Phillips 66 (Form: 10-Q, Received: 08/03/2012 16:36:16)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended		June 30, 2012

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934


For the transition period from		to


Commission file number:		001-35349

Phillips 66

(Exact name of registrant as specified in its charter)

Delaware

45-3779385

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

600 North Dairy Ashford, Houston, TX 77079

(Address of principal executive offices) (Zip Code)

281-293-6600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The registrant had 626,922,698 shares of common stock, $.01 par value, outstanding as of June 30, 2012.

PHILLIPS 66

TABLE OF CONTENTS


	Page
Part I – Financial Information

Item 1. Financial Statements
Consolidated Statement of Income		1
Consolidated Statement of Comprehensive Income		2
Consolidated Balance Sheet		3
Consolidated Statement of Cash Flows		4
Consolidated Statement of Changes in Equity		5
Notes to Consolidated Financial Statements		6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		30

Item 3. Quantitative and Qualitative Disclosures About Market Risk		45

Item 4. Controls and Procedures		45

Part II – Other Information

Item 1. Legal Proceedings		45

Item 1A. Risk Factors		46

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		46

Item 6. Exhibits		47

Signature		50

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS


Consolidated Statement of Income			Phillips 66


	Millions of Dollars
	Three Months Ended June 30					Six Months Ended June 30
	2012		2011			2012			2011

Revenues and Other Income
Sales and other operating revenues*	$	46,747		52,594			92,530			97,373
Equity in earnings of affiliates		815		784			1,549			1,474
Net gain on dispositions		188		43			190			46
Other income		77		9			78			10

Total Revenues and Other Income		47,827		53,430			94,347			98,903


Costs and Expenses
Purchased crude oil and products		40,398		46,600			80,726			85,948
Operating expenses		984		1,018			2,076			2,060
Selling, general and administrative expenses		480		347			829			670
Depreciation and amortization		224		226			440			445
Impairments		275		2			318			2
Taxes other than income taxes*		3,475		3,631			6,895			7,111
Accretion on discounted liabilities		6		6			11			11
Interest and debt expense		83		3			96			7
Foreign currency transaction (gains) losses		8		(31	)		(7	)		(74	)

Total Costs and Expenses		45,933		51,802			91,384			96,180

Income before income taxes		1,894		1,628			2,963			2,723
Provision for income taxes		712		588			1,143			1,006

Net income		1,182		1,040			1,820			1,717
Less: net income attributable to noncontrolling interests		1		1			3			2

Net Income Attributable to Phillips 66	$	1,181		1,039			1,817			1,715


Net Income Attributable to Phillips 66 Per Share of Common Stock (dollars) **
Basic	$	1.88		1.66			2.89			2.73
Diluted		1.86		1.64			2.86			2.70


Average Common Shares Outstanding (in thousands) **
Basic		628,510		627,628			628,069			627,628
Diluted		635,157		634,645			635,051			634,645

* Includes excise taxes on petroleum products sales:	$	*3,389*		3,554			*6,710*			6,937

**	See Note 10–Earnings Per Share.

See Notes to Consolidated Financial Statements.


Consolidated Statement of Comprehensive Income		Phillips 66


	Millions of Dollars
	Three Months Ended June 30						Six Months Ended June 30
	2012			2011			2012			2011


Net Income	$	1,182			1,040			1,820			1,717

Other comprehensive income (loss)
Defined benefit plans
Prior service cost:
Amortization to net income of prior service cost		1			—			1			—
Actuarial gain/loss:
Amortization to net income of net actuarial loss		13			1			15			2
Actuarial gain arising during the period		90			—			90			—
Other plans*		5			4			8			10
Income taxes on defined benefit plans		(40	)		(2	)		(42	)		(5	)

Defined benefit plans, net of tax		69			3			72			7

Foreign currency translation adjustments		(113	)		(7	)		(59	)		17
Income taxes on foreign currency translation adjustments		68			(12	)		48			(60	)

Foreign currency translation adjustments, net of tax		(45	)		(19	)		(11	)		(43	)

Hedging activities		(1	)		1			—			2
Income taxes on hedging activities		—			(1	)		—			(1	)

Hedging activities, net of tax		(1	)		—			—			1

Other Comprehensive Income (Loss), Net of Tax		23			(16	)		61			(35	)

Comprehensive Income		1,205			1,024			1,881			1,682
Less: comprehensive income attributable to noncontrolling interests		1			1			3			2

Comprehensive Income Attributable to Phillips 66	$	1,204			1,023			1,878			1,680

*Plans for which Phillips 66 is not the primary obligor—primarily those administered by equity affiliates.

See Notes to Consolidated Financial Statements.


Consolidated Balance Sheet			Phillips 66


	Millions of Dollars
	June 30 2012			December 31 2011

Assets
Cash and cash equivalents	$	3,104			—
Accounts and notes receivable (net of allowance of $49 million in 2012 and $13 million in 2011)		7,876			8,354
Accounts and notes receivable—related parties		1,337			1,671
Inventories		5,496			3,466
Prepaid expenses and other current assets		713			457

Total Current Assets		18,526			13,948
Investments and long-term receivables		10,640			10,306
Net properties, plants and equipment		15,169			14,771
Goodwill		3,344			3,332
Intangibles		728			732
Other assets		168			122

Total Assets	$	48,575			43,211


Liabilities
Accounts payable	$	10,462			10,007
Accounts payable—related parties		1,012			785
Short-term debt		590			30
Accrued income and other taxes		1,091			1,087
Employee benefit obligations		275			64
Other accruals		941			411

Total Current Liabilities		14,371			12,384
Long-term debt		7,396			361
Asset retirement obligations and accrued environmental costs		770			787
Deferred income taxes		5,497			5,803
Employee benefit obligations		1,057			117
Other liabilities and deferred credits		505			466

Total Liabilities		29,596			19,918


Equity
Common stock (2,500,000,000 shares authorized at $.01 par value) Issued (2012—626,922,698 shares)
Par value		6			—
Capital in excess of par		18,608			—
Retained earnings		692			—
Net parent company investment		—			23,142
Accumulated other comprehensive income (loss)		(358	)		122

Total Stockholders’ Equity		18,948			23,264
Noncontrolling interests		31			29

Total Equity		18,979			23,293

Total Liabilities and Equity	$	48,575			43,211

See Notes to Consolidated Financial Statements.


Consolidated Statement of Cash Flows			Phillips 66


	Millions of Dollars
	Six Months Ended June 30
	2012			2011

Cash Flows From Operating Activities
Net income	$	1,820			1,717
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		440			445
Impairments		318			2
Accretion on discounted liabilities		11			11
Deferred taxes		178			385
Undistributed equity earnings		(561	)		(808	)
Net gain on dispositions		(190	)		(46	)
Other		(14	)		78
Working capital adjustments
Decrease (increase) in accounts and notes receivable		664			(173	)
Decrease (increase) in inventories		(2,046	)		(1,831	)
Decrease (increase) in prepaid expenses and other current assets		(161	)		(241	)
Increase (decrease) in accounts payable		(33	)		1,840
Increase (decrease) in taxes and other accruals		647			159

Net Cash Provided by Operating Activities		1,073			1,538


Cash Flows From Investing Activities
Capital expenditures and investments		(488	)		(393	)
Proceeds from asset dispositions		240			87
Collection of advances/loans—related parties		—			400
Other		—			49

Net Cash Provided by (Used in) Investing Activities		(248	)		143


Cash Flows From Financing Activities
Distributions to ConocoPhillips		(5,255	)		(1,667	)
Issuance of debt		7,794			—
Repayment of debt		(198	)		(13	)
Issuance of common stock		2			—
Other		(67	)		(1	)

Net Cash Provided by (Used in) Financing Activities		2,276			(1,681	)


Effect of Exchange Rate Changes on Cash and Cash Equivalents		3			—


Net Change in Cash and Cash Equivalents		3,104			—
Cash and cash equivalents at beginning of period		—			—

Cash and Cash Equivalents at End of Period	$	3,104			—

See Notes to Consolidated Financial Statements.


Consolidated Statement of Changes in Equity			Phillips 66


	Millions of Dollars
	Attributable to Phillips 66
	Common Stock
	Par Value		Capital in Excess of Par			Retained Earnings		Net Parent Company Investment			Accum. Other Comprehensive Income (Loss)			Noncontrolling Interests			Total

December 31, 2010	$	—		—			—		25,787			214			25			26,026
Net income		—		—			—		1,715			—			2			1,717
Net transfers to ConocoPhillips		—		—			—		(1,532	)		—			—			(1,532	)
Other comprehensive loss		—		—			—		—			(35	)		—			(35	)
Distributions to noncontrolling interests and other		—		—			—		—			—			—			—

June 30, 2011	$	—		—			—		25,970			179			27			26,176


December 31, 2011	$	—		—			—		23,142			122			29			23,293
Net income		—		—			692		1,125			—			3			1,820
Net transfers to/from ConocoPhillips		—		—			—		(5,707	)		(541	)		—			(6,248	)
Other comprehensive income		—		—			—		—			61			—			61
Reclassification of net parent company investment to capital in excess of par		—		18,560			—		(18,560	)		—			—			—
Issuance of common stock at the separation		6		(6	)		—		—			—			—			—
Distributed under benefit plans		—		54			—		—			—			—			54
Distributions to noncontrolling interests and other		—		—			—		—			—			(1	)		(1	)

June 30, 2012	$	6		18,608			692		—			(358	)		31			18,979


	Shares in Thousands Common Stock
December 31, 2011		—
Issuance of common stock at the separation		625,272
Shares issued – stock-based compensation		1,651

June 30, 2012		626,923

See Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements

Phillips 66

Note 1—Separation and Basis of Presentation

The Separation

On April 4, 2012, the ConocoPhillips Board of Directors approved the separation of its downstream businesses into an independent, publicly traded company named Phillips 66. In accordance with a separation and distribution agreement, the two companies were separated by ConocoPhillips distributing to its stockholders all 625,272,302 shares of common stock of Phillips 66 after the market closed on April 30, 2012. Each ConocoPhillips shareholder received one share of Phillips 66 stock for every two shares of ConocoPhillips stock held at the close of business on the record date of April 16, 2012. Fractional shares of Phillips 66 common stock were not distributed and any fractional shares of Phillips 66 common stock otherwise issuable to a ConocoPhillips shareholder were sold in the open market on such shareholder’s behalf, and such shareholder received a cash payment with respect to that fractional share. In conjunction with the separation, ConocoPhillips received a private letter ruling from the Internal Revenue Service to the effect that, based on certain facts, assumptions, representations and undertakings set forth in the ruling, for U.S. federal income tax purposes, the distribution of Phillips 66 stock was not taxable to ConocoPhillips or U.S. holders of ConocoPhillips common stock, except in respect to cash received in lieu of fractional share interests. Following the separation, ConocoPhillips retained no ownership interest in Phillips 66, and each company now has separate public ownership, boards of directors and management. A registration statement on Form 10, as amended through the time of its effectiveness, describing the separation was filed by Phillips 66 with the U.S. Securities and Exchange Commission (SEC) and was declared effective on April 12, 2012 (the Form 10).

On May 1, 2012, Phillips 66 stock began trading the “regular-way” on the New York Stock Exchange under the “PSX” stock symbol. Pursuant to the separation and distribution agreement with ConocoPhillips, on April 30, 2012, we made a special cash distribution to ConocoPhillips of $5.95 billion. After subsequent working capital and inventory determinations, an additional cash distribution of $1.87 billion was made to ConocoPhillips in June 2012. After consideration of the cash retained by Phillips 66 at separation, as well as cash flow impacts of the four months ended April 30, 2012, the net distribution to ConocoPhillips was $5.3 billion.

Basis of Presentation

Prior to the separation on April 30, 2012, our results of operations, financial position and cash flows consisted of ConocoPhillips’ refining, marketing and transportation operations; its natural gas gathering, processing, transmission and marketing operations, primarily conducted through its equity investment in DCP Midstream, LLC (DCP Midstream); its petrochemical operations, conducted through its equity investment in Chevron Phillips Chemical Company LLC (CPChem); its power generation operations; and an allocable portion of its corporate costs (together, the “downstream businesses”). These financial statements have been presented as if the downstream businesses had been combined for all periods presented. All intercompany transactions and accounts within the downstream businesses were eliminated. The assets and liabilities have been reflected on a historical cost basis, as all of the assets and liabilities presented were wholly owned by ConocoPhillips and were transferred within the ConocoPhillips consolidated group. The statement of income for periods prior to the separation includes expense allocations for certain corporate functions historically performed by ConocoPhillips and not allocated to its operating segments, including allocations of general corporate expenses related to executive oversight, accounting, treasury, tax, legal, procurement and information technology. These allocations were based primarily on specific identification of time and/or activities associated with the downstream businesses, employee headcount or capital expenditures. The combined financial statements may not necessarily reflect all of the actual expenses that would have been incurred had we been a stand-alone company during the periods presented prior to the separation.

All financial information presented after the separation represents the consolidated results of operations, financial position and cash flows of Phillips 66. Accordingly:

•

Our consolidated statements of income and comprehensive income for the three months ended June 30, 2012, consist of the consolidated results of Phillips 66 for the two months ended June 30, 2012, and the combined results of the downstream businesses for the one month ended April 30, 2012. Our consolidated statements of income and comprehensive income for the six months ended June 30, 2012, consist of the consolidated results of Phillips 66 for the two months ended June 30, 2012, and of the combined results of the downstream businesses for the four months ended April 30, 2012. Our consolidated statements of income and comprehensive income for the three and six months ended June 30, 2011, consist entirely of the combined results of the downstream businesses.

•

Our consolidated balance sheet at June 30, 2012, consists of the consolidated balances of Phillips 66, while at December 31, 2011, it consists of the combined balances of the downstream businesses.

•

Our consolidated statement of cash flows for the six months ended June 30, 2012, consists of the consolidated results of Phillips 66 for the two months ended June 30, 2012, and the combined results of the downstream businesses for the four months ended April 30, 2012. Our consolidated statement of cash flows for the six months ended June 30, 2011, consists entirely of the combined results of the downstream businesses.

•

Our consolidated statement of changes in equity for the six months ended June 30, 2012, consists of both the combined activity for the downstream businesses prior to April 30, 2012, and the consolidated activity for Phillips 66 completed at and subsequent to the separation on April 30, 2012. Our consolidated statement of changes in equity for the six months ended June 30, 2011, consists entirely of the combined activity of the downstream businesses.

Note 2—Interim Financial Information

The interim-period financial information presented in the financial statements included in this report is unaudited and includes all known accruals and adjustments necessary, in the opinion of management, for a fair presentation of the consolidated financial position of Phillips 66 and its results of operations and cash flows for the periods presented. Unless otherwise specified, all such adjustments are of a normal and recurring nature. Certain notes and other information have been condensed or omitted from the interim financial statements included in this report. Therefore, these interim financial statements should be read in conjunction with the audited combined financial statements and notes thereto for the year ended December 31, 2011, included in our Form 10. The results of operations for the three and six months ended June 30, 2012, are not necessarily indicative of the results to be expected for the full year.

Note 3—Variable Interest Entities (VIEs)

We hold significant variable interests in VIEs that have not been consolidated because we are not considered the primary beneficiary. Information on these VIEs follows:

Merey Sweeny, L.P. (MSLP) is a limited partnership that owns a delayed coker and related facilities at the Sweeny Refinery. As discussed more fully in Note 6—Investments and Long-Term Receivables, in August 2009 we exercised our call right to acquire the 50 percent ownership interest in MSLP of our co-venturer, Petróleos de Venezuela S.A. (PDVSA). That exercise has been challenged, and the dispute is being arbitrated. Because our exercise has been challenged by PDVSA, we continue to use the equity method of accounting for MSLP, and the VIE analysis below is based on the ownership and governance structure in place prior to the exercise of our call right. MSLP is now a VIE because, in securing lender consents in connection with the separation, we provided a 100 percent debt guarantee to the lender of the 8.85% senior notes issued by MSLP. PDVSA did not participate in the debt guarantee. In our VIE assessment, this disproportionate debt guarantee,

plus other liquidity support provided jointly by us and PDVSA independently of equity ownership, results in MSLP not being exposed to all potential losses. We have determined we are not the primary beneficiary while our call exercise is in dispute because under the partnership agreement the co-venturers could jointly direct the activities of MSLP that most significantly impact economic performance. At June 30, 2012, our maximum exposure represented the outstanding principal balance on the debt of $242 million. Our book value in MSLP at June 30, 2012, was $88 million.

We have a 50 percent ownership interest with a 50 percent governance interest in Excel Paralubes, L.P. (Excel). Excel is now a VIE because, in securing lender consents in connection with the separation, ConocoPhillips provided a 50 percent debt guarantee to the lender of the 7.43% senior secured bonds issued by Excel. We provided a full indemnity to ConocoPhillips for this debt guarantee. Our co-venturer did not participate in the debt guarantee. In our assessment of the VIE, this debt guarantee, plus other liquidity support up to $60 million provided jointly by us and our co-venturer independently of equity ownership, results in Excel not being exposed to all potential losses. We have determined we are not the primary beneficiary because we and our co-venturer jointly direct the activities of Excel that most significantly impact economic performance. We continue to use equity method accounting for this investment. At June 30, 2012, our maximum exposure represented 50 percent of the outstanding principal debt balance of $187 million, or $94 million, plus half of the $60 million liquidity support, or $30 million. Our book value in Excel at June 30, 2012, was $139 million.

Note 4—Inventories

Inventories consisted of the following:


	Millions of Dollars
	June 30 2012		December 31 2011


Crude oil and petroleum products	$	5,208		3,193
Materials and supplies		288		273

	$	5,496		3,466

Inventories valued on the last-in, first-out (LIFO) basis totaled $5,061 million and $3,046 million at June 30, 2012, and December 31, 2011, respectively. The estimated excess of current replacement cost over LIFO cost of inventories amounted to approximately $6,900 million and $8,600 million at June 30, 2012, and December 31, 2011, respectively.

During the second quarter of 2012, certain inventory reductions caused a liquidation of LIFO inventory values. This liquidation increased net income $67 million, all of which was attributable to the Refining and Marketing (R&M) segment.

Note 5—Assets Held for Sale or Sold

On June 22, 2012, we sold our refinery located on the Delaware River in Trainer, Pennsylvania, for $229 million. The refinery and associated terminal and pipeline assets were included in our R&M segment and at the time of the disposition had a net carrying value of $38 million, which included $37 million of properties, plants and equipment (PP&E), $25 million of allocated goodwill and a $53 million asset retirement obligation. The $189 million before-tax gain on this disposition was included in the “Net gain on dispositions” line in the consolidated income statement.

In the first quarter of 2012, equipment formerly associated with the cancelled Wilhelmshaven Refinery upgrade project was classified as held for sale. At June 30, 2012, the equipment had a net carrying value of $30 million, primarily PP&E. See Note 8—Impairments for additional information.

Note 6—Investments and Long-Term Receivables

Equity Investments

Summarized 100 percent financial information for WRB Refining LP (WRB) and CPChem combined was as follows:

Millions of Dollars

Three Months Ended
June 30

Six Months Ended
June 30

2012

2011

2012

2011

Revenues

8,544

8,581

17,091

15,708

Income before income taxes

1,474

1,060

2,573

1,938

Net income

1,451

1,039

2,533

1,902

Other

MSLP is a limited partnership that owns a delayed coker and related facilities at the Sweeny Refinery. Prior to August 28, 2009, MSLP was owned 50/50 by ConocoPhillips and PDVSA. Under the agreements that govern the relationships between the partners, certain defaults by PDVSA with respect to supply of crude oil to the Sweeny Refinery gave ConocoPhillips the right to acquire PDVSA’s 50 percent ownership interest in MSLP, which was exercised on August 28, 2009. PDVSA has initiated arbitration with the International Chamber of Commerce challenging the exercise of the call right and claiming it was invalid. The arbitral tribunal is scheduled to hold hearings on the merits of the dispute in December 2012. We continue to use the equity method of accounting for our investment in MSLP.

Note 7—Properties, Plants and Equipment

Our investment in PP&E, with the associated accumulated depreciation and amortization (Accum. D&A), was:


	Millions of Dollars
	June 30, 2012						December 31, 2011*
	Gross PP&E		Accum. D&A		Net PP&E		Gross PP&E		Accum. D&A		Net PP&E

R&M
Refining	$	18,522		5,801		12,721		19,333		6,630		12,703
Transportation		2,400		956		1,444		2,359		931		1,428
Marketing and other		1,374		785		589		1,386		766		620

Total R&M		22,296		7,542		14,754		23,078		8,327		14,751

Midstream		62		49		13		64		51		13
Chemicals		—		—		—		—		—		—
Corporate and Other		786		384		402		14		7		7

	$	23,144		7,975		15,169		23,156		8,385		14,771

* Certain PP&E within the R&M segment have been reclassified between “Refining” and “Marketing and other.”

Note 8—Impairments

During the three- and six-month periods ended June 30, 2012 and 2011, we recognized the following before-tax impairment charges:


	Millions of Dollars
	Three Months Ended June 30				Six Months Ended June 30
	2012		2011		2012		2011

R&M
United States	$	—		1		1		1
International		—		1		42		1

		—		2		43		2

Midstream		275		—		275		—

	$	275		2		318		2

During the second quarter of 2012, we recorded a $275 million impairment of our investment in Rockies Express Pipeline LLC (REX). See the “Fair Value Remeasurements” section below for additional information on this impairment.

The six-month period of 2012 also included a held-for-sale impairment of $42 million in our R&M segment related to equipment formerly associated with the canceled Wilhelmshaven Refinery upgrade project.

Fair Value Remeasurements

There were no material fair value impairments for the six-month period ended June 30, 2011. The following table shows the values of assets at June 30, 2012, by major category, measured at fair value on a nonrecurring basis in periods subsequent to their initial recognition:


	Millions of Dollars
			Fair Value Measurements Using
	Fair Value*		Level 1 Inputs		Level 3 Inputs		Before- Tax Loss

June 30, 2012
Net properties, plants and equipment (held for sale)	$	32		32		—		42
Equity method investment		495		—		495		275

*Represents the fair value at the time of the impairment.

During the six-month period ended June 30, 2012, net PP&E held for sale with a carrying amount of $74 million was written down to its fair value of $32 million, resulting in a before-tax loss of $42 million. The fair value was primarily determined by negotiated selling prices with third parties.

During this same period, our investment in REX was written down to a fair value of $495 million, resulting in a before-tax loss of $275 million. During the second quarter of 2012, our co-venturer recognized a fair value adjustment of a disposal group that included REX, based on information gathered from its marketing process. After identifying this impairment indicator, we performed our own assessment of the carrying amount of our investment, considering expected future cash flows and the discount rate. Based on this updated information, our internal assessment concluded our investment in REX was impaired, and the decline in fair value was other than temporary.

Note 9—Debt

Debt

Long-term debt at June 30, 2012, and December 31, 2011, was:


	Millions of Dollars
	June 30 2012			December 31 2011


1.95% Senior Notes due 2015	$	800			—
2.95% Senior Notes due 2017		1,500			—
4.30% Senior Notes due 2022		2,000			—
5.875% Senior Notes due 2042		1,500			—
Industrial Development Bonds due 2018 through 2022 at 0.15%–0.38% at June 30, 2012 and 0.08%–5.75% at December 31, 2011		50			234
Term loan due 2013 through 2015 at 1.716% at June 30, 2012		2,000			—
Note payable to MSLP due 2020 at 7% (related party)		128			134
Other		3			8

Debt at face value		7,981			376
Capitalized leases		11			14
Net unamortized premiums and discounts		(6	)		1

Total debt		7,986			391
Short-term debt		(590	)		(30	)

Long-term debt	$	7,396			361

During March 2012, we issued, through a private placement, $5.8 billion of Senior Notes. The notes are guaranteed by Phillips 66 Company, a wholly owned subsidiary. In connection with the private placement, we and Phillips 66 Company granted the holders of the notes certain registration rights under a Registration Rights Agreement. We have agreed for the benefit of the holders of the notes to use our commercially reasonable efforts to file and cause to be effective a registration statement with the SEC on an appropriate form with respect to a registered offer to exchange each series of notes for new notes that are guaranteed by Phillips 66 Company with terms substantially identical in all material respects to such series of notes. Generally, we have one year from the issuance of the Senior Notes to complete the exchange offer.

In the second quarter of 2012, we retired approximately $185 million of previously existing debt and closed the financing of $2.0 billion of new debt as a three-year amortizing term loan. The term loan incurs interest at a variable rate based on referenced rates plus a margin dependent upon the credit rating of our senior unsecured long-term debt as determined from time to time by Standard & Poor’s Ratings Services (S&P) and Moody’s Investors Service (Moody’s).

Credit Facilities

In February 2012, we entered into a five-year revolving credit agreement with a syndicate of financial institutions. Under the terms of the revolving credit agreement, we have a borrowing capacity of up to $4.0 billion. No amount has been drawn under this facility. However, as of June 30, 2012, $50 million in letters of credit had been issued that were supported by this facility.

The revolving credit agreement contains covenants that we consider usual and customary for an agreement of this type for comparable commercial borrowers, including a maximum consolidated net debt-to-capitalization ratio of 60 percent. The agreement has customary events of default, such as nonpayment of principal when due; nonpayment of interest, fees or other amounts; violation of covenants; cross-payment default and cross-acceleration (in each case, to indebtedness in excess of a threshold amount); and a change of control.

Borrowings under the credit agreement will incur interest at LIBOR plus a margin based on the credit rating of our senior unsecured long-term debt as determined from time to time by S&P and Moody’s. The revolving credit agreement also provides for customary fees, including administrative agent fees and commitment fees.

Trade Receivables Securitization Facility

In the second quarter of 2012, we established a wholly owned subsidiary to hold trade receivables that will be used as collateral for the subsidiary’s new borrowing facility with an aggregate capacity of $1.2 billion, which has a term of three years. As of June 30, 2012, no cash had been borrowed under the facility, but we had obtained $279 million in letters of credit under the facility that were collateralized by $279 million of the trade receivables held by the subsidiary.

Note 10—Earnings Per Share

Basic earnings per share (EPS) is based on net income attributable to Phillips 66 (earnings) and is calculated based upon the daily weighted-average number of common shares outstanding during the periods presented. Also, this calculation includes fully vested stock and unit awards that have not yet been issued as common stock. Diluted EPS includes the above, plus unvested stock, unit or option awards granted under our compensation plans and vested unexercised stock options, but only to the extent these instruments dilute earnings per share.

On April 30, 2012, 625,272,302 shares of our common stock were distributed to ConocoPhillips stockholders in conjunction with the separation. For comparative purposes, and to provide a more meaningful calculation of weighted-average shares outstanding, we have assumed this amount to be outstanding as of the beginning of each period prior to the separation presented in the calculation of weighted-average shares. In addition, we have assumed the dilutive securities outstanding at April 30, 2012, were also outstanding for each of the periods prior to the separation presented.


	Three Months Ended June 30				Six Months Ended June 30
	2012		2011		2012		2011

Basic EPS Calculation
Net income attributable to Phillips 66 (millions)	$	1,181		1,039		1,817		1,715

Weighted-average common shares outstanding—basic (thousands)		628,510		627,628		628,069		627,628

Earnings per share—basic	$	1.88		1.66		2.89		2.73


Diluted EPS Calculation
Net income attributable to Phillips 66 (millions)	$	1,181		1,039		1,817		1,715

Weighted-average common shares outstanding—basic (thousands)		628,510		627,628		628,069		627,628
Dilutive effect of stock-based compensation (thousands)		6,647		7,017		6,982		7,017

Weighted-average common shares outstanding—diluted (thousands)		635,157		634,645		635,051		634,645

Earnings per share—diluted	$	1.86		1.64		2.86		2.70

Note 11—Guarantees

At June 30, 2012, we were liable for certain contingent obligations under various contractual arrangements as described below. We recognize a liability, at inception, for the fair value of our obligation as a guarantor for newly issued or modified guarantees. Unless the carrying amount of the liability is noted below, we have not recognized a liability either because the guarantees were issued prior to December 31, 2002, or because the fair value of the obligation is immaterial. In addition, unless otherwise stated, we are not currently performing with any significance under the guarantee and expect future performance to be either immaterial or have only a remote chance of occurrence.

Guarantees of Joint Venture Debt

In April 2012, in connection with the separation, we issued a guarantee for 100 percent of the 8.85% senior notes issued by MSLP in July 1999. At June 30, 2012, the maximum potential amount of future payments to third parties under the guarantee is estimated to be $242 million, which could become payable if MSLP fails to meet its obligations under the senior note agreement.

At June 30, 2012, we had other guarantees outstanding for our portion of certain joint venture debt obligations, which have remaining terms of up to 14 years. The maximum potential amount of future payments under these other guarantees is approximately $116 million. Payment would be required if a joint venture defaults on its debt obligations.

Other Guarantees

We have other guarantees with maximum future potential payment amounts totaling $268 million, which consist primarily of guarantees to fund the short-term cash liquidity deficits of certain joint ventures and guarantees of the lease payment obligations of a joint venture. These guarantees generally have remaining terms of up to 13 years or life of the venture.

Indemnifications

Over the years, we have entered into various agreements to sell ownership interests in certain corporations, joint ventures and assets that gave rise to qualifying indemnifications. Agreements associated with these sales include indemnifications for taxes, environmental liabilities, permits and licenses, employee claims, real estate indemnity against tenant defaults, and litigation. The terms of these indemnifications vary greatly. The majority of these indemnifications are related to environmental issues, relative to which the term is generally indefinite and the maximum amount of future payments is generally unlimited. The carrying amount recorded for indemnifications at June 30, 2012, was $362 million. We amortize the indemnification liability over the relevant time period, if one exists, based on the facts and circumstances surrounding each type of indemnity. In cases where the indemnification term is indefinite, we will reverse the liability when we have information the liability is essentially relieved or amortize the liability over an appropriate time period as the fair value of our indemnification exposure declines. Although it is reasonably possible future payments may exceed amounts recorded, due to the nature of the indemnifications, it is not possible to make a reasonable estimate of the maximum potential amount of future payments. Included in the recorded carrying amount were $147 million of environmental accruals for known contamination that are included in asset retirement obligations and accrued environmental costs at June 30, 2012. For additional information about environmental liabilities, see Note 12—Contingencies and Commitments.

Indemnification and Release Agreement

In conjunction with, and effective as of, the separation, we entered into an Indemnification and Release Agreement with ConocoPhillips. This agreement governs the treatment between ConocoPhillips and us of all aspects relating to indemnification, insurance, litigation responsibility and management, and litigation document sharing and cooperation arising in connection with the separation. Generally, the agreement provides for cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of our business with us and financial responsibility for the obligations and liabilities of ConocoPhillips’ business with ConocoPhillips. The agreement also establishes procedures for handling claims subject to indemnification and related matters.

Note 12—Contingencies and Commitments

A number of lawsuits involving a variety of claims have been made against Phillips 66 that arose in the ordinary course of business. We also may be required to remove or mitigate the effects on the environment of the placement, storage, disposal or release of certain chemical, mineral and petroleum substances at various active and inactive sites. We regularly assess the need for accounting recognition or disclosure of these contingencies. In the case of all known contingencies (other than those related to income taxes), we accrue a liability when the loss is probable and the amount is reasonably estimable. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. We do not reduce these liabilities for potential insurance or third-party recoveries. If applicable, we record receivables for probable insurance or other third-party recoveries. In the case of income-tax-related contingencies, we use a cumulative probability-weighted loss accrual in cases where sustaining a tax position is less than certain.

Estimated future environmental remediation costs are subject to change due to such factors as the uncertain magnitude of cleanup costs, the unknown time and extent of such remedial actions that may be required, and the determination of our liability in proportion to that of other responsible parties. Estimated future costs related to tax and legal matters are subject to change as events evolve and as additional information becomes available during the administrative and litigation processes.

Environmental

We are subject to international, federal, state and local environmental laws and regulations. When we prepare our consolidated financial statements, we record accruals for environmental liabilities based on management’s best estimates, using all information available at the time. We measure estimates and base liabilities on currently available facts, existing technology, and presently enacted laws and regulations, taking into account stakeholder and business considerations. When measuring environmental liabilities, we also consider our prior experience in remediation of contaminated sites, other companies’ cleanup experience, and data released by the U.S. Environmental Protection Agency (EPA) or other organizations. We consider unasserted claims in our determination of environmental liabilities, and we accrue them in the period they are both probable and reasonably estimable.

Although liability of those potentially responsible for environmental remediation costs is generally joint and several for federal sites and frequently so for state sites, we are usually only one of many companies cited at a particular site. Due to the joint and several liabilities, we could be responsible for all cleanup costs related to any site at which we have been designated as a potentially responsible party. We have been successful to date in sharing cleanup costs with other financially sound companies. Many of the sites at which we are potentially responsible are still under investigation by the EPA or the state agencies concerned. Prior to actual cleanup, those potentially responsible normally assess the site conditions, apportion responsibility and determine the appropriate remediation. In some instances, we may have no liability or may attain a settlement of liability. Where it appears that other potentially responsible parties may be financially unable to bear their proportional share, we consider this inability in estimating our potential liability, and we adjust our accruals accordingly. As a result of various acquisitions in the past, we assumed certain environmental obligations. Some of these environmental obligations are mitigated by indemnifications made by others for our benefit and some of the indemnifications are subject to dollar and time limits.

We are currently participating in environmental assessments and cleanups at numerous federal Superfund and comparable state sites. After an assessment of environmental exposures for cleanup and other costs, we make accruals on an undiscounted basis (except those acquired in a purchase business combination, which we record on a discounted basis) for planned investigation and remediation activities for sites where it is probable future costs will be incurred and these costs can be reasonably estimated. At June 30, 2012, our consolidated balance sheet included a total environmental accrual of $538 million, compared with $542 million at December 31, 2011. We expect to incur a substantial amount of these expenditures within the next 30 years. We have not reduced these accruals for possible insurance recoveries. In the future, we may be involved in additional environmental assessments, cleanups and proceedings.

Legal Proceedings

Our legal organization applies its knowledge, experience and professional judgment to the specific characteristics of our cases, employing a litigation management process to manage and monitor the legal proceedings against us. Our process facilitates the early evaluation and quantification of potential exposures in individual cases. This process also enables us to track those cases that have been scheduled for trial and/or mediation. Based on professional judgment and experience in using these litigation management tools and available information about current developments in all our cases, our legal organization regularly assesses the adequacy of current accruals and determines if adjustment of existing accruals, or establishment of new accruals, are required.

Other Contingencies

We have contingent liabilities resulting from throughput agreements with pipeline and processing companies not associated with financing arrangements. Under these agreements, we may be required to provide any such company with additional funds through advances and penalties for fees related to throughput capacity not utilized.

At June 30, 2012, we had performance obligations secured by letters of credit of $1,961 million (of which $279 million were issued under the trade receivables securitization facility, $50 million were issued under the provisions of our revolving credit facility, and the remainder were issued as direct bank letters of credit) related to various purchase commitments incident to the ordinary conduct of business.

Note 13—Financial Instruments and Derivative Contracts

Derivative Instruments

We use financial and commodity-based derivative contracts to manage exposures to fluctuations in foreign currency exchange rates and commodity prices or to capture market opportunities. Since we are not currently using cash-flow hedge accounting, all gains and losses, realized or unrealized, from derivative contracts have been recognized in the consolidated statement of income. Gains and losses from derivative contracts held for trading not directly related to our physical business, whether realized or unrealized, have been reported net in “Other income” on our consolidated statement of income. Cash flows from all our derivative activity for the periods presented appear in the operating section of the cash flow statement.

Purchase and sales contracts with fixed minimum notional volumes for commodities that are readily convertible to cash (e.g., crude oil and gasoline) are recorded on the balance sheet as derivatives unless the contracts are eligible for, and we elect, the normal purchases and normal sales exception (i.e., contracts to purchase or sell quantities we expect to use or sell over a reasonable period in the normal course of business). We generally apply this normal purchases and normal sales exception to eligible crude oil, refined product, natural gas and power commodity purchase and sales contracts; however, we may elect not to apply this exception (e.g., when another derivative instrument will be used to mitigate the risk of the purchase or sales contract but hedge accounting will not be applied, in which case both the purchase or sales contract and the derivative contract mitigating the resulting risk will be recorded on the balance sheet at fair value).

