,662	)
Future income tax expenses		(2,440	)		(989	)		(753	)		(27	)		(4,209	)		(1,150	)		(5,359	)
Future net cash flows		4,801			1,698			1,962			22			8,483			2,704			11,187
10% annual discount for estimated timing of cash flows		(1,639	)		(444	)		(954	)		(5	)		(3,042	)		(2,212	)		(5,254	)
Standardized measure of discounted future net cash flows relating to proved oil and gas reserves(a)	$	3,162		$	1,254		$	1,008		$	17		$	5,441		$	492		$	5,933
Standardized measure of discounted future net cash flows relating to discontinued operations	$	–		$	–		$	–		$	384		$	384		$	–		$	384
December 31, 2001:
Future cash inflows	$	8,210		$	3,601		$	307		$	–		$	12,118		$	3,456		$	15,574
Future production, transportation and administrative costs		(2,848	)		(1,407	)		(111	)		–			(4,366	)		(1,198	)		(5,564	)
Future development costs		(661	)		(364	)		(40	)		–			(1,065	)		(178	)		(1,243	)
Future income tax expenses		(1,480	)		(572	)		(51	)		–			(2,103	)		(468	)		(2,571	)
Future net cash flows		3,221			1,258			105			–			4,584			1,612			6,196
10% annual discount for estimated timing of cash flows		(1,086	)		(267	)		(15	)		–			(1,368	)		(1,400	)		(2,768	)
Standardized measure of discounted future net cash flows relating to proved oil and gas reserves(a)	$	2,135		$	991		$	90		$	–		$	3,216		$	212		$	3,428
Standardized measure of discounted future net cash flows relating to discontinued operations	$	–		$	–		$	–		$	172		$	172		$	–		$	172

^(a) Excludes $(26) million, $(5) million and $59 million of discounted future net cash flows from the effects of hedging transactions for 2003, 2002 and 2001, respectively.

F-47

Supplementary Information on Oil and Gas Producing Activities (Unaudited) C O N T I N U E D

Summary of Changes in Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves

	Consolidated									Equity Investees									Total
(In millions)	2003			2002			2001			2003			2002			2001			2003			2002			2001
Sales and transfers of oil and gas produced, net of production, transportation, and administrative costs	$	(2,487	)	$	(1,983	)	$	(2,274	)	$	(49	)	$	(75	)	$	(84	)	$	(2,536	)	$	(2,058	)	$	(2,358	)
Net changes in prices and production, transportation and administrative costs related to future production		1,178			2,795			(7,281	)		–			348			(130	)		1,178			3,143			(7,411	)
Extensions, discoveries and improved recovery, less related costs		618			1,032			592			–			15			–			618			1,047			592
Development costs incurred during the period		802			499			564			20			33			19			822			532			583
Changes in estimated future development costs		(478	)		(297	)		(346	)		10			(89	)		(15	)		(468	)		(386	)		(361	)
Revisions of previous quantity estimates		348			311			(236	)		–			11			(39	)		348			322			(275	)
Net changes in purchases and sales of minerals in place		(531	)		737			173			(97	)		–			–			(628	)		737			173
Net change in exchanges of minerals in place		403			–			(357	)		(403	)		–			357			–			–			–
Accretion of discount		807			417			1,081			6			25			57			813			442			1,138
Net change in income taxes		65			(1,288	)		2,501			29			(152	)		123			94			(1,440	)		2,624
Timing and other		(165	)		2			45			–			164			(144	)		(165	)		166			(99	)
Net change for the year		560			2,225			(5,538	)		(484	)		280			144			76			2,505			(5,394	)
Beginning of year		5,441			3,216			8,754			492			212			68			5,933			3,428			8,822
End of year	$	6,001		$	5,441		$	3,216		$	8		$	492		$	212		$	6,009		$	5,933		$	3,428
Net change for the year from discontinued operations	$	(384	)	$	212		$	(1,280	)	$	–		$	–		$	–		$	(384	)	$	212		$	(1,280	)

F-48

Five-Year Operating Summary

	2003			2002			2001			2000			1999
Net Liquid Hydrocarbon Production (thousands of barrels per day) (a)
United States (by business unit)
Northern		26			28			29			30			28
Southern		81			89			98			101			117
Total United States		107			117			127			131			145
International
Australia		1			1			–			–			–
Egypt		–			–			–			1			5
Equatorial Guinea		12			8			–			–			–
Gabon		15			17			16			16			9
Norway		1			1			–			–			–
United Kingdom		40			51			46			29			31
Russian Federation		9			–			–			–			–
Total International		78			78			62			46			45
Consolidated		185			195			189			177			190
Equity investee		6			8			9			11			1
Total Continuing Operations		191			203			198			188			191
Discontinued Operations		3			4			11			19			17
Worldwide Total		194			207			209			207			208
Natural gas liquids included in above		18			20			19			22			19
Net Natural Gas Production (millions of cubic feet per day)(a)
United States (by business unit)
Northern		392			405			397			363			341
Southern		340			340			396			368			414
Total United States		732			745			793			731			755
International
Egypt		–			–			–			–			13
Equatorial Guinea		66			53			–			–			–
Ireland		62			81			79			115			132
Norway		16			15			5			–			26
United Kingdom – equity		184			203			234			212			168
– other(b)		23			4			8			11			16
Total International		351			356			326			338			355
Consolidated		1,083			1,101			1,119			1,069			1,110
Equity investee		13			25			31			29			36
Total Continuing Operations		1,096			1,126			1,150			1,098			1,146
Discontinued Operations		74			104			123			143			150
Worldwide Total		1,170			1,230			1,273			1,241			1,296
Average Sales Prices(c)
Liquid Hydrocarbons (dollars per barrel)
United States	$	26.92		$	22.18		$	20.62		$	25.55		$	16.01
International		26.45			23.86			23.74			27.72			17.43
Consolidated		26.72			22.86			21.65			26.12			16.35
Equity investee		25.91			24.59			23.41			29.64			22.46
Total Continuing Operations		26.70			22.93			21.73			26.32			16.38
Discontinued Operations		28.96			23.29			21.26			24.28			16.23
Worldwide		26.73			22.94			21.71			26.14			16.37
Natural Gas (dollars per thousand cubic feet)
United States	$	4.53		$	2.87		$	3.69		$	3.49		$	2.07
International		2.77			2.30			2.78			2.57			2.04
Consolidated		3.96			2.69			3.42			3.20			2.06
Equity investee		3.70			3.05			3.39			2.75			1.87
Total Continuing Operations		3.95			2.70			3.42			3.18			2.05
Discontinued Operations		5.43			3.30			4.17			3.89			2.35
Worldwide		4.05			2.75			3.49			3.27			2.09
Net Proved Reserves at year-end (developed and undeveloped)
Liquid Hydrocarbons (millions of barrels)
United States		210			245			268			458			520
International		366			292			118			259			277
Consolidated		576			537			386			717			797
Equity investee		2			183			184			–			77
Total		578			720			570			717			874
Developed reserves as % of total net reserves		68	%		82	%		90	%		76	%		81	%
Natural Gas (billions of cubic feet)
United States		1,635			1,724			1,793			1,914			2,057
International		1,149			1,594			1,014			1,091			1,607
Consolidated		2,784			3,318			2,807			3,005			3,664
Equity investee		–			59			51			89			123
Total		2,784			3,377			2,858			3,094			3,787
Developed reserves as % of total net reserves		72	%		74	%		74	%		78	%		75	%

^(a) Amounts reflect production after royalties, excluding the UK, Ireland and the Netherlands where amounts are shown before royalties.

^(b) Represents gas acquired for injection and subsequent resale.

^(c) Prices exclude derivative gains and losses.

F-49

Five-Year Operating Summary CONTINUED

	2003(a)			2002(a)			2001(a)			2000(a)			1999(a )
Refinery Operations (thousands of barrels per day)
In-use crude oil capacity at year-end		935			935			935			935			935
Refinery runs – crude oil refined		917			906			929			900			888
– other charge and blend stocks		138			148			143			141			139
In-use crude oil capacity utilization rate		98	%		97	%		99	%		96	%		95	%
Source of Crude Processed (thousands of barrels per day)
United States		422			433			403			400			349
Canada		122			114			115			102			92
Middle East and Africa		266			232			347			346			363
Other International		107			127			64			52			84
Total		917			906			929			900			888
Refined Product Yields (thousands of barrels per day)
Gasoline		567			581			581			552			566
Distillates		284			285			286			278			261
Propane		21			21			22			20			22
Feedstocks and special products		93			80			69			74			66
Heavy fuel oil		24			20			39			43			43
Asphalt		72			72			76			74			69
Total		1,061			1,059			1,073			1,041			1,027
Refined Product Sales Volumes (thousands of barrels per day)(b)
Gasoline		776			773			748			746			714
Distillates		365			346			345			352			331
Propane		21			22			21			21			23
Feedstocks and special products		97			82			71			69			66
Heavy fuel oil		24			20			41			43			43
Asphalt		74			75			78			75			74
Total		1,357			1,318			1,304			1,306			1,251
Matching buy/sell volumes included in above		64			71			45			52			45
Refined Products Sales Volumes by Class of Trade (as a % of total sales volumes)
Wholesale & Spot market – independent private-brand
– marketers and consumers		71	%		69	%		66	%		65	%		66	%
Marathon and Ashland brand jobbers and dealers		13			13			13			12			11
Speedway SuperAmerica retail outlets		16			18			21			23			23
Total		100	%		100	%		100	%		100	%		100	%
Refined Products (dollars per barrel)
Average sales price	$	38.55		$	32.26		$	34.54		$	38.24		$	24.59
Average cost of crude oil throughput		29.77			25.41			23.47			29.07			18.66
Refining and Wholesale Marketing Margin (dollars per gallon)(c)	$	.0601		$	.0387		$	.1167		$	.0788		$	.0353
Refined Product Marketing Outlets at year-end
MAP operated terminals		88			86			87			89			91
Retail – Marathon and Ashland brand		3,885			3,822			3,800			3,728			3,482
– Speedway SuperAmerica(d)		1,775			2,006			2,104			2,148			2,346
Speedway SuperAmerica(d)
Gasoline & distillates sales (millions of gallons)		3,332			3,604			3,572			3,732			3,610
Gasoline & distillates gross margin (dollars per gallon)	$	.1229		$	.1007		$	.1206		$	.1261		$	.1274
Merchandise sales (millions)	$	2,244		$	2,380		$	2,253		$	2,160		$	1,917
Merchandise gross margin (millions)	$	555		$	576		$	527		$	510		$	500
Petroleum Inventories at year-end (thousands of barrels)
Crude oil, raw materials and natural gas liquids		31,862			32,600			32,741			33,884			34,470
Refined products		37,650			37,729			36,310			34,386			32,853
Pipelines (miles of common carrier pipelines)(e)
Crude Oil – gathering lines		68			200			271			419			557
– trunklines		4,105			4,459			4,511			4,623			4,720
Products   – trunklines		3,861			3,732			2,847			2,834			2,856
Total		8,034			8,391			7,629			7,876			8,133
Pipeline Barrels Handled (millions)(f)
Crude Oil – gathering lines		12.7			14.1			16.3			22.7			30.4
– trunklines		583.3			575.7			570.6			563.6			545.7
Products   – trunklines		371.3			367.6			345.6			329.7			331.9
Total		967.3			957.4			932.5			916.0			908.0
River Operations
Barges– owned/leased		155			150			156			158			169
Boats– owned/leased		7			7			8			7			8

^(a) Statistics include 100% of MAP.

^(b) Total average daily volumes of all refined product sales to MAP’s wholesale, branded and retail (SSA) customers.

^(c) Sales revenue less cost of refinery inputs, purchased products and manufacturing expenses, including depreciation.

^(d) Excludes travel centers contributed to Pilot Travel Centers LLC. Periods prior to September 1, 2001 have been restated.

^(e) Pipelines for downstream operations also include non-common carrier, leased and equity investees.

^(f) Pipeline barrels handled on owned common carrier pipelines, excluding equity investees.

F-50

Five-Year Selected Financial Data

(Dollars in millions, except as noted)	2003			2002			2001			2000			1999
Revenues and Other Income
Revenues by product:
Refined products	$	24,092		$	19,729		$	20,841		$	22,513		$	15,143
Merchandise		2,395			2,521			2,506			2,441			2,194
Liquid hydrocarbons		10,500			6,517			6,502			6,697			4,490
Natural gas		3,796			2,362			2,801			2,317			1,344
Transportation and other products		180			166			146			151			187
Total revenues		40,963			31,295			32,796			34,119			23,358
Gain (loss) on ownership change in MAP		(1	)		12			(6	)		12			17
Other(a)		272			248			272			(645	)		92
Total revenues and other income	$	41,234		$	31,555		$	33,062		$	33,486		$	23,467
Income From Operations
Exploration and production
Domestic	$	1,128		$	687		$	1,122		$	1,110		$	494
International		359			351			229			305			95
E&P segment income		1,487			1,038			1,351			1,415			589
Refining, marketing and transportation		770			356			1,914			1,273			611
Other energy related businesses		73			78			62			43			61
Segment income		2,330			1,472			3,327			2,731			1,261
Items not allocated to segments:
Administrative expenses		(227	)		(194	)		(187	)		(154	)		(120	)
Gain (loss) on disposal of assets		106			24			–			124			–
Joint venture formation charges		–			–			–			(931	)		–
Inventory market valuation adjustments		–			71			(71	)		–			551
Gain (loss) on ownership change in MAP		(1	)		12			(6	)		12			17
Int’l. & domestic oil & gas impairments & gas contract settlement		–			–			–			(5	)		(16	)
Loss on dissolution of MKM Partners L.P.		(124	)		–			–			–			–
Other items		–			(15	)		45			(70	)		(21	)
Income from operations		2,084			1,370			3,108			1,707			1,672
Minority interest in income of MAP		302			173			704			498			447
Net interest and other financing costs		186			321			172			238			285
Provision for income taxes		584			369			827			536			319
Income From Continuing Operations	$	1,012		$	507		$	1,405		$	435		$	621
Per common share – basic (in dollars)		3.26			1.63			4.54			1.40			2.00
– diluted (in dollars)		3.26			1.63			4.54			1.40			2.00
Net Income		1,321			516			377			432			654
Per common share – basic (in dollars)		4.26			1.66			1.22			1.39			2.11
– diluted (in dollars)		4.26			1.66			1.22			1.39			2.11
Balance Sheet Position at year-end
Current assets	$	6,040		$	4,479			4,411		$	4,985		$	4,081
Net investment in United States Steel		–			–			–			1,919			2,056
Net property, plant and equipment		10,830			10,390			9,552			9,346			10,261
Total assets		19,482			17,812			16,129			17,151			17,730
Short-term debt		272			161			215			228			48
Other current liabilities		3,935			3,498			3,253			3,784			3,096
Long-term debt		4,085			4,410			3,432			1,937			3,320
Minority interest in MAP		2,011			1,971			1,963			1,840			1,753
Common stockholders’ equity		6,075			5,082			4,940			6,764			6,856
Cash Flow Data—Continuing Operations
Net cash from operating activities	$	2,678		$	2,336		$	2,749		$	2,947		$	1,891
Capital expenditures		1,892			1,520			1,533			1,296			1,255
Disposal of assets		644			146			83			550			371
Dividends paid		298			285			284			274			257
Dividends paid per share		.96			.92			.92			.88			.84
Employee Data
Marathon:
Total employment costs	$	1,560		$	1,481		$	1,498		$	1,474		$	1,421
Average number of employees		27,677			28,237			30,791			31,515			33,086
Number of pensioners at year-end		3,291			3,122			3,105			3,255			3,402
Speedway SuperAmerica LLC: (Included in Marathon totals)
Total employment costs	$	464		$	480		$	496		$	489		$	452
Average number of employees		17,911			18,943			21,449			21,649			22,801
Number of pensioners at year-end		234			214			205			211			209
Stockholder Data at year-end
Number of common shares outstanding (in millions)		310.4			309.9			309.4			308.3			311.8
Registered shareholders (in thousands)		61.9			66.4			69.7			65.0			71.4
Market price of common stock	$	33.09		$	21.29		$	30.00		$	27.75		$	24.69

^(a) Includes income from equity method investments, net gains (losses) on disposal of assets and other income.

F-51

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934) was carried out under the supervision and with the participation of Marathon’s management, including our Chief Executive Officer and Chief Financial Officer. As of the end of the period covered by this report based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective, and that there were no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation.

Internal Controls

As of the end of the period covered by this report, Marathon’s management, along with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of Marathon’s internal controls over financial reporting. Based on that evaluation, there have been no significant changes in such internal controls or in other factors that could have significantly affected those controls, including any corrective actions with regard to significant deficiencies and material weaknesses. Marathon believes that its existing financial and operational controls and procedures are adequate.

Marathon reviews and modifies its financial and operational controls on an ongoing basis to ensure that those controls are adequate to address changes in its business as it evolves. Marathon believes that its existing financial and operational controls and procedures are adequate.

57

PART III

Item 10. Directors and Executive Officers of The Registrant

Information concerning the directors of Marathon required by this item is incorporated by reference to the material appearing under the heading “Election of Directors” in Marathon’s Proxy Statement dated March 8, 2004, for the 2004 Annual Meeting of stockholders.

Marathon’s Board of Directors has established the Audit Committee and determined our “Audit Committee Financial Expert.” The information required to be disclosed is incorporated by reference to the material appearing under the sub-heading “Audit Committee” located under the heading “The Board of Directors and Governance Matters” in Marathon’s Proxy Statement dated March 8, 2004, for the 2004 Annual Meeting of Stockholders.

Marathon has adopted a Code of Ethics for Senior Financial Officers. It is available on our website at www.marathon.com/Code_Ethics_Sr_Finan_Off/.

Executive Officers of the Registrant

The executive officers of Marathon or its subsidiaries and their ages as of February 1, 2004, are as follows:

Albert G. Adkins	56	Vice President, Accounting and Controller
Philip G. Behrman	53	Senior Vice President, Worldwide Exploration
Clarence P. Cazalot, Jr	53	President and Chief Executive Officer, and Director
Janet F. Clark	49	Senior Vice President and Chief Financial Officer
Steven B. Hinchman	45	Senior Vice President, Worldwide Production
Jerry Howard	55	Senior Vice President, Corporate Affairs
Alard Kaplan	53	Vice President, Major Projects
Steve J. Lowden	44	Senior Vice President, Business Development/Integrated Gas
Kenneth L. Matheny	56	Vice President, Investor Relations and Public Affairs
Paul C. Reinbolt	48	Vice President, Finance and Treasurer
William F. Schwind, Jr.	59	Vice President, General Counsel and Secretary

With the exception of Mr. Cazalot, Mr. Behrman, Ms. Clark, Mr. Kaplan and Mr. Lowden mentioned above, all of the executive officers have held responsible management or professional positions with Marathon or its subsidiaries for more than the past five years.

Mr. Cazalot joined Marathon Oil Company as president in March 2000. In January of 2002, he was appointed president and chief executive officer of Marathon Oil Corporation. Prior to joining Marathon, Mr. Cazalot served from 1999 to 2000 as vice president of Texaco Inc. and president of Texaco’s worldwide production operations.

Prior to joining Marathon in September 2000, Mr. Behrman served from 1996 as exploration manager for Vastar Resources Inc.’s Gulf of Mexico deepwater division. During 2000, Mr. Behrman assumed the additional responsibilities of acting-vice president of exploration and land.

Ms. Clark joined Marathon in January 2004 as senior vice president and chief financial officer. Prior to joining Marathon, she was employed by Nuevo Energy Company from 2001 to December 2003, with her most recent position as senior vice president and chief financial officer. Prior to her employment with Nuevo Energy Company, Ms. Clark served as executive vice president of corporate development and administration for Santa Fe Snyder Corporation.

Mr. Kaplan joined Marathon in December 2003 as vice president, major projects. Prior to joining Marathon, he was employed by Foster Wheeler Corporation since 2001, with his most recent position as director of LNG for Foster Wheeler’s Houston office. Prior thereto and since 1995, he served Triton Energy Ltd. (merged with Amerada Hess Corporation) as technical manager for the Thai-Malaysian development and as project manager for the Ceiba field FPSO development, offshore Equatorial Guinea.

Prior to joining Marathon Oil Company in December 2000, Mr. Lowden was employed by Premier Oil plc since 1987, with his most recent position as director of commercial and business development responsible for international business.

58

Item 11. Executive Compensation

Information required by this item is incorporated by reference to the material appearing under the heading “Executive Compensation and Other Information” in Marathon’s Proxy Statement dated March 8, 2004, for the 2004 Annual Meeting of stockholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management

Information required by this item is incorporated by reference to the material appearing under the headings, “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Directors and Executive Officers” in Marathon’s Proxy Statement dated March 8, 2004, for the 2004 Annual Meeting of stockholders.

The following table provides information as of December 31, 2003, with respect to shares of the Company’s common stock that may be issued under the Company’s existing equity compensation plans:

Equity Compensation Plan Information

	(a)		(b)		(c)
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by stockholders	9,007,861	(1)	$	28.33	18,249,939	(2)
Equity compensation plans not approved by stockholders(3)	57,243	(4)		N/A	–
Total	9,065,104	(1)	$	28.33	18,249,939	(2)

⁽¹⁾ This number includes 1,715,200 stock options outstanding under the 2003 Incentive Compensation Plan (the “Incentive Plan”) and 7,291,180 stock options outstanding under the 1990 Stock Plan. This number also includes 1,481 phantom shares that have been credited to non-employee directors pursuant to the non-employee director deferred compensation program established under the Incentive Plan. When a non-employee director leaves the Board, he or she will be issued actual shares of Marathon common stock in place of the phantom shares. The weighted-average exercise price shown in column (b) does not take these phantom shares into account.

⁽²⁾ This number includes shares available for issuance under the Incentive Plan and the 1990 Stock Plan as of December 31, 2003. Under the Incentive Plan, 18,027,399 shares remain available for issuance, of which no more than 8,242,599 shares may be issued for awards other than stock options or stock appreciation rights. In addition, shares related to grants that are forfeited, terminated, cancelled, expire unexercised, or settled in such manner that all or some of the shares are not issued to a participant shall immediately become available for issuance. Under the 1990 Stock Plan, 222,540 shares remain available for issuance, all of which may be issued in the form of performance shares. The shares available under the 1990 Stock Plan will be granted to certain officers only if the Company exceeds targeted performance levels.

⁽³⁾ This row reflects awards made under the Deferred Compensation Plan for Non-Employee Directors prior to April 30, 2003. Since that date, all stock-related awards have been made under the Incentive Plan. No new stock-related grants will be made under the Deferred Compensation Plan for Non-Employee Directors.

⁽⁴⁾ This number represents phantom shares that were awarded to non-employee directors under the Deferred Compensation Plan for Non-Employee Directors prior to April 30, 2003. When a non-employee director leaves the Board, he or she will be issued actual shares of Marathon common stock in place of the phantom shares.

Item 13. Certain Relationships and Related Transactions

Information required by this item is incorporated by reference to the material appearing under the heading “Certain Relationships and Related Party Transactions” in Marathon’s Proxy Statement dated March 8, 2004, for the 2004 Annual Meeting of stockholders.

Item 14. Principal Accounting Fees and Services

Information required by this item is incorporated by reference to the material appearing under the heading “Information Regarding the Independent Public Auditor’s Fees, Services and Independence” in Marathon’s Proxy Statement dated March 8, 2004, for the 2004 Annual Meeting of stockholders.

59

PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

A. Documents Filed as Part of the Report
1. Financial Statements (see Part II, Item 8. of this report regarding financial statements).
2. Financial Statement Schedules.
	Financial Statement Schedules listed under SEC rules but not included in this report are omitted because they are not applicable or the required information is contained in the financial statements or notes thereto.
	Schedule II—Valuation and Qualifying Accounts is provided on page 66.
3. Lists of Exhibits:
Exhibit No.
2. Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
(a)	Holding Company Reorganization Agreement, dated as of July 1, 2001, by and among USX Corporation, USX Holdco, Inc. and United States Steel LLC.	Incorporated by reference to Exhibit 2.1 to USX Corporation’s Form 8-K dated July 2, 2001 (filed July 2, 2001).
(b)	Agreement and Plan of Reorganization, dated as of July 31, 2001, by and between USX Corporation and United States Steel LLC.	Incorporated by reference to Exhibit 2.1 to USX Corporation’s Registration Statement on Form S-4 filed September 7, 2001 (Registration. No. 333-69090).
3. Articles of Incorporation and Bylaws
(a)	Restated Certificate of Incorporation of Marathon Oil Corporation.	Incorporated by reference to Exhibit 3(a) to Marathon Oil Corporation’s Form 10-K for the year ended December 31, 2001.
(b)	By-laws of Marathon Oil Corporation.	Incorporated by reference to Exhibit 3(b) to Marathon Oil Corporation’s Form 10-K for the year ended December 31, 2002.
4. Instruments Defining the Rights of Security Holders, Including Indentures
(a)	Five Year Credit Agreement dated as of November 30, 2000.	Incorporated by reference to Exhibit 4(a) to USX Corporation’s Form 10-K for the year ended December 31, 2000.
(b)	Rights Agreement between USX Corporation and ChaseMellon Shareholder Services, L.L.C., as Rights Agent, dated as of September 28, 1999.	Incorporated by reference to Exhibit 4.6 to Post-Effective Amendment No. 2 to Marathon Oil Corporation’s Registration Statement on Form S-3 filed on February 6, 2002 (Registration No. 333-88797).

60

(c)	First Amendment to Rights Agreement between USX Corporation, USX Holdco, Inc. (to be renamed USX Corporation), and Mellon Investor Services LLC (formerly known as ChaseMellon Shareholder Services, L.L.C), as Rights Agent, dated as of July 2, 2001.	Incorporated by reference to Exhibit 4.6 to Post-Effective Amendment No. 2 to Marathon Oil Corporation’s Registration Statement on Form S-3 filed on February 6, 2002 (Registration No. 333-88797).
(d)	Second Amendment to Rights Agreement between USX Corporation (to be renamed Marathon Oil Corporation) and National City Bank, as Rights Agent, dated as of December 31, 2001.	Incorporated by reference to Exhibit 4.6 to Post-Effective Amendment No. 2 to Marathon Oil Corporation’s Registration Statement on Form S-3 filed on February 6, 2002 (Registration No. 333-88797).
(e)	Third Amendment to Rights Agreement between Marathon Oil Corporation and National City Bank, as Rights Agent, dated as of January 29, 2003.	Incorporated by reference to Exhibit 4.4 to Marathon Oil Corporation’s Form 8-K dated January 29, 2003 (filed January 31, 2003).
(f)	Senior Indenture dated February 26, 2002 between Marathon Oil Corporation and JPMorgan Chase Bank, as Trustee.	Incorporated by reference to Exhibit 4.1 to Marathon Oil Corporation’s Form 8-K dated February 27, 2002 (filed February 27, 2002).
(g)	Senior Indenture dated June 14, 2002 among Marathon Global Funding Corporation, Issuer, Marathon Oil Corporation, Guarantor, and JPMorgan Chase Bank, Trustee.	Incorporated by reference to Exhibit 4.1 to Marathon Oil Corporation’s Form 8-K dated June 18, 2002 (filed June 21, 2002).
(h)	Senior Supplemental Indenture No. 1 dated as of September 5, 2003 among Marathon Global Funding Corporation, Issuer, Marathon Oil Corporation, Guarantor and JPMorgan Chase Bank, Trustee to the Indenture dated as of June 14, 2002.	Incorporated by reference to Exhibit 4.1 to Marathon Oil Corporation’s Form 10-Q for the quarter ended September 30, 2003.
(i)	Pursuant to CFR 229.601(b)(4)(iii), instruments with respect to long-term debt issues have been omitted where the amount of securities authorized under such instruments does not exceed 10% of the total consolidated assets of Marathon. Marathon hereby agrees to furnish a copy of any such instrument to the Commission upon its request.
10. Material Contracts
(a)	Marathon Oil Corporation 2003 Incentive Compensation Plan, Effective January 1, 2003.	Incorporated by reference to Appendix C to Marathon Oil Corporation’s Definitive Proxy Statement on Schedule 14A filed March 10, 2003.

61

(b)	Marathon Oil Corporation 1990 Stock Plan, As Amended and Restated Effective January 1, 2002.	Incorporated by reference to Exhibit 10(a) to Marathon Oil Corporation’s Form 10-K for the year ended December 31, 2001.
(c)	Marathon Oil Corporation Deferred Compensation Plan for Non-Employee Directors, Amended and Restated as of January 1, 2002.	Incorporated by reference to Exhibit 10.1 to Marathon Oil Corporation’s Amendment No. 1 to Form 10-Q/A for the quarter ended September 30, 2002.
(d)	Form of Change of Control Agreement between USX Corporation and Various Officers.	Incorporated by reference to Exhibit 10.12 to Amendment No. 1 to USX Corporation’s Registration Statement on Form S-4 filed September 20, 2001 (Registration No. 333-69090).
(e)	Completion and Retention Agreement, dated as of August 8, 2001, among USX Corporation, United States Steel LLC and Thomas J. Usher.	Incorporated by reference to Exhibit 10.10 to Amendment No. 1 to USX Corporation’s Registration Statement on Form S-4 filed September 20, 2001 (Registration No. 333-69090).
(f)	Amendment No. 1 to the Completion and Retention Agreement dated January 29, 2003, effective January 1, 2003, among Marathon Oil Corporation, United States Steel Corporation and Thomas J. Usher.	Incorporated by reference to Exhibit 10(i) to Marathon Oil Corporation’s Form 10-K for the year ended December 31, 2002.
(g)	Letter Agreement relating to restricted stock under Marathon Oil Corporation’s 1990 Stock Plan, dated December 6, 2002, between Marathon Oil Corporation and Thomas J. Usher.	Incorporated by reference to Exhibit 10(j) to Marathon Oil Corporation’s Form 10-K for the year ended December 31, 2002.
(h)	Agreement between Marathon Oil Company and Clarence P. Cazalot, Jr., executed February 28, 2000.	Filed herewith.
(i)	Letter Agreement between Marathon Oil Company and Janet F. Clark, executed December 9, 2003.	Filed herewith.
(j)	Letter Agreement between Marathon Oil Company and Steven J. Lowden, executed September 17, 2000.	Incorporated by reference to Exhibit 10(k) to Marathon Oil Corporation’s Form 10-K for the year ended December 31, 2001.
(k)	Letter Agreement between Marathon Oil Company and Philip G. Behrman, executed September 19, 2000.	Incorporated by reference to Exhibit 10(l) to Marathon Oil Corporation’s Form 10-K for the year ended December 31, 2001.
(l)	Letter Agreement between USX Corporation and John T. Mills, executed September 25, 2000.	Incorporated by reference to Exhibit 10(m) to Marathon Oil Corporation’s Form 10-K for the year ended December 31, 2001.

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(m)	Consulting Services Agreement between Marathon Oil Corporation and John T. Mills, executed January 5, 2004.	Filed herewith.
(n)	Amended and Restated Limited Liability Company Agreement of Marathon Ashland Petroleum LLC, dated as of December 31, 1998.	Filed herewith.
(o)	Put/Call, Registration rights and Standstill Agreement dated as of January 1, 1998 among Marathon Oil Company, USX Corporation, Ashland Inc. and Marathon Ashland petroleum LLC.	Filed herewith.
(p)	Amendment No. 1 dated as of December 31, 1998 to Put/Call, Registration Rights and Standstill Agreement of Marathon Ashland Petroleum LLC dated as of January 1, 1998.	Filed herewith.
(q)	Tax Sharing Agreement between USX Corporation (renamed Marathon Oil Corporation) and United States Steel LLC (converted into United States Steel Corporation) dated as of December 31, 2001.	Incorporated by reference to Exhibit 99.3 to Marathon Oil Corporation’s Form 8-K dated December 31, 2001 (filed January 3, 2002).
(r)	Financial Matters Agreement between USX Corporation (renamed Marathon Oil Corporation) and United States Steel LLC (converted into United States Steel Corporation) dated December 31, 2001.	Incorporated by reference to Exhibit 99.5 to Marathon Oil Corporation’s Form 8-K dated December 31, 2001 (filed January 3, 2002).
(s)	Insurance Assistance Agreement between USX Corporation (renamed Marathon Oil Corporation) and United States Steel LLC (converted into United States Steel Corporation) dated as of December 31, 2001.	Incorporated by reference to Exhibit 99.6 to Marathon Oil Corporation’s Form 8-K dated December 31, 2001 (filed January 3, 2002).
(t)	License Agreement between USX Corporation (renamed Marathon Oil Corporation) and United States Steel LLC (converted into United States Steel Corporation) dated as of December 31, 2001.	Incorporated by reference to Exhibit 99.7 to Marathon Oil Corporation’s Form 8-K dated December 31, 2001 (filed January 3, 2002).

12.1 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends

12.2 Computation of Ratio of Earnings to Fixed Charges

14. Code of Ethics for Senior Financial Officers

21. List of Significant Subsidiaries

23. Consent of Independent Accountants

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31.1 Certification of President and Chief Executive Officer pursuant to Exchange Act Rules Rule 13(a)-14 and 15(d)-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer pursuant to Exchange Act Rules Rule 13(a)-14 and 15(d)-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.

32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.

B. Reports on Form 8-K

Form 8-K dated October 23, 2003 (filed October 23, 2003), reporting under Item 12. Disclosure of Results of Operations and Financial Condition, that Marathon Oil Corporation is furnishing information for the October 23, 2003 press release titled “Marathon Oil Corporation Reports Third Quarter 2003 Results.”

Form 8-K dated December 4, 2003 (filed December 4, 2003), reporting under Item 9. Regulation FD Disclosure, that Marathon Oil Corporation is furnishing information for the December 4, 2003 press release titled “Marathon Appoints Janet F. Clark as Senior Vice President and Chief Financial Officer.”

Form 8-K dated January 27, 2004 (filed January 27, 2004), reporting under Item 12. Disclosure of Results of Operations and Financial Condition, that Marathon Oil Corporation is furnishing information for the January 27, 2004 press release titled “Marathon Oil Corporation Reports Fourth Quarter and Year End 2003 Results.”

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Report of Independent Auditors on

Financial Statement Schedule

To the Stockholders of Marathon Oil Corporation:

Our audit of the consolidated financial statements referred to in our report dated February 25, 2004 appearing in the 2003 Annual Report of Marathon Oil Corporation (which report and consolidated financial statements are included in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

PricewaterhouseCoopers LLP

Houston, Texas

February 25, 2004

65

Marathon Oil Corporation

Schedule II—Valuation and Qualifying Accounts

For the Years Ended December 31, 2003, 2002 and 2001

			Additions
(In millions)	Balance at Beginning of Period		Charged to Cost and Expenses		Charged to Other Accounts			Deductions(a)		Balance at End of Period
Year ended December 31, 2003
Reserves deducted in the balance sheet from the assets to which they apply:
Allowance for doubtful accounts current	$	6	$	10	$	–		$	11	$	5
Allowance for doubtful accounts noncurrent		14		2		–			6		10
Tax valuation allowances:
Federal		–		–		67	(b)		–		67
State		78		–		–			5		73
Foreign		404		–		57	(c)		25		436
Year ended December 31, 2002
Reserves deducted in the balance sheet from the assets to which they apply:
Allowance for doubtful accounts current	$	4	$	13	$	–		$	11	$	6
Allowance for doubtful accounts noncurrent		4		10		–			–		14
Inventory market valuation reserve		72		–		–			72		–
Tax valuation allowances:
State		76		–		2	(c)		–		78
Foreign		285		–		119	(c)		–		404
Year ended December 31, 2001
Reserves deducted in the balance sheet from the assets to which they apply:
Allowance for doubtful accounts current	$	3	$	21	$	–		$	20	$	4
Allowance for doubtful accounts noncurrent		–		4		–			–		4
Inventory market valuation reserve		–		72		–			–		72
Tax valuation allowances:
State		16		7		53	(d)		–		76
Foreign		252		–		43	(c)		10		285

^(a) Deductions for the allowance for doubtful accounts and long-term receivables include amounts written off as uncollectible, net of recoveries. Deductions in the inventory market valuation reserve reflect increases in market prices and inventory turnover, resulting in noncash credits to costs and expenses. Deductions in the state tax valuation allowance is due to expiring net operating losses. Deductions in the foreign tax valuation allowance for 2003 relate to the sale of the exploration and production operations in western Canada. Deductions in the foreign tax valuation allowance for 2001 reflect changes in the amount of deferred taxes expected to be realized, resulting in credits to the provision for income taxes.

^(b) Reflects valuation allowance established for deferred tax assets generated in the current period, resulting from excess capital losses related to the sale of exploration and production operations in western Canada.

^(c) Reflects valuation allowances established for deferred tax assets generated in the current period, primarily related to net operating losses.

^(d) The increase in the valuation allowance is related to net operating losses previously attributed to United States Steel which were retained by Marathon in connection with the Separation. The transfer of net operating losses and the related valuation allowance was recorded as a capital transaction with United States Steel.

66

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity indicated on March 8, 2004.

MARATHON OIL CORPORATION
By:	/s/ ALBERT G. ADKINS
	Albert G. Adkins
	Vice President, Accounting and Controller

Signature	Title
/s/ THOMAS J. USHER Thomas J. Usher	Chairman of the Board and Director
/s/ CLARENCE P. CAZALOT, JR. Clarence P. Cazalot, Jr.	President & Chief Executive Officer and Director
/s/ JANET F. CLARK Janet F. Clark	Senior Vice President and Chief Financial Officer
/s/ ALBERT G. ADKINS Albert G. Adkins	Vice President, Accounting and Controller
/s/ CHARLES F. BOLDEN, JR. Charles F. Bolden, Jr.	Director
/s/ DAVID A. DABERKO David A. Daberko	Director
/s/ WILLIAM L. DAVIS William L. Davis	Director
/s/ SHIRLEY ANN JACKSON Shirley Ann Jackson	Director
/s/ PHILLIP LADER Phillip Lader	Director
/s/ CHARLES R. LEE Charles R. Lee	Director
/s/ DENNIS H. REILLEY Dennis H. Reilley	Director
/s/ SETH E. SCHOFIELD Seth E. Schofield	Director
/s/ DOUGLAS C. YEARLEY Douglas C. Yearley	Director

67

GLOSSARY OF CERTAIN DEFINED TERMS

The following definitions apply to terms used in this document:

Ashland	Ashland Inc.
bbl	barrel
bcf	billion cubic feet
bcfd	billion cubic feet per day
BLM	Bureau of Land Management
BOE	barrels of oil equivalent
BOEPD	barrels of oil equivalent per day
bpd	barrels per day
CAA.	Clean Air Act
CERCLA	Comprehensive Environmental Response, Compensation, and Liability Act
Clairton 1314B	Clairton 1314B Partnership, L.P.
CLAM	CLAM Petroleum B.V.
CWA	Clean Water Act
DOE	Department of Energy
downstream	refining, marketing and transportation operations
E&P	exploration and production
EPA	U.S. Environmental Protection Agency
exploratory	wildcat and delineation, i.e., exploratory wells
FASB	Financial Accounting Standards Board
GTL	gas-to-liquids
IEPA	Illinois EPA
IFO	Income from operations
IMV	Inventory Market Valuation
Kinder Morgan	Kinder Morgan Energy Partners, L.P.
KKPL	Kenai Kachemak Pipeline LLC
KMOC	Khanty Mansiysk Oil Corporation
LNG	liquefied natural gas
LOCAP	LOCAP LLC
LOOP	LOOP LLC
LPG	liquefied petroleum gas
MAP	Marathon Ashland Petroleum LLC
Marathon	Marathon Oil Corporation and its consolidated subsidiaries
Marathon Stock	USX-Marathon Group Common Stock
mbpd	thousand barrels per day
mcf	thousand cubic feet
MKM	MKM Partners L.P.
mmcfd	million cubic feet per day
MTBE	methyl tertiary-butylether
NOL	Net operating loss
NOV	Notice of Violation
NOx	Nitrogen oxide
NYMEX	New York Mercantile Exchange
OCI	Other comprehensive income
OERB	Other energy related businesses
OPA-90	Oil Pollution Act of 1990
OTC	over the counter
Pennaco	Pennaco Energy, Inc.
Pilot	Pilot Corporation
PRB	Powder River Basin
PRP(s)	potentially responsible party (ies)
PTC	Pilot Travel Centers LLC
RCRA	Resource Conservation and Recovery Act
RM&T	refining, marketing and transportation
SPEs	special-purposes entities
SSA	Speedway SuperAmerica LLC
Steel Stock	USX-U. S. Steel Group Common Stock
U.K.	United Kingdom
United States Steel	United States Steel Corporation
upstream	exploration and production operations
USTs	underground storage tanks
VIE	variable interest entity
WTI	West Texas Intermediate

68

EX-10.(H)

EXHIBIT 10(h)

[Letterhead of USX]

USX Corporation 600 Grant Street Pittsburgh, PA 15219-4776 412 433 1101 FAX 412 433 2018 Thomas J. Usher Chairman, Board of Directors & Chief Executive Officer

February 25, 2000

VIA AIRBORNE

Mr. Clarence P. Cazalot, Jr.

510 Frogtown Road

New Canaan, CT 06840

Dear Clarence,

Subject to the approval of the USX Corporation Board of Directors (“Board”), I am authorized to extend to you, on behalf of Marathon Oil Company (“Marathon”), an offer of employment for the position of President, effective March 1, 2000 or such later date, immediately following Texaco’s acceptance of your resignation, as you can take office (the “employment date”). I am also authorized to inform you that you will be nominated to serve on the USX Board as Vice Chairman.

Significant aspects of Marathon’s offer include the following:

1. You will be paid, in equal monthly installments, an annual salary of $600,000. In addition, you will be eligible to receive an annual performance bonus, based on Marathon’s actual performance in each calendar year, under the USX Corporation Senior Executive Officer Annual Incentive Compensation Plan, a copy of which is attached. Your bonus award for the year 2000 will be a minimum of $800,000.

2. You will be paid a retention bonus of $200,000 on the first, second, third, fourth and fifth anniversaries of your employment date.

3. Should you accept this offer of employment, the Board’s Compensation Committee will approve, under the USX Corporation 1990 Stock Plan, a copy of which is attached, the following:

(1) the issuance to you of a stock option for 300,000 shares of USX-Marathon Group common stock, the grant date to be the date of your employment with Marathon. The option price, in accordance with the Plan’s Administrative Regulations, will be equal to the

mean of the high and low prices of USX-Marathon Group common stock on the date of grant, and the option shall be exercisable as follows:

Three years from the date of grant—100,000 shares

Four years from the date of grant—100,000 shares

Five years from the date of grant—100,000 shares

(2) an additional grant of stock options on the date of the next stock option grant (currently scheduled for May 30, 2000) of 100,000 shares, to be made 80% in USX-Marathon Group common stock and 20% in USX-U. S. Steel Group common stock. The option will have the same vesting period as options granted to other executive management employees (currently one year from the date of grant).

(3) a grant of 75,000 restricted-stock shares on the date of the next restricted stock grant (currently scheduled for May 30, 2000). The grant will be made 80% in USX-Marathon Group common stock and 20% in USX-U. S. Steel Group common stock and have an annual target vesting rate of 15,000 shares.

4. As a Marathon executive employee, you will be eligible to participate in all of Marathon’s existing and future employee benefit programs applicable to executive officers. In addition, you will receive (1) a comprehensive physical examination at Company expense in each calendar year in accordance with Marathon’s policy covering physical examinations for Marathon’s executive officers and (2) tax preparation and financial planning advice under terms and conditions comparable to those applicable to USX executive management.

5. Upon your employment by Marathon, the USX Board of Directors will extend to you a change-in-control agreement which, upon your acceptance thereof, will provide you with earnings protection up to a maximum of three times your annual salary and bonus should a change in control of USX, as defined in such agreement, occur.

6. You and your family will be covered by Marathon’s medical care plan immediately upon your employment, resulting in no gap in medical coverage.

7. Marathon will provide for reimbursement of the cost of membership fees and dues for one country club.

8. You will be entitled to five weeks of paid vacation per year or the number of weeks to which you would be entitled under Marathon’s vacation plan, whichever is longer.

Because of your extensive experience and personal qualities, you can make a unique and valuable contribution to Marathon’s future success. I therefore hope, both personally and for Marathon, that you will accept our offer.

Sincerely,

/s/ THOMAS J. USHER

Thomas J. Usher

Agreed to and accepted this 28th day of February, 2000.

/s/ CLARENCE P. CAZALOT, JR.

Clarence P. Cazalot, Jr.

EX-10.(I)

EXHIBIT 10(i)

Eileen M. Campbell

Vice President

Human Resources

[LETTERHEAD OF MARATHON OIL COMPANY]

5555 San Felipe (77056)

P.O. Box 3128 (77253-3128)

Houston, TX

Telephone 713/296-4136

Fax 713/296-4375

November 24, 2003

Ms. Janet F. Clark

2015 Dunstan

Houston, Texas 77005

Dear Ms. Clark:

On behalf of Clarence P. Cazalot, Jr., I want to confirm Marathon Oil Company’s offer to you and your acceptance for the position of Chief Financial Officer, in Houston, Texas starting January 5, 2004.

The terms of the starting compensation package specific to you are as follows:

• Base Compensation @ $400,000 per annum.

• Cash Incentive compensation target @ 75% of base compensation.

• Signing bonus—$300,000, one half to be paid within forty-five (45) days of your starting date (January 5, 2004) and one half to be paid on the one-year anniversary.

• Grant of fifteen thousand (15,000) shares of restricted stock that will vest on the third anniversary of your date of grant.

• Grant of 20,000 stock options to purchase MRO shares, with tandem stock appreciation rights, vesting 6,666 shares on the one-year anniversary of your date of grant; 6,666 shares on the two-year anniversary of your grant and 6,668 shares vesting on the three-year grant date. These options shall be granted at a stock price equal to the average high and low price of MRO shares traded on the NYSE on the tenth business day following your first day of employment with Marathon, which is anticipated to be no later than January 5, 2004.

• Four (4) weeks vacation with pay.

Other benefits that you are entitled to include:

Marathon Oil Company Thrift Plan - You will be eligible to participate in Marathon’s Thrift Plan after 12 months of service. A special one-time only payment equal to 6% of your pay (pay as defined by the Thrift Plan) will be paid to you after the completion of 12-months of employment provided you are on the Marathon payroll on the date of payout.

Janet F. Clark

November 24, 2003

Page 2

Retirement Plan - Company funded retirement plan. You are eligible for the plan once you have completed at least one year of service. Once eligible, this waiting time will count as plan participation.

Change of Control Provisions – In the event there is a change of control of Marathon occur during your employment, and your employment is terminated within 24 months of the change of control, you would be eligible to receive a severance payment equal to three times your salary plus bonus. In addition, you health and life insurance benefits would be continued for up to three years following your termination, and you would receive three additional years of credit for purposes of retiree medical benefits and supplemental retirement benefits. You would also receive a lump sum payment equal in value to the amount of any unvested benefits in the Thrift Plan and any related supplemental plans in which you participate. In addition, all of your equity awards would vest immediately upon a change of control regardless of whether your employment was terminated or not.

The enclosed Benefits in Brief brochure outlines the provisions of the Thrift and Retirement Plan as well as other plans you may participate in.

Your employment is contingent on the following:

• Verification and compliance with the Immigration Reform and Control Act of 1986.

• Completion and return, prior to your start date, of a Comprehensive Health History Questionnaire

• Satisfactory completion of the medical evaluation(s) required for the position being offered.

The following items are enclosed for your action or review:

Employee Eligibility Verification Form (I-9)—Please review this form and bring the appropriate document(s) on your first day of employment. If you are unable to obtain the necessary document(s), please call me prior to your scheduled start date, as failure to provide this information may postpone your employment.

Employee Agreement – Please review this document and be prepared to sign it on your first day of employment. Marathon and its subsidiaries require their employees to protect the company’s intellectual property. This includes respecting the rights of previous employers and their proprietary information.

Comprehensive Health History Questionnaire – Please complete this questionnaire immediately and return it in the provided pre-paid envelope.

The Benefit Highlights Brochure - This guide will provide an overview of Marathon Oil Company benefits and of the enrollment process.

If you have any questions, regarding your benefit elections prior to your start date, please call me.

Janet F. Clark

November 24, 2003

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Please complete all forms and bring them with you on your first day of employment. We will be glad to answer any questions during your indoctrination. Also, please bring the necessary documents(s) to verify your employment eligibility as listed on the attached I-9 form.

Assuming you agree to the above described terms, please sign this letter in duplicate in the space provided below and return one copy to me for my file.

Janet, we look forward to you joining Marathon Oil Company and are confident you will be instrumental in helping us to successfully achieve our business goals. Please call me at 713/296-4136 if you have any questions.

Very truly yours,

/s/ Eileen M. Campbell

Eileen M. Campbell

Vice-President, Human Resources

/s/ Janet F. Clark                         Date 12-9-2003

Janet Clark

cc: Susan Carrera - Manager, Compensation

Enclosures

EX-10.(M)

EXHIBIT 10(m)

CONSULTING SERVICES AGREEMENT

This Agreement is entered into this 5th day of January, 2004, between Marathon Oil Corporation, a Delaware corporation (hereinafter “Marathon” or “Company”) of 5555 San Felipe Road, Houston, Texas 77056-2723, and John T. Mills (hereinafter “Consultant or “Contractor”) of 33 West Oak Drive, Houston, TX 77056.

SCOPE OF WORK

1. During the term of this Agreement, Contractor agrees, as an independent contractor, to provide consulting services to Marathon Oil Corporation and Marathon senior management on issues relating to the operations of the Company in accordance with specific projects requested by the President and Chief Executive Officer of Marathon (the “President”). Prior to each specific project, the Consultant and the President of Marathon, or an individual or individuals designated by the President, will develop written project objectives.

2. Contractor shall periodically provide reports on the progress of such project or projects to the President of Marathon, or individuals designated by the President, to work with the Consultant on the project.

CONFIDENTIALITY

3. Contractor will maintain in strict confidence any proprietary or confidential information received from Marathon including, but not limited to, any information Contractor is exposed to while performing work hereunder and the work product of this Agreement until it otherwise becomes public knowledge or until its divulgence is specifically authorized in writing by the Company. This obligation of confidentiality survives the termination of this agreement.

PAYMENTS FOR SERVICES

4. Payment for the services rendered under this Agreement shall be a daily consulting fee not to exceed $2,800 billable in hourly increments of $350 rounded to the nearest quarter-hour. This fee will apply to any and all hours worked, without regard to time of day, holidays, or weekends. Reasonable business travel, meal and mileage expenses at the current IRS standard mileage rate for business use incurred and required to perform the services to be provided under this Agreement will be reimbursed by Marathon, upon submission of documentation acceptable to the Company.

5. During the course of this agreement, Contractor will transmit to the President of Marathon, or an individual or individuals designated from time to time by the President, on a monthly basis, an itemized statement setting forth the professional services rendered in hourly increments during the month and costs incurred by Contractor on the Company’s behalf in the preceding month. Marathon should receive Contractor’s statements by the tenth day of the month following the month in which such services were rendered and costs incurred.

6. Although Contractor controls his own work hours and schedule, Contractor agrees to accurately account to Marathon in such manner as it may request for all work done and all expenses incurred to the services rendered hereunder.

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TERM

7. This Agreement shall be in effect from January 5, 2004 until the earlier of March 31, 2004 or upon completion of an agreed upon consulting assignment, provided no consulting assignments shall extend beyond June 30, 2004. After March 31, 2004, this Agreement may be renewed for additional terms of one month upon agreement of the parties for the assignment of an additional consulting project or projects. In no event shall this Agreement extend beyond June 30, 2004.

TERMINATION

8. If either party breaches a material provision of this Agreement, the other party may terminate this Agreement upon 30 days’ notice unless the breach is cured within the notice period. Company also may terminate this Agreement at any time, with or without cause, upon 30 days’ notice. Company shall upon termination pay Consultant all unpaid amounts due for Services completed prior to notice of termination. Sections 2 through 6 of this Agreement and any remedies for breach of this Agreement shall survive any termination or expiration. Company may communicate such obligations to any other (or potential) client or employer of Consultant.

LIABILITY

9. The services rendered under this Agreement shall be performed entirely at Contractor’s own risk except as to injuries directly attributable to the sole negligence of Marathon. Contractor will be solely and entirely responsible for his acts and the acts of his agents or employees, if any, during the performance of this Agreement.

INSURANCE COVERAGE

10. During the term of the Agreement, Contractor shall have in force automobile insurance covering Contractor’s operation of an automobile in connection with the services provided under this Agreement.

INDEPENDENT CONTRACTOR

11. In the performance of the services hereunder, Contractor acknowledges that he is an independent contractor with the right to supervise, manage, control and direct the manner of the work or services hereunder. Marathon is interested only in the results to be obtained; provided, however, that Marathon shall be entitled to review and inspect the work and/or services so performed as may be necessary to assure such results. None of the employee benefits provided by Marathon to its employees are available from Marathon to Contractor, his agents, or employees as a result of the services rendered under this Agreement. The Contractor agrees he has no expectations for any employee benefits provided to common law employees of Marathon, and agrees not to make any claims against Marathon or against any of the benefit plans maintained by Marathon on the basis that he was or is a common law employee relating to any period of time that he has been providing services to Marathon as an independent contractor. Further, Contractor agrees not to present himself as being an employee of Marathon, not to attempt to execute any documents on behalf of Marathon unless specifically authorized in writing, and not to make any representations on behalf of Marathon except to the extent specifically authorized in writing by the Company.

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PROPRIETARY RIGHTS

12. To the extent that the “work made for hire” rules under the Copyright Act of 1976 applies, Contractor acknowledges and agrees that the product of all work by Contractor for Company is work made for hire and, as such, all rights in such work are assigned and belong to the Company. In addition, if the “work made for hire” rule under the Copyright Act of 1976 does not apply, Contractor agrees and hereby acknowledges that all rights in such work are assigned and belong to Company, and Contractor agrees to execute all documents required by Company to effect such assignment. Contractor specifically acknowledges and agrees that all right, title and interest in and to the product of all work is assigned to the Company.

13. All reports, work product, drawings, flow diagrams, sketches, specifications, computer data or other records regardless of form (hereinafter collectively referred to as “Records”), prepared by Contractor under the provisions of this Agreement, shall be the property of the Company and may be used by Company for any purpose. As part of the fulfillment of the Agreement, Contractor shall deliver to Company physical possession of all Records upon completion of the Work.

INDEMNIFICATION

14. Contractor shall be indemnified for third party liability arising out of this agreement, in excess of any insurance coverage the Contractor may have, solely to the extent that:

(a) The Contractor acted prudently, in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful; and

(b) The Company is subrogated to all of the Contractor’s rights of recovery against any person or organization for such liability, and the Contractor has executed and delivered instruments and papers and done or agreed to do whatever else is necessary to enable the Company to secure such rights.

(c) Nothing in this provision precludes the Company from taking any action it deems necessary to enforce the other provisions of this Agreement.

(d) The Contractor accepts full and exclusive liability for and will indemnify Marathon against the payment of any and all contributions, assessments, rates, taxes, of whatever kind or nature, which might be imposed or attempted to be imposed upon Marathon pertaining to the compensation paid or to be paid under and in connection with the services to be paid hereunder, including, but not limited to, federal, state, county, city, school district, or otherwise, income and other taxes, social security (FICA taxes), workers’ compensation premiums, unemployment compensation rates, etc. Contractor further agrees that any persons employed by him to perform work under this Agreement are the employees of the Contractor and not employees of Marathon.

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COMPANY POLICIES

15. Contractor acknowledges that he is aware of and agrees to abide by the Company’s policies including:

• Marathon’s Drug and Alcohol Policy.

• Marathon’s No Smoking Policy.

• Marathon’s policy strictly prohibiting the possession of firearms, weapons, or explosives by any of his employees, subcontractors, agents or representatives while on Marathon premises or engaged in work under this Contract.

• Marathon’s Anti-Harassment Policy while on the premises or engaged in work on this Agreement which prohibits all forms of harassment, including sexual harassment, which create an intimidating, hostile or offensive working environment.

16. Contractor agrees to require his employees, servants, agents, representatives and subcontractors, if any, to adhere to Marathon’s policies outlined above while on the premises or engaged in work under this Agreement.

COMPLIANCE WITH APPLICABLE LAWS

17. Contractor further agrees that he will comply with all applicable laws and regulations including, but not limited to, workers’ compensation, social security, unemployment insurance, the Occupational Safety and Health Act, the Immigration Reform Act of 1986, the Americans with Disabilities Act, and all federal, state and local laws affecting employment and business opportunities.

COMPLETE AGREEMENT

18. This Agreement supersedes all prior consulting services contracts and understandings between parties and may not be modified, changed or altered by any promise or statement by whomsoever made, and may only be modified by further written agreement by all parties hereto.

