UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): April 26, 2012
ConocoPhillips
(Exact name of registrant as specified in its charter)
Delaware | 001-32395 | 01-0562944 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) | ||
600 North Dairy Ashford Houston, Texas 77079 | ||||
(Address of principal executive offices and zip code) |
Registrants telephone number, including area code: (281) 293-1000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01 Entry into a Material Definitive Agreement.
On April 26, 2012, in connection with ConocoPhillips previously-announced spin-off of Phillips 66 through a pro rata distribution to ConocoPhillips shareholders of all of the outstanding shares of Phillips 66 common stock (the Distribution), ConocoPhillips entered into several agreements with Phillips 66 that govern the relationship of the parties following the Distribution, including the following:
| Separation and Distribution Agreement |
| Indemnification and Release Agreement |
| Intellectual Property Assignment and License Agreement |
| Tax Sharing Agreement |
| Employee Matters Agreement |
| Transition Services Agreement |
A summary of certain material features of the agreements can be found in the section entitled Certain Relationships and Related Transactions Agreements with ConocoPhillips in the Information Statement included in Phillips 66s Registration Statement on Form 10 filed with the Securities and Exchange Commission on November 14, 2011, as amended, and declared effective on April 12, 2012, and is incorporated herein by reference. The summary is qualified in its entirety by reference to the Separation and Distribution Agreement, Indemnification and Release Agreement, Intellectual Property Assignment and License Agreement, Tax Sharing Agreement, Employee Matters Agreement and Transition Services Agreement, included with this report as Exhibits 2.1, 10.1, 10.2, 10.3, 10.4 and 10.5, respectively, each of which is incorporated herein by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets.
On April 30, 2012, ConocoPhillips effected the Distribution and completed the separation of Phillips 66 from ConocoPhillips. Phillips 66 is now an independent public company trading under the symbol PSX on the New York Stock Exchange. On April 30, 2012, the shareholders of record as of 5:00 p.m. Eastern Time on April 16, 2012 (the Record Date) received one share of Phillips 66 common stock for every two shares of ConocoPhillips common stock held as of the Record Date. ConocoPhillips did not issue fractional shares of Phillips 66 common stock in the Distribution. Fractional shares that ConocoPhillips shareholders would otherwise have been entitled to receive were aggregated and are for sale in the public market by the distribution agent. The aggregate net cash proceeds of these sales will be distributed ratably to those shareholders who would otherwise have been entitled to receive fractional shares. A copy of the press release issued by ConocoPhillips on May 1, 2012 announcing completion of the Distribution is included with this report as Exhibit 99.1 and is incorporated herein by reference.
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Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
In connection with the Distribution, Mr. Harold W. McGraw III and Ms. Victoria J. Tschinkel resigned as directors of ConocoPhillips. Also in connection with the Distribution, Mr. James J. Mulva retired as Chairman, President and CEO of ConocoPhillips and Mr. Ryan M. Lance was appointed as Chairman, President and CEO of ConocoPhillips. Mr. Lances appointment as chairman and chief executive officer of ConocoPhillips was previously disclosed in a Current Report on Form 8-K filed by ConocoPhillips on October 7, 2011, which disclosure is incorporated by reference herein.
Item 8.01 Other Events.
A copy of the opinion of Wachtell, Lipton, Rosen & Katz concerning certain tax matters relating to the Distribution and certain related transactions is attached hereto as Exhibit 99.2.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits. See Exhibit Index attached to this Current Report on Form 8-K, which is incorporated by reference herein.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CONOCOPHILLIPS | ||||
By: | /s/ Janet Langford Kelly | |||
Janet Langford Kelly Senior Vice President, Legal, General Counsel and Corporate Secretary | ||||
Dated: May 1, 2012 |
EXHIBIT INDEX
Exhibit No. |
Description | |
2.1 | Separation and Distribution Agreement between ConocoPhillips and Phillips 66, dated April 26, 2012. | |
10.1 | Indemnification and Release Agreement between ConocoPhillips and Phillips 66, dated April 26, 2012. | |
10.2 | Intellectual Property Assignment and License Agreement between ConocoPhillips and Phillips 66, dated April 26, 2012. | |
10.3 | Tax Sharing Agreement between ConocoPhillips and Phillips 66, dated April 26, 2012. | |
10.4 | Employee Matters Agreement between ConocoPhillips and Phillips 66, dated April 26, 2012. | |
10.5 | Transition Services Agreement between ConocoPhillips and Phillips 66, dated April 26, 2012. | |
99.1 | Press Release, dated May 1, 2012. | |
99.2 | Opinion of Wachtell, Lipton, Rosen & Katz concerning certain tax matters relating to the Distribution and certain related transactions. |
Exhibit 2.1
SEPARATION AND DISTRIBUTION AGREEMENT
BY AND BETWEEN
CONOCOPHILLIPS
AND
PHILLIPS 66
DATED AS OF APRIL 26, 2012
TABLE OF CONTENTS
ARTICLE I DEFINITIONS | 2 | |||||
ARTICLE II THE SEPARATION | 13 | |||||
2.1. | Transfer of Assets and Assumption of Liabilities | 13 | ||||
2.2. | Phillips 66 Assets | 15 | ||||
2.3. | Phillips 66 Liabilities | 17 | ||||
2.4. | Transfer of Excluded Assets; Assumption of Excluded Liabilities | 18 | ||||
2.5. | Approvals and Notifications | 19 | ||||
2.6. | Novation of Phillips 66 Liabilities | 21 | ||||
2.7. | Novation of Excluded Liabilities | 22 | ||||
2.8. | Termination of Agreements | 22 | ||||
2.9. | Treatment of Shared Contracts | 23 | ||||
2.10. | Bank Accounts; Cash Balances | 25 | ||||
2.11. | Other Ancillary Agreements | 26 | ||||
2.12. | Disclaimer of Representations and Warranties | 26 | ||||
2.13. | Phillips 66 Financing Arrangements | 26 | ||||
2.14. | Financial Information Certifications | 27 | ||||
ARTICLE III THE DISTRIBUTION | 27 | |||||
3.1. | The Distribution | 27 | ||||
3.2. | Actions Prior to the Distribution | 27 | ||||
3.3. | Conditions to Distribution | 28 | ||||
3.4. | Certain Stockholder Matters | 29 | ||||
ARTICLE IV DISPUTE RESOLUTION | 30 | |||||
4.1. | General Provisions | 30 | ||||
ARTICLE V FURTHER ASSURANCES AND ADDITIONAL COVENANTS | 30 | |||||
5.1. | Further Assurances | 30 | ||||
5.2. | Performance | 32 | ||||
5.3. | ConocoPhillips Guarantees | 32 | ||||
5.4. | Third-Party Agreements | 32 |
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5.5. | Tax Matters | 32 | ||
5.6. | Indemnification Matters | 32 | ||
5.7. | Employee Matters | 33 | ||
ARTICLE VI TERMINATION | 33 | |||
6.1. | Termination | 33 | ||
ARTICLE VII MISCELLANEOUS | 33 | |||
7.1. | Counterparts; Entire Agreement; Corporate Power | 33 | ||
7.2. | Governing Law | 34 | ||
7.3. | Assignability | 34 | ||
7.4. | Third-Party Beneficiaries | 34 | ||
7.5. | Notices | 35 | ||
7.6. | Severability | 35 | ||
7.7. | Force Majeure | 35 | ||
7.8. | Publicity | 35 | ||
7.9. | Expenses | 36 | ||
7.10. | Late Payments | 36 | ||
7.11. | Headings | 36 | ||
7.12. | Survival of Covenants | 36 | ||
7.13. | Waivers of Default | 36 | ||
7.14. | Specific Performance | 36 | ||
7.15. | Amendments | 36 | ||
7.16. | Interpretation | 37 | ||
7.17. | Relationship of the Parties | 37 | ||
7.18. | Limitations of Liability | 37 |
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SEPARATION AND DISTRIBUTION AGREEMENT
This SEPARATION AND DISTRIBUTION AGREEMENT, made and entered into effective as of April 26, 2012 (this Agreement), is by and between ConocoPhillips, a Delaware corporation (ConocoPhillips), and Phillips 66, a Delaware corporation and wholly owned subsidiary of ConocoPhillips (Phillips 66). Capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in Article I.
R E C I T A L S
WHEREAS, the board of directors of ConocoPhillips (the ConocoPhillips Board) has determined that it is in the best interests of ConocoPhillips and its stockholders to create a new publicly traded company that shall operate the Phillips 66 Business;
WHEREAS, Phillips 66 has been incorporated for this purpose and has not engaged in activities except in preparation for its corporate reorganization (including activities with respect to the Phillips 66 Financing Arrangements) and the distribution of its stock;
WHEREAS, in furtherance of the foregoing, the ConocoPhillips Board has determined that it is appropriate and desirable for ConocoPhillips and its applicable Subsidiaries to transfer the Phillips 66 Assets to Phillips 66 and certain entities designated by Phillips 66 that will be Subsidiaries of Phillips 66 as of the Distribution Date (any such entities, the Phillips 66 Designees), and for Phillips 66 and the Phillips 66 Designees to assume the Phillips 66 Liabilities, in each case as more fully described in this Agreement and the Ancillary Agreements (the Separation);
WHEREAS, ConocoPhillips currently intends that, on the Distribution Date, ConocoPhillips shall distribute to holders of shares of ConocoPhillips Common Stock, through a spin-off, all of the outstanding shares of Phillips 66 Common Stock, as more fully described in this Agreement and the Ancillary Agreements (the Distribution);
WHEREAS, for U.S. federal income tax purposes, the Contribution and the Distribution, if effected, taken together, are intended to qualify as a tax-free transaction under Sections 355 and 368(a)(1)(D) of the Code;
WHEREAS, this Agreement is intended to be, and is hereby adopted as, a plan of reorganization within the meaning of Treas. Reg. 1.368-2(g); and
WHEREAS, it is appropriate and desirable to set forth the principal corporate transactions required to effect the Separation and the Distribution and certain other agreements that will govern certain matters relating to the Separation and the Distribution and the relationship of ConocoPhillips, Phillips 66 and their respective Subsidiaries, following the Distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, the parties, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement, the following terms shall have the following meanings:
Accounts Receivable Securitization means a financing arrangement entered into prior to the Distribution by Phillips 66 Company, and approved by ConocoPhillips, involving the transfer or sale of accounts receivable of Phillips 66 Company or any member of the Phillips 66 Group.
Action means any demand, action, claim, dispute, suit, countersuit, arbitration, inquiry, subpoena, proceeding or investigation of any nature (whether criminal, civil, legislative, administrative, regulatory, prosecutorial or otherwise) by or before any federal, state, local, foreign or international Governmental Authority or any arbitration or mediation tribunal.
Affiliate means, when used with respect to a specified Person, a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person. For the purpose of this definition, control (including with correlative meanings, controlled by and under common control with), when used with respect to any specified Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment, undertaking or otherwise. For the avoidance of doubt, after the Distribution, the members of the ConocoPhillips Group and the members of the Phillips 66 Group shall not be deemed to be under common control for purposes hereof due solely to the fact that ConocoPhillips and Phillips 66 have common shareholders.
Agent means the distribution agent to be appointed by ConocoPhillips to distribute to the stockholders of ConocoPhillips all of the outstanding shares of Phillips 66 Common Stock pursuant to the Distribution.
Agreement shall have the meaning set forth in the Preamble.
Ancillary Agreements means the Employee Matters Agreement, the Indemnification and Release Agreement, the Intellectual Property Assignment and License Agreement, the Transition Services Agreement, the Tax Sharing Agreement and the Transfer Documents.
Approvals or Notifications means any consents, waivers, approvals, permits or authorizations to be obtained from, notices, registrations or reports to be submitted to, or other filings to be made with, any third Person, including any Governmental Authority.
Assets means, with respect to any Person, the assets, properties, claims and rights (including goodwill) of such Person, wherever located (including in the possession of vendors or other third Persons or elsewhere), of every kind, character and description, whether real, personal or mixed, tangible, intangible or contingent, in each case, whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of such Person, including the following:
(a) all accounting and other books, records and files whether in paper, microfilm, microfiche, computer tape or disc, magnetic tape, electronic or any other form;
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(b) all apparatus, computers and other electronic data processing and communications equipment, fixtures, machinery, equipment, furniture, office equipment, automobiles, trucks, vessels, motor vehicles and other transportation equipment and other tangible personal property;
(c) all inventories of materials, parts, raw materials, components, supplies, works-in-process and finished goods and products;
(d) all interests in real property of whatever nature, including easements, whether as owner, mortgagee or holder of a Security Interest in real property, lessor, sublessor, lessee, sublessee or otherwise;
(e) (i) all interests in any capital stock or other equity interests of any Subsidiary, Affiliate or any other Person, (ii) all bonds, notes, debentures or other securities issued by any Subsidiary, Affiliate or any other Person, (iii) all loans, advances or other extensions of credit or capital contributions to any Subsidiary, Affiliate or any other Person, and (iv) all other investments in securities of any Person;
(f) all license agreements, leases of personal property, open purchase orders for raw materials, supplies, parts or services and other contracts, agreements or commitments;
(g) all letters of credit;
(h) all written (including in electronic form) or oral technical information, data, specifications, research and development information, engineering drawings and specifications, operating and maintenance manuals, and materials and analyses prepared by consultants and other third Persons;
(i) all Intellectual Property and Technology;
(j) all Software;
(k) all cost information, sales and pricing data, customer prospect lists, supplier records, customer and supplier lists, customer and vendor data, correspondence and lists, product data and literature, artwork, design, formulations and specifications, quality records and reports and other books, records, studies, surveys, reports, plans and documents;
(l) all prepaid expenses, trade accounts and other accounts and notes receivable;
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(m) all rights under contracts or agreements, all claims or rights against any Person arising from the ownership of any Asset, all rights in connection with any bids or offers and all claims, choses in action or similar rights, whether accrued or contingent;
(n) all licenses, permits, approvals and authorizations which have been issued by any Governmental Authority;
(o) all cash or cash equivalents, bank accounts, lock boxes and other deposit arrangements; and
(p) all interest rate, currency, commodity or other swap, collar, cap or other hedging or similar agreements or arrangements.
Bridge Loan Facility means the bridge loan facility pursuant to the bridge loan facility agreement entered into prior to the Distribution by Phillips 66, as borrower, the bank named therein as administrative agent, and the lending banks named therein, on such terms and conditions as agreed to by Phillips 66 and the other parties to the bridge loan facility agreement and approved by ConocoPhillips.
Chemicals Business means the chemicals segment of ConocoPhillips as described in ConocoPhillips Annual Report on Form 10-K for the period ended December 31, 2011, which business manufactures and markets petrochemicals and plastics.
Code means the Internal Revenue Code of 1986, as amended.
ConocoPhillips shall have the meaning set forth in the Preamble.
ConocoPhillips Accounts shall have the meaning set forth in Section 2.10(a).
ConocoPhillips Board shall have the meaning set forth in the Recitals.
ConocoPhillips Business means (a) the businesses and operations that comprise or are primarily related to the Exploration and Production Business and Emerging Businesses, and (b) (i) the businesses and operations identified on Schedule 1.1A, and (ii) except as otherwise expressly provided herein, any other terminated, divested or discontinued businesses or operations that, at the time of termination, divestiture or discontinuation, primarily related to the businesses and operations described in the foregoing clause (a) as existing at the time of termination, divestiture or discontinuation.
ConocoPhillips Common Stock means the common stock, par value $0.01 per share, of ConocoPhillips.
ConocoPhillips Company means ConocoPhillips Company, a Delaware corporation and a wholly owned subsidiary of ConocoPhillips.
ConocoPhillips Group means ConocoPhillips, each Subsidiary of ConocoPhillips immediately after the Distribution Date, and each Affiliate of ConocoPhillips immediately after the Distribution Date (in each case other than any member of the Phillips 66 Group).
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ConocoPhillips Guarantees shall have the meaning set forth in Section 5.3.
ConocoPhillips Intellectual Property means (a) the ConocoPhillips Name and ConocoPhillips Marks, and (b) all other Intellectual Property that, as of the Distribution Date, is owned or licensed by any member of either Group, other than the Phillips 66 Intellectual Property.
ConocoPhillips Name and ConocoPhillips Marks means the names, marks, trade dress, logos, monograms, domain names and other source or business identifiers of ConocoPhillips or any of its Affiliates using or containing ConocoPhillips (in block letters or otherwise), ConocoPhillips either alone or in combination with other words or elements, and all names, marks, trade dress, logos, monograms, domain names and other source or business identifiers confusingly similar to or embodying any of the foregoing either alone or in combination with other words or elements, together with the goodwill associated with any of the foregoing.
ConocoPhillips Software means all Software that, as of the Distribution Date, is owned or licensed by any member of either Group, other than the Phillips 66 Group Software.
ConocoPhillips Technology means all Technology that, as of the Distribution Date, is owned or licensed by any member of either Group, other than the Phillips 66 Technology.
ConocoPhillips Transfer Documents shall have the meaning set forth in Section 2.1(b).
Contribution means the contribution by ConocoPhillips to Phillips 66 of all the outstanding stock of Phillips 66 Company and any Phillips 66 Assets held directly by ConocoPhillips in exchange for (a) the assumption by Phillips 66 of any Phillips 66 Liabilities from ConocoPhillips, and (b) a number of shares of Phillips 66 Common Stock equal to the Required Share Number.
Dispute shall have the meaning set forth in the Indemnification and Release Agreement.
Distribution shall have the meaning set forth in the Recitals.
Distribution Date means the date and time determined in accordance with Section 3.3(a) at which the Distribution occurs.
Distribution Ratio means one half (0.5) of one (1) share of Phillips 66 Common Stock distributed in the Distribution in respect of one share of ConocoPhillips Common Stock.
Emerging Businesses means that portion of the emerging business segment of ConocoPhillips described in ConocoPhillips Annual Report on Form 10-K for the period ended December 31, 2011, that primarily relates to the Exploration and Production Business, including any business identified on Schedule 1.1B (which are being retained by ConocoPhillips).
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Employee Matters Agreement means the Employee Matters Agreement, dated as of the date hereof, between ConocoPhillips and Phillips 66.
Environmental Law means any Law relating to pollution, protection or restoration of or prevention of harm to the environment or natural resources, including the use, handling, transportation, treatment, storage, disposal, Release or discharge of Hazardous Materials or the protection of or prevention of harm to human health and safety.
Environmental Liabilities means all Liabilities relating to, arising out of or resulting from any Hazardous Materials, Environmental Law or contract or agreement relating to environmental, health or safety matters (including all removal, remediation or cleanup costs, investigatory costs, response costs, natural resources damages, property damages, personal injury damages, costs of compliance, including with any product take back requirements, or with any settlement, judgment or other determination of Liability and indemnity, contribution or similar obligations) and all costs and expenses, interest, fines, penalties or other monetary sanctions in connection therewith.
Exchange Act means the U.S. Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.
Excluded Assets shall have the meaning set forth in Section 2.2(b).
Excluded Contracts shall have the meaning set forth in the definition of Phillips 66 Contracts.
Excluded Liabilities shall have the meaning set forth in Section 2.3(b).
Existing Phillips 66 Group Patents shall have the meaning set forth in the Intellectual Property Assignment and License Agreement.
Exploration and Production Business means the exploration and production segment of ConocoPhillips described in ConocoPhillips Annual Report on Form 10-K for the period ended December 31, 2011, which business explores for, produces, transports and markets crude oil, bitumen, natural gas, liquefied natural gas and natural gas liquids.
Form 10 shall have the meaning set forth in Section 3.3(a)(vi).
Governmental Approvals means any notices, reports or other filings to be made, or any consents, registrations, approvals, permits or authorizations to be obtained from, any Governmental Authority.
Governmental Authority means any nation or government, any state, municipality or other political subdivision thereof, and any entity, body, agency, commission, department, board, bureau, court, tribunal or other instrumentality, whether federal, state, local, domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory, administrative or other similar functions of, or pertaining to, government and any executive official thereof.
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Group means either the Phillips 66 Group or the ConocoPhillips Group, as the context requires.
Hazardous Materials means any chemical, material, substance, waste, pollutant, emission, discharge, release or contaminant that could result in liability under, or that is prohibited, limited or regulated by or pursuant to, any Environmental Law, and any natural or artificial substance (whether solid, liquid or gas, noise, ion, vapor or electromagnetic) that could cause harm to human health or the environment, including petroleum, petroleum products and byproducts, asbestos and asbestos-containing materials, urea formaldehyde foam insulation, electronic, medical or infectious wastes, polychlorinated biphenyls, radon gas, radioactive substances, chlorofluorocarbons and all other ozone-depleting substances.
Indemnification and Release Agreement means the Indemnification and Release Agreement, dated as of the date hereof, between ConocoPhillips and Phillips 66.
Information Statement shall have the meaning set forth in Section 3.3(a)(vi).
Intellectual Property means all of the following whether arising under the Laws of the United States or of any other foreign or multinational jurisdiction: (a) patents, patent applications (including patents issued thereon) and statutory invention registrations, including reissues, divisions, continuations, continuations in part, substitutions, renewals, extensions and reexaminations of any of the foregoing, and all rights in any of the foregoing provided by international treaties or conventions, (b) trademarks, service marks, trade names, service names, trade dress, logos and other source or business identifiers, including all goodwill associated with any of the foregoing and any and all common law rights in and to any of the foregoing, registrations and applications for registration of any of the foregoing, all rights in and to any of the foregoing provided by international treaties or conventions, and all reissues, extensions and renewals of any of the foregoing, (c) Internet domain names, (d) copyrightable works, copyrights, moral rights, mask work rights, database rights and design rights, whether or not registered, and all registrations and applications for registration of any of the foregoing, and all rights in and to any of the foregoing provided by international treaties or conventions, (e) confidential and proprietary information, including trade secrets, invention disclosures, processes and know-how, and (f) intellectual property rights arising from or in respect of any Technology.
Intellectual Property Assignment and License Agreement means the Intellectual Property Assignment and License Agreement, dated as of the date hereof, between ConocoPhillips and Phillips 66.
Internal Contribution means the contribution by ConocoPhillips Company to Phillips 66 Company of any Phillips 66 Assets held directly by ConocoPhillips Company in exchange for (a) the assumption by Phillips 66 Company of any Phillips 66 Liabilities from ConocoPhillips Company, and (b) shares of common stock, par value $0.01 per share, of Phillips 66 Company.
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Internal Distribution means the distribution, on the Internal Distribution Date, by ConocoPhillips Company to ConocoPhillips of all of the outstanding shares of common stock, par value $0.01 per share, of Phillips 66 Company.
Internal Distribution Date means the date on which the Internal Distribution shall be effected, such date to be determined by, or under the authority of, the ConocoPhillips Board in its sole and absolute discretion.
Law means any national, supranational, federal, state, provincial, local or similar law (including common law), statute, code, order, ordinance, rule, regulation, treaty (including any income tax treaty), license, permit, authorization, approval, consent, decree, injunction, binding judicial or administrative interpretation or other requirement, in each case, enacted, promulgated, issued or entered by a Governmental Authority.
Liabilities means any and all debts, guarantees, assurances, commitments, liabilities, responsibilities, Losses, remediation, deficiencies, reimbursement obligations in respect of letters of credit, damages, fines, penalties, settlements, sanctions, costs, expenses, interest and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, accrued or not accrued, asserted or unasserted, liquidated or unliquidated, foreseen or unforeseen, known or unknown, reserved or unreserved, or determined or determinable, including those arising under any Law, claim (including any Third-Party Claim), demand, Action, or order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority or arbitration tribunal, and those arising under any contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment or undertaking, or any fines, damages or equitable relief that is imposed, in each case, including all costs and expenses relating thereto.
Losses means actual losses (including any diminution in value), costs, damages, penalties and expenses (including legal and accounting fees and expenses and costs of investigation and litigation), whether or not involving a Third-Party Claim.
Midstream Business means the midstream segment of ConocoPhillips as described in ConocoPhillips Annual Report on Form 10-K for the period ended December 31, 2011, which business purchases, gathers, processes, transports and markets natural gas and fractionates and markets natural gas liquids.
NYSE means the New York Stock Exchange.
Person means an individual, a general or limited partnership, a corporation, a trust, a joint venture, an unincorporated organization, a limited liability entity, any other entity and any Governmental Authority.
Phillips 66 shall have the meaning set forth in the Preamble.
Phillips 66 Accounts shall have the meaning set forth in Section 2.10(a).
Phillips 66 Assets shall have the meaning set forth in Section 2.2(a).
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Phillips 66 Balance Sheet means the audited combined balance sheet of the Phillips 66 Group, including the notes thereto, as of December 31, 2011.
Phillips 66 Business means (a) the business and operations that comprise or are primarily related to the Refining and Marketing Business, Chemicals Business, Midstream Business and Technology Business, and (b) the Phillips 66 Discontinued Businesses; but in each case, excluding the businesses and operations primarily related to the Excluded Assets. For avoidance of doubt, the term Phillips 66 Business shall include the businesses and operations identified on Schedule 1.1C.
Phillips 66 Certificate of Incorporation shall have the meaning set forth in Section 3.2(d).
Phillips 66 Common Stock means the common stock, par value $0.01 per share, of Phillips 66.
Phillips 66 Company means Phillips 66 Company, a Delaware corporation and a wholly owned subsidiary of ConocoPhillips Company.
Phillips 66 Contracts means the following contracts and agreements to which ConocoPhillips or any of its Affiliates is a party or by which it or any of its Affiliates or any of their respective Assets is bound, whether or not in writing, in each case immediately prior to the Distribution Date, except for any such contract or agreement that is contemplated to be retained by ConocoPhillips or any member of the ConocoPhillips Group pursuant to any provision of this Agreement or any Ancillary Agreement, including those listed on Schedule 1.1D (each, an Excluded Contract):
(a) (i) any customer, distribution, supply or vendor contracts or agreements listed on Schedule 1.1E and (ii) any other customer, distribution, supply or vendor contracts that relate primarily to the Phillips 66 Business;
(b) (i) any joint venture or license agreement listed on Schedule 1.1E and (ii) any other joint venture or license agreement that relates primarily to the Phillips 66 Business;
(c) (i) any guarantee, indemnity, representation or warranty listed on Schedule 1.1E and (ii) any guarantee, indemnity, representation or warranty of any member of the Phillips 66 Group or the ConocoPhillips Group in respect of any other Phillips 66 Contract, any Phillips 66 Liability or the Phillips 66 Business;
(d) any employment, change of control, retention, consulting, indemnification, termination, severance or other similar agreements with any Phillips 66 Employee or consultants of the Phillips 66 Group;
(e) any contract or agreement that is otherwise expressly contemplated pursuant to this Agreement or any of the Ancillary Agreements to be assigned to Phillips 66 or any member of the Phillips 66 Group; and
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(f) any other contract, agreement, arrangement, commitment or understanding listed on Schedule 1.1E and any other contract, agreement, commitment or understanding, whether or not in writing, that relates primarily to the Phillips 66 Business.
Phillips 66 Designees shall have the meaning set forth in the Recitals.
Phillips 66 Discontinued Businesses means (a) the businesses and operations of ConocoPhillips, its current or former Subsidiaries, and any of their predecessors in interest, identified on Schedule 1.1F, (b) the terminated, divested or discontinued businesses and operations consisting of the manufacture, transport, marketing and distribution of petrochemical products by ConocoPhillips, its current and former Subsidiaries, and any of their predecessors in interest, including synthetic fibers, synthetic rubber, specialty chemicals, carbon black, vinyl chloride and butadiene ethylene, (c) the terminated, divested or discontinued businesses and operations consisting of the manufacture, transport, marketing and distribution of fertilizer products by ConocoPhillips, its current and former Subsidiaries, and any of their predecessors in interest, including any Agrico or Phillips fertilizer or fertilizer operations, and (d) except as otherwise expressly provided in this Agreement, any other terminated, divested or discontinued businesses or operations of ConocoPhillips, its current and former Subsidiaries, and any of their predecessors in interest, that, at the time of termination, divestiture or discontinuation, primarily related to businesses, operations and assets described in clause (a) of the definition of Phillips 66 Business as existing at the time of termination, divestiture or discontinuation.
Phillips 66 Employee means any individual who, immediately prior to the Distribution, is either actively employed primarily by, or then on an approved leave of absence from, any Person that will be a member of the Phillips 66 Group immediately after the Distribution.
Phillips 66 Financing Arrangements means the Rule 144A / Capital Markets Securities, the Term Loan Facility, the Bridge Loan Facility, the Accounts Receivable Securitization, and the Revolving Credit Facility.
Phillips 66 Group means Phillips 66, each Subsidiary of Phillips 66 immediately after the Distribution Date, and each Affiliate of Phillips 66 immediately after the Distribution Date.
Phillips 66 Group Proprietary Information shall have the meaning set forth in the Intellectual Property Assignment and License Agreement.
Phillips 66 Group Software shall have the meaning set forth in the Intellectual Property Assignment and License Agreement.
Phillips 66 Intellectual Property means (a) the patents, patent applications, statutory invention registrations, registered trademarks, registered service marks, registered Internet domain names and copyright registrations (collectively, Registrable IP) set forth on Schedule 1.1G, (b) all Registrable IP that is owned or licensed exclusively by any member of the Phillips 66 Group at or prior to the Distribution Date, excluding any such Registrable IP that has been assigned by any member of the Phillips 66 Group to any member of the ConocoPhillips
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Group prior to the Distribution Date, and (c) all Intellectual Property, other than Registrable IP, that is owned or licensed by any member of the ConocoPhillips Group or Phillips 66 Group and that is used or held for use primarily in the Phillips 66 Business as of the Distribution Date.
Phillips 66 Liabilities shall have the meaning set forth in Section 2.3(a).
Phillips 66 Technology means all Technology owned or licensed by any member of the ConocoPhillips Group or Phillips 66 Group and that is primarily used or held for use in the Phillips 66 Business as of the Distribution Date.
Phillips 66 Transfer Documents shall have the meaning set forth in Section 2.4(b).
Prime Rate means the rate which JPMorgan Chase Bank (or any successor thereto or other major money center commercial bank agreed to by the parties hereto) announces from time to time as its prime lending rate, as in effect from time to time.
Record Date means the close of business on the date to be determined by the ConocoPhillips Board as the record date for determining stockholders of ConocoPhillips entitled to receive shares of Phillips 66 Common Stock in the Distribution.
Refining and Marketing Business means the refining and marketing segment of ConocoPhillips as described in ConocoPhillips Annual Report on Form 10-K for the period ended December 31, 2011, which business purchases, refines, markets and transports crude oil and petroleum products, and also includes power generation activities primarily related thereto.
Registrable IP shall have the meaning set forth in the definition of Phillips 66 Intellectual Property.
Release means any release, spill, emission, discharge, leaking, pumping, pouring, dumping, injection, deposit, disposal, dispersal, leaching or migration of Hazardous Materials into the environment (including ambient air, surface water, groundwater and surface or subsurface strata).
Required Share Number means the number of shares of Phillips 66 Common Stock necessary to effect the Distribution less the number of shares of Phillips 66 Common Stock outstanding immediately prior to the Contribution.
Restructuring Steps Memorandum means the memorandum attached as Annex A hereto setting forth the restructuring steps to be taken prior to the Distribution Date and the sequence thereof.
Revolving Credit Facility means a revolving credit facility pursuant to a revolving credit facility agreement entered into prior to the Distribution by Phillips 66, as borrower, the bank named therein as administrative agent, and the lending banks named therein, on such terms and conditions as agreed to by Phillips 66 and the other parties to the revolving credit facility agreement and approved by ConocoPhillips.
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Rule 144A / Capital Markets Securities means securities sold prior to the Distribution by Phillips 66, and approved by ConocoPhillips, in reliance on Rule 144A promulgated under the Securities Act.
SEC means the U.S. Securities and Exchange Commission.
Securities Act means the U.S. Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder.
Security Interest means any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, covenant, condition, easement, encroachment, restriction on transfer, or other encumbrance of any nature whatsoever.
Separation shall have the meaning set forth in the Recitals.
Shared Contract shall have the meaning set forth in Section 2.9(a).
Software means any and all (a) computer programs, including any and all software implementation of algorithms, models and methodologies, whether in source code, object code, human readable form or other form, (b) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (c) descriptions, flow charts and other work products used to design, plan, organize and develop any of the foregoing, screens, user interfaces, report formats, firmware, development tools, templates, menus, buttons and icons, and (d) documentation, including user manuals and other training documentation, relating to any of the foregoing.
Subsidiary or subsidiary means, with respect to any Person, any corporation, limited liability company, joint venture or partnership of which such Person (a) beneficially owns, either directly or indirectly, more than fifty percent (50%) of (i) the total combined voting power of all classes of voting securities of such Person, (ii) the total combined equity interests or (iii) the capital or profit interests, in the case of a partnership, or (b) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.
Tax Return shall have the meaning set forth in the Tax Sharing Agreement.
Tax Sharing Agreement means the Tax Sharing Agreement, dated as of the date hereof, between ConocoPhillips, ConocoPhillips Company, Phillips 66 and Phillips 66 Company.
Taxes shall have the meaning set forth in the Tax Sharing Agreement.
Technology means all technology, designs, formulae, algorithms, procedures, methods, discoveries, processes, techniques, ideas, know-how, research and development, technical data, tools, materials, specifications, processes, inventions (whether patentable or unpatentable and whether or not reduced to practice), apparatus, creations, improvements, works of authorship in any media, confidential, proprietary or non-public information and other similar materials, and all recordings, graphs, drawings, reports, analyses and other writings, and other tangible embodiments of the foregoing in any form whether or not listed herein.
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Technology Business means that portion of the emerging business segment of ConocoPhillips as described in ConocoPhillips Annual Report on Form 10-K for the period ended December 31, 2011, that primarily relates to the Refining and Marketing Business, Chemicals Business or Midstream Business, including the research and development of advanced hydrocarbon processes, energy efficiency technologies, new petroleum-based products, renewable fuels and carbon capture and conversion technologies, and that is not a business identified by company codes on Schedule 1.1B.
Term Loan Facility means the term loan facility pursuant to the term loan agreement entered into prior to the Distribution by Phillips 66, as borrower, the bank named therein as administrative agent, and the lending banks named therein, on such terms and conditions as agreed to by Phillips 66 and the other parties to the term loan agreement and approved by ConocoPhillips.
Third-Party Claim shall have the meaning set forth in the Indemnification and Release Agreement.
Transfer Documents shall have the meaning set forth in Section 2.4(b).
Transferred Entities shall have the meaning set forth in Section 2.2(a)(ii).
Transition Services Agreement means the Transition Services Agreement, dated as of the date hereof, between ConocoPhillips and Phillips 66.
Unreleased Excluded Liability shall have the meaning set forth in Section 2.7(b).
Unreleased Phillips 66 Liability shall have the meaning set forth in Section 2.6(b).
ARTICLE II
THE SEPARATION
2.1. Transfer of Assets and Assumption of Liabilities.
(a) Unless otherwise provided in this Agreement or in any Ancillary Agreement, on or prior to the Distribution Date in accordance with the Restructuring Steps Memorandum and to the extent not previously effected prior to the date hereof pursuant to the steps of the Restructuring Steps Memorandum:
(i) ConocoPhillips shall, and shall cause its applicable Subsidiaries to, assign, transfer, convey and deliver to Phillips 66, or the applicable Phillips 66 Designees, and Phillips 66 or such Phillips 66 Designees shall accept from ConocoPhillips and its applicable Subsidiaries, all of ConocoPhillips and such Subsidiaries respective direct or indirect right, title and interest in and to all of the
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Phillips 66 Assets (it being understood that if any Phillips 66 Asset shall be held by a Transferred Entity or a wholly owned Subsidiary of a Transferred Entity, such Phillips 66 Asset may be assigned, transferred, conveyed and delivered as a result of the transfer of all or substantially all of the equity interests in such Transferred Entity);
(ii) Phillips 66 and the applicable Phillips 66 Designees shall accept, assume and agree faithfully to perform, discharge and fulfill all the Phillips 66 Liabilities in accordance with their respective terms. Phillips 66 and such Phillips 66 Designees shall be responsible for all Phillips 66 Liabilities, regardless of when or where such Phillips 66 Liabilities arose or arise, or whether the facts on which they are based occurred prior to or subsequent to the Distribution Date, regardless of where or against whom such Phillips 66 Liabilities are asserted or determined (including any Phillips 66 Liabilities arising out of claims made by the respective directors, officers, employees, agents, stockholders, Subsidiaries or Affiliates of either Group against any member of either Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud, misrepresentation or any other cause by any member of either Group, or any of their respective directors, officers, employees or agents;
(iii) ConocoPhillips shall cause its applicable Subsidiaries to assign, transfer, convey and deliver to certain of its other Subsidiaries, which shall accept, such applicable Subsidiaries respective right, title and interest in and to any Excluded Assets specified by ConocoPhillips to be so assigned, transferred, conveyed and delivered; and
(iv) ConocoPhillips and certain of its Subsidiaries shall accept and assume from certain of its other Subsidiaries and agree faithfully to perform, discharge and fulfill certain Excluded Liabilities of such other Subsidiaries, and ConocoPhillips and its applicable Subsidiaries shall be responsible for all Excluded Liabilities, regardless of when or where such Excluded Liabilities arose or arise, or whether the facts on which they are based occurred prior to or subsequent to the Distribution Date, regardless of where or against whom such Excluded Liabilities are asserted or determined (including any such Excluded Liabilities arising out of claims made by the respective directors, officers, employees, agents, stockholders, Subsidiaries or Affiliates of either Group against any member of either Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud, misrepresentation or any cause by any member of either Group, or any of their respective directors, officers, employees or agents.
(b) In furtherance of the assignment, transfer, conveyance and delivery of the Phillips 66 Assets and the assumption of the Phillips 66 Liabilities in accordance with Sections 2.1(a)(i) and 2.1(a)(ii), on, before and/or as of the date that such Phillips 66 Assets are assigned, transferred, conveyed or delivered or such Phillips 66 Liabilities are assumed (i) ConocoPhillips shall execute and deliver, and shall cause its Subsidiaries to execute and deliver, such bills of sale, deeds, stock powers, certificates of title, assignments of contracts and other instruments of transfer, conveyance and assignment as and to the extent necessary to evidence the transfer, conveyance and assignment of all of ConocoPhillips and its Subsidiaries (other than Phillips 66 and its Subsidiaries) right, title and interest in and to the Phillips 66 Assets to Phillips 66 and the
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Phillips 66 Designees, and (ii) Phillips 66 shall execute and deliver, and shall cause the Phillips 66 Designees to execute and deliver, such assumptions of contracts and other instruments of assumption as and to the extent necessary to evidence the valid and effective assumption of the Phillips 66 Liabilities by Phillips 66 and the Phillips 66 Designees. All of the foregoing documents contemplated by this Section 2.1(b) shall be referred to collectively herein as the ConocoPhillips Transfer Documents.
(c) To the extent any Phillips 66 Asset is not transferred or assigned to, or any Phillips 66 Liability is not assumed by, a member of the Phillips 66 Group at the Distribution Date or is owned or held by a member of the ConocoPhillips Group after the Distribution Date, from and after the Distribution Date, any such Phillips 66 Asset or Phillips 66 Liability shall be held by such member of the ConocoPhillips Group for the use and benefit of the member of the Phillips 66 Group entitled thereto (at the expense of the member of the Phillips 66 Group entitled thereto) in accordance with Section 2.5(c), and, subject to Section 2.5(b):
(i) ConocoPhillips shall, and shall cause its applicable Subsidiaries to, as soon as reasonably practicable, assign, transfer, convey and deliver to Phillip 66 or certain of its Subsidiaries designated by Phillips 66, and Phillips 66 or such Subsidiaries shall accept from ConocoPhillips and its applicable Subsidiaries, all of ConocoPhillips and such Subsidiaries respective right, title and interest in and to such Phillips 66 Assets; and
(ii) Phillips 66 and certain of its Subsidiaries designated by Phillips 66 shall, as soon as reasonably practicable, accept, assume and agree faithfully to perform, discharge and fulfill all such Phillips 66 Liabilities in accordance with their respective terms.
(d) Phillips 66 hereby waives compliance by each and every member of the ConocoPhillips Group with the requirements and provisions of any bulk-sale or bulk-transfer Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or all of the Phillips 66 Assets to any member of the Phillips 66 Group.
(e) ConocoPhillips hereby waives compliance by each and every member of the Phillips 66 Group with the requirements and provisions of any bulk-sale or bulk-transfer Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or all of the Excluded Assets to any member of the ConocoPhillips Group.
(f) Following the Distribution Date, ConocoPhillips or Phillips 66, as applicable, shall pay or cause to be paid to the other an adjustment amount based on closing date working capital in accordance with Schedule 2.1(f).
2.2. Phillips 66 Assets.
(a) For purposes of this Agreement, Phillips 66 Assets means (without duplication):
(i) all Assets that are expressly provided by this Agreement or any Ancillary Agreement as Assets to be transferred to Phillips 66 or any other member of the Phillips 66 Group, including the Assets listed on Schedule 2.2(a)(i);
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(ii) (A) all Phillips 66 Contracts, (B) all issued and outstanding equity interests held by ConocoPhillips or its Subsidiaries in the wholly owned Subsidiaries and Affiliates of ConocoPhillips that have been or shall be contributed to, or otherwise transferred, conveyed, or assigned to, the Phillips 66 Group or entities that shall be members of the Phillips 66 Group as of the Distribution Date, as listed on Schedule 2.2(a)(ii)(B) (such Subsidiaries and entities, the Transferred Entities), and (C) the shares of capital stock or other equity interests held by ConocoPhillips or its Subsidiaries in certain entities (other than the Transferred Entities) that have been or shall be contributed to, or otherwise transferred, conveyed, or assigned to, the Phillips 66 Group as listed on Schedule 2.2(a)(ii)(C);
(iii) all Assets reflected as assets of Phillips 66 or its Subsidiaries on the Phillips 66 Balance Sheet, subject to any dispositions of such Assets subsequent to the date of the Phillips 66 Balance Sheet and subject to any adjustment amount based on closing date working capital in accordance with Schedule 2.1(f);
(iv) all Phillips 66 Intellectual Property, Phillips 66 Group Software, Phillips 66 Group Proprietary Information, Existing Phillips 66 Group Patents and Phillips 66 Technology, pursuant to the Intellectual Property Assignment and License Agreement; and
(v) any and all Assets owned and used or held for use immediately prior to the Distribution Date by ConocoPhillips or any of its Subsidiaries primarily in the Phillips 66 Business.
Notwithstanding the foregoing, the Phillips 66 Assets shall not, in any event, include the Excluded Assets referred to in Section 2.2(b). All rights of the Phillips 66 Group in respect of ConocoPhillips insurance policies are set forth in the Indemnification and Release Agreement and shall not otherwise be included in the Phillips 66 Assets.
(b) For the purposes of this Agreement, Excluded Assets means (without duplication):
(i) the Assets listed on Schedule 2.2(b)(i) and any and all other Assets that are expressly contemplated by this Agreement or any Ancillary Agreement as Assets to be retained by ConocoPhillips or any other member of the ConocoPhillips Group;
(ii) any cash or cash equivalents withdrawn from Phillips 66 Accounts in accordance with Section 2.10(e);
(iii) the ConocoPhillips Intellectual Property, ConocoPhillips Software and the ConocoPhillips Technology;
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(iv) any Shared Contracts (other than Phillips 66 Assets arising under any Shared Contracts); and
(v) any and all Assets of any members of the ConocoPhillips Group that are not Phillips 66 Assets pursuant to Section 2.2(a).
2.3. Phillips 66 Liabilities.
(a) For the purposes of this Agreement, Phillips 66 Liabilities means (without duplication):
(i) all Liabilities, including any Environmental Liabilities, relating to, arising out of or resulting from:
(A) the operation or ownership of the Phillips 66 Business, as conducted at any time prior to, on or after the Distribution Date (including any Liability relating to, arising out of or resulting from any act or failure to act by any Person (whether or not such act or failure to act is or was within such Persons authority));
(B) the operation or ownership of any other business conducted by any member of the Phillips 66 Group, any entity that shall be a member of the Phillips 66 Group as of the Distribution Date or their predecessors in interest at any time prior to, on or after the Distribution Date (including any Liability relating to, arising out of or resulting from any act or failure to act by any Person (whether or not such act or failure to act is or was within such Persons authority)); or
(C) any Phillips 66 Assets, including any Phillips 66 Contracts, Shared Contracts (to the extent related to the Phillips 66 Business) and any real property and leasehold interests;
in any such case, whether arising before, on or after the Distribution Date;
(ii) the Liabilities listed on Schedule 2.3(a)(ii) and any and all other Liabilities that are expressly provided by this Agreement or any Ancillary Agreement as Liabilities to be assumed by Phillips 66 or any member of the Phillips 66 Group, and all agreements, obligations and Liabilities of any member of the Phillips 66 Group under this Agreement or any of the Ancillary Agreements;
(iii) all Liabilities relating to, arising out of or resulting from the Phillips 66 Financing Arrangements;
(iv) all Liabilities reflected as liabilities or obligations of Phillips 66 or its Subsidiaries on the Phillips 66 Balance Sheet, subject to any discharge of such Liabilities subsequent to the date of the Phillips 66 Balance Sheet;
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(v) all Liabilities arising out of claims made by the respective directors, officers, stockholders, employees, agents, Subsidiaries or Affiliates of either Group against any member of either Group to the extent relating to, arising out of or resulting from the Phillips 66 Business or the other businesses, operations, activities or Liabilities referred to in clauses (i) through (iv) above, inclusive; and
(vi) without limitation of clauses (i) through (v) of this Section 2.3(a) above, all Liabilities of the ConocoPhillips Group relating to the period prior to or on the Distribution Date that are not primarily related to the ConocoPhillips Business, including all Liabilities relating to Phillips 66 Discontinued Businesses and those Liabilities listed on Schedule 2.3(a)(vi).
Notwithstanding the foregoing, the Phillips 66 Liabilities shall not include the Excluded Liabilities referred to in Section 2.3(b).
(b) For the purposes of this Agreement, Excluded Liabilities means (without duplication):
(i) the Liabilities listed on Schedule 2.3(b)(i) and any and all other Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement as Liabilities to be retained or assumed by ConocoPhillips or any other member of the ConocoPhillips Group, and all agreements and obligations of any member of the ConocoPhillips Group under this Agreement or any of the Ancillary Agreements;
(ii) any and all Liabilities of a member of the ConocoPhillips Group to the extent relating to, arising out of or resulting from any Excluded Assets (other than Liabilities arising under any Shared Contracts to the extent such Liabilities relate to the Phillips 66 Business); and
(iii) all Liabilities arising out of claims made by the respective directors, officers, stockholders, employees, agents, Subsidiaries or Affiliates of either Group against any member of either Group to the extent relating to, arising out of or resulting from the ConocoPhillips Business or the other businesses, operations, activities or Liabilities referred to in clauses (i) and (ii) above.
2.4. Transfer of Excluded Assets; Assumption of Excluded Liabilities.
(a) To the extent any Excluded Asset is transferred or assigned to, or any Excluded Liability is assumed by, a member of the Phillips 66 Group at the Distribution Date or is owned or held by a member of the Phillips 66 Group after the Distribution Date, from and after the Distribution Date, any such Excluded Asset or Excluded Liability shall be held by such member of the Phillips 66 Group for the use and benefit of the member of the ConocoPhillips Group entitled thereto (at the expense of the member of the ConocoPhillips Group entitled thereto) in accordance with Section2.5 (d) and:
(i) Phillips 66 shall, and shall cause its applicable Subsidiaries to, as soon as reasonably practicable, assign, transfer, convey and deliver to ConocoPhillips or certain of its Subsidiaries designated by ConocoPhillips, and ConocoPhillips or such
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Subsidiaries shall accept from Phillips 66 and its applicable Subsidiaries, all of Phillips 66s and such Subsidiaries respective right, title and interest in and to such Excluded Assets; and
(ii) ConocoPhillips and certain of its Subsidiaries designated by ConocoPhillips shall, as soon as reasonably practicable, accept, assume and agree faithfully to perform, discharge and fulfill all such Excluded Liabilities in accordance with their respective terms.
(b) In furtherance of the assignment, transfer, conveyance and delivery of Excluded Assets and the assumption of Excluded Liabilities set forth in Sections 2.4(a)(i) and 2.4(a)(ii), and without any additional consideration therefor: (i) Phillips 66 shall execute and deliver, and shall cause its Subsidiaries to execute and deliver, such bills of sale, quitclaim deeds, stock powers, certificates of title, assignments of contracts and other instruments of transfer, conveyance and assignment as and to the extent necessary to evidence the transfer, conveyance and assignment of all of Phillips 66s and its Subsidiaries right, title and interest in and to the Excluded Assets to ConocoPhillips and its Subsidiaries, and (ii) ConocoPhillips shall execute and deliver, and shall cause its Subsidiaries to execute and deliver, such assumptions of contracts and other instruments of assumption as and to the extent necessary to evidence the valid and effective assumption of the Excluded Liabilities. All of the foregoing documents contemplated by this Section 2.4(b) and by Sections 2.1(a)(iii) and 2.1(a)(iv) shall be referred to collectively herein as the Phillips 66 Transfer Documents and, together with the ConocoPhillips Transfer Documents, the Transfer Documents.
2.5. Approvals and Notifications.
(a) To the extent that the transfer or assignment of any Phillips 66 Asset, the assumption of any Phillips 66 Liability, the Separation or the Distribution requires any Approvals or Notifications, the parties will endeavor to obtain or make such Approvals or Notifications as soon as reasonably practicable; provided, however, that, except to the extent expressly provided in this Agreement or any of the Ancillary Agreements or as otherwise agreed between ConocoPhillips and Phillips 66, neither ConocoPhillips nor Phillips 66 shall be obligated to contribute capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any Person in order to obtain or make such Approvals or Notifications.
(b) If and to the extent that the valid, complete and perfected transfer or assignment to the Phillips 66 Group of any Phillips 66 Assets or assumption by the Phillips 66 Group of any Phillips 66 Liabilities would be a violation of applicable Law, or require any Approvals or Notifications in connection with the Separation or the Distribution that have not been obtained or made by the Distribution Date, then, unless the parties hereto shall otherwise mutually determine, the transfer or assignment to the Phillips 66 Group of such Phillips 66 Assets or the assumption by the Phillips 66 Group of such Phillips 66 Liabilities, as the case may be, shall be automatically deemed deferred and any such purported transfer, assignment or assumption shall be null and void until such time as all legal impediments are removed or such Approvals or Notifications have been obtained or made. Notwithstanding the foregoing, any such Phillips 66 Assets or Phillips 66 Liabilities shall continue to constitute Phillips 66 Assets and Phillips 66 Liabilities for all other purposes of this Agreement.
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(c) If any transfer or assignment of any Phillips 66 Asset or any assumption of any Phillips 66 Liability intended to be transferred, assigned or assumed hereunder, as the case may be, is not consummated on or prior to the Distribution Date, whether as a result of the provisions of Section 2.5(b) or for any other reason, then, insofar as reasonably possible, the member of the ConocoPhillips Group retaining such Phillips 66 Asset or such Phillips 66 Liability, as the case may be, shall thereafter hold such Phillips 66 Asset or Phillips 66 Liability, as the case may be, for the use and benefit of the member of the Phillips 66 Group entitled thereto (at the expense of the member of the Phillips 66 Group entitled thereto). In addition, the member of the ConocoPhillips Group retaining such Phillips 66 Asset or such Phillips 66 Liability shall, insofar as reasonably possible and to the extent permitted by applicable Law, treat such Phillips 66 Asset or Phillips 66 Liability in the ordinary course of business in accordance with past practice and take such other actions as may be reasonably requested by the member of the Phillips 66 Group to whom such Phillips 66 Asset is to be transferred or assigned, or which will assume such Phillips 66 Liability, as the case may be, in order to place such member of the Phillips 66 Group in a substantially similar position as if such Phillips 66 Asset or Phillips 66 Liability had been transferred, assigned or assumed as contemplated hereby and so that all the benefits and burdens relating to such Phillips 66 Asset or Phillips 66 Liability, as the case may be, including use, risk of loss, potential for gain, and dominion, control and command over such Phillips 66 Asset or Phillips 66 Liability, as the case may be, and all costs and expenses related thereto, shall inure from and after the Distribution Date (or, in the case of any such Phillips 66 Assets or Phillips 66 Liabilities intended to be transferred, assigned or assumed hereunder, as the case may be, by Phillips 66 Company pursuant to the Internal Contribution on or prior to the Internal Distribution Date, from and after the Internal Distribution Date) to the Phillips 66 Group.
(d) If any transfer or assignment of any Excluded Asset or any assumption of any Excluded Liability not intended to be transferred, assigned or assumed hereunder, as the case may be, is consummated on or prior to the Distribution Date (as described in Section 2.4(a)), then, insofar as reasonably possible, the member of the Phillips 66 Group holding or owning such Excluded Asset or such Excluded Liability, as the case may be, shall thereafter hold such Excluded Asset or Excluded Liability, as the case may be, for the use and benefit of the member of the ConocoPhillips Group entitled thereto (at the expense of the member of the ConocoPhillips Group entitled thereto). In addition, the member of the Phillips 66 Group retaining such Excluded Asset or such Excluded Liability shall, insofar as reasonably possible and to the extent permitted by applicable Law, treat such Excluded Asset or Excluded Liability in the ordinary course of business in accordance with past practice and take such other actions as may be reasonably requested by the member of the ConocoPhillips Group to whom such Excluded Asset is to be transferred or assigned, or which will assume such Excluded Liability, as the case may be, in order to place such member of the ConocoPhillips Group in a substantially similar position as if such Excluded Asset or Excluded Liability had not been so transferred, assigned or assumed and so that all the benefits and burdens relating to such Excluded Asset or Excluded Liability, as the case may be, including use, risk of loss, potential for gain, and dominion, control and command over such Excluded Asset or Excluded Liability, as the case may be, and all costs and expenses related thereto, shall inure from and after the Distribution
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Date (or, in the case of any such Excluded Assets or Excluded Liabilities that were transferred, assigned or assumed hereunder, as the case may be, by ConocoPhillips Company in connection with the Internal Contribution on or prior to the Internal Distribution Date, from and after the Internal Distribution Date) to the ConocoPhillips Group.
(e) If and when the Approvals or Notifications, the absence of which caused the deferral of transfer or assignment of any Phillips 66 Asset or the deferral of assumption of any Phillips 66 Liability pursuant to Section 2.5(b), are obtained or made, and, if and when any other legal impediments for the transfer or assignment of any Phillips 66 Asset or the assumption of any Phillips 66 Liability have been removed, the transfer or assignment of the applicable Phillips 66 Asset or the assumption of the applicable Phillips 66 Liability, as the case may be, shall be effected in accordance with the terms of this Agreement and/or the applicable Ancillary Agreement.
(f) Except as otherwise agreed between ConocoPhillips and Phillips 66, (i) any member of the ConocoPhillips Group retaining a Phillips 66 Asset or Phillips 66 Liability (whether as a result of the provisions of Section 2.5(b) or for any other reason), and (ii) any member of the Phillips 66 Group holding or owning an Excluded Asset or Excluded Liability due to a transfer or assignment to, or assumption by, such member of the Phillips 66 Group (as described in Section 2.4(a)), shall not be obligated, in order to effect the transfer of such Asset or Liability to the Group member entitled thereto, to expend any money unless the necessary funds are advanced (or otherwise made available) by the Group member entitled thereto, other than reasonable out-of-pocket expenses, attorneys fees and recording or similar fees, all of which shall be promptly reimbursed by the Group member entitled to such Asset or Liability.
2.6. Novation of Phillips 66 Liabilities.
(a) Each of ConocoPhillips and Phillips 66, at the request of the other, shall endeavor, if reasonably practicable, to obtain, or to cause to be obtained, if reasonably practicable, any consent, substitution, approval or amendment required to novate or assign all obligations under agreements, leases, licenses and other obligations or Liabilities of any nature whatsoever that constitute Phillips 66 Liabilities, or to obtain in writing the unconditional release of all parties to such arrangements other than any member of the Phillips 66 Group, so that, in any such case, the members of the Phillips 66 Group will be solely responsible for the Phillips 66 Liabilities; provided, however, that neither ConocoPhillips nor Phillips 66 shall be obligated to contribute any capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any third Person from whom any such consent, substitution, approval, amendment or release is requested.
(b) If ConocoPhillips or Phillips 66 is unable to obtain, or to cause to be obtained, any such required consent, substitution, approval, amendment or release and the applicable member of the ConocoPhillips Group continues to be bound by such agreement, lease, license or other obligation or Liability (each, an Unreleased Phillips 66 Liability), Phillips 66 shall, to the extent not prohibited by Law, as indemnitor, guarantor, agent or subcontractor for such member of the ConocoPhillips Group, as the case may be, (i) pay, perform and discharge fully all the obligations or other Liabilities of such member of the ConocoPhillips Group that constitute Unreleased Phillips 66 Liabilities from and after the Distribution Date and (ii) use its
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commercially reasonable efforts to effect such payment, performance, or discharge prior to any demand for such payment, performance, or discharge is permitted to be made by the obligee thereunder on any member of the ConocoPhillips Group. If and when any such consent, substitution, approval, amendment or release shall be obtained or the Unreleased Phillips 66 Liabilities shall otherwise become assignable or able to be novated, ConocoPhillips shall promptly assign, or cause to be assigned, and Phillips 66 or the applicable Phillips 66 Group member shall assume, such Unreleased Phillips 66 Liabilities without exchange of further consideration.
2.7. Novation of Excluded Liabilities.
(a) Each of ConocoPhillips and Phillips 66, at the request of the other, shall endeavor, if reasonably practicable, to obtain, or to cause to be obtained, if reasonably practicable, any consent, substitution, approval or amendment required to novate or assign all obligations under agreements, leases, licenses and other obligations or Liabilities of any nature whatsoever that constitute Excluded Liabilities, or to obtain in writing the unconditional release of all parties to such arrangements other than any member of the ConocoPhillips Group, so that, in any such case, the members of the ConocoPhillips Group will be solely responsible for such Excluded Liabilities; provided, however, that neither ConocoPhillips nor Phillips 66 shall be obligated to contribute any capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any third Person from whom any such consent, substitution, approval, amendment or release is requested.
(b) If ConocoPhillips or Phillips 66 is unable to obtain, or to cause to be obtained, any such required consent, substitution, approval, amendment or release and the applicable member of the Phillips 66 Group continues to be bound by such agreement, lease, license or other obligation or Liability (each, an Unreleased Excluded Liability), ConocoPhillips shall, to the extent not prohibited by Law, as indemnitor, guarantor, agent or subcontractor for such member of the Phillips 66 Group, as the case may be, (i) pay, perform and discharge fully all the obligations or other Liabilities of such member of the Phillips 66 Group that constitute Unreleased Excluded Liabilities from and after the Distribution Date and (ii) use its commercially reasonable efforts to effect such payment, performance, or discharge prior to any demand for such payment, performance, or discharge is permitted to be made by the obligee thereunder on any member of the Phillips 66 Group. If and when any such consent, substitution, approval, amendment or release shall be obtained or the Unreleased Excluded Liabilities shall otherwise become assignable or able to be novated, Phillips 66 shall promptly assign, or cause to be assigned, and ConocoPhillips or the applicable ConocoPhillips Group member shall assume, such Unreleased Excluded Liabilities without exchange of further consideration.
2.8. Termination of Agreements.
(a) Except as set forth in Section 2.8(b), in furtherance of the releases and other provisions of the Indemnification and Release Agreement, Phillips 66 and each member of the Phillips 66 Group, on the one hand, and ConocoPhillips and each member of the ConocoPhillips Group, on the other hand, hereby terminate any and all agreements, arrangements, commitments or understandings, whether or not in writing, between or among Phillips 66 and/or any member of the Phillips 66 Group and/or any entity that shall be a member
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of the Phillips 66 Group as of the Distribution Date, on the one hand, and ConocoPhillips and/or any member of the ConocoPhillips Group (other than entities that shall be members of the Phillips 66 Group as of the Distribution Date), on the other hand, effective as of the Distribution Date. No such terminated agreement, arrangement, commitment or understanding (including any provision thereof which purports to survive termination) shall be of any further force or effect after the Distribution Date. Each party shall, at the reasonable request of any other party, take, or cause to be taken, such other actions as may be necessary to effect the foregoing.
(b) The provisions of Section 2.8(a) shall not apply to any of the following agreements, arrangements, commitments or understandings (or to any of the provisions thereof): (i) this Agreement and the Ancillary Agreements (and each other agreement or instrument expressly contemplated by this Agreement or any Ancillary Agreement to be entered into by any of the parties hereto or any of the members of their respective Groups); (ii) any agreements, arrangements, commitments or understandings listed or described on Schedule 2.8(b)(ii); (iii) any agreements, arrangements, commitments or understandings to which any Person other than the parties hereto and the members of their respective Groups is a party (it being understood that to the extent that the rights and obligations of the parties and the members of their respective Groups under any such agreements, arrangements, commitments or understandings constitute Phillips 66 Assets or Phillips 66 Liabilities, they shall be assigned pursuant to Section 2.1); (iv) any intercompany accounts payable or accounts receivable accrued as of the Distribution Date that are reflected in the books and records of the parties or otherwise documented in writing in accordance with past practices; (v) any agreements, arrangements, commitments or understandings to which any member of the ConocoPhillips Group or Phillips 66 Group, other than a wholly owned Subsidiary of ConocoPhillips or Phillips 66, as the case may be, is a party (it being understood that directors qualifying shares or similar interests will be disregarded for purposes of determining whether a Subsidiary is wholly owned); (vi) any Shared Contracts; and (vii) any other agreements, arrangements, commitments or understandings that this Agreement or any Ancillary Agreement expressly contemplates will survive the Distribution Date.
2.9. Treatment of Shared Contracts.
(a) Without limiting the generality of the obligations set forth in Section 2.1, unless the parties otherwise agree or the benefits of any contract, agreement, arrangement, commitment or understanding described in this Section 2.9 are expressly conveyed to the applicable party pursuant to an Ancillary Agreement, (i) any contract, agreement, arrangement, commitment or understanding that is listed on Schedule 2.9(a) shall be assigned in part to the applicable member(s) of the applicable Group, if so assignable, or appropriately amended prior to, on or after the Distribution Date, so that each party or the members of its respective Group shall, as of the Distribution Date, be entitled to the rights and benefits, and shall assume the related portion of any Liabilities, inuring to its respective businesses, in each case, in accordance with the allocation of benefits and burdens set forth on Schedule 2.9(a), and (ii) (A) any contract, agreement, arrangement, commitment or understanding that is an Excluded Asset or Excluded Liability but, prior to the Distribution Date, inured in part to the benefit or burden of any member of the Phillips 66 Group (other than any such contract, agreement, arrangement, commitment or understanding covering substantially the same services or arrangements that are covered by a contract, agreement, arrangement, commitment or understanding entered into by a member of the Phillips 66 Group in connection with the Separation), and (B) any contract, agreement,
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arrangement, commitment or understanding that is a Phillips 66 Asset or a Phillips 66 Liability but, prior to the Distribution Date, inured in part to the benefit or burden of any member of the ConocoPhillips Group (other than any such contract, agreement, arrangement, commitment or understanding covering substantially the same services or arrangements that are covered by a contract, agreement, arrangement, commitment or understanding entered into by a member of the ConocoPhillips Group in connection with the Separation), shall be assigned in part to the applicable member(s) of the applicable Group, if so assignable, or appropriately amended prior to, on or after the Distribution Date, so that each party or the members of its respective Group shall, as of the Distribution Date, be entitled to the rights and benefits, and shall assume the related portion of any Liabilities, inuring to its respective businesses (any contract, agreement, arrangement, commitment or understanding referred to in clause (i) or (ii) above, a Shared Contract); provided, however, that, in the case of each of clause (i) and (ii), (1) in no event shall any member of any Group be required to assign (or amend) any Shared Contract in its entirety or to assign a portion of any Shared Contract which is not assignable (or cannot be amended) by its terms (including any terms imposing consents or conditions on an assignment where such consents or conditions have not been obtained or fulfilled) and (2) if any Shared Contract cannot be so partially assigned by its terms or otherwise, or cannot be amended or if such assignment or amendment would impair the benefit the parties thereto derive from such Shared Contract, then the parties shall, and shall cause each of their respective Subsidiaries to, take such other reasonable and permissible actions (including by providing prompt notice to the other party with respect to any relevant claim of Liability or other relevant matters arising in connection with a Shared Contract so as to allow such other party the ability to exercise any applicable rights under such Shared Contract) to cause a member of the Phillips 66 Group or the ConocoPhillips Group, as the case may be, to receive the rights and benefits of that portion of each Shared Contract that relates to the Phillips 66 Business or the businesses retained by ConocoPhillips, as the case may be (in each case, to the extent so related), as if such Shared Contract had been assigned to (or amended to allow) a member of the applicable Group pursuant to this Section 2.9, and to bear the burden of the corresponding Liabilities (including any Liabilities that may arise by reason of such arrangement), as if such Liabilities had been assumed by a member of the applicable Group pursuant to this Section 2.9.
(b) Each of ConocoPhillips and Phillips 66 shall, and shall cause the members of its Group to, (i) treat for all Tax purposes the portion of each Shared Contract inuring to its respective businesses as Assets owned by, and/or Liabilities of, as applicable, such party, or its subsidiaries, as applicable, not later than the Distribution Date, and (ii) neither report nor take any Tax position (on a Tax Return or otherwise) inconsistent with such treatment (unless required by applicable Law).
(c) Nothing in this Section 2.9 shall require any member of any Group to make any material payment (except to the extent advanced, assumed or agreed in advance to be reimbursed by any member of the other Group), incur any material obligation or grant any material concession for the benefit of any member of any other Group in order to effect any transaction contemplated by this Section 2.9.
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2.10. Bank Accounts; Cash Balances.
(a) ConocoPhillips and Phillips 66 each agrees to take, or cause the respective members of their respective Groups to take, at the Distribution Date (or such earlier time as ConocoPhillips and Phillips 66 may agree), all actions necessary to amend all contracts or agreements governing each bank and brokerage account owned by Phillips 66 or any other member of the Phillips 66 Group (collectively, the Phillips 66 Accounts) so that such Phillips 66 Accounts, if currently linked (whether by automatic withdrawal, automatic deposit or any other authorization to transfer funds from or to, hereinafter linked) to any bank or brokerage account owned by ConocoPhillips or any other member of the ConocoPhillips Group (collectively, the ConocoPhillips Accounts), are de-linked from the ConocoPhillips Accounts.
(b) ConocoPhillips and Phillips 66 each agrees to take, or cause the respective members of their respective Groups to take, at the Distribution Date (or such earlier time as ConocoPhillips and Phillips 66 may agree), all actions necessary to amend all agreements governing the ConocoPhillips Accounts so that such ConocoPhillips Accounts, if currently linked to a Phillips 66 Account, are de-linked from the Phillips 66 Accounts.
(c) It is intended that, following consummation of the actions contemplated by Sections 2.10(a) and 2.10(b), there will be in place a centralized cash management process pursuant to which the Phillips 66 Accounts will be managed centrally and funds collected will be transferred into one or more centralized accounts maintained by Phillips 66.
(d) It is intended that, following consummation of the actions contemplated by Sections 2.10(a) and 2.10(b), there will continue to be in place a centralized cash management process pursuant to which the ConocoPhillips Accounts will be managed centrally and funds collected will be transferred into one or more centralized accounts maintained by ConocoPhillips.
(e) With respect to any outstanding payments initiated by ConocoPhillips, Phillips 66, or any of their respective Subsidiaries prior to the Separation, such outstanding payments shall be honored following the Separation by the Person or Group owning the account from which the payment was initiated.
(f) As between ConocoPhillips and Phillips 66 (and the members of their respective Groups) all payments made and reimbursements received after the Separation by either party (or member of its Group) that relate to a business, Asset or Liability of the other party (or member of its Group), shall be held by such party for the use and benefit of the party entitled thereto (at the expense of the party entitled thereto). Each party shall maintain an accounting of any such payments and reimbursements, and the parties shall have a monthly reconciliation, whereby all such payments made and reimbursements received by each party are calculated and the net amount owed to ConocoPhillips or Phillips 66 shall be paid over with right of set-off. If at any time the net amount owed to either party exceeds $10,000,000, an interim payment of such net amount owed shall be made to the party entitled thereto within three (3) business days of such amount exceeding $10,000,000. Notwithstanding the foregoing, neither ConocoPhillips nor Phillips 66 shall act as collection agent for the other party, nor shall either party act as surety or endorser with respect to non-sufficient funds checks, or funds to be returned in a bankruptcy or fraudulent conveyance action.
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2.11. Other Ancillary Agreements. Effective as of the date hereof, each of ConocoPhillips and Phillips 66 will execute and deliver all Ancillary Agreements to which it is a party (other than the Transfer Documents, which will be executed on or prior to the Distribution Date).
2.12. Disclaimer of Representations and Warranties. EACH OF CONOCOPHILLIPS (ON BEHALF OF ITSELF AND EACH MEMBER OF THE CONOCOPHILLIPS GROUP) AND PHILLIPS 66 (ON BEHALF OF ITSELF AND EACH MEMBER OF THE PHILLIPS 66 GROUP) UNDERSTANDS AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN ANY ANCILLARY AGREEMENT, NO PARTY TO THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR OTHERWISE, IS REPRESENTING OR WARRANTING IN ANY WAY AS TO THE ASSETS, BUSINESSES OR LIABILITIES TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS OR APPROVALS REQUIRED IN CONNECTION THEREWITH, AS TO THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF SUCH PARTY, OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SET-OFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY CLAIM OR OTHER ASSET, INCLUDING ANY ACCOUNTS RECEIVABLE, OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY ASSIGNMENT, DOCUMENT OR INSTRUMENT DELIVERED HEREUNDER TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF. EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN OR IN ANY ANCILLARY AGREEMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN AS IS, WHERE IS BASIS (AND, IN THE CASE OF ANY REAL PROPERTY, EXCEPT AS OTHERWISE AGREED BY CONOCOPHILLIPS, BY MEANS OF A QUITCLAIM OR SIMILAR FORM DEED OR CONVEYANCE) AND THE RESPECTIVE TRANSFEREES SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE WILL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST, AND (II) ANY NECESSARY APPROVALS OR NOTIFICATIONS ARE NOT OBTAINED OR THAT ANY REQUIREMENTS OF LAWS OR JUDGMENTS ARE NOT COMPLIED WITH.
2.13. Phillips 66 Financing Arrangements. Prior to the Distribution Date, Phillips 66 shall enter into the Phillips 66 Financing Arrangements, on such terms and conditions as agreed by ConocoPhillips (including the amount that shall be borrowed pursuant to the Financing Arrangements and the interest rates for such borrowings). ConocoPhillips and Phillips 66 shall participate in the preparation of all materials and presentations as may be reasonably necessary to secure funding pursuant to the Phillips 66 Financing Arrangements, including rating agency presentations necessary to obtain the requisite ratings needed to secure the financing under any of the Phillips 66 Financing Arrangements. The parties agree that Phillips 66, and not ConocoPhillips, shall be ultimately responsible for all costs and expenses incurred by, and for reimbursement of such costs and expenses to, any member of the ConocoPhillips Group or Phillips 66 Group associated with the Phillips 66 Financing Arrangements.
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2.14. Financial Information Certifications. ConocoPhillips disclosure controls and procedures and internal control over financial reporting (as each is contemplated by the Exchange Act) are currently applicable to Phillips 66 as its Subsidiary. In order to enable the principal executive officer and principal financial officer of Phillips 66 to make the certifications required of them under Section 302 of the Sarbanes-Oxley Act of 2002, ConocoPhillips, within thirty-five (35) days of the end of any fiscal quarter during which Phillips 66 remains its Subsidiary, shall provide Phillips 66 with one or more certifications with respect to such disclosure controls and procedures, its internal control over financial reporting and the effectiveness thereof. Such certification(s) shall be provided by ConocoPhillips (and not by any officer or employee in their individual capacity).
ARTICLE III
THE DISTRIBUTION
3.1. The Distribution.
(a) ConocoPhillips intends to consummate the Distribution in the first half of 2012. ConocoPhillips will, in its sole and absolute discretion, determine the Distribution Date and all terms of the Distribution, including, without limitation, the form, structure and terms of any transaction(s) and/or offering(s) to effect the Distribution and the timing and conditions to the consummation of the Distribution. In addition, ConocoPhillips may, at any time and from time to time until the consummation of the Distribution, modify or change the terms of the Distribution, including, without limitation, by accelerating or delaying the timing of the consummation of all or part of the Distribution. For the avoidance of doubt, nothing in the foregoing shall in any way limit ConocoPhillips right to terminate this Agreement or the Distribution as set forth in Article VI or alter the consequences of any such termination from those specified in such Article.
(b) Phillips 66 shall cooperate with ConocoPhillips to accomplish the Distribution and shall, at ConocoPhillips direction, promptly take any and all actions necessary or desirable to effect the Distribution, including, without limitation, the registration under the Securities Act and the Exchange Act of Phillips 66 Common Stock on an appropriate registration form or forms to be designated by ConocoPhillips. ConocoPhillips shall select any investment bank or manager in connection with the Distribution, as well as any financial printer, solicitation and/or exchange agent and financial, legal, accounting and other advisors for ConocoPhillips. Phillips 66 and ConocoPhillips, as the case may be, will provide to the Agent all share certificates and any information required in order to complete the Distribution.
3.2. Actions Prior to the Distribution.
(a) ConocoPhillips and Phillips 66 shall prepare and mail, prior to the Distribution Date, to the holders of ConocoPhillips Common Stock, such information concerning Phillips 66, its business, operations and management, the Distribution and such other matters as ConocoPhillips shall reasonably determine and as may be required by Law. ConocoPhillips and
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Phillips 66 will prepare, and Phillips 66 will, to the extent required under applicable Law, file with the SEC any such documentation and any requisite no-action letters which ConocoPhillips determines are necessary or desirable to effectuate the Distribution, and ConocoPhillips and Phillips 66 shall each use its commercially reasonable efforts to obtain all necessary approvals from the SEC with respect thereto as soon as practicable.
(b) ConocoPhillips and Phillips 66 shall take all such action as may be necessary or appropriate under the securities or blue sky laws of the United States (and any comparable Laws under any foreign jurisdiction) in connection with the Distribution.
(c) Phillips 66 shall prepare and file, and shall use its commercially reasonable efforts to have approved, an application for the listing of the Phillips 66 Common Stock to be distributed in the Distribution on the NYSE, subject to official notice of distribution.
(d) ConocoPhillips and Phillips 66 shall take all necessary action that may be required to provide for the adoption by Phillips 66 of the Amended and Restated Certificate of Incorporation of Phillips 66 (the Phillips 66 Certificate of Incorporation) and the Amended and Restated Bylaws of Phillips 66, each in such form as may be reasonably determined by ConocoPhillips and Phillips 66, and Phillips 66 will file the Phillips 66 Certificate of Incorporation with the Secretary of State of the State of Delaware.
(e) ConocoPhillips and Phillips 66 shall take all actions as may be necessary to approve the stock-based employee benefit plans of Phillips 66 (and the grants of adjusted awards over ConocoPhillips stock by ConocoPhillips and of awards over Phillips 66 stock by Phillips 66) in order to satisfy the requirement of Rule 16b-3 under the Exchange Act and the applicable rules and regulations of the NYSE.
3.3. Conditions to Distribution.
(a) The consummation of the Distribution will be subject to the satisfaction, or waiver by ConocoPhillips in its sole and absolute discretion, of the conditions set forth in this Section 3.3(a). Any determination by ConocoPhillips regarding the satisfaction or waiver of any of such conditions will be conclusive.
(i) The Separation shall have been completed in accordance with the Restructuring Steps Memorandum.
(ii) ConocoPhillips will have received a private letter ruling from the U.S. Internal Revenue Service substantially to the effect that, among other things, the Contribution and the Distribution, if effected, taken together, will qualify as a transaction that is tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code.
(iii) All Governmental Approvals necessary to consummate the Distribution shall have been obtained and be in full force and effect.
(iv) The actions and filings necessary or appropriate under applicable securities laws in connection with the Distribution will have been taken or made, and, where applicable, have become effective or been accepted by the applicable Governmental Authority.
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(v) No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Distribution or any of the related transactions shall be in effect, and no other event outside the control of ConocoPhillips shall have occurred or failed to occur that prevents the consummation of the Distribution or any of the related transactions.
(vi) A Registration Statement on Form 10 registering the Phillips 66 Common Stock (the Form 10) shall be effective under the Exchange Act, with no stop order in effect with respect thereto, and the Information Statement included therein (the Information Statement) shall have been mailed to ConocoPhillips stockholders as of the Record Date.
(vii) The Phillips 66 Common Stock to be distributed to the ConocoPhillips stockholders in the Distribution shall have been accepted for listing on the NYSE, subject to official notice of distribution.
(viii) Each of the Ancillary Agreements shall have been duly executed and delivered by the parties thereto.
(ix) No events or developments shall have occurred or exist that, in the judgment of the ConocoPhillips Board, in its sole and absolute discretion, make it inadvisable to effect the Distribution or the other transactions contemplated hereby, or would result in the Distribution or the other transactions contemplated hereby not being in the best interest of ConocoPhillips or its stockholders.
(b) The foregoing conditions are for the sole benefit of ConocoPhillips and shall not give rise to or create any duty on the part of ConocoPhillips or the ConocoPhillips Board to waive or not waive such conditions or in any way limit ConocoPhillips right to terminate this Agreement as set forth in Article VI or alter the consequences of any such termination from those specified in such Article. Any determination made by the ConocoPhillips Board prior to the Distribution concerning the satisfaction or waiver of any or all of the conditions set forth in this Section 3.3 shall be conclusive.
3.4. Certain Stockholder Matters.
(a) Subject to Section 3.3, on or prior to the Distribution Date, ConocoPhillips will deliver to the Agent for the benefit of holders of record of ConocoPhillips Common Stock on the Record Date all of the outstanding shares of Phillips 66 Common Stock (including, if such shares are represented by one or more stock certificates, such stock certificates, endorsed by ConocoPhillips in blank), and shall cause the transfer agent for the shares of ConocoPhillips Common Stock to instruct the Agent to distribute on the Distribution Date the appropriate number of such shares of Phillips 66 Common Stock to each such holder or designated transferee or transferees of such holder by way of direct registration in book-entry form. Phillips 66 will not issue paper stock certificates. The Distribution shall be effective at 11:59 p.m. Eastern Time on the Distribution Date or at such other time as ConocoPhillips may determine.
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(b) Subject to Sections 3.3 and 3.4(c), each holder of ConocoPhillips Common Stock on the Record Date will be entitled to receive in the Distribution a number of whole shares of Phillips 66 Common Stock equal to the number of shares of ConocoPhillips Common Stock held by such holder on the Record Date multiplied by the Distribution Ratio.
(c) No fractional shares will be distributed or credited to book-entry accounts in connection with the Distribution. As soon as practicable after the Distribution Date, ConocoPhillips shall direct the Agent to determine the number of whole shares and fractional shares of Phillips 66 Common Stock allocable to each holder of record or beneficial owner of ConocoPhillips Common Stock as of the Record Date, to aggregate all such fractional shares and to sell the whole shares obtained thereby in open market transactions (with the Agent, in its sole and absolute discretion, determining when, how and through which broker-dealer and at what price to make such sales), and to cause to be distributed to each such holder or for the benefit of each such beneficial owner, in lieu of any fractional share, such holders or owners ratable share of the proceeds of such sale, after deducting any taxes required to be withheld and after deducting an amount equal to all brokerage charges, commissions and transfer taxes attributed to such sale. Neither ConocoPhillips nor Phillips 66 will be required to guarantee any minimum sale price for the fractional shares of Phillips 66 Common Stock. Neither ConocoPhillips nor Phillips 66 will be required to pay any interest on the proceeds from the sale of fractional shares.
(d) Until the Phillips 66 Common Stock is duly transferred in accordance with this Section 3.4 and applicable Law, from and after the effective time of the Distribution, Phillips 66 will regard the Persons entitled to receive such Phillips 66 Common Stock as record holders of Phillips 66 Common Stock in accordance with the terms of the Distribution without requiring any action on the part of such Persons. Phillips 66 agrees that, subject to any transfers of such stock, from and after the effective time of the Distribution (i) each such holder will be entitled to receive all dividends payable on, and exercise voting rights and all other rights and privileges with respect to, the shares of Phillips 66 Common Stock then held by such holder, and (ii) each such holder will be entitled, without any action on the part of such holder, to receive evidence of ownership of the shares of Phillips 66 Common Stock then held by such holder.
ARTICLE IV
DISPUTE RESOLUTION
4.1. General Provisions. Any Dispute shall be resolved in accordance with the procedures set forth in Article IV of the Indemnification and Release Agreement, which shall be the sole and exclusive procedures for the resolution of any such Dispute unless otherwise specified in the applicable Ancillary Agreement or in Article IV of the Indemnification and Release Agreement.
ARTICLE V
FURTHER ASSURANCES AND ADDITIONAL COVENANTS
5.1. Further Assurances.
(a) In addition to the actions specifically provided for elsewhere in this Agreement, each of the parties hereto shall use its commercially reasonable efforts, prior to, on
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and after the Distribution Date, to take, or cause to be taken, all actions, and to do, or cause to be done, all things, reasonably necessary, proper or advisable under applicable Laws, regulations and agreements, to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements.