We value our exchange-traded derivatives using closing prices provided by the exchange as of the balance sheet date, and these are classified as Level 1 in the fair value hierarchy. Where exchange-provided prices are adjusted, non-exchange quotes are used or when the instrument lacks sufficient liquidity, we generally classify those exchange-cleared contracts as Level 2. Over-the-counter (OTC) financial swaps and physical commodity forward purchase and sales contracts are generally valued using quotations provided by brokers and price index developers such as Platts and Oil Price Information Service. These quotes are corroborated with market data and are classified as Level 2. In certain less liquid markets or for longer-term contracts, forward prices are not as readily available. In these circumstances, OTC swaps and physical commodity purchase and sales contracts are valued using internally developed methodologies that consider historical relationships among various commodities that result in management’s best estimate of fair value. These contracts are classified as Level 3. A contract that is initially classified as Level 3 due to absence or insufficient corroboration of broker quotes over a material portion of the contract will transfer to Level 2 when the portion of the trade having no quotes or insufficient corroboration becomes an insignificant portion of the contract. A contract would also transfer to Level 2 if we began using a corroborated broker quote that has become available. Conversely, if a corroborated broker quote ceases to be available or used by us, the contract would transfer from Level 2 to Level 3. There were no transfers in or out of Level 1 during the periods presented.

Financial OTC and physical commodity options are valued using industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and contractual prices for the underlying instruments, as well as other relevant economic measures. The degree to which these inputs are observable in the forward markets determines whether the options are classified as Level 2 or 3.

We use a mid-market pricing convention (the mid-point between bid and ask prices). When appropriate, valuations are adjusted to reflect credit considerations, generally based on available market evidence.

The fair value hierarchy for our derivative assets and liabilities accounted for at fair value on a recurring basis was:


	Millions of Dollars
	June 30, 2012								December 31, 2011
	Level 1		Level 2		Level 3		Total		Level 1			Level 2		Level 3		Total

Assets
Commodity derivatives	$	2,392		977		5		3,374		389			270		6		665

Liabilities
Commodity derivatives		2,211		886		1		3,098		428			267		4		699

Net assets (liabilities)	$	181		91		4		276		(39	)		3		2		(34	)

The derivative values above are based on analysis of each contract as the fundamental unit of account; therefore, derivative assets and liabilities with the same counterparty are not reflected net where the legal right of setoff exists. Gains or losses from contracts in one level may be offset by gains or losses on contracts in another level or by changes in values of physical contracts or positions that are not reflected in the table above.

As reflected in the table above, Level 3 activity is not material.

Commodity Derivative Contracts —We operate in the worldwide crude oil, refined products, natural gas liquids, natural gas and electric power markets and are exposed to fluctuations in the prices for these commodities. These fluctuations can affect our revenues, as well as the cost of operating, investing and financing activities. Generally, our policy is to remain exposed to the market prices of commodities; however, we use futures, forwards, swaps and options in various markets to balance physical systems, meet customer needs, manage price exposures on specific transactions, and do a limited, immaterial amount of trading not directly related to our physical business. We also use the market knowledge gained from these activities to capture market opportunities such as moving physical commodities to more profitable locations, storing commodities to capture seasonal or time premiums, and blending commodities to capture quality upgrades. Derivatives may be used to optimize these activities, which may move our risk profile away from market average prices.

The following table indicates the balance sheet line items that include the fair values of commodity derivative assets and liabilities presented net (i.e., commodity derivative assets and liabilities with the same counterparty are netted where the right of setoff exists); however, the balances in the following table are presented gross:


	Millions of Dollars
	June 30 2012		December 31 2011

Assets
Prepaid expenses and other current assets	$	3,368		665
Other assets		17		5
Liabilities
Other accruals		3,080		703
Other liabilities and deferred credits		29		1

Hedge accounting has not been used for any items in the table.

The gains (losses) from commodity derivatives incurred, and the line items where they appear on our consolidated statement of income, were:


	Millions of Dollars
	Three Months Ended June 30					Six Months Ended June 30
	2012		2011			2012		2011


Sales and other operating revenue	$	380		(36	)		214		(646	)
Other income		45		(2	)		52		(13	)
Purchased crude oil and products		25		255			46		161

Hedge accounting has not been used for any item in the table.

The table below summarizes our material net exposures resulting from outstanding commodity derivative contracts. These financial and physical derivative contracts are primarily used to manage price exposure on our underlying operations. The underlying exposures may be from non-derivative positions such as inventory volumes. Financial derivative contracts may also offset physical derivative contracts, such as forward sales contracts.


	Open Position Long/(Short)
	June 30 2012			December 31 2011

Commodity
Crude oil, refined products and natural gas liquids ( millions of barrels )		(27	)		(13	)

Credit Risk

Financial instruments potentially exposed to concentrations of credit risk consist primarily of OTC derivative contracts and trade receivables.

The credit risk from our OTC derivative contracts, such as forwards and swaps, derives from the counterparty to the transaction. Individual counterparty exposure is managed within predetermined credit limits and includes the use of cash-call margins when appropriate, thereby reducing the risk of significant nonperformance. We also use futures, swaps and option contracts that have a negligible credit risk because these trades are cleared with an exchange clearinghouse and subject to mandatory margin requirements until settled; however, we are exposed to the credit risk of those exchange brokers for receivables arising from daily margin cash calls, as well as for cash deposited to meet initial margin requirements.

Our trade receivables result primarily from the sale of products from, or related to, our refinery operations and reflect a broad national and international customer base, which limits our exposure to concentrations of credit risk. The majority of these receivables have payment terms of 30 days or less. We continually monitor this exposure and the creditworthiness of the counterparties and recognize bad debt expense based on historical write-off experience or specific counterparty collectability. Generally, we do not require collateral to limit the exposure to loss; however, we will sometimes use letters of credit, prepayments, and master netting arrangements to mitigate credit risk with counterparties that both buy from and sell to us, as these agreements permit the amounts owed by us or owed to others to be offset against amounts due us.

Certain of our derivative instruments contain provisions that require us to post collateral if the derivative exposure exceeds a threshold amount. We have contracts with fixed threshold amounts and other contracts with variable threshold amounts that are contingent on our credit rating. The variable threshold amounts typically decline for lower credit ratings, while both the variable and fixed threshold amounts typically revert to zero if our credit ratings fall below investment grade. Cash is the primary collateral in all contracts; however, many contracts also permit us to post letters of credit as collateral.

The aggregate fair value of all derivative instruments with such credit-risk-related contingent features that were in a liability position was not material at June 30, 2012.

Fair Values of Financial Instruments

We used the following methods and assumptions to estimate the fair value of financial instruments:

•

Cash and cash equivalents: The carrying amount reported on the balance sheet approximates fair value.

•

Accounts and notes receivable: The carrying amount reported on the balance sheet approximates fair value.

•

Debt: The carrying amount of our floating-rate debt approximates fair value. The fair value of the fixed-rate debt is estimated based on quoted market prices as a Level 2 fair value.

•

Commodity swaps: Fair value is estimated based on forward market prices and approximates the exit price at period end. When forward market prices are not available, fair value is estimated using the forward prices of a similar commodity with adjustments for differences in quality or location.

•

Futures: Fair values are based on quoted market prices obtained from the New York Mercantile Exchange, the InterContinental Exchange Futures, or other traded exchanges.

•

Forward-exchange contracts: Fair values are estimated by comparing the contract rate to the forward rate in effect at the end of the respective reporting periods and approximating the exit price at those dates.

Our commodity derivative and financial instruments were:

Millions of Dollars

Carrying Amount

Fair Value

June 30

2012

December 31

2011

June 30

2012

December 31

2011

Financial Assets

Commodity derivatives

181

Financial Liabilities

Commodity derivatives

138

Total debt, excluding capital leases

7,975

377

8,341

406

The amounts shown for derivatives in the preceding table are presented net (i.e., assets and liabilities with the same counterparty are netted where the right of setoff exists). In addition, the June 30, 2012, commodity derivative assets and liabilities appear net of $245 million of obligations to return cash collateral and $12 million of rights to reclaim cash collateral, respectively. The December 31, 2011, commodity derivative liabilities appear net of $55 million of rights to reclaim cash collateral.

Note 14—Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) in the equity section of the balance sheet included:


	Millions of Dollars
	Defined Benefit Plans			Foreign Currency Translation			Hedging			Accumulated Other Comprehensive Income (Loss)


December 31, 2011	$	(145	)		270			(3	)		122
Other comprehensive income (loss)		72			(11	)		—			61
Net transfer from ConocoPhillips*		(541	)		—			—			(541	)

June 30, 2012	$	(614	)		259			(3	)		(358	)

* See Consolidated Statement of Changes in Equity.

Note 15—Employee Benefit Plans

Pension Plans

Prior to the separation, certain of our U.S. and U.K. employees participated in defined benefit pension plans and postretirement health and life insurance plans (Shared Plans) sponsored by ConocoPhillips, which included participants of other ConocoPhillips subsidiaries. Through the separation date, we accounted for such Shared Plans as multiemployer benefit plans. Accordingly, we did not record an asset or liability to recognize the funded status of the Shared Plans on our consolidated balance sheet until the separation date. We recorded expenses of $21 million and $84 million for the three months and six months ended June 30, 2012, respectively, and $63 million and $126 million for the three months and six months ended June 30, 2011, respectively, for our allocation of U.S. and U.K. pension costs prior to the separation date.

At the separation date, the assets and liabilities of certain defined benefit plans and postretirement benefit plans, allocable to Phillips 66 employees, were transferred to Phillips 66. Plan assets of $2,092 million, benefit obligations of $3,072 million and $870 million of accumulated other comprehensive loss ($541 million net of tax) were recorded for the plans transferred to us. The amount of plan assets transferred is expected to be adjusted based on final actuarial analyses in the third quarter of 2012.

The following table provides a reconciliation of the projected benefit obligations and plan assets for our pension plans and accumulated benefit obligations for our other postretirement benefit plans for the six months ended June 30, 2012:


	Millions of Dollars
	Pension Benefits						Other Benefits
	U.S.			Int’l.

Change in Benefit Obligation
Benefit obligation at January 1, 2012	$	—			237			—
Service cost		21			7			1
Interest cost		16			9			1
Plan participants’ contributions		—			1			—
Actuarial gain		(74	)		(8	)		(8	)
Benefits paid		—			(5	)		—
Liabilities assumed from separation		2,465			408			199
Foreign currency exchange rate changes		—			(13	)		—

Benefit obligation at June 30, 2012*	$	2,428			636			193

*Accumulated benefit obligation portion of above at June 30:	$	2,055			487

Change in Fair Value of Plan Assets
Fair value of plan assets at January 1, 2012	$	—			120			—
Return on plan assets		20			7			—
Company contributions		—			12			—
Plan participants’ contributions		—			1			—
Benefits paid		—			(5	)		—
Assets received from separation		1,740			352			—
Foreign currency exchange rate changes		—			(9	)		—

Fair value of plan assets at June 30, 2012	$	1,760			478			—



Funded Status at June 30, 2012	$	(668	)		(158	)		(193	)

Amounts recognized on the balance sheet at June 30, 2012, for the Company’s pension and other postretirement benefit plans include:


	Millions of Dollars
	Pension Benefits				Other Benefits
	U.S.		Int’l.

Current liabilities	$	4		—		2
Noncurrent liabilities		664		158		191

Total recognized	$	668		158		193

Certain plans in the U.S. and U.K. were remeasured after the separation. As of May 1, 2012, we selected a discount rate of 4.2 percent in the U.S. and 5.0 percent in the U.K. In determining the discount rates, we used yields on high-quality fixed income investments matched to the estimated benefit cash flows of our plans. Based on our long-term plans for compensation increases and expected economic conditions, including the effects of merit increases, promotions and general inflation, we selected an assumption rate for compensation increases of 3.75 percent in the U.S. and 4.2 percent in the U.K. We also selected an estimated long-term rate of return assumption of 7.0 percent in the U.S. and 5.9 percent in the U.K. These assumptions were used in the determination of net periodic benefit cost in the U.S. and U.K. for the period from May 1, 2012, through December 31, 2012.

Included in accumulated other comprehensive loss at June 30, 2012, were the following before-tax amounts that had not been recognized in net periodic benefit cost:


	Millions of Dollars
	Pension Benefits					Other Benefits
	U.S.		Int’l.


Unrecognized net actuarial loss (gain)	$	724		83			(15	)
Unrecognized prior service cost (credit)		16		(11	)		3

Accumulated other comprehensive loss at June 30, 2012, included $40 million expected to be amortized into net periodic benefit cost from July 1, 2012, through December 31, 2012.

The components of net periodic benefit cost of all defined benefit plans are presented in the following table:


	Millions of Dollars
	Pension Benefits									Other Benefits
	2012					2011				2012		2011

		U.S.		Int’l.			U.S.	Int’l.

Components of Net Periodic Benefit Cost
Three Months Ended June 30
Service cost	$	21		6			—	2			1		—
Interest cost		16		6			—	3			1		—
Expected return on plan assets		(20	)	(5	)		—	(2	)		—		—
Amortization of prior service cost		1		—			—	—			—		—
Recognized net actuarial loss		12		1			—	1			—		—

Subtotal net periodic benefit cost		30		8			—	4			2		—

Allocated benefit cost from ConocoPhillips		18		3			53	10			2		5

Total net periodic benefit cost	$	48		11			53	14			4		5


Six Months Ended June 30
Service cost	$	21		7			—	3			1		—
Interest cost		16		9			—	6			1		—
Expected return on plan assets		(20	)	(7	)		—	(4	)		—		—
Amortization of prior service cost		1		—			—	—			—		—
Recognized net actuarial loss		12		3			—	2			—		—

Subtotal net periodic benefit cost		30		12			—	7			2		—

Allocated benefit cost from ConocoPhillips		71		13			106	20			7		10

Total net periodic benefit cost	$	101		25			106	27			9		10

Plan Assets

The investment strategy for managing pension plan assets is to seek a reasonable rate of return relative to an appropriate level of risk and provide adequate liquidity for benefit payments and portfolio management. We follow a policy of broadly diversifying pension plan assets across asset classes, investment managers, and individual holdings. As a result, our plan assets have no significant concentrations of credit risk. Asset classes that are considered appropriate include equities, fixed income, cash, real estate and insurance contracts. Plan fiduciaries may consider and add other asset classes to the investment program from time to time. The target allocations for plan assets are 62 percent equity securities, 36 percent debt securities, 1 percent real estate and 1 percent in all other types of investments. Generally, the investments in the plans are publicly traded, therefore minimizing liquidity risk in the portfolio.

Following is a description of the valuation methodologies used for the pension plan assets.

•

Fair values of equity securities and government debt securities categorized in Level 1 are primarily based on quoted market prices.

•

Fair values of corporate debt securities, agency and mortgage-backed securities and government debt securities categorized in Level 2 are estimated using recently executed transactions and market price quotations. If there have been no market transactions in a particular fixed income security, its fair market value is calculated by pricing models that benchmark the security against other securities with actual market prices. When observable price quotations are not available, fair value is based on pricing models that use something other than actual market prices (e.g., observable inputs such as benchmark yields, reported trades and issuer spreads for similar securities), and these securities are categorized in Level 3 of the fair value hierarchy.

•

Fair values of investments in common/collective trusts are determined by the issuer of each fund based on the fair value of the underlying assets.

•

Fair values of mutual funds are valued based on quoted market prices, which represent the net asset value of shares held. Certain mutual funds are categorized in Level 2 as they are not valued on a daily basis.

•

Cash is valued at cost, which approximates fair value.

•

Fair values of insurance contracts are valued at the present value of the future benefit payments owed by the insurance company to the Plans’ participants.

•

Fair values of real estate investments are valued using real estate valuation techniques and other methods that include reference to third-party sources and sales comparables where available.

The fair values of our pension plan assets at June 30, 2012, by asset class were as follows:


	Millions of Dollars
	U.S.								International
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total

Equity Securities
U.S.	$	496		—		—		496		94		—		—		94
International		308		—		—		308		74		—		—		74
Common/collective trusts		—		219		—		219		—		88		—		88
Mutual funds		1		37		—		38		7		—		—		7
Debt Securities
Government		156		50		—		206		83		—		—		83
Corporate		—		279		1		280		—		—		—		—
Agency and mortgage-backed securities		—		46		—		46		—		—		—		—
Common/collective trusts		—		49		—		49		—		101		—		101
Mutual funds		55		—		—		55		2		—		—		2
Cash		—		—		—		—		5		—		—		5
Insurance contracts		—		—		—		—		—		—		16		16
Real estate		—		—		—		—		—		—		6		6

Total*	$	1,016		680		1		1,697		265		189		22		476

*Fair values in the table include unrealized losses of approximately $60 million and exclude net receivables related to security transactions of $5 million.

During the first six months of 2012, we contributed $12 million to our international plans. Total contributions for the remainder of the year are currently estimated to be $125 million ($100 million for our U.S. plans and $25 million for our international plans).

The following benefit payments, which include estimated future service, are expected to be paid:


	Millions of Dollars
	Pension Benefits				Other Benefits
	U.S.		Int’l.

2012	$	117		11		1
2013		181		13		3
2014		197		15		5
2015		216		17		7
2016		233		22		10
2017-2021		1,289		131		84

Share-Based Compensation

Prior to the separation, our employees participated in the “2011 Omnibus Stock and Performance Incentive Plan of ConocoPhillips” (the COP Omnibus Plan), under which they were eligible to receive ConocoPhillips stock options, restricted stock units (RSUs) and restricted performance share units (PSUs). Effective on the separation date of April 30, 2012, our employees and non-employee directors began participating in the “Omnibus Stock and Performance Incentive Plan of Phillips 66” (the P66 Omnibus Plan).

The P66 Omnibus Plan authorizes the Human Resources and Compensation Committee of our Board of Directors (the Committee) to grant stock options, stock appreciation rights, stock awards (including restricted stock and restricted stock unit awards), cash awards, and performance awards to our employees or non-employee directors and other plan participants. Of the 55 million shares of Phillips 66 common stock issuable under the P66 Omnibus Plan, no more than 40 million shares are available for incentive stock options and no more than 40 million shares are available for awards in stock.

In connection with the separation, share-based compensation awards granted under the COP Omnibus Plan and held by grantees as of April 30, 2012, were adjusted or substituted as follows. These adjustments were intended to preserve the intrinsic value of the awards as of April 30, 2012.

•

Exercisable awards of stock options and stock appreciation rights were adjusted so that the grantee received options to purchase both ConocoPhillips and Phillips 66 common stock.

•

Unexercisable awards of stock options held by Phillips 66 employees were replaced with substitute awards to purchase only Phillips 66 common stock.

•

Restricted stock and PSUs awarded for completed performance periods under the ConocoPhillips Performance Share Program (PSP) were adjusted so that the grantee received both ConocoPhillips and Phillips 66 restricted stock and PSUs.

•

Restricted stock and RSUs received under all programs other than the PSP were replaced entirely with substitute Phillips 66 restricted stock and RSUs.

Awards granted in connection with the adjustment and substitution of awards originally issued under the COP Omnibus Plan are a part of the P66 Omnibus Plan and are included in the maximum number of shares of Phillips 66 common stock available for delivery under the P66 Omnibus Plan.

The adjustment and substitution of awards resulted in the recognition of $9 million of incremental compensation expense in the second quarter of 2012.

Outstanding Awards —Awards granted under the P66 Omnibus Plan as a result of the adjustment and substitution of the COP Omnibus Plan awards in connection with the separation and a summary of stock option, RSU and PSU award activity for the period from April 30, 2012, to June 30, 2012, are presented in the following table:


	Stock Options					RSUs					PSUs
	Options			Weighted- Average Exercise Price		Awards			Weighted- Average Grant Date Fair Value		Awards			Weighted- Average Grant Date Fair Value

Outstanding at April 30, 2012		12,597,240		$	23.06		5,325,118		$	28.52		2,972,039		$	34.30
Granted		—			—		140,368			31.83		—			—
Forfeited		(140,086	)		32.03		(34,619	)		28.95		(1,300	)		38.04
Exercised or settled		(157,416	)		14.59		(16,842	)		26.17		(2,097	)		32.51
Expired or canceled		(54,195	)		32.24		—			—		—			—

Outstanding at June 30, 2012		12,245,543		$	23.03		5,414,025		$	28.61		2,968,642		$	34.30

All option, RSU, and PSU awards presented in this table are for Phillips 66 stock only, including those awards held by ConocoPhillips employees.

As of June 30, 2012, unrecognized compensation cost related to stock option awards was $11 million, which is expected to be recognized over a weighted average period of 1.4 years. Unrecognized compensation cost related to RSU and PSU awards was $96 million, which is expected to be recognized over a weighted average period of 2.9 years. The calculations of unamortized expense and weighted-average periods include awards based on both Phillips 66 and ConocoPhillips stock held by Phillips 66 employees.

Note 16—Related Party Transactions

Significant transactions with related parties were:


	Millions of Dollars
	Three Months Ended June 30				Six Months Ended June 30
	2012		2011		2012		2011


Operating revenues and other income (a)	$	2,099		2,458		4,236		4,408
Purchases (b)		5,778		8,778		14,808		16,416
Operating expenses and selling, general and administrative expenses (c)		44		80		143		191
Interest expense (d)		2		2		4		4

(a)

We sold crude oil to the Malaysian Refining Company Sdn. Bhd. (MRC). Natural gas liquids, solvents and petrochemical feedstocks were sold to CPChem, and gas oil and hydrogen feedstocks were sold to Excel. Crude oil, blendstock and other intermediate products were sold to WRB. In addition, we charged several of our affiliates, including CPChem and MSLP, for the use of common facilities, such as steam generators, waste and water treaters and warehouse facilities.

(b)

We purchased refined products from WRB. We purchased natural gas and natural gas liquids from DCP Midstream and CPChem for use in our refinery processes and other feedstocks from various affiliates. We purchased refined products from MRC. We also paid fees to various pipeline equity companies for transporting finished refined products. In addition, we paid a price upgrade to MSLP for heavy crude processing. We purchased base oils and fuel products from Excel for use in our refining and marketing businesses.

(c)	We paid utility and processing fees to various affiliates.

(d)	We incurred interest expense on a note payable to MSLP.

Also included in the table above are transactions with ConocoPhillips through April 30, 2012, the effective date of the separation. These transactions include crude oil purchased from ConocoPhillips as feedstock for our refineries and power sold to ConocoPhillips from our power generation facilities. Sales to ConocoPhillips prior to the separation were $85 million and $297 million for the three months ended June 30, 2012 and 2011, respectively, and $381 million and $564 million for the six months ended June 30, 2012 and 2011, respectively. Purchases from ConocoPhillips prior to the separation were $1,112 million and $3,836 million for the three months ended June 30, 2012 and 2011, respectively, and $5,328 million and $7,587 million for the six months ended June 30, 2012 and 2011, respectively.

For periods prior to the separation, the consolidated statement of income includes expense allocations for certain corporate functions historically performed by ConocoPhillips and not allocated to its operating segments, including allocations of general corporate expenses related to executive oversight, accounting, treasury, tax, legal, procurement and information technology. Net charges from ConocoPhillips for these services, reflected in selling, general and administrative expenses, were $9 million and $33 million for the three months ended June 30, 2012 and 2011, respectively, and $70 million and $98 million for the six months ended June 30, 2012 and 2011, respectively.

Net Parent Company Investment

The following is a reconciliation of the amounts presented as “Net transfers to/from ConocoPhillips” on the consolidated statement of changes in equity and the amounts presented as “Distributions to ConocoPhillips” on the consolidated statement of cash flows.


	Millions of Dollars
	Six Months Ended June 30
	2012			2011


Net transfers to ConocoPhillips per the consolidated statement of changes in equity	$	(5,707	)		(1,532	)
Non-cash adjustments
Foreign currency translation adjustments on net parent company investment		(118	)		(131	)
Net transfer of assets and liabilities with ConocoPhillips		570			(4	)

Distributions to ConocoPhillips per the consolidated statement of cash flows	$	(5,255	)		(1,667	)

Supplemental Cash Flow Information

In accordance with the separation and distribution agreement with ConocoPhillips, certain assets and liabilities were transferred to us at separation that were not included in the historical financial statements for periods prior to the separation. These noncash capital contributions included:

•

$374 million of PP&E; primarily office buildings and facilities.

•

$1,201 million of employee benefit liabilities; primarily related to U.S. and U.K. pension plans.

•

$329 million of deferred taxes associated with the employee benefit liabilities.

Note 17—Segment Disclosures and Related Information

We have organized our reporting structure based on the grouping of similar products and services, resulting in three operating segments:

R&M —This segment purchases, refines, markets and transports crude oil and petroleum products, mainly in the United States, Europe and Asia. This segment also includes power generation operations. The R&M segment’s United States and international operations are disclosed separately for reporting purposes.

Midstream —This segment gathers, processes, transports and markets natural gas and fractionates and markets natural gas liquids in the United States. The Midstream segment primarily consists of our 50 percent equity investment in DCP Midstream.

Chemicals —This segment manufactures and markets petrochemicals and plastics on a worldwide basis. The Chemicals segment consists of our 50 percent equity investment in CPChem.

Corporate and Other includes general corporate overhead, interest expense, our investments in new technologies and various other corporate activities. Corporate assets include all cash and cash equivalents.

We evaluate performance and allocate resources based on net income attributable to Phillips 66. Intersegment sales are at prices that approximate market.

Analysis of Results by Operating Segment


	Millions of Dollars
	Three Months Ended June 30						Six Months Ended June 30
	2012			2011			2012			2011

Sales and Other Operating Revenues
R&M
United States	$	29,998			34,821			59,446			64,775
International		15,340			16,054			29,993			28,934
Intersegment eliminations		(59	)		(180	)		(164	)		(313	)

R&M		45,279			50,695			89,275			93,396

Midstream
Total sales		1,506			2,022			3,405			4,253
Intersegment eliminations		(44	)		(129	)		(159	)		(285	)

Midstream		1,462			1,893			3,246			3,968

Chemicals		3			3			6			6
Corporate and Other		3			3			3			3

Consolidated sales and other operating revenues	$	46,747			52,594			92,530			97,373


Net Income (Loss) Attributable to Phillips 66
R&M
United States	$	1,124			695			1,531			1,118
International		60			79			53			144

Total R&M		1,184			774			1,584			1,262

Midstream		(91	)		111			(2	)		172
Chemicals		207			190			424			375
Corporate and Other		(119	)		(36	)		(189	)		(94	)

Consolidated net income attributable to Phillips 66	$	1,181			1,039			1,817			1,715


	Millions of Dollars
	June 30 2012		December 31 2011

Total Assets
R&M
United States	$	25,373		25,056
International		10,289		8,902
Goodwill		3,344		3,332

Total R&M		39,006		37,290

Midstream		2,206		2,900
Chemicals		3,613		2,999
Corporate and Other		3,750		22

Consolidated total assets	$	48,575		43,211

Note 18—Income Taxes

Our effective tax rate for the second quarter and first six months of 2012 was 38 percent and 39 percent, respectively, compared with 36 percent and 37 percent for the corresponding periods of 2011. The effective tax rate differs from the federal statutory rate of 35 percent primarily due to state income taxes (net of federal benefit) and the impact of foreign operations. The provision for income taxes for periods prior to the separation has been computed as if we were a stand-alone company.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis is the company’s analysis of its financial performance and of significant trends that may affect future performance. It should be read in conjunction with the consolidated financial statements and notes. It contains forward-looking statements including, without limitation, statements relating to the company’s plans, strategies, objectives, expectations and intentions that are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions identify forward-looking statements. The company does not undertake to update, revise or correct any of the forward-looking information unless required to do so under the federal securities laws. Readers are cautioned that such forward-looking statements should be read in conjunction with the company’s disclosures under the heading: “CAUTIONARY STATEMENT FOR THE PURPOSES OF THE ‘SAFE HARBOR’ PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995,” beginning on page 44.

The terms “earnings” and “loss” as used in Management’s Discussion and Analysis refer to net income (loss) attributable to Phillips 66.

BUSINESS ENVIRONMENT AND EXECUTIVE OVERVIEW

Phillips 66 is an international downstream company with refining and marketing, midstream and chemicals businesses. At June 30, 2012, we had total assets of $49 billion. On May 1, 2012, our common stock began trading “regular-way” on the New York Stock Exchange under the symbol “PSX.”

The Separation

Basis of Presentation

the downstream businesses had been combined for all periods presented. All intercompany transactions and accounts within the downstream businesses were eliminated. The assets and liabilities have been reflected on a historical cost basis, as all of the assets and liabilities presented were wholly owned by ConocoPhillips and were transferred within the ConocoPhillips consolidated group. The statement of income for periods prior to the separation includes expense allocations for certain corporate functions historically performed by ConocoPhillips and not allocated to its operating segments, including allocations of general corporate expenses related to executive oversight, accounting, treasury, tax, legal, procurement and information technology. These allocations were based primarily on specific identification of time and/or activities associated with the downstream businesses, employee headcount or capital expenditures. The combined financial statements may not necessarily reflect all of the actual expenses that would have been incurred had we been a stand-alone company during the periods presented prior to the separation. All financial information presented after the separation represents the consolidated results of operations, financial position and cash flows of Phillips 66.

Business Environment

Results for our Refining and Marketing (R&M) segment depend largely on refining and marketing margins, cost control, refinery throughput, and product yields. The overall change in crack spreads will impact our refining margins. Both domestic and international industry crack spreads improved in the second quarter of 2012. The U.S. 3:2:1 crack spread increased in the second quarter of 2012, compared with both the second quarter of 2011 and the first quarter of 2012. The improvement in domestic industry crack spreads primarily resulted from the decline in crude oil prices outpacing the decline in refined product prices.

In addition, record inventory levels in the Midcontinent, combined with constrained infrastructure out of the region, continue to cause West Texas Intermediate (WTI) crude to trade at a deep discount relative to waterborne crudes. Refineries capable of processing WTI crude and crude oils that are WTI based, primarily the Midcontinent and Gulf Coast refineries, benefitted from these lower regional feedstock prices.

The Northwest Europe benchmark crack spread increased in the second quarter of 2012, compared with the second quarter of 2011 and the first quarter of 2012. The improvement over both periods was driven by lower crude oil prices, due to economic concerns out of Europe related to the debt crisis as well as worries related to economic growth in the United States and China.

The Midstream segment’s results are closely linked to natural gas liquids prices and, to a lesser extent, natural gas prices. Natural gas liquids prices decreased in the second quarter of 2012, compared with the second quarter of 2011 and the first quarter of 2012, due to growing natural gas liquids production from liquids-rich gas shale plays with limited corresponding demand increase from the petrochemical industry, combined with lower crude oil prices caused by uncertainties in the global economy.

The Chemicals segment consists of our 50 percent equity investment in CPChem. The chemicals and plastics industry is mainly a commodity-based industry where the margins for key products are based on market factors. The chemicals industry experienced improved ethylene margins in regions of the world where production is based upon natural gas liquids versus crude-derived feedstocks. In particular, North American ethane-based crackers benefitted from the lower-priced feedstocks.

RESULTS OF OPERATIONS

Unless otherwise indicated, discussion of results for the three- and six-month periods ended June 30, 2012, is based on a comparison with the corresponding periods of 2011.

Consolidated Results

A summary of net income (loss) attributable to Phillips 66 by business segment follows:


	Millions of Dollars
	Three Months Ended June 30						Six Months Ended June 30
	2012			2011			2012			2011


R&M	$	1,184			774			1,584			1,262
Midstream		(91	)		111			(2	)		172
Chemicals		207			190			424			375
Corporate and Other		(119	)		(36	)		(189	)		(94	)

Net income attributable to Phillips 66	$	1,181			1,039			1,817			1,715

Earnings for Phillips 66 increased 14 percent in the second quarter of 2012 and 6 percent in the six-month period ended June 30, 2012, compared with the corresponding periods of 2011. The increases in both periods were primarily the result of:

•

Improved results from our R&M segment, mainly due to higher refining margins and marketing margins, and a gain of $106 million after-tax from the sale of Trainer Refinery and associated terminal and pipeline assets.

•

Improved results from our Chemicals segment, reflecting higher margins in the olefins and polyolefins business lines.

These improved results were partially offset by lower earnings from our Midstream segment resulting from a $170 million after-tax impairment of our equity investment in Rockies Express Pipeline LLC (REX) and lower natural gas liquids prices, and higher corporate repositioning expenses and interest expense.

See the “Segment Results” section for additional information on our segment results.

Income Statement Analysis

Sales and other operating revenues for the second quarter and six-month period of 2012 decreased 11 percent and 5 percent, respectively, and purchased crude oil and products decreased 13 percent and 6 percent, respectively. The decreases were mainly due to lower prices for petroleum products, crude oil and natural gas liquids (NGL).

Equity in earnings of affiliates for the second quarter and six-month period of 2012 increased 4 percent and 5 percent, respectively. The increases in both periods primarily resulted from:

•

Improved earnings from WRB Refining LP (WRB), mainly due to higher refining margins in the Central Corridor, combined with processing higher refining volumes associated with the start-up of the coker and refining expansion (CORE) project at the Wood River Refinery.

•

Improved earnings from CPChem, primarily due to higher margins in the olefins and polyolefins business lines.

These increases were partially offset by:

•

Lower earnings from DCP Midstream, mainly due to lower natural gas liquids prices and, to a lesser extent, natural gas and crude oil prices.

•

Lower earnings from Malaysian Refining Company Sdn., mainly due to lower refining margins.

Net gain on dispositions for the second quarter and six-month period of 2012 increased $145 million and $144 million, respectively, primarily related to the before-tax gain of $189 million from the sale of Trainer Refinery and associated terminal and pipeline assets in the second quarter of 2012. For additional information on the sale, see Note 5—Assets Held for Sale or Sold, in the Notes to Consolidated Financial Statements.

Other income for the second quarter and six-month period of 2012 both increased $68 million, primarily related to gains from trading activities not directly related to our physical business.

Selling, general and administrative expenses for the second quarter and six-month period of 2012 increased 38 percent and 24 percent, respectively, primarily resulting from costs associated with the separation of Phillips 66 from ConocoPhillips, and incremental costs relating to a prior retail disposition program.

Impairments for the second quarter and six-month period of 2012 increased $273 million and $316 million, respectively, primarily related to the $275 million impairment of our equity investment in REX and the $42 million impairment of equipment formerly associated with the canceled Wilhelmshaven Refinery (WRG) upgrade project. For additional information on the impairments, see Note 8—Impairments, in the Notes to Consolidated Financial Statements.

Interest and debt expense for the second quarter and six-month period of 2012 increased $80 million and $89 million, respectively, primarily due to new debt issued in March and April of 2012. For additional information on the debt issuance, see Note 9—Debt, in the Notes to Consolidated Financial Statements.

Foreign currency transaction (gains) losses for the second quarter of 2012 were an $8 million loss compared with a gain of $31 million for the second quarter of 2011. For the six-month period of 2012, the gains decreased $67 million compared with the same period of 2011. The unfavorable changes were primarily due to the U.S. dollar strengthening against both the British pound and the euro during both periods of 2012, compared with the U.S. dollar weakening against both the British pound and the euro during the corresponding periods of 2011.

See Note 18—Income Taxes, in the Notes to Consolidated Financial Statements, for information regarding our provision for income taxes and effective tax rates.

Segment Results

R&M


	Three Months Ended June 30					Six Months Ended June 30
	2012			2011		2012		2011

	Millions of Dollars
Net Income Attributable to Phillips 66
United States	$	1,124			695		1,531		1,118
International		60			79		53		144

	$	1,184			774		1,584		1,262


	Dollars Per Barrel
Refining Margins
Atlantic Basin/Europe	$	7.76			4.62		7.32		5.28
Gulf Coast		9.36			8.69		7.75		8.98
Central Corridor		26.34			19.96		21.64		18.60
Western/Pacific		7.91			9.34		9.29		9.89
Worldwide		12.56			9.49		11.40		9.63


	Dollars Per Gallon
U.S. Average Wholesale Prices*
Gasoline	$	3.09			3.19		3.04		2.97
Distillates		3.09			3.23		3.15		3.08

*Excludes excise taxes.