19. All notices under this Agreement shall be in writing, and shall be deemed given when personally delivered, or three days after being sent by prepaid certified or registered U.S. mail to the address of the party to be noticed as set forth herein or such other address as such party last provided to the other by written notice. All notices shall be delivered as follows:

To the Consultant:	To the Company:
John T. Mills	W. F. Schwind, Jr.
33 West Oak Drive	General Counsel
Houston, TX 77056	Marathon Oil Corporation
	5555 San Felipe Road
	Houston, TX 77056-2723

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AGREEMENT NOT ASSIGNABLE

20. Contractor shall not have the right to assign this Agreement or subcontract work hereunder without the prior written consent of Marathon. Any such assignment or subcontracting shall not release Contractor from his obligations hereunder.

PROVISIONS SEPARATELY ENFORCEABLE

21. Each of the provisions of this Agreement shall be enforceable independently of any other provision of this Contract and independent of any other claim or cause of action.

GOVERNING LAW

22. In the event of any dispute arising under this Agreement, it is agreed between the parties that the law of the State of Texas will govern the interpretation, validity and effect of this Agreement without regard to the place of execution or place of performance thereof.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the 5th day of January, 2004.

MARATHON OIL CORPORATION	JOHN T. MILLS, CONSULTANT
By: /s/ Eileen M. Campbell	By: /s/ John T, Mills
Name: Eileen M. Campbell	Name: John T, Mills
Title: V.P. Human Resources	Date: 1-5-04
Date: 01/05/04

Page 5

EX-10.(N)

EXHIBIT 10(n)

EXECUTION COPY

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

of

MARATHON ASHLAND PETROLEUM LLC

Dated as of December 31, 1998

TABLE OF CONTENTS

		Page
ARTICLE I
Certain Definitions; Applicable GAAP
SECTION 1.01.	Definitions	2
SECTION 1.02.	Applicable GAAP	21
ARTICLE II
General Provisions
SECTION 2.01.	Formation; Effectiveness	22
SECTION 2.02.	Name	22
SECTION 2.03.	Term	22
SECTION 2.04.	Registered Agent and Office	23
SECTION 2.05.	Purpose	23
SECTION 2.06.	Powers	24
ARTICLE III
Members
SECTION 3.01.	Members; Percentage Interests	25
SECTION 3.02.	Adjustments in Percentage Interests	26
ARTICLE IV
Capital Contributions; Assumption of Assumed Liabilities
SECTION 4.01.	Contributions	26
SECTION 4.02.	Additional Contributions	28
SECTION 4.03.	Negative Balances; Withdrawal of Capital; Interest	29

ARTICLE V
Distributions
SECTION 5.01.	Distributions	29
SECTION 5.02.	Certain General Limitations	32
SECTION 5.03.	Distributions in Kind	32
SECTION 5.04.	Distributions in the Event of an Exercise of the Marathon Call Right, Ashland Put Right or the Special Termination Rights	33
ARTICLE VI
Allocations and Other Tax Matters
SECTION 6.01.	Maintenance of Capital Accounts	33
SECTION 6.02.	Allocations	34
SECTION 6.03.	Tax Allocations	35
SECTION 6.04.	Tax Elections	35
SECTION 6.05.	Fiscal Year	36
SECTION 6.06.	Tax Returns	36
SECTION 6.07.	Tax Matters Partner	37
SECTION 6.08.	Duties of Tax Matters Partner	37
SECTION 6.09.	Survival of Provisions	39
SECTION 6.10.	Section 754 Election	39
SECTION 6.11.	Qualified Income Offset, Minimum Gain Chargeback	39
SECTION 6.12.	Tax Treatment of Designated Sublease Agreements	39
SECTION 6.13.	Tax Treatment of Reimbursed Liability Payments	40
SECTION 6.14.	Tax Treatment of Disproportionate Payments	40
SECTION 6.15.	Allocation of Income, Gains, Losses and Other Items from LOOP LLC and LOCAP, Inc	41
SECTION 6.16.	Allocation of Income, Gain, Loss, Deduction and Credits Attributable to Stock-Based Compensation	41
ARTICLE VII
Books and Records
SECTION 7.01.	Books and Records; Examination	42
SECTION 7.02.	Financial Statements and Reports	42
SECTION 7.03.	Notice of Affiliate Transactions; Annual List	44

ARTICLE VIII
Management of the Company
SECTION 8.01.	Managing Members	45
SECTION 8.02.	Board of Managers	45
SECTION 8.03.	Responsibility of the Board of Managers	46
SECTION 8.04.	Meetings	46
SECTION 8.05.	Compensation	48
SECTION 8.06.	Quorum	48
SECTION 8.07.	Voting	49
SECTION 8.08.	Matters Constituting Super Majority Decisions	50
SECTION 8.09.	Annual Capital Budget	56
SECTION 8.10.	Business Plan	56
SECTION 8.11.	Requirements as to Affiliate Transactions	57
SECTION 8.12.	Review of Certain Affiliate Transactions Related to Crude Oil Purchases and Shared Services	59
SECTION 8.13.	Adjustable Amounts	61
SECTION 8.14.	Company Leverage Policy	62
SECTION 8.15.	Company’s Investment Guidelines	62
SECTION 8.16.	Requirements as to Operating Leases	63
SECTION 8.17.	Limitations on Actions Relating to the Calculation of Distributable Cash	63
SECTION 8.18.	Reliance by Third Parties	63
SECTION 8.19.	Integration of Retail Operations	63
ARTICLE IX
Officers
SECTION 9.01.	Election, Appointment and Term of Office	65
SECTION 9.02.	Resignation, Removal and Vacancies	66
SECTION 9.03.	Duties and Functions of Executive Officers	67
ARTICLE X
Transfers of Membership Interests
SECTION 10.01.	Restrictions on Transfers	67
SECTION 10.02.	Conditions for Admission	71
SECTION 10.03.	Allocations and Distributions	72
SECTION 10.04.	Right of First Refusal	72
SECTION 10.05.	Restriction on Resignation or Withdrawal	73

ARTICLE XI
Liability, Exculpation and Indemnification
SECTION 11.01.	Liability	73
SECTION 11.02.	Exculpation	73
SECTION 11.03.	Indemnification	74
ARTICLE XII
Fiduciary Duties
SECTION 12.01.	Duties and Liabilities of Covered Persons	75
SECTION 12.02.	Fiduciary Duties of Members of the Company and Members of the Board of Managers	76
ARTICLE XIII
Dispute Resolution Procedures
SECTION 13.01.	General	76
SECTION 13.02.	Dispute Notice and Response	76
SECTION 13.03.	Negotiation Between Senior Managers	77
SECTION 13.04.	Negotiation Between Chief Executive Officer and President	77
SECTION 13.05.	Right to Equitable Relief Preserved	78
ARTICLE XIV
Rights and Remedies with Respect to Monetary Disputes
SECTION 14.01.	Ability of Company to Borrow to Fund Disputed Monetary Amounts	79
SECTION 14.02	Interim Payment of Disputed Monetary Amount	80
SECTION 14.03.	Liquidated Damages	80
SECTION 14.04.	Right of Set-Off	82
SECTION 14.05.	Security Interest	83
ARTICLE XV
Dissolution and Termination
SECTION 15.01.	Dissolution	84
SECTION 15.02.	Winding Up of Company	84
SECTION 15.03.	Distribution of Property	85
SECTION 15.04.	Time Limitation	85
SECTION 15.05.	Termination of Company	85

ARTICLE XVI
Miscellaneous
SECTION 16.01.	Notices	85
SECTION 16.02.	Merger and Entire Agreement	86
SECTION 16.03.	Assignment	87
SECTION 16.04.	Parties in Interest	87
SECTION 16.05.	Counterparts	87
SECTION 16.06.	Amendment; Waiver	87
SECTION 16.07.	Severability	87
SECTION 16.08.	GOVERNING LAW	88
SECTION 16.09.	Enforcement	88
SECTION 16.10.	Creditors	89
SECTION 16.11.	No Bill for Accounting	89
SECTION 16.12.	Waiver of Partition	89
SECTION 16.13.	Table of Contents, Headings and Titles	89
SECTION 16.14.	Use of Certain Terms; Rules of Construction	89
SECTION 16.15.	Holidays	89
SECTION 16.16.	Third Parties	89
SECTION 16.17.	Liability for Affiliates	89

Appendix A	Certain Definitions
Appendix B	Procedures for Dispute Resolution
Exhibit A	Speedway SuperAmerica LLC Retail Integration Protocol
Schedule 1.01	Financed Properties
Schedule 4.01(c)	Subleased Property
Schedule 4.02(a)-1	Marathon Capital Expenditures
Schedule 4.02(a)-2	Ashland Capital Expenditures
Schedule 8.01(k)(i)(A)	Closing Date Affiliate Transactions
Schedule 8.14	Company Leverage Policy
Schedule 8.15	Company Investment Guidelines
Schedule A	Calculations re: Normal Annual Capital Budget Amount
Schedule B-1	Adjustments to Historical EBITDA (Marathon)
Schedule B-2	Adjustments to Historical EBITDA (Ashland)
Schedule C	Initial Executive Officers

AMENDED AND RESTATED LIMITED

LIABILITY COMPANY AGREEMENT dated as of

December 31, 1998, of MARATHON ASHLAND PETROLEUM LLC (the “Company”), by and between Marathon Oil Company, an Ohio corporation (“Marathon”), and Ashland Inc., a Kentucky corporation (“Ashland”), as Members.

Preliminary Statement

WHEREAS, on June 11, 1997, Marathon and Emro Marketing Company (“Emro Marketing”) formed the Company (formerly known as “Emro Supply, LLC”) by filing a Certificate of Formation of the Company with the Secretary of State of the State of Delaware and executed the Limited Liability Company Agreement of the Company pursuant to which Marathon received a 60% interest in the Company and Emro Marketing received a 40% interest in the Company;

WHEREAS, on July 18, 1997, Emro Marketing assigned its interest in the Company to Marathon and Fuelgas Company, Inc., a wholly owned subsidiary of Marathon (“Fuelgas”), with Marathon receiving an additional 39% interest in the Company and Fuelgas receiving a 1% interest in the Company, which interest will be transferred to Marathon immediately following the Closing (for purposes of this Agreement and the other Transaction Documents, all references to Marathon’s interest in the Company shall be deemed to include the 1% interest owned by Fuelgas);

WHEREAS, on July 18, 1997, Marathon and Fuelgas executed the First Amended and Restated Limited Liability Company Agreement of the Company and filed an Amended and Restated Certificate of Formation of the Company with the Secretary of State of the State of Delaware;

WHEREAS, on October 29, 1997, Marathon and Fuelgas filed a Second Amended and Restated Certificate of Formation of the Company with the Secretary of State of the State of Delaware to change the name of the Company to Marathon Ashland Petroleum LLC;

WHEREAS, on December 8, 1997, Marathon and Fuelgas executed the Second Amended and Restated Limited Liability Company Agreement of the Company which became effective on December 10, 1997;

WHEREAS the parties hereto desire that the Company (a) be a premier petroleum supply, refining, marketing and transportation business, (b) create a highly efficient, cost-effective and competitive petroleum supply, refining, marketing and transportation system, (c) deliver to the Members the highest possible economic value added, (d) be customer-focused and market-driven in its business strategy, (e) be a respected and responsible member of the communities in which the Company will operate, with a high regard for environmental responsibility and employee safety, and (f) seek to maximize Distributable Cash to the Members consistent with the foregoing, including capital spending levels which over time are expected to be generally equivalent to the level of non-cash charges; and

WHEREAS the Members entered into this Agreement on January 1, 1998 to set forth the rights and responsibilities of each of them with respect to the governance, financing and operation of the Company;

WHEREAS, the Members have executed Amendment No. 1 to this Agreement as of August 21, 1998, and have executed Amendment No. 2 to this Agreement as of September 1, 1998; and

WHEREAS, the Members wish to make certain additional amendments to this Agreement, and to restate this Agreement incorporating such additional amendments as well as the amendments contained in Amendment No. 1 and Amendment No. 2.

NOW, THEREFORE, the parties hereto hereby agree as follows:

ARTICLE I

Certain Definitions; Applicable GAAP

SECTION 1.01. Definitions. Defined terms used in this Agreement shall have the meanings ascribed to them by definition in this Agreement or in Appendix A. In addition, when used herein the following terms have the following meanings:

“Accounting Determination” has the meaning set forth in Section 1.02.

“Acquisition Expenditures” means, in connection with any acquisition by the Company and its subsidiaries, without duplication (i) the purchase price paid or to be paid for the net assets or capital stock or other equity interests in connection with such acquisition, (ii) any Indebtedness assumed by the Company and its subsidiaries in connection with any such acquisition, (iii) any contingent liabilities assumed or incurred by the Company and its subsidiaries in connection with any such acquisition to the extent that such contingent liabilities are required to be reflected on the balance sheet of the Company and its subsidiaries in accordance with Financial Accounting Standard Number 5 (or any successor or superseding provision of Applicable GAAP), and (iv) all other costs and expenses incurred or to be incurred by the Company or any of its subsidiaries in connection with any such acquisition to the extent that such costs and expenses would be capitalized if such acquisition were consummated.

“Adjustable Amount” has the meaning set forth in Section 8.13.

“Additional Monetary Amount” has the meaning set forth in Section 14.03(c).

“Additional Required Cash Amount” has the meaning set forth in Section 14.01(a).

“Adjusted DD&A” means:

(i) for the twelve-month periods ended December 31, 1995 and 1996, $348 million and $346 million, respectively;

(ii) for the twelve-month period ended December 31, 1997, the total combined depreciation, depletion and amortization expense of the Marathon Business and the Ashland Business during such twelve-month period, including, without duplication, (a) any gains (deductions from depreciation, depletion and amortization) or losses (additions to depreciation, depletion and amortization) on asset retirements during such period and (b) pro forma depreciation, depletion and amortization expense related to the Financed Properties during such period (calculated in the same manner such pro forma depreciation, depletion and amortization expense was calculated in Schedule A, which considers the placed-in-service dates of the Financed Properties);

(iii) for the twelve-month period ended September 30, 1998, the sum of:

(a) the total combined depreciation, depletion and amortization expense of the Marathon Business and the Ashland Business during the period commencing on October 1, 1997, and ended on the date immediately preceding the Closing Date, including, without duplication, (1) any gains (deductions from depreciation, depletion and amortization) or losses (additions to depreciation, depletion and amortization) on asset retirements during such period and (2) pro forma depreciation, depletion and amortization expense related to the Financed Properties during such period (calculated in the same manner such pro forma depreciation, depletion and amortization expense was calculated in Schedule A, which considers the placed-in-service dates of the Financed Properties); and

(b) the total depreciation, depletion and amortization expense of the Company and its subsidiaries for the period commencing on the Closing Date and ended on September 30, 1998, including (1) any gains (deductions from depreciation, depletion and amortization) or losses (additions to depreciation, depletion and amortization) on asset retirements during such period, (2) depreciation, depletion and amortization expense related to the Garyville Propylene Upgrade Project during such period and (3) depreciation, depletion and amortization expense related to all Company-funded Capital Expenditures, but excluding (4) depreciation, depletion and amortization expense related to Member-Funded Capital Expenditures and (5) the increase or decrease in such depreciation, depletion and amortization expense related to the Ashland Transferred Assets (including pro forma depreciation, depletion and

amortization expense related to the Financed Properties) resulting from the application of purchase accounting treatment to the transactions contemplated by the Transaction Documents (such purchase accounting treatment causing an increase or decrease in the estimated useful lives and the net book value of the Ashland Transferred Assets); and

(iv) for the twelve-month period ended September 30, 1999, and each twelve-month period ended September 30 thereafter, the total depreciation, depletion and amortization expense of the Company and its subsidiaries for such twelve-month period, including, without duplication, (a) any gains (deductions from depreciation, depletion and amortization) or losses (additions to depreciation, depletion and amortization) on asset retirements during such period, (b) depreciation, depletion and amortization expense related to the Garyville Propylene Upgrade Project during such period and (c) depreciation, depletion and amortization expense related to Company-funded Capital Expenditures but excluding (d) depreciation, depletion and amortization expense related to Member-Funded Capital Expenditures and (e) the increase or decrease in such depreciation, depletion and amortization expense related to the Ashland Transferred Assets (including pro forma depreciation, depletion and amortization expense related to the Financed Properties) resulting from the application of purchase accounting treatment to the transactions contemplated by the Transaction Documents (such purchase accounting treatment causing an increase or decrease in the estimated useful lives and the net book value of the Ashland Transferred Assets);

all as determined on a consolidated basis with respect to (x) in the case of any period ending prior to the Closing Date, Marathon and its subsidiaries or Ashland and its subsidiaries, as applicable, or (y) in the case of any period ending on or after the Closing Date, the Company and its subsidiaries, in each case in accordance with Applicable GAAP.

“Adjusted EBITDA” means:

(i) for the twelve-month periods ended December 31, 1995 and 1996, $657 million and $600 million, respectively;

(ii) for the twelve-month period ended December 31, 1997, the sum of:

(a) Historical EBITDA for such twelve-month period, plus

(b) $80 million, minus

(c) 38% of an amount equal to (1) the sum of the amounts calculated pursuant to clauses (a) and (b) above for such twelve-month period less (2) the Adjusted DD&A for such twelve-month period.

(iii) for the twelve-month period ended September 30, 1998, the sum of:

(a) for the period commencing on October 1, 1997, and ended on the date immediately preceding the Closing Date, the sum of:

(1) Historical EBITDA for such period, plus

(2) $20 million, minus

(3) 38% of an amount equal to (A) the sum of the amounts calculated pursuant to clauses (1) and (2) above with respect to such period less (B) the Adjusted DD&A for such period; and

(b) for the period commencing on the Closing Date and ended on September 30, 1998, the sum of:

(1) EBITDA of the Company and its subsidiaries for such period, plus

(2) $12.4 million, minus

(3) the Tax Distribution Amounts paid or to be paid in respect of each of the three Fiscal Quarters (or portion thereof) included in such period; and

(iv) for the twelve-month period ended September 30, 1999 and each twelve-month period ended September 30 thereafter, the sum of:

(a) EBITDA of the Company and its subsidiaries for such twelve-month period, minus

(b) the Tax Distribution Amounts paid or to be paid in respect of each of the four Fiscal Quarters included in such twelve-month period;

all as determined on a consolidated basis with respect to (x) in the case of any period ending prior to the Closing Date, Marathon and its subsidiaries or Ashland and its subsidiaries, as applicable, or (y) in the case of any period ending on or after the Closing Date, the Company and its subsidiaries, in each case in accordance with then Current GAAP (other than Ordinary Course Lease Expenses which shall be calculated in accordance with Applicable GAAP).

“Advanced Amount” has the meaning set forth in Section 14.01(b).

“Affiliate Transaction” means any agreement or transaction between the Company or any of its subsidiaries and any Member or any Affiliate of any Member that:

(a) for purposes of Section 7.03(a)(i), will result or is reasonably anticipated will result in expenditures, contingent or actual liabilities or benefits to the Company and its subsidiaries in excess of $2 million;

(b) for purposes of Section 7.03(b), is either (i) outside the ordinary course of the Company and its subsidiaries’ business and results or will result in contingent or actual liabilities or benefits to the Company and its subsidiaries in excess of $100,000 in the applicable Fiscal Year or (ii) within the ordinary course of the Company and its subsidiaries’ business and results or will result in expenditures, contingent or actual liabilities or benefits to the Company and its subsidiaries (A) in excess of $2 million individually in the applicable Fiscal Year or (B) when taken together with all other agreements or transactions entered into the same Fiscal Year as such agreement or transaction which are either related to such agreement or transaction or are substantially the same type of agreement or transaction as such agreement or transaction, in excess of $2 million in the aggregate in the applicable Fiscal Year; and

(c) for purposes of Section 8.08(k)(i), is either (i) outside the ordinary course of the Company and its subsidiaries’ business and will result or is reasonably anticipated will result in expenditures, contingent or actual liabilities or benefits to the Company and its subsidiaries in excess of $2 million or (ii) within the ordinary course of the Company and its subsidiaries’ business and will result or is reasonably anticipated will result in expenditures, contingent or actual liabilities or benefits to the Company and its subsidiaries in excess of $25 million.

For purposes of this definition of Affiliate Transaction, any guarantee by a Member or any Affiliate of any Member of any obligations of the Company or any of its subsidiaries that is provided by such Member or such Affiliate without cost to the Company and its subsidiaries shall not be deemed to be an Affiliate Transaction. Notwithstanding the foregoing, the term “Affiliate Transaction” shall not include any distributions of cash or other property to the Members pursuant to Article V.

“Affiliate Transaction Dispute Notice” has the meaning set forth in Section 8.11(b).

“Aggregate Tax Rate” has the meaning set forth in Section 5.01(a)(i).

“Agreed Additional Capital Contributions” has the meaning set forth in Section 4.02(c).

“Agreement” means this Limited Liability Company Agreement of the Company, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Annual Capital Budget” has the meaning set forth in Section 8.09(a).

“Applicable GAAP” has the meaning set forth in Section 1.02.

“Approved Marathon Crude Oil Purchase Program” has the meaning set forth in Section 8.12.

“Arbitratable Dispute” has the meaning set forth in Section 13.04(a).

“Arbitration Payment Due Date” has the meaning set forth in Section 14.03(a).

“Arbitration Proceeding” has the meaning set forth in Section 14.01(a).

“Arbitration Tribunal” has the meaning set forth in Appendix B.

“Arm’s-Length Transaction” has the meaning set forth in Section 8.11(a).

“Ashland Designated Sublease Agreements” shall mean the Ashland Sublease Agreements attached as Exhibits L- 1, L-2, L-3 and L-4 to the Asset Transfer and Contribution Agreement.

“Ashland-Funded Capital Expenditures” has the meaning set forth in Section 4.02(a).

“Audited Financial Statements” has the meaning set forth in Section 7.02(c).

“Average Annual DD&A” means:

(a) for Fiscal Year 1998, the average of the Adjusted DD&A for the three twelve-month periods ended December 31, 1995, 1996 and 1997;

(b) for Fiscal Year 1999, the average of the Adjusted DD&A (i) for the two twelve-month periods ended December 31, 1996 and 1997 and (ii) for the one twelve-month period ended September 30, 1998;

(c) for Fiscal Year 2000, the average of the Adjusted DD&A (i) for the twelve-month period ended December 31, 1997 and (ii) for the two twelve-month periods ending on September 30, 1998 and 1999; and

(d) for Fiscal Year 2001 and each Fiscal Year thereafter, the average of the Adjusted DD&A for the three twelve-month periods ending on September 30 in each of the three Fiscal Years immediately preceding such Fiscal Year.

“Average Adjusted EBITDA” means:

(a) for Fiscal Year 1998, the average of the Adjusted EBITDA for the three twelve-month periods ended December 31, 1995, 1996 and 1997;

(b) for Fiscal Year 1999, the average of the Adjusted EBITDA (i) for the two twelve-month periods ended December 31, 1996 and 1997 and (ii) for the one twelve-month period ended September 30, 1998;

(c) for Fiscal Year 2000, the average of the Adjusted EBITDA (i) for the twelve-month period ended December 31, 1997 and (ii) for the two twelve-month periods ending on September 30, 1998 and 1999; and

(d) for Fiscal Year 2001 and each Fiscal Year thereafter, the average of the Adjusted EBITDA for the three twelve-month periods ending on September 30 in each of the three Fiscal Years immediately preceding such Fiscal Year.

“Average Annual Level” means for any twelve-month period ending on September 30 of any calendar year, the average of the level of the Price Index ascertained by adding the twelve monthly levels of the Price Index during such twelve-month period and dividing the total by twelve.

“Bareboat Charters” has the meaning set forth in Section 9.3(k) of the Asset Transfer and Contribution Agreement.

“Base Level” means 161.2.

“Base Rate” has the meaning set forth in Section 1.01 of the Put/Call, Registration Rights and Standstill Agreement.

“Board of Managers” has the meaning set forth in Section 8.02(a).

“Bulk Motor Oil Business” has the meaning set forth in Section 14.03(h) of the Put/Call, Registration Rights and Standstill Agreement.

“Business Plan” has the meaning set forth in Section 8.10.

“Capital Account” has the meaning set forth in Section 6.01.

“Capital Expenditures” means, for any period, the aggregate of all expenditures incurred by the Company and its subsidiaries during such period that, in accordance with Applicable GAAP, are or should be included in additions to property, plant or equipment or similar items reflected in the consolidated statement of cash flows of the Company and its subsidiaries; provided, however, that Capital Expenditures shall not include (a) exchanges of such items for other items, (b) expenditures of proceeds of insurance settlements by the Company or any of its subsidiaries in respect of lost, destroyed or damaged assets, equipment or other property to the extent such expenditures are made to replace or repair such lost, destroyed or damaged assets, equipment or other property within 18 months of such loss, destruction or damage, (c) funds expended by a Member or an Affiliate of a Member to purchase any Subleased Property that is contributed to the Company or a subsidiary of the Company pursuant to Section 4.01(c)(i)(A) or (d) Member-Funded Capital Expenditures; all as determined on a consolidated basis with respect to the Company and its subsidiaries in accordance with Applicable GAAP.

“Capital Lease” means any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a consolidated balance sheet of the Company and its subsidiaries in accordance with Applicable GAAP.

“Closing Date Affiliate Transactions” has the meaning set forth in Section 8.08(k)(i)(A).

“Company Independent Auditors” has the meaning set forth in Section 7.01.

“Company Investment Guidelines” has the meaning set forth in Section 8.15.

“Company Leverage Policy” has the meaning set forth in Section 8.14.

“Competitive Business” has the meaning set forth in Section 14.01(a) of the Put/Call, Registration Rights and Standstill Agreement.

“Competitive Third Party” has the meaning set forth in Section 14.01(d) of the Put/Call, Registration Rights and Standstill Agreement.

“Contracting Member” has the meaning set forth in Section 8.11(b).

“Covered Person” means any Member, any Affiliate of a Member or any officers, directors, shareholders, partners, employees, representatives or agents of a Member or their respective Affiliates, or any Representative, or any employee, officer or agent of the Company or its Affiliates.

“Critical Decision” means each Primary Critical Decision and each Other Critical Decision.

“Critical Decision Termination Date” means (a) in the case of any Other Critical Decision, the first anniversary of the Closing Date or (b) in the case of any Primary Critical Decision, the first anniversary of the Closing Date or, if the Critical Decision Termination Date shall be extended with respect to such Primary Critical Decision as provided in Section 8.19(c), the fifteen-month anniversary of the Closing Date.

“Crude Oil Purchases” means any purchase of crude oil by the Company or any of its subsidiaries from Marathon or

any Affiliate of Marathon.

“Current GAAP” means, at any time, GAAP as in effect at such time.

“Delinquent Member” has the meaning set forth in Section 14.01(a).

“Designated Sublease Agreements” means the Ashland Designated Sublease Agreements and the Marathon Designated Sublease Agreements.

“Designated Sublease Amount” means any obligation of a Member to the Company or a subsidiary of the Company under Section 4.01(c) with respect to a Subleased Property or a Designated Sublease Agreement.

“Dispute” has the meaning set forth in Section 13.01.

“Dispute Notice” has the meaning set forth in Section 13.02.

“Disputed Capital Contribution Amount” has the meaning set forth in Section 13.04(a).

“Disputed Indemnification Amount” has the meaning set forth in Section 14.01(a).

“Disputed Monetary Amount” has the meaning set forth in Section 14.01(a).

“Distributable Cash” means, for each Fiscal Quarter, without duplication:

(a) the Short-Term Investments of the Company and its subsidiaries on the last day of such Fiscal Quarter, minus

(b) the Ordinary Course Debt of the Company and its subsidiaries on the last day of such Fiscal Quarter, minus

(c) the Tax Distribution Amount to be paid in respect of such Fiscal Quarter, minus

(d) funds held on the last day of such Fiscal Quarter for financing Special Projects or Permitted Capital Projects/Acquisitions, minus

(e) if the notional repayment of principal for Special Project Indebtedness or Permitted Capital Project/Acquisition Indebtedness during such Fiscal Quarter calculated using a notional repayment schedule established and approved by the Board of Managers in accordance with the Company Leverage Policy was more than the amount of actual principal repayments for such Special Project Indebtedness or Permitted Capital Project/Acquisition Indebtedness during such Fiscal Quarter, the amount of such excess, plus

(f) if the amount of the actual principal repayments for Special Project Indebtedness or Permitted Capital Project/Acquisition Indebtedness during such Fiscal Quarter was more than the notional repayment of principal for such Special Project Indebtedness or Permitted Capital Project/Acquisition Indebtedness during such Fiscal Quarter (calculated in the manner described in clause (e) above), the amount of such excess, plus or minus

(g) any adjustments or reserves (including any adjustments for minimum cash balance requirements, including cash reserves for accrued or withheld Taxes not yet due) in the amounts and for the time periods established and approved by the Board of Managers pursuant to a vote in accordance with Section 8.07(b).

“Distribution Date” has the meaning set forth in Section 5.01(a).

“Distributions Calculation Statement” has the meaning set forth in Section 5.01(c).

“EBITDA” means for any period:

(a) net income, plus

(b) to the extent deducted in computing such net income, the sum of (i) estimated or actual Federal, state, local and foreign income tax expense, (ii) interest expense, (iii) depreciation, depletion and amortization expense, (iv) non-cash charges resulting from the cumulative effect of changes in accounting principles, and (v) non-cash lower of cost or market inventory or fixed asset writedowns; minus

(c) to the extent added in computing such net income, (i) any interest income (excluding interest income on accounts receivable related to marketing programs), (ii) non-cash gains resulting from the cumulative effect of changes in accounting principles and (iii) non-cash lower of cost or market inventory or fixed asset gains;

all as determined on a consolidated basis (x) in the case of any period ended prior to the Closing Date, Marathon and its subsidiaries or Ashland and its subsidiaries, as applicable, or (y) in the case of any period ending on or after the Closing Date, with respect to the Company and its subsidiaries, in each case in accordance with then Current GAAP. For purposes of this definition, depreciation, depletion and amortization expense will include any gains (deductions from depreciation, depletion and amortization) or losses (additions to depreciation, depletion and amortization) on asset retirements and excess purchase price amortization adjustments. For the avoidance of doubt, EBITDA shall not include any revenues or expenses constituting Member-Funded Capital Expenditures or Member-Indemnified Expenditures.

“Executive Officers” has the meaning set forth in Section 9.01(a).

“Final Monetary Amount” has the meaning set forth in Section 14.03(a).

“Financed Properties” means each of the properties listed in Schedule 1.01.

“Fiscal Quarter” means the three-month period ended March 31, June 30, September 30 and December 31 of each Fiscal Year.

“Fiscal Year” has the meaning set forth in Section 6.05.

“Fuelgas Interest” means the 1% interest in the Company which is owned by Fuelgas.

“GAAP” means United States generally accepted accounting principles applied on a consistent basis.

“Garyville Propylene Upgrade Project” means the propylene splitter with a capacity of approximately 800 million pounds per year that is being constructed at the Garyville refinery for the production of propylene.

“Historical EBITDA” means for any period ending prior to the Closing Date the sum of:

(a) EBITDA of the Marathon Business for such period as adjusted for each of the “EBIT Adjustment” items set forth in lines 10-55 of Schedule B-1 and each of the “Depreciation Adjustment” items set forth in lines 133 through 150 of Schedule B-1, in each case calculated for such period in the same manner that such adjustments were calculated in Schedule B-1, plus

(b) EBITDA of the Ashland Business for such period as adjusted for each of the “EBIT Adjustment” items set forth in lines 11-56 of Schedule B-2 and each of the “Depreciation Adjustment” items set forth in lines 111-120 of Schedule B-2, in each case calculated for such period in the same manner that such adjustments were calculated in Schedule B-2;

all determined on a consolidated basis with respect to Marathon and its subsidiaries or Ashland and its subsidiaries, as applicable, in accordance with then Current GAAP.

“Initial GAAP” has the meaning set forth in Section 1.02.

“Initial Term” has the meaning set forth in Section 2.03.

“Make-Up Expense” has the meaning set forth in Section 6.02(d).

“Maralube Express Business” has the meaning set forth in Section 14.03(d)(i) of the Put/Call, Registration Rights and Standstill Agreement.

“Marathon Crude Oil Purchase Program” has the meaning set forth in Section 8.12.

“Marathon Designated Sublease Agreements” shall mean the Marathon Sublease Agreements attached as Exhibits E-1, E-2 and E-3 to the Asset Transfer and Contribution Agreement.

“Marathon-Funded Capital Expenditures” has the meaning set forth in Section 4.02(a).

“Material Adverse Effect” has the meaning set forth in the Asset Transfer and Contribution Agreement.

“Member-Funded Capital Expenditures” has the meaning set forth in Section 4.02(a).

“Member-Indemnified Expenditures” has the meaning set forth in Section 4.02(b).

“Monetary Dispute” has the meaning set forth in Section 14.01(a).

“Non-Contracting Member” has the meaning set forth in Section 8.11(b).

“Non-Delinquent Member” has the meaning set forth in Section 14.01.

“Non-Terminating Member” has the meaning set forth in the Put/Call, Registration Rights and Standstill Agreement.

“Normal Annual Capital Budget Amount” means, for each Fiscal Year, an amount equal to the sum of:

(i) an amount equal to 130% of the Average Annual DD&A for such Fiscal Year, plus

(ii) if, with respect to any Fiscal Year, (a) the Average Adjusted EBITDA for such Fiscal Year less the amount calculated pursuant to clause (i) above for such Fiscal Year exceeds (b) $240 million (such excess, the “Excess EBITDA” for such Fiscal Year), the sum of (1) the lesser of: (x) 10% of the Average Annual DD&A for such Fiscal Year and (y) the Excess EBITDA for such Fiscal Year and (2) 50% of the amount by which the Excess EBITDA for such Fiscal Year exceeds an amount equal to 10% of the Average Annual DD&A for such Fiscal Year.

An example of the calculation of Adjusted DD&A, Adjusted EBITDA, Average Annual DD&A, Average Adjusted EBITDA and the Normal Annual Capital Budget Amount is shown in Schedule A. In the event of any inconsistency between such Schedule A and the language of this definition of Normal Annual Capital Budget Amount, neither shall control over the other.

“Offer Notice” has the meaning set forth in Section 10.04(a).

“Ordinary Course Debt” means, without duplication, the aggregate outstanding principal amount of all loans and advances under any committed or uncommitted credit facilities (including any commercial paper borrowings or borrowings under the Revolving Credit Agreement, but excluding trade payables), provided that Ordinary Course Debt shall not include any Permitted Intercompany Debt, any Special Project Indebtedness or any Permitted Capital Project Indebtedness.

“Ordinary Course Lease Expense” means, with respect to any Fiscal Year, the rental or lease expense for such Fiscal Year of assets rented or financed by operating leases (as determined in accordance with Applicable GAAP).

“Original Lease” means the lease or charter underlying a Marathon Designated Sublease Agreement or an Ashland Designated Sublease Agreement in which Marathon or Ashland, as applicable, is the lessee or charterer.

“Other Critical Decision” means each of the Level III decisions set forth in paragraphs 2(c)(iii), (v), (vii), (viii) and (ix) of the Retail Integration Protocol.

“Packaged Motor Oil Business” has the meaning set forth in Section 14.03(h) of the Put/Call, Registration Rights and Standstill Agreement.

“Percentage Interest” has the meaning set forth in Section 3.01.

“Permitted Capital Project/Acquisition Indebtedness” has the meaning set forth in the Company Leverage Policy.

“Permitted Intercompany Debt” has the meaning set forth in the Company Leverage Policy.

“Price Index” means the Consumer Price Index for All Urban Consumers of the United States Department of Labor Bureau of Labor Statistics for all Urban Areas (on the 1982- 84 equals 100 standard).

“Primary Critical Decision” means each of the Level III decisions set forth in paragraphs 2(c)(i), (ii), (iv) and (vi) of the Retail Integration Protocol.

“Prime Rate” means the rate of interest per annum publicly announced from time to time by Citibank, NA, as its prime rate in effect at its principal office in New York; each change in the Prime Rate shall be effective on the date such change is publicly announced as being effective.

“Private Label Packaged Motor Oil Business” has the meaning set forth in Section 14.03(h) of the Put/Call Registration Rights and Standstill Agreement.

“Profit and Loss”, as appropriate, means, for any period, the taxable income or tax loss of the Company and its subsidiaries under Code Section 703(a) and Treasury Regulation Section 1.703-1 for the Fiscal Year, adjusted as follows:

(a) All items of income, gain, loss or deduction required to be separately stated pursuant to Code Section 703(a)(1) shall be included;

(b) Tax exempt income as described in Code Section 705(a)(1)(B) realized by the Company during such Fiscal Year shall be taken into account as if it were taxable income;

(c) Expenditures of the Company described in Code Section 705(a)(2)(B) for such Fiscal Year, including items treated under Treasury Regulation Section 1.704-1(b)(2)(iv)(i) as items described in Code Section 705(a)(2)(B), shall be taken into account as if they were deductible items;

(d) With respect to any property (other than money) which has been contributed to the capital of the Company, “Profit” and “Loss” shall be computed in accordance with the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(g) by computing depreciation, amortization, income, gain, loss or deduction based upon the fair market value of such property at the date of contribution. Book depreciation (as that term is used in Treasury Regulation Section 1.704-(b)(2)(iv)(g)(3)) for any asset contributed to the Company that was fully depreciated for federal income tax purposes as of the date of its contribution shall be based on the applicable recovery period (as determined in Code Section 168(c)) for new assets of the same type;

(e) With respect to any property of the Company which has been revalued as required or permitted by Treasury Regulations under Code Section 704(b), “Profit” or “Loss” shall be determined based upon the fair market value of such property as determined in such revaluation; and

(f) With respect to any property of the Company which (i) is distributed in kind to a Member, or (ii) has been revalued under Section 6.03 upon the occurrence of any event specified in Treasury Regulation Section 1.704- 1(b)(2)(iv)(f), the difference between the adjusted basis for federal income tax purposes and the fair market value shall be treated as gain or loss upon the disposition of such property.

“Qualified Candidate” has the meaning set forth in Section 9.02(c).

“Quick Lube Business” has the meaning set forth in Section 14.03(h) of the Put/Call, Registration Rights and Standstill Agreement.

“Refundable Amount” has the meaning set forth in Section 14.03(d).

“Representatives” has the meaning set forth in Section 8.01

“Response” has the meaning set forth in Section 13.02.

“Retail Integration Protocol” means the Speedway SuperAmerica LLC Retail Integration Protocol attached hereto as Exhibit A.

“Revolving Credit Agreement” has the meaning set forth in Section 2.2(a) of the Master Formation Agreement.

“Section 8.11(b) Affiliate Transaction” has the meaning set forth in Section 8.11(b).

“Security Interest” has the meaning set forth in Section 14.05(a).

“Selling Member” has the meaning set forth in Section 10.04(a).

“Senior Manager” has the meaning set forth in Section 13.02.

“Shared Service” means an administrative service that is provided to the Company or its subsidiaries by Marathon, Ashland or any of their respective Affiliates pursuant to the Shared Services Agreement or provided to Marathon, Ashland or any of their respective Affiliates by the Company or its subsidiaries pursuant to the Shared Services Agreement.

“Shared Services Agreement” means the Shared Services Agreement by and among Marathon, Ashland and the Company, including the Schedules thereto, attached as Exhibit U to the Asset Transfer and Contribution Agreement.

“Short-Term Investments” means, without duplication, collected or available bank cash balances, the fair market value of any investment made by the Company or any of its subsidiaries pursuant to the Company’s Investment Guidelines and the fair market value of any investment made by the Company or any of its subsidiaries that should have been made pursuant to the Company’s Investment Guidelines, but excluding Incidental Cash and any cash balances that represent uncollected funds.

“Significant Shared Service” means (a) any Shared Service related to the Treasury and Cash Management function and (b) any Shared Service (or group of related Shared Services) that results or is reasonably anticipated to result in the payment by or to the Company or any of its subsidiaries of more than $2 million in any contract year in the period during which such Shared Service will be provided. For purposes of determining whether the $2 million threshold of this definition has been satisfied, payments for all Shared Services in each of the following general administrative areas shall be aggregated within each area specified below and considered related Shared Services: Human Resources; Health, Environment and Safety; Law; Public Affairs; Governmental Affairs; Finance and Accounting (including Internal Audit); Administrative Services; Information Technology Services; Procurement; Business Development; Aviation; Engineering and Technology; Economics; and Security.

“Sole Arbitrator” has the meaning set forth in Appendix B.

“Special Project” has the meaning set forth in the Company Leverage Policy.

“Special Project Indebtedness” has the meaning set forth in the Company Leverage Policy.

“Special Termination Right” has the meaning set forth in Section 2.01(a) of the Put/Call, Registration Rights and Standstill Agreement.

“Subleased Property” has the meaning set forth in Section 4.01(c).

“Super Majority Decision” has the meaning set forth in Section 8.08.

“Surplus Cash” has the meaning assigned to such term in the Company Leverage Policy.

“Tax Distribution Amount” has the meaning set forth in Section 5.01(a).

“Tax Liability” means, with respect to a Fiscal Year, a Member’s liability for Federal, state, local and foreign taxes attributable to taxable income allocated to such Member pursuant to Section 6.03 and Section 10.03, taking into account any Tax deduction or loss specifically allocated to a Member pursuant to this Agreement or any other Transaction Document.

“Term of the Company” has the meaning set forth in Section 2.03.

“Terminating Member” has the meaning set forth in Section 2.01(a) of the Put/Call, Registration Rights and Standstill Agreement.

“Unaudited Financial Statements” has the meaning set forth in Section 7.02(a).

“Valvoline Business” has the meaning set forth in Section 14.03(h) of the Put/Call, Registration Rights and Standstill Agreement.

SECTION 1.02. Applicable GAAP. In connection with the calculation pursuant to this Agreement of Adjusted DD&A, Capital Expenditures or Ordinary Course Lease Expenses, the determination of whether a lease is a Capital Lease or the determination of whether the Company has entered into an operating lease for purposes of Section 8.16 (each such calculation or determination, an “Accounting Determination”), the Company shall apply then Current GAAP; provided, however, that if at any time after January 1, 1998, a change shall occur in GAAP which would result in any Accounting Determination being different under Current GAAP than such Accounting Determination would have been under GAAP as in effect on January 1, 1998 (“Initial GAAP”), then (a) the Members shall negotiate in good faith to make such amendments to the relevant provisions of this Agreement as shall be required to preserve the economic and other results intended by the Members as of January 1, 1998 with respect to such Accounting Determination and (b) unless and until such time as the Members shall in good faith mutually agree to such amendments, Initial GAAP shall be applied to make such Accounting Determination or, if the Members shall have previously amended the relevant provisions of this Agreement pursuant to this Section 1.02 in response to a prior change in GAAP, then GAAP as in effect at the time the most recent such previous amendment was made shall be used to make such Accounting Determination (the GAAP that is actually applied by the Company in making any such Accounting Determination pursuant to this Agreement being the “Applicable GAAP”).

ARTICLE II

General Provisions

SECTION 2.01. Formation; Effectiveness. The Company has been formed as a limited liability company pursuant to the provisions of the Delaware Act by the filing of the Certificate of Formation with the Secretary of State of the State of Delaware. Pursuant to Section 18-201(d) of the Delaware Act, the provisions of this Agreement shall be effective as of the Closing Date. Each Member hereby adopts, confirms and ratifies the Certificate of Formation and all acts taken in connection therewith. Ashland shall be admitted as a member of the Company upon its execution and delivery of this Agreement. Except as provided in this Agreement, the rights, duties, liabilities and powers of the Members shall be as provided in the Delaware Act.

SECTION 2.02. Name. The name of the Company shall be Marathon Ashland Petroleum LLC. The Board of Managers may adopt such trade or fictitious names as it may determine.

SECTION 2.03. Term. Subject to the provisions of Article XV providing for early termination in certain circumstances and the provisions of Article IX of the Put/Call, Registration Rights and Standstill Agreement, the initial term of the Company (the “Initial Term”) began on the date the Certificate of Formation was filed with the

Secretary of State of the State of Delaware, and shall continue until the close of business on December 31, 2022 and, thereafter, the term of the Company shall be automatically extended for successive 10-year periods unless at least two years prior to the end of the Initial Term or any succeeding 10-year period, as applicable, a Member notifies the Board of Managers and the other Member in writing that it wants to terminate the term of the Company at the end of the Initial Term or such 10-year period, in which event, the term of the Company shall not thereafter be extended for a successive ten-year term. The President of the Company shall notify each Member in writing at least six months prior to each such two-year notification date that the Term of the Company will be automatically extended unless a Member provides a notice to the contrary pursuant to this Section 2.03. The failure of the President of the Company to give such notice, or any defect in any notice so given, shall not affect the Members’ rights to terminate the Term of the Company pursuant to this Section 2.03, and shall not result in a termination of the Term of the Company unless a Member provides a notice to the contrary pursuant to this Section 2.03. The Initial Term, together with any such extensions, is hereinafter referred to as the “Term of the Company”. The existence of the Company as a separate legal entity shall continue until the cancelation of the Certificate of Formation in the manner provided in the Delaware Act.

SECTION 2.04. Registered Agent and Office. The name of the registered agent of the Company for service of process on the Company in the State of Delaware is The Corporation Trust Company, and the address of the registered agent and the address of the office of the Company in the State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801. The Board of Managers may change such office and such agent from time to time in its sole discretion.

SECTION 2.05. Purpose. (a) The purpose of the Company is to engage in any lawful act or activity for which a limited liability company may be formed under the Delaware Act (either directly or indirectly through one or more subsidiaries). It is the Members’ understanding and intent that (i) the Company will be an independent, self-funding entity, (ii) no additional capital contributions are expected to be required by the Members and (iii) the administrative requirements of the Company will generally be provided by the Company’s own employees. In furtherance of this understanding and intent, and without limiting the generality of the foregoing, unless the Members shall mutually agree otherwise, the following administrative functions and services shall be provided substantially by the Company and its subsidiaries’ employees (or by its unaffiliated third party contractors) under the supervision and control of the Company’s officers: Human Resources; Health, Environment and Safety; Law; Finance and Accounting; Internal Audit; Treasury and Cash Management; and Information Technology. For the avoidance of doubt, the Members acknowledge and agree that the provision at any time of the specific Shared Services identified and described in Schedule 10.2(e) to the Marathon Asset Transfer and Contribution Agreement Disclosure Letter and Schedule 10.2(e) to the Ashland Asset Transfer and Contribution Agreement Disclosure Letter to the Company and its subsidiaries by the Members shall not be deemed to violate the requirements of the immediately preceding sentence.

(b) The Company, and the President on behalf of the Company, may enter into and perform the Transaction Documents and the Commercial Documents to which the Company is a party without any further act, vote or approval of the Board of Managers or the Members notwithstanding any other provision of this Agreement, the Delaware Act or other Applicable Law. The President of the Company is hereby authorized to enter into such Transaction Documents and such Commercial Documents on behalf of the Company, but such authorization shall not be deemed a restriction on the power of the Board of Managers to enter into other agreements on behalf of the Company.

SECTION 2.06. Powers. In furtherance of its purposes, but subject to all the provisions of this Agreement, the Company shall have the power and is hereby authorized to:

(a) acquire by purchase, lease, contribution of property or otherwise, own, operate, hold, sell, convey, transfer or dispose of any real or personal property which may be necessary, convenient or incidental to the accomplishment of the purpose of the Company;

(b) act as a trustee, executor, nominee, bailee, director, officer, agent or in some other fiduciary capacity for any person or entity and to exercise all the powers, duties, rights and responsibilities associated therewith;

(c) take any and all actions necessary, convenient or appropriate as trustee, executor, nominee, bailee, director, officer, agent or other fiduciary, including the granting or approval of waivers, consents or amend ments of rights or

powers relating thereto and the execution of appropriate documents to evidence such waivers, consents or amendments;

(d) borrow money and issue evidences of indebtedness in furtherance of any or all of the purposes of the Company, and secure the same by mortgage, pledge or other lien on the assets of the Company;

(e) invest any funds of the Company pending distribution or payment of the same pursuant to the provisions of this Agreement;

(f) prepay in whole or in part, refinance, recast, increase, modify or extend any Indebtedness of the Company and, in connection therewith, execute any extensions, renewals or modifications of any mortgage or security agreement securing such Indebtedness;

(g) enter into, perform and carry out contracts of any kind, including, without limitation, contracts with any person or entity affiliated with any of the Members, necessary to, in connection with, convenient to, or incidental to the accomplishment of the purposes of the Company;

(h) employ or otherwise engage employees, managers, contractors, advisors, attorneys and consultants and pay reasonable compensation for such services;

(i) enter into partnerships, limited liability companies, trusts, associations, corporations or other ventures with other persons or entities in furtherance of the purposes of the Company; and

(j) do such other things and engage in such other activities related to the foregoing as may be necessary, convenient or incidental to the conduct of the business of the Company, and have and exercise all of the powers and rights conferred upon limited liability companies formed pursuant to the Delaware Act.

ARTICLE III

Members

SECTION 3.01. Members; Percentage Interests. The names and addresses of the Members and their respective percentage interests in the Company (“Percentage Interests”) are as follows:

Members	Percentage Interests
Marathon Oil Company	62	%
5555 San Felipe
P.O. Box 3128
Houston, TX 77056-2723
Ashland Inc.	38	%
50 East RiverCenter Boulevard
P.O. Box 391
Covington, KY 41012-0391

Marathon’s Percentage Interest shall be deemed to include the Fuelgas Interest. Promptly after the Closing, Marathon will cause Fuelgas to merge with and into Marathon.

SECTION 3.02. Adjustments in Percentage Interests. Marathon’s and Ashland’s Percentage Interests, and the Percentage Interests of each other Member, if any, shall be adjusted (a) at the time of any Transfer of such Member’s Membership Interests pursuant to Section 10.02 and (b) at the time of the admission of each new Member pursuant

to such terms and conditions as the Board of Managers from time to time shall determine pursuant to a vote in accordance with Section 8.07(b), in each case to take into account such Transfer or admission of a new Member.

ARTICLE IV

Capital Contributions; Assumption of Assumed Liabilities

SECTION 4.01. Contributions. (a) On or before the Closing Date, Marathon shall contribute, convey, transfer, assign and deliver to the Company or shall have contributed, conveyed, transferred, assigned and delivered to the Company, the Marathon Transferred Assets, and Ashland shall contribute, convey, transfer, assign and deliver to the Company or shall have contributed, conveyed, transferred, assigned and delivered to the Company, the Ashland Transferred Assets, in each case pursuant to terms and conditions of the Asset Transfer and Contribution Agreement. In addition, any additional assets that Marathon or Ashland are required to contribute, convey, transfer, assign and deliver to the Company at a later date pursuant to the terms and conditions of the Asset Transfer and Contribution Agreement shall be so contributed at such later date.

(b) The Company shall assume, as of the Closing Date, the Assumed Liabilities pursuant to the terms of the Asset Transfer and Contribution Agreement.

(c) Payments or Damages under Designated Sublease Agreements as Contributions. (i) Each Member has agreed, pursuant to the Designated Sublease Agreements to which it is a party, to sublease to the Company or one of its subsidiaries the assets or property listed on Schedule 4.01(c) (“Subleased Property”) for a nominal consideration in lieu of transferring such property to the Company or such subsidiary, free of any Liens, other than Permitted Encumbrances, as a capital contribution.

(A) If at any time after January 1, 1998 a Member in its capacity as a sublessor shall become the owner of any Subleased Property, such Member shall promptly contribute, convey, transfer, assign and deliver to the Company (or, if the Company so directs, to one of its subsidiaries) at no cost to the Company or such subsidiary, and the Company hereby agrees to accept, or to cause such subsidiary to accept, such Subleased Property and the related Designated Sublease Agreement shall be terminated with respect to such Subleased Property, all as more specifically set forth in such Designated Sublease Agreement. In addition, if at any time after January 1, 1998 a Member assigns to the Company (or a subsidiary of the Company) a purchase option with respect to a Subleased Property pursuant to a Designated Sublease Agreement and the Company or such subsidiary exercises such purchase option and pays all or a portion of the purchase price therefor, such Member shall promptly reimburse the Company or such subsidiary such amount so paid and, if not so reimbursed, such amount shall be subject to set-off pursuant to Section 14.04. Any such payment by the Company shall be treated as a distribution to the appropriate Member for capital account purposes, and any such amount paid to the Company or such subsidiary by a Member in connection with such reimbursement obligation, or to the extent of a set-off applied pursuant to Section 14.04 as a result of such failure to so reimburse, shall be treated as a capital contribution to the Company.

(B) Any amount paid by the Company or any of its subsidiaries under a Designated Sublease Agreement to cure or prevent a payment default by the sublessor Member under the underlying Original Lease shall be reimbursed to the Company or such subsidiary by such Member, and if not so reimbursed, shall be subject to set-off pursuant to Section 14.04. Any such payment by the Company shall be treated as a distribution to the appropriate Member for capital account purposes, and any such amount paid to the Company or such subsidiary by a Member in connection with a default of its payment obligations under its respective Designated Sublease Agreements, or to the extent of a set-off applied pursuant to Section 14.04 as a result of such default, shall be treated as a capital contribution to the Company.

(C) None of the capital contributions pursuant to (A) and (B) above shall result in any adjustment to the Members’ respective Percentage Interests in the Company.

(ii) If (A) a Member commences a voluntary case under any applicable bankruptcy, insolvency, liquidation, receivership, reorganization or other similar law now in effect, or an order for relief is entered against such Member in an involuntary case under any such law and (B) a trustee of such Member rejects a Designated Sublease Agreement of such Member, then (1) the Member shall be obligated to reimburse the Company for the Loss to the

Company as a result of such rejected Designated Sublease Agreement, which Loss, if not so reimbursed, shall be subject to set-off pursuant to Section 14.04 prior to the interest of such Member in any distributions hereunder and (2) the amount of such Loss shall be deemed to be the loss of use of such Subleased Property for the economic life thereof rather than any other period.

SECTION 4.02. Additional Contributions.

(a) Member-Funded Capital Expenditures. For each Capital Expenditure project identified on Schedule 4.02(a)-1, Marathon shall contribute to the Company the amount of funds necessary to comply with its obligations under Section 7.1(j) of the Asset Transfer and Contribution Agreement with respect to such Capital Expenditure project as, when and if the Company actually incurs Capital Expenditures related to such Capital Expenditure project (such Capital Expenditures, as, when and if they are funded by Marathon, are referred to herein as the “Marathon-Funded Capital Expenditures”). For each Capital Expenditure project identified on Schedule 4.02(a)-2, Ashland shall contribute to the Company the amount of funds necessary to comply with its obligations under Section 7.2(k) of the Asset Transfer and Contribution Agreement with respect to such Capital Expenditure project as, when and if the Company actually incurs Capital Expenditures related to such Capital Expenditure project (such Capital Expenditures, as, when and if they are funded by Ashland, are referred to herein as the “Ashland-Funded Capital Expenditures”, and together with the Marathon-Funded Capital Expenditures, the “Member-Funded Capital Expenditures”). Each Member-Funded Capital Expenditure shall be treated as a capital contribution to the Company, but shall not result in any adjustment to the Members’ respective Percentage Interests in the Company. To the extent permitted by applicable Tax law, any Tax deduction by the Company of a Member-Funded Capital Expenditure shall be specially allocated so that each Member will have the Tax benefit of its Member-Funded Capital Expenditures.

(b) Indemnification Payments as Contributions. Any indemnity amount paid by Marathon or Ashland to the Company under Article IX of the Asset Transfer and Contribution Agreement (each a “Member-Indemnified Expenditure”) shall be treated as a capital contribution to the Company, but shall not result in any adjustment to the Members’ respective Percentage Interests in the Company. A determination of whether the associated Loss will be deducted or capitalized by the Company for Tax purposes shall be made by the Company at the direction of the Indemnifying Party. Any Tax deduction or loss claimed by the Company with respect to the indemnified amount shall be specially allocated to the Indemnifying Party.

(c) Other Additional Capital Contributions. The Members shall make other additional capital contributions (“Agreed Additional Capital Contributions”) pro rata based on their respective Percentage Interests if and to the extent such capital contributions are approved by the Board of Managers pursuant to a vote in accordance with Section 8.07(b).

(d) No Third-Party Beneficiaries. The provisions of this Agreement, including without limitation, this Section 4.02, are intended solely to benefit the Members and, to the fullest extent permitted by Applicable Law, shall not be construed as conferring any benefit upon any creditor of the Company other than the Members, and no such creditor of the Company other than the Members shall be a third-party beneficiary of this Agreement, and no Member or member of the Board of Managers shall have any duty or obligation to any creditor of the Company to issue any call for capital pursuant to this Agreement.

SECTION 4.03. Negative Balances; Withdrawal of Capital; Interest. Neither of the Members shall have any obligation to the Company or to the other Member to restore any negative balance in its Capital Account. Neither Member may withdraw capital or receive any distributions from the Company except as specifically provided herein. No interest shall be paid by the Company on any capital contributions.