(b) Without limiting the foregoing, prior to, on and after the Distribution Date, each party hereto shall cooperate with the other parties, and without any further consideration, but at the expense of the requesting party, to execute and deliver, or use its commercially reasonable efforts to cause to be executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to make all filings with, and to obtain all consents, approvals or authorizations of, any Governmental Authority or any other Person under any permit, license, agreement, indenture or other instrument (including any third-party consents or Governmental Approvals), and to take all such other actions as such party may reasonably be requested to take by any other party hereto from time to time, consistent with the terms of this Agreement and the Ancillary Agreements, in order to effectuate the provisions and purposes of this Agreement and the Ancillary Agreements and the transfers of the Phillips 66 Assets and the assignment and assumption of the Phillips 66 Liabilities and the other transactions contemplated hereby and thereby. Without limiting the foregoing, each party will, at the reasonable request, cost and expense of any other party, take such other actions as may be reasonably necessary to vest in such other party good and marketable title, free and clear of any Security Interest, if and to the extent it is practicable to do so.
(c) On or prior to the Distribution Date, ConocoPhillips and Phillips 66 in their respective capacities as direct and indirect stockholders of their respective Subsidiaries, shall each ratify any actions which are reasonably necessary or desirable to be taken by ConocoPhillips Company, Phillips 66 Company or any other Subsidiary of ConocoPhillips, as the case may be, to effectuate the transactions contemplated by this Agreement and the Ancillary Agreements.
(d) ConocoPhillips and Phillips 66, and each of the members of their respective Groups, waive (and agree not to assert against any of the others) any claim or demand that any of them may have against any of the others for any Liabilities or other claims relating to or arising out of: (i) the failure of Phillips 66 or any member of the Phillips 66 Group, on the one hand, or of ConocoPhillips or any member of the ConocoPhillips Group, on the other hand, to provide any notification or disclosure required under any state Environmental Law in connection with the Separation or the other transactions contemplated by this Agreement or the Ancillary Agreements, including the transfer by any member of any Group to any member of the other Group of ownership or operational control of any Assets not previously owned or operated by such transferee; or (ii) any inadequate, incorrect or incomplete notification or disclosure under any such state Environmental Law by the applicable transferor. To the extent any Liability to any Governmental Authority or any third Person arises out of any action or inaction described in clause (i) or (ii) above, the transferee of the applicable Asset hereby assumes and agrees to pay any such Liability.
(e) Prior to the first anniversary of the Distribution Date, if one or more of the parties identifies any commercial or other service that is needed to assure a smooth and orderly transition of the businesses in connection with the consummation of the transactions
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contemplated hereby, and that is not otherwise governed by the provisions of this Agreement or any Ancillary Agreement, the parties will cooperate in determining whether there is a mutually acceptable basis on which the other party will provide such service; provided, that if such service is to extend beyond the first anniversary of the Distribution Date, the terms and conditions upon which the services are to be provided beyond the first anniversary of the Distribution Date shall be market and arms-length terms and conditions.
5.2. Performance. ConocoPhillips will cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement or in any Ancillary Agreement to be performed by any member of the ConocoPhillips Group. Phillips 66 will cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement or in any Ancillary Agreement to be performed by any member of the Phillips 66 Group. Each party (including its permitted successors and assigns) further agrees that it will (a) give timely notice of the terms, conditions and continuing obligations contained in this Section 5.2 to all of the other members of its Group, and (b) cause all of the other members of its Group not to take any action or fail to take any such action inconsistent with such partys obligations under this Agreement, any Ancillary Agreement or the transactions contemplated hereby or thereby.
5.3. ConocoPhillips Guarantees. Phillips 66 acknowledges that in the course of conduct of the Phillips 66 Business, ConocoPhillips and members of the ConocoPhillips Group may have entered into various arrangements in which guarantees, bonds, letters of credit or similar arrangements were issued or arranged by ConocoPhillips or members of the ConocoPhillips Group to support or facilitate the Phillips 66 Business. Any such arrangements entered into by ConocoPhillips and its Affiliates are, to the extent related to the Phillips 66 Business, hereinafter referred to as the ConocoPhillips Guarantees. Except as otherwise agreed by ConocoPhillips and Phillips 66, Phillips 66 agrees that it will use its commercially reasonable efforts to obtain or provide replacement guarantees, bonds, letters of credit or similar arrangements, which will be in effect at the Distribution Date, and obtain the release of ConocoPhillips and members of the ConocoPhillips Group from any ConocoPhillips Guarantees in accordance with Section 2.9 of the Indemnification and Release Agreement.
5.4. Third-Party Agreements. Phillips 66 agrees that it will use its commercially reasonable efforts to obtain or provide replacement agreements with third parties for agreements between such third parties and ConocoPhillips or any member of the ConocoPhillips Group that are Phillips 66 Contracts and cannot be assigned to Phillips 66.
5.5. Tax Matters. Notwithstanding anything to the contrary in this Agreement or any Ancillary Agreement, in the case of any conflict between this Agreement or any Ancillary Agreement (other than the Tax Sharing Agreement) and the Tax Sharing Agreement in relation to any matters addressed by the Tax Sharing Agreement, the Tax Sharing Agreement shall prevail.
5.6. Indemnification Matters. Notwithstanding anything to the contrary in this Agreement or any Ancillary Agreement, in the case of any conflict between this Agreement or any Ancillary Agreement (other than the Indemnification and Release Agreement) and the Indemnification and Release Agreement in relation to any matters addressed by the
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Indemnification and Release Agreement, the Indemnification and Release Agreement shall prevail; provided, however, that in relation to any matters concerning Taxes, the Tax Sharing Agreement shall prevail over the Indemnification and Release Agreement, and in relation to any matters governed by the Employee Matters Agreement, the Employee Matters Agreement shall prevail over the Indemnification and Release Agreement.
5.7. Employee Matters. Notwithstanding anything to the contrary in this Agreement or any Ancillary Agreement, in the case of any conflict between this Agreement or any Ancillary Agreement (other than the Employee Matters Agreement) and the Employee Matters Agreement in relation to any matters addressed by the Employee Matters Agreement, the Employee Matters Agreement shall prevail; provided, however, that in relation to any matters concerning Taxes, the Tax Sharing Agreement shall prevail over the Employee Matters Agreement.
ARTICLE VI
TERMINATION
6.1. Termination. This Agreement and any Ancillary Agreement may be terminated and the terms and conditions of the Distribution may be amended, modified or abandoned at any time prior to the Distribution Date by and in the sole and absolute discretion of the ConocoPhillips Board without the approval of any Person, including Phillips 66, in which case no party will have any liability of any kind to any other party by reason of this Agreement. After the Distribution, this Agreement may not be terminated except by an agreement in writing signed by each of the parties to this Agreement.
ARTICLE VII
MISCELLANEOUS
7.1. Counterparts; Entire Agreement; Corporate Power.
(a) This Agreement and each Ancillary Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party.
(b) This Agreement and the Ancillary Agreements contain the entire agreement between the parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter and there are no agreements or understandings between the parties other than those set forth or referred to herein or therein.
(c) ConocoPhillips represents on behalf of itself and each other member of the ConocoPhillips Group, and Phillips 66 represents on behalf of itself and each other member of the Phillips 66 Group, as follows:
(i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform each of this Agreement and each Ancillary Agreement to which it is a party and to consummate the transactions contemplated hereby and thereby; and
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(ii) this Agreement and each Ancillary Agreement to which it is a party has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof.
(d) Each party hereto acknowledges that it and each other party hereto may execute certain of the Ancillary Agreements by facsimile, stamp or mechanical signature. Each party hereto expressly adopts and confirms each such facsimile, stamp or mechanical signature made in its respective name as if it were a manual signature, agrees that it will not assert that any such signature is not adequate to bind such party to the same extent as if it were signed manually and agrees that at the reasonable request of any other party hereto at any time it will as promptly as reasonably practicable cause each such Ancillary Agreement to be manually executed (any such execution to be as of the date of the initial date thereof).
(e) Notwithstanding any provision of this Agreement or any Ancillary Agreement, neither ConocoPhillips nor Phillips 66 shall be required to take or omit to take any act that would violate its fiduciary duties to any minority stockholders of any non-wholly owned Subsidiary of ConocoPhillips or Phillips 66, as the case may be (it being understood that directors qualifying shares or similar interests will be disregarded for purposes of determining whether a Subsidiary is wholly owned).
7.2. Governing Law. This Agreement and, unless expressly provided therein, each Ancillary Agreement (and any claims or disputes arising out of or related hereto or thereto or to the transactions contemplated hereby and thereby or to the inducement of any party to enter herein and therein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Delaware, irrespective of the choice of laws principles of the State of Delaware as of the date of this Agreement, including all matters of validity, construction, effect, enforceability, performance and remedies.
7.3. Assignability. Except as set forth in any Ancillary Agreement, this Agreement and each Ancillary Agreement shall be binding upon and inure to the benefit of the parties hereto and thereto, respectively, and their respective successors and permitted assigns; provided, however, that no party hereto or thereto may assign its respective rights or delegate its respective obligations under this Agreement or any Ancillary Agreement without the express prior written consent of the other parties hereto or thereto.
7.4. Third-Party Beneficiaries. Except for the indemnification rights under this Agreement or any Ancillary Agreement of any ConocoPhillips Indemnitee or Phillips 66 Indemnitee (as those capitalized terms are defined in the Indemnification and Release Agreement) in their respective capacities as such, (a) the provisions of this Agreement and each Ancillary Agreement are solely for the benefit of the parties and are not intended to confer upon any Person except the parties any rights or remedies hereunder or thereunder, and (b) there are no third-party beneficiaries of this Agreement or any Ancillary Agreement and neither this Agreement nor any Ancillary Agreement shall provide any third person with any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement or any Ancillary Agreement.
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7.5. Notices. All notices, requests, claims, demands or other communications under this Agreement and, to the extent, applicable and unless otherwise provided therein, under each of the Ancillary Agreements shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by facsimile or electronic transmission with receipt confirmed (followed by delivery of an original via overnight courier service), or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 7.5):
If to ConocoPhillips, to:
ConocoPhillips
600 North Dairy Ashford Street
Houston, Texas 77079
Attention: General Counsel
If to Phillips 66, to:
Phillips 66
600 North Dairy Ashford Street
Houston, Texas 77079
Attention: General Counsel
Any party may, by notice to the other party, change the address and contact person to which any such notices are to be given.
7.6. Severability. If any provision of this Agreement or any Ancillary Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof or thereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby. Upon such determination, the parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the parties.
7.7. Force Majeure. No party shall be deemed in default of this Agreement or any Ancillary Agreement to the extent that any delay or failure in the performance of its obligations under this Agreement or any Ancillary Agreement, other than a delay or failure to make a payment, results from any cause beyond its reasonable control and without its fault or negligence, such as acts of God, acts of civil or military authority, embargoes, epidemics, war, riots, insurrections, fires, explosions, earthquakes, floods, unusually severe weather conditions, labor problems or unavailability of parts, or, in the case of computer systems, any failure in electrical or air conditioning equipment. In the event of any such excused delay, the time for performance shall be extended for a period equal to the time lost by reason of the delay.
7.8. Publicity. Prior to the Distribution, each of Phillips 66 and ConocoPhillips shall consult with each other prior to issuing any press releases or otherwise making public statements with respect to the Separation, the Distribution or any of the other transactions contemplated hereby and prior to making any filings with any Governmental Authority with respect thereto.
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7.9. Expenses. Except as expressly set forth in this Agreement (including Sections 2.13 and 5.1(b)) or in any Ancillary Agreement, all fees, costs and expenses incurred in connection with the preparation, execution, delivery and implementation of this Agreement and any Ancillary Agreement, and with the consummation of the transactions contemplated hereby and thereby, will be borne by the party incurring such fees, costs or expenses.
7.10. Late Payments. Except as expressly provided to the contrary in this Agreement or in any Ancillary Agreement, any amount not paid when due pursuant to this Agreement or any Ancillary Agreement (and any amounts billed or otherwise invoiced or demanded and properly payable that are not paid within thirty (30) days of such bill, invoice or other demand) shall accrue interest at a rate per annum equal to the Prime Rate plus 5%.
7.11. Headings. The article, section and paragraph headings contained in this Agreement and in the Ancillary Agreements are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement or any Ancillary Agreement.
7.12. Survival of Covenants. Except as expressly set forth in any Ancillary Agreement, the covenants, representations and warranties contained in this Agreement and each Ancillary Agreement, and liability for the breach of any obligations contained herein or therein, shall survive the Separation and the Distribution and shall remain in full force and effect.
7.13. Waivers of Default. Waiver by any party of any default by the other party of any provision of this Agreement or any Ancillary Agreement shall not be deemed a waiver by the waiving party of any subsequent or other default, nor shall it prejudice the rights of such party. No failure or delay by any party in exercising any right, power or privilege under this Agreement or any Ancillary Agreement shall operate as a waiver thereof nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege.
7.14. Specific Performance. Subject to the provisions of Article IV, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement or any Ancillary Agreement, the party or parties who are, or are to be, thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief in respect of its or their rights under this Agreement or such Ancillary Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The parties agree that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived by each of the parties to this Agreement.
7.15. Amendments. No provisions of this Agreement or any Ancillary Agreement shall be deemed waived, amended, supplemented or modified by any party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the party against whom it is sought to enforce such waiver, amendment, supplement or modification.
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7.16. Interpretation. In this Agreement and any Ancillary Agreement, (a) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other genders as the context requires; (b) the terms hereof, herein, herewith and words of similar import, and the terms Agreement and Ancillary Agreement shall, unless otherwise stated, be construed to refer to this Agreement or the applicable Ancillary Agreement as a whole (including all of the Schedules, Exhibits and Appendices hereto and thereto) and not to any particular provision of this Agreement or such Ancillary Agreement; (c) Article, Section, Exhibit, Schedule and Appendix references are to the Articles, Sections, Exhibits, Schedules and Appendices to this Agreement (or the applicable Ancillary Agreement) unless otherwise specified; (d) the word including and words of similar import when used in this Agreement (or the applicable Ancillary Agreement) means including, without limitation; (e) the word or shall not be exclusive; and (f) unless expressly stated to the contrary in this Agreement or in any Ancillary Agreement, all references to the date hereof, the date of this Agreement, hereby and hereupon and words of similar import shall all be references to the date first stated in the preamble to this Agreement, regardless of any amendment or restatement hereof.
7.17. Relationship of the Parties. It is expressly agreed that, from and after the Distribution Date and for purposes of this Agreement and the Ancillary Agreements, (a) no member of the Phillips 66 Group shall be deemed to be an Affiliate of any member of the ConocoPhillips Group and (b) no member of the ConocoPhillips Group shall be deemed to be an Affiliate of any member of the Phillips 66 Group.
7.18. Limitations of Liability. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, NEITHER PHILLIPS 66 OR ITS AFFILIATES, ON THE ONE HAND, NOR CONOCOPHILLIPS OR ITS AFFILIATES, ON THE OTHER HAND, SHALL BE LIABLE UNDER THIS AGREEMENT TO THE OTHER FOR ANY SPECIAL, INDIRECT, PUNITIVE, EXEMPLARY, REMOTE, SPECULATIVE OR SIMILAR DAMAGES IN EXCESS OF COMPENSATORY DAMAGES OF THE OTHER ARISING IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY (OTHER THAN ANY SUCH LIABILITY WITH RESPECT TO A THIRD-PARTY CLAIM).
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IN WITNESS WHEREOF, the parties have caused this Separation and Distribution Agreement to be executed by their duly authorized representatives.
CONOCOPHILLIPS | ||
By: | /s/ Ryan M. Lance | |
Name: | Ryan M. Lance | |
Title: | Chairman and Chief Executive Officer | |
PHILLIPS 66 | ||
By: | /s/ Greg C. Garland | |
Name: | Greg C. Garland | |
Title: | Chairman, President and Chief Executive Officer |
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Exhibit 10.1
INDEMNIFICATION AND RELEASE AGREEMENT
BY AND BETWEEN
CONOCOPHILLIPS
AND
PHILLIPS 66
DATED AS OF APRIL 26, 2012
TABLE OF CONTENTS
ARTICLE I DEFINITIONS |
1 | |||||
ARTICLE II MUTUAL RELEASES; INDEMNIFICATION |
10 | |||||
2.1. |
Release of Pre-Distribution Claims | 10 | ||||
2.2. |
Indemnification by Phillips 66 | 12 | ||||
2.3. |
Indemnification by ConocoPhillips | 13 | ||||
2.4. |
Indemnification Obligations Net of Insurance Proceeds and Other Amounts | 14 | ||||
2.5. |
Procedures for Indemnification of Third-Party Claims | 15 | ||||
2.6. |
Additional Matters | 17 | ||||
2.7. |
Remedies Cumulative | 19 | ||||
2.8. |
Survival of Indemnities | 19 | ||||
2.9. |
Guarantees, Letters of Credit and other Obligations | 19 | ||||
2.10. |
No Impact on Third Parties | 20 | ||||
2.11. |
No Cross-Claims or Third-Party Claims | 20 | ||||
2.12. |
Severability | 20 | ||||
2.13. |
Change of Control | 20 | ||||
ARTICLE III INSURANCE MATTERS |
21 | |||||
3.1. |
Insurance Matters | 21 | ||||
ARTICLE IV DISPUTE RESOLUTION |
23 | |||||
4.1. |
General Provisions | 23 | ||||
4.2. |
Consideration by Senior Executives | 24 | ||||
4.3. |
Mediation | 24 | ||||
4.4. |
Arbitration | 25 | ||||
ARTICLE V EXCHANGE OF INFORMATION; CONFIDENTIALITY |
27 | |||||
5.1. |
Agreement for Exchange of Information | 27 | ||||
5.2. |
Ownership of Information | 27 | ||||
5.3. |
Compensation for Providing Information | 27 | ||||
5.4. |
Record Retention | 27 | ||||
5.5. |
Limitations of Liability | 28 |
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5.6. |
Other Agreements Providing for Exchange of Information | 28 | ||||
5.7. |
Production of Witnesses; Records; Cooperation | 28 | ||||
5.8. |
Confidentiality | 29 | ||||
5.9. |
Protective Arrangements | 30 | ||||
ARTICLE VI FURTHER ASSURANCES |
30 | |||||
6.1. |
Attorney-Client Privilege | 30 | ||||
6.2. |
Interpretation | 30 | ||||
6.3. |
No Attorney Testimony | 30 | ||||
ARTICLE VII MISCELLANEOUS |
30 | |||||
7.1. |
Entire Agreement | 30 | ||||
7.2. |
Assignability | 31 | ||||
7.3. |
Third-Party Beneficiaries | 31 | ||||
7.4. |
Notices | 31 | ||||
7.5. |
Severability | 32 | ||||
7.6. |
Force Majeure | 32 | ||||
7.7. |
Headings | 32 | ||||
7.8. |
Survival of Covenants | 32 | ||||
7.9. |
Waivers of Default | 32 | ||||
7.10. |
Amendments | 32 | ||||
7.11. |
Limitations of Liability | 32 | ||||
7.12. |
Further Assurances | 33 |
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INDEMNIFICATION AND RELEASE AGREEMENT
This INDEMNIFICATION AND RELEASE AGREEMENT, made and entered into effective as of April 26, 2012 (this Agreement), is by and between ConocoPhillips, a Delaware corporation (ConocoPhillips), and Phillips 66, a Delaware corporation and wholly owned subsidiary of ConocoPhillips (Phillips 66). Capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in Article I or in the Separation and Distribution Agreement dated as of 26, 2012 (as amended, modified or supplemented from time to time in accordance with its terms, the Separation and Distribution Agreement).
R E C I T A L S
WHEREAS, the board of directors of ConocoPhillips (the ConocoPhillips Board) has determined that it is in the best interests of ConocoPhillips and its stockholders to create a new publicly traded company that shall operate the Phillips 66 Business;
WHEREAS, ConocoPhillips and Phillips 66 have entered into the Separation and Distribution Agreement in connection with the separation of the Phillips 66 Business from ConocoPhillips (the Separation) and the distribution of Phillips 66 Common Stock to stockholders of ConocoPhillips (the Distribution); and
WHEREAS, the Separation and Distribution Agreement also provides for the execution and delivery of certain other agreements, including this Agreement, in order to facilitate and provide for the separation of Phillips 66 and its Subsidiaries from ConocoPhillips.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, the parties, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
The following capitalized terms used in this Agreement shall have the meanings set forth below:
AAA shall have the meaning set forth in Section 4.3.
AAA Commercial Arbitration Rules shall have the meaning set forth in Section 4.4(a).
Accounts Receivable Securitization means a financing arrangement entered into prior to the Distribution by Phillips 66 Company, and approved by ConocoPhillips, involving the transfer or sale of accounts receivable of Phillips 66 Company or any member of the Phillips 66 Group.
Action means any demand, action, claim, dispute, suit, countersuit, arbitration, settlement, inquiry, subpoena, proceeding or investigation of any nature (whether criminal, civil, legislative, administrative, regulatory, prosecutorial or otherwise) by or before any federal, state, local, foreign or international Governmental Authority or any arbitration or mediation tribunal.
Affiliate means, when used with respect to a specified Person, a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person. For the purpose of this definition, control (including with correlative meanings, controlled by and under common control with), when used with respect to any specified Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment, undertaking or otherwise. For the avoidance of doubt, after the Distribution, the members of the ConocoPhillips Group and the members of the Phillips 66 Group shall not be deemed to be under common control for purposes hereof due solely to the fact that ConocoPhillips and Phillips 66 have common shareholders.
Agreement shall have the meaning set forth in the Preamble.
Ancillary Agreements means the Employee Matters Agreement, this Agreement, the Intellectual Property Assignment and License Agreement, the Transition Services Agreement, the Tax Sharing Agreement and the Transfer Documents.
Applicable Toxic Tort Claim shall mean an Action alleging pollution, contamination, an illness, injury, death or medical condition resulting from or arising out of the presence of or exposure to asbestos, benzene, vinyl chloride, butadiene, or ethylene dichloride, except such Actions (a) alleging exposure to Flosal (which shall continue to be tendered by ConocoPhillips to Chevron Phillips Chemical Company LLC, a Delaware limited liability company), (b) alleging exposure to Benzene in Norway, or (c) relating to or associated with Polar Tankers, Inc. and its predecessors.
Assets means, with respect to any Person, the assets, properties, claims and rights (including goodwill) of such Person, wherever located (including in the possession of vendors or other third Persons or elsewhere), of every kind, character and description, whether real, personal or mixed, tangible, intangible or contingent, in each case, whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of such Person, including the following:
(a) all accounting and other books, records and files whether in paper, microfilm, microfiche, computer tape or disc, magnetic tape, electronic or any other form;
(b) all apparatus, computers and other electronic data processing and communications equipment, fixtures, machinery, equipment, furniture, office equipment, automobiles, trucks, vessels, motor vehicles and other transportation equipment and other tangible personal property;
(c) all inventories of materials, parts, raw materials, components, supplies, works-in-process and finished goods and products;
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(d) all interests in real property of whatever nature, including easements, whether as owner, mortgagee or holder of a Security Interest in real property, lessor, sublessor, lessee, sublessee or otherwise;
(e) (i) all interests in any capital stock or other equity interests of any Subsidiary, Affiliate or any other Person, (ii) all bonds, notes, debentures or other securities issued by any Subsidiary, Affiliate or any other Person, (iii) all loans, advances or other extensions of credit or capital contributions to any Subsidiary, Affiliate or any other Person, and (iv) all other investments in securities of any Person;
(f) all license agreements, leases of personal property, open purchase orders for raw materials, supplies, parts or services and other contracts, agreements or commitments;
(g) all letters of credit;
(h) all written (including in electronic form) or oral technical information, data, specifications, research and development information, engineering drawings and specifications, operating and maintenance manuals, and materials and analyses prepared by consultants and other third Persons;
(i) all Intellectual Property and Technology;
(j) all Software;
(k) all cost information, sales and pricing data, customer prospect lists, supplier records, customer and supplier lists, customer and vendor data, correspondence and lists, product data and literature, artwork, design, formulations and specifications, quality records and reports and other books, records, studies, surveys, reports, plans and documents;
(l) all prepaid expenses, trade accounts and other accounts and notes receivable;
(m) all rights under contracts or agreements, all claims or rights against any Person arising from the ownership of any Asset, all rights in connection with any bids or offers and all claims, choses in action or similar rights, whether accrued or contingent;
(n) all licenses, permits, approvals and authorizations which have been issued by any Governmental Authority;
(o) all cash or cash equivalents, bank accounts, lock boxes and other deposit arrangements; and
(p) all interest rate, currency, commodity or other swap, collar, cap or other hedging or similar agreements or arrangements.
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Assumed Actions means (a) those Actions which are listed in Schedule 1; and (b) those Actions that are primarily related to the Phillips 66 Business.
Bridge Loan Facility means the bridge loan facility pursuant to the bridge loan facility agreement entered into prior to the Distribution by Phillips 66, as borrower, the bank named therein as administrative agent, and the lending banks named therein, on such terms and conditions as agreed to by Phillips 66 and the other parties to the bridge loan facility agreement and approved by ConocoPhillips.
ConocoPhillips shall have the meaning set forth in the Preamble.
ConocoPhillips Board shall have the meaning set forth in the Recitals.
ConocoPhillips Company means ConocoPhillips Company, a Delaware corporation and a wholly owned subsidiary of ConocoPhillips.
ConocoPhillips Group means ConocoPhillips, each Subsidiary of ConocoPhillips immediately after the Distribution Date and each Affiliate of ConocoPhillips immediately after the Distribution Date (in each case other than any member of the Phillips 66 Group).
ConocoPhillips Indemnitees shall have the meaning set forth in Section 2.2.
ConocoPhillips Intellectual Property means (a) the ConocoPhillips Name and ConocoPhillips Marks and (b) all other Intellectual Property that, as of the Distribution Date, is owned or licensed by any member of either Group, other than the Phillips 66 Intellectual Property.
ConocoPhillips Name and ConocoPhillips Marks means the names, marks, trade dress, logos, monograms, domain names and other source or business identifiers of ConocoPhillips or any of its Affiliates using or containing ConocoPhillips (in block letters or otherwise), ConocoPhillips either alone or in combination with other words or elements, and all names, marks, trade dress, logos, monograms, domain names and other source or business identifiers confusingly similar to or embodying any of the foregoing either alone or in combination with other words or elements, together with the goodwill associated with any of the foregoing.
Contribution means the contribution by ConocoPhillips to Phillips 66 of all the outstanding stock of Phillips 66 Company and any Phillips 66 Assets held directly by ConocoPhillips in exchange for (a) the assumption by Phillips 66 of any Phillips 66 Liabilities from ConocoPhillips, and (b) a number of shares of Phillips 66 Common Stock equal to the Required Share Number.
Corporate Action means any Action, whether filed before, on or after the Distribution Date, to the extent it asserts violations of any federal, state, local, foreign or international securities Law, securities class action or shareholder derivative claim.
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Credit Rating means on any date, the rating that has been most recently announced by any Rating Agency for any class of senior, unsecured, non-convertible publicly held long-term debt of a Person.
Dispute shall have the meaning set forth in Section 4.1(a).
Distribution shall have the meaning set forth in the Recitals.
Distribution Date means the date and time determined in accordance with Section 3.3(a) of the Separation and Distribution Agreement at which the Distribution occurs.
Employee Matters Agreement means the Employee Matters Agreement, dated as of the date hereof, between ConocoPhillips and Phillips 66.
Environmental Law means any Law relating to pollution, protection or restoration of or prevention of harm to the environment or natural resources, including the use, handling, transportation, treatment, storage, disposal, Release or discharge of Hazardous Materials or the protection of or prevention of harm to human health and safety.
Environmental Liabilities means all Liabilities relating to, arising out of or resulting from any Hazardous Materials, Environmental Law or contract or agreement relating to environmental, health or safety matters (including all removal, remediation or cleanup costs, investigatory costs, response costs, natural resources damages, property damages, personal injury damages, costs of compliance, including with any product take back requirements, or with any settlement, judgment or other determination of Liability and indemnity, contribution or similar obligations) and all costs and expenses, interest, fines, penalties or other monetary sanctions in connection therewith.
Exchange Act means the U.S. Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.
Form 10 shall have the meaning set forth in the Separation and Distribution Agreement.
Governmental Authority means any nation or government, any state, municipality or other political subdivision thereof, and any entity, body, agency, commission, department, board, bureau, court, tribunal or other instrumentality, whether federal, state, local, domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory, administrative or other similar functions of, or pertaining to, government and any executive official thereof.
Group means either the Phillips 66 Group or the ConocoPhillips Group, as the context requires.
Hazardous Materials means any chemical, material, substance, waste, pollutant, emission, discharge, release or contaminant that could result in liability under, or that is prohibited, limited or regulated by or pursuant to, any Environmental Law, and any natural or artificial substance (whether solid, liquid or gas, noise, ion, vapor or electromagnetic) that could
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cause harm to human health or the environment, including petroleum, petroleum products and byproducts, asbestos and asbestos-containing materials, urea formaldehyde foam insulation, electronic, medical or infectious wastes, polychlorinated biphenyls, radon gas, radioactive substances, chlorofluorocarbons and all other ozone-depleting substances.
Indemnifying Party shall have the meaning set forth in Section 2.4(a).
Indemnitee shall have the meaning set forth in Section 2.4(a).
Indemnity Payment shall have the meaning set forth in Section 2.4(a).
Information means information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including studies, reports, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names, memos, and other technical, financial, employee or business information or data.
Information Statement shall have the meaning set forth in the Separation and Distribution Agreement.
Initial Notice shall have the meaning set forth in Section 4.2.
Insurance Proceeds means those monies:
(a) received by an insured from an insurance carrier; or
(b) paid by an insurance carrier on behalf of the insured;
in any such case net of any applicable premium adjustments (including reserves and retrospectively rated premium adjustments) and net of any costs or expenses incurred in the collection thereof; provided, however, with respect to a captive insurance arrangement, Insurance Proceeds shall only include net amounts received by the captive insurer in respect of any captive reinsurance arrangement.
Intellectual Property means all of the following whether arising under the Laws of the United States or of any other foreign or multinational jurisdiction: (a) patents, patent applications (including patents issued thereon) and statutory invention registrations, including reissues, divisions, continuations, continuations in part, substitutions, renewals, extensions and reexaminations of any of the foregoing, and all rights in any of the foregoing provided by international treaties or conventions, (b) trademarks, service marks, trade names, service names, trade dress, logos and other source or business identifiers, including all goodwill associated with any of the foregoing and any and all common law rights in and to any of the foregoing, registrations and applications for registration of any of the foregoing, all rights in and to any of the foregoing provided by international treaties or conventions, and all reissues, extensions and renewals of any of the foregoing, (c) Internet domain names, (d) copyrightable works, copyrights, moral rights, mask work rights, database rights and design rights, in each case, other
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than Software, whether or not registered, and all registrations and applications for registration of any of the foregoing, and all rights in and to any of the foregoing provided by international treaties or conventions, (e) confidential and proprietary information, including trade secrets, invention disclosures, processes and know-how, in each case, other than Software, and (f) intellectual property rights arising from or in respect of any Technology.
Intellectual Property Assignment and License Agreement means the Intellectual Property Assignment and License Agreement, dated as of the date hereof, between ConocoPhillips and Phillips 66.
Investment Grade shall mean a rating of at least (a) BBB- by Standard & Poors Financial Services LLC, (b) Baa3 by Moodys Investors Service, Inc., or (c) BBB- by Fitch, Inc.
Law means any national, supranational, federal, state, provincial, local or similar law (including common law), statute, code, order, ordinance, rule, regulation, treaty (including any income tax treaty), license, permit, authorization, approval, consent, decree, injunction, binding judicial or administrative interpretation or other requirement, in each case, enacted, promulgated, issued or entered by a Governmental Authority.
LHO shall have the meaning set forth in Section 2.5(i).
Liabilities means any and all debts, guarantees, assurances, commitments, liabilities, responsibilities, Losses, remediation, deficiencies, reimbursement obligations in respect of letters of credit, damages, fines, penalties, settlements, sanctions, costs, expenses, interest and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, accrued or not accrued, asserted or unasserted, liquidated or unliquidated, foreseen or unforeseen, known or unknown, reserved or unreserved, or determined or determinable, including those arising under any Law, claim (including any Third-Party Claim), demand, Action, or order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority or arbitration tribunal, and those arising under any contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment or undertaking, or any fines, damages or equitable relief that is imposed, in each case, including all costs and expenses relating thereto.
Losses means actual losses (including any diminution in value), costs, damages, penalties and expenses (including legal and accounting fees and expenses and costs of investigation and litigation), whether or not involving a Third-Party Claim.
Medicare Reporting Obligations shall have the meaning set forth in Section 2.6(g).
Person means an individual, a general or limited partnership, a corporation, a trust, a joint venture, an unincorporated organization, a limited liability entity, any other entity and any Governmental Authority.
Phillips 66 shall have the meaning set forth in the Preamble.
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Phillips 66 Common Stock means the common stock, par value $0.01 per share, of Phillips 66.
Phillips 66 Company means Phillips 66 Company, a Delaware corporation and a wholly owned subsidiary of ConocoPhillips Company.
Phillips 66 Financing Arrangements means the Rule 144A / Capital Markets Securities, the Term Loan Facility, the Bridge Loan Facility, the Accounts Receivable Securitization, and the Revolving Credit Facility.
Phillips 66 Group means Phillips 66, each Subsidiary of Phillips 66 immediately after the Distribution Date, and each Affiliate of Phillips 66 immediately after the Distribution Date.
Phillips 66 Indemnitees shall have the meaning set forth in Section 2.3.
Rating Agency means Moodys Investors Service, Inc., Standard & Poors, a division of The McGraw-Hill Companies, Inc., Fitch, Inc. or any nationally recognized statistical rating organizations registered with the Securities and Exchange Commission.
Release means any release, spill, emission, discharge, leaking, pumping, pouring, dumping, injection, deposit, disposal, dispersal, leaching or migration of Hazardous Materials into the environment (including, ambient air, surface water, groundwater and surface or subsurface strata).
Representatives means, with respect to any Person, any of such Persons directors, officers, employees, agents, consultants, advisors, accountants, attorneys or other representatives.
Required Share Number means the number of shares of Phillips 66 Common Stock necessary to effect the Distribution less the number of shares of Phillips 66 Common Stock outstanding immediately prior to the Contribution.
Response shall have the meaning set forth in Section 4.2.
Revolving Credit Facility means a revolving credit facility pursuant to a revolving credit facility agreement entered into prior to the Distribution by Phillips 66, as borrower, the bank named therein as administrative agent, and the lending banks named therein, on such terms and conditions as agreed to by Phillips 66 and the other parties to the revolving credit facility agreement and approved by ConocoPhillips.
Rule 144A / Capital Markets Securities means securities sold prior to the Distribution by Phillips 66, and approved by ConocoPhillips, in reliance on Rule 144A promulgated under the Securities Act.
Securities Act means the U.S. Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder.
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Security Interest means any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, covenant, condition, easement, encroachment, restriction on transfer, or other encumbrance of any nature whatsoever.
Separation shall have the meaning set forth in the Recitals.
Separation and Distribution Agreement has the meaning set forth in the Preamble.
Software means any and all (a) computer programs, including any and all software implementation of algorithms, models and methodologies, whether in source code, object code, human readable form or other form, (b) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (c) descriptions, flow charts and other work products used to design, plan, organize and develop any of the foregoing, screens, user interfaces, report formats, firmware, development tools, templates, menus, buttons and icons, and (d) documentation, including user manuals and other training documentation, relating to any of the foregoing.
Subsidiary or subsidiary means, with respect to any Person, any corporation, limited liability company, joint venture or partnership of which such Person (a) beneficially owns, either directly or indirectly, more than fifty percent (50%) of (i) the total combined voting power of all classes of voting securities of such Person, (ii) the total combined equity interests or (iii) the capital or profit interests, in the case of a partnership, or (b) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.
Tax Benefit shall have the meaning set forth in the Tax Sharing Agreement.
Tax Sharing Agreement means the Tax Sharing Agreement, dated as of the date hereof, between ConocoPhillips, ConocoPhillips Company, Phillips 66 and Phillips 66 Company.
Taxes shall have the meaning set forth in the Tax Sharing Agreement.
Technology means all technology, designs, formulae, algorithms, procedures, methods, discoveries, processes, techniques, ideas, know-how, research and development, technical data, tools, materials, specifications, processes, inventions (whether patentable or unpatentable and whether or not reduced to practice), apparatus, creations, improvements, works of authorship in any media, confidential, proprietary or non-public information and other similar materials, and all recordings, graphs, drawings, reports, analyses and other writings, and other tangible embodiments of the foregoing in any form whether or not listed herein, in each case, other than Software.
Term Loan Facility means the term loan facility pursuant to the term loan agreement entered into prior to the Distribution by Phillips 66, as borrower, the bank named therein as administrative agent, and the lending banks named therein, on such terms and conditions as agreed to by Phillips 66 and the other parties to the term loan agreement and approved by ConocoPhillips.
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Third Party shall have the meaning set forth in Section 2.5(a).
Third-Party Claim shall have the meaning set forth in Section 2.5(a).
Transfer Documents shall have the meaning set forth in the Separation and Distribution Agreement.
Transition Services Agreement means the Transition Services Agreement, dated as of the date hereof, between ConocoPhillips and Phillips 66.
ARTICLE II
MUTUAL RELEASES; INDEMNIFICATION
2.1. Release of Pre-Distribution Claims.
(a) Except as provided in Section 2.1(c), effective as of the Distribution Date, Phillips 66 does hereby, for itself and each other member of the Phillips 66 Group, their respective Affiliates (other than any member of the ConocoPhillips Group), successors and assigns, and all Persons who at any time prior to the Distribution Date have been directors, officers, agents or employees of any member of the Phillips 66 Group (in each case, in their respective capacities as such), remise, release and forever discharge ConocoPhillips and the members of the ConocoPhillips Group, their respective Affiliates (other than any member of the Phillips 66 Group), successors and assigns, and all Persons who at any time prior to the Distribution Date have been stockholders, directors, officers, agents or employees of any member of the ConocoPhillips Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from any and all Liabilities whatsoever, whether at law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Distribution Date, including in connection with the transactions and all other activities to implement the Separation and the Distribution.
(b) Except as provided in Section 2.1(c), effective as of the Distribution Date, ConocoPhillips does hereby, for itself and each other member of the ConocoPhillips Group, their respective Affiliates (other than any member of the Phillips 66 Group), successors and assigns, and all Persons who at any time prior to the Distribution Date have been directors, officers, agents or employees of any member of the ConocoPhillips Group (in each case, in their respective capacities as such), remise, release and forever discharge Phillips 66, the respective members of the Phillips 66 Group, their respective Affiliates (other than any member of the ConocoPhillips Group), successors and assigns, and all Persons who at any time prior to the Distribution Date have been stockholders, directors, officers, agents or employees of any member of the Phillips 66 Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from any and all Liabilities whatsoever, whether at law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur
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or any conditions existing or alleged to have existed on or before the Distribution Date, including in connection with the transactions and all other activities to implement the Separation and the Distribution.
(c) Nothing contained in Section 2.1(a) or (b) shall impair any right of any Person to enforce this Agreement, the Separation and Distribution Agreement, any other Ancillary Agreement or any agreements, arrangements, commitments or understandings that are specified in Section 2.8(b) of the Separation and Distribution Agreement or the applicable Schedules thereto as not to terminate as of the Distribution Date, in each case in accordance with its terms. Nothing contained in Section 2.1(a) or (b) shall release any Person from:
(i) any Liability provided in or resulting from any agreement among any members of the ConocoPhillips Group or the Phillips 66 Group that is specified in Section 2.8(b) of the Separation and Distribution Agreement or the applicable Schedules thereto as not to terminate as of the Distribution Date, or any other Liability specified in such Section 2.8(b) as not to terminate as of the Distribution Date;
(ii) any Liability, contingent or otherwise, assumed, transferred, assigned or allocated to the Group of which such Person is a member in accordance with, or any other Liability of any member of any Group under, this Agreement, the Separation and Distribution Agreement or any other Ancillary Agreement;
(iii) any Liability for the sale, lease, construction or receipt of goods, property or services purchased, obtained or used in the ordinary course of business by a member of one Group from a member of the other Group prior to the Distribution Date;
(iv) any Liability for unpaid amounts for products or services or refunds owing on products or services due on a value-received basis for work done by a member of one Group at the request or on behalf of a member of the other Group;
(v) any Liability that the parties may have with respect to indemnification or contribution pursuant to this Agreement for claims brought against the parties by third Persons, which Liability shall be governed by the provisions of this Article II and Article III and, if applicable, the appropriate provisions of the Separation and Distribution Agreement and the other Ancillary Agreements; or
(vi) any Liability the release of which would result in the release of any third Person other than a Person released pursuant to this Section 2.1.
In addition, nothing contained in Section 2.1(a) shall release ConocoPhillips from honoring its existing obligations to indemnify any director, officer or employee of a member of the Phillips 66 Group who was a director, officer or employee of a member of the ConocoPhillips Group on or prior to the Distribution Date, to the extent such director, officer or employee becomes a named defendant in any Action with respect to which such director, officer or employee was entitled to such indemnification pursuant to then existing obligations; it being understood that, if the underlying obligation giving rise to such Action is a Phillips 66 Liability, Phillips 66 shall indemnify ConocoPhillips for such Liability (including ConocoPhillips costs to indemnify the director, officer or employee) in accordance with the provisions set forth in this Article II.
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(d) Phillips 66 covenants that it will not make, and will not permit any member of the Phillips 66 Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against ConocoPhillips or any member of the ConocoPhillips Group, or any other Person released pursuant to Section 2.1(a), with respect to any Liabilities released pursuant to Section 2.1(a). ConocoPhillips covenants that it will not make, and will not permit any member of the ConocoPhillips Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Phillips 66 or any member of the Phillips 66 Group, or any other Person released pursuant to Section 2.1(b), with respect to any Liabilities released pursuant to Section 2.1(b).
(e) It is the intent of each of ConocoPhillips and Phillips 66, by virtue of the provisions of this Section 2.1, to provide for a full and complete release and discharge of all Liabilities existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Distribution Date, between or among Phillips 66 or any member of the Phillips 66 Group, on the one hand, and ConocoPhillips or any member of the ConocoPhillips Group, on the other hand (including any contractual agreements or arrangements existing or alleged to exist between or among any such members on or before the Distribution Date), except as expressly set forth in Section 2.1(c). At any time, at the request of any other party to this Agreement, each party shall cause each member of its respective Group to execute and deliver releases reflecting the provisions hereof.
(f) Any breach of the provisions of this Section 2.1 by either ConocoPhillips or Phillips 66 shall entitle the other party to recover reasonable fees and expenses of counsel in connection with such breach or any action resulting from such breach.
2.2. Indemnification by Phillips 66. Subject to Section 2.4, Phillips 66 shall, and shall cause the other members of the Phillips 66 Group to, indemnify, defend and hold harmless ConocoPhillips, each member of the ConocoPhillips Group and each of their respective directors, officers and employees, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the ConocoPhillips Indemnitees), from and against any and all Liabilities of the ConocoPhillips Indemnitees relating to, arising out of or resulting from any of the following items (without duplication):
(a) the failure of Phillips 66 or any other member of the Phillips 66 Group or any other Person to pay, perform or otherwise promptly discharge any Phillips 66 Liabilities or Phillips 66 Contracts in accordance with its respective terms, whether prior to or after the Distribution Date or the date hereof;
(b) the Phillips 66 Business, any Phillips 66 Liabilities or any Phillips 66 Contracts;
(c) the Assumed Actions;
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(d) any Corporate Action or Action relating primarily to the Phillips 66 Business from which Phillips 66 is unable to cause a ConocoPhillips Group party to be removed pursuant to Section 2.6(d);
(e) any use by any member of the ConocoPhillips Group allowed by the Intellectual Property Assignment and License Agreement, the Separation and Distribution Agreement or any other Ancillary Agreement after the Distribution Date of the Phillips 66 Intellectual Property owned by, or licensed by a Third Party to, a member of the Phillips 66 Group;
(f) any failure by Phillips 66 or a member of the Phillips 66 Group to use commercially reasonable efforts to obtain the waivers of subrogation contemplated by Section 2.4(d);
(g) any breach by Phillips 66 or any member of the Phillips 66 Group of this Agreement, the Separation and Distribution Agreement or any of the other Ancillary Agreements;
(h) any guarantee, indemnification obligation, letter of credit reimbursement obligations, surety, bond or other credit support agreement, arrangement, commitment or understanding for the benefit of Phillips 66 or its Subsidiaries by ConocoPhillips or any of its Subsidiaries (other than Phillips 66 or its Subsidiaries) that survives following the Distribution Date; and
(i) any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to all information contained in any of the Form 10 (including in any amendments or supplements thereto), the Information Statement (as amended or supplemented if Phillips 66 will have furnished any amendments or supplements thereto) or any offering memorandum or other marketing materials prepared in connection with the Phillips 66 Financing Arrangements, other than any such statement or omission in the Form 10, Information Statement or offering memorandum or other marketing materials based on information furnished by ConocoPhillips solely in respect of the ConocoPhillips Group.
2.3. Indemnification by ConocoPhillips. Subject to Section 2.4, ConocoPhillips shall, and shall cause the other members of the ConocoPhillips Group to, indemnify, defend and hold harmless Phillips 66, each member of the Phillips 66 Group and each of their respective directors, officers and employees, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the Phillips 66 Indemnitees), from and against any and all Liabilities of the Phillips 66 Indemnitees relating to, arising out of or resulting from any of the following items (without duplication):
(a) the failure of ConocoPhillips or any other member of the ConocoPhillips Group or any other Person to pay, perform or otherwise promptly discharge any Excluded Liabilities, whether prior to or after the Distribution Date or the date hereof;
(b) the ConocoPhillips Business or any Excluded Contracts;
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(c) the Excluded Liabilities;
(d) any Corporate Action or Action relating primarily to the ConocoPhillips Business from which ConocoPhillips is unable to cause a Phillips 66 Group party to be removed pursuant to Section 2.6(d);
(e) any use by any member of the Phillips 66 Group allowed by the Intellectual Property Assignment and License Agreement, the Separation and Distribution Agreement or any other Ancillary Agreement after the Distribution Date of the ConocoPhillips Intellectual Property owned by, or licensed by a Third Party to, a member of the ConocoPhillips Group;
(f) any failure by ConocoPhillips or a member of the ConocoPhillips Group to use commercially reasonable efforts to obtain the waivers of subrogation contemplated by Section 2.4(d);
(g) any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to all information contained in any of the Form 10 (including in any amendments or supplements thereto), the Information Statement (as amended or supplemented if Phillips 66 will have furnished any amendments or supplements thereto) or any offering memorandum or other marketing materials prepared in connection with the Phillips 66 Financing Arrangements, only to the extent based on information furnished by ConocoPhillips solely in respect of the ConocoPhillips Group; and
(h) any breach by ConocoPhillips or any member of the ConocoPhillips Group of this Agreement, the Separation and Distribution Agreement or any of the other Ancillary Agreements.
2.4. Indemnification Obligations Net of Insurance Proceeds and Other Amounts.
(a) The parties intend that any Liability subject to indemnification or reimbursement pursuant to this Article II or Article III will be net of Insurance Proceeds that actually reduce the amount of the Liability. Accordingly, the amount which any party (an Indemnifying Party) is required to pay to any Person entitled to indemnification hereunder (an Indemnitee) will be reduced by any Insurance Proceeds theretofore actually recovered by or on behalf of the Indemnitee in respect of the related Liability. If an Indemnitee receives a payment (an Indemnity Payment) required by this Agreement from an Indemnifying Party in respect of any Liability and subsequently receives Insurance Proceeds, then the Indemnitee will pay to the Indemnifying Party an amount equal to the excess of the Indemnity Payment received over the amount of the Indemnity Payment that would have been due if the Insurance Proceeds had been received, realized or recovered before the Indemnity Payment was made.
(b) An insurer who would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of the indemnification provisions hereof, have any subrogation rights with respect thereto, it being expressly understood and agreed that no insurer or any other Third Party shall be entitled to a windfall (i.e., a benefit they would not be entitled to receive in the absence of the indemnification provisions) by virtue of the indemnification provisions hereof.
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(c) The parties intend that any indemnification or reimbursement payment in respect of a Liability pursuant to this Article II or Article III shall be (i) reduced to take into account the amount of any Tax Benefit to the indemnified or reimbursed Person resulting from the Liability so indemnified or reimbursed and (ii) increased so that the amount of such payment, reduced by the amount of all Income Taxes (as defined in the Tax Sharing Agreement) payable with respect to the receipt thereof (but taking into account all correlative Tax Benefits resulting from the payment of such Income Taxes), shall equal the amount of the payment which the Person receiving such payment would otherwise be entitled to receive pursuant to this Agreement. For purposes of this Section 2.4(c), the amount of any Tax Benefit and any Income Taxes shall be calculated on the basis that the indemnified or reimbursed Person is subject to the highest marginal regular statutory income Tax rate, has sufficient taxable income to permit the realization or receipt of any relevant Tax Benefit at the earliest possible time and is not subject to the alternative minimum tax.
(d) Each of ConocoPhillips and Phillips 66 shall, and shall cause the members of its Group to, when appropriate, use commercially reasonable efforts to obtain waivers of subrogation for each of the insurance policies identified on Schedule 3.1(c). Each of ConocoPhillips and Phillips 66 hereby waives, for itself and each member of its Group, its rights to recover against the other party in subrogation or as subrogee for a third Person.
(e) For all claims as to which indemnification is provided under Section 2.2 or Section 2.3 other than Third-Party Claims (as to which Section 2.5 shall apply), the reasonable fees and expenses of counsel to the Indemnitee for the enforcement of the indemnity obligations shall be borne by the Indemnifying Party.
2.5. Procedures for Indemnification of Third-Party Claims.
(a) If an Indemnitee shall receive written notice from a Person (including any Governmental Authority) who is not a member of the ConocoPhillips Group or the Phillips 66 Group (a Third Party) of any claim or of the commencement by any such Person of any Action (collectively, a Third-Party Claim) with respect to which an Indemnifying Party may be obligated to provide indemnification to such Indemnitee pursuant to Section 2.2 or 2.3, or any other Section of this Agreement or any other Ancillary Agreement, such Indemnitee shall give such Indemnifying Party written notice thereof within fourteen (14) days of such written notice. Any such notice shall describe the Third-Party Claim in reasonable detail and include copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third-Party Claim. Notwithstanding the foregoing, the failure of an Indemnitee to provide notice in accordance with this Section 2.5(a) shall not relieve an Indemnifying Party of its indemnification obligations under this Agreement, except to the extent to which the Indemnifying Party shall demonstrate that it was materially prejudiced by the Indemnitees failure to provide notice in accordance with this Section 2.5(a).
(b) An Indemnifying Party may elect to defend (and, unless the Indemnifying Party has specified any reservations or exceptions, to seek to settle or compromise), at such
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Indemnifying Partys own expense and by such Indemnifying Partys own counsel, any Third-Party Claim. Within thirty (30) days after the receipt of notice from an Indemnitee in accordance with Section 2.5(a) (or sooner, if the nature of such Third-Party Claim so requires), the Indemnifying Party shall notify the Indemnitee of its election whether the Indemnifying Party will assume responsibility for defending such Third-Party Claim, which election shall specify any reservations or exceptions. After notice from an Indemnifying Party to an Indemnitee of its election to assume the defense of a Third-Party Claim, such Indemnitee shall have the right to employ separate counsel and to participate in (but not control) the defense, compromise, or settlement thereof, but the fees and expenses of such counsel shall be the expense of such Indemnitee except as set forth in the next sentence.
(c) In the event that the Indemnifying Party has elected to assume the defense of the Third-Party Claim but has specified, and continues to assert, any reservations or exceptions in such notice, then, in any such case, the reasonable fees and expenses of one separate counsel for all Indemnitees shall be the expense of such Indemnitees, but shall be reimbursed by the Indemnifying Party.
In the event that the Indemnifying Party has elected to assume the defense of the Third Party Claim but has specified, and continues to assert, any reservations or exceptions in such notice, then the Indemnitee must consent to any settlement or compromise.
(d) Notwithstanding an election by an Indemnifying Party to defend a Third-Party Claim pursuant to Section 2.5(b), the Indemnitee may, upon notice to the Indemnifying Party, elect to take over the defense of such Third-Party Claim if (i) in its exercise of reasonable business judgment, the Indemnitee determines that the Indemnifying Party is not defending such Third-Party Claim competently or in good faith, (ii) the Credit Rating of the Indemnifying Party is or falls below Investment Grade as determined by at least two Rating Agencies, (iii) the Indemnitee determines in its exercise of reasonable business judgment that there exists a compelling business reason for such Indemnitee to defend such Third-Party Claim (other than as contemplated by the foregoing clause (i)), (iv) the Indemnifying Party makes a general assignment for the benefit of creditors, has filed against it or files a petition in bankruptcy or insolvency or is declared bankrupt or insolvent or declares that it is bankrupt or insolvent, or (v) there occurs a change of control of the Indemnifying Party.
(e) If an Indemnifying Party elects not to assume responsibility for defending a Third-Party Claim, or fails to notify an Indemnitee of its election as provided in Section 2.5(b), or if an Indemnitee takes over the defense of a Third-Party Claim as provided in Section 2.5(d)(i), the Indemnifying Party shall bear the costs and expenses of the Indemnitee incurred in defending such Third-Party Claim. If the Indemnitee takes over the defense of a Third-Party Claim as provided in Section 2.5(d)(ii)-(v), the Indemnifying Party shall bear all of the Indemnitees reasonable costs and expenses incurred in defending such Third-Party Claim.
(f) If, pursuant to Section 2.5(d) or for any other reason, the Indemnifying Party is not defending a Third-Party Claim for which indemnification is provided under this Agreement, the Indemnifying Party shall have the right, at its own expense, to monitor reasonably the defense of such Third-Party Claim; provided, that such monitoring activity shall not interfere in any material respect with the conduct of such defense.
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(g) If an Indemnifying Party has failed to assume the defense of the Third-Party Claim in accordance with the terms of this Agreement or an Indemnitee takes over the defense of a Third-Party Claim as provided in Section 2.5(d)(i), an Indemnitee may settle or compromise the Third-Party Claim without the consent of the Indemnifying Party. If an Indemnitee takes over the defense of a Third-Party Claim as provided in Section 2.5(d)(ii)-(v), such Indemnitee may not settle or compromise any Third-Party Claim without the consent of the Indemnifying Party, such consent not to be unreasonably withheld or delayed.
(h) In the case of a Third-Party Claim, no Indemnifying Party shall consent to entry of any judgment or enter into any settlement of the Third-Party Claim without the consent of the Indemnitee if the effect thereof is to permit any injunction, declaratory judgment or other non-monetary relief to be entered, directly or indirectly against any Indemnitee. For the avoidance of doubt, the consent of any Indemnitee pursuant to this Section 2.5(h) shall be required only with respect to non-monetary relief.
(i) Phillips 66 shall prepare and circulate a legal hold order (LHO) covering relevant categories of documents as promptly as practical following receipt of any notice pursuant to Section 2.5(a) and shall promptly notify ConocoPhillips after such LHO has been circulated. ConocoPhillips shall prepare and circulate a LHO covering documents in the possession, custody or control of the ConocoPhillips Group with respect to any Action so notified to Phillips 66.
(j) The provisions of this Section 2.5 (other than this Section 2.5(j)) and the provisions of Section 2.6 shall not apply to Taxes (Taxes being governed by the Tax Sharing Agreement).
(k) All Assumed Actions have been tendered by ConocoPhillips to Phillips 66 and are deemed to be formally accepted by Phillips 66 upon the execution of this Agreement.
(l) An Indemnifying Party shall provide the Indemnitee with a monthly written report identifying any Third Party Claims which such Indemnifying Party has elected to defend pursuant to Section 2.5(b) or, in the case of Phillips 66, which are identified on Schedule 1.1. In addition, the Indemnifying Party shall establish a procedure reasonably acceptable to the Indemnitee to automatically send electronic notice from the Indemnifying Party to the Indemnitee through the litigation management system or any successor system when any such Third Party Claim is closed, regardless of whether such Third Party Claim was decided by settlement, verdict, dismissal or was otherwise disposed of.
2.6. Additional Matters.
(a) Indemnification payments in respect of any Liabilities for which an Indemnitee is entitled to indemnification under this Article II shall be paid by the Indemnifying Party to the Indemnitee as such Liabilities are incurred upon demand by the Indemnitee, including reasonably satisfactory documentation setting forth the basis for the amount of such indemnification payment, including documentation with respect to calculations made and consideration of any Insurance Proceeds that actually reduce the amount of such Liabilities. THE INDEMNITY AGREEMENTS CONTAINED IN THIS ARTICLE II SHALL REMAIN
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OPERATIVE AND IN FULL FORCE AND EFFECT, REGARDLESS OF (I) ANY INVESTIGATION MADE BY OR ON BEHALF OF ANY INDEMNITEE, (II) THE KNOWLEDGE BY THE INDEMNITEE OF LIABILITIES FOR WHICH IT MIGHT BE ENTITLED TO INDEMNIFICATION HEREUNDER AND (III) ANY TERMINATION OF THIS AGREEMENT.
(b) Any claim on account of a Liability that does not result from a Third-Party Claim shall be asserted by written notice given by the Indemnitee to the related Indemnifying Party. Such Indemnifying Party shall have a period of thirty (30) days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond within such thirty (30)-day period, such Indemnifying Party shall be deemed to have refused to accept responsibility to make payment. If such Indemnifying Party does not respond within such thirty (30)-day period or rejects such claim in whole or in part, such Indemnitee shall be free to pursue such remedies as may be available to such party as contemplated by this Agreement and the other Ancillary Agreements.
(c) In the event of payment by or on behalf of any Indemnifying Party to any Indemnitee in connection with any Third-Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right, defense or claim relating to such Third-Party Claim against any claimant or plaintiff asserting such Third-Party Claim or against any other Person. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right, defense or claim.
(d) In the event of an Action for which indemnification is sought pursuant to Section 2.2 or 2.3 and in which the Indemnifying Party is not a named defendant, if either the Indemnitee or Indemnifying Party shall so request, the parties shall use commercially reasonable efforts to substitute the Indemnifying Party for the named defendant.
(e) In the event that Phillips 66 or ConocoPhillips shall establish a risk accrual in an amount of at least $25 million with respect to any Third-Party Claim for which such party has indemnified the other party pursuant to Section 2.2 or 2.3, as applicable, it shall notify the other party of the existence and amount of such risk accrual (i.e., when the accrual is recorded in the financial statements as an accrual for a potential liability), subject to the parties entering into an appropriate agreement with respect to the confidentiality and/or privilege thereof.
(f) Any Applicable Toxic Tort Claim for which, at the time notice is required under Section 2.5(a), ConocoPhillips cannot reasonably determine whether such Applicable Toxic Tort Claim primarily relates to the Phillips 66 Business shall be presumed to fall within Phillips 66s indemnification obligation in Section 2.2(d). If pursuant to Section 2.5(a) an Applicable Toxic Tort Claim is notified to Phillips 66, and thereafter it is determined that Section 2.2 does not provide any indemnification therefor, ConocoPhillips shall pay to Phillips 66 $5,000 to cover Phillips 66s direct and indirect expenses promptly following the re-tender of such Applicable Toxic Tort Claim to ConocoPhillips and its acceptance thereof.
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(g) Phillips 66 shall provide ConocoPhillips or a Third Party designated by ConocoPhillips with all information necessary for the members of the ConocoPhillips Group to comply with their obligations under Section 111 of the Medicare, Medicaid and SCHIP Extension Act (or any successor thereto) (Medicare Reporting Obligations) with respect to the settlement or other disposition of any Action by or on behalf of any member of the Phillips 66 Group. If Phillips 66 fails to do so promptly and/or provides materially incorrect information, then Phillips 66 shall indemnify ConocoPhillips pursuant to Section 2.2 for any fines, penalties and/or costs arising from any such Phillips 66 failure or action. Phillips 66 shall bear all costs associated with satisfying such Medicare Reporting Obligations (including but not limited to settlements or releases of personal injury claims from a Medicare beneficiary on behalf of ConocoPhillips), including ConocoPhillips costs if ConocoPhillips elects to effect reporting, or reasonable third-party costs if ConocoPhillips outsources such reporting. ConocoPhillips agrees that it shall not use a Third Party for such purpose unless such Third Party indemnifies both ConocoPhillips and Phillips 66 on commercially reasonable terms for any wrongful reporting. Phillips 66 shall provide ConocoPhillips with a monthly written report identifying all Actions that are subject to Medicare Reporting Obligations on the part of any member of the ConocoPhillips Group and that have been settled or otherwise disposed of by or on behalf of any member of the Phillips 66 Group. In addition, Phillips 66 shall establish a procedure reasonably acceptable to ConocoPhillips to automatically send electronic notice from Phillips 66 to ConocoPhillips through the litigation management system or any successor system when any such Action is closed, regardless of whether such Action was decided by settlement, verdict, dismissal or was otherwise disposed of.
2.7. Remedies Cumulative. The remedies provided in this Article II shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party.
2.8. Survival of Indemnities. The rights and obligations of each of ConocoPhillips and Phillips 66 and their respective Indemnitees under this Article II shall survive the sale or other transfer by any party of any Assets or businesses or the assignment by it of any Liabilities.
2.9. Guarantees, Letters of Credit and other Obligations. In furtherance of, and not in limitation of, the obligations set forth in Section 2.6 hereof and Section 5.3 of the Separation and Distribution Agreement:
(a) On or prior to the Distribution Date or as soon as practicable thereafter, Phillips 66 shall (with the reasonable cooperation of the applicable member(s) of the ConocoPhillips Group) use its commercially reasonable efforts to have any member(s) of the ConocoPhillips Group removed as guarantor of or obligor for any Phillips 66 Liability to the extent that they relate to Phillips 66 Liabilities, including in respect of those guarantees, letters of credit and other obligations set forth on Schedule 2.9(a).
(b) On or prior to the Distribution Date, to the extent required to obtain a release from a guarantee, letter of credit or other obligation of any member of the ConocoPhillips Group, Phillips 66 shall execute a substitute document in the form of any such existing guarantee or letter of credit, as applicable, or such other form as is agreed to by the relevant parties to such guarantee agreement, letter of credit or other obligation, except to the extent that such existing
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guarantee contains representations, covenants or other terms or provisions either (i) with which Phillips 66 would be reasonably unable to comply or (ii) which would be reasonably expected to be breached.
(c) If the parties are unable to obtain, or to cause to be obtained, any such required removal as set forth in clauses (a) and (b) of this Section 2.9, (i) Phillips 66 shall, and shall cause the other members of the Phillips 66 Group to, indemnify, defend and hold harmless each of the ConocoPhillips Indemnitees for any Liability arising from or relating to such guarantee, letter of credit or other obligation, as applicable, and shall, as agent or subcontractor for the applicable ConocoPhillips Group guarantor or obligor, pay, perform and discharge fully all of the obligations or other Liabilities of such guarantor or obligor thereunder, and (ii) Phillips 66 shall not, and shall cause the other members of the Phillips 66 Group not to, agree to renew or extend the term of, increase any obligations under, or transfer to a third Person, any loan, guarantee, , letter of credit, lease, contract or other obligation for which a member of the ConocoPhillips Group is or may be liable unless all obligations of the members of the ConocoPhillips Group with respect thereto are thereupon terminated by documentation satisfactory in form and substance to ConocoPhillips in its sole and absolute discretion.
2.10. No Impact on Third Parties. For the avoidance of doubt, except as expressly set forth in this Agreement, the indemnifications provided for in this Article II are made only for purposes of allocating responsibility for Liabilities between the ConocoPhillips Group, on the one hand, and the Phillips 66 Group, on the other hand, and are not intended to, and shall not, affect any obligations to, or give rise to any rights of, any third parties.
2.11. No Cross-Claims or Third-Party Claims. Each of Phillips 66 and ConocoPhillips agrees that it shall not, and shall not permit the members of its respective Group to, in connection with any Third-Party Claim, assert as a counterclaim or third-party claim against any member of the ConocoPhillips Group or Phillips 66 Group, respectively, any claim (whether sounding in contract, tort or otherwise) that arises out of or relates to this Agreement, any breach or alleged breach hereof, the transactions contemplated hereby (including all actions taken in furtherance of the transactions contemplated hereby on or prior to the date hereof), or the construction, interpretation, enforceability or validity hereof, which in each such case shall be asserted only as contemplated by Article IV.
2.12. Severability. If any indemnification provided for in this Article II is determined by a Delaware federal or state court to be invalid, void or unenforceable, the liability shall be apportioned between the Indemnitee and the Indemnifying Party as determined in a separate proceeding in accordance with Article IV.
2.13. Change of Control. In the event that any third Person or group (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) acquires, including by way of merger, consolidation or other business combination, fifty percent (50%) or more of the assets or voting equity of either ConocoPhillips or Phillips 66, ConocoPhillips or Phillips 66, as applicable, shall take all necessary action so that such third Person or group shall become a guarantor of the obligations of ConocoPhillips or Phillips 66, as applicable, under this Agreement, the Separation and Distribution Agreement and the other Ancillary Agreements.
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ARTICLE III
INSURANCE MATTERS
3.1. Insurance Matters.
(a) ConocoPhillips and Phillips 66 agree to cooperate in good faith to arrange insurance coverage for Phillips 66 to be effective no later than the Distribution Date. In no event shall ConocoPhillips, any other member of the ConocoPhillips Group or any ConocoPhillips Indemnitee have liability or obligation whatsoever to any member of the Phillips 66 Group in the event that any insurance policy or other contract or policy of insurance shall be terminated or otherwise cease to be in effect for any reason, shall be unavailable or inadequate to cover any Liability of any member of the Phillips 66 Group for any reason whatsoever or shall not be renewed or extended beyond the current expiration date.
(b) From and after the Distribution Date, other than as provided in Section 3.1(c), neither Phillips 66 nor any member of the Phillips 66 Group shall have any rights to or under any of ConocoPhillips or its Affiliates insurance policies. At the Distribution Date, Phillips 66 shall have in effect all insurance programs required to comply with Phillips 66s contractual obligations and such other insurance policies as reasonably necessary, and, following the Distribution Date, Phillips 66 shall maintain such insurance programs and policies with insurers which comply with the minimum financial credit rating standards set by the major global insurance brokers.
(c) From and after the Distribution Date, except with respect to the insurance matters identified on Schedule 3.1(c), whose treatment shall be as set forth on such Schedule, with respect to any losses, damages and liabilities incurred by any member of the Phillips 66 Group prior to or in respect of the period prior to the Distribution Date, ConocoPhillips will provide Phillips 66 with access to, and Phillips 66 may, upon 10 days prior written notice to ConocoPhillips, make claims under, ConocoPhillips third-party insurance policies in place at the time of the Distribution and ConocoPhillips historical policies of insurance, but solely to the extent that such policies provided coverage for the Phillips 66 Group prior to the Distribution; provided, that such access to, and the right to make claims under such insurance policies, shall be subject to the terms and conditions of such insurance policies, including any limits on coverage or scope, any deductibles and other fees and expenses, and shall be subject to the following additional conditions:
(i) Phillips 66 shall provide ConocoPhillips with a written report sixty (60) days prior to any such third-party insurance policys renewal date, as advised by ConocoPhillips, identifying any claims made by Phillips 66 for which notice has previously been provided to insurers of ConocoPhillips;
(ii) Phillips 66 and its Affiliates shall indemnify, hold harmless and reimburse ConocoPhillips and its Affiliates for any deductibles, self-insured retention, fees and expenses incurred by ConocoPhillips or its Affiliates to the extent resulting from any such access to, or any claims made by Phillips 66 or any of its Affiliates under, any insurance provided pursuant to this Section 3.1(c), including any indemnity payments, settlements, judgments, legal fees and allocated claims expenses and claim handling fees, whether such claims are made by Phillips 66, its employees or third Persons; and
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(iii) Phillips 66 shall exclusively bear (and neither ConocoPhillips nor its Affiliates shall have any obligation to repay or reimburse Phillips 66 or its Affiliates for) and shall be liable for all uninsured, uncovered, unavailable or uncollectible amounts of all such claims made by Phillips 66 or any of its Affiliates under the policies as provided for in this Section 3.1(c).
In the event that an insurance policy aggregate is exhausted, or believed likely to be exhausted, due to noticed claims, the Phillips 66 Group, on the one hand, and the ConocoPhillips Group, on the other hand, shall be responsible for their pro rata portion of the reinstatement premium, based upon the losses of such Group submitted to ConocoPhillips insurance carrier(s) (including any submissions prior to the Distribution Date). To the extent that the ConocoPhillips Group or the Phillips 66 Group is allocated more than its pro rata portion of such premium due to the timing of losses submitted to ConocoPhillips insurance carrier(s), the other party shall promptly pay the first party an amount so that each Group has been properly allocated its pro rata portion of the reinstatement premium. ConocoPhillips and Phillips 66 can mutually agree not to reinstate the policy aggregate and each Group then will bear all of its own future costs.
In the event that any member of the ConocoPhillips Group incurs any losses, damages or liability incurred prior to the Distribution Date under Phillips 66s third-party insurance policies, the same process pursuant to this Section 3.1(c) shall apply, substituting ConocoPhillips for Phillips 66 and Phillips 66 for ConocoPhillips.
(d) All payments and reimbursements by Phillips 66 pursuant to this Section 3.1 will be made within fifteen (15) days after Phillips 66s receipt of an invoice therefor from ConocoPhillips. If ConocoPhillips incurs costs to enforce Phillips 66s obligations herein, Phillips 66 agrees to indemnify ConocoPhillips for such enforcement costs, including attorneys fees.
(e) All payments and reimbursements by ConocoPhillips pursuant to this Section 3.1 will be made within fifteen (15) days after ConocoPhillips receipt of an invoice therefor from Phillips 66. If Phillips 66 incurs costs to enforce ConocoPhillips obligations herein, ConocoPhillips agrees to indemnify Phillips 66 for such enforcement costs, including attorneys fees.
(f) ConocoPhillips shall retain the exclusive right to control its insurance policies and programs, including the right to exhaust, settle, release, commute, buy-back or otherwise resolve disputes with respect to any of its insurance policies and programs and to amend, modify or waive any rights under any such insurance policies and programs, notwithstanding whether any such policies or programs apply to any Phillips 66 Liabilities and/or claims Phillips 66 has made or could make in the future, and no member of the Phillips 66 Group shall, without the prior written consent of ConocoPhillips, erode, exhaust, settle, release, commute, buy-back or otherwise resolve disputes with ConocoPhillips insurers with respect to any of ConocoPhillips insurance policies and programs, or amend, modify or waive any rights under any such insurance policies and programs. Phillips 66 shall cooperate with ConocoPhillips
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and share such information at Phillips 66s cost as is reasonably necessary in order to permit ConocoPhillips to manage and conduct its insurance matters as it deems appropriate. Neither ConocoPhillips nor any of its Affiliates shall have any obligation to secure extended reporting for any claims under any of ConocoPhillips or its Affiliates liability policies for any acts or omissions by any member of the Phillips 66 Group incurred prior to the Distribution Date.
(g) This Agreement shall not be considered as an attempted assignment of any policy of insurance or as a contract of insurance and shall not be construed to waive any right or remedy of any member of the ConocoPhillips Group in respect of any insurance policy or any other contract or policy of insurance.
(h) Phillips 66 does hereby, for itself and each other member of the Phillips 66 Group, agree that no member of the ConocoPhillips Group shall have any Liability whatsoever as a result of the insurance policies and practices of ConocoPhillips and its Affiliates as in effect at any time, including as a result of the level or scope of any such insurance, the creditworthiness of any insurance carrier, the terms and conditions of any policy, or the adequacy or timeliness of any notice to any insurance carrier with respect to any claim or potential claim or otherwise.
(i) The parties acknowledge that to the extent there are losses or premium adjustments under the parties tripartite insurance agreements, such losses or adjustments will be governed by such tripartite insurance agreements.
ARTICLE IV
DISPUTE RESOLUTION
4.1. General Provisions.
(a) Any dispute, controversy or claim arising out of or relating to this Agreement, the Separation and Distribution Agreement or the other Ancillary Agreements (except as otherwise set forth in any such Ancillary Agreements), including the validity, interpretation, breach or termination thereof (a Dispute), shall be resolved in accordance with the procedures set forth in this Article IV, which shall be the sole and exclusive procedures for the resolution of any such Dispute unless otherwise specified in the applicable Ancillary Agreement or in this Article IV.
(b) Commencing with a request contemplated by Section 4.2, all communications between the parties or their representatives in connection with the attempted resolution of any Dispute shall be deemed to have been delivered in furtherance of a Dispute settlement and shall be exempt from discovery and production, and shall not be admissible into evidence for any reason (whether as an admission or otherwise), in any arbitral or other proceeding for the resolution of any Dispute.
(c) THE PARTIES EXPRESSLY WAIVE AND FOREGO ANY RIGHT TO TRIAL BY JURY.
(d) Governing Law. This Agreement and, unless expressly provided therein, the Separation and Distribution Agreement and each Ancillary Agreement (and any claims or disputes arising out of or related hereto or thereto or to the transactions contemplated hereby and
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thereby or to the inducement of any party to enter herein and therein, whether for breach of contract, tortious conduct or otherwise, and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Delaware, irrespective of the choice of laws principles of the State of Delaware, including all matters of validity, construction, effect, enforceability, performance and remedies.
(e) The specific procedures set forth in this Article IV, including the time limits referenced herein, may be modified by agreement of both of the parties in writing.
(f) All applicable statutes of limitations and defenses based upon the passage of time shall be tolled while the procedures specified in this Article IV are pending. The parties will take any necessary or appropriate action required to effectuate such tolling.
4.2. Consideration by Senior Executives. If a Dispute is not resolved in the normal course of business at the operational level, the parties shall attempt in good faith to resolve the Dispute by negotiation between executives who hold, at a minimum, the office of Senior Vice President and/or General Counsel. Either party may initiate the executive negotiation process by providing a written notice to the other (the Initial Notice). Within fifteen (15) days after delivery of the Initial Notice, the receiving party shall submit to the other a written response (the Response). The Initial Notice and the Response shall include (a) a statement of the Dispute and of each partys position and (b) the name and title of the executive who will represent that party and of any other person who will accompany the executive. The parties agree that such executives shall have full and complete authority to resolve any Disputes submitted pursuant to this Section 4.2. Such executives will meet in person or by teleconference or video conference within thirty (30) days of the date of the Initial Notice to seek a resolution of the Dispute. In the event that the executives are unable to agree to a format for such meeting, the meeting shall be convened by teleconference.
4.3. Mediation. If a Dispute is not resolved by negotiation or a meeting between executives is not held as provided in Section 4.2 within thirty (30) days from the delivery of the Initial Notice, then either party may submit the Dispute for resolution by mediation pursuant to the American Arbitration Association (the AAA) Mediation Procedures as then in effect. Unless otherwise agreed to in writing, the parties shall (a) conduct the mediation in Houston, Texas, and (b) select a mutually agreeable mediator from the AAA Panel of Mediators in the selected location. If the parties are unable to agree upon a mediator, the parties agree that AAA shall select a mediator from its panels consistent with its mediation rules. The parties shall agree to a mutually convenient date and time to conduct the mediation; provided that the mediation must occur within thirty (30) days of the request unless a later date is agreed to by the parties in writing. Each party shall bear its own fees, costs and expenses and an equal share of the expenses of the mediation. Each party shall designate a business executive to have full and complete authority to resolve the Dispute and to represent its interests in the mediation, and each party may, in its sole and absolute discretion, include any number of other Representatives in the mediation process. At the commencement of the mediation, either party may request to submit a written mediation statement to the mediator.
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4.4. Arbitration.
(a) In the event any Dispute is not finally resolved pursuant to Section 4.2 within sixty (60) days from the delivery of the Initial Notice (if mediation is not requested pursuant to Section 4.3), or mediation pursuant to Section 4.3 within sixty (60) days of selection of a mediator, then such Dispute may be submitted to be finally resolved by binding arbitration pursuant to the AAA Commercial Arbitration Rules as then in effect (the AAA Commercial Arbitration Rules).
(b) Without waiving its rights to any remedy under this Agreement and without first complying with the provisions of Sections 4.2 and 4.3, either party may seek any interim or provisional relief that is necessary to protect the rights or property of that party either (i) before any Delaware federal or state court, (ii) before a special arbitrator, as provided for under the AAA Commercial Arbitration Rules, or (iii) before the arbitral tribunal established hereunder.
(c) Unless otherwise agreed by the parties in writing, any Dispute to be decided in arbitration hereunder will be decided (i) before a sole arbitrator if the amount in dispute, inclusive of all claims and counterclaims, totals less than $3 million; or (ii) by an arbitral tribunal of three (3) arbitrators if (A) the amount in dispute, inclusive of all claims and counterclaims, is equal to or greater than $3 million, or (B) either party elects in writing to have such dispute decided by three (3) arbitrators when one of the parties believes, in its sole judgment, the issue could have significant precedential value; however, the party who makes that request shall solely bear the increased costs and expenses associated with a panel of three (3) arbitrators (i.e., the additional costs and expenses associated with the two (2) additional arbitrators).
(d) The panel of three (3) arbitrators will be chosen as follows: (i) upon the written demand of either party and within fifteen (15) days from the date of such demand, each party will name an arbitrator; and (ii) the two (2) party-appointed arbitrators will thereafter, within thirty (30) days from the date on which the second of the two (2) arbitrators was named, name a third, independent arbitrator who will act as chairperson of the arbitral tribunal. In the event that either party fails to name an arbitrator within fifteen (15) days from the date of a written demand to do so, then upon written application by either party, that arbitrator will be appointed pursuant to the AAA Commercial Arbitration Rules. In the event that the two (2) party-appointed arbitrators fail to appoint the third, independent arbitrator within thirty (30) days from the date on which the second of the two (2) arbitrators was named, then upon written application by either party, the third, independent arbitrator will be appointed pursuant to AAA Commercial Arbitration Rules. If the arbitration will be before a sole independent arbitrator, then the sole independent arbitrator will be appointed by agreement of the parties within fifteen (15) days upon written demand of either party. If the parties cannot agree to a sole independent arbitrator, then upon written application by either party, the sole independent arbitrator will be appointed pursuant to AAA Commercial Arbitration Rules.
(e) The place of arbitration shall be Houston, Texas. Along with the arbitrator(s) appointed, the parties will agree to a mutually convenient location, date and time to conduct the arbitration, but in no event will the final hearing(s) be scheduled less than nine (9) months from submission of the Dispute to arbitration unless the parties agree otherwise in writing.
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(f) The arbitral tribunal will have the right to award, on an interim basis, or include in the final award, any relief which it deems proper in the circumstances, including money damages (with interest on unpaid amounts from the due date), injunctive relief (including specific performance) and attorneys fees and costs; provided that the arbitral tribunal will not award any relief not specifically requested by the parties and, in any event, will not award special damages. Upon constitution of the arbitral tribunal following any grant of interim relief by a special arbitrator or court pursuant to Section 4.4(b), the tribunal may affirm or disaffirm that relief, and the parties will seek modification or rescission of the order entered by the special arbitrator or court as necessary to accord with the tribunals decision.
(g) The parties agree to be bound by the provisions of Rule 13 of the Federal Rules of Civil Procedure with respect to compulsory counterclaims (as the same may be amended from time to time); provided that any such compulsory counterclaim shall be filed within thirty (30) days of the filing of the original claim.
(h) So long as either party has a timely claim to assert, the agreement to arbitrate Disputes set forth in this Section 4.4 will continue in full force and effect subsequent to, and notwithstanding the completion, expiration or termination of, this Agreement.
(i) A party obtaining an order of interim injunctive relief may enter judgment upon such award in any Delaware federal or state court. The final award in an arbitration pursuant to this Article IV shall be conclusive and binding upon the parties, and a party obtaining a final award may enter judgment upon such award in any court of competent jurisdiction.
(j) It is the intent of the parties that the agreement to arbitrate Disputes set forth in this Section 4.4 shall be interpreted and applied broadly such that all reasonable doubts as to arbitrability of a Dispute shall be decided in favor of arbitration.
(k) The parties agree that any Dispute submitted to mediation and/or arbitration shall be governed by, and construed and interpreted in accordance with, Delaware Law, as provided in Section 4.1(d) and, except as otherwise provided in this Article IV or mutually agreed to in writing by the parties, the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq., shall govern any arbitration between the parties pursuant to this Section 4.4.
(l) Subject to Section 4.4(c)(ii)(B), each party shall bear its own fees, costs and expenses and shall bear an equal share of the costs and expenses of the arbitration, including the fees, costs and expenses of the three (3) arbitrators; provided that the arbitral tribunal may award the prevailing party its reasonable fees and expenses (including attorneys fees), including with respect to any Disputes relating to the parties rights and obligations with respect to indemnification under this Agreement.
(m) Notwithstanding anything in this Article IV to the contrary, any disputes relating to the interpretation of Article II or requesting injunctive relief or specific performance shall be conducted according to the fast-track arbitration procedures of the AAA then in effect.