	Thousands of Barrels Daily
Operating Statistics
Refining operations*
Atlantic Basin/Europe
Crude oil capacity		588			773		588		773
Crude oil processed		561			715		567		719
Capacity utilization (percent)		95	%		93		96		93
Refinery production		616			784		621		784
Gulf Coast
Crude oil capacity		733			733		733		733
Crude oil processed		670			664		635		639
Capacity utilization (percent)		91	%		91		87		87
Refinery production		758			765		720		731
Central Corridor
Crude oil capacity		470			471		470		471
Crude oil processed		446			447		462		430
Capacity utilization (percent)		95	%		95		98		91
Refinery production		462			462		479		446
Western/Pacific
Crude oil capacity		439			435		439		435
Crude oil processed		391			370		383		383
Capacity utilization (percent)		89	%		85		87		88
Refinery production		412			397		408		410
Worldwide
Crude oil capacity		2,230			2,412		2,230		2,412
Crude oil processed		2,068			2,196		2,047		2,171
Capacity utilization (percent)		93	%		91		92		90
Refinery production		2,248			2,408		2,228		2,371

*Includes our share of equity affiliates.

Three Months Ended
June 30

Six Months Ended
June 30

2012

2011

2012

2011

Thousands of Barrels Daily

Petroleum products sales volumes

Gasoline

1,283

1,409

1,207

1,340

Distillates

1,162

1,177

1,148

1,190

Other products

532

568

493

578

2,977

3,154

2,848

3,108

The R&M segment refines crude oil and other feedstocks into petroleum products (such as gasoline, distillates and aviation fuels); buys, sells and transports crude oil; and buys, transports, distributes and markets petroleum products. This segment also includes power generation operations. R&M has operations mainly in the United States, Europe and Asia.

R&M reported earnings of $1,184 million during the second quarter of 2012, an increase of $410 million, or 53 percent, compared with the second quarter of 2011. Earnings for the first six months of 2012 were $1,584 million, an increase of $322 million, or 26 percent, compared with the same period of 2011. See the “Business Environment and Executive Overview” section for information on industry crack spreads and other market factors impacting this quarter’s results.

Earnings for both periods of 2012 improved, primarily due to higher worldwide refining margins, wholesale marketing margins, and lubricant margins, as well as a gain of $106 million after-tax from the sale of Trainer Refinery and associated terminal and pipeline assets. These items were partially offset by foreign currency transaction losses and a higher provision for income taxes associated with foreign dividends.

Additionally, the six-month period of 2012 included a $42 million after-tax property impairment related to equipment formerly associated with the canceled WRG upgrade project. For additional information on the impairment, see Note 8—Impairments, in the Notes to Consolidated Financial Statements.

During the six-month period of 2012, our refineries processed higher refining volumes in our higher-margin Central Corridor region, while processing lower refining volumes in our Atlantic Basin/Europe region due to the shutdown of Trainer Refinery in September 2011, which positively impacted our earnings.

Our worldwide refining capacity utilization rate was 93 percent in the second quarter of 2012, compared with 91 percent in the second quarter of 2011. The current year improvement was primarily due to improved market conditions.

Midstream


	Three Months Ended June 30					Six Months Ended June 30
	2012			2011		2012			2011

	Millions of Dollars

Net Income (Loss) Attributable to Phillips 66*	$	(91	)		111		(2	)		172

*Includes DCP Midstream-related earnings:	$	42			90		*102*			141


	Dollars Per Barrel
Weighted Average Sales Prices
U.S. natural gas liquids*
Equity affiliates	$	32.48	52.24	37.29	49.94

*Based on index prices from the Mont Belvieu and Conway market hubs that are weighted by natural gas liquids component and location mix.


	Thousands of Barrels Daily
Operating Statistics
Natural gas liquids extracted*		196	189	201	184
Natural gas liquids fractionated**		93	115	99	110

*Includes

our share of equity affiliates.

**Excludes

DCP Midstream.

The Midstream segment purchases raw natural gas from producers and gathers natural gas through an extensive network of pipeline gathering systems. The natural gas is then processed to extract natural gas liquids from the raw gas stream. The remaining “residue” gas is marketed to electric utilities, industrial users and gas marketing companies. Most of the natural gas liquids are fractionated—separated into individual components such as ethane, propane and butane—and marketed as chemical feedstock, fuel or blendstock. The Midstream segment consists of our 50 percent equity investment in DCP Midstream, as well as other natural gas liquids fractionation, trading and marketing businesses in the United States. The Midstream segment also includes our 25 percent ownership interest in REX.

Earnings from the Midstream segment decreased $202 million in the second quarter of 2012 and $174 million in the six-month period of 2012, compared with the corresponding periods of 2011. The decreases in both periods were primarily due to a $170 million after-tax impairment of our equity investment in REX and decreased earnings from DCP Midstream, partially offset by improved earnings from our NGL trading and marketing business. For additional information on the impairment of REX, see Note 8—Impairments, in the Notes to Consolidated Financial Statements. The decrease in earnings of DCP Midstream mainly resulted from lower NGL prices and, to a lesser extent, natural gas and crude oil prices, partially offset by lower depreciation and amortization (D&A) as described below. See the “Business Environment and Executive Overview” section for additional information on natural gas liquids prices.

During the second quarter of 2012, DCP Midstream completed a review of the estimated depreciable lives of its major classes of properties, plants and equipment (PP&E). As a result of that review, the depreciable lives were extended. This change in accounting estimate was implemented on a prospective basis, effective April 1, 2012. DCP Midstream estimates its D&A will be lowered approximately $240 million per year (on a 100 percent basis), which would be an estimated after-tax benefit to our equity earnings from DCP Midstream of approximately $75 million.

Chemicals

Millions of Dollars

Three Months Ended
June 30

Six Months Ended
June 30

2012

2011

2012

2011

Net Income Attributable to Phillips 66

207

190

424

375

Millions of Pounds

CPChem Externally Marketed Sales Volumes

Olefins and Polyolefins

3,510

3,473

7,150

6,835

Specialties, Aromatics and Styrenics

1,811

1,732

3,604

3,419

5,321

5,205

10,754

10,254

The Chemicals segment consists of our 50 percent interest in CPChem, which we account for under the equity method. CPChem uses natural gas liquids and other feedstocks to produce petrochemicals. These products are then marketed and sold or used as feedstocks to produce plastics and commodity chemicals.

Earnings from the Chemicals segment increased $17 million, or 9 percent, in the second quarter of 2012 and $49 million, or 13 percent, in the six-month period of 2012, compared with the corresponding periods of 2011. The increases in both periods of 2012 primarily resulted from higher polyethylene and ethylene margins, reflecting lower feedstock costs, and lower utility costs due to decreased natural gas prices, partially offset by a loss on early extinguishment of debt as described below, and higher operating costs due to plant turnaround activity in the second quarter of 2012. Ethylene margins benefitted from lower ethane and propane prices during the 2012 periods.

During the second quarter of 2012, CPChem began execution of its plan to retire $1 billion of fixed-rate debt by the end of 2012. On June 1, 2012, CPChem redeemed its $300 million of 7% notes due 2014 and its $300 million of 4.75% notes due 2021, and wrote off the associated unamortized debt issuance costs. CPChem recognized a loss on early extinguishment of debt of $114 million (100 percent basis), which decreased our equity in earnings from CPChem, on an after-tax basis, by approximately $35 million. We expect that during the second-half of 2012, we will recognize a further after-tax reduction in equity earnings of approximately $50 million when CPChem retires its $400 million of 8.25% notes due 2019.

Corporate and Other


	Millions of Dollars
	Three Months Ended June 30						Six Months Ended June 30
	2012			2011			2012			2011

Net Income (Loss) Attributable to Phillips 66
Net interest	$	(45	)		(3	)		(54	)		(5	)
Corporate general and administrative expenses		(21	)		(14	)		(49	)		(36	)
Technology		(11	)		(11	)		(24	)		(24	)
Repositioning costs		(30	)		—			(30	)		—
Other		(12	)		(8	)		(32	)		(29	)

	$	(119	)		(36	)		(189	)		(94	)

Net interest consists of interest and financing expense, net of interest income. Net interest increased $42 million in the second quarter of 2012 and $49 million in the six-month period of 2012, compared with the corresponding periods of 2011, primarily due to the new debt issued in March and April of 2012. For additional information on the debt issuance, see Note 9—Debt, in the Notes to Consolidated Financial Statements.

Corporate general and administrative expenses increased $7 million in the second quarter of 2012 and $13 million in the six-month period of 2012, compared with the corresponding periods of 2011. The increases in both periods were primarily due to higher actual expenses as a stand-alone company for the two-month period subsequent to the separation.

Repositioning costs consist of expenses related to the separation of Phillips 66 from ConocoPhillips. Expenses incurred in the second quarter of 2012 primarily included compensation and benefits, information systems, and shared services costs.

The category “Other” includes certain foreign currency transaction gains and losses, environmental costs associated with sites no longer in operation, and other costs not directly associated with an operating segment.

CAPITAL RESOURCES AND LIQUIDITY

Significant Sources of Capital

Historically, cash generated from operating activities has been our primary source of liquidity and capital resources. In addition, we received proceeds from asset dispositions.

Operating Activities

During the first six months of 2012, cash provided by operating activities was $1,073 million compared with $1,538 million in the corresponding period of 2011. The decline in the 2012 period reflects the negative working capital impacts of decreasing commodity prices during the first six months of 2012 versus increasing commodity prices in the first six months of 2011, partially offset by higher realized refining and marketing margins in the 2012 period.

Our short- and long-term operating cash flows are highly dependent upon refining and marketing margins, prices for natural gas liquids, and chemicals margins. Prices and margins in our industry are typically volatile and are driven by market conditions over which we have little or no control. Absent other mitigating factors, as these prices and margins fluctuate, we would expect a corresponding change in our operating cash flows.

Generally, demand for gasoline is higher during the spring and summer months than during the fall and winter months in most of our markets due to seasonal changes in highway traffic. As a result, our operating results in the first and fourth quarters are generally lower than in the second and third quarters. However, our cash flow from operations may not always follow this seasonal trend in operating results, due to working capital fluctuations associated with inventory management. Historically, we have built inventory levels during the first quarter (thus lowering cash flow from operations) and lowered inventory levels in the fourth quarter (increasing cash flow from operations).

The level and quality of output from our refineries impacts our cash flows. The output at our refineries is impacted by such factors as operating efficiency, maintenance turnarounds, market conditions, feedstock availability and weather conditions. We actively manage the operations of our refineries and, typically, any variability in their operations has not been as significant to cash flows as that caused by margins and prices.

Our operating cash flows are also impacted by dividend decisions made by our equity affiliates, including WRB, DCP Midstream and CPChem. During the first six months of 2012, we received dividends of $988 million from our equity affiliates, compared with $666 million during the same period of 2011. We cannot control the amount of future dividends from equity affiliates; therefore, future dividend payments by these companies are not assured. For a discussion of distributions by CPChem, see the “Capital Spending—Chemicals” section.

Credit Facilities

In February 2012, we entered into a five-year revolving credit agreement with a syndicate of financial institutions. Under the terms of the revolving credit agreement, we have a borrowing capacity of up to $4.0 billion. We have not borrowed under this facility. However, as of June 30, 2012, $50 million in letters of credit had been issued that were supported by this facility.

Borrowings under the credit agreement will incur interest at LIBOR plus a margin based on the credit rating of our senior unsecured long-term debt as determined from time to time by Standard & Poor’s Ratings Services (S&P) and Moody’s Investors Service (Moody’s). The revolving credit agreement also provides for customary fees, including administrative agent fees and commitment fees.

During April, a newly formed, wholly owned subsidiary entered into a trade receivables securitization facility with an aggregate borrowing capacity of $1.2 billion, and a term of three years. As of June 30, 2012, no amount had been drawn under the facility. However, $279 million in letters of credit had been issued that were supported by the facility.

Debt Financings

During March 2012, we issued, through a private placement, $5.8 billion of debt consisting of:

•

$0.8 billion aggregate principal amount of 1.950% Senior Notes due 2015.

•

$1.5 billion aggregate principal amount of 2.950% Senior Notes due 2017.

•

$2.0 billion aggregate principal amount of 4.300% Senior Notes due 2022.

•

$1.5 billion aggregate principal amount of 5.875% Senior Notes due 2042.

The notes are guaranteed by Phillips 66 Company, a wholly owned subsidiary. In connection with the private placement, we and Phillips 66 Company granted the holders of the notes certain registration rights under a Registration Rights Agreement. We have agreed for the benefit of the holders of the notes to use our commercially reasonable efforts to file and cause to be effective a registration statement with the U.S. Securities and Exchange Commission on an appropriate form with respect to a registered offer to exchange each series of notes for new notes that are guaranteed by Phillips 66 Company with terms substantially identical in all material respects to such series of notes. Generally, we have one year from the issuance of the Senior Notes to complete the exchange offer.

During April 2012, approximately $185 million of previously existing debt was retired. Also during April, we closed on $2.0 billion of new debt as a three-year amortizing term loan. The term loan bears interest at a variable rate based on referenced rates plus a margin dependent upon the credit rating of our senior unsecured long-term debt as determined from time to time by S&P and Moody’s. As of June 30, 2012, the interest rate was 1.716 percent.

Our senior unsecured long-term debt has been rated investment grade by Moody’s and S&P. We do not have any ratings triggers on any of our corporate debt that would cause an automatic default, and thereby impact our access to liquidity, in the event of a downgrade of our credit rating. If our credit rating deteriorated to a level prohibiting us from accessing the commercial paper market, we would expect to be able to access funds under our $5.2 billion in liquidity facilities mentioned above.

Because of the opportunities available to us, including internally generated cash flow and access to capital markets, we believe our short-term and long-term liquidity will be adequate to fund not only our operations, but also our anticipated near-term and long-term funding requirements, including capital spending programs, dividend payments, defined benefit plan contributions, repayment of debt maturities and other amounts that may ultimately be paid in connection with contingencies.

Off-Balance Sheet Arrangements

In April 2012, in connection with the separation, we entered into an agreement to guarantee 100 percent of certain outstanding debt obligations of Merey Sweeny, L.P. (MSLP). At June 30, 2012, the aggregate principal amount of MSLP debt guaranteed by us was $242 million.

For additional information about guarantees, see Note 11—Guarantees, in the Notes to Consolidated Financial Statements.

Capital Requirements

For information about our capital expenditures and investments, see the “Capital Spending” section.

On July 11, 2012, our Board of Directors declared the payment of a quarterly dividend of $0.20 per share. The dividend is payable on September 4, 2012, to stockholders of record at the close of business on July 23, 2012.

On July 31, 2012, our Board of Directors authorized the repurchase of up to $1 billion of our outstanding common stock. We expect to begin purchases under this authorization in the third quarter of 2012. The share repurchases are expected to be funded primarily through cash generated by operating activities. Shares of stock repurchased will be held as treasury shares.

Capital Spending


	Millions of Dollars
	Six Months Ended June 30
	2012		2011

Capital Expenditures and Investments
R&M
United States	$	365		303
International		89		75

		454		378

Midstream		8		4
Chemicals		—		—
Corporate and Other		26		11

	$	488		393

United States	$	399		318
International		89		75

	$	488		393

R&M

Capital spending for the R&M segment during the first six months of 2012 was primarily for air emission reduction and clean fuels projects to meet new environmental standards, refinery upgrade projects to improve product yields, improvements to the operating integrity of key processing units and safety-related projects. During the first six months of 2012, R&M capital spending was $454 million.

Major construction activities in progress include:

•

Revamp and expansions of equipment for production of low benzene gasoline at Bayway Refinery.

•

Several reliability and maintenance capital projects across the refining system aimed at improving operating availability.

•

Programs aimed at air emission reductions in various U.S. plants.

Generally, our equity affiliates in the R&M segment are intended to have self-funding capital programs.

Midstream

During the first six months of 2012, DCP Midstream had a self-funded capital program, and thus required no new capital infusions from us or our co-venturer. During this period, on a 100 percent basis, DCP Midstream’s capital expenditures and investments were approximately $1,125 million. We are currently forecasting DCP Midstream to remain self-funding through 2012.

Chemicals

During the first six months of 2012, CPChem had a self-funded capital program, and thus required no new capital infusions from us or our co-venturer. During this period, on a 100 percent basis, CPChem’s capital expenditures and investments were approximately $290 million. Our agreement with Chevron Corporation regarding CPChem provides for CPChem to: (i) prior to the separation, halt all mandatory cash distributions to its owners and accumulate its excess cash; and (ii) after the separation, use the accumulated cash and its excess cash flow to retire all of its approximately $1 billion outstanding fixed-rate debt on an accelerated basis. In the second quarter of 2012, CPChem paid $714 million to redeem an aggregate principal balance of $600 million of debt, together with $114 million of prepayment premiums. During this period of debt repayment, CPChem is not required to make any cash distributions to its owners. In addition, after the separation, the agreement generally provides that instead of CPChem incurring debt, CPChem’s owners will make capital infusions as necessary to fund CPChem’s capital requirements to the extent these requirements exceed CPChem’s available cash from operations. We are currently forecasting CPChem to remain self-funding through 2012.

Contingencies

A number of lawsuits involving a variety of claims have been made against us that arose in the ordinary course of business. We also may be required to remove or mitigate the effects on the environment of the placement, storage, disposal or release of certain chemical, mineral and petroleum substances at various active and inactive sites. We regularly assess the need for accounting recognition or disclosure of these contingencies. In the case of all known contingencies (other than those related to income taxes), we accrue a liability when the loss is probable and the amount is reasonably estimable. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. We do not reduce these liabilities for potential insurance or third-party recoveries. If applicable, we accrue receivables for probable insurance or other third-party recoveries. In the case of income-tax-related contingencies, we use a cumulative probability-weighted loss accrual in cases where sustaining a tax position is less than certain.

Based on currently available information, we believe it is remote that future costs related to known contingent liability exposures will exceed current accruals by an amount that would have a material adverse impact on our consolidated financial statements. As we learn new facts concerning contingencies, we reassess our position both with respect to accrued liabilities and other potential exposures. Estimates particularly sensitive to future changes include contingent liabilities recorded for environmental remediation, tax and legal matters. Estimated future environmental remediation costs are subject to change due to such factors as the uncertain magnitude of cleanup costs, the unknown time and extent of such remedial actions that may be required, and the determination of our liability in proportion to that of other responsible parties. Estimated future costs related to tax and legal matters are subject to change as events evolve and as additional information becomes available during the administrative and litigation processes.

Legal and Tax Matters

Environmental

We are subject to the same numerous international, federal, state and local environmental laws and regulations as other companies in our industry. For a discussion of the most significant of these environmental laws and regulations, including those with associated remediation obligations, see the “Environmental” section in Management’s Discussion and Analysis of Financial Condition and Results of Operations on pages 146, 147 and 148 of the Information Statement included in the Form 10.

We occasionally receive requests for information or notices of potential liability from the U.S. Environmental Protection Agency (EPA) and state environmental agencies alleging that we are a potentially responsible party under the Federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) or an equivalent state statute. On occasion, we also have been made a party to cost recovery litigation by those agencies or by private parties. These requests, notices and lawsuits assert potential liability for remediation costs at various sites that typically are not owned by us, but allegedly contain wastes attributable to our past operations. As of December 31, 2011, we reported that we had been notified of potential liability under CERCLA and comparable state laws at 61 sites around the United States. During the first two quarters of 2012, we were notified of one new site and 10 sites were resolved and closed, leaving 52 unresolved sites with potential liability.

At June 30, 2012, our consolidated balance sheet included a total environmental accrual of $538 million, compared with $542 million at December 31, 2011. We expect to incur a substantial amount of these expenditures within the next 30 years.

Notwithstanding any of the foregoing, and as with other companies engaged in similar businesses, environmental costs and liabilities are inherent concerns in our operations and products, and there can be no assurance that material costs and liabilities will not be incurred. However, we currently do not expect any material adverse effect on our results of operations or financial position as a result of compliance with current environmental laws and regulations.

The EPA’s Renewable Fuel Standard (RFS) program was implemented in accordance with the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007. The RFS program sets annual quotas for the percentage of biofuels (such as ethanol) that must be blended into motor fuels consumed in the United States. A Renewable Identification Number (RIN) represents a serial number assigned to each gallon of biofuel produced or imported into the United States. As a producer of petroleum-based motor fuels, we are obligated to blend biofuels into the products we produce at a rate that is at least equal to the EPA’s quota and, to the extent we do not, we must purchase RINs in the open market to satisfy our obligation under the RFS program. The market for RINs has been the subject of fraudulent activity, and we have identified that we have unknowingly purchased RINs in the past that were invalid due to fraudulent activity. Although costs to replace fraudulently marketed RINs that have been determined to be invalid have not been material through June 30, 2012, it is reasonably possible that some additional RINs that we have previously purchased may also be determined to be invalid. Should that occur, we would incur additional replacement charges. Although the cost for replacing any additional fraudulently marketed RINs is not reasonably estimable at this time, we could have a possible exposure of approximately $150 million before-tax. It could take several years for this possible exposure to reach ultimate resolution; therefore, we would not expect to incur the full financial impact of fraudulent RIN replacement costs in any single interim or annual period.

Climate Change

There has been a broad range of proposed or promulgated state, national and international laws focusing on greenhouse gas (GHG) reduction. These proposed or promulgated laws apply or could apply in countries where we have interests or may have interests in the future. Laws in this field continue to evolve, and while it is not possible to accurately estimate either a timetable for implementation or our future compliance costs relating to implementation, such laws, if enacted, could have a material impact on our results of operations and financial condition. We previously disclosed that the EPA’s announcement on March 29, 2010 (published as “Interpretation of Regulations that Determine Pollutants Covered by Clean Air Act Permitting Programs,” 75 Fed. Reg. 17004 (April 2, 2010)), and the EPA’s and U.S. Department of Transportation’s joint promulgation of a Final Rule on April 1, 2010, that triggers regulation of GHGs under the Clean Air Act, may lead to more climate-based claims for damages, and may result in longer agency review time for development projects to determine the extent of climate change. Challenges to both the announcement and rulemaking were recently denied by the Court of Appeals for the D.C. Circuit, but may be subject to additional legal actions. We continue to monitor other legislative and regulatory actions and legal proceedings globally for potential impacts on our operations.

For examples of legislation or precursors for possible regulation that do or could affect our operations, see the “Climate Change” section in Management’s Discussion and Analysis of Financial Condition and Results of Operations on pages 148 and 149 of the Information Statement included in the Form 10.

CRITICAL ACCOUNTING ESTIMATES

Projected Benefit Obligations

Determination of the projected benefit obligations for our defined benefit pension and postretirement plans are important to the recorded amounts for such obligations on the balance sheet and to the amount of benefit expense in the income statement. The actuarial determination of projected benefit obligations and company contribution requirements involves judgment about uncertain future events, including estimated retirement dates, salary levels at retirement, mortality rates, lump-sum election rates, rates of return on plan assets, future health care cost-trend rates, and rates of utilization of health care services by retirees. Due to the specialized nature of these calculations, we engage outside actuarial firms to assist in the determination of these projected benefit obligations and company contribution requirements. For Employee Retirement Income Security Act-qualified pension plans, the actuary exercises fiduciary care on behalf of plan participants in the determination of the judgmental assumptions used in determining required company contributions into the plan. Due to differing objectives and requirements between financial accounting rules and the pension plan funding regulations promulgated by governmental agencies, the actuarial methods and assumptions for the two purposes differ in certain important respects. Ultimately, we will be required to fund all promised benefits under pension and postretirement benefit plans not funded by plan assets or investment returns, but the judgmental assumptions used in the actuarial calculations significantly affect periodic financial statements and funding patterns over time. Benefit expense is particularly sensitive to the discount rate and return on plan assets assumptions. A 1 percent decrease in the discount rate assumption would increase annual benefit expense by an estimated $40 million, while a 1 percent decrease in the return on plan assets assumption would increase annual benefit expense by an estimated $20 million. In determining the discount rate, we use yields on high-quality fixed income investments matched to the estimated benefit cash flows of our plans.

CAUTIONARY STATEMENT FOR THE PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify our forward-looking statements by the words “anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions.

We based the forward-looking statements on our current expectations, estimates and projections about us and the industries in which we operate in general. We caution you these statements are not guarantees of future performance as they involve assumptions that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict. In addition, we based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecast in the forward-looking statements. Any differences could result from a variety of factors, including the following:

•

Fluctuations in crude oil, NGL, and natural gas prices, refining and marketing margins and margins for our chemicals business.

•

Failure of new products and services to achieve market acceptance.

•

Unexpected changes in costs or technical requirements for constructing, modifying or operating facilities for manufacturing, refining or transportation projects.

•

Unexpected technological or commercial difficulties in manufacturing, refining or transporting our products, including chemicals products.

•

Lack of, or disruptions in, adequate and reliable transportation for our crude oil, natural gas, NGL, and refined products.

•

The level and success of natural gas drilling around DCP Midstream’s assets, the level and quality of gas production volumes around its assets and its ability to connect supplies to its gathering and processing systems in light of competition.

•

Inability to timely obtain or maintain permits, including those necessary for refinery projects; comply with government regulations; or make capital expenditures required to maintain compliance.

•

Failure to complete definitive agreements and feasibility studies for, and to timely complete construction of, announced and future refinery, chemical plant, midstream and transportation projects.

•

Potential disruption or interruption of our operations due to accidents, extraordinary weather events, civil unrest, political events, terrorism or cyber attacks.

•

International monetary conditions and exchange controls.

•

Substantial investment or reduced demand for products as a result of existing or future environmental rules and regulations.

•

Liability for remedial actions, including removal and reclamation obligations, under environmental regulations.

•

Liability resulting from litigation.

•

General domestic and international economic and political developments, including armed hostilities; expropriation of assets; changes in governmental policies relating to crude oil, natural gas, NGL or refined product pricing, regulation or taxation; other political, economic or diplomatic developments; and international monetary fluctuations.

•

Changes in tax, environmental and other laws and regulations (including alternative energy mandates) applicable to our business.

•

Limited access to capital or significantly higher cost of capital related to illiquidity or uncertainty in the domestic or international financial markets.

•

Inability to obtain economical financing for projects, construction or modification of facilities and general corporate purposes.

•

The operation, financing and distribution decisions of our joint ventures.

•

Domestic and foreign supplies of crude oil and other feedstocks.

•

Domestic and foreign supplies of refined products, such as gasoline, diesel, jet fuel, home heating oil and petrochemicals.

•

Overcapacity or under capacity in the refining and chemical industries.

•

Fluctuations in consumer demand for refined products.

•

Crude/refined product inventory levels.

•

The factors generally described in the section entitled “Risk Factors” in the Information Statement included in the Form 10.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information about market risks for the six months ended June 30, 2012, does not differ materially from that discussed on pages 152 and 153 in the Information Statement included in the Form 10.

Item 4. CONTROLS AND PROCEDURES

With the participation of management, our Chairman and Chief Executive Officer (principal executive officer) and our Executive Vice President and Chief Financial Officer (principal financial officer) carried out an evaluation, pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the Act), of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Act) as of the end of the period covered by this report. Based upon that evaluation, our Chairman and Chief Executive Officer and our Executive Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were operating effectively as of June 30, 2012.

There have been no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) of the Act, in the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

The following is a description of reportable legal proceedings including those involving governmental authorities under federal, state and local laws regulating the discharge of materials into the environment for this reporting period. The following proceedings include those matters that arose during the second quarter of 2012. We did not have material developments with respect to matters previously reported in the Form 10 or the Quarterly Report on Form 10-Q for the quarter ended March 31, 2012. While it is not possible to accurately predict the final outcome of these pending proceedings, if any one or more of such proceedings was decided adversely to Phillips 66, we expect there would be no material effect on our consolidated financial position. Nevertheless, such proceedings are reported pursuant to the U.S. Securities and Exchange Commission’s (SEC) regulations.

Our U.S. refineries are implementing two separate consent decrees regarding alleged violations of the Federal Clean Air Act with the U.S. Environmental Protection Agency (EPA), six states and one local air pollution agency. Some of the requirements and limitations contained in the decrees provide for stipulated penalties for violations. Stipulated penalties under the decrees are not automatic, but must be requested by one of the agency signatories. As part of periodic reports under the decrees or other reports required by permits or regulations, we occasionally report matters that could be subject to a request for stipulated penalties. If a specific request for stipulated penalties meeting the reporting threshold set forth in SEC rules is made pursuant to these decrees based on a given reported exceedance, we will separately report that matter and the amount of the proposed penalty.

New Matters

In May 2012, the Illinois Attorney General’s office filed and served a complaint against Phillips 66 with respect to operations at the WRB Wood River Refinery alleging violations of the Illinois groundwater standards and a third-party’s hazardous waste permit. The complaint seeks as relief remediation of area groundwater, compliance with the hazardous waste permit, enhanced pipeline and tank integrity measures, additional spill reporting, and yet-to-be specified amounts for fines and penalties. Phillips 66 is working with the Illinois Environmental Protection Agency and Attorney General’s office to resolve these allegations.

On March 7, 2012, the Bay Area Air Quality Management District (the District) issued a $302,500 demand to settle five Notices of Violation (NOVs) issued between 2008 and 2010. The NOVs allege non-compliance with the District rules and/or facility permit conditions. We are working with the District to resolve this matter.

Item 1A. RISK FACTORS

There have been no material changes from the risk factors disclosed in the section entitled “Risk Factors” in the Information Statement included in the Form 10.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

On July 31, 2012, our Board of Directors authorized the repurchase of up to $1 billion of our outstanding common stock. We expect to begin purchases under this authorization, which has no expiration date, in the third quarter of 2012. The shares will be repurchased from time to time in the open market at the company’s discretion, subject to market conditions and other factors, and in accordance with applicable regulatory requirements and the Tax Sharing Agreement entered into in connection with the separation from ConocoPhillips. We are not obligated to acquire any particular amount of common stock and may commence, suspend or discontinue purchases at any time or from time to time without prior notice. Shares of stock repurchased will be held as treasury shares.

Item 6. EXHIBITS


		Incorporated by Reference
Exhibit Number	Exhibit Description	Form		Exhibit Number		Filing Date		SEC File No.

10.1	Indemnification and Release Agreement between ConocoPhillips and Phillips 66, dated April 26, 2012.		8-K		10.1		05/01/12		001-35349

10.2	Intellectual Property Assignment and License Agreement between ConocoPhillips and Phillips 66, dated April 26, 2012.		8-K		10.2		05/01/12		001-35349

10.3	Tax Sharing Agreement between ConocoPhillips and Phillips 66, dated April 26, 2012.		8-K		10.3		05/01/12		001-35349

10.4	Employee Matters Agreement between ConocoPhillips and Phillips 66, dated April 26, 2012.		8-K		10.4		05/01/12		001-35349

10.5	Transition Services Agreement between ConocoPhillips and Phillips 66, dated April 26, 2012.		8-K		10.5		05/01/12		001-35349

10.6	Receivables Purchase Agreement, dated as of April 27, 2012, among Phillips 66 Receivables Funding LLC, Phillips 66 Company, Royal Bank of Canada, as Administrative Agent and Structuring Agent, certain committed purchasers and conduit purchasers that are parties thereto from time to time and the other parties thereto from time to time.		8-K		10.6		05/01/12		001-35349

10.7	Purchase and Contribution Agreement, dated as of April 27, 2012, by and between Phillips 66 Company and Phillips 66 Receivables Funding LLC.		8-K		10.7		05/01/12		001-35349

10.8	Omnibus Stock and Performance Incentive Plan of Phillips 66.		S-8		4.1		05/01/12		333-181080

10.9	Second Amended and Restated Limited Liability Company Agreement of Duke Energy Field Services, LLC, dated July 5, 2005, by and between ConocoPhillips Gas Company and Duke Energy Enterprises Corporation.		10		10.12		04/05/12		001-35349

10.10	First Amendment to the Second Amended and Restated Limited Liability Company Agreement of Duke Energy Field Services, LLC, dated August 11, 2006, by and between ConocoPhillips Gas Company and Duke Energy Enterprises Corporation.		10		10.13		04/05/12		001-35349

Incorporated by Reference

Exhibit
Number

Exhibit Description

Form

Exhibit
Number

Filing
Date

SEC
File No.

10.11

Second Amendment to the Second Amended and Restated Limited Liability Company Agreement of DCP Midstream, LLC (formerly Duke Energy Field Services, LLC), dated February 1, 2007, by and between ConocoPhillips Gas Company, Spectra Energy DEFS Holding, LLC, and Spectra Energy DEFS Holding Corp.

10.14

04/05/12

001-35349

10.12

Third Amendment to the Second Amended and Restated Limited Liability Company Agreement of DCP Midstream, LLC (formerly Duke Energy Field Services, LLC), dated April 30, 2009, by and between ConocoPhillips Gas Company, Spectra Energy DEFS Holding, LLC, and Spectra Energy DEFS Holding Corp.

10.15

04/05/12

001-35349

10.13

Fourth Amendment to the Second Amended and Restated Limited Liability Company Agreement of DCP Midstream, LLC (formerly Duke Energy Field Services, LLC), dated November 9, 2010, by and between ConocoPhillips Gas Company, Spectra Energy DEFS Holding, LLC, and Spectra Energy DEFS Holding Corp.

10.16

04/05/12

001-35349

10.14*

Third Amended and Restated Limited Liability Company Agreement of Chevron Phillips Chemical Company LLC, effective as of May 1, 2012.

10.15*

Phillips 66 Key Employee Supplemental Retirement Plan.

10.16*

Phillips 66 Executive Severance Plan.

10.17*

Phillips 66 Deferred Compensation Plan for Non-Employee Directors.

10.18*

Phillips 66 Key Employee Deferred Compensation Plan – Title I.

10.19*

Phillips 66 Key Employee Deferred Compensation Plan – Title II.

10.20*

Phillips 66 Defined Contribution Make-Up Plan – Title I.

10.21*

Phillips 66 Defined Contribution Make-Up Plan – Title II.

10.22*

Phillips 66 Key Employee Change in Control Severance Plan.


		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Exhibit Number	Filing Date	SEC File No.

10.23*	Annex to the Phillips 66 Nonqualified Deferred Compensation Arrangements.

12*	Computation of Ratio of Earnings to Fixed Charges.

31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

32*	Certifications pursuant to 18 U.S.C. Section 1350.

101.INS*	XBRL Instance Document.

101.SCH*	XBRL Schema Document.

101.CAL*	XBRL Calculation Linkbase Document.

101.LAB*	XBRL Labels Linkbase Document.

101.PRE*	XBRL Presentation Linkbase Document.

101.DEF*	XBRL Definition Linkbase Document.

* Filed herewith.

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 thereunto duly authorized.