ARTICLE V

Distributions

SECTION 5.01. Distributions. (a) Within 45 days after the end of each Fiscal Quarter during each Fiscal Year, the Company shall distribute to the Members (the date of such distribution being a “Distribution Date”) an amount in cash (the “Tax Distribution Amount”) determined as follows:

(i) The maximum Tax Liability of each Member with respect to its allocable portion (as provided in Section 6.03) of the Company’s estimated taxable income for the portion of such Fiscal Year ending on the last day of such Fiscal Quarter shall be determined, based upon the highest aggregate marginal statutory Federal, state and local income tax rate (determined taking into account the deductibility, to the extent allowed, of income-based taxes paid to governmental entities) to which any Member may be subject for the related Fiscal Year (and excluding any deferred taxes) (the “Aggregate Tax Rate”).

(ii) If the Tax Liability determined in clause (i) is positive with respect to either Member, there shall be a cash distribution to each of the Members, in accordance with their Percentage Interests, of an aggregate amount such that neither Member shall have received distributions under this clause and subsection (b) below for such portion of such Fiscal Year in an amount less than its Tax Liability for such portion of such Fiscal Year.

(iii) Following a determination by the Company of the Company’s actual net taxable income with respect to a Fiscal Year, the maximum Tax Liability of each Member with respect to its allocable portion (as provided in Section 6.03) of the Company’s net taxable income for such Fiscal Year shall be determined, based upon the Aggregate Tax Rate. If the maximum Tax Liability of any Member for the Fiscal Year is in excess of the cash distributions previously made to the Member for such Fiscal Year under clause (ii) above and subsection (b) below, the Company shall make a cash distribution to all the Members, in accordance with their Percentage Interests, of an aggregate amount such that the excess is eliminated for all the Members. Such distribution shall be made within 45 days of the date the Company’s actual net taxable income is determined.

(iv) In the event that the Company Independent Auditors determine pursuant to Section 7.02(d) that the Company’s actual net taxable income with respect to a Fiscal Year is greater than the amount determined by the Company pursuant to clause (iii) above, the Company shall make a determination of the amount of cash, if any, required to be distributed to the Members, in accordance with their Percentage Interests, such that, after taking into account cash distributions previously made to a Member under clauses (ii) and (iii) above and subsection (b) below, no Member shall receive less than its Tax Liability for such Fiscal Year based on such higher net taxable income amount. The Company shall, within 15 days after the determination is made, distribute such additional amount of cash to the Members, in accordance with their Percentage Interests.

(v) In the event that the Company Independent Auditors determine pursuant to Section 7.02(d) that the Company’s actual net taxable income with respect to a Fiscal Year is less than the amount determined by the Company pursuant to clause (iii) above, a determination shall be made of the excess Tax Distribution Amount that was distributed to the Members in respect of such Fiscal Year based on the Company’s determination of its actual net taxable income and the Company shall deduct from the next Tax Distribution Amount payable to the Members pursuant to this Section 5.01, the amount of such excess distribution.

(b) In addition to the distributions pursuant to Section 5.01(a), on each Distribution Date, the Company shall distribute to the Members all Distributable Cash for the Fiscal Quarter to which such Distribution Date relates provided, however, that the distribution of (i) Distributable Cash pursuant to this paragraph 5.01(b) or (ii) cash pursuant to Section 5.01(a) above, in each case with respect to any Fiscal Quarter may be made in such other manner and in such other amount as the Members shall agree with respect to such Fiscal Quarter; provided, further, however, that any agreement by any Member with respect to the distribution of either Distributable Cash pursuant to this paragraph 5.01(b) or cash pursuant to Section 5.01(a) for any Fiscal Quarter pursuant to the preceding proviso shall not alter or waive any of the rights of either Member under this Agreement with respect to distributions of Distributable Cash pursuant to this paragraph 5.01(b) or cash pursuant to Section 5.01(a) with respect to any subsequent Fiscal Quarter. Subject to Section 5.02(b), each such distribution shall be allocated between the Members pro rata based upon their respective Percentage Interests.

(c) The Company shall prepare and distribute to each Member within 45 days after the end of each Fiscal Quarter a statement (a “Distributions Calculation Statement”) setting forth the calculations (in reasonable detail) used by the Company for purposes of distributions pursuant to this Section 5.01 of (i) the Tax Distribution Amount for each Member for such Fiscal Quarter, (ii) the amount of Distributable Cash for such Fiscal Quarter and

(iii) the allocation of such Distributable Cash between the Members.

(d) Notwithstanding anything to the contrary in this Agreement, any agreement reached between the Members to

distribute any amount of cash different from the amounts which would be calculated in accordance with the methodology set forth in Section 5.01(a) and Section 5.01(b) above shall not alter or waive in any manner the obligations of the Company to prepare and deliver the Distributions Calculation Statement as set forth in Section 5.01(c) above, and after any such agreement has been reached the Company shall continue to prepare and deliver such Distribution Calculation Statement with respect to each Fiscal Quarter as if no such agreement had been reached.

SECTION 5.02. Certain General Limitations.

(a) Notwithstanding any provision to the contrary contained in this Agreement, the Company, and the Board of Managers on behalf of the Company, shall not be required to make a distribution to either Member with respect to such Member’s Membership Interests if such distribution would violate Section 18-607 of the Delaware Act or other applicable law.

(b) Notwithstanding any other provision of this Article V, all amounts distributed to the Members in connection with a dissolution of the Company or the sale or other disposition of all or substantially all the assets of the Company that results in a dissolution of the Company shall be distributed to the Members in accordance with their respective Capital Account balances, as adjusted pursuant to Article VI for all Company operations up to and including the date of such distribution.

SECTION 5.03. Distributions in Kind. The Company shall not distribute to the Members any assets in kind unless approved by the Board of Managers pursuant to a vote in accordance with Section 8.07(b). If cash and property in kind are to be distributed simultaneously, the Company shall distribute such cash and property in kind in the same proportion to each Member, unless otherwise approved by the Board of Managers pursuant to a vote in accordance with Section 8.07(b). For purposes of determining amounts distributable to Members under Section 5.01, for purposes of determining Profit and Loss under Section 1.01, for purposes of making adjustments to Capital Accounts under Article VI and for purposes of allocations under Article VI, any property to be distributed in kind shall have the value assigned to such property by the Board of Managers pursuant to a vote in accordance with Section 8.07(b) and such value shall be deemed to be part of and included in Distributable Cash for purposes of determining distributions to the Members under this Agreement.

SECTION 5.04. Distributions in the Event of an Exercise of the Marathon Call Right, Ashland Put Right or the Special Termination Rights. In the event of an exercise by Marathon of its Marathon Call Right or its Special Termination Right or the exercise by Ashland of its Ashland Put Right or its Special Termination Right pursuant to the Put/Call, Registration Rights and Standstill Agreement, certain distributions to Ashland or Marathon, as applicable, will be suspended in accordance with the provisions of Section 5.01 thereof.

ARTICLE VI

Allocations and Other Tax Matters

SECTION 6.01. Maintenance of Capital Accounts. An account (a “Capital Account”) shall be established and maintained in the Company’s books for each Member in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv) and to which the following provisions apply to the extent not inconsistent with such Regulation:

(a) There shall be credited to each Member’s Capital Account (i) the amount of money contributed by such Member to the Company (including liabilities of the Company assumed by such Member as provided in Treasury Regulation Section 1.704-1(b)(2)(iv)(c)), (ii) the fair market value of any property contributed by the Member to the Company (net of liabilities secured by such contributed property that the Company is considered to assume or take subject to under Code Section 752), and (iii) such Member’s share of the Company’s Profit;

(b) There shall be debited from each Member’s Capital Account (i) the amount of money distributed to such Member by the Company (including liabilities of such Member assumed by the Company as provided in Treasury Regulation Section 1.704-1(b)(2)(iv)(c)) other than amounts which are in repayment of debt obligations of the Company to such Member, (ii) the fair market value of property distributed to such Member (net of liabilities secured by such property that such Member is considered to assume or take subject to under Code Section 752), and (iii) such Member’s

share of the Company’s Loss;

(c) To each Member’s Capital Account there shall be credited, in the case of an increase, or debited, in the case of a decrease, such Member’s share of any adjustment to the adjusted basis of Company assets pursuant to Code Section 734(b) or Code Section 743(b) to the extent provided by Treasury Regulation Section 1.704-(b)(2)(iv)(m); and

(d) Upon the transfer of all or any part of the Membership Interests of a Member, the Capital Account of the transferee Member shall include the portion of the Capital Account of the transferor Member attributable to such transferred Membership Interest (or portion thereof).

SECTION 6.02. Allocations. (a) Except as provided in Section 6.02(b), 6.02(c), 6.02(d) and 6.02(e), Profit or Loss for any Fiscal Year shall be allocated between the Members in proportion to their respective Percentage Interests.

(b) To the extent any Tax deduction or loss is specifically allocated to a Member pursuant to this Agreement (other than pursuant to Section 6.03) or any other Transaction Document, including any deduction or loss indemnified by a Member, any Member-Funded Capital Expenditure, any Member-Indemnified Expenditure and any special allocations pursuant to Sections 6.12, 6.13, 6.14, 6.15 and 6.16 the associated Profit and Loss shall be allocated to the same Member.

(c) Depreciation and amortization with respect to any asset contributed by a Member to the Company shall be allocated solely to such Member.

(d) If any asset contributed by a Member is sold or otherwise disposed of prior to the time such asset has been completely depreciated or amortized for Federal income tax purposes, the Member contributing such property shall be allocated an expense (“Make-Up Expense”) equal to (i) the remaining tax basis of the asset at the time of the sale or other disposition, multiplied by (ii) the other Member’s Percentage Interest at the time of such sale or other disposition. The contributing Member shall be allocated Make-Up Expense over the remaining tax life of the asset at the time of sale or other disposition at the same rate as depreciation or amortization would have been allocated to such Member if the sale or other disposition had not occurred. Make-Up Expense allocated to a Member shall be taken from and reduce the amount of expenses allocated to the other Member. The purpose for this provision is to allocate to a Member, with respect to depreciable or amortizable assets contributed by such Member, a total amount of deductions and cost recovery allowances equal to 100% of the basis of such assets at the time of contribution.

(e) In the event that the Company sells or otherwise disposes of all or substantially all its assets or engages in any other transaction that will lead to a liquidation of the Company, then, notwithstanding the foregoing provisions of this Section 6.02, (i) any Profit or Loss realized by the Company in such transaction and (ii), to the extent necessary, any other Profit or Loss in the Fiscal Year such transaction occurs or thereafter (and, in each case, to the extent necessary, constituent items of income, gain, loss, deduction and credit) shall be specially allocated as between the Members as required so as to cause in so far as possible each Member’s Capital Account balance to be proportionate to its Percentage Interest.

SECTION 6.03. Tax Allocations. (a) For income tax purposes only, each item of income, gain, loss, deduction and credit of the Company as determined for income tax purposes shall be allocated between the Members in accordance with the corresponding allocation in Section 6.02, subject to the requirements of Section 704(c) of the Code.

(b) The Members acknowledge and agree that Section 704(c) shall be applied using the so-called “traditional method with curative allocations” set forth in Treasury Regulation Section 1.704-3(c). Curative allocations of income, gain, loss or deduction shall, to the extent possible, have substantially the same effect on each Member’s Federal income tax liability as the item of income, gain, loss or deduction for which allocation is limited.

(c) By reason of the special allocation of book depreciation and amortization with respect to the assets contributed by the Members pursuant to Section 6.02(c), tax depreciation and amortization with respect to each such asset shall be allocated solely to the contributing Member.

(d) Items described in this Section 6.03 shall neither be credited nor charged to the Members’ Capital Accounts.

SECTION 6.04. Tax Elections. (a) The Members intend that the Company be treated as a partnership for Federal income tax purposes. Accordingly, neither the Tax Matters Partner nor either Member shall file any election or return on its own behalf or on behalf of the Company that is inconsistent with that intent.

(b) Any elections or other decisions relating to tax matters that are not expressly provided for herein, including the determination of the fair market value of contributed property and the decision to adjust the Capital Accounts to reflect the fair market value of the Company’s assets upon the occurrence of any event specified in Treasury Regulation Section 1.704-1(b)(2)(iv)(f), shall be made jointly by the Members in any manner that reasonably reflects the purpose and intention of this Agreement.

SECTION 6.05. Fiscal Year. The fiscal year (the “Fiscal Year”) of the Company for tax and accounting purposes shall be the 12-month (or shorter) period ending on the last day of December of each year.

SECTION 6.06. Tax Returns. (a) The Company shall cause to be prepared and timely filed all Federal, state, local and foreign income tax returns and reports required to be filed by the Company and its subsidiaries. The Company shall provide copies of all the Company’s Federal, state, local and foreign tax returns (and any schedules or other required filings related to such returns) that reflect items of income, gain, deduction, loss or credit that flow to separate Member returns, to the Members for their review and comment prior to filing, except as otherwise agreed by the Members. The Members agree in good faith to resolve any difference in the tax treatment of any item affecting such returns and schedules. However, if the Members are unable to resolve the dispute, the position of the Tax Matters Partner shall be followed if nationally recognized tax counsel acceptable to both Members provides an opinion that substantial authority exists for such position. Substantial authority shall be given the meaning ascribed to it in Code Section 6662. If the Members are unable to resolve the dispute prior to the due date for filing the return, including approved extensions, the position of the Tax Matters Partner shall be followed, and amended returns shall be filed if necessary at such time the dispute is resolved. The costs of the dispute shall be borne by the Company. The Members agree to file their separate Federal income tax returns in a manner consistent with the Company’s return, the provisions of this Agreement and in accordance with applicable Federal income tax law.

(b) The Company shall elect the most rapid method of depreciation and amortization allowed under Applicable Law, unless the Members agree otherwise. The failure of either Member to agree that the Company should elect a less rapid method of depreciation or amortization is not subject to any dispute resolution provisions.

(c) The Members shall provide each other with copies of all correspondence or summaries of other communications with the Internal Revenue Service or any state, local or foreign taxing authority (other than routine correspondence and communications) regarding the tax treatment of the Company’s operations. No Member shall enter into settlement negotiations with the Internal Revenue Service or any state, local or foreign taxing authority with respect to any issue concerning the Company’s income, gains, losses, deductions or credits if the tax adjustment attributable to such issue (assuming the then current Aggregate Tax Rate) would be $2 million or greater, without first giving reasonable advance notice of such intended action to the other Member.

SECTION 6.07. Tax Matters Partner. (a) Initially, Marathon shall be the “Tax Matters Partner” of the Company within the meaning of Section 6231(a)(7) of the Code, and shall act in any similar capacity under state, local or foreign law, but only with respect to returns for which items of income, gain, loss, deduction or credit flow to the separate returns of the Members. In the event of a transfer of any Member’s interest in the Company, the Tax Matters Partner shall be the Member with the largest Percentage Interest following such transfer.

(b) The Tax Matters Partner shall incur no liability (except as a result of the gross negligence or willful misconduct of the Tax Matters Partner) to the other Member including, but not limited to, liability for any additional taxes, interest or penalties owed by the other Member due to adjustments of Company items of income, gain, loss, deduction or credit at the Company level.

SECTION 6.08. Duties of Tax Matters Partner. (a) Except as provided in Section 6.08(b), the Tax Matters Partner shall cooperate with the other Member and shall promptly provide the other Member with copies of notices or other materials from, and inform the other Member of discussions engaged in with, the Internal Revenue Service or any state, local or foreign taxing authority and shall provide the other Member with notice of all scheduled administrative proceedings, including meetings with agents of the Internal Revenue Service or any state, local or

foreign taxing authority, technical advice conferences, appellate hearings, and similar conferences and hearings, as soon as possible after receiving notice of the scheduling of such proceedings, but in any case prior to the date of such scheduled proceedings.

(b) The duties of the Tax Matters Partner under Section 6.08(a) shall not apply with respect to notices, materials, discussions, proceedings, meetings, conferences, or hearings involving any issue concerning the Company’s income, gains, losses, deductions or credits if the tax adjustment attributable to such issue (assuming the then current Aggregate Tax Rate) would be less than $2 million except as otherwise required under Applicable Law.

(c) The Tax Matters Partner shall not extend the period of limitations or assessments without the consent of the other Member, which consent shall not be unreasonably withheld.

(d) The Tax Matters Partner shall not file a petition or complaint in any court, or file any claim, amended return or request for an administrative adjustment with respect to partnership items, after any return has been filed, with respect to any issue concerning the Company’s income, gains, losses, deductions or credits if the tax adjustment attributable to such issue (assuming the then current Aggregate Tax Rate) would be $2 million or greater, unless agreed by the other Member. If the other Member does not agree, the position of the Tax Matters Partner shall be followed if nationally recognized tax counsel acceptable to both Members issues an opinion that a reasonable basis exists for such position. Reasonable basis shall be given the meaning ascribed to it for purposes of applying Code Section 6662. The costs of the dispute shall be borne by the Company.

(e) The Tax Matters Partner shall not enter into any settlement agreement with the Internal Revenue Service or any state, local or foreign taxing authority, either before or after any audit of the applicable return is completed, with respect to any issue concerning the Company’s income, gains, losses, deductions or credits, unless any of the following apply:

(i) both Members agree to the settlement;

(ii) the tax effect of the issue if resolved adversely would be, and the tax effect of settling the issue is, proportionately the same for both Members (assuming each otherwise has substantial taxable income);

(iii) the Tax Matters Partner determines that the settlement of the issue is fair to both Members and the amount of the tax adjustment attributable to such issue (assuming the then current Aggregate Tax Rate) would be less than $2 million; or

(iv) nationally recognized tax counsel acceptable to both Members determines that the settlement is fair to both Members and is one it would recommend to the Company if both Members were owned by the same person and each had substantial taxable income.

In all events, the costs incurred by the Tax Matters Partner in performing its duties hereunder shall be borne by the Company in accordance with the Shared Services Agreement.

(f) The Tax Matters Partner may request extensions to file any tax return or statement without the written consent of, but shall so inform, the other Member.

SECTION 6.09. Survival of Provisions. The provisions of this Agreement regarding the Company’s tax returns and Tax Matters Partner shall survive the termination of the Company and the transfer of any Member’s interest in the Company and shall remain in effect for the period of time necessary to resolve any and all matters regarding the federal, state, local and foreign taxation of the Company and items of Company income, gain, loss, deduction and credit.

SECTION 6.10. Section 754 Election. In the event that a Member purchases the Membership Interests of a Selling Member pursuant to Section 10.04, the purchasing Member shall have the right to direct the Tax Matters Partner to make an election under Section 754 of the Code. The purchasing Member shall pay all costs incurred by the Company in connection with such election, including any costs borne by the Company to maintain records required as a result of such election. The purchasing Member, at its option and expense, may maintain on behalf of the

Company any records required as a result of such election.

SECTION 6.11. Qualified Income Offset, Minimum Gain Chargeback. Notwithstanding anything to the contrary in this Agreement, there is hereby incorporated a qualified income offset provision which complies with Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and minimum gain chargeback and partner minimum gain chargeback provisions which comply with the requirements of Treasury Regulation Section 1.704-2 and such provisions shall apply to the allocation of Profits and Losses.

SECTION 6.12. Tax Treatment of Designated Sublease Agreements. (a) For purposes of Article VI, Ashland or Marathon, as the case may be, shall be treated as transferring to the Company all of its interest in Subleased Property pursuant to an Ashland Designated Sublease Agreement or a Marathon Designated Sublease Agreement, as if the leasehold interest in such Subleased Property was an Ashland Transferred Asset or a Marathon Transferred Asset.

(b) Payments under the Original Lease made by Ashland or Marathon, as the case may be, after the effective date of the Ashland Designated Sublease Agreement or Marathon Designated Sublease Agreement, as the case may be, shall be treated as made by the Company or its subsidiaries, and then immediately reimbursed by Ashland or Marathon, as the case may be.

(c) All items of loss, deduction and credit attributable to payments under the Original Lease made by Ashland or Marathon, as the case may be, including payments by the Company or any of its subsidiaries that are charged to Ashland or Marathon by set-off or other means, shall be allocated entirely to the Member incurring such payments.

(d) Depreciation and amortization deductions, if any, as well as any deductions or offsets to taxable income or gain, attributable to property described in the Ashland Designated Sublease Agreements or the Marathon Designated Sublease Agreements, as the case may be, shall be allocated entirely to Ashland or Marathon, as the case may be, except to the extent such deductions or offsets are attributable to amounts paid by the Company or any of its subsidiaries and not reimbursed by Ashland or Marathon, as the case may be, either directly or indirectly.

SECTION 6.13. Tax Treatment of Reimbursed Liability Payments. Any tax deduction or loss attributable to payments by the Company or any of its subsidiaries of Assumed Liabilities, as described in Schedules 2.3(d) and 3.3(d) to the Asset Transfer and Contribution Agreement, that are reimbursed by a Member either directly or indirectly, shall be allocated entirely to such Member.

SECTION 6.14. Tax Treatment of Disproportionate Payments. Except as otherwise provided in this Agreement or in any other Transaction Document, any Tax deduction or loss reflected on a Tax return, report or other Tax filing by the Company, attributable to (i) payments made or costs incurred by a Member, (ii) payments made or costs incurred by the Company and reimbursed or to be reimbursed by a Member and (iii) payments made or costs incurred by the Company and not shared among the Members based on their Percentage Interests, shall be allocated among the Members to take into account the amounts paid, incurred, reimbursed or shared by each.

SECTION 6.15. Allocation of Income, Gains, Losses and Other Items from LOOP LLC and LOCAP, Inc. (a) Income, gains, losses, deductions, credits, adjustments, tax preferences and other distributive share items with respect to the Company’s interest in LOOP LLC, a tax partnership, for periods beginning on or after the Closing, shall be allocated between the Members in such a manner so that, when such items are included with the same items allocated to Ashland with respect to the Ashland LOOP/LOCAP Interest, each Member is allocated all such items in proportion to its respective Percentage Interest in the Company.

(b) In determining the Capital Account for each Member, (i) Ashland shall be treated as contributing the Ashland LOOP/LOCAP Interest to the Company, (ii) Profit and Loss shall be treated as including taxable income, gain, loss and distributions arising from Ashland’s 4% interest in LOOP LLC and (iii) dividends and distributions that Ashland receives from LOOP LLC or LOCAP, Inc. in respect of the Ashland LOOP/LOCAP Interest and paid to the Company pursuant to Section 7.2(i) of the Asset Transfer and Contribution Agreement shall be treated as being received directly by the Company.

SECTION 6.16. Allocation of Income, Gain, Loss, Deduction and Credits Attributable to Stock-Based Compensation. Each item of income, gain, loss, deduction (excluding deductions for administrative costs incurred

by the Company) and credit attributable to the grant to, or the exercise by or on behalf of, an employee or retired employee of the Company of a stock option, stock appreciation right, or other stock-based incentive compensation involving the stock of a Member or an Affiliate of a Member shall be allocated to the Member whose stock or whose Affiliate’s stock is involved. Any exercise price paid by or on behalf of the employee or retired employee to the Company shall be paid over to the Member whose stock (or whose Affiliate’s stock) is involved. A Member’s Capital Account shall be (i) increased by the fair market value of its (or its Affiliate’s) stock delivered to or on behalf of an employee or retired employee as aforesaid (without duplication to the extent such stock is first contributed to the Company), (ii) decreased (pursuant to Section 6.01(a)(iii) or (b)(iii)) by the deduction allocated to such Member as aforesaid and (iii) decreased by the amount of the exercise price so paid over by the Company or deemed to be paid over by the Company under principles analogous to those in Treasury Regulation Section 1.83-6(d)(1).

ARTICLE VII

Books and Records

SECTION 7.01. Books and Records; Examination. The Board of Managers shall keep or cause to be kept such books of account and records with respect to the Company’s business as they may deem appropriate. Each Member and its duly authorized representatives shall have the right at any time to examine, or to appoint independent certified public accountants (the fees of which shall be paid by such Member) to examine, the books, records and accounts of the Company and its subsidiaries, their operations and all other matters that such Member may wish to examine, including, without limitation, all documentation relating to actual or proposed transactions with either Member or any Affiliate of either Member. The Company, and the Board of Managers, shall not have the right to keep confidential from the Members any information that the Board of Managers would otherwise be permitted to keep confidential from the Members pursuant to Section 18-305(c) of the Delaware Act. The Company’s books of account shall be kept using the method of accounting determined by the Board of Managers. The Company Independent Auditors (the “Company Independent Auditors”) shall be an independent public accounting firm selected by the Board of Managers pursuant to a vote in accordance with Section 8.07(b) or Section 8.07(c), as applicable, and shall initially be Price Waterhouse LLP.

SECTION 7.02. Financial Statements and Reports. (a) Unaudited Monthly Financial Statements. (i) The Company shall prepare and send to each Member (at the same time) promptly, but in no event later than noon on the 15th Business Day after the last day of each month, the following unaudited financial statements with respect to the Company and its subsidiaries: a balance sheet, a statement of operations, a statement of cash flows and a statement of changes in capital (collectively, “Unaudited Financial Statements”) as at the end of and for such month.

(ii) The Company shall prepare and send to each Member promptly, but in no event later than noon on the 20th Business Day after the last day of each month, an unaudited financial summary booklet containing a breakdown of such operating and financial information by major department or division of the Company and its subsidiaries as at the end of and for such month as either Member shall reasonably request; provided that each Member shall be provided with the same information at the same time as the other Member.

(b) Unaudited Quarterly Financial Statements. The Company shall prepare and send to each Member (at the same time) promptly, but in no event later than the 30th day after the last day of each Fiscal Quarter, (i) Unaudited Financial Statements as at the end of and for such Fiscal Quarter; (ii) a management’s discussion and analysis of financial condition and results of operations section prepared in accordance with Rule 303 of Regulation S-K of the Securities Act with respect to such Fiscal Quarter; and (iii) an unaudited statement of changes in the Members’ capital accounts as at the end of and for such Fiscal Quarter.

(c) Audited Annual Financial Statements. Within 75 days after the end of each Fiscal Year, the Board of Managers shall cause (i) an examination to be made, at the expense of the Company, by the Company Independent Auditors, covering (A) the assets, liabilities and capital of the Company and its subsidiaries, and the Company’s and its subsidiaries’ operations during such Fiscal Year, (B) an examination of the Distributions Calculation Statement for such Fiscal Year, and (C) all other matters customarily included in such examinations and (ii) to be delivered to each Member (at the same time) a copy of the report of such examination, stating that such examination has been performed in accordance with generally accepted auditing standards, together with (1) the following financial statements with respect to the Company and its subsidiaries certified by such accountants as having been prepared in

accordance with GAAP: a balance sheet, a statement of operations, a statement of cash flows and a statement of changes in capital as at the end of and for such Fiscal Year (collectively, the “Audited Financial Statements”) and (2) a management’s discussion and analysis of financial condition and results of operations section prepared in accordance with Rule 303 of Regulation S-K of the Securities Act with respect to such Fiscal Year. The Company shall prepare the Audited Financial Statements in such manner and form as is necessary to enable Ashland to file such Audited Financial Statements with the Commission in accordance with Item 3-09 of Regulation S-X under the Exchange Act.

(d) Schedule of Members’ Capital Accounts. (i) Preliminary Annual Capital Account Schedule. The Company shall prepare and send to each Member (at the same time) promptly, but in no event later than the 75th day after the last day of each Fiscal Year, a schedule showing the respective Capital Accounts of the Members based on the Company’s estimated taxable income for such Fiscal Year.

(ii) Examination. Unless otherwise agreed by the Members, within 15 days after the date the Company determines its net taxable income with respect to any Fiscal Year, but in no event later than 7 months after the end of such Fiscal Year, the Board of Managers shall cause (i) an examination to be made, at the expense of the Company, by the Company Independent Auditors, covering (A) the determination of the Company’s taxable income with respect to such Fiscal Year and (B) the respective Capital Accounts of the Members based on the Company’s taxable income for such Fiscal Year and (ii) to be delivered to each Member (at the same time) a copy of the report of such examination, stating that such examination has been performed in accordance with generally accepted auditing standards.

(iii) Final Annual Capital Account Schedule. The Company shall prepare and send to each Member (at the same time) promptly, but in no event later than the 15th day after the date the Company files its federal income tax return with respect to each Fiscal Year, a schedule showing the respective Capital Accounts of the Members based on the Company’s actual taxable income for such Fiscal Year.

(e) Other Financial Information. The Company shall prepare and send to each Member (at the same time) promptly such other financial information as a Member shall from time to time reasonably request.

SECTION 7.03. Notice of Affiliate Transactions; Annual List. (a) (i) The Company shall notify each Member of any Affiliate Transaction (other than an Affiliate Transaction that is a Significant Shared Service) that the Company or any of its subsidiaries is considering entering into or renewing or extending the term thereof (whether pursuant to contractual provisions thereof or otherwise), which notice shall be given, to the extent reasonably possible, sufficiently in advance of the time that the Company intends to enter into, renew or extend the term of such Affiliate Transaction so as to provide the Members with a reasonable opportunity to examine the documentation related to such Affiliate Transaction.

(ii) The Company shall notify each Member of any Affiliate Transaction that is a Significant Shared Service that the Company or any of its subsidiaries is considering entering into or renewing or extending the term thereof (whether pursuant to contractual provisions thereof or otherwise), which notice shall be given, to the extent reasonably possible, sufficiently in advance of the time that the Company intends to enter into, renew or extend the term of such Affiliate Transaction so as to provide the Members with a reasonable opportunity to examine the documentation related to such Affiliate Transaction.

(b) Within 60 days after the end of each Fiscal Year, the Company shall prepare and distribute to each Member a list setting forth a description of each Affiliate Transaction entered into by the Company or any of its subsidiaries during such Fiscal Year and identifying all of the parties to such Affiliate Transactions; provided that if two or more Affiliate Transactions either (i) constitute a series of related transactions or agreements or (ii) are substantially the same type of transaction or agreement, the Company need not separately describe each such Affiliate Transaction but instead can describe such related or similar Affiliated Transactions as a group.

ARTICLE VIII

Management of the Company

SECTION 8.01. Managing Members. The business and affairs of the Company shall be managed by the Members acting through their respective representatives on the Board of Managers (“Representatives”). The President and the Representatives shall be deemed “managers” of the Company within the meaning of the Delaware Act. Except for such matters as may be delegated to a Member from time to time by the Board of Managers pursuant to a vote in accordance with Section 8.07(b), and subject to the provisions of Sections 6.07 and 6.08, no Member shall act unilaterally on behalf of the Company or any of its subsidiaries without the approval of the other Member and no Member shall have the power unilaterally to bind the Company or any of its subsidiaries.

SECTION 8.02. Board of Managers. (a) The Members shall exercise their management authority through a board of managers (the “Board of Managers”) consisting of (i) the President of the Company, who shall not be deemed a Representative hereunder and who shall not be entitled to vote on any matter coming before the Board of Managers, and (ii) eight Representatives, each of whom shall be entitled to vote, five of whom shall be designated by Marathon and three of whom shall be designated by Ashland. In the event of a Transfer by a Member of its Membership Interests pursuant to Article X, effective at the time of such Transfer, (i) such Member’s Representatives shall automatically be removed from the Board of Managers and (ii) the transferee of such Membership Interests shall be permitted to designate the number of Representatives to the Board of Managers as is equal to the number previously designated by the transferor of such Membership Interests. Such transferee shall promptly notify the other Member as to the names of the persons who such transferee has designated as its Representatives on the Board of Managers.

(b) Each Representative may be removed and replaced, with or without cause, at any time by the Member designating him or her, but, except as provided in Section 8.02(a), may not be removed or replaced by any other means. A Member who removes one or more of its Representatives from the Board of Managers shall promptly notify the other Member as to the names of its replacement Representatives.

SECTION 8.03. Responsibility of the Board of Managers. The Board of Managers shall be responsible for overseeing the operations of the Company and shall, in particular, have sole jurisdiction to approve each of the following matters:

(i) hiring senior executives of the Company, evaluating their performance and planning for their succession;

(ii) reviewing and approving Company strategies, Business Plans and Annual Capital Budgets;

(iii) reviewing and approving significant external business opportunities for the Company, including acquisitions, mergers and divestitures;

(iv) reviewing and approving policies of the Company that maintain high standards in areas of environmental responsibility, employee safety and health, community, government, employee and customer relations;

(v) reviewing external and internal audits and management responses thereto; and

(vi) establishing compensation and benefits policies for employees of the Company.

SECTION 8.04. Meetings. (a) Except as set forth in Section 8.04(h), all actions of the Board of Managers shall be taken at meetings of the Board of Managers in accordance with this Section 8.04.

(b) As soon as practicable after the appointment of the Representatives, the Board of Managers shall meet for the purpose of organization and the transaction of other business.

(c) Regular meetings of the Board of Managers shall be held at such times as the Board of Managers shall from time to time determine, but no less frequently than once each Fiscal Quarter; provided that an annual meeting of the Board of Managers (which annual meeting shall count as one of the regular quarterly meetings) shall be held no later than June 30 of each Fiscal Year.

(d) Special meetings of the Board of Managers shall be held whenever called by any Member. Any and all business may be transacted at a special meeting that may be transacted at a regular meeting of the Board of Managers.

(e) The Board of Managers may hold its meetings at such place or places as the Board of Managers may from time to time by resolution determine or as shall be designated in the respective notices or waivers of notice thereof; however, the Board of Managers shall consider holding meetings from time to time at each of the Member’s corporate headquarters and at the operational sites of the Company.

(f) Notices of regular meetings of the Board of Managers or of any adjourned meeting shall be given at least two weeks prior to such meeting, unless otherwise agreed by each Member. Notices of special meetings of the Board of Managers shall be mailed by the Secretary or an Assistant Secretary to each member of the Board of Managers addressed to him or her at his or her residence or usual place of business, so as to be received at least two Business Days before the day on which such meeting is to be held, or shall be sent to him or her by telegraph, cable, facsimile or other form of recorded communication or be delivered personally, by overnight courier or by telephone so as to be received not later than two Business Days before the day on which such meeting is to be held. Such notice shall include the purpose, time and place of such meeting and shall set forth in reasonable detail the matters to be considered at such meeting. However, notice of any such meeting need not be given to any member of the Board of Managers if such notice is waived by him or her in writing or by telegraph, cable, facsimile or other form of recorded communication, whether before or after such meeting shall be held, or if he or she shall be present at such meeting.

(g) Action by Communication Equipment. The members of the Board of Managers may participate in a meeting of the Board of Managers by means of video or telephonic conferencing or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meeting.

(h) Unanimous Action by Written Consent. Any action required or permitted to be taken at any meeting of the Board of Managers may be taken without a meeting if all the Representatives consent thereto in writing and such writing is filed with the minutes of the proceedings of the Board of Managers.

(i) Organization. Meetings of the Board of Managers shall be presided over by a chair, who will be a member of the Board of Managers selected by a majority of the Board of Managers. The Secretary of the Company or, in the case of his or her absence, any person whom the person presiding over the meeting shall appoint, shall act as secretary of such meeting and keep the minutes thereof.

SECTION 8.05. Compensation. Unless the Members otherwise agree, no person shall be entitled to any compensation from the Company in connection with his or her services as a Representative.

SECTION 8.06. Quorum. (a) Quorum for Super Majority Decisions. Subject to Section 14.01(e) of the Put/Call, Registration Rights and Standstill Agreement and Sections 14.01 and 14.05 and Section 5 of Schedule 8.14, at all meetings of the Board of Managers, the quorum required for the transaction of any business that constitutes a Super Majority Decision shall be the presence, either in person or by proxy, of (i) at least one Representative of each Member and (ii) a majority of all the Representatives on the Board of Managers (which may include the Representatives referred to in the preceding clause (i)).

(b) Quorum for Other Decisions. Subject to Sections 14.01 and 14.05 and Section 5 of Schedule 8.14, at all meetings of the Board of Managers, the quorum required for the transaction of any business that does not constitute a Super Majority Decision shall be (i) in the case of all matters that were described in the notice in reasonable detail for such meeting delivered to the members of the Board of Managers pursuant to Section 8.04(f), the presence, either in person or by proxy, of a majority of all the Representatives on the Board of Managers and (ii) in the case of all matters that were not described in the notice in reasonable detail for such meeting delivered to the members of the Board of Managers pursuant to Section 8.04(f), the presence, either in person or by proxy, of (A) at least one Representative of each Member and (B) a majority of all the Representatives on the Board of Managers (which may include the Representatives referred to in the preceding clause (A)).

(c) Rescheduled Meetings. The Company shall use its reasonable best efforts to schedule the time and place of each meeting of the Board of Managers so as to ensure that a quorum will be present at each such meeting and that at least one Representative of each Member will be present at each such meeting. In the absence of a quorum at any such meeting or any adjournment or adjournments thereof, a majority in voting interest of those present in person or

by proxy and entitled to vote thereat may reschedule such meeting from time to time until the Representatives requisite for a quorum, as aforesaid, be present in person or by proxy. At any such rescheduled meeting at which a quorum is present, any business may be transacted that might have been transacted at the meeting as originally called.

SECTION 8.07. Voting. (a) General. Each Representative shall be entitled to cast one vote on all matters coming before the Board of Managers. In exercising their voting rights under this Agreement, the Representatives may act by proxy.

(b) Super Majority Decisions. Subject to Section 14.01(e) of the Put/Call, Registration Rights and Standstill Agreement and Sections 14.01 and 14.05 and Section 5 of Schedule 8.14, all Super Majority Decisions to be decided by the Board of Managers shall be approved by the unanimous affirmative vote of the votes cast by the Representatives who are present, either in person or by proxy, at a duly called meeting of the Board of Managers at which a quorum is present. The parties acknowledge and agree that all references in this Agreement, any other Transaction Document and any appendices, exhibits or schedules hereto or thereto to any determination, decision, approval or other form of authorization by the Board of Managers pursuant to a vote in accordance with Section 8.07(b) shall be deemed to mean that such determination, decision, approval or other form of authorization shall constitute a Super Majority Decision which requires the approval of the Board of Managers in accordance with this Section 8.07(b).

(c) Other Decisions. Subject to Sections 14.01 and 14.05 and Section 5 of Schedule 8.14, all matters other than Super Majority Decisions to be decided by the Board of Managers shall be approved by the affirmative vote of a majority of the votes cast by the Representatives who are present, either in person or by proxy, at a duly called meeting of the Board of Managers at which a quorum is present, unless the vote of a greater number of Representatives is required by Applicable Law or this Agreement.

SECTION 8.08. Matters Constituting Super Majority Decisions. Subject to the provisions of Section 8.07(b), each of the following matters, and only the following matters, shall constitute a “Super Majority Decision” which requires the approval of the Board of Managers pursuant to Section 8.07(b):

(a) (i) the purchase or investment by the Company or any of its subsidiaries of or in any assets or securities, or any group of assets or securities, that have an aggregate purchase price or cost of more than $20 million, if the purpose or effect of such purchase or investment is to enable the Company to enter into a line of business other than (A) the Company’s Business as such Business is conducted on the Closing Date or (B) any other line of business that is approved after the Closing Date by the Board of Managers as a Super Majority Decision under this Section 8.08(a)(i) pursuant to a vote in accordance with Section 8.07(b), provided that any such purchase or investment by the Company or any of its subsidiaries shall not require a Super Majority Decision under this Section 8.08(a) if and to the extent such purchase or investment is being made to enable the Company to enter into the Bulk Motor Oil Business, the Packaged Motor Oil Business, the Private Label Packaged Motor Oil Business and/or the Quick Lube Business and, at the time of such purchase or investment, (1) the Company and its subsidiaries are permitted to engage in such business under Section 14.03(b) of the Put/Call, Registration Rights and Standstill Agreement and (2) Ashland and its Affiliates shall own (beneficially or otherwise) 20% or more of the Valvoline Business (it being understood and agreed that this proviso shall not limit or constitute an exception to any other provision of Section 8.08); and

(ii) the determination of whether any new line of business approved by the Board of Managers as a Super Majority Decision under Section 8.08(a)(i) should constitute a “Competitive Business” for purposes of Section 14.01 of the Put/Call, Registration Rights and Standstill Agreement;

(b) (i) any reorganization, merger, consolidation or similar transaction between the Company and any person (other than a direct or indirect Wholly Owned Subsidiary of the Company) or any sale or lease of all or substantially all of the Company’s assets to any person (other than a direct or indirect Wholly Owned Subsidiary of the Company);

(ii) any (A) reorganization, merger, consolidation or similar transaction or series of transactions between any of the Company’s subsidiaries and any person (other than the Company or a direct or indirect Wholly Owned Subsidiary of the Company) or (B) sale or lease of all or substantially all of any of the Company’s subsidiaries’ assets to any

person (other than the Company or a direct or indirect Wholly Owned Subsidiary of the Company) which in either case involves an aggregate consideration of over $50,000,000;

c) the admission of a new Member (other than as a result of a Transfer of an existing Member’s Membership Interests pursuant to Article X) or the issuance of any additional Membership Interests or other equity interests to any person, including any existing Member;

(d) except as expressly provided in Sections 4.01(c), 4.02(a) and 4.02(b), the acceptance or requirement of any additional capital contributions to the Company by either Member;

(e) the initial hiring of the following officers of the Company: the President; the Executive Vice President; the officers principally in charge of (i) refining, (ii) wholesale and branded marketing, (iii) retail marketing (two initially), (iv) supply and transportation and (v) environmental health and safety and human resources; the Senior Vice President-Finance and Commercial Services of the Company; and the general counsel of the Company;

(f) (i) the approval of Acquisition Expenditures, Capital Expenditures and such other expenditures of the type to be included in the Annual Capital Budget for any Fiscal Year (other than (A) Ordinary Course Lease Expenses, (B) up to $100 million in the aggregate for all periods in Capital Expenditures of the Company and its subsidiaries directly associated with the Garyville Propylene Upgrade Project, (C) Member-Funded Capital Expenditures, (D) Member-Indemnified Expenditures and (E) Acquisition Expenditures or Capital Expenditures of the Company and its subsidiaries directly associated with Permitted Capital Projects/Acquisitions that are funded with Permitted Capital Project/Acquisition Indebtedness) that when taken together with (x) the other expenditures already approved as part of the Annual Capital Budget for such Fiscal Year and (y) all other expenditures already made in such Fiscal Year, would reasonably be expected to exceed the Normal Annual Capital Budget Amount for such Fiscal Year; and

(ii) the incurrence of rentals or operating leases which result in aggregate Ordinary Course Lease Expenses (other than Ordinary Course Lease Expenses incurred under the Bareboat Charters) for any Fiscal Year that exceed $80 million; provided, however, in the event the Company or one of its subsidiaries shall make any acquisition or divestiture, the Members shall negotiate in good faith to adjust the dollar amount set forth in this Section 8.08(f)(ii) to take into account the effect of such acquisition or divestiture;

(g) (i) except for any acquisition or capital project related to the Bulk Motor Oil Business, the Packaged Motor Oil Business, the Private Label Motor Oil Business and/or the Quick Lube Business, any acquisition, divestiture or individual capital project (other than (i) Ordinary Course Lease Expenses, (ii) up to $100 million in the aggregate for all periods in Capital Expenditures of the Company and its subsidiaries directly associated with the Garyville Propylene Upgrade Project, (iii) Member-Funded Capital Expenditures, (iv) Member-Funded Indemnified Expenditures and (v) Acquisition Expenditures or Capital Expenditures of the Company and its subsidiaries directly associated with Permitted Capital Projects/Acquisitions that are funded with Permitted Capital Project/Acquisition Indebtedness) where the liability or consideration involved is more than $50 million in the aggregate (including contingent liabilities only to the extent required to be reflected on the balance sheet of the Company in accordance with Financial Accounting Standard Number 5 (or any successor or superseding provision of Current GAAP));

(ii) any acquisitions or individual capital projects related to the Bulk Motor Oil Business, the Packaged Motor Oil Business, the Private Label Motor Oil Business and/or the Quick Lube Business during any Fiscal Year where the liability or consideration involved is more than $50 million in the aggregate in such Fiscal Year (including contingent liabilities only to the extent required to be reflected on the balance sheet of the Company in accordance with Financial Accounting Standard Number 5 (or any successor or superseding provision of Current GAAP)); provided that nothing in this Section 8.08(g)(ii) shall be deemed or interpreted to permit the Company or any of its subsidiaries to engage in any of such businesses except as and to the extent expressly permitted under Section 14.03 of the Put/Call, Registration Rights and Standstill Agreement;

(iii) for the avoidance of doubt, acquisitions or individual capital projects related to the Maralube Express Business shall be subject to clause (i) of this Section 8.08(g) and not clause (ii) of this Section 8.08(g);

(h) the initiation or settlement of any action, suit, claim or proceeding involving (i) an amount in excess of $50 million (with respect to initiation) or $25 million (with respect to settlement), (ii) material non-monetary relief

(including, without limitation, entering into any consent decree that has or could reasonably be expected to (A) impose any material obligation on Ashland or any of its Affiliates or the Company or any of its subsidiaries or (B) have a material adverse effect on the business, operations, assets, liabilities, results of operations, cash flows, condition (financial or otherwise) or prospects of Ashland or any of its Affiliates or the Company or any of its subsidiaries) or (iii) the initiation or settlement of any criminal action, suit, claim or proceeding (other than a misdemeanor) if such criminal action, suit or proceeding has or could reasonably be expected to (A) impose any material obligation on Ashland or any of its Affiliates or (B) have a material adverse effect on the business, operations, assets, liabilities, results of operations, cash flows, condition (financial or otherwise) or prospects of Ashland or any of its Affiliates;

(i) any change in the Company Independent Auditors unless the new firm is one of the “Big Six” accounting firms (or any successor thereto) or a firm of comparable stature in Ashland’s opinion;

(j) any modification, alteration, amendment or termination of any Transaction Document to which the Company or any of its subsidiaries is a party and all Members are not a party;

(k) (i) in the case of any Affiliate Transaction that is not a Crude Oil Purchase, a Significant Shared Service or a Designated Sublease Agreement, (A) any Affiliate Transaction (other than the Affiliate Transactions listed on Schedule 8.08(k)(i)(A) (the “Closing Date Affiliate Transactions”)), (B) any material amendment to or change in the terms or provisions of any Affiliate Transaction that was either a Closing Date Affiliate Transaction or previously approved by the Board of Managers pursuant to Section 8.08(k)(i)(A) (it being understood that a renewal or extension of the term of an Affiliate Transaction pursuant to contractual provisions that were previously approved by the Board of Managers pursuant to this Section 8.08(k)(i) or that were included in a Closing Date Affiliate Transaction on the Closing Date shall be deemed for purposes of this Agreement not to constitute a new Affiliate Transaction or a material amendment to or change in an Affiliate Transaction) or (C) any amendment or change in the terms or provisions of any agreement or transaction between the Company or any of its subsidiaries and any Member or any Affiliate of any Member which causes such agreement or transaction to become an Affiliate Transaction;

(ii) in the case of Crude Oil Purchases, the approval of such Crude Oil Purchases in accordance with Section 8.12(a);

(iii) in the case of any Significant Shared Service, (A) any agreement or transaction constituting a Significant Shared Service (other than the specific Significant Shared Services identified and described in Schedule 10.2(e) to the Asset Transfer and Contribution Agreement), (B) any material amendment to or change in the terms and provisions of any Significant Shared Service identified and described in Schedule 10.2(e) to the Asset Transfer and Contribution Agreement or thereafter approved by the Board of Managers in accordance with this Section 8.08(k)(iii), (C) subject to the provisions of Section 8.11(b) and except as expressly provided in Section 8.12(b), any cancelation or failure by the Company or any of its subsidiaries to renew any Significant Shared Service provided by Ashland or any Affiliate of Ashland to the Company or any of its subsidiaries or provided by the Company or any of its subsidiaries to Ashland or any Affiliate of Ashland and (D) the periodic review and approval of Significant Shared Services in accordance with Section 8.12(b); and

(iv) any material amendment to or change in the terms or provisions of, cancelation, termination or failure to renew, any Designated Sublease Agreement or any election by the Company to refuse or reject the contribution of any Subleased Property to the Company or any of its subsidiaries;

(l) the commencement of a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent to the entry of an order for relief in an involuntary case under any such law, or the consent to the appointment of or the taking possession by a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Company or any of its subsidiaries or for any substantial part of the Company’s or any of its subsidiaries’ property, or the making of any general assignment for the benefit of creditors;

(m) (i) the modification, alteration or amendment of the amount, timing, frequency or method of calculation of distributions to the Members from that provided in Article V or (ii) an adjustment to the amount of Distributable Cash pursuant to clause (g) of the definition of “Distributable Cash” in Section 1.01;

(n) (i) the modification, alteration or amendment of the Company Leverage Policy, or (ii) the approval of any matter which the Company Leverage Policy provides is to be approved by the Board of Managers as a Super Majority Decision;

(o) (i) the approval of any distribution by the Company to the Members of any assets in kind, (ii) the approval of any distribution by the Company to the Members of cash and property in kind on a non-pro rata basis, and (iii) the determination of the value assigned to such assets in kind;

(p) each Critical Decision or material amendment thereto made on or prior to the Critical Decision Termination Date for such Critical Decision; and

(q) the delegation to a Member of the power to unilaterally bind the Company or any of its subsidiaries with respect to any matter.

SECTION 8.09. Annual Capital Budget. (a) In Fiscal Year 1999 and in each Fiscal Year thereafter, the Executive Officers of the Company shall timely prepare or cause to be prepared a draft capital budget (the “Draft Annual Capital Budget”) for such Fiscal Year, which shall set forth in reasonable line item detail the proposed Acquisition Expenditures, Capital Expenditures and the Ordinary Course Lease Expenditures of the Company and its subsidiaries for such Fiscal Year, including all Ordinary Course Lease Expenditures and all Capital Expenditures of the Company and its subsidiaries directly associated with the Garyville Propylene Upgrade Project. In addition, to the extent that information can reasonably be obtained on the nature of assets rented or financed by operating leases, such information shall be presented along with the Annual Capital Budget. Copies of the Draft Annual Capital Budget shall be provided to each Member (at the same time) and to the Board of Managers. No later than the last regular meeting of the Board of Managers for a Fiscal Year, the Executive Officers shall present to the Board of Managers the Draft Annual Capital Budget for the following Fiscal Year for the Board of Managers’ review, consideration and approval, with such additions, deletions and changes thereto as the Board of Managers shall deem necessary. Upon its approval by the Board of Managers (and taking into account any additions, deletions or other changes deemed necessary by the Board of Managers) the Draft Annual Capital Budget for a Fiscal Year shall become the “Annual Capital Budget” for such Fiscal Year.

(b) If the Board of Managers shall fail to approve an Annual Capital Budget for any Fiscal Year, the total expenditures provided for in the Annual Capital Budget for such Fiscal Year shall be in an amount equal to the Normal Annual Capital Budget Amount for such Fiscal Year.

(c) No later than August 30 of each Fiscal Year, the Board of Managers shall review the Annual Capital Budget for such Fiscal Year and shall make such additions, deletions and changes thereto as the Board of Managers shall deem necessary.

SECTION 8.10. Business Plan. In Fiscal Year 1999 and in each Fiscal Year thereafter, the Executive Officers of the Company shall timely prepare or cause to be prepared a draft business plan (the “Draft Business Plan”) for the next three Fiscal Years. Copies of the Draft Business Plan shall be provided to each Member (at the same time) and to the Board of Managers. No later than the last regular meeting of the Board of Managers for a Fiscal Year, the Executive Officers shall present to the Board of Managers the Business Plan for their review, consideration and approval, with such additions, deletions and changes thereto as the Board of Managers shall deem necessary. Upon its approval by the Board of Managers (and taking into account any such additions, deletions or other changes deemed necessary by the Board of Managers), the Draft Business Plan for a Fiscal Year shall become the “Business Plan” for such Fiscal Year.

SECTION 8.11. Requirements as to Affiliate Transactions. (a) The Company and its subsidiaries shall only be permitted to enter into or renew or extend the term thereof (whether pursuant to contractual provisions thereof or otherwise) an agreement or a transaction with a Member or an Affiliate of a Member (which, solely for purposes of this Section 8.11, shall be deemed to include any entity more than 10% of the voting stock or other ownership interests of, or economic interest in, which is owned by a Member (other than the Company or any of its subsidiaries)) on the same terms or on terms no less favorable to the Company or such subsidiary than could be obtained from a third party on an arm’s-length basis (an “Arm’s-Length Transaction”).

(b) (i) If (A) the Company or any subsidiary of the Company enters into, renews or extends the term of (pursuant to contractual provisions thereof that were previously approved by the Board of Managers or otherwise) or materially amends or changes the terms or provisions of, any agreement or transaction between the Company or any of its subsidiaries and any Member or any Affiliate of any Member (a “Section 8.11(b) Affiliate Transaction”) or proposes to do any of the foregoing and (ii) not later than 90 days after receiving written notice thereof from the Company pursuant to Section 7.03 or otherwise (which notice describes the material terms and conditions of such transaction in reasonable detail), the Member that is not (or whose Affiliate is not) a party to such Section 8.11(b) Affiliate Transaction (the “Non-Contracting Member”) notifies the Company and the Member that is (or whose Affiliate is) a party to such Section 8.11(b) Affiliate Transaction (the “Contracting Member”) in writing that the Non-Contracting Member believes in good faith that either such Affiliate Transaction is not an Arm’s-Length Transaction or that the quality of the service being provided or to be provided by the Contracting Member is inferior to that which the Company and its subsidiaries could otherwise obtain on comparable terms and conditions, then the Company shall promptly (and, in any event within 30 days) provide the Non-Contracting Member with a reasonably detailed explanation of the basis for the Company’s determination that such new, renewed or extended Affiliate Transaction is an Arm’s-Length Transaction or the quality of the service being provided or to be provided to the Company and its subsidiaries is not inferior.

(ii) If following receipt of such evidence, the Non-Contracting Member is not reasonably satisfied that such Affiliate Transaction is an Arm’s-Length Transaction or the quality of the service being provided or to be provided to the Company and its subsidiaries is not inferior, then, at the written request of the Non-Contracting Member (such written request being an “Affiliate Transaction Dispute Notice”), the Company shall (A) modify the terms of such Affiliate Transaction so that it becomes an Arm’s- Length Transaction, (B) if the Company had given the Members written notice pursuant to Section 7.03(a) prior to entering into, renewing or extending such Affiliate Transaction, not enter into, renew or extend such Affiliate Transaction or (C) if the Company had given the Members written notice pursuant to Section 7.03(a) prior to entering into, renewing or extending such Affiliate Transaction, enter into, renew or extend such Affiliate Transaction in which event the determination of whether such Affiliate Transaction is an Arm’s Length Transaction and/or whether the quality of the service being provided is inferior shall be in accordance with the Dispute Resolution Procedures set forth in Article XIII or (D) if the Company shall not have given the Members written notice pursuant to Section 7.03(a) prior to entering into, renewing or extending such Affiliate Transaction, commence the dispute resolution procedures set forth in Article XIII.

(iii) For purposes of Article XIII, a Non- Contracting Member’s delivery of an Affiliate Transaction Dispute Notice to the Company shall constitute delivery of a Dispute Notice thereunder, and the Company shall be required to deliver a Response to the Non-Contracting Member within 30 days thereafter. If it is finally determined pursuant to such Dispute Resolution Procedures that such Affiliate Transaction is an Arm’s-Length Transaction and, if disputed, that the quality of service being so provided is not inferior, then the Company shall be permitted to enter into, renew or extend such Affiliate Transaction. If it is finally determined pursuant to such Dispute Resolution Procedures that such Affiliate Transaction is not an Arm’s-Length Transaction or that the quality of service being so provided is inferior, then the Company shall either modify the terms of such Affiliate Transaction so that it becomes an Arm’s-Length Transaction and, if disputed, with an adequate level of quality of service or not enter into, renew or extend such Affiliate Transaction. In the event that such Affiliate Transaction has already been entered into, renewed or extended, then (A) the Company and the Contracting Member shall make such modifications to the terms of such Affiliate Transaction as are necessary so that such Affiliate Transaction becomes an Arm’s-Length Transaction and, if disputed, with an adequate level of quality of service and (B) the Contracting Member shall pay the Company an amount equal to the difference between (I) the costs incurred by the Company under such Affiliate Transaction since the time of such entering into, renewal or extension and (II) the costs that the Company would have incurred under such Affiliate Transaction during such time period had such Affiliate Transaction been an Arm’s-Length Transaction and, if disputed, with an adequate level of quality of service at the time of such initial agreement, renewal or extension.