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ARTICLE V
EXCHANGE OF INFORMATION; CONFIDENTIALITY
5.1. Agreement for Exchange of Information.
(a) Subject to Section 5.8 and any other applicable confidentiality obligations, each of ConocoPhillips and Phillips 66, on behalf of its respective Group, agrees to provide, or cause to be provided, to the other Group, at any time before or after the Distribution Date, as soon as reasonably practicable after written request therefor, any Information in the possession or under the control of such respective Group which the requesting party reasonably needs (i) to comply with reporting, disclosure, filing or other requirements imposed on the requesting party (including under applicable securities or tax Laws) by a Governmental Authority having jurisdiction over the requesting party, (ii) for use in any other judicial, regulatory, administrative, tax or other proceeding or in order to satisfy audit, accounting, claims, regulatory, litigation, tax or other similar requirements, in each case other than claims or allegations that one party to this Agreement has against the other, or (iii) subject to the foregoing clause (ii), to comply with its obligations under this Agreement or any other Ancillary Agreement; provided, however, that, in the event that any party determines that any such provision of Information could be commercially detrimental, violate any Law or agreement, or waive any privilege otherwise available under applicable Law, including the attorney-client privilege, the parties shall take all reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or consequence.
5.2. Ownership of Information. Any Information owned by one Group that is provided to a requesting party pursuant to Section 5.1 or Section 5.7 shall be deemed to remain the property of the providing party. Unless specifically set forth herein, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such Information.
5.3. Compensation for Providing Information. The party requesting Information agrees to reimburse the other party for the reasonable costs, if any, of creating, gathering and copying such Information, to the extent that such costs are incurred for the benefit of the requesting party. Except as may be otherwise specifically provided elsewhere in this Agreement or in any other agreement between the parties, such costs shall be computed in accordance with the providing partys standard methodology and procedures.
5.4. Record Retention. To facilitate the possible exchange of Information pursuant to this Article V and other provisions of this Agreement after the Distribution Date, the parties agree to use their reasonable best efforts to retain all Information in their respective possession or control on the Distribution Date in accordance with the policies of ConocoPhillips as in effect on the Distribution Date or such other policies as may be adopted by ConocoPhillips after the Distribution Date (provided, in the case of Phillips 66, that ConocoPhillips notifies Phillips 66 of any such change). No party will destroy, or permit any of its Subsidiaries to destroy, any Information which the other party may have the right to obtain pursuant to this Agreement prior to the end of the retention period set forth in such policies without first notifying the other party of the proposed destruction and giving the other party the opportunity to take possession of such information prior to such destruction; provided, however, that in the case of any Information
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relating to Taxes, employee benefits or Environmental Liabilities, such retention period shall be extended to the expiration of the applicable statute of limitations (giving effect to any extensions thereof). Notwithstanding the foregoing, Section 9 of the Tax Sharing Agreement shall govern the retention of Tax Records (as defined in the Tax Sharing Agreement).
5.5. Limitations of Liability. No party shall have any liability to any other party in the event that any Information exchanged or provided pursuant to this Agreement which is an estimate or forecast, or which is based on an estimate or forecast, is found to be inaccurate in the absence of willful misconduct by the party providing such Information. No party shall have any liability to any other party if any Information is destroyed after reasonable best efforts by such party to comply with the provisions of Section 5.4.
5.6. Other Agreements Providing for Exchange of Information. The rights and obligations granted under this Article V are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange, retention or confidential treatment of Information set forth in the Separation and Distribution Agreement or any Ancillary Agreement.
5.7. Production of Witnesses; Records; Cooperation.
(a) After the Distribution Date, except in the case of an adversarial Action by one party against another party, each party hereto shall use its commercially reasonable efforts to make available to the other party, upon written request, the former, current and future directors, officers, employees, other personnel and agents of the members of its respective Group as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available, to the extent that any such person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with any Action in which the requesting party may from time to time be involved, regardless of whether such Action is a matter with respect to which indemnification may be sought hereunder. The requesting party shall bear all costs and expenses in connection therewith.
(b) If an Indemnifying Party chooses to defend or to seek to compromise or settle any Third-Party Claim, the other party shall make available to such Indemnifying Party, upon written request, the former, current and future directors, officers, employees, other personnel and agents of the members of its respective Group as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available, to the extent that any such person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with such defense, settlement or compromise, or such prosecution, evaluation or pursuit, as the case may be, and shall otherwise cooperate in such defense, settlement or compromise, or such prosecution, evaluation or pursuit, as the case may be.
(c) Without limiting the foregoing, the parties shall cooperate and consult to the extent reasonably necessary with respect to any Actions.
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(d) Without limiting any provision of this Section 5.7, each of the parties agrees to cooperate, and to cause each member of its respective Group to cooperate, with each other in the defense of any infringement or similar claim with respect any Intellectual Property and shall not claim to acknowledge, or permit any member of its respective Group to claim to acknowledge, the validity or infringing use of any Intellectual Property of a third Person in a manner that would hamper or undermine the defense of such infringement or similar claim.
(e) The obligation of the parties to provide witnesses pursuant to this Section 5.7 is intended to be interpreted in a manner so as to facilitate cooperation and shall include the obligation to provide as witnesses inventors and other officers without regard to whether the witness or the employer of the witness could assert a possible business conflict (subject to the exception set forth in the first sentence of Section 5.7(a)).
(f) In connection with any matter contemplated by this Section 5.7, the parties will enter into a mutually acceptable joint defense agreement so as to maintain to the extent practicable any applicable attorney-client privilege or work product immunity of any member of any Group.
5.8. Confidentiality.
(a) Subject to Section 5.9, until the five (5)-year anniversary of the Distribution Date, each of ConocoPhillips and Phillips 66, on behalf of itself and each member of its respective Group, agrees to hold, and to cause its respective Representatives to hold, in strict confidence, with at least the same degree of care that applies to ConocoPhillips confidential and proprietary information pursuant to policies in effect as of the Distribution Date, all Information concerning each such other Group that is either in its possession (including Information in its possession prior to the Distribution Date) or furnished by any such other Group or its respective Representatives at any time pursuant to this Agreement, the Separation and Distribution Agreement, any other Ancillary Agreement or otherwise, and shall not use any such Information other than for such purposes as shall be expressly permitted hereunder or thereunder, except, in each case, to the extent that such Information has been (i) in the public domain through no fault of such party or any member of such Group or any of their respective Representatives, (ii) later lawfully acquired from other sources by such party (or any member of such partys Group) which sources are not themselves bound by a confidentiality obligation, or (iii) independently generated without reference to any proprietary or confidential Information of the other party.
(b) Each party agrees not to release or disclose, or permit to be released or disclosed, any such Information to any other Person, except its Representatives who need to know such Information (who shall be advised of their obligations hereunder with respect to such Information), except in compliance with Section 5.9. Without limiting the foregoing, when any Information is no longer needed for the purposes contemplated by this Agreement, the Separation and Distribution Agreement or any other Ancillary Agreement, each party will promptly after request of the other party either return to the other party all Information in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) or certify to the other party that it has destroyed such Information (and such copies thereof and such notes, extracts or summaries based thereon).
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5.9. Protective Arrangements. In the event that any party or any member of its Group either determines on the advice of its counsel that it is required to disclose any Information pursuant to applicable Law or receives any demand under lawful process or from any Governmental Authority to disclose or provide Information of any other party (or any member of any other partys Group) that is subject to the confidentiality provisions hereof, such party shall notify the other party prior to disclosing or providing such Information and shall cooperate at the expense of the requesting party in seeking any reasonable protective arrangements requested by such other party. Subject to the foregoing, the Person that received such request may thereafter disclose or provide Information to the extent required by such Law (as so advised by counsel) or by lawful process or such Governmental Authority.
ARTICLE VI
FURTHER ASSURANCES
6.1. Attorney-Client Privilege. Phillips 66 agrees that, in the event of any Dispute or other litigation, dispute, controversy or claim between ConocoPhillips or a member of the ConocoPhillips Group, on the one hand, and Phillips 66 or a member of the Phillips 66 Group, on the other hand, Phillips 66 will not, and will cause the members of its Group not to, seek any waiver of attorney-client privilege with respect to any communications relating to advice given prior to the Distribution Date by counsel to ConocoPhillips or any Person that was a subsidiary of ConocoPhillips prior to the Distribution Date, regardless of any argument that such advice may have affected the interests of both parties. Moreover, Phillips 66 will, and will cause the members of its Group to, honor any such attorney-client privilege between ConocoPhillips and the members of its Group and its or their counsel, and will not assert that ConocoPhillips or a member of its Group has waived, relinquished or otherwise lost such privilege. For the avoidance of doubt, in the event of any litigation, dispute, controversy or claim between ConocoPhillips or a member of its Group, on the one hand, and a Third Party other than a member of the Phillips 66 Group, on the other hand, ConocoPhillips shall retain the right to assert attorney-client privilege with respect to any communications relating to advice given prior to the Distribution Date by counsel to ConocoPhillips or any Person that was a subsidiary of ConocoPhillips prior to the Distribution Date.
6.2. Interpretation. Nothing contained herein shall be interpreted or construed against the drafter(s) of these agreements. Both parties had full and fair opportunity to contribute.
6.3. No Attorney Testimony. No in-house attorney or outside attorney may be called to testify about or present evidence covering the interpretation or meaning of this Agreement in any dispute between the parties.
ARTICLE VII
MISCELLANEOUS
7.1. Entire Agreement. This Agreement, together with the documents referenced herein (including the Separation and Distribution Agreement and any other Ancillary Agreement), constitutes the entire agreement and understanding between the Parties with respect to the subject matter hereof and supersedes all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof. In the case of any
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conflict between this Agreement and the Separation and Distribution Agreement or any other Ancillary Agreement (other than the Tax Sharing Agreement and the Employee Matters Agreement) in relation to any matters addressed by this Agreement, this Agreement shall prevail. Notwithstanding anything to the contrary in this Agreement, the Separation and Distribution Agreement or any other Ancillary Agreement, in the case of any conflict between this Agreement and the Tax Sharing Agreement in relation to matters addressed by the Tax Sharing Agreement, the Tax Sharing Agreement shall prevail. Notwithstanding anything to the contrary in this Agreement, the Separation and Distribution Agreement or any other Ancillary Agreement, in the case of any conflict between this Agreement and the Employee Matters Agreement in relation to matters addressed by the Employee Matters Agreement, the Employee Matters Agreement shall prevail.
7.2. Assignability. This Agreement shall be binding upon and inure to the benefit of the parties hereto and thereto, respectively, and their respective successors and permitted assigns; provided, however, that no party hereto or thereto may assign its respective rights or delegate its respective obligations under this Agreement without the express prior written consent of the other parties hereto or thereto.
7.3. Third-Party Beneficiaries. Except for the indemnification rights under this Agreement of any ConocoPhillips Indemnitee or Phillips 66 Indemnitee in their respective capacities as such, (a) the provisions of this Agreement are solely for the benefit of the parties and are not intended to confer upon any Person except the parties any rights or remedies hereunder, and (b) there are no third-party beneficiaries of this Agreement and this Agreement shall not provide any third person with any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.
7.4. Notices. All notices, requests, claims, demands or other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by facsimile or electronic transmission with receipt confirmed (followed by delivery of an original via overnight courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 7.4):
If to ConocoPhillips, to:
ConocoPhillips
600 North Dairy Ashford Street
Houston, Texas 77079
Attention: General Counsel
If to Phillips 66 to:
Phillips 66
600 North Dairy Ashford Street
Houston, Texas 77079
Attention: General Counsel
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Any party may, by notice to the other party, change the address and contact person to which any such notices are to be given.
7.5. Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a Delaware state or federal court to be invalid, void or unenforceable, the remaining provisions hereof or thereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby. Upon such determination, the parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the parties.
7.6. Force Majeure. No party shall be deemed in default of this Agreement to the extent that any delay or failure in the performance of its obligations under this Agreement, other than a delay or failure to make a payment, results from any cause beyond its reasonable control and without its fault or negligence, such as acts of God, acts of civil or military authority, embargoes, epidemics, war, riots, insurrections, fires, explosions, earthquakes, floods, unusually severe weather conditions, labor problems or unavailability of parts, or, in the case of computer systems, any failure in electrical or air conditioning equipment. In the event of any such excused delay, the time for performance shall be extended for a period equal to the time lost by reason of the delay.
7.7. Headings. The article, section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
7.8. Survival of Covenants. The covenants, representations and warranties contained in this Agreement, and liability for the breach of any obligations contained herein, shall survive the Separation and the Distribution and shall remain in full force and effect.
7.9. Waivers of Default. Waiver by any party of any default by the other party of any provision of this Agreement shall not be deemed a waiver by the waiving party of any subsequent or other default, nor shall it prejudice the rights of the other party. No failure or delay by any party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege.
7.10. Amendments. No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by any party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the party against whom it is sought to enforce such waiver, amendment, supplement or modification.
7.11. Limitations of Liability. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, NEITHER PHILLIPS 66 OR ITS AFFILIATES, ON THE ONE HAND, NOR CONOCOPHILLIPS OR ITS AFFILIATES, ON THE OTHER HAND, SHALL BE LIABLE UNDER THIS AGREEMENT TO THE OTHER FOR ANY SPECIAL, INDIRECT, PUNITIVE, EXEMPLARY, REMOTE,
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SPECULATIVE OR SIMILAR DAMAGES IN EXCESS OF COMPENSATORY DAMAGES OF THE OTHER ARISING IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY (OTHER THAN ANY SUCH LIABILITY WITH RESPECT TO A THIRD-PARTY CLAIM).
7.12. Further Assurances.
(a) In addition to the actions specifically provided for elsewhere in this Agreement, each of the parties hereto shall use its commercially reasonable efforts, prior to, on and after the Distribution Date, to take, or cause to be taken, all actions, and to do, or cause to be done, all things, reasonably necessary, proper or advisable under applicable Laws, regulations and agreements, to consummate and make effective the transactions contemplated by this Agreement, the Separation and Distribution Agreement and the other Ancillary Agreements.
(b) Without limiting the foregoing, prior to, on and after the Distribution Date, each party hereto shall cooperate with the other parties, and without any further consideration, but at the expense of the requesting party, to execute and deliver, or use its commercially reasonable efforts to cause to be executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to make all filings with, and to obtain all consents, approvals or authorizations of, any Governmental Authority or any other Person under any permit, license, agreement, indenture or other instrument (including any third-party consents or Governmental Approvals), and to take all such other actions as such party may reasonably be requested to take by any other party hereto from time to time, consistent with the terms of this Agreement, the Separation and Distribution Agreement and the other Ancillary Agreements, in order to effectuate the provisions and purposes of this Agreement, the Separation and Distribution Agreement and the other Ancillary Agreements and the transfers of the Phillips 66 Assets and the assignment and assumption of the Phillips 66 Liabilities and the other transactions contemplated hereby and thereby. Without limiting the foregoing, each party will, at the reasonable request, cost and expense of any other party, take such other actions as may be reasonably necessary to vest in such other party good and marketable title, free and clear of any Security Interest, if and to the extent it is practicable to do so.
(c) On or prior to the Distribution Date, ConocoPhillips and Phillips 66 in their respective capacities as direct and indirect stockholders of their respective Subsidiaries, shall each ratify any actions which are reasonably necessary or desirable to be taken by ConocoPhillips Company, Phillips 66 Company or any other Subsidiary of ConocoPhillips, as the case may be, to effectuate the transactions contemplated by this Agreement, the Separation and Distribution Agreement and the other Ancillary Agreements.
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IN WITNESS WHEREOF, the parties have caused this Indemnification and Release Agreement to be executed by their duly authorized representatives.
CONOCOPHILLIPS | ||
By: | /s/ Ryan M. Lance | |
Name: | Ryan M. Lance | |
Title: | Chairman and Chief Executive Officer | |
PHILLIPS 66 | ||
By: | /s/ Greg C. Garland | |
Name: | Greg C. Garland | |
Title: | Chairman, President and Chief Executive Officer |
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Exhibit 10.2
INTELLECTUAL PROPERTY ASSIGNMENT AND LICENSE AGREEMENT
BY AND BETWEEN
CONOCOPHILLIPS
AND
PHILLIPS 66
DATED AS OF APRIL 26, 2012
TABLE OF CONTENTS
Page | ||||||
ARTICLE I DEFINITIONS | 1 | |||||
ARTICLE II SOFTWARE | 6 | |||||
2.1 | Existing Software Ownership | 6 | ||||
2.2 | Allocation of Software Ownership Within a Group | 6 | ||||
2.3 | Software License Grants | 6 | ||||
2.4 | Furnishing of Software | 7 | ||||
2.5 | Subsequent Derivative Works | 7 | ||||
2.6 | Confidentiality of Software | 8 | ||||
2.7 | No Contravention of Existing License Agreements | 8 | ||||
ARTICLE III PROPRIETARY INFORMATION | 8 | |||||
3.1 | Ownership of Existing Proprietary Information | 8 | ||||
3.2 | Allocation of Proprietary Information Within a Group | 9 | ||||
3.3 | License Grants for Proprietary Information | 9 | ||||
3.4 | Confidentiality Obligations | 10 | ||||
3.5 | Limitations on Confidentiality Restrictions | 10 | ||||
3.6 | Compelled Production | 10 | ||||
3.7 | Furnishing of Proprietary Information | 11 | ||||
3.8 | No Contravention of Existing License Agreements | 11 | ||||
ARTICLE IV PATENTS | 11 | |||||
4.1 | Ownership of Existing Patents | 11 | ||||
4.2 | License to Existing Patents | 11 | ||||
ARTICLE V TRADEMARKS | 13 | |||||
5.1 | Ownership of Trademarks | 13 | ||||
5.2 | Allocation of Trademarks Within a Group | 13 | ||||
5.3 | No rights in Phillips 66 Group Trademarks | 13 | ||||
5.4 | License to ConocoPhillips Group Trademarks | 13 | ||||
5.5 | Ownership of Domains | 14 | ||||
5.6 | License and Transfer-back of Certain Domain Names to ConocoPhillips | 14 | ||||
5.7 | FTC Matter Related to Certain Phillips 66 Group Trademarks | 14 | ||||
ARTICLE VI IPR FUTURES AND ISSUES OF OWNERSHIP | 14 | |||||
6.1 | Ownership Unaffected by this Agreement | 14 | ||||
6.2 | No Rights or Licenses Granted | 15 | ||||
6.3 | Issues as to Ownership | 15 | ||||
ARTICLE VII ASSIGNMENT AND SUBLICENSES | 15 | |||||
7.1 | Assignment Agreements | 15 | ||||
7.2 | Assignment of Phillips 66 IP Licenses | 15 | ||||
7.3 | Assignment of ConocoPhillips IP Licenses | 16 | ||||
7.4 | Sublicense of Phillips 66 IP Licenses | 16 |
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7.5 | Sublicense of ConocoPhillips IP Licenses | 16 | ||||
7.6 | Acquisition of Subsidiary by Phillips 66 | 17 | ||||
7.7 | Failure of Assignment of Phillips 66 IP Licenses | 17 | ||||
7.8 | Failure of Assignment of ConocoPhillips IP Licenses | 18 | ||||
7.9 | Order of Precedence | 19 | ||||
ARTICLE VIII ASSIGNMENT/SUBLICENSING | 19 | |||||
8.1 | Assignments | 19 | ||||
8.2 | Sublicense Rights | 19 | ||||
ARTICLE IX INFRINGEMENT | 19 | |||||
ARTICLE X NO WARRANTIES OR REPRESENTATIONS | 20 | |||||
ARTICLE XI GOVERNING LAW; IP CLAIMS | 20 | |||||
11.1 | Choice of Law | 20 | ||||
11.2 | Intellectual Property Rights | 20 | ||||
11.3 | Equitable Remedies | 20 | ||||
11.4 | Bankruptcy | 21 | ||||
ARTICLE XII NOTICE | 21 | |||||
ARTICLE XIII FURTHER DUE DILIGENCE | 22 | |||||
ARTICLE XIV FEES AND EXPENSES | 22 | |||||
ARTICLE XV MISCELLANEOUS | 22 | |||||
15.1 | No Other Rights | 22 | ||||
15.2 | No Enforcement Against Third Party | 22 | ||||
15.3 | Further Assurances | 22 | ||||
15.4 | Rules of Construction | 23 | ||||
15.5 | Amendments | 23 | ||||
15.6 | No Waiver | 24 | ||||
15.7 | Third Party Beneficiaries | 24 | ||||
15.8 | Force Majeure | 24 | ||||
15.9 | Counterparts | 24 | ||||
15.10 | Severability | 25 | ||||
15.11 | Entire Agreement | 25 |
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INTELLECTUAL PROPERTY ASSIGNMENT AND LICENSE AGREEMENT
THIS INTELLECTUAL PROPERTY ASSIGNMENT AND LICENSE AGREEMENT made and entered into effective as of April 26, 2012 (this Agreement), is by and between ConocoPhillips, a Delaware corporation (ConocoPhillips), and Phillips 66, a Delaware corporation and wholly-owned subsidiary of ConocoPhillips (Phillips 66) (the Parties). Capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in Article I or in that certain Separation and Distribution Agreement between ConocoPhillips and Phillips 66 dated as of April 26, 2012 (the Separation and Distribution Agreement).
R E C I T A L S
WHEREAS, the board of directors of ConocoPhillips (the ConocoPhillips Board) has determined that it is in the best interests of ConocoPhillips and its stockholders to create a new publicly traded company that shall operate the Phillips 66 Business;
WHEREAS, Phillips 66 has been incorporated for this purpose and has not engaged in activities except in preparation for its corporate reorganization and the distribution of its stock;
WHEREAS, in furtherance of the foregoing, the ConocoPhillips Board has determined that it is appropriate and desirable for ConocoPhillips and its applicable Subsidiaries to transfer the Phillips 66 Assets, including the Phillips 66 Intellectual Property, to Phillips 66 and its applicable Subsidiaries, and for Phillips 66 and its applicable Subsidiaries to assume the Phillips 66 Liabilities, in each case, as more fully described in the Separation and Distribution Agreement, the Ancillary Agreements and the Associated Agreements;
WHEREAS, Phillips 66 and its Subsidiaries desire to receive (and ConocoPhillips is willing to grant to Phillips 66 and its Subsidiaries) certain rights under Patents and non-Patent Intellectual Property retained and owned by ConocoPhillips or its Subsidiaries on or after the Effective Date, and ConocoPhillips and its Subsidiaries desire to receive (and Phillips 66 is willing to grant to ConocoPhillips and its Subsidiaries) certain rights under Patents and Non-Patent Intellectual Property Rights owned by Phillips 66 or its Subsidiaries on or after the Effective Date.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth below, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement, the following terms shall have the following meanings:
Affiliate has the meaning set forth in the Separation and Distribution Agreement.
Agreement shall have the meaning set forth in the preamble.
Ancillary Agreements shall have the meaning set forth in the Separation and Distribution Agreement.
Associated Agreements shall mean the Copyright and Technology Assignment, the Patent Assignment, the Trademark and Service Mark Assignment, and the Domain Name Assignment.
Authorized Persons shall have the meaning set forth in Section 3.4.
ConocoPhillips shall have the meaning set forth in the preamble.
ConocoPhillips Board shall have the meaning set forth in the recitals.
ConocoPhillips Business shall have the meaning set forth in the Separation and Distribution Agreement.
ConocoPhillips Company shall have the meaning set forth in the Separation and Distribution Agreement.
ConocoPhillips Group shall have the meaning set forth in the Separation and Distribution Agreement.
ConocoPhillips Group Proprietary Information shall have the meaning set forth in Section 3.1.1.
ConocoPhillips Group Software shall have the meaning set forth in Section 2.1.1.
ConocoPhillips Group Trademarks shall have the meaning set forth in Section 5.1.1.
ConocoPhillips IP Licenses shall mean all (a) licenses, permissions and covenants granted by any Person, including Phillips 66 Group members, to ConocoPhillips or any Subsidiary of ConocoPhillips to, in any way, exploit or use Intellectual Property owned, controlled or otherwise licensable by such Person, and the corresponding agreements by which such licenses, permissions or covenants are granted, which are licenses, permissions or covenants to use or exploit Software, Patents or Proprietary Information and that primarily relate to, arise out of or result from the ConocoPhillips Business (such licenses, permissions and covenants, and their corresponding agreements, being collectively referred to as Inbound ConocoPhillips IP Licenses); and (b) licenses, permissions and covenants granted by ConocoPhillips or any Subsidiary of ConocoPhillips to any Person to, in any way, exploit or use Intellectual Property owned, controlled or otherwise licensable by the ConocoPhillips Group, and the corresponding agreements by which such licenses, permissions or covenants are granted, which are licenses, permissions or covenants to use or exploit Software, Patents or Proprietary Information and that primarily relate to, arise out of or result from the ConocoPhillips Business (such licenses, permissions and covenants, and their corresponding agreements, being collectively referred to as Outbound ConocoPhillips IP Licenses). Notwithstanding the foregoing, this Agreement shall not be deemed a ConocoPhillips IP License.
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Copyright and Technology Assignment shall mean that certain Copyright and Technology Assignment contemporaneously executed by ConocoPhillips Company and Phillips 66 Company in the form attached hereto as Exhibit I.
Copyrights shall mean all copyrights and related rights and interests in copyrights and related rights, moral rights, licenses and all other rights, privileges and priorities relating to any works of authorship or any subject matter protected by related rights, including all works of authorship under Section 102 of Title 17 of the United States Code, under the copyright and related rights laws of every country and jurisdiction throughout the world, now or hereafter known, whether registered or unregistered, for their entire term of protection, including all extensions, licenses, renewals or reversions thereof.
Derivative Work shall mean a work which is based upon one or more preexisting works, and which is a derivative work, including any revision, modification, translation, abridgment, condensation, expansion, collection, compilation, or any other form in which such preexisting works may be recast, transformed, or adapted, and which, if prepared without authorization by the owner of a preexisting work, would constitute Copyright infringement.
Distribution shall have the meaning set forth in the Separation and Distribution Agreement.
Existing ConocoPhillips Group Patents shall have the meaning set forth in Section 4.1.1.
Existing Phillips 66 Group Patents shall have the meaning set forth in Section 4.1.2.
Governmental Authority shall have the meaning set forth in the Separation and Distribution Agreement.
Group shall have the meaning set forth in the Separation and Distribution Agreement.
Inbound ConocoPhillips IP Licenses shall have the meaning set forth in the definition of ConocoPhillips IP Licenses.
Inbound Phillips 66 IP Licenses shall have the meaning set forth in the definition of Phillips 66 IP Licenses.
Intellectual Property shall have the meaning set forth in the Separation and Distribution Agreement.
Internal Contribution shall have the meaning set forth in the Separation and Distribution Agreement.
Internal Contribution Date shall mean the date on which the Internal Contribution is effected.
IPR Futures shall have the meaning set forth in Section 6.1.1.
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Licensee shall mean a Party receiving a license of any Intellectual Property hereunder.
Licensor shall mean a Party licensing any Intellectual Property hereunder.
Outbound ConocoPhillips IP Licenses shall have the meaning set forth in the definition of ConocoPhillips IP Licenses.
Outbound Phillips 66 IP Licenses shall have the meaning set forth in the definition of Phillips 66 IP Licenses.
Parties shall have the meaning assigned to it in the preamble.
Patent Assignment shall mean that certain Patent Assignment contemporaneously executed by ConocoPhillips Company and Phillips 66 Company, in the form attached hereto as Exhibit II.
Patents shall mean patents and patent applications, all foreign counterparts, continuations, divisions, reissues, reexaminations and renewals of such patents and patent applications, all prosecution files and databases for such patents and patent applications and all inventions created or first reduced to practice as of the Distribution on which a patent later issues.
Person shall have the meaning set forth in the Separation and Distribution Agreement.
Phillips 66 shall have the meaning set forth in the preamble.
Phillips 66 Business shall have the meaning set forth in the Separation and Distribution Agreement.
Phillips 66 Company shall have the meaning set forth in the Separation and Distribution Agreement.
Phillips 66 Group shall have the meaning set forth in the Separation and Distribution Agreement.
Phillips 66 Designee shall have the meaning set forth in the Separation and Distribution Agreement.
Phillips 66 Group Domains shall have the meaning set forth in Section 5.5.1.
Phillips 66 Group Proprietary Information shall have the meaning set forth in Section 3.1.2.
Phillips 66 Group Software shall have the meaning set forth in Section 2.1.2.
Phillips 66 Group Trademarks shall have the meaning set forth in Section 5.1.2.
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Phillips 66 IP Licenses shall mean all (a) licenses, permissions and covenants granted by any Person, including ConocoPhillips Group members, to Phillips 66 or any Subsidiary of Phillips 66 to, in any way, exploit or use Intellectual Property owned, controlled or otherwise licensable by such Person, and the corresponding agreements by which such licenses, permissions or covenants are granted, which are licenses, permissions or covenants to use or exploit Software, Patents or Proprietary Information and that primarily relate to, arise out of or result from the Phillips 66 Business (such licenses, permissions and covenants, and their corresponding agreements, being collectively referred to as Inbound Phillips 66 IP Licenses); and (b) licenses, permissions and covenants granted by Phillips 66 or any Subsidiary of Phillips 66 to any Person to, in any way, exploit or use Intellectual Property owned, controlled or otherwise licensable by the Phillips 66 Group, and the corresponding agreements by which such licenses, permissions or covenants are granted, which are licenses, permissions or covenants to use or exploit Software, Patents or Proprietary Information and that primarily relate to, arise out of or result from the Phillips 66 Business (such licenses, permissions and covenants, and their corresponding agreements, being collectively referred to as Outbound Phillips 66 IP Licenses). Notwithstanding the foregoing, this Agreement shall not be deemed a Phillips 66 IP License.
Proprietary Information shall mean (i) business and technical information, including ideas, data, knowledge, trade secrets, know-how and algorithms, existing as of the Distribution, which is proprietary and/or that derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy and (ii) all physical manifestations of the business and technical information described in the preceding clause (i), including documents, specifications, designs, plans, records, drawings and databases.
Separation and Distribution Agreement shall have the meaning set forth in the preamble.
Software shall have the meaning set forth in the Separation and Distribution Agreement.
Subsidiary shall have the meaning set forth in the Separation and Distribution Agreement.
Third Party shall mean any Person other than a member of a Group.
Trademark shall mean any word, name, corporate name, trade name, domain name (including, without limitation, IP addresses and ASNs), logo, design, mark, trademark, service mark, symbol, device, trade dress, any common law marks, trademark or service mark application or registration, or any other indicia of origin or any combination thereof and all goodwill associated therewith.
Trademark and Service Mark Assignment shall mean that certain Trademark and Service Mark Assignment contemporaneously executed by ConocoPhillips Company and Phillips 66 Company in the form attached hereto as Exhibit III.
Transaction Expenses shall mean with respect to any Party, all out-of-pocket expenses (including, without limitation, all fees and expenses of counsel, accountants, investment bankers, experts, consultants or agents to such Party or any of its Affiliates and including governmental
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transfer taxes, recording fees and other similar fees and impositions) incurred by such Party or its Affiliates (or on such Partys or Affiliates behalf) in connection with or related to the authorization, preparation, negotiation, execution or performance of this Agreement.
ARTICLE II
SOFTWARE
2.1 Existing Software Ownership
As between the Phillips 66 Group and the ConocoPhillips Group, any Software existing as of the Internal Contribution Date that was:
2.1.1. created by or for or assigned, transferred, conveyed to, or otherwise owned by ConocoPhillips or any other member of either Group that primarily relates to, arises out of or results from the ConocoPhillips Business, shall be owned by ConocoPhillips Company or, at ConocoPhillips discretion, a Subsidiary of ConocoPhillips (ConocoPhillips Group Software);
2.1.2. created by or for or assigned, transferred, conveyed to, or otherwise owned by ConocoPhillips or any other member of either Group that primarily relates to, arises out of or results from the Phillips 66 Business shall be owned by Phillips 66 Company or, at Phillips 66s discretion, a Phillips 66 Designee (Phillips 66 Group Software); and
2.1.3. created by or for or assigned, transferred, conveyed to, or otherwise owned by ConocoPhillips and that is not covered under Section 2.1.1 or Section 2.1.2 shall be owned by ConocoPhillips Company or, at ConocoPhillips discretion, a Subsidiary of ConocoPhillips.
2.2 Allocation of Software Ownership Within a Group
Each Group may allocate ownership of Software owned by that Group to the appropriate member or members within that Group.
2.3 Software License Grants
2.3.1. Subject to the terms and conditions of this Agreement, and subject to rights of Third Parties and licenses in effect as of the Internal Contribution Date, effective as of the Internal Contribution Date, ConocoPhillips hereby grants, and agrees to cause each other ConocoPhillips Group member to grant, to Phillips 66 Company a non-exclusive, fully paid-up, worldwide, perpetual, non-sublicensable (except as provided in Section 8.2), non-assignable (except as provided in Section 8.1), royalty-free and irrevocable license to, in the conduct of the Phillips 66 Business, use, reproduce, distribute, display and prepare Derivative Works based upon, any ConocoPhillips Group Software that is used in the Phillips 66 Business as of the Internal Contribution Date.
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2.3.2. Subject to the terms and conditions of this Agreement, and subject to rights of Third Parties and licenses in effect as of the Internal Contribution Date, effective immediately following the Internal Contribution Date, Phillips 66 hereby grants, and agrees to cause each other Phillips 66 Group member to grant to ConocoPhillips Company a non-exclusive, fully paid-up, worldwide, perpetual, non-sublicensable (except as provided in Section 8.2), non-assignable (except as provided in Section 8.1), royalty-free and irrevocable license to, in the conduct of the ConocoPhillips Business, use, reproduce, distribute, display and prepare Derivative Works based upon, any Phillips 66 Group Software that is used in the ConocoPhillips Business as of the Internal Contribution Date.
2.3.3. Subject to the terms and conditions of this Agreement, and subject to rights of Third Parties and licenses in effect as of the Internal Contribution Date, effective as of the Internal Contribution Date, ConocoPhillips hereby grants, and agrees to cause each other ConocoPhillips Group member to grant, to Phillips 66 Company a non-exclusive, fully paid-up, worldwide, perpetual, fully-sublicensable, fully-assignable, royalty-free and irrevocable license to use, reproduce, distribute, display and prepare Derivative Works based upon any Software described under Section 2.1.3. The license granted in this Section 2.3.3 shall not be restricted to any field of use.
2.4 Furnishing of Software
Subject to reasonable confidentiality restrictions and Third Party rights, until the date that is twelve (12) months after the Internal Contribution Date, a Group may request a copy of Software licensed pursuant to Section 2.3, including the source code, which Software such Group reasonably believes is required in the conduct of its business, and the other Group shall provide a copy of such Software; provided that, in each case, such Software exists in the same form in which it existed as of the Internal Contribution Date. Following such twelve-month period, for an additional two-year period, each Group shall use reasonable efforts to supply a copy of such Software to the requesting Group. Notwithstanding anything to the contrary herein, the Party in possession of the licensed Software need only furnish a copy of such software in the form in which it existed as of the Internal Contribution Date and in no event shall a Party be required to furnish to the other Party any upgrades, updates, enhancements or other modifications to the licensed Software.
2.5 Subsequent Derivative Works
After the Internal Contribution Date, a Group creating a Derivative Work of Software licensed from another Group shall own all rights in and to the particular modifications, additions or changes made to such Software by the creating Group, subject to the Intellectual Property rights of the licensing Group. No license is granted hereunder to such modifications, additions or changes by the Group creating such a Derivative Work to the Group that owns the Software on which such Derivative Work is based and the Group creating such a Derivative Work shall not, by virtue of creating any Derivative Work, gain any greater rights in and to such licensed Software than are expressly granted pursuant to this Agreement.
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2.6 Confidentiality of Software
Each Group shall treat any source code for Software owned by the other Group as Proprietary Information of the other Group and shall hold it in confidence in accordance with the terms of Section 3.4.
2.7 No Contravention of Existing License Agreements
Nothing in this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement changes, alters, limits or expands any current rights that any ConocoPhillips Group member or any Phillips 66 Group member may have been granted as of the Internal Contribution Date by any Person to reproduce, distribute, display or otherwise use Software. For purposes of clarity, the Parties understand and agree that the purpose of the Software licenses granted herein is to allow to continue after the Internal Contribution Date certain incidental uses by one Group of the other Groups Software which have taken place in the Groups prior to the Internal Contribution Date and neither Group shall seek to use any license to Software granted hereunder to exploit Software in a manner that was not granted prior to the Internal Contribution Date.
ARTICLE III
PROPRIETARY INFORMATION
3.1 Ownership of Existing Proprietary Information
As between the Phillips 66 Group and the ConocoPhillips Group, any Proprietary Information existing as of the Internal Contribution Date:
3.1.1. created or developed by or for or assigned, transferred, conveyed to, or otherwise owned by ConocoPhillips Company or any other member of either Group that primarily relates to, arises out of or results from the ConocoPhillips Business, shall be owned by ConocoPhillips Company or, at ConocoPhillips discretion, a Subsidiary of ConocoPhillips. Proprietary Information owned by the ConocoPhillips Company or another Subsidiary of ConocoPhillips pursuant to this Section 3.1.1 is referred to as ConocoPhillips Group Proprietary Information and includes, but is not limited to the Proprietary Information listed in Schedule 3.1.1;
3.1.2. created or developed by or for or assigned, transferred, conveyed to, or otherwise owned by ConocoPhillips Company or any other member of either Group that primarily relates to, arises out of or results from the Phillips 66 Business, shall be owned by Phillips 66 Company or, at Phillips 66s discretion, a Phillips 66 Designee; Proprietary Information owned by Phillips 66 Company or another Phillips 66 Designee pursuant to this Section 3.1.2 is referred to as Phillips 66 Group Proprietary Information and includes, but is not limited to the Proprietary Information listed in Schedule 3.1.2; and
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3.1.3. created or developed by or for or assigned, transferred, conveyed to, or otherwise owned by ConocoPhillips Company, and that is not covered under Section 3.1.1 or Section 3.1.2 shall be owned by ConocoPhillips Company or, at ConocoPhillipss discretion, a Subsidiary of ConocoPhillips.
3.2 Allocation of Proprietary Information Within a Group
Each Group may allocate ownership of Proprietary Information owned by that Group to the appropriate member or members within that Group.
3.3 License Grants for Proprietary Information
3.3.1. Subject to the terms and conditions of this Agreement, and subject to rights of Third Parties and licenses in effect as of the Internal Contribution Date, effective as of the Internal Contribution Date, ConocoPhillips hereby grants, and agrees to cause each other ConocoPhillips Group member to grant, to Phillips 66 Company a non-exclusive, fully paid-up, worldwide, perpetual, non-sublicensable (except as provided in Section 8.2), non-assignable (except as provided in Section 8.1), royalty-free and irrevocable license to, in the conduct of the Phillips 66 Business, use any ConocoPhillips Group Proprietary Information that is used in the Phillips 66 Business as of the Internal Contribution Date.
3.3.2. Subject to the terms and conditions of this Agreement, and subject to rights of Third Parties and licenses in effect as of the Internal Contribution Date, effective immediately following the Internal Contribution Date, Phillips 66 hereby grants, and agrees to cause each other Phillips 66 Group member to grant, to ConocoPhillips Company a non-exclusive, fully paid-up, worldwide, perpetual, non-sublicensable (except as provided in Section 8.2), non-assignable (except as provided in Section 8.1), royalty-free and irrevocable license to, in the conduct of the ConocoPhillips Business, use any Phillips 66 Group Proprietary Information that is used in the ConocoPhillips Business as of the Internal Contribution Date.
3.3.3. Subject to the terms and conditions of this Agreement, and subject to rights of Third Parties and licenses in effect as of the Internal Contribution Date, effective as of the Internal Contribution Date, ConocoPhillips hereby grants, and agrees to cause each other ConocoPhillips Group member to grant, to Phillips 66 Company an exclusive, fully paid-up, worldwide, perpetual, fully-sublicensable, fully-assignable, royalty-free and irrevocable license to, in the conduct of the Phillips 66 Business, use any Proprietary Information described in Section 3.1.3 that is used in the ConocoPhillips Business as of the Internal Contribution Date. In addition, subject to rights of Third Parties and licenses in effect as of the Internal Contribution Date, effective as of the Internal Contribution Date, ConocoPhillips hereby grants, and agrees to cause each other ConocoPhillips Group member to grant, to Phillips 66 Company a non-exclusive, fully paid-up,
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worldwide, perpetual, fully-sublicensable, fully-assignable, royalty-free and irrevocable license to use any ConocoPhillips Group Proprietary Information described in Section 3.1.3 in any field of use that does not fall within the ConocoPhillips Business and the Phillips 66 Business.
3.4 Confidentiality Obligations
With respect to Proprietary Information owned by the other Group, each Group shall:
3.4.1. restrict disclosure of such Proprietary Information to its employees, contractors, Affiliates and advisors with a need to know (Authorized Persons) and obligate such Authorized Persons to conduct themselves in accordance with the obligations assumed herein, and
3.4.2. not disclose such Proprietary Information to any Third Party without the prior written approval of such other Group.
3.5 Limitations on Confidentiality Restrictions
The restrictions concerning the use or disclosure of Proprietary Information contained in Section 3.4 shall not apply to information:
3.5.1. lawfully received free of restriction from another source that was not legally or contractually prohibited from distribution of such information;
3.5.2. after it has become generally available to the public without breach of this Agreement;
3.5.3. independently developed or derived by the recipient without use of the Proprietary Information; or
3.5.4. that the Group who owns such information agrees, in writing, may be used or disclosed and then only to the extent of such agreement.
3.6 Compelled Production
The restrictions concerning the use or disclosure of Proprietary Information contained in Section 3.4 shall not preclude a member of either Group, on the good faith advice of counsel, from complying with applicable law or other demand under lawful process, including a discovery request in a civil litigation or from a governmental agency or official, if the member first gives the Group owning the relevant Proprietary Information prompt notice of the required disclosure and cooperates with the owning Group, at the owning Groups sole expense, in seeking reasonable protective arrangements with the party requiring disclosure under applicable law or other demand under lawful process. In no event shall such cooperation require any member of a Group to take any action which, on the advice of its counsel, could result in the imposition of any sanctions or other penalties against that member.
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3.7 Furnishing of Proprietary Information
Except as required by the terms of this Agreement, no member of any Group is required to furnish any physical manifestations of any Proprietary Information to any member of any other Group.
3.8 No Contravention of Existing License Agreements
Nothing in this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement changes, alters, limits or expands any current rights that any ConocoPhillips Group member or any Phillips 66 Group member may have been granted as of the Distribution by any Person to use Proprietary Information. For purposes of clarity, the Parties understand and agree that the purpose of the licenses to use Proprietary Information granted herein is to allow to continue after the Internal Contribution Date certain incidental uses by one Group of the other Groups Proprietary Information which have taken place in the Groups prior to the Internal Contribution Date and neither Group shall seek to use any license to Proprietary Information granted hereunder to exploit Proprietary Information in a manner that was not granted prior to the Internal Contribution Date.
ARTICLE IV
PATENTS
4.1 Ownership of Existing Patents
As between the Phillips 66 Group and the ConocoPhillips Group, any Patents existing as of the Internal Contribution Date that:
4.1.1. were invented or developed by or for or assigned, transferred, conveyed to, or otherwise owned by the ConocoPhillips Group and are primarily related to the ConocoPhillips Business, including but not limited to, those set forth on Schedule 4.1.1 hereto, shall be owned by ConocoPhillips Company or, at ConocoPhillips discretion, a Subsidiary of ConocoPhillips (Existing ConocoPhillips Group Patents as further defined in Exhibit II);
4.1.2. were invented or developed by or for or assigned, transferred, conveyed to, or otherwise invented or developed for the benefit of the Phillips 66 Group and are primarily related to the Phillips 66 Business, including but not limited to, those set forth on Schedule 4.1.2 hereto, shall be owned by Phillips 66 Company or, at Phillips 66s discretion, a Phillips 66 Designee (Existing Phillips 66 Group Patents as further defined in Exhibit II).
4.2 License to Existing Patents
4.2.1. Subject to the terms and conditions of this Agreement, and subject to rights of Third Parties and licenses in effect as of the Distribution, effective as of the Internal Contribution Date, ConocoPhillips hereby grants, and agrees to cause
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each other ConocoPhillips Group member to grant, to Phillips 66 Company under Existing ConocoPhillips Group Patents, including, for the purpose of clarification, all counterparts, continuations, divisions, reissues, reexaminations and renewals thereof, an exclusive, fully paid-up, worldwide, perpetual, fully-sublicensable, fully-assignable, royalty-free and irrevocable license to make, have made, use, have used, offer to sell, sell and import any and all products and services in the conduct of the Phillips 66 Business, and limited to the scope of the Phillips 66 Business as of the Internal Contribution Date. For the purpose of clarification, ConocoPhillips reserves all rights, and no license is granted herein to Phillips 66 Company under Existing ConocoPhillips Group Patents to make, have made, use, offer to sell, sell and import any and all products and services other than in the conduct of the Phillips 66 Business as of the Internal Contribution Date.
4.2.2. Subject to the terms and conditions of this Agreement, and subject to rights of Third Parties and licenses in effect as of the Internal Contribution Date, effective immediately following the Internal Contribution Date, Phillips 66 hereby grants, and agrees to cause each other Phillips 66 Group member to grant, to ConocoPhillips Company under Existing Phillips 66 Group Patents, including, for the purpose of clarification, all counterparts, continuations, divisions, reissues, reexaminations and renewals thereof, an exclusive, fully paid-up, worldwide, perpetual, fully-sublicensable, fully-assignable, royalty-free and irrevocable license to make, have made, use, have used, offer to sell, sell and import any and all products and services in the conduct of the ConocoPhillips Business, and limited to the scope of the ConocoPhillips Business as of the Internal Contribution Date. For the purpose of clarification, Phillips 66 reserves all rights, and no license is granted herein to ConocoPhillips Company under Existing Phillips 66 Group Patents to make, have made, use, offer to sell, sell and import any and all products and services other than in the conduct of the ConocoPhillips Business as of the Internal Contribution Date.
4.2.3. Should the owner of any Patent subject to the license grants in Section 4.2.1 or 4.2.2 not wish to prepare, file, prosecute, maintain or issue any patent application, or maintain a Patent issuing from any such patent applications, in any particular country, the owning Party, in consideration for the then fair market value of such Patent, shall grant the other Party any necessary authority to file, prosecute, maintain or issue such patent application, or maintain such Patent, in the name of non-owning Party and at its sole expense.
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ARTICLE V
TRADEMARKS
5.1 Ownership of Trademarks
As between the Phillips 66 Group and the ConocoPhillips Group, any Trademarks existing as of the Internal Contribution Date that:
5.1.1. were created or developed by or for or assigned, transferred, conveyed to, or otherwise owned by the ConocoPhillips Group and primarily relate to, arise out of or result from the ConocoPhillips Business, shall be owned by ConocoPhillips Company or, at ConocoPhillips discretion, a Subsidiary of ConocoPhillips. Trademarks owned by ConocoPhillips Company or another Subsidiary of ConocoPhillips pursuant to this Section 5.1.1 are referred to as ConocoPhillips Group Trademarks and are listed in Schedule 5.1.1; and
5.1.2. were created or developed by or for or assigned, transferred, conveyed to, or otherwise owned by the Phillips 66 Group and primarily relate to, arise out of or result from the Phillips 66 Business, shall be owned by Phillips 66 Company or, at Phillips 66s discretion, a Phillips 66 Designee. Trademarks owned by Phillips 66 Company or another Phillips 66 Designee pursuant to this Section 5.1.2 are referred to as Phillips 66 Group Trademarks and are listed in Schedule 5.1.2.
5.2 Allocation of Trademarks Within a Group
Each Group may allocate ownership of Trademarks owned by that Group to the appropriate member within that Group.
5.3 No rights in Phillips 66 Group Trademarks
For the avoidance of doubt, and notwithstanding anything to the contrary herein, in any Ancillary Agreement or in the Separation and Distribution Agreement, all Trademarks other than the ConocoPhillips Group Trademarks shall be exclusively owned by Phillips 66 Company or, at Phillips 66s discretion, a Phillips 66 Designee. Nothing in this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement changes, alters, limits or expands any current rights that any ConocoPhillips Group member or any Phillips 66 Group Member may have been granted as of the Internal Contribution Date by any party to use Trademarks.
5.4 License to ConocoPhillips Group Trademarks
Subject to the terms and conditions of this Agreement, and subject to rights of Third Parties and licenses in effect as of the Internal Contribution Date, effective as of the Internal Contribution Date, ConocoPhillips hereby grants, and agrees to cause each other ConocoPhillips Group member to grant, to Phillips 66 Company under ConocoPhillips Group Trademarks that are used in the Phillips 66 Business as of the Internal Contribution Date, a nonexclusive, fully paid-up, worldwide, non-sublicensable (except as provided in Section 8.2), non-assignable (except as provided in Section 8.1), royalty-free license to use the ConocoPhillips Group Trademarks in commerce in connection with the offer to sell, sell and import of any and all products and services in the conduct of the Phillips 66 Business. Phillips 66 Company shall acquire no ownership rights in the ConocoPhillips Group Trademarks and all goodwill symbolized by and connected with the use of the ConocoPhillips Group Trademarks by Phillips 66 Company shall inure solely to the benefit of ConocoPhillips Company. The term of the license granted in this Section 5.4 shall be thirty-six (36) months.
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5.5 Ownership of Domains
As between the Phillips 66 Group and the ConocoPhillips Group, any domain names existing as of the Internal Contribution Date that:
5.5.1. were created or developed by or for or assigned, transferred, conveyed to, or otherwise owned by the Phillips 66 Group and primarily relate to, arise out of or result from the Phillips 66 Business, shall be owned by Phillips 66 Company or, at Phillips 66s discretion, a Phillips 66 Designee, subject to the temporary license and transfer of the domain names containing the trademark CONOCOPHILLIPS. Domain names owned by Phillips 66 Company or another Phillips 66 Designee pursuant to this Section 5.5.1 are referred to as Phillips 66 Group Domains and are listed in Schedule 5.5.1.
5.6 License and Transfer-back of Certain Domain Names to ConocoPhillips
Certain domain names identified in the Phillips 66 Group Domains schedule contain the mark CONOCOPHILLIPS and shall be temporarily transferred and licensed for Phillips 66 Companys control and during which the trademark license identified in Section 5.4 is active. Accordingly, ConocoPhillips grants a license to Phillips 66 Company to control and use the domain names identified in the Phillips 66 Group Domains schedule during the term in which the trademark license in Section 5.4 remains active. Upon the expiration of the trademark license in Section 5.4, all domain names in the Phillips 66 Group Domains schedule containing the trademark CONOCOPHILLIPS shall be transferred back to ConocoPhillips Company within one-hundred and twenty (120) days.
5.7 FTC Matter Related to Certain Phillips 66 Group Trademarks
Further to Section 5.3 and in accordance with the Decision and Order of In the Matter of Conoco, Inc., a corporation, and Phillips Petroleum Company, a corporation, Docket No. C-4058, February 7, 2003, as modified November 14, 2011, Phillips 66 Company shall succeed to the consent decree obligations set forth in the Order.
ARTICLE VI
IPR FUTURES AND ISSUES OF OWNERSHIP
6.1 Ownership Unaffected by this Agreement
6.1.1. All Software, Proprietary Information, Patents, and Trademarks (a) created, developed or made, or, (b) other than by operation of this Agreement, otherwise acquired or controlled, by a member of a Group after the Internal Contribution Date (IPR Futures) shall be owned in accordance with applicable law or agreement and such ownership is not covered or in any way provided by this Agreement (other than Section 6.3 and Article VII below), the Separation and
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Distribution Agreement or any Ancillary Agreement, except that (i) Patents issuing on applications contained in the definition of Existing ConocoPhillips Group Patents and all counterparts, continuations, divisions, reissues, reexaminations and renewals of Existing ConocoPhillips Group Patents shall be owned by ConocoPhillips Company or, at ConocoPhillips discretion, a Subsidiary of ConocoPhillips and (ii) Patents issuing on applications contained in the definition of Existing Phillips 66 Group Patents and all counterparts, continuations, divisions, reissues, reexaminations and renewals of Existing Phillips 66 Group Patents shall be owned by Phillips 66 Company or, at Phillips 66s discretion, a Phillips 66 Designee.
6.2 No Rights or Licenses Granted
Other than as provided in the Patent Assignment, the Trademark and Service Mark Assignment, or the Copyright and Technology Assignment, no rights or licenses under any IPR Futures are granted pursuant to this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement.
6.3 Issues as to Ownership
In the event that an issue should arise under this Agreement as to the ownership of, or license rights in, particular Software, Proprietary Information, Copyrights, Patents, Trademarks or IPR Futures, the Parties shall discuss and negotiate reasonably in good faith to resolve any such issue.
ARTICLE VII
ASSIGNMENT AND SUBLICENSES
7.1 Assignment Agreements
By the Patent Assignment, the Copyright and Technology Assignment, the Trademark and Service Mark Assignment and the Domain Name Assignment, as of the Internal Contribution Date, ConocoPhillips, on behalf of itself and each of its Subsidiaries (including ConocoPhillips Company), assigns to Phillips 66 Company any and all right, title and interest of ConocoPhillips and each of its Subsidiaries (including ConocoPhillips Company) in, to and under the Existing Phillips 66 Group Patents, Phillips 66 Group Trademarks, Phillips 66 Group Software and Phillips 66 Group Proprietary Information.
7.2 Assignment of Phillips 66 IP Licenses
ConocoPhillips, on behalf of itself and each of its Subsidiaries (including ConocoPhillips Company), does hereby assign, convey, transfer and deliver to Phillips 66 Company, effective as of the Internal Contribution Date, all of ConocoPhillips and each of its Subsidiaries entire right, title and interest, to, in and under all Phillips 66 IP Licenses, in accordance with the terms of such licenses and only to the extent ConocoPhillips or a Subsidiary of ConocoPhillips has the right to do so (subject to its obligations in Section 15.3.1), together with any and all rights and licenses granted to the Phillips 66 Group
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pursuant to this Agreement. Immediately after the assignment to Phillips 66 Company set forth in this Section 7.2, ConocoPhillips and the other ConocoPhillips Group members shall no longer retain any rights or licenses granted to the Phillips 66 Group pursuant to this Agreement.
7.3 Assignment of ConocoPhillips IP Licenses
Phillips 66, on behalf of itself and each Phillips 66 Designee (including Phillips 66 Company), does hereby assign, convey, transfer and deliver to ConocoPhillips Company effective immediately following the Internal Contribution Date, all of Phillips 66s and each Phillips 66 Designees entire right, title and interest, to, in and under all ConocoPhillips IP Licenses, in accordance with the terms of such licenses and only to the extent Phillips 66 or a Phillips 66 Designee has the right to do so (subject to its obligations in Section 15.3.1), together with any and all rights and licenses granted to the ConocoPhillips Group pursuant to this Agreement. Immediately after the assignment to ConocoPhillips Company set forth in this Section 7.3, Phillips 66 and the other Phillips 66 Group members shall no longer retain any rights or licenses granted to the ConocoPhillips Group pursuant to this Agreement.
7.4 Sublicense of Phillips 66 IP Licenses
Effective immediately following the Internal Contribution Date and subject to the terms and conditions of this Agreement, Phillips 66, on behalf of itself and each Phillips 66 Designee (including Phillips 66 Company), hereby grants to ConocoPhillips Company a non-exclusive, fully paid-up, worldwide, perpetual, non-sublicensable (except as provided in Section 8.2), non-assignable (except as provided in Section 8.1), royalty-free and irrevocable sublicense to use Phillips 66 IP Licenses that were used in the ConocoPhillips Business as of the Internal Contribution Date, in accordance with the terms set forth in such license agreements and only to the extent that Phillips 66 or a Phillips 66 Designee has the right to do so (subject to its obligations in Section 15.3.2 herein).
7.5 Sublicense of ConocoPhillips IP Licenses
Effective as of the Internal Contribution Date and subject to the terms and conditions of this Agreement, ConocoPhillips, on behalf of itself and each other ConocoPhillips Group member, hereby grants to Phillips 66 Company a non-exclusive, fully paid-up, worldwide, perpetual, non-sublicensable (except as provided in Section 8.2), non-assignable (except as set forth as provided in Section 8.1), royalty-free and irrevocable sublicense to use ConocoPhillips IP Licenses that were used in the Phillips 66 Business as of the Internal Contribution Date, in accordance with the terms set forth in such license agreements and only to the extent ConocoPhillips or a member of the ConocoPhillips Group has the right to do so (subject to its obligations in Section 15.3.2 herein).
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7.6 Acquisition of Subsidiary by Phillips 66
The Parties recognize that one or more Subsidiaries of ConocoPhillips will no longer be Subsidiaries of ConocoPhillips following the Internal Contribution Date but will become Subsidiaries of Phillips 66. Such Subsidiaries shall not be required to assign to Phillips 66 Company any Phillips 66 IP Licenses under Section 7.2 or any other Intellectual Property allocated to the Phillips 66 Group pursuant to this Agreement because Phillips 66 Company will obtain control of such Phillips 66 IP License or other Intellectual Property through equity ownership of that Subsidiary. Accordingly, to the extent that Phillips 66 Company obtains as a Subsidiary a Subsidiary of ConocoPhillips Company, which Subsidiary would, but for the operation of this Section 7.6, have assigned to Phillips 66 its Phillips 66 IP Licenses by operation of Section 7.2 or other Intellectual Property by operation of the Copyright and Technology Assignment, the Patent Assignment or the Trademark and Service Mark Assignment, then the assignment of such rights, and only such rights, shall not be deemed to have been made by operation of the Copyright and Technology Assignment, the Patent Assignment, the Trademark and Service Mark Assignment or Section 7.2. Otherwise, the assignments of this Agreement are unaffected by this Section 7.6.
7.7 Failure of Assignment of Phillips 66 IP Licenses
In the event that a particular Phillips 66 IP License cannot be assigned by ConocoPhillips or its Subsidiaries (including ConocoPhillips Company) to Phillips 66 or a Phillips 66 Designee (including Phillips 66 Company) after assistance has been fully rendered in accordance with the obligations set forth in Section 15.3.1, then, with respect to such a Phillips 66 IP License that is
7.7.1. an Outbound Phillips 66 IP License, ConocoPhillips hereby irrevocably appoints, and agrees to cause each of its Subsidiaries to irrevocably appoint, Phillips 66 Company as ConocoPhillips and its Subsidiaries exclusive agent for administering such Outbound Phillips 66 IP License and hereby irrevocably assigns to Phillips 66 Company any and all right, title and interest in and to all royalties and other payments to be paid to ConocoPhillips or any of its Subsidiaries pursuant to such Outbound Phillips 66 IP License. ConocoPhillips shall, on behalf of itself and each of its Subsidiaries, at any time without charge to Phillips 66 Company, sign all papers, take all rightful oaths, and do all acts which Phillips 66 Company believes to be necessary, desirable or convenient to effect such appointment and assignment, including sending such letters as Phillips 66 Company may request directing licensees under such Outbound Phillips 66 IP Licenses to make payments to Phillips 66 Company.
7.7.2. an Inbound Phillips 66 IP License, ConocoPhillips shall exercise, and agrees to cause each of its Subsidiaries to exercise, to the fullest extent permitted by such Inbound Phillips 66 IP License, its rights for the maximum benefit and protection of Phillips 66 Company, and ConocoPhillips, to the fullest extent permitted without jeopardizing Phillips 66 Companys license rights under such Inbound Phillips 66 IP License, hereby irrevocably appoints, and agrees to cause each of its Subsidiaries to irrevocably appoint, Phillips 66 Company as an agent for ConocoPhillips and its Subsidiaries under such Inbound Phillips 66 IP License with full authority to act on behalf of ConocoPhillips and its Subsidiaries to ensure that the Phillips 66 Group enjoys the maximum benefit and protection of
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such Inbound Phillips 66 IP License. ConocoPhillips shall, on behalf of itself and each of its Subsidiaries, at any time without charge to Phillips 66 Company, sign all papers, take all rightful oaths, and do all acts which Phillips 66 Company believes to be necessary, desirable or convenient to effect such appointment, including sending such letters as Phillips 66 Company may request advising licensors of such appointment.
7.8 Failure of Assignment of ConocoPhillips IP Licenses
In the event that a particular ConocoPhillips IP License cannot be assigned by Phillips 66 or a Phillips 66 Designee to ConocoPhillips Company after assistance has been fully rendered in accordance with the obligations set forth in Section 15.3.1, then, with respect to such a ConocoPhillips IP License that is
7.8.1. an Outbound ConocoPhillips IP License, Phillips 66 hereby irrevocably appoints, and agrees to cause each of the Phillips 66 Designees to irrevocably appoint, ConocoPhillips Company as Phillips 66 and its Subsidiaries exclusive agent for administering such Outbound ConocoPhillips IP License and hereby irrevocably assigns to ConocoPhillips Company any and all right, title and interest in and to all royalties and other payments to be paid to Phillips 66 and its Subsidiaries pursuant to such Outbound ConocoPhillips IP License. Phillips 66 shall, on behalf of itself and each of its Subsidiaries, at any time without charge to ConocoPhillips Company, sign all papers, take all rightful oaths, and do all acts which ConocoPhillips Company believes to be necessary, desirable or convenient to effect such appointment and assignment, including sending such letters as ConocoPhillips Company may request directing licensees under such Outbound ConocoPhillips IP Licenses to make payments to ConocoPhillips Company.
7.8.2. an Inbound ConocoPhillips IP License, Phillips 66 shall exercise, and agrees to cause each of the Phillips 66 Designees to exercise, to the fullest extent permitted by such Inbound ConocoPhillips IP License, its rights for the maximum benefit and protection of ConocoPhillips Company, and Phillips 66, to the fullest extent permitted without jeopardizing ConocoPhillips Companys license rights under such Inbound ConocoPhillips IP License, hereby irrevocably appoints, and agrees to cause each of the Phillips 66 Designees to appoint, ConocoPhillips Company as an agent for Phillips 66 and the Phillips 66 Designees under such Inbound ConocoPhillips IP License with full authority to act on behalf of Phillips 66 and the Phillips 66 Designees to ensure that the ConocoPhillips Group enjoys the maximum benefit and protection of such Inbound ConocoPhillips IP License. Phillips 66 shall, on behalf of itself and each of its Subsidiaries, at any time without charge to ConocoPhillips Company, sign all papers, take all rightful oaths, and do all acts which ConocoPhillips Company believes to be necessary, desirable or convenient to effect such appointment, including sending such letters as ConocoPhillips Company may request advising licensors of such appointment.
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7.9 Order of Precedence
In the event of any inconsistency between the terms and conditions of this Agreement and those of the Patent Assignment, the Copyright and Technology Assignment, or the Trademark and the Service Mark Assignment, the order of priority shall be first the Patent Assignment, the Copyright and Technology Assignment, or the Trademark and Service Mark Assignment, as applicable, and second this Agreement.
ARTICLE VIII
ASSIGNMENT/SUBLICENSING
8.1 Assignments
8.1.1. Except as expressly provided for elsewhere in this Agreement, neither Party shall assign its rights or obligations under this Agreement without the prior written consent of the other Party, unless such assignment is to a Person who is or becomes an Affiliate of such Party. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors, legal representatives and permitted assigns of each of the Parties.
8.1.2. Except as provided in Section 8.2 below and subject to the terms and conditions of this Agreement and the Associated Agreements, as applicable, each Party shall have the right to assign, transfer, convey, license or use in any manner, any Intellectual Property, including Software, Proprietary Information, Patents, and Trademarks, owned by such Party, whether as a result of allocations, assignments or transfers set forth in or contemplated by this Agreement, the Associated Agreements or otherwise.
8.2 Sublicense Rights
Neither Party shall sublicense any of the Intellectual Property rights licensed to it pursuant to Sections 2.3.1, 2.3.2, 3.3.1, 3.3.2, 5.4, 7.4 or 7.5 hereof without the prior written consent of the other Party, unless such sublicense is to a Person who is or becomes an Affiliate of such Party; provided that, the sublicense granted to such Person shall only be effective for so long as such Person remains an Affiliate of such Party.
ARTICLE IX
INFRINGEMENT
ConocoPhillips and Phillips 66 agree to reasonably cooperate with each other, and to cause their respective Subsidiaries to reasonably cooperate with each other, in the protection and enforcement of the Intellectual Property licensed to the other Party pursuant to this Agreement. Licensor may, in its sole discretion, commence or prosecute and effect the disposition of any claims or suits relative to the infringement, misappropriation and/or unlawful use of the licensed Intellectual Property in its own name and may, with Licensees permission, such permission not to be unreasonably withheld or delayed, join Licensee as a party in the prosecution of such claims or suits. Licensee agrees to reasonably cooperate with Licensor in connection with any
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such claims or suits and undertakes to furnish reasonable assistance to Licensor in the conduct of all proceedings in regard thereto. Both Parties shall promptly notify the other party in writing of any infringement, misappropriation or illegal uses by others of the licensed Intellectual Property.
ARTICLE X
NO WARRANTIES OR REPRESENTATIONS
ALL SOFTWARE, PROPRIETARY INFORMATION, TRADEMARKS, AND PATENTS COVERED UNDER THIS AGREEMENT ARE FURNISHED AS IS, WITHOUT ANY SUPPORT, ASSISTANCE, MAINTENANCE OR WARRANTIES OF ANY KIND, WHATSOEVER. EACH GROUP ASSUMES TOTAL RESPONSIBILITY AND RISK FOR ITS USE OF ANY SOFTWARE, PATENTS, TRADEMARKS, OR PROPRIETARY INFORMATION COVERED BY THIS AGREEMENT. NEITHER GROUP MAKES, AND EACH GROUP EXPRESSLY DISCLAIMS, ANY EXPRESS OR IMPLIED WARRANTIES OF ANY KIND WHATSOEVER, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WARRANTIES OF TITLE OR NON-INFRINGEMENT, OR ANY WARRANTY THAT SUCH SOFTWARE, PATENTS, TRADEMARKS, OR PROPRIETARY INFORMATION IS ERROR FREE.
ARTICLE XI
GOVERNING LAW; IP CLAIMS
11.1 Choice of Law
This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware without regard to its principles of conflicts of law. Except as otherwise provided herein, ConocoPhillips and Phillips 66, each on behalf of itself and the members of its respective Group, hereby irrevocably submit to the exclusive jurisdiction of the United States District Court for the Delaware, or absent subject matter jurisdiction in that court, the state courts of the State of Delaware for all actions, suits or proceedings arising in connection with this Agreement.
11.2 Intellectual Property Rights
Notwithstanding any provision in this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement, in no event shall any claims, disputes or controversies between the Parties which potentially concern the validity, enforceability, infringement or misappropriation of any Intellectual Property rights, including any rights protectable under Intellectual Property law anywhere throughout the world such as Patent, Copyright, trade secret and Trademark law, be subject to resolution by arbitration.
11.3 Equitable Remedies
The Parties recognize that money damages alone may not be an adequate remedy for any breach or threatened breach of any obligation hereunder involving Intellectual Property rights or either Party exceeding the scope of its license and rights hereunder. The Parties therefore agree that in addition to any other remedies available hereunder, by law or otherwise, the non-breaching Party shall be entitled to seek injunctive relief against any such continued action by the other Parties.
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11.4 Bankruptcy
This Agreement constitutes a license of intellectual property within the meaning of Section 365(n) of the United States Bankruptcy Code. If Section 365(n) of the United States Bankruptcy Code (or any successor provision) is applicable, and the trustee or debtor-in-possession has rejected this Agreement and if the Licensee has elected pursuant to Section 365(n) to retain its rights hereunder, then upon written request of Licensee, to the extent Licensee is otherwise entitled hereunder, the trustee or debtor-in-possession shall provide to Licensee any intellectual property (including embodiments thereof) held or controlled by the trustee or debtor-in-possession.
ARTICLE XII
NOTICE
Unless otherwise provided in this Agreement, all notices, consents, approvals, waivers and the like made hereunder shall be in written English addressed as provided below, shall reference this Agreement and shall be sent by any of the following methods: (a) certified mail, postage-prepaid, return-receipt requested, (b) a delivery service which requires proof of delivery signed by the recipient or (c) properly-transmitted facsimile followed by written confirmation in accordance with methods (a), (b) or first-class U.S. mail. The date of notice shall be deemed to be the date it was received (in the case of method (c) above, the date of notice shall be deemed to be the date that the facsimile copy is received). A Party may change its address for notice by written notice delivered in accordance with this Article XII.
If to ConocoPhillips, to:
ConocoPhillips
600 North Dairy Ashford Street
Houston, Texas 77079
Attention: General Counsel
If to Phillips 66, to:
Phillips 66
600 North Dairy Ashford Street
Houston, Texas 77079
Attention: General Counsel
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ARTICLE XIII
FURTHER DUE DILIGENCE
ConocoPhillips and Phillips 66 acknowledge that following the execution of this Agreement and prior to the Distribution, ConocoPhillips and Phillips 66 will be conducting further due diligence into the Patents, and other Intellectual Property owned by the Groups. ConocoPhillips and Phillips 66 agree to work in good faith to ensure that the Intellectual Property covered by this Agreement has been properly allocated, assigned and licensed to each Group according to principles set forth in this Agreement.
ARTICLE XIV
FEES AND EXPENSES
All Transaction Expenses incurred by either of the Parties or its Affiliates shall be paid by the Party incurring the Transaction Expense. However, all out-of-pocket expenses incurred by a Party related to the filing, prosecution, registration, maintenance or recordation of Intellectual Property rights assigned to a Party by this Agreement shall be paid by the Party to which such rights are assigned by this Agreement.
ARTICLE XV
MISCELLANEOUS
15.1 No Other Rights
EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT OR THE ASSOCIATED AGREEMENTS, NO OTHER RIGHTS OR LICENSES ARE GRANTED.
15.2 No Enforcement Against Third Party
Notwithstanding any provision of this Agreement or the Associated Agreements, in no event shall any member of any Group be required to enforce or otherwise assert against any Person any Intellectual Property rights.
15.3 Further Assurances
Each Party covenants to execute upon request any further documents reasonably necessary to effect the express terms and conditions of this Agreement, including such documents as are reasonably necessary to vest title in Intellectual Property rights as provided in this Agreement. All expenses incurred in connection with such actions shall be paid in accordance with Article XIV.
15.3.1. Assistance with Assignment. ConocoPhillips, on behalf of itself and each other ConocoPhillips Group member, and Phillips 66, on behalf of itself and each other Phillips 66 Group member, shall, at any time without charge to the other Party, sign all papers, take all rightful oaths, and do all acts which the other Party believes are necessary, desirable or convenient to assign, convey, transfer and deliver to such other Party any licenses to be assigned pursuant to Section 7.2 or 7.3, and to record such assignments with the appropriate Governmental Authorities, including without limitation, using reasonable efforts to seek consent of any party to any such license for the assignment of the same to the other Party. It is understood and agreed that neither Party shall be required to undertake
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extraordinary or unreasonable measures to obtain any necessary consent, including making any expenditures or accepting any material changes in the terms of any license agreement for which consent is sought.
15.3.2. Assistance with Sublicense. ConocoPhillips, on behalf of itself and each other ConocoPhillips Group member, and Phillips 66, on behalf of itself and each other Phillips 66 Group member, shall at any time without charge to the other Party, sign all papers, take all rightful oaths, and do all acts which the other Party believes is necessary, desirable or convenient to sublicense to such other Party any licenses to be sublicensed pursuant to Section 7.4. or 7.5, including without limitation, using reasonable efforts to seek consent of any party to any such license for the sublicense of the same to such other Party. It is understood and agreed that neither Party shall be required to undertake extraordinary or unreasonable measures to obtain any necessary consent, including making any expenditures or accepting any material changes in the terms of any license agreement for which consent is sought.
15.4 Rules of Construction
As used in this Agreement, (i) neutral pronouns and any derivations thereof shall be deemed to include the feminine and masculine and all terms used in the singular shall be deemed to include the plural and vice versa, as the context may require; (ii) the words hereof, herein, hereunder and other words of similar import refer to this Agreement as a whole, including all exhibits and schedules as the same may be amended or supplemented from time to time, and not to any subdivision of this Agreement; (iii) the word including or any variation thereof means including, without limitation and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it; (iv) descriptive headings and titles used in this Agreement are inserted for convenience of reference only and do not constitute a part of and shall not be utilized in interpreting this Agreement; (v) the words Party and Parties refer, respectively, to each or both parties to this Agreement (vi) reference to a work of authorship or information as being created or developed by a Party means that the work of authorship or information is created or developed by employees of that Party or by such other individuals, such as contractors, who have a duty to assign ownership in such work of authorship or information to such Party. This Agreement shall be fairly interpreted in accordance with its terms and without any strict construction in favor of or against either Party.
15.5 Amendments
This Agreement may not be amended, changed, supplemented, waived or otherwise modified except by an instrument in writing signed by the Parties.
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15.6 No Waiver
The failure of either Party to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by the other Party with its obligations hereunder, and any custom or practice of the Parties at variance with the terms hereof, shall not constitute a waiver by such Party of its right to exercise any such or other right, power or remedy or to demand such compliance.
15.7 Third Party Beneficiaries
The provisions of this Agreement and each Ancillary Agreement are solely for the benefit of the Parties and are not intended to confer upon any Person except the Parties any rights or remedies hereunder and there are no third party beneficiaries of this Agreement or any Ancillary Agreement and neither this Agreement nor any Ancillary Agreement shall provide any third person with any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement or any Ancillary Agreement. No Party hereto shall have any right, remedy or claim with respect to any provision of this Agreement or any Ancillary Agreement to the extent such provision relates solely to the other Party hereto or the members of such other Partys respective Groups. No Party shall be required to deliver any notice under this Agreement or under any Ancillary Agreement to any other Party with respect to any matter in which such other Party has no right, remedy or claim.
15.8 Force Majeure
No Party shall be deemed in default of this Agreement or any Ancillary Agreement during the period of extension referred to in the next sentence to the extent that any delay or failure in the performance of its obligations under this Agreement or any Ancillary Agreement results from any cause beyond its reasonable control and without its fault or negligence, such as acts of God, criminal or terrorist acts, acts of civil or military authority, embargoes, epidemics, war, riots, insurrections, fires, explosions, earthquakes, floods, unusually severe weather conditions, labor problems or unavailability of parts, or, in the case of computer systems, any failure in electrical or air conditioning equipment. In the event of any such excused delay, the time for performance shall be extended for a period equal to the time lost by reason of the delay, but in no event shall such period of extension exceed forty-five (45) days.
15.9 Counterparts
This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies each signed by less than all, but together signed by all, the Parties.
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15.10 Severability
The provisions of this Agreement are severable, and in the event that any one or more provisions, or any portion thereof, are deemed illegal or unenforceable, the remaining provisions or portions thereof, as the case may be, shall remain in full force and effect unless the deletion of such provision or portion thereof shall cause this Agreement to become materially adverse to either Party, in which event the Parties shall use commercially reasonable efforts to arrive at an accommodation that best preserves for the Parties the benefits and obligations of the offending provision or portion thereof.
15.11 Entire Agreement
This Agreement together with the Associated Agreements set forth the entire agreement and understanding between the Parties as to the subject matter hereof and thereof and merge all prior discussions between them. Neither of the Parties shall be bound by any warranties, understandings or representations with respect to such subject matter other than as expressly provided herein, in prior written agreements, or in a writing executed with or subsequent to the execution of this Agreement by an authorized representative of the Party to be bound thereby.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed on their behalf by one of their duly authorized representatives as of the date first written above.
CONOCOPHILLIPS | ||
By: | /s/ Ryan M. Lance | |
Name: | Ryan M. Lance | |
Title: | Chairman and Chief Executive Officer | |
PHILLIPS 66 | ||
By: | /s/ Greg C. Garland | |
Name: | Greg C. Garland | |
Title: | Chairman, President and Chief Executive Officer |
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Exhibit 10.3
TAX SHARING AGREEMENT
DATED AS OF APRIL 26, 2012
BY AND AMONG
CONOCOPHILLIPS,
CONOCOPHILLIPS COMPANY,
PHILLIPS 66,
AND
PHILLIPS 66 COMPANY
TABLE OF CONTENTS
Page | ||||
Section 1. Definition of Terms |
2 | |||
Section 2. Allocation of Tax Liabilities and Tax Benefits |
13 | |||
Section 2.01 General Rule |
13 | |||
Section 2.02 Federal Tax and Tax Benefits |
13 | |||
Section 2.03 State Tax and Tax Benefits |
15 | |||
Section 2.04 Foreign Tax and Tax Benefits |
16 | |||
Section 2.05 UK Taxes |
17 | |||
Section 2.06 Certain Transaction Taxes and Breaches of Covenant |
18 | |||
Section 2.07 Tax Benefits |
19 | |||
Section 2.08 Special Allocation and Computational Rules |
20 | |||
Section 2.09 Deductible and Includible Tax Payments |
20 | |||
Section 3. Proration of Taxes for Straddle Periods |
21 | |||
Section 4. Preparation and Filing of Tax Returns |
21 | |||
Section 4.01 General |
21 | |||
Section 4.02 ConocoPhillipss Responsibility |
22 | |||
Section 4.03 Phillips 66s Responsibility |
22 | |||
Section 4.04 Tax Return Filing and Past Practices |
22 | |||
Section 4.05 Consolidated or Combined Tax Returns |
23 | |||
Section 4.06 Right to Review Tax Returns |
23 | |||
Section 4.07 Phillips 66 Carrybacks and Claims for Refund |
25 | |||
Section 4.08 Apportionment of Earnings and Profits and Tax Attributes |
25 | |||
Section 5. Due Date for Payments and Related Matters |
26 | |||
Section 5.01 General Rule |
26 |
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Section 5.02 ConocoPhillips Federal Consolidated Income Tax Returns, ConocoPhillips State Combined Income Tax Returns and State Separate Income Tax Returns |
26 | |||
Section 5.03 Other Taxes |
31 | |||
Section 5.04 Certain Separate Return Income Taxes and Property Taxes |
34 | |||
Section 5.05 Tax-Related Losses |
35 | |||
Section 5.06 Treatment of Payments; Tax Gross Up |
35 | |||
Section 5.07 Late Payments |
35 | |||
Section 6. Tax-Free Status |
36 | |||
Section 6.01 Tax Opinions/Rulings and Representation Letters |
36 | |||
Section 6.02 Restrictions on Phillips 66 and Phillips 66 Company |
36 | |||
Section 6.03 Procedures Regarding Opinions and Rulings |
39 | |||
Section 6.04 Liability for Tax-Related Losses |
40 | |||
Section 7. Assistance and Cooperation |
41 | |||
Section 7.01 Assistance and Cooperation |
41 | |||
Section 7.02 Tax Packages and Other Tax Return Information |
41 | |||
Section 7.03 Reliance by ConocoPhillips |
42 | |||
Section 8. Tax Records |
42 | |||
Section 8.01 Retention of Tax Records |
42 | |||
Section 8.02 Access to Tax Records |
43 | |||
Section 9. Tax Contests |
43 | |||
Section 9.01 Notice |
43 | |||
Section 9.02 Control of Tax Contests |
43 |
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Section 10. Effective Date; Termination of Prior Intercompany Tax Allocation Agreements |
46 | |||
Section 11. Survival of Obligations |
46 | |||
Section 12. Dispute Resolution |
46 | |||
Section 13. Expenses |
46 | |||
Section 14. General Provisions |
47 | |||
Section 14.01 Addresses and Notices |
47 | |||
Section 14.02 Binding Effect |
47 | |||
Section 14.03 Waiver |
47 | |||
Section 14.04 Severability |
48 | |||
Section 14.05 Authority |
48 | |||
Section 14.06 Further Action |
48 | |||
Section 14.07 Integration |
48 | |||
Section 14.08 Construction |
48 | |||
Section 14.09 No Double Recovery |
48 | |||
Section 14.10 Counterparts |
49 | |||
Section 14.11 Governing Law |
49 | |||
Section 14.12 Jurisdiction |
49 | |||
Section 14.13 Amendment |
49 | |||
Section 14.14 Phillips 66 Subsidiaries |
49 | |||
Section 14.15 Successors |
49 | |||
Section 14.16 Injunctions |
49 |
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TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT (this Agreement) is entered into as of April 26, 2012, by and among ConocoPhillips, a Delaware corporation (ConocoPhillips), ConocoPhillips Company, a Delaware corporation and a wholly-owned subsidiary of ConocoPhillips (ConocoPhillips Company), Phillips 66, a Delaware corporation and a wholly-owned subsidiary of ConocoPhillips (Phillips 66), and Phillips 66 Company, a Delaware corporation and a wholly-owned subsidiary of ConocoPhillips Company (Phillips 66 Company) (ConocoPhillips and Phillips 66 are sometimes collectively referred to herein as the Companies and, as the context requires, individually referred to herein as the Company).