		PHILLIPS 66

		/s/ C. Doug Johnson

		C. Doug Johnson Vice President and Controller (Chief Accounting and Duly Authorized Officer)

August 3, 2012

Exhibit 10.14

THIRD AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

CHEVRON PHILLIPS CHEMICAL COMPANY LLC

EFFECTIVE AS OF May 1, 2012

TABLE OF CONTENTS


		Page

ARTICLE 1 DEFINITIONS			3

ARTICLE 2 OFFICES AND STATUTORY AGENT			13
2.1	REGISTERED OFFICE AND STATUTORY AGENT		13
2.2	PRINCIPAL EXECUTIVE OFFICE		14
2.3	BUSINESS		14

ARTICLE 3 MEMBERS; CLASSES; VOTING RIGHTS; MEETINGS OF MEMBERS			14
3.1	MEMBERS		14
3.2	CLASSES OF MEMBERS		14
3.3	DUTIES OF MEMBERS		14
3.4	VOTING RIGHTS		14
3.5	PLACE OF MEETINGS		15
3.6	MEETINGS OF MEMBERS; NOTICE OF MEETINGS		15
3.7	QUORUM		15
3.8	WAIVER OF NOTICE		15
3.9	ACTION BY MEMBERS WITHOUT A MEETING		16

ARTICLE 4 BOARD OF DIRECTORS			16
4.1	GENERAL		16
4.2	NUMBER AND CLASSES OF DIRECTORS		17
4.3	ELECTION AND REMOVAL OF DIRECTORS		17
4.4	VACANCIES; RESIGNATIONS, REPLACEMENTS		18
4.5	TERM		18
4.6	COMPENSATION OF DIRECTORS		18
4.7	FIDUCIARY DUTIES OF DIRECTORS		18
4.8	LIMITATION OF LIABILITY		18

ARTICLE 5 MEETINGS OF BOARD OF DIRECTORS			19
5.1	PLACE OF MEETINGS		19
5.2	MEETINGS OF DIRECTORS		19
5.3	QUORUM; ALTERNATES; PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE PERMITTED; VOTE REQUIRED FOR ACTION		19
5.4	WAIVER OF NOTICE; CONSENT TO MEETING		20
5.5	ACTION BY BOARD OF DIRECTORS WITHOUT A MEETING		20
5.6	COMMITTEES AND SUBCOMMITTEES		20

ARTICLE 6 OFFICERS			21
6.1	GENERAL		21
6.2	APPOINTMENT AND REMOVAL		21
6.3	CHIEF EXECUTIVE OFFICER AND PRESIDENT		21


6.4	VICE PRESIDENTS	21
6.5	SECRETARY		21
6.6	CHIEF FINANCIAL OFFICER		22
6.7	TERM		22

ARTICLE 7 OPERATIONAL MATTERS			22
7.1	BOARD OF DIRECTOR APPROVAL		22
7.2	STRATEGIC AND BUSINESS PLANS; REPORTS		24

ARTICLE 8 CAPITAL CONTRIBUTIONS AND PERCENTAGE INTERESTS			25
8.1	CAPITAL CONTRIBUTIONS AND PERCENTAGE INTERESTS		25
8.2	ADDITIONAL CAPITAL CONTRIBUTIONS		26
8.3	WITHDRAWAL OR REDUCTION OF CAPITAL CONTRIBUTIONS		26
8.4	NO RETURN ON OR OF CAPITAL CONTRIBUTIONS		26
8.5	CAPITAL ACCOUNTS		26
8.6	LOANS BY MEMBERS TO THE COMPANY		27
8.7	TREATMENT OF CERTAIN INDEMNITY PAYMENTS		28
8.8	TREATMENT OF CERTAIN DEFERRED CAPITAL CONTRIBUTIONS		28
8.9	SPECIAL RULE		29
8.10	APPLICATION OF THE BASKET, TAX BASKET AMOUNT AND CAP		29

ARTICLE 9 ALLOCATION OF PROFITS AND LOSSES; DISTRIBUTIONS; TAX AND ACCOUNTING MATTERS			29
9.1	ALLOCATIONS		29
9.2	DISTRIBUTIONS		33
9.3	ACCOUNTING MATTERS		36
9.4	TAX STATUS AND RETURNS		36
9.5	754 ELECTION AND OTHER TAX ELECTIONS		36
9.6	TAX MATTERS PARTNER		36

ARTICLE 10 RESTRICTIONS ON TRANSFER			37
10.1	TRANSFER OF INTERESTS		37
10.2	CONDITIONS OF TRANSFER		37
10.3	ADMISSION OF SUBSTITUTE MEMBER		37
10.4	EFFECT OF TRANSFER WITHOUT APPROVAL		38
10.5	LIABILITY FOR BREACH		38
10.6	PERMITTED TRANSFERS SUBJECT TO RIGHT OF FIRST REFUSAL		38
10.7	PERMITTED TRANSFERS AMONG WHOLLY-OWNED AFFILIATES		40
10.8	TRANSFERS OF EQUITY INTERESTS IN A MEMBER		40
10.9	CREDIT RATINGS BUY-OUT OPTION		40
10.10	BUY-OUT OPTION UPON CHANGE OF CONTROL		43
10.11	CLOSING OF BUY-OUT OPTION EXERCISES		44


ARTICLE 11 COMPETITION		45
11.1	GENERAL		45
11.2	RESOLUTION OF COMPETITIVE CONFLICTS		46

ARTICLE 12 TERM AND DISSOLUTION			47
12.1	TERM		47
12.2	DISSOLUTION		47
12.3	LIQUIDATION.		47
12.4	LIABILITIES		48
12.5	SETTLING OF ACCOUNTS		48
12.6	DISTRIBUTION OF PROCEEDS		48
12.7	CERTIFICATE OF CANCELLATION		49

ARTICLE 13 INDEMNIFICATION			49
13.1	INDEMNIFICATION: PROCEEDING OTHER THAN BY COMPANY		49
13.2	INDEMNIFICATION: PROCEEDING BY COMPANY		49
13.3	MANDATORY ADVANCEMENT OF EXPENSES		50
13.4	EFFECT AND CONTINUATION		50
13.5	INSURANCE AND OTHER FINANCIAL ARRANGEMENTS.		51
13.6	NOTICE OF INDEMNIFICATION AND ADVANCEMENT		52
13.7	REPEAL OR MODIFICATION		52

ARTICLE 14 INSPECTION OF COMPANY RECORDS; ANNUAL AND OTHER REPORTS			52
14.1	RECORDS TO BE KEPT		52
14.2	ACCESS TO COMPANY INFORMATION		52
14.3	ANNUAL AND QUARTERLY REPORTS		53

ARTICLE 15 DEFAULTS AND REMEDIES			53
15.1	DEFAULTS		53
15.2	REMEDIES		53
15.3	NO WAIVER		53

ARTICLE 16 MISCELLANEOUS			54
16.1	AMENDMENTS		54
16.2	REPRESENTATION OF SHARES OF COMPANIES OR INTERESTS IN OTHER ENTITIES		54
16.3	SEAL		54
16.4	ACTIONS BY CLASS P MEMBERS AND CLASS C MEMBERS		54
16.5	ENTIRE AGREEMENT		54
16.6	THIRD PARTIES		55
16.7	GOVERNING LAW; JURISDICTION AND FORUM; WAIVER OF JURY TRIAL		55
16.8	COUNTERPARTS		55
16.9	TITLES AND SUBTITLES; FORM OF PRONOUNS; CONSTRUCTION AND DEFINITIONS		56
16.10	DELAWARE LIMITED LIABILITY COMPANY ACT PREVAILS		56

iii


16.11	SEVERABILITY	56
16.12	EFFECTIVE DATES OF AMENDMENTS		56

THIRD AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

CHEVRON PHILLIPS CHEMICAL COMPANY LLC

THIS THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT is made and entered into effective as of May 1, 2012, by and among Chevron Corporation (formerly ChevronTexaco Corporation, a Delaware corporation (“Chevron”), Phillips 66, a Delaware corporation (“Phillips 66”), Phillips 66 Company, a Delaware corporation (“Phillips 66 Company”), WesTTex 66 Pipeline Company, a Delaware corporation (“WesTTex 66”), Phillips Chemical Holdings Company (formerly Drilling Specialties Co.), a Delaware corporation (“Chemical Holdings”) and Chevron U.S.A. Inc., a Pennsylvania corporation (“CUSA,” or the “Initial Chevron Member”).

W I T N E S S E T H:

WHEREAS, on May 23, 2000, a Certificate of Formation (the “Certificate”) for Chevron Phillips Chemical Company LLC (the “Company”), a limited liability company organized under the laws of the State of Delaware, was filed with the Secretary of State of the State of Delaware; and

WHEREAS, the Initial Chevron Member and ConocoPhillips Company (formerly Phillips Petroleum Company), a Delaware corporation (“Phillips,” or the “Initial Phillips Member”), entered into the original Limited Liability Company Agreement of the Company (the “Original LLC Agreement”) on May 23, 2000; and

WHEREAS, on July 1, 2000, Chemical Holdings, WesTTex 66, Phillips Petroleum International Corporation, a Delaware corporation (“PPIC”), the Initial Chevron Member, the Initial Phillips Member, and others entered into an Amended and Restated Limited Liability Company Agreement (the “Amended & Restated LLC Agreement”) that amended and restated the Original LLC Agreement in its entirety; and

WHEREAS, the Amended & Restated LLC Agreement was amended, effective as of July 1, 2000, by Amendment No. 1 to the Amended and Restated Limited Liability Company Agreement of Chevron Phillips Chemical Company (“Amendment No. 1 to the Amended & Restated LLC Agreement”); and

WHEREAS, effective as of July 1, 2002, Chevron, Chemical Holdings, WesTTex 66, PPIC, the Initial Chevron Member and the Initial Phillips Member entered into a Second Amended and Restated Limited Liability Company Agreement (the “Second Amended & Restated LLC Agreement”) that amended and restated the Amended & Restated LLC Agreement in its entirety; and

WHEREAS, the Second Amended & Restated LLC Agreement was amended, effective as of September 30, 2007, by Consent and First Amendment to the Second Amended and Restated Limited Liability Company Agreement of Chevron Phillips Chemical Company LLC; and

WHEREAS, the Second Amended & Restated LLC Agreement was amended, effective as of November 11, 2011, by Second Amendment to the Second Amended and Restated Limited Liability Company Agreement of Chevron Phillips Chemical Company LLC; and

WHEREAS, a letter agreement was entered into as of November 11, 2011, by and among Phillips, PPIC, WesTTex 66, Chemical Holdings and CUSA with respect to certain matters relating to Tax Distributions (as defined below); and

WHEREAS, the Second Amended & Restated LLC Agreement was amended, effective as of February 10, 2012, by Third Amendment to the Second Amended and Restated Limited Liability Company Agreement of Chevron Phillips Chemical Company LLC; and

WHEREAS, the Second Amended & Restated LLC Agreement was amended, effective as of April 26, 2012, by Fourth Amendment to the Second Amended and Restated Limited Liability Company Agreement of Chevron Phillips Chemical Company LLC to reflect the admission of Phillips 66 Company as a substitute Member; and

WHEREAS, ConocoPhillips, a Delaware corporation (“ConocoPhillips”), separated certain of its businesses, via a series of transactions including a contribution of certain assets and entities to Phillips 66 or its Subsidiaries, followed by a distribution of all of the stock of Phillips 66 to ConocoPhillips’ stockholders (the “Spin-off”); and

WHEREAS, in connection with the Spin-off, (i) PPIC transferred its 10.62% Membership Interest to Phillips, increasing Phillips’ Percentage Interest to 47.54%, (ii) Phillips formed Phillips 66 Company as a wholly-owned Subsidiary and contributed its 47.54% Membership Interest to Phillips 66 Company together with Phillips’ equity interests in WesTTex 66 and Chemical Holdings, (iii) Phillips distributed its equity interest in Phillips 66 Company to ConocoPhillips, (iv) ConocoPhillips contributed its equity interest in Phillips 66 Company to Phillips 66 at which time Phillips 66 was a wholly-owned Subsidiary of ConocoPhillips and (v) ConocoPhillips distributed all the stock of Phillips 66 to ConocoPhillips’ stockholders (collectively, the “Phillips 66 Transfer”); and

WHEREAS, pursuant to Section 16.1(a) of the Second Amended & Restated LLC Agreement, the Members desire to amend and restate the Second Amended & Restated LLC Agreement in its entirety to reflect the Phillips 66 Transfer and to make certain other revisions to the Second Amended & Restated LLC Agreement.

NOW, THEREFORE, the Members by this Agreement set forth the limited liability company agreement for the Company under the Delaware Limited Liability Company Act (6 Del.C. ss. 18-101 et seq., the “Act”) upon the following terms and conditions:

ARTICLE 1

DEFINITIONS

Capitalized terms used in this Agreement without other definition shall, unless expressly stated otherwise, have the meanings specified in this Article 1.

“Act” has the meaning set forth in the Recitals hereto.

“Adjusted Capital Account Balance” means each Member’s Capital Account, increased by the amount of such Member’s share of “minimum gain” and “partner nonrecourse debt minimum gain” as such terms are defined in Treasury Regulation 1.704-2 and such other amounts as such Member is unconditionally obligated to contribute hereunder.

“Adjusted Capital Account Deficit” means, with respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments:

(a) Credit such Capital Account by any amounts which such Member is obligated to restore pursuant to this Agreement (including any note obligations) or is deemed to be obligated to restore pursuant to the penultimate sentence of each of sections 1.704-2(i)(5) and 1.704-2(g)(1) of the Income Tax Regulations; and

(b) Debit such Capital Account by the items described in sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Income Tax Regulations.

The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of section 1.704-1(b)(2)(ii)(d) of the Income Tax Regulations and shall be interpreted consistently therewith.

“Adjusted Taxable Income” means, for a Fiscal Year, Fiscal Quarter or other period, the federal taxable income allocated by the Company to the Member for such Fiscal Year, Fiscal Quarter or other period; provided, that such taxable income shall be computed by taking into account any special basis adjustment with respect to such Member resulting from an election by the Company under Code Section 754.

“Affiliate” has the meaning set forth in Rule 405 under the Securities Act of 1933, as amended.

“Agreement” means this Third Amended and Restated Limited Liability Company Agreement, as originally executed and as amended, modified or supplemented from time to time. Words such as “herein,” “hereinafter,” “hereof,” “hereto,” “hereby” and “hereunder,” when used with reference to this Agreement, refer to this Agreement as a whole, unless the context otherwise requires.

“Amended & Restated LLC Agreement” has the meaning set forth in the Recitals hereto.

“Amendment No. 1 to the Amended & Restated LLC Agreement” has the meaning set forth in the Recitals hereto.

“Basket” has the meaning set forth in Article I of the Contribution Agreement.

“Board of Directors” has the meaning set forth in Section 4.1.

“Buy-Out Interests” has the meaning set forth in Section 10.9(d).

“Buy-Out Interest Option” has the meaning set forth in Section 10.9(d).

“Buy-Out Interest Option Period” has the meaning set forth in Section 10.9(d).

“Buy-Out Members” has the meaning set forth in Section 10.9(a).

“Buy-Out Purchase Price” has the meaning set forth in Section 10.9(d).

“Cap” has the meaning set forth in Article I of the Contribution Agreement.

“Capital Account” has the meaning set forth in Section 8.5.

“Capital Contributions” means the contributions made by the Members to the capital of the Company pursuant to Section 8.1 or 8.2 hereof and, in the case of all the Members, the aggregate of all such Capital Contributions.

“Carrying Value” means, with respect to any Company asset, such asset’s adjusted basis for federal income tax purposes, except as follows:

(a) The fair market value as agreed by the Members, when contributed, of an asset contributed to the Company by any Member. The aggregate Carrying Value effective as of the Closing of the assets initially contributed by the Initial Chevron Member and each Previous Phillips Member to the Company pursuant to Section 8.1(a) of the Amended & Restated LLC Agreement, is the amount that was determined in accordance with Section 8.1(c) of the Amended & Restated LLC Agreement.

(b) The Carrying Values of all Company assets shall be adjusted to equal their respective fair market values as agreed to by the Board of Directors, and the resulting unrecognized gain or loss allocated to the Capital Accounts of the Members as though such assets had been sold for their respective fair market values as of the following times: (i) immediately before the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis capital contribution; (ii) upon the distribution by the Company to a Member of more than a de minimis amount of Company assets, unless all Members receive simultaneous distributions of either undivided interests in the distributed property or identical Company assets in proportion to their interests in the Company; (iii) the date the Company is liquidated within the meaning of section 1.704-1(b)(2)(ii)(g) of the Income Tax Regulations; and (iv) the termination of the Company pursuant to the provisions of this Agreement.

(c) The Carrying Value of the Company assets shall be increased or decreased to the extent required under section 1.704-1(b)(2)(iv)(m) of the Income Tax Regulations in the event that the adjusted tax basis of Company assets are adjusted pursuant to section 732, 734 or 743 of the Code, provided, however , that the Carrying Value shall not be adjusted pursuant to this subparagraph (c) to the extent that an adjustment pursuant to subparagraph (b) is required in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (c).

(d) The Carrying Value of a Company asset that is distributed (whether in liquidation of the Company or otherwise) to one or more Members shall be adjusted to equal its fair market value at the time of such distribution as determined by the Board of Directors, and the resulting unrecognized gain or loss shall be allocated to the Capital Accounts of the Members as though such asset had been sold for such fair market value.

(e) The Carrying Value of a Company asset shall be adjusted by the Depreciation attributable to such asset.

“Cash Earnings” shall mean the Company’s Net Profit for each Fiscal Quarter, (i) exclusive of any net income as so computed of the Company’s non-United States subsidiaries that has not been distributed by such subsidiaries to the Company or the Company’s United States subsidiaries, (ii) increased by depreciation, amortization, cost recovery allowances and other non-cash charges deducted in determining the Company’s Net Profit, and (iii) decreased by any income or franchise taxes (including without limitation withholding or branch profits taxes on distributions made or deemed made to the Company) imposed on the Company (as distinguished from income taxes imposed on the Members), to the extent not already deducted in computing Net Profit.

“Certificate” has the meaning set forth in the Recitals hereto.

“Change of Control” of an entity shall be deemed to occur if:

(a) during any consecutive 24-month period, persons who constitute the board of directors of such entity at the beginning of the period (the “Incumbent Directors”) cease to constitute at least a majority of the board of directors of such entity; provided , that any person becoming a director during such 24-month period and whose appointment, election or nomination was approved by a vote of at least a majority of the Incumbent Directors then on the board of directors of such entity (either by a specific vote or by approval of the proxy statement of such entity in which such person is named as a nominee for director) shall be an Incumbent Director; provided, however , that no individual initially appointed, elected or nominated as a director of such entity as a result of an actual or threatened election contest relating to the election or removal of members of the board of directors of such entity (“Election Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of any “person” (as such term is defined in Section 3(a)(9) of the Exchange Act and as used in Section 13(d)(3) and 14(d)(2) of the Exchange Act) other than the board of directors of such entity (“Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director;

(b) any “person” (as such term is defined in Section 3(a)(9) of the Exchange Act) or “group” (as such term is defined in Section 13(d)(3) of the Exchange Act), is or becomes the “beneficial owner” (as such phrase is defined in Rule 13d-5 under the Exchange Act), directly or indirectly, of securities of such entity representing fifty percent (50%) or more of the combined voting power of such entity’s then outstanding voting securities;

(c) such entity consummates a merger or consolidation of such entity, with any other company, other than a merger or consolidation that would result in the voting securities of such entity outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the combined voting power of the voting securities of such entity or such surviving entity outstanding immediately after such merger or consolidation; or

(d) such entity consummates the sale or disposition of all or substantially all of its assets.

“Change of Control Interests” has the meaning set forth in Section 10.10(b).

“Change of Control Notice” has the meaning set forth in Section 10.10(a).

“Change of Control Option” has the meaning set forth in Section 10.10(b).

“Change of Control Option Period” has the meaning set forth in Section 10.10(b).

“Change of Control Purchase Price” has the meaning set forth in Section 10.10(b).

“Chemicals Business” means the lines of business comprising P Chem and C Chem (as defined in the Contribution Agreement), other petrochemicals businesses and related businesses; provided, however , that Chemicals Business shall not include any specific businesses comprising Chevron Excluded Assets or Phillips Excluded Assets (as defined in the Contribution Agreement).

“Chemical Holdings” has the meaning set forth in the Preamble hereto.

“Chevron” has the meaning set forth in the Preamble hereto.

“Chevron Pipe Line Contribution” shall have the meaning set forth in Exhibit A-2 of the Contribution Agreement.

“Class C Director” and “Class C Directors” have the meaning set forth in Section 4.3(a).

“Class C Member” includes CUSA and any other Member to whom a Class C Member Transfers a Membership Interest in accordance with this Agreement; provided, however , that a Class C Member shall cease to be a Class C Member upon the Transfer of all of such Person’s Membership Interest in accordance with this Agreement.

“Class C Members Aggregate Allocable Share” means, for each Fiscal Year, Fiscal Quarter or other period of the Company, the sum of the Adjusted Taxable Income of the Company allocated to all Class C Members for such Fiscal Year, Fiscal Quarter or other period.

“Class P Director” and “Class P Directors” have the meaning set forth in Section 4.3(b).

“Class P Member” includes Phillips 66 Company, WesTTex 66, Chemical Holdings and any other Member to whom a Class P Member Transfers a Membership Interest in accordance with this Agreement; provided, however , that a Class P Member shall cease to be a Class P Member upon the Transfer of all of such Person’s Membership Interest in accordance with this Agreement.

“Class P Members Aggregate Allocable Share” means, for each Fiscal Year, Fiscal Quarter or other period of the Company, the sum of the Adjusted Taxable Income of the Company allocated to all Class P Members for such Fiscal Year, Fiscal Quarter or other period.

“Class Membership Interest” means the aggregate Membership Interest of all of the Class C Members or all of the Class P Members, as the case may be.

“Closing” has the meaning provided for in the Contribution Agreement.

“Closing Date” means the date of the Closing.

“Code” means the United States Internal Revenue Code of 1986, as amended, or any corresponding provision or provisions of any succeeding law.

“Company” has the meaning set forth in the Recitals hereto.

“Company Indemnifiable Payment” has the meaning set forth in Section 8.7(a).

“Company Minimum Gain” has the meaning set forth in sections 1.704-2(b)(2) and 1.704-2(d) of the Income Tax Regulations for the phrase “partnership minimum gain.”

“Competing Class” has the meaning set forth in Section 11.1.

“Conflict Notice” has the meaning set forth in Section 11.1.

“ConocoPhillips” has the meaning set forth in the Recitals hereto.

“Consent Agreement” means that certain Consent Agreement, dated as of November 11, 2011, by and among the Company, ConocoPhillips, Phillips, Chemical Holdings, WesTTex 66, PPIC, Chevron and CUSA, as the same may be amended or modified from time to time.

“Contribution Agreement” means that certain Contribution Agreement, dated as of May 23, 2000, by and among Chevron Corporation, Phillips Petroleum Company and the Company, as the same may be amended or modified from time to time.

“Contribution Assumption Agreement” means that certain Contribution Assumption Agreement, dated as of April 26, 2012, by and among Phillips, Phillips 66, Chevron, the

Company, and Chevron Phillips Chemical Company LP, a Delaware limited partnership and an indirect wholly-owned Subsidiary of the Company, as the same may be amended or modified from time to time.

“Costs” means the sum of all cash expenditures made by the Company in connection with the ownership of the Company’s assets and the operation of the Company’s business, including, without limitation, the cost of all materials purchased, goods returned, services provided and other similar fees, costs and expenses; all real estate and sales taxes; all insurance premiums; all payments of principal and interest on Company indebtedness; any distributions to Members, and other similar expenditures.

“Counter-Offer” has the meaning set forth in Section 11.2(a).

“Credit Rating Event” has the meaning set forth in Section 10.9(a).

“Cure Event” has the meaning set forth in Section 10.9(b).

“CUSA” has the meaning set forth in the Preamble hereto.

“Depreciation” means, for a Fiscal Year or other period, an amount equal to the federal income tax depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such Fiscal Year or other period, except that if the Carrying Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Fiscal Year or other period, Depreciation shall be an amount that bears the same ratio to such beginning Carrying Value as the federal income tax depreciation, amortization or other cost recovery deduction for such Fiscal Year or other period bears to such beginning adjusted tax basis; provided, however , that if the federal income tax depreciation, amortization or other cost recovery deduction for such Fiscal Year or other period is zero, then Depreciation shall be determined with reference to such beginning Carrying Value using any reasonable method selected by the Board of Directors.

“Director” means a Person who is elected as a Director of the Company pursuant to Section 4.3 or 4.4 of this Agreement.

“Distribution Date” has the meaning set forth in Section 12.4.

“Downgraded Members” has the meaning set forth in Section 10.9(a).

“Electing Class” has the meaning set forth in Section 10.6(d).

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Fair Market Value” has the meaning set forth in Section 10.9(c).

“Fiscal Quarter” means the three (3) month period beginning on the first day of the Company’s Fiscal Year, and each subsequent (3) month period within the Company’s Fiscal Year.

“Fiscal Year” means the Company’s tax year for U.S. federal income tax purposes specified in Section 9.3.

“Income Tax Regulations” means the regulations issued with respect to the Code.

“Indemnified Party” and “Indemnifying Party” shall have the meanings set forth in Article I of the Contribution Agreement.

“Initial Chevron Member” has the meaning set forth in the Preamble hereto.

“Initial Credit Rating Event” has the meaning set forth in Section 10.9(b).

“Initial Cure Period” has the meaning set forth in Section 10.9(b).

“Initial Offer” has the meaning set forth in Section 11.2(a).

“Initial Phillips Member” has the meaning set forth in the Preamble hereto.

“K-Resin Accident” means the fire and explosion on March 27, 2000 that took place at the Phillips K-Resin plant located in Pasadena, Texas.

“Member” has the meaning set forth in Section 3.1.

“Member Indemnifiable Payment” has the meaning set forth in Section 8.7(b).

“Member Nonrecourse Debt Minimum Gain” means an amount, with respect to each Member, equal to the Company Minimum Gain that would result if all such Member’s Member Nonrecourse Debt were treated as a Nonrecourse Liability, as determined in accordance with section 1.704-2(i)(3) of the Income Tax Regulations.

“Member Nonrecourse Debt” has the meaning set forth in section 1.704-2(b)(4) of the Income Tax Regulations for the phrase “partner nonrecourse debt.”

“Member Nonrecourse Deduction” has the meaning set forth in section 1.704-2(i)(2) of the Income Tax Regulations for the phrase “partner nonrecourse deduction.”

“Member’s Proportionate Tax Share” means (i) with respect to a Class C Member, the product of (X) the Tax Distribution for the Fiscal Year, Fiscal Quarter or other period, as applicable, and (Y) a fraction, the numerator of which is the Percentage Interest of such Class C Member for such Fiscal Year, Fiscal Quarter or other period and the denominator is the sum of the Percentage Interests for all Class C Members for such Fiscal Year, Fiscal Quarter or other period and (ii) with respect to a Class P Member, the product of (X) the Tax Distribution for the Fiscal Year, Fiscal Quarter or other period, as applicable, and (Y) a fraction, the numerator of which is the Percentage Interest of such Class P Member for such Fiscal Year, Fiscal Quarter or other period and the denominator is the sum of the Percentage Interests for all Class P Members for such Fiscal Year, Fiscal Quarter or other period. In the event that the Percentage Interest of a Member changes during any Fiscal Year, Fiscal Quarter or other period, the Member’s Proportionate Tax Share of such Member and the other Class P Members or Class C Members,

as the case may be, for such Fiscal Year, Fiscal Quarter or other period shall be appropriately adjusted to take into account the Class P Members’ or Class C Members’, as the case may be, varying interests. In no event shall the application of the foregoing formula result in the Class C Members in the aggregate or the Class P Members in the aggregate receiving an amount in excess of the Tax Calculation Share applicable to such Fiscal Year, Fiscal Quarter or other period.

“Membership Interest” means the ownership interest of a Member in the Company, and right to share in the Company’s items of income, gain, loss, deduction, credits and similar items, and the right to receive distributions from the Company, as well as a Member’s rights to vote and otherwise participate in the operation or affairs of the Company as provided for herein and under the Act.

“Moody’s Triggering Credit Rating” means a credit rating lower than Baa3 (or the equivalent) from Moody’s Investors Service, Inc. (or any successor thereto).

“Net After-Tax Basis” has the meaning set forth in Section 8.9.

“Net Profit” or “Net Loss” means for each Fiscal Year or other period, an amount equal to the Company’s taxable income or loss for such Fiscal Year or period determined in accordance with section 703(a) of the Code (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments:

(a) Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Net Profit or Net Loss pursuant to this definition shall be added to such taxable income or loss;

(b) Any expenditure of the Company described in section 705(a)(2)(B) of the Code or treated as such expenditure pursuant to section 1.704-1(b)(2)(iv)(i) of the Income Tax Regulations, and not otherwise taken into account in computing Net Profit or Net Loss, shall be subtracted from such taxable income or loss;

(c) Gain or loss resulting from any disposition of Company assets where such gain or loss is recognized for federal income tax purposes shall be computed by reference to the Carrying Value of the Company assets disposed of, notwithstanding that the adjusted tax basis of such Company assets differs from its Carrying Value;

(d) In lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Fiscal Year;

(e) To the extent an adjustment to the adjusted tax basis of any asset included in Company assets pursuant to section 734(b) of the Code or section 743(b) is required pursuant to section 1.704-1(b)(2)(iv)(m)(4) of the Income Tax Regulations to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Member’s Membership Interest, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for the purposes of computing Net Profit and Net Loss;

(f) If the Carrying Value of any Company asset is adjusted in accordance with either of clauses (b) or (d) of the definition of “Carrying Value,” the amount of such adjustment shall be taken into account in the Fiscal Year of such adjustment as gain or loss from the disposition of such asset for purposes of computing Net Profit or Net Loss; and

(g) Notwithstanding any other provision of this definition, any items that are specially allocated pursuant to Section 9.1(b) shall not be taken into account in computing Net Profit or Net Loss.

“Non-Competing Class” has the meaning set forth in Section 11.1.

“Nonrecourse Deductions” has the meaning set forth in section 1.704-2(c) of the Income Tax Regulations.

“Nonrecourse Liability” has the meaning set forth in section 1.704-2(b)(3) of the Income Tax Regulations.

“Non-Transferring Class” has the meaning set forth in Section 10.6(b).

“Non-Voting Directors” has the meaning set forth in Section 4.2.

“Officers” has the meaning set forth in Section 6.1.

“Original LLC Agreement” has the meaning set forth in the Recitals hereto.

“Parent” means, when used with respect to any Person, any corporation, partnership, limited liability company, or other organization, whether incorporated or unincorporated, which owns or controls, directly or indirectly, 50% or more of the outstanding voting securities (or equivalent voting interests) of such Person.

“Percentage Interest” means a Member’s percentage interest in the Company as set forth opposite such Member’s name on Schedule 2 hereto.

“Person” means any general partnership, limited partnership, joint venture, association, corporation, limited liability company, trust or other entity and, where the contexts so permits or requires, a natural person.

“Phillips” has the meaning set forth in the Recitals hereto.

“Phillips 66” has the meaning set forth in the Preamble hereto.

“Phillips 66 Company” has the meaning set forth in the Preamble hereto.

“Phillips 66 Transfer” has the meaning set forth in the Recitals hereto.

“PPIC” has the meaning set forth in the Recitals hereto.

“Previous Phillips Member” means each of Phillips, WesTTex 66, Chemical Holdings and PPIC.

“Purchaser” has the meaning set forth in Section 10.11(a).

“Quarterly Tax Distribution” means, for each Member for each of the first three Fiscal Quarters of the Company during the term of the Company, such Member’s Proportionate Tax Share for such Fiscal Quarter.

“Regulatory Allocations” has the meaning set forth in Section 9.1(b)(viii).

“Reimbursable Capital Expenditures” has the meaning set forth in Section 9.2(h)(i).

“Revenues” means revenues and receipts of every kind and nature (from both cash and credit transactions), including sales proceeds, rental, license, lease or other income, net proceeds from issuance of indebtedness, proceeds from insurance and all other similar items, but excluding (i) payments received as an advance or deposit, until actually applied by the Company; and (ii) except as otherwise expressly agreed by the Members, the amount of any Capital Contributions.

“S&P Triggering Credit Rating” means a credit rating lower than BBB- (or the equivalent) from Standard & Poor’s Ratings Group (or any successor thereto).

“Second Amended & Restated LLC Agreement” has the meaning set forth in the Recitals hereto.

“Seller Member” has the meaning set forth in Section 10.11(a).

“Special Distribution” has the meaning set forth in Section 9.2(h)(iii).

“Spin-off” has the meaning set forth in the Recitals hereto.

“Subsequent Credit Rating Event” has the meaning set forth in Section 10.9(b).

“Subsequent Cure Period” has the meaning set forth in Section 10.9(b).

“Subsequent Offer” has the meaning set forth in Section 11.2(a).

“Subsidiary” means, when used with respect to any Person, any corporation, partnership, limited liability company, or other organization, whether incorporated or unincorporated, of which such Person owns or controls, directly or indirectly, 50% or more of the outstanding voting securities (or equivalent voting interests).

“Suspension Period” has the meaning set forth in Section 8.2.

“Tax Basket Amount” shall have the meaning set forth in Section 1.11 of Annex B to the Contribution Agreement.

“Tax Calculation Share” means, for each Fiscal Year, Fiscal Quarter or other period, the greater of (i) the Class P Members Aggregate Allocable Share for such Fiscal Year, Fiscal Quarter or other period and (ii) the Class C Members Aggregate Allocable Share for such Fiscal Year, Fiscal Quarter or other period.

“Tax Distribution” means, for each Fiscal Year, Fiscal Quarter or other period of the Company during the term of the Company, the product of (i) the Tax Calculation Share for such Fiscal Year, Fiscal Quarter or other period and (ii) the Tax Rate for such Fiscal Year, Fiscal Quarter or other period.

“Tax Rate” means the marginal blended tax rate determined by assuming that (i) such Person is a corporation subject to the highest marginal corporate United States federal income tax rate applicable for the applicable period, (ii) such Person is subject to franchise and other income taxes at a combined rate initially determined to be 5% (which rate may be periodically changed to such rate as shall be agreed upon by the Class C Member(s) and Class P Member(s)), and (iii) the franchise and other income taxes described in the preceding clause (ii) are deductible for United States federal income tax purposes.

“Transfer” has the meaning set forth in Section 10.1.

“Transfer Notice” has the meaning set forth in Section 10.6(b).

“Transferred Interest” has the meaning set forth in Section 10.6(b).

“Transferring Class” has the meaning set forth in Section 10.6(a).

“Ultimate Parent” means, with respect to any Person, a Parent who is not a Subsidiary of any other Person.

“Valuation Notice” has the meaning set forth in Section 10.9(a).

“Voting Directors” has the meaning set forth in Section 4.2.

“WesTTex 66” has the meaning set forth in the Preamble hereto.

“Wholly-Owned Affiliate” means a wholly-owned Subsidiary of the Ultimate Parent of a Member.

ARTICLE 2

OFFICES AND STATUTORY AGENT

2.1 REGISTERED OFFICE AND STATUTORY AGENT . The registered office and statutory agent in Delaware required by the Act shall be as set forth in the Certificate until such time as the registered office or statutory agent is changed in accordance with the Act.

2.2 PRINCIPAL EXECUTIVE OFFICE . The location of the principal executive office for the transaction of the business of the Company shall be Houston, Texas, or such other location as determined by the Board of Directors from time to time.

2.3 BUSINESS. The Company may carry on any lawful business, purpose or activity which is permitted to be carried on by a limited liability company under the Act. The actual business of the Company shall be determined by the Board of Directors.

ARTICLE 3

MEMBERS; CLASSES; VOTING RIGHTS; MEETINGS OF MEMBERS

3.1 MEMBERS . Each party to this Agreement, except for Chevron and Phillips 66, and each person admitted as a Member pursuant to this Agreement shall be a member of the Company until they cease to be a member in accordance with the provisions of the Act, the Certificate or this Agreement (the “Members”). The names of the Members shall be set forth on Schedule 1 hereto.

3.2 CLASSES OF MEMBERS. The Membership Interests in the Company shall be divided into two (2) classes of members, such classes being designated as Class C Members and Class P Members.

3.3 DUTIES OF MEMBERS . Members shall not owe duties, fiduciary or otherwise, or obligations to the Company or other Members, except as expressly set forth herein.

3.4 VOTING RIGHTS .

(a) Except as may otherwise be provided by this Agreement or the Act or the Certificate, the unanimous vote of the Members on a matter shall constitute the act of the Members.

(b) The Members shall have the right to elect Directors in accordance with Sections 4.3 and 4.4 of this Agreement.

(c) Only Persons whose names are listed as Members on the records of the Company at the close of business on the business day immediately preceding the day on which notice of the meeting is given or, if such notice is waived, at the close of business on the business day immediately preceding the day on which the meeting of Members is held (except that the record date for Members entitled to give consent to action without a meeting shall be determined in accordance with Section 3.9) shall be entitled to receive notice of and to vote at such meeting, and such day shall be the record date for such meeting. Any Member entitled to vote on any matter shall be entitled to cast that number of votes equal to such Member’s Percentage Interest and may cast part of the votes in favor of the proposal and refrain from exercising the remaining votes or vote against the proposal (other than elections of a Director), but if the Member fails to

specify the number of votes such Member is exercising affirmatively, it will be conclusively presumed that the Member’s approving vote is with respect to all votes such Member is entitled to cast. Such vote may be viva voce or by ballot; provided, however , that all elections for Directors must be by ballot upon demand made by a Member at any election and before the voting begins.