SECTION 8.12. Review of Certain Affiliate Transactions Related to Crude Oil Purchases and Shared Services. (a) (i) Not less than 30 days prior to the regular meeting of the Board of Managers during the fourth Fiscal Quarter of each Fiscal Year (or, if no regular meeting of the Board of Managers is scheduled during such Fiscal Quarter, at a special meeting of the Board of Managers during such Fiscal Quarter), the Company shall submit to the Board of Managers a reasonably detailed description of any proposed transactions or agreements related to crude oil purchases by the Company and its subsidiaries from Marathon or any Affiliate of Marathon that are intended to

remain in effect or to be put into effect during such next Fiscal Year (collectively, the “Marathon Crude Oil Purchase Program”). Following such submission, the Company shall provide the Board of Managers promptly with such information with respect to such Marathon Crude Oil Purchase Program and the Company’s other proposed crude oil purchases and policies for such next Fiscal Year as any Representative shall reasonably request. At each such regular or special meeting during the fourth Fiscal Quarter of each Fiscal Year, the Board of Managers shall review such Marathon Crude Oil Purchase Program. During such next Fiscal Year, the Company and its subsidiaries shall be permitted to purchase crude oil from Marathon or any Affiliate of Marathon only on the terms and conditions of the proposed transactions and agreements submitted to and approved by the Board of Managers at such regular or special meeting pursuant to a vote in accordance with Section 8.07(b) (the “Approved Marathon Crude Oil Purchase Program”). Any purchase (or group of related purchases) of crude oil by the Company or any of its subsidiaries from Marathon or any Affiliate of Marathon during such Fiscal Year that is an Affiliate Transaction for purposes of Section 8.08(k) and is not made under or in accordance with the Approved Marathon Crude Oil Purchase Program and any material amendment to or change in the Approved Marathon Crude Oil Purchase Program during such Fiscal Year shall be made only with the prior approval of the Board of Managers pursuant to a vote in accordance with Section 8.07(b).

(ii) The Company shall prepare and send to each Member (at the same time) promptly, but in no event later than the 30th day after the last day of each Fiscal Quarter, (A) a summary of all Crude Oil Purchases during such Fiscal Quarter, (B) a description of any amendments to, changes in or deviations from the Approved Marathon Crude Oil Purchase Program in effect during such Fiscal Quarter, (C) a description of any then known proposed amendments to, changes in or deviations from the Approved Marathon Crude Oil Purchase Program in effect during the remaining balance of the Fiscal Year and (D) such other information with respect to purchases of crude oil by the Company and its subsidiaries as either Member shall reasonably request.

(b)(i) All administrative services that Marathon, Ashland and each of their respective Affiliates provide to the Company or any of its subsidiaries, and that the Company and its subsidiaries provide to Marathon, Ashland or any of their respective Affiliates, shall be pursuant to the Shared Services Agreement. To the extent that there is a conflict between the Shared Services Agreement, Schedule 10.2(e) to the Marathon Asset Transfer and Contribution Agreement Disclosure Letter or Schedule 10.2(e) to the Ashland Asset Transfer and Contribution Agreement Disclosure Letter, on the one hand, and this Agreement, on the other hand, this Agreement shall control.

(ii) Not less than 90 days prior to each of the annual meetings of the Board of Managers held in 2000, 2003 and every three years thereafter, the Company shall submit to the Board of Managers the provisions of the Shared Services Agreement that relate to each Significant Shared Service then in effect or that is proposed to be put into effect. Following such submission, the Company shall provide the Board of Managers promptly with such information with respect to such Significant Shared Services and with respect to any other Shared Services then being provided or proposed to be provided as any Representative shall reasonably request. At each such annual meeting, unless all the Representatives otherwise agree, the Board of Managers shall review each such Significant Shared Service and shall determine pursuant to a vote in accordance with Section 8.07(b) whether such Significant Shared Service should be continued (or, in the case of any proposed Significant Shared Service, put into effect). Unless the Board of Managers approves pursuant to a vote in accordance with Section 8.07(b) the continuation or effectiveness of a Significant Shared Service, the Shared Service Agreement to the extent it relates to such Significant Shared Service shall be terminated effective 90 days after such annual meeting or at such later date as the Board of Managers shall specify pursuant to a vote in accordance with Section 8.07(b) and the Company shall be deemed at the time of such annual meeting to have given notice to the Member providing or receiving (or whose Affiliate is providing or receiving) such Significant Shared Service that the Company is terminating the Shared Service Agreement with respect to such Significant Shared Service.

SECTION 8.13. Adjustable Amounts. Within 30 days following the date on which the United States Department of Labor Bureau of Labor Statistics for all Urban Areas publishes the Price Index for the month of September of each Fiscal Year commencing September, 1998, the Company shall determine whether the Average Annual Level for the immediately preceding twelve-month period exceeds the Base Level. If the Company determines that the Average Annual Level for such twelve-month period exceeds the Base Level, then the Company shall increase or decrease each of the dollar amounts set forth in this Agreement (other than the $348 million and $346 million amounts set forth in the definition of Adjusted DD&A, the $657 million, $600 million, $80 million, $20 million and $12.4 million amounts set forth in the definition of Adjusted EBITDA, the $240 million amount set forth in the definition

of “Normal Annual Capital Budget Amount” in Section 1.01, the $100 million amount set forth in Section 8.08(f)(i) and any dollar amount set forth in any Appendix, Exhibit or Schedule to this Agreement, including Schedule 8.14) (each dollar amount that is adjusted pursuant to this Section 8.13 being an “Adjustable Amount”), including, without limitation, the following amounts, to an amount calculated by multiplying the relevant Adjustable Amount by a fraction whose numerator is the Average Annual Level for such twelve-month period and whose denominator is the Base Level: (i) the $100,000, $2 million and $25 million amounts set forth in the definition of “Affiliate Transaction” and the $2 million amount set forth in the definition of “Significant Shared Service” in each case in Section 1.01; (ii) the $2 million amount set forth in Section 6.06(c); (iii) the $2 million amounts set forth in Sections 6.08(b), (d) and (e); (iv) the $20 million amount set forth in Section 8.08(a)(i); (v) the $80 million amount set forth on Section 8.08(f)(ii) (or such other dollar amount as shall be agreed pursuant to the proviso to Section 8.08(f)(ii)); (vi) the $50 million amount set forth in Section 8.08(g); (vii) the $50 million and $25 million amounts set forth in Section 8.08(h)(i); and (viii) each $7.5 million amount set forth in Section 14.01(a); provided that in no event shall any Adjustable Amount be decreased below the initial amount thereof set forth herein. Within five Business Days after making such determinations, the Company shall distribute to each Member a notice setting forth: (A) the amount by which the Average Annual Level for such Fiscal Year exceeded the Base Level and (B) the calculations of any adjustments made to the Adjustable Amounts pursuant to this Section 8.13. Any adjustment made to the Adjustable Amounts pursuant to this Section 8.13 shall be effective as of January 1st of the next Fiscal Year.

SECTION 8.14. Company Leverage Policy. The leverage policy for the Company shall be the leverage policy set forth on Schedule 8.14, with such modifications, alterations or amendments thereto as the Board of Managers shall from time to time approve pursuant to a vote in accordance with Section 8.07(b) (such leverage policy, as so modified, altered or amended, is referred to herein as the “Company Leverage Policy”).

SECTION 8.15. Company’s Investment Guidelines. The Company’s Senior Vice President-Finance and Commercial Services, Vice President-Finance and Controller and Treasurer (or Treasury Manager) shall constitute an Investment Policy Committee of the Company and shall establish investment guidelines for the Company and its subsidiaries (such investment guidelines, as they may be modified, altered or amended by such Investment Policy Committee from time to time, are referred to herein as the “Company Investment Guidelines”). The initial Company Investment Guidelines is set forth on Schedule 8.15. The Company and its subsidiaries shall only make investments that are permitted under the Company Investment Guidelines at the time of such investments. In addition, the Company and its subsidiaries shall invest all Surplus Cash (after meeting daily cash requirements) in accordance with the Company Investment Guidelines.

SECTION 8.16. Requirements as to Operating Leases. The Company and its subsidiaries shall not enter into any operating lease (as determined in accordance with Applicable GAAP) if the purpose or intent of entering into such operating lease is to circumvent the Company Leverage Policy or the super majority voting requirement for Capital Expenditures of the Company set forth in Section 8.08(f). The lease by the Company and its subsidiaries of vehicles, railcars and computers in accordance with the historical practices of the Ashland Business and the Marathon Business shall not be deemed to violate this Section 8.16, provided, for the avoidance of doubt, that all Ordinary Course Lease Expenses related to any such leases shall be considered Ordinary Course Lease Expenses for the purposes of Section 8.08(f)(ii).

SECTION 8.17. Limitations on Actions Relating to the Calculation of Distributable Cash. Notwithstanding anything to the contrary contained in this Agreement, the Company shall not, and shall cause its subsidiaries not to (a) modify, alter or amend the Company Investment Guidelines, (b) accelerate the payment of the Company’s and its subsidiaries’ accounts payable, (c) delay the collection of the Company’s and its subsidiaries’ accounts receivable or (d) take any other action, if the purpose or intent of such action is to reduce the amount of Distributable Cash in a manner that is inconsistent with the intent of the Members to maximize the amount of Distributable Cash distributions to the Members.

SECTION 8.18. Reliance by Third Parties. Persons dealing with the Company are entitled to rely conclusively upon the power and authority of the Board of Managers herein set forth. Except as provided in this Agreement, neither the President, nor a Representative, nor any Member shall have any authority to bind the Company or any of its subsidiaries.

SECTION 8.19. Integration of Retail Operations. (a) Until the Critical Decision is made regarding the location of

the Company’s retail operations’ headquarters, the Company’s retail operations’ business shall have headquarters in both Enon, Ohio and Lexington, Kentucky.

(b) (i) The Company shall make a formal recommendation to the Board of Managers with respect to each Critical Decision not later than the ten-month anniversary of the Closing Date. Following receipt of a formal recommendation with respect to any Critical Decision, Marathon and Ashland shall negotiate in good faith to reach an agreement with respect to such Critical Decision not later than the first anniversary of the Closing Date.

(ii) Each formal recommendation with respect to any Critical Decision shall be accompanied by a report on the business and economic analyses used by the Company to arrive at such recommendation, including but not limited to, a reasonably detailed description of the risks and benefits of the recommended decision and the anticipated impact of the recommended decision on the Speedway and SuperAmerica brand images and business models.

(iii) Following receipt of any formal recommendation with respect to any Critical Decision, each Member may request, and the Company shall promptly provide to both Members, such additional information and analyses (including studies by outside consultants) as such Member may reasonably request; provided, however, any additional information request shall not extend the Critical Decision Termination Date.

(c) If any Primary Critical Decision shall not have been agreed by the Board of Managers pursuant to a vote in accordance with Section 8.07(b) prior to the first anniversary of the Closing Date, the Critical Decision Termination Date with respect to such Primary Critical Decision shall be automatically, and without any further action required by either Member, the Company or the Board of Managers, extended until the fifteen-month anniversary of the Closing Date. During the period of such extension, the Company shall provide promptly to each Member such additional information or analyses (including studies by outside consultants) as either Member shall reasonably request. Not later than 30 days prior to the fifteen-month anniversary of the Closing Date, the Company shall, if requested by either Member, again make a formal recommendation to the Board of Managers with respect to such Primary Critical Decision. Such formal recommendation shall include a report on the supporting business and economic analyses described in Section 8.19(b)(ii). Any request for additional information shall not extend the Critical Decision Termination Date.

(d) Until such time as the implementation of any Critical Decision shall have been completed in all material respects, the President of the Company shall report to the Board of Managers at each regular meeting of the Board of Managers on the implementation of such Critical Decision and on any material modifications or changes to such Critical Decision.

(e) To the extent there is any conflict between the terms and provisions of this Agreement and the terms and provisions of the Retail Integration Protocol, the terms and provisions of this Agreement shall control.

ARTICLE IX

Officers

SECTION 9.01. (a) Election, Appointment and Term of Office. The executive officers of the Company (the “Executive Officers”) shall consist solely of: a President; an Executive Vice President; an officer principally in charge of refining; an officer principally in charge of wholesale and branded marketing; the officer or officers (two initially) principally in charge of retail marketing; an officer principally in charge of supply and transportation; an officer who shall be the Senior Vice President-Finance and Commercial Services of the Company; and an officer who shall be the general counsel of the Company; provided, however, that Marathon and Ashland may make additions or deletions to the positions which shall be considered executive officers of the Company by mutual agreement. Schedule C sets forth a list of (i) the persons who Marathon and Ashland have chosen to serve initially as the Executive Officers of the Company, (ii) the executive office for which each such person is to serve and (iii) whether each such person was designated by Marathon or Ashland. Marathon and Ashland agree that the composition of the initial Executive Officers is intended to reflect their respective Percentage Interests in the Company. Accordingly, if any person identified on Schedule C is for any reason unable or unwilling to serve as an Executive Officer at the Closing Date, the Member who designated such person shall have the right to designate a substitute person, subject to the right of the other Member to consent to such substitute nominee (which consent

shall not be unreasonably withheld). Marathon and Ashland shall cause their respective Representatives to promptly approve the appointment of each person listed on Schedule C to the related executive office position listed on Schedule C.

(b) Except as otherwise determined by the Board of Managers, each Executive Officer shall hold office until his or her death or until his or her earlier resignation or removal in the manner hereinafter provided. Except as otherwise expressly provided herein, the Executive Officers shall have such powers and duties in the management of the Company as generally pertain to their respective offices as if the Company were a corporation governed by the General Corporation Law of the State of Delaware.

(c) The Board of Managers may elect or appoint such other officers to assist and report to the Executive Officers as it deems necessary. Subject to the preceding sentence, each such officer shall have such authority and shall perform such duties as may be provided herein or as the Board of Managers may prescribe. The Board of Managers may delegate to any Executive Officer the power to choose such other officers and to prescribe their respective duties and powers.

(d) Except as otherwise determined by the Board of Managers, if additional officers are elected or appointed during the year pursuant to Section 9.01(c), each such officer shall hold office until his or her death or until his or her earlier resignation or removal in the manner hereinafter provided.

SECTION 9.02. Resignation, Removal and Vacancies. (a) Any officer may resign at any time by giving written notice to the President or the Secretary of the Company, and such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, when accepted by action of the Board of Managers. Except as aforesaid, the acceptance of such resignation shall not be necessary to make it effective.

(b) All officers and agents elected or appointed by the Board of Managers shall be subject to removal at any time by the Board of Managers with or without cause.

(c) Vacancies in all Executive Officer positions may only be filled by the majority vote of the Representatives on the Board of Managers. In each instance where a vacant Executive Officer position is to be filled, Marathon, after consultation with the Company, shall first send Ashland a notice which discloses the name and details of the candidate for the vacant Executive Officer position that the Representatives of Marathon will nominate and vote in favor of for such position. Ashland shall thereafter have the right, by notice to the Company and Marathon within ten days after receipt of such notice from Marathon, to veto such candidate. Each candidate that Marathon proposes for a vacant Executive Officer position shall be a bona fide candidate who is willing and able to serve and who Marathon in good faith believes is qualified to fill such vacant Executive Officer position (a “Qualified Candidate”). In the event Ashland exercises its veto with respect to a Qualified Candidate, the vacancy will be filled by the majority vote of the Representatives on the Board of Managers.

SECTION 9.03. Duties and Functions of Executive Officers. (a) President. The President of the Company, who shall be a non-voting member of the Board of Managers, shall be in charge of the day-to-day operations of the Company and shall preside at all meetings of the Board of Managers and shall perform such other duties and exercise such powers, as may from time to time be prescribed by the Board of Managers.

(b) Executive Vice President. The Executive Vice President of the Company initially shall report to the President and be the officer principally in charge of all supply, refining, marketing and transportation operations of the Company other than the Company’s retail operations.

(c) Other Executive Officers. The Executive Officers of the Company other than the President and the Executive Vice President shall perform such duties and exercise such powers, as may from time to time be prescribed by the President or the Board of Managers.

ARTICLE X

Transfers of Membership Interests

SECTION 10.01. Restrictions on Transfers. (a) General. Except as expressly provided by this Article X, neither Member shall Transfer all or any part of its Membership Interests to any person without first obtaining the written approval of the other Member, which approval may be granted or withheld in its sole discretion. Notwithstanding anything to the contrary contained in this Agreement, no Transfer by a Member of its Membership Interests to any person shall be made except to a permitted assignee under Article XV of the Put/Call, Registration Rights and Standstill Agreement.

(b) Transfer by Operation of Law. In the event a Member shall be party to a merger, consolidation or similar business combination transaction with a third party or sell all or substantially all its assets to a third party, such Member may Transfer all (but not part) of its Membership Interests to such third party; provided, however, that such Member shall not be permitted to Transfer its Membership Interests to such third party as aforesaid if the purpose or intent of such merger, consolidation, similar business combination transaction or sale is to circumvent or avoid the application of Sections 10.01(c) and 10.04 to the Transfer of such Member’s Membership Interests to such third party.

(c) Transfer by Sale to Third Party. At any time after December 31, 2002, a Member may sell all (but not part) of its Membership Interests (and, in the case of Ashland, the Ashland LOOP/LOCAP Interest) to any person (other than a Transfer by operation of law pursuant to Section 10.01(b), a Transfer to a Wholly Owned Subsidiary pursuant to Section 10.01(d) or a Transfer by Ashland to Marathon pursuant to Section 10.01(e)) if (i) it shall first have offered the other Member the opportunity to purchase such Membership Interests (and, in the case of Ashland, the Ashland LOOP/LOCAP Interest) pursuant to the right of first refusal procedures set forth in Section 10.04, (ii) such sale is completed within the time periods specified in Section 10.04, (iii) the other Member shall have approved the purchaser of such Membership Interests (and, in the case of Ashland, the Ashland LOOP/LOCAP Interest), which approval shall not be unreasonably withheld or delayed and (iv) it shall use its commercially reasonable best efforts to (A) terminate the outstanding Original Lease underlying each of its Designated Sublease Agreements on or prior to the date of such Transfer and (B) contribute the related Subleased Property to the Company or one of its subsidiaries at no cost to the Company or such subsidiary on or prior to the date of such Transfer; provided, however, that (i) such Member shall not be obligated to pay more than a reasonable amount as consideration therefor to, or make more than a reasonable financial accommodation in favor of, or commence litigation against, a third party lessor with respect to any such underlying Original Lease in order to obtain any consent required from such lessor and (ii) any additional cost associated with exercising an option under the Original Lease to purchase Subleased Property or to terminate the Original Lease shall be deemed not to constitute an obligation to pay more than a reasonable amount. In the event that such Member is unable to terminate an outstanding Original Lease in accordance with this Section 10.02(b), then (i) the Company shall be entitled to continue to sublease the Subleased Property pursuant to the related Designated Sublease Agreement until the term of the Original Lease expires, (ii) the Member shall continue to use its commercially reasonable best efforts to terminate the Original Lease and contribute the Subleased Property to the Company as provided above; provided, however that (A) such Member shall not be obligated to pay more than a reasonable amount as consideration therefor to, or make more than a reasonable financial accommodation in favor of, or commence litigation against, a third party lessor with respect to any such Original Lease in order to obtain any consent required from such lessor and (b) any additional cost associated with exercising an option under the Original Lease to purchase Subleased Property or to terminate the Original Lease shall be deemed not to constitute an obligation to pay more than a reasonable amount and (iii) if such Member subsequently acquires fee title to the Subleased Property, such Member shall contribute such Subleased Property to the Company or one of its subsidiaries at no cost to the Company or such subsidiary at such time. It is expressly understood and agreed that, in determining whether to reasonably withhold its approval of a proposed purchaser of Marathon’s Membership Interests pursuant to this Section 10.01(c), Ashland shall be entitled to consider the creditworthiness of such proposed purchaser, including whether such proposed purchaser is likely to be able to perform all of Marathon’s and USX’s respective obligations under the Put/Call, Registration Rights and Standstill Agreement.

(d) Transfer to Wholly Owned Subsidiary. A Member may Transfer all (but not part) of its Membership Interests at any time to a Wholly Owned Subsidiary of such Member if (i) such Member shall have received an opinion from nationally recognized tax counsel acceptable to both Members that such Transfer will not result in a termination of the status of the Company as a partnership for Federal income tax purposes and (ii) the transferring Member enters into an agreement with the other Member providing that so long as such Wholly Owned Subsidiary holds such

transferring Member’s Membership Interests, such Wholly Owned Subsidiary shall remain a Wholly Owned Subsidiary of such transferring Member.

(e) Transfer Pursuant to Put/Call, Registration Rights and Standstill Agreement. Ashland may Transfer all of its Membership Interests to Marathon in connection with the exercise by Marathon of its Marathon Call Right or its Special Termination Right or the exercise by Ashland of its Ashland Put Right. In addition, Marathon may Transfer all of its Membership Interests to Ashland in connection with the exercise by Ashland of its Special Termination Right.

(f) Consequences of Permitted Transfers. (i) In connection with any Transfer by a Member to a third party transferee pursuant to Section 10.01(b), (A) such third party transferee shall at the time of such Transfer become subject to all of such transferring Member’s obligations hereunder and shall succeed to all of such transferring Member’s rights hereunder and (B) such transferring Member shall be relieved of all of its obligations hereunder other than with respect to any default hereunder by such transferring Member or any of its Affiliates hereunder that occurred prior to the time of such Transfer.

(ii) In connection with any Transfer by a Member to a third party transferee or to the other Member pursuant to Section 10.01(c), (A) such third party transferee or such other Member shall at the time of such Transfer become subject to all of such transferring Member’s obligations hereunder and shall succeed to all of such transferring Member’s rights hereunder and (B) such transferring Member shall at the time of such Transfer be relieved of all of its obligations hereunder other than with respect to any default hereunder by such transferring Member or any of its Affiliates that occurred prior to the time of such Transfer.

(iii) In connection with any Transfer by a Member to a Wholly Owned Subsidiary of such Member pursuant to Section 10.01(d), (A) such Wholly Owned Subsidiary shall at the time of such Transfer become subject to all of such Member’s obligations hereunder and shall succeed to all of such Member’s rights hereunder and (B) such Member shall not be relieved of its obligations hereunder without the prior written consent of the other Member, which consent shall not be unreasonably withheld or delayed.

(iv) In connection with any Transfer by Ashland to Marathon pursuant to Section 10.01(e), (A) Marathon shall at the time of such Transfer become subject to all of Ashland’s obligations hereunder and shall succeed to all of Ashland’s rights hereunder and (B) Ashland shall at the time of such Transfer be relieved of all of its obligations hereunder other than with respect to any default hereunder by Ashland or any of its Affiliates that occurred prior to the Exercise Date (as such term is defined in the Put/Call, Registration Rights and Standstill Agreement).

(v) In connection with any Transfer by Marathon to Ashland pursuant to Section 10.01(e), (A) Ashland shall at the time of such Transfer become subject to all of Marathon’s obligations hereunder and shall succeed to all of Marathon’s rights hereunder and (B) Marathon shall at the time of such Transfer be relieved of all of its obligations hereunder other than with respect to any default hereunder by Marathon or any of its Affiliates that occurred prior to the Special Termination Exercise Date (as such term is defined in the Put/Call, Registration Rights and Standstill Agreement).

(vi) In connection with any Transfer by Ashland to a third party transferee pursuant to Section 10.01(b), 10.01(c) or 10.01(d), such third party transferee shall at the time of such Transfer succeed to all of Ashland’s veto rights under Section 9.02(c); provided, that if Ashland Transfers its Membership Interests to a third party transferee pursuant to Section 10.01(c), such third party transferee shall not thereafter be permitted to transfer its veto rights under Section 9.02(c) to another third party transferee pursuant to Section 10.01(c).

(vii) In connection with any Transfer by a Member to a third party transferee pursuant to this Article X, such transferring Member shall retain all of the rights granted to a Member under Article VII to examine the books and records of the Company and to receive financial statements and reports prepared by the Company until such time following such Transfer as such transferring Member ceases to have any liability under Article IX of the Asset Transfer and Contribution Agreement.

(g) Consequences of an Unpermitted Transfer. Any Transfer of a Member’s Membership Interests made in violation of the applicable provisions of this Agreement shall be void and without legal effect.

SECTION 10.02. Conditions for Admission. No transferee of all of the Membership Interests of any Member shall be admitted as a Member hereunder unless (a) such Membership Interests are Transferred to a person in compliance with the applicable provisions of this Agreement, (b) such transferee shall have executed and delivered to the Company such instruments as the Board of Managers deems necessary or desirable in its reasonable discretion to effectuate the admission of such transferee as a Member and to confirm the agreement of such transferee or recipient to be bound by all the terms and provisions of this Agreement with respect to the Membership Interests acquired by such transferee and (c) such transferee shall have executed and delivered an assignment and assumption agreement pursuant to Section 15.04 of the Put/Call, Registration Rights and Standstill Agreement.

SECTION 10.03. Allocations and Distributions. Subject to applicable Treasury Regulations, upon the Transfer of all the Membership Interests of a Member as herein provided, the Profit or Loss of the Company attributable to the Membership Interests so transferred for the Fiscal Year during which such Transfer occurs shall be allocated between the transferor and transferee as of the date set forth on the written assignment, and such allocation shall be based upon any permissible method agreed to by the Members that is provided for in Code Section 706 and the Treasury Regulations issued thereunder. Except as otherwise expressly provided in Section 5.01 of the Put/Call, Registration Rights and Standstill Agreement, distributions shall be made to the holder of record of the Membership Interests on the date of distribution.

SECTION 10.04. Right of First Refusal. (a) If a Member (the “Selling Member”) shall desire to sell all (but not part) of its Membership Interests (which, for purposes of this Section 10.04, shall be deemed to include, in the case of Ashland, the Ashland LOOP/LOCAP Interest) pursuant to Section 10.01(c), then the Selling Member shall give notice (the “Offer Notice”) to the other Member, identifying the proposed purchaser from whom it has received a bona fide offer and setting forth the proposed sale price (which shall be payable only in cash or purchase money obligations secured solely by the Membership Interests being sold) and the other material terms and conditions upon which the Selling Member is proposing to sell such Membership Interests to such proposed purchaser. No such sale shall encompass or be conditioned upon the sale or purchase of any property other than such Membership Interests (other than, in the case of Ashland, the Ashland LOOP/LOCAP Interest). The other Member shall have 30 days from receipt of the Offer Notice to elect, by notice to the Selling Member, to purchase the Membership Interests offered for sale on the terms and conditions set forth in the Offer Notice.

(b) If a Member makes such election, the notice of election shall state a closing date not later than 60 days after the date of the Offer Notice. If such Member breaches its obligation to purchase the Membership Interests of the Selling Member on the same terms and conditions as those contained in the Offer Notice after giving notice of its election to make such purchase (other than where such breach is due to circumstances beyond such Member’s reasonable control), then, in addition to all other remedies available, the Selling Member may, at any time for a period of 270 days after such default, sell such Membership Interests to any person at any price and upon any other terms without further compliance with the procedures set forth in Section 10.04.

(c) If the other Member gives notice within the 30-day period following the Offer Notice from the Selling Member that it elects not to purchase the Membership Interests, the Selling Member may, within 120 days after the end of such 30-day period (or 270 days in the case where such parties have received a second request under HSR), sell such Membership Interests to the identified purchaser (subject to clause (iii) of Section 10.01(c)) on terms and conditions no less favorable to the Selling Member than the terms and conditions set forth in such Offer Notice. In the event the Selling Member shall desire to offer the Membership Interests for sale on terms and conditions less favorable to it than those previously set forth in an Offer Notice, the procedures set forth in this Section 10.04 must again be initiated and applied with respect to the terms and conditions as modified.

SECTION 10.05. Restriction on Resignation or Withdrawal. Except in connection with a Transfer permitted pursuant to Section 10.01, neither Member shall resign or withdraw from the Company without the consent of the other Member. Any purported resignation or withdrawal from the Company in violation of this Section 10.05 shall be null and void and of no force or effect.

ARTICLE XI

Liability, Exculpation and Indemnification

SECTION 11.01. Liability. Except as otherwise provided by the Delaware Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Covered Person shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Covered Person.

SECTION 11.02. Exculpation. (a) No Covered Person shall be liable to the Company or any other Covered Person for any cost, expense, loss, damage, claim or liability incurred by reason of any act or omission performed or omitted by such Covered Person in such capacity, whether or not such person continues to be a Covered Person at the time of such cost, expense, loss, damage, claim or liability is incurred or imposed, if the Covered Person acted in good faith and in a manner the Covered Person reasonably believed to be in or not opposed to the best interests of the Company, and if, with respect to any criminal action or proceeding, such Covered Person had no reasonable cause to believe its conduct was unlawful, except that a Covered Person shall be liable for any such cost, expense, loss, damage, claim or liability incurred by reason of such Covered Person’s breach of Section 12.02.

(b) A Covered Person shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by any person as to any matters the Covered Person reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which distributions to Members might properly be paid.

SECTION 11.03. Indemnification. (a) To the fullest extent permitted by Applicable Law, a Covered Person shall be entitled to indemnification from the Company for any reasonable cost and expense, loss, damage, claim or liability incurred by such Covered Person in connection with any pending, threatened or completed claim, action, suit or proceeding by reason of being a Covered Person or by reason of any act or omission performed or omitted by such Covered Person in such capacity, whether or not such person continues to be a Covered Person at the time such cost, expense, loss, damage, claim or liability is incurred or imposed, if the Covered Person (i) has been successful on the merits or otherwise with respect to such claim, action, suit or proceeding, or (ii) acted in good faith and in a manner the Covered Person reasonably believed to be in or not opposed to the best interests of the Company, and if, with respect to any criminal action or proceeding, such Covered Person had no reasonable cause to believe its conduct was unlawful, except that no Covered Person shall be entitled to be indemnified in respect of any such cost, expense, loss, damage, claim or liability incurred by such Covered Person by reason of such Covered Person’s breach of Section 12.02 with respect to such acts or omissions; provided, however, that any indemnity under this Section 11.03 shall be provided out of and to the extent of Company assets only, and no Covered Person shall have any personal liability on account of such indemnification of any other Covered Person, and provided further that, in the case of officers, employees and agents of the Company, such right to indemnification shall be subject to any further limitations or requirements that may be adopted by the Board of Managers, provided such limitations or requirements were adopted prior to the events that gave rise to the claim for indemnification.

(b) Expenses incurred with respect to any claim, action, suit or proceeding of the character described in Section 11.03(a) shall be advanced to a Covered Person by the Company prior to the final disposition thereof, but the Covered Person shall be obligated to repay such advances if it is ultimately determined that the Covered Person is not entitled to indemnification under Section 11.03(a). As a condition to advancing expenses hereunder, the Company may require the Covered Person to sign a written instrument acknowledging his obligation to repay any advances hereunder if it is ultimately determined he is not entitled to such indemnity.

(c) Notwithstanding anything in this Section 11.03 to the contrary, no Covered Person shall be indemnified in respect of any claim, action, suit or proceeding initiated by such Covered Person or his personal or legal representative, or which involved the voluntary solicitation or intervention of such person or his personal or legal representative (other than an action to enforce indemnification rights hereunder or any action initiated with the approval of a majority of the Board of Managers).

(d) The rights of indemnification provided in this Section 11.03 shall be in addition to any other rights to which any Covered Person may otherwise be entitled to by contract or otherwise; and in the event of any Covered Person’s death, such rights shall extend to such Covered Person’s heirs and personal representatives.

ARTICLE XII

Fiduciary Duties

SECTION 12.01. Duties and Liabilities of Covered Persons. To the extent that, at law or in equity, a Covered Person has duties (including fiduciary duties) and liabilities relating thereto to the Company or to any other Covered Person, a Covered Person acting under this Agreement shall not be liable to the Company or to any other Covered Person for its good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they expand or restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the parties hereto to replace such other duties and liabilities of such Covered Person.

SECTION 12.02. Fiduciary Duties of Members of the Company and Members of the Board of Managers. Each Member and each member of the Board of Managers shall have the fiduciary duties of loyalty and care (similar to the fiduciary duties of loyalty and care of directors of a business corporation governed by the General Corporation Law of the State of Delaware) to the Company and all of the Members. Notwithstanding any provision of this Agreement to the contrary, each Member and each member of the Board of Managers agrees to and shall exercise good faith, fairness and loyalty to the Company and to all of the Members, and shall make all decisions in a manner that such Member or such member of the Board of Managers reasonably believes to be in the best interest of the Company and all of the Members. Notwithstanding the foregoing, this Section 12.02 is not intended to limit a Member’s ability to exercise or enforce any of its rights and remedies under this Agreement and the other Transaction Documents in good faith, including, without limitation, Article IX of the Asset Transfer and Contribution Agreement.

ARTICLE XIII

Dispute Resolution Procedures

SECTION 13.01. General. All controversies, claims or disputes between the Members or between the Company and either Member that arise out of or relate to this Agreement or the construction, interpretation, performance, breach, termination, enforceability or validity of this Agreement, or the commercial, economic or other relationship of the parties hereto, whether such claim is based on rights, privileges or interests recognized by or based upon statute, contract, tort, common law or otherwise and whether such claim existed prior to or arises on or after January 1, 1998 (a “Dispute”) shall be resolved in accordance with the provisions of this Article XIII (except as otherwise expressly provided in Sections 6.06 and 6.08). Notwithstanding anything to the contrary contained in this Article XIII, nothing in this Article XIII shall limit the ability of the directors and officers of either Member from communicating directly with the directors and officers of the other Member.

SECTION 13.02. Dispute Notice and Response. Either Member may give the other Member written notice (a “Dispute Notice”) of any Dispute which has not been resolved in the normal course of business. Within fifteen Business Days after delivery of the Dispute Notice, the receiving Member shall submit to the other Member a written response (the “Response”). The Dispute Notice and the Response shall each include (i) a statement setting forth the position of the Member giving such notice, a summary of the arguments supporting such position and, if applicable, the relief sought and (ii) the name and title of a senior manager of such Member who has authority to settle the Dispute and will be responsible for the negotiations related to the settlement of the Dispute (the “Senior Manager”).

SECTION 13.03. Negotiation Between Senior Managers. (a) Within 10 days after delivery of the Response provided for in Section 13.02, the Senior Managers of both Members shall meet or communicate by telephone at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, and shall negotiate in good faith to attempt to resolve the Dispute that is the subject of such Dispute Notice. If such Dispute has not been resolved within 45 days after delivery of the Dispute Notice, then the Members shall attempt to settle the Dispute pursuant to Section 13.04.

(b) All negotiations between the Senior Managers pursuant to this Section 13.03 shall be treated as compromise and settlement negotiations. Nothing said or disclosed, nor any document produced, in the course of such negotiations

which is not otherwise independently discoverable shall be offered or received as evidence or used for impeachment or for any other purpose in any current or future arbitration or litigation.

SECTION 13.04. Negotiation Between Chief Executive Officer and President. (a) If the Dispute has not been resolved by negotiation between the Senior Managers pursuant to Section 13.03, then within 10 Business Days after the expiration of the 45 day period provided in Section 13.03, the Chief Executive Officer of Ashland and the President of Marathon shall meet or communicate by telephone at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, and shall negotiate in good faith to attempt to resolve the Dispute that is the subject of such Dispute Notice. If such Dispute has not been resolved within 20 Business Days after the expiration of the 45 day period provided in Section 13.03, then (i) if the Dispute relates solely to (A) a claim by a Member or the Board of Managers that the other Member has failed to pay the Company a Designated Sublease Amount or an amount in respect of a Member-Funded Capital Expenditure, a Member-Funded Indemnity Expenditure or an Agreed Additional Capital Contribution required to be made by it pursuant to Section 4.02 (a “Disputed Capital Contribution Amount”), (B) the determination of any of the following amounts with respect to any period: distributions pursuant to Article V; the Aggregate Tax Rate; Adjusted DD&A; Adjusted EBITDA; EBITDA; Distributable Cash; the Average Annual Level and adjustments to Adjustable Amounts; the Normal Annual Capital Budget Amount; Ordinary Course Lease Expenses; Profit and Loss; the Tax Distribution Amount; the Tax Liability of any Member; and the determination of fair market value of property distributed in kind under Section 15.03, (C) the resolution of any dispute arising under Section 8.11(b) with respect to Affiliate Transactions or (D) the resolution of any dispute arising under Section 8.12 with respect to certain Affiliate Transactions related to Crude Oil Purchases and Shared Services (any Dispute relating to any of the matters set forth in clause (A), (B), (C) or (D) above being referred to herein as an “Arbitratable Dispute”), such Dispute shall be settled pursuant to the arbitration procedures set forth in Appendix B and (ii) if the Dispute does not relate primarily to an Arbitratable Dispute, each party hereto shall be permitted to take such actions at law or in equity as it is otherwise permitted to take or as may be available under Applicable Law.

(b) All negotiations between the Chief Executive Officer of Ashland and the President of Marathon pursuant to this Section 13.04 shall be treated as compromise and settlement negotiations. Nothing said or disclosed, nor any document produced, in the course of such negotiations which is not otherwise independently discoverable shall be offered or received as evidence or used for impeachment or for any other purpose in any current or future arbitration or litigation.

SECTION 13.05. Right to Equitable Relief Preserved. Notwithstanding anything in this Agreement or Appendix B to the contrary, either Member or the Company may at any time seek from any court of the United States located in the State of Delaware or from any Delaware state court, any interim, provisional or injunctive relief that may be necessary to protect the rights or property of such party or maintain the status quo before, during or after the pendency of the negotiation process or the arbitration proceeding or any other proceeding contemplated by Section 13.03 or 13.04.

ARTICLE XIV

Rights and Remedies with Respect to Monetary Disputes

SECTION 14.01. Ability of Company to Borrow to Fund Disputed Monetary Amounts. (a) If the Company or a Member on behalf of the Company (a “Non-Delinquent Member”) claims that the other Member (a “Delinquent Member”) owes the Company a monetary amount in respect of either (i) a Disputed Capital Contribution Amount or (ii) an indemnification obligation under Article IX of the Asset Transfer and Contribution Agreement that the Company or the Non-Delinquent Member claims the Delinquent Member owes the Company and is either (A) past due or (B) in dispute (a “Disputed Indemnification Amount”) (each such claim described in clauses (i) and (ii) above being a “Monetary Dispute”, and each such claimed amount being a “Disputed Monetary Amount”), and if (1) the Disputed Monetary Amount itself, or when added together all other Disputed Monetary Amounts, exceeds $7.5 million; (2) the Board of Managers (by vote of a majority of the Representatives of the Non-Delinquent Member at a special or regular meeting of the Board of Managers (which majority shall constitute a quorum for purposes of the transaction of such business)) has determined that an out-of-pocket disbursement of such Disputed Monetary Amount or any portion thereof by the Company or one of its subsidiaries within the next twelve months is reasonably necessary for the operation and conduct of the Company’s Business and, accordingly, that such amount

should be paid within the next twelve months; (3) the aggregate amount of all Disputed Monetary Amounts (or portions thereof) that the Board of Managers shall have determined pursuant to clause (2) above should be paid within the next twelve months (such aggregate amount being the “Additional Required Cash Amount”) exceeds $7.5 million; (4) postponement by the Company or such subsidiary of such disbursement until such time as the Monetary Dispute is reasonably likely to be finally resolved pursuant to an arbitration proceeding in accordance with Appendix B to this Agreement or Appendix B to the Asset Transfer and Contribution Agreement, as applicable (an “Arbitration Proceeding”), would have, or would reasonably be expected to have, a Material Adverse Effect on the Company’s Business; and (5) the Delinquent Member has not paid the Company the Disputed Monetary Amount pursuant to Section 14.02 or otherwise, then the Board of Managers (by vote of a majority of the Representatives of the Non-Delinquent Member at a special or regular meeting of the Board of Managers (which majority shall constitute a quorum for purposes of the transaction of such business)) shall be permitted to cause the Company to incur an amount of Indebtedness equal to such Additional Required Cash Amount, which Indebtedness may be borrowed from a third party or the Non-Delinquent Member.

(b) If the Non-Delinquent Member lends the Company the Additional Required Cash Amount pursuant to Section 14.01(a), then (i) the amount actually lent by the Non-Delinquent Member (the “Advanced Amount”) and all accrued interest thereon shall be due and payable on the Arbitration Payment Due Date (provided that the Company shall be permitted to prepay the Advanced Amount in whole or in part at any time prior to such date); and (ii) the Advanced Amount shall bear interest at the Base Rate from the date on which such advance is made until the date that the Advanced Amount, together with all interest accrued thereon, is repaid to the Non-Delinquent Member.

SECTION 14.02. Interim Payment of Disputed Monetary Amount. In order to reduce the amount of liquidated damages that a Delinquent Member would be required to pay to the Company pursuant to Section 14.03 in the event that such Delinquent Member loses in an Arbitration Proceeding with respect to a Monetary Dispute, the Delinquent Member shall be permitted to pay the Company the related Disputed Monetary Amount prior to the commencement of such Arbitration Proceeding. The Arbitration Tribunal or Sole Arbitrator, as applicable, shall not take into consideration in determining the liability of the Delinquent Member, a decision by such Delinquent Member to pay the Disputed Monetary Amount prior to the commencement of the Arbitration Proceeding.

SECTION 14.03. Liquidated Damages. (a) No Interim Payment of Disputed Monetary Amount—Delinquent Member is Found Liable for Final Monetary Amount. If (i) it is finally determined in an Arbitration Proceeding that a Delinquent Member owes the Company a monetary amount in respect of (A) a Disputed Capital Contribution Amount or (B) a Disputed Indemnification Amount (each such finally determined amount being a “Final Monetary Amount”) and (ii) the Delinquent Member had not paid the Company the Disputed Monetary Amount prior to the commencement of such Arbitration Proceeding pursuant to Section 14.02, then the Delinquent Member shall promptly, and in any event on or before the tenth Business Day following the date on which the Arbitration Tribunal or Sole Arbitrator makes its final determination (such tenth Business Day being the “Arbitration Payment Due Date”), pay to the Company (A) the Final Monetary Amount, together with interest, accrued from the commencement of the Arbitration Proceeding to the date that the Delinquent Member pays the Final Monetary Amount to the Company, on the Final Monetary Amount, at a rate per annum equal to (1) during the period from the commencement of the Arbitration Proceeding to the Arbitration Payment Due Date, the Prime Rate and (2) at any time thereafter, 150% of the Prime Rate, in each case, with daily accrual of interest, plus (B) an amount equal to 25% of the Final Monetary Amount.

(b) Interim Payment of Disputed Monetary Amount— Delinquent Member is Found Liable for the Same Amount. If (i) it is finally determined in an Arbitration Proceeding that a Delinquent Member owes the Company a Final Monetary Amount, (ii) the Final Monetary Amount is equal to the Disputed Monetary Amount and (iii) the Delinquent Member had paid the Company the Disputed Monetary Amount prior to the commencement of such Arbitration Proceeding pursuant to Section 14.02, then if the Final Monetary Amount is equal to the Disputed Monetary Amount, the Delinquent Member shall not owe the Company any other amount in respect of the Monetary Dispute.

(c) Interim Payment of Disputed Monetary Amount— Delinquent Member is Found Liable for a Greater Amount. If (i) it is finally determined in an Arbitration Proceeding that a Delinquent Member owes the Company a Final Monetary Amount, (ii) the Final Monetary Amount is greater than the Disputed Monetary Amount and (iii) the Delinquent Member had paid the Company the Disputed Monetary Amount prior to the commencement of such

Arbitration Proceeding pursuant to Section 14.02, then the Delinquent Member shall promptly, and in any event on or before the Arbitration Payment Due Date, pay to the Company an amount (an “Additional Monetary Amount”) equal to (A) the Final Monetary Amount less (B) the Disputed Monetary Amount, together with interest, accrued from the commencement of the Arbitration Proceeding to the date that the Delinquent Member pays the Additional Monetary Amount to the Company, on the Additional Monetary Amount, at a rate per annum equal to (1) during for the period from the commencement of the Arbitration Proceeding to the Arbitration Payment Due Date, the Prime Rate and (2) at any time thereafter, 150% of the Prime Rate, in each case, with daily accrual of interest.

(d) Interim Payment of Disputed Monetary Amount— Delinquent Member is Found Liable for a Lesser Amount. If (i) it is finally determined in an Arbitration Proceeding that a Delinquent Member owes the Company a Final Monetary Amount, (ii) the Final Monetary Amount is less than the Disputed Monetary Amount and (iii) the Delinquent Member had paid the Company the Disputed Monetary Amount prior to the commencement of such Arbitration Proceeding, then the Company shall promptly, and in any event on or before the Arbitration Payment Due Date, repay to the Delinquent Member an amount (a “Refundable Amount”) equal to (A) the Disputed Monetary Amount less (B) the Final Monetary Amount, together with interest, accrued from the commencement of the Arbitration Proceeding to the date that the Company repays the Refundable Amount to the Delinquent Member, on the Refundable Amount, at a rate per annum equal to (1) during the period from the commencement of the Arbitration Proceeding to the Arbitration Payment Due Date, the Prime Rate and (2) at any time thereafter, 150% of the Prime Rate, in each case, with daily accrual of interest.

(e) Interim Payment of Disputed Monetary Amount— Delinquent Member is Found Not Liable for Disputed Monetary Amount. If (i) it is finally determined in an Arbitration Proceeding that a Delinquent Member does not owe the Company the related Disputed Monetary Amount and (ii) the Delinquent Member had paid the Company the Disputed Monetary Amount prior to the commencement of such Arbitration Proceeding, then the Company shall promptly, and in any event on or before the Arbitration Payment Due Date, repay to the Delinquent Member an amount equal to the Disputed Monetary Amount, together with interest, accrued from the commencement of the Arbitration Proceeding to the date that the Company repays the Disputed Monetary Amount to the Delinquent Member, on the Disputed Monetary Amount, at a rate per annum equal to (A) during the period from the commencement of the Arbitration Proceeding to the Arbitration Payment Due Date, the Prime Rate and (B) at any time thereafter, 150% of the Prime Rate, in each case, with daily accrual of interest.

SECTION 14.04. Right of Set-Off. Notwithstanding any provision to the contrary contained in this Agreement, if at the time of a Distribution Date a Delinquent Member has failed to pay the Company an amount that it was required pursuant to Section 14.03 to pay to the Company on or before such Distribution Date, then on such Distribution Date, the Company shall be permitted to set off from the distribution that it would otherwise be required to make to such Delinquent Member pursuant to Section 5.01 on such Distribution Date, an amount equal to such unpaid amount. If the amount of the distribution that such Delinquent Member was otherwise entitled to receive pursuant to Section 5.01 on such Distribution Date is less than the aggregate amount that such Delinquent Member owes to the Company pursuant to Section 14.03, then the Company shall be permitted to set off from subsequent distributions that it would otherwise make to such Delinquent Member pursuant to Section 5.01 the remaining unpaid amount until such time as such remaining unpaid amount shall have been paid in full. A Delinquent Member’s interest in distributions to be made to such Delinquent Member pursuant to Section 5.01 shall be reduced by any amount set off by the Company against such distributions pursuant to this Section 14.04(a).

SECTION 14.05. Security Interest. (a) Each Member hereby agrees that if (i) it has failed to pay the Company an amount that it was required to pay to the Company pursuant to Section 14.03 on or prior to the related Arbitration Payment Due Date, and (ii) the Board of Managers (by vote of a majority of the Representatives of the other Member at a special or regular meeting of the Board of Managers (which majority shall constitute a quorum for purposes of the transaction of such business) so requests, such Member shall (A) on the Business Day next following such Arbitration Payment Due Date, grant to the Company, as security for the performance of its obligation to pay the Company such amount owed (but for no other amount), a first priority security interest in its Membership Interests and the proceeds thereof (a “Security Interest”), all under the Uniform Commercial Code of the State of Delaware and (ii) promptly thereafter, execute and deliver to the Company all financing statements and other instruments that the Board of Managers (by vote of a majority of the Representatives of the other Member at a special or regular meeting of the Board of Managers (which majority shall constitute a quorum for purposes of the transaction of such business)) may request to effectuate and carry out the preceding provisions of this Section

14.05(a). The Company shall be entitled to all the rights and remedies of a secured party under the Uniform Commercial Code of the State of Delaware with respect to any Security Interest granted by such Member. At the option of the Company, this Agreement or a carbon, photographic, or other copy hereof may serve as a financing statement with respect to any such Security Interest. For purposes of perfecting a Security Interest, a Member’s Membership Interests shall be deemed to be a “security” governed by Chapter 8 of the Delaware Uniform Commercial Code and as such term is therein defined in Section 8-102(c) thereunder.

(b) If the Company incurs Indebtedness pursuant to Section 14.01 by borrowing from a Non-Delinquent Member, the Company shall be permitted to assign all its rights with respect to a Security Interest granted to it pursuant to Section 14.05(a) to such Non-Delinquent Member as security for such Indebtedness; provided that such Non-Delinquent Member shall not be permitted to assign such Security Interest to a third party.

ARTICLE XV

Dissolution and Termination

SECTION 15.01. Dissolution. The Company shall be dissolved and its business and affairs wound up upon the earliest to occur of any one of the following events:

(a) the expiration of the Term of the Company;

(b) the sale or other disposition of all or substantially all the property of the Company;

(c) the written consent of both Members;

(d) the unanimous agreement of all Representatives on the Board of Managers;

(e) the bankruptcy, involuntary liquidation or dissolution of either Member; or

(f) the entry of a decree of judicial dissolution pursuant to Section 18-802 of the Delaware Act.

The bankruptcy, involuntary liquidation of dissolution of a Member shall cause a Member to cease to be a member of the Company. Notwithstanding the foregoing, the Company shall not be dissolved and its business and affairs shall not be wound up upon the occurrence of any event specified in (i) clause (e) above if within 90 days after the date on which such event occurs, the remaining Member elects in writing to continue the business of the Company or (ii) clause (a) above if a Non-Terminating Member purchases the Membership Interests of the Terminating Member pursuant to its Special Termination Right. Except as provided in this paragraph and Section 15.01(e), and to the fullest extent permitted by the Delaware Act, the occurrence of an event that causes a Member to cease to be a member of the Company shall not cause the Company to be dissolved or its business or affairs to be wound up, and upon the occurrence of such an event, the business of the Company shall continue without dissolution.

SECTION 15.02. Winding Up of Company. Upon dissolution, the Company’s business shall be liquidated in an orderly manner. The Board of Managers shall act as the liquidating trustee (unless the Board of Managers elects to appoint a liquidating trustee) to wind up the affairs of the Company pursuant to this Agreement. In performing its duties, the liquidating trustee is authorized to sell, distribute, exchange or otherwise dispose of the assets of the Company in accordance with the Delaware Act and in any reasonable manner that the liquidating trustee shall determine to be in the best interest of the Members or their successors-in-interest.

SECTION 15.03. Distribution of Property. In the event the Board of Managers determines that it is necessary in connection with the liquidation of the Company to make a distribution of property in kind, such property shall be transferred and conveyed to the Members so as to vest in each of them as a tenant in common an undivided interest in the whole of such property equal to their interests in the property based upon the amount of cash that would be distributed to each of the Members in accordance with Article V if such property were sold for an amount of cash equal to the fair market value of such property, as determined and approved by the Board of Managers pursuant to a vote in accordance with Section 8.07(b).

SECTION 15.04. Time Limitation. Any liquidating distribution pursuant to this Article XV shall be made no later than the later of (a) the end of the taxable year during which such liquidation occurs and (b) 90 days after the date of such liquidation.

SECTION 15.05. Termination of Company. The Company shall terminate when all assets of the Company, after payment of or due provision for all debts, liabilities and obligations of the Company, shall have been distributed to the Members in the manner provided for in this Agreement, and the Certificate of Formation shall have been canceled in the manner provided by the Delaware Act.

ARTICLE XVI

Miscellaneous

SECTION 16.01. Notices. Any notice, consent or approval to be given under this Agreement shall be in writing and shall be deemed to have been given if delivered: (i) personally by a reputable courier service that requires a signature upon delivery; (ii) by mailing the same via registered or certified first-class mail, postage prepaid, return receipt requested; or (iii) by telecopying the same with receipt confirmation (followed by a first-class mailing of the same) to the intended recipient. Any such writing will be deemed to have been given: (a) as of the date of personal delivery via courier as described above; (b) as of the third calendar day after depositing the same into the custody of the postal service as evidenced by the date-stamped receipt issued upon deposit of the same into the mails as described above; and (c) as of the date and time electronically transmitted in the case of telecopy delivery as described above, in each case addressed to the intended party at the address set forth below:

To the Board of Managers:

Marathon Ashland Petroleum LLC

539 South Main Street

Findlay, Ohio 45840

Attn: General Counsel

Phone: (419) 422-2121

Fax: (419) 421-4115

To Marathon:

Marathon Oil Company

5555 San Felipe

P.O. Box 3128

Houston, TX 77056-2723

Attn: General Counsel

Phone: (713) 296-4137

Fax: (713) 296-4171

To Ashland:

Ashland Inc.

50 E. RiverCenter Boulevard

P.O. Box 391

Covington, KY 41012-0391

Attn: General Counsel

Phone: (606) 815-4711

Fax: (606) 815-3823

Any party may designate different addresses or telecopy numbers by notice to the other parties.

SECTION 16.02. Merger and Entire Agreement. This Agreement (including the Exhibits, Schedules and Appendices attached hereto), together with the other Transaction Documents (including the exhibits, schedules and appendices thereto) and certain other agreements executed contemporaneously with the Master Formation

Agreement constitutes the entire Agreement of the parties hereto and supersedes any prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof.

SECTION 16.03. Assignment. A party hereto shall not assign all or any of its rights, obligations or benefits under this Agreement to any third party otherwise than (i) in connection with a Transfer of its Membership Interests pursuant to Article X, (ii) with the prior written consent of the other party hereto, which consent may be withheld in such party’s sole discretion, (iii) the granting by a Member of a Security Interest to the Company pursuant to Section 14.05 or (iv) pursuant to Article V of the Put/Call, Registration Rights and Standstill Agreement, and any attempted assignment not in compliance with this Section 16.03 shall be void ab initio.

SECTION 16.04. Parties in Interest. This Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors, legal representatives and permitted assigns.

SECTION 16.05. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

SECTION 16.06. Amendment; Waiver. This Agreement may not be amended except in a written instrument signed by each of the parties hereto and expressly stating it is an amendment to this Agreement. Any failure or delay on the part of any party hereto in exercising any power or right hereunder shall not operate as a waiver thereof, nor shall any single or partial exercise of any such right or power preclude any other or further exercise thereof or the exercise of any other right or power hereunder or otherwise available at law or in equity.

SECTION 16.07. Severability. If any term, provision, covenant, or restriction of this Agreement or the application thereof to any person or circumstance, at any time or to any extent, is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement (or the application of such provision in other jurisdictions or to persons or circumstances other than those to which it was held invalid or unenforceable) shall in no way be affected, impaired or invalidated, and to the extent permitted by Applicable Law, any such term, provision, covenant or restriction shall be restricted in applicability or reformed to the minimum extent required for such to be enforceable. This provision shall be interpreted and enforced to give effect to the original written intent of the parties hereto prior to the determination of such invalidity or unenforceability.

SECTION 16.08. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH SECTION 18-1101 OF THE DELAWARE ACT. ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR PROCEEDING RELATED TO OR ARISING OUT OF THIS AGREEMENT, OR ANY TRANSACTION OR CONDUCT IN CONNECTION HEREWITH, IS WAIVED.

SECTION 16.09. Enforcement. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in the Delaware Chancery Court; provided that if the Delaware Chancery Court does not have jurisdiction with respect to such matter, the parties hereto shall be entitled to enforce specifically the terms and provisions of this Agreement in any court of the United States located in the State of Delaware or in Delaware state court, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit itself to the personal jurisdiction of the Delaware Chancery Court in the event that any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement; provided that if the Delaware Chancery Court does not have jurisdiction with respect to any such dispute, such party consents to submit itself to the personal jurisdiction of any Federal court located in the State of Delaware or any Delaware state court, (ii) agrees to appoint and maintain an agent in the State of Delaware for service of legal process, (iii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (iv) agrees that it will not plead or claim in any such court that any action relating to this Agreement or any of the transactions

contemplated by this Agreement in any such court has been brought in an inconvenient forum and (v) agrees that it will not initiate any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than (1) the Delaware Chancery Court, or (2) if the Delaware Chancery Court does not have jurisdiction with respect to such action, a Federal court sitting in the State of Delaware or a Delaware state court.

SECTION 16.10. Creditors. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditor of the Company or of any Member.

SECTION 16.11. No Bill for Accounting. In no event shall either Member have any right to file a bill for an accounting or any similar proceeding.

SECTION 16.12. Waiver of Partition. Each Member hereby waives any right to partition of the Company property.

SECTION 16.13. Table of Contents, Headings and Titles. The table of contents and section headings of this Agreement and titles given to Exhibits and Schedules to this Agreement are for reference purposes only and are to be given no effect in the construction or interpretation of this Agreement.

SECTION 16.14. Use of Certain Terms; Rules of Construction. As used in this Agreement, the words “herein”, “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular paragraph, subparagraph, section, subsection or other subdivision. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa. Each party hereto agrees that any rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation or construction of this Agreement or any Transaction Document.

SECTION 16.15. Holidays. Notwithstanding any deadline for payment, performance, notice or election under this Agreement, if such deadline falls on a date that is not a Business Day, then the deadline for such payment, performance, notice or election will be extended to the next succeeding Business Day.