RECITALS
WHEREAS, the board of directors of ConocoPhillips has determined that it is in the best interests of ConocoPhillips and its stockholders to create a new publicly traded company that shall operate the Phillips 66 Business;
WHEREAS, pursuant to the Separation and Distribution Agreement, ConocoPhillips and Phillips 66 have agreed to create the new publicly traded company by means of, among other actions, (a) the contribution by ConocoPhillips Company to Phillips 66 Company of any Phillips 66 Assets held directly by ConocoPhillips Company in exchange for (i) the assumption by Phillips 66 Company of any Phillips 66 Liabilities from ConocoPhillips Company, and (ii) a number of shares of common stock, par value $0.01 per share, of Phillips 66 Company (the Internal Contribution); (b) the distribution, on the Internal Distribution Date, by ConocoPhillips Company to ConocoPhillips of all the outstanding shares of common stock, par value $0.01 per share, of Phillips 66 Company (the Internal Distribution); (c) the contribution by ConocoPhillips to Phillips 66 of all the outstanding stock of Phillips 66 Company and any Phillips 66 Assets held directly by ConocoPhillips in exchange for (i) the assumption by Phillips 66 of any Phillips 66 Liabilities from ConocoPhillips, (ii) a special cash distribution; and (iii) a number of shares of Phillips 66 Common Stock (the Contribution); and (d) the distribution to holders of shares of ConocoPhillips Common Stock, through a spin-off, of all the outstanding shares of Phillips 66 Common Stock, as more fully described in the Separation and Distribution Agreement and the Ancillary Agreements (the Distribution);
WHEREAS, as of the date hereof, ConocoPhillips is the common parent of an affiliated group of corporations, including ConocoPhillips Company, Phillips 66, and Phillips 66 Company, which has elected to file consolidated Federal Income Tax Returns;
WHEREAS, as a result of the Distribution, Phillips 66 and its subsidiaries will cease to be members of the affiliated group (as that term is defined in Section 1504 of the Code) of which ConocoPhillips is the common parent;
WHEREAS, the parties desire to provide for and agree upon the allocation between the parties of liabilities for Taxes arising prior to, as a result of, and subsequent to the Distribution, and to provide for and agree upon other matters relating to Taxes;
NOW THEREFORE, in consideration of the mutual agreements contained herein, the parties hereby agree as follows:
Section 1. Definition of Terms.
For purposes of this Agreement (including the recitals hereof), the following terms have the following meanings, and capitalized terms used but not otherwise defined herein shall have the meaning ascribed to them in the Separation and Distribution Agreement:
Accounting Cutoff Date means, with respect to Phillips 66, any date as of the end of which there is a closing of the financial accounting records for such entity.
Accrued has the meaning set forth in Section 5.02(b)(i)(A) of this Agreement.
Accrued ConocoPhillips Other Tax Liability has the meaning set forth in Section 5.03(b)(ii)(A)of this Agreement.
Accrued ConocoPhillips State Income Tax Asset has the meaning set forth in Section 5.02(b)(ii)(A) of this Agreement.
Accrued ConocoPhillips State Income Tax Liability has the meaning set forth in Section 5.02(b)(ii)(A) of this Agreement.
Accrued Phillips 66 Federal Income Tax Asset has the meaning set forth in Section 5.02(b)(i)(A) of this Agreement.
Accrued Phillips 66 Income Tax Asset has the meaning set forth in Section 5.02(b)(i)(A) of this Agreement.
Accrued Phillips 66 Other Tax Liability has the meaning set forth in Section 5.03(b)(i)(A) of this Agreement.
Accrued Phillips 66 State Income Tax Asset has the meaning set forth in Section 5.02(b)(i)(A) of this Agreement.
Accrued Phillips 66 Federal Income Tax Liability has the meaning set forth in Section 5.02(b)(i)(A) of this Agreement.
Accrued Phillips 66 Income Tax Liability has the meaning set forth in Section 5.02(b)(i)(A) of this Agreement.
Accrued Phillips 66 State Income Tax Liability has the meaning set forth in Section 5.02(b)(i)(A) of this Agreement.
Active Trade or Business means the active conduct (as defined in Section 355(b)(2) of the Code and the regulations thereunder) by (a) Phillips 66 and its separate affiliated group (as defined in Section 355(b)(3)(B) of the Code) of the Refining Active Business (as defined in the Ruling Request) as conducted immediately prior to the Distribution; and (b) Phillips 66 Company and its separate affiliated group (as defined in Section 355(b)(3)(B) of the Code) of the Refining Active Business (as defined in the Ruling Request) as conducted immediately prior to the Internal Distribution.
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Adjustment Request means any formal or informal claim or request filed with any Tax Authority, or with any administrative agency or court, for the adjustment, refund, or credit of Taxes, including (a) any amended Tax return claiming adjustment to the Taxes as reported on the Tax Return or, if applicable, as previously adjusted, (b) any claim for equitable recoupment or other offset, and (c) any claim for refund or credit of Taxes previously paid.
Affiliate means any entity that is directly or indirectly controlled by either the person in question or an Affiliate of such person. Control means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through ownership of voting securities, by contract or otherwise. The term Affiliate shall refer to Affiliates of a person as determined immediately after the Distribution.
Agreed UK Group Relief Surrenders means Group Relief Surrenders between members of one Group and members of the other Group in the amounts and in respect of the UK Corporation Tax UK Accounting Periods set out in Appendix 1 to Schedule 2.05 or such other Group Relief Surrenders as fall to be made in accordance with Paragraph 3 of Schedule 2.05, and any reference to an amendment to an Agreed UK Group Relief Surrender shall include any amendment or adjustment to, any withdrawal of and the making of any claim, election, surrender, notice or consent that is inconsistent with the claims, elections, surrenders, notices or consents made in respect of such Agreed UK Group Relief Surrender prior to Closing.
Agreement means this Tax Sharing Agreement.
Ancillary Agreement has the meaning set forth in the Separation and Distribution Agreement.
Benefit Intercompany Payee has the meaning set forth in Section 2.09 of this Agreement.
Benefit Intercompany Payor has the meaning set forth in Section 2.09 of this Agreement.
Board Certificate has the meaning set forth in Section 6.02(e) of this Agreement.
Business Day means a day other than a Saturday, a Sunday, or a day on which banking institutions located in Houston, Texas, New York, New York, or London, England are authorized or obligated by law or executive order to close.
Code means the U.S. Internal Revenue Code of 1986, as amended.
Companies and Company have the meaning provided in the first sentence of this Agreement.
Contribution has the meaning set forth in the recitals.
ConocoPhillips has the meaning provided in the first sentence of this Agreement.
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ConocoPhillips Affiliated Group means the affiliated group (as that term is defined in Section 1504 of the Code and Treasury Regulations thereunder) of which ConocoPhillips is the common parent.
ConocoPhillips Business has the meaning provided in the Separation and Distribution Agreement.
ConocoPhillips Company has the meaning provided in the first sentence of this Agreement.
ConocoPhillips Federal Consolidated Income Tax Return means any U.S. Federal consolidated Tax Return in respect of Federal Income Taxes for the ConocoPhillips Affiliated Group.
ConocoPhillips Group means ConocoPhillips and its Affiliates, excluding any entity that is a member of the Phillips 66 Group.
ConocoPhillips Group Transaction Returns shall have the meaning set forth in Section 4.04(b) of this Agreement.
ConocoPhillips Past Practice has the meaning set forth in Section 4.04(a) of this Agreement.
ConocoPhillips Separate Return means any Separate Return of ConocoPhillips or any member of the ConocoPhillips Group.
ConocoPhillips State Combined Income Tax Return means a consolidated, combined or unitary State Tax Return in respect of State Income Taxes that actually includes, by election or otherwise, one or more members of the ConocoPhillips Group together with one or more members of the Phillips 66 Group.
ConocoPhillips Tax Attributes means any Tax Attributes other than Phillips 66 Tax Attributes.
ConocoPhillips UK Tax Practice has the meaning set forth in Section 4.04(a) of this Agreement.
ConocoPhillips UK Topco means ConocoPhillips Holdings Limited.
Controlling Party means, in the case of any Tax Contest described in Section 9.02(a) or (b), the Company entitled to control the Tax Contest under such Section.
Corresponding Relievable Loss means a Relievable Loss which may be the subject of an Agreed UK Group Relief Surrender as set out in Appendix 1 to Schedule 2.05 subject to adjustment as contemplated by Paragraph 3 of Schedule 2.05.
CTA 2009 means the United Kingdoms Corporation Tax Act 2009.
CTA 2010 means the United Kingdoms Corporation Tax Act 2010.
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Dispute has the meaning set forth in Section 12 of this Agreement.
DGCL means the Delaware General Corporation Law.
Distribution has the meaning set forth in the recitals.
Distribution Date means the date determined in accordance with Section 3.3(a) of the Separation and Distribution Agreement on which the Distribution occurs.
Employee Matters Agreement has the meaning set forth in the Separation and Distribution Agreement.
Excess Foreign Tax Credits means, for each category of foreign tax credits under Section 901 of the Code, the excess, if any, of the foreign tax credits (other than foreign tax credits that are Phillips 66 Tax Attributes) utilized by the Phillips 66 Business with respect to the ConocoPhillips Federal Consolidated Income Tax Returns for the Pre-Distribution Periods that end during 2011 or 2012 and any Straddle Period, collectively, taking into account any adjustment pursuant to a Final Determination of any such Tax Return, as determined pursuant to and consistent with the ConocoPhillips Past Practice, over the amount of such foreign tax credits utilized by the Phillips 66 Business as reported on such Tax Returns (other than any amended Tax Returns), collectively, as determined pursuant to and consistent with the ConocoPhillips Past Practice.
Federal Income Tax means any Tax imposed by Subtitle A of the Code, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing.
Federal Other Tax means any Tax imposed by the federal government of the United States of America other than any Federal Income Taxes, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing.
Federal Tax means any Federal Income Taxes or Federal Other Taxes.
Fifty-Percent or Greater Interest has the meaning ascribed to such term for purposes of Sections 355(d) and (e) of the Code.
Final Determination means the final resolution of liability for any Income Tax or Other Tax, which resolution may be for a specific issue or adjustment or for a taxable period, (a) by IRS Form 870 or 870-AD (or any successor forms thereto), on the later of the date of acceptance by or on behalf of the taxpayer or the IRS, or by a comparable form under the Laws of a State, local, or foreign taxing jurisdiction, except that a Form 870 or 870-AD or comparable form shall not constitute a Final Determination to the extent that it reserves (whether by its terms or by operation of Law) the right of the taxpayer to file a claim for refund or the right of the Tax Authority to assert a further deficiency in respect of such issue or adjustment or for such taxable period (as applicable); (b) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable; (c) by a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Code, or a comparable agreement under the Laws of a State, local, or foreign taxing jurisdiction; (d) by any allowance of a refund or credit in respect of an overpayment of Income Tax or Other Tax, but only after the
5
expiration of all periods during which such refund may be recovered (including by way of offset) by the jurisdiction imposing such Income Tax or Other Tax; (e) by a final settlement resulting from a treaty-based competent authority determination; or (f) by any other final disposition, including by reason of the expiration of the applicable statute of limitations or by mutual agreement of the parties.
Foreign Income Tax means any Tax imposed by any foreign country or any possession of the United States, or by any political subdivision of any foreign country or any possession of the United States, which is an income tax as defined in Treasury Regulation Section 1.901-2, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing.
Foreign Other Tax means any Tax imposed by any foreign country or any possession of the United States, or by any political subdivision of any foreign country or any possession of the United States, other than any Foreign Income Taxes and Foreign Property Taxes, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing.
Foreign Property Tax means any real, personal and intangible ad valorem property Tax imposed by any foreign country or any possession of the United States, or by any political subdivision of any foreign country or any possession of the United States, and any interest penalties, additions to tax, or additional amounts in respect of the foregoing.
Foreign Tax means any Foreign Income Taxes, Foreign Property Taxes or Foreign Other Taxes.
Group means the ConocoPhillips Group or the Phillips 66 Group, or both, as the context requires.
Group Relief Surrender means the surrender of Relievable Losses in accordance with Part 5 of CTA 2010.
Income Tax means any Federal Income Tax, State Income Tax or Foreign Income Tax.
Indemnification and Release Agreement has the meaning set forth in the Separation and Distribution Agreement.
Indemnitee has the meaning set forth in Section 5.06(b) of this Agreement.
Indemnitor has the meaning set forth in Section 5.06(b) of this Agreement.
Internal Contribution has the meaning set forth in the recitals.
Internal Distribution has the meaning set forth in the recitals.
Internal Distribution Date has the meaning set forth in the Separation and Distribution Agreement.
IRS means the U.S. Internal Revenue Service.
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Joint Return means any Tax Return of a member of the ConocoPhillips Group or the Phillips 66 Group that is not a Separate Return.
Non-Controlling Party means, in the case of any Tax Contest described in Section 9.02(a) or (b), the Company not entitled to control the Tax Contest under such Section.
Notified Action has the meaning set forth in Section 6.03(a) of this Agreement.
Other Tax means any Federal Other Tax, State Other Tax, or Foreign Other Tax.
Payment Date means (a) with respect to any ConocoPhillips Federal Consolidated Income Tax Return, the due date (determined without regard to extensions) for filing the return determined under Section 6072 of the Code and the date the return is filed, and (b) with respect to any other Tax Return, the corresponding dates determined under the applicable Tax Law.
Person means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof, without regard to whether any entity is treated as disregarded for U.S. Federal Income Tax purposes.
Phillips 66 has the meaning provided in the first sentence of this Agreement.
Phillips 66 Business has the meaning set forth in the Separation and Distribution Agreement.
Phillips 66 Capital Stock means all classes or series of capital stock of Phillips 66, including (a) the Phillips 66 Common Stock, (b) all options, warrants and other rights to acquire such capital stock and (c) all instruments properly treated as stock in Phillips 66 for U.S. Federal Income Tax purposes.
Phillips 66 Carryback means any net operating loss, net capital loss, excess tax credit, or other similar Tax Item of any member of the Phillips 66 Group which may or must be carried from one Tax Period to another prior Tax Period under the Code or other applicable Tax Law.
Phillips 66 Common Stock has the meaning set forth in the Separation and Distribution Agreement.
Phillips 66 Company has the meaning provided in the first sentence of this Agreement.
Phillips 66 Company Capital Stock means all classes or series of capital stock of Phillips 66 Company, including (a) the common stock, par value $0.01 per share, of Phillips 66 Company, (b) all options, warrants and other rights to acquire such capital stock and (c) all instruments properly treated as stock in Phillips 66 Company for U.S. Federal Income Tax purposes.
Phillips 66 Federal Consolidated Income Tax Return means any U.S. Federal Income Tax Return for the affiliated group (as that term is defined in Section 1504 of the Code) of which Phillips 66 is the common parent.
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Phillips 66 Group means Phillips 66 and its Affiliates, as determined immediately after the Distribution.
Phillips 66 Restructuring has the meaning set forth in Section 6.02(f) of this Agreement.
Phillips 66 Separate Return means any Separate Return of Phillips 66 or any member of the Phillips 66 Group.
Phillips 66 Tax Attributes means any Tax Attributes that are attributable to, or arise with respect to, assets or activities of the Phillips 66 Business, determined on a with and without basis.
Post-Distribution Period means any Tax Period beginning after the Distribution Date, and, in the case of any Straddle Period, the portion of such Straddle Period beginning the day after the Distribution Date.
Pre-Distribution Period means any Tax Period ending on or before the Distribution Date, and, in the case of any Straddle Period, the portion of such Straddle Period ending on the Distribution Date.
Prime Rate has the meaning set forth in the Separation and Distribution Agreement.
Privilege means any privilege that may be asserted under applicable Law, including any privilege arising under or relating to the attorney-client relationship (including the attorney-client and work product privileges), the accountant-client privilege and any privilege relating to internal evaluation processes.
Proposed Acquisition Transaction means a transaction or series of transactions (or any agreement, understanding or arrangement, within the meaning of Section 355(e) of the Code and Treasury Regulation Section 1.355-7, or any other regulations promulgated thereunder, to enter into a transaction or series of transactions), whether such transaction is supported by Phillips 66 management or shareholders, is a hostile acquisition, or otherwise, as a result of which Phillips 66 would merge or consolidate with any other Person or as a result of which any Person or any group of related Persons would (directly or indirectly) acquire, or have the right to acquire, from Phillips 66 and/or one or more holders of outstanding shares of Phillips 66 Capital Stock, a number of shares of Phillips 66 Capital Stock that would, when combined with any other changes in ownership of Phillips 66 Capital Stock pertinent for purposes of Section 355(e) of the Code, comprise 40% or more of (a) the value of all outstanding shares of stock of Phillips 66 as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series, or (b) the total combined voting power of all outstanding shares of voting stock of Phillips 66 as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series. Notwithstanding the foregoing, a Proposed Acquisition Transaction shall not include (x) the adoption by Phillips 66 of a shareholder rights plan or (y) issuances by Phillips 66 that satisfy Safe Harbor VIII (relating to acquisitions in connection with a persons performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulation Section 1.355-7(d). For purposes of determining whether a transaction constitutes an indirect acquisition, any
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recapitalization resulting in a shift of voting power or any redemption of shares of stock shall be treated as an indirect acquisition of shares of stock by the non-exchanging shareholders. This definition and the application thereof is intended to monitor compliance with Section 355(e) of the Code and shall be interpreted accordingly. Any clarification of, or change in, the statute or regulations promulgated under Section 355(e) of the Code shall be incorporated in this definition and its interpretation.
Relievable Losses means losses or other amounts eligible for group relief in accordance with Part 5 of CTA 2010, and any reference to the use of a Relievable Loss includes the use of a Relievable Loss as an allowance, credit, deduction, exemption or set off in respect of any tax, or in the computation of any income, profits or gains for the purposes of any tax, or to obtain a repayment of or saving of tax.
Representation Letters means the representation letters and any other materials (including, without limitation, a Ruling Request and any related supplemental submissions to the IRS) delivered or deliverable by ConocoPhillips and others in connection with the rendering by Tax Advisors, and/or the issuance by the IRS, of the Tax Opinions/Rulings.
Responsible Company means, with respect to any Tax Return, the Company having responsibility for preparing and filing such Tax Return under this Agreement.
Retention Date has the meaning set forth in Section 8.01 of this Agreement.
Ruling means the private letter ruling issued by the IRS to ConocoPhillips in connection with the Transactions.
Ruling Request means any letter filed by ConocoPhillips with the IRS requesting a ruling (including the Ruling) regarding certain tax consequences of the Transactions (including all attachments, exhibits, and other materials submitted with such ruling request letter) and any amendment or supplement to such ruling request letter.
Section 6.02(e) Acquisition Transaction means any transaction or series of transactions that is not a Proposed Acquisition Transaction but would be a Proposed Acquisition Transaction if the percentage reflected in the definition of Proposed Acquisition Transaction were 25% instead of 40%.
Separate Return means (a) in the case of any Tax Return of any member of the Phillips 66 Group (including any consolidated, combined or unitary return), any such Tax Return that does not include any member of the ConocoPhillips Group and (b) in the case of any Tax Return of any member of the ConocoPhillips Group (including any consolidated, combined or unitary return), any such Tax Return that does not include any member of the Phillips 66 Group.
Separation and Distribution Agreement means the Separation and Distribution Agreement, as amended from time to time, by and among ConocoPhillips and Phillips 66 dated as of April 26, 2012.
Special Joint Tax Contest means any Tax Contest with respect to a Joint Return to which Section 9.02(c)(ii) applies involving a potential adjustment as a result of which adjustment
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Phillips 66 may reasonably be expected to become liable to make any indemnification payment (or any payment under Section 2.07) of at least the amount set forth on Schedule 9.02.
Specified Separate Return means any Separate Return reflecting both Taxes for which Phillips 66 is responsible under Section 2 and Taxes for which ConocoPhillips is responsible under Section 2.
State means each State of the United States and the District of Columbia.
State Income Tax means any Tax imposed by any State of the United States or by any political subdivision of any such State which is imposed on or measured by net income, including state and local franchise or similar Taxes measured by net income, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing.
State Other Tax means any Tax imposed by any State of the United States or by any political subdivision of any such State other than any State Income Taxes and State Property Tax, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing.
State Property Tax means any real, personal and intangible ad valorem property Tax imposed by any State of the United States or by any political subdivision of any such State, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing.
State Separate Income Tax Return means a Separate Return in respect of State Income Taxes.
State Tax means any State Income Taxes, State Property Taxes or State Other Taxes.
Straddle Period means any Tax Period that begins on or before and ends after the Distribution Date.
Substantial Authority means substantial authority within the meaning of Section 6662(d)(2)(B) of the Code and Treasury Regulations Section 1.6662-4(d) (or, in the case of any Taxes not subject to Section 6662(a), an analogous standard).
Tax or Taxes means any income, gross income, gross receipts, profits, capital stock, franchise, withholding, payroll, social security, workers compensation, unemployment, disability, property, ad valorem, stamp, excise, severance, occupation, service, sales, use, license, lease, transfer, import, export, value added, alternative minimum, estimated or other tax (including any fee, assessment, or other charge in the nature of or in lieu of any tax) imposed by any governmental entity or political subdivision thereof, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing.
Tax Advisor means a U.S. tax counsel or accountant of recognized national standing.
Tax Attribute or Attribute means a net operating loss, net capital loss, unused investment credit, unused foreign tax credit, excess charitable contribution, general business credit, minimum tax credit or any other Tax Item that could reduce a Tax.
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Tax Authority means, with respect to any Tax, the governmental entity or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such entity or subdivision.
Tax Benefit means any refund or reduction in otherwise required Tax payments.
Tax Contest means an audit, review, examination, or any other administrative or judicial proceeding with the purpose or effect of redetermining Taxes (including any administrative or judicial review of any claim for refund).
Tax Control means the definition of control set forth in Section 368(c) of the Code (or in any successor statute or provision), as such definition may be amended from time to time.
Tax-Free Status means the qualification of each of the Internal Contribution and Internal Distribution, taken together, and the Contribution and Distribution, taken together, (a) as a reorganization described in Sections 355(a) and 368(a)(1)(D) of the Code, (b) as a transaction in which the stock distributed thereby is qualified property for purposes of Sections 355(d), 355(e) and 361(c) of the Code, and (c) a transaction in which ConocoPhillips, ConocoPhillips Company, Phillips 66, and Phillips 66 Company, and the shareholders of ConocoPhillips, recognize no income or gain for Federal Income Tax purposes pursuant to Sections 355, 361, and 1032 of the Code, other than, (x) in the case of ConocoPhillips, ConocoPhillips Company, Phillips 66, and Phillips 66 Company, intercompany items or excess loss accounts taken into account pursuant to the Treasury Regulations promulgated pursuant to Section 1502 of the Code, and (y) in the case of shareholders of ConocoPhillips, any receipt of cash in lieu of fractional shares.
Tax Intercompany Payee has the meaning set forth in Section 2.09 of this Agreement.
Tax Intercompany Payor has the meaning set forth in Section 2.09 of this Agreement.
Tax Item means, (a) with respect to any Income Tax, any item of income, gain, loss, deduction, credit or recapture of credit or any other item that may have the effect of increasing or decreasing any Income Tax paid or payable, and (b) with respect to any other Tax, any item that may have the effect of increasing or decreasing any Tax paid or payable.
Tax Law means the Law of any governmental entity or political subdivision thereof relating to any Tax.
Tax Opinion means (a) the opinion of Wachtell, Lipton, Rosen & Katz in connection with the Contribution and the Distribution, and/or (b) the opinion (or opinions) of Tax Advisors in connection with the Transactions.
Tax Opinions/Rulings means the Tax Opinion (or Tax Opinions) of Tax Advisors and/or the Ruling (or Rulings) by the IRS deliverable to ConocoPhillips in connection with the Contribution and the Distribution.
Tax Packages has the meaning set forth in Section 7.02(b) of this Agreement.
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Tax Period means, with respect to any Tax, the period for which the Tax is reported as provided under the Code or other applicable Tax Law.
Tax Records means any Tax Returns, Tax Return workpapers, documentation relating to any Tax Contests, and any other books of account or records (whether or not in written, electronic or other tangible or intangible forms and whether or not stored on electronic or any other medium) required to be maintained under the Code or other applicable Tax Laws or under any record retention agreement with any Tax Authority.
Tax-Related Losses means (a) all federal, state and local Taxes (including interest and penalties thereon) imposed pursuant to any settlement, Final Determination, judgment or otherwise; (b) all accounting, legal and other professional fees, and court costs incurred in connection with such Taxes; and (c) all costs, expenses and damages associated with stockholder litigation or controversies and any amount paid by ConocoPhillips (or any ConocoPhillips Affiliate) or Phillips 66 (or any Phillips 66 Affiliate) in respect of the liability of shareholders, whether paid to shareholders or to the IRS or any other Tax Authority, in each case, resulting from the failure of the Internal Contribution and Internal Distribution, taken together, or the Contribution and Distribution, taken together, to have Tax-Free Status.
Tax Return means any report of Taxes due, any claim for refund of Taxes paid, any information return with respect to Taxes, or any other similar report, statement, declaration, or document required to be filed under the Code or other Tax Law, including any attachments, exhibits, or other materials submitted with any of the foregoing, and including any amendments or supplements to any of the foregoing.
Transactions means the Internal Contribution, the Internal Distribution, the Contribution, the Distribution and the other transactions contemplated by the Separation and Distribution Agreement.
Transfer Pricing Adjustment means any proposed or actual allocation by a Tax Authority of any Tax Item between or among any member of the ConocoPhillips Group and any member of the Phillips 66 Group with respect to any Pre-Distribution Period.
Treasury Regulations means the regulations promulgated from time to time under the Code as in effect for the relevant Tax Period.
UK Corporation Tax means corporation tax charged pursuant to section 2 of CTA 2009 and any corresponding tax on profits or gains imposed by a UK Tax Authority (including, for the absence of doubt, the supplementary charge charged pursuant to section 330 of CTA 2010).
UK GPA means ConocoPhillips UK Topcos group payment arrangement made pursuant to section 36 of the United Kingdoms Finance Act 1998 or section 59F of the United Kingdoms Taxes Management Act 1970.
UK Nominated Company means ConocoPhillips (U.K.) Limited.
UK Tax means Tax imposed, assessed or collected by a UK Tax Authority.
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UK Tax Authority means any Tax Authority within the United Kingdom.
UK Tax Document means UK Tax Returns, and claims, elections, surrenders, disclaimers, notices and consents for UK Tax purposes.
UK Tax Return means any Tax Return required to be made to any UK Tax Authority.
United Kingdom means the United Kingdom of Great Britain and Northern Ireland.
Unqualified Tax Opinion means an unqualified will opinion of a Tax Advisor, which Tax Advisor is acceptable to ConocoPhillips, on which ConocoPhillips may rely to the effect that a transaction will not affect the Tax-Free Status. Any such opinion must assume that the Internal Contribution, the Internal Distribution, the Contribution and the Distribution would have qualified for Tax-Free Status if the transaction in question did not occur.
VAT means value added tax imposed pursuant to European Council Directive 2006/112/EC, and any national legislation of a member state of the European Union giving effect thereto, and any similar sales or turnover tax.
Section 2. Allocation of Tax Liabilities and Tax Benefits.
Section 2.01 General Rule.
(a) Phillips 66 Liability. Phillips 66 shall be liable for, and shall indemnify and hold harmless the ConocoPhillips Group from and against any liability for, Taxes which are allocated to Phillips 66 under this Section 2.
(b) ConocoPhillips Liability. ConocoPhillips shall be liable for, and shall indemnify and hold harmless the Phillips 66 Group from and against any liability for, Taxes which are allocated to ConocoPhillips under this Section 2.
Section 2.02 Federal Tax and Tax Benefits. Except as provided in Section 2.06, Federal Income Tax and Federal Other Tax and related Tax Benefits shall be allocated as follows:
(a) ConocoPhillips Federal Consolidated Income Tax for Pre-Distribution, Straddle and Certain Post-Distribution Periods.
(i) With respect to any ConocoPhillips Federal Consolidated Income Tax Return for any Pre-Distribution Period or any Straddle Period, (A) Phillips 66 shall be responsible for any and all Federal Income Taxes and any reduction in any Tax Benefit (other than any alternative minimum Tax or reduction in any alternative minimum Tax Benefit) attributable to, or arising with respect to or as a result of, assets or activities of the Phillips 66 Business, determined on a with and without basis pursuant to and consistent with the ConocoPhillips Past Practice; and (B) ConocoPhillips shall be responsible for any and all Federal Income Taxes and any reduction in any Tax Benefit other than Federal Income Taxes (and any reduction in Tax Benefits) for which Phillips 66 is responsible pursuant to Section 2.02(a)(i)(A).
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(ii) With respect to any ConocoPhillips Federal Consolidated Income Tax Return for any Pre-Distribution Period or any Straddle Period, subject to Section 4.07, Phillips 66 shall be entitled to any Tax Benefit (other than any alternative minimum Tax Benefit) attributable to, or arising with respect to or as a result of, assets or activities of the Phillips 66 Business, determined on a with and without basis pursuant to and consistent with the ConocoPhillips Past Practice. For purposes of the calculations pursuant to this Section 2.02(a)(ii), in any Pre-Distribution Period or Straddle Period for which both Phillips 66 Tax Attributes and ConocoPhillips Tax Attributes are available for use, such Tax Attributes shall be deemed utilized in the order determined pursuant to and consistent with the ConocoPhillips Past Practice.
(iii) With respect to any ConocoPhillips Federal Consolidated Income Tax Return for any Post-Distribution Period (other than any Straddle Period), Phillips 66 shall be responsible for any and all Federal Income Taxes and any reduction in any Tax Benefit (other than any alternative minimum Tax or reduction in any alternative minimum Tax Benefit), whether in connection with the filing of such a Tax Return or a Final Determination of such a Tax Return, that would not have arisen but for the utilization by the Phillips 66 Business for any Pre-Distribution Period that ends during 2011 or 2012 or any Straddle Period of Excess Foreign Tax Credits, as determined pursuant to and consistent with the ConocoPhillips Past Practice.
(b) Separate Return Federal Income Tax. (i) Phillips 66 shall be responsible for any and all Federal Income Taxes relating to any Phillips 66 Separate Return; and (ii) except as set forth in Section 2.02(a)(iii), ConocoPhillips shall be responsible for any and all Federal Income Taxes relating to any ConocoPhillips Separate Return.
(c) Federal Other Tax.
(i) For all Pre-Distribution Periods and Straddle Periods, (A) with respect to any and all Federal Other Taxes relating to any Tax Return filed or required to be filed under applicable Tax Law by any member of the ConocoPhillips Group, (I) Phillips 66 shall be responsible for any and all Federal Other Taxes attributable to, or arising with respect to or as a result of, assets or activities of the Phillips 66 Business; and (II) ConocoPhillips shall be responsible for any and all other Federal Other Taxes; and (B) with respect to any and all Federal Other Taxes relating to any Tax Return filed or required to be filed under applicable Tax Law by any member of the Phillips 66 Group, (I) ConocoPhillips shall be responsible for any and all Federal Other Taxes attributable to, or arising with respect to or as a result of, assets or activities of the ConocoPhillips Business and (II) Phillips 66 shall be responsible for any and all other Federal Other Taxes.
(ii) For all Post-Distribution Periods (other than any Straddle Periods or portion thereof), (A) Phillips 66 shall be responsible for any and all Federal Other Taxes relating to any Phillips 66 Separate Return; and (B) ConocoPhillips shall be responsible for any and all Federal Other Taxes relating to any ConocoPhillips Separate Return.
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Section 2.03 State Tax and Tax Benefits. Except as provided in Section 2.06, State Income Tax, State Property Tax, and State Other Tax and related Tax Benefits shall be allocated as follows:
(a) State Income Tax.
(i) For any Pre-Distribution Period or any Straddle Period, (A) with respect to any State Income Taxes relating to any ConocoPhillips State Combined Income Tax Return or any State Separate Income Tax Return filed or required to be filed under applicable Tax Law by any member of the ConocoPhillips Group, (I) Phillips 66 shall be responsible for any and all State Income Taxes and any reduction in any Tax Benefit attributable to, or arising with respect to or as a result of, assets or activities of the Phillips 66 Business, determined as reported on such Tax Return or as subsequently adjusted pursuant to a Final Determination (which, for the absence of doubt, means the State Income Taxes computed for the applicable entity using its respective apportionment factor and allocated to the Phillips 66 Business pursuant to and consistent with the ConocoPhillips Past Practice); and (II) ConocoPhillips shall be responsible for any and all State Income Taxes and any reduction in any Tax Benefit other than State Income Taxes (and any reduction in Tax Benefits) for which Phillips 66 is responsible pursuant to Section 2.03(a)(i)(A)(I); and (B) with respect to any State Income Taxes relating to any ConocoPhillips State Combined Income Tax Return or any State Separate Income Tax Return filed or required to be filed under applicable Tax Law by any member of the Phillips 66 Group, (I) ConocoPhillips shall be responsible for any and all State Income Taxes and any reduction in any Tax Benefit attributable to, or arising with respect to or as a result of, assets or activities of the ConocoPhillips Business, determined as reported on such Tax Return or as subsequently adjusted pursuant to a Final Determination (which, for the absence of doubt, means the State Income Taxes computed for the applicable entity using its respective apportionment factor and allocated to the ConocoPhillips Business pursuant to and consistent with the ConocoPhillips Past Practice); and (II) Phillips 66 shall be responsible for any and all State Income Taxes and any reduction in any Tax Benefit other than State Income Taxes (and any reduction in Tax Benefits) for which ConocoPhillips is responsible pursuant to Section 2.03(a)(i)(B)(I).
(ii) For any Pre-Distribution Period or any Straddle Period, subject to Section 4.07, (A) with respect to any State Income Taxes relating to any ConocoPhillips State Combined Income Tax Return or any State Separate Income Tax Return filed or required to be filed under applicable Tax Law by any member of the ConocoPhillips Group, (I) Phillips 66 shall be entitled to any Tax Benefit attributable to, or arising with respect to or as a result of, assets or activities of the Phillips 66 Business, determined as reported on such Tax Return or as subsequently adjusted pursuant to a Final Determination (which, for the absence of doubt, means the Tax Benefit computed for the applicable entity using its respective apportionment factor and allocated to the Phillips 66 Business pursuant to and consistent with the ConocoPhillips Past Practice); and (II) ConocoPhillips shall be entitled to any and all Tax Benefits other than Tax Benefits to which Phillips 66 is entitled under Section 2.03(a)(ii)(A)(I); and (B) with respect to any State Income Taxes relating to any ConocoPhillips State Combined Income Tax Return or any State Separate Income Tax Return filed or required to be filed under applicable Tax Law by any member of the Phillips 66 Group, (I) ConocoPhillips shall be entitled to any Tax Benefit attributable to, or arising with respect to or as a result of, assets or activities of the ConocoPhillips Business, determined as reported on such Tax Return or as subsequently adjusted pursuant to a Final Determination (which, for the absence of doubt, means the
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Tax Benefit computed for the applicable entity using its respective apportionment factor and allocated to the ConocoPhillips Business pursuant to and consistent with the ConocoPhillips Past Practice); and (II) Phillips 66 shall be entitled to any and all Tax Benefits other than Tax Benefits to which ConocoPhillips is entitled under Section 2.03(a)(ii)(B)(I). For purposes of the calculations pursuant to this Section 2.03(a)(ii), in any Pre-Distribution Period or Straddle Period for which both Phillips 66 Tax Attributes and ConocoPhillips Tax Attributes are available for use, such Tax Attributes shall be deemed utilized in the order determined pursuant to and consistent with the ConocoPhillips Past Practice.
(b) State Property Tax. (i) Phillips 66 shall be responsible for any and all State Property Taxes imposed (whether in respect of a period, or a time, before or after the Distribution) with respect to any property owned by any member of the Phillips 66 Group immediately after the Distribution; and (ii) ConocoPhillips shall be responsible for any and all State Property Taxes imposed with respect to any property owned by any member of the ConocoPhillips Group immediately after the Distribution or any property formerly owned by any member of the ConocoPhillips Group or Phillips 66 Group before the Distribution other than State Property Taxes for which Phillips 66 is responsible pursuant to Section 2.03(b)(i).
(c) State Other Tax.
(i) For all Pre-Distribution Periods and Straddle Periods, (A) with respect to any and all State Other Taxes relating to any Tax Return filed or required to be filed under applicable Tax Law by any member of the ConocoPhillips Group, (I) Phillips 66 shall be responsible for any and all State Other Taxes attributable to, or arising with respect to or as a result of, assets or activities of the Phillips 66 Business; and (II) ConocoPhillips shall be responsible for any and all other State Other Taxes; and (B) with respect to any and all State Other Taxes relating to any Tax Return filed or required to be filed under applicable Tax Law by any member of the Phillips 66 Group, (I) ConocoPhillips shall be responsible for any and all State Other Taxes attributable to, or arising with respect to or as a result of, assets or activities of the ConocoPhillips Business and (II) Phillips 66 shall be responsible for any and all other State Other Taxes.
(ii) For all Post-Distribution Periods (other than any Straddle Periods or portion thereof), (A) Phillips 66 shall be responsible for any and all State Other Taxes relating to any Phillips 66 Separate Return; and (B) ConocoPhillips shall be responsible for any and all State Other Taxes relating to any ConocoPhillips Separate Return.
Section 2.04 Foreign Tax and Tax Benefits. Subject to Section 2.05 and except as provided in Section 2.06, Foreign Income Tax, Foreign Property Tax and Foreign Other Tax and related Tax Benefits shall be allocated as follows:
(a) Separate Return Foreign Income Tax. (i) Phillips 66 shall be responsible for any and all Foreign Income Taxes relating to any Phillips 66 Separate Return, including Foreign Income Tax of Phillips 66 or any member of the Phillips 66 Group imposed by way of withholding by a member of the ConocoPhillips Group; and (ii) ConocoPhillips shall be responsible for any and all Foreign Income Taxes relating to any ConocoPhillips Separate Return, including Foreign Income Tax of ConocoPhillips or any member of the ConocoPhillips Group imposed by way of
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withholding by a member of the Phillips 66 Group; provided, however, that, in any case falling within clause (i) or clause (ii), UK Corporation Tax that is to be or has been discharged by the UK Nominated Company pursuant to the UK GPA shall be dealt with in accordance with Paragraph 2.02(a) to Paragraph 2.02(c) of Schedule 2.05.
(b) Foreign Property Tax. (i) Phillips 66 shall, except, for the absence of doubt, as regards VAT imposed by a UK Tax Authority to which Paragraph 2.01(b) of Schedule 2.05 applies (which shall be dealt with in accordance with that paragraph), be responsible for any and all Foreign Property Taxes imposed (whether in respect of a period, or a time, before or after the Distribution) with respect to any property owned by any member of the Phillips 66 Group immediately after the Distribution; and (ii) ConocoPhillips shall be responsible for any and all Foreign Property Taxes imposed with respect to any property owned by any member of the ConocoPhillips Group immediately after the Distribution or any property formerly owned by any member of the ConocoPhillips Group or Phillips 66 Group before the Distribution other than Foreign Property Taxes for which Phillips 66 is responsible pursuant to Section 2.04(b)(i).
(c) Foreign Other Tax.
(i) Subject to Section 2.04(c)(iii), for all Pre-Distribution Periods and Straddle Periods, (A) with respect to any and all Foreign Other Taxes relating to any Tax Return filed or required to be filed under applicable Tax Law by any member of the ConocoPhillips Group, (I) Phillips 66 shall be responsible for any and all Foreign Other Taxes attributable to, or arising with respect to or as a result of, assets or activities of the Phillips 66 Business; and (II) ConocoPhillips shall be responsible for any and all other Foreign Other Taxes; and (B) with respect to any and all Foreign Other Taxes relating to any Tax Return filed or required to be filed under applicable Tax Law by any member of the Phillips 66 Group, (I) ConocoPhillips shall be responsible for any and all Foreign Other Taxes attributable to, or arising with respect to or as a result of, assets or activities of the ConocoPhillips Business; and (II) Phillips 66 shall be responsible for any and all other Foreign Other Taxes.
(ii) Subject to Section 2.04(c)(iii), for all Post-Distribution Periods (other than any Straddle Periods or portion thereof), (A) Phillips 66 shall be responsible for any and all Foreign Other Taxes relating to any Phillips 66 Separate Return; and (B) ConocoPhillips shall be responsible for any and all Foreign Other Taxes relating to any ConocoPhillips Separate Return.
(iii) VAT imposed by a UK Tax Authority to which Paragraph 2.01(b) of Schedule 2.05 applies shall be dealt with in accordance with that paragraph.
Section 2.05 UK Taxes. As regards UK Taxes, this Agreement applies as follows:
(a) The provisions of Schedule 2.05 apply to the allocation of UK Taxes and to other UK Tax matters;
(b) The other provisions of this Agreement also apply to the allocation of UK Taxes and to other UK Tax matters, except for the following provisions, which, notwithstanding such provisions, shall not so apply: Section 2.02, Section 2.03, Section 2.07(b), Section 2.07(c),
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Section 2.08, Section 3, Section 4.02(a), Section 4.02(b), Section 4.05, Section 4.06(a), Section 4.07, Section 4.08, Section 5.02, Section 5.03(b), Section 5.03(c), Section 5.03(d), Section 5.03(e), Section 5.04(c), Section 5.05, Section 5.06(a) (except with respect to any Federal or State Income Tax treatment of any such payments in respect of UK Taxes made by or to ConocoPhillips, Phillips 66, ConocoPhillips Company, Phillips 66 Company or any other member of the ConocoPhillips Group or the Phillips 66 Group that is organized under the laws of the United States or any State), Section 6, and any schedule other than Schedule 2.05; and
(c) In the event of conflict between the Sections of this Agreement (other than Schedule 2.05) and the paragraphs of Schedule 2.05, the paragraphs of Schedule 2.05 prevail, save to the extent that the conflict is between the Sections of this Agreement (other than Schedule 2.05) and paragraph 1 of Schedule 2.05, when the Sections of this Agreement prevail.
Section 2.06 Certain Transaction Taxes and Breaches of Covenant.
(a) Phillips 66 Liability. Phillips 66 shall be liable for, and shall indemnify and hold harmless the ConocoPhillips Group from and against any liability for:
(i) Any stamp, sales and use, gross receipts, value-added or other transfer Taxes imposed by any Tax Authority on any member of the Phillips 66 Group (if such member is primarily liable for such Tax) on the transfers occurring pursuant to the Transactions, provided that VAT imposed by a UK Tax Authority to which Paragraph 2.01(b) of Schedule 2.05 applies shall be dealt with in accordance with that paragraph and that the consideration given by any member of the ConocoPhillips Group to any member of the Phillips 66 Group for any chargeable supply made by a member of the Phillips 66 Group shall, unless the persons giving and receiving such consideration agree otherwise, be increased by an amount equal to the VAT chargeable;
(ii) Any Tax resulting from a breach by Phillips 66 of any covenant in this Agreement, the Separation and Distribution Agreement, the Indemnification and Release Agreement, or any other Ancillary Agreement; and
(iii) Any Tax-Related Losses for which Phillips 66 is responsible pursuant to Section 6.04 of this Agreement.
(b) ConocoPhillips Liability. Subject to Paragraph 2.01(b) of Schedule 2.05, ConocoPhillips shall be liable for, and shall indemnify and hold harmless the Phillips 66 Group from and against any liability for:
(i) Any stamp, sales and use, gross receipts, value-added or other transfer Taxes imposed by any Tax Authority on any member of the ConocoPhillips Group (if such member is primarily liable for such Tax or if the applicable Tax Law is silent with respect to whether any member of the ConocoPhillips Group, on the one hand, or any member of the Phillips 66 Group, on the other hand, is primarily liable for such Tax) on the transfers occurring pursuant to the Transactions, provided that the consideration given by any member of the Phillips 66 Group to any member of the ConocoPhillips Group for any chargeable supply made by a member of the ConocoPhillips Group shall, unless the persons giving and receiving such consideration agree otherwise, be increased by an amount equal to the VAT chargeable; and
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(ii) Any Tax resulting from a breach by ConocoPhillips of any covenant in this Agreement, the Separation and Distribution Agreement, the Indemnification and Release Agreement, or any other Ancillary Agreement.
(c) UK Stamp Duty. For the purposes of Section 2.06(a) and (b), the primary liability to pay any United Kingdom stamp duty arising on any instrument of transfer executed pursuant to the Transactions shall be deemed to fall on the transferee under that instrument.
(d) Wrong Pocket Tax Liabilities. For the absence of doubt, to the extent that Section 2.4(a) or Section 2.5(c) or (d) of the Separation and Distribution Agreement apply to the transfer or assignment of any Excluded Assets or Phillips 66 Assets, as applicable, or to the assumption of any Excluded Liabilities or Phillips 66 Liabilities, as applicable, such provisions shall also apply to determine the responsibility for any Taxes (other than stamp, sales and use, gross receipts, value-added or other transfer Taxes imposed by any Tax Authority on the transfer or assignment of any such Assets or the assumption of such Liabilities, which shall be governed by Section 2.06(a)(i) and Section 2.06(b)(i), as applicable) attributable to, or arising with respect to or as a result of holding such Assets or Liabilities for, or transferring such Assets or Liabilities to, the member of the Group entitled to such Assets or responsible for such Liabilities under such provisions.
Section 2.07 Tax Benefits.
(a) Except as set forth in Section 2.07(b), (c), and (d), provided that refunds (and any interest thereon received from a UK Tax Authority) to which paragraph 2 of Schedule 2.05 applies shall be dealt with in accordance with that paragraph:
(i) Phillips 66 shall be entitled to any refund of or reduction in otherwise required payments of (and any interest thereon received from the applicable Tax Authority) Property Taxes, Other Taxes and Foreign Income Taxes for which Phillips 66 is responsible pursuant to Section 2 and any Tax Benefits (I) to the extent set forth in Sections 2.02(a)(ii), 2.03(a)(ii) and 2.09(b), (II) relating to Taxes for which Phillips 66 is responsible pursuant to 2.02(b)(i) or (III) relating to a Phillips 66 State Separate Income Tax Return for a Post-Distribution Period (other than a Straddle Period); and
(ii) ConocoPhillips shall be entitled to any refund of or reduction in otherwise required payments of (and any interest thereon received from the applicable Tax Authority) Income Taxes, Property Taxes and Other Taxes other than such Tax Benefits to which Phillips 66 is entitled pursuant to Section 2.07(a)(i).
(iii) If Phillips 66 receives a Tax Benefit to which ConocoPhillips is entitled pursuant to this Agreement, Phillips 66 shall pay over such Tax Benefit to ConocoPhillips as provided in Section 5 and 2.09(a)(i); and if ConocoPhillips receives a Tax Benefit to which Phillips 66 is entitled pursuant to this Agreement, ConocoPhillips shall pay over such Tax Benefit to Phillips 66 as provided in Section 5 and 2.09(a)(i).
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(b) Refunds Attributable to a Phillips 66 Carryback. For the absence of doubt, Phillips 66 shall be entitled to any refund of or reduction in otherwise required payments of any Federal Tax or State Tax, as applicable, with respect to any Joint Return which refund or reduction is attributable to, and would not have arisen but for, a Phillips 66 Carryback pursuant to the proviso set forth in Section 4.07.
(c) Phillips 66 Minimum Tax Credits. Phillips 66 shall pay to ConocoPhillips an amount equal to the minimum tax credit under Section 53 of the Code allocated to the Phillips 66 Group by ConocoPhillips pursuant to Section 4.08.
(d) Income Tax Deductions in Respect of Certain Equity Awards and Incentive Compensation. Solely the member of the Group for which the relevant individual is currently employed or, if such individual is not currently employed by a member of the Group, was most recently employed at the time of the vesting, exercise, disqualifying disposition, payment or other relevant taxable event, as appropriate, in respect of the equity awards and other incentive compensation described in Article IV of the Employee Matters Agreement shall be entitled to claim any Income Tax deduction in respect of such equity awards and other incentive compensation on its respective Tax Return associated with such event.
Section 2.08 Special Allocation and Computational Rules.
(a) For purposes of Sections 2.02(a), 2.02(c)(i), 2.03(a), 2.03(c)(i), and 2.04(c)(i), any and all Tax Items (including, for the absence of doubt, Tax Items with respect to intercompany transactions between members of the ConocoPhillips Group and the Phillips 66 Group) shall be allocated to the assets and activities of the ConocoPhillips Business, on the one hand, and the assets and activities of the Phillips 66 Business, on the other hand, as applicable pursuant to and consistent with the ConocoPhillips Past Practice.
(b) ConocoPhillips shall determine the allocations described in Section 2.08(a), the Federal Income Taxes or State Income Taxes, as applicable (or Tax Benefits or reductions in Tax Benefits, as applicable) and any Other Taxes, as applicable, attributable to, or arising with respect to or as a result of, assets or activities of the Phillips 66 Business or the ConocoPhillips Business, the utilization of foreign tax credits under Section 901 by the Phillips 66 Business and the Taxes (or reductions in Tax Benefits) that would not have arisen but for the utilization of foreign tax credits by the Phillips 66 Business. In connection with any relevant demand for payment under Section 5, ConocoPhillips shall provide Phillips 66 with written notice containing a reasonably detailed summary of any such relevant determinations and timely respond to any reasonable requests from Phillips 66 for additional information with respect to any such determinations. Notwithstanding anything to the contrary in this Agreement, such determinations by ConocoPhillips shall, in the absence of bad faith or clear error, be conclusive.
Section 2.09 Deductible and Includible Tax Payments. Notwithstanding any other provision in this Agreement, without duplication for any amounts otherwise required to be paid hereunder (and provided that, for the absence of doubt, this Section 2.09 shall not apply to payments required to be made pursuant to Paragraph 2 of Schedule 2.05), (a) in the event that any Company (the Benefit Intercompany Payor) is required to pay over a Tax Benefit to the other Company (the Benefit Intercompany Payee) hereunder, (i) the Benefit Intercompany Payor shall also pay over to the Benefit Intercompany Payee any interest relating thereto that is
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received (by way of offset or otherwise) by the Benefit Intercompany Payor or any of its Affiliates from the applicable Tax Authority and (ii) the Benefit Intercompany Payee shall be required to pay to the Benefit Intercompany Payor the amount of any Tax (or any reduction in Tax Benefit) actually suffered in cash by the Benefit Intercompany Payor or any of its Affiliates resulting (on a with and without basis) from the receipt by the Benefit Intercompany Payor or any of its Affiliates of the Tax Benefit from the applicable Tax Authority and (b) in the event that any Company (the Tax Intercompany Payor) is required to pay the other Company (the Tax Intercompany Payee) hereunder in respect of a Tax (or reduction in any Tax Benefit), (i) for the absence of doubt, the Tax Intercompany Payor shall pay to the Tax Intercompany Payee any interest or penalties relating thereto that is required to be paid (by way of offset or otherwise) by the Tax Intercompany Payee or any of its Affiliates to the applicable Tax Authority and (ii) the Tax Intercompany Payee shall be required to pay to the Tax Intercompany Payor the amount of any Tax Benefit actually realized in cash by the Tax Intercompany Payee or any of its Affiliates resulting (on a with and without basis) from the payment by the Tax Intercompany Payee or any of its Affiliates of the Tax to the applicable Tax Authority (or the reduction in Tax Benefit). Any amounts required to be paid pursuant to this Section 2.09 shall be calculated or recalculated, as applicable, in light of any Final Determination or any other facts that may arise or come to light after a payment is made pursuant to this Section 2.09 that would affect any amount required to be paid pursuant to this Section 2.09, and an appropriate adjusting payment shall be made (without duplication) by Phillips 66 or ConocoPhillips, as applicable, such that the aggregate amounts paid pursuant to this Section 2.09 reflect such recalculated amount.
Section 3. Proration of Taxes for Straddle Periods.
(a) General Method of Proration. In the case of any Straddle Period, Tax Items shall be apportioned between Pre-Distribution Periods and Post-Distribution Periods in accordance with the principles of Treasury Regulation Section 1.1502-76(b) as reasonably interpreted and applied by the Companies. No election shall be made under Treasury Regulation Section 1.1502-76(b)(2)(ii) (relating to ratable allocation of a years Tax Items). If the Distribution Date is not an Accounting Cutoff Date, the provisions of Treasury Regulation Section 1.1502-76(b)(2)(iii) will be applied to ratably allocate the Tax Items (other than extraordinary items) for the month which includes the Distribution Date.
(b) Transaction Treated as Extraordinary Item. In determining the apportionment of Tax Items between Pre-Distribution Periods and Post-Distribution Periods, any Tax Items relating to the Transactions shall be treated as extraordinary items described in Treasury Regulation Section 1.1502-76(b)(2)(ii)(C) and shall (to the extent occurring on or prior to the Distribution Date) be allocated to Pre-Distribution Periods, and any Taxes related to such items shall be treated under Treasury Regulation Section 1.1502-76(b)(2)(iv) as relating to such extraordinary item and shall (to the extent occurring on or prior to the Distribution Date) be allocated to Pre-Distribution Periods.
Section 4. Preparation and Filing of Tax Returns.
Section 4.01 General. Except as otherwise provided in this Section 4, Tax Returns shall be prepared and filed when due (including extensions) by the person obligated to file such Tax Returns under the Code or applicable Tax Law. The Companies shall provide, and shall cause their Affiliates to provide, assistance and cooperation to one another in accordance with Section 7 with respect to the preparation and filing of Tax Returns, including providing information required to be provided in Section 7.
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Section 4.02 ConocoPhillipss Responsibility. ConocoPhillips has the exclusive obligation and right to prepare and file, or to cause to be prepared and filed:
(a) ConocoPhillips Federal Consolidated Income Tax Returns for any Tax Periods ending on, before or after the Distribution Date;
(b) Except for Tax Returns required to be filed under applicable Tax Law by a member of the Phillips 66 Group, (i) ConocoPhillips State Combined Income Tax Returns and (ii) any other Joint Returns which ConocoPhillips reasonably determines are required to be filed (or which ConocoPhillips chooses to be filed) by the Companies or any of their Affiliates for Tax Periods ending on, before or after the Distribution Date; provided, however, that if such ConocoPhillips State Combined Income Tax Return or other Joint Return, as applicable, has not previously been filed by the Companies or any of their Affiliates in the applicable jurisdiction, ConocoPhillips shall provide written notice of such determination to file such ConocoPhillips State Combined Income Tax Returns or other Joint Returns to Phillips 66; and
(c) ConocoPhillips Separate Returns which ConocoPhillips reasonably determines are required to be filed by the Companies or any of their Affiliates for Tax Periods ending on, before or after the Distribution Date.
Section 4.03 Phillips 66s Responsibility. Phillips 66 shall prepare and file, or shall cause to be prepared and filed, all Tax Returns required to be filed by or with respect to members of the Phillips 66 Group other than those Tax Returns which ConocoPhillips is required to prepare and file under Section 4.02. For the absence of doubt, the Tax Returns required to be prepared and filed by Phillips 66 under this Section 4.03 shall include (a) any Phillips 66 Federal Consolidated Income Tax Return for Tax Periods ending after the Distribution Date and (b) Phillips 66 Separate Returns required to be filed for Tax Periods ending on, before or after the Distribution Date.
Section 4.04 Tax Return Filing and Past Practices.
(a) General Rule. Except as provided in Section 4.04(b), with respect to any Tax Return that Phillips 66 has the obligation and right to prepare and file, or cause to be prepared and filed, under Section 4.03, to the extent Tax Items reported on such Tax Return might reasonably be expected to affect Taxes (or rights to Tax Benefits) for which ConocoPhillips is responsible (or to which ConocoPhillips is entitled) under this Agreement, such Tax Return shall, in the case of a Tax Return that is not a UK Tax Return, be prepared in accordance with the past practice of the ConocoPhillips Group in determining accrued assets and liabilities for cash taxes on the books and records of ConocoPhillips and its subsidiaries and the past return filing practice of the ConocoPhillips Group with respect to the relevant Tax Return (including any past accounting methods, elections and conventions) (the ConocoPhillips Past Practice) and, in the case of a UK Tax Return, on a basis which is consistent with the basis on which UK Tax Documents already submitted by or on behalf of the relevant taxpayer to HM Revenue & Customs were prepared and filed (the ConocoPhillips UK Tax Practice), unless (i) any Tax Items with respect to the Tax Returns in question are not covered by the ConocoPhillips Past Practice or the
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ConocoPhillips UK Tax Practice (as relevant) (in which case, with respect to such Tax Items, such Tax Returns shall be prepared in accordance with reasonable Tax accounting practices selected by ConocoPhillips), (ii) no Substantial Authority exists for the ConocoPhillips Past Practice or the ConocoPhillips UK Tax Practice (as relevant) with respect to any Tax Items reportable on the Tax Returns in question (in which case, with respect to such Tax Items, such Tax Returns shall be prepared in accordance with reasonable Tax accounting practices selected by ConocoPhillips), or (iii) there is no adverse effect to ConocoPhillips (in which case, the Tax Returns in question shall be prepared in accordance with reasonable Tax accounting practices selected by Phillips 66).
(b) Reporting of Transactions. The Tax treatment of the Transactions reported on any Tax Return shall be consistent with the treatment thereof in the Ruling Requests and the Tax Opinions/Rulings, unless there is no reasonable basis for such Tax treatment. To the extent there is a Tax treatment relating to the Transactions which is not covered by the Ruling Requests or the Tax Opinions/Rulings, the Tax treatment of the Transactions reported on any Tax Return for which Phillips 66 is the Responsible Party shall be consistent with that on any Tax Return filed or to be filed by ConocoPhillips or any member of the ConocoPhillips Group or caused or to be caused to be filed by ConocoPhillips (ConocoPhillips Group Transaction Returns), unless there is no reasonable basis for such Tax treatment. To the extent there is a Tax treatment relating to the Transactions which is not covered by the Ruling Requests, the Tax Opinions/Rulings or ConocoPhillips Group Transaction Returns, the Companies shall agree on the Tax treatment to be reported on any Tax Return. For this purpose, the Tax treatment shall be determined by ConocoPhillips and shall be agreed to by Phillips 66 unless either (i) no Substantial Authority exists for the technical merits of the position, or (ii) such Tax treatment is inconsistent with the Tax treatment contemplated in the Ruling Requests, the Tax Opinions/Rulings and/or the ConocoPhillips Group Transaction Returns. Any dispute regarding such Tax treatment shall be referred for resolution pursuant to Section 12, sufficiently in advance of the filing date of such Tax Return (including extensions) to permit timely filing of the Tax Return.
Section 4.05 Consolidated or Combined Tax Returns. Phillips 66 will elect and join, and will cause its respective Affiliates to elect and join, in filing any ConocoPhillips State Combined Income Tax Returns and any Joint Returns that ConocoPhillips determines are required to be filed or that ConocoPhillips chooses to file pursuant to Section 4.02(b).
Section 4.06 Right to Review Tax Returns.
(a) ConocoPhillips Federal Consolidated Income Tax Returns and ConocoPhillips State Combined Income Tax Returns. ConocoPhillips shall make any ConocoPhillips Federal Consolidated Income Tax Return and ConocoPhillips State Combined Income Tax Return (other than any such Tax Return for which Phillips 66 is the Responsible Company) and any workpapers related to any such Tax Return available for review by Phillips 66, if requested by Phillips 66. ConocoPhillips shall use its reasonable best efforts to make such Tax Return available to Phillips 66 for review and comment as required under this paragraph prior to the due date (including extensions) for filing of such Tax Return. Phillips 66 shall use reasonable best efforts to respond in writing to ConocoPhillips with any comments no later than the date on which ConocoPhillips files such Tax Return with the applicable Tax Authority, provided, however that Phillips 66s comments shall be limited to the reporting of any material Tax Item
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on such Tax Return with respect to which Phillips 66 reasonably believes that no Substantial Authority exists for the technical merits of the position. ConocoPhillips shall reasonably consider such comments with respect to the reporting of any such material Tax Item on such Return (including considering whether to revise the reporting of such Tax Item on such Tax Return prior to filing such Tax Return with the applicable Tax Authority, file an amended Tax Return with the applicable Tax Authority revising the reporting of such Tax Item, or pursue an adjustment to the reporting of such Tax Item in connection with a Tax Contest with respect to such Tax Return or make no change).
(b) Certain Other Joint Returns and Separate Returns. The Responsible Company with respect to any material Joint Return (other than any ConocoPhillips Consolidated Federal Income Tax Return or any ConocoPhillips State Combined Income Tax Return for which ConocoPhillips is the Responsible Company) or material Separate Return shall make such Tax Return and related workpapers available for review by the other Company, if requested by the other Company, to the extent (i) such Tax Return relates to Taxes for which the requesting party would reasonably be expected to be liable under applicable Tax Law or responsible under this Agreement, (ii) such Tax Return relates to Taxes and the requesting party would reasonably be expected to be liable under applicable Tax Law or responsible under this Agreement in whole or in part for any additional Taxes owing as a result of adjustments to the amount of such Taxes reported on such Tax Return, (iii) such Tax Return relates to Taxes for which the requesting party would reasonably be expected to have a claim for Tax Benefits under this Agreement, (iv) the requesting party reasonably determines that it must inspect such Tax Return to confirm compliance with the terms of this Agreement, (v) such Tax Return relates to an Agreed UK Group Relief Surrender, or (vi) such Tax Return relates to a Transfer Pricing Adjustment relating to a transaction or transactions involving a member of the requesting partys Group. The Responsible Company shall use its reasonable best efforts to make such Tax Return available for review and comment as required under this paragraph prior to the due date (including extensions) for filing of such Tax Return. The requesting party shall use reasonable best efforts to respond in writing to the Responsible Party with any comments no later than the date on which the Responsible Party files such Tax Return with the applicable Tax Authority provided, however that (x) if ConocoPhillips is the Responsible Company, Phillips 66s comments shall be limited to the reporting of any material Tax Item on such Tax Return with respect to which Phillips 66 reasonably believes that no Substantial Authority exists for the technical merits of the position and (y) if Phillips 66 is the Responsible Company, ConocoPhillips comments shall be limited to the reporting of any material Tax Item on such Tax Return with respect to which ConocoPhillips reasonably believes that no Substantial Authority exists for the technical merits of the position or the reporting of any Tax Item on such Tax Return in accordance with this Agreement or the ConocoPhillips Past Practice or ConocoPhillips UK Tax Practice, as applicable. The Responsible Party shall reasonably consider such comments with respect to the reporting of any such material Tax Item on such Return (including considering whether to revise the reporting of such Tax Item on such Tax Return prior to filing such Tax Return with the applicable Tax Authority, file an amended Tax Return with the applicable Tax Authority revising the reporting of such Tax Item, or pursue an adjustment to the reporting of such Tax Item in connection with a Tax Contest with respect to such Tax Return or make no change).
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(c) Execution of Returns Prepared by Other Party. In the case of any Tax Return which is required to be prepared and filed by one Company under this Agreement and which is required by Law to be signed by the other Company or its Affiliate (or by an authorized representative thereof), the Company which is legally required to sign such Tax Return (or whose Affiliate is legally required to sign or an authorized representative thereof) shall not be required to sign such Tax Return under this Agreement if there is no reasonable basis for the Tax treatment of any Tax Item reported on the Tax Return or the Tax treatment of any Tax Item reported on the Tax Return should, in the opinion of a Tax advisor from a nationally recognized legal, accounting or professional tax services firm, subject the other Company or its Affiliate (or its authorized representatives) to material penalties.
Section 4.07 Phillips 66 Carrybacks and Claims for Refund. Phillips 66 hereby agrees that, unless ConocoPhillips consents in writing, (a) no Adjustment Request with respect to any Joint Return shall be filed, and (b) any available elections to waive the right to claim in any Pre-Distribution Period with respect to any Joint Return any Phillips 66 Carryback arising in a Post-Distribution Period shall be made, and no affirmative election shall be made to claim any such Phillips 66 Carryback; provided, however, that the parties agree that any such Adjustment Request shall be made with respect to any Phillips 66 Carryback related to Federal Taxes or State Taxes, as applicable, upon the reasonable request of Phillips 66, if such Phillips 66 Carryback is necessary to prevent the loss of the Federal and/or State Tax Benefit of such Phillips 66 Carryback (including, but not limited to, an Adjustment Request with respect to a Phillips 66 Carryback of a capital loss for Federal and/or State Tax purposes arising in a Post-Distribution Period to a Pre-Distribution Period) and such Adjustment Request, based on ConocoPhillips sole, reasonable determination, will cause no Tax detriment to ConocoPhillips, the ConocoPhillips Group or any member of the ConocoPhillips Group. Any Adjustment Request which ConocoPhillips consents to make under this Section 4.07 shall be prepared and filed by the Responsible Company for the Joint Return to be adjusted.
Section 4.08 Apportionment of Earnings and Profits and Tax Attributes. ConocoPhillips shall in good faith advise Phillips 66 in writing of the portion, if any, of any earnings and profits, Tax Attribute, overall foreign loss or other consolidated, combined or unitary attribute which ConocoPhillips determines shall be allocated or apportioned to the Phillips 66 Group under applicable Law. Phillips 66 and all members of the Phillips 66 Group shall prepare all Tax Returns in accordance with such written notice. In the event that any temporary or final amendments to Treasury Regulations are promulgated after the date of this Agreement that provide for any election to apply such regulations retroactively, then any such election shall be made only to the extent that ConocoPhillips determines to make such election. As soon as practicable after receipt of a written request from Phillips 66, ConocoPhillips shall provide copies of any studies, reports, and workpapers supporting the earnings and profits and other Tax Attributes allocable to Phillips 66. In the event of a subsequent adjustment to the earnings and profits or any Tax Attributes determined by ConocoPhillips, ConocoPhillips shall promptly notify Phillips 66 in writing of such adjustment. For the absence of doubt, ConocoPhillips shall not be liable to Phillips 66 or any member of the Phillips 66 Group for any failure of any determination under this Section 4.08 to be accurate under applicable Law.
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Section 5. Due Date for Payments and Related Matters.
Section 5.01 General Rule.
(a) The due date for payment of any liability of one Company to the other Company under this Agreement shall be as follows:
(i) In the case of any liability of one Company to the other Company under Section 2 for which Section 5.02 through Section 5.07 specify a due date for payment of such liability, the due date for payment of such liability shall be as so specified in Section 5.02 through Section 5.07.
(ii) In the case of any liability of one Company to the other Company under Schedule 2.05 for which Schedule 2.05 specifies a due date for payment of such liability, the due date for payment of such liability shall be as so specified in Schedule 2.05.
(iii) In the case of any other liability under this Agreement, the due date for payment of such liability shall be within the later of (x) 30 days following the date of receipt of a written notice and demand from ConocoPhillips or Phillips 66, as applicable, for payment of the liability due (provided, in the case of any liability in respect of a refund, that ConocoPhillips or Phillips 66, as applicable, is aware of the receipt by the other Group of such refund) and (y) in the case of any liability in respect of a refund, within 30 days following the date of receipt of such refund from the relevant Tax Authority and, in the case of any liability in respect of Taxes payable to the relevant Tax Authority, the due date for payment of such Taxes to the relevant Tax Authority.
(b) All payments under this Agreement shall be made by ConocoPhillips directly to Phillips 66 and by Phillips 66 directly to ConocoPhillips; provided, however, that if the Companies mutually agree with respect to any such payment, any member of the ConocoPhillips Group, on the one hand, may make such payment to any member of the Phillips 66 Group, on the other hand, and vice versa.
Section 5.02 ConocoPhillips Federal Consolidated Income Tax Returns, ConocoPhillips State Combined Income Tax Returns and State Separate Income Tax Returns. In the case of (x) any ConocoPhillips Federal Consolidated Income Tax Return, (y) any ConocoPhillips State Combined Income Tax Return, and (z) any State Separate Income Tax Return, as applicable, in each case for any Pre-Distribution Period or any Straddle Period (including, for the absence of doubt, amended Tax Returns):
(a) Taxes Shown as Due on Tax Return. The Responsible Company shall compute the amount of Tax required to be paid to the applicable Tax Authority (taking into account the requirements of Section 4.04) with respect to such Tax Return in respect of a Payment Date. In the case of any such Tax Return filed or required to be filed under applicable Tax Law by any member of the ConocoPhillips Group, ConocoPhillips shall pay (or cause to be paid) such amount to such Tax Authority on or before such Payment Date (and provide notice and proof of payment to Phillips 66) and, in the case of any such Tax Return filed or required to be filed under applicable Tax Law by any member of the Phillips 66 Group, Phillips 66 shall pay (or cause to be paid) such amount to such Tax Authority on or before such Payment Date (and provide notice and proof of payment to ConocoPhillips).
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(b) Accrual-to-Return Payment.
(i) Tax Returns Filed by ConocoPhillips Group Member. In the case of any such Tax Return for any Pre-Distribution Tax Period that ends during 2011 or 2012 or any Straddle Period filed or required to be filed under applicable Tax Law by any member of the ConocoPhillips Group:
(A) (I) Phillips 66 shall be deemed to have paid ConocoPhillips on the Distribution Date an amount equal to any liability for cash Federal Income Taxes or State Income Taxes, as applicable, with respect to such Tax Return to the extent such Federal Income Taxes (other than alternative minimum Taxes) or State Income Taxes, as applicable, have been accrued as of the Distribution Date on the books and records of ConocoPhillips and its subsidiaries (Accrued) and allocated to the Phillips 66 Business (including any member of the Phillips 66 Group) as of the Distribution Date (which accruals and allocations, for the absence of doubt, (x) may be computed after the Distribution Date as of the Distribution Date and which shall be recomputed as of the Distribution Date to take account of any Tax Return that is filed in respect of such Taxes and (y) shall not include any reserves for financial accounting purposes in respect of Taxes that may arise upon audit) (with respect to such Federal Income Taxes, the Accrued Phillips 66 Federal Income Tax Liability, and such State Income Taxes, the Accrued Phillips 66 State Income Tax Liability and, collectively, the Accrued Phillips 66 Income Tax Liability); and (II) ConocoPhillips shall be deemed to have paid Phillips 66 on the Distribution Date an amount equal to any reduction of Federal Income Taxes or State Income Taxes, as applicable, otherwise due with respect to such Tax Return to the extent such reduction in Federal Income Taxes or State Income Taxes, as applicable, has been Accrued and allocated to the Phillips 66 Business (including any member of the Phillips 66 Group) as of the Distribution Date (which accruals and allocations, for the absence of doubt, (x) may be computed after the Distribution Date as of the Distribution Date and which shall be recomputed as of the Distribution Date to take account of any Tax Return that is filed in respect of such Taxes and (y) shall not include any reserves for financial accounting purposes in respect of Taxes that may arise upon audit) (with respect to such Federal Income Taxes, the Accrued Phillips 66 Federal Income Tax Asset, and such State Income Taxes, the Accrued Phillips 66 State Income Tax Asset, and, collectively, the Accrued Phillips 66 Income Tax Asset).
(B) Within 120 days following the earlier of (y) the due date (including extensions) for filing such Tax Return, or (z) the date on which such Tax Return is filed:
(I) In the case of any Accrued Phillips 66 Federal Income Tax Liability or Accrued Phillips 66 State Income Tax Liability, as applicable, with respect to such Tax Return (1) if Phillips 66 is responsible for Federal Income
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Taxes or State Income Taxes, as applicable, shown as due on such Tax Return (for the absence of doubt, without regard to any estimated, installment, or other advance payments or minimum tax credits) pursuant to Section 2.02(a) or 2.03(a) (or if Phillips 66 is neither responsible for any Federal Income Taxes or State Income Taxes, as applicable, shown as due on such Tax Return nor entitled to any Tax Benefit with respect to such Tax Return) (for this purpose, determined without regard to Section 5.02(b)(i)(A)), (x) Phillips 66 shall pay ConocoPhillips an amount equal to the excess, if any, of the amount of such Federal Income Taxes or State Income Taxes, as applicable, for which Phillips 66 is responsible, if any, over such Accrued Phillips 66 Federal Income Tax Liability or Accrued Phillips 66 State Income Tax Liability, as applicable, and (y) ConocoPhillips shall pay Phillips 66 an amount equal to the excess, if any, of such Accrued Phillips 66 Federal Income Tax Liability or Accrued Phillips 66 State Income Tax Liability, as applicable, over the amount of such Federal Income Taxes or State Income Taxes, as applicable, for which Phillips 66 is responsible, if any; and (2) if Phillips 66 is entitled to any Tax Benefit (other than any alternative minimum Tax Benefit) with respect to such Tax Return pursuant to Section 2.02(a)(ii) or Section 2.03(a)(ii), as applicable, ConocoPhillips shall pay Phillips 66 an amount equal to the sum of such Tax Benefit to which Phillips 66 is entitled and the amount of any such Accrued Phillips 66 Federal Income Tax Liability or Accrued Phillips 66 State Income Tax Liability, as applicable; and
(II) In the case of any Accrued Phillips 66 Federal Income Tax Asset or Accrued Phillips 66 State Income Tax Asset, as applicable, with respect to such Tax Return, (1) if Phillips 66 is entitled to any Tax Benefit (other than alternative minimum Tax Benefit) with respect to such Tax Return pursuant to Section 2.02(a)(ii) or Section 2.03(a)(ii), as applicable (or if Phillips 66 is neither entitled to any Tax Benefit with respect to such Tax Return nor responsible for any Federal Income Taxes or State Income Taxes, as applicable shown as due on such Tax Return) (for the absence of doubt, without regard to any estimated, installment, or other advance payments or minimum tax credit) (for this purpose, determined without regard to Section 5.02(b)(i)(A)), (x) ConocoPhillips shall pay Phillips 66 an amount equal to the excess, if any, of the amount of such Tax Benefit to which Phillips 66 is entitled, if any, over such Accrued Phillips 66 Federal Income Tax Asset or Accrued Phillips 66 State Income Tax Asset, as applicable; and (y) Phillips 66 shall pay ConocoPhillips an amount equal to the excess, if any, of such Accrued Phillips 66 Federal Income Tax Asset or Accrued Phillips 66 State Income Tax Asset, as applicable, over the amount of any such Tax Benefit, if any; and (2) if Phillips 66 is responsible for Federal Income Taxes or State Income Taxes, as applicable, shown as due on such Tax Return (for the absence of doubt, without regard to any estimated, installment, minimum tax credits or other advance payments) pursuant to Section 2.02(a) or 2.03(a) (for this purpose, determined without regard to Section 5.02(b)(i)(A)), Phillips 66 shall pay ConocoPhillips an amount equal to the sum of the amount of such Federal Income Taxes or State Income Taxes, as applicable, for which Phillips 66 is responsible and the amount of such Accrued Phillips 66 Federal Income Tax Asset or Accrued Phillips 66 State Income Tax Asset, as applicable.
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(ii) Tax Returns Filed by Phillips 66 Group Member. In the case of any such ConocoPhillips State Combined Income Tax Return or State Separate Income Tax Return, as applicable, for any Pre-Distribution Tax Period that ends during 2011 or 2012 or any Straddle Period filed or required to be filed under applicable Tax Law by any member of the Phillips 66 Group:
(A) (I) ConocoPhillips shall be deemed to have paid Phillips 66 on the Distribution Date an amount equal to any liability for cash State Income Taxes with respect to such Tax Return to the extent such State Income Taxes have been Accrued as of the Distribution Date and allocated to the ConocoPhillips Business (including any member of the ConocoPhillips Group) as of the Distribution Date (which accrual and allocation, for the absence of doubt, (x) may be computed after the Distribution Date as of the Distribution Date and which shall be recomputed as of the Distribution Date to take account of any Tax Return that is filed in respect of such Taxes and (y) shall not include any reserves for financial accounting purposes in respect of Taxes that may arise upon audit) (with respect to such State Income Taxes, the Accrued ConocoPhillips State Income Tax Liability)); and (II) Phillips 66 shall be deemed to have paid ConocoPhillips on the Distribution Date an amount equal to any reduction of State Income Taxes otherwise due with respect to such Tax Return to the extent such reduction in State Income Taxes has been Accrued and allocated to the ConocoPhillips Business (including any member of the ConocoPhillips Group) as of the Distribution Date (which accruals and allocations, for the absence of doubt, (x) may be computed after the Distribution Date as of the Distribution Date and which shall be recomputed as of the Distribution Date to take account of any Tax Return that is filed in respect of such Taxes and (y) shall not include any reserves for financial accounting purposes in respect of Taxes that may arise upon audit) (with respect to such State Income Taxes, the Accrued ConocoPhillips State Income Tax Asset).
(B) Within 120 days following the earlier of (y) the due date (including extensions) for filing such Tax Return, or (z) the date on which such Tax Return is filed:
(I) In the case of any Accrued ConocoPhillips State Income Tax Liability with respect to such Tax Return (1) if ConocoPhillips is responsible for any State Income Taxes shown as due on such Tax Return (for the absence of doubt, without regard to any estimated, installment, or other advance payments or minimum tax credits) pursuant to Section 2.03(a) (or if ConocoPhillips is neither responsible for State Income Taxes shown as due on such Tax Return nor entitled to any Tax Benefit with respect to such Tax Return) (for this purpose, determined without regard to Section 5.02(b)(ii)(A)), (x) ConocoPhillips shall pay Phillips 66 an amount equal to the excess, if any, of the amount of such State Income Taxes for which ConocoPhillips is responsible, if any, over such Accrued ConocoPhillips State Income Tax Liability and (y) Phillips 66 shall pay ConocoPhillips an amount equal to the excess, if any, of such Accrued
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ConocoPhillips State Income Tax Liability over the amount of such State Income Taxes for which ConocoPhillips is responsible, if any; and (2) if ConocoPhillips is entitled to any Tax Benefit with respect to such Tax Return pursuant to this Agreement, Phillips 66 shall pay ConocoPhillips an amount equal to the sum of such Tax Benefit to which ConocoPhillips is entitled and the amount of any such Accrued ConocoPhillips State Income Tax Liability; and
(II) In the case of any Accrued ConocoPhillips State Income Tax Asset with respect to such Tax Return, (1) if ConocoPhillips is entitled to any Tax Benefit with respect to such Tax Return pursuant to this Agreement (or if ConocoPhillips is neither entitled to any Tax Benefit with respect to such Tax Return nor responsible for any State Income Taxes shown as due on such Tax Return) (for the absence of doubt, without regard to any estimated, installment, or other advance payments or minimum tax credit) (for this purpose, determined without regard to Section 5.02(b)(ii)(A)), (x) Phillips 66 shall pay ConocoPhillips an amount equal to the excess, if any, of the amount of such Tax Benefit to which ConocoPhillips is entitled, if any, over such Accrued ConocoPhillips State Income Tax Asset; and (y) ConocoPhillips shall pay Phillips 66 an amount equal to the excess, if any, of such Accrued ConocoPhillips State Income Tax Asset over the amount of any such Tax Benefit, if any; and (2) if ConocoPhillips is responsible for State Income Taxes shown as due on such Tax Return (for the absence of doubt, without regard to any estimated, installment, minimum tax credits or other advance payments) pursuant to Section 2.03(a) (for this purpose, determined without regard to Section 5.02(b)(ii)(A)), ConocoPhillips shall pay Phillips 66 an amount equal to the sum of the amount of such State Income Taxes for which ConocoPhillips is responsible and the amount of such Accrued ConocoPhillips State Income Tax Asset.
(c) Phillips 66 Minimum Tax Credits Payment. Within 120 days after the date on which the ConocoPhillips Federal Consolidated Income Tax Return for the Straddle Period is filed, Phillips 66 shall pay ConocoPhillips any amount for which Phillips 66 is responsible pursuant to Section 2.07(c).
(d) Taxes Resulting from Adjustment. In the case of any adjustment pursuant to a Final Determination with respect to such Tax Return, (A) in the case of any such Tax Return filed or required to be filed under applicable Tax Law by any member of the ConocoPhillips Group, ConocoPhillips shall pay (or cause to be paid) to the applicable Tax Authority when due any additional Tax due with respect to such Tax Return required to be paid as a result of such adjustment; and (B) in the case of any such Tax Return filed or required to be filed under applicable Tax Law by any member of the Phillips 66 Group, Phillips 66 shall pay (or cause to be paid) to the applicable Tax Authority when due any additional Tax due with respect to such Tax Return as a result of such adjustment.
(e) Return-to-Adjustment Payments. In the case of any adjustment pursuant to a Final Determination with respect to such Tax Return, within 30 days following the later of (x) the date any additional Federal Income Tax or State Income Tax, as applicable, was paid by ConocoPhillips or Phillips 66, as applicable, with respect to such Tax Return as a result of such
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adjustment (or any Tax Benefit was actually reduced in cash or Tax Benefit is actually received in cash) or (y) the date of receipt of a written notice and demand from ConocoPhillips or Phillips 66, as applicable, following such Final Determination for payment of the amount due:
(i) In the case of any such Tax Return filed or required to be filed under applicable Tax Law by any member of the ConocoPhillips Group, (A) Phillips 66 shall pay ConocoPhillips (x) any Federal Income Tax or State Income Tax, as applicable, due with respect to such Tax Return or any reduction in any Tax Benefit for which Phillips 66 is responsible pursuant to Section 2.02(a) or 2.03(a) as a result of such adjustment and (y) any amount required to be paid by Phillips 66 to ConocoPhillips pursuant to Section 2.07 with respect to such Tax Return as a result of such adjustment; and (B) ConocoPhillips shall pay Phillips 66 (x) any reduction in any Tax Benefit for which ConocoPhillips is responsible pursuant to Section 2.02(a) or 2.03(a) and to which Phillips 66 is entitled pursuant to Section 2.02(a) or 2.03(a) as a result of such adjustment and (y) any amount required to be paid by ConocoPhillips to Phillips 66 pursuant to Section 2.07 with respect to such Tax Return as a result of such adjustment; and
(ii) In the case of any such Tax Return filed or required to be filed under applicable Tax Law by any member of the Phillips 66 Group, (A) ConocoPhillips shall pay Phillips 66 (x) any State Income Tax due with respect to such Tax Return or any reduction in any Tax Benefit for which ConocoPhillips is responsible pursuant to Section 2.03(a) as a result of such adjustment and (y) any amount required to be paid by ConocoPhillips to Phillips 66 pursuant to Section 2.07 with respect to such Tax Return as a result of such adjustment; and (B) Phillips 66 shall pay ConocoPhillips (x) any reduction in any Tax Benefit for which Phillips 66 is responsible pursuant to Section 2.03(a) and to which ConocoPhillips is entitled pursuant to Section 2.03(a) as a result of such adjustment and (y) any amount required to be paid by Phillips 66 to ConocoPhillips pursuant to Section 2.07 with respect to such Tax Return as a result of such adjustment.