3.5 PLACE OF MEETINGS . All meetings of the Members shall be held at any place within or without the State of Delaware which may be designated either by the Board of Directors or by the written consent of all Members entitled to vote thereat given either before or after the meeting and filed with the secretary. In the event of any inconsistency in the places designated by the Board of Directors or the Members as herein provided, or in the absence of any such designation, Members’ meetings shall be held at the principal executive office of the Company.

3.6 MEETINGS OF MEMBERS; NOTICE OF MEETINGS . Meetings of the Members for the purpose of taking any action permitted to be taken by the Members may be called by a majority of the Directors or by Members holding a majority of the Percentage Interests. Upon request in writing that a meeting of Members be called for any proper purpose, the Secretary forthwith shall cause notice to be given to the Members entitled to vote that a meeting will be held at a time requested by the person or persons calling the meeting, not less than thirty-five (35) nor more than sixty (60) days after receipt of the request. Except in special cases where other express provision is made by statute, notice of such meetings shall be given personally, in writing, via electronic means or via facsimile to each Member entitled to vote not less than thirty-five (35) nor more than sixty (60) days before the meeting. Such notices shall state:

(a) The place, date and hour of the meeting;

(b) Those matters which the Directors, at the time of the mailing of the notice, intend to present for action by the Members; and

3.7 QUORUM . The presence at any meeting in person or by proxy of Members holding one-hundred percent (100%) of the aggregate Percentage Interests entitled to vote at such meeting shall constitute a quorum for the transaction of business.

3.8 WAIVER OF NOTICE . The actions of any meeting of Members, however called and noticed, and wherever held, shall be as valid as if taken at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, not present in person or by proxy, signs a written waiver of notice or a consent to a holding of the meeting, or an approval of the minutes thereof. The waiver of notice, consent or approval need not specify either the business to be transacted or the purpose of any regular or special meeting of Members. All such waivers, consents or approvals shall be filed with the Company records and made a part of the minutes of the meeting.

Attendance of a Member at a meeting shall also constitute a waiver of notice of and presence at such meeting, except when the Member objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters required to be included in the notice but not so included, if such objection is expressly made at the meeting.

3.9 ACTION BY MEMBERS WITHOUT A MEETING . Directors may be elected or removed without a meeting by a consent in writing, setting forth the action so taken, signed by Members entitled to elect or remove Directors in accordance with Section 4.3; in addition, a Director may be elected at any time to fill a vacancy by a written consent signed by Members entitled to elect or remove Directors in accordance with Section 4.3. Notice of such election shall be promptly given to nonconsenting Members.

Any other action which, under any provision of the Act or the Certificate or this Agreement, may be taken at a meeting of the Members, may be taken without a meeting, and without notice except as hereinafter set forth, if a consent in writing, setting forth the action so taken, is signed by Members having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all Members entitled to vote thereon were present and voted. All such consents shall be filed with the secretary of the Company and shall be maintained in the Company’s records.

Unless the consents of all Members entitled to vote have been solicited in writing, prompt notice shall be given of the taking of any action approved by Members without a meeting by less than unanimous written consent to those Members entitled to vote who have not consented in writing.

Unless the Board of Directors sets a record date for the determination of Members entitled to notice of and to give such written consent, the record date for such determination shall be the day on which the first written consent is given.

Any Member giving a written consent, or the Member’s proxyholders, or a personal representative of the Member or their respective proxyholders, may revoke the consent by a writing received by the secretary prior to the time that written consents of the number of votes required to authorize the proposed action have been filed with the secretary, but may not do so thereafter. Such revocation is effective upon its receipt by the secretary or, if there shall be no person then holding such office, upon its receipt by any other officer or Director of the Company.

ARTICLE 4

BOARD OF DIRECTORS

4.1 GENERAL . Subject to the provisions of the Act and any limitations in the Certificate and this Agreement as to action required to be authorized or approved by the

Members, the business and affairs of the Company shall be managed and all its powers shall be exercised by the Members, who have in turn delegated their authority to manage the business and affairs of the Company and to exercise all of the Company’s powers to the board of directors of the Company (the “Board of Directors”), who have in turn delegated to the Officers (as defined herein) such portions of the authority of the Board of Directors as set forth herein (and as may be set forth in resolutions of the Board of Directors), provided that any delegation of authority to the Officers set forth herein or otherwise is subject to the discretion of the Board of Directors. Without prejudice to such general powers, but subject to the same limitations, it is hereby expressly declared that the Board of Directors shall have the following powers:

(a) To conduct, manage and control the business and affairs of the Company, including, to the extent determined by the Board of Directors, managing any Subsidiary limited liability company and to make such rules and regulations therefor not inconsistent with law or with the Certificate or with this Agreement, as the Board of Directors shall deem to be in the best interests of the Company;

(b) To appoint and remove at pleasure the officers, agents and employees of the Company, prescribe their duties and fix their compensation;

(c) To borrow money and incur indebtedness for the purposes of the Company and to cause to be executed and delivered therefor, in the Company’s name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations or other evidences of debt and securities therefor;

(d) To designate an executive and other committees, each consisting of two or more Directors, to serve at the pleasure of the Board of Directors, and to prescribe the manner in which proceedings of such committees shall be conducted; and

(e) To acquire real and personal property, arrange financing, enter into contracts and complete all other arrangements needed to effectuate the business of the Company.

4.2 NUMBER AND CLASSES OF DIRECTORS . The Board of Directors shall consist of six (6) voting Directors (the “Voting Directors”) and two (2) non-voting Directors (the “Non-Voting Directors”).

4.3 ELECTION AND REMOVAL OF DIRECTORS . The Directors shall be elected as follows:

(a) The Class C Member(s) shall elect three (3) Voting Directors (individually, a “Class C Director”, and together, the “Class C Directors”).

(b) The Class P Member(s) shall elect three (3) Voting Directors (individually, a “Class P Director”, and together, the “Class P Directors”).

(c) The Class C Member(s) may remove, at any time, any or all of the Class C Directors, with or without cause. The Class P Member(s) may remove, at any time, any or all of the Class P Directors, with or without cause.

(d) The chief executive officer and the chief financial officer of the Company shall be ex officio the two Non-Voting Directors. The Non-Voting Directors may be removed at any time by the Board of Directors. If either the office of chief executive officer or the office of chief financial officer is vacant, the Non-Voting Director position associated with such office shall also be vacant.

4.4 VACANCIES; RESIGNATIONS, REPLACEMENTS .

(a) Upon the death, resignation or removal of any Voting Director, the Member(s) that elected such Voting Director is authorized to fill the vacancy and shall have power to elect a successor to take office when the resignation, removal or deemed vacancy becomes effective.

(b) Any Voting Director may resign effective upon giving thirty (30) days written notice to each Member of the Company, unless the notice specifies a later time for the effectiveness of such resignation.

4.5 TERM . The Class C Directors and Class P Directors shall hold office until their removal pursuant to this Agreement or until their respective successors are elected and qualified pursuant to this Agreement.

4.6 COMPENSATION OF DIRECTORS . Directors of the Company, as such, shall not be entitled to compensation, unless otherwise unanimously approved by the Members.

4.7 FIDUCIARY DUTIES OF DIRECTORS . The Class C Directors shall owe fiduciary duties exclusively to the Class C Member(s), and the Class P Directors shall owe fiduciary duties exclusively to the Class P Member(s). No person shall be authorized to institute an action against a Voting Director for breach of fiduciary duty other than a Member to whom a fiduciary duty is owed pursuant to the previous sentence.

4.8 LIMITATION OF LIABILITY . The Voting Directors shall not be liable to the Company or its Members for actions taken in good faith.

ARTICLE 5

MEETINGS OF BOARD OF DIRECTORS

5.1 PLACE OF MEETINGS . Meetings of the Board of Directors shall be held at any place within or without the State of Delaware that has been designated from time to time by the Board of Directors. In the absence of such designation, meetings of the Board of Directors shall be held at the principal executive office of the Company, except as provided in Section 5.2.

5.2 MEETINGS OF DIRECTORS . The Board of Directors shall meet at least six (6) times per Fiscal Year, pursuant to a schedule established by the Board of Directors as early as practicable each Fiscal Year. In addition, meetings of the Board of Directors for any purpose or purposes may be called at any time by any Director. Notice of the time and place of meetings shall be delivered personally or by telephone to each Director, or sent by first-class mail or by telex, telegram, electronic mail or facsimile transmission, charges prepaid, addressed to him or her at his or her address as it appears upon the records of the Company or, if it is not so shown on the records and is not readily ascertainable, at the place at which the meetings of the Board of Directors are regularly held. In case such notice is mailed, it shall be deposited in the United States mail at least four (4) days prior to the time of the holding of the meeting. In case such notice is telegraphed or sent by telex, electronic mail or facsimile transmission, it shall be delivered to a common carrier for transmission to the Director or actually transmitted by the person giving the notice by electronic means to the Director at least forty-eight (48) hours prior to the time of the holding of the meeting. In case such notice is delivered personally or by telephone as above provided, it shall be so delivered at least twenty-four (24) hours prior to the time of the holding of the meeting. Any notice given personally or by telephone shall be communicated directly to the Director. Such deposit in the mail, delivery to a common carrier, transmission by electronic means or delivery, personally or by telephone, as above provided, shall be due, legal and personal notice to such Directors. The notice need not specify the purpose of the meeting.

5.3 QUORUM; ALTERNATES; PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE PERMITTED; VOTE REQUIRED FOR ACTION .

(a) The presence of at least one Class C Director and at least one Class P Director constitutes a quorum for the transaction of business. If the meeting is adjourned for more than twenty-four (24) hours, notice of any adjournment to another time or place (other than adjournments until the time fixed for the next regular meeting of the Board of Directors, as to which no notice is required) shall be given prior to the time of the adjourned meeting to the Directors who were not present at the time of the adjournment.

(b) Each Voting Director may, by written notice given to the chief executive officer, appoint an alternate to attend and vote at meetings, or at any particular meeting, if the Voting Director is unable to attend. The presence of an alternate at any meeting shall be deemed to be presence of the Director at such meeting for all purposes, and the vote of such alternate shall be deemed to be the vote of the relevant Director. No Director may retract the vote of any duly

appointed alternate on behalf of such Director after the close of the meeting at which such vote is made. In the event that the Director who appointed an alternate attends a meeting, the appointment of such alternate shall be ineffective for such meeting, and the alternate shall have no right to be present or to participate in that meeting.

(c) Directors may participate in a meeting through use of conference telephone or similar communications equipment, so long as all Directors participating in such meeting can communicate with and hear one another.

(d) Every act or decision done or made by the Board of Directors shall require the unanimous consent of all Voting Directors present at a meeting duly held at which a quorum is present.

5.4 WAIVER OF NOTICE; CONSENT TO MEETING . Notice of a meeting need not be given to any Director who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such Director. All such waivers, consents and approvals shall be filed with the Company’s records and made a part of the minutes of the meeting.

5.5 ACTION BY BOARD OF DIRECTORS WITHOUT A MEETING . Any action required or permitted to be taken by the Board of Directors may be taken without a meeting if at least one Class C Director and at least one Class P Director (or their alternates who have been appointed pursuant to Section 5.3(b) above) shall individually or collectively consent in writing to such action. Such written consent or consents shall be filed with the minutes of the proceedings of the Board of Directors. Such action by written consent shall have the same force and effect as a unanimous vote of the Board of Directors.

5.6 COMMITTEES AND SUBCOMMITTEES . The provisions of this Article 5 shall also apply, with necessary changes in points of detail, to committees and subcommittees of the Board of Directors, if any, and to actions by such committees or subcommittees (except for the first sentence of Section 5.2, which shall not apply, and except that special meetings of a committee or subcommittee may also be called at any time by any two members of the committee or subcommittee), unless otherwise provided by this Agreement or by the resolution of the Board of Directors designating such committee or subcommittee. For such purpose, references to the Directors collectively shall be deemed to refer to each such committee or subcommittee, and references to “Directors” shall be deemed to refer to members of the committee or subcommittee. In addition, the Members intend that the Board of Directors appoint a separate committee responsible for taxes and that such committee at least be given the authority to make routine and/or recurring decisions with respect to taxes.

ARTICLE 6

OFFICERS

6.1 GENERAL . Subject to the provisions of the Act, the Certificate and this Agreement, the Board of Directors shall from time to time appoint one or more individuals who shall be termed officers of the Company (the “Officers”). Subject to the decision and control of the Board of Directors, the Officers of the Company shall manage the day-to-day activities and affairs and will have discretion with regard to all matters not otherwise reserved to the Board of Directors of the Company. Each Officer shall hold his or her respective office at the pleasure of the Board of Directors. Except as otherwise specifically provided for below, an Officer need not be a Member or Director of the Company, and any number of offices may be held by the same person. The Officers of the Company shall include a president and chief executive officer, a chief financial officer, and a secretary. The Company may also have, at the discretion of the Board of Directors, one or more vice presidents, and such other Officers as may be designated from time to time by the Board of Directors.

6.2 APPOINTMENT AND REMOVAL . Officers shall be appointed by the Board of Directors. Each Officer, including an Officer elected to fill a vacancy, shall hold office until his or her successor is elected, except as otherwise provided by the Act or the Certificate, unless earlier removed pursuant to this Section 6.2. Any Officer may be removed, with or without cause, at any time by the Board of Directors.

6.3 CHIEF EXECUTIVE OFFICER AND PRESIDENT . The chief executive officer and president shall, subject to the oversight and control of the Board of Directors, have general supervision, direction and control of the business and affairs of the Company. Subject to Section 7.1 hereof, the chief executive officer and president shall have all of the powers which are ordinarily inherent in the office of the chief executive officer and president of a corporation, and he shall have such further powers and shall perform such further duties, as may be prescribed for him by the Board of Directors.

6.4 VICE PRESIDENTS . In the absence or disability of the president, the vice presidents in order of their rank as fixed by the chief executive officer, or, if not ranked, the vice president designated by the chief executive officer, shall perform all of the duties of the chief executive officer and when so acting shall have all the powers of and be subject to all the restrictions upon the chief executive officer. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them, respectively, by the president or by this Agreement or by the Board of Directors.

6.5 SECRETARY . The secretary shall keep or cause to be kept at the principal executive office of the Company, or such other place as the president may order, a book of minutes of all proceedings of the Members and of the Board of Directors, with the time and place of holding, whether regular or special, and if special how authorized, the notice thereof given, the names of those present and the number of votes present or represented at Members’ or Board of Directors meetings. The secretary or an assistant secretary, or, if they are absent or unable or refuse to act, any other officer of the Company, shall give or cause to be given notice of all the meetings of the Members required by the Agreement or by law to be given, and he shall keep the

seal of the Company, if any, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the president or by this Agreement or by the Board of Directors.

6.6 CHIEF FINANCIAL OFFICER . The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of account of the Company. The chief financial officer shall keep or cause to be kept at the principal executive office of the Company a record of Members showing (i) the names of the Members and their addresses, (ii) their respective initial and all their respective subsequent Capital Contributions and Percentage Interests, as they may vary from time to time. The chief financial officer shall receive and deposit all moneys and other valuables belonging to the Company in the name and to the credit of the Company and shall disburse the same only in such manner as the chief executive officer or the appropriate officers of the Company may from time to time determine, shall render, whenever requested, an account of all his transactions as chief financial officer and of the financial condition of the Company, and shall perform such further duties as the chief executive officer or this Agreement or the Board of Directors may prescribe.

6.7 TERM . The initial Officers of the Company were appointed for a term of three years from the Closing, which term may be renewed by the Board of Directors. Notwithstanding the foregoing sentence, the initial Officers shall serve at the pleasure of the Board of Directors and may be removed by the Board of Directors in its discretion at any time prior to the end of their three year terms pursuant to Section 6.2 hereof. Any subsequent Officers shall serve at the pleasure of the Board of Directors and may be removed by the Board of Directors in its discretion at any time.

ARTICLE 7

OPERATIONAL MATTERS

7.1 BOARD OF DIRECTOR APPROVAL .

(a) Unless otherwise determined by the Board of Directors pursuant to subsection (b) below, the Company shall not have the authority to approve or undertake any of the following matters without the approval of the Board of Directors (obtained as set forth in Section 5.3(d)):

(i) The hiring, firing, renewal, compensation, evaluation and planning for succession of the chief executive officer and president, the chief financial officer and senior vice presidents and other Officers of similar rank.

(ii) Compensation policies for Company employees, including specific compensation and benefit plans and programs.

(iii) Annual strategic and business plans and amendments thereto (including entering into any unrelated new lines of business) in accordance with Section 7.2, Company-wide financing plans, and Company-wide risk management plans (including a program of insurance).

(iv) Any distribution to the Members in excess of, or in an amount less than, Tax Distributions made in accordance with Sections 9.2(a) and 9.2(b) hereof (which are deemed automatically approved by the Board of Directors, subject to Section 8.2 hereof).

(v) The following material transactions:

(A) Projects, long-term contracts (including cancellation thereof), mergers, consolidations, re-capitalization, acquisitions, divestitures, joint ventures or alliances involving the commitment or transfer by the Company of value in excess of $25 million and shut-downs of material facilities; and

(B) Investments and transactions outside the normal lines of business in excess of $10 million.

(vi) Capital expenditures in excess of 110% of the approved capital expenditure budget or overruns on major projects greater than 10%.

(vii) Individual borrowings and leasing arrangements in excess of $25 million, or if the Board of Directors in its discretion sets a debt ceiling, any borrowing in excess of such debt ceiling.

(viii) Unusual, non-recurring uses of Company credit in support of operations above a $10 million exposure.

(ix) The settlement of actions or claims against the Company involving more than $10 million.

(x) Related-party transactions involving the receipt or payment of more than $5 million in any one transaction or $10 million in any series of related transactions, irrespective of individual amounts (other than transactions reflected by the agreements referred to on Schedules 6.11(b) and 6.11(c) of each of the Phillips Disclosure Schedule to the Contribution Agreement and the Chevron Disclosure Schedule to the Contribution Agreement).

(xi) Any amendment to the Certificate or this Agreement.

(xii) Except as otherwise specifically provided for in Article X, the admission of an additional Member or other equity holder of the Company.

(xiii) Any redemption of an equity interest in the Company.

(xiv) Any adoption of or change in the Company’s form of business or accounting principles.

(xv) Any material consolidation or relocation of the Company’s research and development facilities, or the exercise or waiver of any right affecting the term of any leasehold for research and development facilities.

(xvi) The commencement of voluntary bankruptcy proceedings for the Company.

(xvii) Any material decision regarding repair, replacement or startup relating to the K-Resin Accident.

(xviii) The liquidation or dissolution of the Company.

(xix) Any use by the Company of the “Chevron,” “ChevronTexaco” or “Phillips” name, by itself.

(b) The Board of Directors shall review periodically the appropriateness of the list of items contained in Section 7.1(a) (including the related threshold dollar amounts contained therein) which must be brought before the Board of Directors, and will implement changes if and when appropriate. Any such changes shall be set forth in a written resolution, and, to the extent that such written resolution is inconsistent with Section 7.1(a), the written resolution will control.

7.2 STRATEGIC AND BUSINESS PLANS; REPORTS .

(a) The Board of Directors and the Officers will conduct an interactive strategic planning process on an annual basis. In connection with this process, the Officers shall prepare and submit to the Board of Directors and the Board of Directors shall review, consider and adopt:

(i) a strategic plan for the Company; and

(ii) a three (3) year business plan, including capital and operating budgets.

Such process shall be conducted in accordance with the strategic planning processes of the Members, as determined by the Board of Directors.

(b) In the event that the Board of Directors fails to timely approve capital or operating budgets for any period, the Officers will be authorized to spend such amounts as are necessary or appropriate to meet the Company’s prior commitments and obligations and to conduct and maintain the Company’s operations and properties in a safe and efficient manner in accordance with industry practice.

(c) The Officers shall provide the Board of Directors with monthly reports of the operating results of the Company compared with the strategic and business plan, including the capital and operating budgets, and annual and periodic reports of compliance matters (e.g. financial controls, environmental, human resources, etc.).

ARTICLE 8

CAPITAL CONTRIBUTIONS AND PERCENTAGE INTERESTS

8.1 CAPITAL CONTRIBUTIONS AND PERCENTAGE INTERESTS .

(a) Effective as of the Closing, the Initial Chevron Member and each of the Previous Phillips Members agreed (i) to make a Capital Contribution to the Company as contemplated by Article II of the Contribution Agreement and credit the Capital Account of the Initial Chevron Member and each Previous Phillips Member in respect thereof in accordance with Section 8.1(b) of the Amended & Restated LLC Agreement, (ii) to determine the Percentage Interest of each Class C Member and each Class P Member in accordance with Section 8.1(a) of the Amended & Restated LLC Agreement, and (iii) that (A) the aggregate Percentage Interests of all Class C Members shall equal 50% and the aggregate Percentage Interests of all Class P Members shall equal 50%, (B) such aggregate Percentage Interests shall not change unless otherwise agreed by the Members, and (C) such aggregate Percentage Interests shall not be affected by the Chevron Pipe Line Contribution.

(b) Effective as of the Closing, Chevron and Phillips agreed to (i) determine the balance of the Capital Account of the Initial Chevron Member and each Previous Phillips Member as of the Closing Date in accordance with Section 8.1(c) of the Amended & Restated LLC Agreement, (ii) determine the Percentage Interest of the Initial Chevron Member and each Previous Phillips Member as of the Closing Date in accordance with Section 8.1(c) of the Amended & Restated LLC Agreement, and (iii) agree to schedules setting forth the Carrying Values of assets specified in clause (i) of the first sentence of Section 8.1(c) of the Amended & Restated LLC Agreement.

(c) The determination of Capital Account balances as described in Section 8.1(b) hereof was designed to result in the aggregate credit balances in the Capital Accounts of the Class C Members being equal to the aggregate credit balances in the Capital Accounts of the Class P Members as of Closing and after giving effect to the distributions described in Section 9.2(f) which is consistent with the agreement of the Initial Chevron Member and each of the Previous Phillips Members that the fair market value of the net assets contributed to the Company by the Class C Members at Closing and the fair market value of the net assets contributed to the Company by the Class P Members at Closing were equal after giving effect to the distributions described in Section 9.2(f), and this result was not to be affected by the Chevron Pipe Line Contribution.

8.2 ADDITIONAL CAPITAL CONTRIBUTIONS . No Member may make additional Capital Contributions other than pursuant to its obligations under the Contribution Agreement or this Agreement without the consent of the Board of Directors. The Board of Directors shall approve all material terms of any such Capital Contribution, including its effect on the Members’ relative Capital Accounts and Percentage Interests. Except as provided below, the Members intend that any capital requirements of the Company after the date hereof not satisfied by revenues generated from the operations of the Company will be funded through additional Capital Contributions by the Members or loans from Members to the Company, in each case as approved by the Members and the Board of Directors. It is not anticipated that such future capital requirements of the Company will be funded through the incurrence of indebtedness for borrowed money; provided that the foregoing shall not prevent (i) the entry into commercial cash management facilities, including but not limited to corporate revolving credit facilities, commercial paper programs and accounts receivable securitization programs, solely for short term or general working capital purposes or (ii) project financing. Notwithstanding anything in this Agreement to the contrary, in the event that any additional Capital Contributions by the Members or loans from Members to the Company are approved by the Members and the Board of Directors, no Tax Distributions shall be made with respect to the two (2) Fiscal Quarters that end immediately after the date that each such additional Capital Contribution or loan is made (each such period, a “Suspension Period”).

8.3 WITHDRAWAL OR REDUCTION OF CAPITAL CONTRIBUTIONS .

(a) Except as expressly provided in this Agreement, no Member shall have the right to withdraw from the Company all or any part of its Capital Contribution.

(b) A Member, irrespective of the nature of its Capital Contribution, shall not have the right to demand and receive a distribution in kind in return for its Capital Contribution, unless the Members shall have otherwise unanimously agreed.

8.4 NO RETURN ON OR OF CAPITAL CONTRIBUTIONS . No amounts shall be payable on, with respect to, or in return of, Capital Contributions or Capital Accounts of Members except as expressly provided in this Agreement.

8.5 CAPITAL ACCOUNTS . A single Capital Account shall be maintained for each Member (regardless of the class of interests owned by such Member and regardless of the time or

manner in which such interests were acquired) in accordance with the capital accounting rules of section 704(b) of the Code and the Income Tax Regulations thereunder (including without limitation section 1.704-1(b)(2)(iv) of the Income Tax Regulations) and as further described in this Section 8.5.

(a) There shall be established for each Member a Capital Account reflecting the excess (or deficit) of (a) the sum of (i) the Carrying Value of assets contributed to the Company by such Member and the amount of cash contributed to the Company by such Member under Section 8.1 or Section 8.2 or paid pursuant to a note contributed to the Company by such Member, (ii) such Member’s share of Net Profits calculated in accordance with Section 9.1 and any items in the nature of income or gain that are specifically allocated to such Member under Section 9.1, and (iii) the amount of any Company liabilities assumed by such Member or which are secured by any property distributed to such Member over (b) the sum of (i) such Member’s share of Net Losses under Section 9.1 and any items in the nature of losses or expenses that are specifically allocated to such Member under Section 9.1, (ii) any distributions to such Member under Section 9.2 or Section 12.6, and (iii) liabilities of such Member assumed by the Company or which are secured by any property contributed by such Member. In determining the amount of any liability for purposes of this section, there shall be taken into account section 752(c) of the Code and any other applicable provisions of the Code and Income Tax Regulations.

(b) In the event of a transfer of all or any portion of a Member’s interest in the Company pursuant to Article 10 hereof, the Capital Account of any transferee shall include the appropriate portion of the Capital Account of the Member from which the transferee’s interest in the Company was obtained.

(c) When Company property is distributed in kind (whether in connection with liquidation and dissolution or otherwise), the Capital Accounts of the Members shall first be adjusted to reflect the manner in which the unrealized income, gain, loss and deduction inherent in such property (that has not been reflected in the Capital Account previously) would be allocated among the Members if there were a taxable disposition of such property for the fair market value of such property (taking into account section 7701(g) of the Code) on the date of distribution.

(d) The appropriate Officers shall make or cause to be made all necessary adjustments in each Member’s Capital Account as required by the capital accounting rules of section 704(b) of the Code and the regulations thereunder.

8.6 LOANS BY MEMBERS TO THE COMPANY . No Member shall be obligated to lend money to the Company. No Member may lend money to the Company without the consent of the Board of Directors. The Board of Directors shall approve all material terms of such a loan, including, without limitation, the interest rate and term. Any loan by a Member to the Company with the required consent of the Board of Directors shall be separately entered on the books of the Company as a loan to the Company and not as a Capital Contribution, and shall be evidenced by a promissory note duly executed by at least one Class C Director and one Class P Director on behalf of the Company and delivered to the lending Member.

8.7 TREATMENT OF CERTAIN INDEMNITY PAYMENTS .

(a) If Company makes any payment to a third party that is subject to indemnification by a Class C Member, a Class P Member or a Previous Phillips Member (or any Affiliate thereof) pursuant to the Contribution Agreement or Annex B or C thereto (a “Company Indemnifiable Payment”), the Members intend such payment to be treated as preserving the value of the contribution made pursuant to Article II of the Contribution Agreement by the Member liable for the indemnity payment. Toward that end, each indemnity obligation arising in respect of a Company Indemnifiable Payment will be treated as having arisen immediately prior to such contribution of assets by the Indemnifying Party, the Indemnifying Party will be treated as if it had originally contributed assets with a Carrying Value increased by the amount of the Company Indemnifiable Payment, and the Company will be treated as having assumed an additional liability in the amount of the Company Indemnifiable Payment. As a result, the amounts credited to the Capital Accounts of the Class C Members in the aggregate and the Class P Members in the aggregate will remain equal. The Members also intend that the tax consequences of such Company Indemnifiable Payment and the indemnification payment itself shall inure to the Indemnifying Party, but, except as otherwise agreed by the Members, only to the extent that such tax result can be achieved without causing the Capital Accounts of the Class C Members in the aggregate and the Capital Accounts of the Class P Members in the aggregate to fail to be equal.

(b) If a Member or a Previous Phillips Member makes any payment to a third party that is subject to indemnification by the Company pursuant to the Contribution Agreement or Annex B or C thereto (a “Member Indemnifiable Payment”), the Members intend that the tax consequences of such Member Indemnifiable Payment and the indemnification payment itself shall inure to the Company and be shared by the Members in accordance with their respective Percentage Interests, but, except as otherwise agreed by the Members, only to the extent that such tax results can be achieved without causing the Capital Accounts of the Class C Members in the aggregate and the Capital Accounts of the Class P Members in the aggregate to fail to be equal.

8.8 TREATMENT OF CERTAIN DEFERRED CAPITAL CONTRIBUTIONS . As a result of the K-Resin Accident, the value of certain assets contributed by the Previous Phillips Members at Closing had declined from that which existed when the Initial Chevron Member and the Previous Phillips Members were first agreeing on the economic terms of the arrangement described in this Agreement. The Initial Chevron Member and the Previous Phillips Members could not agree on the amount of the decline in value, in part because they were unable to reach an agreement on the likely time and expense involved in repairing the damage caused by the K-Resin Accident and the degree and permanence of any loss of customers that the K-Resin Accident may cause. In order to resolve the issue, it was agreed that one or more of the Class P Members might have to make capital contributions to the Company after the Closing under the circumstances and in the amounts calculated under the provisions of the Contribution Agreement. The Members view such deferred capital contributions as necessary to preserve the pre K-Resin

Accident value of the business and assets contributed by the Class P Members. The Members agree that any deferred contributions are capital contributions and will not be reported as income by the Company.

8.9 SPECIAL RULE . An Indemnifying Party will indemnify the Indemnified Party on a Net After-Tax Basis against any income or franchise tax incurred in the event that any indemnification payment is treated as taxable income to the Indemnified Party. For purposes of this paragraph, “Net After-Tax Basis” means after any U.S. federal, state or local income or franchise taxes (computed using the Tax Rate) incurred as a result of such indemnification (assuming the deductibility of such state and local income and franchise taxes in calculating federal income tax), reduced by any tax benefit arising as a result of such indemnification.

8.10 APPLICATION OF THE BASKET, TAX BASKET AMOUNT AND CAP . No provision of this Agreement or the Contribution Agreement (including the Annexes thereto) shall be applied or interpreted in a manner that would cause any indemnification payment to be made that otherwise would not be payable because of application of the Basket, Tax Basket Amount or the Cap.

ARTICLE 9

ALLOCATION OF PROFITS AND LOSSES; DISTRIBUTIONS; TAX AND

ACCOUNTING MATTERS

9.1 ALLOCATIONS . Net Profit and Net Loss of the Company shall be determined and allocated with respect to each Fiscal Year, Fiscal Quarter or other period of the Company as follows:

(a) GENERAL ALLOCATION. Except as otherwise provided in this Article 9, Net Profit and Net Loss for each Fiscal Year, Fiscal Quarter or other period shall be allocated to the Members in accordance with their Percentage Interests.

(b) REGULATORY ALLOCATIONS. Notwithstanding the foregoing, the following special allocations shall be made for each Fiscal Year or other period in the following order of priority:

(i) If there is a net decrease in Company Minimum Gain during a Company taxable year, then each Member shall be allocated items of Company income and gain for such taxable year (and, if necessary, for subsequent years) in an amount equal to such Member’s share of net decrease in Company Minimum Gain, determined in accordance with section 1.704-2(g)(2) of the Income Tax Regulations. This subsection (b)(i) is intended to comply with the minimum gain chargeback requirement of section 1.704-2(f) of the Income Tax Regulations and shall be interpreted consistently therewith.

(ii) If there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during any Company taxable year, each Member who has a share of the Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with section 1.704-2(i)(5) of the Income Tax Regulations, shall be specially allocated items of Company income and gain for such taxable year (and, if necessary, subsequent years) in the amount equal to such Member’s share of net decrease in Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in a manner consistent with the provisions of section 1.704-2(i)(4) of the Income Tax Regulations. This subsection (b)(ii) is intended to comply with the partner nonrecourse debt minimum gain chargeback requirement of section 1.704-2(i)(4) of the Income Tax Regulations and shall be interpreted consistently therewith.

(iii) If any Member unexpectedly receives (or Members unexpectedly receive) an adjustment, allocation or distribution of the type contemplated by section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Income Tax Regulations, items of income and gain shall be allocated to such Member (or if more than one Member receives such an adjustment, allocation or distribution, items of income and gain shall be allocated to such Members in proportion to the amounts of their respective Adjusted Capital Account Deficits) in an amount (or amounts) and manner sufficient to eliminate the Adjusted Capital Account Deficit of such Member (or deficits of such Members) as quickly as possible. It is intended that this subsection (b)(iii) qualify and be construed as a “qualified income offset” within the meaning of section 1.704-1(b)(2)(ii)(d) of the Income Tax Regulations.

(iv) If the allocation of Net Loss to a Member as provided in Section 9.1(a) would create or increase an Adjusted Capital Account Deficit and one or more other Members would have a positive Capital Account balance, there shall be allocated to such Member only that amount of Net Loss as will not create or increase an Adjusted Capital Account Deficit. The Net Loss that would, absent the application of the preceding sentence, otherwise be allocated to such Member shall, subject to the Adjusted Capital Account Deficit limitations of such sentence, be allocated to those Members having positive Capital Account balances up to the amount of such positive Capital Account balances in the ratios that each such Member’s positive Capital Account Balance bears to the sum of such positive Capital Account balances. To the extent that allocations of Net Losses have been made pursuant to this subsection (b)(iv), future allocations of Net Profits, notwithstanding anything to the contrary in this Agreement, shall be made first to restore such Net Losses.

(v) Member Nonrecourse Deductions for any Fiscal Year or other period shall be allocated each year to the Member that bears the economic risk of loss (within the meaning of section 1.752-2 of the Income Tax Regulations) for the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable.

(vi) Nonrecourse Deductions for any Fiscal Year or other period shall be allocated to the Members in proportion to their respective Percentage Interests.

(vii) To the extent an adjustment to the adjusted tax basis of any Company asset, pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4) of the Income Tax Regulations, to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of such Member’s interest in the Company, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in accordance with their interests in the Company in the event section 1.704-1(b)(2)(iv)(m)(2) of the Income Tax Regulations applies, or to the Member to whom such distribution was made in the event section 1.704-1(b)(2)(iv)(m)(4) of the Income Tax Regulations applies

(viii) The allocations set forth in subsections (b)(i) through (b)(vii) (the “Regulatory Allocations”) are intended to comply with certain requirements of sections 1.704-1(b), 1.704-2(f) and 1.704-2(i) of the Income Tax Regulations. Notwithstanding the provisions of Section 9.1(a), the Regulatory Allocations shall be taken into account in allocating other items of income, gain, loss and deduction among the Members so that, to the extent possible, the net amount of such allocations of other items and the Regulatory Allocations to each Member shall be equal to the net amount that would have been allocated to each Member if the Regulatory Allocations had not occurred.

(i) Except as provided in subsection (c)(ii), for income tax purposes under the Code and the Income Tax Regulations, Company taxable income and loss shall be allocated to each Member in the same manner that Company Net Profit and Net Loss (and items entering into the determination thereof) are allocated.

(ii) SECTION 704(C). In accordance with section 704(c) of the Code and the Income Tax Regulations thereunder, income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall, solely for income tax purposes, be allocated so as to take account of any variation between the adjusted basis of such property to the Company for federal income

tax purposes and the initial Carrying Value of such property. If the Carrying Value of any Company property is adjusted as described in the definition of “Carrying Value”, subsequent allocations of income, gain, loss, and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and the Carrying Value of such asset in the manner prescribed under Sections 704(b) and 704(c) of the Code and the Income Tax Regulations thereunder. With respect to assets contributed or required to be contributed by the Initial Chevron Member, Phillips 66 and the Previous Phillips Members at the Closing pursuant to the Contribution Agreement, for purposes of applying section 704(c) of the Code and this Section 9.1(c)(ii), the Company shall use the traditional method with curative allocations set forth in section 1.704-3(c) of the Income Tax Regulations. Any elections or other decisions relating to such allocations shall be made by the Board of Directors.