SECTION 16.16. Third Parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person and their respective successors, legal representatives and permitted assigns any rights, remedies or basis for reliance upon, under or by reason of this Agreement.

SECTION 16.17. Liability for Affiliates. Except where and to the extent that a contrary intention otherwise appears, where a Member undertakes to cause its Affiliates to take or abstain from taking any action, such undertaking shall mean (i) in the case of any Affiliate that is controlled by such Member, that such Member shall cause such Affiliate to take or abstain from taking such action and (ii) in the case of an Affiliate that controls or is under common control with such Member, that such Member shall use its commercially reasonable best efforts to cause such Affiliates to take or abstain from taking such action; provided, however, that such Member shall not be required to violate, or cause any director of such Affiliate to violate, any fiduciary duty to minority shareholders of such Affiliate.

IN WITNESS WHEREOF, this Agreement has been duly executed by the Members as of the day and year first above written.

MARATHON OIL COMPANY
By:	/s/ Victor G. Beghini
Name:	Victor G. Beghini
Title:	President

ASHLAND INC.
By:	/s/Paul W. Chellgren
Name:	Paul W. Chellgren
Title:	Chairman of the Board of Chief Executive Officer

EX-10.(O)

EXHIBIT 10(o)

PUT/CALL, REGISTRATION RIGHTS

AND

STANDSTILL AGREEMENT

Dated as of January 1, 1998

among

MARATHON OIL COMPANY,

USX CORPORATION,

ASHLAND INC.

and

MARATHON ASHLAND PETROLEUM LLC

TABLE OF CONTENTS

		Page
ARTICLE I
Certain Definitions; Adjustable Amounts; Representations and Warranties
SECTION 1.01.	Definitions	2
SECTION 1.02.	Adjustable Amounts	17
SECTION 1.03.	Representations and Warranties	18
ARTICLE II
Special Termination Right
SECTION 2.01.	Special Termination Right	20
SECTION 2.02.	Special Termination Price	20
SECTION 2.03.	Method of Exercise	21
ARTICLE III
Marathon Call Right
SECTION 3.01.	Marathon Call Right	21
SECTION 3.02.	Marathon Call Price	21
SECTION 3.03.	Method of Exercise	22
SECTION 3.04.	Limitation on Marathon’s Ability To Exercise its Marathon Call Right	22
ARTICLE IV
Ashland Put Right
SECTION 4.01.	Ashland Put Right	22
SECTION 4.02.	Ashland Put Price	23
SECTION 4.03.	Method of Exercise	26
SECTION 4.04.	Ashland Put Price Election Notice	26
SECTION 4.05.	Limitation on Ashland’s Ability To Exercise its Ashland Put Right	27

ARTICLE V
Termination of Certain Distributions; Revocable Proxies
SECTION 5.01.	Termination of Certain Distributions	27
SECTION 5.02.	Revocable Proxies	30
ARTICLE VI
Determination of the Appraised Value of the Company
SECTION 6.01.	Determination of Appraised Value of the Company	31
ARTICLE VII
Determination of the Fair Market Value of Securities
SECTION 7.01.	General	35
SECTION 7.02.	Determination of Fair Market Value of Marathon Debt Securities	35
SECTION 7.03.	Determination of Fair Market Value of Actively Traded Marathon Equity Securities	35
SECTION 7.04.	Determination of Fair Market Value of Non-Actively Traded Marathon Equity Securities	39
ARTICLE VIII
Certain Matters Relating to Securities
SECTION 8.01.	Certain Requirements with Respect to Marathon Debt Securities	42
SECTION 8.02.	Procedures with Respect to the Issuance of Securities	42
SECTION 8.03.	Holding Period	45
SECTION 8.04.	Manner of Sale of Marathon Equity Securities	45
ARTICLE IX
Closing; Conditions to Closing; Consequences of Delay
SECTION 9.01.	Closing	46
SECTION 9.02.	Conditions to Closing	49
SECTION 9.03.	Consequences of a Delayed Closing of the Marathon Call Right or the Ashland Put Right Where Ashland Is at Fault	54

SECTION 9.04.	Consequences of a Delayed Closing of the Marathon Call Right or the Ashland Put Right Where Marathon or USX Is at Fault	55
SECTION 9.05.	Consequences of a Delayed Closing of the Marathon Call Right or the Ashland Put Right Where No Party Is at Fault	57
SECTION 9.06.	Consequences of Delayed Second or Third Scheduled Installment Payment	58
SECTION 9.07.	Consequences of a Delayed Closing of the Special Termination Right Where Terminating Member Is at Fault	58
SECTION 9.08.	Consequences of a Delayed Closing of the Special Termination Right Where Non-Terminating Member Is at Fault	60
SECTION 9.09.	Consequences of Delayed Closing of Special Termination Right Where No Party Is at Fault	62
ARTICLE X
Registration Rights
SECTION 10.01.	Registration upon Request	63
SECTION 10.02.	Covenants of the Issuer	67
SECTION 10.03.	Fees and Expenses	72
SECTION 10.04.	Indemnification and Contribution	73
SECTION 10.05.	Underwriting Agreement; Purchase Agreement	77
SECTION 10.06.	Undertaking To File Reports	78
ARTICLE XI
Covenants
SECTION 11.01.	Cooperation; Commercially Reasonable Best Efforts	78
SECTION 11.02.	Antitrust Notification; FTC or DOJ Investigation	78
SECTION 11.03.	Governmental Filings re: Ashland LOOP/LOCAP Interest	80
SECTION 11.04.	Designated Sublease Agreements	81

ARTICLE XII
Standstill Agreement
SECTION 12.01.	Restrictions of Certain Actions by Marathon and USX	83
SECTION 12.02.	Restrictions of Certain Actions by Ashland	86
ARTICLE XIII
Indemnification
SECTION 13.01.	Indemnification re: Ashland Representatives’ Revocable Proxies and the Ashland LOOP/LOCAP Revocable Proxy	88
SECTION 13.02.	Indemnification re: Marathon Representatives Revocable Proxies	89
SECTION 13.03.	Indemnification re: Transfer of Economic Interests in the Ashland LOOP/LOCAP Interest to Marathon, the Company or a Person Designated by Marathon	89
SECTION 13.04.	Procedures Relating to Indemnification Under This Article XIII	90
ARTICLE XIV
Company Competitive Businesses; Detrimental Activities; Limitations on the Company Entering into Valvoline’s Business
SECTION 14.01.	Competitive Businesses	90
SECTION 14.02.	Detrimental Activities	94
SECTION 14.03.	Limitations on the Company Entering into the Valvoline Business	96
SECTION 14.04.	Purchase Price of Competitive Business Assets	103

ARTICLE XV
Survival; Assignment
SECTION 15.01.	Survival and Assignment re: Marathon and USX	106
SECTION 15.02.	Survival and Assignment re: Ashland	107
SECTION 15.03.	Survival and Assignment re: the Company	109
SECTION 15.04.	Assignment and Assumption Agreements	109
SECTION 15.05.	Consequences of Unpermitted Assignments	110
ARTICLE XVI
Dispute Resolution Procedures
SECTION 16.01.	General	110
SECTION 16.02.	Dispute Notice and Response	110
SECTION 16.03.	Negotiation Between Chief Executive Officers	110
SECTION 16.04.	Right to Equitable Relief Preserved	111
ARTICLE XVII
Miscellaneous
SECTION 17.01.	Notices	111
SECTION 17.02.	Merger and Entire Agreement	113
SECTION 17.03.	Parties in Interest	113
SECTION 17.04.	Counterparts	113
SECTION 17.05.	Amendment; Waiver	113
SECTION 17.06.	Severability	113
SECTION 17.07.	GOVERNING LAW	114
SECTION 17.08.	Enforcement	114
SECTION 17.09.	Table of Contents, Headings and Titles	115
SECTION 17.10.	Use of Certain Terms; Rules of Construction	115
SECTION 17.11.	Holidays	115
SECTION 17.12.	Third Parties	115
SECTION 17.13.	Liability for Affiliates	115
SECTION 17.14.	Schedules	116

APPENDIX A Certain Definitions

SCHEDULE 1.03(c) Conflicts

SCHEDULE 1.03(d) Consents

SCHEDULE 14.01(a) Competitive Businesses PUT/CALL, REGISTRATION RIGHTS AND STANDSTILL AGREEMENT dated as of [January 1], 1998,⁽²⁾ by and among MARATHON OIL COMPANY, an Ohio corporation (“Marathon”), USX CORPORATION, a Delaware corporation (“USX”), ASHLAND INC., a Kentucky corporation (“Ashland”), and MARATHON ASHLAND PETROLEUM LLC, a Delaware limited liability company (the “Company”).

Preliminary Statement

WHEREAS Marathon and Ashland have previously entered into a Master Formation Agreement dated as of December 12, 1997, relating to the formation of the Company, which will own and operate certain of Marathon’s and Ashland’s respective petroleum supply, refining, marketing, and transportation businesses;

WHEREAS Marathon and Ashland have previously entered into an Asset Transfer and Contribution Agreement dated as of December 12, 1997, pursuant to which, among other things, Marathon and Ashland will transfer their respective Businesses (as defined below) to the Company;

WHEREAS Marathon, USX and Ashland have previously entered into a Parent Agreement dated as of December 12, 1997;

WHEREAS Marathon and Ashland have entered into an LLC Agreement dated as of the date hereof in order to establish the rights and responsibilities of each of them with respect to the governance, financing and operation of the Company;

WHEREAS Marathon and Ashland have agreed that under certain circumstances, Ashland will sell to Marathon and Marathon will purchase from Ashland all of Ashland’s Membership Interests and the Ashland LOOP/LOCAP Interest (each as defined below), upon the terms and subject to the conditions set forth herein;

(2) To be dated as of the Closing Date under the Master Formation Agreement.

WHEREAS Marathon and Ashland have agreed that if Marathon or Ashland elects to terminate the Term of the Company pursuant to Section 2.03 of the LLC Agreement, then the non-terminating Member shall have the right to purchase from the terminating Member all of the terminating Member’s Membership Interests, upon the terms and subject to the conditions set forth herein;

WHEREAS Marathon and USX have agreed that Marathon and USX will grant Ashland certain registration rights with respect to any Securities (as defined below) that Marathon or USX issues to Ashland pursuant to this Agreement in connection with the purchase by Marathon of Ashland’s Membership Interests and the Ashland LOOP/LOCAP Interest, upon the terms and subject to the conditions set forth herein;

WHEREAS Marathon and USX have agreed to certain restrictions with respect to actions relating to Ashland Voting Securities (as defined below), upon the terms and subject to the conditions set forth herein;

WHEREAS Ashland has agreed to certain restrictions with respect to actions relating to USX Voting Securities (as defined below), upon the terms and subject to the conditions set forth herein; and

WHEREAS Marathon, USX and Ashland have agreed to certain restrictions with respect to certain of their business activities, upon the terms and subject to the conditions set forth herein.

NOW, THEREFORE, the parties hereto hereby agree as follows:

ARTICLE I

Certain Definitions; Adjustable Amounts;

Representations and Warranties

SECTION 1.01. Definitions. Defined terms used in this Agreement shall have the meanings ascribed to them by definition in this Agreement or in Appendix A. In addition,

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when used herein the following terms have the following meanings:

“Actively Traded Marathon Equity Securities” means Marathon Equity Securities for which there is an active trading market on the National Market System of the NASDAQ or on a National Securities Exchange during the period commencing 30 days prior to the Closing Date or applicable Installment Payment Date and ending on the Closing Date or such Installment Payment Date.

“Adjustable Amount” has the meaning set forth in Section 1.02.

“Adjustable Amounts Notice” has the meaning set forth in Section 1.02.

“Adjustment Year” has the meaning set forth in Section 1.02.

“Agreement” means this Put/Call, Registration Rights, and Standstill Agreement, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Appraised Value Determination Date” has the meaning set forth in Section 6.01(c).

“Appraised Value of the Company” has the meaning set forth in Section 6.01(c).

“Ashland Designated Sublease Agreements” means the Ashland Sublease Agreements attached as Exhibits L-1, L-2, L-3 and L-4 to the Asset Transfer and Contribution Agreement.

“Ashland Exercise Period Distributions” has the meaning set forth in Section 5.01(a)(i).

“Ashland LOOP/LOCAP Interest” means (i) the 4.0% interest in LOOP LLC owned by Ashland on the date hereof pursuant to the limited liability company agreement of LOOP LLC dated as of October 18, 1996, among Ashland, Marathon Pipe Line Company, Murphy Oil Corporation, Shell Oil Company and Texaco Inc. and (ii) the 86.20 shares of common stock of LOCAP, Inc. owned by Ashland, which shares on the date hereof represent an 8.6% interest in LOCAP, Inc.; provided

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that in the event there is a reclassification of the LOOP, LLC membership interests or the common stock of LOCAP, Inc. into one or more different types or classes of securities, the “Ashland LOOP/LOCAP Interest” shall instead include such different types or classes of securities.

“Ashland LOOP/LOCAP Irrevocable Proxy” has the meaning set forth in Section 9.02(e).

“Ashland LOOP/LOCAP Revocable Proxy” has the meaning set forth in Section 5.02(c).

“Ashland Material Adverse Effect” means, for purposes of Section 1.03, either (i) a material adverse effect on the ability of Ashland to perform its obligations under this Agreement or (ii) an effect on the business, operations, assets, liabilities, results of operations, cash flows, condition (financial or otherwise) or prospects of Ashland’s Business which results in a Loss of two million dollars ($2,000,000) or more, or, if such Loss is not susceptible to being measured in monetary terms, is otherwise materially adverse to Ashland’s Business; provided that any such effect relating to or resulting from any change in the price of petroleum or petroleum byproducts, general economic conditions or local, regional, national or international industry conditions (including changes in financial or market conditions) shall be deemed not to constitute an Ashland Material Adverse Effect.

“Ashland Membership Interests” means the initial Membership Interests of Ashland on the date hereof, together with any additional Membership Interests that Ashland may hereafter acquire.

“Ashland Put Exercise Date” has the meaning set forth in Section 4.03.

“Ashland Put Exercise Notice” has the meaning set forth in Section 4.03.

“Ashland Put Price” has the meaning set forth in Section 4.01.

“Ashland Put Price Election Date” has the meaning set forth in Section 4.04(b).

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“Ashland Put Price Election Notice” has the meaning set forth in Section 4.04(a).

“Ashland Put Right” has the meaning set forth in Section 4.01.

“Ashland Representatives Revocable Proxies” has the meaning set forth in Section 5.02(a).

“Ashland Special Termination Right” means the Special Termination Right granted to Ashland pursuant to Section 2.01.

“Ashland Voting Securities” means the securities of Ashland (i) having the power under ordinary circumstances to elect at least a majority of the board of directors of Ashland (whether or not any senior class of stock has voting power by reason of any contingency) or (ii) convertible into or exchangeable for securities of Ashland having the power under ordinary circumstances to elect at least a majority of the board of directors of Ashland (whether or not any senior class of stock has voting power by reason of any contingency).

“Average Annual Level” means for any twelve-month period ending on December 31 of any calendar year, the average of the level of the Price Index ascertained by adding the twelve monthly levels of the Price Index during such twelve-month period and dividing the total by twelve.

“Base Level” has the meaning set forth in the LLC Agreement.

“Base Rate” means a rate of interest closely approximating that of comparable term senior debt securities or debt obligations priced to trade at par issued by USX or issued by Marathon and fully guaranteed by USX, or issued by a firm of comparable credit standing.

“Blackout Period” has the meaning set forth in Section 10.01(b).

“Bulge Bracket Investment Banking Firm” means an investment banking firm that is listed as one of the top 10 investment banking firms for all domestic equity issues in terms of the aggregate dollar amount of such issues (with full credit given to the lead manager) as reported in the

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latest issue of Investment Dealers’ Digest or a publication (or otherwise) of similar national repute which provides rankings of investment banking firms by size of domestic issues.

“Bulk Motor Oil Business” has the meaning set forth in Section 14.03(h).

“Cash” means United States dollars or immediately available funds in United States dollars.

“Closing” has the meaning set forth in Section 9.01(a).

“Closing Date” has the meaning set forth in Section 9.01(a).

“Commission” means the Securities and Exchange Commission or any successor agency having jurisdiction under the Securities Act.

“Company Competitive Business” has the meaning set forth in Section 14.01(a).

“Company Competitive Business Assets” has the meaning set forth in Section 14.01(d).

“Company Competitive Third Party” has the meaning set forth in Section 14.01(d).

“Company Material Adverse Effect” means, for purposes of Section 1.03, an effect on the business, operations, assets, liabilities, results of operations, cash flows, condition (financial or otherwise) or prospects of the Company’s Business which results in a Loss of two million dollars ($2,000,000) or more, or, if such Loss is not susceptible to being measured in monetary terms, is otherwise materially adverse to the Company’s Business; provided that any such effect relating to or resulting from any change in the price of petroleum or petroleum byproducts, general economic conditions or local, regional, national or international industry conditions (including changes in financial or market conditions) shall be deemed not to constitute a Company Material Adverse Effect.

“Competitive Business Purchase Price” has the meaning set forth in Section 14.04.

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“Confidential Information” has the meaning set forth in Section 14.02(b).

“Confidentiality Agreement” has the meaning set forth in Section 14.02(b).

“Delayed Closing Date” has the meaning set forth in Section 9.03(b).

“Delayed Closing Date Interest Period” has the meaning set forth in Section 9.03(b).

“Delayed Installment Payment Date” has the meaning set forth in Section 9.06.

“Delayed Installment Payment Date Interest Period” has the meaning set forth in Section 9.06.

“Demand Registration” has the meaning set forth in Section 10.01(a).

“Designated Sublease Agreements” means the Ashland Designated Sublease Agreements and the Marathon Designated Sublease Agreements.

“Disclosing Party” has the meaning set forth in Section 14.02(b).

“Dispute” has the meaning set forth in Section 16.01.

“Dispute Notice” has the meaning set forth in Section 16.02.

“Distributable Cash” has the meaning set forth in the LLC Agreement.

“Escrow Account” has the meaning set forth in Section 5.01(a)(ii)(B).

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exercise Date” means the Special Termination Exercise Date, the Marathon Call Exercise Date or the Ashland Put Exercise Date, as applicable.

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“Exercise Period Distributions” means Ashland Exercise Period Distributions or Marathon Exercise Period Distributions, as applicable.

“Fair Market Value” has the meaning set forth in Section 7.01.

“14.01(d) Presentation Meeting” has the meaning set forth in Section 14.01(d).

“14.01(d) Scheduled Closing Date” has the meaning set forth in Section 14.01(d).

“14.03(d) Offer Notice” has the meaning set forth in Section 14.03(d).

“14.03(d) Purchase Election Notice” has the meaning set forth in Section 14.03(d).

“14.03(d) Scheduled Closing Date” has the meaning set forth in Section 14.03(d).

“14.03(f) Offer Notice” has the meaning set forth in Section 14.03(f)(i).

“14.03(f) Purchase Election Notice” has the meaning set forth in Section 14.03(f)(i).

“14.04 Appraisal Process Commencement Date” has the meaning set forth in Section 14.04.

“14.04 Appraisal Report” has the meaning set forth in Section 14.04.

“14.04 Initial Opinion Values” has the meaning set forth in Section 14.04.

“14.04 Subsequent Appraisal Process Commencement Date” has the meaning set forth in Section 14.04.

“14.04 Third Opinion Value” has the meaning set forth in Section 14.04.

“Fully Distributed Sale” has the meaning set forth in Section 8.04.

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“Holding Period” has the meaning set forth in Section 8.03.

“Installment Payment” has the meaning set forth in Section 4.02(b).

“Installment Payment Date” means a Scheduled Installment Payment Date or a Delayed Installment Payment Date, as applicable.

“Investment Grade Rating” means a rating of BBB-or higher by S&P or Baa3 or higher by Moody’s or the equivalent of such rating by S&P and Moody’s.

“Issuer” has the meaning set forth in Section 10.01(a).

“Issuer Material Adverse Effect” means either (i) a material adverse effect on the ability of the Issuer to perform its obligations under this Agreement or (ii) a material adverse effect on the business, operations, assets, liabilities, results of operations, cash flows, condition (financial or otherwise) or prospects of the Issuer and its subsidiaries, taken as a whole; provided, however, that any such effect relating to or resulting from any change in the price of petroleum or petroleum byproducts, general economic conditions or local, regional, national or international industry conditions (including changes in financial or market conditions) or any change in applicable tax laws or regulations shall be deemed not to constitute an Issuer Material Adverse Effect.

“LIBOR Rate” means, for any one-month period or portion thereof, the per annum rate (rounded to the nearest 1/10,000 of 1%) for U.S. dollar deposits for such one-month period which appears on Bloomberg Page DG522a Equity GPGX as of 11:00 a.m. London time on the second London business day preceding the first day of such one-month period. “Bloomberg Page DG522a Equity GPGX” means the display page designated “DG522a Equity GPGX” on the Bloomberg, L.P. quotation service (or replacement page or successor service for displaying comparable rates).

“Losses” has the meaning set forth in Section 10.04.

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“Long Term Debt” means Indebtedness with a maturity of one year or longer.

“Maralube Express Business” has the meaning set forth in Section 14.03(d)(i).

“Marathon Call Exercise Date” has the meaning set forth in Section 3.03.

“Marathon Call Exercise Notice” has the meaning set forth in Section 3.03.

“Marathon Call Price” has the meaning set forth in Section 3.01.

“Marathon Call Right” has the meaning set forth in Section 3.01.

“Marathon Debt Securities” has the meaning set forth in Section 8.01.

“Marathon Designated Sublease Agreements” means the Marathon Sublease Agreements attached as Exhibits E-1, E-2 and E-3 to the Asset Transfer and Contribution Agreement.

“Marathon Equity Securities” means any of (i) the class of common stock of USX designated as USX-Marathon Group Common Stock, par value $1.00 per share, (ii) the class of common equity securities of Marathon or, if USX has transferred all of the assets and liabilities of the Marathon Group to a Marathon Group Subsidiary (as such term is defined in the Certificate of Incorporation of USX) pursuant to Section 2(a) of Division I of Article Fourth of the Certificate of Incorporation of USX and the Board of Directors of USX has declared that all of the outstanding shares of USX-Marathon Group Common Stock be exchanged for shares of common stock of the Marathon Group Subsidiary, the Marathon Group Subsidiary; provided, that so long as Marathon shall be a subsidiary of USX, such common equity securities shall constitute Marathon Equity Securities only if such class accounts for USX’s primary ownership interest in Marathon, or (iii) the common equity securities of USX (but only if a single class of common equity securities of USX exists), in each case (1) registered pursuant to Section 12 of the Exchange Act and (2) issued to Ashland pursuant to Section 4.02(c); provided that in the event there is a

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reclassification of any of the foregoing classes of common stock into one or more different types or classes of securities, “Marathon Equity Securities” shall instead include such different types or classes of securities.

“Marathon Exercise Period Distributions” has the meanings set forth in Section 5.01(b)(i).

“Marathon Material Adverse Effect” means, for purposes of Section 1.03, either (i) a material adverse effect on the ability of Marathon to perform its obligations under this Agreement or (ii) an effect on the business, operations, assets, liabilities, results of operations, cash flows, condition (financial or otherwise) or prospects of Marathon’s Business which results in a Loss of two million dollars ($2,000,000) or more, or, if such Loss is not susceptible to being measured in monetary terms, is otherwise materially adverse to Marathon’s Business; provided that any such effect relating to or resulting from any change in the price of petroleum or petroleum byproducts, general economic conditions or local, regional, national or international industry conditions (including changes in financial or market conditions) shall be deemed not to constitute a Marathon Material Adverse Effect.

“Marathon Membership Interests” means the initial Membership Interests of Marathon on the date hereof, together with any additional Membership Interests that Marathon may hereafter acquire.

“Marathon Representatives Revocable Proxies” has the meaning set forth in Section 5.02(b).

“Marathon Special Termination Right” means the Special Termination Right granted to Marathon pursuant to Section 2.01.

“Market Value of the Company” has the meaning set forth in Section 6.01(c).

“Maximum Offering Size” has the meaning set forth in Section 10.01(e).

“Mid-Level Employee” has the meaning set forth in Section 14.02(a)(ii).

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“Minimum Lube Oil Purchase Amount” has the meaning set forth in Section 14.03(h).

“Moody’s” means Moody’s Investors Service Inc. and any successor thereto.

“National Securities Exchange” means a securities exchange registered as a national securities exchange under Section 6 of the Exchange Act.

“9.04(b) Post-Scheduled Closing Date Distribution Amount” has the meaning set forth in Section 9.04(b).

“9.08(b) Post-Scheduled Closing Date Distribution Amount” has the meaning set forth in Section 9.08(b).

“Non-Terminating Member” has the meaning set forth in Section 2.01(a).

“Offering Memorandum” means any offering memorandum prepared in connection with a sale of Securities effected in accordance with Section 4(2) or Rule 144A under the Securities Act, including all amendments and supplements to such offering memorandum, all exhibits thereto and all materials incorporated by reference in such offering memorandum.

“Other Holders” has the meaning set forth in Section 10.01(e).

“Packaged Motor Oil Business” has the meaning set forth in Section 14.03(h).

“Percentage Interest” has the meaning set forth in the LLC Agreement.

“Permitted Investments” means any of the following: (i) any investment in direct obligations of the United States of America or any agency thereof or obligations Guaranteed by the United States of America or any agency thereof; (ii) investments in time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America having capital, surplus and undivided profits

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aggregating in excess of $250,000,000 (or the foreign currency equivalent thereof) and whose Long Term debt is rated “A” (or higher) by Moody’s or S&P; (iii) repurchase agreements having terms of not more than 30 days that are (A) collateralized by underlying securities of the types described in clause (i) above having a fair market value at the time the Company enters into such repurchase agreements of at least 102% of the principal amount of such repurchase agreements and (B) entered into with a bank meeting the qualifications described in clause (ii) above; (iv) investments in commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate of any of the parties hereto) organized and in existence under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of both “P-1” (or higher) according to Moody’s and “A-1” (or higher) according to S&P; and (v) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least “A” by S&P or “A” by Moody’s.

“Price Index” has the meaning set forth in the LLC Agreement.

“Private Label Packaged Motor Oil Business” has the meaning set forth in Section 14.03(h).

“Qualifying Public Offering” has the meaning set forth in Section 8.04.

“Quick Lube Business” has the meaning set forth in Section 14.03(h).

“Registration Statement” means any registration statement under the Securities Act which permits the public offering of Securities, including the prospectus included therein, all amendments and supplements to such egistration statement or prospectus, including post-effective amendments, all exhibits thereto and all materials incorporated by reference in such registration statement.

“Representatives” has the meaning set forth in Section 14.02(b).

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“Response” has the meaning set forth in Section 16.02.

“Required Disclosure” has the meaning set forth in Section 7.03(a).

“Required Disclosure Date” has the meaning set forth in Section 7.03(a).

“Scheduled Closing Date” has the meaning set forth in Section 9.01(a).

“Scheduled Installment Payment Date” has the meaning set forth in Section 4.02(b).

“Securities” means Marathon Debt Securities and/or Marathon Equity Securities.

“Securities Act” means the Securities Act of 1933.

“Securities Document” has the meaning set forth in Section 8.02.

“Senior Employee” has the meaning set forth in Section 14.02(a)(ii).

“S&P” means Standard & Poor’s Corporation and any successor thereto.

“7.03(b) Appraisal Process Commencement Date” has the meaning set forth in Section 7.03(b).

“7.03(b) Appraisal Report” has the meaning set forth in Section 7.03(b).

“7.03(b) Discount Amount” has the meaning set forth in Section 7.03(b).

“7.03(b) Initial Opinion Values” has the meaning set forth in Section 7.03(b).

“7.03(b) Subsequent Appraisal Process Commencement Date” has the meaning set forth in Section 7.03(b).

“7.03(b) Third Opinion Value” has the meaning set forth in Section 7.03(b).

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“7.04 Appraisal Process Commencement Date” has the meaning set forth in Section 7.04(b).

“7.04 Appraisal Report” has the meaning set forth in Section 7.04(b).

“7.04 Discount Amount” has the meaning set forth in Section 7.04(b).

“7.04 Initial Opinion Values” has the meaning set forth in Section 7.04(b).

“7.04 Subsequent Appraisal Process Commencement Date” has the meaning set forth in Section 7.04(b).

“7.04 Third Opinion Value” has the meaning set forth in Section 7.04(b).

“6.01 Appraisal Process Commencement Date” has the meaning set forth in Section 6.01(b).

“6.01 Appraisal Report” has the meaning set forth in Section 6.01(b).

“6.01 Initial Opinion Values” has the meaning set forth in Section 6.01(b).

“6.01 Subsequent Appraisal Process Commencement Date” has the meaning set forth in Section 6.01(b).

“6.01 Third Opinion Value” has the meaning set forth in Section 6.01(b).

“Special Termination Exercise Date” has the meaning set forth in Section 2.03.

“Special Termination Exercise Notice” has the meaning set forth in Section 2.03.

“Special Termination Price” has the meaning set forth in Section 2.01(a).

“Special Termination Right” has the meaning set forth in Section 2.01(a).

“Tax Liability” has the meaning set forth in the LLC Agreement.

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“Tax Liability Distributions” means the cash distributions to which a Member is entitled pursuant to Section 5.01(a) of the LLC Agreement.

“Terminating Member” has the meaning set forth in Section 2.01(a).

“Terminating Member’s Membership Interests” means, if Ashland is the Terminating Member, the Ashland Membership Interests and, if Marathon is the Terminating Member, the Marathon Membership Interests.

“Terminating Member’s Percentage Interest” means, if Ashland is the Terminating Member, the Ashland Percentage Interest and, if Marathon is the Terminating Member, the Marathon Percentage Interest.

“Termination Notice” has the meaning set forth in Section 2.01(a).

“Trading Day” means any day on which the New York Stock Exchange is open for business.

“Underwritten Public Offering” means an underwritten public offering of Securities pursuant to an effective Registration Statement under the Securities Act.

“USX Material Adverse Effect” means, for purposes of Section 1.03, a material adverse effect on the ability of USX to perform its obligations under this Agreement.

“USX Voting Securities” means the securities of USX (i) having the power under ordinary circumstances to elect at least a majority of the board of directors of USX (whether or not any senior class of stock has voting power by reason of any contingency) or (ii) convertible into or exchangeable for securities of USX having the power under ordinary circumstances to elect at least a majority of the board of directors of USX (whether or not any senior class of stock has voting power by reason of any contingency); provided, that each class of common equity securities of USX, and any securities of USX convertible into or exchangeable for any such class, shall constitute USX Voting Securities regardless of whether such class has the power under ordinary circumstances to elect at least a majority of the board of directors of USX.

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“Valvoline” has the meaning set forth in Section 14.03(h).

“Valvoline Business” has the meaning set forth in Section 14.03(h).

“Valvoline Competitive Business Assets” has the meaning set forth in Section 14.03(d).

“Valvoline Competitive Third Party” has the meaning set forth in Section 14.03(d).

“Weighted Average Price” has the meaning set forth in Section 7.03(a).

SECTION 1.02. Adjustable Amounts. Within 30 days following the date on which the United States Department of Labor Bureau of Labor Statistics for all Urban Areas publishes the Price Index for (a) the month of December, 2002 and (b) thereafter, the month of December in each five year anniversary of the year 2002 (the year 2002 and each such five year anniversary being an “Adjustment Year”), the Company shall determine whether the Average Annual Level for the applicable Adjustment Year exceeds the Base Level. If the Company determines that the Average Annual Level for such Adjustment Year exceeds the Base Level, then the Company shall increase or decrease each of the following amounts (each, an “Adjustable Amount”) to an amount calculated by multiplying the relevant Adjustable Amount by a fraction whose numerator is the Average Annual Level for such Adjustment Year and whose denominator is the Base Level:

(i) the two million dollars ($2,000,000) amount set forth in the definition of “Ashland Material Adverse Effect”; (ii) the two million dollars ($2,000,000) amount set forth in the definition of “Company Material Adverse Effect”; (iii) the two million dollars ($2,000,000) amount set forth in the definition of “Marathon Material Adverse Effect”; (iv) the $250 million amount set forth in clause (ii) of the definition of “Permitted Investments” in Section 1.01; and (v) the $100 million and $25 million amounts set forth in Section 10.01(a); provided that in no event shall any Adjustable Amount be decreased below the initial amount thereof set forth herein. Within five Business Days after making such determinations, the Company shall distribute to each Member a notice (an “Adjustable Amounts Notice”) setting forth: (A) the amount by which the Average Annual Level for such Adjustment Year exceeded the

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Base Level and (B) the calculations of any adjustments made to the Adjustable Amounts pursuant to this Section 1.02. Any adjustment made to the Adjustable Amounts pursuant to this Section 1.02 shall be effective as of the date on which the Company delivers to the Members the related Adjustable Amounts Notice.

SECTION 1.03. Representations and Warranties. Each of Marathon and USX represents and warrants to Ashland, and Ashland represents and warrants to each of Marathon and USX, in each case as of the date hereof and will be required to represent and warrant as of any Closing Date, as follows:

(a) Due Organization, Good Standing and Power. It is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation with the power and authority to own, lease and operate its assets and to conduct the business now being or to be conducted by it. It is duly authorized, qualified or licensed to do business as a foreign corporation or other organization in good standing in each of the jurisdictions in which its right, title or interest in or to any of the assets held by it or the business conducted by it requires such authorization, qualification or licensing, except where the failure to be so authorized, qualified, licensed or in good standing would not have and would not reasonably be expected to have, individually or in the aggregate, a Marathon Material Adverse Effect, a USX Material Adverse Effect or an Ashland Material Adverse Effect, as the case may be. It has all requisite power and authority to enter into this Agreement and to perform its obligations hereunder.

(b) Authorization and Validity of Agreements. The execution and delivery by it of this Agreement and the consummation by it of the transactions contemplated hereby have been duly authorized and approved by all necessary corporate or other action on its part. This Agreement has been duly executed and delivered by it. This Agreement is its legal, valid and binding obligation, enforceable against it in accordance with its terms.

(c) Lack of Conflicts. Except as set forth on Schedule 1.03(c) to the Marathon, USX or Ashland Put/Call, Registration Rights and Standstill Disclosure

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Letter, as applicable, neither the execution and delivery by it of this Agreement nor the consummation by it of the transactions contemplated hereby does or will (i) conflict with, or result in the breach of any provision of, its charter or by-laws or similar governing or organizational documents or any of its subsidiaries, (ii) violate any Applicable Law or any permit, order, award, injunction, decree or judgment of any Governmental Authority applicable to or binding upon it or any of its subsidiaries or to which any of their respective properties or assets is subject, (iii) violate, conflict with or result in the breach or termination of, or otherwise give any other person the right to terminate, or constitute a default, an event of default or an event which with notice, lapse of time or both, would constitute a default or an event of default under the terms of, any mortgage, indenture, deed of trust or lease or other agreement or instrument to which it or any of its subsidiaries is a party or by which any of their respective properties or assets is subject, except, in the case of clauses (ii) or (iii), for such violations, conflicts, breaches, terminations and defaults which would not have and would not reasonably be expected to have, individually, a Company Material Adverse Effect.

(d) No Consents. Except as set forth on Schedule 1.03(d) to the Marathon, USX or Ashland Put/Call, Registration Rights and Standstill Disclosure Letter, as applicable, no Governmental Approval or other consent is required by it for the execution and delivery by it of this Agreement or for the consummation of the transactions contemplated hereby except (a) for such Governmental Approvals or other consents as have been obtained or are contemplated hereby to be obtained after Closing or (b) where the failure to obtain such Governmental Approvals or other consents would not have and would not reasonably be expected to have, individually, a Company Material Adverse Effect.

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ARTICLE II

Special Termination Right

SECTION 2.01. Special Termination Right. (a) If Ashland or Marathon (the “Terminating Member”) notifies the Board of Managers of the Company and the other Member (the “Non-Terminating Member”) in writing pursuant to Section 2.03 of the LLC Agreement that it wants to terminate the term of the Company at the end of the Initial Term or any succeeding 10-year period (any such notice being a “Termination Notice”), then, subject to Section 2.01(b), the Non-Terminating Member shall have the right, exercisable at any time during the 180-day period following its receipt from the Terminating Member of a Termination Notice, to purchase from the Terminating Member on the Scheduled Closing Date (the “Special Termination Right”), and the Terminating Member shall thereupon be required to sell to the Non-Terminating Member on the Scheduled Closing Date, all of its Membership Interests and, in the circumstance where Ashland is the Terminating Member, the Ashland LOOP/LOCAP Interest, for an aggregate amount equal to the purchase price (the “Special Termination Price”) set forth in Section 2.02(a), plus interest on the Special Termination Price at a rate per annum equal to the Base Rate, with daily accrual of interest, for the period commencing on the Special Termination Exercise Date and ending on the Scheduled Closing Date. The Special Termination Right shall automatically terminate at the close of business on the 180th day following the Non-Terminating Member’s receipt of a Termination Notice, unless previously exercised by the Non-Terminating Member in accordance with the provisions of Section 2.03.

(b) Notwithstanding anything to the contrary contained in Section 2.01(a), if Marathon and Ashland each deliver a Terminating Notice to the Board of Managers of the Company and the other Member, then neither Marathon nor Ashland shall have a Special Termination Right.

SECTION 2.02. Special Termination Price. (a) Amount. The Special Termination Price shall be an amount equal to the product of (i) 100% of the Appraised Value of the Company multiplied by (ii) the Terminating Member’s Percentage Interest.

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(b) Timing of Payment. The Non-Terminating Member shall pay the entire Special Termination Price, together with accrued interest calculated as set forth in Section 2.01, on the Scheduled Closing Date.

(c) Form of Consideration. The Non-Terminating Member shall pay the Special Termination Price, and all accrued interest, in Cash.

SECTION 2.03. Method of Exercise. The Non-Terminating Member shall exercise its Special Termination Right by delivering to the Terminating Member a notice of such exercise (the “Special Termination Exercise Notice”). The date of the Terminating Member’s receipt of the Special Termination Exercise Notice shall be deemed to be the date of the Non-Terminating Member’s exercise of its Special Termination Right (the “Special Termination Exercise Date”) and, except as expressly provided in Sections 9.08(a) and 9.09, the Non-Terminating Member’s exercise of its Special Termination Right shall thereafter be irrevocable.

ARTICLE III

Marathon Call Right

SECTION 3.01. Marathon Call Right. Subject to Section 3.04, at any time on and after December 31, 2004, Marathon shall have the right to purchase from Ashland on the Scheduled Closing Date (the “Marathon Call Right”), and Ashland shall thereupon be required to sell to Marathon on the Scheduled Closing Date, all of Ashland’s Membership Interests and the Ashland LOOP/LOCAP Interest, for an aggregate amount equal to the purchase price (the “Marathon Call Price”) set forth in Section 3.02(a), plus interest on the Marathon Call Price at a rate per annum equal to the Base Rate, with daily accrual of interest, for the period commencing on the Marathon Call Exercise Date and ending on the Scheduled Closing Date.

SECTION 3.02. Marathon Call Price. (a) Amount. The Marathon Call Price shall be an amount equal to the product of (i) 115% of the Appraised Value of the Company multiplied by (ii) Ashland’s Percentage Interest.

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(b) Timing of Payment. Marathon shall pay the entire Marathon Call Price, together with accrued interest calculated as set forth in Section 3.01, on the Scheduled Closing Date.

(c) Form of Consideration. Marathon shall pay the Marathon Call Price, and all accrued interest, in Cash.

SECTION 3.03. Method of Exercise. Marathon shall exercise its Marathon Call Right by delivering to Ashland a notice of such exercise (the “Marathon Call Exercise Notice”). The date of Ashland’s receipt of the Marathon Call Exercise Notice shall be deemed to be the date of Marathon’s exercise of its Marathon Call Right (the “Marathon Call Exercise Date”) and, except as expressly provided in Sections 9.03(a), 9.04(a) and 9.05, Marathon’s exercise of its Marathon Call Right shall thereafter be irrevocable.

SECTION 3.04. Limitation on Marathon’s Ability To Exercise its Marathon Call Right. If prior to the Marathon Call Exercise Date, Ashland elects to Transfer its Membership Interests to a third party pursuant to Section 10.01(c) of the LLC Agreement, and in connection therewith delivers to Marathon the requisite Offer Notice pursuant to Section 10.04 of the LLC Agreement, Marathon shall not be permitted to exercise its Marathon Call Right for a period commencing on the date of Marathon’s receipt of such Offer Notice and ending on the earliest of (i) 120 days (or 270 days if a second request has been made under HSR) following such receipt, (ii) the closing of such Transfer, and (iii) the date such proposed Transfer by Ashland shall have been finally abandoned. After such period, Marathon shall be entitled to exercise its Marathon Call Right.

ARTICLE IV

Ashland Put Right

SECTION 4.01. Ashland Put Right. Subject to Section 4.05, at any time after December 31, 2004, Ashland shall have the right to sell to Marathon on the Scheduled Closing Date (the “Ashland Put Right”), and Marathon shall thereupon be required to purchase from Ashland on the Scheduled Closing Date, all of Ashland’s Membership Interests and the Ashland LOOP/LOCAP Interest, for an

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aggregate amount equal to the purchase price (the “Ashland Put Price”) set forth in Section 4.02, plus interest on the Ashland Put Price (or, in the event that Marathon elects to pay the Ashland Put Price in installments, any unpaid portion of the Ashland Put Price) at a rate per annum equal to the Base Rate, with daily accrual of interest, for the period commencing on the Ashland Put Exercise Date and ending on the Scheduled Closing Date (or, in the event that Marathon elects to pay the Ashland Put Price in installments, on the applicable Scheduled Installment Payment Date).

SECTION 4.02. Ashland Put Price. (a) Amount. The Ashland Put Price shall be an amount equal to the sum of (i) for that portion of the Ashland Put Price to be paid to Ashland in Cash or in Marathon Debt Securities, an amount equal to the product of (x) 85% of the Appraised Value of the Company multiplied by (y) Ashland’s Percentage Interest multiplied by (z) the percentage of the Ashland Put Price to be paid to Ashland in Cash and/or in Marathon Debt Securities, plus (ii) for that portion of the Ashland Put Price to be paid to Ashland in Marathon Equity Securities, an amount equal to the product of (x) 90% of the Appraised Value of the Company multiplied by (y) Ashland’s Percentage Interest multiplied by (z) the percentage of the Ashland Put Price to be paid to Ashland in Marathon Equity Securities.

(b) Timing of Payment. Subject to Section 4.02(d), Marathon shall have the right to elect, by specifying in the Ashland Put Price Election Notice, to (i) pay the entire Ashland Put Price on the Scheduled Closing Date or (ii) pay the Ashland Put Price in three equal installments (each an “Installment Payment”), in either case, together with accrued interest calculated as set forth in Section 4.01. If Marathon elects to pay the Ashland Put Price in installments, Marathon shall pay Ashland (x) the first Installment Payment on the Scheduled Closing Date; (y) the second Installment Payment on the first anniversary of the Scheduled Closing Date; and (z) the third Installment Payment on the second anniversary of the Scheduled Closing Date (each such date being a “Scheduled Installment Payment Date”), in each case, together with accrued interest calculated as set forth in Section 4.01.

(c) Form of Consideration. Subject to Section 4.02(d), Marathon shall have the right to elect, by specifying in an Ashland Put Price Election Notice, to pay

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the Ashland Put Price (i) entirely in Cash or (ii) in a combination of Cash and Securities; provided that at least 50% of the Ashland Put Price (and at least 50% of each Installment Payment if Marathon elects to pay in installments) shall consist of Cash; provided further, that the sum of (x) the Fair Market Value of any Securities issued to Ashland on the Closing Date (or on any Installment Payment Date) plus (y) the amount of Cash paid to Ashland on the Closing Date (or on such Installment Payment Date) in respect of the Ashland Put Price, in each case exclusive of any interest paid thereon, shall equal the Ashland Put Price (or the applicable Installment Payment); and provided further, that in no event shall Marathon or USX issue to Ashland an amount of Marathon Equity Securities that would cause Ashland to own, directly or indirectly, at the Closing or on any Scheduled Installment Payment Date in the aggregate 10% or more of the number of shares of such class of Marathon Equity Securities that are outstanding on the Closing Date and are publicly held (it being understood and agreed that for purposes of this Section 4.02(c), any shares of such class of Marathon Equity Securities that are either held by Marathon or any of its Affiliates or subject to restrictions on transfer shall not be considered publicly held). Marathon shall pay all accrued interest in Cash.

(d) Consequences of Failure to Make Certain Elections. Notwithstanding anything to the contrary in this Agreement:

(i) if Marathon fails to deliver to Ashland an Ashland Put Price Election Notice within the requisite time period set forth in Section 4.04(a) or if Marathon delivers to Ashland an Ashland Put Price Election Notice that states that the entire Ashland Put Price will be paid at Closing but does not state whether any portion of the Ashland Put Price will be paid in Securities, Marathon shall thereafter be required to pay Ashland the entire Ashland Put Price in Cash on the Closing Date;

(ii) if Marathon delivers to Ashland an Ashland Put Price Election Notice pursuant to Section 4.04(a) that does not indicate whether it is electing to pay the Ashland Put Price in installments, Marathon shall thereafter be required to pay Ashland the entire Ashland Put Price on the Closing Date;

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(iii) if Marathon delivers to Ashland an Ashland Put Price Election Notice pursuant to Section 4.04(a) that does not indicate the form of consideration regarding the Ashland Put Price (or, if such Ashland Put Price Election Notice states that Marathon has elected to pay the Ashland Put Price in installments, the first Installment Payment), Marathon shall thereafter be required to pay Ashland the entire Ashland Put Price (or first Installment Payment) in Cash on the Closing Date;

(iv) if Marathon has elected in its Ashland Put Price Election Notice delivered pursuant to Section 4.04(b) to pay the Ashland Put Price in installments and thereafter if Marathon fails to deliver to Ashland an Ashland Put Price Election Notice within the requisite time period set forth in Section 4.04(b) for any Scheduled Installment Payment Date, Marathon shall thereafter be required to pay Ashland the entire Installment Payment in Cash on the applicable Installment Payment Date;

(v) if Marathon elects in any Ashland Put Price Election Notice to issue (or to have USX issue) to Ashland Actively Traded Marathon Equity Securities on the Closing Date (or applicable Installment Payment Date) and at any time prior to the Closing Date (or such Installment Payment Date), such Securities cease for whatever reason to be Actively Traded Marathon Equity Securities, Marathon shall thereafter be required to pay Ashland the entire Ashland Put Price (or the applicable Installment Payment) in Cash on the Closing Date (or applicable Installment Payment Date); and

(vi) if Marathon elects in any Ashland Put Price Election Notice to issue (or to have USX issue) to Ashland Actively Traded Marathon Equity Securities on the Closing Date (or applicable Installment Payment Date) and Marathon fails to give the related Required Disclosure on the applicable Required Disclosure Date, Marathon shall thereafter be required to pay to Ashland the entire Ashland Put Price (or the applicable Installment Payment) in Cash on the Closing Date (or on such Installment Payment Date).

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SECTION 4.03. Method of Exercise. Ashland may exercise its Ashland Put Right by delivering to Marathon a notice of such exercise (the “Ashland Put Exercise Notice”). The date of Marathon’s receipt of the Ashland Put Exercise Notice shall be deemed to be the date of Ashland’s exercise of its Ashland Put Right (the “Ashland Put Exercise Date”) and, except as expressly provided in Sections 9.03(a), 9.04(a) and 9.05, Ashland’s exercise of its Ashland Put Right shall thereafter be irrevocable.

SECTION 4.04. Ashland Put Price Election Notice. (a) Notice re: Closing. Within five Business Days after the Appraised Value Determination Date, Marathon shall notify Ashland (a “Ashland Put Price Election Notice”) as to (i) whether it elects to pay the Ashland Put Price (A) entirely at Closing or (B) in three equal installments and (ii) whether Marathon elects to pay part of the Ashland Put Price or first Installment Payment, as applicable, at Closing in Securities, and, if so, (A) the name of the issuer of such Securities, (B) the type of such Securities, (C) the portion of the Ashland Put Price or first Installment Payment, as applicable, which will be comprised of such Securities, (D) whether it elects to impose a Holding Period with respect to any of such Securities and (E) the length of any such Holding Period.

(b) Notices re: Second and Third Scheduled Installment Payment Dates. Within 45 days prior to each of the second and third Scheduled Installment Payment Dates, if applicable, Marathon shall deliver to Ashland an Ashland Put Price Election Notice as to whether Marathon elects to pay part of the applicable Installment Payment in Securities, and, if so, (i) the name of the issuer of such Securities, (ii) the type of Securities, (iii) the portion of the applicable Installment Payment which will be comprised of such Securities, (iv) whether it elects to impose a Holding Period with respect to any of such Securities and (v) the length of any such Holding Period. The date of Ashland’s receipt of any Ashland Put Price Election Notice is referred to herein as the

“Ashland Put Price Election Date” with respect to such Ashland Put Price Election Notice.

(c) Additional Information With Respect to Securities. If Marathon elects to pay any part of the Ashland Put Price in Securities, then in addition to the information provided to Ashland in the Ashland Put Price Election Notice pursuant to Section 4.04(a) or 4.04(b),

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Marathon shall provide Ashland and its advisors with any other information concerning such Securities that Ashland or its advisors may reasonably request.

(d) Irrevocability of Elections. Marathon’s elections as set forth in an Ashland Put Price Election Notice shall be irrevocable upon Ashland’s receipt of such Ashland Put Price Election Notice; provided that at any time prior to the date that is ten Business Days prior to the Closing Date (or applicable Installment Payment Date) Marathon shall have the right to change a previous election to pay part of the Ashland Put Price (or applicable Installment Payment) in Securities to an election to pay a greater portion of or the entire Ashland Put Price (or applicable Installment Payment) in Cash, or to change a previous election to pay the Ashland Put Price in installments to an election to pay the entire or remaining Ashland Put Price on the Closing Date (or applicable Installment Payment Date).

SECTION 4.05. Limitation on Ashland’s Ability To Exercise its Ashland Put Right. If prior to the Ashland Put Exercise Date, Marathon elects to Transfer all of its Membership Interests to a third party pursuant to Section 10.01(c) of the LLC Agreement, and in connection therewith delivers to Ashland the requisite Offer Notice pursuant to Section 10.04 of the LLC Agreement, Ashland shall not be permitted to exercise its Ashland Put Right for a period commencing on the date of Ashland’s receipt of such Offer Notice and ending on the earlier of (i) 120 days (270 days if a second request has been made under HSR) following such receipt, (ii) the closing of such Transfer, and (iii) the date such proposed Transfer by Marathon shall have been finally abandoned. After such period, Ashland shall be entitled to exercise its Ashland Put Right.

ARTICLE V

Termination of Certain Distributions; Revocable Proxies

SECTION 5.01. Termination of Certain Distributions. (a) Distributions to Ashland. (i) Subject to Sections 9.04(a), 9.05, 9.08(a) and 9.09, in the event that Marathon exercises its Marathon Call Right or its Special Termination Right, or in the event that Ashland exercises its Ashland Put Right, then on the relevant

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Exercise Date, Ashland shall cause each of its Representatives to authorize Marathon’s Representatives to cause the Company to withhold from Ashland all distributions of Distributable Cash and all Tax Liability Distributions that Ashland would otherwise be entitled to receive pursuant to Article V of the LLC Agreement during the period from the relevant Exercise Date to the Closing Date, other than (i) all distributions of Distributable Cash and Tax Liability Distributions that are attributable to any Fiscal Quarter that ends on or prior to the close of business on the relevant Exercise Date, (ii) a pro rata portion of all distributions of Distributable Cash and Tax Liability Distributions that are attributable to the portion of a Fiscal Quarter that begins prior to the relevant Exercise Date and that ends after such Exercise Date and (iii) all Tax Liability Distributions that are attributable to the period from the relevant Exercise Date to the Closing Date to the extent that Ashland has any Tax Liability during such period (“Ashland Exercise Period Distributions”).

(ii) Any Ashland Exercise Period Distributions withheld from Ashland pursuant to Section 5.01(a)(i) shall be distributed by the Company as follows:

(A) if at the time such distribution is so withheld, either (1) USX’s Long Term Debt has an Investment Grade Rating and USX has agreed in writing to guarantee (which guarantee shall be a guarantee of payment) Marathon’s obligations to pay to Ashland in the circumstances set forth in Sections 9.04(a) and 9.05 (pursuant to a guarantee agreement in form and substance reasonably satisfactory to Ashland and its counsel) or (2) Marathon’s Long Term Debt has an Investment Grade Rating, then the Company shall pay such Ashland Exercise Period Distributions directly to Marathon; and

(B) if at the time such distribution is so withheld, (1) Marathon’s Long Term Debt does not have an Investment Grade Rating and (2) either (x) USX’s Long Term Debt does not have an Investment Grade Rating or (y) USX’s Long Term Debt has an Investment Grade Rating but USX has not agreed in writing to guarantee Marathon’s payment obligations described in clause (2) of subparagraph (A) above, then Marathon’s Representatives shall cause the Company to, and the Company shall, deposit all Ashland Exercise Period

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Distributions into an escrow account to be established by the Company (the “Escrow Account”) and to release such deposits from the Escrow Account only in accordance with this Agreement. All amounts in the Escrow Account shall be invested only in Permitted Investments.

(b) Distributions to Marathon. (i) Subject to Sections 9.08(a) and 9.09, in the event that Ashland exercises its Special Termination Right in accordance with the terms hereof, then on the Special Termination Exercise Date, Marathon shall cause each of its Representatives to authorize Ashland’s Representatives to cause the Company to withhold from Marathon all distributions of Distributable Cash and all Tax Liability Distributions that Marathon would otherwise be entitled to receive pursuant to Article V of the LLC Agreement during the period from the Special Termination Exercise Date to the Closing Date, other than (A) all distributions of Distributable Cash and Tax Liability Distributions that are attributable to any Fiscal Quarter that ends on or prior to the close of business on the Special Termination Exercise Date, (B) a pro rata portion of all distributions of Distributable Cash and Tax Liability Distributions that are attributable to the portion of a Fiscal Quarter that begins prior to the Special Termination Exercise Date and that ends after the Special Termination Exercise Date and (C) all Tax Liability Distributions that are attributable to the period from the Special Termination Exercise Date to the Closing Date to the extent that Marathon has any Tax Liability during such period (“Marathon Exercise Period Distributions”).

(ii) Any Marathon Exercise Period Distributions withheld from Ashland pursuant to Section 5.01(a) shall be distributed by the Company as follows:

(A) if at the time such distribution is so withheld, Ashland’s Long Term Debt has an Investment Grade Rating, then the Company shall pay such Marathon Exercise Period Distributions directly to Ashland; and

(B) if at the time such distribution is so withheld, Ashland’s Long Term Debt does not have an Investment Grade Rating, then Ashland’s Representatives shall cause the Company to, and the Company shall, deposit all Marathon Exercise Period Distributions into an Escrow Account and to release such deposits from the

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Escrow Account only in accordance with this Agreement. All amounts in the Escrow Account shall be invested only in Permitted Investments.

SECTION 5.02. Revocable Proxies. (a) Ashland Representatives Revocable Proxies. Subject to Sections 9.04(a), 9.05, 9.08(a) and 9.09, in the event that Marathon exercises its Marathon Call Right or its Special Termination Right, or in the event that Ashland exercises its Ashland Put Right, then on the relevant Exercise Date, Ashland shall cause each of its Representatives to grant to Marathon’s Representatives a proxy (the “Ashland Representatives Revocable Proxies”) which shall authorize Marathon’s Representatives to cast each Ashland Representative’s vote at a Board of Managers’ meeting (but not by written consent in lieu of a meeting in accordance with Section 8.04(h) of the LLC Agreement unless Marathon shall have given Ashland prior written notice of the specific action to be taken by such written consent) in favor of or against any of the Super Majority Decisions described in Sections 8.08 of the LLC Agreement, as Marathon’s Representatives shall, in their sole discretion, determine, other than any vote with respect to a Super Majority Decision described in Sections 8.08(c) (admission of a new Member; issuance of additional Membership Interests), 8.08(d) (additional capital contributions), 8.08(i) (change in Company’s independent auditors), 8.08(j) (amendments to LLC Agreement or other Transaction Documents to which Company or its subsidiaries is a party), 8.08(l) (bankruptcy), 8.08(m) (modification of provisions re: distributions of Distributable Cash) or 8.08(q) (delegation to a Member of power to unilaterally bind the Company), with respect to which Ashland’s Representatives shall retain all of their rights and authority to vote; provided that Marathon shall not, and shall cause each of its Representatives not to, take any action through the exercise of the Ashland Representatives Revocable Proxies to cause the Company’s status as a partnership for Federal income tax purposes to terminate prior to the Closing Date.