Section 5.03 Other Taxes. In the case of any Tax Return with respect to Other Taxes for the Pre-Distribution Period or Straddle Period (including, for the absence of doubt, amended Tax Returns):
(a) Taxes Shown as Due on Tax Return. The Responsible Company shall compute the amount of Tax required to be paid to the applicable Tax Authority (taking into account the requirements of Section 4.04) with respect to such Tax Return in respect of a Payment Date. In the case of any such Tax Return filed or required to be filed under applicable Tax Law by any member of the ConocoPhillips Group, ConocoPhillips shall pay (or cause to be paid) such amount to such Tax Authority on or before such Payment Date (and provide notice and proof of payment to Phillips 66) and, in the case of any such Tax Return filed or required to be filed under applicable Tax Law by any member of the Phillips 66 Group, Phillips 66 shall pay (or cause to be paid) such amount to such Tax Authority on or before such Payment Date (and provide notice and proof of payment to ConocoPhillips).
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(b) Accrual-to-Return Payment.
(i) Tax Returns Filed by ConocoPhillips Group Member. In the case of any such Tax Return for any Pre-Distribution Tax Period that ends during 2011 or 2012 or any Straddle Period filed or required to be filed under applicable Tax Law by any member of the ConocoPhillips Group:
(A) Phillips 66 shall be deemed to have paid ConocoPhillips on the Distribution Date an amount equal to any liability for cash Other Taxes with respect to such Tax Return to the extent such Other Taxes have been Accrued and allocated to the Phillips 66 Business (including any member of the Phillips 66 Group) as of the Distribution Date (which accruals and allocations, for the absence of doubt, (x) may be computed after the Distribution Date as of the Distribution Date and which shall be recomputed as of the Distribution Date to take account of any Tax Return that is filed in respect of such Taxes and (y) shall not include any reserves for financial accounting purposes in respect of Taxes that may arise upon audit) (with respect to such Other Taxes, the Accrued Phillips 66 Other Tax Liability).
(B) Subject to Section 5.03(e), within 120 days following the earlier of (y) the due date (including extensions) for filing such Tax Return, or (z) the date on which such Tax Return is filed, (x) Phillips 66 shall pay ConocoPhillips an amount equal to the excess, if any, of the amount of Other Taxes shown as due on such Tax Return for which Phillips 66 is responsible (for the absence of doubt, without regard to any estimated, installment or other advance payments) pursuant to Section 2.02(c)(i), Section 2.03(c)(i), and Section 2.04(c)(i) (for this purpose, determined without regard to Section 5.03(b)(i)(A)) over any Accrued Phillips 66 Other Tax Liability with respect to such Tax Return, and (y) ConocoPhillips shall pay Phillips 66 an amount equal to the excess, if any, of any Accrued Phillips 66 Other Tax Liability with respect to such Tax Return over the amount of such Other Taxes for which Phillips 66 is responsible.
(ii) Tax Returns Filed by Phillips 66 Group Member. In the case of any such Tax Return for any Pre-Distribution Tax Period that ends during 2011 or 2012 or any Straddle Period filed or required to be filed under applicable Tax Law by any member of the Phillips 66 Group:
(A) ConocoPhillips shall be deemed to have paid Phillips 66 on the Distribution Date an amount equal to any liability for cash Other Taxes with respect to such Tax Return to the extent such Other Taxes have been Accrued and allocated to the ConocoPhillips Business (including any member of the ConocoPhillips Group) as of the Distribution Date (which accruals and allocations, for the absence of doubt, (x) may be computed after the Distribution Date as of the Distribution Date and which shall be recomputed as of the Distribution Date to take account of any Tax Return that is filed in respect of such Taxes and (y) shall not include any reserves for financial accounting purposes in respect of Taxes that may arise upon audit) (with respect to such Other Taxes, the Accrued ConocoPhillips Other Tax Liability).
(B) Subject to Section 5.03(e), within 120 days following the earlier of (y) the due date (including extensions) for filing such Tax Return, or (z) the date on which such Tax Return is filed, (x) ConocoPhillips shall pay Phillips 66 an
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amount equal to the excess, if any, of the amount of Other Taxes shown as due on such Tax Return for which ConocoPhillips is responsible (for the absence of doubt, without regard to any estimated, installment or other advance payments) pursuant to Section 2.02(c)(i), Section 2.03(c)(i), and Section 2.04(c)(i) (for this purpose, determined without regard to Section 5.03(b)(ii)(A)) over any Accrued ConocoPhillips Other Tax Liability with respect to such Tax Return, and (y) Phillips 66 shall pay ConocoPhillips an amount equal to the excess, if any, of any Accrued ConocoPhillips Other Tax Liability with respect to such Tax Return over the amount of such Other Taxes for which ConocoPhillips is responsible.
(c) Taxes Resulting from Adjustment. In the case of any adjustment pursuant to a Final Determination with respect to any such Tax Return for any Pre-Distribution Periods or any Straddle Periods, (A) in the case of any such Tax Return filed or required to be filed under applicable Tax Law by any member of the ConocoPhillips Group, ConocoPhillips shall pay (or cause to be paid) when due any additional Other Tax required to be paid with respect to such Tax Return as a result of such adjustment; and (B) in the case of any such Tax Return filed or required to be filed under applicable Tax Law by any member of the Phillips 66 Group, Phillips 66 shall pay (or cause to be paid) when due any additional Other Tax required to be paid with respect to such Tax Return as a result of such adjustment.
(d) Return-to-Adjustment Payments. Subject to Section 5.03(e), in the case of any adjustment pursuant to a Final Determination with respect to such Tax Return for any Pre-Distribution Periods or any Straddle Periods, within 30 days following the later of (i) the date any Other Taxes were paid by ConocoPhillips or Phillips 66, as applicable, pursuant to Section 5.03(c) with respect to such Tax Return as a result of such adjustment or (ii) the date of receipt of a written notice and demand from ConocoPhillips or Phillips 66, as applicable, following such Final Determination for payment of the amount due:
(i) In the case of any such Tax Return filed or required to be filed under applicable Tax Law by any member of the ConocoPhillips Group, (A) Phillips 66 shall pay ConocoPhillips (x) any Other Taxes due with respect to such Tax Return for which Phillips 66 is responsible pursuant to Section 2.02(c)(i), Section 2.03(c)(i), and Section 2.04(c)(i) as a result of such adjustment and (y) any amount required to be paid by Phillips 66 to ConocoPhillips pursuant to Section 2.07(a) with respect to such Tax Return as a result of such adjustment; and (B) ConocoPhillips shall pay Phillips 66 any amount required to be paid by ConocoPhillips to Phillips 66 pursuant to Section 2.07(a) as a result of such adjustment; and
(ii) In the case of any such Tax Return filed or required to be filed under applicable Tax Law by any member of the Phillips 66 Group, (A) ConocoPhillips shall pay Phillips 66 (x) any Other Taxes due with respect to such Tax Return for which ConocoPhillips is responsible pursuant to Section 2.02(c)(i), Section 2.03(c)(i), and Section 2.04(c)(i) as a result of such adjustment and (y) any amount required to be paid by ConocoPhillips to Phillips 66 pursuant to Section 2.07(a) with respect to such Tax Return as a result of such adjustment; and (B) Phillips 66 shall pay ConocoPhillips any amount required to be paid by Phillips 66 to ConocoPhillips pursuant to Section 2.07(a) as a result of such adjustment.
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(e) De Minimis Threshold for Other Taxes. Notwithstanding Section 2.02(c), Section 2.03(c), Section 5.03(b) (except with respect to Foreign Other Taxes), and Section 5.03(d) (except with respect to Foreign Other Taxes) and except with respect to any amended Tax Return, in no event shall ConocoPhillips or Phillips 66, as applicable, be liable to pay Phillips 66 or ConocoPhillips, as applicable, any amount with respect to Other Taxes (other than Foreign Other Taxes) pursuant to Section 5.03(b) or Section 5.03(d) unless the amount of such payment otherwise required to be made pursuant to Section 5.03(b) with respect to the relevant Tax Return (other than any amended Tax Return) or Section 5.03(d) with respect to the relevant adjustment, as applicable (in each case, for the absence of doubt, without regard to this Section 5.03(e)), exceeds $100,000. For the absence of doubt, (i) the foregoing limitation shall apply on a per Tax Return basis (in the case of any payment otherwise required to be made pursuant to Section 5.03(b)) or on a per adjustment basis (in the case of any payment otherwise required to be made pursuant to Section 5.03(d)) and (ii) ConocoPhillips or Phillips 66, as applicable, shall be liable for the full amount of any payment to which the foregoing limitation does not apply.
Section 5.04 Certain Separate Return Income Taxes and Property Taxes. In the case of any (x) Income Taxes with respect to a Separate Return (other than State Separate Income Tax Returns for Pre-Distribution Periods or Straddle Periods); and (y) Property Taxes or any refunds of such Taxes:
(a) Taxes Due. Each Company shall pay, or shall cause to be paid, to the applicable Tax Authority when due (i) except as set forth in Section 5.04(c), all Income Taxes with respect to such Separate Return; and (ii) all Property Taxes, in each case for which such Company is responsible pursuant to Section 2.
(b) Refunds. If a Company or any member of such Companys Group receives a refund of (i) Income Taxes with respect to such Separate Return; or (ii) Property Taxes, in each case to which the other Company is entitled pursuant to Section 2.07, such Company shall pay over such refund to the other Company within 30 days following the receipt of such refund.
(c) Section 2.02(a)(iii) Taxes. In the case of any ConocoPhillips Federal Income Tax Return (including, for the absence of doubt, an amended Tax Return) for a Post-Distribution Period (other than any Straddle Period), within 120 days following the earlier of (y) the due date (including extensions) for filing such Tax Return or (z) the date on which such Tax Return is filed, Phillips 66 shall pay ConocoPhillips the amount for which Phillips 66 is responsible under Section 2.02(a)(iii) with respect to such Tax Return. In the case of any adjustment pursuant to a Final Determination with respect to such Tax Return, within 30 days following the later of (i) the date any additional Federal Income Tax was paid by ConocoPhillips with respect to such Tax Return as a result of such adjustment (or any Tax Benefit was actually reduced in cash) or (ii) the date of receipt of a written notice and demand from ConocoPhillips following such Final Determination for payment of the amount due, Phillips 66 shall pay ConocoPhillips the amount for which Phillips 66 is responsible pursuant to Section 2.02(a)(iii) as a result of such adjustment.
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Section 5.05 Tax-Related Losses. Phillips 66 shall pay ConocoPhillips the amount of any Tax-Related Losses for which Phillips 66 is responsible under Section 6.04:
(a) In the case of Tax-Related Losses described in clause (a) of the definition of Tax-Related Losses, no later than two Business Days prior to the date COP files, or causes to be filed, the applicable Tax Return for the year of the Internal Contribution, Internal Distribution, Contribution or Distribution, as applicable (provided that if such Tax-Related Losses arise pursuant to a Final Determination described in clause (a), (b) or (c) of the definition of Final Determination, then Phillips 66 shall pay ConocoPhillips no later than two Business Days after the date of such Final Determination); and
(b) In the case of Tax-Related Losses described in clause (b) or (c) of the definition of Tax-Related Losses, no later than two Business Days after the date ConocoPhillips pays such Tax-Related Losses.
Section 5.06 Treatment of Payments; Tax Gross Up.
(a) Treatment of Payments. In the absence of any change in Tax treatment under the Code or other applicable Tax Law and except as provided in Section 5.06(b), any payments made by a Company under this Agreement shall be reported for Tax purposes by the payor and the recipient as distributions or capital contributions, as appropriate, occurring immediately before the Distribution (but only to the extent that the payment does not relate to a Tax allocated to the payor in accordance with Section 1552 of the Code or the regulations thereunder or Treasury Regulation Section 1.1502-33(d) (or under corresponding principles of other applicable Tax Laws)) or as payments of an assumed or retained liability.
(b) Treatment of Interest Payments Under This Agreement. Anything herein to the contrary notwithstanding, to the extent one Company (the Indemnitor) makes a payment of interest to another Company (the Indemnitee) under this Agreement with respect to the period from the date that the Indemnitee made a payment of a Tax to a Tax Authority to the date that the Indemnitor reimbursed the Indemnitee for such Tax payment, the interest payment shall be treated as interest expense to the Indemnitor (deductible to the extent provided by Law) and as interest income by the Indemnitee (includible in income to the extent provided by Law). The amount of the payment shall not be adjusted to take into account any associated Tax Benefit to the Indemnitor or increase in Tax to the Indemnitee.
(c) Tax Gross Up. If (i) notwithstanding the manner in which any payment under this Agreement is reported, there is an adjustment to the Tax liability of a Company as a result of its receipt of a payment pursuant to this Agreement or (ii) any deduction or withholding is required by Law to be made from any payment (other than an interest payment) under this Agreement, such payment shall be appropriately adjusted so that the amount of such payment, reduced by the amount of all Income Taxes payable with respect to the receipt thereof or the amount of all deduction or withholding required by Law with respect to such payment, as applicable (in each case, taking into account all correlative Tax Benefits resulting from the payment of such Income Taxes), shall equal the amount of the payment which the Company receiving such payment would otherwise be entitled to receive pursuant to this Agreement.
Section 5.07 Late Payments. Any amount owed by one party to another party under this Agreement which is not paid when due shall bear interest at the Prime Rate plus five percent, compounded semiannually, from the due date of the payment to the date paid. To the extent interest required to be paid under this Section 5.07 duplicates interest required to be paid under any other provision of this Agreement, interest shall be computed at the higher of the interest rate provided under this Section 5.07 or the interest rate provided under such other provision.
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Section 6. Tax-Free Status.
Section 6.01 Tax Opinions/Rulings and Representation Letters.
(a) Each of Phillips 66 and ConocoPhillips hereby represents and agrees that (i) it has or will read the Representation Letters deliverable to Wachtell, Lipton, Rosen & Katz in connection with the rendering of the Tax Opinion prior to the date submitted and has or will read the Representation Letters (including the Ruling Request) delivered to the IRS in connection with obtaining the Ruling prior to the date of this Agreement and (ii) subject to any qualifications therein, all information contained in such Representation Letters and Rulings that concerns or relates to such Company or any member of its Group will be true, correct and complete.
(b) Phillips 66, Phillips 66 Company, ConocoPhillips, and ConocoPhillips Company acknowledge that the Tax Opinions/Rulings and the Representation Letters may not yet have been obtained or submitted. Phillips 66, Phillips 66 Company, ConocoPhillips, and ConocoPhillips Company shall use their commercially reasonable efforts and shall cooperate in good faith to finalize the Representation Letters for the Distribution as soon as possible hereafter and to cause the same to be submitted to the Tax Advisors, the IRS or such other governmental authorities as ConocoPhillips shall deem necessary or desirable and shall take such other commercially reasonable actions as may be necessary or desirable to obtain the Tax Opinions/Rulings in order to confirm the Tax-Free Status.
Section 6.02 Restrictions on Phillips 66 and Phillips 66 Company.
(a) Phillips 66 and Phillips 66 Company agree that they will not take or fail to take, or permit any Phillips 66 Affiliate or Phillips 66 Company Affiliate, as applicable, to take or fail to take, any action where such action or failure to act would be inconsistent with or cause to be untrue any material, information, covenant or representation in any Representation Letters or Tax Opinions/Rulings. Phillips 66 and Phillips 66 Company agree that they will not take or fail to take, or permit any Phillips 66 Affiliate or Phillips 66 Company Affiliate, as applicable, to take or fail to take, any action which prevents or could reasonably be expected to prevent (i) the Tax-Free Status, or (ii) any transaction contemplated by the Separation and Distribution Agreement which is intended by the parties to be tax-free (including, but not limited to, those transactions which the IRS has ruled qualify for tax-free treatment in the Ruling) from so qualifying, including, (x) in the case of Phillips 66, issuing any Phillips 66 Capital Stock that would prevent the Distribution from qualifying as a tax-free distribution within the meaning of Section 355 of the Code; and (y) in the case of Phillips 66 Company, issuing any Phillips 66 Company Capital Stock that would prevent the Internal Distribution from qualifying as a tax-free distribution within the meaning of Section 355 of the Code.
(b) Pre-Distribution Period. During the period from the date hereof until the completion of the Distribution, Phillips 66 and Phillips 66 Company shall not take any action (including, in the case of Phillips 66, the issuance of Phillips 66 Capital Stock) or permit any Phillips 66 Affiliate or Phillips 66 Company Affiliate directly or indirectly controlled by Phillips 66 or Phillips 66 Company, as applicable, to take any action if, as a result of taking such action, (i)
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Phillips 66 could have a number of shares of Phillips 66 Capital Stock (computed on a fully diluted basis or otherwise) issued and outstanding, including by way of the exercise of stock options (whether or not such stock options are currently exercisable) or the issuance of restricted stock, that could cause ConocoPhillips to cease to have Tax Control of Phillips 66; or (ii) Phillips 66 Company could have a number of shares of Phillips 66 Company Capital Stock (computed on a fully diluted basis or otherwise) issued and outstanding, including by way of the exercise of stock options (whether or not such stock options are currently exercisable) or the issuance of restricted stock, that could cause ConocoPhillips Company to cease to have Tax Control of Phillips 66 Company.
(c) Each of Phillips 66 and Phillips 66 Company agrees that, from the date hereof until the first day after the two-year anniversary of the Distribution Date, it will (i) maintain its status as a company engaged in the Active Trade or Business for purposes of Section 355(b)(2) of the Code and (ii) not engage in any transaction that would result in it ceasing to be a company engaged in the Active Trade or Business for purposes of Section 355(b)(2) of the Code, in each case, taking into account Section 355(b)(3) of the Code.
(d) Phillips 66 agrees that, from the date hereof until the first day after the two-year anniversary of the Distribution Date, it will not (i) enter into any Proposed Acquisition Transaction or, to the extent Phillips 66 has the right to prohibit any Proposed Acquisition Transaction, permit any Proposed Acquisition Transaction to occur (whether by (A) redeeming rights under a shareholder rights plan, (B) finding a tender offer to be a permitted offer under any such plan or otherwise causing any such plan to be inapplicable or neutralized with respect to any Proposed Acquisition Transaction, or (C) approving any Proposed Acquisition Transaction, whether for purposes of Section 203 of the DGCL or any similar corporate statute, any fair price or other provision of Phillips 66s charter or bylaws or otherwise), (ii) merge or consolidate with any other Person or liquidate or partially liquidate or cause or permit Phillips 66 Company to merge or consolidate with any other Person or liquidate or partially liquidate, (iii) in a single transaction or series of transactions sell or transfer (other than sales or transfers of inventory in the ordinary course of business) all or substantially all of the assets that were transferred to Phillips 66 as part of the Contribution or to Phillips 66 Company as part of the Internal Contribution or sell or transfer (or cause or permit to be transferred) 60% or more of the gross assets of the Active Trade or Business or 60% or more of the consolidated gross assets of Phillips 66 and its Affiliates (such percentages to be measured based on fair market value as of the Distribution Date) or sell or transfer any of the shares of Phillips 66 Company, (iv) redeem or otherwise repurchase (directly or through a Phillips 66 Affiliate) any Phillips 66 stock, or rights to acquire stock, except to the extent such repurchases satisfy Section 4.05(1)(b) of Revenue Procedure 96-30 (as in effect prior to the amendment of such Revenue Procedure by Revenue Procedure 2003-48), (v) amend its certificate of incorporation (or other organizational documents), or take any other action, whether through a stockholder vote or otherwise, affecting the voting rights of Phillips 66 Capital Stock (including, without limitation, through the conversion of one class of Phillips 66 Capital Stock into another class of Phillips 66 Capital Stock) or (vi) take any other action or actions (including any action or transaction that would be reasonably likely to be inconsistent with any representation made in the Representation Letters or the Tax Opinions/Rulings) which in the aggregate (and taking into account any other transactions described in this subparagraph (d)) would be reasonably likely to have the effect of causing or permitting one or more persons (whether or not acting in concert) to acquire directly
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or indirectly stock representing a Fifty-Percent or Greater Interest in Phillips 66 or Phillips 66 Company or otherwise jeopardize the Tax-Free Status, unless prior to taking any such action set forth in the foregoing clauses (i) through (vi), (x) Phillips 66 shall have requested that ConocoPhillips obtain a Ruling in accordance with Section 6.03(b) and (d) of this Agreement to the effect that such transaction will not affect the Tax-Free Status and ConocoPhillips shall have received such a Ruling in form and substance satisfactory to ConocoPhillips in its sole and absolute discretion, which discretion shall be exercised in good faith solely to preserve the Tax-Free Status (and in determining whether a Ruling is satisfactory, ConocoPhillips may consider, among other factors, the appropriateness of any underlying assumptions and managements representations made in connection with such Ruling), (y) Phillips 66 shall provide ConocoPhillips with an Unqualified Tax Opinion in form and substance satisfactory to ConocoPhillips in its sole and absolute discretion, which discretion shall be exercised in good faith solely to preserve the Tax-Free Status (and in determining whether an opinion is satisfactory, ConocoPhillips may consider, among other factors, the appropriateness of any underlying assumptions and managements representations if used as a basis for the opinion and ConocoPhillips may determine that no opinion would be acceptable to ConocoPhillips) or (z) ConocoPhillips shall have waived the requirement to obtain such Ruling or Unqualified Tax Opinion.
(e) Certain Issuances of Phillips 66 Capital Stock. If Phillips 66 proposes to enter into any Section 6.02(e) Acquisition Transaction or, to the extent Phillips 66 has the right to prohibit any Section 6.02(e) Acquisition Transaction, proposes to permit any Section 6.02(e) Acquisition Transaction to occur, in each case, during the period from the date hereof until the first day after the two-year anniversary of the Distribution Date, Phillips 66 shall provide ConocoPhillips, no later than ten days following the signing of any written agreement with respect to the Section 6.02(e) Acquisition Transaction, with a written description of such transaction (including the type and amount of Phillips 66 Capital Stock to be issued in such transaction) and a certificate of the Board of Directors of Phillips 66 to the effect that the Section 6.02(e) Acquisition Transaction is not a Proposed Acquisition Transaction or any other transaction to which the requirements of Section 6.02(d) apply (a Board Certificate).
(f) Phillips 66 Restructuring. Phillips 66 and Phillips 66 Company shall not engage in, cause or permit any internal restructuring (including by making or revoking any election under Treasury Regulation Section 301.7701-3) involving Phillips 66 or Phillips 66 Company and/or any of their subsidiaries or any contribution, sale or other transfer of any of the assets directly or indirectly transferred to Phillips 66 as part of the Contribution, transferred to Phillips 66 Company as part of the Internal Contribution, or otherwise transferred to Phillips 66 or Phillips 66 Company, as applicable, or any of their subsidiaries in connection with the Transaction (any such action, a Phillips 66 Restructuring) during or with respect to any Tax Period (or portion thereof) ending on or prior to 6 months following the Distribution Date without obtaining the prior written consent of ConocoPhillips (such prior written consent not to be unreasonably withheld). Phillips 66 or Phillips 66 Company, as applicable, shall provide written notice to ConocoPhillips describing any Phillips 66 Restructuring proposed to be taken during or with respect to any Tax Period (or portion thereof) ending on or prior to 6 months following the Distribution Date and shall consult with ConocoPhillips regarding any such proposed actions.
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(g) Distributions by Foreign Phillips 66 Subsidiaries. Until January 1st of the calendar year immediately following the calendar year in which the Distribution occurs, Phillips 66 shall neither cause nor permit any foreign subsidiary of Phillips 66 to enter into any transaction or take any action that would be considered under the Code to constitute the declaration or payment of a dividend (including pursuant to Section 304 of the Code) without obtaining the prior written consent of ConocoPhillips (such prior written consent not to be unreasonably withheld).
Section 6.03 Procedures Regarding Opinions and Rulings.
(a) If Phillips 66 notifies ConocoPhillips that it desires to take one of the actions described in clauses (i) through (vi) of Section 6.02(d) (a Notified Action), ConocoPhillips and Phillips 66 shall reasonably cooperate to attempt to obtain the Ruling or Unqualified Tax Opinion referred to in Section 6.02(d), unless ConocoPhillips shall have waived the requirement to obtain such Ruling or Unqualified Tax Opinion.
(b) Rulings or Unqualified Tax Opinions at Phillips 66s Request. ConocoPhillips agrees that at the reasonable request of Phillips 66 pursuant to Section 6.02(d), ConocoPhillips shall cooperate with Phillips 66 and use its reasonable best efforts to seek to obtain, as expeditiously as possible, a Ruling from the IRS or an Unqualified Tax Opinion for the purpose of permitting Phillips 66 to take the Notified Action. Further, in no event shall ConocoPhillips be required to file any Ruling Request under this Section 6.03(b) unless Phillips 66 represents that (i) it has read the Ruling Request, and (ii) all information and representations, if any, relating to any member of the Phillips 66 Group, contained in the Ruling Request documents are (subject to any qualifications therein) true, correct and complete. Phillips 66 shall reimburse ConocoPhillips for all reasonable costs and expenses incurred by the ConocoPhillips Group in obtaining a Ruling or Unqualified Tax Opinion requested by Phillips 66 within ten Business Days after receiving an invoice from ConocoPhillips therefor.
(c) Rulings or Unqualified Tax Opinions at ConocoPhillips Request. ConocoPhillips shall have the right to obtain a Ruling or an Unqualified Tax Opinion at any time in its sole and absolute discretion. If ConocoPhillips determines to obtain a Ruling or an Unqualified Tax Opinion, Phillips 66 shall (and shall cause each Affiliate of Phillips 66 to) cooperate with ConocoPhillips and take any and all actions reasonably requested by ConocoPhillips in connection with obtaining the Ruling or Unqualified Tax Opinion (including, without limitation, by making any representation or covenant or providing any materials or information requested by the IRS or Tax Advisor; provided that Phillips 66 shall not be required to make (or cause any Affiliate of Phillips 66 to make) any representation or covenant that is inconsistent with historical facts or as to future matters or events over which it has no control). ConocoPhillips and Phillips 66 shall each bear its own costs and expenses in obtaining a Ruling or an Unqualified Tax Opinion requested by ConocoPhillips.
(d) Phillips 66 hereby agrees that ConocoPhillips shall have sole and exclusive control over the process of obtaining any Ruling, and that only ConocoPhillips shall apply for a Ruling. In connection with obtaining a Ruling pursuant to Section 6.03(b), (i) ConocoPhillips shall keep Phillips 66 informed in a timely manner of all material actions taken or proposed to be taken by ConocoPhillips in connection therewith; (ii) ConocoPhillips shall (A) reasonably in advance of the submission of any Ruling Request documents provide Phillips 66 with a draft copy thereof, (B) reasonably consider Phillips 66s comments on such draft copy, and (C) provide Phillips 66
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with a final copy; and (iii) ConocoPhillips shall provide Phillips 66 with notice reasonably in advance of, and Phillips 66 shall have the right to attend, any formally scheduled meetings with the IRS (subject to the approval of the IRS) that relate to such Ruling. Neither Phillips 66 nor any Phillips 66 Affiliate directly or indirectly controlled by Phillips 66 shall seek any guidance from the IRS or any other Tax Authority (whether written, verbal or otherwise) at any time concerning the Contribution, the Distribution, the Internal Contribution, the Internal Distribution (including the impact of any transaction on the Contribution, the Distribution, the Internal Contribution or the Internal Distribution) or any transaction referred to in Section 6.02(a)(ii).
Section 6.04 Liability for Tax-Related Losses.
(a) Notwithstanding anything in this Agreement, the Separation and Distribution Agreement, the Indemnification and Release Agreement, or any other Ancillary Agreement to the contrary, subject to Section 6.04(b), Phillips 66 shall be responsible for, and shall indemnify and hold harmless ConocoPhillips, ConocoPhillips Company, each of their Affiliates and each of their respective officers, directors and employees from and against, one hundred percent (100%) of any Tax-Related Losses that are attributable to or result from any one or more of the following: (i) the acquisition (other than pursuant to the Internal Contribution, the Internal Distribution, the Contribution, or the Distribution) of all or a portion of the stock and/or assets of Phillips 66 and/or its subsidiaries by any means whatsoever by any Person, (ii) any negotiations, understandings, agreements or arrangements by Phillips 66 with respect to transactions or events (including, without limitation, stock issuances, pursuant to the exercise of stock options or otherwise, option grants, capital contributions or acquisitions, or a series of such transactions or events) that cause the Internal Distribution or the Distribution to be treated as part of a plan pursuant to which one or more Persons acquire directly or indirectly stock of Phillips 66 Company or Phillips 66, as applicable, representing a Fifty-Percent or Greater Interest therein, (iii) any action or failure to act by Phillips 66 after the Distribution (including, without limitation, any amendment to Phillips 66s certificate of incorporation (or other organizational documents), whether through a stockholder vote or otherwise) affecting the voting rights of Phillips 66 stock or Phillips 66 Company stock (including, without limitation, through the conversion of one class of Phillips 66 Capital Stock or Phillips 66 Company Capital Stock, respectively, into another class of Phillips 66 Capital Stock or Phillips 66 Company Capital Stock, respectively), (iv) any act or failure to act by Phillips 66, Phillips 66 Company, or any Phillips 66 Affiliate described in Section 6.02 (regardless whether such act or failure to act is covered by a Ruling, Unqualified Tax Opinion or waiver described in clause (x), (y) or (z) of Section 6.02(d), a Board Certificate described in Section 6.02(e) or a consent described in Section 6.02(f) or (g)) or (v) any breach by Phillips 66 of its agreement and representation set forth in Section 6.01(a).
(b) For purposes of calculating the amount and timing of any Tax-Related Loss for which Phillips 66 is responsible under this Section 6.04, Tax-Related Losses shall be calculated by assuming that ConocoPhillips, ConocoPhillips Company, the ConocoPhillips Affiliated Group and each member of the ConocoPhillips Group (I) pay Tax at the highest marginal corporate Tax rates in effect in each relevant taxable year and (II) have no Tax Attributes in any relevant taxable year.
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Section 7. Assistance and Cooperation.
Section 7.01 Assistance and Cooperation.
(a) General. Each of the Companies shall cooperate (and cause its respective Affiliates to cooperate) with the other Company and with the other Companys agents, representatives or advisors, including accounting firms and legal counsel, in connection with Tax matters relating to the Companies and their Affiliates including (i) preparation and filing of Tax Returns, (ii) determining the liability for and amount of any Taxes due (including estimated Taxes) or the right to and amount of any refund of Taxes, (iii) determining any amounts required to be paid pursuant to this Agreement, (iv) examinations of Tax Returns, and (v) any administrative or judicial proceeding in respect of Taxes assessed or proposed to be assessed or claims for refunds. Such cooperation shall include, without limitation, (x) preparing Tax Packages and providing information and documents as provided in Section 7.02, (y) making all information and documents in their possession relating to the other Company and its Affiliates available to such other Company as provided in Section 8, and (z) making available to the other Company, as reasonably requested and available, personnel (including officers, directors, employees and agents of the Companies or their respective Affiliates) responsible for preparing, maintaining, and interpreting information and documents relevant to Taxes, and personnel reasonably required as witnesses or for purposes of providing information or documents in connection with any administrative or judicial proceedings relating to Taxes. In the event that a member of the ConocoPhillips Group, on the one hand, or a member of the Phillips 66 Group, on the other hand, suffers a Tax detriment as a result of a Transfer Pricing Adjustment, the Companies shall cooperate pursuant to this Section 7 to seek any competent authority relief that may be available with respect to such Transfer Pricing Adjustment.
(b) Confidentiality. Any information or documents provided under this Section 7 shall be kept confidential by the Company receiving the information or documents, except as may otherwise be necessary in connection with the filing of Tax Returns or in connection with any administrative or judicial proceedings relating to Taxes. Notwithstanding any other provision of this Agreement or any other agreement, (i) neither ConocoPhillips nor any ConocoPhillips Affiliate shall be required to provide Phillips 66 or any Phillips 66 Affiliate or any other Person access to or copies of any information or procedures (including the proceedings of any Tax Contest) other than information or procedures that relate solely to Phillips 66, the business or assets of Phillips 66 or any Phillips 66 Affiliate and (ii) in no event shall ConocoPhillips or any ConocoPhillips Affiliate be required to provide Phillips 66, any Phillips 66 Affiliate or any other Person access to or copies of any information if such action could reasonably be expected to result in the waiver of any Privilege. In addition, in the event that ConocoPhillips determines that the provision of any information to Phillips 66 or any Phillips 66 Affiliate could be commercially detrimental, violate any Law or agreement or waive any Privilege, the parties shall use reasonable best efforts to permit compliance with their respective obligations under this Section 7 in a manner that avoids any such harm or consequence.
Section 7.02 Tax Packages and Other Tax Return Information.
(a) General. Phillips 66, Phillips 66 Company, ConocoPhillips, and ConocoPhillips Company acknowledge that time is of the essence in relation to any request for information, assistance or cooperation made by ConocoPhillips or Phillips 66 pursuant to Section 7.01 or this
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Section 7.02. Phillips 66, Phillips 66 Company, ConocoPhillips, and ConocoPhillips Company acknowledge that failure to conform to the deadlines set forth herein or reasonable deadlines otherwise set by ConocoPhillips or Phillips 66 could cause irreparable harm.
(b) Tax Packages. Phillips 66 (if ConocoPhillips is the Responsible Company with respect to the applicable Tax Returns) or ConocoPhillips (if Phillips 66 is the Responsible Company with respect to the applicable Tax Returns) shall provide to the Responsible Company a package containing information and documents relating to its Group required by the Responsible Company to prepare and file the applicable Tax Returns (Tax Packages). Phillips 66 or ConocoPhillips, as applicable, shall provide such Tax Packages (i) containing information or documents in such form as the Responsible Company reasonably requests (or, in the absence of such request, in such form as historically provided to the Responsible Company for the purposes of preparing and filing the applicable Tax Returns) and (ii) in sufficient time for the Responsible Company to file the applicable Tax Returns on a timely basis.
Section 7.03 Reliance by ConocoPhillips. If any member of the Phillips 66 Group supplies information to a member of the ConocoPhillips Group in connection with a Tax liability and an officer of a member of the ConocoPhillips Group signs a statement or other document under penalties of perjury in reliance upon the accuracy of such information, then upon the written request of such member of the ConocoPhillips Group identifying the information being so relied upon, the chief financial officer of Phillips 66 (or any officer of Phillips 66 as designated by the chief financial officer of Phillips 66) shall certify in writing that to his or her knowledge (based upon consultation with appropriate employees) the information so supplied is accurate and complete. Each of Phillips 66 and Phillips 66 Company agrees to indemnify and hold harmless each member of the ConocoPhillips Group and its directors, officers and employees from and against any fine, penalty, or other cost or expense of any kind attributable to a member of the Phillips 66 Group having supplied, pursuant to this Section 7, a member of the ConocoPhillips Group with inaccurate or incomplete information in connection with a Tax liability.
Section 8. Tax Records.
Section 8.01 Retention of Tax Records. Each Company shall preserve and keep all Tax Records exclusively relating to the assets and activities of its Group for Pre-Distribution Periods, and ConocoPhillips shall preserve and keep all other Tax Records relating to Taxes of the Groups for Pre-Distribution Tax Periods, for so long as the contents thereof may become material in the administration of any matter under the Code or other applicable Tax Law, but in any event until the later of (a) the expiration of any applicable statutes of limitations, or (b) seven years after the Distribution Date (such later date, the Retention Date). After the Retention Date, each Company may dispose of such Tax Records upon 90 days prior written notice to the other Company. If, prior to the Retention Date, a Company reasonably determines that any Tax Records which it would otherwise be required to preserve and keep under this Section 8 are no longer material in the administration of any matter under the Code or other applicable Tax Law and the other Company agrees, then such first Company may dispose of such Tax Records upon 90 days prior notice to the other Company. Any notice of an intent to dispose given pursuant to this Section 8.01 shall include a list of the Tax Records to be disposed of describing in reasonable detail each file, book, or other record accumulation being disposed. The notified Company shall have the opportunity, at its cost and expense, to copy or remove, within such 90-
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day period, all or any part of such Tax Records. If, at any time prior to the Retention Date, Phillips 66 or Phillips 66 Company determines to decommission or otherwise discontinue any computer program or information technology system used to access or store any Tax Records, then Phillips 66 or Phillips 66 Company may decommission or discontinue such program or system upon 90 days prior notice to ConocoPhillips and ConocoPhillips shall have the opportunity, at its cost and expense, to copy, within such 90-day period, all or any part of the underlying data relating to the Tax Records accessed by or stored on such program or system.
Section 8.02 Access to Tax Records. The Companies and their respective Affiliates shall make available to each other for inspection and copying during normal business hours upon reasonable notice all Tax Records (and, for the avoidance of doubt, any pertinent underlying data accessed or stored on any computer program or information technology system) in their possession and shall permit the other Company and its Affiliates, authorized agents and representatives and any representative of a Taxing Authority or other Tax auditor direct access during normal business hours upon reasonable notice to any computer program or information technology system used to access or store any Tax Records, in each case to the extent reasonably required by the other Company in connection with the preparation of Tax Returns or financial accounting statements, audits, litigation, or the resolution of items under this Agreement.
Section 9. Tax Contests.
Section 9.01 Notice. Each of the Companies shall provide prompt notice to the other Company of any written communication from a Tax Authority regarding any pending or threatened Tax audit, assessment or proceeding or other Tax Contest of which it or its Affiliate becomes aware related to Taxes for Tax Periods for which it is indemnified by the other Company hereunder. Such notice shall attach copies of the pertinent portion of any written communication from a Tax Authority and contain factual information (to the extent known) describing any asserted Tax liability in reasonable detail and shall be accompanied by copies of any notice and other documents received from any Tax Authority in respect of any such matters; provided, however, that the Indemnitor shall not be relieved of its obligations hereunder by reason of any failure by the Indemnitee to so notify except to the extent the Indemnitor was materially harmed by such failure.
Section 9.02 Control of Tax Contests.
(a) Separate Returns. In the case of any Tax Contest with respect to any Separate Return for any Pre-Distribution Period or any Straddle Period:
(i) If the Tax Contest relates exclusively to Taxes for which Phillips 66 is responsible under Section 2, Phillips 66 shall have exclusive control over such Tax Contest, except insofar as ConocoPhillips shall have exclusive control over such Tax Contest pursuant to Section 9.02(a)(ii)(B) and subject to Section 9.02(c)(i) and (d) below; and
(ii) If the Tax Contest relates (A) exclusively to Taxes for which ConocoPhillips is responsible under Section 2, (B) exclusively to Taxes for which Phillips 66 is responsible under Section 2 and ConocoPhillips determines in good faith that Phillips 66 has failed to defend diligently such Tax Contest, or (C) to Taxes for which both ConocoPhillips and
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Phillips 66 are responsible under Section 2, ConocoPhillips shall (in the case of Tax Contests described in Section 9.02(a)(ii)(B), at ConocoPhillips option) have exclusive control over the Tax Contest, subject to Section 9.02(c)(i) and (d) below.
(b) Joint Returns. In the case of any Tax Contest with respect to any ConocoPhillips Federal Consolidated Income Tax Return, ConocoPhillips State Combined Income Tax Return or other Joint Return, in each case, for any Pre-Distribution Period or Straddle Period, ConocoPhillips shall have exclusive control over the Tax Contest, including exclusive authority with respect to any settlement of such Tax liability, subject to Section 9.02(c)(ii) below.
(c) Settlement Rights and Certain Other Rights.
(i) Separate Returns. In the case of any Tax Contest with respect to any Separate Return, the Controlling Party shall have the sole right to contest, litigate, compromise and settle any such Tax Contest without obtaining the prior consent of the Non-Controlling Party; provided, however, that if Phillips 66 is the Controlling Party with respect to any Tax Contest with respect to any Separate Return which Tax Contest would reasonably be expected to have an adverse impact on ConocoPhillips, Phillips 66 shall not compromise or settle such Tax Contest without obtaining the prior consent of ConocoPhillips. Unless waived by the parties in writing, in connection with any potential adjustment in such Tax Contest (x) with respect to any Separate Return as a result of which adjustment the Non-Controlling Party may reasonably be expected to become liable to make any indemnification payment (or any payment under Section 2.07) to the Controlling Party under this Agreement or (y) with respect to any Specified Separate Return: (A) the Controlling Party shall keep the Non-Controlling Party informed in a timely manner of all actions taken or proposed to be taken by the Controlling Party with respect to such potential adjustment in such Tax Contest; (B) the Controlling Party shall provide the Non-Controlling Party copies of any written materials relating to such potential adjustment in such Tax Contest received from any Tax Authority; (C) the Controlling Party shall consult with the Non-Controlling Party before submitting any written materials prepared or furnished in connection with such potential adjustment in such Tax Contest and shall offer the Non-Controlling Party a reasonable opportunity to comment before submitting any such written materials; and (D) the Controlling Party shall timely provide the Non-Controlling Party with copies of any correspondence or filings submitted to any Tax Authority or judicial authority in connection with such potential adjustment in such Tax Contest. The failure of the Controlling Party to take any action specified in the preceding sentence with respect to the Non-Controlling Party shall not relieve the Non-Controlling Party of any liability and/or obligation which it may have to the Controlling Party under this Agreement except to the extent that the Non-Controlling Party was materially harmed by such failure, and in no event shall such failure relieve the Non-Controlling Party from any other liability or obligation which it may have to the Controlling Party.
(ii) Joint Returns. In the case of any Tax Contest with respect to Joint Returns, the Controlling Party shall have the sole right to contest, litigate, compromise and settle any such Tax Contest without obtaining the prior consent of the Non-Controlling Party. Unless waived by the parties in writing, in connection with any potential adjustment in such Tax Contest as a result of which adjustment the Non-Controlling Party may
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reasonably be expected to become liable to make any indemnification payment (or any payment under Section 2.07) to the Controlling Party under this Agreement: (A) the Controlling Party shall keep the Non-Controlling Party informed in a timely manner of all actions taken or proposed to be taken by the Controlling Party with respect to such potential adjustment in such Tax Contest; (B) the Controlling Party shall provide the Non-Controlling Party copies of any written materials relating to such potential adjustment in such Tax Contest received from any Tax Authority; and (C) the Controlling Party shall consult with the Non-Controlling Party before submitting any written materials prepared or furnished in connection with such potential adjustment in such Tax Contest. Phillips 66 shall not be entitled to attend meetings or teleconferences with the Tax Authority in connection with any Tax Contest with respect to any Joint Returns, except that, in connection with any Special Joint Tax Contest, Phillips 66 shall be entitled to attend such portion of any meeting or teleconference as pertains to Phillips 66. The failure of the Controlling Party to take any action specified in the second preceding sentence with respect to the Non-Controlling Party shall not relieve the Non-Controlling Party of any liability and/or obligation which it may have to the Controlling Party under this Agreement except to the extent that the Non-Controlling Party was materially harmed by such failure, and in no event shall such failure relieve the Non-Controlling Party from any other liability or obligation which it may have to the Controlling Party. ConocoPhillips shall be entitled to permit Phillips 66 to conduct any portion of a Special Joint Tax Contest on such terms and conditions as ConocoPhillips shall determine in its sole discretion.
(d) Tax Contest Participation. In the case of any Tax Contest with respect to any Separate Return, unless waived by the parties in writing, the Controlling Party shall provide the Non-Controlling Party with written notice reasonably in advance of, and the Non-Controlling Party shall have the right to attend, any formally scheduled meetings with Tax Authorities or hearings or proceedings before any judicial authorities in connection with any potential adjustment in a Tax Contest pursuant to which the Non-Controlling Party may reasonably be expected to become liable to make any indemnification payment (or any payment under Section 2.07) to the Controlling Party under this Agreement or with respect to any Specified Separate Return. The failure of the Controlling Party to provide any notice specified in this Section 9.02(d) to the Non-Controlling Party shall not relieve the Non-Controlling Party of any liability and/or obligation which it may have to the Controlling Party under this Agreement except to the extent that the Non-Controlling Party was materially harmed by such failure, and in no event shall such failure relieve the Non-Controlling Party from any other liability or obligation which it may have to the Controlling Party.
(e) Power of Attorney. Each member of the Phillips 66 Group shall execute and deliver to ConocoPhillips (or such member of the ConocoPhillips Group as ConocoPhillips shall designate) any power of attorney or other similar document reasonably requested by ConocoPhillips (or such designee) in connection with any Tax Contest (as to which ConocoPhillips is the Controlling Party) described in this Section 9.
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Section 10. Effective Date; Termination of Prior Intercompany Tax Allocation Agreements.
This Agreement shall be effective as of the date hereof. As of the date hereof, (a) all prior intercompany Tax allocation agreements shall be terminated, and (b) amounts due under such agreements as of the date hereof shall be settled before the Distribution Date. Upon such termination and settlement, no further payments by or to ConocoPhillips, Phillips 66 or any member of their respective Group, with respect to such agreements shall be made, and all other rights and obligations resulting from such agreements between the Companies and their Affiliates shall cease at such time. The prior practice of ConocoPhillips of creating intercompany obligations in respect of Tax allocations with respect to the Phillips 66 Business shall be terminated effective immediately prior to the Distribution on the Distribution Date, and amounts due under any such remaining intercompany obligations shall be settled in the ordinary course.
Section 11. Survival of Obligations.
The representations, warranties, covenants and agreements set forth in this Agreement shall be unconditional and absolute and shall remain in effect without limitation as to time.
Section 12. Dispute Resolution.
The Companies mutually desire that friendly collaboration will continue between them. Accordingly, they will try, and they will cause their respective Group members to try, to resolve in an amicable manner all disagreements and misunderstandings relating to their respective rights and obligations under this Agreement, including any amendments hereto. In furtherance thereof, in the event of any dispute, controversy or claim arising out of or relating to this Agreement, including the validity, interpretation, breach or termination thereof (a Dispute), the Tax departments of the Companies shall negotiate in good faith to resolve the Dispute. If such good faith negotiations do not resolve the Dispute, then the Dispute shall be resolved in accordance with the procedures set forth in Article IV of the Indemnification and Release Agreement, which shall be the sole and exclusive procedures for the resolution of any such Dispute unless otherwise specified in Article IV of the Indemnification and Release Agreement. Notwithstanding anything to the contrary in this Agreement, the Indemnification and Release Agreement, the Separation and Distribution Agreement or any other Ancillary Agreement, ConocoPhillips and Phillips 66 are the only members of their respective Group entitled to commence a dispute resolution procedure under this Agreement, and each of ConocoPhillips and Phillips 66 will cause its respective Group members not to commence any dispute resolution procedure other than through such party as provided in this Section 12.
Section 13. Expenses.
Except as otherwise provided in this Agreement, each party and its Affiliates shall bear their own expenses incurred in connection with preparation of Tax Returns, Tax Contests, and other matters related to Taxes under the provisions of this Agreement.
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Section 14. General Provisions.
Section 14.01 Addresses and Notices. Each party giving any notice required or permitted under this Agreement will give the notice in writing and use one of the following methods of delivery to the party to be notified, at the address set forth below (except that any notice involving an amount at issue less than $100,000, individually, shall be sent to the designee of the General Tax Officer of the other Company, rather than the address below) or another address of which the sending party has been notified in accordance with this Section 14.01: (a) personal delivery; (b) facsimile or telecopy transmission with a reasonable method of confirming transmission; (c) commercial overnight courier with a reasonable method of confirming delivery; (d) pre-paid, United States of America certified or registered mail, return receipt requested; or (e) electronic mail with a reasonable method of confirming receipt. Notice to a party is effective for purposes of this Agreement only if given as provided in this Section 14.01 and shall be deemed given on the date that the intended addressee actually receives the notice.
If to ConocoPhillips or ConocoPhillips Company:
ConocoPhillips 600 North Dairy Ashford Houston, Texas 77079 Attention: General Tax Officer Facsimile: 281-293-2852 Email: ben.j.clayton@conocophillips.com |
with a copy to:
ConocoPhillips 600 North Dairy Ashford Houston, Texas 77079 Attention: Chief Financial Officer Facsimile: 281-293-6311 Email: jeff.w.sheets@conocophillips.com | |
If to Phillips 66 or Phillips 66 Company:
Phillips 66 600 North Dairy Ashford Houston, Texas 77079 Attention: General Tax Officer Facsimile: 281-293-2852 Email: audrey.l.miller@P66.com |
with a copy to:
Phillips 66 600 North Dairy Ashford Houston, Texas 77079 Attention: Chief Financial Officer Facsimile: 281-293-3793 Email: greg.g.maxwell@P66.com |
A party may change the address for receiving notices under this Agreement by providing written notice of the change of address to the other parties.
Section 14.02 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and assigns.
Section 14.03 Waiver. The parties may waive a provision of this Agreement only by a written waiver signed by the party intended to be bound by the waiver. A party is not prevented from enforcing any right, remedy or condition in the partys favor because of any failure or delay in exercising any right or remedy or in requiring satisfaction of any condition, except to the extent that the party specifically waives the same in writing. A written waiver given for one matter or occasion is effective only in that instance and only for the purpose stated. A waiver once given is not to be construed as a waiver for any other matter or occasion. Any enumeration of a partys rights and remedies in this Agreement is not intended to be exclusive, and a partys rights and remedies are intended to be cumulative to the extent permitted by Law and include any rights and remedies authorized in Law or in equity.
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Section 14.04 Severability. If any provision of this Agreement is determined to be invalid, illegal or unenforceable, the remaining provisions of this Agreement remain in full force, if the essential terms and conditions of this Agreement for each party remain valid, binding and enforceable.
Section 14.05 Authority. Each of the parties represents to the other that (a) it has the corporate or other requisite power and authority to execute, deliver and perform this Agreement, (b) the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate or other action, (c) it has duly and validly executed and delivered this Agreement, and (d) this Agreement is a legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors rights generally and general equity principles.
Section 14.06 Further Action. The parties shall execute and deliver all documents, provide all information, and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement, including the execution and delivery to the other parties and their Affiliates and representatives of such powers of attorney or other authorizing documentation as is reasonably necessary or appropriate in connection with Tax Contests (or portions thereof) under the control of such other parties in accordance with Section 9.
Section 14.07 Integration. This Agreement, together with each of the exhibits and schedules appended hereto, constitutes the final agreement between the parties, and is the complete and exclusive statement of the parties agreement on the matters contained herein. All prior and contemporaneous negotiations and agreements between the parties with respect to the matters contained herein are superseded by this Agreement, as applicable. In the event of any inconsistency between this Agreement and the Separation and Distribution Agreement, or any of the Ancillary Agreements (other than this Agreement), with respect to matters addressed herein, the provisions of this Agreement shall control.
Section 14.08 Construction. The language in all parts of this Agreement shall in all cases be construed according to its fair meaning and shall not be strictly construed for or against any party. The captions, titles and headings included in this Agreement are for convenience only, and do not affect this Agreements construction or interpretation. Unless otherwise indicated, all Section references in this Agreement are to sections of this Agreement.
Section 14.09 No Double Recovery. No provision of this Agreement shall be construed to provide an indemnity or other recovery for any costs, damages, or other amounts for which the damaged party has been fully compensated under any other provision of this Agreement or under any other agreement or action at Law or equity. Unless expressly required in this Agreement, a party shall not be required to exhaust all remedies available under other agreements or at Law or equity before recovering under the remedies provided in this Agreement.
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Section 14.10 Counterparts. The parties may execute this Agreement in multiple counterparts, each of which constitutes an original as against the party that signed it, and all of which together constitute one agreement. This Agreement is effective upon delivery of one executed counterpart from each party to the other party. The signatures of the parties need not appear on the same counterpart. The delivery of signed counterparts by facsimile or email transmission that includes a copy of the sending partys signature is as effective as signing and delivering the counterpart in person.
Section 14.11 Governing Law. The internal Laws of the State of Delaware (without reference to its principles of conflicts of Law) govern the construction, interpretation and other matters arising out of or in connection with this Agreement and each of the exhibits and schedules hereto and thereto (whether arising in contract, tort, equity or otherwise).
Section 14.12 Jurisdiction. If any dispute arises out of or in connection with this Agreement, except as expressly contemplated by another provision of this Agreement, the parties irrevocably (and the parties will cause each other member of their respective Group to irrevocably) (a) consent and submit to the exclusive jurisdiction of federal and state courts located in Delaware, (b) waive any objection to that choice of forum based on venue or to the effect that the forum is not convenient, and (c) WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO TRIAL OR ADJUDICATION BY JURY.
Section 14.13 Amendment. Except as otherwise expressly provided herein with respect to the Schedules hereto, the parties may amend this Agreement only by a written agreement signed by each party to be bound by the amendment and that identifies itself as an amendment to this Agreement.
Section 14.14 Phillips 66 Subsidiaries. If, at any time, Phillips 66 acquires or creates one or more subsidiaries that would have been includable in the Phillips 66 Group had they been acquired or created immediately after the Distribution, they shall be subject to this Agreement and all references to the Phillips 66 Group herein shall thereafter include a reference to such subsidiaries.
Section 14.15 Successors. This Agreement shall be binding on and inure to the benefit of any successor by merger, acquisition of assets, or otherwise, to any of the parties hereto (including but not limited to any successor of ConocoPhillips, ConocoPhillips Company, Phillips 66, or Phillips 66 Company succeeding to the Tax attributes of either under Section 381 of the Code), to the same extent as if such successor had been an original party to this Agreement.
Section 14.16 Injunctions. The parties acknowledge that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with its specific terms or were otherwise breached. The parties hereto shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any court having jurisdiction, such remedy being in addition to any other remedy to which they may be entitled at Law or in equity.
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IN WITNESS WHEREOF, each party has caused this Agreement to be executed on its behalf by a duly authorized officer on the date first set forth above.
CONOCOPHILLIPS | PHILLIPS 66 | |||||||
By: | /s/ Ryan M. Lance |
By: | /s/ Greg C. Garland | |||||
Name: | Ryan M. Lance | Name: | Greg C. Garland | |||||
Title: | Chairman, President and Chief Executive Officer | Title: | Chairman, President and Chief Executive Officer | |||||
CONOCOPHILLIPS COMPANY | PHILLIPS 66 COMPANY | |||||||
By: | /s/ Ben J. Clayton |
By: | /s/Audrey L. Miller | |||||
Name: | Ben J. Clayton | Name: | Audrey L. Miller | |||||
Title: | General Tax Officer | Title: | Assistant Tax Administration Officer |
50
UK TAX
SCHEDULE 2.05
Part A: UK Tax Matters
Paragraph 1. General Principle.
Save as expressly provided in this Agreement, and without prejudice to the rights and obligations contained in this Schedule, each member of the ConocoPhillips Group and each member of the Phillips 66 Group shall be responsible for discharging any UK Tax Liability that may fall on it and shall be entitled to any UK Relief arising to it, and none of the parties to this Agreement indemnifies or otherwise agrees to make payment to, or to procure the making of payment to, the other in relation thereto.
Paragraph 2. Management of Pre-Distribution UK Tax Affairs.
Paragraph 2.01. VAT Grouping.
(a) ConocoPhillips shall procure that (if one has not already been made) an application shall be made to HM Revenue & Customs pursuant to section 43B of the Value Added Tax Act 1994 for the exclusion of each member of the Phillips 66 Group that has previously been a member of ConocoPhillips UK Topcos VAT group from the bodies corporate treated as members of ConocoPhillips UK Topcos VAT group and for such exclusion to take effect from the time of the Distribution or, if HM Revenue & Customs do not permit this, at the earliest date following the Distribution permitted.
(b) Phillips 66 shall contribute, or shall procure that each member of the Phillips 66 Group which was a member of ConocoPhillips UK Topcos VAT group contributes, to the representative member of such VAT group such proportion of any VAT for which the representative member is accountable as is properly attributable to supplies, acquisitions and importations (supplies) made by each member of the Phillips 66 Group whilst a member of ConocoPhillips UK Topcos VAT group (less such amount of deductible input tax as is properly attributable to such supplies), such contribution to be made in cleared funds on the day which is the later of 30 days after demand is made therefor, and four Business Days before the day on which the representative member is required to account for such VAT to HM Revenue & Customs. ConocoPhillips shall pay, or shall procure that there is paid, to Immingham CHP LLP (on behalf of itself and each other relevant member of the Phillips 66 Group) an amount equivalent to such proportion of any repayment of VAT received by the representative member from HM Revenue & Customs or of any credit obtained by reference to an excess of deductible input tax over output tax that is properly attributable to supplies made to and by members of the Phillips 66 Group whilst members of ConocoPhillips UK Topcos VAT group (but excluding any part of such repayment or credit that is attributable to interest payable by HM Revenue & Customs), promptly after its receipt by, or offset against a liability of, the representative member. Phillips 66 shall provide such information as may be required to enable the representative member to make the returns and provide the information required to be provided for VAT purposes.
Paragraph 2.02 . Group Payment Arrangement.
(a) ConocoPhillips shall procure that the UK Nominated Company will, in accordance with the UK GPA, give notice to HM Revenue & Customs to the effect that all members of the Phillips 66 Group will cease from the Distribution to be members of the same group of companies as the UK Nominated Company within the meaning of section 36 of the Finance Act 1998 or section 59F of the Taxes Management Act 1970.
(b) Phillips 66 shall procure that each member of the Phillips 66 Group which was a member of the UK GPA contributes to the UK Nominated Company, within 30 days after written demand is made therefor (or, if later, four Business Days before the amount becomes due and payable to HM Revenue & Customs), an amount equal to any instalment of UK Corporation Tax which is to be or has been discharged by the UK Nominated Company on behalf of the member of the Phillips 66 Group in question pursuant to the UK GPA (including, without limitation, through payment of a balance of monies payable pursuant to the UK GPA) as certified by the UK Nominated Company (but, for the avoidance of doubt, not including any amount in respect of interest payable in respect of any such instalment of UK Corporation Tax to HM Revenue & Customs), provided that no such contribution shall be made to the extent that such contribution was made prior to or at the time of the Distribution.
(c) ConocoPhillips shall:
(i) procure that the UK Nominated Company shall, to the extent that it has not made such payment prior to the Distribution, pay to HM Revenue & Customs when the relevant amount is due and payable to HM Revenue & Customs (or promptly following receipt of the contribution by the relevant member of the Phillips 66 Group in respect of the relevant amount, if such contribution is received after the date when the relevant amount is due and payable to HM Revenue & Customs) an amount equal to any amount contributed after the Distribution to the UK Nominated Company by any member of the Phillips 66 Group pursuant to the UK GPA in respect of any instalment of UK Corporation Tax;
(ii) procure that the UK Nominated Company shall (subject to paragraph (iii) below) apportion to the relevant member of the Phillips 66 Group each amount contributed before or after the Distribution to the UK Nominated Company by any member of the Phillips 66 Group pursuant to the UK GPA in respect of any instalment of UK Corporation Tax (a Contributed Amount), such apportionment to be made by reference to the instalment or instalments of UK Corporation Tax in respect of which the Contributed Amount was paid; and
(iii) within 30 days after the relevant UK Corporation Tax has finally been apportioned, pay, or procure that there is paid, to the relevant member of the Phillips 66 Group an amount equal to any excess of any Contributed Amount in respect of any instalment of UK Corporation Tax over the amount of UK Corporation Tax finally apportioned to that member of the Phillips 66 Group in respect of that instalment (for the avoidance of doubt, taking no account of any interest payable by HM Revenue & Customs in respect of such excessive Contributed Amount).
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Paragraph 3. Group Relief Surrenders between the Groups.
Paragraph 3.01. ConocoPhillips and Phillips 66 shall procure that after the Distribution no claim, election, surrender, notice or consent is made in respect of any Group Relief Surrender by a member of the ConocoPhillips Group to a member of the Phillips 66 Group (or vice versa) other than pursuant to this Paragraph 3.
Paragraph 3.02. Subject to the remainder of this Paragraph 3, ConocoPhillips and Phillips 66 shall use all reasonable endeavors to procure that each Agreed UK Group Relief Surrender referred to in Appendix 1 shall be made (and not later amended) or, if made prior to the Distribution, shall not be amended.
Paragraph 3.03. No payment shall be made by the company receiving an Agreed UK Group Relief Surrender, or by any other member of its Group, for any Agreed UK Group Relief Surrender (including for any increase in the amount of any Agreed UK Group Relief Surrender in accordance with Paragraph 3.05); and no payment shall be made by a company surrendering an Agreed UK Group Relief Surrender, or any member of its Group, in respect of any tax liability falling on a company receiving such Agreed UK Group Relief Surrender because the amount of such Agreed UK Group Relief Surrender is reduced in accordance with Paragraph 3.04.
Paragraph 3.04. If the amount of any Corresponding Relievable Loss is certified by the person to whom that loss arises to be in fact less than the amount given for that Corresponding Relievable Loss in Appendix 1, then the amount of any Agreed UK Group Relief Surrender in respect of that Corresponding Relievable Loss will be reduced accordingly. Any necessary allocation of the reduction shall be determined by Phillips 66 (if the reduction is in a Corresponding Relievable Loss assumed to be surrendered to more than one member of the Phillips 66 Group) or by ConocoPhillips (if the reduction is in a Corresponding Relievable Loss assumed to be surrendered to more than one member of the ConocoPhillips Group).
Paragraph 3.05. If a person who is a member of a Group has a Corresponding Relievable Loss in respect of a UK Accounting Period referred to in Appendix 1 which is in fact greater than a Corresponding Relievable Loss assumed for that member in Appendix 1, the amount thereof shall be certified by that person as soon as reasonably practicable to Phillips 66 (where the person with the Corresponding Relievable Loss is a member of the ConocoPhillips Group) or to ConocoPhillips (where the person with the Corresponding Relievable Loss is a member of the Phillips 66 Group) and an Agreed UK Group Relief Surrender in respect of that Corresponding Relievable Loss may, if requested by Phillips 66 or ConocoPhillips, as the case may be, for the other Group, be increased or made (including as an additional Group Relief Surrender to another member of the other Group) but only to the extent that the amount of the Corresponding Relievable Loss that exceeds the amount set out for that Corresponding Relievable Loss in Appendix 1 cannot be used by the person to whom that Corresponding Relievable Loss arises, or by another member of the same UK Tax Group, other than in a UK Accounting Period of that person subsequent to the UK Accounting Period in which that Corresponding Relievable Loss arises.
3
Paragraph 3.06. Subject to the other provisions of this Paragraph 3, if a company which is a member of a UK Tax Group has lower profits available to be relieved by a Group Relief Surrender than are assumed by Appendix 1 then Phillips 66 (in the case of the Phillips 66 UK Tax Group) or ConocoPhillips (in the case of the ConocoPhillips UK Tax Group) may require that a Group Relief Surrender of all or part of the Corresponding Relievable Loss in question is reallocated to another member of the same UK Tax Group.
Paragraph 3.07. ConocoPhillips and Phillips 66 shall each use all reasonable endeavors as respects its Group to procure that claims, adjustments, elections, surrenders, notices, consents (including adjustments to any of these) and other procedural matters required to give effect to this Paragraph 3 shall occur, within applicable UK Time Limits.
Paragraph 4. Other Surrenders and Similar Matters.
Paragraph 4.01. Transfer Pricing. Subject to its compliance with Section 4.06(b) of this Agreement, no balancing or other payment shall be made by any member of either Group to a member of the other Group in respect of any Transfer Pricing Adjustment or compensating adjustment in respect of a UK Accounting Period ending on or before, or commencing before and ending after, the Distribution, including in respect of any alteration to any such Transfer Pricing Adjustment.
Paragraph 4.02. Surrenders. No Non Group Relief Surrender shall be made after the Distribution by any member of either Group to a member of the other Group in respect of which no claim, election, surrender, notice or consent has been made on or prior to the Distribution.
Paragraph 4.03. Rollover and Holdover Relief. ConocoPhillips and Phillips 66 shall procure that after the Distribution no claim for Rollover Relief or Holdover Relief shall be made by a member of one Group in respect of any chargeable gains of a member of the other Group, other than pursuant to this Paragraph 4.03. ConocoPhillips and Phillips 66 shall use all reasonable endeavors to procure that (a) the claims for Rollover Relief and Holdover Relief listed in Part A of Appendix 2 (if any) shall be made and not later amended and (b) adjustments, elections, surrenders, notices, consents (including adjustments to any of these) and other procedural matters required to give effect to such claims shall occur, within applicable UK Time Limits. ConocoPhillips and Phillips 66 shall procure that no amendment is made to the claims for Rollover Relief or Holdover Relief made prior to the Distribution and listed in Part B of Appendix 2. Each member of each Group shall be responsible for discharging any UK Tax Liability arising in connection with a claim for Rollover Relief or Holdover Relief made prior to the Distribution or pursuant to this Paragraph 4.03 that may fall on it.
Paragraph 4.04. Worldwide Debt Cap. ConocoPhillips and Phillips 66 agree that prior to the Distribution no member of either Group has been subject to any Worldwide Debt Cap Disallowance, and that no payments shall be, or have been, made in respect of any Worldwide Debt Cap Disallowance by any member of either Group to any member of the other Group in respect of any UK Accounting Period ending on or before, or commencing before and ending after, the Distribution.
Paragraph 4.05. Existing Arrangements. Any agreement, arrangement or understanding existing prior to the Distribution in respect of transfer pricing, Non Group Relief Surrenders, Rollover Relief or Holdover Relief or Worldwide Debt Cap Disallowances is (subject to Paragraph 4.03) terminated as regards the period from the Distribution forwards as between members of the Phillips 66 Group and members of the ConocoPhillips Group and no claims or payments shall be made in connection therewith.
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Part B: Definitions and Interpretation
Paragraph 1. Definitions.
In this Schedule the following definitions shall have the following meanings:
ConocoPhillips UK Tax Group means ConocoPhillips UK Topco and any other company or companies (other than any member of the Phillips 66 Group) treated after the Distribution as a member or members of the same group as, or as otherwise connected or associated in any way with, ConocoPhillips UK Topco for any UK Tax purpose;
Contributed Amount has the meaning set forth in Paragraph 2.02(c)(ii) of this Schedule 2.05.
Holdover Relief means holdover relief available in accordance with sections 152 and 154 TCGA (as extended by sections 175 and 179B TCGA and/or following any election pursuant to section 179A TCGA), and any reference to an amendment to a claim for Holdover Relief shall include any amendment or adjustment to, any withdrawal of and the making of any claim, election, surrender, notice or consent that is inconsistent with the claims, elections, surrenders, notices or consents made in respect of such claim for Holdover Relief prior to the Distribution;
Non Group Relief Surrender means:
(a) the notional transfer of any asset or reallocation of a gain or loss in accordance with section 171A or section 179A of the TCGA; and/or
(b) the surrender of eligible unrelieved foreign tax (EUFT) in accordance with The Double Taxation Relief (Surrender of Relievable Tax Within a Group) Regulations 2001 (S.I. 2001 No. 1163); and/or
(c) any reallocation of a chargeable realization gain in accordance with section 792 of CTA 2009;
Phillips 66 UK Tax Group means Phillips 66 UK Topco and any other company or companies treated after the Distribution as a member or members of the same group as, or as otherwise connected or associated in any way with, Phillips 66 UK Topco for any UK Tax purpose;
Phillips 66 UK Topco means U.K. Phillips 66 Limited;
Relief includes, unless the context otherwise requires, any Tax Benefits and any allowance, credit, deduction, exemption or set off in respect of any tax or relevant to the computation of any income, profits or gains for the purposes of any tax, or any right to or actual repayment of or saving of tax, and any reference to the use or set off of a Relief shall be construed accordingly;
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Rollover Relief means rollover relief available in accordance with section 152 TCGA (as extended by sections 175 and 179B TCGA and/or following any election pursuant to section 179A TCGA), and any reference to an amendment to a claim for Rollover Relief shall include any amendment or adjustment to, any withdrawal of and the making of any claim, election, surrender, notice or consent that is inconsistent with the claims, elections, surrenders, notices or consents made in respect of such claim for Rollover Relief prior to the Distribution;
Taxes Act means the Income and Corporation Taxes Act 1988;
TCGA means the Taxation of Chargeable Gains Act 1992;
TIOPA means the Taxation (International and other Provisions) Act 2010;
UK Accounting Period means any period by reference to which any income, profits or gains, or any other amounts relevant for the purposes of UK Tax, are measured or determined;
UK Relief means a Relief relating to UK Tax;
UK Tax Group means either of the Phillips 66 UK Tax Group or the ConocoPhillips UK Tax Group;
UK Tax Liability means a liability to make or suffer an actual payment of UK Tax;
UK Time Limit means the latest date on which a UK Tax document can be executed or delivered to a relevant UK Tax Authority either without incurring interest or a penalty, or in order to ensure that such UK Tax document is effective; and
Worldwide Debt Cap Disallowance means a disallowance under Chapter 3 of Part 7 of TIOPA.
Paragraph 2. Interpretation
Paragraph 2.01 General. In this Schedule:
(a) persons shall be treated as connected if they are connected within the meaning of section 1122 of CTA 2010;
(b) references to legislation are references to legislation of the United Kingdom; and
(c) references to provisions of the Corporation Taxes Acts shall, where relevant, be construed as references to the corresponding provisions of the Taxes Act or a Finance Act that the provisions referred to replace,
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Paragraph 2.02. Part A: Paragraph References. References in the main body of this Agreement and in Part A of this Schedule to paragraphs of this Schedule are, unless otherwise stated, references to paragraphs in Part A of this Schedule.
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Exhibit 10.4
EMPLOYEE MATTERS AGREEMENT
by and between
CONOCOPHILLIPS
and
PHILLIPS 66
dated as of
April 26, 2012
TABLE OF CONTENTS
ARTICLE I GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES | 1 | |||||||
Section 1.1 |
General Principles | 1 | ||||||
Section 1.2 |
Service Credit | 3 | ||||||
Section 1.3 |
Plan Administration | 3 | ||||||
Section 1.4 |
No Duplication or Acceleration of Benefits | 3 | ||||||
Section 1.5 |
No Expansion of Participation | 4 | ||||||
ARTICLE II DEFINITIONS | 4 | |||||||
Section 2.1 |
Definitions | 4 | ||||||
Section 2.2 |
Interpretation | 12 | ||||||
ARTICLE III ASSIGNMENT OF EMPLOYEES | 14 | |||||||
Section 3.1 |
Active Employees | 14 | ||||||
Section 3.2 |
Former Employees | 17 | ||||||
Section 3.3 |
Employment Law Obligations | 17 | ||||||
Section 3.4 |
Employee Records | 17 | ||||||
Section 3.5 |
Non-Solicitation | 19 | ||||||
ARTICLE IV EQUITY AND INCENTIVE COMPENSATION PLANS | 19 | |||||||
Section 4.1 |
General Principles | 19 | ||||||
Section 4.2 |
Restricted Stock | 20 | ||||||
Section 4.3 |
Non-exercisable Stock Options | 20 | ||||||
Section 4.4 |
Exercisable Stock Options and Vested Stock Appreciation Rights | 23 | ||||||
Section 4.5 |
Restricted Stock Units | 25 | ||||||
Section 4.6 |
Performance Share Units | 26 | ||||||
Section 4.7 |
Specified Transition Employees | 26 | ||||||
Section 4.8 |
Section 16(b) of the Exchange Act; Code Sections 162(m) and 409A | 27 | ||||||
Section 4.9 |
Performance Share Program | 28 | ||||||
Section 4.10 |
Liabilities for Settlement of Awards | 28 | ||||||
Section 4.11 |
Bonus and Short-Term Incentive Payments | 29 | ||||||
Section 4.12 |
Form S-8 | 29 | ||||||
Section 4.13 |
Tax Reporting and Withholding for Equity-Based Awards | 30 |
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Section 4.14 |
Plan Administrator | 30 | ||||||
Section 4.15 |
Approval of Phillips 66 New Equity Plan | 30 | ||||||
ARTICLE V U.S. QUALIFIED DEFINED BENEFIT PLANS |
30 | |||||||
Section 5.1 |
Establishment of Phillips 66 Pension Plan | 30 | ||||||
Section 5.2 |
Phillips 66 Pension Plan Participants | 31 | ||||||
Section 5.3 |
Delayed Transfer Employees | 33 | ||||||
ARTICLE VI U.S. QUALIFIED DEFINED CONTRIBUTION PLANS |
34 | |||||||
Section 6.1 |
Establishment of the Phillips 66 401(k) Plan | 34 | ||||||
Section 6.2 |
Transfer of COP 401(k) Plan Assets | 34 | ||||||
Section 6.3 |
Treatment of Phillips 66 Common Stock and COP Common Stock | 34 | ||||||
Section 6.4 |
Continuation of Elections | 35 | ||||||
Section 6.5 |
Delayed Transfer Employees | 35 | ||||||
Section 6.6 |
Tax Qualified Status | 35 | ||||||
ARTICLE VII NONQUALIFIED COMPENSATION PLANS | 36 | |||||||
Section 7.1 |
Excess Benefit Plans | 36 | ||||||
Section 7.2 |
Key Employee Deferred Compensation Plans | 36 | ||||||
Section 7.3 |
Treatment of Phantom Shares in Deferred Compensation Plans | 37 | ||||||
Section 7.4 |
Grantor Trusts | 38 | ||||||
ARTICLE VIII WELFARE PLANS | 38 | |||||||
Section 8.1 |
Establishment of Phillips 66 Welfare Plans | 38 | ||||||
Section 8.2 |
Transitional Matters Under Phillips 66 Welfare Plans | 38 | ||||||
Section 8.3 |
Continuity of Benefits, Benefit Elections and Beneficiary Designations | 40 | ||||||
Section 8.4 |
Delayed Transfer Employees from Phillips 66 Group to COP Group | 42 | ||||||
Section 8.5 |
Insurance Contracts | 42 | ||||||
Section 8.6 |
Third-Party Vendors | 42 | ||||||
Section 8.7 |
Retiree Welfare Plans | 43 | ||||||
ARTICLE IX WORKERS COMPENSATION AND UNEMPLOYMENT COMPENSATION | 43 | |||||||
Section 9.1 |
Phillips 66 Workers and Unemployment Compensation | 43 | ||||||
Section 9.2 |
COP Workers and Unemployment Compensation | 44 | ||||||
Section 9.3 |
Assignment of Contribution Rights | 44 |
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Section 9.4 |
Collateral | 44 | ||||||
Section 9.5 |
Cooperation | 45 | ||||||
ARTICLE X SEVERANCE |
45 | |||||||
Section 10.1 |
Severance | 45 | ||||||
ARTICLE XI BENEFIT ARRANGEMENTS AND OTHER MATTERS |
45 | |||||||
Section 11.1 |
Termination of Participation | 45 | ||||||
Section 11.2 |
Accrued Time Off | 45 | ||||||
Section 11.3 |
Leaves of Absence | 46 | ||||||
Section 11.4 |
Collective Bargaining Agreements | 46 | ||||||
Section 11.5 |
Director Programs | 46 | ||||||
Section 11.6 |
Restrictive Covenants in Employment and Other Agreements | 46 | ||||||
ARTICLE XII NON-U.S. EMPLOYEES |
47 | |||||||
Section 12.1 |
General Principles | 47 | ||||||
Section 12.2 |
Treatment of Equity Awards Held by Non-U.S. Employees. | 47 | ||||||
Section 12.3 |
Other Canada Employee Matters | 51 | ||||||
Section 12.4 |
UK Employee Matters Agreement | 51 | ||||||
ARTICLE XIII GENERAL PROVISIONS |
52 | |||||||
Section 13.1 |
Preservation of Rights to Amend | 52 | ||||||
Section 13.2 |
Confidentiality | 52 | ||||||
Section 13.3 |
Administrative Complaints/Litigation | 52 | ||||||
Section 13.4 |
Reimbursement and Indemnification | 52 | ||||||
Section 13.5 |
Costs of Compliance with Agreement | 53 | ||||||
Section 13.6 |
Fiduciary Matters | 53 | ||||||
Section 13.7 |
Entire Agreement | 53 | ||||||
Section 13.8 |
Binding Effect; No Third-Party Beneficiaries; Assignment | 53 | ||||||
Section 13.9 |
Amendment; Waivers | 54 | ||||||
Section 13.10 |
Remedies Cumulative | 54 | ||||||
Section 13.11 |
Notices | 54 | ||||||
Section 13.12 |
Counterparts | 54 | ||||||
Section 13.13 |
Severability | 54 | ||||||
Section 13.14 |
Governing Law | 55 |
- iii -
Section 13.15 |
Dispute Resolution | 55 | ||||||
Section 13.16 |
Performance | 55 | ||||||
Section 13.17 |
Construction | 55 | ||||||
Section 13.18 |
Effect if Distribution Does Not Occur | 55 |
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EMPLOYEE MATTERS AGREEMENT
THIS EMPLOYEE MATTERS AGREEMENT, dated as of April 26, 2012, is entered into by and between ConocoPhillips, a Delaware corporation (COP), and Phillips 66, a Delaware corporation (Phillips 66). COP and Phillips 66 are also referred to in this Agreement individually as a Party and collectively as the Parties.
RECITALS
WHEREAS, COP has determined that it would be appropriate, desirable and in the best interests of COP and the shareholders of COP to separate the Phillips 66 business from COP;
WHEREAS, COP and Phillips 66 have entered into the Separation and Distribution Agreement, dated 26, 2012 (the Separation Agreement), in connection with the separation of the Phillips 66 business from COP and the Distribution of Phillips 66 Common Stock to shareholders of COP;
WHEREAS, the Separation Agreement also provides for the execution and delivery of certain other agreements, including this Agreement, in order to facilitate and provide for the separation of Phillips 66 and its subsidiaries from COP; and
WHEREAS, in order to ensure an orderly transition under the Separation Agreement, it will be necessary for the Parties to allocate between them Assets, Liabilities and responsibilities with respect to certain employee compensation and benefit plans and programs, and certain other employment matters.
NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth below and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the Parties hereby agree as follows:
ARTICLE I
GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES
Section 1.1 General Principles. (a) Each member of the COP Group and each member of the Phillips 66 Group shall take any and all reasonable action as shall be necessary or appropriate so that active participation in the COP Pension Plan, COP 401(k) Plan, COP Welfare Plans and COP Benefit Plans by all Phillips 66 Group Employees shall terminate in connection with the Distribution as and when provided under this Agreement (or if not specifically provided under this Agreement, as of the Effective Time).
(b) Except as otherwise provided in this Agreement, effective as of the Distribution Date, one or more members of the Phillips 66 Group (as determined by Phillips 66) shall assume or continue the sponsorship of, and no member of the COP Group shall have any further Liability with respect to or under, the following agreements, obligations and Liabilities, and Phillips 66 shall indemnify each member of the COP Group, and the officers, directors, and
employees of each member of the COP Group, and hold them harmless with respect to such agreements, obligations or Liabilities:
(i) any and all individual agreements entered into between any member of the COP Group and any Phillips 66 Group Employee;
(ii) any and all agreements entered into between any member of the COP Group and any individual who is an independent contractor providing services primarily for the business activities of the Phillips 66 Group;
(iii) any and all collective bargaining agreements, collective agreements and trade union or works council agreements entered into between any member of the COP Group and any union, works council or other body representing only Phillips 66 Group Employees;
(iv) any and all wages, salaries, incentive compensation (as the same may be modified by this Agreement), commissions, bonuses, and any other employee compensation or benefits payable to or on behalf of any Phillips 66 Group Employees after the Distribution Date, without regard to when such wages, salaries, incentive compensation, commissions, bonuses, or other employee compensation or benefits are or may have been earned;
(v) any and all moving expenses and obligations related to relocation, repatriation, transfers or similar items incurred by or owed to any Phillips 66 Group Employees that have not been paid prior to the Distribution Date;
(vi) any and all immigration-related, visa, work application or similar rights, obligations and Liabilities related to any Phillips 66 Group Employees; and
(vii) any and all Liabilities and obligations whatsoever with respect to claims made by or with respect to any Phillips 66 Group Employees in connection with any employee benefit plan, program or policy not otherwise retained or assumed by any member of the COP Group pursuant to this Agreement, including such Liabilities relating to actions or omissions of or by any member of the Phillips 66 Group or any officer, director, employee or agent thereof on or prior to the Distribution Date.
(c) Except as otherwise provided in this Agreement, effective as of the Effective Time, no member of the Phillips 66 Group shall have any further Liability for, and COP shall indemnify each member of the Phillips 66 Group, and the officers, directors, and employees of each member of the Phillips 66 Group, and hold them harmless with respect to any and all Liabilities and obligations whatsoever with respect to, claims made by or with respect to any COP Group Employees or Former COP Group Employees in connection with any employee benefit plan, program or policy not otherwise retained or assumed by any member of the Phillips 66 Group pursuant to this Agreement, including such Liabilities relating to actions or omissions of or by any member of the COP Group or any officer, director, employee or agent thereof on, prior to or after the Distribution Date.
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Section 1.2 Service Credit.
(a) Service for Eligibility, Vesting, and Benefit Purposes. Except as otherwise provided in any other provision of this Agreement, the Phillips 66 Pension Plan, the Phillips 66 401(k) Plan, and the Phillips 66 Welfare Plans shall, and Phillips 66 shall cause each member of the Phillips 66 Group to, recognize each Phillips 66 Group Employee full service credit for purposes of eligibility, vesting, determination of level of benefits and, to the extent applicable, benefit accruals under any Phillips 66 Benefit Plan for such Phillips 66 Group Employees service with any member of the COP Group on or prior to the Effective Time or Transfer Date, as applicable, to the same extent such service would be credited if it had been performed for a member of the Phillips 66 Group.