(d) DEPRECIATION RECAPTURE. Solely for tax purposes, a Member’s share of the Company’s depreciation recapture recognized for tax purposes upon the disposition of Company property shall be computed in the manner provided for in sections 1.704-3(a)(11), 1.1245-1(e) and 1.1250-1(f) of the Income Tax Regulations. The provisions of this Section 9.1(d) are intended to affect only the character of the items of gain allocated by the Company to the Members. This Section 9.1(d) shall not affect the aggregate amount of gain (including gain characterized under this Section 9.1(d) as depreciation recapture) otherwise allocable to a Member pursuant to this Section 9.1.

(e) CHANGE IN PERCENTAGE INTERESTS. Except as otherwise required by law, if the Percentage Interests of the Members of the Company are changed during any taxable year, all items to be allocated to the Members for such entire taxable year shall be prorated on the basis of the portion of such taxable year which precedes each such change and the portion of such taxable year on and after each such change according to the number of days in each such portion, and the items so allocated for each such portion shall be allocated to the Members in the manner in which such items are allocated as provided in Section 9.1(a) during each such portion of the taxable year in question.

(f) EXCESS NONRECOURSE LIABILITIES. Nonrecourse liabilities of the Company that constitute “excess nonrecourse liabilities” within the meaning of section 1.752-3(a)(3) of the Income Tax Regulations, shall be allocated among the Members in proportion to their respective Percentage Interests.

(g) [INTENTIONALLY OMITTED]

(h) ALLOCATIONS RELATING TO CAPITAL TRANSACTIONS. In connection with the sale or other disposition of all or substantially all of the assets of the Company (including upon liquidation of the Company), items of income, gain, loss and deduction shall, except as otherwise required by subsections (b) through (f) above, be allocated to the Members

in the following manner: in such amounts as shall cause (A) the ratio of the Capital Account of each Member to the aggregate Capital Accounts of all Members to (B) equal as nearly as possible each Member’s respective Percentage Interest.

(i) STATE AND LOCAL ITEMS. Items of income, gain, loss, deduction, credit and tax preference for state and local income tax purposes shall be allocated to and among the Members in a manner consistent with the allocation of such items for federal income tax purposes in accordance with the foregoing provisions of this Section 9.1.

9.2 DISTRIBUTIONS .

(a) Subject to Section 8.2 hereof, the Company shall distribute to each Member as promptly as practicable (and in any event within forty-five (45) days) after the end of each of the first three (3) Fiscal Quarters of each Fiscal Year of the Company an amount equal to such Member’s Quarterly Tax Distribution for such Fiscal Quarter. In addition, subject to Section 8.2 hereof, the Company shall distribute to each Member as promptly as practicable (and in any event within forty-five (45) days) after the end of each Fiscal Year an amount equal to the excess, if any, of such Member’s Proportionate Tax Share for such Fiscal Year over the aggregate amount of Quarterly Tax Distributions made to such Member with respect to such Fiscal Year; provided that, if a Suspension Period occurs during such Fiscal Year, such calculation shall exclude any Adjusted Taxable Income attributable to Fiscal Quarters within such Suspension Period; provided further that, if Section 9.2(b) ceases to prevent Tax Distributions pursuant to this Section 9.2(a) during a Fiscal Year, the calculation of the Tax Distribution to be made with respect to such Fiscal Year pursuant to the second sentence of this Section 9.2(a) shall also exclude any Adjusted Taxable Income attributable to Fiscal Quarters in such Fiscal Year that ended prior to the date when Section 9.2(b) ceased to prevent such Tax Distributions.

(b) Notwithstanding anything herein to the contrary, in no event shall the Company make any Tax Distribution pursuant to Section 9.2(a) until the date upon which each of (i) the $300,000,000 7% Senior Notes due 2014, (ii) the $400,000,000 8 ¹ / ₄ % Senior Notes due 2019 and (iii) the $300,000,000 4.75% Senior Notes due 2021, each issued by the Company and Chevron Phillips Chemical Company LP as joint and several obligors (collectively, the “Bond Indebtedness”), has been repaid or redeemed in full or such repayment obligations otherwise have been fully discharged. The Class C Member and each of the Class P Members agree to cause the Class C Directors and the Class P Directors, respectively, to instruct management of the Company to use commercially reasonable efforts to repay or redeem the Bond Indebtedness, as promptly as commercially practicable after the date hereof, with available cash of the Company in the manner most beneficial to the Company in management’s discretion.

(c) Any distributions by the Company to the Members, other than a Tax Distribution in accordance with Sections 9.2(a) and 9.2(b) hereof, shall be payable at the discretion of the Board of Directors.

(d) To the extent the Company is required by law to withhold or to make tax payments on behalf of or with respect to any Member, the Company may withhold such amounts and make such tax payments as so required. For purposes of this Agreement, any such payments or withholdings shall be treated as a distribution to the Member on behalf of whom the withholding or payment was made.

(e) Notwithstanding anything to the contrary contained in this Section 9.2, the Company shall not make any distribution to the Members which would render the Company insolvent or which is otherwise prohibited by applicable law.

(f) Subsequent to the Closing, the Company made distributions to the Initial Chevron Member and the Previous Phillips Members as provided in Section 9.2(f) of the Amended & Restated LLC Agreement, and, after such distributions, the aggregate Capital Accounts of the Class C Members remained equal to the aggregate Capital Accounts of the Class P Members. The Company will use its best efforts to avoid taking any action that, or failing to take any action the failure of which to take, is likely to cause all or part of the distributions made pursuant to Section 9.2(f) of the Amended & Restated LLC Agreement to be taxable to one or more of the Members and in connection therewith the Members shall cooperate with the Company and each other.

(g) In the event that, within two years of the Closing or any contribution of an asset to the Company, the Members desire for the Company to make a distribution or payment to any of the Members or pay all or a portion of any liability, and if such distribution or payment to a Member or such payment of a liability may give rise to a disguised sale under section 707(a)(2)(B) of the Code or corresponding provision of state or local law, the Members shall cooperate to avoid such result without changing the intended economics of the arrangement.

(h) FORMATION AND REIMBURSEMENT FOR CAPITAL EXPENDITURES.

(i) The Initial Chevron Member and the Previous Phillips Members intended that the contributions of P Chem (as defined in the Contribution Agreement) and C Chem (as defined in the Contribution Agreement) constitute a nonrecognition transaction pursuant to Section 721(a) of the Code, and the Initial Chevron Member and the Previous Phillips Members reported and caused the Company to report and otherwise treat the transfers of P Chem and C Chem to the Company as solely a nonrecognition transaction pursuant to Section 721(a) of the Code on all relevant tax returns and reports. Each Class P Member states that it has made capital expenditures that are eligible for reimbursement pursuant to Regulations Section 1.707-4(d) (“Reimbursable Capital Expenditures”) with respect to P Chem in an amount that is not less than the amount set forth opposite its name on Schedule 3 attached hereto, and the Class C Member states that it has made Reimbursable Capital Expenditures with respect to C Chem in an amount that is not less than the amount set forth opposite its name on Schedule 3 attached hereto.

(ii) If, absent this Section 9.2(h), any distribution to a Class P Member would cause any of the P Chem property transferred by a Previous Phillips Member to the Company pursuant to the Contribution Agreement to be treated as a sale of such property, or if, absent this Section 9.2(h), any distribution to a Class C Member would cause any of the C Chem property transferred by that Member to the Company pursuant to the Contribution Agreement to be treated as a sale of such property, then, to the extent permitted by Regulations Section 1.707-4(d), the Company and the Members shall treat such distribution as a reimbursement of Reimbursable Capital Expenditures made by such Person (up to the amount thereof as set forth on Schedule 3 less any portion of such amount that has been reimbursed by any prior distribution treated as a reimbursement of Reimbursable Capital Expenditures under this Section 9.2(h)).

(iii) Without limiting the generality of the foregoing Section 9.2(h)(ii), if, absent this Section 9.2(h), any distribution to a Member would cause any of the property transferred by that Member (or in the case of a Class P Member any property transferred by a Previous Phillips Member) to the Company pursuant to the Contribution Agreement to be treated as a sale of such property, then, to the extent permitted by Regulations Section 1.707-4(d), the Members and the Company shall treat (i) any excess of any of the distribution to a Class C Member of the Initial Financing required by Section 9.2(f) of the LLC Agreement and Section 6.16 of the Contribution Agreement and any distribution in respect of Actual Contributed Cash and/or Working Capital Difference required by Section 3.3 of the Contribution Agreement (collectively, the “Special Distribution”) over the Class C Member’s “allocable share” (within the meaning of Regulations Section 1.707-5(b)) of the Interim Financing or other borrowing of the Company, the proceeds of which are allocable (within the meaning of Regulations Section 1.707-5(b) and Notice 89-35, 1989-1 C.B. 675) to such Special Distribution, as reimbursements of Reimbursable Capital Expenditures incurred by such Class C Member (up to the amount thereof as set forth on Schedule 3 less any portion of such amount that has been reimbursed by any prior distribution treated as a reimbursement of Reimbursable Capital Expenditures under this Section 9.2(h)), and (ii) any excess of the Special Distribution to a Class P Member over the Class P Member’s “allocable share” (within the meaning of Regulations Section 1.707-5(b)) of the Interim Financing or other borrowing of the Company, the proceeds of which are allocable (within the meaning of Regulations Section 1.707-5(b) and Notice 89-35, 1989-1 C.B. 675) to such Special Distribution, as reimbursements of Reimbursable Capital Expenditures incurred by such Class P Member (up to the amount thereof as set forth on Schedule 3 less any portion of such amount that has been reimbursed by any prior distribution treated as a reimbursement of Reimbursable Capital Expenditures under this Section 9.2(h)).

9.3 ACCOUNTING MATTERS . The Company’s tax year shall be the calendar year unless otherwise required by section 706 of the Code or the Income Tax Regulations thereunder. The Board of Directors shall cause to be maintained complete books and records accurately reflecting the accounts, business and transactions of the Company on a calendar-year basis and using such cash, accrual, or hybrid method of accounting as in the judgment of the Board of Directors is most appropriate; provided, however, that books and records with respect to the Company’s Capital Accounts and allocations under this Agreement of Net Profit and Net Loss (and items entering into the determination thereof) and income, gain, loss, deduction or credit (or item thereof) shall be kept on the basis of the Company’s Fiscal Year and under United States federal income tax accounting principles as applied to partnerships.

9.4 TAX STATUS AND RETURNS .

(a) Any provision hereof to the contrary notwithstanding, solely for United States federal income tax purposes, each of the Members hereby recognizes that the Company is subject to all provisions of Subchapter K of Chapter 1 of Subtitle A of the Code; provided, however , that the filing of U.S. Partnership Returns of Income shall not be construed to expand the purposes of the Company or expand the obligations or liabilities of the Members.

(b) The chief financial officer shall prepare or cause to be prepared all tax returns and statements, if any, that must be filed on behalf of the Company with any taxing authority, and shall make timely filing thereof. Within one-hundred eighty (180) days after the end of each calendar year, the Company shall cause to be prepared and delivered to each Member a report setting forth in reasonable detail the information with respect to the Company during such calendar year reasonably required to enable each Member to prepare its federal, state and local income tax returns in accordance with applicable law then prevailing.

9.5 754 ELECTION AND OTHER TAX ELECTIONS . In the event of a distribution of property to a Member, or a transfer of any interest in the Company permitted under the Act or this Agreement, the Company, upon the written request of the transferor or transferee, shall file a timely election under section 754 of the Code and the Income Tax Regulations thereunder to adjust the basis of the Company’s assets under section 734(b) or 743(b) of the Code and a corresponding election under the applicable provisions of state and local law, and the person making such request shall pay all costs incurred by the Company in connection therewith, including reasonable attorneys’ and accountants’ fees. Other tax elections and decisions relating to Taxes not specifically governed by any other express provision of this Agreement shall be made as agreed by the Board of Directors.

9.6 TAX MATTERS PARTNER .

(a) Phillips 66 Company shall be the Company’s “tax matters partner” for purposes of subchapter C of chapter 63 of subtitle F of the Code (dealing with the tax treatment of partnership items); provided, however , that the tax matters partner shall not take any action without the approval of the Board of Directors or its designee; and provided, further , that the tax matters partner shall receive no compensation for its services as tax matters partner but shall be reimbursed for any out-of-pocket expenses incurred in acting in such capacity.

(b) The Company shall indemnify the tax matters partner (including the officers and directors of a corporate tax matters partner) against judgments, fines, amounts paid in settlement, and expenses (including attorney fees) reasonably incurred in any civil, criminal, or investigative proceeding in which they are involved or threatened to be involved by reason of being the tax matters partner unless the tax matters partner acted in bad faith or with gross negligence. The indemnification provided hereunder shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any applicable statute, agreement, vote of Partners, or otherwise.

ARTICLE 10

RESTRICTIONS ON TRANSFER

10.1 TRANSFER OF INTERESTS . No Member may sell, assign, transfer or hypothecate (“Transfer”) all or any part of its Membership Interest in the Company, or any interest therein, except in accordance with the terms and conditions set forth in this Article 10.

10.2 CONDITIONS OF TRANSFER . No Member may Transfer all or any part of such Member’s Membership Interest, or any interest therein, except in compliance with Section 10.6, Section 10.7, Section 10.9, Section 10.10, Section 10.11 or Article 11, such compliance to be jointly determined by the chief executive officer and the chief financial officer and documented by a certificate evidencing such Transfer. Moreover, except as set forth in Sections 10.9, 10.10 or 10.11 or Article 11, no Member may Transfer all or any part of such Member’s Membership Interest, or any interest therein, unless such Transfer will not (and, upon request of the Board of Directors, the transferring Member provides an opinion of counsel in form and substance reasonably satisfactory to the Board of Directors that such Transfer will not): (A) subject the Company to registration as an investment company or election as a “business development company” under the Investment Company Act of 1940; (B) require any Member or any affiliate of a Member to register as an investment adviser under the Investment Advisers Act of 1940; (C) effect a termination of the Company under section 708 of the Code; (D) cause the Company to be treated as an association taxable as a corporation for federal income tax purposes; (E) cause the Company or any Member to be treated as an ERISA fiduciary; or (F) otherwise violate this Agreement; provided, that no Transfer shall violate any federal, state or local laws, including any applicable federal or state securities laws or regulations.

10.3 ADMISSION OF SUBSTITUTE MEMBER . In the event of a Transfer pursuant to Sections 10.6, 10.7, 10.9, 10.10 or 10.11 or Article 11, and the requirements of Section 10.2 and this Section 10.3 are met, then the transferee of the Member’s Membership Interest shall be entitled to be admitted to the Company as a substitute Member, and this Agreement (and all schedules and exhibits hereto) shall be amended to reflect such admission, provided that the following conditions are complied with:

(a) The transferor and transferee shall have executed and acknowledged such instruments as the Board of Directors may deem necessary or desirable to effect the substitution;

(b) The transferee acknowledges all of the terms and provisions of this Agreement as the same may have been amended and agrees in writing to be bound by the same;

(c) The transferee reimburses the Company for all reasonable expenses connected with such admission including, but not limited to, legal fees and costs;

(d) The filing with the Company, if required by the Board of Directors, of such proof of the investment intent and financial status of the transferee as the Board of Directors may request; and

(e) Compliance with all applicable federal and state securities laws.

10.4 EFFECT OF TRANSFER WITHOUT APPROVAL . Any purported Transfer of all or any part of a Member’s Membership Interest, or any interest therein, which is not in compliance with this Article 10 shall be void and, except as provided for in Section 10.5, below, shall be of no effect.

10.5 LIABILITY FOR BREACH . Notwithstanding anything to the contrary in this Article 10, any Member purporting to Transfer its Membership Interest, or any part thereof, in violation of this Article 10 shall be liable to the Company and the other Members for all liabilities, obligations, damages, losses, costs and expenses (including reasonable attorneys’ fees and court costs) arising as a direct or consequential result of such non-complying transfer, attempted transfer or purported transfer, including specifically, any additional cost or taxes created by non-compliance with any of the requirements and conditions provided for in Section 10.2.

10.6 PERMITTED TRANSFERS SUBJECT TO RIGHT OF FIRST REFUSAL .

(a) At any time the Class C Member(s) or the Class P Member(s) (a “Transferring Class”) may Transfer not less than all of their respective Class Membership Interest to a Person for cash, subject to the Right of First Refusal provided for in this Section 10.6 and the last sentence of Section 10.2.

(b) In the event that any Transferring Class has received a bona fide written cash offer, which such Transferring Class is willing to accept, for the Transferring Class to sell not less than all of its respective Class Membership Interest (the “Transferred Interest”) to any Person, the Transferring Class shall deliver a written notice (the “Transfer Notice”) to all of the Members, other than the Members in the Transferring Class (the “Non-Transferring Class”), stating the Transferring Class’s intent to sell the Transferred Interest pursuant to a bona fide cash

offer. The Transfer Notice shall (i) specify the purchase price for and other material terms with respect to the sale of the Transferred Interest, (ii) identify the proposed purchaser of the Transferred Interest, (iii) specify the date scheduled for the transfer (which date shall not be earlier than one hundred twenty (120) days from the date the Transfer Notice is delivered), (iv) contain a statement that the offer has been accepted pending compliance with the right of first refusal set forth herein and receipt of required regulatory and other approvals, and (v) shall have attached thereto a copy of the written offer containing all of the terms and conditions on which the Transferred Interest is to be sold.

(c) The Non-Transferring Class shall have the exclusive option to purchase all (but not less than all) of the Transferred Interest on terms and conditions substantially the same in all material respects as, and at the same price, set forth in the written offer delivered pursuant to subsection (b) above. The Non-Transferring Class shall notify the Company and the Transferring Class of its intention to exercise or not to exercise the right of first refusal hereunder within forty-five (45) days of receipt by the Non-Transferring Class of a Transfer Notice.

(d) In the event that the Non-Transferring Class shall have duly elected to purchase the Transferred Interest (the “Electing Class”), the Electing Class and the Transferring Class shall diligently pursue obtaining all regulatory approvals and use best commercially reasonable efforts to consummate the closing of the purchase of the Transferred Interest as soon as practicable and in any event within one year from receipt of the Transfer Notice; provided that, if such closing does not occur within such one-year period due to the failure to obtain any required regulatory approvals, the Electing Class’s right to close such sale may be extended at the option of the Electing Class, until such regulatory approvals are obtained, but in no event for a period of greater than one additional year. In the event of a failure of the Non-Transferring Class to elect to purchase all of the Transferred Interest or a failure of the Electing Class to consummate such purchase in accordance herewith, the Transferring Class will be free, at any time within 120 days from the date the Non-Transferring Class elect not to exercise their purchase rights hereunder or from the date the time periods specified in this section for such election have expired, subject, in each case, to extension for up to an additional eight (8) months to the extent necessary to achieve any required regulatory approvals, to consummate the sale of the Transferred Interest to the purchaser at a price and upon terms and conditions no more favorable to the purchaser than those specified in the Transfer Notice; provided that the purchaser shall assume all of the liabilities and obligations of the Transferring Class under this Agreement by a binding written instrument which shall be enforceable by the Company and the Non-Transferring Class.

(e) A Transferring Class shall not be relieved of any of its obligations arising under this Agreement prior to such Transfer. The Transferring Class and any transferee shall execute such documents as the Non-Transferring Class shall reasonably request to evidence the Transfer and the assumption and continuing obligations under this Agreement.

(f) At the request of a Member, the Company will provide prospective purchasers of such Member’s Class Membership Interest with reasonable access to financial, operating and other information of the Company, subject to customary confidentiality agreements which shall

include provisions to protect competitively sensitive information. Each Member shall cooperate with, and shall not oppose, the closing of any Transfer which is in Compliance with this Section 10.6.

10.7 PERMITTED TRANSFERS AMONG WHOLLY-OWNED AFFILIATES . Notwithstanding anything contained herein to the contrary, any Member may Transfer all or any portion of its Membership Interest to a Wholly-Owned Affiliate of such Member, and such Transfer shall be deemed automatically approved by the Board of Directors; provided, however , that such Transfer otherwise meets the conditions and requirements of Sections 10.2 and 10.3.

10.8 TRANSFERS OF EQUITY INTERESTS IN A MEMBER . A sale, assignment, transfer or hypothecation of any direct or indirect equity interest in a Member by a Parent of such Member shall be deemed to be a Transfer by that Member of its Membership Interest in the Company for purposes of this Article 10 and shall not be permitted except in accordance with the terms and conditions set forth in this Article 10. Chevron and Phillips 66 shall comply with this Section 10.8 and shall take all necessary action to cause their Affiliates to comply with this Section 10.8. For the purpose of clarification of this Section 10.8, a Change of Control of the Ultimate Parent of any Member shall not be considered a Transfer of such Member’s Membership Interest or a Transfer of the equity interest in such Member pursuant to this and the foregoing sections of this Article 10; provided, that a Change of Control of Phillips 66 shall be subject to the provisions of Section 10.10 hereof.

10.9 CREDIT RATINGS BUY-OUT OPTION .

(a) Notwithstanding anything to the contrary in this Agreement, if any of the Members of one class or the Ultimate Parent of any of the Members of one class (the Member(s) of such class, the “Downgraded Members”) concurrently have both an S&P Triggering Credit Rating and a Moody’s Triggering Credit Rating (a “Credit Rating Event”), the Member(s) of the other class (the “Buy-Out Members”) may, by delivering written notice (a “Valuation Notice”) to the Downgraded Members following such Credit Rating Event in accordance with Section 10.9(b) below, require that the Members determine the Fair Market Value of the Membership Interests of the Downgraded Members in accordance with Section 10.9(c) below. The Downgraded Members each agree to give written notice to the Buy-Out Members within five (5) days of any Credit Rating Event.

(b) Upon the first occurrence of a Credit Rating Event for the Downgraded Members (an “Initial Credit Rating Event”), the Buy-Out Members shall not be entitled to deliver a Valuation Notice unless a Downgraded Member or its Ultimate Parent has had either an S&P Triggering Credit Rating or a Moody’s Triggering Credit Rating continuously for three hundred sixty-five (365) days from the beginning of the Initial Credit Rating Event (the “Initial Cure Period”). If each Downgraded Member and each Downgraded Member’s Ultimate Parent no longer has an S&P Triggering Credit Rating and no longer has a Moody’s Triggering Credit Rating after an Initial Credit Rating Event (a “Cure Event”), and another Credit Rating Event occurs with respect to any such Downgraded Member or any such Downgraded Member’s Ultimate Parent within twenty-four (24) months following the date of the most recent Cure Event

(a “Subsequent Credit Rating Event”), the Buy-Out Members shall not be entitled to deliver a Valuation Notice hereunder unless a Downgraded Member or its Ultimate Parent has had either an S&P Triggering Credit Rating or a Moody’s Triggering Credit Rating continuously for the following number of days following such Subsequent Credit Rating Event: (i) three hundred sixty-five (365) days minus the sum of (ii) the number of days between the beginning of an Initial Credit Rating Event and the Cure Event associated with such Initial Credit Rating Event and (iii) the number of days between the beginning of each other Subsequent Credit Rating Event and the Cure Event associated with each such other Subsequent Credit Rating Event (a “Subsequent Cure Period”); provided, however, that if at least twenty-four (24) months elapse after a Cure Event and before the next Credit Rating Event, such Credit Rating Event will be deemed to be an Initial Credit Rating Event hereunder; provided further, however, that if no Cure Event occurs during the Initial Cure Period (including the Initial Cure Period following a Credit Rating Event deemed an Initial Credit Rating Event hereunder) or during any Subsequent Cure Period, as applicable, with respect to a Credit Rating Event (such Credit Rating Event, a “Uncured Credit Rating Event”), the Buy-Out Members may deliver a Valuation Notice at any time within ninety (90) days following the expiration of any such period. For the avoidance of doubt, after the occurrence of an Uncured Credit Rating Event for the Downgraded Members, the Buy-Out Members may deliver a Valuation Notice at any time within ninety (90) days following the occurrence of a Subsequent Credit Rating Event with respect to such Downgraded Members (other than (x) during the time the Fair Market Value is being determined pursuant to Section 10.9(c), (y) during the Buy-Out Interest Option Period or (z) after the exercise of the Buy-Out Interest Option, unless such exercise is terminated by the Purchaser (as defined below) in accordance with Section 10.11(a), in each case of (x), (y) and (z), due to a previously delivered Valuation Notice by the Buy-Out Members); provided, however, that if at least twenty-four (24) months elapse after the Cure Event associated with the Uncured Credit Rating Event and before the next Credit Rating Event, such Credit Rating Event will be deemed to be an Initial Credit Rating Event hereunder.

(i) the amount agreed between the Class C Member and Phillips 66 after negotiating in good faith for no more than thirty (30) days after notice having been served requiring that the Members determine the Fair Market Value of the relevant Membership Interests in accordance with Sections 10.9(a) and 10.9(b) or Section 10.10(a) hereof, as the case may be; or

(ii) in the event that the Class C Member and Phillips 66 are unable to agree on the Fair Market Value of the relevant Membership Interests within such period, each shall appoint, within ten (10) days following the expiration of the thirty (30) day period referred to in Section 10.9(c)(i), a nationally recognized investment bank to act for the appointing party to determine the fair market value of the relevant Membership Interests as promptly as possible and in any event within thirty (30) days following the expiration of the above mentioned ten (10) day period. In the event the Class C Member or Phillips 66 fails to timely appoint

such an investment bank, the party that has timely appointed such an investment bank shall be entitled, at such party’s option, either (A) to have the investment bank it appointed determine the fair market value of the relevant Membership Interests, which determination shall be final and binding on the Members or (B) to petition the Delaware Court of Chancery to have the Chancellor of such court (or his designee) promptly appoint a second such investment bank. Each investment bank appointed pursuant to this Section 10.9(c) shall be instructed to determine the fair market value of the relevant Membership Interests by determining the value of fifty percent (50%) of the aggregate Membership Interests of the Class C Member and Class P Members, without a control premium and with valuation premised on a sale in an arm’s length transaction where neither the seller nor the buyer is under compulsion to consummate the sale. If the lower of the two values determined by the two investment banks is no more than 10% lower than the greater value, then the Fair Market Value of the relevant Membership Interests shall be the average of the two values. If the lower value is more than 10% lower than the greater value, then the Class C Member and Phillips 66 shall direct the two (2) investment banks to promptly (and not later than ten (10) days following the delivery of the last of the two (2) valuations prepared by such investment banks) appoint a third nationally recognized investment bank to determine the fair market value of the relevant Membership Interests. In the event the two (2) investment banks fail to timely appoint such a third investment bank, either the Class C Member or Phillips 66 shall be entitled to petition the Delaware Court of Chancery to have the Chancellor of such court (or his designee) promptly appoint a third such investment bank. If the value determined by such third investment bank is within the range of the first two values, then the fair market value of the relevant Membership Interests as determined by such third investment bank shall be the Fair Market Value of the relevant Membership Interests. If the value determined by such third investment bank is outside the range of the first two values, then the Fair Market Value of the relevant Membership Interests shall be the median of the three values. Each of the Class C Member and Phillips 66 shall pay the costs and fees for the investment bank it appoints and the costs and fees of the third investment bank, if any, shall be shared equally between the Class C Member and Phillips 66.

(iii) The above-described determination of Fair Market Value of the relevant Membership Interests of the Company will be final and binding on the Members.

(d) The Buy-Out Members shall have the option, but not the obligation (the “Buy-Out Interest Option”), to purchase from the Downgraded Members, and to require each Downgraded Member to sell to the Buy-Out Members, all (but not less than all) of each Downgraded Member’s Membership Interest (the “Buy-Out Interests”) for a purchase price (the “Buy-Out Purchase Price”) equal to the Fair Market Value of each such Downgraded Member’s Membership Interest (as finally determined pursuant to Section 10.9(c)). The Buy-Out Interest Option must be exercised with respect to all of the Downgraded Members. The Buy-Out Interest

Option shall be exercisable by the Buy-Out Members, in their sole discretion and at their sole option, by delivering written notice (which written notice shall be irrevocable except as provided in Section 10.11(a)) to each of the Downgraded Members at any time during the period commencing on the date on which the Fair Market Value of the Membership Interests of the Downgraded Members is finally determined pursuant to Section 10.9(c) and ending sixty (60) days after such date (the “Buy-Out Interest Option Period”). Such written notice shall obligate each Downgraded Member to sell and the Buy-Out Members to purchase the Buy-Out Interests as herein provided. The failure of the Buy-Out Members to deliver the written notice during a given Buy-Out Interest Option Period (or the delivery of a written notice by the Buy-Out Members declining to exercise the Buy-Out Interest Option) shall result in the termination of the Buy-Out Interest Option with respect to such Buy-Out Interest Option Period, and any subsequent exercise of the Buy-Out Interest Option by the Buy-Out Members after such termination shall require the delivery of a new Valuation Notice to the Downgraded Members with respect to a different Credit Rating Event in accordance with Section 10.9(b).

(e) Notwithstanding anything to the contrary herein, no Member shall be entitled to deliver a Valuation Notice or exercise a Buy-Out Interest Option if (i) a Credit Rating Event has occurred with respect to (A) such Member, (B) any Member of the same class as such Member, (C) the Ultimate Parent of such Member or (D) the Ultimate Parent of any Member of the same class as such Member and (ii) no Cure Event has occurred with respect to such Credit Rating Event.

(f) The Buy-Out Members shall be entitled, in the Buy-Out Members’ sole discretion, to assign all or a portion of its rights and obligations to the Buy-Out Interest Option to any of their Affiliates and to any third party. Such assignment may be made by the Buy-Out Members at any time prior to the consummation of the Transfer of the Buy-Out Interests hereunder.

10.10 BUY-OUT OPTION UPON CHANGE OF CONTROL .

(a) If there is a Change of Control of Phillips 66, within ten (10) days of such Change of Control Phillips 66 shall deliver a written notice (a “Change of Control Notice”) to the Class C Member. Notwithstanding anything to the contrary in this Agreement, if there occurs a Change of Control of Phillips 66, the Class C Member may, by delivering written notice to Phillips 66 at any time after the occurrence of the Change of Control of Phillips 66 but no later than fifteen (15) days after receipt of the Change of Control Notice, require that the Members determine the Fair Market Value of the aggregate Membership Interests of the Class P Members in accordance with Section 10.9(c) above.

(b) If the Class C Member delivers its written notice in accordance with Section 10.10(a), the Class C Member shall have the option, but not the obligation (the “Change of Control Option”), to purchase such aggregate Membership Interests, and to require the sale of such aggregate Membership Interests by the Class P Members (the “Change of Control Interests”), for a purchase price (the “Change of Control Purchase Price”) equal to the Fair Market Value of the Change of Control Interests (as finally determined pursuant to Section

10.9(c)). The Change of Control Option must be exercised with respect to all of the Class P Members. The Change of Control Option shall be exercisable by the Class C Member, in its sole discretion and at its sole option, by delivering written notice (which written notice shall be irrevocable except as provided in Section 10.11(a)) to each of the Class P Members at any time during the period commencing on the date on which the Fair Market Value of the Membership Interests of the Class P Members is finally determined pursuant to Section 10.9(c) and ending sixty (60) days after such date (the “Change of Control Option Period”). Such written notice shall obligate each Class P Member to sell and the Class C Member to purchase the Change of Control Interests as herein provided. The failure of the Class C Member to deliver the written notice during a given Change of Control Option Period (or the delivery of a written notice by the Class C Member declining to exercise the Change of Control Option) shall result in the termination of the Change of Control Option with respect to such Change of Control Option Period.

(c) The Class C Member shall be entitled, in the Class C Member’s sole discretion, to assign all or a portion of its right and obligations to the Change of Control Option to any of its Affiliates and to any third party. Such assignment may be made by the Class C Member at any time prior to the consummation of the Transfer of the Change of Control Interests hereunder.

10.11 CLOSING OF BUY-OUT OPTION EXERCISES.

(a) The closing of the sale and purchase of Membership Interests pursuant to the Change of Control Option or pursuant to the Buy-Out Interest Option shall take place at the offices of the Purchaser’s counsel ninety (90) days after, as applicable, (i) the date of the exercise of the Buy-Out Interest Option or (ii) the date of the exercise of the Change of Control Option; provided, that the closing shall in no event occur earlier than five (5) days after receipt of all approvals required from, and expiration of all waiting periods (including waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) imposed by, any governmental authorities in connection with the purchase and sale. At closing, (w) each Member selling its Membership Interest (the “Seller Member”) shall represent and warrant to each Member (or its assignee(s)) purchasing such Membership Interest (the “Purchaser”) that the Purchaser is receiving good and marketable legal and beneficial title to such Seller Member’s Membership Interest, free and clear of any liens (other than restrictions imposed by the Securities Act of 1933, as amended, applicable state securities laws, and this Agreement), which representations and warranties shall be the sole representations and warranties required of such Seller Member, (x) the Purchaser shall assume, and cause the release of each Seller Member from, each on-going obligation of such Seller Member under this Agreement and in respect of the Company and its business, including all obligations under guarantees issued by such Seller Member, in each case arising after the closing of the sale and purchase of such Membership Interest, (y) each Seller Member shall deliver resignations from those Voting Directors the Seller Member has elected to the Board of Directors, and (z) the Purchaser shall deliver to each of the Seller Member(s) an amount equal to either the applicable Buy-Out Purchase Price (in the case of the purchase of the Membership Interest pursuant to the Buy-Out Interest Option) or the applicable Change of Control Purchase Price (in the case of the purchase of the Membership Interest pursuant to the Change of Control Option) in immediately available funds; provided that

nothing in the foregoing clause (x) shall relieve any Seller Member of any of its obligations pursuant to the Contribution Agreement. Notwithstanding anything to the contrary in this Section 10.11, if a governmental authority whose approval is required to consummate the purchase of the Membership Interest fails to approve such transaction or imposes a condition on its approval that, in the sole discretion of the Purchaser, would make the purchase by it of the Membership Interest pursuant to the Buy-Out Interest Option or pursuant to the Change of Control Option impractical or not otherwise in the best interests of the Purchaser, then the Purchaser may terminate the exercise of the applicable option and the purchase of the Membership Interest by and upon delivery of written notice to the Seller Member and, upon such termination, no Member shall have any further obligation under this Section 10.11 with respect thereto and each such Seller Member shall continue to own its Membership Interest.

(b) The Members shall take all necessary actions required to give effect to the provisions of Section 10.9, Section 10.10 and Section 10.11, including (i) the passing of such Member and Board of Directors resolutions of the Company as may be reasonably necessary to facilitate the relevant transaction, and (ii) the filing of all necessary notices to and requests for consent of any governmental authorities, and the Members shall equally share any filing fees required in connection therewith.

(c) If requested in writing by the Purchaser, the Company and the Members hereby agree to cooperate with Purchaser to structure, in a manner reasonably requested by Purchaser (with the Purchaser to bear the incremental cost, if any, of such request), the Transfer pursuant to the exercise of the Buy-Out Interest Option or the Change of Control Option so as not to effect a termination of the Company under section 708 of the Code.

ARTICLE 11

COMPETITION

11.1 GENERAL . The Members expect that the Company shall be the primary vehicle by which each of the Members (together with their Affiliates) engage in the Chemicals Business. If a majority in interest of the Members of one class (the “Non-Competing Class”) concludes in good faith that the Company is no longer the primary vehicle by which the Members of the other class (together with its Affiliates) (the “Competing Class”) is engaged in the Chemicals Business, then the Non-Competing Class shall have the right to send written notice of such good faith conclusion (“Conflict Notice”) to the Competing Class. Upon receipt of the Conflict Notice, the Competing Class shall enter into good faith negotiations with the Non-Competing Class to resolve any or all substantial conflicts of interest resulting from the ownership of businesses competing with the businesses of the Company.