(b) Marathon Representative Revocable Proxy. Subject to Sections 9.08(a) and 9.09, in the event that Ashland exercises its Special Termination Right, then on the Special Exercise Date, Marathon shall cause each of its Representatives to grant to Ashland’s Representatives a proxy (the “Marathon Representatives Revocable Proxies”) which shall authorize Ashland’s Representatives to cast each

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Marathon Representative’s vote at a Board of Managers’ meeting (but not by written consent in lieu of a meeting in accordance with Section 8.04(h) of the LLC Agreement unless Ashland shall have given Marathon prior written notice of the specific action to be taken by such written consent) in favor of or against any of the Super Majority Decisions described in Sections 8.08 of the LLC Agreement, as Ashland’s Representatives shall, in their sole discretion, determine, other than any vote with respect to a Super Majority Decision described in Section 8.08(c), 8.08(d), 8.08(i), 8.08(j), 8.08(l), 8.08(m) or 8.08(q) (except as expressly provided in Section 5.01), with respect to which Marathon’s Representatives shall retain all of their rights and authority to vote; provided that Ashland shall not, and shall cause each of its Representatives not to, take any action through the exercise of the Marathon Representatives Revocable Proxies to cause the Company’s status as a partnership for Federal income tax purposes to terminate prior to the Closing Date.

(c) Ashland LOOP/LOCAP Revocable Proxy. Subject to Sections 9.04(a), 9.05, 9.08(a) and 9.09, in the event that Marathon exercises its Marathon Call Right or its Special Termination Right, or in the event that Ashland exercises its Ashland Put Right, then on the relevant Exercise Date, Ashland shall grant to Marathon, or such other person as Marathon shall designate, a proxy (the “Ashland LOOP/LOCAP Revocable Proxy”) which shall authorize Marathon and its Representatives (or such other person) to exercise on Ashland’s behalf, all of Ashland’s voting rights with respect to the Ashland LOOP/LOCAP Interest.

ARTICLE VI

Determination of the Appraised Value of the Company

SECTION 6.01. Determination of Appraised Value of the Company. (a) Negotiation Period. If Marathon exercises its Special Termination Right or its Marathon Call Right or if Ashland exercises its Special Termination Right or its Ashland Put Right, then for a period of 60 days following the relevant Exercise Date, Marathon and Ashland shall negotiate in good faith to seek to reach agreement as to the Market Value of the Company. If Marathon and Ashland reach such an agreement, then the Market Value of the Company shall be deemed to be the amount so agreed upon by Marathon and Ashland.

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(b) Appraisal Process. In the event Marathon and Ashland are unable to reach an agreement as to the Market Value of the Company within the 60-day period referred to in Section 6.01(a), then within five Business Days after the expiration of such 60-day period (such fifth Business Day being referred to herein as the “6.01 Appraisal Process Commencement Date”), Marathon and Ashland each shall select a nationally recognized investment banking firm to (i) prepare a report which (A) sets forth such investment banking firm’s determination of the Market Value of the Company (which shall be a single amount as opposed to a range) and (B) includes work papers which indicate the basis for and calculation of the Market Value of the Company (a “6.01 Appraisal Report”) and (ii) deliver to Marathon or Ashland, as the case may be, an oral and written opinion addressed to such party as to the Market Value of the Company. The fees and expenses of each investment banking firm shall be paid by the party selecting such investment banking firm. Each of Marathon and Ashland shall instruct its respective investment banking firm to (i) not consult with the other investment banking firm with respect to its view as to the Market Value of the Company prior to the time that both investment banking firms have delivered their respective opinions to Marathon or Ashland, as applicable, (ii) determine the Market Value of the Company in accordance with Section 6.01(c), (iii) deliver their respective 6.01 Appraisal Reports, together with their oral and written opinions as to the Market Value of the Company (the “6.01 Initial Opinion Values”), within 60 days after the 6.01 Appraisal Process Commencement Date, and (iv) deliver a copy of its written opinion and its 6.01 Appraisal Report to the Company, the other party and the other party’s investment banking firm at the time it delivers its oral and written opinion to Marathon or Ashland, as applicable.

If the 6.01 Initial Opinion Values differ and the lesser 6.01 Initial Opinion Value equals or exceeds 90% of the greater 6.01 Initial Opinion Value, the Market Value of the Company shall be deemed to be an amount equal to (i) the sum of the 6.01 Initial Opinion Values divided by (ii) two.

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If the 6.01 Initial Opinion Values differ and the lesser 6.01 Initial Opinion Value is less than 90% of the greater 6.01 Initial Opinion Value, then:

(i) within two Business Days after both investment banking firms have delivered their respective opinions to Marathon or Ashland, as applicable, each investment banking firm shall, at a single meeting at which Marathon, Ashland, the Company and the other investment banking firm are present, make a presentation with respect to its 6.01 Initial Opinion Value. At such presentation, Marathon, Ashland, the Company and the other investment banking firm shall be entitled to ask questions as to the basis for and the calculation of such investment banking firm’s 6.01 Initial Opinion Value; and

(ii) Marathon and Ashland shall, within five Business Days after the date Marathon and Ashland receive the 6.01 Initial Opinion Values (such fifth Business Day being referred to herein as the “6.01 Subsequent Appraisal Process Commencement Date”), jointly select a third nationally recognized investment banking firm to (A) prepare a 6.01 Appraisal Report and (B) deliver an oral and written opinion addressed to Marathon and Ashland as to the Market Value of the Company. The fees and expenses of such third investment banking firm shall be paid 50% by Marathon and 50% by Ashland. Such third investment banking firm shall not be provided with the 6.01 Initial Opinion Values and shall not consult with the initial investment banking firms with respect thereto. During such five-Business Day period, Marathon and Ashland shall negotiate in good faith to independently reach an agreement as to the Market Value of the Company. If Marathon and Ashland reach such an agreement, then the Market Value of the Company shall be deemed to be the amount so agreed upon by Marathon and Ashland. If Marathon and Ashland are unable to reach such an agreement, then Marathon and Ashland shall instruct such third investment banking firm to (A) determine the Market Value of the Company in accordance with Section 6.01(c) and (B) deliver its 6.01 Appraisal Report, together with its oral and written opinion (the “6.01 Third Opinion Value”), within 60 days after the 6.01 Subsequent Appraisal Process Commencement Date. The Market Value of the Company in such circumstance shall

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be deemed to be an amount equal to (A) the sum of (x) the 6.01 Third Opinion Value plus (y) whichever of the two 6.01 Initial Opinion Values is closer to the 6.01 Third Opinion Value (or, if the 6.01 Third Opinion Value is exactly halfway between the two 6.01 Initial Opinion Values, the 6.01 Third Opinion Value), divided by (B) two.

(c) Definition of Market Value of the Company. For purposes of this Agreement, the Market Value of the Company (the “Market Value of the Company”) means the fair market value of the combined common equity of the Company as of the relevant Exercise Date, (including, in the circumstance where Marathon has exercised its Marathon Call Right or its Special Termination Right or Ashland has exercised its Ashland Put Right, the Ashland LOOP/LOCAP Interest) assuming the consummation of a transaction designed to achieve the highest value of such combined common equity. In determining the Market Value of the Company, (i) consideration should be given as to (A) all possible transaction participants (other than Marathon or Ashland or their respective Affiliates) and categories of possible transactions; (B) a range of analytical methodologies, potentially including, but not limited to, the following: comparable trading analysis, comparable transaction analysis, discounted cash flow analysis, leveraged buyout analysis and break-up analysis; and (C) the value to the Company of all indemnification obligations of Marathon, USX and Ashland in favor of the Company pursuant to any Transaction Document (including, without limitation, Article IX of the Asset Transfer and Contribution Agreement), to the extent such indemnification obligations remain in effect after the Closing and (ii) no separate incremental value will be attributed to the Ashland LOOP/ LOCAP Interest. In determining the Market Value of the Company, no consideration should be given to the values that are initially assigned to assets of the Company for purchase accounting or tax accounting purposes. The Market Value of the Company as determined pursuant to this Section 6.01 is referred to herein as the “Appraised Value of the Company”, and the date on which the Market Value of the Company is so determined is referred to herein as the “Appraised Value Determination Date”.

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ARTICLE VII

Determination of the Fair Market Value of Securities

SECTION 7.01. General. The fair market value of any Securities to be issued to Ashland on the Closing Date and on any subsequent Installment Payment Date, shall be determined pursuant to the following procedures (the fair market value of such Securities as so determined being the “Fair Market Value” of such Securities).

SECTION 7.02. Determination of Fair Market Value of Marathon Debt Securities. The Fair Market Value of any Marathon Debt Securities shall be deemed to be an amount equal to the aggregate stated principal amount of such Marathon Debt Securities.

SECTION 7.03. Determination of Fair Market Value of Actively Traded Marathon Equity Securities. (a) Fair Market Value Where There is No Holding Period. The Fair Market Value of any Actively Traded Marathon Equity Securities to be issued to Ashland on the Closing Date or applicable Installment Payment Date for which Marathon has not elected a Holding Period shall be deemed to be an amount equal to the product of (i) the aggregate number of such Actively Traded Marathon Equity Securities to be issued to Ashland multiplied by (ii) the Weighted Average Price (as defined below) of such Actively Traded Marathon Equity Securities on the National Market System of the NASDAQ or the relevant National Securities Exchange, as reported by The Wall Street Journal or, if not reported thereby, as reported by any other authoritative source, for the ten full Trading Days immediately preceding the Business Day immediately preceding the Closing Date or applicable Installment Payment Date; provided that at least five Trading Days prior to the commencement of such ten full Trading Day period (the “Required Disclosure Date”), Marathon shall have made appropriate public disclosure (including by issuing a press release and filing a copy of such press release with the Commission) of (A) the existence of the Transaction, (B) the Ashland Put Price and (C) the information required to be included in the Ashland Put Price Election Notice (each such public disclosure being a “Required Disclosure”). Marathon shall provide Ashland with a copy of each Required Disclosure prior to Marathon making such disclosure public. Any such Required Disclosure shall be in form and substance reasonably satisfactory to Ashland

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and its counsel. For purposes of this Section 7.03(a), the “Weighted Average Price” means the quotient of (1) the product of (x) the number of shares in each trade in such Actively Traded Marathon Equity Securities that occurred during such ten full Trading Day period multiplied by (y) the price at which each such trade occurred, divided by (2) the total number of shares traded in such Actively Traded Marathon Equity Securities that occurred during such ten full Trading Day period. In the event of (i) any split, combination or reclassification of the class of Actively Traded Marathon Equity Securities to be issued to Ashland on the Closing Date or applicable Installment Payment Date, (ii) any issuance or the authorization of any issuance of any other securities in exchange or in substitution for the shares of such class of Actively Traded Marathon Equity Securities or (iii) any issuance or declaration of cash or stock dividends or other distributions with respect to such class of Actively Traded Marathon Equity Securities, in each case at any time during the ten full Trading Day period referred to above, Marathon and Ashland shall make such adjustment to the Fair Market Value of such Actively Traded Equity Securities determined pursuant to this Section 7.03(a) as Marathon and Ashland shall mutually agree so as to preserve the economic benefits to Ashland expected on the date of this Agreement as a result of the issuance to it of such Actively Traded Marathon Equity Securities as part of the Ashland Put Price.

(b) Fair Market Value Where There is a Holding Period. In the event that Marathon elects pursuant to Section 4.04(a) or 4.04(b) to impose a Holding Period on any Actively Traded Marathon Equity Securities, the Fair Market Value of such Actively Traded Marathon Equity Securities shall be deemed to be an amount equal to (i) the Fair Market Value of such Actively Traded Marathon Equity Securities as determined pursuant to Section 7.03(a), minus (ii) a discount factor that takes into account such limitation on Ashland’s ability to freely trade such Actively Traded Marathon Equity Securities (a “7.03(b) Discount Amount”). The 7.03(b) Discount Amount with respect to the Fair Market Value of such Actively Traded Marathon Equity Securities shall be determined pursuant to the following procedures:

(i) Negotiation Period. For a period of 15 days following the applicable Ashland Put Price Election Date, Marathon and Ashland will negotiate in good faith to seek to reach an agreement as to the 7.03(b)

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Discount Amount. If Marathon and Ashland reach such an agreement, then the 7.03(b) Discount Amount shall be deemed to be the amount so agreed upon by Marathon and Ashland.

(ii) Appraisal Process. In the event Marathon and Ashland are unable to reach an agreement as to the 7.03(b) Discount Amount within the 15-day period referred to in clause (i) above, then within five Business Days after the expiration of such 15-day period (such fifth Business Day being referred to herein as the “7.03(b) Appraisal Process Commencement Date”), Marathon and Ashland each shall select a nationally recognized investment banking firm to (A) prepare a report which (1) sets forth such investment banking firm’s determination of the 7.03(b) Discount Amount (which shall be a single amount as opposed to a range) and (2) includes work papers which indicate the basis for and the calculation of the 7.03(b) Discount Amount (a “7.03(b) Appraisal Report”) and (B) deliver to Marathon or Ashland, as the case may be, an oral and written opinion addressed to such party as to the 7.03(b) Discount Amount. The fees and expenses of each investment banking firm shall be paid by the party selecting such investment banking firm. Each of Marathon and Ashland shall instruct its respective investment banking firm to (i) not consult with the other investment banking firm with respect to its view as to the 7.03(b) Discount Amount prior to the time that both investment banking firms have delivered their respective opinions to Marathon and Ashland, as applicable, (ii) deliver their respective 7.03(b) Appraisal Reports, together with their oral and written opinions as to the 7.03(b) Discount Amount (the “7.03(b) Initial Opinion Values”), within 15 days after the 7.03(b) Appraisal Process Commencement Date, and (iii) deliver a copy of its written opinion and its 7.03(b) Appraisal Report to the Company, the other party and the other party’s investment banking firm at the time it delivers its oral and written opinion to Marathon or Ashland, as applicable.

If the 7.03(b) Initial Opinion Values differ and the lesser 7.03(b) Initial Opinion Value equals or exceeds 90% of the greater 7.03(b) Initial Opinion Value, the 7.03(b) Discount Amount shall be deemed to

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be an amount equal to (1) the sum of the 7.03(b) Initial Opinion Values divided by (2) two.

If the 7.03(b) Initial Opinion Values differ and the lesser 7.03(b) Initial Opinion Value is less than 90% of the greater 7.03(b) Initial Opinion Value, then:

(i) within two Business Days after both investment banking firms have delivered their respective opinions to Marathon or Ashland, as applicable, each investment banking firm shall, at a single meeting at which Marathon, Ashland, the Company and the other investment banking firm are present, make a presentation with respect to its 7.03(b) Initial Opinion Value. At such presentation, Marathon, Ashland, the Company and the other investment banking firm shall be entitled to ask questions as to the basis for and the calculation of such investment banking firm’s 7.03(b) Initial Opinion Value; and

(ii) Marathon and Ashland shall, within five Business Days after the date Marathon and Ashland receive the 7.03(b) Initial Opinion Values (such fifth Business Day being referred to herein as the “7.03(b) Subsequent Appraisal Process Commencement Date”), jointly select a third nationally recognized investment banking firm to (i) prepare a 7.03(b) Appraisal Report and (ii) deliver an oral and written opinion addressed to Marathon and Ashland as to the 7.03(b) Discount Amount. The fees and expenses of such third investment banking firm shall be paid 50% by Marathon and 50% by Ashland. Such third investment banking firm shall not be provided with the 7.03(b) Initial Opinion Values and shall not consult with the initial investment banking firms with respect thereto. During such five-Business Day period, Marathon and Ashland shall negotiate in good faith to independently reach an agreement as to the 7.03(b) Discount Amount. If Marathon and Ashland reach such an agreement, then the 7.03(b) Discount Amount shall be deemed to be the amount so agreed upon by Marathon and Ashland. If Marathon and Ashland are unable to reach such an agreement, then Marathon and Ashland shall instruct such third investment banking firm to deliver its 7.03(b) Appraisal Report, together with its oral and written opinion as to the 7.03(b) Discount Amount (the “7.03(b) Third Opinion Value”),

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within 15 days after the 7.03(b) Subsequent Appraisal Process Commencement Date. The 7.03(b) Discount Amount in such circumstance shall be deemed to be an amount equal to (1) the sum of (x) the 7.03(b) Third Opinion Value plus (y) whichever of the two 7.03(b) Initial Opinion Values is closer to the 7.03(b) Third Opinion Value (or, if the 7.03(b) Third Opinion Value is exactly halfway between the two 7.03(b) Initial Opinion Values, the 7.03(b) Third Opinion Value), divided by (2) two.

SECTION 7.04. Determination of Fair Market Value of Non-Actively Traded Marathon Equity Securities. (a) Negotiation Period. If Marathon proposes to issue (or to have issued) to Ashland Marathon Equity Securities that are not Actively Traded Marathon Equity Securities, then for a period of 15 days following the applicable Ashland Put Price Election Date, Marathon and Ashland will negotiate in good faith to seek to reach an agreement as to the Fair Market Value of such Marathon Equity Securities, taking into account, if there is a Holding Period, a discount factor that takes into account such limitation on Ashland’s ability to freely trade such Marathon Equity Securities (a “7.04 Discount Amount”). If Marathon and Ashland reach such an agreement, then the Fair Market Value of such Marathon Equity Securities shall be deemed to be the amount so agreed upon by Marathon and Ashland.

(b) Appraisal Process. In the event Marathon and Ashland are unable to reach an agreement as to such Fair Market Value of Marathon Equity Securities and such 7.04 Discount Amount, if any, within the 15-day period referred to in clause (a) above, then within five Business Days after the expiration of such 15-day period (such fifth Business Day being referred to herein as the “7.04 Appraisal Process Commencement Date”), Marathon and Ashland each shall select a nationally recognized investment banking firm to (i) prepare a report which (1) sets forth such investment banking firm’s determination of the Fair Market Value of such Marathon Equity Securities (which shall be a single amount as opposed to a range), taking into account, if there is a Holding Period, a 7.04 Discount Amount, which is determined by such investment banking firm, and (2) includes work papers which separately indicate the basis for and the calculation of the Fair Market Value of such Marathon Equity Securities and, if there is a Holding Period, the basis for and the calculation of the 7.04 Discount Amount (a “7.04

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Appraisal Report”) and (ii) deliver to Marathon or Ashland, as the case may be, an oral and written opinion addressed to such party as to the Fair Market Value of such Marathon Equity Securities (which opinion shall take into account a 7.04 Discount Amount if there is a Holding Period with respect to such Marathon Equity Securities). The fees and expenses of each investment banking firm shall be paid by the party selecting such investment banking firm. Each of Marathon and Ashland shall instruct its respective investment banking firm to (i) not consult with the other investment banking firm with respect to its view as to the Fair Market Value of such Marathon Equity Securities and the 7.04 Discount Amount prior to the time that both investment banking firms have delivered their respective opinions to Marathon and Ashland, as applicable, (ii) deliver their respective 7.04 Appraisal Reports, together with their oral and written opinions as to the Fair Market Value of such Marathon Equity Securities (the “7.04 Initial Opinion Values”), within 15 days after the 7.04 Appraisal Process Commencement Date, and (iii) deliver a copy of its written opinion and its 7.04 Appraisal Report to the Company, the other party and the other party’s investment banking firm at the time it delivers its oral and written opinion to Marathon or Ashland, as applicable.

If the 7.04 Initial Opinion Values differ and the lesser 7.04 Initial Opinion Value equals or exceeds 90% of the greater 7.04 Initial Opinion Value, the Fair Market Value of such Marathon Equity Securities shall be deemed to be an amount equal to (1) the sum of the 7.04 Initial Opinion Values divided by (2) two.

If the 7.04 Initial Opinion Values differ and the lesser 7.04 Initial Opinion Value is less than 90% of the greater 7.04 Initial Opinion Value, then:

(i) within two Business Days after both investment banking firms have delivered their respective opinions to Marathon or Ashland, as applicable, each investment banking firm shall, at a single meeting at which Marathon, Ashland, the Company and the other investment banking firm are present, make a presentation with respect to its 7.04 Initial Opinion Value. At such presentation, Marathon, Ashland, the Company and the other investment banking firm shall be entitled to ask questions as to the basis for and the calculation of

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such investment banking firm’s 7.04 Initial Opinion Value; and

(ii) Marathon and Ashland shall, within five Business Days after the date Marathon and Ashland receive the 7.04 Initial Opinion Values (such fifth Business Day being referred to herein as the “7.04 Subsequent Appraisal Process Commencement Date”), jointly select a third nationally recognized investment banking firm to (i) prepare a 7.04 Appraisal Report and (ii) deliver an oral and written opinion addressed to Marathon and Ashland as to the Fair Market Value of such Marathon Equity Securities (which opinion shall take into account a 7.04 Discount Amount if there is a Holding Period with respect to such Marathon Equity Securities). The fees and expenses of such third investment banking firm shall be paid 50% by Marathon and 50% by Ashland. Such third investment banking firm shall not be provided with the 7.04 Initial Opinion Values and shall not consult with the initial investment banking firms with respect thereto. During such five-Business Day period, Marathon and Ashland shall negotiate in good faith to independently reach an agreement as to the Fair Market Value of such Marathon Equity Securities. If Marathon and Ashland reach such an agreement, then the Fair Market Value of such Marathon Equity Securities shall be deemed to be the amount so agreed upon by Marathon and Ashland. If Marathon and Ashland are unable to reach such an agreement, then Marathon and Ashland shall instruct such third investment banking firm to deliver its 7.04 Appraisal Report, together with its oral and written opinion as to the Fair Market Value of such Marathon Equity Securities (the “7.04 Third Opinion Value”), within 15 days after the 7.04 Subsequent Appraisal Process Commencement Date. The Fair Market Value of such Marathon Equity Securities in such circumstance shall be deemed to be an amount equal to (i) the sum of (x) the 7.04 Third Opinion Value plus (y) whichever of the two 7.04 Initial Opinion Values is closer to the 7.04 Third Opinion Value (or, if the 7.04 Third Opinion Value is exactly halfway between the two 7.04 Initial Opinion Values, the 7.04 Third Opinion Value), divided by (ii) two.

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ARTICLE VIII

Certain Matters Relating to Securities

SECTION 8.01. Certain Requirements with Respect to Marathon Debt Securities. All debt securities issued to Ashland pursuant to Section 4.02(c) shall (i) be unsecured senior public fixed income debt securities of (a) USX or (b) Marathon and fully guaranteed as to performance by USX; (ii) have maturities of 5 to 7 years; (iii) have yields which are comparable to those of 5 to 7 year public debt instruments issued by companies whose Long Term Debt at the time of the issuance of such debt securities to Ashland is rated by S&P and Moody’s at least equal to the respective ratings by S&P and Moody’s of USX’s Long Term Debt; (iv) be priced to trade at par initially; and (v) have covenants substantially the same as those included in other outstanding senior publicly traded debt instruments of USX, including a negative pledge providing for pari passu security rights and usual and customary successorship provisions concerning changes in USX’s ownership (all such debt securities are referred to herein as “Marathon Debt Securities”).

SECTION 8.02. Procedures with Respect to the Issuance of Securities. All Securities to be issued hereunder shall be accompanied on the Closing Date or applicable Installment Payment Date by (i) a certificate from an authorized officer of the Issuer and (ii) an opinion from such Issuer’s counsel, in each case as to such matters as Ashland may reasonably request, including, but not limited to the matters substantially as follows (which shall be made as of the Closing Date or applicable Installment Payment Date):

(i) the Issuer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation with the power and authority to own, lease and operate its assets and to conduct the business now being or to be conducted by it. The Issuer is duly authorized, qualified or licensed to do business as a foreign corporation or other organization in good standing in each of the jurisdictions in which its right, title or interest in or to any of the assets held by it or the business conducted by it requires such authorization, qualification or licensing, except where the failure to

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be so authorized, qualified, licensed or in good standing would not, individually or in the aggregate, result in an Issuer Material Adverse Effect;

(ii) the Issuer’s authorized capitalization is as set forth in its Exchange Act filings (or, in the circumstance where Ashland has made a Demand Registration, as set forth in the Registration Statement or Offering Memorandum, as applicable, with respect to such Securities). All of the outstanding equity securities of the Issuer are duly and validly authorized and issued, are fully paid and nonassessable and were not issued in violation of or subject to any preemptive rights or other contractual rights to purchase securities;

(iii) if such Securities are Marathon Equity Securities, such Securities are duly authorized, validly issued and outstanding, are fully paid and nonassessable, and were not issued in violation of or subject to any preemptive rights or other contractual rights to purchase securities;

(iv) if such Securities are Marathon Debt Securities, such Securities have been duly authorized and validly issued by the Issuer and constitute legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms, except as such enforcement is subject to the effect of any applicable bankruptcy, insolvency, reorganization or other law relating to or affecting creditors’ rights generally and general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law);

(v) such Securities conform in all material respects to the description thereof contained in the Issuer’s Exchange Act filings (or, in the circumstance where Ashland has made a Demand Registration, to the description thereof contained in the Registration Statement or Offering Memorandum, as applicable, with respect to such Securities) and the certificates evidencing such Securities will be, upon issuance, in due and proper form;

(vi) if such Securities are Marathon Equity Securities, such Securities have been authorized

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conditionally for listing on each national securities exchange on which the other securities of the Issuer of the same class are listed at the time of the Closing Date or Installment Payment Date, subject to issuance and certain other conditions that are not material;

(vii) if such Securities are Marathon Debt Securities, the execution and delivery by the Issuer of each agreement pursuant to which such Securities have been issued or which relate to such Securities (each, a “Securities Document”) and the consummation by it of the transactions contemplated thereby have been duly authorized and approved by all necessary corporate or other action on the part of the Issuer. Each Securities Document has been duly executed and delivered by the Issuer and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as such enforcement is subject to the effect of any applicable bankruptcy, insolvency, reorganization or other law relating to or affecting creditors’ rights generally and general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law);

(viii) neither the execution and delivery by the Issuer of the Securities Documents (in the case of Marathon Debt Securities), nor the issuance of the Securities pursuant to this Agreement and/or such Securities Documents will (a) conflict with, or results in the breach of any provision of, the charter or by-laws or similar governing or organizational documents of the Issuer or any of its subsidiaries, (b) violate any Applicable Law or any permit, order, award, injunction, decree or judgment of any Governmental Authority applicable to or binding upon the Issuer or any of its subsidiaries or to which any of their respective properties is subject or (c) violate, conflict with or result in the breach or termination of, or otherwise give any other person the right to terminate, or constitute a default, event of default or an event which with notice, lapse of time or both, would constitute a default or event of default under the terms of, any mortgage, indenture, deed of trust or lease or other agreement or instrument to which the Issuer or any of its subsidiaries is a party or by which any of their respective properties or

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assets is subject, except, in the case of clauses (b) and (c) for such violations, conflicts, breaches, terminations and defaults which would not, individually or in the aggregate, result in an Issuer Material Adverse Effect; and

(ix) except as set forth on a schedule to such certificate or opinion, no Governmental Approval or other consent is required by the Issuer for the execution and delivery by it of the Securities Documents (in the case of Marathon Debt Securities) or the issuance of the Securities pursuant to this Agreement and/or such Securities Documents, except (a) for such Governmental Approvals or other consents as have been obtained or (b) where the failure to obtain such Governmental Approvals or other consents would not, individually or in the aggregate, result in an Issuer Material Adverse Effect.

If any Securities are issued by Marathon and guaranteed by USX, each of Marathon and USX shall provide Ashland with a certificate and an opinion of counsel in accordance with this Section 8.02.

SECTION 8.03. Holding Period. If Marathon elects (by so notifying Ashland in the Ashland Put Price Election Notice) to impose a Holding Period with respect to sales by Ashland of Marathon Equity Securities issued to Ashland on the Closing Date or on an Installment Payment Date, as applicable, then Ashland shall not be permitted to sell such Marathon Equity Securities during such Holding Period. The term “Holding Period”, with respect to any Marathon Equity Securities, means the period commencing on the Closing Date or applicable Installment Payment Date and ending on such later date as Marathon shall state in the Ashland Put Price Election Notice; provided that the length of a Holding Period with respect to any Marathon Equity Securities shall in no event exceed 30 days.

SECTION 8.04. Manner of Sale of Marathon Equity Securities. Ashland agrees to sell all Marathon Equity Securities (i) pursuant to a bona fide Underwritten Public Offering managed by one or more Bulge Bracket Investment Banking Firms selected by Ashland, or by one or more other investment banking firms selected by Ashland and to which Marathon or USX shall not have reasonably objected, in a manner reasonably designed to effect a broad distribution of

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such Marathon Equity Securities (a “Qualifying Public Offering”), (ii) to any person, provided that after giving effect to such sale such person beneficially owns, together with such person’s Affiliates, no more than 5% of the Marathon Equity Securities of the relevant issuer then outstanding on a fully diluted basis (a “Fully Distributed Sale”) or (iii) to a broker or underwriter selected by Ashland who agrees to effect any subsequent transfer by it of such Marathon Equity Securities in a Qualifying Public Offering or a Fully Distributed Sale.

ARTICLE IX

Closing; Conditions to Closing; Consequences of Delay

SECTION 9.01. Closing. (a) Closing Date. The closing (the “Closing”) of (i) the purchase and sale of Ashland’s Membership Interests and the Ashland LOOP/LOCAP Interest pursuant to Marathon’s exercise of its Special Termination Right or Marathon Call Right or Ashland’s exercise of its Ashland Put Right or (ii) the purchase and sale of Marathon’s Membership Interests pursuant to Ashland’s exercise of its Special Termination Right, shall be held at the offices of Marathon, at 10:00 a.m. on the later of (x) the 60th day after the Appraised Value Determination Date (or at such other place or at such other time or such other date as Marathon and Ashland shall mutually agree) (the “Scheduled Closing Date”) and (y) the fifth Business Day following the satisfaction or waiver of all conditions to the obligations of Marathon and Ashland set forth in Section 9.02. The date on which the Closing actually occurs is referred to herein as the “Closing Date”.

(b) Purchase Procedures in the Event of the Exercise by Marathon of its Special Termination Right or its Marathon Call Right. In the event that Marathon exercises its Special Termination Right or Marathon Call Right, at the Closing:

(i) Marathon shall deliver to Ashland, in Cash or by wire transfer to a bank account designated in writing by Ashland, immediately available funds in an amount equal to the sum of (x) the Special Termination Price or Marathon Call Price, as applicable, plus (y) the amount of interest payable pursuant to Section 3.01, plus (z) the amount of interest, if any,

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payable pursuant to Section 9.04(b), 9.05, 9.08(b) or 9.09;

(ii) Ashland shall Transfer to Marathon (or, if Marathon so elects by written notice to Ashland, a Wholly Owned Subsidiary of Marathon or USX) in accordance with Article X of the LLC Agreement, all of Ashland’s Membership Interests;

(iii) Ashland shall Transfer to Marathon or, if Marathon so elects by written notice to Ashland, to the Company or such other person as Marathon shall direct, the Ashland LOOP/LOCAP Interest; and

(iv) the Company shall release to Marathon any amounts held in the Escrow Account, including any income earned thereon.

(c) Purchase Procedures in the Event of the Exercise by Ashland of its Ashland Put Right. In the event that Ashland exercises its Ashland Put Right, at the Closing:

(i) Marathon shall deliver to Ashland, in Cash or by wire transfer to a bank account designated in writing by Ashland, immediately available funds in an amount equal to the sum of (x) the Cash portion of the Ashland Put Price or first Installment Payment, as applicable, plus (y) the amount of interest payable pursuant to Section 4.01, plus (z) the amount of interest, if any, payable pursuant to Section 9.04(b), 9.05, 9.08(b) or 9.09;

(ii) Marathon and/or USX, as applicable, shall issue the Securities to be issued on the Closing Date, if any, which Securities shall be accompanied by the certificate(s) and opinion(s) referred to in Section 8.02;

(iii) Ashland shall Transfer to Marathon or, if Marathon so elects by written notice to Ashland, a Wholly Owned Subsidiary of Marathon or USX in accordance with Article X of the LLC Agreement, all of Ashland’s Membership Interests;

(iv) Ashland shall Transfer to Marathon or, if Marathon so elects by written notice to Ashland, to the

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Company or such other person as Marathon shall direct, the Ashland LOOP/LOCAP Interest; and

(v) the Company shall release to Marathon any amounts held in the Escrow Account, including any income earned thereon.

In addition, on each of two remaining Scheduled Installment Payment Dates, if any, (i) Marathon shall deliver to Ashland, in Cash or by wire transfer to a bank account (which bank account has been designated in writing by Ashland at least two Business Days prior to the applicable Installment Payment Date), immediately available funds in an amount equal to the sum of (x) the Cash portion of the second and third Installment Payments, respectively, plus (y) the amount of interest payable pursuant to Section 4.01, plus (z) the amount of interest, if any, payable pursuant to Section 9.04(b) or 9.05; and (ii) Marathon and/or USX, as applicable, shall issue the Securities to be issued on such Installment Payment Dates, if any, which Securities shall be accompanied by the certificate(s) and opinion(s) referred to in Section 8.02.

(d) Purchase Procedures in the Event of the Exercise by Ashland of its Special Termination Right. In the event that Ashland exercises its Special Termination Right at the Closing:

(i) Ashland shall deliver to Marathon, in Cash or by wire transfer to a bank account designated in writing by Marathon, immediately available funds in an amount equal to the sum of (x) the Special Termination Price plus (y) the amount of interest payable pursuant to Section 2.01, plus (z) the amount of interest, if any, payable pursuant to Section 9.08(b) or 9.09;

(ii) Marathon shall Transfer to Ashland (or, if Ashland so elects by written notice to Marathon, a Wholly Owned Subsidiary of Ashland) in accordance with Article X of the LLC Agreement, all of Marathon’s Membership Interests; and

(iii) the Company shall release to Ashland any amounts held in the Escrow Account, including any income earned thereon.

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SECTION 9.02. Conditions to Closing. (a) Marathon’s Obligation in the Event of an Exercise by Marathon of its Special Termination Right or its Marathon Call Right or an Exercise by Ashland of its Ashland Put Right. Marathon’s obligation to purchase and pay for Ashland’s Membership Interests and the Ashland LOOP/LOCAP Interest pursuant to this Agreement in the event of an exercise by Marathon of its Special Termination Right or its Marathon Call Right or in the event of an exercise by Ashland of its Ashland Put Right is subject in each case to the satisfaction (or waiver by Marathon) as of the Closing of the following conditions:

(i) As of the Closing Date, there shall be no (i) injunction or restraining order of any nature issued by any Governmental Authority which directs, or which has the effect of directing, that the Closing shall not be consummated as herein provided or (ii) investigation, action or other proceeding that shall have been brought by any Governmental Authority and be pending on the Closing Date, or that shall have been threatened by any Governmental Authority, in any such case against Marathon or Ashland in connection with the consummation of the transactions contemplated by this Agreement which is reasonably likely to result in an injunction or restraining order which directs, or which has the effect of directing, that the Closing shall not be consummated as herein provided;

(ii) the waiting period under the HSR Act, if applicable to the purchase and sale of Ashland’s Membership Interests pursuant to this Agreement shall have expired or been terminated; and

(iii) Ashland shall have Transferred to Marathon (or, if Marathon shall have so elected by written notice to Ashland, a Wholly Owned Subsidiary of Marathon or USX) all of its Membership Interests on the Closing Date free and clear of all Liens.

It is understood and agreed that a breach by Ashland of any of its representations or warranties in this Agreement shall not constitute a condition to Marathon’s obligation to purchase and pay for Ashland’s Membership Interests and the Ashland LOOP/LOCAP Interest pursuant to this Agreement in the circumstances set forth above; provided that Marathon shall not be deemed to have waived any right to make a Claim

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against Ashland with respect to any Loss that Marathon suffers as a result of any such breach.

(b) Ashland’s Obligation in the Event of an Exercise by Marathon of its Special Termination Right or its Marathon Call Right or an Exercise by Ashland of its Ashland Put Right. Ashland’s obligation to sell its Membership Interests and the Ashland LOOP/LOCAP Interest to Marathon pursuant to this Agreement in the event of an exercise by Marathon of its Special Termination Right or its Marathon Call Right or in the event of an exercise by Ashland of its Ashland Put Right is subject in each case to the satisfaction (or waiver by Ashland) as of the Closing of the following conditions:

(i) As of the Closing Date, there shall be no (i) injunction or restraining order of any nature issued by any Governmental Authority which directs, or which has the effect of directing, that the Closing shall not be consummated as herein provided or (ii) investigation, action or other proceeding that shall have been brought by any Governmental Authority and be pending on the Closing Date, or threatened by any Governmental Authority, in any such case against Marathon or Ashland in connection with the consummation of the transactions contemplated by this Agreement which is reasonably likely to result in an injunction or restraining order which directs, or which has the effect of directing, that the Closing shall not be consummated as herein provided;

(ii) the waiting period under HSR Act, if applicable to the purchase and sale of Ashland’s Membership Interests pursuant to this Agreement shall have expired or been terminated;

(iii) Marathon shall have delivered to Ashland, in Cash or by wire transfer to a bank account designated in writing by Ashland, immediately available funds in an amount equal to (x) the Special Termination Price or Marathon Call Price, as applicable, or the Cash portion of the Ashland Put Price or applicable Installment Payment, plus (y) the amount of interest payable pursuant to Section 3.01 or 4.01, as applicable, plus (z) the amount of interest, if any, payable pursuant to Section 9.04(b) or 9.05; and

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(iv) Marathon or USX, as applicable, shall have issued the Securities to be issued on the Closing Date, if any, accompanied by the certificate(s) and opinion(s) referred to in Section 8.02.

It is understood and agreed that a breach by Marathon or USX of any of its respective representations or warranties in this Agreement shall not constitute a condition to Ashland’s obligation to sell its Membership Interests and the Ashland LOOP/LOCAP Interest to Marathon pursuant to this Agreement in the circumstances set forth above; provided that Ashland shall not be deemed to have waived any right to make a Claim against Marathon or USX with respect to any Loss that Ashland suffers as a result of any such breach.

(c) Ashland’s Obligation in the Event of an Exercise by Ashland of its Special Termination Right. Ashland’s obligation to purchase and pay for Marathon’s Membership Interests pursuant to this Agreement in the event of an exercise by Ashland of its Special Termination Right is subject to the satisfaction (or waiver by Ashland) as of the Closing of the following conditions:

(i) As of the Closing Date, there shall be no (i) injunction or restraining order of any nature issued by any Governmental Authority which directs, or which has the effect of directing, that the Closing shall not be consummated as herein provided or (ii) investigation, action or other proceeding that shall have been brought by any Governmental Authority and be pending on the Closing Date, or that shall have been threatened by any Governmental Authority, in any such case against Marathon or Ashland in connection with the consummation of the transactions contemplated by this Agreement which is reasonably likely to result in an injunction or restraining order which directs, or which has the effect of directing, that the Closing shall not be consummated as herein provided;

(ii) the waiting period under the HSR Act, if applicable to the purchase and sale of Marathon’s Membership Interests pursuant to this Agreement shall have expired or been terminated; and

(iii) Marathon shall have Transferred to Ashland (or, if Ashland shall have so elected by written notice to Marathon, a Wholly Owned Subsidiary of Ashland) all

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of its Membership Interests on the Closing Date free and clear of all Liens.

It is understood and agreed that a breach by Marathon or USX of any of its respective representations or warranties in this Agreement shall not constitute a condition to Ashland’s obligation to purchase and pay for Marathon’s Membership Interests pursuant to this Agreement in the circumstances set forth above; provided that Ashland shall not be deemed to have waived any right to make a Claim against Marathon or USX with respect to any Loss that Ashland suffers as a result of any such breach.

(d) Marathon’s Obligation in the Event of an Exercise by Ashland of its Special Termination Right. Marathon’s obligation to sell its Membership Interests to Ashland pursuant to this Agreement in the event of an exercise by Ashland of its Special Termination Right is subject to the satisfaction (or waiver by Marathon) as of the Closing of the following conditions:

(i) As of the Closing Date, there shall be no (i) injunction or restraining order of any nature issued by any Governmental Authority which directs, or which has the effect of directing, that the Closing shall not be consummated as herein provided or (ii) investigation, action or other proceeding that shall have been brought by any Governmental Authority and be pending on the Closing Date, or threatened by any Governmental Authority, in any such case against Marathon or Ashland in connection with the consummation of the transactions contemplated by this Agreement which is reasonably likely to result in an injunction or restraining order which directs, or which has the effect of directing, that the Closing shall not be consummated as herein provided;

(ii) the waiting period under HSR Act, if applicable to the purchase and sale of Marathon’s Membership Interests pursuant to this Agreement shall have expired or been terminated; and

(iii) Ashland shall have delivered to Marathon, in Cash or by wire transfer to a bank account designated in writing by Marathon, immediately available funds in an amount equal to (x) the Special Termination Price plus (y) the amount of interest payable pursuant to

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Section 2.01 plus (z) the amount of interest, if any, payable pursuant to Section 9.08(b) or 9.09.

It is understood and agreed that a breach by Ashland of any of its representations or warranties in this Agreement shall not constitute a condition to Marathon’s obligation to sell its Membership Interests to Ashland pursuant to this Agreement in the circumstances set forth above; provided that Marathon shall not be deemed to have waived any right to make a Claim against Ashland with respect to any Loss that Marathon suffers as a result of any such breach.

(e) Consequences of Inability To Transfer the Ashland LOOP/LOCAP Interest on the Closing Date. It shall not be a condition to the Closing of the Marathon Call Right, the Ashland Put Right or the Marathon Special Termination Right, as applicable, that Ashland shall have Transferred the Ashland LOOP/LOCAP Interest to Marathon, the Company or such other person as Marathon shall direct. In the event that any consents or approvals required for such Transfer are not obtained prior to the Closing of the Marathon Call Right, the Ashland Put Right or the Marathon Special Termination Right, as applicable, and as a consequence Ashland is not able to Transfer the Ashland LOOP/LOCAP Interest to Marathon, the Company or such other person as Marathon shall direct, as applicable, on the Closing Date, the parties hereto shall use their commercially reasonable best efforts to achieve any lawful and reasonable (including with respect to the costs and expenses to be borne by Ashland) arrangement proposed by Marathon under which Marathon or the Company, as applicable, shall obtain the economic claims, rights and benefits under the Ashland LOOP/LOCAP Interest. Such reasonable arrangement may include (i) Ashland subcontracting, sublicensing or subleasing to Marathon, the Company or such other person as Marathon shall direct, as applicable, any and all of Ashland’s rights, and delegating all of Ashland’s obligations, under the Ashland LOOP/LOCAP Interest, and (ii) Ashland granting to Marathon, the Company or such other person as Marathon shall direct, as applicable, a proxy (the “Ashland LOOP/LOCAP Irrevocable Proxy”) which shall authorize such party to exercise on Ashland’s behalf, all of Ashland’s voting rights with respect to the Ashland LOOP/LOCAP Interest. The costs and expenses incurred in connection with any such arrangements shall be borne 62% by Marathon and 38% by Ashland.

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SECTION 9.03. Consequences of a Delayed Closing of the Marathon Call Right or the Ashland Put Right Where Ashland Is at Fault. (a) Right to Revoke Ashland Put Exercise Notice or Marathon Call Exercise Notice. If the Closing of the Marathon Call Right or the Ashland Put Right shall not have occurred on or prior to the date that is 180 days after the Scheduled Closing Date, and (i) the delay is due to (x) a failure by Ashland to timely perform in any material respect any of its covenants and agreements contained herein or (y) the fact that any of Ashland’s representations and warranties contained herein have ceased to be true and correct in any material respect, and (ii) neither Marathon nor USX shall have (x) failed to timely perform in any material respect any of its covenants and agreements contained herein or (y) breached any of its representations and warranties contained herein in any material respect, then Marathon shall thereafter have the right, exercisable at any time prior to the Closing by written notice to Ashland, to revoke Ashland’s Ashland Put Exercise Notice or its Marathon Call Exercise Notice, as applicable.

(b) Adjustment to Ashland Put Price or Marathon Call Price. If the Closing of the Marathon Call Right or the Ashland Put Right does not occur on the Scheduled Closing Date, and (i) the delay is due to (x) a failure by Ashland to timely perform in any material respect any of its covenants and agreements contained herein or (y) the fact that any of Ashland’s representations and warranties contained herein have ceased to be true and correct in any material respect, and (ii) neither Marathon nor USX shall have (x) failed to timely perform in any material respect any of its covenants and agreements contained herein or (y) breached any of its representations and warranties contained herein in any material respect, then on such later date on which the Closing actually takes place (such later date being the “Delayed Closing Date”) Marathon shall deduct from the Marathon Call Price or the Ashland Put Price (or the first Installment Payment, as applicable) payable to Ashland on the Delayed Closing Date, an amount equal to the amount of interest accrued during the period commencing at 12:01 a.m. on the day immediately following the Scheduled Closing Date and ending on and including the Delayed Closing Date (the “Delayed Closing Date Interest Period”) on the Marathon Call Price, or the Ashland Put Price (or the first Installment Payment thereof, as applicable), at a rate per

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annum equal to the 30-day LIBOR Rate multiplied by 1.5, with daily accrual of interest.

(c) Other Consequences. In the event that Marathon revokes Ashland’s Ashland Put Exercise Notice or its Marathon Call Exercise Notice pursuant to Section 9.03(a), each of Marathon and Ashland shall thereafter have the right to exercise their respective Marathon Call Right and Ashland Put Right in accordance with the terms of this Agreement. Any such revocation shall not operate as a release of Ashland from any liability it may have to Marathon for any breach of its obligations under this Agreement and such revocation shall not in any way preclude Marathon from exercising any right or power hereunder or otherwise available to it at law or in equity as a result of any such breach.

SECTION 9.04. Consequences of a Delayed Closing of the Marathon Call Right or the Ashland Put Right Where Marathon or USX Is at Fault. (a) Revocation of Proxies; Payment of Distributions to Ashland; Right To Revoke Ashland Put Exercise Notice or Marathon Call Exercise Notice. If the Closing of the Marathon Call Right or the Ashland Put Right does not occur on the Scheduled Closing Date, and (i) the delay is due to (x) a failure by Marathon or USX to timely perform in any material respect any of its respective covenants and agreements contained herein or (y) the fact that any of Marathon’s or USX’s respective representations and warranties contained herein (or in any certificate required to be delivered to Ashland pursuant to Section 9.02(b)(iv)) have ceased to be true and correct in any material respect, and (ii) Ashland shall not have (x) failed to timely perform in any material respect any of its covenants and agreements contained herein or (y) breached any of its representations and warranties contained herein in any material respect, then (i) effective as of 12:01 a.m. on the day immediately following the Scheduled Closing Date, all Ashland Representatives Revocable Proxies and the Ashland LOOP/LOCAP Revocable Proxy shall automatically be revoked; (ii) Marathon shall, and shall cause each of its Representatives to, promptly take all such actions as are necessary to provide that the Company shall thereupon resume making distributions of Distributable Cash and Tax Liability Distributions directly to Ashland pursuant to Article V of the LLC Agreement; (iii) Marathon shall immediately pay to Ashland an amount equal to all Exercise Period Distributions received by

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Marathon from the Company in accordance with the provisions of Section 5.01(a)(ii), together with interest on each such Exercise Period Distribution at a rate per annum equal to the Base Rate, with daily accrual of interest, from (but excluding) the date such amount was otherwise payable to Ashland (or, if earlier, the date such amount was paid to Marathon) to (and including) the date such amount is paid to Ashland in accordance with the provisions of this clause (iii); (iv) the Company shall immediately release to Ashland all amounts then held in the Escrow Account, including any income earned thereon; and (v) if the Closing shall not have occurred on or prior to the date that is 180 days after the Scheduled Closing Date, Ashland thereafter shall have the right, exercisable at any time prior to the Closing by written notice to Marathon, to revoke its Ashland Put Exercise Notice or Marathon’s Marathon Call Exercise Notice, as applicable.

(b) Adjustments to Ashland Put Price or Marathon Call Price. In addition, if the Closing of the Marathon Call Right or the Ashland Put Right does not occur on the Scheduled Closing Date, and (i) the delay is due to (x) a failure by Marathon or USX to timely perform in any material respect any of its respective covenants and agreements contained herein or (y) the fact that any of Marathon’s or USX’s respective representations and warranties contained herein have ceased to be true and correct in any material respect, and (ii) Ashland shall not have (x) failed to timely perform in any material respect any of its covenants and agreements contained herein or (y) breached any of its representations and warranties contained herein in any material respect, then Marathon shall be entitled to deduct from the Marathon Call Price or from the Ashland Put Price (or the first Installment Payment, as applicable) payable to Ashland on the Delayed Closing Date, an amount (the “9.04(b) Post-Scheduled Closing Date Distribution Amount”) equal to the amount of any Ashland Exercise Period Distributions that Ashland shall have received from the Company in Cash during the Delayed Closing Date Interest Period and, on the Delayed Closing Date, Marathon shall pay to Ashland in addition to the Marathon Call Price or the Ashland Put Price (or the first Installment Payment, as applicable) and related accrued interest payable pursuant to Section 3.01 or 4.01, as applicable, an amount in Cash equal to the amount of interest accrued during the Delayed Closing Interest Period on an amount equal to (1) the Marathon Call Price or the Ashland Put Price (or the first Installment Payment thereof,

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as applicable) minus (2) the 9.04(b) Post-Scheduled Closing Date Distribution Amount, at a rate per annum equal to the 30-day LIBOR Rate multiplied by 1.5, with daily accrual of interest.

(c) Other Consequences. In the event that Ashland revokes its Ashland Put Exercise Notice or Marathon’s Marathon Call Exercise Notice pursuant to clause (v) of Section 9.03(a), each of Ashland and Marathon shall thereafter have the right to exercise their respective Ashland Put Right and Marathon Call Right in accordance with the terms of this Agreement. Any such revocation shall not operate as a release of Marathon or USX from any liability it may have to Ashland for any breach of its obligations under this Agreement and such revocation shall not in any way preclude Ashland from exercising any right or power hereunder or otherwise available to it at law or in equity as a result of any such breach.

SECTION 9.05. Consequences of a Delayed Closing of the Marathon Call Right or the Ashland Put Right Where No Party Is at Fault. If the Closing of the Marathon Call Right or the Ashland Put Right does not occur on the Scheduled Closing Date, and the delay is not due to a failure by any party hereto to timely perform in any material respect any of its respective covenants and agreements contained herein or to the fact that any party’s representations and warranties contained herein have ceased to be true and correct in any material respect, then Marathon shall pay to Ashland on the Delayed Closing Date, in addition to the Marathon Call Price or the Ashland Put Price (or the first Installment Payment, as applicable) and related accrued interest payable pursuant to Section 3.01 or 4.01, as applicable, an amount in Cash equal to the amount of interest accrued during the Delayed Closing Interest Period on the Marathon Call Price or the Ashland Put Price (or the first Installment Payment, as applicable), at a rate per annum equal to the Base Rate, with daily accrual of interest. If the Delayed Closing Date does not occur on or prior to the date that is 180 days after the Scheduled Closing Date and the delay is not due to an action or failure to act by any of Marathon, USX or Ashland, then (i) effective as of 12:01 a.m. on the day immediately following the last day of such 180-day period, all Ashland Representatives Revocable Proxies and the Ashland LOOP/LOCAP Revocable Proxy shall automatically be revoked; (ii) Marathon shall, and shall cause each of its

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Representatives to, promptly take all such actions as are necessary to provide that the Company shall resume making distributions of Distributable Cash and Tax Liability Distributions directly to Ashland pursuant to Article V of the LLC Agreement; (iii) Marathon shall immediately pay to Ashland an amount equal to all Exercise Period Distributions received by Marathon from the Company in accordance with the provisions of Section 5.01(a)(ii), together with interest on each such Exercise Period Distribution at a rate per annum equal to the Base Rate, with daily accrual of interest, from (but excluding) the date such amount was otherwise payable to Ashland (or, if earlier, the date such amount was paid to Marathon) to (and including) the date such amount is paid to Ashland in accordance with the provisions of this clause (iii); (iv) the Company shall immediately release to Ashland all amounts then held in the Escrow Account, including any income earned thereon; and (v) the parties shall be restored to their rights as though the Ashland Put Right or the Marathon Call Right had never been exercised, without liability to any party and without any effect on the ability of Ashland to exercise its Ashland Put Right or Marathon to exercise its Marathon Call Right in accordance with the terms of this Agreement in the future.

SECTION 9.06. Consequences of Delayed Second or Third Scheduled Installment Payment. If Marathon shall fail to make an Installment Payment on the second or third Scheduled Installment Payment Date, if applicable, then on such later date on which the applicable Installment Payment is actually made (such later date being a “Delayed Installment Payment Date”), Marathon shall pay to Ashland, in addition to the applicable Installment Payment and related accrued interest payable pursuant to Section 3.01 or 4.01, as applicable, an amount in Cash equal to the amount of interest accrued during the period commencing on the day immediately following the Scheduled Installment Payment Date and ending on and including the date of the payment of the relevant Installment Payment (the “Delayed Installment Payment Date Interest Period”) on the applicable Installment Payment, at a rate per annum equal to the 30 day LIBOR Rate multiplied by 1.5, with daily accrual of interest.

SECTION 9.07. Consequences of a Delayed Closing of the Special Termination Right Where Terminating Member Is at Fault. (a) Continuation of Term of the Company; Right to Specific Performance. If the Closing of the Special Termination Right shall not have occurred on or prior to the

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Scheduled Closing Date, and (i) the delay is due to (x) a failure by the Terminating Member (or, if Marathon is the Terminating Member, Marathon or USX) to timely perform in any material respect any of its covenants and agreements contained herein or (y) the fact that any of the Terminating Member’s (or, if Marathon is the Terminating Member, Marathon’s or USX’s) representations and warranties contained herein have ceased to be true and correct in any material respect, and (ii) the Non-Terminating Member (or, if Marathon is the Non- Terminating Member, Marathon or USX) shall not have (x) failed to timely perform in any material respect any of its covenants and agreements contained herein or (y) breached any of its representations and warranties contained herein in any material respect, then the Non-Terminating Member shall have the right to elect, by written notice to the Company and the Terminating Member, to either (i) terminate the Term of the Company at the end of the Initial Term or the then- current 10-year extension thereof, as applicable (in which case the Term of the Company shall automatically terminate upon the expiration of the Initial Term or the then-current 10-year extension thereof), or (ii) extend the Term of the Company for two additional years following the expiration of the Initial Term or the then-current 10-year extension thereof, as applicable (in which case the Term of the Company shall automatically be extended for such additional two-year period).

(b) Adjustment to Special Termination Price. If the Closing of the Special Termination Right does not occur on the Scheduled Closing Date, and (i) the delay is due to (x) a failure by the Terminating Member (or, if Marathon is the Terminating Member, Marathon or USX) to timely perform in any material respect any of its covenants and agreements contained herein or (y) the fact that any of the Terminating Member’s (or, if Marathon is the Terminating Member, Marathon’s or USX’s) representations and warranties contained herein have ceased to be true and correct in any material respect, and (ii) the Non-Terminating Member (or, if Marathon is the Terminating Member, Marathon or USX) shall not have (x) failed to timely perform in any material respect any of its covenants and agreements contained herein or (y) breached any of its representations and warranties contained herein in any material respect, then on the Delayed Closing Date the Non-Terminating Member shall deduct from the Special Termination Price payable to the Terminating Member on the Delayed Closing Date, an amount equal to the amount of interest accrued during the Delayed

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Closing Date Interest Period on the Special Termination Price, at a rate per annum equal to the 30-day LIBOR Rate multiplied by 1.5, with daily accrual of interest.

SECTION 9.08. Consequences of a Delayed Closing of the Special Termination Right Where Non-Terminating Member Is at Fault.(a) Revocation of Proxies; Payment of Distributions to Terminating Member; Right to Revoke Special Termination Exercise Notice. If the Closing of the Special Termination Right does not occur on the Scheduled Closing Date, and (i) the delay is due to a failure by the Non-Terminating Member (or, if Marathon is the Non-Terminating Member, Marathon or USX) to timely perform in any material respect any of its covenants and agreements contained herein or (y) the fact that any of the Non- Terminating Member’s (or, if Marathon is the Non-Terminating Member, Marathon’s or USX’s) representations and warranties contained herein have ceased to be true and correct in any material respect, and (ii) the Terminating Member (or, if Marathon is the Terminating Member, Marathon or USX) shall not have (x) failed to timely perform in any material respect any of its covenants and agreements contained herein or (y) breached any of its representations and warranties contained herein in any material respect, then (i) effective as of 12:01 a.m. on the day immediately following the Scheduled Closing Date, all Marathon Representative Revocable Proxies (in the circumstance where Marathon is the Terminating Member) or all Ashland Representative Revocable Proxies and the Ashland LOOP/LOCAP Revocable Proxy (in the circumstance where Ashland is the Terminating Member) shall automatically be revoked; (ii) the Non-Terminating Member shall, and shall cause each of its Representatives to, promptly take all such actions as are necessary to provide that the Company shall thereupon resume making distributions of Distributable Cash and Tax Liability Distributions directly to the Terminating Member pursuant to Article V of the LLC Agreement; (iii) the Non-Terminating Member shall immediately pay to the Terminating Member an amount equal to all Exercise Period Distributions received by the Non- Terminating Member from the Company in accordance with the provisions of Section 5.01(a)(ii) or Section 5.01(b)(ii), as applicable, together with interest on each such Exercise Period Distribution at a rate per annum equal to the Base Rate, with daily accrual of interest, from (but excluding) the date such amount was otherwise payable to the Terminating Member (or, if earlier, the date such amount was paid to the Non-Terminating Member) to (and including) the

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date such amount is paid to the Terminating Member in accordance with the provisions of this clause (iii); (iv) the Company shall immediately release to the Terminating Member all amounts then held in the Escrow Account, including any income earned thereon; and (v) if the Closing shall not have occurred on or prior to the date that is 120 days before the expiration of the Initial Term or the then-current 10-year extension thereof, each of the Terminating Member and the Non-Terminating Member thereafter shall have the right, exercisable at any time prior to the Closing by written notice to the other party, to revoke the Non-Terminating Member’s Special Termination Exercise Notice, in which event the Term of the Company shall automatically terminate upon the expiration of the Initial Term or the then-current 10-year extension thereof.