(b) Evidence of Prior Service. Notwithstanding anything to the contrary, but subject to applicable Law, upon reasonable request by one Party to the other Party, the first Party will provide to the other Party copies of any records available to the first Party to document such service, plan participation and membership of such Employees and cooperate with the first Party to resolve any discrepancies or obtain any missing data for purposes of determining benefit eligibility, participation, vesting and calculation of benefits with respect to any Employee.
Section 1.3 Plan Administration.
(a) Transition Services. The Parties acknowledge that the COP Group or the Phillips 66 Group may provide administrative services for certain of the other Partys benefit programs for a transitional period under the terms of the Transition Services Agreement. The Parties agree to enter into a business associate agreement (if required by HIPAA or other applicable health information privacy Laws) in connection with such Transition Services Agreement.
(b) Participant Elections and Beneficiary Designations. All participant elections and beneficiary designations made under any plan sponsored by a member of the COP Group prior to the Effective Time with respect to which Assets or Liabilities are transferred or allocated to plans maintained by a member of the Phillips 66 Group in accordance with this Agreement shall continue in effect under the applicable Phillips 66 plan, including deferral, investment and payment form elections, dividend elections, coverage options and levels, beneficiary designations and the rights of alternate payees under qualified domestic relations orders, to the extent allowed by applicable Law.
Section 1.4 No Duplication or Acceleration of Benefits . Notwithstanding anything to the contrary in this Agreement, the Separation Agreement or any Transfer Document, no participant in the Phillips 66 Pension Plan, Phillips 66 401(k) Plan, Phillips 66 SERP, Phillips 66 Deferred Compensation Plans, Phillips 66 Welfare Plan or other Benefit Plans of Phillips 66 shall receive benefits that duplicate benefits provided by the corresponding COP Benefit Plan or arrangement. Furthermore, unless expressly provided for in this Agreement, the Separation Agreement or in any Transfer Document or required by applicable Law, no provision in this Agreement shall be construed to create any right to accelerate vesting or entitlements to any
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compensation or Benefit Plan on the part of any COP Group Employee, Former COP Group Employee or Phillips 66 Group Employee.
Section 1.5 No Expansion of Participation. Unless otherwise expressly provided in this Agreement, as otherwise determined or agreed to by COP and Phillips 66, as required by applicable Law, or as explicitly set forth in a Phillips 66 Benefit Plan, a Phillips 66 Group Employee shall be entitled to participate in the Phillips 66 Benefit Plans only to the extent that such Employee was entitled to participate in the corresponding COP Benefit Plan as in effect immediately prior to the Distribution Date, with it being the intent of the Parties that this Agreement does not result in any expansion of the number of Phillips 66 Group Employees participating or the participation rights therein that they had prior to the Effective Time.
ARTICLE II
DEFINITIONS
Section 2.1 Definitions. As used in this Agreement, the following terms shall have the meanings set forth in this Section 2.1:
Adjustment Time means the Effective Time, except with regard to the provisions of Section 12.2(a), with regard to which it means the time that is immediately before the time that is immediately before the Effective Time.
Adjusted COP PSU has the meaning set forth in Section 4.6.
Adjusted COP RSA has the meaning set forth in Section 4.2(a).
Adjusted COP RSU has the meaning set forth in Section 4.5(c).
Adjusted COP Non-exercisable Option has the meaning set forth in Section 4.3(a)(i).
Adjusted COP Unvested SAR has the meaning set forth in Section 4.3(b)(i).
Adjusted COP Exercisable Option has the meaning set forth in Section 4.4(a)(i).
Adjusted COP Vested SAR has the meaning set forth in Section 4.4(b)(i).
Affiliate has the meaning set forth in the Separation Agreement.
Agreement means this Employee Matters Agreement, together with all Schedules hereto and all amendments, modifications, and changes hereto entered into pursuant to Section 13.9.
Assets has the meaning set forth in the Separation Agreement.
Benefit Management Records has the meaning set forth in Section 3.4(b)(i).
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Benefit Plan means any contract, agreement, policy, practice, program, plan, trust, commitment or arrangement providing for benefits, perquisites or compensation of any nature to any Employee, or to any family member, dependent, or beneficiary of any such Employee, including pension plans, thrift plans, supplemental pension plans and welfare plans, and contracts, agreements, policies, practices, programs, plans, trusts, commitments and arrangements providing for terms of employment, fringe benefits, severance benefits, change in control protections or benefits, travel and accident, life, disability and accident insurance, tuition reimbursement, travel reimbursement, vacation, sick, personal or bereavement days, leaves of absences and holidays.
Business Days means any day other than a Saturday or Sunday or a day in which banking institutions in Houston, Texas are authorized or requested by law to close.
Canada Tax Act means the Income Tax Act (Canada).
Canadian Holder has the meaning set forth in Section 12.2.
COBRA means the U.S. Consolidated Omnibus Budget Reconciliation Act of 1985, as codified at Section 601 et seq. of ERISA and at Section 4980B of the Code.
Code has the meaning set forth in the Separation Agreement.
Collective Bargaining Agreements shall have the meaning set forth in Section 3.1(j).
COP has the meaning set forth in the preamble to this Agreement.
COP Actuary means an independent actuary selected by COP.
COP Adjusted Exercise Price has the meaning set forth in Section 4.3(a)(i).
COP Benefit Plan means any Benefit Plan sponsored or maintained by a member of the COP Group immediately prior to the Effective Time.
COP Common Stock means the common stock, par value $0.01 per share, of COP.
COP Deferred Compensation Plans means the Key Employee Deferred Compensation Plan of COP, the Defined Contribution Make-up Plan of COP and the COP Director Deferral Plan for non-employee directors.
COP Delayed Price Ratio means, with respect to a Delayed Transfer Employee, the quotient obtained by dividing (i) the volume weighted average per share price of COP Common Stock trading on the NYSE during Regular Trading Hours on the last Trading Day immediately before such Delayed Transfer Employees Transfer Date by (ii) the volume weighted average per share price of Phillips 66 Common Stock trading on the NYSE during Regular Trading Hours on the last Trading Day immediately before such Delayed Transfer Employees Transfer Date.
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COP Delayed Share Ratio means, with respect to a Delayed Transfer Employee, the quotient obtained by dividing (i) the volume weighted average per share price of Phillips 66 Common Stock trading on the NYSE during Regular Trading Hours on the last Trading Day immediately before such Delayed Transfer Employees Transfer Date by (ii) the volume weighted average per share price of COP Common Stock trading on the NYSE during Regular Trading Hours on the last Trading Day immediately before such Delayed Transfer Employees Transfer Date.
COP Director means any individual who is a non-employee member of the board of directors of COP immediately after the Effective Time.
COP Entity means any member of the COP Group.
COP 401(k) Plan means the ConocoPhillips Savings Plan.
COP 401(k) Plan Beneficiaries has the meaning set forth in Section 6.3(a).
COP Grantor Trust means the ConocoPhillips Grantor Trust.
COP Group shall have the same meaning as ConocoPhillips Group in the Separation Agreement.
COP Group Employee means, subject to the last sentence of Section 3.1(c), any individual who is employed by a member of the COP Group immediately after the Effective Time.
COP Equity Plan means any equity plan sponsored or maintained by COP immediately prior to the Distribution Date, including each of the plans set forth on Schedule 2.1(a).
COP Options means exercisable and non-exercisable options to purchase shares of COP Common Stock granted pursuant to any of the COP Equity Plans.
COP Pension Plan means the ConocoPhillips Retirement Plan.
COP Post-Distribution Stock Value means the simple average of the volume weighted average per share price of COP Common Stock trading on the NYSE during Regular Trading Hours on the first four Trading Days following the Distribution Date.
COP Pre-Distribution Stock Value means the simple average of the volume weighted average per share price of COP Common Stock trading regular way with due bills on the NYSE during Regular Trading Hours on the Distribution Date and the three immediately preceding Trading Days.
COP Price Ratio means the quotient obtained by dividing the COP Post-Distribution Stock Value by the COP Pre-Distribution Stock Value.
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COP PSUs means restricted stock units issued in connection with COPs Performance Share Program or in connection with Phillips Petroleum Companys Long-Term Incentive Plan or its predecessors, and shall also include that certain grant of restricted stock made to James J. Mulva on June 20, 2000 (and tendered and exchanged for restricted stock units effective January 29, 2002), that certain grant of restricted stock units made to James J. Mulva on November 17, 2001, and that certain grant of restricted stock units made to James J. Mulva on May 8, 2005 (together with any dividend equivalents related thereto that have been issued as further restricted stock units).
COP RSAs means restricted stock awards issued under any of the COP Equity Plans.
COP RSUs means restricted stock units granted under any of the COP Equity Plans, other than those which are COP PSUs.
COP SARs means stock appreciation rights granted under any of the COP Equity Plans.
COP SERP means the non-qualified COP supplemental executive retirement plans, including the Key Employee Supplemental Retirement Plan.
COP Severance has the meaning set forth in Section 10.1.
COP Share Ratio means the quotient obtained by dividing the COP Pre-Distribution Stock Value by the COP Post-Distribution Stock Value.
COP Welfare Plan means any Welfare Plan sponsored or maintained by any one or more members of the COP Group as of immediately prior to the Effective Time, including each of the Welfare Plans set forth on Schedule 2.1(b).
Delayed Transfer COP Option shall have the meaning set forth in Section 4.3(b).
Delayed Transfer Employees means those COP Group Employees or Phillips 66 Group Employees whose transfer from COP Group to Phillips 66 Group or from Phillips 66 Group to COP Group, respectively, in connection with the Distribution will be delayed until after the Effective Time in accordance with the terms of the notice provided by COP to Phillips 66.
Delayed Transfer Phillips 66 Option shall have the meaning set forth Section 4.3(b).
Distribution has the meaning set forth in the Separation Agreement.
Distribution Date has the meaning set forth in the Separation Agreement.
Distribution Ratio shall be one share of Phillips 66 Common Stock for every two shares of COP Common Stock.
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Effective Time means the time immediately before the effective time of the Distribution.
Employee means any COP Group Employee, Former COP Group Employee or Phillips 66 Group Employee.
Employee Leasing Agreements means the agreements between the Parties (or their respective Subsidiaries) for providing, on a limited basis, temporary services from individual employees of one Party or any of its Subsidiaries to the other Party or any of its Subsidiaries.
ERISA means the U.S. Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.
Estimated Pension Plan Transfer Amount has the meaning set forth in Section 5.2 (b)(ii).
FICA has the meaning set forth in Section 3.1(h).
Final Pension Plan Transfer Amount has the meaning set forth in Section 5.2(b)(iv).
Final Transfer Date has the meaning set forth in Section 5.2(b)(v).
FMLA means the U.S. Family and Medical Leave Act, as amended, and the regulations promulgated thereunder.
Former COP Group Employee has the meaning set forth in Section 3.2.
FSA Participation Period has the meaning set forth in Section 8.3(b).
FUTA has the meaning set forth in Section 3.1(h).
HIPAA means the Health Insurance Portability and Accountability Act of 1996, as amended, and the regulations promulgated thereunder.
HSA Participation Period has the meaning set forth in Section 8.3(c).
Indemnification and Release Agreement has the meaning set forth in the Separation Agreement.
Initial Transfer Amount has the meaning set forth in Section 5.2(b)(iv).
IRS means the Internal Revenue Service.
Law has the meaning set forth in the Separation Agreement.
Liabilities has the meaning set forth in the Separation Agreement.
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NYSE means the New York Stock Exchange.
Party or Parties has the meaning set forth in the preamble to this Agreement.
Person has the meaning set forth in the Separation Agreement.
Phillips 66 has the meaning set forth in the preamble to this Agreement.
Phillips 66 Actuary means an independent actuary selected by Phillips 66.
Phillips 66 Adjusted Exercise Price has the meaning set forth in Section 4.3(a)(ii).
Phillips 66 Benefit Plan means any Benefit Plan sponsored or maintained by a member of the Phillips 66 Group immediately following the Effective Time.
Phillips 66 Business has the meaning set forth in the Separation Agreement.
Phillips 66 Common Stock means the common stock, par value $0.01 per share, of Phillips 66.
Phillips 66 Delayed Price Ratio means, with respect to a Delayed Transfer Employee, the quotient obtained by dividing (i) the volume weighted average per share price of Phillips 66 Common Stock on the NYSE during Regular Trading Hours on the last Trading Day immediately before such Delayed Transfer Employees Transfer Date by (ii) the volume weighted average per share price of COP Common Stock on the NYSE during Regular Trading Hours on the last Trading Day immediately before such Delayed Transfer Employees Transfer Date.
Phillips 66 Delayed Share Ratio means, with respect to a Delayed Transfer Employee, the quotient obtained by dividing (i) the volume weighted average per share price of COP Common Stock on the NYSE during Regular Trading Hours on the last Trading Day immediately before such Delayed Transfer Employees Transfer Date by (ii) the volume weighted average per share price of Phillips 66 Common Stock on the NYSE during Regular Trading Hours on the last Trading Day immediately before such Delayed Transfer Employees Transfer Date.
Phillips 66 Deferred Compensation Plans has the meaning set forth in Section 6.3.
Phillips 66 Deferred Compensation Beneficiary has the meaning set forth in Section 6.3.
Phillips 66 Director means any individual who is a non-employee member of the board of directors of Phillips 66 immediately after the Effective Time.
Phillips 66 Entity means any member of the Phillips 66 Group.
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Phillips 66 401(k) Plan has the meaning set forth in Section 6.1.
Phillips 66 401(k) Plan Beneficiaries has the meaning set forth in Section 6.2.
Phillips 66 FSA has the meaning set forth in Section 8.3(b).
Phillips 66 Group has the meaning set forth in the Separation Agreement.
Phillips 66 Group Employee means, subject to the penultimate sentence of Section 3.1(c), any individual who is employed by a member of the Phillips 66 Group immediately after the Effective Time.
Phillips 66 HSA has the meaning set forth in Section 8.3(c).
Phillips 66 New Equity Plan means the plan adopted by Phillips 66 prior to the Effective Time and approved by COP, as sole shareholder of Phillips 66, under which the Phillips 66 equity-based awards described in Article IV shall be issued.
Phillips 66 Option means a Phillips 66 Exercisable Option or a Phillips 66 Non-exercisable Option.
Phillips 66 Pension Participants has the meaning set forth in Section 5.1.
Phillips 66 Pension Plan has the meaning set forth in Section 5.1.
Phillips 66 Price Ratio means the quotient obtained by dividing the Phillips 66 Stock Value by the COP Pre-Distribution Stock Value.
Phillips 66 PSUs means restricted stock units initially granted in connection with COPs Performance Share Program or in connection with Phillips Petroleum Companys Long-Term Incentive Plan or its predecessors.
Phillips 66 RSAs has the meaning set forth in Section 4.2(a).
Phillips 66 SERP has the meaning set forth in Section 7.1.
Phillips 66 SERP Beneficiaries has the meaning set forth in Section 7.1.
Phillips 66 Share Ratio means the quotient obtain by dividing the COP Pre-Distribution Stock Value by the Phillips 66 Stock Value.
Phillips 66 Short-Term Incentive Plan has the meaning set forth in Section 4.9(a).
Phillips 66 Stock Value means the simple average of the volume weighted average per share price of Phillips 66 Common Stock trading on the NYSE during Regular Trading Hours on the first four Trading Days following the Distribution Date.
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Phillips 66 Non-exercisable Option has the meaning set forth in Section 4.3(a)(ii).
Phillips 66 Exercisable Option has the meaning set forth in Section 4.4(a)(ii).
Phillips 66 Unvested SAR has the meaning set forth in Section 4.4(b)(ii).
Phillips 66 Welfare Plan means any Welfare Plan sponsored or maintained by any one or more members of the Phillips 66 Group immediately after the Effective Time.
Phillips 66 Welfare Plan Participants has the meaning set forth in Section 8.1.
Post-Distribution Value means, with respect to a Persons COP PSUs or RSUs or Phillips 66 PSUs or RSUs, as applicable, the product of (a) the number of shares of COP Common Stock or shares of Phillips 66 Common Stock, as applicable, subject to such COP PSUs or RSUs or Phillips 66 PSUs or RSUs, as applicable, immediately after the Adjustment Time, and (b) the COP Post-Distribution Stock Value or Phillips 66 Stock Value, as applicable.
Pre-Distribution Spread means, with respect to any exercisable COP Option, COP Option held by a Former Employee, COP Option held by a Specified Transition Employee, or vested COP SAR, the product of (a) the number of shares of COP Common Stock subject to such exercisable COP Option or vested COP SAR immediately prior to the Effective Time and (b) the excess of the COP Pre-Distribution Stock Value over the per-share exercise price for such exercisable COP Option, COP Option held by a Former Employee, COP Option held by a Specified Transition Employee, or vested COP SAR, prior to any adjustment contemplated by Article IV.
Pre-Distribution Value means, with respect to a Persons COP PSUs or RSUs, the product of (a) the number of shares of COP Common Stock subject to such COP PSUs or RSUs immediately prior to the Adjustment Time, and (b) the COP Pre-Distribution Stock Value.
Privacy Contract means any contract entered into in connection with applicable privacy protection Laws or regulations.
Regular Trading Hours means the period beginning at 9:30 A.M. New York City time and ending 4:00 P.M. New York City time.
Revised Pension Plan Amount has the meaning set forth in Section 5.2(b)(iv).
Securities Act has the meaning set forth in the Separation Agreement.
Separation Agreement has the meaning set forth in the recitals to this Agreement.
Subsidiary has the meaning set forth in the Separation Agreement.
Trading Day means the period of time during any given calendar day, commencing with the determination of the opening price on the NYSE and ending with the
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determination of the closing price on the NYSE, in which trading and settlement in shares of COP Common Stock or Phillips 66 Common Stock is permitted on the NYSE.
Transfer Date means, with respect to a Delayed Transfer Employee, the date that such Delayed Transfer Employee commences employment with a member of the COP Group or Phillips 66 Group, as applicable, with the Transfer Date being specified in the notice provided by COP.
Transfer Document has the meaning set forth in the Separation Agreement.
Transition Services Agreement has the meaning set forth in the Separation Agreement.
True-Up Amount has the meaning set forth in Section 5.2(b)(v).
U.S. means the United States of America.
WARN means the U.S. Worker Adjustment and Retraining Notification Act, as amended, and the regulations promulgated thereunder, and any applicable state or local Law equivalent.
Welfare Plan means, where applicable, a welfare plan (as defined in Section 3(1) of ERISA) or a cafeteria plan under Section 125 of the Code, and any benefits offered thereunder, and any other plan offering health benefits (including medical, prescription drug, dental, vision, and mental health and substance abuse), disability benefits, or life, accidental death and disability, and business travel insurance, pre-tax premium conversion benefits, dependent care assistance programs, employee assistance programs, paid time off programs, contribution funding toward a health savings account, flexible spending accounts, or cashable credits.
Section 2.2 Interpretation. In this Agreement, unless the context clearly indicates otherwise:
(a) words used in the singular include the plural and words used in the plural include the singular;
(b) if a word or phrase is defined in this Agreement, its other grammatical forms, as used in this Agreement, shall have a corresponding meaning;
(c) reference to any gender includes the other gender and the neuter;
(d) the words include, includes and including shall be deemed to be followed by the words without limitation;
(e) the words shall and will are used interchangeably and have the same meaning;
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(f) the word or shall have the inclusive meaning represented by the phrase and/or;
(g) relative to the determination of any period of time, from means from and including, to means to but excluding and through means through and including;
(h) all references to a specific time of day in this Agreement shall be based upon Central Standard Time or Central Daylight Savings Time, as applicable, on the date in question;
(i) whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified;
(j) accounting terms used herein shall have the meanings historically ascribed to them by COP and its Subsidiaries, including Phillips 66 for this purpose, in its and their internal accounting and financial policies and procedures in effect immediately prior to the date of this Agreement;
(k) reference to any Article, Section or Schedule means such Article or Section of, or such Schedule to, this Agreement, as the case may be, and references in any Section or definition to any clause means such clause of such Section or definition;
(l) the words this Agreement, herein, hereunder, hereof, hereto and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Section or other provision of this Agreement;
(m) the term commercially reasonable efforts means efforts which are commercially reasonable to enable a Party, directly or indirectly, to satisfy a condition to or otherwise assist in the consummation of a desired result and which do not require the performing Party to expend funds or assume Liabilities other than expenditures and Liabilities which are customary and reasonable in nature and amount in the context of a series of related transactions similar to the Distribution;
(n) reference to any agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and not prohibited by this Agreement;
(o) reference to any Law (including statutes and ordinances) means such Law (including any and all rules and regulations promulgated thereunder) as amended, modified, codified or reenacted, in whole or in part, and in effect at the time of determining compliance or applicability;
(p) references to any Person include such Persons successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement; a reference to such Persons Affiliates shall be deemed to mean such Persons Affiliates following the Distribution and any reference to a third party shall be deemed to mean a Person who is not a Party or an Affiliate of a Party;
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(q) if there is any conflict between the provisions of the main body of this Agreement and the Schedules hereto, the provisions of the main body of this Agreement shall control unless explicitly stated otherwise in such Schedule;
(r) unless otherwise specified in this Agreement, all references to dollar amounts herein shall be in respect of lawful currency of the U.S.;
(s) the titles to Articles and headings of Sections contained in this Agreement, in any Schedule and Exhibit and in the table of contents to this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of or to affect the meaning or interpretation of this Agreement; and
(t) any portion of this Agreement obligating a Party to take any action or refrain from taking any action, as the case may be, shall mean that such Party shall also be obligated to cause its relevant Subsidiaries to take such action or refrain from taking such action, as the case may be.
ARTICLE III
ASSIGNMENT OF EMPLOYEES
Section 3.1 Active Employees.
(a) Phillips 66 Group Employees. Except as otherwise set forth in this Agreement, effective not later than immediately following the Effective Time, the employment of each individual whose employment duties are to be primarily related to the business activities of the Phillips 66 Group immediately after the Distribution Date (collectively, the Phillips 66 Group Employees) shall be continued by a member of the Phillips 66 Group or shall be assigned and transferred to a member of the Phillips 66 Group (in each case, with such member as determined by Phillips 66). Each of the Parties agrees to execute, and to seek to have the applicable employees execute, such documentation, if any, as may be necessary to reflect such assignments and transfers.
(b) COP Group Employees. Except as otherwise set forth in this Agreement, effective not later than immediately following the Effective Time, the employment of each individual whose employment duties are to be primarily related to the business activities of the COP Group immediately after the Distribution Date (collectively, the COP Group Employees) shall be continued by a member of the COP Group or shall be assigned and transferred to a member of the COP Group (in each case as determined by COP). Each of the Parties agrees to execute, and to seek to have the applicable employees execute, such documentation, if any, as may be necessary to reflect such assignments and transfers.
(c) Delayed Transfer Employees. The Parties recognize that a certain number of the COP Group Employees who are Delayed Transfer Employees will be providing services to the Phillips 66 Group pursuant to the terms of the Transition Services Agreement and that certain of such Employees will be transferred to a Phillips 66 Entity at or around the time of the termination of the services being provided under the Transition Services Agreement. In addition, the Parties recognize that it is in the best interest of both Parties to defer the transfers of certain other Delayed Transfer Employees until after the Distribution Date.
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Furthermore, the Parties recognize the possibility that an Employee may be transferred to the Phillips 66 Group and become a Phillips 66 Group Employee at the Effective Time, but at a later time (no later than December 31, 2012), be transferred back to the COP Group and become a COP Group Employee, upon the approval of both COP and Phillips 66. Effective not later than the Transfer Date specified in the notice provided by COP (if to a COP Group Employee) or by Phillips 66 (if to a Phillips 66 Group Employee), Delayed Transfer Employees will be transferred to the Phillips 66 Group or to the COP Group, as applicable. The Parties will cooperate and negotiate in good faith to amend the Transfer Dates as may reasonably be required by the Parties, taking into consideration (i) any adjustments to the termination of the applicable services under the Transition Services Agreement for which a Delayed Transfer Employee was primarily providing support under such agreement in order to avoid any material disruptions in the applicable services being provided under such agreement, (ii) any adjustments in the work assignments of the applicable Delayed Transfer Employee for the COP Group or the Phillips 66 Group that reasonably require the Transfer Date of such Delayed Transfer Employee to be adjusted, and (iii) the need to avoid any break in service for the Delayed Transfer Employees; provided that in no event shall the Transfer Date for any Delayed Transfer Employee extend more than the earlier of December 31, 2012 or three (3) months beyond the applicable Transfer Date provided in the notice. Notwithstanding anything to the contrary in this Agreement, Delayed Transfer Employees who are COP Group Employees as of immediately following the Effective Time and are subsequently transferred to the Phillips 66 Group pursuant to this Section 3.1(c) shall be treated as COP Group Employees for all purposes of this Agreement until their actual transfer, upon and following which they shall be treated as Phillips 66 Group Employees for all purposes of this Agreement. Notwithstanding anything to the contrary in this Agreement, Delayed Transfer Employees who are Phillips 66 Group Employees as of the day immediately following the Distribution Date and are subsequently transferred to the COP Group pursuant to this Section 3.1(c) shall be treated as Phillips 66 Group Employees for all purposes of this Agreement during their time served as an employee of the Phillips 66 Group, until their actual transfer, upon and following which they shall be treated as COP Group Employees for all purposes of this Agreement.
(d) Leased Employees. COP Group Employees who have been leased or seconded to the Phillips 66 Group through an Employee Leasing Agreement shall remain in the COP Benefits Plans during the duration of the secondment or leasing, which shall not exceed 18 months. Phillips 66 Group Employees who have been leased or seconded to the COP Group through an Employee Leasing Agreement shall remain in the Phillips 66 Benefit Plans during the duration of the secondment or leasing, which shall not exceed 18 months. Any such employee leasing agreement(s) shall require the company benefiting from the services of each leased employee to fully reimburse the leasing company for the cost of each such employees remuneration and shall contain other terms and conditions consistent with an arms length commercial relationship between the leasing company and service recipient.
(e) At-Will Status. Notwithstanding the above or any other provision of this Agreement, nothing in this Agreement shall create any obligation on the part of any member of the COP Group or any member of the Phillips 66 Group to (i) continue the employment of any Employee or permit the return from a leave of absence for any period following the date of this Agreement or the Distribution Date (except as required by applicable Law) or (ii) change the
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employment status of any Employee from at will, to the extent such Employee is an at will employee under applicable Law.
(f) Severance. The Parties acknowledge and agree that the Distribution and the assignment, transfer or continuation of the employment of Employees as contemplated by this Section 3.1 shall not be deemed a severance of employment of any Employee for purposes of this Agreement or any Benefit Plan of any member of the COP Group or any member of the Phillips 66 Group.
(g) Not a Change of Control/Change in Control. The Parties acknowledge and agree that neither the consummation of the Distribution nor any transaction in connection with the Distribution shall be deemed a change of control, change in control, or term of similar import for purposes of any Benefit Plan of any member of the COP Group or any member of the Phillips 66 Group.
(h) Payroll and Related Taxes. With respect to the portion of the tax year occurring prior to the day immediately following the Distribution Date, COP will (i) be responsible for all payroll obligations, tax withholding and reporting obligations and (ii) furnish a Form W-2 or similar earnings statement to all Phillips 66 Group Employees for such period. With respect to the remaining portion of such tax year, Phillips 66 will (i) be responsible for all payroll obligations, tax withholding, and reporting obligations regarding Phillips 66 Group Employees and (ii) furnish a Form W-2 or similar earnings statement to all Phillips 66 Group Employees. With respect to each Phillips 66 Group Employee, COP and Phillips 66 shall, and shall cause their respective Affiliates to (to the extent permitted by applicable Law and practicable) (i) treat Phillips 66 (or the applicable Phillips 66 Entity) as a successor employer and COP (or the applicable COP Entity) as a predecessor, within the meaning of Sections 3121(a)(1) and 3306(b)(1) of the Code, to the extent appropriate, for purposes of taxes imposed under the United States Federal Insurance Contributions Act, as amended (FICA), or the United States Federal Unemployment Tax Act, as amended (FUTA), (b) cooperate with each other to avoid, to the extent possible, the restart of FICA and FUTA upon or following the Effective Time with respect to each such Phillips 66 Group Employee for the tax year during which the Effective Time occurs, and (c) file tax returns, exchange wage payment information, and report wage payments made by the respective predecessor and successor employer on separate IRS Forms W-2 or similar earnings statements to each such Phillips 66 Group Employee for the tax year in which the Effective Time occurs, in a manner provided in Section 4.02(l) of Revenue Procedure 2004-53.
(i) Employment Contracts; Expatriate Obligations. Phillips 66 will assume and honor, or will cause a Phillips 66 Entity to assume and honor, any agreements to which any Phillips 66 Group Employee is party with either any COP Entity or any joint venture with a COP Entity, including any (i) employment contract, (ii) retention, severance or change of control arrangement or (iii) expatriate (including any international assignee) contract or arrangement (including agreements and obligations regarding repatriation, relocation, equalization of taxes and living standards in the host country).
(j) Collective Bargaining Agreements. Schedule 3.1(j) sets forth a list of collective bargaining agreements relating to the Phillips 66 Group Employees in effect on the
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date of this Agreement (the Collective Bargaining Agreements). Prior to the Distribution Date, COP and Phillips 66 will take or cause to be taken any actions necessary to cause a Phillips 66 Entity to assume the Collective Bargaining Agreements to the maximum extent permitted by applicable Law. Nothing in this Agreement is intended to alter the provisions of any Collective Bargaining Agreement or modify in any way the obligations owed to the Employees covered by any such agreement.
Section 3.2 Former Employees. All former employees of COP who have an employment end date on or before the Effective Time, regardless of whether or not they provided services to a downstream business while employed by COP, shall be a Former COP Group Employee.
Section 3.3 Employment Law Obligations.
(a) WARN Act. After the Effective Time, (i) COP shall be responsible for providing any necessary WARN notice (and meeting any similar state Law notice requirements) with respect to any termination of employment of any COP Group Employee and (ii) Phillips 66 shall be responsible for providing any necessary WARN notice (and meeting any similar state Law notice requirements) with respect to any termination of employment of any Phillips 66 Group Employee.
(b) Compliance With Employment Laws. On and after the Distribution Date, (i) each member of the COP Group shall be responsible for adopting and maintaining any policies or practices, and for all other actions and inactions, necessary to comply with employment-related Laws and requirements relating to the employment of COP Group Employees and the treatment of any applicable Former COP Group Employees in respect of their former employment, and (ii) each member of the Phillips 66 Group shall be responsible for adopting and maintaining any policies or practices, and for all other actions and inactions, necessary to comply with employment-related Laws and requirements relating to the employment of Phillips 66 Group Employees.
Section 3.4 Employee Records.
(a) Sharing of Information. Subject to any limitations imposed by applicable Law, COP and Phillips 66 (acting directly or through members of the COP Group or the Phillips 66 Group, respectively) shall provide to the other and their respective agents and vendors all information necessary for the Parties to perform their respective duties under this Agreement. The Parties also hereby agree to enter into any business associate arrangements that may be required for the sharing of any Information pursuant to this Agreement to comply with the requirements of HIPAA.
(b) Transfer of Personnel Records and Authorization. Subject to any limitation imposed by applicable Law, on the Distribution Date, COP shall transfer and assign to Phillips 66 all personnel records, all immigration documents, including I-9 forms and work authorizations, all payroll deduction authorizations and elections, whether voluntary or mandated by Law, including but not limited to W-4 forms and deductions for benefits under the applicable Phillips 66 Benefit Plan and all absence management records, Family and Medical
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Leave Act records, insurance beneficiary designations, Flexible Spending Account enrollment confirmations, attendance, and return to work information (Benefit Management Records) relating to Phillips 66 Welfare Plan Participants. COP shall transfer and assign to Phillips 66 all personnel records, immigration documents, payroll forms and benefit management records relating to Delayed Transfer Employees as soon as administratively feasible after the Transfer Date for each Delayed Transfer Employee. Subject to any limitations imposed by applicable Law, COP, however, may retain originals of, copies of, or access to personnel Records, immigration records, payroll forms and Benefit Management Records as long as necessary to provide services to Phillips 66 (acting on its behalf pursuant to the Transition Services Agreement between the Parties entered into as of the date of this Agreement). Immigration records will, if and as appropriate, become a part of Phillips 66s public access file. Phillips 66 will use personnel records, payroll forms and benefit management records for lawful purposes only, including calculation of withholdings from wages and personnel management. It is understood that following the Distribution Date, COP records so transferred and assigned may be maintained by Phillips 66 (acting directly or through one of its Subsidiaries) pursuant to Phillips 66s applicable records retention policy.
(c) Access to Records. To the extent not inconsistent with this Agreement and any applicable privacy protection Laws or regulations or Privacy Contracts, reasonable access to Employee-related records after the Distribution Date will be provided to members of the COP Group and members of the Phillips 66 Group pursuant to the terms and conditions of Section 5.7 of the Indemnification and Release Agreement. In addition, notwithstanding anything to the contrary, Phillips 66 shall provide COP with reasonable access to those records necessary for its administration of any plans or programs on behalf of COP Group Employees and Former COP Group Employees after the Distribution Date as permitted by any applicable privacy protection Laws or regulations or Privacy Contracts. COP shall also be permitted to retain copies of all restrictive covenant agreements with any Phillips 66 Group Employee in which any member of the COP Group has a valid business interest. In addition, COP shall provide Phillips 66 with reasonable access to those records necessary for its administration of any plans or programs on behalf of Phillips 66 Group Employees after the Distribution Date as permitted by any applicable privacy protection Laws or regulations or Privacy Contracts. Phillips 66 shall also be permitted to retain copies of all restrictive covenant agreements with any COP Group Employee or Former COP Group Employee in which any member of the Phillips 66 Group has a valid business interest.
(d) Maintenance of Records. With respect to retaining, destroying, transferring, sharing, copying and permitting access to all Employee-related information, COP and Phillips 66 shall comply with all applicable Laws, regulations and internal policies, and shall indemnify and hold harmless each other from and against any and all Liability, claims, actions, and damages that arise from a failure (by the indemnifying party or its Subsidiaries or their respective agents) to so comply with all applicable Laws, regulations, Privacy Contracts and internal policies applicable to such information.
(e) No Access to Computer Systems or Files. Except as set forth in the Indemnification and Release Agreement or any Transfer Document, no provision of this Agreement shall give (i) any member of the COP Group direct access to the computer systems or other files, records or databases of any member of the Phillips 66 Group or (ii) any member
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of the Phillips 66 Group direct access to the computer systems or other files, records or databases of any member of the COP Group, unless specifically permitted by the owner of such systems, files, records or databases.
(f) Confidentiality. The provisions of this Section 3.4 shall be in addition to, and not in derogation of, the provisions of the Indemnification and Release Agreement governing confidential information, including Section 5.8 of the Indemnification and Release Agreement. Except as otherwise set forth in this Agreement, all records and data relating to Employees shall, in each case, be subject to the confidentiality provisions of the Indemnification and Release Agreement and any other applicable agreement and applicable Law.
(g) Cooperation. Each Party shall use commercially reasonable efforts to cooperate to share, retain, and maintain data and records that are necessary or appropriate to further the purposes of this Section 3.4 and for each Party to administer its respective Benefit Plans to the extent consistent with this Agreement and applicable Law, and each Party agrees to cooperate as long as is reasonably necessary to further the purposes of this Section 3.4. Except as provided under any Transfer Document, no Party shall charge another Party a fee for such cooperation.
Section 3.5 Non-Solicitation. Each party agrees that, for a period of one year from the Distribution Date, such party (a Soliciting Party) will not solicit for employment any employee of any other party (a Protected Party); provided, however, that it is understood that this employee non-solicitation provision shall not prohibit: (a) any transfers of Delayed Transfer Employees; (b) generalized solicitations by advertising and the like, which are not directed to specific individuals or employees of the Protected Party; or (c) solicitations of persons whose employment was terminated by the Protected Party.
ARTICLE IV
EQUITY AND INCENTIVE COMPENSATION PLANS
Section 4.1 General Principles.
(a) COP and Phillips 66 shall take any and all reasonable actions as shall be necessary and appropriate to further the provisions of this Article IV, including, to the extent practicable, providing written notice or similar communication to each Employee who holds one or more awards granted under any of the COP Equity Plans informing such Employee of (i) the actions contemplated by this Article IV with respect to such awards and (ii) whether (and during what time period) any blackout period shall be imposed upon holders of awards granted under any of the COP Equity Plans during which time awards may not be exercised or settled, as the case may be.
(b) Following the Distribution, a grantee who has outstanding awards under one or more of the COP Equity Plans and/or replacement awards under the Phillips 66 New Equity Plan shall be considered to have been employed by the applicable plan sponsor before and after the Distribution for purposes of (i) vesting and (ii) determining the date of termination of employment as it applies to any such award.
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(c) No award described in this Article IV, whether outstanding or to be issued, adjusted, substituted or cancelled by reason of or in connection with the Distribution, shall be adjusted, settled, cancelled, or exercisable, until in the judgment of the administrator of the applicable plan or program such action is consistent with all applicable Laws, including federal securities Laws. Any period of exercisability will not be extended on account of a period during which such an award is not exercisable pursuant to the preceding sentence.
(d) The adjustment or conversion of COP Options, COP SARs, COP RSUs and COP PSUs shall be effectuated in a manner that is intended to avoid the imposition of any penalty or other taxes on the holders thereof pursuant to Section 409A of the Code.
Section 4.2 Restricted Stock. Each holder of outstanding COP RSAs immediately prior to the Effective Time, whether a COP Group Employee, a Former COP Group Employee or a Phillips 66 Group Employee, shall receive, upon the Distribution being made, such number of shares of Phillips 66 restricted stock (Phillips 66 RSAs) as determined by applying the Distribution Ratio in the same way as if the outstanding COP RSAs were fully vested shares of COP Common Stock as of the Effective Time. The COP RSAs outstanding following the Distribution are hereinafter referred to as Adjusted COP RSAs. Except as set forth in this Section 4.2, the Adjusted COP RSAs and the Phillips 66 RSAs shall be subject to substantially the same terms and conditions immediately following the Effective Time as applicable to COP RSAs immediately prior to the Effective Time.
Section 4.3 Non-exercisable Stock Options.
(a) Treatment of Outstanding Non-exercisable Stock Options.
(i) COP Group Employees. Each non-exercisable COP Option outstanding under the COP Equity Plans which is held by a COP Group Employee shall remain an option to purchase COP Common Stock issued under the applicable COP Equity Plan (each such option, an Adjusted COP Non-exercisable Option). Each Adjusted COP Non-exercisable Option shall be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to the corresponding non-exercisable COP Option immediately prior to the Effective Time; provided, however, that from and after the Effective Time:
(x) the per-share exercise price of each such Adjusted COP Non-exercisable Option shall be equal to the product of (A) the per-share exercise price of the corresponding non-exercisable COP Option immediately prior to the Effective Time and (B) the COP Price Ratio, rounded up to the nearest whole cent (the COP Adjusted Exercise Price); and
(y) the number of shares of COP Common Stock subject to each such Adjusted COP Non-exercisable Option shall be equal to the product of (A) the number of shares of COP Common Stock subject to the corresponding non-exercisable COP Option immediately prior to the Effective Time and (B) the quotient obtained by dividing (I) the excess of the COP Pre-Distribution Stock Value over the original exercise price of such non-exercisable COP Option by
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(II) the excess of the COP Post-Distribution Stock Value over the COP Adjusted Exercise Price, with any fractional share rounded down to the nearest whole share.
(ii) Phillips 66 Group Employees. Each non-exercisable COP Option outstanding under the COP Equity Plans which is held by a Phillips 66 Employee at the Effective Time shall be converted as of the Effective Time into an option to purchase shares of Phillips 66 Common Stock (each such option, a Phillips 66 Non-exercisable Option) pursuant to the terms of the Phillips 66 New Equity Plan subject to terms and conditions after the Effective Time that are substantially similar to the terms and conditions applicable to the corresponding non-exercisable COP Option immediately prior to the Effective Time; provided, however, that from and after the Effective Time:
(x) the per-share exercise price of each such Phillips 66 Non-exercisable Option shall be equal to the product of (A) the per-share exercise price of the corresponding non-exercisable COP Option immediately prior to the Effective Time and (B) the Phillips 66 Price Ratio, rounded up to the nearest whole cent (the Phillips 66 Adjusted Exercise Price); and
(y) the number of shares of Phillips 66 Common Stock subject to each such Phillips 66 Non-exercisable Option shall be equal to the product of (A) the number of shares of COP Common Stock subject to the corresponding non-exercisable COP Option immediately prior to the Effective Time and (B) the quotient obtained by dividing (I) the excess of the COP Pre-Distribution Stock Value over the original exercise price of such non-exercisable COP Option by (II) the excess of the Phillips 66 Stock Value over the Phillips 66 Adjusted Exercise Price, with any fractional share rounded down to the nearest whole share.
(iii) Former Employees. Each non-exercisable COP Option held by a Former Employee shall be adjusted at the Effective Time such that the holder of such non-exercisable COP Option shall immediately following the Effective Time holds an adjusted non-exercisable option to purchase COP Common Stock (an Adjusted COP Non-exercisable Option) and a non-exercisable option to purchase Phillips 66 Common Stock (a Phillips 66 Non-exercisable Option). Each Adjusted COP Non-exercisable Option and Phillips 66 Non-exercisable Option shall be subject to substantially the same terms and conditions after the Effective Time as the terms and conditions applicable to the corresponding exercisable COP Option immediately prior to the Effective Time; provided, however, that from and after the Effective Time:
(x) the per-share exercise price of each such Adjusted COP Non-exercisable Option shall be the COP Adjusted Exercise Price; and (y) the number of shares of COP Common Stock subject to each such Adjusted COP Non-exercisable Option shall be equal to the product of such number of shares multiplied by the quotient obtained by dividing (A) the Pre-Distribution Spread by (B) the sum of (I) the excess of the COP Post-Distribution Stock Value over the COP Adjusted Exercise Price plus (II) one half the excess of the Phillips 66 Stock Value over the Phillips 66 Adjusted Exercise Price; and
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(y) the per-share exercise price of each such Phillips 66 Non-exercisable Option shall be the Phillips 66 Adjusted Exercise Price, and (y) the number of shares of Phillips 66 Common Stock subject to each such Phillips 66 Non-exercisable Option shall be equal to one half the number of shares subject to the corresponding Adjusted COP Exercisable Option, with any fractional share rounded down to the nearest whole share.
(b) Special Rules for Delayed Transfer Employees Holding Non-exercisable Stock Options.
(i) Each non-exercisable COP Option held by a Delayed Transfer Employee who is not a Phillips 66 Employee shall be treated as set forth in Section 4.3(a)(i) on the same basis as any other non-exercisable COP Option. Each non-exercisable COP Option held by a Delayed Transfer Employee who is a Phillips 66 Employee shall be treated as set forth in Section 4.3(a)(ii) on the same basis as any other non-exercisable COP Option held by Phillips 66 Employees.
(ii) Each non-exercisable COP Option held by a Delayed Transfer Employee who transfers from the COP Group to the Phillips 66 Group shall be converted as of such Transfer Date into an option to purchase shares of Phillips 66 Common Stock (each such option, a Delayed Transfer Phillips 66 Option) pursuant to the terms of the applicable Phillips 66 equity plan and shall be subject to terms and conditions after such Delayed Transfer Employees Transfer Date that are substantially similar to the terms and conditions applicable to the corresponding Adjusted COP Non-exercisable Option immediately prior to such Delayed Transfer Employees Transfer Date; provided, however, that from and after the Effective Time:
(x) the per-share exercise price of each such Delayed Transfer Phillips 66 Option shall be equal to the product of (A) the per-share exercise price of the corresponding Adjusted COP Non-exercisable Option immediately prior to such Delayed Transfer Employees Transfer Date and (B) the Phillips 66 Delayed Price Ratio, rounded up to the nearest whole cent; and
(y) the number of shares of Phillips 66 Common Stock subject to each such Delayed Transfer Phillips 66 Option shall be equal to the product of (A) the number of shares of COP Common Stock subject to the corresponding Adjusted COP Non-exercisable Option immediately prior to such Delayed Transfer Employees Transfer Date and (B) the quotient obtained by dividing (I) the excess of the volume weighted average per share price of COP Common Stock trading on the NYSE during Regular Trading Hours on the last Trading Day immediately before such Delayed Transfer Employees Transfer Date over the exercise price of the Adjusted COP Non-exercisable Option by (II) the excess of the volume weighted average per share price of Phillips 66 Common Stock trading on the NYSE during Regular Trading Hours on the last Trading Day immediately before such Delayed Transfer Employees Transfer Date over the exercise price for the Delayed Transfer Phillips 66 Option, as determined under clause (x) of this
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Section 4.3(b)(ii), with any fractional share rounded down to the nearest whole share.
(iii) Each Phillips 66 Non-exercisable Option held by a Delayed Transfer Employee who transfers from the Phillips 66 Group to the COP Group shall be converted as of such Transfer Date into an option to purchase shares of COP Common Stock (each such option, a Delayed Transfer COP Option) pursuant to the terms of the applicable COP equity plan and shall be subject to terms and conditions after such Delayed Transfer Employees Transfer Date that are substantially similar (to the extent practicable) to the terms and conditions applicable to the corresponding Phillips 66 Non-exercisable Option immediately prior to such Delayed Transfer Employees Transfer Date; provided, however, that from and after the Effective Time:
(x) the per-share exercise price of each such Delayed Transfer COP Option shall be equal to the product of (A) the per-share exercise price of the corresponding Phillips 66 Non-exercisable Option immediately prior to such Delayed Transfer Employees Transfer Date and (B) the COP Delayed Price Ratio, rounded up to the nearest whole cent; and
(y) the number of shares of COP Common Stock subject to each such Delayed Transfer COP Option shall be equal to the product of (A) the number of shares of Phillips 66 Common Stock subject to the corresponding Phillips 66 Non-exercisable Option immediately prior to such Delayed Transfer Employees Transfer Date and (B) the quotient obtained by dividing (I) the excess of the volume weighted average per share price of Phillips 66 Common Stock trading on the NYSE during Regular Trading Hours on the last Trading Day immediately before such Delayed Transfer Employees Transfer Date over the exercise price of the Phillips 66 Non-exercisable Option by (II) the excess of the volume weighted average per share price of COP Common Stock trading on the NYSE during Regular Trading Hours on the last Trading Day immediately before such Delayed Transfer Employees Transfer Date over the exercise price for the Delayed Transfer COP Option, as determined under clause (x) of this Section 4.3(b)(iii), with any fractional share rounded down to the nearest whole share.
Section 4.4 Exercisable Stock Options and Vested Stock Appreciation Rights.
(a) Treatment of Outstanding Exercisable Stock Options. Each Exercisable COP Option regardless of who holds such exercisable COP option shall be adjusted at the Effective Time such that the holder of such exercisable COP Option shall immediately following the Effective Time holds an adjusted exercisable option to purchase COP Common Stock (an Adjusted COP Exercisable Option) and an exercisable option to purchase Phillips 66 Common Stock (a Phillips 66 Exercisable Option). Each Adjusted COP Exercisable Option and Phillips 66 Exercisable Option shall be subject to substantially the same terms and conditions after the Effective Time as the terms and conditions applicable to the corresponding exercisable COP Option immediately prior to the Effective Time; provided, however, that from and after the Effective Time:
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(i) (x) the per-share exercise price of each such Adjusted COP Exercisable Option shall be the COP Adjusted Exercise Price; and (y) the number of shares of COP Common Stock subject to each such Adjusted COP Exercisable Option shall be equal to the product of such number of shares multiplied by the quotient obtained by dividing (A) the Pre-Distribution Spread by (B) the sum of (I) the excess of the COP Post-Distribution Stock Value over the COP Adjusted Exercise Price plus (II) one half the excess of the Phillips 66 Stock Value over the Phillips 66 Adjusted Exercise Price; and
(ii) (x) the per-share exercise price of each such Phillips 66 Exercisable Option shall be the Phillips 66 Adjusted Exercise Price, and (y) the number of shares of Phillips 66 Common Stock subject to each such Phillips 66 Exercisable Option shall be equal to one half the number of shares subject to the corresponding Adjusted COP Exercisable Option, with any fractional share rounded down to the nearest whole share.
(b) Treatment of Outstanding Vested Stock Appreciation Rights. Each vested COP SAR regardless of who holds such vested COP SAR, shall be adjusted as of the Effective Time such that the holder of such vested COP SAR shall, immediately following the Effective Time, holds an adjusted vested stock appreciation right with respect to COP Common Stock (an Adjusted Vested COP SAR) and a vested stock appreciation right with respect to Phillips 66 Common Stock (a Vested Phillips 66 SAR). Each Adjusted Vested COP SAR and each Vested Phillips 66 SAR shall be subject to substantially the same terms and conditions after the Effective Time as the terms and conditions applicable to the corresponding vested COP SAR immediately prior to the Effective Time; provided, however, that from and after the Effective Time:
(i) (x) the per-share exercise price of each such Adjusted Vested COP SAR shall be the COP Adjusted Exercise Price, and (y) the number of shares of COP Common Stock subject to each such Adjusted Vested COP SAR shall be equal to the product of the number of such shares multiplied by the quotient obtained by dividing (A) the Pre-Distribution Spread by (B) the sum of (I) the excess of the COP Post-Distribution Stock Value over the COP Adjusted Exercise Price plus (II) one half the excess of the Phillips 66 Stock Value over the Phillips 66 Adjusted Exercise Price, with any fractional share rounded down to the nearest whole share; and
(ii) (x) the per-share exercise price of each such Vested Phillips 66 SAR shall be the Phillips 66 Adjusted Exercise Price, and (y) the number of shares of Phillips 66 Common Stock subject to each such Vested Phillips 66 SAR shall be equal to one half the number of shares subject to the corresponding Adjusted Vested COP SAR, with any fractional share rounded down to the nearest whole share.
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Section 4.5 Restricted Stock Units.
(a) Treatment of COP RSUs Held by COP Group Employees and Former COP Group Employees. COP RSUs held by a COP Group Employee or a Former COP Group Employee immediately prior to the Effective Time shall be adjusted by multiplying the number of COP RSUs subject to each grant by the COP Share Ratio. If the resulting product includes a fractional share, the number of COP RSUs shall be rounded up to the nearest whole share. The terms and condition to which the COP RSUs are subject shall be substantially the same terms and conditions prior to the Distribution and following the Distribution.
(b) Treatment of COP RSUs Held by Phillips 66 Group Employees. COP RSUs held by Phillips 66 Group Employees immediately prior to the Effective Time shall be replaced with an award of a number of Phillips 66 restricted stock units (the Phillips 66 RSUs) determined by multiplying the number of COP RSUs subject to each grant by the Phillips 66 Share Ratio. If the resulting product includes a fractional share, the number of Phillips 66 RSUs shall be rounded up to the nearest whole share. Phillips 66 RSUs shall be subject to substantially the same terms and conditions after the Distribution as the terms and conditions applicable to the corresponding COP RSUs immediately prior to the Distribution.
(c) Treatment of COP RSUs Held by COP Directors or Phillips 66 Directors. COP RSUs held by COP Directors or Phillips 66 Directors immediately prior to the Effective Time shall receive, upon the Distribution being made, such number of Phillips 66 RSUs as determined by applying the Distribution Ratio in the same way as if the COP RSUs were fully vested shares of COP Common Stock as of the Effective Time. The COP RSUs outstanding following the Distribution having been made are hereinafter referred to as Adjusted COP RSUs. The Adjusted COP RSUs and the Phillips 66 RSUs shall be subject to substantially the same terms and conditions immediately following the Effective Time as applicable to COP RSUs immediately prior to the Effective Time.
(d) Special Rules for Delayed Transfer Employees Holding RSUs.
(i) COP RSUs held by a Delayed Transfer Employee who is employed by Phillips 66 immediately following the Effective Time shall be adjusted under Section 4.5(b) above on the same basis as any other COP RSU held by any other Phillips 66 Employee. COP RSUs held by a Delayed Transfer Employee who is employed by COP immediately following the Effective Time shall be adjusted under Section 4.5(a) on the same basis as any other COP RSU held by an individual who is not a Phillips 66 Employee.
(ii) COP RSUs held by a Delayed Transfer Employee who transfers from the COP Group to the Phillips 66 Group shall be converted as of such Delayed Transfer Employees Transfer Date into Phillips 66 RSUs (Delayed Transfer Phillips 66 RSUs). Delayed Transfer Phillips 66 RSUs shall be granted pursuant to the terms of the applicable Phillips 66 equity plan and shall be subject to terms and conditions after the holders Transfer Date that are substantially similar to the terms and conditions applicable to the corresponding COP RSU grant immediately prior to such Delayed Transfer Employees Transfer Date, except as provided in this Section 4.5(d)(ii). The
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number of Delayed Transfer Phillips 66 RSUs shall be determined by multiplying (A) the number of COP RSUs subject to each grant by (B) the Phillips 66 Delayed Share Ratio. Any fractional share which result from such calculation shall be rounded up to the nearest whole share.
(iii) Phillips 66 RSUs held by a Delayed Transfer Employee who transfers from the Phillips 66 Group to the COP Group shall be converted as of such Delayed Transfer Employees Transfer Date into COP RSUs (Delayed Transfer COP RSUs). Delayed Transfer COP RSUs shall be issued pursuant to the terms of the applicable COP equity plan and shall be subject to terms and conditions after the holders Transfer Date that are substantially similar to the terms and conditions applicable to the corresponding Phillips 66 RSU grant immediately prior to such Delayed Transfer Employees Transfer Date, except as provided in this Section 4.5(d)(iii). The number of Delayed Transfer COP RSUs subject to each grant shall be determined by multiplying (A) the number of Phillips 66 RSUs subject to each grant by (B) the COP Delayed Share Ratio. Any fractional share which result from such calculation shall be rounded up to the nearest whole share.
Section 4.6 Performance Share Units. Each holder of outstanding COP PSUs, whether a COP Group Employee, a Former COP Group Employee or a Phillips 66 Group Employee, immediately prior to the Effective Time shall receive, upon the Distribution being made, such number of Phillips 66 PSUs as determined by applying the Distribution Ratio in the same way as if the COP PSUs were fully vested shares of COP Common Stock as of the Effective Time. The COP PSUs outstanding following the Distribution having been made are hereinafter referred to as Adjusted COP PSUs. The Adjusted COP PSUs and the Phillips 66 PSUs shall be subject to substantially the same terms and conditions immediately following the Effective Time as applicable to COP PSUs immediately prior to the Effective Time.
Section 4.7 Specified Transition Employees. Notwithstanding anything in this Agreement to the contrary, with regard to awards made to certain specified employees set forth on Schedule 4.7 (Specified Transition Employees), the following shall apply:
(a) Treatment of COP Options Held by Specified Transition Employees. COP Options granted (a COP Specified Transition Option) and held by a Specified Transition Employee immediately prior to the Effective Time shall be adjusted at the Effective Time such that the holder of such COP Specified Transition Option shall immediately following the Effective Time holds an adjusted option to purchase COP Common Stock (an Adjusted COP Specified Transition Option) and an option to purchase Phillips 66 Common Stock (a Phillips 66 Specified Transition Option). Each Adjusted COP Specified Transition Option and Phillips 66 Specified Transition Option shall be subject to substantially the same terms and conditions after the Effective Time as the terms and conditions applicable to the corresponding COP Specified Transition Option immediately prior to the Effective Time; provided, however, that from and after the Effective Time:
(x) the per-share exercise price of each such Adjusted COP Specified Transition Option shall be the COP Adjusted Exercise Price; and (y) the number of shares of COP Common Stock subject to each such Adjusted COP Specified
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Transition Option shall be equal to the product of such number of shares multiplied by the quotient obtained by dividing (A) the Pre-Distribution Spread by (B) the sum of (I) the excess of the COP Post-Distribution Stock Value over the COP Adjusted Exercise Price plus (II) one half the excess of the Phillips 66 Stock Value over the Phillips 66 Adjusted Exercise Price; and
(x) the per-share exercise price of each such Phillips 66 Specified Transition Option shall be the Phillips 66 Adjusted Exercise Price, and (y) the number of shares of Phillips 66 Common Stock subject to each such Phillips 66 Specified Transition Option shall be equal to one half the number of shares subject to the corresponding Adjusted COP Specified Transition Option, with any fractional share rounded down to the nearest whole share.
(b) Treatment of COP RSUs Held by Specified Transition Employees. COP RSUs granted in 2012 (COP Specified Transition RSUs) and held by a Specified Transition Employee immediately prior to the Effective Time shall receive, upon the Distribution being made, such number of Phillips 66 RSUs (Phillips 66 Specified Transition RSUs) as determined by applying the Distribution Ratio in the same way as if the COP Specified Transition RSUs were fully vested shares of COP Common Stock as of the Effective Time. The COP Specified Transition RSUs outstanding following the Distribution having been made are hereinafter referred to as Adjusted COP Specified Transition RSUs. The Adjusted COP Specified Transition RSUs and the Phillips 66 Specified Transition RSUs shall be subject to substantially the same terms and conditions immediately following the Effective Time as applicable to COP Specified Transition RSUs immediately prior to the Effective Time.
Section 4.8 Section 16(b) of the Exchange Act; Code Sections 162(m) and 409A. (a) By approving the adoption of this Agreement, the respective Boards of Directors of each of COP and Phillips 66 intend to exempt from the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, by reason of the application of Rule 16b-3 thereunder, all acquisitions and dispositions of equity incentive awards by directors and officers of each of COP and Phillips 66, and the respective Boards of Directors of COP and Phillips 66 also intend expressly to approve, in respect of any equity-based award, the use of any method for the payment of an exercise price and the satisfaction of any applicable Tax withholding (specifically including the actual or constructive tendering of shares in payment of an exercise price and the withholding of option shares from delivery in satisfaction of applicable Tax withholding requirements) to the extent such method is permitted under the applicable COP Equity Plan and award agreement.
(b) Notwithstanding anything in this Agreement to the contrary (including the treatment of supplemental and deferred compensation plans, outstanding long-term incentive awards and annual incentive awards as described herein), COP and Phillips 66 agree to negotiate in good faith regarding the need for any treatment different from that otherwise provided herein to ensure that (i) a federal income tax deduction for the payment of such supplemental or deferred compensation or long-term incentive award, annual incentive award or other compensation is, to the extent prescribed under the terms of the applicable plan and award agreement, not limited by reason of Section 162(m) of the Code, and (ii) the treatment of such supplemental or deferred compensation or long-term incentive award, annual incentive
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award or other compensation does not cause the imposition of a penalty tax under Section 409A of the Code.
Section 4.9 Performance Share Program. (a) Immediately prior to the Effective Time, each ongoing performance period under the COP Performance Share Program shall be truncated and COP PSUs shall be granted on a prorated basis based on the portion of each performance period that has elapsed prior to the Effective Time to COP Group Employees and Phillips 66 Group Employees who are participating in the COP Performance Share Program immediately prior to the Effective Time based on actual performance as compared to the applicable quantitative and qualitative measures during each ongoing performance period.
(b) Not later than the Effective Time, Phillips 66 shall, or shall cause another Phillips 66 Entity to, adopt a performance share program that is substantially similar to the COP Performance Share Program and shall provide compensation opportunities under the Phillips 66 performance share program to each Phillips 66 Group Employee who participated in the COP Performance Share Program immediately prior to the Effective Time that are substantially similar to the compensation opportunities that such Phillips 66 Group Employees had under the COP Performance Share Program immediately prior to the Effective Time.
(c) Immediately following the Effective Time, COP shall provide the COP Group Employees who participated in the COP Performance Share Program immediately prior to the Effective Time with compensation opportunities under the COP Performance Share Program that are substantially similar to the compensation opportunities that such COP Group Employees had under the COP Performance Share Program immediately prior to the Effective Time.
Section 4.10 Liabilities for Settlement of Awards.
(a) Settlement of COP Options. COP shall be responsible for all Liabilities associated with COP Options (regardless of the holder of such awards) including any option exercise, share delivery, registration or other obligations related to the exercise of the COP Options.
(b) Settlement of Phillips 66 Options. Phillips 66 shall be responsible for all Liabilities associated with Phillips 66 Options (regardless of the holder of such awards) including any option exercise, share delivery, registration or other obligations related to the exercise of the Phillips 66 Options.
(c) Settlement of COP SARs. COP shall be responsible for all Liabilities associated with COP SARs (regardless of the holder of such awards) including any stock appreciation right exercise, share delivery, registration or other obligations related to the exercise of the COP SARs.
(d) Settlement of Phillips 66 SARs. Phillips 66 shall be responsible for all Liabilities associated with Phillips 66 SARs (regardless of the holder of such awards) including any stock appreciation right exercise, share delivery, registration or other obligations related to the exercise of the Phillips 66 SARs.
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(e) Settlement of Outstanding COP Restricted Stock. COP shall be responsible for all Liabilities associated with COP Restricted Stock including any share delivery, registration or other obligations related to the settlement of the COP Restricted Stock awards.
(f) Settlement of Outstanding Phillips 66 Restricted Stock. Phillips 66 shall be responsible for all Liabilities associated with Phillips 66 Restricted Stock including any share delivery, registration or other obligations related to the settlement of the Phillips 66 Restricted Stock awards.
(g) Settlement of Outstanding COP RSUs. COP shall be responsible for all Liabilities associated with COP RSUs, including any share delivery, registration or other obligations related to the settlement of COP RSUs.
(h) Settlement of Outstanding Phillips 66 RSUs. Phillips 66 shall be responsible for all Liabilities associated with Phillips 66 RSUs, including any share delivery, registration or other obligations related to the settlement of the Phillips 66 RSUs.
Section 4.11 Bonus and Short-Term Incentive Payments.
(a) Not later than the Effective Time, Phillips 66 shall, or shall cause another Phillips 66 Entity to, adopt a plan that will provide annual bonus or short-term cash incentive compensation opportunities for Phillips 66 Group Employees and Delayed Transfer Employees transferred from the COP Group to the Phillips 66 Group that are substantially similar to the opportunities provided to such Employees immediately prior to the Effective Time (the Phillips 66 Short-Term Incentive Plan), subject to Phillips 66s right to amend such plan after the Effective Time in accordance with the terms thereof. The Phillips 66 Short-Term Incentive Plan shall be approved prior to the Effective Time by COP, as the sole shareholder of Phillips 66 and Phillips 66 Group Employees shall participate in such Phillips 66 Short-Term Incentive Plan immediately following the Effective Time; provided, however, that service with COP shall be credited for the purposes of determining whether such Phillips 66 Group Employee had been a participant in the Phillips 66 Short-Term Incentive Plan during the applicable performance period.
(b) For the avoidance of doubt, (i) the Phillips 66 Group shall be solely responsible for funding, paying, and discharging all obligations relating to any annual cash incentive awards that any Phillips 66 Employee is eligible to receive under any Phillips 66 Group annual bonus and other short-term incentive compensation plans with respect to payments made beginning at or after the Effective Time, including the Phillips 66 Short-Term Incentive Plan, and no member of the COP Group shall have any obligations with respect thereto, and (ii) the COP Group shall be solely responsible for funding, paying, and discharging all obligations relating to any annual cash incentive awards that any COP Group Employee is eligible to receive under any COP annual bonus plans with respect to payments made beginning at or after the Effective Time, and no member of the Phillips 66 Group shall have any obligations with respect thereto.
Section 4.12 Form S-8. Upon or as soon as reasonably practicable after the Effective Time and subject to applicable Law, Phillips 66 shall prepare and file with the SEC a registration
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statement on Form S-8 (or another appropriate form) registering under the Securities Act the offering of a number of shares of Phillips 66 Common Stock at a minimum equal to the number of shares subject to the Replacement Phillips 66 RSAs, Phillips 66 RSUs, Phillips 66 PSUs, Phillips 66 SARs, and the Phillips 66 Options. Phillips 66 shall use commercially reasonable efforts to cause any such registration statement to be kept effective (and the current status of the prospectus or prospectuses required thereby to be maintained) as long as any Phillips 66 RSAs, Phillips 66 RSUs, Phillips 66 PSUs, Phillips 66 SAR, and Phillips 66 Options remain outstanding.
Section 4.13 Tax Reporting and Withholding for Equity-Based Awards. COP (or one of its Subsidiaries) will be responsible for all income, payroll, or other tax reporting related to income of COP Group Employees or COP Group Former Employees from equity-based awards, and Phillips 66 (or one of its Subsidiaries) will be responsible for all income, payroll, or other tax reporting related to income of Phillips 66 Group Employees from equity-based awards. Similarly, COP will be responsible for all income, payroll, or other tax reporting related to income of its non-employee directors from equity-based awards, and Phillips 66 will be responsible for all income, payroll, or other tax reporting related to income of its non-employee directors from equity-based awards. Further, COP (or one of its Subsidiaries) shall be responsible for remitting applicable tax withholdings for COP Group Employees to each applicable taxing authority, and Phillips 66 (or one of its Subsidiaries) shall be responsible for remitting applicable tax withholdings for Phillips 66 Group Employees to each applicable taxing authority; provided, however, that either COP or Phillips 66 shall act as agent for the other company by remitting amounts withheld in the form of shares or in conjunction with an exercise transaction to an appropriate taxing authority. COP and Phillips 66 acknowledge and agree that the parties will cooperate with each other and with third-party providers to effectuate withholding and remittance of taxes, as well as required tax reporting, in a timely, efficient, and appropriate manner.
Section 4.14 Plan Administrator. Each of COP and Phillips 66 agrees that it will use Bank of America Merrill Lynch for at least two years immediately following the Effective Time to administer all employee equity awards that are outstanding immediately following the Effective Time (including all such equity awards that are adjusted in accordance with this Section 4).
Section 4.15 Approval of Phillips 66 New Equity Plan. Not later than the Effective Time, Phillips 66 shall, or shall have caused a Phillips 66 Entity to, have adopted the Phillips 66 New Equity Plan. The Phillips 66 New Equity Plan shall be approved prior to the Effective Time by COP, as the sole shareholder of Phillips 66.
ARTICLE V
U.S. QUALIFIED DEFINED BENEFIT PLANS
Section 5.1 Establishment of Phillips 66 Pension Plan. Effective as of the Distribution Date, Phillips 66 shall, or shall cause another Phillips 66 Entity to, establish a defined benefit pension plan and related trust to provide retirement benefits to Phillips 66 Group Employees who immediately prior to the Distribution Date were participants in a COP Pension Plan (such defined benefit pension plan, the Phillips 66 Pension Plan and such Phillips 66 Employees, the
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Phillips 66 Pension Plan Participants). Phillips 66 shall be responsible for taking all necessary, reasonable, and appropriate action to establish, maintain, and administer the Phillips 66 Pension Plan so that it is qualified under Section 401(a) of the Code and that the related trust thereunder is exempt under Section 501(a) of the Code. Phillips 66 (acting directly or through members of the Phillips 66 Group) shall be responsible for any and all Liabilities (including Liability for funding) and other obligations with respect to the Phillips 66 Pension Plan.
Section 5.2 Phillips 66 Pension Plan Participants.
(a) Assumption of COP Pension Plan Liabilities. Effective as of the Distribution Date, Phillips 66 (acting directly or through members of the Phillips 66 Group) hereby agrees to cause the Phillips 66 Pension Plan to assume, fully perform, pay, and discharge all Liabilities under the COP Pension Plan relating to all Phillips 66 Pension Plan Participants as of the Distribution Date or, with respect to Delayed Transfer Employees, the Transfer Date.
(b) Transfer of the COP Pension Plan Assets.
(i) The Parties intend that the portion of the COP Pension Plan covering Phillips 66 Pension Plan Participants
shall
be transferred to the Phillips 66 Pension Plan in accordance with Section 414(l) of the Code, Treasury Regulation
Section 1.414(l)-1, and Section 208 of ERISA. No later than thirty (30) days prior to the Distribution Date, COP and
Phillips 66 (acting directly or through members of the COP Group or the Phillips 66 Group, respectively) shall, to the extent necessary, file an IRS Form 5310-A regarding the transfer of Assets and Liabilities from the COP Pension Plan to the
Phillips 66 Pension Plan.
(ii) Prior to the Distribution Date (or such later time as mutually agreed by the Parties), COP shall cause the COP Actuary to determine the estimated value, as of the Distribution Date, of the Assets to be transferred to the Phillips 66 Pension Plan in accordance with the assumptions and valuation methodology set forth on Schedule 5.2(b) attached hereto (the Estimated Pension Plan Transfer Amount).
(iii) Not later than thirty (30) Business Days following the Distribution Date (or such later time as mutually agreed by the Parties), COP and Phillips 66 shall cooperate in good faith to cause an initial transfer of Assets from COP Pension Plan to the Phillips 66 Pension Plan in an amount equal to ninety percent (90%) of the Estimated Pension Plan Transfer Amount (such amount, the Initial Transfer Amount). COP shall satisfy its obligation pursuant to this Section 5.2(b)(iii) by causing the COP Pension Plan to transfer Assets equal to the Initial Transfer Amount. Assets may be transferred in cash, cash-like securities, or other cash equivalents, or in kind, or in a combination thereof, as determined by COP in its sole discretion.
(iv) Within two hundred seventy (270) days (or such later time as mutually agreed by the Parties) following the Distribution Date, COP shall cause the COP Actuary to provide Phillips 66 with a revised calculation of the value, as of the Distribution Date, of the Assets to be transferred to the Phillips 66 Pension Plan
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determined in accordance with the assumptions and valuation methodology set forth on Schedule 5.2(b) attached hereto (the Revised Pension Plan Transfer Amount). Phillips 66 may submit, at its sole cost and expense, the Revised Pension Plan Transfer Amount to the Phillips 66 Actuary for verification; provided, that, such verification process and any calculation performed by the Phillips 66 Actuary in connection therewith shall be performed solely on the basis of the assumptions and valuation methodology set forth on Schedule 5.2(b) attached hereto. In order to perform such verification, upon request from Phillips 66, the Phillips 66 Actuary will receive the data and additional detailed methodology used to calculate the Initial Transfer Amount and the Final Pension Plan Transfer Amount (if reasonably needed) from the COP Actuary. Phillips 66 will be responsible for the cost and expense of the Phillips 66 Actuary and COP will be responsible for the cost and expense for the COP Actuary for such data transfer. In the event the Phillips 66 Actuary so determines that the value, as of the Distribution Date, of the Assets to be transferred to the Phillips 66 Pension Plan differs from the Revised Pension Plan Transfer Amount, the Phillips 66 Actuary shall identify in writing to the COP Actuary all objections to the determination within sixty (60) days following provision of the revised value calculation to Phillips 66 pursuant to the first sentence of this paragraph (iv), and the Phillips 66 Actuary and COP Actuary shall use good faith efforts to reconcile any such difference. If the Phillips 66 Actuary and the COP Actuary fail to reconcile such differences, the Phillips 66 Actuary and the COP Actuary shall jointly designate a third, independent actuary whose calculation of the value, as of the Distribution Date, of the Assets to be transferred to the Phillips 66 Pension Plan shall be final and binding; provided, that, such calculation must be performed within sixty (60) days following designation of such third actuary and in accordance with the assumptions and valuation methodology set forth on Schedule 5.2(b) attached hereto; and provided, further, that such value shall be between the value determined by the Phillips 66 Actuary and the Revised Pension Plan Transfer Amount or equal to either such value. COP and Phillips 66 shall each pay one-half of the costs incurred in connection with the retention of such independent actuary. The final, verified value, as of the Distribution Date, of the Assets to be transferred to the Phillips 66 Pension Plan as determined in accordance with this Section 5.2(b)(iv) shall be referred to herein as the Final Pension Plan Transfer Amount.
(v) Within forty-five (45) days (or such later time as mutually agreed by the Parties) of the determination of the Final Pension Plan Transfer Amount, COP shall cause the COP Pension Plan to transfer to the Phillips 66 Pension Plan (the date of such transfer, the Final Transfer Date) an amount (as determined by COP in its discretion, in kind, in cash, cash-like securities or other cash equivalents), equal to (A) the Final Pension Plan Transfer Amount minus (B) the Initial Transfer Amount (such difference, as adjusted to reflect earnings or losses as described in this Section 5.2(b)(v), the True-Up Amount); provided, that, in the event the True-Up Amount is negative, COP shall not be required to cause any such additional transfer and instead Phillips 66 shall be required to cause a transfer of cash, cash-like securities or other cash equivalents (or, if determined by COP in its discretion, assets in kind) from the Phillips 66 Pension Plan to the COP Pension Plan in an amount equal to the absolute value of the True-Up Amount. The Parties acknowledge that the COP Pension Plans transfer of the True-Up Amount to the Phillips 66 Pension Plan shall be in full settlement and satisfaction of the
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obligations of COP to cause the transfer of, and the COP Pension Plan to transfer, Assets to the Phillips 66 Pension Plan pursuant to this Section 5.2(b)(v). The True-Up Amount, if any, shall be paid from the COP Pension Plan to the Phillips 66 Pension Plan, as determined by COP in its discretion in kind, in cash, cash-like securities or other cash equivalents, and shall be adjusted to reflect earnings or losses during the period from the Distribution Date to the Final Transfer Date. Such earnings or losses shall be determined based on the actual rate of return of the COP Pension Plan for the period commencing on (x) the first day of the calendar month in which the Distribution Date occurs, if the Distribution Date is any date other than the last day of a calendar month, or (y) the first day of the calendar month immediately following the Distribution Date, if the Distribution Date is the last day of a calendar month, and ending on the last calendar day of the month ending immediately prior to the Final Transfer Date. Earnings or losses for the period from such last day of the month to the Final Transfer Date shall be based on the actual rate of return of the COP Pension Plan during the last calendar month ending immediately prior to the Final Transfer Date determined as of the date that is as close as administratively practicable to the Final Transfer Date. In the event that Phillips 66 is obligated to cause the Phillips 66 Pension Plan to reimburse the COP Pension Plan pursuant to this Section 5.2(b)(v), such reimbursement shall be performed in accordance with the same principles set forth herein with respect to the payment of the True-Up Amount. The Parties acknowledge that the Phillips 66 Pension Plans transfer of such reimbursement amount to the COP Pension Plan shall be in full settlement and satisfaction of the obligations of Phillips 66 to cause the transfer of, and the Phillips 66 Pension Plan to transfer, Assets to the COP Pension Plan pursuant to this Section 5.2(b)(v).
(c) Continuation of Elections. As of the Distribution Date, Phillips 66 shall cause the Phillips 66 Pension Plan to recognize and maintain all existing elections, including, but not limited to, beneficiary designations, payments from elections and rights of alternate payees under qualified domestic relations orders with respect to Phillips 66 Pension Plan Participants under the COP Pension Plan.
Section 5.3 Delayed Transfer Employees. As of each Delayed Transfer Employees Transfer Date, Phillips 66 (acting directly or through a member of the Phillips 66 Group) shall cause the Phillips 66 Pension Plan to recognize, to the extent practicable, all existing elections under the COP Pension Plan, including beneficiary designations, payments from elections, and rights of alternate payees under qualified domestic relations orders with respect to each Delayed Transfer Employee who becomes a Phillips 66 Pension Plan Participant, and COP (acting directly or through a member of the COP Group) shall cause the COP Pension Plan to recognize, to the extent practicable, all existing elections under the Phillips 66 Pension Plan, including beneficiary designations, payments from elections, and rights of alternate payees under qualified domestic relations orders with respect to each Delayed Transfer Employee who becomes a COP Pension Plan Participant. As of each Delayed Transfer Employees Transfer Date, COP and Phillips 66 (acting directly or through a member of their respective Groups) shall take such actions as may be necessary to transfer assets and assume liabilities under the COP Pension Plan and the Phillips 66 Pension Plan in accordance with the provisions of Sections 5.1 and 5.2, but applied at the Transfer Date rather than at the Distribution Date.
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ARTICLE VI
U.S. QUALIFIED DEFINED CONTRIBUTION PLANS
Section 6.1 Establishment of the Phillips 66 401(k) Plan. As of the Effective Time, Phillips 66 shall, or shall cause another Phillips 66 Entity to, establish a defined contribution plan and trust for the benefit of Phillips 66 Group Employees (the Phillips 66 401(k) Plan). Phillips 66 shall be responsible for taking all necessary, reasonable, and appropriate action to establish, maintain, and administer the Phillips 66 401(k) Plan so that it is qualified under Section 401(a) of the Code and that the related trust thereunder is exempt under Section 501(a) of the Code. Phillips 66 (acting directly or through its Affiliates) shall be responsible for any and all Liabilities and other obligations with respect to the Phillips 66 401(k) Plan.
Section 6.2 Transfer of COP 401(k) Plan Assets. Not later than thirty (30) days following the Distribution Date (or such later time as mutually agreed by the Parties), COP shall cause the accounts (including any outstanding loan balances) in the COP 401(k) Plan attributable to Phillips 66 Group Employees who will participate in the Phillips 66 401(k) Plan (the Phillips 66 401(k) Plan Beneficiaries) and all of the Assets in the COP 401(k) Plan related thereto to be transferred in-kind to the Phillips 66 401(k) Plan, and Phillips 66 shall cause the Phillips 66 401(k) Plan to accept such transfer of accounts and underlying Assets and, effective as of the date of such transfer, to assume and to fully perform, pay, and discharge, all obligations of the COP 401(k) Plan relating to the accounts of the Phillips 66 401(k) Plan Beneficiaries (to the extent the Assets related to those accounts are actually transferred from the COP 401(k) Plan to the Phillips 66 401(k) Plan) as of the Distribution Date. The transfer of Assets shall be conducted in accordance with Section 414(l) of the Code, Treasury Regulation Section 1.414(1)-1, and Section 208 of ERISA.
Section 6.3 Treatment of Phillips 66 Common Stock and COP Common Stock .
(a) Phillips 66 Common Stock Fund; Phillips 66 Common Stock Held in COP 401(k) Plan Accounts. The Phillips 66 401(k) Plan will provide, effective as of the Effective Time: (i) for the establishment of a Phillips 66 Common Stock fund; (ii) that such Phillips 66 Common Stock fund shall receive a transfer of and hold all shares of Phillips 66 Common Stock distributed in connection with the Distribution in respect of COP Common Stock held in COP 401(k) Plan accounts of Phillips 66 401(k) Plan Beneficiaries; and (iii) that, following the Effective Time, contributions made by or on behalf of such Phillips 66 401(k) Plan Beneficiaries may be allocated to the Phillips 66 Common Stock fund. Shares of Phillips 66 Common Stock distributed in connection with the Distribution in respect of shares of COP Common Stock held in COP 401(k) Plan accounts of COP Group Employees or Former COP Group Employees who participate in the COP 401(k) Plan (the COP 401(k) Plan Beneficiaries) shall be deposited in a Phillips 66 Common Stock fund under the COP 401(k) Plan, and COP 401(k) Plan Beneficiaries will be prohibited from increasing their holdings in such Phillips 66 Common Stock fund under the COP 401(k) Plan and may elect to liquidate their holdings in such Phillips 66 Common Stock fund and invest those monies in any other investment fund offered under the COP 401(k) Plan. Any shares of Phillips 66 Common Stock held in COP 401(k) Plan accounts of Phillips 66 Group Employees shall be transferred in kind to the trust underlying the Phillips 66 401(k) Plan pursuant to Section 6.2 of this Agreement.
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(b) COP Common Stock in Phillips 66 401(k) Plan Accounts. Without limiting the generality of the provisions of Section 6.2, shares of COP Common Stock held in COP 401(k) Plan accounts of Phillips 66 401(k) Plan Beneficiaries prior to the Effective Time shall be transferred in kind to a COP Common Stock Fund under the Phillips 66 401(k) Plan pursuant to Section 6.2 of this Agreement. Phillips 66 401(k) Plan Beneficiaries will be prohibited from increasing their holdings in COP Common Stock under such COP Common Stock Fund and may elect to liquidate their holdings in such COP Common Stock Fund and invest those monies in any other investment fund offered under the Phillips 66 401(k) Plan.
Section 6.4 Continuation of Elections. As of the Distribution Date, Phillips 66 (acting directly or through members of the Phillips 66 Group) shall cause the Phillips 66 401(k) Plan to recognize and maintain all COP 401(k) Plan elections, including, but not limited to, deferral, investment, and payment form elections, beneficiary designations, and the rights of alternate payees under qualified domestic relations orders with respect to Phillips 66 Group Employees to the extent such election or designation is available under the Phillips 66 401(k) Plan.
Section 6.5 Delayed Transfer Employees. As of each Delayed Transfer Employees Transfer Date, Phillips 66 (acting directly or through a member of the Phillips 66 Group) shall cause the Phillips 66 401(k) Plan to recognize, to the extent practicable, all existing elections under the COP 401(k) Plan, including beneficiary designations, payments from elections, and rights of alternate payees under qualified domestic relations orders with respect to each Delayed Transfer Employee who becomes a Phillips 66 401(k) Plan Participant, and COP (acting directly or through a member of the COP Group) shall cause the COP 401(k) Plan to recognize, to the extent practicable, all existing elections under the Phillips 66 401(k) Plan, including beneficiary designations, payments from elections, and rights of alternate payees under qualified domestic relations orders with respect to each Delayed Transfer Employee who becomes a COP 401(k) Plan Participant. As of each Delayed Transfer Employees Transfer Date, COP and Phillips 66 (acting directly or through a member of their respective Groups) shall take such actions as may be necessary to transfer assets and assume liabilities under the COP 401(k) Plan and the Phillips 66 401(k) Plan in accordance with the provisions of Sections 6.2 and 6.3, but applied at the Transfer Date rather than at the Distribution Date.