11.2 RESOLUTION OF COMPETITIVE CONFLICTS .

(a) In the event that:

(i) A Non-Competing Class exercises its right to require a Competing Class to engage in good faith negotiations pursuant to Section 11.1;

(ii) The Non-Competing Class and Competing Class are unable to resolve the conflicts of interest within 150 days of the delivery of the Conflict Notice; and

(iii) The value (in the opinion of a nationally recognized investment bank selected by the Board of Directors) of the Competing Class’s (including its Affiliates’) interests in businesses competing with the businesses of the Company exceeds 50% of the enterprise value of the Company; provided that if the Board of Directors does not select such a nationally recognized investment bank within 30 days of the end of the 150 day period set forth in (ii) above, such value shall be determined by nationally recognized investment banks selected by the process set forth in Section 10.9(c)(ii), mutatis mutandis (including, if necessary, the appointment of a third investment bank to determine such value, if necessary, and without regard to the sentence beginning “Each investment bank…”);

then, in such case, the Non-Competing Class shall have the right, within 30 days from the later of (x) the expiration of the period in (ii) above or (y) the determination in (iii) above, to state a single cash price at which it is prepared to purchase the Class Membership Interest of the Competing Class, which will constitute a binding offer to purchase (the “Initial Offer”). In the event of an Initial Offer, the Competing Class shall have 60 days to decide either to accept the Initial Offer or to make a counter-offer by stating a single cash price, which is at least 5% higher than the Initial Offer, at which it is prepared to purchase the Class Membership Interest of the Non-Competing Class (a “Counter-Offer”). In the event of a Counter-Offer, the Non-Competing Class shall have 30 days to decide either to accept the Counter-Offer or to make another offer by stating a single cash price, which is at least 5% higher than the Counter-Offer, at which it is prepared to purchase the Class Membership Interest of the Competing Class (a “Subsequent Offer”). In the event of a Subsequent Offer by the Non-Competing Class, the Competing Class shall have 30 days to decide either to accept the Subsequent Offer or to make another counter- offer by stating a single cash price, which is at least 5% higher than the Subsequent Offer, at which it is prepared to purchase the Class Membership Interest of the Non-Competing Class. The offering process described in this paragraph shall continue in this manner until a price is reached at which either the Competing Class or the Non-Competing Class is willing to sell its Class Membership Interest to the other class. If such a price is reached, the closing of the sale and purchase of the Membership Interests pursuant to this Article 11 shall be conducted in accordance with the terms of Sections 10.11(a), (b) and (c), mutatis mutandis . Notwithstanding anything to the contrary in the foregoing, a Member may also sell its Class Membership Interest pursuant to the right of first refusal provisions set forth in Section 10.6.

(b) In the event that a Non-Competing Class has concluded in good faith that the Company is no longer the primary vehicle by which a Competing Class is engaged in the Chemicals Business in accordance with Section 11.1, and:

(i) a sale pursuant to subsection (a) above is not concluded (whether or not the condition expressed in subsection (a)(iii) above is satisfied); and

(ii) the Competing Class and Non-Competing Class have not been able to resolve, pursuant to Section 11.1 above, all substantial conflicts of interest resulting from the ownership by the Competing Class of a substantial business competing with the businesses of the Company;

then either the Competing Class or the Non-Competing Class may require the other class from time to time to enter into good faith negotiations to cause the Company (and/or the Members) to adopt such reasonable, mutually acceptable provisions as would mitigate the potential adverse consequences of the conflicts of interests on the continuing businesses of the Company. Such provisions could include, for example, restrictions on the dissemination and use of confidential information, greater delegation of authority to management of the Company, or modification of distribution requirements or the non-involvement of the Competing Class in business decisions of the Company potentially affecting such competing businesses.

ARTICLE 12

TERM AND DISSOLUTION

12.1 TERM . Except as provided in Section 12.2 hereof, the existence of the Company shall be perpetual.

12.2 DISSOLUTION . The Company shall be dissolved and its affairs wound up upon the first to occur of the following:

(a) The approval of dissolution by the Board of Directors; or

(b) The bankruptcy or dissolution of either all of the Class C Members or all of the Class P Members.

12.3 LIQUIDATION .

(a) Upon the occurrence of an event of dissolution as defined in the Act or in Section 12.2 of this Agreement, the Company shall cease to engage in any further business, except to the extent necessary to perform existing obligations, and shall wind up its affairs and liquidate its assets. The Board of Directors, or if there be no Directors then in office the Members, shall appoint a liquidator (who may, but need not, be a Member) who shall have sole authority and

control over the winding up and liquidation of the Company’s business and affairs and shall diligently pursue the winding up and liquidation of the Company. As soon as practicable after his appointment, the liquidator shall cause to be filed a statement of intent to dissolve as required by section 18-203 of the Act.

(b) During the course of liquidation, the Members shall continue to share profits and losses as provided in Section 9.1 of this Agreement, but there shall be no cash distributions to the Members until the Distribution Date (as defined in Section 12.4).

(c) A Member shall not have any obligation to contribute any amount to the Company in the event of a negative balance in its Capital Account.

12.4 LIABILITIES . Liquidation shall continue until the Company’s affairs are in such condition that there can be a final accounting, showing that all fixed or liquidated obligations and liabilities of the Company are satisfied or can be adequately provided for under this Agreement. The assumption or guarantee in good faith by one or more financially responsible persons shall be deemed to be an adequate means of providing for such obligations and liabilities. When the liquidator has determined that there can be a final accounting, the liquidator shall establish a date (not to be later than the end of the taxable year of the liquidation, i.e., the time at which the Company ceases to be a going concern as provided in section 1.704-1(b)(2)(ii)(g) of the Income Tax Regulations, or, if later, ninety (90) days after the date of such liquidation) for the distribution of the proceeds of liquidation of the Company (the “Distribution Date”). The net proceeds of liquidation of the Company shall be distributed to the Members as provided in Section 12.6 hereof not later than the Distribution Date.

12.5 SETTLING OF ACCOUNTS . Subject to section 18-804 of the Act, upon the dissolution and liquidation of the Company, the proceeds of liquidation shall be applied as follows: (a) first, to pay all expenses of liquidation and winding up; (b) second, to pay all debts, obligations and liabilities of the Company, in the order of priority as provided by law, other than debts owing to the Members or on account of Members’ contributions; (c) third, to pay all debts of the Company owing to a Member; and (d) to establish reasonable reserves for any remaining contingent or unforeseen liabilities of the Company not otherwise provided for, which reserves shall be maintained by the liquidator on behalf of the Company in a regular interest-bearing trust account for a reasonable period of time as determined by the liquidator. If any excess funds remain in such reserves at the end of such reasonable time, then such remaining funds shall be distributed by the Company to the Members pursuant to Section 12.6 hereof.

12.6 DISTRIBUTION OF PROCEEDS .

(a) Subject to section 18-804 of the Act, upon final liquidation of the Company but not later than the Distribution Date, the net proceeds of liquidation remaining following the settling of accounts in accordance with Section 12.5 hereof shall be distributed to the Members in the following manner: to the Members in proportion to and up to the balance of their respective positive Capital Accounts.

(b) The balance of Members’ Capital Accounts immediately prior to distributions under Section 12.6(a) shall be determined after all adjustments to such Capital Accounts for the taxable year of the Company during which the liquidation occurs as are required by this Agreement and Income Tax Regulations section 1.704-1(b), such adjustments to be made within the time specified in such Income Tax Regulations.

12.7 CERTIFICATE OF CANCELLATION . Upon dissolution and liquidation of the Company, the liquidator shall cause to be executed and filed with the Secretary of State of the State of Delaware, a certificate of cancellation in accordance with section 18-203 of the Act.

ARTICLE 13

INDEMNIFICATION

13.1 INDEMNIFICATION: PROCEEDING OTHER THAN BY COMPANY . The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the Company, by reason of the fact that he is or was a Director, Member or officer of the Company (and may similarly indemnify employees or agents of the Company), or is or was serving at the request of the Company as a manager, member, director, officer, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful.

13.2 INDEMNIFICATION: PROCEEDING BY COMPANY .

(a) The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that he is or was an officer of the Company (and may similarly indemnify employees or agents of the Company), or is or was serving at the request of the Company as a manager, member, director, officer, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company.

(b) The Company will indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that he is or was a Director of the Company, or is or was a Director of the Company serving at the request of the Company as a manager, member, director, officer, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith in accordance with Section 4.8 hereof.

(c) With respect to indemnification pursuant to subsection (a) or (b) above, such indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the Company or for amounts paid in settlement to the Company, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

13.3 MANDATORY ADVANCEMENT OF EXPENSES . The expenses of Directors, Members and officers incurred in defending a civil or criminal action, suit or proceeding must be paid by the Company as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the Director, Member or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the Company. The provisions of this Section 13.3 do not affect any rights to advancement of expenses to which personnel of the Company other than Directors, Members or officers may be entitled under any contract or otherwise.

13.4 EFFECT AND CONTINUATION . The indemnification and advancement of expenses authorized in or ordered by a court pursuant to Section 13.1 to Section 13.3, inclusive:

(a) Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the Certificate or any limited liability company agreement, vote of Members or disinterested Directors, if any, or otherwise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court pursuant to Section 13.2 or for the advancement of expenses made pursuant to Section 13.3, may not be made to or on behalf of any Member, Director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action.

(b) Continues for a person who has ceased to be a Member, Director, officer, employee or agent and inures to the benefit of his heirs, executors and administrators.

13.5 INSURANCE AND OTHER FINANCIAL ARRANGEMENTS .

(a) The Board of Directors may cause the Company to purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a Member, Director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a manager, Member, director, officer, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him and liability and expenses incurred by him in his capacity as a Director, member, director, officer, employee or agent, or arising out of his status as such, whether or not the Company has the authority to indemnify him against such liability and expenses.

(b) The other financial arrangements made by the Company pursuant to Section 13.5(a) may include:

(i) The creation of a trust fund;

(ii) The establishment of a program of self-insurance;

(iii) The securing of its obligation of indemnification by granting a security interest or other lien on any assets of the Company; or

(iv) The establishment of a letter of credit, guaranty or surety.

No financial arrangement made pursuant to this Section 13.5(b) may provide protection for a person adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable for intentional misconduct, fraud or a knowing violation of law, except with respect to the advancement of expenses or indemnification ordered by a court.

(i) The decision of the Company as to the propriety of the terms and conditions of any insurance or other financial arrangement made pursuant to this Section 13.5 and the choice of the person to provide the insurance or other financial arrangement is conclusive; and

(ii) The insurance or other financial arrangement:

(A) Is not void or voidable; and

(B) Does not subject any Director or Member approving it to personal liability for his action, even if a Director or Member approving the insurance or other financial arrangement is a beneficiary of the insurance or other financial arrangement.

13.6 NOTICE OF INDEMNIFICATION AND ADVANCEMENT . Any indemnification of, or advancement of expenses to, a Director, Member or officer in accordance with this Article 13, if arising out of a proceeding by or on behalf of the Company, shall be reported in writing to the Members with or before the notice of the next Members’ meeting.

13.7 REPEAL OR MODIFICATION . Any repeal or modification of this Article 13 by the Members of the Company shall not adversely affect any right of a Director, Member or officer of the Company existing hereunder at the time of such repeal or modification.

ARTICLE 14

INSPECTION OF COMPANY RECORDS; ANNUAL AND OTHER REPORTS

14.1 RECORDS TO BE KEPT . The Company shall keep at its registered office:

(a) A current list of the full name and last known business, residence or mailing address of each Member and Director separately identifying the Members in alphabetical order and the Directors, if any, in alphabetical order;

(b) A copy of the filed Certificate and all amendments thereto, together with executed copies of any powers of attorney pursuant to which any document has been executed;

(d) Copies of the Company’s federal income tax returns and reports, if any, for, at least, the three most recent years; and

(e) Copies of any financial statements of the Company for, at least, the three most recent years.

14.2 ACCESS TO COMPANY INFORMATION . The accounting books and records, the record of Members, and minutes of proceedings of the Members of the Company, including, without limitation such information necessary to conduct periodic audits of various kinds (e.g. EHS, financial), shall be open to inspection upon the reasonable request of any Member (or of the Initial Phillips Member, upon the execution by the Initial Phillips Member of a customary confidentiality agreement acceptable to the Class C Member, acting reasonably, and solely to the extent relating to matters existing or arising prior to the Spin-off ) at any reasonable time during usual business hours, for a purpose reasonably related to such Person’s interest as a Member.

Such inspection may be made in person or by agent or attorney, and the right of inspection includes the right to copy and make extracts. In addition, the Members (or the Initial Phillips Member, upon the execution by the Initial Phillips Member of a customary confidentiality agreement acceptable to the Class C Member, acting reasonably, and solely to the extent relating to matters existing or arising prior to the Spin-off ) shall have reasonable access to the Officers of the Company in order to discuss the Company’s business.

14.3 ANNUAL AND QUARTERLY REPORTS .

(a) The Board of Directors shall within 45 days after the end of the first three Fiscal Quarters and within 90 days after the close of a Fiscal Year, deliver or mail to the Members, the quarterly and annual, respectively, financial statements of the Company.

(b) The income statements and balance sheets referred to in this Section 14.3 shall be accompanied by the report thereon, if any, of any independent accountants engaged by the Company or the certificate of an authorized officer of the Company that such financial statements were prepared without audit from the books and records of the Company.

(c) The annual financial statements of the Company shall be audited by independent accountants, and independent accountants shall participate in the preparation of quarterly financial statements of the Company, in each case consistent with the rules of the Securities and Exchange Commission relating to annual and quarterly financial statements of publicly traded companies.

ARTICLE 15

DEFAULTS AND REMEDIES

15.1 DEFAULTS . If a Member materially defaults in the performance of its obligations under this Agreement, and such default is not cured within ten (10) days after notice of such default is given by a Director to the defaulting Member for a default that can be cured by the payment of money, or within thirty (30) days after notice of such default is given by a Director to the defaulting Member for any other default, then the non-defaulting Members shall have the rights and remedies described in Section 15.2 hereunder in respect of the default.

15.2 REMEDIES . If a Member fails to perform its obligations under this Agreement, any other Member shall have, in addition to any rights and remedies provided hereunder, all such rights and remedies as are provided at law or in equity.

15.3 NO WAIVER . No consent or waiver, express or implied, by a Member to or of any breach or default by another Member in the performance by such other Member of its obligations under this Agreement shall constitute a consent to or waiver of any similar breach or default by any other Member. Failure by a Member to complain of any act or omission to act by another Member, or to declare such other Member in default, irrespective of how long such

failure continues, shall not constitute a waiver by such Member of its rights under this Agreement. Neither the failure nor any delay on the part of any Member to exercise any right or remedy under this Agreement shall preclude any other or further exercise of the same or of any other right or remedy.

ARTICLE 16

MISCELLANEOUS

16.1 AMENDMENTS .

(a) Subject to any contrary provisions of the Act, this Agreement may be amended only by the affirmative vote of Members owning all of the Class Membership Interest of both Class C and Class P. Any such amendment shall be in writing, duly executed by all the Members.

(b) Subject to any contrary provisions of the Act, the Certificate may only be amended by the affirmative vote of Members owning one hundred percent (100%) of all of the Percentage Interests entitled to vote. Any such amendment shall be in writing, and shall be executed and filed in accordance with section 18-202 of the Act.

16.2 REPRESENTATION OF SHARES OF COMPANIES OR INTERESTS IN OTHER ENTITIES . The chief executive officer, any vice president or the secretary or any assistant secretary of this Company is authorized to vote, represent and exercise on behalf of this Company all rights incident to any and all shares of any other company or companies, or any interests in any other entity, standing in the name of this Company. The authority herein granted to said officers to vote or represent on behalf of this Company any and all shares held by this Company in any other company or companies, or any interests in any other entity, may be exercised either by such officers in person or by any other person authorized so to do by proxy or power of attorney duly executed by said officers.

16.3 SEAL . The Members or Board of Directors may adopt a seal of the Company in such form as the Members or the Board of Directors (as the case may be) shall decide.

16.4 ACTIONS BY CLASS P MEMBERS AND CLASS C MEMBERS . Phillips 66 shall ensure that each of the Class P Members, and Chevron shall ensure that each of the Class C Members, takes all actions necessary to be taken by such Member in order to fulfill the obligations of such Member, or of Phillips 66 or Chevron, as the case may be, under this Agreement.

16.5 ENTIRE AGREEMENT . This Agreement, including the exhibits and schedules hereto, together with the Contribution Agreement, the Contribution Assumption Agreement, the Consent Agreement, and all other agreements, instruments, certificates and other documents entered into or delivered by the parties in connection herewith or therewith, constitutes the entire agreement among the Members with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, representations, and understandings of the parties. No party

hereto shall be liable or bound to the other in any manner by any warranties, representations or covenants with respect to the subject matter hereof except as specifically set forth herein or therein.

16.6 THIRD PARTIES . Nothing in this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto, and their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as provided in Section 14.2 and that the provisions of Article 13 are for the benefit of the Persons to be indemnified by the Company.

16.7 GOVERNING LAW; JURISDICTION AND FORUM; WAIVER OF JURY TRIAL .

(a) This Agreement shall be governed by and construed under the substantive laws of the State of Delaware, without regard to Delaware choice of law provisions.

(b) Each party hereto irrevocably submits to the jurisdiction of any Delaware state court or any federal court sitting in the State of Delaware in any action arising out of or relating to this Agreement, and hereby irrevocably agrees that all claims in respect of such action may be heard and determined in such Delaware state or federal court. Each party hereto hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. The parties hereto further agree, to the extent permitted by law, that final and unappealable judgment against any of them in any action or proceeding contemplated above shall be conclusive and may be enforced in any other jurisdiction within or outside the United States by suit on the judgment, a certified copy of which shall be conclusive evidence of the fact and amount of such judgment.

(c) To the extent that any party hereto has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, each party hereto hereby irrevocably waives such immunity in respect of its obligations with respect to this Agreement.

(d) Each party hereto waives, to the fullest extent permitted by applicable laws, any right it may have to a trial by jury in respect of any action, suit or proceeding arising out of or relating to this Agreement. Each party hereto certifies that it has been induced to enter into this Agreement by, among other things, the mutual waivers and certifications set forth above in this Section 16.7.

16.8 COUNTERPARTS . This Agreement may be executed in two or more counterparts, including through electronically exchanged signature pages (e.g., emailed PDFs or facsimile transmission), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument, and shall become effective when there exist copies hereof which, when taken together, bear the authorized signatures of each of the parties hereto. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

16.9 TITLES AND SUBTITLES; FORM OF PRONOUNS; CONSTRUCTION AND DEFINITIONS . The titles of the sections and paragraphs of this Agreement are for convenience only and are not to be considered in construing this Agreement. All pronouns used in this Agreement shall be deemed to include masculine, feminine and neuter forms, the singular number includes the plural and the plural number includes the singular. Unless otherwise specified, references to Sections or Articles are to the Sections or Articles in this Agreement. Unless the context otherwise requires, the term “including” shall mean “including, without limitation”.

16.10 DELAWARE LIMITED LIABILITY COMPANY ACT PREVAILS . Unless the context otherwise requires, the general provisions, rules of construction and definitions contained in the Act and the Delaware General Corporation Law shall govern the construction of this Agreement; provided, however , that in the event of any inconsistency between such laws, the provisions of the Act shall prevail.

16.11 SEVERABILITY . If one or more provisions of this Agreement are held by a proper court to be unenforceable under applicable law, portions of such provisions, or such provisions in their entirety, to the extent necessary and permitted by law, shall be severed herefrom, and the balance of this Agreement shall be enforceable in accordance with its terms.

16.12 EFFECTIVE DATES OF AMENDMENTS . The amendments made by Amendment No. 1 to the Amended & Restated LLC Agreement which is restated in Section 9.2(h) hereof remain effective as of July 1, 2000. All other amendments made by this Agreement are effective as of the date first set forth above.

[ Signatures Follow ]

IN WITNESS WHEREOF, the undersigned hereby execute this Third Amended and Restated Limited Liability Company Agreement as of the date first set forth above.


CHEVRON CORPORATION

By		/s/ Karl H. Endries
Name		Karl H. Endries
Title		Assistant Secretary

CHEVRON U.S.A. INC.

By		/s/ Frank G. Soler
Name		Frank G. Soler
Title		Assistant Secretary

PHILLIPS 66

By		/s/ Frances M. Vallejo
Name		Frances M. Vallejo
Title		Vice President and Treasurer

PHILLIPS 66 COMPANY

By		/s/ Frances M. Vallejo
Name		Frances M. Vallejo
Title		Vice President and Treasurer

WESTTEX 66 PIPELINE COMPANY

By		/s/ Frances M. Vallejo
Name		Frances M. Vallejo
Title		Vice President and Treasurer


PHILLIPS CHEMICAL HOLDINGS COMPANY

By		/s/ Frances M. Vallejo
Name		Frances M. Vallejo
Title		Vice President and Treasurer

Exhibit 10.15

PHILLIPS 66

KEY EMPLOYEE SUPPLEMENTAL RETIREMENT PLAN

The Phillips 66 Key Employee Supplemental Retirement Plan is hereby adopted effective as of the “Effective Time” defined in the Employee Matters Agreement by and between ConocoPhillips and Phillips 66 (the “Effective Time”) and conditioned on the occurrence of the “Distribution” defined in such Employee Matters Agreement (the “Distribution”). See Appendix B for special rules related to the spin-off of Phillips 66 from ConocoPhillips.

PURPOSE

The purpose of the Phillips 66 Key Employee Supplemental Retirement Plan (the “Plan”) is to attract and retain key employees by providing them with supplemental retirement benefits. This Plan is intended to be and shall be administered in part as an unfunded pension excess benefit plan within the meaning of ERISA Sections 3(36) and in part as an unfunded pension benefit plan maintained primarily for a select group of management or highly compensated employees.

SECTION I. Definitions

Terms used in this Plan shall have the same meaning they have in the relevant Title of the Phillips 66 Retirement Plan if they are not otherwise specifically defined herein.

As used in this Plan:

(a)	“Board” shall mean the board of directors of the Company.

(b)	“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

(c)	“Committee” shall mean the Compensation Committee of the Board of Directors of Phillips 66.

(d)	“Company” shall mean Phillips 66 Company, a Delaware corporation, or any successor corporation. The Company is a Subsidiary of Phillips 66.

(e)	“Controlled Group” shall mean Phillips 66 and its Subsidiaries.

(f)	“Employee” shall mean a person who is an active participant or a terminated vested participant in the Retirement Plan.

(g)	“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor statute.

(h)	“Final Average Earnings” shall mean “final average earnings” as that term is defined in Title I of the Phillips 66 Retirement Plan.

(i)

“Incentive Compensation Plan” shall mean the Incentive Compensation Plan of Phillips Petroleum Company, the Annual Incentive Compensation Plan of Phillips Petroleum Company, the Variable Cash Incentive Program of ConocoPhillips, the Phillips 66 Variable Cash Incentive Program, or successor plans or programs, or all, as the context may require.

(j)	“KEDCP” shall mean the Phillips 66 Key Employee Deferred Compensation Plan or a successor plan.

(k)	“Participant” shall mean an Employee who is eligible to receive a benefit from this Plan, whether as an active participant who is currently employed by a member of the Controlled Group or as a terminated vested participant who was previously employed by a member of the Controlled Group.

(l)	“Participating Subsidiary” shall mean a Subsidiary that has adopted one or more plans making Participants eligible for participation in this Plan.

(m)	“Phillips 66” shall mean Phillips 66, a Delaware corporation, or any successor corporation. Phillips 66 is a publicly held corporation and the parent of the Company.

(n)	“Plan” shall mean the Phillips 66 Key Employee Supplemental Retirement Plan, the terms of which are stated in and by this document. The Plan is sponsored and maintained by the Company.

(o)	“Plan Administrator” shall mean the Manager, Benefits of the Company, or such person’s successor.

(p)	“Plan-age 55” shall mean the first of the calendar month after an Employee’s age 55 or, if earlier, the date the applicable title of the Retirement Plan treats the Employee as being age 55.

(q)	“Restricted Stock” shall mean shares of Stock which have certain restrictions attached to the ownership thereof.

(r)	“Retirement Plan” shall mean the Phillips 66 Retirement Plan, which is qualified under Code Section 401(a).

(s)	“Salary” shall mean the monthly equivalent rate of pay for an Employee before adjustments for any before-tax voluntary reductions.

(t)

“Separation from Service” shall mean the date on which the Participant separates from service with the Controlled Group within the meaning of Code section 409A, whether by reason of disability, retirement, or otherwise. In determining Separation from Service, with regard to a bona fide leave of absence that is due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months, where such impairment causes the Employee to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, a 29-month period of absence shall be substituted for the six-month period set forth in section 1.409A-1(h)(1)(i) of the regulations issued under section 409A of the Code, as allowed thereunder. For purposes of this Plan, Separation from Service shall not include a separation caused by death.

(u)	“Stock” means shares of common stock of Phillips 66, par value $.01.

(v)

“Subsidiary” shall mean any corporation or other entity that is treated as a single employer with Phillips 66 under section 414(b) or (c) of the Code. In applying section 1563(a)(1), (2), and (3) of the Code for purposes of determining a controlled group of corporations under section 414(b) of the Code and for purposes of determining trades or businesses (whether or not incorporated) under common control under regulation section 1.414(c)-2 for purposes of section 414(c) of the Code, the language “at least 80%” shall be used without substitution as allowed under regulations pursuant to section 409A of the Code.

(w)	“Title I” shall mean Title I of the Phillips 66 Retirement Plan (Phillips Retirement Income Plan).

(x)	“Title II” shall mean Title II of the Phillips 66 Retirement Plan (Cash Balance Account).

(y)	“Title III” shall mean Title III of the Phillips 66 Retirement Plan (Tosco Pension Plan).

(z)	“Title IV” shall mean Title IV of the Phillips 66 Retirement Plan (Retirement Plan of Conoco).

(aa)

“Total Final Average Earnings” shall mean the sum of: (i) the average of the high 3 consecutive Annual Earnings, (including any increases under Section II(b)(i)(bb), (ee), (ff) and (gg) of this Plan, but excluding Incentive Compensation Plan awards and any increases under Section II(b)(i)(aa), (cc), and (dd) of this Plan), paid or deemed to be paid in the Employee’s final eleven calendar years of employment with the Company or a Participating Subsidiary including the calendar year in which the Employee’s last date of employment with the Company or a Participating Subsidiary occurs; plus (ii) the average of the high 3 Incentive Compensation Plan awards (including any increases under Section II(b)(i)(aa), (cc), or (dd) of this Plan, but excluding any increases under Section II(b)(i)(bb), (ee), (ff) and (gg) of this Plan) paid or deemed to be paid in the Employee’s

final eleven calendar years of employment with the Company or a Participating Subsidiary including the calendar year in which the Employee’s last date of employment with the Company or Participating Subsidiary occurs. Provided, however, in determining Total Final Average Earnings, an Incentive Compensation Plan award (and any increases under the provisions of Section II(b)(i) cited above) shall be taken into consideration only if the Employee to whom such award or increase applies, was at the time of the award or increase, classified in a Phillips 66 salary grade 19 or above job, ConocoPhillips salary grade 19 or above job, or any equivalent salary grade of Phillips Petroleum Company.

(bb)	“Trustee” means the trustee of the grantor trust established for this Plan by the trust agreement between the Company and the trustee, or any successor trustee.

SECTION II. Plan Accrued Benefit .

(a)

An Employee shall be entitled to payments under this Plan based on an accrued benefit with the following components: (i) his Title I-related accrued benefit, (ii) his Title II-related accrued Benefit, (iii) his Title III-related accrued benefit (but only with regard to an Employee who, on or after July 1, 2007, performed an hour of service under Title III), and (iv) his Title IV-related accrued benefit, each as defined below. An Employee shall be entitled to payments under this Plan to the same extent he is vested in his respective component under the Phillips 66 Retirement Plan.

(b)

“Title I-related accrued benefit shall mean the sum of (i), (ii), and (iii) below:

(i)

The difference between the Employee’s total accrued benefit under Title I and his actual accrued benefit under Title I. For this purpose, an Employee’s “total accrued benefit under Title I” is the accrued benefit he would have if his accrued benefit under Title I were determined under the terms of Title I but with the following modifications:

(aa)

Include in Annual Earnings an award under the Incentive Compensation Plan which the employee deferred under the terms of the KEDCP. Include such award in the calendar year in which the award would have been paid to the Employee if it had not been deferred.

(bb)

Include in Annual Earnings salary that would have been paid to the Employee but for the fact that he voluntarily elected to defer receipt of that salary under the terms of KEDCP. Include the deferred salary in Annual Earnings in the calendar year in which the salary would have been paid had it not been deferred.

(cc)

Include in Annual Earnings the initial value of a restricted stock or restricted stock unit award under the Incentive Compensation Plan. Include that value in Annual Earnings in the calendar year in which the award was granted.

(dd)

Include in Annual Earnings the value of any special award specified by the Committee under the terms of the special award to be included for Annual Earnings purposes under Title I in the year in which any applicable restrictions on the award lapse or, if deferred, in the year in which any applicable restrictions would have lapsed absent an election to defer.

(ee)

Disregard the limitations on compensation related to Code section 401(a)(17).

(ff)

Disregard the limitation on benefits related to Code section 415.

(gg)

If an Employee is eligible to receive benefits under the Phillips 66 Executive Severance Plan or under the Phillips 66 Key Employee Change in Control Severance Plan, include in Annual Earnings an amount determined by dividing the Employee’s Salary by 4.3333 times the number of weeks or partial weeks

from the date the Employee’s employment ends with the Employer to the end of that calendar year. Provided, however, this subsection (gg) shall be disregarded to the extent the benefit created solely by operation of this subsection (gg) is provided under the terms of Title I.

(ii)

In the case of an Employee who terminated employment on or after February 8, 1993, the Title I-related accrued benefit shall include an additional supplemental accrued benefit calculated under the terms of Title I, but disregarding the limitation on compensation that is taken into account, using as final average earnings the difference, if any, between the Total Final Average Earnings and the Final Average Earnings used in Title I.

(iii)

The Title I-related accrued benefit shall also include any benefit provided under Section IV of this Plan.

(c)

“Title II-related accrued benefit” shall mean the difference between the Employee’s total accrued benefit under Title II and his actual accrued benefit under Title II. For this purpose, an Employee’s “total accrued benefit under Title II” is the accrued benefit he would have if his accrued benefit under Title II were determined under the terms of Title II but with the following modifications:

(i)

Include in Annual Earnings an award under the Incentive Compensation Plan which the Employee deferred under the terms of the KEDCP. Include such award in the calendar month and year in which the award would have been paid to the Employee if it had not been deferred.

(ii)

Include in Annual Earnings salary that would have been paid to the employee but for the fact that he voluntarily elected to defer receipt of that salary under the terms of KEDCP. Include the deferred salary in Annual Earnings in the calendar month and year in which the salary would have been paid had it not been deferred.

(iii)

(iv)

Include in Annual Earnings the value of any special award specified by the Committee under the terms of the special award to be included for Annual Earnings purposes under Title II in the year in which any applicable restrictions on the award lapse or, if deferred, in the year in which any applicable restrictions would have lapsed absent an election to defer.

(v)

Disregard the limitation on compensation related to Code section 401(a)(17).

(vi)

Disregard the limitation on benefits related to Code section 415.

(d)

“Title III-related accrued benefit” shall mean the difference between the Employee’s total accrued benefit under Title III and his actual accrued benefit under Title III. For this purpose, an Employee’s “total accrued benefit under Title III” is the benefit he would have if his accrued benefit were determined under the provisions of Title III but with the following modifications:

(i)

Include in Compensation salary that would have been paid to the Employee but for the fact that he voluntarily elected to defer receipt of that salary under the terms of KEDCP or a similar predecessor program but only if such salary is not included in Compensation for purposes of calculating the Title III accrued benefit due to the election to defer. If applicable, include the deferred salary in the calendar month and year in which the salary would have been paid had it not been deferred.

(ii)

Disregard the limitation on compensation related to Code section 401(a)(17).

(iii)

Disregard the limitation on benefits related to Code section 415.

(e)

“Title IV-related accrued benefit” shall mean the difference between the Employee’s total accrued benefit under Title IV and his actual accrued benefit under Title IV. For this purpose, an Employee’s “total accrued benefit under Title IV” is the benefit he would have if his accrued benefit were determined under the provisions of Title IV but with the following modifications:

(i)

Include in Compensation salary that would have been paid to the Employee but for the fact that he voluntarily elected to defer receipt of that salary under the terms of KEDCP or a similar predecessor program but only if such salary is not included in Compensation for purposes of calculating the Title IV accrued benefit due to the election to defer. If applicable, include the deferred salary in the calendar month and year in which the salary would have been paid had it not been deferred.

(ii)

Include in Compensation any Incentive Compensation Plan award that would have been paid to the Employee but for the fact that he voluntarily elected to defer receipt of that award under the terms of KEDCP or a similar predecessor program but only if such award is not included in Compensation for purposes of calculating the Title IV accrued benefit due to the election to defer. If applicable, include the deferred award in the calendar month and year in which the award would have been paid had it not been deferred.

(iii)

Include in Compensation the value of any special award specified by the Committee under the terms of the special award to be included for compensation purposes under Title IV in the calendar month and year in which any applicable restrictions on the award lapse or, if deferred, in the calendar month and year in which any applicable restrictions would have lapsed absent an election to defer.

(iv)

Disregard the limitation on compensation related to Code section 401(a)(17).

(v)

Disregard the limitation on benefits related to Code section 415.

(f)

Each of the components of the accrued benefit under this Plan (the Title I-related accrued benefit, the Title II-related accrued benefit, the Title III-related accrued benefit, and the Title IV-related accrued benefit) shall be expressed as a straight life annuity starting at the age that is the normal retirement age under the applicable title of the Retirement Plan in accordance with the following rules:

(i)

If the annuity starting date for the relevant Retirement Plan benefit occurs on or before the required commencement date under this Plan, the Title I-related accrued benefit, the Title II-related accrued benefit, the Title III-related accrued benefit, or the Title IV-related accrued benefit, as is applicable, shall first be calculated as of the Retirement Plan annuity starting date related to that component benefit and then shall be converted actuarially to a straight life annuity payable at age 65 applying actuarial assumptions that are consistent with the relevant Title of the Retirement Plan. The component accrued benefit so calculated shall not be increased or decreased based on subsequent events.

(ii)

If the annuity starting date for the relevant Retirement Plan benefit has not occurred on or before the required commencement date under this Plan, the Title I-related accrued benefit, the Title II-related accrued benefit, the Title III-related accrued benefit, or the Title IV-related accrued benefit, as is applicable, shall be calculated as if the relevant Retirement Plan benefit had an annuity starting date and a form of payment that is the same as the required commencement date and form of payment under this Plan. The resulting component benefit shall then be converted actuarially to an equivalent straight life annuity starting at age 65, and the component accrued benefit so calculated shall be the component accrued benefit under this Plan and shall not be increased or decreased based on subsequent events.

(g)

The component accrued benefit described in subsection (f) above shall be converted to the actual benefit paid under this Plan applying the methodology specified in the applicable title of the Retirement Plan. For this purpose, the terms of the applicable title of the Retirement Plan are those in effect as of the annuity starting date used in this Plan. If the applicable title of the Retirement Plan does not provide a methodology, a reasonable methodology, as determined by the Plan Administrator, shall be used.

SECTION III. DEATH BENEFIT

If an Employee dies prior to the date his accrued benefit under this Plan would otherwise commence, this Plan shall provide a death benefit if the applicable title of the Retirement Plan provides a death benefit under that circumstance. Any death benefit under this Plan shall be paid in a lump sum on the first day of the first calendar month after death. If there is a delay in payment of the lump sum, regardless of the reason, the Plan shall not make an adjustment to

reflect the time value of money. Except as described in the preceding sentence, the death benefit shall be the present value of the Employee’s entire accrued benefit under this Plan payable in accordance with the following rules:

(a)

The present value shall be paid to the Employee’s named primary Beneficiary or beneficiaries or, if applicable, to the Employee’s named contingent beneficiary or beneficiaries if the beneficiary or beneficiaries were named in a manner acceptable to the Plan Administrator.

(b)

If the Employee had not, prior to his death, named any beneficiary in a manner acceptable to the Plan Administrator, the present value shall be paid to the Employee’s estate.