(b) Adjustments to Special Termination Price. In addition, if the Closing of the Special Termination Right does not occur on the Scheduled Closing Date, and (i) the delay is due to (x) a failure by the Non-Terminating Member (or, if Marathon is the Non-Terminating Member, Marathon or USX) to timely perform in any material respect any of its covenants and agreements contained herein or (y) the fact that any of the Non-Terminating Member’s (or, if Marathon is the Non-Terminating Member, Marathon’s or USX’s) representations and warranties contained herein have ceased to be true and correct in any material respect, and (ii) the Terminating Member (or, if Marathon is the Terminating Member, Marathon or USX) shall not have (x) failed to timely perform in any material respect any of its covenants and agreements contained herein or (y) breached any of its representations and warranties contained herein in any material respect, then the Non-Terminating Member shall be entitled to deduct from the Special Termination Price payable to the Terminating Member on the Delayed Closing Date, an amount (the “9.08(b) Post-Scheduled Closing Date Distribution Amount”) equal to the amount of any Exercise Period Distributions that the Terminating Member shall have received from the Company in Cash during the Delayed Closing Date Interest Period and, on the Delayed Closing Date, the Non-Terminating Member shall pay to the Terminating Member in addition to the Special Termination Price and related accrued interest payable pursuant to Section 2.01, an amount in Cash equal to the amount of interest accrued during the Delayed Closing Interest Period on an amount equal to (1) the Special Termination Price minus (2) the 9.08(b) Post-Scheduled Closing Date Distribution Amount, at a rate

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per annum equal to the 30-day LIBOR Rate multiplied by 1.5, with daily accrual of interest.

(c) Other Consequences. In the event that the Terminating Member revokes the Non-Terminating Member’s Special Termination Exercise Notice, then the Non-Terminating Member shall not thereafter have the right to exercise its Special Termination Right. Any such revocation shall not operate as a release of the Non-Terminating Member from any liability it may have to the Terminating Member for any breach of its obligations under this Agreement and such revocation shall not in any way preclude the Terminating Member from exercising any right or power hereunder or otherwise available to it at law or in equity as a result of any such breach.

SECTION 9.09. Consequences of Delayed Closing of Special Termination Right Where No Party Is at Fault. If the Closing of the Special Termination Right does not occur on the Scheduled Closing Date, and the delay is not due to a failure by any party hereto to timely perform in any material respect any of its respective covenants and agreements contained herein or to the fact that any party’s representations and warranties contained herein have ceased to be true and correct in any material respect, then the Non-Terminating Member shall pay to the Terminating Member on the Delayed Closing Date, in addition to the Special Termination Price and related accrued interest payable pursuant to Section 2.01, an amount in Cash equal to the amount of interest accrued during the Delayed Closing Interest Period on the Special Termination Price, at a rate per annum equal to the Base Rate, with daily accrual of interest. If the Delayed Closing Date does not occur on or prior to the date that is 120 days before the expiration of the Initial Term or the then-current 10-year extension thereof and the delay is not due to an action or failure to act by the Terminating Member or the Non-Terminating Member, then (i) effective as of 12:01 a.m. on the day immediately following such 120th day before the expiration of the Initial Term or the then-current 10-year extension thereof, all Marathon Representative Revocable Proxies (in the circumstance where Marathon is the Terminating Member) or all Ashland Representative Revocable Proxies and the Ashland LOOP/LOCAP Revocable Proxy (in the circumstance where Ashland is the Terminating Member) shall be revoked; (ii) the Non-Terminating Member shall, and shall cause each of its Representatives to, promptly take all such actions as

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are necessary to provide that the Company shall resume making distributions of Distributable Cash and Tax Liability Distributions directly to the Terminating Member pursuant to Article V of the LLC Agreement; (iii) the Non-Terminating Member shall immediately pay to the Terminating Member an amount equal to all Exercise Period Distributions received by the Non-Terminating Member from the Company in accordance with the provisions of Section 5.01(a)(ii) or Section 5.01(b)(ii), as applicable, together with interest on each such Exercise Period Distribution at a rate per annum equal to the Base Rate, with daily accrual of interest, from (but excluding) the date such amount was otherwise payable to the Terminating Member (or, if earlier, the date such amount was paid to the Non- Terminating Member) to (and including) the date such amount is paid to the Terminating Member in accordance with the provisions of this clause (iii); (iv) the Company shall immediately release to the Terminating Member all amounts then held in the Escrow Account, including any income earned thereon; and (v) the Term of the Company shall automatically terminate upon the expiration of the Initial Term or the then-current 10-year extension thereof.

ARTICLE X

Registration Rights

SECTION 10.01. Registration upon Request. (a) Ashland shall have the right to make a written demand upon the issuer or, in the case of any Marathon Debt Securities issued by Marathon and guaranteed by USX, issuers of any class of Securities delivered or to be delivered to Ashland as payment of any portion of the Ashland Put Price (both parties hereinafter referred to collectively as the “Issuer”), on not more than six separate occasions (subject to the provisions of this Section 10.01), to either, at Ashland’s option, (i) register under the Securities Act all or a portion of such Securities for purposes of a public offering by Ashland of such Securities or (ii) prepare an Offering Memorandum that covers all or a portion of such Securities for purposes of a private placement by Ashland of such Securities (either of such requests being referred to herein as a “Demand Registration”) that were not registered under the Securities Act at the time of issuance thereof to Ashland on the Closing Date or Installment Payment Date, as the case may be, and the Issuer shall use its best efforts

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to file a Registration Statement and cause such Securities to be registered under the Securities Act (in the case of a Demand Registration for a public offering) or to prepare a final Offering Memorandum (in the case of a Demand Registration for a private placement) (i) in the case of any Securities to be delivered to Ashland on the Closing Date or any Installment Payment Date, not later than the Scheduled Closing Date or applicable Scheduled Installment Payment Date or (ii) in the case of any Securities that have been delivered to Ashland on the Closing Date or any Installment Payment Date, in each case not later than 60 days after such written demand by Ashland; provided that each Demand Registration shall cover Securities having an aggregate fair market value (based on the then-current market value of such Securities or, if such market value cannot be determined, based on the expected offering price of such Securities) equal to (i) in the case of a public offering, $100 million or more, unless Ashland shall hold less than $100 million of Securities, in which event, the remaining Securities held by Ashland and (ii) in the case of a private placement, $25 million or more, unless Ashland shall hold less than $25 million of Securities, in which event, the remaining Securities held by Ashland.

(b) Notwithstanding the provisions of Section 10.01(a), the Issuer (i) shall not be obligated to prepare or file more than one Registration Statement pursuant to this Section 10.01 during any six month period (measured from the effective date (or, in the case of a private placement, the closing date) of the most recently requested Demand Registration to the date of the demand by Ashland for a subsequent Demand Registration) and (ii) shall be entitled to postpone the filing of any Registration Statement otherwise required to be prepared and filed by it pursuant to Section 10.01(a), and to prevent Ashland from initially distributing any Offering Memorandum required to be prepared by the Issuer pursuant to Section 10.01(a), in each case (x) if the Issuer is actively pursuing an Underwritten Public Offering, for a period of up to 90 days following the closing of any Underwritten Public Offering; provided that the Issuer is advised by its managing underwriter or underwriters in writing (with a copy to Ashland), that the price at which securities would be offered in such offering would, in its or in their opinion, be materially adversely affected by the registration or the initial dissemination of the Offering Memorandum so requested, or (y) for a period of up to 90 days if the

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Issuer determines in its reasonable judgment and in good faith that the registration and distribution of such Securities (or the private placement thereof, in the case of a sale by Ashland of such securities pursuant to Section 4(2) or Rule 144A of the Securities Act) would materially adversely impair or interfere with in any material respect any contemplated material financing, acquisition, disposition, corporate reorganization or other similar transaction involving the Issuer or any of its subsidiaries or Affiliates ((x) or (y) being hereinafter referred to as a “Blackout Period”), provided, however, that the aggregate number of days included in all Blackout Periods during any consecutive 12 months shall not exceed 180 days, and; provided further, however, that a period of at least 30 days shall elapse between the termination of any Blackout Period and the commencement of the immediately succeeding Blackout Period. In the event of such postponement, Ashland shall have the right to withdraw such request for registration or request for preparation of an Offering Memorandum by giving written notice to the Issuer within 20 days after receipt of notice of postponement and, in the event of such withdrawal, such request shall not be counted for purposes of determining the number of Demand Registrations to which Ashland is entitled pursuant to Section 10.01(a).

(c) A registration requested pursuant to this Section 10.01 shall not be deemed to have been effected unless the Registration Statement relating thereto (i) has become effective under the Securities Act and (ii) has remained effective for a period of at least 90 days (or such shorter period in which all Securities included in such registration have actually been sold thereunder); provided, however, that if after any Registration Statement requested pursuant to this Section 10.01 becomes effective such Registration Statement is interfered with by any stop order, injunction or other order or requirement of the Commission or other Governmental Authority solely due to the actions or omissions to act of the Issuer prior to being effective for 90 days and less than 75% of the Securities have been sold thereunder, such Registration Statement shall be at the sole expense of the Issuer and shall not constitute a Demand Registration. In addition, a request for the preparation of an Offering Memorandum pursuant to this Section 10.01 shall not be deemed to have been effected unless the information contained in such Offering Memorandum has remained “reasonably current” (as such term is defined in Rule 144A

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under the Securities Act) for a period of at least 90 days (or such shorter period in which all Securities covered by such Offering Memorandum have actually been sold thereunder); provided, however, that if such Offering Memorandum is interfered with by any stop order, injunction or other order or requirement of the Commission or other Governmental Authority solely due to the actions or omissions to act of the Issuer prior to such Offering Memorandum being made available to Ashland for 90 days and less than 75% of the Securities have been sold pursuant thereto, such Offering Memorandum shall be at the sole expense of the Issuer and shall not constitute a Demand Registration.

(d) On or after the date hereof, the Issuer shall not grant to any other holder of its securities, whether currently outstanding or issued in the future, any incidental or “piggy-back” registration rights with respect to any Registration Statement filed or Offering Memorandum prepared pursuant to a Demand Registration under this Section 10.01 and, without the prior consent of Ashland, will not permit any holder of its securities to participate in any offering or private placement made pursuant to a Demand Registration under this Section 10.01.

(e) If a Demand Registration involves an Underwritten Public Offering and the managing underwriter or underwriters shall advise the Issuer and Ashland in writing that, in its view, the number of securities requested to be included in such registration (including, without limitation, Securities requested to be included by Ashland, securities which the Issuer proposes to be included, and securities proposed to be included by other holders of securities entitled to include securities in such registration pursuant to incidental or “piggy-back” registration rights other than those pursuant to this Article X (the “Other Holders”)) exceeds the largest number of shares of securities which can be sold without having an adverse effect on such offering, including the price at which such securities can be sold (the “Maximum Offering Size”), the Issuer shall include in such registration, in the priority listed below, up to the Maximum Offering Size:

(i) first, all Securities requested to be registered by Ashland;

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(ii) second, all securities requested to be included in such registration by any Other Holder (allocated, if necessary, for the offering not to exceed the Maximum Offering Size, pro rata among such Other Holders on the basis of the relative number of securities requested to be included in such registration); and

(iii) third, any securities proposed to be registered by the Issuer or by any Other Holders pursuant to incidental or “piggy-back” registration rights.

(f) Ashland may, at any time, prior to the effective date of the Registration Statement or the initial distribution of the Offering Memorandum relating to such request, revoke such request by providing a written notice to the Issuer, in which case such request, as so revoked, shall not constitute a Demand Registration.

SECTION 10.02. Covenants of the Issuer. (a) Registration Statement Covenants. In the event that any Securities are to be registered pursuant to Section 10.01, the Issuer covenants and agrees that it shall (i) use its best efforts to effect the registration, (ii) cooperate in the sale of the Securities and (iii) as expeditiously as possible:

(1) prepare and file with the Commission a Registration Statement with respect to such Securities on Form S-3, if permitted, or otherwise on any form for which the Issuer then qualifies or which counsel for the Issuer shall deem appropriate, and which form shall be available for the sale of the Securities in accordance with the intended methods of distribution thereof, and use its best efforts to cause such Registration Statement to become and remain effective;

(2) prepare and file with the Commission amendments and supplements to such Registration Statement and prospectus used in connection therewith as may be necessary to maintain the effectiveness of such registration and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement until the earlier of (i) such time as all of such securities have been disposed of in accordance with the

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intended methods of disposition by Ashland set forth in such Registration Statement and (ii) the expiration of 90 days after the date such Registration Statement becomes effective; provided that before filing a Registration Statement or prospectus, or any amendments or supplements thereto, the Issuer shall furnish to Ashland and its counsel, copies of all documents proposed to be filed;

(3) furnish to Ashland such number of copies of such Registration Statement and of each amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus and prospectus supplement, as applicable, in conformity with the requirements of the Securities Act, and such other documents as Ashland may reasonably request in order to facilitate the disposition of the Securities by Ashland;

(4) use its best efforts to register or qualify such Securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions as Ashland shall reasonably request, and do any and all other acts and things which may be reasonably necessary or advisable to enable Ashland to consummate the disposition in such jurisdictions of the Securities owned by Ashland, except that the Issuer shall not for any such purpose be required to (i) qualify generally to do business as a foreign corporation in any jurisdiction where, but for the requirements of this Section 10.04(a)(4), it would not be obligated to be so qualified, (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction);

(5) use its best efforts to cause such Securities covered by such Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable Ashland to consummate the disposition of such Securities;

(6) notify Ashland at any time when a prospectus relating to a Registration Statement is required to be delivered under the Securities Act within the appropriate period mentioned in Section 10.02(a)(2), of the happening of any event as a result of which such Registration Statement contains an untrue statement of

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a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and at the request of Ashland, prepare and furnish to Ashland a reasonable number of copies of an amended or supplemental prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Securities, such prospectus shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;

(7) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to Ashland, as soon as reasonably practicable (but not more than eighteen months) after the effective date of the Registration Statement, an earnings statement which shall satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations promulgated thereunder;

(8) use its best efforts to cause all such Securities that are Marathon Equity Securities to be listed on any securities exchange on which the securities of the Issuer are then listed, if such Securities are not already so listed and if such listing is then permitted under the rules of such exchange, and to provide a transfer agent and registrar for such Securities covered by such Registration Statement no later than the effective date of such Registration Statement;

(9) use its best efforts to obtain a “cold comfort” letter or letters from the Issuer’s independent public accountants in customary form; and

(10) cooperate with Ashland and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing the Securities to be sold under such Registration Statement, and enable such Securities to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or Ashland may request.

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(b) Offering Memorandum Covenants. In the event that any Securities are to be sold by Ashland by means of an Offering Memorandum prepared by the Issuer pursuant to Sections 10.01, the Issuer covenants and agrees that it shall (i) cooperate in the sale of the Securities and (ii) as expeditiously as possible:

(1) prepare the Offering Memorandum;

(2) prepare amendments and supplements to such Offering Memorandum as may be necessary to keep the information in such Offering Memorandum “reasonably current” (as such term is defined in Rule 144A under the Securities Act) and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Offering Memorandum until the earlier of (i) such time as all of such securities have been disposed of in accordance with the intended methods of disposition by Ashland set forth in such Offering Memorandum and (ii) the expiration of 90 days after the date such Offering Memorandum (in definitive form) is circulated to the initial purchasers; provided that before making any amendments or supplements thereto, the Issuer shall furnish to Ashland and its counsel, copies of all proposed amendments or supplements;

(3) furnish to Ashland such number of copies of such Offering Memorandum and of each amendment and supplement thereto (in each case including all exhibits), and such other documents as Ashland may reasonably request in order to facilitate the disposition of the Securities by Ashland;

(4) use its best efforts to register or qualify such Securities covered by such Offering Memorandum under such other securities or blue sky laws of such jurisdictions as Ashland shall reasonably request, and do any and all other acts and things which may be reasonably necessary or advisable to enable Ashland to consummate the disposition in such jurisdictions of the Securities owned by Ashland, except that the Issuer shall not for any such purpose be required to (i) qualify generally to do business as a foreign corporation in any jurisdiction where, but for the requirements of this Section 10.02(b)(4), it would not be obligated to be so qualified, (ii) subject itself to

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taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction);

(5) use its best efforts to cause such Securities covered by such Offering Memorandum to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable Ashland to consummate the disposition of such Securities;

(6) notify Ashland at any time prior to the completion of the sale of the Securities by Ashland that are covered by the Offering Memorandum, of the happening of any event as a result of which such Offering Memorandum contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and at the request of Ashland, prepare and furnish to Ashland a reasonable number of copies of an amended or supplemental Offering Memorandum as may be necessary so that, as thereafter delivered to the purchasers of such Securities, such Offering Memorandum shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;

(7) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission;

(8) use its best efforts to cause all such Securities that are Marathon Equity Securities to be listed on any securities exchange on which the securities of the Issuer are then listed, if such Securities are not already so listed and if such listing is then permitted under the rules of such exchange, and to provide a transfer agent and registrar for such Securities covered by such Offering Memorandum no later than the effective date of such Offering Memorandum;

(9) use its best efforts to obtain a “cold comfort” letter or letters from the Issuer’s independent public accountants in customary form; and

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(10) cooperate with Ashland and the initial purchasers, if any, to facilitate the timely preparation and delivery of certificates representing the Securities to be sold under such Offering Memorandum, and enable such Securities to be in such denominations and registered in such names as the initial purchasers, if any, or Ashland may request. The Issuer may require Ashland to furnish the Issuer with such information regarding Ashland and pertinent to the disclosure requirements relating to the registration and/or the distribution of such Securities pursuant to this Article X as the Issuer may from time to time reasonably request in writing.

Ashland agrees that, upon receipt of any notice from the Issuer of the happening of any event of the kind described in Section 10.02(a)(6) or 10.02(b)(6), or of the imposition by the Issuer of a Blackout Period of the type described in clause (y) of 10.01(b)(ii), Ashland shall forthwith discontinue such disposition of such Securities pursuant to the Registration Statement or Offering Memorandum covering such Securities until Ashland’s receipt of the copies of the supplemented or amended prospectus or Offering Memorandum contemplated by Section 10.02(a)(6) and 10.02(b)(6), respectively, or the expiration of such Blackout Period, as applicable, and, if so directed by the Issuer, Ashland shall deliver to the Issuer (at the Issuer’s expense) all copies, other than permanent file copies then in Ashland’s possession, of the prospectus or Offering Memorandum covering such Securities current at the time of receipt of such notice. In the event the Issuer shall give any such notice, the period mentioned in Section 10.02(a)(2) or 10.02(b)(2), as applicable, shall be extended by the number of days during the period from the date of the giving of such notice pursuant to Section 10.02(a)(6) or 10.02(b)(6), as applicable, and through the date when Ashland shall have received the copies of the supplemented or amended prospectus or Offering Memorandum contemplated by Section 10.02(a)(6) or 10.02(b)(6), respectively, or the expiration of such Blackout Period, as applicable.

SECTION 10.03. Fees and Expenses. In connection with any registration pursuant to this Article X or the preparation of any Offering Memorandum pursuant to this Article X, (i) Ashland shall pay all agent fees and commissions and underwriting discounts and commissions

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related to the Securities being sold by Ashland and the fees and disbursements of its counsel and accountants and (ii) the Issuer shall pay all fees and disbursements of its counsel and accountants and the expenses, including fees incurred in the preparation of a cold comfort letter requested by Ashland pursuant to Section 10.02(a)(9) or 10.02(b)(9), as applicable. All others fees and expenses in connection with any Registration Statement or Offering Memorandum (including, without limitation, all registration and filing fees, all printing costs, all fees and expenses of complying with securities or blue sky laws) shall be borne by Ashland; provided that Ashland shall not pay any expenses relating to work that would otherwise be incurred by the Issuer including, but not limited to, the preparation and filing of periodic reports with the Commission.

SECTION 10.04. Indemnification and Contribution. In the case of any offering registered pursuant to this Article X or any private placement pursuant to an Offering Memorandum prepared by the Issuer pursuant to this Article X, the Issuer agrees to indemnify and hold Ashland, each underwriter or initial purchaser, if any, of the Securities under such registration or covered by such Offering Memorandum and each person who controls any of the foregoing within the meaning of Section 15 of the Securities Act, and any director, officer, employee, stockholder, partner, agent or representative, of the foregoing, harmless against any and all losses, claims, damages or liabilities (including reasonable legal fees and other reasonable expenses incurred in the investigation and defense thereof) (collectively “Losses”) to which they or any of them may become subject under the Securities Act or otherwise, insofar as any such Losses shall arise out of or shall be based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (as amended if the Issuer shall have filed with the Commission any amendment thereof) or Offering Memorandum (as amended if the Issuer shall have prepared and delivered to Ashland for private distribution any amendment to such Offering Memorandum), or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or (ii) any untrue statement or alleged untrue statement of a material fact contained in the prospectus relating to the sale of such Securities (as amended or supplemented if the Issuer shall have filed with the Commission any amendment

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thereof or supplement thereto), or the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided that the indemnification contained in this Section 10.04 shall not apply to such Losses which shall arise out of or shall be based upon any such untrue statement or alleged untrue statement, or any such omission or alleged omission, which shall have been made in reliance upon and in conformity with information furnished in writing to the Issuer by Ashland or such underwriter or initial purchaser, as the case may be, specifically for use in connection with the preparation of the Registration Statement, the prospectus contained in the Registration Statement or the Offering Memorandum, as applicable, or any such amendment thereof or supplement therein.

Notwithstanding the foregoing provisions of this Section 10.04, the Issuer shall not be liable to Ashland, any person who participates as an underwriter in the offering or sale of such Securities, any person who participates as an initial purchaser in the private placement of such Securities or any other person, if any, who controls Ashland or any underwriter or initial purchaser (within the meaning of the Securities Act), under the indemnity agreement in this Section 10.04 for any such Losses that arise out of Ashland’s or such other person’s failure to send or give a copy of the final prospectus or final Offering Memorandum to the person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of the Securities to such person if such statement or omission was corrected in such final prospectus or final Offering Memorandum and the Issuer has previously furnished copies thereof in accordance with this Agreement.

In the case of each offering registered pursuant to this Article X and each private placement pursuant to this Article X, Ashland shall agree, and each underwriter or initial purchaser, if any, participating therein shall agree, substantially in the same manner and to the same extent as set forth in the preceding paragraph, severally to indemnify and hold harmless the Issuer and each person who controls the Issuer within the meaning of Section 15 of the Securities Act, and any director, officer, employee, stockholder, partner, agent or representative of the Issuer, with respect to any statement in or omission from such

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Registration Statement (as amended or as supplemented, if amended or supplemented as aforesaid) or Offering Memorandum (as amended or as supplemented, if amended or supplemented as aforesaid), as applicable, if such statement or omission shall have been made in reliance upon and in conformity with information furnished in writing to the Issuer by Ashland or such underwriter or initial purchaser, as the case may be, specifically for use in connection with the Registration Statement, the prospectus contained in such Registration Statement or the Offering Memorandum, as applicable, or any such amendment thereof or supplement thereto.

Each party indemnified under this Section 10.04 shall, promptly after receipt of notice of the commencement of any claim against any such indemnified party in respect of which indemnity may be sought hereunder, notify the indemnifying party in writing of the commencement thereof. The failure of any indemnified party to so notify an indemnifying party of any action shall not relieve the indemnifying party from any liability in respect of such action which it may have to such indemnified party on account of the indemnity contained in this Section 10.04, unless (and only to the extent) the indemnifying party was prejudiced by such failure, and in no event shall such failure relieve the indemnifying party from any other liability which it may have to such indemnified party. In case any action in respect of which indemnification may be sought hereunder shall be brought against any indemnified party and it shall notify an indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it may desire, jointly with any other indemnifying party similarly notified, to assume the defense thereof through counsel reasonably satisfactory to the indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 10.04 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof, other than reasonable costs of investigation (unless (i) such indemnified party reasonably objects to such assumption on the grounds that there may be defenses available to it which are different from or in addition to those available to such indemnifying party, (ii) the indemnifying party and such indemnified party shall have mutually agreed to the retention of such counsel or (iii) in the reasonable opinion

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of such indemnified party representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding, in which case the indemnified party shall be reimbursed by the indemnifying party for the reasonable expenses incurred in connection with retaining one firm of separate legal counsel; provided that (i) in circumstances where Ashland or an underwriter or initial purchaser is the indemnifying party, the indemnifying party shall not be liable for more than one firm of legal counsel for all indemnified parties and (ii) in circumstances where the Issuer is the indemnifying party, the indemnifying party shall not be liable for more than (A) one firm of legal counsel for Ashland, each person who controls Ashland within the meaning of Section 15 of the Securities Act, and any director, officer, employee, stockholder, partner, agent or representative of Ashland, and (B) one firm of legal counsel for the underwriters or initial purchasers, if any, indemnified under this Section 10.04, each person who controls such underwriters or initial purchasers within the meaning of Section 15 of the Securities Act, and any director, officer, employee, stockholder, partner, agent or representative of such underwriters or initial purchasers). No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any claim or pending or threatened proceeding in respect of which the indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability arising out of such claim or proceeding. If an indemnifying party shall have expressly acknowledged its indemnification obligations with respect to a claim or pending or threatened proceeding, then the indemnified party with respect to such claim or pending or threatened proceeding shall not, without the prior written consent of the indemnifying party, effect any settlement of such claim or pending or threatened proceeding.

If the indemnification provided for in this Section 10.04 is unavailable to an indemnified party or is insufficient to hold such indemnified party harmless from any Losses in respect of which this Section 10.04 would otherwise apply by its terms (other than by reason of exceptions provide herein), then each applicable

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indemnifying party, in lieu of indemnifying such indemnified party, shall have a joint and several obligation to contribute to the amount paid or payable by such indemnified party as a result of such Losses, in such proportion as is appropriate to reflect the relative benefits received by and fault of the indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the offering or private placement to which such contribution relates as well as any other relevant equitable considerations. The relative benefit shall be determined by reference to, among other things, the amount of proceeds received by each party from the offering or private placement to which such contribution relates. The relative fault shall be determined by reference to, among other things, each party’s relative knowledge and access to information concerning the matter with respect to which the claim was asserted, and the opportunity to correct and prevent any statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include any legal or other fees or expenses incurred by such party in connection with any investigation or proceeding, to the extent such party would have been indemnified for such expenses if the indemnification provided for in this Section 10.04 was available to such party.

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 10.04 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

SECTION 10.05. Underwriting Agreement; Purchase Agreement. In connection with any underwritten offering or private placement of Securities pursuant to a Demand Registration under Section 10.01, the Issuer and Ashland shall enter into an underwriting agreement with the underwriters for such offering or a purchase agreement with the initial purchasers for such private placement, such underwriting agreement or purchase agreement to contain such representations and warranties by the Issuer and Ashland and such other terms and provisions as are customarily contained

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in underwriting agreements with respect to secondary distributions or purchase agreements with respect to private placements, including, without limitation, indemnities and contribution to the effect and to the extent provided in Section 10.04 (and customary provisions with respect to indemnities and contribution by such underwriters or initial purchasers).

SECTION 10.06. Undertaking To File Reports. For as long as Ashland holds Securities, the Issuer shall use its best efforts to file, on a timely basis, all annual, quarterly and other reports required to be filed by it under Sections 13 and 15(d) of the Exchange Act and the rules and regulations of the Commission thereunder, as amended from time to time, or any successor statute or provisions.

ARTICLE XI

Covenants

SECTION 11.01. Cooperation; Commercially Reasonable Best Efforts. Each of the parties hereto shall cooperate with each other in good faith, and shall cause their respective officers, employees, agents, auditors and representatives to cooperate with each other in good faith, to cause the Closing to occur. In addition, each of the parties hereto shall use its commercially reasonable best efforts to cause the Closing to occur.

SECTION 11.02. Antitrust Notification; FTC or DOJ Investigation. (a) Each of Marathon, USX and Ashland shall as promptly as practicable, but in no event later than 30 days following the relevant Exercise Date, file with the FTC and the DOJ the notification and report form, if any, required for the transactions contemplated hereby and any supplemental information requested in connection therewith pursuant to the HSR Act. Any such notification and report form and supplemental information shall be in substantial compliance with the requirements of the HSR Act. Each of Marathon, USX and Ashland shall furnish to the other such necessary information and reasonable assistance as the other may request in connection with its preparation of any filing or submission which is necessary under the HSR Act. Each of Marathon, USX and Ashland shall keep each other apprised of the status of any communications with, and any inquiries or requests for additional information from, the FTC and the

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DOJ and shall comply promptly with any such inquiry or request.

(b) In the event that Marathon, USX and Ashland are not required to file with the FTC and the DOJ any notification and report form pursuant to the HSR Act, but the FTC or the DOJ nevertheless commences an investigation with respect to the transactions contemplated hereby, each of Marathon, USX and Ashland shall comply promptly with any inquiry or request made by the DOJ or the FTC in connection with such investigation.

(c) In the event that Marathon, USX and Ashland file notification and report forms with the FTC and the DOJ pursuant to Section 11.02(a) or the FTC or the DOJ commences an investigation with respect to the transactions contemplated hereby, then, in addition to the obligations of Marathon, USX and Ashland set forth in Section 11.02(a) and 11.02(b), as applicable, Marathon, USX and Ashland agree as follows:

(i) In the case of Marathon’s exercise of its Marathon Call Right, each of Marathon and USX shall take all such actions as are necessary to obtain any clearance required under the HSR Act or from the FTC or DOJ in connection with any such investigation, as applicable, for the purchase and sale of Ashland’s Membership Interests and the Ashland LOOP/LOCAP Interest pursuant to this Agreement, including divesting or holding separate any assets or commencing or defending litigation; provided, however, that neither Marathon nor USX shall be required to take any action proposed by the FTC or the DOJ that would or would reasonably be expected to have a material adverse effect on the business, operations, assets, liabilities, results of operations, cash flows, condition (financial or otherwise) or prospects of the Company and its subsidiaries, taken as a whole.

(ii) In the case of (A) Ashland’s exercise of its Ashland Put Right or (B) Marathon’s exercise of its Special Termination Right, each of Marathon and USX shall take all such actions as are necessary to obtain any clearance required under the HSR Act or from the FTC or DOJ in connection with any such investigation, as applicable, for the purchase and sale of Ashland’s Membership Interests and the Ashland LOOP/LOCAP

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Interest pursuant to this Agreement, including divesting or holding separate any assets or commencing or defending litigation; provided, however, that neither Marathon nor USX shall be required to take any action proposed by the FTC or the DOJ that would or would reasonably be expected to have a material adverse effect on the business, operations, assets, liabilities, results of operations, cash flows, condition (financial or otherwise) or prospects of (A) the Company and its subsidiaries, taken as a whole, (B) Marathon and its subsidiaries, taken as a whole, or (C) USX and its subsidiaries, taken as a whole.

(iii) In the case of Ashland’s exercise of its Special Termination Right, Ashland shall take all such actions as are necessary to obtain any clearance required under the HSR Act or from the FTC or DOJ in connection with any such investigation, as applicable, for the purchase and sale of Marathon’s Membership Interests pursuant to this Agreement, including divesting or holding separate any assets or commencing or defending litigation; provided, however, that Ashland shall not be required to take any action proposed by the FTC or the DOJ that would or would reasonably be expected to have a material adverse effect on the business, operations, assets, liabilities, results of operations, cash flows, condition (financial or otherwise) or prospects of (A) the Company and its subsidiaries, taken as a whole or (B) Ashland and its subsidiaries, taken as a whole.

SECTION 11.03. Governmental Filings re: Ashland LOOP/LOCAP Interest. (a) Each of the parties hereto shall as promptly as practical, but in no event later than five Business Days following the relevant Exercise Date, file all documentation with all relevant Governmental Entities that is required to be filed with such Governmental Entities in connection with the purchase and sale of the Ashland LOOP/LOCAP Interest on the Scheduled Closing Date. Each of the parties hereto shall keep the other apprised of the status of any communications with, and any inquiries or requests for additional information from, such Governmental Entities and shall comply promptly with any such inquiry or request.

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(b) In addition to the obligations of the parties hereto set forth in Section 11.03(a), Marathon and USX agree as follows:

(i) In the case of Marathon’s exercise of its Marathon Call Right, each of Marathon and USX shall take all such actions as are necessary to obtain any requisite approvals from such Governmental Entities as are required in connection with the purchase and sale of the Ashland LOOP/LOCAP Interest pursuant to this Agreement, including commencing or defending litigation; provided, however, that neither Marathon nor USX shall be required to take any such action that would or would reasonably be expected to have a material adverse effect on the business, operations, assets, liabilities, results of operations, cash flows, condition (financial or otherwise) or prospects of the Company and its subsidiaries, taken as a whole.

(ii) In the case of Marathon’s exercise of its Special Termination Right or Ashland’s exercise of its Ashland Put Right, each of Marathon and USX shall take all such actions as are necessary to obtain any requisite approvals from such Governmental Entities as are required in connection with the purchase and sale of the Ashland LOOP/LOCAP Interest pursuant to this Agreement, including commencing or defending litigation; provided, however, that neither Marathon nor USX shall be required to take any such action that would or would reasonably be expected to have a material adverse effect on the business, operations, assets, liabilities, results of operations, cash flows, condition (financial or otherwise) or prospects of (A) the Company and its subsidiaries, taken as a whole, (B) Marathon and its subsidiaries, taken as a whole, or (C) USX and its subsidiaries, taken as a whole.

SECTION 11.04. Designated Sublease Agreements. (a) Ashland Designated Sublease Agreements. In the event of (i) Marathon’s exercise of its Marathon Call Right, (ii) Ashland’s exercise of its Ashland Put Right or (iii) Marathon’s exercise of its Special Termination Right, Ashland shall use its commercially reasonable best efforts to (A) terminate the outstanding Original Lease underlying each Ashland Designated Sublease Agreement on or prior to Closing and (B) contribute the related Subleased Property to the Company or one of its subsidiaries at no cost to the

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Company or such subsidiary on or prior to Closing; provided, however, that (i) Ashland shall not be obligated to pay more than a reasonable amount as consideration therefor to, or make more than a reasonable financial accommodation in favor of, or commence litigation against, a third party lessor with respect to any such underlying Original Lease in order to obtain any consent required from such lessor and (ii) any additional cost associated with exercising an option under the Original Lease to purchase Subleased Property shall be deemed not to constitute an obligation to pay more than a reasonable amount. In the event that Ashland is unable to terminate an outstanding Original Lease in accordance with this Section 11.04(a), then (i) the Company shall be entitled to continue to sublease the Subleased Property pursuant to the related Ashland Designated Sublease Agreement until the term of the Original Lease expires, (ii) Ashland shall continue to use its commercially reasonable best efforts to terminate the Original Lease and contribute the Subleased Property to the Company as provided above; provided, however, that (A) Ashland shall not be obligated to pay more than a reasonable amount as consideration therefor to, or make more than a reasonable financial accommodation in favor of, or commence litigation against, a third party lessor with respect to any such underlying Original Lease in order to obtain any consent required from such lessor and (B) any additional cost associated with exercising an option under the Original Lease to purchase Subleased Property shall be deemed not to constitute an obligation to pay more than a reasonable amount and (iii) if Ashland subsequently acquires fee title to the Subleased Property, Ashland shall contribute such Subleased Property to the Company or one of its subsidiaries at no cost to the Company or such subsidiary at such time.

(b) Marathon Designated Sublease Agreements. In the event of Ashland’s exercise of its Special Termination Right, Marathon shall use its commercially reasonable best efforts to (A) terminate the outstanding Original Lease underlying each Marathon Designated Sublease Agreement on or prior to Closing and (B) contribute the related Subleased Property to the Company or one of its subsidiaries at no cost to the Company or such subsidiary on or prior to Closing; provided, however, that (i) Marathon shall not be obligated to pay more than a reasonable amount as consideration therefor to, or make more than a reasonable financial accommodation in favor of, or commence litigation against, a third party lessor with respect to any such

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underlying Original Lease in order to obtain any consent required from such lessor and (ii) any additional cost associated with exercising an option under the Original Lease to purchase Subleased Property shall be deemed not to constitute an obligation to pay more than a reasonable amount. In the event that Marathon is unable to terminate an outstanding Original Lease in accordance with this Section 11.04(b), then (i) the Company shall be entitled to continue to sublease the Subleased Property pursuant to the related Marathon Designated Sublease Agreement until the term of the Original Lease expires, (ii) Marathon shall continue to use its commercially reasonable best efforts to terminate the Original Lease and contribute the Subleased Property to the Company as provided above; provided, however, that (A) Marathon shall not be obligated to pay more than a reasonable amount as consideration therefor to, or make more than a reasonable financial accommodation in favor of, or commence litigation against, a third party lessor with respect to any such underlying Original Lease in order to obtain any consent required from such lessor and (B) any additional cost associated with exercising an option under the Original Lease to purchase Subleased Property shall be deemed not to constitute an obligation to pay more than a reasonable amount and (iii) if Marathon subsequently acquires fee title to the Subleased Property, Marathon shall contribute such Subleased Property to the Company or one of its subsidiaries at no cost to the Company or such subsidiary at such time.

ARTICLE XII

Standstill Agreement

SECTION 12.01. Restrictions of Certain Actions by Marathon and USX. Each of Marathon and USX covenants and agrees that, from the date hereof through the six-month anniversary of the earlier to occur of (a) the date that Ashland and its Affiliates do not own any Membership Interests, and (b) the date that Marathon and its Affiliates do not own any Membership Interests, it shall not, and it shall cause each of its Affiliates (including, for the avoidance of doubt, Employee Benefit Plans of USX, Marathon and their respective Affiliates) not to, singly or as part of a partnership, limited partnership, syndicate or other

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group (as those terms are defined in Section 13(d)(3) of the Exchange Act), directly or indirectly:

(i) acquire, offer to acquire, or agree to acquire, by purchase, gift or otherwise, more than 1% of any class of any Ashland Voting Securities, except (A) pursuant to a stock split, stock dividend, rights offering, recapitalization, reclassification or similar transaction, (B) in connection with the transfer of Ashland Voting Securities to a Marathon or USX Employee Benefit Plan as contemplated by Section 3.1(v) of the Asset Transfer and Contribution Agreement or (C) the ownership by any Employee Benefit Plan of USX, Marathon or any of their respective Affiliates of any interest in any diversified index, mutual or pension fund managed by an independent investment advisor, which fund in turn holds, directly or indirectly, Ashland Voting Securities; provided that not more than 5% of such fund’s assets are comprised of Ashland Voting Securities;

(ii) make, or in any way participate in any “solicitation” of “proxies” to vote (as such terms are defined in Rule 14a-1 under the Exchange Act), solicit any consent or communicate with or seek to advise or influence any person or entity with respect to the voting of any Ashland Voting Securities or become a “participant” in any “election contest” (as such terms are defined or used in Rule 14a-11 under the Exchange Act) with respect to Ashland;

(iii) form, join, encourage or in any way participate in the formation of, any “person” within the meaning of Section 13(d)(3) of the Exchange Act with respect to any Ashland Voting Securities;

(iv) deposit any Ashland Voting Securities into a voting trust or subject any such Ashland Voting Securities to any arrangement or agreement with respect to the voting thereof;

(v) initiate, propose or otherwise solicit shareholders for the approval of one or more shareholder proposals with respect to Ashland as described in Rule 14a-8 under the Exchange Act, or induce or attempt to induce any other person to initiate any shareholder proposal;

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(vi) seek election to or seek to place a representative on the Board of Directors of Ashland or seek the removal of any member of the Board of Directors of Ashland;

(vii) except with the approval of management of Ashland, call or seek to have called any meeting of the shareholders of Ashland;

(viii) otherwise act to seek to control, disrupt or influence the management, business, operations, policies or affairs of Ashland;

(ix) (A) solicit, seek to effect, negotiate with or provide any information to any other person with respect to, (B) make any statement or proposal, whether written or oral, to the Board of Directors of Ashland or any director or officer of Ashland with respect to, or (C) otherwise make any public announcement or proposal whatsoever with respect to, any form of business combination transaction involving Ashland (other than the Transaction), including, without limitation, a merger, exchange offer, or liquidation of Ashland’s assets, or any restructuring, recapitalization or similar transaction with respect to Ashland;

(x) seek to have Ashland waive, amend or modify any of the provisions contained in this Section 12.01;

(xi) disclose or announce any intention, plan or arrangement inconsistent with the foregoing; or

(xii) advise, assist, instigate or encourage any third party to do any of the foregoing.

If either Marathon or USX or any of their respective Affiliates owns or acquires any Ashland Voting Securities in violation of this Section 12.01, such Ashland Voting Securities shall immediately be disposed of to persons who (i) are not Marathon or USX or Affiliates thereof and (ii) do not own, individually or as part of a “group” (within the meaning of Section 13(d)(3) of the Exchange Act), more than 5% of the then outstanding Ashland Voting Securities; provided that Ashland may also pursue any other available remedy to which it may be entitled as a result of such violation.

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SECTION 12.02. Restrictions of Certain Actions by Ashland. Ashland covenants and agrees that, from the date hereof through the later to occur of (a) the six-month anniversary of the earlier to occur of (i) the date that Marathon and its Affiliates do not own any Membership Interests and (ii) the date that Ashland and its Affiliates do not own any Membership Interests and (b) in the event that Ashland or its Affiliates acquires USX Voting Securities pursuant to the Closing of the Ashland Put Right, the date on which Ashland and its Affiliates do not own more than 5% of the then outstanding USX Voting Securities, it shall not, and it shall cause each of its Affiliates (including, for the avoidance of doubt, Employee Benefit Plans of Ashland and its Affiliates) not to, singly or as part of a partnership, limited partnership, syndicate or other group (as those terms are defined in Section 13(d)(3) of the Exchange Act), directly or indirectly:

(i) acquire, offer to acquire, or agree to acquire, by purchase, gift or otherwise, more than 1% of any class of USX Voting Securities, except (A) pursuant to a stock split, stock dividend, rights offering, recapitalization, reclassification or similar transaction and except for any issuance of USX Voting Securities to Ashland as payment of any portion of the Ashland Put Price in accordance with the provisions of this Agreement or (B) the ownership by any Employee Benefit Plan of Ashland or any of its Affiliates of any interest in any diversified index, mutual or pension fund managed by an independent investment advisor, which fund in turn holds, directly or indirectly, USX Voting Securities; provided that not more than 5% of such fund’s assets are comprised of USX Voting Securities;

(ii) make, or in any way participate in any “solicitation” of “proxies” to vote (as such terms are defined in Rule 14a-1 under the Exchange Act), solicit any consent or communicate with or seek to advise or influence any person or entity with respect to the voting of any USX Voting Securities or become a “participant” in any “election contest” (as such terms are defined or used in Rule 14a-11 under the Exchange Act) with respect to USX;

(iii) form, join, encourage or in any way participate in the formation of, any “person” within

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the meaning of Section 13(d)(3) of the Exchange Act with respect to any USX Voting Securities;

(iv) deposit any USX Voting Securities into a voting trust or subject any such USX Voting Securities to any arrangement or agreement with respect to the voting thereof;

(v) initiate, propose or otherwise solicit shareholders for the approval of one or more shareholder proposals with respect to USX as described in Rule 14a-8 under the Exchange Act, or induce or attempt to induce any other person to initiate any shareholder proposal;

(vi) seek election to or seek to place a representative on the Board of Directors of USX or seek the removal of any member of the Board of Directors of USX or seek the removal of any member of the Board of Directors of USX;

(vii) except with the approval of management of USX, call or seek to have called any meeting of the shareholders of USX;

(viii) otherwise act to seek to control, disrupt or influence the management, business, operations, policies or affairs of USX;

(ix) (A) solicit, seek to effect, negotiate with or provide any information to any other person with respect to, (B) make any statement or proposal, whether written or oral, to the Board of Directors of USX or any director or officer of USX with respect to, or (C) otherwise make any public announcement or proposal whatsoever with respect to, any form of business combination transaction involving USX (other than the Transaction), including, without limitation, a merger, exchange offer, or liquidation of USX’s assets, or any restructuring, recapitalization or similar transaction with respect to USX;

(x) seek to have USX waive, amend or modify any of the provisions contained in this Section 12.02;

(xi) disclose or announce any intention, plan or arrangement inconsistent with the foregoing; or

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(xii) advise, assist, instigate or encourage any third party to do any of the foregoing.

If Ashland or any of its Affiliates owns or acquires any USX Voting Securities in violation of this Section 12.02, such USX Voting Securities shall immediately be disposed of to persons who (i) are not Ashland or Affiliates thereof and (ii) do not own, individually or as part of a “group” (within the meaning of Section 13(d)(3) of the Exchange Act), more than 5% of the then outstanding USX Voting Securities; provided that USX may also pursue any other available remedy to which it may be entitled as a result of such violation.

ARTICLE XIII

Indemnification

SECTION 13.01. Indemnification re: Ashland Representatives’ Revocable Proxies and the Ashland LOOP/LOCAP Revocable Proxy. In the event that Ashland’s Representatives grant Marathon’s Representatives the Ashland Representatives Revocable Proxies pursuant to Section 5.02(a) and Ashland grants to Marathon or a person designated by Marathon, as applicable, the Ashland LOOP/LOCAP Revocable Proxy pursuant to Section 5.02(c), each of Marathon, USX and the Company agree to indemnify and hold Ashland, its Representatives, their respective Affiliates and any director, officer, employee, stockholder, partner, agent or representative of Ashland or its Affiliates harmless against any and all Losses to which they or any of them may become subject, insofar as any such Losses shall arise out of, are based upon or relate to any obligations or liabilities of whatever kind and nature, primary or secondary, direct or indirect, absolute or contingent, known or unknown, whether or not accrued, which arise on or after the relevant Exercise Date and which are attributable to (i) in the event that the Closing occurs, (A) the Company and its subsidiaries or LOOP, LLC or LOCAP, Inc., (B) Ashland’s ownership interest in the Company or the Ashland LOOP/LOCAP Interest, (C) actions taken by Marathon’s Representatives pursuant to the Ashland Representatives Revocable Proxies or (D) actions taken by Marathon or the Company, as applicable, pursuant to the Ashland LOOP/LOCAP Revocable Proxy, and (ii) in the event that Ashland or Marathon revokes Ashland’s Ashland Put Exercise Notice or Marathon’s Marathon Call

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Exercise Notice pursuant to Section 9.03(a), 9.04(a), 9.05, 9.08(a) or 9.09, or Ashland revokes Marathon’s Special Termination Exercise Notice pursuant to Section 9.08(a) or 9.09 (A) actions taken by Marathon’s Representatives pursuant to the Ashland Representatives Revocable Proxies or (B) actions taken by Marathon or the Company, as applicable, pursuant to the Ashland LOOP/LOCAP Revocable Proxy.

SECTION 13.02. Indemnification re: Marathon Representatives Revocable Proxies. In the event that Marathon’s Representatives grant Ashland’s Representatives the Marathon Representatives Revocable Proxies pursuant to Section 5.02(b), each of Ashland and the Company agree to indemnify and hold Marathon, its Representatives, their respective Affiliates and any director, officer, employee, stockholder, partner, agent or representative of Marathon or its Affiliates harmless against any and all Losses to which they or any of them may become subject, insofar as any such Losses shall arise out of, are based upon or relate to any obligations or liabilities of whatever kind and nature, primary or secondary, direct or indirect, absolute or contingent, known or unknown, whether or not accrued, which arise on or after the Special Termination Exercise Date and which are attributable to (i) in the event that the Closing occurs, (A) the Company and its subsidiaries or (B) actions taken by Ashland’s Representatives pursuant to the Marathon Representatives Revocable Proxies and (ii) in the event that Marathon revokes Ashland’s Special Termination Exercise Notice pursuant to Section 9.08(a) or 9.09, actions taken by Ashland’s Representatives pursuant to the Marathon Representatives Revocable Proxies.

SECTION 13.03. Indemnification re: Transfer of Economic Interests in the Ashland LOOP/LOCAP Interest to Marathon, the Company or a Person Designated by Marathon. To the extent that Ashland is unable to Transfer the Ashland LOOP/LOCAP Interest to Marathon, the Company or a person designated by Marathon, as applicable, at Closing, and as a result thereof, Ashland enters into any arrangement under which Marathon, the Company or such other person shall obtain the economic claims, rights and benefits under the Ashland LOOP/LOCAP interest, including a grant to Marathon, the Company or such other person, as applicable, of the Ashland LOOP/LOCAP Irrevocable Proxy, each of Marathon, USX and the Company agree to indemnify and hold Ashland, its Representatives, their respective Affiliates and any director, officer, employee, stockholder, partner, agent or

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representative of Ashland or its Affiliates harmless against any and all Losses to which they or any of them may become subject, insofar as any such Losses shall arise out of, be based upon or relate to any obligations or liabilities of whatever kind and nature, primary or secondary, direct or indirect, absolute or contingent, known or unknown, whether or not accrued, which arise on or after the relevant Exercise Date and which are attributable to (i) LOOP, LLC, (ii) LOCAP, Inc., (iii) Ashland’s ownership interest in LOOP, LLC and LOCAP, Inc., (iv) any such arrangements between Ashland and Marathon, the Company or such other person or (v) actions taken by Marathon, the Company or such other person, as applicable, pursuant to the Ashland LOOP/LOCAP Irrevocable Proxies.

SECTION 13.04. Procedures Relating to Indemnification Under This Article XIII. The procedures for Indemnification under this Article XIII shall be the procedures for indemnification set forth in Section 9.7 of the Asset Transfer and Contribution Agreement.

ARTICLE XIV

Company Competitive Businesses;

Detrimental Activities; Limitations on the

Company Entering into Valvoline’s Business

SECTION 14.01. Competitive Businesses. (a) Subject to Sections 14.01(b), 14.01(d) and 14.03(c), and except to the extent otherwise provided in Schedule 14.01(a), each of Marathon, USX and Ashland hereby agrees that during the Term of the Company, it shall not, and it shall cause its Affiliates not to, engage in any business within North America which is substantially in competition with (i) the Company’s Business conducted on the date hereof or (ii) any new line of business of the Company that the Board of Managers has approved in accordance with Section 8.07(b) of the LLC Agreement (but only if and to the extent that the Board of Managers specifically determined pursuant to Section 8.07(b) of the LLC Agreement that such new line of business should also constitute a Company Competitive Business) (each such business in clauses (i) and (ii), a “Company Competitive Business”); provided, however, that nothing in this Section 14.01 shall be deemed or interpreted to prohibit Ashland or any of its Affiliates from engaging in the Valvoline Business.

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(b) Notwithstanding any limitation contained in Section 14.01(a), Marathon, USX and Ashland and their respective Affiliates shall be permitted to engage in a Company Competitive Business if: (i) Marathon or Ashland, as applicable, shall have first presented the Company, at a meeting of the Board of Managers at which at least one of the Representatives of the other Member was present, with the opportunity to pursue or engage in such Company Competitive Business and (ii) one or more of the Representatives of the other Member on the Board of Managers shall have voted against the Company pursuing such Company Competitive Business.

(c) If Marathon, USX or Ashland or any of their respective Affiliates is permitted pursuant to Section 14.01(b) to engage in a Company Competitive Business and, in connection therewith, wishes to use any of the properties, facilities or other assets of the Company or any of its subsidiaries, Marathon or Ashland and their respective Representatives will negotiate in good faith with the Company to reach a reasonable agreement as to the nature and scope of any agreement between the Company or any such subsidiary and such Member with respect to the use of such property, facility or other assets. Any transaction relating to such property, facility or assets shall be deemed for purposes of the LLC Agreement to constitute an Affiliate Transaction that was entered into outside the ordinary course of the Company’s business.

(d) Notwithstanding any limitation contained in Section 14.01(a), Marathon, USX and Ashland and their respective Affiliates shall be permitted to purchase: (i) less than an aggregate of 10% of any class of stock of a person engaged, directly or indirectly, in one or more Competitive Businesses (a “Company Competitive Third Party”); provided that such stock is listed on a national securities exchange or is quoted on the National Market System of NASDAQ; (ii) less than 10% in value of any instrument of Indebtedness of a Company Competitive Third Party; (iii) a Company Competitive Third Party (whether by merger or purchase of all or substantially all of such Company Competitive Third Party’s assets) which engages, directly or indirectly, in one or more Company Competitive Businesses which accounted for less than 20% of such Company Competitive Third Party’s consolidated revenues for the most recently completed fiscal quarter; and (iv) a Company Competitive Third Party (whether by merger or purchase of

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all or substantially all of such Company Competitive Third Party’s assets or otherwise) which engages, directly or indirectly, in one or more Company Competitive Businesses which accounted for greater than 20% of such Company Competitive Third Party’s consolidated revenues for the most recently completed fiscal quarter; provided that a purchase by Marathon, USX or Ashland or any of their respective Affiliates of a Company Competitive Third Party pursuant to this clause (iv) shall only be permitted if within 30 Business Days after the earlier to occur of (A) the execution of definitive agreements with respect to such purchase or (B) the closing of such purchase, Marathon, USX, Ashland or such Affiliate, as applicable, shall present the Company with the opportunity to purchase the portion of such Company Competitive Third Party’s business that is in substantial competition with the Company in North America (the “Company Competitive Business Assets”) at a purchase price determined in accordance with Section 14.04, at a special or regular meeting of the Board of Managers (such meeting, a “14.01(d) Presentation Meeting”).

(e) If the Board of Managers determines at the 14.01(d) Presentation Meeting (by a vote of a majority of the Representatives of the Member not purchasing such Company Competitive Third Party’s business at a special or regular meeting of the Board of Managers (which majority shall constitute a quorum for purposes of the transaction of business)) to purchase the Company Competitive Business Assets, the closing date with respect to such purchase shall not be later than 60 days after the date of the determination of the Purchase Price pursuant to Section 14.04 or, if later, 30 days after the Company has received any antitrust clearance or other Governmental Approval required in connection with such purchase (the “14.01(d) Scheduled Closing Date”). If the Company breaches its obligation to purchase the Company Competitive Business Assets on the 14.01(d) Scheduled Closing Date after the Board of Managers shall have determined to make such purchase as provided in the immediately preceding sentence (other than where such breach is due to circumstances beyond the Company’s reasonable control), then Marathon, USX, Ashland or such Affiliate, as applicable, shall be permitted to retain such Company Competitive Business Assets and the Company shall cease to have the right to purchase such Company Competitive Business Assets. If the Company breaches its obligation to purchase the Company Competitive Business Assets on the 14.01(d) Scheduled Closing Date after

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the Board of Managers shall have determined to make such purchase as provided in the first sentence of this Section 14.01(e)and such breach is due to circumstances beyond the Company’s reasonable control, then, if the closing of the purchase by the Company of the Company Competitive Business Assets does not occur within 270 days after the Scheduled Closing Date, Marathon, USX, Ashland or such Affiliate, as applicable, shall be permitted to retain such Company Competitive Business Assets and the Company shall cease to have the right to purchase such Company Competitive Business Assets. If the Board of Managers determines at the 14.01(d) Presentation Meeting not to purchase such Company Competitive Business Assets, then Marathon, USX, Ashland or such Affiliate, as applicable, shall be permitted to retain such Company Competitive Business Assets and the Company shall cease to have the right to purchase such Company Competitive Business Assets.

(f) It is the intention of each of the parties hereto that if any of the restrictions or covenants contained in this Section 14.01 is held by a court of competent jurisdiction to cover a geographic area or to be for a length of time that is not permitted by Applicable Law, or is in any way construed by a court of competent jurisdiction to be too broad or to any extent invalid, such provision shall not be construed to be null, void and of no effect, but to the extent such provision would be valid or enforceable under Applicable Law, a court of competent jurisdiction shall construe and interpret or reform this Section 14.01 to provide for a covenant having the maximum enforceable geographic area, time period and other provisions (not greater than those contained in this Section 14.01) as shall be valid and enforceable under such Applicable Law. Each of the parties hereto acknowledges that any breach of the terms, conditions or covenants set forth in this Section 14.01 shall be competitively unfair and may cause irreparable damage to the Company because of the special, unique, unusual, extraordinary and intellectual character of the Company’s business, and the Company’s recovery of damages at law will not be an adequate remedy. Accordingly, each of the parties hereto agrees that for any breach of the terms, covenants or agreements of this Section 14.01, a restraining order or an injunction or both may be issued against such person, in addition to any other rights or remedies the Company or the other parties hereto may have.