Section 6.6 Tax Qualified Status. Phillips 66 will take all steps and make any necessary filings with the IRS to establish and maintain the Phillips 66 401(k) Plan so that it is qualified under Section 401(a) of the Code and the related trust is tax-exempt under Section 501(a) of the Code, including seeking and obtaining a favorable determination letter from the IRS as to such qualification. Furthermore, no later than thirty (30) days prior to the Distribution Date, COP and Phillips 66 (each acting directly or through their respective Affiliates) shall, to the extent necessary, file IRS Form 5310-A regarding the transfer of Assets and Liabilities from the COP 401(k) Plan to the Phillips 66 401(k) Plan as discussed in this Article VI.
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ARTICLE VII
NONQUALIFIED COMPENSATION PLANS
Section 7.1 Excess Benefit Plans.
(a) Establishing Phillips 66 SERP. On or prior to the Effective Time, Phillips 66 shall, or shall cause another Phillips 66 Entity to, establish and adopt an excess benefit plan (the Phillips 66 SERP) to provide each Phillips 66 Group Employee who was a participant in the COP SERP as of immediately prior to the Effective Time (the Phillips 66 SERP Beneficiaries) benefits in respect of service and compensation following the Effective Time substantially similar to those accrued with respect to such person under the COP SERP as of immediately prior to the Effective Time. Each member of the Phillips 66 Group shall cease to be a participating employer in the COP SERP, and the Phillips 66 Group Employees shall no longer participate in the COP SERP, effective as of the Effective Time. Notwithstanding the above, with respect to any Delayed Transfer Employee whose employment is transferred from a COP Entity to a Phillips 66 Entity on a Transfer Date and who was a participant in the COP SERP (and each alternate payee or beneficiary of such person) as of immediately prior to such Transfer Date, the Phillips 66 SERP shall provide benefits substantially similar to those accrued with respect to such person under the COP SERP as of immediately prior to such Delayed Transfer Employees transfer. The Parties agree that for purposes of the COP SERP the employment of a Phillips 66 SERP Beneficiary shall not be considered to have terminated as a result of the Distribution or the transfer of employment from COP (or a COP Entity) to Phillips 66 (or a Phillips 66 Entity), and such employment shall only be considered to terminate for purposes of the Phillips 66 SERP when the employment of such Phillips 66 SERP Beneficiary with the Phillips 66 Group terminates in accordance with the terms of the Phillips 66 SERP and applicable Laws.
(b) Liability and Responsibility. The Liabilities in respect of Phillips 66 SERP Beneficiaries under the COP SERP shall be assumed by the member of the Phillips 66 Group which sponsors the Phillips 66 SERP, effective as of the Effective Time; provided that such Liabilities in respect of each such Phillips 66 SERP Beneficiary who is a Delayed Transfer Employee shall be assumed by such member of the Phillips 66 Group effective as of close of business on the applicable Transfer Date. Phillips 66 shall have sole responsibility for the administration of the Phillips 66 SERP and the payment of benefits thereunder to or on behalf of Phillips 66 Group Employees, and no member of the COP Group shall have any liability or responsibility therefor. COP shall have sole responsibility for the administration of the COP SERP and the payment of benefits thereunder to or on behalf of COP Group Employees and Former COP Group Employees, and no member of the Phillips 66 Group shall have any liability or responsibility therefor.
Section 7.2 Key Employee Deferred Compensation Plans.
(a) Establishing Phillips 66 Deferred Compensation Plans. On or prior to the Effective Time, Phillips 66 shall, or shall cause another Phillips 66 Entity to, establish and adopt deferred compensation plans for its key employees and directors (the Phillips 66 Deferred Compensation Plan) to provide each Phillips 66 Group Employee or Phillips 66 Director who was a participant in the COP Deferred Compensation Plans as of immediately
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prior to the Effective Time (the Phillips 66 Deferred Compensation Beneficiaries) benefits in respect of service and compensation following the Effective Time substantially similar to those accrued with respect to such person under the COP Deferred Compensation Plans as of immediately prior to the Effective Time. As of the Effective Time, the Phillips 66 Group Employees shall no longer participate in the COP Deferred Compensation Plans. Notwithstanding the above, with respect to any Delayed Transfer Employee whose employment is transferred from a COP Entity to a Phillips 66 Entity on a Transfer Date and who was a participant in a COP Deferred Compensation Plan as of immediately prior to such Transfer Date, the Phillips 66 Deferred Compensation Plans shall provide benefits substantially similar to those available to such person under the COP Deferred Compensation Plans as of immediately prior to such Delayed Transfer Employees transfer. The Parties agree that for purposes of the COP Deferred Compensation Plans the employment of a Phillips 66 Deferred Compensation Beneficiary shall not be considered to have terminated as a result of the Distribution or the transfer of employment from COP (or a COP Entity) to Phillips 66 (or a Phillips 66 Entity), and such employment shall only be considered to terminate for purposes of the Phillips 66 Deferred Compensation Plans when the employment of such Phillips 66 Deferred Compensation Beneficiary with the Phillips 66 Group terminates in accordance with the terms of the Phillips 66 Deferred Compensation Plans and applicable Laws.
(b) Liability and Responsibility. The Liabilities in respect of Phillips 66 Deferred Compensation Beneficiaries under the COP Deferred Compensation Plans shall be assumed by the member of the Phillips 66 Group which sponsors the applicable Phillips 66 Deferred Compensation Plan, effective as of the Effective Time; provided that such Liabilities in respect of each such Phillips 66 Deferred Compensation Beneficiary who is a Delayed Transfer Employee shall be assumed by such member of the Phillips 66 Group effective as of close of business on the applicable Transfer Date. Phillips 66 shall have sole responsibility for the administration of the Phillips 66 Deferred Compensation Plans and the payment of benefits thereunder to or on behalf of Phillips 66 Group Employees, and no member of the COP Group shall have any liability or responsibility therefor. COP shall have sole responsibility for the administration of the COP Deferred Compensation Plans and the payment of benefits thereunder to or on behalf of COP Group Employees and Former COP Group Employees, and no member of the Phillips 66 Group shall have any liability or responsibility therefor.
Section 7.3 Treatment of Phantom Shares in Deferred Compensation Plans. Each cash-settled phantom share relating to COP Common Stock held in the COP Deferred Compensation Plans (or in any similar nonqualified deferred compensation arrangement maintained by a COP Entity) or the Phillips 66 Deferred Compensation Plans (a COP Phantom Share) on the Distribution Date shall be converted into, upon the Distribution being made, an adjusted COP Phantom Share and such number of phantom shares relating to Phillips 66 Common Stock (the Phillips 66 Phantom Shares) as determined by applying the Distribution Ratio in the same way as it is applied to shares of COP Common Stock on the Distribution Date. The adjusted COP Phantom Shares and the Phillips 66 Phantom Shares held in the COP Deferred Compensation Plans (or in any similar nonqualified deferred compensation arrangement maintained by a COP Entity) and the Phillips 66 Deferred Compensation Plan shall continue to
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be subject to the same terms and conditions as COP Phantom Shares immediately prior to the Effective Time.
Section 7.4 Grantor Trusts. On or prior to the Effective Time, Phillips 66 shall, or shall cause another Phillips 66 Entity to, adopt a grantor trust in a form that is substantially comparable to the COP Grantor Trust as in effect immediately prior to the Effective Time. In connection with the assumption of the Liabilities under the COP SERP and the COP Deferred Compensation Plans in respect of Phillips 66 Group Employees, COP shall (or shall cause a COP Entity to), as soon as reasonably practicable after the Effective Time in respect of the Phillips 66 SERP and Phillips 66 Deferred Compensation Plans, transfer Assets in an amount equal to the funded percentage of such Liabilities (as determined by the COP Actuary) as of the Effective Time to such grantor trust as of the Effective Time.
ARTICLE VIII
WELFARE PLANS
Section 8.1 Establishment of Phillips 66 Welfare Plans. On or prior to the Effective Time, Phillips 66 shall, or shall cause another Phillips 66 Entity to, establish and adopt Phillips 66 Welfare Plans which will provide welfare benefits to each Phillips 66 Group Employee and Delayed Transfer Employee who is transferred from the COP Group to the Phillips 66 Group who is a participant in any of the COP Welfare Plans (and their eligible spouses and dependents, as the case may be) (collectively, the Phillips 66 Welfare Plan Participants) under terms and conditions that are substantially similar to the COP Welfare Plans. Coverage and benefits under the Phillips 66 Welfare Plans shall then be provided to the Phillips 66 Welfare Plan Participants on an uninterrupted basis under the newly established Phillips 66 Welfare Plans which shall contain substantially the same benefit provisions as in effect under the corresponding COP Welfare Plans immediately prior to the Effective Time; provided, however, that with respect to Delayed Transfer Employees transferred from the COP Group to the Phillips 66 Group, such coverage and benefits shall begin immediately after the Transfer Date. Phillips 66 Welfare Plan Participants shall cease to be eligible for coverage under the COP Welfare Plans (i) in the case of Phillips 66 Welfare Plan Participants who are not Delayed Transfer Employees described in clause (ii) of this sentence, at the Effective Time, and (ii) in the case of Delayed Transfer Employees who are transferred from the COP Group to the Phillips 66 Group, upon their transfer to the Phillips 66 Group. For the avoidance of doubt, Phillips 66 Welfare Plan Participants shall not participate in any COP Welfare Plans after the time set forth in the immediately preceding sentence, and COP Group Employees and Former COP Group Employees shall not participate in any Phillips 66 Welfare Plans at any time.
Section 8.2 Transitional Matters Under Phillips 66 Welfare Plans.
(a) Treatment of Claims Incurred.
(i) Liability for Claims. With respect to unpaid covered claims incurred on or prior to the last day of the month in which the Distribution occurs by any Phillips 66 Welfare Plan Participant under any COP Welfare Plans, including claims that are self-insured and claims that are fully insured through third-party insurance, COP shall retain and be responsible for the payment for such claims or shall cause such COP
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Welfare Plans to fully perform, pay and discharge all such claims, as the case may be. No Phillips 66 Entity shall be responsible for any Liability with respect to any such claims.
(ii) Claims Incurred. For purposes of this Section 8.2(a), a claim or expense is deemed to be incurred (A) with respect to medical (including continuous hospitalization), dental, vision and/or prescription drug benefits, upon the rendering of health services giving rise to such claim or expense; (B) with respect to life insurance, accidental death and dismemberment and business travel accident insurance, upon the occurrence of the event giving rise to such claim or expense; and (C) with respect to long-term disability benefits, upon the date of an individuals disability, as determined by the disability benefit insurance carrier or claim administrator, giving rise to such claim or expense.
(b) Credit for Deductibles and Other Limits. With respect to each Phillips 66 Welfare Plan Participant, the Phillips 66 Welfare Plans will give credit for the plan year in which the Distribution Date occurs (in the case of Delayed Transfer Employees transferred from the COP Group to the Phillips 66 Group, for the plan year in which the applicable Transfer Date occurs) for any amount paid, number of services obtained or provider visits by such Phillips 66 Welfare Plan Participant toward deductibles, out-of-pocket maximums, limits on number of services or visits, or other similar limitations to the extent such amounts are taken into account under the comparable COP Welfare Plan. For purposes of any life-time maximum benefit limit payable to a Phillips 66 Welfare Plan Participant under any Phillips 66 Welfare Plan, the Phillips 66 Welfare Plans will recognize any expenses paid or reimbursed by a COP Welfare Plan with respect to such participant prior to the Effective Time (in the case of Delayed Transfer Employees transferred from the COP Group to the Phillips 66 Group, prior to the Transfer Date) to the same extent such expense payments or reimbursements would be recognized in respect of an active plan participant under the applicable COP Welfare Plan.
(c) COBRA. At and after the Effective Time, Phillips 66 shall assume all requirements under COBRA with respect to all Phillips 66 Group Employees (and their qualifying beneficiaries) who, as of the day prior to the Distribution Date, were covered under a COP Benefit Plan pursuant to COBRA or who have a COBRA qualifying event (as defined in Section 4980B of the Code) prior to the Distribution Date. Upon and after their transfer to the Phillips 66 Group, Phillips 66 shall assume and satisfy all requirements under COBRA with respect to any Delayed Transfer Employees who are transferred from the COP Group to the Phillips 66 Group who have a COBRA qualifying event on or after the applicable Transfer Date for the Delayed Transfer Employee and their qualified beneficiaries.
(d) Employees on Leave. As of the Effective Time, Phillips 66 shall assume and satisfy all Liabilities with respect to any Phillips 66 Group Employee who is as of the Effective Time, on vacation or other approved leave of absence (including leave under FMLA or corresponding state Law, disability, military leave and other approved leave, including Liabilities for salary continuation, paid leave or continuing Benefit Plans). For avoidance of doubt, effective as of their transfer to the Phillips 66 Group, Phillips 66 shall assume and satisfy all Liabilities with respect to any Delayed Transfer Employee transferred from the COP Group to the Phillips 66 Group who is, as of the applicable Transfer Date, on vacation or other
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approved leave of absence (including leave under FMLA or corresponding state Law, disability, military leave and other approved leave, including Liabilities for salary continuation, paid leave or continuing Benefit Plans).
Section 8.3 Continuity of Benefits, Benefit Elections and Beneficiary Designations.
(a) Benefit Elections and Designations. As of the first day of the month after the month in which the Distribution occurs (or such other date provided for under Section 8.3(b)), Phillips 66 shall cause the Phillips 66 Welfare Plans to recognize and give effect to all elections and designations (including all coverage and contribution elections and beneficiary designations) made by each Phillips 66 Welfare Plan Participants under, or with respect to, the corresponding COP Welfare Plan for the plan year in which the Distribution occurs. Notwithstanding the foregoing, nothing in this Section 8.3(a) will prohibit Phillips 66 from soliciting or causing the solicitation of new election forms or beneficiary designations from Phillips 66 Welfare Plan Participants to be effective under the Phillips 66 Welfare Plan as of the first day of the month after the month in which the Distribution occurs.
(b) Additional Details Regarding Flexible Spending Accounts. Pursuant to Section 8.1, at or prior to the Effective Time, Phillips 66 shall, or shall cause another Phillips 66 Entity to, establish and adopt Phillips 66 Welfare Plans which will provide health care flexible spending account or dependent care flexible spending account benefits to Phillips 66 Welfare Plan Participants. To the extent any Phillips 66 Welfare Plan provides or constitutes a health care flexible spending account or dependent care flexible spending account (each a Phillips 66 FSA), such Phillips 66 Welfare Plan shall be effective as of the Effective Time.
(i) It is the intention of the Parties that all activity under a Phillips 66 Welfare Plan Participants flexible spending account with COP for the plan year in which the Distribution Date occurs (in the case of Delayed Transfer Employees transferred from the COP Group to the Phillips 66 Group, for the plan year in which the applicable Transfer Date occurs) be treated instead as activity under the corresponding Phillips 66 FSA. Accordingly, (i) any period of participation by a Phillips 66 Welfare Plan Participant in a COP flexible spending account during the plan year in which the Distribution Date occurs (in the case of Delayed Transfer Employees transferred from the COP Group to the Phillips 66 Group, for the plan year in which the applicable Transfer Date occurs) (the FSA Participation Period) will be deemed a period when the Phillips 66 Welfare Plan Participant participated in the corresponding Phillips 66 FSA; (ii) all expenses incurred during the FSA Participation Period will be deemed incurred while the Phillips 66 Welfare Plan Participants coverage was in effect under the corresponding Phillips 66 FSA; and (iii) all elections and reimbursements made with respect to an FSA Participation Period under a COP flexible spending account will be deemed to have been made with respect to the corresponding Phillips 66 FSA.
(ii) If the aggregate reimbursement payouts made to Phillips 66 Welfare Plan Participants prior to the Effective Time (in the case of Delayed Transfer Employees transferred from the COP Group to the Phillips 66 Group, prior to their transfer to the Phillips 66 Group) from the applicable COP Welfare Plan flexible spending accounts during the plan year in which the Distribution occurs (in the case of
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Delayed Transfer Employees transferred from the COP Group to the Phillips 66 Group, for the plan year in which the applicable Transfer Date occurs) are less than the aggregate accumulated contributions to such accounts made by such Phillips 66 Welfare Plan Participants prior to the Effective Time (in the case of Delayed Transfer Employees, prior to their transfer to the Phillips 66 Group) for such plan year, COP shall cause an amount equal to the amount by which such contributions are in excess of such reimbursement payouts to be transferred to Phillips 66 (or a Phillips 66 Entity designated by Phillips 66) by wire transfer of immediately available funds as soon as practicable, but in no event later than 45 days, following the Effective Time (in the case of Delayed Transfer Employees transferred from the COP Group to the Phillips 66 Group, in no event later than 45 days, following their transfer to the Phillips 66 Group).
(iii) If the aggregate reimbursement payouts made to Phillips 66 Welfare Plan Participants prior to the Effective Time (in the case of Delayed Transfer Employees transferred from the COP Group to the Phillips 66 Group, prior to their transfer to the Phillips 66 Group) from the applicable COP Welfare Plan flexible spending accounts during the plan year in which the Distribution occurs (in the case of Delayed Transfer Employees transferred from the COP Group to the Phillips 66 Group, for the plan year in which the applicable Transfer Date occurs) exceed the aggregate accumulated contributions to such accounts made by the Phillips 66 Welfare Plan Participants prior to the Effective Time (in the case of Delayed Transfer Employees, prior to their transfer to the Phillips 66 Group) for such plan year, Phillips 66 shall cause an amount equal to the amount by which such reimbursement payouts are in excess of such contributions to be transferred to COP (or a COP Group Entity designated by COP) by wire transfer of immediately available funds as soon as practicable, but in no event later than 45 days, following the Effective Time (in the case of Delayed Transfer Employees transferred from the COP Group to the Phillips 66 Group, in no event later than 45 days, following their transfer to the Phillips 66 Group).
(iv) Notwithstanding anything in this Section 8.3(b), at and after the Effective Time, the Phillips 66 Group shall assume, and cause the Phillips 66 Welfare Plans to be solely responsible for, all claims by Phillips 66 Welfare Plan Participants under the applicable COP Welfare Plan flexible spending accounts that were incurred in the plan year in which the Distribution occurs, whether incurred prior to, on, or after the Effective Time, that have not been paid in full as of the Effective Time.
(c) Additional Details Regarding Health Savings Accounts. Pursuant to Section 8.1, on or prior to the Effective Time, Phillips 66 shall, or shall cause another Phillips 66 Entity to, establish and adopt Phillips 66 Welfare Plans which will provide health savings account benefits to Phillips 66 Welfare Plan Participants. To the extent any Phillips 66 Welfare Plan provides or constitutes a health savings account (each a Phillips 66 HSA), such Phillips 66 Welfare Plan shall be effective as of the Effective Time. It is the intention of the Parties that all activity under a Phillips 66 Welfare Plan Participants health savings account with COP for the year in which the Distribution occurs (in the case of Delayed Transfer Employees transferred from the COP Group to the Phillips 66 Group, for the plan year in which the applicable Transfer Date occurs) be treated instead as activity under the corresponding Phillips 66 HSA. Accordingly, (i) any period of participation by a Phillips 66 Welfare Plan Participant
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in a COP health savings account during the year in which the Distribution occurs (in the case of Delayed Transfer Employees transferred from the COP Group to the Phillips 66 Group, for the plan year in which the applicable Transfer Date occurs) (the HSA Participation Period) will be deemed a period when the Phillips 66 Welfare Plan Participant participated in the corresponding Phillips 66 HSA; (ii) all expenses incurred during the HSA Participation Period will be deemed incurred while the Phillips 66 Welfare Plan Participants coverage was in effect under the corresponding Phillips 66 HSA; and (iii) all elections and reimbursements made with respect to an HSA Participation Period under a COP health savings account will be deemed to have been made with respect to the corresponding Phillips 66 HSA.
(d) Employer Non-elective Contributions. As of immediately after the Effective Time, Phillips 66 shall cause any Phillips 66 Welfare Plan that constitutes a cafeteria plan under Section 125 of the Code to recognize and give effect to all non-elective employer contributions credited toward coverage of a Phillips 66 Welfare Plan Participant under the corresponding COP Welfare Plan that is a cafeteria plan under Section 125 of the Code for the applicable plan year.
(e) Waiver of Conditions or Restrictions. Unless prohibited by applicable Law or collective bargaining agreement, the Phillips 66 Welfare Plans will waive all limitations as to preexisting conditions, exclusions, service conditions, waiting period limitations or evidence of insurability requirements that would otherwise be applicable to the Phillips 66 Welfare Plan Participant following the Effective Time (in the case of Delayed Transfer Employees transferred from the COP Group to the Phillips 66 Group, following their transfer to the Phillips 66 Group) to the extent that such Employee had previously satisfied such limitation under the corresponding COP Welfare Plan.
Section 8.4 Delayed Transfer Employees from Phillips 66 Group to COP Group. With regard to a Delayed Transfer Employee who is transferred from Phillips 66 (or a member of the Phillips 66 Group) to COP (or a member of the COP Group), the provisions of this Article VIII shall be applied as of the Transfer Date to place the Delayed Transfer Employee in the applicable COP Welfare Plans taking into account any circumstances or activity that had occurred while the Delayed Transfer Employee was with Phillips 66 (or a member of the Phillips 66 Group), in the same manner as described in this Article VIII with regard to the transfer of a Delayed Transfer Employee who is transferred from the COP Group to the Phillips 66 Group.
Section 8.5 Insurance Contracts. To the extent any COP Welfare Plan is funded through the purchase of an insurance contract or is subject to any stop loss contract, COP and Phillips 66 will cooperate and use their commercially reasonable efforts to replicate such insurance contracts for Phillips 66 (except to the extent changes are required under applicable state insurance Laws or filings by the respective insurers) and to maintain any pricing discounts or other preferential terms for both COP and Phillips 66 for a reasonable term. Neither Party shall be liable for failure to obtain such insurance contracts, pricing discounts, or other preferential terms for the other Party. Each Party shall be responsible for any additional premiums, charges, or administrative fees that such Party may incur pursuant to this Section 8.5.
Section 8.6 Third-Party Vendors. Except as provided below, to the extent any COP Welfare Plan is administered by a third-party vendor, COP and Phillips 66 will cooperate and use
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their commercially reasonable efforts to replicate any contract with such third-party vendor for Phillips 66 and to maintain any pricing discounts or other preferential terms for both COP and Phillips 66 for a reasonable term. Neither Party shall be liable for failure to obtain such pricing discounts or other preferential terms for the other Party. Each Party shall be responsible for any additional premiums, charges, or administrative fees that such Party may incur pursuant to this Section 8.6.
Section 8.7 Retiree Welfare Plans.
(a) COP Retiree Welfare Plans. Notwithstanding anything herein to the contrary (other than Section 13.1), in respect of any COP Welfare Plan that provides retiree medical or other post-retirement benefits to eligible Employees: (i) no Phillips 66 Group Employee shall be eligible to receive such retiree benefits under any such COP Welfare Plan at or at any time after the Effective Time; provided, however, that any Phillips 66 Group Employee who, at the Effective Time, would have been eligible to receive such retiree medical benefits from any such COP Welfare Plan had that Phillips 66 Group Employee retired on or before the Effective Time, shall remain eligible to receive such retiree medical benefits under any such applicable COP Welfare Plan, considering the service and age points credited to the Effective Time but not any service or age points during time employed as a Phillips 66 Group Employee, and further shall not be eligible to receive such retiree medical benefits from any applicable COP Welfare Plan if that Phillips 66 Group Employee is receiving such retiree medical benefits from a Phillips 66 Welfare Plan; and (ii) COP (or one or more members of the COP Group designated by COP) shall retain sole responsibility for the Liabilities associated with any COP Welfare Plan providing retiree medical or other post-retirement benefits to eligible employees or former employees, and no Phillips 66 Entity shall have any Liability therefor.
(b) Phillips 66 Retiree Welfare Plans. Pursuant to Section 8.1, at or as soon as practicable after the Effective Time, Phillips 66 shall, or shall cause another Phillips 66 Entity to, establish and adopt Phillips 66 Welfare Plans that will provide retiree medical benefits to eligible Phillips 66 Welfare Plan Participants at and after the Effective Time.
ARTICLE IX
WORKERS COMPENSATION AND UNEMPLOYMENT COMPENSATION
Section 9.1 Phillips 66 Workers and Unemployment Compensation. Effective as of the Effective Time, the Phillips 66 Group Subsidiary employing each Phillips 66 Group Employee shall have (and, to the extent it has not previously had such obligations, such Phillips 66 Group Subsidiary shall assume) the obligations for all claims and Liabilities relating to workers compensation and unemployment compensation benefits for all Phillips 66 Group Employees employed by that Subsidiary. Effective as of the applicable Transfer Date, the Phillips 66 Group Subsidiary employing the Delayed Transfer Employee shall have (and, to the extent it has not previously had such obligations, such Phillips 66 Group Subsidiary shall assume) the obligations for all claims and Liabilities relating to workers compensation and unemployment compensation benefits for all Delayed Transfer Employees transferred from the COP Group to that Phillips 66 Group Subsidiary. Effective as of the Effective Time, Phillips 66, acting through the Phillips 66 Group Subsidiary employing each Phillips 66 Group Employee,
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will be responsible for (a) obtaining workers compensation insurance, including providing all collateral required by the insurance carriers and (b) establishing new or transferred unemployment insurance employer accounts, policies and claims handling contracts with the applicable government agencies. To the extent that such insurance coverage cannot be either assigned to or obtained by Phillips 66 or a Phillips 66 Group Subsidiary, in respect of claims and Liabilities otherwise to be assumed by Phillips 66 or a Phillips 66 Group Subsidiary pursuant to this Section 9.1, COP shall remain primarily liable for such claims and Liabilities, but Phillips 66 shall indemnify and hold harmless COP for any such claims and Liabilities. If the preceding sentence applies, then at one or more mutually agreed upon dates, COPs Actuary will determine the present value of such claims and Liabilities and Phillips 66 shall reimburse COP for that amount.
Section 9.2 COP Workers and Unemployment Compensation. Effective as of the Effective Time, the COP Group Subsidiary employing each COP Group Employee shall have (and, to the extent it has not previously had such obligations, such COP Group Subsidiary shall assume) the obligations for all claims and Liabilities relating to workers compensation and unemployment compensation benefits for all COP Group Employees. Effective as of the applicable Transfer Date, the COP Group Subsidiary employing the Delayed Transfer Employee shall have (and, to the extent it has not previously had such obligations, such COP Group Subsidiary shall assume) the obligations for all claims and Liabilities relating to workers compensation and unemployment compensation benefits for all Delayed Transfer Employees transferred from the Phillips 66 Group to that COP Group Subsidiary. Effective as of the Effective Time, the COP Group Subsidiary formerly employing each COP Group Employee shall have (and, to the extent it has not previously had such obligations, such COP Group Subsidiary shall assume) the obligations for all claims and Liabilities relating to workers compensation and unemployment compensation benefits for all Former COP Group Employees.
Section 9.3 Assignment of Contribution Rights. COP will transfer and assign (or cause another member of the COP Group to transfer and assign) to a member of the Phillips 66 Group all rights to seek contribution or damages from any applicable third party (such as a third party who aggravates an injury to a worker who makes a workers compensation claim) with respect to any workers compensation claim for which Phillips 66 is responsible for pursuant to this Article IX. Phillips 66 will transfer and assign (or cause another member of the Phillips 66 Group to transfer and assign) to a member of the COP Group all rights to seek contribution or damages from any applicable third party (such as a third party who aggravates an injury to a worker who makes a workers compensation claim) with respect to any workers compensation claim for which COP is responsible for pursuant to this Article IX.
Section 9.4 Collateral. On and after the Distribution Date, Phillips 66 (acting directly or through a member of the Phillips 66 Group) shall be responsible for providing all collateral required by insurance carriers in connection with workers compensation claims for which Liability is allocated to the Phillips 66 Group under this Article IX. COP (acting directly or through a member of the COP Group) shall be responsible for providing all collateral required by insurance carriers in connection with workers compensation claims for which Liability is allocated to the COP Group under this Article IX.
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Section 9.5 Cooperation. Phillips 66 and COP shall use commercially reasonable efforts to provide that workers compensation and unemployment insurance costs are not adversely affected for either of them by reason of the Distribution.
ARTICLE X
SEVERANCE
Section 10.1 Severance. COP shall have no Liability or obligation under any COP severance plan or policy with respect to Phillips 66 Group Employees. As of the applicable Transfer Date, COP shall have no Liability or obligation under any COP severance plan or policy with respect to Delayed Transfer Employees transferred from the COP Group to the Phillips 66 Group. By no later than the Effective Time, Phillips 66 shall, or shall cause another Phillips 66 Entity to, adopt severance plans under which Phillips 66 Group Employees who, immediately prior to the Effective Time, and Delayed Transfer Employees transferred from the COP Group to the Phillips 66 Group who, immediately prior to the applicable Transfer Date, are participants in any COP severance plan or policy, including the ConocoPhillips Severance Pay Plan, the ConocoPhillips Executive Severance Plan, the ConocoPhillips Key Employee Change in Control Severance Plan, (the COP Severance Plans), shall be eligible to participate immediately following the Effective Time (in the case of Phillips 66 Group Employees who are not Delayed Transfer Employees) or the applicable Transfer Date (in the case of Delayed Transfer Employees transferred from the COP Group to the Phillips 66 Group). Such Phillips 66 severance plan(s) or policies will provide terms and conditions for Phillips 66 Group Employees who are severed from the Phillips 66 Group following the Effective Time or Transfer Date, as the case may be, that are substantially similar to the terms and conditions provided under the applicable COP Severance Plans in which such Phillips 66 Group Employees participated immediately prior to the Effective Time or such Transfer Date. For the avoidance of doubt, the Distribution and the assignment, transfer or continuation of the employment of Phillips 66 Group Employees contemplated by Section 3.1 shall not be deemed a severance of employment for purposes of this Agreement and any COP Severance Plans or policies, and effective as of the Effective Time, Phillips 66 Employees shall not be eligible to receive any severance or other benefits under any COP Severance Plans or policies.
ARTICLE XI
BENEFIT ARRANGEMENTS AND OTHER MATTERS
Section 11.1 Termination of Participation. Except as otherwise provided under this Agreement, (i) effective as of immediately after the Effective Time, Phillips 66 Group Employees shall not be eligible to participate in any COP Benefit Plan, and (ii) effective as of immediately after their transfer to the Phillips 66 Group, Delayed Transfer Employees transferred from the COP Group to the Phillips 66 Group shall not be eligible to participate in any COP Benefit Plan.
Section 11.2 Accrued Time Off. Phillips 66 shall recognize and assume all Liability for all unused vacation, holiday, sick leave, flex days, personal days and paid-time off and other time-off benefits with respect to (i) Phillips 66 Group Employees which accrued prior to the Effective Time and (ii) Delayed Transfer Employees transferred from the COP Group to the
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Phillips 66 Group which accrued prior to the applicable Transfer Date, and Phillips 66 shall credit each Phillips 66 Group Employee and Delayed Transfer Employee with such accrual.
Section 11.3 Leaves of Absence. Phillips 66 will continue to apply the appropriate leave of absence policies applicable to inactive Phillips 66 Group Employees who are on an approved leave of absence as of the Effective Time and Delayed Transferred Employees transferred from the COP Group to the Phillips 66 Group as of their Transfer Date. Leaves of absence taken by Phillips 66 Group Employees prior to the Effective Time and such Delayed Transfer Employees prior to their Transfer Date shall be deemed to have been taken as employees of a member of the Phillips 66 Group.
Section 11.4 Collective Bargaining Agreements. The COP Group shall have no further Liability for all collective bargaining agreements, collective agreements, multiemployer plans, pension and welfare plans and arrangements, and trade union or works council agreements entered into with any member of the COP Group, any union, works council, or other body representing only Phillips 66 Group Employees and such agreements, plans, and arrangements shall, to the extent permitted under applicable Law and their respective terms, be assigned from the applicable COP Entity to Phillips 66 (or a Phillips 66 Entity designated by Phillips 66) effective as of the Effective Time.
Section 11.5 Director Programs.
(a) Certain Director Plans. Effective as of the Distribution Date, Phillips 66 shall, or shall cause a Phillips 66 Entity to, establish a plan with terms and conditions substantially comparable to the COP Directors Annual Matching Gift Program.
(b) Certain Director Fees. With respect to any COP Director and Phillips 66 Director, COP shall retain responsibility for the payment of any fees payable in respect of service on the board of directors of COP that are payable but not yet paid as of the Effective Time, and Phillips 66 shall not have any responsibility for any such payments. With respect to any Phillips 66 Director, Phillips 66 shall be responsible for the payment of any fees payable in respect of service on the board of directors of Phillips 66 that are earned at any time beginning at or after the Effective Time, and COP shall not have any responsibility for any such payments. With respect to any COP Director, COP shall be responsible for the payment of any fees payable in respect of service on the board of directors of COP that are earned at any time beginning at or after the Effective Time, and Phillips 66 shall not have any responsibility for any such payments.
Section 11.6 Restrictive Covenants in Employment and Other Agreements. To the fullest extent permitted by the agreements described in this Section 11.6 and applicable Law, COP shall assign, or cause an applicable member of the COP Group to assign, to Phillips 66 or a member of the Phillips 66 Group, as designated by Phillips 66, all agreements containing restrictive covenants (including confidentiality, non-competition and non-solicitation provisions) between a member of the COP Group and a Phillips 66 Group Employee, with such assignment to be effective as of the Effective Time. To the extent that assignment of such agreements is not permitted, effective as of the Effective Time, each member of the Phillips 66 Group shall be considered to be a successor to each member of the COP Group for purposes of, and a third-party
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beneficiary with respect to, all agreements containing restrictive covenants (including confidentiality, non-competition and non-solicitation provisions) between a member of the COP Group and a Phillips 66 Group Employee, such that each member of the Phillips 66 Group shall enjoy all the rights and benefits under such agreements (including rights and benefits as a third-party beneficiary), with respect to the business operations of the Phillips 66 Group; provided, however, that in no event shall COP be permitted to enforce such restrictive covenant agreements against Phillips 66 Group Employees for action taken in their capacity as employees of a member of the Phillips 66 Group. Furthermore, the Parties agree that, with respect to equity awards held by COP Group Employees or Phillips 66 Group Employees which provide for cancellation, forfeiture or similar action in the event of a determination that the holder of an equity award engaged in Detrimental Activities, the entity that does not employ such holder shall enforce the penalties with respect to the Detrimental Activities and treat any equity award that was converted pursuant to the terms of this Agreement in the same manner as a result of such Detrimental Activities as the employing entity.
ARTICLE XII
NON-U.S. EMPLOYEES
Section 12.1 General Principles. Except as explicitly set forth in this Article XII, COP Group Employees and Phillips 66 Group Employees who are resident outside of the United States or otherwise are subject to non-U.S. Law and their related benefits and obligations shall be treated in the same manner as the COP Group Employees and Phillips 66 Group Employees who are resident of the United States are treated. All actions taken with respect to non-U.S. employees in connection with the Distribution will be accomplished in accordance with applicable Law and custom in each of the applicable jurisdictions.
Section 12.2 Treatment of Equity Awards Held by Non-U.S. Employees.
(a) Special Rules for Canadian Holders. For the purposes of this Agreement a COP Option or COP RSU, as applicable, is held by a Canadian Holder if such COP Option or COP RSU is held by a Person who is a resident of Canada for the purposes of Canada Tax Act or by a Person who was granted such COP Option or COP RSU in respect of, in the course of, or by virtue of employment in Canada. In respect of any COP Option or COP RSU held by a Canadian Holder, notwithstanding the other provisions of Sections 4.3(a), 4.4(a), 4.5(a) or 4.5(b), as applicable, the following rules apply:
(i) Timing for Canadian Holders. The adjustment or conversion of each COP RSU or COP Option held by a Canadian Holder shall be effected with such modifications as may be required such that any action under Sections 4.3(a), 4.4(a), 4.5(a) or 4.5(b) which is called for at or as of the Effective Time shall be taken or completed at the Adjustment Time;
(ii) Application of Canada Tax Act. It is intended that the provisions of subsection 7(1.4) of the Canada Tax Act apply to the adjustment or conversion of each COP RSU or COP Option held by a Canadian Holder.
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(iii) Greater Certainty. For greater certainty, in respect of the application of subsection 7(1.4) of the Canada Tax Act to the adjustment or conversion of any COP RSU or COP Option held by a Canadian Holder, the computation of each amount under Sections 4.3(a), 4.4(a), 4.5(a) or 4.5(b), as applicable, shall be undertaken in respect of each such COP Option or COP RSU such that, for purposes of subsection 7(1.4) of the Canada Tax Act,
(x) the amount by which the total value immediately after the Adjustment Time of the rights of the Canadian Holder to acquire securities of COP or Phillips 66, as applicable, exceeds of the total of the amount payable to acquire such securities
does not exceed
(y) the amount by which the total value immediately before the Adjustment Time of the rights of the Canadian Holder to acquire securities of COP under the applicable COP Option or COP RSU exceeds of the total of the amount payable to acquire such securities
and COP or Phillips 66, as applicable, shall take all such steps and shall make all such adjustments effective as of the Adjustment Time as are necessary to ensure that the conversions or adjustments pursuant to Sections 4.3(a), 4.4(a), 4.5(a) or 4.5(b) are in compliance with the provisions of subsection 7(1.4) of the Canada Tax Act.
(iv) Delayed Transfer Employees. The provisions of this Agreement relating to the benefits and obligations of a Delayed Transfer Employee after the Effective Time shall not apply in respect of a Canadian Holder and arrangements in respect of such Delayed Transfer Employee shall be determined on an individual basis.
(b) Special Rules for Australian Employees Holding COP Exercisable Options. Notwithstanding the other provisions of Section 4.4, with regard to any Employee who, while on the Australia payroll, was granted a COP Option that, at the Effective Time, is a COP Exercisable Option, or who, at the Effective Time, is a national or citizen of Australia and whose home country payroll is Australia, and who holds a COP Exercisable Option, the following shall apply:
(i) All Holders Other than Phillips 66 Group Employees. Each exercisable COP Option held by any such person other than a Phillips 66 Group Employee shall remain an option to purchase COP Common Stock issued under the applicable COP Equity Plan (each such option, an Adjusted COP Exercisable Option). Each Adjusted COP Exercisable Option shall be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to the corresponding exercisable COP Option immediately prior to the Effective Time; provided, however, that from and after the Effective Time:
(x) the per-share exercise price of each such Adjusted COP Exercisable Option shall be equal to the product of (A) the per-share exercise price of the corresponding exercisable COP Option immediately prior to the Effective Time
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and (B) the COP Price Ratio, rounded up to the nearest whole cent (the COP Adjusted Exercise Price); and
(y) the number of shares of COP Common Stock subject to each such Adjusted COP Exercisable Option shall be equal to the product of (A) the number of shares of COP Common Stock subject to the corresponding Exercisable COP Option immediately prior to the Effective Time and (B) the quotient obtained by dividing (I) the excess of the COP Pre-Distribution Stock Value over the original exercise price of such Exercisable COP Option by (II) the excess of the COP Post-Distribution Stock Value over the COP Adjusted Exercise Price, with any fractional share rounded down to the nearest whole share.
(ii) Phillips 66 Group Employees. Each exercisable COP Option outstanding under the COP Equity Plans which is held by a Phillips 66 Employee at the Effective Time shall be converted as of the Effective Time into an option to purchase shares of Phillips 66 Common Stock (each such option, a Phillips 66 Exercisable Option) pursuant to the terms of the Phillips 66 New Equity Plan subject to terms and conditions after the Effective Time that are substantially similar to the terms and conditions applicable to the corresponding exercisable COP Option immediately prior to the Effective Time; provided, however, that from and after the Effective Time:
(x) the per-share exercise price of each such Phillips 66 Exercisable Option shall be equal to the product of (A) the per-share exercise price of the corresponding exercisable COP Option immediately prior to the Effective Time and (B) the Phillips 66 Price Ratio, rounded up to the nearest whole cent (the Phillips 66 Adjusted Exercise Price); and
(y) the number of shares of Phillips 66 Common Stock subject to each such Phillips 66 Exercisable Option shall be equal to the product of (A) the number of shares of COP Common Stock subject to the corresponding exercisable COP Option immediately prior to the Effective Time and (B) the quotient obtained by dividing (I) the excess of the COP Pre-Distribution Stock Value over the original exercise price of such non-exercisable COP Option by (II) the excess of the Phillips 66 Stock Value over the Phillips 66 Adjusted Exercise Price, with any fractional share rounded down to the nearest whole share.
(iii) Special Rules for Australian Delayed Transfer Employees Holding Exercisable Stock Options.
(x) Each Exercisable COP Option held by a Delayed Transfer Employee who transfers from the COP Group to the Phillips 66 Group shall be converted as of such Transfer Date into an option to purchase shares of Phillips 66 Common Stock (each such option, a Delayed Transfer Phillips 66 Option) pursuant to the terms of the applicable Phillips 66 equity plan and shall be subject to terms and conditions after such Delayed Transfer Employees Transfer Date that are substantially similar to the terms and conditions applicable to the corresponding Adjusted COP Exercisable Option immediately prior to such
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Delayed Transfer Employees Transfer Date; provided, however, that from and after the Effective Time:
(I) the per-share exercise price of each such Delayed Transfer Phillips 66 Option shall be equal to the product of (A) the per-share exercise price of the corresponding Adjusted COP Exercisable Option immediately prior to such Delayed Transfer Employees Transfer Date and (B) the Phillips 66 Delayed Price Ratio, rounded up to the nearest whole cent; and
(II) the number of shares of Phillips 66 Common Stock subject to each such Delayed Transfer Phillips 66 Option shall be equal to the product of (A) the number of shares of COP Common Stock subject to the corresponding Adjusted COP Exercisable Option immediately prior to such Delayed Transfer Employees Transfer Date and (B) the quotient obtained by dividing (I) the excess of the volume weighted average per share price of COP Common Stock trading on the NYSE during Regular Trading Hours on the last Trading Day immediately before such Delayed Transfer Employees Transfer Date over the exercise price of the Adjusted COP Exercisable Option by (II) the excess of the volume weighted average per share price of Phillips 66 Common Stock trading on the NYSE during Regular Trading Hours on the last Trading Day immediately before such Delayed Transfer Employees Transfer Date over the exercise price for the Delayed Transfer Phillips 66 Option, as determined under clause (x)(I) of this Section 12.2(d)(iii), with any fractional share rounded down to the nearest whole share.
(y) Each Phillips 66 Exercisable Option held by a Delayed Transfer Employee who transfers from the Phillips 66 Group to the COP Group shall be converted as of such Transfer Date into an option to purchase shares of COP Common Stock (each such option, a Delayed Transfer COP Option) pursuant to the terms of the applicable COP equity plan and shall be subject to terms and conditions after such Delayed Transfer Employees Transfer Date that are substantially similar (to the extent practicable) to the terms and conditions applicable to the corresponding Phillips 66 Exercisable Option immediately prior to such Delayed Transfer Employees Transfer Date; provided, however, that from and after the Effective Time:
(I) the per-share exercise price of each such Delayed Transfer COP Option shall be equal to the product of (A) the per-share exercise price of the corresponding Phillips 66 Exercisable Option immediately prior to such Delayed Transfer Employees Transfer Date and (B) the COP Delayed Price Ratio, rounded up to the nearest whole cent; and
(II) the number of shares of COP Common Stock subject to each such Delayed Transfer COP Option shall be equal to the product of (A) the number of shares of Phillips 66 Common Stock subject to the
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corresponding Phillips 66 Exercisable Option immediately prior to such Delayed Transfer Employees Transfer Date and (B) the quotient obtained by dividing (I) the excess of the volume weighted average per share price of Phillips 66 Common Stock trading on the NYSE during Regular Trading Hours on the last Trading Day immediately before such Delayed Transfer Employees Transfer Date over the exercise price of the Phillips 66 Exercisable Option by (II) the excess of the volume weighted average per share price of COP Common Stock trading on the NYSE during Regular Trading Hours on the last Trading Day immediately before such Delayed Transfer Employees Transfer Date over the exercise price for the Delayed Transfer COP Option, as determined under clause (y)(I) of this Section 12.2(d)(iii), with any fractional share rounded down to the nearest whole share.
Section 12.3 Other Canada Employee Matters.
(a) Establishment of Retirement and Savings Plans. Without limiting the meaning of Section 12.1 or any other provision hereof, ConocoPhillips and Phillips 66 agree and confirm that Phillips 66 Canada ULC will establish:
(i) subject to regulatory approval, a defined contribution registered pension plan pursuant to the laws of Alberta;
(ii) a supplemental employee retirement plan or plans for employees of Phillips 66 Canada ULC; and
(iii) an employee savings plan,
for the benefit of employees of Phillips 66 Canada ULC each on terms similar to those enjoyed by members of the comparable plans sponsored by ConocoPhillips Canada Resources Corp.
(b) Transfer of Existing Retirement and Savings Plans Accounts. Promptly, upon receipt of all required regulatory approvals ConocoPhillips Canada Resources Corp. and Phillips 66 Canada ULC will arrange for transfer of the accounts and the assets therein of employees of Phillips 66 Canada ULC from the comparable plans sponsored by ConocoPhillips Canada Resources Corp. to accounts in the plans referred to in sub-section (a) above.
(c) Beneficiary Designations. Prior to the Distribution Date, ConocoPhillips Canada Resources Corp. and Phillips 66 Canada ULC will seek to obtain beneficiary designations from employees of Phillips 66 Canada ULC in relation to the plans referred to in sub-section (a) above and in relation to such Welfare Plans as ConocoPhillips Canada Resources Corp. considers necessary.
Section 12.4 UK Employee Matters Agreement. COP Group Employees and Phillips 66 Group Employees who are employees of ConocoPhillips Limited or of ConocoPhillips (U.K.) Limited shall be treated in the manner provided in the UK Employee Matters Agreement between those companies (attached as Appendix A to this Agreement) with regard to matters that are subject to this Agreement or to the UK Employee Matters Agreement. In the event of a
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conflict between this Agreement and the UK Employee Matters Agreement, the UK Employee Matters Agreement shall prevail with regard to employees of ConocoPhillips Limited or of ConocoPhillips (U.K.) Limited or assets or liabilities of or relating to benefit plans and compensation programs for their benefit. In the event the UK Employee Matters Agreement addresses a matter with regard to employees of ConocoPhillips Limited or ConocoPhillips (U.K.) Limited or assets or liabilities of or relating to benefit plans and compensation programs for their benefit as to which this Agreement is silent, the UK Employee Matters Agreement shall be followed. In the event this Agreement addresses a matter with regard to employees of ConocoPhillips Limited or ConocoPhillips (U.K.) Limited or assets or liabilities of or relating to benefit plans and compensation programs for their benefit as to which the UK Employee Matters Agreement is silent, this Agreement shall be followed.
ARTICLE XIII
GENERAL PROVISIONS
Section 13.1 Preservation of Rights to Amend. The rights of each member of the COP Group and each member of the Phillips 66 Group to amend, waive, or terminate any plan, arrangement, agreement, program, or policy referred to herein shall not be limited in any way by this Agreement.
Section 13.2 Confidentiality. Each Party agrees that any information conveyed or otherwise received by or on behalf of a Party in conjunction herewith that is not otherwise public through no fault of such Party is confidential and is subject to the terms of the confidentiality provisions set forth herein and in the Indemnification and Release Agreement, including Section 3.4(g) of this Agreement and Section 5.8 of the Indemnification and Release Agreement.
Section 13.3 Administrative Complaints/Litigation. Except as otherwise provided in this Agreement, on and after the Distribution Date, Phillips 66 shall assume, and be solely liable for, the handling, administration, investigation, and defense of actions, including ERISA, occupational safety and health, employment standards, union grievances, wrongful dismissal, discrimination or human rights, and unemployment compensation claims asserted at any time against COP or any member of the COP Group by any Phillips 66 Group Employee (including any dependent or beneficiary of any such Employee) or any other person, to the extent such actions or claims arise out of or relate to employment or the provision of services (whether as an employee, contractor, consultant, or otherwise) to or with respect to the business activities of any member of the Phillips 66 Group after the Distribution Date. To the extent that any legal action relates to a putative or certified class of plaintiffs, which includes both COP Group Employees (or Former COP Group Employees) and Phillips 66 Group Employees and such action involves employment or benefit plan related claims, reasonable costs and expenses incurred by the Parties in responding to such legal action shall be allocated among the Parties equitably in proportion to a reasonable assessment of the relative proportion of Employees included in or represented by the putative or certified plaintiff class. The procedures contained in the indemnification and related litigation cooperation provisions of the Indemnification and Release Agreement shall apply with respect to each Partys indemnification obligations under this Section 13.3.
Section 13.4 Reimbursement and Indemnification. Each Party agrees to reimburse the other Party, within 30 days of receipt from the other Party of reasonable verification, for all costs
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and expenses which the other Party may incur on its behalf as a result of any of the respective COP and Phillips 66 Welfare Plans, 401(k) Plans, Benefit Plans, and Pension Plans and, as contemplated by Section 10.1, any termination or severance payments or benefits. All Liabilities retained, assumed, or indemnified against by Phillips 66 pursuant to this Agreement, and all Liabilities retained, assumed, or indemnified against by COP pursuant to this Agreement, shall in each case be subject to the indemnification provisions of the Separation Agreement. Notwithstanding anything to the contrary, (i) no provision of this Agreement shall require any member of the Phillips 66 Group to pay or reimburse to any member of the COP Group any benefit-related cost item that a member of the Phillips 66 Group has paid or reimbursed to any member of the COP Group prior to the Effective Time; and (ii) no provision of this Agreement shall require any member of the COP Group to pay or reimburse to any member of the Phillips 66 Group any benefit-related cost item that a member of the COP Group has paid or reimbursed to any member of the Phillips 66 Group prior to the Effective Time.
Section 13.5 Costs of Compliance with Agreement. Except as otherwise provided in this Agreement or any other Transfer Document, each Party shall pay its own expenses in fulfilling its obligations under this Agreement.
Section 13.6 Fiduciary Matters. COP and Phillips 66 each acknowledges that actions required to be taken pursuant to this Agreement may be subject to fiduciary duties or standards of conduct under ERISA or other applicable Law, and no Party shall be deemed to be in violation of this Agreement if it fails to comply with any provisions hereof based upon its good-faith determination (as supported by advice from counsel experienced in such matters) that to do so would violate such a fiduciary duty or standard. Each Party shall be responsible for taking such actions as are deemed necessary and appropriate to comply with its own fiduciary responsibilities and shall fully release and indemnify the other Party for any Liabilities caused by the failure to satisfy any such responsibility.
Section 13.7 Entire Agreement. This Agreement, together with the documents referenced herein (including the Separation Agreement, the Transfer Documents and the plans and agreements referenced herein), constitutes the entire agreement and understanding among the Parties with respect to the subject matter hereof and supersedes all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof. To the extent any provision of this Agreement conflicts with the provisions of the Separation Agreement, the provisions of this Agreement shall be deemed to control with respect to the subject matter hereof.
Section 13.8 Binding Effect; No Third-Party Beneficiaries; Assignment. This Agreement shall inure to the benefit of and be binding upon the Parties and their respective successors and permitted assigns. Except as otherwise expressly provided in this Agreement, this Agreement is solely for the benefit of the Parties and should not be deemed to confer upon any third parties any remedy, claim, Liability, reimbursement, cause of action, or other right in excess of those existing without reference to this Agreement. Nothing in this Agreement is intended to amend any employee benefit plan or affect the applicable plan sponsors right to amend or terminate any employee benefit plan pursuant to the terms of such plan. The provisions of this Agreement are solely for the benefit of the Parties, and no current or former Employee, officer, director, or independent contractor or any other individual associated
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therewith shall be regarded for any purpose as a third-party beneficiary of this Agreement. This Agreement may not be assigned by any Party, except with the prior written consent of the other Parties.
Section 13.9 Amendment; Waivers. No change or amendment may be made to this Agreement except by an instrument in writing signed on behalf of each of the Parties. Any Party may, at any time, (i) extend the time for the performance of any of the obligations or other acts of another Party, (ii) waive any inaccuracies in the representations and warranties of another Party contained herein or in any document delivered pursuant hereto, and (iii) waive compliance by another Party with any of the agreements, covenants, or conditions contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the Party to be bound thereby. No failure or delay on the part of any Party in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant, or agreement contained herein, nor shall any single or partial exercise of any such right preclude other or further exercises thereof or of any other right.
Section 13.10 Remedies Cumulative. All rights and remedies existing under this Agreement or the Schedules attached hereto are cumulative to, and not exclusive of, any rights or remedies otherwise available.
Section 13.11 Notices. Unless otherwise expressly provided herein, all notices, claims, certificates, requests, demands and other communications hereunder shall be in writing and shall be deemed to be duly given: (i) when personally delivered, (ii) if mailed by registered or certified mail, postage prepaid, return receipt requested, on the date the return receipt is executed or the letter is refused by the addressee or its agent, (iii) if sent by overnight courier which delivers only upon the executed receipt of the addressee, on the date the receipt acknowledgment is executed or refused by the addressee or its agent, or (iv) if sent by facsimile or electronic mail, on the date confirmation of transmission is received (provided that a copy of any notice delivered pursuant to this clause (iv) shall also be sent pursuant to clause (i), (ii) or (iii)), addressed to the attention of the addressees General Counsel at the address of its principal executive office or to such other address or facsimile number for a Party as it shall have specified by like notice.
Section 13.12 Counterparts. This Agreement, including the Schedules hereto and the other documents referred to herein, may be executed in multiple counterparts, each of which when executed shall be deemed to be an original but all of which together shall constitute one and the same agreement.
Section 13.13 Severability. If any term or other provision of this Agreement or the Schedules attached hereto is determined by a non-appealable decision by a court, administrative agency, or arbitrator to be invalid, illegal, or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the court, administrative agency, or arbitrator shall interpret this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that transactions
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contemplated hereby are fulfilled to the fullest extent possible. If any sentence in this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.
Section 13.14 Governing Law. This Agreement (and any claims or disputes arising out of or related hereto or thereto or to the transactions contemplated hereby and thereby or to the inducement of any party to enter herein and therein, whether for breach of contract, tortious conduct, or otherwise and whether predicated on common law, statute, or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Delaware irrespective of the choice of laws principles of the State of Delaware, including all matters of validity, construction, effect, enforceability, performance, and remedies.
Section 13.15 Dispute Resolution. The procedures for negotiation and binding arbitration set forth in Article IV of the Indemnification and Release Agreement shall apply to any dispute, controversy or claim (whether sounding in contract, tort or otherwise) that arises out of or relates to this Agreement, any breach or alleged breach hereof, the transactions contemplated hereby (including all actions taken in furtherance of the transactions contemplated hereby on or prior to the date hereof), or the construction, interpretation, enforceability, or validity hereof.
Section 13.16 Performance. Each of COP and Phillips 66 shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any member of the COP Group and any member of the Phillips 66 Group, respectively. The Parties each agree to take such further actions and to execute, acknowledge, and deliver, or to cause to be executed, acknowledged, and delivered, all such further documents as are reasonably requested by the other for carrying out the purposes of this Agreement or of any document delivered pursuant to this Agreement.
Section 13.17 Construction. This Agreement shall be construed as if jointly drafted by the Parties and no rule of construction or strict interpretation shall be applied against any Party.
Section 13.18 Effect if Distribution Does Not Occur. Notwithstanding anything in this Agreement to the contrary, if the Separation Agreement is terminated prior to the Effective Time, this Agreement shall be of no further force and effect.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names by a duly authorized officer as of the date first written above.
CONOCOPHILLIPS | ||
By: | /s/ Ryan M. Lance | |
Name: Ryan M. Lance Title: Chairman, President and Chief Executive Officer |
PHILLIPS 66 | ||
By: | /s/ Greg C. Garland | |
Name: Greg C. Garland Title: Chairman, President and Chief Executive Officer |
APPENDIX A
CONOCOPHILLIPS LIMITED
CONOCOPHILLIPS (U.K.) LIMITED
UK Employee Matters Agreement
[] 2012
CONTENTS
Clause | Page | |||||
1. | Definitions and Interpretation | 1 | ||||
2. | Transfer of Employees | 3 | ||||
3. | Allocation of liabilities | 6 | ||||
4. | Information and Consultation | 6 | ||||
5. | Provision of Employees Transition Services Agreement | 7 | ||||
6. | Provision of Employees Secondments | 7 | ||||
7. | UK Share Incentive Plan | 8 | ||||
8. | Tax Reporting and Withholding for Equity-Based Awards | 9 | ||||
9. | Pensions | 10 | ||||
10. | General Provisions | 10 |
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AGREEMENT
dated [] 2012
PARTIES
1. | ConocoPhillips (U.K.) Limited (COPUK); and |
2. | ConocoPhillips Limited (COPL). |
WHEREAS:
(A) This Agreement is entered into by and between COPUK and COPL. COPUK and COPL are also referred to in this Agreement individually as a Party and collectively as the Parties;
(B) It has been determined that it would be appropriate and desirable to separate the upstream and downstream businesses of the ConocoPhillips group. Following such separation, the downstream business will be operated by the Phillips 66 Group and the upstream business will be operated by the COP Group;
(C) COPUK has historically been engaged in operating the upstream business of the ConocoPhillips group, and COPL has historically been engaged in operating the downstream business. Following the separation referred to in recital B above, employees of the downstream business will be employed by COPL and employees of the upstream business will be employed by COPUK;
(D) This agreement sets out the agreement of the Parties regarding the allocation and transfer of UK employees liabilities between COPL and COPUK and arrangements in relation to such employees.
IT IS AGREED:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement, unless the context otherwise requires, the following words and phrases shall have the following meanings:
COP Common Stock means the common stock, par value $0.01 per share, of COP;
COP Group has the meaning given to it in the Separation Agreement;
COP Group UK SIP means the ConocoPhillips Share Incentive Plan;
COPL means ConocoPhillips Limited whose registered office is at Portman House, 2 Portman Street, London, W1H 6DU (registered in England under registered number 529086);
COPL Secondee has the meaning given to it in clause 6.1(b);
COPUK means ConocoPhillips (U.K.) Limited whose registered office is at Portman House, 2 Portman Street, London, W1H 6DU (registered in England under registered number 524868);
COPUK Secondee has the meaning given to it in clause 6.1(a);
CPP has the meaning given to it in clause 9.1;
Distribution has the same meaning as in the Separation Agreement;
Downstream Employees has the meaning given to it in clause 2.1;
Effective Time means the effective time of the Distribution;
Employee Matters Agreement means the Employee Matters Agreement entered into by ConocoPhillips and Phillips 66 dated [] 2012;
Employees means all employees of COPL and COPUK;
Former COPL Employees has the meaning given to it in clause 2.7;
Former COPUK Employees has the meaning given to it in clause 2.7;
HMRC means Her Majestys Revenue and Customs;
ITEPA means the UK Income Tax (Earnings and Pensions) Act 2003;
Liabilities has the meaning given to it in the Separation Agreement;
Party or Parties has the meaning given to it in Recital (A);
Phillips 66 Common Stock means the common stock, par value $0.01 per share, of Phillips 66;
Phillips 66 Group has the meaning given to it in the Separation Agreement;
Phillips 66 Group UK SIP has the meaning given to it in clause 7.4;
Separation Agreement means the Separation and Distribution Agreement entered into by ConocoPhillips and Phillips 66 dated [] 2012;
SIP means a share incentive plan that complies with Schedule 2 of ITEPA;
Transfer Regulations means the Transfer of Undertakings (Protection of Employment) Regulations 2006;
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Transition Services Agreement has the meaning given to it in the Separation Agreement;
1.2 The headings in this Agreement do not affect its interpretation.
1.3 References in this Agreement to statutory provisions shall (where the context so admits and unless otherwise expressly provided) be construed as references to those provisions as amended, consolidated, extended or re-enacted from time to time (whether before or after the date of this Agreement).
1.4 In this Agreement:
(a) | words denoting the singular shall include the plural and vice versa; |
(b) | words denoting one gender shall include each gender and all genders; |
(c) | references to persons shall be deemed to include references to natural persons, to firms, to partnerships, to bodies corporate, to associations, to organisations and to trusts (in each case whether or not having separate legal personality), but references to individuals shall be deemed to be references to natural persons only; |
(d) | references to clauses are references to clauses of this Agreement; |
(e) | references to the parties include their respective successors in title, permitted assignees, estates and legal personal representatives; and |
(f) | where the word including is used it shall be deemed to read including without limitation. |
1.5 Expressions in this Agreement that are appropriate to companies shall be construed, in relation to an undertaking that is not a company, as references to the corresponding persons, officers, documents or organs, as the case may be, appropriate to undertakings of that nature.
2. TRANSFER OF EMPLOYEES
2.1 The Parties intend that at the Effective Time the employment of all Employees whose employment duties are to be primarily related to the business activities of the Phillips 66 Group immediately after the Effective Time (collectively, the Downstream Employees) and all liabilities relating to their employment (other than rights under the CPP) shall, to the extent such Employees are not already employed by COPL, transfer to COPL by operation of the Transfer Regulations.
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2.2 If, following the Effective Time, the contract of employment of any Downstream Employee who was employed by COPUK immediately prior to the Effective Time is found or alleged not to have effect by virtue of the Transfer Regulations as if originally made with COPL, the Parties agree that:
(a) | COPL will, within 14 days of becoming aware of such finding or allegation, make an offer of employment to such Downstream Employee, to take effect upon the termination referred to in clause 2.2(b) below, on terms and conditions which (other than the identity of the employer and any terms and conditions relating to an occupational pension scheme) do not differ from the corresponding provisions of the Downstream Employees contract of employment immediately before the Effective Time; |
(b) | if such offer of employment is accepted by the relevant Downstream Employee within 14 days of the offer being made, the Downstream Employee will be released from employment by COPUK; |
(c) | if such offer of employment is not accepted by the relevant Downstream Employee within 14 days of the offer being made (or if no such offer is made by COPL), COPUK may terminate the employment of such Downstream Employee and COPL agrees to indemnify COPUK for any costs arising in relation to the employment of such Downstream Employee between the Effective Time and the termination date, and any costs arising in connection with the termination of employment of such Downstream Employee. |
2.3 If, following the Effective Time, the contract of employment of any Downstream Employee who was employed by COPL immediately prior to the Effective Time is found or alleged to have effect by virtue of the Transfer Regulations as if originally made with COPUK, the Parties agree that:
(a) | COPL will, within 14 days of becoming aware of such finding or allegation, make an offer of employment to such Downstream Employee, to take effect upon the termination referred to in clause 2.3(b) below, on terms and conditions which do not differ from the corresponding provisions of the Downstream Employees contract of employment immediately before the Effective Time; |
(b) | if such offer of employment is accepted by the relevant Downstream Employee within 14 days of the offer being made, the Downstream Employee will be released from employment by COPUK; |
(c) | if such offer of employment is not accepted by the relevant Downstream Employee within 14 days of the offer being made (or if no such offer is made by COPL), COPUK may terminate the employment of such Downstream Employee and COPL agrees to indemnify COPUK for any costs arising in relation to the employment of such Upstream Employee between the Effective Time and the termination date, and any costs arising in connection with the termination of employment of such Downstream Employee. |
2.4 The Parties intend that at the Effective Time, the employment of all Employees whose employment duties are to be primarily related to the business activities of the COP Group immediately after the Effective Time (collectively, the Upstream Employees) and all liabilities relating to their employment (other than rights under the CPP) shall, to the extent such Employees are not already employed by COPUK, transfer to COPUK by operation of the Transfer Regulations.
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2.5 If, following the Effective Time, the contract of employment of any Upstream Employee who was employed by COPL immediately prior to the Effective Time is found or alleged not to have effect by virtue of the Transfer Regulations as if originally made with COPUK, the Parties agree that:
(a) | COPUK will, within 14 days of becoming aware of such finding or allegation, make an offer of employment to such Upstream Employee, to take effect upon the termination referred to in clause 2.5(b) below, on terms and conditions which (other than the identity of the employer and any terms and conditions relating to an occupational pension scheme) do not differ from the corresponding provisions of the Upstream Employees contract of employment immediately before the Effective Time; |
(b) | if such offer of employment is accepted by the relevant Upstream Employee within 14 days of the offer being made, the Upstream Employee will be released from employment by COPL; |
(c) | if such offer of employment is not accepted by the relevant Upstream Employee within 14 days of the offer being made (or if no such offer is made by COPUK), COPL may terminate the employment of such Upstream Employee and COPUK agrees to indemnify COPL for any costs arising in relation to the employment of such Upstream Employee between the Effective Time and the termination date, and any costs arising in connection with the termination of employment of such Upstream Employee. |
2.6 If, following the Effective Time, the contract of employment of any Upstream Employee who was employed by COPUK immediately prior to the Effective Time is found or alleged to have effect by virtue of the Transfer Regulations as if originally made with COPL, the Parties agree that:
(a) | COPUK will, within 14 days of becoming aware of such finding or allegation, make an offer of employment to such Upstream Employee, to take effect upon the termination referred to in clause 2.6(b) below, on terms and conditions which do not differ from the corresponding provisions of the Upstream Employees contract of employment immediately before the Effective Time; |
(b) | if such offer of employment is accepted by the relevant Upstream Employee within 14 days of the offer being made, the Upstream Employee will be released from employment by COPL; |
(c) | if such offer of employment is not accepted by the relevant Upstream Employee within 14 days of the offer being made (or if no such offer is made by COPUK), COPL may terminate the employment of such Upstream Employee and COPUK agrees to indemnify COPL for any costs arising in relation to the employment of such Upstream Employee between the Effective Time and the termination date, and any costs arising in connection with the termination of employment of such Upstream Employee. |
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2.7 All former employees of COPUK whose employment has terminated prior to the Effective Time, shall be Former COPUK Employees (regardless of whether or not they provided services to an upstream or downstream business during their employment). All former employees of COPL whose employment has terminated prior to the Effective Time, shall be Former COPL Employees (regardless of whether or not they provided services to an upstream or downstream business during their employment). Notwithstanding any other provisions in this Agreement, any liabilities in respect of Former COPUK Employees or Former COPL Employees who, prior to the Effective Time, are deferred or pensioner members of the CPP will remain liabilities of the CPP.
2.8 On and after the Effective Time, (i) COPUK shall be responsible for adopting and maintaining any policies or practices, and for all other actions and inactions, necessary to comply with employment-related laws and requirements relating to the employment of the Upstream Employees and the treatment of any applicable Former COPUK Employees in respect of their former employment, and (ii) COPL shall be responsible for adopting and maintaining any policies or practices, and for all other actions and inactions, necessary to comply with employment-related laws and requirements relating to the employment of the Downstream Employees and the treatment of any applicable Former COPL Employees in respect of their former employment.
3. ALLOCATION OF LIABILITIES
3.1 Except as otherwise provided in this Agreement:
(a) | COPL shall assume and be solely liable for, the handling, administration, investigation, and defence of claims or actions by or in respect of any of the Downstream Employees on or after the Effective Time; and |
(b) | COPUK shall assume and be solely liable for, the handling, administration, investigation, and defence of claims or actions by or in respect of any of the Upstream Employees on or after the Effective Time. |
4. INFORMATION AND CONSULTATION
4.1 Subject to any limitations imposed by applicable law, COPUK and COPL shall provide to the other and their respective agents and vendors all information necessary for the Parties to perform their respective duties under this Agreement.
4.2 Each Party will comply with any legislative requirements which are triggered by the automatic transfer of the employment contracts of the Upstream Employees or the Downstream Employees to consult with such employees or their representatives or to provide information to the relevant members of the other Party in relation to such employees, including under Regulation 11, Regulation 13 and Regulation 14 of the Transfer Regulations.
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5. PROVISION OF EMPLOYEES TRANSITION SERVICES AGREEMENT
5.1 The Parties recognise that:
(a) | a certain number of the Upstream Employees will be providing services to COPL pursuant to the terms of the Transition Services Agreement; and |
(b) | a certain number of the Downstream Employees will be providing services to COPUK pursuant to the terms of the Transition Services Agreement. |
5.2 The Parties agree to provide all reasonable assistance to each other (or procure that such assistance is provided) to facilitate the provision of Employees under such arrangements.
5.3 The Parties intend and believe that neither the provision of any services pursuant to the Transition Services Agreement, nor the termination of such services, shall constitute a relevant transfer for the purposes of the Transfer Regulations.
5.4 If any Upstream Employee who is providing services to COPL pursuant to the Transition Services Agreement is found or alleged to have become by operation of the Transfer Regulations an employee of COPL (an Alleged COPL Transferee):
(a) | COPL may terminate the employment of such Alleged COPL Transferee; and |
(b) | provided that the termination is effected within one month of the date on which COPL becomes aware of the finding or allegation in respect of such Alleged COPL Transferee, COPUK agrees to indemnify COPL in respect of any expenses, losses, fees, costs and/or liabilities arising out of the employment of such Alleged COPL Transferee and its termination. |
5.5 If any Downstream Employee who is providing services to COPUK pursuant to the Transition Services Agreement is found or alleged to have become by operation of the Transfer Regulations an employee of COPUK (an Alleged COPUK Transferee):
(a) | COPUK may terminate the employment of such Alleged COPUK Transferee; and |
(b) | provided that the termination is effected within one month of the date on which COPUK becomes aware of the finding or allegation in respect of such Alleged COPUK Transferee, COPL agrees to indemnify COPUK in respect of any expenses, losses, fees, costs and/or liabilities arising out of the employment of such Alleged COPUK Transferee and its termination. |
6. PROVISION OF EMPLOYEES SECONDMENTS
6.1 The Parties recognise that:
(a) | COPUK may second Upstream Employees (each such individual being a COPUK Secondee) to COPL on or after the Effective Time for a specified period; and |
(b) | COPL may second Downstream Employees (each such individual being a COPL Secondee) to COPUK on or after the Effective Time for a specified period. |
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6.2 COPUK shall:
(a) | procure that the COPUK Secondees shall enter into such contractual arrangements with COPUK or COPL as are necessary for them to be seconded to COPL in accordance with clause 6.1; and |
(b) | enter into such agreements with COPL as are necessary to document such secondments. |
6.3 COPL shall:
(a) | procure that the COPL Secondees shall enter into such contractual arrangements with COPL or COPUK as are necessary for them to be seconded to COPUK in accordance with clause 6.1; and |
(b) | enter into such agreements with COPUK as are necessary to document such secondments. |
7. UK SHARE INCENTIVE PLAN
7.1 COPUK and COPL shall take any and all reasonable actions as shall be necessary and appropriate to further the provisions of this clause 7, including, to the extent practicable, providing written notice or similar communication to each Employee who holds shares under the COP Group UK SIP, informing such Employee of the actions contemplated by this clause 7 in respect of such shares.
7.2 The Parties will arrange for appropriate communications to be sent to participants in the COP Group UK SIP to explain the effect of the Distribution on their participation in the COP Group UK SIP.
7.3 COPUK shall procure that each Upstream Employee who is participating in the COP Group UK SIP and each Downstream Employee who is participating in the COP Group UK SIP shall be paid a sum of compensation in relation to any UK income tax and social security contributions payable in relation to Phillips 66 Common Stock on the Distribution.
7.4 COPL will prior to the Effective Time establish a new SIP for the benefit of Downstream Employees (the Phillips 66 Group UK SIP), the terms of which will be substantially similar to the terms of the COP Group UK SIP (save that the Phillips 66 Group UK SIP shall relate to Phillips 66 Common Stock rather than COP Common Stock).
7.5 COPL shall invite all eligible Downstream Employees to apply for participation in the Phillips 66 Group UK SIP to take effect as soon as reasonably practicable the Effective Time.
7.6 Following the Effective Time Downstream Employees shall:
(a) | cease to be eligible for new grants of share awards under the COP Group UK SIP; |
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(b) | be permitted to retain COP Common Stock acquired before the Effective Time in the COP Group UK SIP for a period of 90 days after such time as HMRC confirms the relevant sponsoring companies of the COP Group and the Phillips 66 Group have ceased to be associated companies (as defined in paragraph 94 of Schedule 2 to ITEPA); and |
(c) | be eligible to participate in the Phillips 66 Group UK SIP on terms substantially similar to their participation in the COP Group UK SIP. |
7.7 Both Parties agree to cooperate in seeking agreement with HMRC that the relevant sponsoring company of the COP Group UK SIP and the relevant sponsoring company of the Phillips 66 Group UK SIP will be treated as ceasing to be associated companies (as defined in paragraph 94 of Schedule 2 to ITEPA) as from the Effective Time.
7.8 Each Party agrees to cooperate in providing the other Party with sufficient information relating to its share register in order to establish when the Parties shall cease to be associated companies (as defined in paragraph 94 of Schedule 2 to ITEPA).
7.9 COPL will provide the trustee or shall procure the provision to the trustee of the COP Group UK SIP with details of any Downstream Employees who have ceased to be employed by COPL in the UK and their reason for leaving.
7.10 COPL will procure that the trustee of the COP Group UK SIP is kept informed of the Phillips 66 Common Stock awarded to or acquired by each Downstream Employee under the Phillips 66 Group UK SIP.
7.11 COPUK will procure that the trustee of the Phillips 66 Group UK SIP is kept informed of the COP Common Stock awarded to or acquired by each Downstream Employee under the COP Group UK SIP.
7.12 COPL will procure that COPUK is reimbursed for any costs associated with the operation of the COP Group UK SIP that relate to Downstream Employees.
8. TAX REPORTING AND WITHHOLDING FOR EQUITY-BASED AWARDS
8.1 COPUK will be responsible for all income, payroll, or other tax reporting related to income of Upstream Employees or Former COPUK Employees from equity-based awards, and COPL will be responsible for all income, payroll, or other tax reporting related to income of Downstream Employees or Former COPL Employees from equity-based awards. Similarly, COPUK will be responsible for all income, payroll, or other tax reporting related to income of its non-employee directors from equity-based awards, and COPL will be responsible for all income, payroll, or other tax reporting related to income of its non-employee directors from equity-based awards. Further, COPUK shall be responsible for remitting applicable tax withholdings for Upstream Employees to each applicable taxing authority, and COPL shall be responsible for remitting applicable tax withholdings for Downstream Employees to each applicable taxing authority; provided, however, that either COPUK or COPL shall act as agent for the other company by remitting amounts withheld in the form of shares or in conjunction with an exercise transaction to an appropriate taxing authority. COPUK and COPL will cooperate with each other and with third-party providers to effectuate withholding and remittance of taxes, as well as required tax reporting, in a timely, efficient, and appropriate manner.
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9. PENSIONS
9.1 The Parties acknowledge and agree that matters relating to the UK ConocoPhillips Pension Plan (CPP) shall be dealt with in accordance with the provisions of a pensions demerger agreement to be entered into between COPUK, COPL, the trustee of the CPP and the trustee of a new occupational pension scheme to be established by COPL.
10. GENERAL PROVISIONS
10.1 The rights of COPUK and COPL to amend, waive, or terminate any plan, arrangement, agreement, program, or policy referred to herein shall not be limited in any way by this Agreement.
10.2 Each Party agrees that any information conveyed or otherwise received by or on behalf of a Party in conjunction herewith that is not otherwise public through no fault of such Party is confidential and is subject to the terms of the confidentiality provisions set forth herein and in the Separation Agreement, including Section 7.8 of the Separation Agreement.
10.3 All Liabilities retained, assumed, or indemnified against by COPL pursuant to this Agreement, and all Liabilities retained, assumed, or indemnified against by COPUK pursuant to this Agreement, shall in each case be subject to the indemnification provisions of the Separation Agreement. Notwithstanding anything to the contrary, (i) no provision of this Agreement shall require COPL to pay or reimburse to COPUK any benefit-related cost item that COPL has paid or reimbursed to COPUK prior to the Effective Time; and (ii) no provision of this Agreement shall require COPUK to pay or reimburse to COPL any benefit-related cost item that COPUK has paid or reimbursed to COPL prior to the Effective Time.
10.4 Except as otherwise provided in this Agreement, each Party shall pay its own expenses in fulfilling its obligations under this Agreement.
10.5 COPUK and COPL each acknowledges that actions required to be taken pursuant to this Agreement may be subject to fiduciary duties or applicable law, and no Party shall be deemed to be in violation of this Agreement if it fails to comply with any provisions hereof based upon its good-faith determination (as supported by advice from counsel experienced in such matters) that to do so would violate such a fiduciary duty or applicable law. Each Party shall be responsible for taking such actions as are deemed necessary and appropriate to comply with its own fiduciary responsibilities and shall fully release and indemnify the other Party for any Liabilities caused by the failure to satisfy any such responsibility.
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10.6 This Agreement, together with the documents referenced herein, constitutes the entire agreement and understanding among the Parties with respect to the subject matter hereof and supersedes all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof. To the extent any provision of this Agreement conflicts with the provisions of the Separation Agreement, the provisions of this Agreement shall be deemed to control with respect to the subject matter hereof. To the extent that any provision of this Agreement conflicts with the provisions of the Employee Matters Agreement, in so far as the matter relates to employees of COPL or COPUK, this Agreement shall prevail. Any matters concerning employees of COPL or COPUK which are not dealt with expressly in this Agreement shall be governed by the terms of the Employee Matters Agreement.
10.7 This Agreement shall inure to the benefit of and be binding upon the Parties and their respective successors and permitted assigns. Except as otherwise expressly provided in this Agreement, this Agreement is solely for the benefit of the Parties and should not be deemed to confer upon any third parties any remedy, claim, Liability, reimbursement, cause of action, or other right in excess of those existing without reference to this Agreement including under the Contracts (Rights of Third Parties) Act 1999 or other equivalent applicable law. Nothing in this Agreement is intended to amend any employee benefit plan or affect the applicable plan sponsors right to amend or terminate any employee benefit plan pursuant to the terms of such plan. The provisions of this Agreement are solely for the benefit of the Parties, and no current or former Employee, officer, director, or independent contractor or any other individual associated therewith shall be regarded for any purpose as a third-party beneficiary of this Agreement. This Agreement may not be assigned by any Party, except with the prior written consent of the other Parties.
10.8 No change or amendment may be made to this Agreement except by an instrument in writing signed on behalf of each of the Parties. Any Party may, at any time, (i) extend the time for the performance of any of the obligations or other acts of another Party, (ii) waive any inaccuracies in the representations and warranties of another Party contained herein or in any document delivered pursuant hereto, and (iii) waive compliance by another Party with any of the agreements, covenants, or conditions contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the Party to be bound thereby. No failure or delay on the part of any Party in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant, or agreement contained herein, nor shall any single or partial exercise of any such right preclude other or further exercises thereof or of any other right.
10.9 All rights and remedies existing under this Agreement attached hereto are cumulative to, and not exclusive of, any rights or remedies otherwise available.
10.10 Unless otherwise expressly provided herein, all notices, claims, certificates, requests, demands and other communications hereunder shall be in writing and shall be deemed to be duly given: (i) when personally delivered, (ii) if mailed by registered or certified mail, postage prepaid, return receipt requested, on the date the return receipt is executed or the letter is refused by the addressee or its agent, (iii) if sent by overnight courier which delivers only upon the executed receipt of the addressee, on the date the receipt acknowledgment is executed or refused by the addressee or its agent, or (iv) if sent by facsimile or electronic mail, on the date confirmation of transmission is received (provided that a copy of any notice delivered pursuant to this clause (iv) shall also be sent pursuant to clause (i), (ii) or (iii)), addressed to the attention of the addressees General Counsel at the address of its principal executive office or to such other address or facsimile number for a Party as it shall have specified by like notice.
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10.11 This Agreement may be executed in multiple counterparts, each of which when executed shall be deemed to be an original but all of which together shall constitute one and the same agreement.
10.12 If any term or other provision of this Agreement is determined by a non-appealable decision by a court, administrative agency, or arbitrator to be invalid, illegal, or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the court, administrative agency, or arbitrator shall interpret this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the fullest extent possible. If any sentence in this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.
10.13 This Agreement (and any claims or disputes arising out of or related hereto or thereto or to the transactions contemplated hereby and thereby or to the inducement of any party to enter herein and therein, whether for breach of contract, tortious conduct, or otherwise and whether predicated on common law, statute, or otherwise) shall be governed by and construed and interpreted in accordance with the laws of England.
10.14 The procedures for negotiation and binding arbitration set forth in Article VIII of the Separation Agreement shall apply to any dispute, controversy or claim (whether sounding in contract, tort or otherwise) that arises out of or relates to this Agreement, any breach or alleged breach hereof, the transactions contemplated hereby (including all actions taken in furtherance of the transactions contemplated hereby on or prior to the date hereof), or the construction, interpretation, enforceability, or validity hereof.
10.15 The Parties each agree to take such further actions and to execute, acknowledge, and deliver, or to cause to be executed, acknowledged, and delivered, all such further documents as are reasonably requested by the other for carrying out the purposes of this Agreement or of any document delivered pursuant to this Agreement.
10.16 This Agreement shall be construed as if jointly drafted by the Parties and no rule of construction or strict interpretation shall be applied against any Party.
10.17 Notwithstanding anything in this Agreement to the contrary, if the Separation Agreement is terminated prior to the Effective Time, this Agreement shall be of no further force and effect.
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SIGNATURE
This Agreement is signed by duly authorised representatives of the parties:
SIGNED | ) | SIGNATURE: | _______________ | |||
for and on behalf of | ) | |||||
ConocoPhillips (U.K.) Limited | ) | NAME: | _______________ | |||
SIGNED | ) | SIGNATURE: | _______________ | |||
for and on behalf of | ) | |||||
ConocoPhillips Limited | ) | NAME: | _______________ |
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Exhibit 10.5
TRANSITION SERVICES AGREEMENT
BY AND BETWEEN
CONOCOPHILLIPS
AND
PHILLIPS 66
DATED AS OF APRIL 26, 2012
TABLE OF CONTENTS
ARTICLE I DEFINITIONS |
1 | |||||
ARTICLE II SERVICES |
4 | |||||
2.1. |
Services | 4 | ||||
2.2. |
Additional Services | 4 | ||||
2.3. |
Services Not Included | 4 | ||||
2.4. |
Service Providers | 5 | ||||
2.5. |
Cooperation and Service Coordinators | 6 | ||||
2.6. |
Service Boundaries and Scope | 8 | ||||
2.7. |
Standard of Performance; Limitation of Liability | 9 | ||||
2.8. |
Precedence of Schedules | 11 | ||||
2.9. |
Leases and Subleases | 11 | ||||
ARTICLE III SERVICE CHARGES |
11 | |||||
3.1. |
Compensation | 11 | ||||
ARTICLE IV PAYMENT |
12 | |||||
4.1. |
Payment | 12 | ||||
4.2. |
Payment Disputes | 13 | ||||
4.3. |
Records; Review of Charges; Error Correction | 13 | ||||
4.4. |
Taxes | 14 | ||||
ARTICLE V TERM |
15 | |||||
5.1. |
Term | 15 | ||||
ARTICLE VI DISCONTINUATION OF SERVICES |
15 | |||||
6.1. |
Discontinuation or Termination of Services | 15 | ||||
6.2. |
Procedures Upon Discontinuation or Termination of Services | 16 | ||||
6.3. |
Transition From Services | 16 | ||||
ARTICLE VII DEFAULT |
17 | |||||
7.1. |
Termination for Default | 17 |
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ARTICLE VIII INDEMNIFICATION AND WAIVER |
17 | |||||
8.1. |
Personnel of ConocoPhillips Group | 17 | ||||
8.2. |
Personnel of Phillips 66 Group | 17 | ||||
8.3. |
Property of ConocoPhillips Group | 18 | ||||
8.4. |
Property of Phillips 66 Group | 18 | ||||
8.5. |
Environmental Matters | 18 | ||||
8.6. |
Impact on Third Parties | 18 | ||||
8.7. |
Services Received | 18 | ||||
8.8. |
Waiver of Consequential Damages | 19 | ||||
8.9. |
Express Negligence | 20 | ||||
ARTICLE IX CONFIDENTIALITY |
20 | |||||
9.1. |
Confidentiality | 20 | ||||
9.2. |
Access to Computer Software | 21 | ||||
9.3. |
Data | 21 | ||||
9.4. |
Change Management | 21 | ||||
9.5. |
System Security | 21 | ||||
ARTICLE X FORCE MAJEURE |
22 | |||||
10.1. |
Performance Excused | 22 | ||||
10.2. |
Notice | 22 | ||||
10.3. |
Cooperation | 22 | ||||
ARTICLE XI MISCELLANEOUS |
22 | |||||
11.1. |
Entire Agreement | 22 | ||||
11.2. |
Binding Effect; No Third-Party Beneficiaries; Assignment | 23 | ||||
11.3. |
Amendment; Waivers | 23 | ||||
11.4. |
Notices | 23 | ||||
11.5. |
Counterparts | 24 | ||||
11.6. |
Severability | 24 | ||||
11.7. |
Governing Law | 24 | ||||
11.8. |
Dispute Resolution | 24 | ||||
11.9. |
Performance | 24 | ||||
11.10. |
Relationship of Parties | 24 |
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11.11. |
Regulations | 25 | ||||
11.12. |
Interpretation | 25 | ||||
11.13. |
Effect if Separation does not Occur | 25 |
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TRANSITION SERVICES AGREEMENT
This TRANSITION SERVICES AGREEMENT (this Agreement) is entered into as of April 26, 2012, by and between ConocoPhillips, a Delaware corporation (ConocoPhillips) and Phillips 66, a Delaware corporation and wholly-owned subsidiary of ConocoPhillips (Phillips 66). ConocoPhillips and Phillips 66 are sometimes referred to herein individually as a Party, and collectively as the Parties. Capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in Article I.
R E C I T A L S
WHEREAS, the board of directors of ConocoPhillips (the ConocoPhillips Board) has determined that it would be in the best interests of ConocoPhillips and its stockholders to separate the Phillips 66 Business from ConocoPhillips;
WHEREAS, ConocoPhillips and Phillips 66 have entered into the Separation and Distribution Agreement dated April 26, 2012 (as amended, modified or supplemented from time to time in accordance with its terms, the Separation and Distribution Agreement) in connection with the separation of the Phillips 66 Business from ConocoPhillips (the Separation) and the distribution of Phillips 66 Common Stock to stockholders of ConocoPhillips (the Distribution);
WHEREAS, the Separation and Distribution Agreement also provides for the execution and delivery of certain other agreements, including this Agreement, in order to facilitate and provide for the separation of Phillips 66 and its Subsidiaries from ConocoPhillips; and
WHEREAS, in order to ensure an orderly transition under the Separation and Distribution Agreement, the Parties agree that it will be advisable for the ConocoPhillips Group to provide to the Phillips 66 Group, and for the Phillips 66 Group to provide to the ConocoPhillips Group, certain goods and services described herein for a transitional period.
NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth below and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, and intending to be legally bound, the Parties agree as follows:
ARTICLE I
DEFINITIONS
Unless otherwise defined in this Agreement, all capitalized terms used in this Agreement shall have the same meaning as in the Separation and Distribution Agreement. The following capitalized terms used in this Agreement shall have the meanings set forth below:
Accessing Party has the meaning set forth in Section 9.5(a).
Additional Services has the meaning set forth in Section 2.2.
Affiliate (including, with a correlative meaning, affiliated) means, when used with respect to a specified Person, a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person. For the purpose of this definition, control (including, with correlative meanings, controlled by and under common control with), when used with respect to any specified Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment, undertaking or otherwise. For the avoidance of doubt, after the Distribution, the members of the ConocoPhillips Group and the members of the Phillips 66 Group shall not be deemed to be under common control for purposes hereof due solely to the fact that ConocoPhillips and Phillips 66 have common shareholders.
Agreement has the meaning set forth in the preamble.
Ancillary Agreement means the Employee Matters Agreement, Indemnification and Release Agreement, Intellectual Property Assignment and License Agreement, Separation and Distribution Agreement, Tax Sharing Agreement and Transfer Documents.
Business Day means a day other than a Saturday, a Sunday or a day on which banking institutions located in Houston, Texas or New York, New York are authorized or obligated by law or executive order to close.
Claims has the meaning set forth in Section 8.1.
ConocoPhillips has the meaning set forth in the preamble.
ConocoPhillips Board has the meaning set forth in the recitals.
ConocoPhillips Group means ConocoPhillips and each Affiliate of ConocoPhillips after the Distribution Date.
Distribution has the meaning set forth in the recitals.
Distribution Date means the date and time determined in accordance with Section 3.3(a) of the Separation and Distribution Agreement at which the Distribution occurs.
Employees has the meaning set forth in the Employee Matters Agreement.
Exhibits means the Exhibits attached hereto.
Force Majeure Event has the meaning set forth in Section 10.1.
Group means either the ConocoPhillips Group or the Phillips 66 Group.
Indemnification and Release Agreement means the Indemnification and Release Agreement, dated as of the date hereof, between ConocoPhillips and Phillips 66.
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Indemnified Party has the meaning set forth in Section 11.10.
Indemnifying Party has the meaning set forth in Section 11.10.
Initial Services has the meaning set forth in Section 2.1.
Lease has the meaning set forth in Section 2.9.
Louisiana Exception has the meaning set forth in Section 2.4(c).
New Data has the meaning set forth in Section 9.3.
Parties and Party have the meaning set forth in the preamble.
Phillips 66 has the meaning set forth in the preamble.
Phillips 66 Group means Phillips 66 and each Affiliate of Phillips 66 after the Distribution Date.
Schedules means the Schedules attached hereto.
Security Regulations has the meaning set forth in Section 9.5(a).
Separation has the meaning set forth in the recitals.
Separation and Distribution Agreement has the meaning set forth in the recitals.
Service Coordinator has the meaning set forth in Section 2.5(c).
Service Provider means a member of the ConocoPhillips Group or the Phillips 66 Group, as applicable, when it is providing Services to a member of the other Partys Group.
Service Provider Group means the ConocoPhillips Group or the Phillips 66 Group, as applicable, when it is providing Services to a member of the other Partys Group.
Service Recipient means a member of the Phillips 66 Group or the ConocoPhillips Group, as applicable, when it is receiving Services from a member of the other Partys Group.
Service Recipient Group means the Phillips 66 Group or the ConocoPhillips Group, as applicable, when it is receiving Services from a member of the other Partys Group.
Services means the Initial Services and any Additional Services agreed to by the Parties in accordance with Section 2.2.
Sublease has the meaning set forth in Section 2.9.
Systems has the meaning set forth in Section 9.5(a).
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Tax has the meaning set forth in Section 4.4.
Third Party License has the meaning set forth in Section 2.7(b).
Third Party Provider means a Person that is not affiliated with either Group and that is retained by the Service Provider to provide any portion of the Services under this Agreement, including any consultants, agents, contractors or subcontractors.
Transition Coordinator has the meaning set forth in Section 2.5(c).
ARTICLE II
SERVICES
2.1. Services.
(a) Upon the terms and subject to the conditions of this Agreement, ConocoPhillips agrees to provide or to cause to be provided the services set forth in Schedules 1 through 52 to the applicable member of the Phillips 66 Group, and Phillips 66 agrees to provide or to cause to be provided the services set forth in Schedules 1 through 52 to the applicable member of the ConocoPhillips Group (collectively, the Initial Services).
(b) The Parties agree and acknowledge that the right to receive any Services (or portions thereof) may be assigned, allocated and/or contributed, in whole or in part, to any Affiliate(s) of a relevant Party. To the extent so assigned, allocated and/or contributed, the relevant Affiliate shall be deemed the Service Recipient with respect to the relevant portion of such Services.
2.2. Additional Services. A Party may request additional transitional Services (the Additional Services) in addition to the Initial Services from the Service Provider by providing written notice. The Service Provider shall use commercially reasonable efforts to accommodate such request; it being understood, however, that the Service Provider shall not be required to provide any Additional Services if the Parties are unable to reach agreement on the terms thereof. Upon the mutual written agreement as to the nature, cost, duration and scope of such Additional Services, the Parties shall supplement in writing the Schedules hereto to include such Additional Services. A Service Providers obligations with respect to providing any such Additional Services shall become effective only upon a new Schedule or an amendment to an existing Schedule being duly executed by the Parties.
2.3. Services Not Included. It is not the intent of the Service Provider and the other members of the Service Provider Group to render, nor of the Service Recipient and the other members of the Service Recipient Group to receive from the Service Provider and the other members of the Service Provider Group, professional advice or opinions, whether with regard to tax, legal, treasury, finance, employment or other business and financial matters, technical advice, whether with regard to information technology or other matters, or the handling of or addressing environmental matters; the Service Recipient shall not rely on, or construe, any Service rendered by or on behalf of the Service Provider as such professional advice or opinions or technical advice; and the Service Recipient shall seek all third-party professional advice and opinions or technical advice as it may desire or need.
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2.4. Service Providers.
(a) Subject to Section 2.4(b), the Service Provider shall have the right (i) to provide the Services either directly and/or through its Affiliates and their respective Employees, agents or Third Party Providers designated by any of them and (ii) to select the particular personnel and working hours of such personnel in providing the Services; provided that any provision of Services through Third Party Providers shall not relieve the Service Provider of its obligations under this Agreement; and shall not decrease the quality or level of the Services provided to the Service Recipient.
(b) Each Service Provider may determine, in its reasonable discretion, which of its or its Affiliates Employees, agents or Third Party Providers will provide the applicable Services; provided that the Service Provider shall take into consideration reasonable requests of the Service Recipient in making such determinations. Without limiting the above and the provisions of Section 2.6(a), the Service Provider shall take into consideration the following in making its determination in this regard:
(i) The Service Provider shall consult in good faith with the Service Recipient regarding the proposed hiring of any Third Party Provider that has not been involved in the activities relating to such Service prior to the Distribution Date; provided, that, in the event that the Service Provider intends to subcontract a material portion of any of the Services set forth in one or more of the Schedules hereto where such subcontracting is inconsistent with the practice applied by the Service Provider generally from time to time within its own organization, the Service Provider shall give notice to the Service Recipient of its intent to subcontract any portion of the Services and the Service Recipient shall have twenty (20) calendar days (or such lesser period set forth in the notice as may be practicable in the event of exigent circumstances) to determine, in its sole discretion, whether to permit such subcontracting or whether to cancel such Service in accordance with Article VI hereof. If the Service Recipient opts to cancel a Service as provided in the immediately preceding sentence, it shall not be liable to the Service Provider pursuant to Section 6.1 for any costs or expenses the Service Provider or any member of the Service Provider Group remains obligated to pay to the Third Party Provider identified in the notice provided by the Service Provider as described above. The Service Provider shall not be required to give notice of its intent to subcontract Services to any Third Party Provider listed on the applicable Schedule, nor shall the Service Recipient have any right to cancel any Service subcontracted to any such listed party pursuant to this Section 2.4(b) (provided that this sentence shall not prevent the Service Recipient from cancelling any Service pursuant to Section 6.1), and the Parties agree that any such Third Party Providers are capable of providing a quality or level of Services comparable to that provided by the Service Provider.
(ii) Except as provided in a particular Schedule, the Service Provider shall take into consideration any reasonable requests of the Service Recipient with regard to attempting to maintain as much continuity of personnel or representatives that provide any of the applicable Services as is reasonably practicable; provided, that the Service Provider will retain the right to determine which personnel or representatives will provide the Services in its reasonable discretion taking into consideration any competing needs and requirements for its businesses. Each Service Provider shall be solely responsible for the payment of all benefits and any other direct and indirect compensation for such Service Provider personnel assigned to
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perform Services under this Agreement, as well as such personnels workers compensation insurance and employment taxes, and other employer liabilities relating to such personnel as required by law.
(c) Without limiting the provisions of Section 11.10, at all times during the performance of the Services, all Persons performing such Services (including agents, temporary employees and Third Party Providers) shall be construed as being independent from the Service Recipient and the other members of the Service Recipient Group, and (except as stated in the Louisiana Exception below) such Persons shall not be entitled to any employee benefits or other forms of compensation of or from the Service Recipient or the other members of the Service Recipient Group nor, except as stated in the Louisiana Exception below, be considered or deemed to be employees of the Service Recipient or any member of the Service Recipient Group as a result of this Agreement. In all cases where the Service Providers (or its Affiliates) employees (which shall be defined to include, but not be limited to, direct, borrowed, special or statutory employees) are covered by the Louisiana Workers Compensation Act, La. R.S. 23:1021 et seq. (the Louisiana Exception): (i) the Parties agree that all Services performed by the Service Provider and its (or its Affiliates) employees pursuant to this Agreement are an integral part of and are essential to the ability of the Service Recipient to generate its goods, products and services for purposes of La. R.S. 23:1061(A)(1); (ii) the Service Recipient agrees that it is the principal or statutory employer of the Service Providers (or its Affiliates) employees who are performing services for the Service Recipient pursuant to this Agreement for purposes of La. R.S. 23:1061(A)(3); and (iii) this provision is included for the sole purpose of establishing a statutory employer relationship to gain the benefits expressed in La. R.S. 23:1031 and La. R.S. 23:1061(A), and is not intended to create an employer-employee relationship for any other purpose.
(d) Unless expressly provided otherwise in this Agreement, although the Service Provider will direct the performance of its Employees, agents and Third Party Providers and will consult with and advise the Service Recipient regarding the performance of the Services in accordance with this Agreement, the Service Recipient will be responsible for decision-making on behalf of any member of the Service Recipient Group. Furthermore, nothing in this Agreement shall provide the Service Provider, or its Employees, agents and Third Party Providers that are performing the Services, the right directly or indirectly to control or direct the operations of the Service Recipient. Such Employees, agents and Third Party Providers shall not be required to report to management of the Service Recipient nor be deemed to be under the management or direction of the Service Recipient (except as otherwise stated in the Louisiana Exception). The Service Recipient acknowledges and agrees that, except as may be expressly set forth herein as a Service (including any Additional Services) or otherwise expressly set forth in the Separation and Distribution Agreement or another Ancillary Agreement, no member of the Service Provider Group shall be obligated to provide, or cause to be provided, any service or goods to any member of the Service Recipient Group.
2.5. Cooperation and Service Coordinators.
(a) Subject to the confidentiality provisions set forth in Article IX, during the term of this Agreement and for so long as any Services are being provided to members of the Service Recipient Group under this Agreement, the Service Recipient will provide the Service
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Provider and its authorized representatives reasonable access, during regular business hours and upon reasonable notice, to the Service Recipient Group and their Employees, representatives, facilities and books and records as the Service Provider and its representatives may reasonably require in order to perform such Services. Similarly, and subject to the same restrictions and conditions set forth above, the Service Provider will provide the Service Recipient and its authorized representatives reasonable access, during regular business hours and upon reasonable notice, to the members of the Service Provider Group and their Employees, representatives, facilities and books and records as the Service Recipient may reasonably require in connection with performance of its obligations and exercise of its rights under this Agreement, including rights to confirm or verify the Services.
(b) The Service Provider will devote such time and personnel as is reasonably necessary to carry out its obligations under this Agreement. The Service Provider and the Service Recipient shall cooperate with one another and provide such further assistance as the other Party may reasonably request in connection with the provision of Services hereunder.
(c) Each Party shall select in writing a representative to act as the primary contact with respect to the provision of the Services and the resolution of disputes under this Agreement (each such person, a Transition Coordinator). The initial Transition Coordinators shall be Glenda M. Schwarz, for ConocoPhillips, and C. Doug Johnson, for Phillips 66. The Transition Coordinators shall meet as expeditiously as possible to resolve any dispute hereunder; and any dispute that is not resolved by the Transition Coordinators within forty-five (45) calendar days shall be resolved in accordance with the dispute resolution procedures set forth in Section 11.8. The Parties may elect to designate individual coordinators for individual Services or groups of Services by designating such individuals in the applicable Schedule. The authority of such individual coordinator shall be limited to the designated Service or group of Services. Additionally, a Transition Coordinator may, by written notice to the other Transition Coordinator, designate one or more individuals as individual coordinators for certain classes or types of Services. Such written notice will identify the area of responsibility and any limitations on the authority of the designated individual. In either case, each such individual coordinator will hereinafter be referred to as a Service Coordinator. Each Party may treat an act of the Transition Coordinator (or of a Service Coordinator with respect to its assigned area of responsibility) of the other Party which is consistent with the provisions of this Agreement as being authorized by such other Party without inquiring behind such act or ascertaining whether such Transition Coordinator or Service Coordinator had authority to so act; provided, however, that no such Transition Coordinator or Service Coordinator shall have authority to amend this Agreement. The Service Provider and the Service Recipient shall advise each other promptly (in any case within no more than three (3) Business Days) in writing of any change in their respective Transition Coordinators, setting forth the name of the replacement, and stating that the replacement Transition Coordinator is authorized to act for such Party in accordance with this Section2.5(c). Any change in Service Coordinators shall be handled by similar written notification from the applicable Transition Coordinator.
(d) The Transition Coordinators (and/or the Service Coordinators with respect to their assigned areas of responsibility) may establish, by mutual agreement, procedures and protocols for communication, invoicing, payment and other functions under this Agreement that will supplement and implement the requirements and obligations specifically set forth in this Agreement.
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2.6. Service Boundaries and Scope.
(a) Except as provided in a Schedule for a specific Service: (i) the Service Provider shall be required to provide, or cause to be provided, the Services only at the locations such Services were being provided by any member of the Service Provider Group for any member of the Service Recipient Group immediately prior to the Distribution Date; provided, however, that, to the extent any such Service is to be provided by an Employee of the Service Provider who did not work for the Service Provider prior to the Distribution Date or who was relocated by the Service Provider, such Service shall, to the extent feasible, only be provided by such Employee from the location at which such Employee is based; and (ii) the Services shall be available only for purposes of conducting the business of the Service Recipient Group substantially in the manner in which it was conducted immediately prior to the Distribution Date. Except as provided in a Schedule for a specific Service, in providing, or causing to be provided, the Services, the Service Provider shall not be obligated to: (A) maintain the employment of any specific Employee or hire additional Employees or Third Party Providers; (B) purchase, lease or license any additional equipment (including computer equipment, furniture, furnishings, fixtures, machinery, vehicles, tools and other tangible personal property), software or other assets, rights or properties; (C) make modifications to its existing systems or software; (D) provide any member of the Service Recipient Group with access to any systems or software other than those to which had authorized access immediately prior to the Distribution Date; (E) pay any costs related to the transfer or conversion of data of any member of the Service Recipient Group or (F) devote the efforts of any particular personnel providing the Services exclusively for the benefit of the Service Recipient, recognizing that such personnel may engage in other activities the Service Provider considers appropriate, whether or not related to this Agreement. The Service Recipient acknowledges (on its own behalf and on behalf of the other members of the Service Recipient Group) that the Employees of the Service Provider or any other members of the Service Provider Group who may be assisting in the provision of Services hereunder are at-will employees and, as such, may terminate or be terminated from employment with the Service Provider or any of the other members of the Service Provider Group at any time for any reason (it being understood that, except as specifically provided in a Schedule to this Agreement, nothing in this Agreement shall preclude or in any way affect any right of a Service Provider to terminate any of its Employees, including those who may be assisting in the provisions of Services hereunder, whether such Employee is or was employed at-will or otherwise). For the avoidance of doubt and except as may hereafter be designated as Additional Services in accordance with Section 2.2, the Services do not include any services required for or that may result from any business acquisitions, divestitures, start-ups or terminations by the Service Recipient Group occurring following the Distribution Date. To the extent the Service Recipient desires the Service Provider to provide any services in connection with any such acquisitions, divestitures, start-ups or terminations, the Service Recipient shall follow the procedures for requesting Additional Services pursuant to Section 2.2.
(b) Subject to Sections 2.2, 2.6 and 2.7, the Parties acknowledge the transitional nature of the Services and that the Service Provider may make changes from time to time in the manner of performing the Services; provided, that such changes do not materially decrease the quality or level of the Services provided to the Service Recipient.
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2.7. Standard of Performance; Limitation of Liability.
(a) Unless otherwise provided to the contrary in a Schedule, the Service Provider warrants that the Services shall be performed with the same general degree of care, at the same general level and at the same general degree of responsiveness, as when performed within the ConocoPhillips organization (including, for this purpose, Phillips 66 and its Subsidiaries) prior to the Distribution Date, and, if any such Services wee not performed within the ConocoPhillips organization prior to the Distribution Date, then such Services shall be performed with the same degree of care and with substantially the same service levels as the Service Provider performs comparable services for itself. It is understood and agreed that the Service Provider is not a professional provider of the types of services included in the Services and that the Service Provider personnel performing Services have other responsibilities and will not be dedicated full-time to performing Services hereunder.
(b) Notwithstanding anything to the contrary in this Agreement, no Service Provider shall be required to perform Services hereunder or take any actions relating thereto that conflict with or violate any applicable law, contract, license, authorization, certification or permit or the Service Providers governance policies, as they may be amended from time to time. Without limiting the above, the provision of the Services may require consents, waivers, or approvals from certain third parties under permits, licenses and agreements to which the Service Provider, the Service Recipient or one of their respective Affiliates is a party (a Third Party License) to enable the Service Provider to provide the Services. The Parties shall promptly notify each other, providing reasonable detail of any specific impairment in the ability to provide any Services by reason of the limitations described in this Section2.7(b). The Parties will use commercially reasonable efforts to develop a resolution that enables the Service Provider to continue the provision of the Services, including obtaining any required consents, waivers or approvals under a Third Party License, with the costs of obtaining such consents, waivers or approvals being the responsibility of the Service Recipient. If no commercially reasonable resolution is available within sixty (60) calendar days of notice of such impairment, either Party may immediately terminate the affected Service by providing written notice to the other Party. To the extent permitted by any applicable contracts of the Service Recipient, the Service Recipient hereby grants to the Service Provider a limited, nontransferable license, without the right to sublicense (except to an Affiliate of the Service Provider or a Third Party Provider who is providing Services on the Service Providers behalf, solely to the extent necessary for such Affiliate or Third Party Provider to provide the Services), for the term of this Agreement, to use the intellectual property owned by the Service Recipient solely to the extent necessary for the Service Provider to perform its obligations hereunder.
(c) In the event the Services are not provided in accordance with the warranty set forth in Section 2.7(a), then, at the Service Recipients request, the Service Provider shall re-perform such Services to the extent necessary to correct the failure as soon as reasonably practicable, with the same degree of care used in correcting a failure of a similar service for itself, at no additional cost to the Service Recipient. The foregoing sets forth the sole and exclusive remedy of the Service Recipient with respect to any failure of the Service Provider to
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meet the warranty and the Service Providers liabilities under this Section 2.7(c) are subject to the liability cap set forth in Section 2.7(h); provided, that in the event the Service Provider defaults in the manner described in clause (ii) of Section 7.1, the Service Recipient shall have the further rights set forth in Article VII.
(d) Notwithstanding anything to the contrary in this Agreement, except to the extent caused by a Service Provider and to the extent such Service Provider is otherwise liable under this Agreement, the Service Provider shall not be liable to the Service Recipient for any breach of any agreement by a Third Party Provider; provided, that the Service Provider shall use commercially reasonable efforts to enforce the terms of such agreements.
(e) The Parties recognize that some of the Services are being provided by the Service Provider in conjunction with the Employees of the Service Recipient and other members of the Service Recipient Group. To the extent that such Employees are not made available to provide the Services in conjunction with the Service Provider, then the Service Provider shall be relieved of its obligations to provide such Services to the extent that such services were dependent on the availability of such Employees.
(f) It is the intent of the Service Provider to plan and staff such that the Service Provider can completely fulfill the needs of the Service Recipient as well as the Service Providers own needs, and the Service Provider does not anticipate the need for any rationing or limitation of Services. Notwithstanding the foregoing, the Service Recipient acknowledges and agrees that the Service Provider shall have the right to establish reasonable priorities between the needs of the Service Provider, on the one hand, and the needs of the Service Recipient, on the other hand, as to the provision of any Service if the Service Provider determines that such priorities are necessary to avoid any adverse affect on the Service Provider. If any such priorities are established, the Service Provider shall advise the Service Recipient as soon as possible of any Service that will be materially delayed as a result of such prioritization, and will use commercially reasonable efforts to minimize the duration and impact of such delays.
(g) IN CONSIDERATION OF THE EXPRESS WARRANTY PROVIDED IN SECTION 2.7(A) AND THE EXPRESS REMEDY FOR BREACH THEREOF PROVIDED IN SECTION 2.7(C), NO OTHER REPRESENTATIONS, WARRANTIES OR GUARANTIES OF ANY KIND, EXPRESSED OR IMPLIED (INCLUDING THE WARRANTIES OF NON-INFRINGEMENT, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR CONFORMITY TO ANY REPRESENTATION OR DESCRIPTION), ARE MADE BY THE SERVICE PROVIDER WITH RESPECT TO THE SERVICES, AND, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ALL SUCH REPRESENTATIONS, WARRANTIES AND GUARANTEES ARE HEREBY WAIVED AND DISCLAIMED. THE SERVICE RECIPIENT (ON ITS OWN BEHALF AND ON BEHALF OF EACH OTHER MEMBER OF THE SERVICE RECIPIENT GROUP) HEREBY EXPRESSLY WAIVES ANY RIGHT SERVICE RECIPIENT OR ANY MEMBER OF THE SERVICE RECIPIENT GROUP MAY OTHERWISE HAVE FOR ANY LOSSES, TO ENFORCE SPECIFIC PERFORMANCE OR TO PURSUE ANY OTHER REMEDY AVAILABLE IN CONTRACT, AT LAW OR IN EQUITY OTHER THAN THE SPECIFIC, LIMITED RIGHT AND REMEDY SET FORTH IN SECTION 2.7(C) IN THE EVENT OF ANY INADEQUATE PERFORMANCE, FAULTY PERFORMANCE OR OTHER FAILURE OR BREACH BY THE SERVICE PROVIDER
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UNDER OR RELATING TO THIS AGREEMENT, EVEN IF RESULTING FROM THE NEGLIGENCE (WHETHER SOLE OR JOINT OR CONCURRENT OR ACTIVE OR PASSIVE) OF THE SERVICE PROVIDER OR ANY THIRD PARTY PROVIDER AND WHETHER DAMAGES ARE ASSERTED IN CONTRACT OR TORT, UNDER FEDERAL, STATE OR NON U.S. LAWS OR OTHER STATUTE.
(h) NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL THE MEMBERS OF THE SERVICE PROVIDER GROUP BE LIABLE TO THE MEMBERS OF THE SERVICE RECIPIENT GROUP PURSUANT TO THIS SECTION 2.6 FOR AMOUNTS IN THE AGGREGATE EXCEEDING THE AGGREGATE SERVICE CHARGES PAID HEREUNDER BY THE MEMBERS OF THE SERVICE RECIPIENT GROUP.
2.8. Precedence of Schedules. Each Schedule attached to or referenced in this Agreement is hereby incorporated into and shall form a part of this Agreement by reference; provided, however, that the terms contained in such Schedule shall only apply with respect to the Services provided under that Schedule. In the event of a conflict between the terms contained in an individual Schedule and the terms in the body of this Agreement, the terms in the Schedule shall take precedence with respect to the Services under such Schedule only. No terms contained in individual Schedules shall otherwise modify the terms of this Agreement.
2.9. Leases and Subleases. Certain of the Schedules shall incorporate by reference separately executed lease arrangements (each, a Lease) or sublease agreements (each, a Sublease) with respect to certain office spaces identified in the applicable Schedule in accordance with the specific language in the applicable Schedule. Each such Lease or Sublease shall be substantially in the form attached to the applicable Schedule, with modifications to the form as may be necessary in order to comply with the requirements of the Group occupying the applicable space, or with the requirements of a particular Lease for any such space or of a third party landlord, or as may be beneficial to the Parties based on the provisions of any such Lease. Notwithstanding the form attached to a Schedule, the executed Lease or Sublease shall be the document incorporated into the applicable Schedule, and, notwithstanding anything to the contrary contained in this Agreement or the applicable Schedule, the rights and obligations of the Groups with respect to the occupancy of any particular office space shall be governed by the applicable Lease or Sublease. In the event of any inconsistency between the terms of this Agreement, the applicable Schedule and/or the applicable Lease or Sublease, the terms of the applicable Lease or Sublease shall control and be binding on both Parties and their respective Groups. Each Party shall take all reasonable actions to assure that all property occupied by personnel of both Groups are clearly marked to delineate the separation between them.
ARTICLE III
SERVICE CHARGES
3.1. Compensation. Subject to the specific terms of this Agreement, the compensation to be received by the Service Provider for each Service provided hereunder will be the fees or charges set forth in or calculated in the manner set forth in the Schedule relating to the particular Service, subject only to any escalation, reduction or other modifications provided for in such Schedule. In consideration for the provision of a Service, each member of the Service Recipient
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Group receiving such Service shall pay to the Service Provider, in the manner set forth in Article IV below, the fee or charge for such Service as set forth in or calculated in the manner set forth in the applicable Schedule.
ARTICLE IV
PAYMENT
4.1. Payment.
(a) Each month, the Transition Coordinator for ConocoPhillips shall prepare an invoice that identifies, with reasonable detail, all the Services performed in the prior month by ConocoPhillips and the other members of the ConocoPhillips Group for Phillips 66 and the other members of the Phillips 66 Group along with the charges for each Service, and the Transition Coordinator for Phillips 66 shall prepare an invoice that identifies, with reasonable detail, all the Services performed by Phillips 66 and the other members of the Phillips 66 Group for ConocoPhillips and the other members of the ConocoPhillips Group along with the charges for each Service. Each such invoice shall be broken down to show the Services performed by the Service Provider pursuant to each Schedule, shall detail the charge for each Service in accordance with the applicable Schedule and shall be supported by any applicable third party invoices and other documentation reasonably necessary for the Service Recipient to evaluate the charges. If the Service Provider incurs any out-of-pocket expenses (including any incremental license fees incurred by the Service Provider in connection with performance of the Services and any travel expenses incurred at the request or with the consent of the Service Recipient) or remits funds to a third party on behalf of the Service Recipient, in either case in connection with the rendering of Services, then the Service Provider shall include such amount in its monthly invoice to the Service Recipient, with reasonable supporting documentation.
(b) Each invoice shall be directed to the Service Recipients Transition Coordinator or such other person designated in writing from time to time by such Transition Coordinator. Except as otherwise set forth in Section 4.1(d) or 4.1(e), the Service Recipient shall pay the total amount of the invoice to the Service Provider no later than twenty (20) calendar days after receipt of the invoice. Unless otherwise provided in this Agreement, the Service Recipient shall remit funds in payment of invoices provided hereunder either by wire transfer or Automated Clearing House in accordance with the payment instructions provided in the invoice. Any obligation to make payment for Services provided hereunder shall survive the termination of this Agreement.
(c) Except as otherwise set forth in Section 4.1(d) or Section 4.1(e) below or in an applicable Schedule, all charges from all Schedules shall be accumulated as set forth in Section 4.1(a), shall be invoiced as set forth in Section 4.1(b), shall be denominated in United States dollars, and shall be paid in United States dollars.
(d) Notwithstanding anything to the contrary above, the Service Provider shall have the option to forward the invoices of any Third Party Provider directly to the Service Recipient for its payment to the Third Party Provider, rather than the procedures set forth in Sections 4.1(a) and (b). If the Service Provider makes such election, the Service Provider shall provide the Third Party Providers invoice promptly so that the Service Provide may process and
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provide payment to the Third Party in a timely manner, and the Service Recipient shall be responsible to pay the Third Party Provider directly in accordance with the terms of the applicable agreement the Service Provider has with (and the invoice from) the Third Party Provider.
(e) Notwithstanding the requirements in Sections 4.1(a) through (c) above, in the event the Services under a particular Schedule are performed by a particular Service Provider outside the United States and/or are received by a Service Recipient outside the United States, the Service Provider and Service Recipient shall organize and implement alternative invoicing and payment procedures in order to comply with local requirements and/or minimize the overall tax exposure for any party. In such event, the Service Provider and the Service Recipient shall provide both Transition Coordinators with contemporaneous copies of all correspondence, invoicing and proof of payment.
(f) Interest will accrue on any amounts remaining unpaid at the due date for such payment at five percent (5%) per annum (compounded monthly) or, if less, the maximum non-usurious rate of interest permitted by applicable law, until such amounts, together with all accrued and unpaid interest thereon, are paid in full.
4.2. Payment Disputes. The Service Recipient may object to any amounts for any Service at any time before, at the time of, or after payment is made, provided such objection is made in writing to the Service Provider within one hundred twenty (120) calendar days following the date of the disputed invoice. The Service Recipient shall timely pay the disputed items in full while resolution of the dispute is pending; provided, however, that the Service Provider shall pay interest at a rate of five percent (5%) per annum (compounded monthly) on any amounts it is required to return to the Service Recipient upon resolution of the dispute. Payment of any amount shall not constitute approval thereof. The Transition Coordinators shall meet as expeditiously as possible to resolve any dispute. Any dispute that is not resolved by the Transition Coordinators within forty-five (45) calendar days shall be resolved in accordance with the dispute resolution and arbitration procedures set forth in Section 11.8. Neither Party (nor any member of its respective Group) shall have a right of set-off against the other Party (or any member of its respective Group) for billed amounts hereunder. Upon written request, the Service Provider will provide to the Service Recipient reasonable additional detail and support documentation to permit the Service Recipient to verify the accuracy of an invoice.
4.3. Records; Review of Charges; Error Correction. The Service Provider shall maintain true and correct records of all receipts, invoices, reports and other documents relating to the Services hereunder in accordance with its standard accounting practices and procedures, consistently applied. Such records (including invoices of third parties) shall be sufficient to calculate, and allow the Service Recipient to verify, the amounts owed under this Agreement. The Service Provider shall retain such accounting records and make them available to the Service Recipients authorized representatives and auditors for a period of not less than one year from the termination of this Agreement; provided, however, that the Service Provider may, at its option, transfer such accounting records to the Service Recipient upon termination of this Agreement. From time to time during such period, the Service Recipient shall have the right to review such books and records to verify the accuracy of such amounts, provided that such reviews shall not occur more frequently than once per calendar quarter. Each such review shall
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be conducted during normal business hours and in a manner that does not unreasonably interfere with the operations of the Service Provider. If, as a result of any such review, the Service Recipient determines that it overpaid any amount to the Service Provider, then the Service Recipient may raise an objection pursuant to the provisions of Section 4.2. The Service Recipient shall bear the cost and expense of any such review. The Service Provider shall make adjustments to charges as required to reflect the discovery of errors or omissions in charges. By way of clarification, the procedure in Section 4.2 provides the only means by which the Service Recipient may challenge specific charges in invoices from the Service Provider, and the procedures in this Section 4.3 are only for the purpose of correcting errors in calculations or documentation.
4.4. Taxes.
(a) The Service Recipient shall be entitled to withhold from sums otherwise due to the Service Provider under this Agreement any income, excess profits and/or other taxes required by applicable law to be withheld and shall pay the taxes withheld by the Service Recipient when due to the applicable taxing authorities. Further, the Service Recipient shall gross up its payment to the Service Provider so that the amount that the Service Provider receives is the same that it would have received had the withholding taxes imposed by the applicable tax authorities not applied; provided, however, that the Service Recipient shall not be required to gross up its payment to the Service Provider for any withholding taxes that are attributable to the failure of the Service Provider to comply with the final sentence of this Section 4.4(a). The Service Recipient shall provide the Service Provider with official governmental tax receipts (or certified copies of such tax receipts) evidencing payment of taxes withheld or other evidence of such payment reasonably satisfactory to the Service Provider. Should the Service Provider be entitled to claim exemption from or reduction of withholding under applicable law with respect to payments to the Service Provider under this Agreement, the Service Provider shall provide the Service Recipient (to the extent the Service Provider is entitled to do so under applicable law) with all properly completed forms or other evidence as may be required by applicable law to substantiate that the Service Recipient is entitled to claim such exemption or reduction.
(b) All transfer taxes, excises, fees or other charges (including value added, sales, use or receipts taxes, but not including any tax on or measured by the income, net or gross revenues, business activity or capital of a member of the Service Provider Group), or any increase therein, now or hereafter imposed directly or indirectly by law upon any fees paid hereunder for Services, which a member of the Service Provider Group is required to pay or incur in connection with the provision of Services hereunder (Tax), shall, to the extent allowed by law, be passed on to the Service Recipient as an explicit surcharge and shall be paid by the Service Recipient in addition to any Service fee payment, whether included in the applicable Service fee payment, or added retroactively. If the Service Recipient submits to the Service Provider a timely and valid resale or other exemption certificate acceptable to the Service Provider and sufficient to support the exemption from Tax, then such Tax will not be added to the Service fee; provided, however, that if a member of the Service Provider Group is ever required to pay such Tax pursuant to a final determination by the applicable tax authorities, the Service Recipient will promptly reimburse the Service Provider for such Tax, including any interest, penalties and attorneys fees related thereto.
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(c) The Parties shall reasonably cooperate to minimize the imposition of any taxes with respect to any fees paid for Services or to obtain a refund of such taxes. In the event that the Service Provider receives a refund of any taxes with respect to which the Service Recipient had grossed up its payment to the Service Provider under Section 4.4(a) or any taxes paid by the Service Recipient under Section 4.4(b), the Service Provider shall pay over such refund to the Service Recipient (but only to the extent the additional amounts paid by the Service Recipient under Section 4.4(a) or (b) with respect to taxes giving rise to such refund), net of all out of pocket expenses of the Service Provider (including any taxes imposed with respect to such refund) as is determined by the Servicer Provider in good faith and its sole discretion; provided, however, that in the event the Service Provider is required to repay such refund to the applicable tax authorities, the Service Recipient will promptly reimburse the Service Provider the amount of such refund paid over to the Service Recipient, including any interest or penalties related thereto imposed by the applicable tax authorities.
ARTICLE V
TERM
5.1. Term. Subject to Articles VI and VII, the members of the Service Provider Group shall provide the specific Services to the members of the Service Recipient Group pursuant to this Agreement for the time period set forth in the Schedule relating to the specific Service. In accordance with the Separation and Distribution Agreement and Article VI, the Service Recipient shall use commercially reasonable efforts to provide, and to terminate as soon as reasonably practicable, the specified Services to the applicable Service Recipient. Unless a specific Service or group of related Services is specified in the applicable Schedule to terminate earlier or a particular Service is extended beyond such date, all Services shall terminate one (1) year from the Distribution Date. Except as otherwise expressly agreed or unless sooner terminated, this Agreement shall commence upon the Distribution Date and shall continue in full force and effect between the Parties for so long as any Service set forth in any Schedule hereto is being provided to a Service Recipient, and this Agreement shall terminate upon the cessation of all Services provided hereunder; provided that Articles I, IV, VIII, IX and XI and Sections 2.7(g) and (h) will survive the termination of this Agreement and any such termination shall not affect any obligation for the payment of Services rendered prior to termination. Notwithstanding any of the foregoing, including any extensions of this Agreement or of the period of performance of any particular Service, this Agreement cannot be extended beyond, and all Services shall terminate no later than, eighteen (18) months from the Distribution Date.
ARTICLE VI
DISCONTINUATION OF SERVICES
6.1. Discontinuation or Termination of Services.
(a) Unless otherwise provided in the relevant Schedule for a particular Service, at any time after the Distribution Date, the Service Recipient may, without cause and in accordance with the terms and conditions hereunder and the Separation and Distribution Agreement direct the discontinuation or termination of one or more specific Services by giving the Service Provider at least sixty (60) calendar days prior written notice or such other shorter notice specifically agreed by the Parties. Furthermore, any such discontinuation or termination
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will affect the amounts payable to the Service Provider under this Agreement in the following manner: (i) to the extent that the charges for the discontinued or terminated Services have been separately identified in the applicable Schedule, such separately identified charges shall not apply following the discontinuation or termination of those Services; and (ii) from month to month, the Service Coordinators shall agree on the percentage reduction in Services and a commensurate percentage reduction in the amounts payable by the Service Recipient with respect to any Services which have been partially discontinued or terminated or for which the scope or amount has been narrowed. The Service Recipient shall be liable to the Service Provider for all costs and expenses the Service Provider or any member of the Service Provider Group remains obligated to pay in connection with any discontinued or terminated Service or Services (including to a Third Party Provider), except in the case of a Service terminated by the Service Recipient pursuant to clause (ii) of the first sentence of Section 7.1. The Parties shall cooperate as reasonably required to effectuate an orderly and systematic transfer to the Service Recipient Group of all of the duties and obligations previously performed by the Service Provider or a member of the Service Provider Group under this Agreement.
(b) Upon a Change in Control of the Service Recipient or in the event the Service Recipient becomes a competitor of the Service Provider or a member of the Service Provider Group or becomes affiliated with a competitor of the Service Provider or of a member of the Service Provider Group, the Service Provider shall have the right, in its sole discretion, to terminate this Agreement or any or all of the applicable Services being provided under this Agreement upon thirty (30) calendar days prior written notice. For purposes of this Agreement, the term Change in Control shall have the meaning ascribed to such term in the 2011 Omnibus Stock and Performance Incentive Plan of ConocoPhillips, as such plan exists as of the date hereof and with the term Company as used in such definition to mean either ConocoPhillips or Phillips 66 as applicable.
6.2. Procedures Upon Discontinuation or Termination of Services. Upon the discontinuation or termination of a Service hereunder, this Agreement shall be of no further force and effect with respect to such Service, except as otherwise provided in the Schedule for the specific Service and except as to obligations accrued prior to the date of discontinuation or termination; provided, however, that Articles I, IV, VIII, IX and XI and Sections 2.7(g) and 2.7(h) of this Agreement shall survive such discontinuation or termination. Each Party shall, within sixty (60) calendar days after discontinuation or termination of a Service, deliver to the other Party originals of all books, records, contracts, receipts for deposits and all other papers or documents in its Groups possession which pertain exclusively to the business of the other Group and relate to such Service; provided that a Party may retain copies of material provided to the other Party pursuant to this Section 6.2 as it deems necessary or appropriate in connection with its financial reporting obligations or internal control practices and policies.
6.3. Transition From Services. It is the express intent of the Parties and the members of their respective Groups that, notwithstanding the terms or schedules for performance of the Services provided or referenced in this Agreement, including in Article V and in the Schedules, the performance of Services pursuant to this Agreement be terminated as soon as possible. Consequently, each Service Recipient agrees to use commercially reasonable efforts to reduce or eliminate its dependency on each Service as soon as reasonably practicable. Each Party agrees, on its behalf and on behalf of the other members of its Group, to facilitate the smooth transition of the Services from being performed by the Service Provider to being performed by the Service Recipient for itself.
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ARTICLE VII
DEFAULT
7.1. Termination for Default. In the event (i) of a failure of the Service Recipient to pay for Services in accordance with the terms of this Agreement, or (ii) any Party or member of its Group shall default, in any material respect, in the due performance or observance by it of any of the other terms, covenants or agreements contained in this Agreement, then the non-defaulting Party shall have the right, at its sole discretion, to terminate the Service with respect to which the default occurred; provided that the defaulting Party shall have the right to cure or cause the cure of such default within thirty (30) calendar days of receipt of the written notice of such default and thereby avoid the termination. The Service Recipients right to terminate this Agreement pursuant to this Article VII and the rights set forth in Section 2.7 shall constitute the Service Recipients sole and exclusive rights and remedies for a breach by the Service Provider hereunder (including any breach caused by an Affiliate of the Service Provider or a Third Party Provider).
ARTICLE VIII
INDEMNIFICATION AND WAIVER
8.1. Personnel of ConocoPhillips Group. CONOCOPHILLIPS SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS EACH OF THE MEMBERS OF THE PHILLIPS 66 GROUP AND THEIR RESPECTIVE OFFICERS AND EMPLOYEES FROM AND AGAINST ANY AND ALL CAUSES OF ACTION, CLAIMS, SUITS, LOSSES, LIABILITIES, FINES, PENALTIES, COSTS, DAMAGES, JUDGMENTS, AWARDS AND EXPENSES, INCLUDING, BUT NOT LIMITED TO, COURT COSTS AND ATTORNEYS FEES (CLAIMS) ARISING OUT OF OR RELATED IN ANY WAY TO PERSONAL INJURY, DISEASE OR DEATH OF THE EMPLOYEES OR OFFICERS OF THE MEMBERS OF THE CONOCOPHILLIPS GROUP ARISING OUT OF OR OCCURRING IN CONNECTION WITH THIS AGREEMENT AND/OR PERFORMANCE OF SERVICES HEREUNDER, REGARDLESS OF THE TIMING OR NATURE OR STYLE OF SUCH CLAIMS AND REGARDLESS OF THE IDENTITY OF THE CLAIMANT INCLUDING, BUT NOT LIMITED TO, THE EMPLOYEE OR OFFICER HIMSELF AND THEIR RESPECTIVE REPRESENTATIVES, AGENTS, HEIRS, BENEFICIARIES, ASSIGNS AND FAMILY MEMBERS.
8.2. Personnel of Phillips 66 Group. PHILLIPS 66 SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS EACH OF THE MEMBERS OF THE CONOCOPHILLIPS GROUP AND THEIR RESPECTIVE OFFICERS AND EMPLOYEES FROM AND AGAINST ANY AND ALL CLAIMS ARISING OUT OF OR RELATED IN ANY WAY TO PERSONAL INJURY, DISEASE OR DEATH OF THE EMPLOYEES OR OFFICERS OF THE MEMBERS OF THE PHILLIPS 66 GROUP ARISING OUT OF OR OCCURRING IN CONNECTION WITH THIS AGREEMENT AND/OR PERFORMANCE OF SERVICES HEREUNDER, REGARDLESS OF THE TIMING OR NATURE OR STYLE OF SUCH CLAIMS AND REGARDLESS OF THE IDENTITY OF THE CLAIMANT INCLUDING, BUT NOT LIMITED TO, THE EMPLOYEE OR OFFICER HIMSELF AND THEIR RESPECTIVE REPRESENTATIVES, AGENTS, HEIRS, BENEFICIARIES, ASSIGNS AND FAMILY MEMBERS.
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8.3. Property Of Conocophillips Group. CONOCOPHILLIPS SHALL BE LIABLE FOR AND SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS EACH OF THE MEMBERS OF THE PHILLIPS 66 GROUP AND THEIR RESPECTIVE OFFICERS AND EMPLOYEES FROM AND AGAINST ANY AND ALL CLAIMS ARISING OUT OF OR RELATED IN ANY WAY TO PHYSICAL DAMAGE TO OR LOSS OF THE PROPERTY OF THE MEMBERS OF THE CONOCOPHILLIPS GROUP OR THE PROPERTY OF THEIR RESPECTIVE EMPLOYEES OR OFFICERS, INCLUDING ENVIRONMENTAL CONTAMINATION OF SUCH PROPERTY, ARISING OUT OF OR OCCURRING IN CONNECTION WITH THIS AGREEMENT AND/OR PERFORMANCE OF SERVICES HEREUNDER.
8.4. Property of Phillips 66 Group. PHILLIPS 66 SHALL BE LIABLE FOR AND SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS EACH OF THE MEMBERS OF THE CONOCOPHILLIPS GROUP AND THEIR RESPECTIVE OFFICERS AND EMPLOYEES FROM AND AGAINST ANY AND ALL CLAIMS ARISING OUT OF OR RELATED IN ANY WAY TO PHYSICAL DAMAGE TO OR LOSS OF THE PROPERTY OF THE MEMBERS OF THE PHILLIPS 66 GROUP OR THE PROPERTY OF THEIR RESPECTIVE EMPLOYEES OR OFFICERS, INCLUDING ENVIRONMENTAL CONTAMINATION OF SUCH PROPERTY, ARISING OUT OF OR OCCURRING IN CONNECTION WITH THIS AGREEMENT AND/OR PERFORMANCE OF SERVICES HEREUNDER.
8.5. Environmental Matters. THE SERVICE RECIPIENT AND THE SERVICE PROVIDER AGREE THAT IN NO EVENT SHALL THE SERVICE PROVIDER BE CONSIDERED TO BE THE GENERATOR OF ANY WASTE MATERIAL AND ALL DECISIONS REGARDING THE SELECTION OF OFF-SITE DISPOSAL SITES OR OPTIONS IN CONNECTION WITH THE SERVICES SHALL BE MADE EXCLUSIVELY BY SERVICE RECIPIENT. ACCORDINGLY, EXCEPT AS SET FORTH IN SECTIONS 8.1 THROUGH 8.4 ABOVE, THE SERVICE RECIPIENT SHALL BE LIABLE FOR AND SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS EACH OF THE MEMBERS OF THE SERVICE PROVIDER GROUP AND THEIR RESPECTIVE OFFICERS AND EMPLOYEES FROM AND AGAINST ANY AND ALL CLAIMS RELATED TO OR ARISING OUT OF ENVIRONMENTAL MATTERS, POLLUTION, OR NONCOMPLIANCE WITH ENVIRONMENTAL RULES, LAWS, REGULATIONS OR AGREEMENTS IN CONNECTION WITH THIS AGREEMENT AND/OR PERFORMANCE OF SERVICES HEREUNDER.
8.6. Impact on Third Parties. THE SERVICE RECIPIENT ACKNOWLEDGES AND AGREES THAT THE SERVICES ARE OF SIGNIFICANT VALUE TO THE SERVICE RECIPIENTS BUSINESS AND ARE OF NO MATERIAL VALUE TO THE SERVICE PROVIDER OR THE OTHER MEMBERS OF THE SERVICE PROVIDER GROUP. THEREFORE, EXCEPT AS SET FORTH IN SECTIONS 8.1 THROUGH 8.5 ABOVE, THE SERVICE RECIPIENT SHALL BE LIABLE FOR AND SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS THE SERVICE PROVIDER, THE OTHER MEMBERS OF THE SERVICE PROVIDER GROUP AND THEIR RESPECTIVE OFFICERS AND EMPLOYEES FROM AND AGAINST ANY CLAIMS ARISING OUT OF OR CONNECTED WITH THE IMPACT OF THE SERVICES OR THE RESULTS OF THE SERVICES ON ANY THIRD PARTIES (PERSONS OTHER THAN MEMBERS OF THE SERVICE PROVIDER GROUP OR THE SERVICE RECIPIENT GROUP OR THEIR RESPECTIVE OFFICERS OR EMPLOYEES), INCLUDING PERSONAL INJURY OR DEATH, PROPERTY DAMAGE OR LOSS, AND MONETARY LOSS OR IMPACT.
8.7. Services Received. The Service Recipient hereby acknowledges and agrees that:
(a) the Service Providers liabilities with respect to the Services to be provided hereunder are subject to and limited by the provisions of Section 2.7, Article VII and
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the other provisions hereof, including the limitation of remedies available to the Service Recipient that restricts available remedies resulting from a Service not provided in accordance with the terms hereof to non-payment and, in certain circumstances, the right to terminate this Agreement;
(b) the Services are being provided solely to facilitate the transition of each of ConocoPhillips and Phillips 66 as separate companies as a result of the Distribution;
(c) the Service Recipient shall be responsible for and assume all risks associated with the Services, except to the limited extent set forth in Section 2.7 and Article VII and this Article VIII;
(d) with respect to any software or documentation within the Services, the Service Recipient shall use such software and documentation internally and for their intended purpose only, shall not distribute, publish, transfer, sublicense or in any manner make such software or documentation available to other organizations or persons, and shall not act as a service bureau or consultant in connection with such software; and
(e) a material inducement to the Service Providers agreement to provide the Services is the limitation of liability and the release provided by the Service Recipient in this Agreement.
ACCORDINGLY, EXCEPT WITH REGARD TO THE LIMITED REMEDIES EXPRESSLY SET FORTH IN SECTION 2.7, THE SERVICE RECIPIENT SHALL ASSUME ALL LIABILITY FOR AND SHALL FURTHER RELEASE, DEFEND, INDEMNIFY AND HOLD THE SERVICE PROVIDER, THE OTHER MEMBERS OF THE SERVICE PROVIDER GROUP AND THEIR RESPECTIVE EMPLOYEES, OFFICERS, DIRECTORS AND AGENTS (ALL INDEMNIFIED PARTIES) FREE AND HARMLESS FROM AND AGAINST ALL CLAIMS OF THE SERVICE RECIPIENT AND THE OTHER MEMBERS OF THE SERVICE RECIPIENT GROUP AND OF THIRD PARTIES RESULTING FROM, ARISING OUT OF OR RELATED TO THE SERVICES PROVIDED BY ANY MEMBER OF THE SERVICE PROVIDER GROUP TO ANY MEMBER OF THE SERVICE RECIPIENT GROUP, HOWSOEVER ARISING AND WHETHER OR NOT CAUSED BY THE NEGLIGENCE OR GROSS NEGLIGENCE OF THE SERVICE PROVIDER, ANY MEMBER OF THE SERVICE PROVIDER GROUP OR ANY THIRD PARTY PROVIDER, OTHER THAN THOSE LOSSES CAUSED BY THE WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY.
8.8. Waiver of Consequential Damages.
(a) THE MEMBERS OF THE CONOCOPHILLIPS GROUP SHALL NOT BE LIABLE TO THE MEMBERS OF THE PHILLIPS 66 GROUP UNDER THIS AGREEMENT FOR ANY EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL, REMOTE OR SPECULATIVE DAMAGES (INCLUDING IN RESPECT OF LOST PROFITS OR REVENUES), HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE OR GROSS NEGLIGENCE, STRICT LIABILITY AND STATUTORY) ARISING IN ANY WAY OUT OF THIS AGREEMENT AND/OR PERFORMANCE HEREUNDER, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT EACH PARTYS INDEMNIFICATION OBLIGATIONS FOR LIABILITIES TO THIRD PARTIES AS SET FORTH IN THIS AGREEMENT, THE SEPARATION AND DISTRIBUTION AGREEMENT OR ANY OTHER ANCILLARY AGREEMENT.
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(b) THE MEMBERS OF THE PHILLIPS 66 GROUP SHALL NOT BE LIABLE TO THE MEMBERS OF THE CONOCOPHILLIPS GROUP UNDER THIS AGREEMENT FOR ANY EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL, REMOTE OR SPECULATIVE DAMAGES (INCLUDING IN RESPECT OF LOST PROFITS OR REVENUES), HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE OR GROSS NEGLIGENCE, STRICT LIABILITY AND STATUTORY) ARISING IN ANY WAY OUT OF THIS AGREEMENT AND/OR PERFORMANCE HEREUNDER, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT EACH PARTYS INDEMNIFICATION OBLIGATIONS FOR LIABILITIES TO THIRD PARTIES AS SET FORTH IN THIS AGREEMENT, THE SEPARATION AND DISTRIBUTION AGREEMENT OR ANY OTHER ANCILLARY AGREEMENT.
8.9. Express Negligence. IT IS THE EXPRESS INTENT OF THE PARTIES (I) THAT THE INDEMNITIES, RELEASES, DISCLAIMERS AND LIMITATIONS OF LIABILITY SET FORTH IN THIS AGREEMENT (INCLUDING THOSE SET FORTH IN ARTICLE II AND IN THIS ARTICLE VIII) ARE TO BE ENFORCEABLE AGAINST THE PARTIES IN ACCORDANCE WITH THE EXPRESS TERMS AND SCOPE THEREOF NOTWITHSTANDING ANY EXPRESS NEGLIGENCE RULE OR ANY SIMILAR DIRECTIVE THAT WOULD PROHIBIT OR OTHERWISE LIMIT INDEMNITIES, RELEASES, DISCLAIMERS OR LIMITATIONS OF LIABILITY; AND (II) THAT SUCH INDEMNITIES, RELEASES, DISCLAIMERS AND LIMITATIONS SHALL APPLY WHETHER THE CLAIMS ARISE OUT OF OR ARE BASED ON COMMON LAW, CIVIL LAW, MARITIME LAW, STATUTE, BREACH OF CONTRACT, POLLUTION, BREACH OF WARRANTY, OR OTHER SOURCE OR THEORY OF LAW OR LIABILITY AND EVEN IF THE CLAIM OR THE INJURY, LOSS OR DAMAGE RELATED THERETO IS CAUSED BY THE NEGLIGENCE OR GROSS NEGLIGENCE (WHETHER SOLE OR JOINT OR CONCURRENT OR ACTIVE OR PASSIVE), STRICT LIABILITY OR OTHER LEGAL FAULT OF THE PERSON RELEASED OR INDEMNIFIED THEREUNDER; PROVIDED, THAT THE INDEMNITIES, RELEASES, DISCLAIMERS AND LIMITATIONS OF LIABILITY SHALL NOT APPLY TO THE EXTENT THE CLAIM IS CAUSED BY OR RESULTS FROM THE WILLFUL MISCONDUCT OF SUCH PERSON.
ARTICLE IX
CONFIDENTIALITY
9.1. Confidentiality. The Parties each acknowledge and agree that in activities related to the performance of Services hereunder and in other interchanges between the Parties and their Groups as a result of the Distribution, each of the Parties and the members of their respective Groups will have access to information of the members of the other Group that is considered confidential or proprietary. Therefore, each of the Parties agrees to maintain all information of or regarding the other Group as confidential and not to use any such information for any purpose other than the performance of Services hereunder and/or necessary communications and cooperation between the Groups in connection with the Distribution. Each Party shall cause the members of its Group to become familiar with these requirements and shall cause such other members to comply with the requirements hereof. Notwithstanding anything to the contrary set forth above, the obligation of confidentiality shall not apply to any information which comes into the authorized possession of a Party (which, for purposes of this Article 9, shall include the Party
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itself and any member of its Group) from a source other than the other Party or which becomes part of the public domain other than due to breach of this Agreement by the Party. If a Party is required by audit requirements, legal process or other lawful order to disclose information considered confidential hereunder, such Party shall give the other Party prompt notice of such requirement in order to allow the other Party to seek elimination of such order or to seek protection of such information, but the Party receiving such process or order shall be permitted to comply with such process or order.
9.2. Access to Computer Software. A Service Provider, in its sole discretion, may limit access to and the right to use software supplied by the Service Provider in connection with the Services solely to those Employees of the Service Recipient who need such access and right to use in connection with the provision of the Services.
9.3. Data. A Service Provider is authorized to have access to and make use of all data provided by the Service Recipient or created by the Service Provider solely on behalf of the Service Recipient after the Distribution Date (New Data), as necessary and appropriate for the performance by a Service Provider of its obligations under this Agreement. A Service Provider may not use any New Data for any purpose other than providing the Services.
9.4. Change Management. During the term of this Agreement, the Service Recipient shall abide by the Service Providers documented internal change control management policies and procedures (copies of which shall be provided to the Service Recipient) in connection with its use of any software used in connection with the Services.
9.5. System Security.
(a) If any Party is given access to the other Partys computer systems or software (collectively, the Systems) in connection with the Services, the Party given access (the Accessing Party) shall comply with all of the other Partys system security policies, procedures and requirements that have been provided to the Accessing Party in advance and in writing (collectively, Security Regulations), and shall not tamper with, compromise or circumvent any security or audit measures employed by such other Party. The Accessing Party shall access and use only those Systems of the other Party to which it has been granted the right of access and use.
(b) Each Party shall use commercially reasonable efforts to ensure that only those of its personnel who are specifically authorized to have access to the Systems of the other Party gain such access, and use commercially reasonable efforts to prevent unauthorized access, use, destruction, alteration or loss of information contained therein, including notifying its personnel of the restrictions set forth in this Agreement and of the Security Regulations.
(c) If, at any time, the Accessing Party determines that any of its personnel has sought to circumvent, or has circumvented, the Security Regulations, that any unauthorized Accessing Party personnel has accessed the Systems, or that any of its personnel has engaged in activities that may lead to the unauthorized access, use, destruction, alteration or loss of data, information or software of the other Party, the Accessing Party shall promptly terminate any such persons access to the Systems and immediately notify the other Party. In addition, such
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other Party shall have the right to deny personnel of the Accessing Party access to its Systems upon notice to the Accessing Party. The Accessing Party shall use commercially reasonable efforts to cooperate with the other Party in investigating any apparent unauthorized access to such other Partys Systems.
ARTICLE X
FORCE MAJEURE
10.1. Performance Excused. Continued performance of a Service, except for any obligation to pay amounts due, may be suspended immediately to the extent the fulfillment of such Service is prevented, frustrated, hindered or delayed by any event or condition beyond the reasonable control of the Person suspending such performance (and not involving any willful misconduct of such Person), including acts of God, pandemics, floods, fire, earthquakes, labor or trade disturbances, strikes, war, acts of terrorism, civil commotion, electrical shortages or blackouts, breakdown or injury to computing facilities, compliance in good faith with any Law (whether or not it later proves to be invalid), unavailability of materials or bad weather (a Force Majeure Event). Unless the Service Provider Group incurs costs under agreements with its Third Party Providers, the Service Recipient shall not be obligated to pay any amount for Services that it does not receive as a result of a Force Majeure Event (and the Parties shall negotiate reasonably to determine the amount applicable to such Services not received). In addition to the reduction of any amounts owed by the Service Recipient hereunder, during the occurrence of a Force Majeure Event, to the extent the provision of any Service has been disrupted or reduced, during such disruption or reduction, (a) the Service Recipient may replace any such affected Service by, at its own cost, providing any such Service for itself or engaging one or more third parties to provide such Service at the expense of the Service Recipient and (b) the Service Provider shall cooperate with, provide such information to and take such other actions as may be reasonably required to assist such third parties to provide such substitute Service.
10.2. Notice. The Party claiming suspension due to a Force Majeure Event will give prompt notice to the other of the occurrence of the Force Majeure Event giving rise to the suspension and of its nature and anticipated duration.
10.3. Cooperation. Upon the occurrence of a Force Majeure Event, the Parties shall cooperate with each other to find alternative means and methods for the provision of the suspended Service.
ARTICLE XI
MISCELLANEOUS
11.1. Entire Agreement. This Agreement, together with the documents referenced herein (including the Separation and Distribution Agreement and any other Ancillary Agreement), constitutes the entire agreement and understanding between the Parties with respect to the subject matter hereof and supersedes all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof.
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11.2. Binding Effect; No Third-Party Beneficiaries; Assignment. This Agreement shall inure to the benefit of and be binding upon the Parties and their respective successors and permitted assigns; and nothing in this Agreement, express or implied, is intended to confer upon any other person or entity any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement. Except as otherwise provided in Sections 2.1 and 2.4 with respect to the assignment of certain rights and obligations to a Partys Affiliates, this Agreement may not be assigned by either Party, except with the prior written consent of the other Party.
11.3. Amendment; Waivers. No change or amendment may be made to this Agreement except by an instrument in writing signed on behalf of both of the Parties. Either Party may, at any time, (i) extend the time for the performance of any of the obligations or other acts of the other, (ii) waive any inaccuracies in the representations and warranties of the other contained herein or in any document delivered pursuant hereto, and (iii) waive compliance by the other with any of the agreements, covenants or conditions contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the Party to be bound thereby. No failure or delay on the part of either Party in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant or agreement contained herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right.
11.4. Notices. Except for invoicing and payment, modifications to or additions to the Schedules or Services (which shall be handled between the Transition Coordinators), other regular communications between the Groups as established pursuant to procedures and protocols adopted in accordance with this Agreement and as otherwise set forth in this Agreement, all notices, requests, claims, demands or other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by facsimile or electronic transmission with receipt confirmed (followed by delivery of an original via overnight courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 11.4):
If to ConocoPhillips, to:
ConocoPhillips
600 North Dairy Ashford Street
Houston, TX 77079
Attn: General Counsel
If to Phillips 66 to:
Phillips 66
600 North Dairy Ashford Street
Houston, TX 77079
Attn: General Counsel
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Any Party may, by notice to the other Party, change the address and contact person to which any such notices are to be given.
11.5. Counterparts. This Agreement, including the Schedules and Exhibits hereto and the other documents referred to herein, may be executed in multiple counterparts, each of which when executed shall be deemed to be an original but all of which together shall constitute one and the same agreement.
11.6. Severability. If any provision of this Agreement or any Ancillary Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof or thereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby. Upon such determination, the parties shall negotiate in good faith in an effort to agree upon a suitable and equitable provision to effect the original intent of the parties.
11.7. Governing Law. This Agreement (and any claims or disputes arising out of or related hereto or to the transactions contemplated hereby or to the inducement of any party to enter herein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Delaware irrespective of the choice of laws principles of the State of Delaware, including all matters of validity, construction, effect, enforceability, performance and remedies.
11.8. Dispute Resolution. Any Dispute shall be resolved in accordance with the procedures set forth in Article IV of the Indemnification and Release Agreement, which shall be the sole and exclusive procedures for the resolution of any such Dispute unless otherwise specified herein or in Article IV of the Indemnification and Release Agreement.
11.9. Performance. Each Party shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Affiliate of such Party.
11.10. Relationship of Parties. In the performance of this Agreement, the Service Provider (and any other member of the Service Provider Group which performs Services hereunder) will at all times act in its own capacity as an independent contractor, and nothing contained herein may be construed to make the Service Provider an agent, partner, fiduciary or joint venturer of the Service Recipient or the other members of the Service Recipient Group. The Service Providers Employees which perform Services under this Agreement (a) will remain personnel of the Service Provider, (b) will not by reason of the performance of Services under this Agreement become employees of any member of the Service Recipient Group and (c) will not be entitled to participate in any of the Service Recipients employee benefit or compensation plans, programs, agreements or arrangements, including pension, 401(k), profit sharing, retirement, deferred compensation, medical, health, group insurance, disability, bonus, incentive compensation, vacation pay, severance pay and other similar plans, programs, agreements and arrangements, whether reduced to writing or not. Similarly, any of the Service Recipients Employees that perform Services under this
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Agreement pursuant to Section2.7(e), (i) will remain personnel of the Service Recipient, (ii) will not by reason of the performance of Services under this Agreement become employees of any member of the Service Provider Group and (iii) will not be entitled to participate in any of the Service Providers employee benefit or compensation plans, programs, agreements or arrangements, including pension, 401(k), profit sharing, retirement, deferred compensation, medical, health, group insurance, disability, bonus, incentive compensation, vacation pay, severance pay and other similar plans, programs, agreements or arrangements, whether reduced to writing or not. Each Party (the Indemnifying Party) will indemnify and hold harmless the other Party and its affiliates and their officers, directors, employees, agents, successors and permitted assigns (the Indemnified Party) from and against all losses, damages, liabilities, deficiencies, actions, judgments, interest, awards, penalties, fines, costs or expenses of whatever kind (including reasonable attorneys fees) arising out of or resulting from any claims asserted by, on behalf of, or in relation to the Employees of the Indemnifying Party that such Employees are employed by the Indemnified Party or one of its Affiliates, including any assertions of contingent worker or co-employment relationships, and including any responsibility or liability to any Employee or governmental authority for alleged misclassification of any employment relationship.
11.11. Regulations. All Employees of the Service Provider and the members of the Service Provider Group shall, when on the property of the Service Recipient, conform to the rules and regulations of the Service Recipient concerning safety, health and security that are made known to such Employees in advance in writing. All Employees of the Service Recipient and the other members of the Service Recipient Group shall, when on the property of the Service Provider, conform to the rules and regulations of the Service Provider concerning safety, health and security that are made known to such Employees in advance in writing.
11.12. Interpretation. In this Agreement, (a) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other genders as the context requires; (b) the terms hereof, herein, and herewith and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the Schedules, Exhibits and Appendices hereto) and not to any particular provision of this Agreement; (c) Article, Section, Exhibit, Schedule and Appendix references are to the Articles, Sections, Exhibits, Schedules and Appendices to this Agreement unless otherwise specified; (d) the word including and words of similar import when used in this Agreement means including, without limitation,; (e) the word or shall not be exclusive; (f) unless expressly stated to the contrary in this Agreement, all references to the date hereof, the date of this Agreement, hereby and hereupon and words of similar import shall all be references to the date first stated in the preamble, regardless of any amendment or restatement hereof.
11.13. Effect if Separation does not Occur. If the Distribution does not occur, then all actions and events that are, under this Agreement, to be taken or occur effective as of or following the Distribution Date, or otherwise in connection with the Distribution, shall not be taken or occur except to the extent specifically agreed in writing by the Parties and (in the absence of such specific written agreement) neither Party shall have any liability or further obligation to the other Party under this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives.
CONOCOPHILLIPS | ||
By: | /s/ Ryan M. Lance | |
Name: | Ryan M. Lance | |
Title: | Chairman and Chief Executive Officer | |
PHILLIPS 66 | ||
By: | /s/ Greg C. Garland | |
Name: | Greg C. Garland | |
Title: | Chairman, President and Chief Executive Officer |
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Exhibit 99.1
![]() |
600 North Dairy Ashford (77079-1175) | |||
P. O. Box 2197 | ||||
Houston, TX 77252-2197 | ||||
Phone 281.293.1000 www.conocophillips.com |
NEWS RELEASE
ConocoPhillips Becomes One of the Worlds Largest
Independent E&P Companies
Spinoff of Phillips 66 Complete
HOUSTON, May 1, 2012 ConocoPhillips [NYSE:COP] today announced that it has completed the spinoff of its downstream businesses to its stockholders. With the completion of this transaction, ConocoPhillips is the worlds largest independent exploration and production (E&P) company, based on proved reserves and production of liquids and natural gas.
ConocoPhillips will truly be unique as an independent E&P company. Our unmatched size, scope and capability position us to compete successfully in this business, said Ryan Lance, chairman and chief executive officer. With an exclusive focus on exploration and production, we will pursue opportunities and take actions to create value for all our stakeholders. We will emphasize execution and operations excellence, the principles that made us what we are today and that will shape the ConocoPhillips of tomorrow.
ConocoPhillips benefits from more than a century of experience and success achieved by its predecessor companies. The company has a presence and capability in key technology-driven resource opportunities globally. Among these are conventional and unconventional reservoirs, oil sands and heavy-oil deposits, liquefied natural gas, and deepwater and Arctic operations.
As we move forward with todays strong base, our vision is to pioneer a new standard of E&P excellence, Lance said. ConocoPhillips has always placed safety, health and environmental stewardship first, and this will not change. In addition, we have an unprecedented opportunity to unlock potential by combining the legacy of our world-class workforce, asset base, technical capability and financial capacity with the focus and culture of an independent company. We believe this will allow us to create value for all our stakeholders and deliver a compelling formula of profitable growth, strong financial returns and a sector-leading dividend.
To effect the spinoff, ConocoPhillips stockholders received one share of Phillips 66 common stock for every two shares of ConocoPhillips common stock held on the record date of April 16, 2012. Phillips 66 is now an independent, publicly traded company in which ConocoPhillips retains no ownership interest.
ConocoPhillips will webcast its 2012 Annual Meeting of Stockholders Wednesday, May 9 at 10 a.m. Eastern time. To access the webcast, go to www.conocophillips.com/investor and click on the Register for Webcast link at least 15-20 minutes prior to the meeting. An archived replay will be available shortly after the meeting.
Headquartered in Houston, Texas, ConocoPhillips has operations in almost 30 countries and more than 16,000 employees as of May 1, 2012. Production averaged 1.62 million BOE per day in 2011 and proved reserves were 8.4 billion BOE as of Dec. 31, 2011. For more information, go to www.conocophillips.com.
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ConocoPhillips Becomes One of the Worlds Largest Independent E&P Companies
Additional resources for journalists, including biographies and images, are available at www.conocophillips.com/media. Accredited broadcast journalists may request access to b-roll by visiting www.conocophillips.com/EN/newsroom/video/Pages/index.aspx.
CONTACTS
Aftab Ahmed (media) | 281-293-4138 | |
aftab.ahmed@conocophillips.com | ||
Vladimir dela Cruz (investors) | 212-207-1996 | |
v.r.delacruz@conocophillips.com |
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE SAFE HARBOR PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This press release contains forward-looking statements. Forward-looking statements relate to future events and anticipated results of operations, business strategies, and other aspects of our operations or operating results. In many cases you can identify forward-looking statements by terminology such as anticipate, estimate, believe, continue, could, intend, may, plan, potential, predict, should, will, expect, objective, projection, forecast, goal, guidance, outlook, effort, target and other similar words. However, the absence of these words does not mean that the statements are not forward-looking. Where, in any forward-looking statement, the company expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, there can be no assurance that such expectation or belief will result or be achieved. The actual results of operations can and will be affected by a variety of risks and other matters including, but not limited to, changes in commodity prices; changes in expected levels of oil and gas reserves or production; operating hazards, drilling risks, unsuccessful exploratory activities; difficulties in developing new products and manufacturing processes; unexpected cost increases; international monetary conditions; potential liability for remedial actions under existing or future environmental regulations; potential liability resulting from pending or future litigation; limited access to capital or significantly higher cost of capital related to illiquidity or uncertainty in the domestic or international financial markets; and general domestic and international economic and political conditions; as well as changes in tax, environmental and other laws applicable to our business. Other factors that could cause actual results to differ materially from those described in the forward-looking statements include other economic, business, competitive and/or regulatory factors affecting our business generally as set forth in our filings with the Securities and Exchange Commission. Unless legally required, ConocoPhillips undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Page 2 of 2
Exhibit 99.2
April 3, 2012
ConocoPhillips and its Board of Directors
600 N. Dairy Ashford
Houston, TX 77079
Ladies and Gentlemen:
We have acted as special counsel to ConocoPhillips, a Delaware corporation (ConocoPhillips), in connection with the transactions contemplated by the Separation and Distribution Agreement (the Agreement) to be entered into by and between ConocoPhillips and Phillips 66, a Delaware corporation (Phillips 66). At your request, we are rendering our opinion as to certain United States federal income tax consequences of certain transactions contemplated by the Agreement. All capitalized terms used but not defined herein shall have the meanings ascribed to them in the ConocoPhillips Certificate dated as of the date hereof and delivered in connection herewith (the ConocoPhillips Certificate), and any reference to any document includes a reference to any exhibit, appendix, or similar attachment thereto.
In providing this opinion, we have reviewed and relied upon: (i) the Agreement; (ii) the ConocoPhillips Certificate and the Phillips 66 Certificate dated as of the date hereof and delivered in connection herewith (the Phillips 66 Certificate, and, together with the ConocoPhillips Certificate, the Certificates); (iii) the Tax Sharing Agreement to be entered into by and among ConocoPhillips, ConocoPhillips Company, a Delaware corporation and a wholly-owned subsidiary of ConocoPhillips (ConocoPhillips Company), Phillips 66, and
ConocoPhillips
April 3, 2012
Page 2
Phillips 66 Company, a Delaware corporation and a wholly-owned subsidiary of ConocoPhillips Company (Phillips 66 Company); (iv) the ruling request relating to Sections 332, 351, 355, 368 and certain other provisions of the Internal Revenue Code of 1986, as amended (the Code) filed by ConocoPhillips with the Internal Revenue Service in connection with the transactions contemplated by the Agreement and all supplemental submissions filed in connection therewith (together, the Request for Rulings); (v) the private letter ruling issued to ConocoPhillips by the Internal Revenue Service in response to the Request for Rulings (the Private Letter Ruling); (vi) the registration statement of Phillips 66 on Form 10 filed with the Securities and Exchange Commission on November 14, 2011 (as amended through the date hereof) (the Registration Statement), ConocoPhillipss annual reports on Form 10-K for its fiscal years ended December 31, 2010 and December 31, 2011, and ConocoPhillipss proxy statement relating to the annual meeting of ConocoPhillipss shareholders held on May 11, 2011 (collectively, the Public Documents); and (vii) such other documents, records, and papers as we have deemed necessary or appropriate in order to give this opinion.
For purposes of this opinion, we have assumed: (i) that the statements, representations, and assumptions (which statements, representations, and assumptions we have neither investigated nor verified) contained, respectively, in the Request for Rulings, the Private Letter Ruling, the Certificates, and the Agreement are true, complete, and correct as of the date of this opinion, and will remain true, complete, and correct at all times up to and including the Distribution Date; (ii) that all statements and representations qualified by knowledge, belief, or materiality or comparable qualification are true, complete, and correct as if made without such qualification; (iii) that all documents submitted to us as originals are authentic, that all documents submitted to us as copies conform to the originals, that all relevant documents have been or will be duly executed in the form presented to us, and that all natural persons are of legal capacity; (iv) that the transactions contemplated by the Agreement will be consummated in accordance with the provisions of the Agreement, without amendment, waiver, or modification of any of the terms or conditions set forth therein, and in the manner described in the Request for Rulings and the Private Letter Ruling; (v) that ConocoPhillips and Phillips 66 will treat the Contribution (as defined below) and the Distribution (as defined below) for United States federal income tax consequences in a manner consistent with this opinion; (vi) that the Public Documents are true, complete, and correct; and (vii) that all applicable reporting requirements have been or will be satisfied.
Based upon and subject to the foregoing, it is our opinion that, under presently applicable provisions of the Code, and the rules and regulations promulgated thereunder:
(1) | The contribution by ConocoPhillips to Phillips 66 of (i) all the outstanding shares of Phillips 66 Company and (ii) any other property relating to the Transferred Businesses held directly by ConocoPhillips in exchange for (i) Phillips 66 Common Stock, (ii) the assumption by Phillips 66 of related liabilities, and (iii) the Special Cash Distribution (the Contribution), followed by the distribution by ConocoPhillips to holders of shares of ConocoPhillips Common Stock of all the outstanding shares of Phillips 66 Common Stock (the Distribution) will qualify as a transaction that is described in Sections 355(a) and 368(a)(1)(D) of the Code; and |
ConocoPhillips
April 3, 2012
Page 3
(2) | The summary of material U.S. federal income tax consequences of the Distribution set forth in the amended registration statement of Phillips 66 on Form 10 filed with the Securities and Exchange Commission on March 1, 2012 under the caption Material U.S. Federal Income Tax Consequences of the Distribution is accurate in all material respects. |
We render no opinion as to any United States federal income tax issues or other matters except as specifically set forth above. We render no opinion as to the United States federal income tax consequences of (i) any conditions existing at the time of, or effects resulting from, the transaction that are not specifically covered above; (ii) any transactions contemplated by the Agreement or described in the Private Letter Ruling other than the Contribution and the Distribution; (iii) non-arms length payments (if any) made in connection with the transaction; or (iv) any continuing transactions between or among any of ConocoPhillips or ConocoPhillipss subsidiaries and Phillips 66 or Phillips 66s subsidiaries and any payments made in connection with such continuing transactions. We render no opinion as to the tax consequences of the transaction under state, local, or foreign tax laws.
This opinion is based on the Code, the Treasury Regulations promulgated thereunder, published pronouncements of the Internal Revenue Service, and case law, all as in effect as of the date hereof. We assume no responsibility to inform ConocoPhillips of any change or inaccuracy that may occur or come to our attention after the date hereof that may affect the continuing validity of this opinion.
We are furnishing this opinion solely for the benefit of ConocoPhillips. Furthermore, we are furnishing this opinion solely in connection with the transactions contemplated by the Agreement, and it is not to be relied upon, used, circulated, quoted, or otherwise referred to for any other purpose or by any other party without our consent. We hereby consent to the filing of this opinion with the Securities and Exchange Commission. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Wachtell, Lipton, Rosen & Katz
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