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SECTION 14.02. Detrimental Activities. (a) Solicitation, Recruiting or Hiring of Employees. Each of Marathon, USX and Ashland hereby agrees that during the Term of the Company, without the consent of each of the Members, it shall not, and it shall cause its Affiliates not to, solicit, recruit or hire any employee of the Company or any of its subsidiaries (other than solicitations that are directed at the public in general in publications available to the public in general) if:

(i) such employee is an Executive Officer or the officer principally in charge of environmental health and safety and human resources, unless, subject to clauses (iii) and (iv) below, such solicitation, recruitment or hiring is consented to in advance by Ashland (in the case of a solicitation, recruitment or hiring by Marathon, USX or any of their respective Affiliates) or by Marathon (in the case of a solicitation, recruitment or hiring by Ashland or any of its Affiliates), which consent shall not be unreasonably withheld;

(ii) such employee reports directly to (A) an Executive Officer or the officer principally in charge of environmental health and safety and human resources(a “Senior Employee”) or (B) a Senior Employee (a “Mid-Level Employee”), unless, subject to clauses (iii) and (iv) below, at the time of such solicitation, recruitment or hiring, the total number of Senior Employees and Mid-Level Employees that have been hired by Marathon, USX, Ashland and their respective Affiliates during the then preceding twenty- four months is less than 10% of the total number of Senior Employees and Mid-Level Employees employed by the Company at the time Marathon, USX, Ashland or an Affiliate thereof wishes to solicit, recruit or hire such Senior Employee or Mid-Level Employee (based on the average number of Senior Employees and Mid-Level Employees employed by the Company during such twenty-four-month period);

(iii) the hiring of such employee, when considered together with all other employees hired by Marathon, USX, Ashland and their respective Affiliates during the then preceding twenty-four months, would have or would reasonably be expected to have, a significant

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detrimental impact on the department of the Company in which such employee is then working; or

(iv) such employee is being solicited, recruited or hired for a position in a Competitive Business of such person or such person’s Affiliates.

Notwithstanding the foregoing, the employees of the Company shall not be required to accept any job offer by Marathon, USX, Ashland or any of their respective Affiliates and a refusal to accept such a job offer shall not negatively affect an employee’s career opportunities at the Company.

(b) Disclosure of Confidential Information. Each of Marathon, USX and Ashland (each, a “Disclosing Party”) hereby agrees that during the Term of the Company, it shall not, and it shall cause its Affiliates not to, disclose or furnish to anyone any confidential information relating to the Company and its subsidiaries (“Confidential Information”) except pursuant to a confidentiality agreement in form and substance reasonably satisfactory to the other parties hereto which expressly provides that the other parties hereto shall be a beneficiary thereof (a “Confidentiality Agreement”). The foregoing restriction on disclosure of Confidential Information shall not apply to (i) information which is or becomes part of the public domain through no fault or breach of the Disclosing Party; (ii) information which at the time of disclosure is already in the possession of the Disclosing Party in written form and was not received directly or indirectly from the Company or any of its subsidiaries under a requirement of confidentiality; (iii) information received by the Disclosing Party from a third party; provided that the Disclosing Party, after reasonable inquiry, has no reason to believe that the third party obtained the information directly or indirectly from the Company or any of its subsidiaries under a requirement of confidentiality; (iv) information required to be disclosed under subpoena or other mandatory legal process; provided, that the Disclosing Party shall give the Company timely notice of the service of the subpoena or other process so that the Company may seek a protective order or other legal remedy to prevent such disclosure; (v) information which has been subsequently and independently acquired or developed by the Disclosing Party without violating any of its obligations under this Section 14.02(b) or under any Confidentiality Agreement; and (vi) information which is required or advisable to be disclosed

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under the Securities Act or the Exchange Act. Notwithstanding the foregoing, a Disclosing Party shall be permitted to disclose Confidential Information to its directors, officers, employees, auditors, agents, advisors and representatives (such persons being collectively referred as its “Representatives”) if the Disclosing Party informs its Representatives of the confidential nature of the Confidential Information and obtains their agreement to be bound by this Section 14.02(b) and not to disclose such Confidential Information to any other person. Each Disclosing Party shall be responsible for any breach of this Section 14.02 by its Representatives.

SECTION 14.03. Limitations on the Company Entering into the Valvoline Business. (a) Subject to Sections 14.03(b) and 14.03(d), the Company hereby agrees that it shall not, and it shall cause its Affiliates (other than Marathon, Ashland and their respective subsidiaries (other than the Company and its subsidiaries)) not to, engage in any business worldwide which is substantially in competition with the Valvoline Business. Notwithstanding the foregoing, the provisions of this Section 14.03(a) shall terminate on the first date on which Ashland and its Affiliates shall own (beneficially or otherwise) less than 20% of the Valvoline Business.

(b)(i) Notwithstanding any limitation contained in Section 14.03(a), if in any two consecutive calendar years, (A) Valvoline shall not have purchased from the Company and its subsidiaries a quantity of lube oil at least equal to the Minimum Lube Oil Purchase Amount and (B)(1) such failure to purchase was due to the fact that the Company and Valvoline could not in good faith agree to mutually acceptable terms and conditions for the sale by the Company and its subsidiaries to Valvoline of at least such quantity of lube oil and (2) such failure was not due, in whole or in part, to the failure of the Company and its subsidiaries to produce and offer for sale to Valvoline the Minimum Lube Oil Purchase Amount during either such calendar year, the failure of the Company and its subsidiaries to produce and offer for sale to Valvoline lube oil satisfying contractual specifications or any other failure of the Company or its subsidiaries to satisfy in any material respect any of its then existing material contractual obligations to Valvoline, then the Company and its subsidiaries shall be permitted to

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engage in a business which is substantially in competition with Valvoline’s Bulk Motor Oil Business and/or Valvoline’s Packaged Motor Oil Business (but, except as expressly permitted in Section 14.03(a), no other business that constitutes part of the Valvoline Business); provided that, notwithstanding the foregoing, the Company and its subsidiaries shall not be permitted to enter into or engage in any such business if the Company and its subsidiaries shall have substantially ceased production at the Catlettsburg, Kentucky refinery of lube oil for sale to third parties (other than due to a force majeure or an inability to find a willing buyer for its lube oil) for any period of 90 consecutive days or more prior to the time the Company and its subsidiaries shall first enter or propose to enter into such business.

(ii) Notwithstanding any limitation contained in Section 14.03(a), if in each of the four calendar years following the consecutive two-year period provided for in Section 14.03(b)(i), (A) Valvoline shall not have purchased from the Company and its subsidiaries a quantity of lube oil at least equal to the Minimum Lube Oil Purchase Amount and (B)(1) such failure to purchase was due to the fact that the Company and Valvoline could not in good faith agree to mutually acceptable terms and conditions for the sale by the Company and its subsidiaries to Valvoline of at least such quantity of lube oil and (2) such failure was not due, in whole or in part, to the failure of the Company and its subsidiaries to produce and offer for sale to Valvoline the Minimum Lube Oil Purchase Amount during any such calendar year, the failure of the Company and its subsidiaries to produce and offer for sale to Valvoline lube oil satisfying contractual specifications or any other failure of the Company or its subsidiaries to satisfy in any material respect any of its existing material contractual obligations to Valvoline, then at any time after the conclusion of such consecutive four-year period, the Company and its subsidiaries shall be permitted to engage in a business which is substantially in competition with Valvoline’s Private Label Packaged Motor Oil Business and/or Valvoline’s Quick Lube Business; provided that, notwithstanding the foregoing, the Company and its subsidiaries shall not be permitted to enter into or engage in any such business if the Company and its subsidiaries shall have

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substantially ceased production at the Catlettsburg, Kentucky refinery of lube oil for sale to third parties (other than due to a force majeure or an inability to find a willing buyer for its lube oil) for any period of 90 consecutive days or more prior to the time the Company and its subsidiaries shall first enter or propose to enter into such business.

(iii) The provisions set forth in this Section 14.03(b) permitting the Company and its subsidiaries to engage in a new business in competition with the Valvoline Business if certain conditions are satisfied shall be an exception only to the super majority vote requirement in Section 8.08(a) of the LLC Agreement, and shall not be an exception to any other supermajority vote requirements of Section 8.08 of the LLC Agreement.

(c) Notwithstanding any limitation contained in Section 14.01(a), if at any time the Company or any of its subsidiaries enters into, other than as expressly permitted in Section 14.03(d), either the Bulk Motor Oil Business, the Packaged Motor Oil Business, the Private Label Packaged Motor Oil Business or the Quick Lube Business, Ashland and its subsidiaries thereafter shall be permitted to enter into a business which is substantially in competition with the Company’s lube oil production business.

(d) Notwithstanding any limitation contained in Section 14.03(a), subject to Section 8.08 of the LLC Agreement, the Company and its subsidiaries shall be permitted to (i) engage, directly or through its own dealers, jobbers or jobber dealers, in the business currently conducted under the brand name “Maralube Express” (the “Maralube Express Business”); (ii) engage, directly or through its own dealers, jobbers or jobber dealers, in the truck stop oil change business; (iii) engage, directly or through its own dealers, jobbers, or jobber dealers, in the oil, lubricants, antifreeze and other, in each case automotive fluid change business and auto and light truck maintenance service, in each case incidental to operating their service stations or other retail units; (iv) engage, directly or through its own dealers, jobbers, or jobber dealers, in the sale of lubricants to farm, government, school and other similar commercial accounts; (v) engage, directly or through its own dealers, jobbers, or jobber dealers, in the sale of car care products and chemicals,

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antifreeze and rust preventatives in service stations or similar retail units that are owned or operated by them, in each case incidental to operating their service stations or other retail units; (vi) engage, directly or through its own dealers, jobbers, or jobber dealers, in the collection of used lubricants at service stations or similar retail units that are owned or operated by them, in each case incidental to operating their service stations or other retail units; (vii) enter into contractual agreements with Valvoline or other third party packagers with respect to the packaging by Valvoline or such other third party packagers of lube oil products for sale (A) in service stations or similar retail units that are owned or operated by the Company and its subsidiaries or its dealers, jobbers or jobber dealers or to farm, government, school or other similar commercial accounts pursuant to clause (iv) above and (B) solely under the brandnames or trademarks of such service stations; and (viii) purchase a Person (whether by merger or purchase of all or substantially all the assets or otherwise) which engages, directly or indirectly, in a business that is substantially in competition with the Valvoline Business (a “Valvoline Competitive Third Party”) provided that less than 33% of such Valvoline Competitive Third Party’s consolidated revenues for the most recently completed fiscal quarter are derived from businesses which are substantially in competition with Valvoline’s Business; provided further that a purchase by the Company or one of its subsidiaries of a Valvoline Competitive Third Party shall be permitted only if within 30 Business Days after the earlier to occur of (A) the execution of definitive agreements with respect to such purchase or (B) the closing of such purchase, the Company shall give notice (a “14.03(d) Offer Notice”) to Ashland, identifying the portion of such Valvoline Competitive Third Party’s business that is substantially in competition with the Valvoline Business (the “Valvoline Competitive Business Assets”) and offering to sell to Ashland such Valvoline Competitive Business Assets at a purchase price determined in accordance with Section 14.04.

(e) Ashland shall have 90 days from receipt of the 14.03(d) Offer Notice to elect, by notice to the Company (a “14.3(d) Purchase Election Notice”), to purchase such Valvoline Competitive Business Assets. If Ashland makes such election, the notice of election shall state a closing date not later than 60 days after the date of the Section 14.03(d) Purchase Election Notice or, if later, 30 days after Ashland has received any antitrust clearance or other

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Governmental Approval required in connection with such purchase (a “14.03(d) Scheduled Closing Date”). If Ashland breaches its obligation to purchase the Valvoline Competitive Business Assets on the 14.03(d) Scheduled Closing Date after giving notice of its election to make such purchase (other than where such breach is due to circumstances beyond Ashland’s reasonable control), then the Company shall be permitted to retain such Valvoline Competitive Business Assets. If Ashland breaches its obligation to purchase the Valvoline Competitive Business Assets on the 14.03(d) Scheduled Closing Date after giving notice of its election to make such purchase and such breach is due to circumstances beyond Ashland’s reasonable control, then, if the closing of the purchase by Ashland of the Valvoline Competitive Business Assets does not occur within 270 days after the Scheduled Closing Date, the Company shall be permitted to retain such Valvoline Competitive Business Assets. If Ashland elects not to purchase such Valvoline Competitive Business Assets, then the Company shall be permitted to retain such Valvoline Competitive Business Assets.

(f) (i) If the Company and its subsidiaries are permitted under Section 14.03(d) to retain any Valvoline Competitive Business Assets and, at any time thereafter, the Company or any such subsidiary shall determine to sell such Valvoline Competitive Business Assets (or any portion thereof), then the Company shall give notice (a “14.03(f) Valvoline Offer Notice”) to Ashland, identifying the proposed purchaser from whom it has received a bona fide offer and setting forth the proposed sale price (which shall be payable only in cash or purchase money obligations secured solely by such Valvoline Competitive Business Assets (or portion thereof) being sold) and the other material terms and conditions upon which the Company is proposing to sell such Valvoline Competitive Business Assets to such identified purchaser (or portion thereof). No such sale shall encompass or be conditioned upon the sale or purchase of any property other than such Valvoline Competitive Business Assets (or portion thereof). Ashland shall have 90 days from receipt of the Valvoline Offer Notice to elect, by notice to the Company (a “14.03(f) Valvoline Purchase Election Notice”), to purchase such Valvoline Competitive Business Assets (or portion thereof) on the terms and conditions set forth in the 14.03(f) Valvoline Offer Notice.

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(ii) If Ashland makes such election, the notice of election shall state a closing date not later than 60 days after the date of the 14.03(f) Valvoline Purchase Election Notice. If Ashland breaches its obligation to purchase such Valvoline Competitive Business Assets (or portion thereof) on the same terms and conditions as those contained in the 14.03(f) Valvoline Offer Notice after giving notice of its election to make such purchase (other than where such breach is due to circumstances beyond Ashland’s reasonable control), then the Company may, at any time for a period of 270 days after such default, sell such Valvoline Competitive Business Assets (or portion thereof) to any person at any price and upon any other terms without further compliance with the procedures set forth in this Section 14.03(f).

(iii) If Ashland gives notice within the 90-day period following the 14.03(f) Valvoline Offer Notice from the Company that it elects not to purchase such Valvoline Competitive Business Assets (or portion thereof), the Company may, within 120 days after the end of such 90-day period (or 270 days in the case where such parties have received a second request under HSR), sell such Valvoline Competitive Business Assets to the identified purchaser on terms and conditions no less favorable to the Company than the terms and conditions set forth in such 14.03(f) Valvoline Offer Notice. In the event the Company shall desire to offer such Valvoline Competitive Business Assets (or portion thereof) for sale to such identified purchaser or to any other person on terms and conditions less favorable to it than those previously set forth in a 14.03(f) Valvoline Offer Notice, the procedures set forth in this Section 14.03(f) must again be initiated and applied with respect to the terms and conditions as modified.

(g) It is the intention of each of the parties hereto that if any of the restrictions or covenants contained in this Section 14.03 is held by a court of competent jurisdiction to cover a geographic area or to be for a length of time that is not permitted by Applicable Law, or is in any way construed by a court of competent jurisdiction to be too broad or to any extent invalid, such provision shall not be construed to be null, void and of no effect, but to the extent such provision would be valid or enforceable under Applicable Law, a court of competent jurisdiction shall construe and interpret or reform this Section 14.03 to provide for a covenant having the maximum enforceable geographic area, time period and other

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provisions (not greater than those contained in this Section 14.03) as shall be valid and enforceable under such Applicable Law. Each of the parties hereto acknowledges that any breach of the terms, conditions or covenants set forth in this Section 14.03 shall be competitively unfair and may cause irreparable damage because of the special, unique, unusual, extraordinary and intellectual character of the applicable business, and recovery of damages at law will not be an adequate remedy. Accordingly, each of the parties hereto agrees that for any breach of the terms, covenants or agreements of this Section 14.03, a restraining order or an injunction or both may be issued against such person, in addition to any other rights or remedies the aggrieved party may have.

(h) For purposes of this Agreement, the following terms shall have the following meanings:

(i) “Bulk Motor Oil Business” means sales of blended (finished) motor oil in tanker truck, barge and tanker railcar quantities.

(ii) “Minimum Lube Oil Purchase Amount” means a quantity of lube oil at least equal to 70% of the quantity of lube oil that Valvoline purchased from the Catlettsburg, Kentucky refinery in the 1997 calendar year.

(iii) “Packaged Motor Oil Business” means the ownership, use and/or operation (including toll processing through a third party’s plant) of packaging facilities for the sale of packaged motor oil under third party brandnames or trademarks.

(iv) “Private Label Packaged Motor Oil Business” means the sale of packaged motor oil under third party and/or the Company’s brand names or trademarks.

(v) “Quick Lube Business” means the provision of services for changing oil, lubricants, antifreeze and other automotive fluids for passenger car and light commercial trucks and the provision of maintenance checks and related services.

(vi) “Valvoline” means the Valvoline division of Ashland.

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(vii) “Valvoline Business” means the business currently engaged in by Valvoline, including (A) the production and marketing of automotive and industrial oils, automotive car care products and chemicals, antifreeze, rust preventives, (B) automotive services and (C) environmental recycling services (including collection of used oil, filters and related items). For the avoidance of doubt, the Valvoline Business includes the Bulk Motor Oil Business, the Packaged Motor Oil Business, the Private Label Packaged Motor Oil Business and the Quick Lube Business.

SECTION 14.04. Purchase Price of Competitive Business Assets. In the event that (x) the Company elects to purchase any Company Competitive Business Assets pursuant to the proviso to Section 14.01(d)(iv) or (y) Ashland elects to purchase any Valvoline Competitive Business Assets pursuant to the second proviso to Section 14.03(d)(viii), the purchase price of such Company Competitive Business Assets or Valvoline Competitive Business Assets (the “Competitive Business Purchase Price”) shall be determined pursuant to the following procedures:

(a) Negotiation Period. For a period of 15 days following the date the Board of Managers approves such purchase, Marathon and Ashland will negotiate in good faith to seek to reach an agreement as to the Competitive Business Purchase Price. If Marathon and Ashland reach such an agreement, then the Competitive Business Purchase Price shall be deemed to be the amount so agreed upon by Marathon and Ashland.

(b) Appraisal Process. (i) In the event Marathon and Ashland are unable to reach an agreement as to the Competitive Business Purchase Price within the 15 day period referred to in clause (a) above, then within five Business Days after the expiration of such 15-day period (such fifth Business Day being referred to herein as the “14.04 Appraisal Process Commencement Date”), Marathon and Ashland each shall select a nationally recognized investment banking firm to (A) prepare a report which (1) sets forth such investment banking firm’s determination of the Competitive Business Purchase Price (which shall be a single amount as opposed to a range) and (2) includes work papers which indicate the basis for the calculations of the Competitive Business Purchase Price

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(a “14.04 Appraisal Report”) and (B) deliver to Marathon or Ashland, as the case may be, an oral and written opinion addressed to such party as to the Competitive Business Purchase Price.

(ii) The fees and expenses of each investment banking firm shall be paid by the party selecting such investment banking firm.

(iii) Each of Marathon and Ashland shall instruct its respective investment banking firm to (A) not consult with the other investment banking firm with respect to its view as to the Competitive Business Purchase Price prior to the time that both investment banking firms have delivered their respective opinions to Marathon and Ashland, as applicable, (B) deliver their respective 14.04 Appraisal Reports, together with their oral and written opinions as to the Competitive Business Purchase Price (the “14.04 Initial Opinion Values”), within 15 days after the 14.04 Appraisal Process Commencement Date, and (C) deliver a copy of its written opinion and its 14.04 Appraisal Report to the Company, the other party and the other party’s investment banking firm at the time it delivers its oral and written opinion to Marathon or Ashland, as applicable.

(iv) If the 14.04 Initial Opinion Values differ and the lesser 14.04 Initial Opinion Value equals or exceeds 90% of the greater 14.04 Initial Opinion Value, the Competitive Business Purchase Price shall be deemed to be an amount equal to (A) the sum of the 14.04 Initial Opinion Values divided by (B) two.

(v) If the 14.04 Initial Opinion Values differ and the lesser 14.04 Initial Opinion Value is less than 90% of the greater 14.04 Initial Opinion Value then:

(A) within two Business Days after both investment banking firms have delivered their respective opinions to Marathon or Ashland, as applicable, each investment banking firm shall, at a single meeting at which Marathon, Ashland, the Company and the other investment banking firm are present, make a presentation with respect to its 14.04 Initial Opinion Value. At such presentation, Marathon, Ashland, the Company and the other

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investment banking firm shall be entitled to ask questions as to the basis for and the calculation of such investment banking firm’s 14.04 Initial Opinion Value; and

(B) Marathon and Ashland shall, within five Business Days after the date Marathon and Ashland receive the 14.04 Initial Opinion Values (such fifth Business Day being referred to herein as the “14.04 Subsequent Appraisal Process Commencement Date”), jointly select a third nationally recognized investment banking firm to (1) prepare a 14.04 Appraisal Report and (2) deliver an oral and written opinion addressed to Marathon and Ashland as to the Competitive Business Purchase Price. The fees and expenses of such third investment banking firm shall be paid 50% by Marathon and 50% by Ashland. Such third investment banking firm shall not be provided with the 14.04 Initial Opinion Values and shall not consult with the initial investment banking firms with respect thereto. During such five- Business Day period, Marathon and Ashland shall negotiate in good faith to independently reach an agreement as to the Competitive Business Purchase Price. If Marathon and Ashland reach such an agreement, then the Competitive Business Purchase Price shall be deemed to be the amount so agreed upon by Marathon and Ashland. If Marathon and Ashland are unable to reach such an agreement, then Marathon and Ashland shall instruct such third investment banking firm to deliver its 14.04 Appraisal Report, together with its oral and written opinion as to the Competitive Business Purchase Price (the “14.04 Third Opinion Value”), within 15 days after the 14.04 Subsequent Appraisal Process Commencement Date. The Competitive Business Purchase Price in such circumstances shall be deemed to be an amount equal to (I) the sum of (x) the 14.04 Third Opinion Value plus (y) which ever of the two 14.04 Initial Opinion Values is closer to the 14.04 Third Opinion Value (or, if the 14.04 Third Opinion Value is exactly halfway between the two 14.04 Initial Opinion Values, the 14.04 Third Opinion Value), divided by (II) two.

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ARTICLE XV

Survival; Assignment

SECTION 15.01. Survival and Assignment re: Marathon and USX. (a) General. Except as expressly permitted by this Section 15.01, neither Marathon nor USX shall assign all or any part of its rights and obligations hereunder to any person without first obtaining the written approval of each of the other parties hereto, which approval may be granted or withheld in such parties’ sole discretion.

(b) Merger or Sale of Substantially All of Marathon’s or USX’s Assets. In the event that Marathon or USX shall be a party to a merger, consolidation or other similar business combination transaction with a third party or sell all or substantially all its assets to a third party, Marathon’s or USX’s, as the case may be, rights and obligations hereunder shall be assignable to such third party in connection with such transaction; provided, however, that Marathon or USX shall not be permitted to assign its rights and obligations hereunder to such third party as aforesaid if the purpose or intent of such merger, consolidation, similar business combination transaction or sale is to circumvent or avoid the application of Sections 10.01(c) and 10.04 of the LLC Agreement to the related Transfer of Marathon’s Membership Interests to such third party.

(c) Transfer of Marathon’s Membership Interests Pursuant to Section 10.01(c) of the LLC Agreement. In the event that Marathon Transfers all of its Membership Interests to a third party pursuant to Section 10.01(c) of the LLC Agreement, then:

(i) such third party shall at the time of such Transfer become subject to all of Marathon’s and USX’s respective obligations hereunder and shall succeed to all of Marathon’s and USX’s respective rights hereunder;

(ii) such third party and its ultimate parent, if any, shall each become subject to the same standstill obligations that apply to Marathon and USX under Section 12.01, which standstill provisions shall remain in effect with respect to such third party and its ultimate parent, if any, through the six-month

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anniversary of the earlier to occur of (a) the date that Ashland and its Affiliates do not own any Membership Interests and (b) the date that such third party and its Affiliates do not own any Membership Interests;

(iii) such third party and its ultimate parent, if any, shall each become subject to the same non-compete covenants that apply to Marathon and USX under Article XIV; and

(iv) Marathon and USX shall each be relieved of all of its obligations hereunder other than (1) any default hereunder by Marathon or USX or any of their respective Affiliates that occurred prior to the time of such Transfer; (2) Marathon’s and USX’s respective obligations under Section 12.01 (which are in addition to, and not in lieu of such third party’s obligations under Section 12.01); (3) Marathon’s and USX’s respective obligations under Article X with respect to any Securities that Marathon and/or USX issued to Ashland pursuant to Section 4.02(c) prior to such Transfer or that Marathon and/or USX intends to issue to Ashland pursuant to Section 4.02(c) after such Transfer; and (4) Marathon’s and USX’s respective obligations under Article XIV (which shall survive for six months from the date of such Transfer and which are in addition to, and not in lieu of such third party’s obligations under Article XIV).

(d) Assignment of Marathon’s Marathon Call Right and Special Termination Right. In the event of an assignment by Marathon of its rights and obligations under this Agreement to a third party pursuant to this Section 15.01, Marathon’s rights and obligations related to its Marathon Call Right and its Special Termination Right shall also be assigned to such third party;

provided, that such third party shall not be permitted to exercise the Marathon Call Right until the third anniversary of the date of such assignment.

SECTION 15.02. Survival and Assignment re: Ashland. (a) General. Except as expressly permitted by this Section 15.02, Ashland shall not assign all or any part of its rights and obligations hereunder to any person without first obtaining the prior written approval of each

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of the other parties hereto, which approval may be granted in such parties’ sole discretion.

(b) Merger or Sale of Substantially all of Ashland’s Assets. In the event that Ashland shall be a party to a merger, consolidation or other similar business combination transaction with a third party or sell all or substantially all of its assets to a third party, Ashland’s rights and obligations hereunder shall be assignable to such third party in connection with such transaction;

provided, however, that Ashland shall not be permitted to assign its rights and obligations hereunder to such third party as aforesaid if the purpose or intent of such merger, consolidation, similar business combination transaction or sale is to circumvent or avoid the application of Sections 10.01(c) and 10.04 of the LLC Agreement to the related Transfer of Ashland’s Membership Interests to such third party.

(c) Transfer of Membership Interests Pursuant to Section 10.01(c) of the LLC Agreement. In the event that Ashland Transfers all of its Membership Interests to a third party pursuant to Section 10.01(c) of the LLC Agreement, then:

(i) such third party shall at the time of such Transfer become subject to all of Ashland’s obligations hereunder and shall succeed to all of Ashland’s rights hereunder;

(ii) such third party and its ultimate parent, if any, shall each become subject to the same standstill obligations that apply to Ashland under Section 12.02, which standstill provisions shall remain in effect with respect to such third party and its ultimate parent, if any, through the later to occur of (i) the six-month anniversary of the earlier to occur of (A) the date that Marathon and its Affiliates do not own any Membership Interests and (B) the date that such third party and its Affiliates do not own any Membership Interests and (ii) in the event that such third party or its Affiliates acquires USX Voting Securities pursuant to the Closing of the Ashland Put Right, the date on which such third party and its Affiliates do not own more than 5% of the then outstanding USX Voting Securities;

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(iii) such third party and its ultimate parent, if any, shall each become subject to the same non-compete covenants that apply to Ashland under Article XIV;

(iv) Ashland shall be relieved of all of its obligations hereunder other than (1) any default hereunder by Ashland or any of its Affiliates that occurred prior to the time of such Transfer; (2) Ashland’s obligations under Section 12.02 (which are in addition to, and not in lieu of such third party’s obligations under Section 12.02); and (3) Ashland’s obligations under Article XIV (which shall survive for six months from the date of such Transfer and which are in addition to, and not in lieu of such third party’s obligations under Article XIV); and

(v) Ashland shall retain all of its rights under Article X with respect to any Securities that are issued to Ashland pursuant to Section 4.02(c) prior to or after the date of such Transfer (which rights shall be in addition to and not in lieu of the rights that the third party of Ashland’s Membership Interests is entitled to under Article X).

(d) Assignment of Ashland’s Ashland Put Right and Special Termination Right. In the event of an assignment by Ashland of its rights and obligations under this Agreement to a third party pursuant to this Section 15.02, Ashland’s rights and obligations related to its Ashland Put Right and its Special Termination Right shall also be assigned to such third party; provided that such third party shall not be permitted to exercise the Ashland Put Right until the third anniversary of the date of such assignment.

SECTION 15.03. Survival and Assignment re: the Company. The Company shall not be permitted to assign its rights and obligations hereunder without the prior written consent of each of the other parties hereto, which consent shall not be unreasonably withheld.

SECTION 15.04. Assignment and Assumption Agreements. Any assignment of Marathon’s, USX’s, Ashland’s or the Company’s respective rights and obligations hereunder pursuant to this Article XV shall be pursuant to an assignment and assumption agreement by and among the third party, such third party’s ultimate parent, if any, and each

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of the parties hereto, in such form as the parties hereto shall reasonably approve.

SECTION 15.05. Consequences of Unpermitted Assignments. Any attempted assignment in violation of this Article XV shall be void and without legal effect.

ARTICLE XVI

Dispute Resolution Procedures

SECTION 16.01. General. All controversies, claims or disputes that arise out of or relate to the Agreement or the construction, interpretation, performance, breach, termination, enforceability or validity of the Agreement, or the commercial economic or other relationship of the parties thereto, whether such claim is based on rights, privileges or interests recognized by or based upon statute, contract, tort, common law or otherwise and whether such claim existed prior to or arises on or after the date of the Agreement (a “Dispute”) shall be resolved in accordance with the provisions of this Article XVI. Notwithstanding anything to the contrary contained in this Article XVI, nothing in this Article XVI shall limit the ability of the directors and officers of a party hereto from communicating directly with the directors and officers of any other party hereto.

SECTION 16.02. Dispute Notice and Response. A party hereto may give another party hereto written notice (a “Dispute Notice”) of any Dispute which has not been resolved in the normal course of business. Within fifteen Business Days after delivery of the Dispute Notice, the receiving party shall submit to the other party a written response (the “Response”). The Dispute Notice and the Response shall each include a statement setting forth the position of the party giving such notice, a summary of the arguments supporting such position and, if applicable, the relief sought.

SECTION 16.03. Negotiation Between Chief Executive Officers. (a) If a Dispute Notice is delivered prior to the Closing, within 10 Business Days after delivery of the Response provided for in Section 16.02, the Chief Executive Officer (in the case of Ashland and USX) and/or the President (in the case of Marathon and the Company) of

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each party to such Dispute shall meet or communicate by telephone at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, and shall negotiate in good faith to attempt to resolve the Dispute that is the subject of such Dispute Notice. If such Dispute has not been resolved within 20 Business Days after the delivery of the Response as provided for in Section 16.02, then each party shall be permitted to take such actions at law or in equity as it is otherwise permitted to take or as may be available under Applicable Law.

(b) All negotiations between the Chief Executive Officer(s) and/or the President(s) pursuant to this Section 16.03 shall be treated as compromise and settlement negotiations. Nothing said or disclosed, nor any document produced, in the course of such negotiations which is not otherwise independently discoverable shall be offered or received as evidence or used for impeachment or for any other purpose in any current or future arbitration or litigation.

SECTION 16.04. Right to Equitable Relief Preserved. Notwithstanding anything in this Agreement to the contrary, any party hereto may at any time seek from any court of the United States located in the State of Delaware or from any Delaware state court, any interim, provisional or injunctive relief that may be necessary to protect the rights or property of such party or maintain the status quo before, during or after the pendency of the negotiation process or any other proceeding contemplated by Section 16.03.

ARTICLE XVII

Miscellaneous

SECTION 17.01. Notices. Any notice, consent or approval to be given under this Agreement shall be in writing and shall be deemed to have been given if delivered: (i) personally by a reputable courier service that requires a signature upon delivery; (ii) by mailing the same via registered or certified first-class mail, postage prepaid, return receipt requested; or (iii) by telecopying the same with receipt confirmation (followed by a first-class mailing of the same) to the intended recipient. Any such writing will be deemed to have been given: (a) as of the date of

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personal delivery via courier as described above; (b) as of the third calendar day after depositing the same into the custody of the postal service as evidenced by the date-stamped receipt issued upon deposit of the same into the mails as described above; and (c) as of the date and time electronically transmitted in the case of telecopy delivery as described above, in each case addressed to the intended party at the address set forth below:

To Marathon:

Marathon Oil Company

5555 San Felipe

P.O. Box 3128

Houston, TX 77056

Attn: General Counsel

Phone: (713) 296-4137

Fax: (713) 296-4171

To USX:

USX Corporation

600 Grant Street

Pittsburgh, PA, 15219-4776

Attn: General Counsel

Phone: (412) 433-1121

Fax: (412) 433-2015

To Ashland:

Ashland Inc.

1000 Ashland Drive

Russell, KY 41169

Attn: General Counsel

Phone: (606) 329-3333

Fax: (606) 329-3823

To the Company:

Marathon Ashland Petroleum LLC

539 South Main Street

Findlay, Ohio 45840

Attn: General Counsel

Phone: (419) 421-4115

Fax: (419) 422-2121

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Any party may designate different addresses or telecopy numbers by notice to the other parties.

SECTION 17.02. Merger and Entire Agreement. This Agreement (including the Schedules and Appendices attached hereto), together with the other Transaction Documents (including the exhibits, schedules and appendices thereto) and certain other agreements executed contemporaneously with the Master Formation Agreement constitutes the entire Agreement of the parties hereto and supersedes any prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof.

SECTION 17.03. Parties in Interest. This Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors, legal representatives and permitted assigns.

SECTION 17.04. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

SECTION 17.05. Amendment; Waiver. This Agreement may not be amended except in a written instrument signed by each of the parties hereto and expressly stating it is an amendment to this Agreement. Any failure or delay on the part of any party hereto in exercising any power or right hereunder shall not operate as a waiver thereof, nor shall any single or partial exercise of any such right or power preclude any other or further exercise thereof or the exercise of any other right or power hereunder or otherwise available at law or in equity.

SECTION 17.06. Severability. If any term, provision, covenant, or restriction of this Agreement or the application thereof to any Person or circumstance, at any time or to any extent, is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement (or the application of such provision in other jurisdictions or to Persons or circumstances other than those to which it was held invalid or unenforceable) shall in no way be affected, impaired or invalidated, and to the extent permitted by Applicable Law, any such term, provision, covenant or

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restriction shall be restricted in applicability or reformed to the minimum extent required for such to be enforceable. This provision shall be interpreted and enforced to give effect to the original written intent of the parties hereto prior to the determination of such invalidity or unenforceability.

SECTION 17.07. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR PROCEEDING RELATED TO OR ARISING OUT OF THIS AGREEMENT, OR ANY TRANSACTION OR CONDUCT IN CONNECTION HEREWITH, IS WAIVED.

SECTION 17.08. Enforcement. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in the Delaware Chancery Court; provided that if the Delaware Chancery Court does not have jurisdiction with respect to such matter, the parties hereto shall be entitled to enforce specifically the terms and provisions of this Agreement in any court of the United States located in the State of Delaware or in Delaware state court, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit itself to the personal jurisdiction of the Delaware Chancery Court in the event that any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement; provided that if the Delaware Chancery Court does not have jurisdiction with respect to any such dispute, such party consents to submit itself to the personal jurisdiction of any Federal court located in the State of Delaware or any Delaware state court, (ii) agrees to appoint and maintain an agent in the State of Delaware for service of legal process, (iii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (iv) agrees that it will not plead or claim in any such court that any action relating to this Agreement or any of the transactions contemplated by this Agreement in any such court has been brought in an inconvenient forum and (v) agrees that it will not initiate

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any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than (1) the Delaware Chancery Court, or (2) if the Delaware Chancery Court does not have jurisdiction with respect to such action, a Federal court sitting in the State of Delaware or a Delaware state court.

SECTION 17.09. Table of Contents, Headings and Titles. The table of contents and section headings of this Agreement and titles given to Schedules and Appendices to this Agreement are for reference purposes only and are to be given no effect in the construction or interpretation of this Agreement.

SECTION 17.10. Use of Certain Terms; Rules of Construction. As used in this Agreement, the words “herein”, “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular paragraph, subparagraph, section, subsection or other subdivision. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa. Each party hereto agrees that any rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation or construction of this Agreement or any Transaction Document.

SECTION 17.11. Holidays. Notwithstanding any deadline for payment, performance, notice or election under this Agreement, if such deadline falls on a date that is not a Business Day, then the deadline for such payment, performance, notice or election will be extended to the next succeeding Business Day.

SECTION 17.12. Third Parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person and their respective successors, legal representatives and permitted assigns any rights, remedies or basis for reliance upon, under or by reason of this Agreement.

SECTION 17.13. Liability for Affiliates. Except where and to the extent that a contrary intention otherwise appears, where any party hereto undertakes to cause its Affiliates to take or abstain from taking any action, such

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undertaking shall mean (i) in the case of an Affiliate that is controlled by such party, that such party shall cause such Affiliate to take or abstain from taking such action and (ii) in the case of an Affiliate that controls or is under common control with such party, that such party shall use its commercially reasonable best efforts to cause such Affiliates to take or abstain from taking such action; provided, however, that such party shall not be required to violate, or cause any director of an Affiliate to violate, any fiduciary duty to minority shareholders of such Affiliate.

SECTION 17.14. Schedules. No representation or warranty hereunder shall be deemed to be inaccurate if the actual situation is disclosed pursuant to another representation or warranty herein or in a schedule to a Put/Call, Registration Rights and Standstill Agreement Disclosure Letter or in any other Transaction Document or any exhibit, schedule or appendix thereto, whether or not an explicit cross-reference appears. Neither the specification of any dollar amount in any representation, warranty or covenant contained in this Agreement nor the inclusion of any specific item in a schedule to a Put/Call, Registration Rights and Standstill Agreement Disclosure Letter is intended to imply that such amount, or higher or lower amounts, or the item so included or other items, are or are not material, and neither party shall use the fact of the setting forth of any such amount or the inclusion of any such item in any dispute or controversy involving the parties as to whether any obligation, item or matter not described herein or included in a schedule to a Put/Call,

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Registration Rights and Standstill Agreement Disclosure Letter is or is not material for purposes of this Agreement.

IN WITNESS WHEREOF, this Agreement has been duly executed by the parties as of the day and year first above written.

MARATHON OIL COMPANY
by	/s/ Victor G. Beghini
	Name: Victor G. Beghini Title:    President

USX CORPORATION
by	/s/ Thomas J. Usher
	Name: Thomas J. Usher Title:   Chairman of the Board and Chief         Executive Officer

ASHLAND INC.
by	/s/ Paul W. Chellgren
	Name: Paul W. Chellgren Title:   Chairman of the Board and Chief         Executive Officer

MARATHON ASHLAND PETROLEUM LLC
by	/s/ J. L. Frank
	Name: J. L. Frank Title:    President

EX-10.(P)

EXHIBIT 10(p)

EXECUTION COPY

AMENDMENT NO. 1, dated as of December 31, 1998 (this “Amendment”) to the PUT/CALL, REGISTRATION RIGHTS AND STANDSTILL AGREEMENT dated as of January 1, 1998 (the “Agreement”) among MARATHON OIL COMPANY, an Ohio corporation, USX CORPORATION, a Delaware corporation, ASHLAND INC., a Kentucky corporation and MARATHON ASHLAND PETROLEUM LLC, a Delaware limited liability company (collectively, the “Parties”).

WHEREAS, the Parties have heretofore entered into the Agreement (capitalized terms used in this Amendment and not defined herein shall have the meanings given such terms in the Agreement); and

WHEREAS, the Parties wish to amend the Agreement to reflect certain changes to the prices set forth therein.

NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the Parties agree as follows:

Section 1. Amendments:

(a) Section 1.01 of the Agreement is amended to insert the following definition after the definition of “Price Index” and prior to the definition of “Private Label Packaged Motor Oil Business”:

“‘Price Reduction’ shall have the meaning set forth in Section 2.02(b) of the Put/Call, Registration Rights and Standstill Agreement.”

(b) Section 2.02(a) of the Agreement is amended to read in its entirety as follows:

“(a) Amount. The Special Termination Price shall be an amount equal to (i) the product of (x) 100% of the Appraised Value of the Company multiplied by (y) the Terminating Member’s Percentage Interest, less (ii) if the Terminating Member is Ashland, the Price Reduction.”

(c) Sections 2.02(b) and 2.02(c) as numbered in the Agreement are numbered Sections 2.02(c) and 2.02(d) respectively and a new Section 2.02(b) of the Agreement is added to read in its entirety as follows:

“(b) Price Reduction. Price Reduction means an amount equal to the excess of (i) $14,139,519, which is the agreed present value at January 1, 1998, of the tax cost to Ashland (“Present Value Tax Cost”) of allocating to it depreciation deductions as shown in Chart A in Schedule 2.02(b)(1) (“Chart A Depreciation”), as compared to allocating to Ashland depreciation deductions as shown in Chart B in Schedule 2.02(b)(1) (“Chart B Depreciation”), over (ii) the present value at January 1, 1998, of the tax cost to Ashland of allocating to it Chart A Depreciation as compared to Chart B Depreciation, taking into account Ashland’s decreased taxable gain or increased taxable loss on the sale of all of its Membership Interest in the Company when Chart A Depreciation as compared to Chart B Depreciation is allocated to it (“Present Value Tax Cost on Sale”).

“Chart A Depreciation represents the agreed depreciation deductions with respect to property contributed by Ashland on the Closing of the Asset Transfer and Contribution Agreement allocated to it through the depreciable life of such property as set forth in Section 6.03 of the LLC Agreement as amended and restated as of December 31, 1998. Chart B Depreciation represents the agreed depreciation deductions with respect to property contributed by Ashland on the Closing of the Asset Transfer and Contribution Agreement allocated to it through the depreciable life of such property as set forth in Sections 6.03, 6.12 and 4.01(c) of such agreement as in effect prior to such restatement as if it were in effect through such depreciable life, but treating the assets comprising the Merrill Lynch Master Lease Program as Subleased Property listed on Schedule 4.01(c) for purposes of Sections 4.01(c) and 6.12. Chart A Depreciation and Chart B Depreciation shall not be

revised to reflect the actual amount of depreciation deductions with respect to property contributed by Ashland on the Closing of the Asset Transfer and Contribution Agreement allocated to Ashland, or to take into account the sale or other disposition by the Company of any of the property contributed by Ashland on the Closing of the Asset Transfer and Contribution Agreement.

“Solely for purposes of determining the Present Value Tax Cost and the Present Value Tax Cost on Sale, the following factors and assumptions have been and will be used: (i) discount rate of 9% per annum, (ii) combined Federal/State income tax rate of 39%, (iii) the cash flow impact of a reduction in Ashland’s income taxes for a year as the result of Chart A or Chart B Depreciation is realized on the last day of that year and (iv) the cash flow impact of Ashland’s income tax expense or benefit arising from a sale of all of its membership interest in the Company is incurred or realized on the last day of the year of sale.

“Schedule 2.02(b)(2) reflects, for purposes of illustration, the Present Value Tax Cost on Sale if Ashland sells all of its 38% membership interest in the Company on January 1, 2005. The Present Value Tax Cost on Sale with respect to Ashland’s sale of all of its interest in the Company at a date different than January 1, 2005, shall be computed in the same manner as the Present Value Tax Cost on Sale illustrated in Schedule 2.02(b)(2).

“Consistent with the foregoing principle, if Ashland sells all or part of its Membership Interest to Marathon in a transaction not otherwise described in this Agreement, the price paid by or on behalf of Marathon for such interest shall be appropriately reduced.”

(d) Attached new Schedules 2.02(b)(1) and 2.02(b)(2) are inserted between Schedule 1.03(d) and Schedule 14.01(a).

(e) Section 3.02(a) of the Agreement is amended to read in its entirety as follows:

“(a) Amount. The Marathon Call Price shall be an amount equal to (i) the product of (x) 115% of the Appraised Value of the Company multiplied by (y) Ashland’s Percentage Interest, less (ii) the Price Reduction.”

(f) Section 4.02(a) of the Agreement is amended to read in its entirety as follows:

“(a) Amount. The Ashland Put Price shall be an amount equal to the sum of (i) for that portion of the Ashland Put Price to be paid to Ashland in Cash or in Marathon Debt Securities, an amount equal to the product of (1) the excess of (x) the product of (A) 85% of the Appraised Value of the Company multiplied by (B) Ashland’s Percentage Interest over (y) the Price Reduction, multiplied by (2) the percentage of the Ashland Put Price to be paid to Ashland in Cash and/or in Marathon Debt Securities, plus (ii) for that portion of the Ashland Put Price to be paid to Ashland in Marathon Equity Securities the same as above but substituting 90% for 85% in Clause (A) and substituting Marathon Equity Securities for Cash and/or Marathon Debt Securities in clause (2).”

Section 2. Parties in Interest. This Amendment shall inure to the benefit of, and be binding upon, the Parties hereto and their respective successors, legal representatives and permitted assigns.

Section 3. Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

Section 4. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR PROCEEDING RELATED TO OR ARISING OUT OF THIS AMENDMENT, OR ANY TRANSACTION OR CONDUCT IN CONNECTION HEREWITH, IS WAIVED.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the day and year first above written.

MARATHON OIL COMPANY	ASHLAND INC.
By:/s/ V. G. Beghini	By:/s/Paul W. Chellgren
Name: V. G. Beghini	Name: Paul W. Chellgren
Title: President	Title:   Chairman of the Board and Chief Executive Officer
USX CORPORATION	MARATHON ASHLAND PETROLEUM, LLC
By:/s/ Thomas J. Usher	By:/s/ J. L. Frank
Name: Thomas J. Usher	Name: J. L. Frank
Title: Chairman of the Board and Chief Executive Officer	Title: President

Put/Call, Registration Rights and Standstill Agreement Schedule 2.02(b)(1) Chart A and Chart B Depreciation

Chart A

Calendar Year	Depreciation Allocated to Ashland		Combined Fed. & State Inc. Tax @ 39%		Present Value Tax Effect @ 9%
1998	$	116,601,400	$	45,474,546	$	41,719,767
1999		209,882,520		81,854,183		68,895,028
2000		167,906,016		65,483,346		50,565,158
2001		134,324,816		52,386,678		37,112,044
2002		107,506,491		41,927,531		27,250,019
2003		85,935,232		33,514,740		19,983,745
2004		76,373,917		29,785,828		16,293,868
2005		76,373,917		29,785,828		14,948,502
2006		76,373,917		29,785,828		13,714,222
2007		76,373,917		29,785,828		12,581,855
2008		38,361,861		14,961,126		5,797,928
Totals	$	1,166,014,004	$	454,745,462	$	308,862,136

Chart B

Calendar Year	Depreciation Allocated to Ashland		Combined Fed. & State Inc. Tax @ 39%		Present Value Tax Effect @ 9%
1998	$	134,434,575	$	52,429,484	$	48,100,444
1999		213,507,942		83,268,097		70,085,092
2000		171,643,459		66,940,949		51,690,695
2001		138,302,064		53,937,805		38,210,901
2002		111,275,746		43,397,541		28,205,424
2003		89,884,379		35,054,908		20,902,096
2004		77,757,082		30,325,262		16,588,957
2005		77,057,057		30,052,252		15,082,212
2006		77,057,057		30,052,252		13,836,892
2007		77,057,057		30,052,252		12,694,396
2008		50,315,315		19,622,973		7,604,547
Totals	$	1,218,291,733	$	475,133,776	$	323,001,655
Present Value tax cost					$	14,139,519

Put/Call, Registration Rights and Standstill Agreement

Schedule 2.02(b)(2)

Present Value Tax Cost on Sale Illustration

Sale of 100% Interest 1/1/2005

Calendar Year	Depreciation Allocated to Ashland				Difference		Decr. Gain/ Incr. Loss
	Chart A		Chart B				Chart A vs. B
1998	$	116,601,400	$	134,434,575	$	17,833,175
1999		209,882,520		213,507,942		3,625,422
2000		167,906,016		171,643,459		3,737,443
2001		134,324,816		138,302,064		3,977,248
2002		107,506,491		111,275,746		3,769,255
2003		85,935,232		89,884,379		3,949,147
2004		76,373,917		77,757,082		1,383,165
-2005		—		—		—		(38,274,855	)(1)
2006		—		—		—
2007		—		—		—
2008		—		—		—
Totals	$	898,530,392	$	936,805,247	$	38,274,855	$	(38,274,855	)

Calendar Year	Increase (Decrease) Taxable Income Chart A vs. B			Combined Federal/State Income Tax @ 39%			Present Value Tax Cost on Sale
1998	$	17,833,175		$	6,954,938		$	6,380,677
1999		3,625,422			1,413,915			1,190,064
2000		3,737,443			1,457,603			1,125,537
2001		3,977,248			1,551,127			1,098,857
2002		3,769,255			1,470,009			955,405
2003		3,949,147			1,540,167			918,351
2004		1,383,165			539,434			295,089
2005		(38,274,855	)		(14,927,193	)		(7,491,455	)
2006		—			—			—
2007		—			—			—
2008		—			—			—
Totals	$	—		$	—		$	4,472,526
Present Value Tax Cost
(Schedule 2.02 (b)(1))							$	14,139,519
Price Reduction							$	9,666,993

(1) 100% of cumulative difference between Chart A and Chart B depreciation through 2004.

EX-12.1

Exhibit 12.1

Marathon Oil Corporation

Computation of Ratio of Earnings to Combined Fixed Charges

and Preferred Stock Dividends

TOTAL ENTERPRISE BASIS — Unaudited

(Dollars in Millions)

	Year Ended December 31
	2003		2002		2001		2000		1999
Portion of rentals representing interest	$	63	$	66	$	54	$	50	$	47
Capitalized interest, including discontinued operations		41		16		27		19		26
Other interest and fixed charges, including discontinued operations		270		316		349		375		365
Pretax earnings which would be required to cover preferred stock dividend requirements of parent		—		—		12		12		14
Combined fixed charges and preferred stock dividends (A)	$	374	$	398	$	442	$	456	$	452
Earnings-pretax income with applicable adjustments (B)	$	2,422	$	1,446	$	3,365	$	1,884	$	1,830
Ratio of (B) to (A)		6.48		3.63		7.61		4.12		4.04

EX-12.2

Exhibit 12.2

Marathon Oil Corporation

Computation of Ratio of Earnings to Fixed Charges

TOTAL ENTERPRISE BASIS — Unaudited

(Dollars in Millions)

	Year Ended December 31
	2003		2002		2001		2000		1999
Portion of rentals representing interest	$	63	$	66	$	54	$	50	$	47
Capitalized interest, including discontinued operations		41		16		27		19		26
Other interest and fixed charges, including discontinued operations		270		316		349		375		365
Total fixed charges (A)	$	374	$	398	$	430	$	444	$	438
Earnings-pretax income with applicable adjustments (B)	$	2,422	$	1,446	$	3,365	$	1,884	$	1,830
Ratio of (B) to (A)		6.48		3.63		7.83		4.24		4.18

EX-14

EXHIBIT 14

MARATHON OIL CORPORATION

CODE OF ETHICS

for

SENIOR FINANCIAL OFFICERS

General Philosophy

The honesty, integrity and sound judgment of Marathon Oil Corporation’s (“Marathon”) Senior Financial Officers is fundamental to our reputation and success. While all directors, officers and employees are required to adhere to Marathon’s Code of Business Conduct, the professional and ethical conduct of the Senior Financial Officers is essential to the proper functioning and success of Marathon.

Applicability

This Code of Ethics shall apply to Marathon’s Senior Financial Officers. “Senior Financial Officers” shall include the principal executive officer, the principal financial officer, the principal accounting officer or controller, or persons performing similar functions, including Marathon’s President and Chief Executive Officer, Chief Financial Officer, and Vice President – Accounting and Controller. In the event of the change of an officer’s title or designation as a principal officer, or the addition of an officer to the foregoing definition, any officer performing a similar function shall be included.

Standards of Conduct

To the best of their knowledge and ability, the Senior Financial Officers shall:

• act with honesty and integrity, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

• provide full, fair, accurate, timely, and understandable disclosure in reports and documents that Marathon files with, or submits to, the Securities and Exchange Commission (“Commission”) and in other public communications made by Marathon;

• comply with applicable governmental laws, rules and regulations;

• promote the prompt internal reporting of violations of this Code of Ethics to the chair of the Audit Committee of the board of directors and to the appropriate person or persons identified in Marathon’s Code of Business Conduct;

• respect the confidentiality of information acquired in the course of employment;

• maintain the skills necessary and relevant to Marathon’s needs;

• promote, as appropriate, contact by employees with the Business Integrity Office or the chair of the Audit Committee of the board of directors for any issues concerning improper accounting or financial reporting of Marathon without fear of retaliation; and

1

EXHIBIT 14

• proactively promote ethical and honest behavior within Marathon and its consolidated subsidiaries.

All Senior Financial Officers are expected to adhere to both the Marathon Oil Corporation Code of Business Conduct and this Code of Ethics. Any violation of this Code of Ethics will be subject to appropriate discipline, up to and including dismissal from the Company and prosecution under the law. The board of directors shall have the sole and absolute discretionary authority to approve any deviation or waiver from this Code of Ethics for Senior Financial Officers. Any change in or waiver from and the grounds for such change or waiver of this Code of Ethics for Senior Financial Officers shall be promptly disclosed through a filing with the Commission on Form 8-K.

2

EX-21

Exhibit 21

List of Significant Subsidiaries

The following subsidiaries are 100 percent owned, directly or indirectly, and were consolidated by Marathon Oil Corporation at December 31, 2003:

Name of Subsidiary	State or jurisdiction in which incorporated
Marathon International Oil Company	Delaware
Marathon Oil Company	Ohio
Marathon EG Production Limited	Cayman Islands

The following subsidiaries are 62 percent owned, directly or indirectly, by Marathon Oil Corporation at December 31, 2003:

Marathon Ashland Petroleum LLC	Delaware
Speedway SuperAmerica LLC	Delaware
Catlettsburg Refining, LLC	Delaware

Names of particular subsidiaries have been omitted from the above list since, considered in the aggregate, they would not constitute a significant subsidiary at December 31, 2003.

EX-23

Exhibit 23

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statements listed below of Marathon Oil Corporation of our reports dated February 25, 2004, relating to the financial statements and financial statement schedule, which appear in this Form 10-K:

On Form S-3:		Relating to:
File No.	33-57997	Dividend Reinvestment Plan
	333-88947	Dividend Reinvestment and Direct Stock Purchase Plan
	333-99223	Marathon Oil Corporation Debt Securities, Common Stock, Preferred Stock, Warrants, Stock Purchase Contracts/Units and Preferred Securities
	333-99223-01	Marathon Financing Trust I
	333-99223-02	Marathon Financing Trust II
On Form S-8:		Relating to:
File No.	33-41864	1990 Stock Plan
	33-56828	Marathon Oil Company Thrift Plan
	333-29699	1990 Stock Plan
	333-29709	Marathon Oil Company Thrift Plan
	333-52751	1990 Stock Plan
	333-86847	1990 Stock Plan
	333-104910	Marathon Oil Corporation 2003 Incentive Compensation Plan

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Houston, Texas

March 8, 2004

EX-31.1

Exhibit 31.1

MARATHON OIL CORPORATION

CERTIFICATION PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Clarence P. Cazalot, Jr., President and Chief Executive Officer, certify that:

(1) I have reviewed this report on Form 10-K of Marathon Oil Corporation;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 8, 2004

/s/  Clarence P. Cazalot, Jr.

President & Chief Executive Officer

EX-31.2

Exhibit 31.2

MARATHON OIL CORPORATION

CERTIFICATION PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Janet F. Clark, Senior Vice President and Chief Financial Officer, certify that:

(1) I have reviewed this report on Form 10-K of Marathon Oil Corporation;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 8, 2004

/s/ Janet F. Clark

Senior Vice President and

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Marathon Oil Corporation (the “Company”) on Form 10-K for the period ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Clarence P. Cazalot, Jr., President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Clarence P. Cazalot, Jr.

Clarence P. Cazalot, Jr.

President and Chief Executive Officer

March 8, 2004

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Marathon Oil Corporation (the “Company”) on Form 10-K for the period ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Janet F. Clark, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Janet F. Clark

Janet F. Clark

Senior Vice President and

Chief Financial Officer

March 8, 2004