(c)

The present value shall be paid in a lump sum and shall be calculated using the first of the month after death as the annuity starting date and applying the rules described in Section II(f) and (g) of this Plan for determining the amount to be paid.

(d)

If a beneficiary makes a “qualified disclaimer” as that term is defined in Section 2518 of the Code, and the Plan Administrator receives a copy of the disclaimer within 9 months after the employee’s death and before payment of the death benefit under this Plan, at the place designated by the Plan Administrator, the Plan will be administered as if the disclaiming beneficiary had died before the Employee.

SECTION IV. Special Provision for former ARCO Alaska Employees.

Notwithstanding any provisions to the contrary, in order to comply with the terms of the Master Purchase and Sale Agreement (“Sale Agreement”) by which the ConocoPhillips Company acquired certain Alaskan assets of Atlantic Richfield Company, Inc. (“ARCO”), the following supplemental payments will be made:

(a)

The payments which would have been received under Article XXIV – ARCO Flight Crew of Title I of the Retirement Plan for those who were classified as an Aviation Manager, Chief Pilot, Assistant Chief Pilot, Captain or Reserve Captain as of July 31, 2000 if they had been eligible for those benefits under Title I of the Retirement Plan, except that if they receive a limited social security makeup benefit from Title I of the Retirement Plan it will be offset from the benefit payable from the Plan.

(b)

A final ARCO Supplemental Executive Retirement Plan (SERP) benefit will be calculated at the earlier of the time an Employee who had an ARCO SERP benefit terminates employment or, 2 years following the ARCO/BP Amoco p.l.c. merger, April 17, 2002 (“calculation date”). The SERP benefit attributable to service through July 31, 2000 shall be paid by BP Amoco p.l.c. and the difference shall be paid by this Plan. The SERP calculation will be done as if the Employee had continued to participate in the Atlantic Richfield Retirement Plan and SERP up to the calculation date. The ARCO Annual Incentive Plan (AIP) amount used will be:

(i)

If the Employee terminates employment involuntarily prior to April 17, 2002, the highest of the actual AIP in the last 3 years including the AIP target payment amount for years after 1999 or the payment received under Phillips Annual Incentive Compensation Plan.

(ii)

If the Employee terminates employment voluntarily prior to April 17, 2002, or if the calculation is made as of April 17, 2002, then the AIP will include the highest 3 year average using the highest of the actual AIP, the AIP target payment amount for years after 1999, or the payment received under Phillips Annual Incentive Compensation Plan. Any benefit paid by this Plan under this Section IV(b)(ii) and the SERP benefit paid by BP Amoco p.l.c. shall offset the benefit payable from this Plan.

SECTION V. Payment of Benefits .

The benefit under this Plan shall be calculated and paid as follows:

(a)

Commencement — Unless the accrued benefit has been or will be paid on account of the Employee’s death as described in Section III, the present value of the Employee’s accrued benefit shall be paid in a lump sum on the later of: the Employee’s Plan-age 55 or the first day of the seventh calendar month after the Employee’s Separation from Service; but in no event earlier than November 1, 2006.

(b)	Annuity Starting Date for calculating the present value:

(i)

If the applicable commencement date for a Title I-related or a Title IV-related accrued benefit is the first day of the seventh calendar month after Separation from Service, the annuity starting date used in calculating the present value shall be the later of: the Employee’s Plan-age 55 or the first day of the first calendar month after the Employee’s Separation from Service; and the Plan shall pay interest from the annuity starting date to the commencement date at the 6 month T-Bill rate (as determined by the Plan Administrator) in effect on the annuity starting date. If the applicable commencement date for a Title-II-related accrued benefit is the first day of the seventh calendar month after Separation from Service, the annuity starting date shall be the same as the commencement date.

(ii)

Except as provided in the second sentence of this subsection (b)(ii), if the applicable commencement date is the Employee’s Plan-age 55 or November 1, 2006, the annuity starting date used in calculating the present value shall be the

same as the commencement date. Provided, however, in the case of an Employee whose Separation from Service is in 2006 and whose commencement date under this Plan is November 1, 2006, the annuity starting date used in calculating the present value shall be the later of: the Employee’s Plan-age 55 or the first day of the first calendar month after the Employee’s Separation from Service; and the Plan shall pay simple interest from the annuity starting date to November 1, 2006, at the 6 month T-Bill rate (as determined by the Plan Administrator) in effect on the annuity starting date.

(iii)

Except as specifically provided in subsections (b)(i) and (ii), the Plan shall not make an adjustment of the benefit to reflect the time value of money if there is delay in paying the benefit for any reason.

SECTION VI. Method of Providing Benefits .

All amounts payable under this Plan shall be paid solely from the general assets of the Company and any rights accruing to an eligible Employee or beneficiary under the Plan shall be those of a general creditor; provided, however, that the Company may establish a grantor trust to satisfy part or all of its Plan payment obligations so long as the Plan remains an unfunded excess benefit plan and or an unfunded benefit plan for a select group of management or highly compensated employees for purposes of Title I of ERISA.

SECTION VII. Nonassignability .

The right of an Employee, or beneficiary, or other person who becomes entitled to receive payments under this Plan, shall not be assignable or subject to garnishment, attachment or any other legal process by the creditors of, or other claimants against, the Employee, beneficiary, or other such person.

SECTION VIII. Administration .

(a)

The Plan shall be administered by the Plan Administrator. The Plan Administrator may adopt such rules, regulations and forms as deemed desirable for administration of the Plan and shall have the discretionary authority to allocate responsibilities under the Plan to such other persons as may be designated.

(b)

Any claim for benefits hereunder shall be presented in writing to the Plan Administrator for consideration, grant or denial. In the event that a claim is denied in whole or in part by the Plan Administrator, the claimant, within ninety days of receipt of said claim by the Plan Administrator, shall receive written notice of denial. Such notice shall contain:

(1)

a statement of the specific reason or reasons for the denial;

(2)

specific references to the pertinent provisions hereunder on which such denial is based;

(3)

a description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is necessary; and

(4)

an explanation of the following claims review procedure set forth in paragraph (c) below.

(c)

written notice of denial. The Trustee shall render a decision regarding the claim within sixty days after receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered within a reasonable time, but not later than 120 days after receipt of the request for review. The decision of the Trustee shall be in writing and, in the case of the denial of a claim in whole or in part, shall set forth the same information as is required in an initial notice of denial by the Plan Administrator, other than an explanation of this claims review procedure. The Trustee shall have absolute discretion in carrying out its responsibilities to make its decision of an appeal, including the authority to interpret and construe the terms hereunder, and all interpretations, findings of fact, and the decision of the Trustee regarding the appeal shall be final, conclusive and binding on all parties.

(d)

Compliance with the procedures described in paragraphs (b) and (c) shall be a condition precedent to the filing of any action to obtain any benefit or enforce any right which any individual may claim hereunder. Notwithstanding anything to the contrary in this Plan, these paragraphs (b), (c) and (d) may not be amended without the written consent of a seventy-five percent (75%) majority of Participants and Beneficiaries and such paragraphs shall survive the termination of this Plan until all benefits accrued hereunder have been paid.

SECTION IX. Employment Not Affected by Plan .

Participation or nonparticipation in this Plan shall neither adversely affect any person’s employment status, or confer any special rights on any person other than those expressly stated in the Plan. Participation in the Plan by an Employee of the Company or of a Participating Subsidiary shall not affect the Company’s or the Participating Subsidiary’s right to terminate the Employee’s employment or to change the Employee’s compensation or position.

SECTION X. Miscellaneous Provisions .

(a)	The Board reserves the right to amend or terminate this Plan at any time, if, in the sole judgment of the Board, such amendment or termination is deemed desirable; provided that the Company shall remain liable for any benefits accrued under this Plan prior to the date of amendment or termination.

(b)	Except as otherwise provided herein, the Plan shall be binding upon the Company, its successors and assigns, including but not limited to any corporation which may acquire all or substantially all of the Company’s assets and business or with or into which the Company may be consolidated or merged.

(c)	No amount accrued or payable hereunder shall be deemed to be a portion of an Employee’s compensation or earnings for the purpose of any other employee benefit plan adopted or maintained by the Company, nor shall this Plan be deemed to amend or modify the provisions of the Retirement Plan.

(d)	The Plan shall be construed, regulated, and administered in accordance with the laws of the State of Texas except to the extent that said laws have been preempted by the laws of the United States.

SECTION XI. Effective Date of the Plan.

The Phillips 66 Key Employee Supplemental Retirement Plan is hereby adopted effective as of the Effective Time and conditioned on the occurrence of the Distribution.

Executed this 24th day of April 2012, by a duly authorized officer of the Company.

/s/ Chantal D. Veevaete

Chantal D. Veevaete

APPENDIX A

SELECT NEW HIRES TO

PHILLIPS 66 KEY EMPLOYEE SUPPLEMENTAL RETIREMENT PLAN

For Select New Hires, as set forth in resolutions adopted from time to time by the Human Resources and Compensation Committee of the Board of Directors of Phillips 66, or its successor, the following provisions apply:

1. The Select New Hire will, effective on the first day of employment with the Controlled Group, become a Participant in the Phillips 66 Key Employee Supplemental Retirement Plan. In addition to the benefits provided under the Plan, the Select New Hire will be eligible for a further benefit (the “Further Benefit”), calculated in accordance with the provisions of this Appendix.

2. Further Benefit shall mean the difference between the Putative Title I Benefit and the Offsetting Benefits, both as described below. In determining the Further Benefit, paragraphs (f) and (g) of the Plan shall apply.

3. The Putative Title I Benefit shall mean the sum of (i), (ii), and (iii) below:

(i)

The difference between the Select New Hire’s total accrued benefit under Title I and his actual accrued benefit under Title I. For this purpose, a Select New Hire’s total accrued benefit under Title I is the accrued benefit he would have if his accrued benefit under Title I were determined under the terms of Title I but with the following modifications:

(aa)

Include in Annual Earnings an award under the Incentive Compensation Plan which the Select New Hire deferred under the terms of KEDCP. Include such award in the calendar year in which the award would have been paid to the Select New Hire if it had not been deferred.

(bb)

Include in Annual Earnings salary that would have been paid to the Select New Hire but for the fact that he voluntarily elected to defer receipt of that salary under the terms of KEDCP. Include the deferred salary in Annual Earnings in the calendar year in which the salary would have been paid had it not been deferred.

(cc)

(dd)

(ee)

Disregard the limitations on compensation related to Code section 401(a)(17).

(ff)

Disregard the limitation on benefits related to Code section 415.

(gg)

If the Select New Hire is eligible to receive benefits under the Phillips 66 Executive Severance Plan or under the Phillips 66 Key Employee Change in Control Severance Plan, include in Annual Earnings an amount determined by dividing the Select New Hire’s Salary by 4.3333 times the number of weeks or partial weeks from the date the Select New Hire’s employment ends with the Employer to the end of that calendar year. Provided, however, this subsection (gg) shall be disregarded to the extent the benefit created solely by operation of this subsection (gg) is provided under the terms of Title 1.

(hh)

Determine service credited for purposes of benefit accrual as if the Select New Hire had originally been employed by the Controlled Group on the date that the Select New Hire began employment with the company with which the Select New Hire was employed immediately prior to becoming employed by the Controlled Group.

(ii)

In the case of a Select New Hire who terminated employment on or after February 8, 1993, the Title I-related accrued benefit shall include an additional supplemental accrued benefit calculated under the terms of Title I, but disregarding the limitation on compensation that is taken into account, using as final average earnings the difference, if any, between the Total Final Average Earnings and the Final Average Earnings used in Title 1.

(iii)

The Title I-related accrued benefit shall also include any benefit provided under Section IV of this Plan.

4. The Offsetting Benefits shall mean any benefit, other than the Further Benefit, provided to the Select New Hire under a defined benefit plan of Phillips 66, including but not limited to the Phillips 66 Retirement Plan (and any successor plan) and the Phillips 66 Key Employee Supplemental Retirement Plan (and any successor plan), together with any benefit provided to the Select New Hire under a “defined benefit plan” (as defined in section 3(35) of the Employee Retirement Income Security Act of 1974, as amended (ERISA)), including any such plan regardless of whether it might also be considered an “excess benefit plan” as defined in

section 3(36) of ERISA, of the company by which the Select New Hire was employed immediately prior to becoming an employee of the Controlled Group. In determining the value of a benefit provided

by an employer which is not a member of the Controlled Group, the Plan Administrator may make any reasonable assumptions necessary and use such information as may be publicly available, provided by such employer, or provided by the Select New Hire, although it is within the discretion of the Plan Administrator to determine which such information and assumptions to use and to disregard any information which the Plan Administrator considers invalid, incomplete, or otherwise suspect.

5. Nothing in this Appendix is intended to affect the other operations or provisions of the Plan. If the Select New Hire is, under the provisions of the Plan, otherwise eligible to participate in the Plan, the Select New Hire will do so in accordance with those provisions.

APPENDIX B

CONOCOPHILLIPS SPIN-OFF

1.	Background . Phillips 66 was a subsidiary of ConocoPhillips (“COP”) prior to the Distribution. As a result of the Distribution, COP distributed its interest in Phillips 66 to its shareholders.

As of the Effective Time, pursuant to an agreement between Phillips 66 and COP that was conditioned on the Distribution occurring, the liabilities for certain participants’ benefits under the ConocoPhillips Key Employee Supplemental Retirement Plan (the “COP Plan”), including amounts grandfathered from Code section 409A (i.e., amounts deferred and vested prior to January 1, 2005), were transferred to the Company and to this Plan. The Participants whose benefits were transferred to this Plan on the Effective Time are referred to below as “COP Participants.” The rules in this Appendix shall apply to COP Participants and certain other Plan terms notwithstanding any Plan provisions to the contrary.

Plan Benefits . COP Participants who qualified as eligible employees under the COP Plan as of the Effective Time shall be eligible employees under this Plan on such date. All service and compensation that would be taken into account for purposes of determining the amount of a COP Participant’s benefit under the COP Plan as of the Effective Time shall be taken into account for the same purposes under this Plan.

3.	Distributions . The terms of this Plan shall govern the distribution of all benefits payable to a COP Participant or any other person with a right to receive such benefits, including amounts accrued under the COP Plan and then transferred to this Plan.

Separation from Service . For avoidance of doubt, no COP Participant shall be treated as incurring a separation from service, termination of employment, retirement, or similar event for purposes of determining the right to a distribution (for amounts subject to Code section 409A or otherwise), benefits, or any other purpose under the Plan as a result of COP’s distribution of Phillips 66 shares to COP’s shareholders or the COP Participant’s transfer of employment to the Company or any other subsidiary of Phillips 66.

5.	Participant Elections . All elections made by COP Participants under the COP Plan, including any payment elections or beneficiary designations, shall apply to the same effect under this Plan as if made under the terms of this Plan.

6.	References to Plan . All references in this Plan to the “Plan” as in effect before the Effective Time shall be read as references to the COP Plan as it was in effect at such time.

Right to Benefits . With respect to any service or compensation used to determine a benefit provided or due under the COP Plan at any time, no benefit will be due under the Plan except with respect to such service and compensation related to a liability transferred from the COP Plan to the Plan on the Effective Time. Additionally, on and after the Effective Time, COP, any subsidiary of COP that remains a subsidiary after the Distribution (“COP Subsidiary”), the COP Plan, any directors, officers, or employees of COP or a COP Subsidiary, and any successors to any of the aforementioned entities or individuals shall have no further obligation or liability to any COP Participant with respect to any benefit, amount, or right due under the COP Plan.

8.	ConocoPhillips Stock . For the period prior to the Distribution, “Stock” may also include any common stock of ConocoPhillips, par value $.01.

Exhibit 10.16

PHILLIPS 66

EXECUTIVE SEVERANCE PLAN

The Phillips 66 Executive Severance Plan (the “Plan”) is hereby adopted effective as of the “Effective Time” defined in the Employee Matters Agreement by and between ConocoPhillips and Phillips 66 (the “Effective Time”) and conditioned on the occurrence of the “Distribution” defined in such Employee Matters Agreement (the “Distribution”).

Phillips 66 was a subsidiary of ConocoPhillips (“COP”) prior to the Distribution. As a result of the Distribution, COP distributed its interest in Phillips 66 to its shareholders. Certain employees of ConocoPhillips Company and other subsidiaries of COP whose employment duties were primarily related to the business activities of Phillips 66 and its subsidiaries transferred employment to Phillips 66 Company or other subsidiaries of Phillips 66 as of the Effective Time. No Eligible Employee shall be treated as incurring a Severance or Separation from Service as a result of (i) the Distribution, (ii) the Eligible Employee’s transfer to the Controlled Group in connection with the Distribution, or (iii) the Eligible Employee’s transfer to ConocoPhillips Company or any other subsidiary of COP in connection with the Distribution.

The Plan is adopted for the benefit of certain employees of the Company and its Subsidiaries. All capitalized terms used herein are defined in Section 1 hereof. This Plan is intended to be a plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, within the meaning of Title I of the Employee Retirement Income Security Act of 1974, as amended and shall be interpreted in a manner consistent with such intention.

SECTION 1. DEFINITIONS . As hereinafter used:

1.1 “Board” means the Board of Directors of the Company.

1.2 “Cause” means (i) the willful and continued failure by the Eligible Employee to substantially perform the Eligible Employee’s duties with the Employer (other than any such failure resulting from the Eligible Employee’s incapacity due to physical or mental illness), or (ii) the willful engaging, not in good faith, by the Eligible Employee in conduct which is demonstrably injurious to the Company or any of its Subsidiaries, monetarily or otherwise.

1.3 “Code” means the Internal Revenue Code of 1986, as it may be amended from time to time.

1.4 “Company” means Phillips 66 or any successors thereto.

1.5 “Controlled Group” shall mean Phillips 66 and its Subsidiaries.

1.6 “Credited Compensation” of a Severed Employee means the aggregate of the Severed Employee’s annual base salary plus his or her annual incentive compensation, each as further described below. For purposes of this definition, (a) annual base salary shall be determined immediately prior to the Severance Date and (b) annual incentive compensation shall be deemed to equal the Severed Employee’s most recently established target (determined at one hundred percent of target) for annual incentive compensation for such employee prior to such employee’s Severance Date pursuant to the Variable Cash Incentive Program or its successor program maintained by the Employer.

1.7 “Effective Date” means the date first stated above as the effective date of this Plan.

1.8 “Eligible Employee” means any employee that is a Tier 1 Employee or a Tier 2 Employee, other than those employees who are listed on Exhibit B.

1.9 “Employer” means the Company or any of its Subsidiaries.

1.10 “Person” means any individual, firm, corporation, partnership, association, trust, unincorporated organization, or other entity.

1.11 “Plan” means the Phillips 66 Executive Severance Plan, as set forth herein, as it may be amended from time to time.

1.12 “Plan Administrator” means the person or persons appointed from time to time by the Board, which appointment may be revoked at any time by the Board.

1.13 “Retirement Plans” means the Phillips 66 Retirement Plan and the Phillips 66 Key Employee Supplemental Retirement Plan.

1.14 “Separation from Service” means the date on which the Participant separates from service with the Controlled Group within the meaning of Code section 409A, whether by reason of death, disability, retirement, or otherwise. In determining Separation from Service, with regard to a bona fide leave of absence that is due to any

medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months, where such impairment causes the Employee to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, a 29-month period of absence shall be substituted for the six-month period set forth in section 1.409A-1(h)(1)(i) of the regulations issued under section 409A of the Code, as allowed thereunder.

1.15 “Severance” means the termination of an Eligible Employee's employment with the Employer by the Employer other than for Cause. An Eligible Employee will not be considered to have incurred a Severance if his employment is discontinued by reason of the Eligible Employee’s death or a physical or mental condition causing such Eligible Employee’s inability to substantially perform his duties with the Employer and entitling him or her to benefits under any long-term sick pay or disability income policy or program of the Employer. Furthermore, an Eligible Employee will not be considered to have incurred a Severance if employment with the Employer is discontinued after the Eligible Employee has been offered employment with another employer that has purchased a Subsidiary or division of the Company or all or substantially all of the assets of an a Subsidiary or division of the Company and the offer of employment from the other employer is at the same or greater salary and the same or greater target bonus as the Eligible Employee has at that time from the Employer . An Eligible Employee will not be considered to have incurred a Severance as a result of (i) the Distribution, (ii) the Eligible Employee’s transfer to the Controlled Group in connection with the Distribution, or (iii) the Eligible Employee’s transfer to ConocoPhillips Company or any other subsidiary of COP in connection with the Distribution. Still further, an Eligible Employee will not be considered to have incurred a Severance if employment with the Employer is discontinued and the Eligible Employee is also eligible for payments under the Phillips 66 Key Employee Change in Control Severance Plan. Furthermore, in order to be considered a Severance, the termination must also meet the requirements of a Separation from Service.

1.16 “Severance Date” means the date on which an Eligible Employee incurs a Severance.

1.17 “Severance Pay” means the payment determined pursuant to Section 2.1 hereof.

1.18 “Severed Employee” means an Eligible Employee who has incurred a Severance.

1.19 “Subsidiary” means any corporation or other entity that is treated as a single employer with Phillips 66 after the Distribution, under section 414(b) or (c) of the Code; provided, that in making this determination, in applying section 1563(a)(1), (2), and (3)

of the Code for purposes of determining a controlled group of corporations under section 414(b) of the Code and for purposes of determining trades or businesses (whether or not incorporated) under common control under regulation section 1.414(c)-2 for purposes of section 414(c) of the Code, the language “at least 80%” shall be used without substitution as allowed under regulations pursuant to section 409A of the Code.

1.20 “Tier 1 Employee” means any employee of the Employer who is in salary grade 26 or above (under the salary grade schedule of the Company on the Effective Date, with appropriate adjustment for any subsequent change in such salary grade schedule) on the Severance Date.

1.21 “Tier 2 Employee” means any employee of the Employer, other than a Tier 1 Employee, who is in salary grade 23 or above (under the salary grade schedule of the Company on the Effective Date, with appropriate adjustment for any subsequent change in such salary grade schedule) on the Severance Date.

SECTION 2. BENEFITS .

2.1 Subject to Section 2.7, each Severed Employee shall be entitled to receive Severance Pay equal to the sum of the amounts determined under Sections 2.1(a), (b), and (c). Furthermore, for purposes of Employer compensation plans, programs, and arrangements, each Severed Employee shall be considered to have been laid off by the Employer.

(a)

The amount that is the Severed Employee’s Credited Compensation, multiplied by (i) 2, in the case of a Tier 1 Employee or (ii) 1.5 in the case of a Tier 2 Employee.

(b)

The amount that is the present value, determined as of the Severed Employee’s Severance Date, of the increase in benefits under the Retirement Plans that would result if the Severed Employee was credited with the following number of additional years of age and service under the Retirement Plans: (i) 2, in the case of a Tier 1 Employee or (ii) 1.5, in the case of a Tier 2 Employee; provided, however, that in calculating (b), if the Severed Employee is entitled under the Retirement Plans to any additional credited service due to the circumstances of the Severed Employee’s termination, then the amount of the present value of the increased benefits called for in the determination of (b) shall be reduced by the amount of the present value of the increased benefits under the Retirement Plans calculated after taking into account the circumstances of the Severed Employee’s termination, but not below zero. Present value shall be determined based on the assumptions utilized under the Phillips 66 Retirement Plan for purposes of determining contributions under Code Section 412 for the most recently completed plan year.

(c)

The amount that is equal to either (i) or (ii), as applicable, plus either (iii) or (iv), as applicable, plus (v), if applicable, plus (vi), if applicable:

(i)

If the Severed Employee was enrolled in company-sponsored medical coverage on the Severance Date, an amount equal to 6 times the difference between the COBRA participant contribution rate and the active employee contribution rate, each as of the Severance Date, for the type of coverage in which the Tier 2 Employee was enrolled.

(ii)

If the Severed Employee was not enrolled in company-sponsored medical coverage on the Severance Date, an amount equal to 18 times the difference between the COBRA participant contribution rate and the active employee contribution rate, each as of the Severance Date, for PPO medical coverage.

(iii)

If the Severed Employee was enrolled in company-sponsored dental coverage on the Severance Date, an amount equal to 6 times the difference between the COBRA participant contribution rate and the active employee contribution rate, each as of the Severance Date, for the type of coverage in which the Tier 2 Employee was enrolled.

(iv)

If the Severed Employee was not enrolled in company-sponsored dental coverage on the Severance Date, an amount equal to 18 times the difference between the COBRA participant contribution rate and the active employee contribution rate, each as of the Severance Date, for dental coverage (using the Phillips 66 dental option coverage).

(v)

In the case of a Tier 1 Employee, an amount equal to the sum of 6 times the COBRA participant contribution rate, as of the Severance Date, for PPO medical coverage plus 6 times the COBRA participant contribution rate, as of the Severance Date, for dental coverage (using the Phillips 66 dental option coverage).

(vi)

If any persons qualified as eligible dependents of the Severed Employee under the applicable company-sponsored medical or dental coverage in which the Severed Employee was enrolled on the Severance Date, an amount equal to the sum of the differences, for each such eligible dependent, between the COBRA eligible dependent contribution rate and the eligible dependent contribution rate for eligible dependents of active employees, each as of the Severance Date, for the medical and/or dental coverage in which the Severed Employee was enrolled on the Severance Date, as applicable, times the factor set forth in the applicable Section 2.1(c)(i) or (ii), (c)(iii) or (iv), and (c)(v); provided, that if the Severed Employee was not enrolled for medical or dental coverage, then the eligibility and amount for each dependent shall be determined as if the Severed Employee had been enrolled in the PPO medical coverage or dental coverage (using the Phillips 66 dental option coverage), as applicable, on the Severance Date.

2.2 Subject to Section 2.7, Severance Pay (as well as any amount payable pursuant to Section 2.4 hereof) shall be paid to an eligible Severed Employee in a cash lump sum on the first business day immediately following 10 days after the end of the period for executing and delivering the Severed Employee’s release, as set forth in Section 2.7.

2.3 Subject to Section 2.7, for a period of (a) 24 months, in the case of a Tier 1 Employee or (b) 18 months, in the case of a Tier 2 Employee, beginning the first of the month following the termination of active employee benefits, the Company shall arrange to provide the Severed Employee and his eligible dependents certain benefits, as enumerated below, similar to those the Severed Employee and his eligible dependents had immediately prior to the Severed Employee’s Severance Date. These benefits will be provided at no greater cost to the Severed Employee than active employee rates for the plan year of coverage provided the benefits continue to be offered by the Company to active employees and the Severed Employee and his eligible dependents meet the same eligibility criteria for the benefits as an active employee and dependents of an

active employee. Depending on coverages prior to the Severed Employee’s Severance Date, these benefits could include the following, but do not include any other benefits offered by the Company: Life Insurance, which includes Basic, Executive Basic, Supplemental, and Dependent Life; and Personal Accident Insurance. Severed employees may also continue Executive Life directly through the vendor to be paid for by the Severed Employee. Nothing herein shall prevent a Severed Employee or eligible dependents of a Severed Employee from electing to receive COBRA continuation coverage of health benefits subject to COBRA, in accordance with the applicable provisions of the law and the applicable plans. While as an active employee the Severed Employee may have been able to make employee contributions or pay premiums for certain coverage through a pre-tax salary reduction arrangement, that will not continue after the Severed Employee’s Severance Date. The cost of these benefits will not be adjusted to reflect that the Severed Employee’s cost will no longer be pre-tax. All other active employee benefits, not specifically mentioned above, are excluded, although if any of the benefits specifically mentioned above are replaced with a similar benefit after the Severed Employee’s Severance Date, such replacement benefits are to be considered as mentioned specifically above even though their names, terms, and conditions may have been changed. Such benefits shall not be provided (except to the extent as may be required by law) during any period when the Severed Employee is eligible to receive such benefits from another employer or from an Employer or if the Severed Employee has resumed working for an Employer. The Severed Employee is obligated to inform the Company when or if they become eligible to receive such benefits from another employer.

2.4 Each Severed Employee shall be entitled to receive the employee’s full salary through the Severance Date and, subject to Section 2.7 but notwithstanding any provision of the Company’s Variable Cash Incentive Program or similar annual bonus incentive plan to the contrary, shall be eligible for consideration for an award under such program or plan when awards are made with regard to the fiscal year under such program or plan in which the Severance Date occurred.

2.5 Each party to any dispute concerning this Plan shall be responsible for that party’s own legal fees and expenses; provided, however, that the arbitrator appointed pursuant to Section 3.2 of this Plan may award reasonable legal fees and expenses to an Eligible Employee if the arbitrator determines that the Company’s denial of the claim of the Eligible Employee was not reasonable.

2.6 The Company shall be entitled to withhold and/or to cause to be withheld from amounts to be paid to the Severed Employee hereunder any federal, state, or local withholding or other taxes or charges which it is from time to time required to withhold.

2.7 No Severed Employee shall be eligible to receive Severance Pay or other benefits under the Plan unless he or she first executes a written release substantially in the form attached as Exhibit A hereto (or, if the Severed Employee was not a United States employee, a similar release which is in accordance with the applicable laws in the relevant jurisdiction) and, to the extent such release is revocable by its terms, only if the Severed Employee does not revoke it, and unless he or she also, at the request of the Company, executes a written agreement not to compete with the Company, with such terms and conditions as may be proposed by the Company at the time. Such release and, if requested, such agreement not to compete must be executed and delivered to the Company within 30 days of the Employee’s Severance Date.

SECTION 3. PLAN ADMINISTRATION .

3.1 The Plan Administrator shall administer the Plan and may interpret the Plan, prescribe, amend, and rescind rules and regulations under the Plan and make all other determinations necessary or advisable for the administration of the Plan, subject to the provisions of the Plan. The Plan Administrator shall have absolute discretion and authority in carrying out its responsibilities, and all interpretations of the Plan, determinations of eligibility under the Plan, determinations to grant or deny benefits under the Plan, or findings of fact or resolutions related to the Plan and its administration that are made by the Plan Administrator shall be binding, final, and conclusive on all parties.

3.2 Claims Procedures . Any claim for benefits hereunder shall be presented in writing to the Plan Administrator for consideration, grant, or denial. Claimants will be notified in writing of approved claims, which will be processed as claimed. A claim is considered approved only if its approval is communicated in writing to a claimant.

(a)

In the case of a denial of a claim respecting benefits paid or payable with respect to a Participant, a written notice will be furnished to the claimant within 90 days of the date on which the claim is received by the Plan Administrator. If special circumstances (such as for a hearing) require a longer period, the claimant will be notified in writing, prior to the expiration of the 90-day period, of the reasons for an extension of time; provided, however, that no extensions will be permitted beyond 90 days after the expiration of the initial 90-day period. A denial or partial denial of a claim will be dated and signed by the Plan Administrator and will clearly set forth:

(i)

the specific reason or reasons for the denial;

(ii)

specific reference to pertinent Plan provisions on which the denial is based;

(iii)

a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and

(iv)

an explanation of the procedure for review of the denied or partially denied claim set forth below.

(b)

Upon denial of a claim, in whole or in part, a claimant or his duly authorized representative will have the right to submit a written request to a committee of individuals established by the Board (the “Claims Committee”) for a full and fair review of the denied claim by filing a written notice of appeal with the Claims Committee within 60 days of the receipt by the claimant of written notice of the denial of the claim. A claimant or the claimant’s authorized representative will have, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits and may submit issues and comments in writing. The review will take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. If the claimant fails to file a request for review within 60 days of the denial notification, the claim will be deemed abandoned and the claimant precluded from reasserting it. If the claimant does file a request for review, his request must include a description of the issues and evidence he deems relevant. Failure to raise issues or present evidence on review will preclude those issues or evidence from being presented in any subsequent proceeding or judicial review of the claim.

(c)

The Claims Committee will provide a prompt written decision on review. If the claim is denied on review, the decision shall set forth:

(i)

the specific reason or reasons for the adverse determination;

(ii)

specific reference to pertinent Plan provisions on which the adverse determination is based;

(iii)

a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits; and

(iv)

a statement describing any voluntary appeal procedures offered by the Plan and the claimant’s right to obtain the information about such procedures.

(d)

A decision will be rendered no more than 60 days after the Claims Committee’s receipt of the request for review, except that such period may be extended for an additional 60 days if the Claims Committee determines that special circumstances (such as for a hearing) require such extension. If an extension of time is required, written notice of the extension will be furnished to the claimant before the end of the initial 60-day period.

(e)

To the extent permitted by law, decisions reached under the claims procedures set forth in this Section shall be final and binding on all parties. No legal action for benefits under the Plan shall be brought unless and until the claimant has exhausted his remedies under this Section. In any such legal action, the claimant may only present evidence and theories which the claimant presented during the claims procedure. Any claims which the claimant does not in good faith pursue through the review stage of the procedure shall be treated as having been irrevocably waived. Judicial review of a claimant’s denied claim shall be limited to a determination of whether the denial was an abuse of discretion based on the evidence and theories the claimant presented during the claims procedure.

(f)

Except as provided in the preceding portion of this Section 3.2, all disputes under this Plan shall be settled exclusively by binding arbitration in Houston, Texas, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction.

3.3 The Plan Administrator may delegate any of its duties hereunder to such person or persons from time to time as it may designate.

3.4 The Plan Administrator is empowered, on behalf of the Plan, to engage accountants, legal counsel, and such other personnel as it deems necessary or advisable to assist it in the performance of its duties under the Plan. The functions of any such persons engaged by the Plan Administrator shall be limited to the specified services and duties for which they are engaged, and such persons shall have no other duties, obligations or responsibilities under the Plan. Such persons shall exercise no discretionary authority or discretionary control respecting the management of the Plan. All reasonable expenses thereof shall be borne by the Employer.

SECTION 4. DURATION; AMENDMENT; AND TERMINATION .

4.1 This Plan shall be effective on the Effective Date. This Plan shall continue in effect unless and until it is terminated as provided in Section 4.2.

4.2 This Plan may be amended from time to time during its term by the Company acting through its Board of Directors or, to the extent authorized by the Board of Directors, its officers. The Company may, by action of its Board of Directors, terminate this Plan at any time.

SECTION 5. GENERAL PROVISIONS .

5.1 Except as otherwise provided herein or by law, no right or interest of any Eligible Employee under the Plan shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including without limitation by execution, levy, garnishment, attachment, pledge, or in any manner; no attempted assignment or transfer thereof shall be effective; and no right or interest of any Eligible Employee under the Plan shall be liable for, or subject to, any obligation or liability of such Eligible Employee. When a payment is due under this Plan to a Severed Employee who is unable to care for his or her affairs, payment may be made directly to his or her legal guardian or personal representative.

5.2 If any Employer is obligated by law or by contract to pay severance pay, a termination indemnity, notice pay, or the like, to a Severed Employee, or if any Employer is obligated by law to provide advance notice of separation (“Notice Period”) to a Severed Employee, then any Severance Pay hereunder to such Severed Employee shall be reduced by the amount of any such severance pay, termination indemnity, notice pay, or the like, as applicable, and by the amount of any compensation received during any Notice Period. This provision specifically includes any payments or obligations under the Phillips 66 Severance Pay Plan. Furthermore, if an Eligible Employee has willful and bad faith conduct demonstrably injurious to Company or its Subsidiaries, monetarily or otherwise, after receiving Severance Pay, the Company may offset an amount equal to such Severance Pay against any other amounts due from other plans or programs, unless otherwise required by law.

5.3 Neither the establishment of the Plan, nor any modification thereof, nor the creation of any fund, trust, or account, nor the payment of any benefits shall be construed as giving any Eligible Employee, or any person whomsoever, the right to be retained in the service of the Employer, and all Eligible Employees shall remain subject to discharge to the same extent as if the Plan had never been adopted.

5.4 If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provisions had not been included.

5.5 This Plan shall be binding upon the heirs, executors, administrators, successors, and assigns of the parties, including each Eligible Employee, present and future, and any successor to the Employer.

5.6 The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan.

5.7 The Plan shall not be funded. No Eligible Employee shall have any right to, or interest in, any assets of any Employer that may be applied by the Employer to the payment of benefits or other rights under this Plan.

5.8 Any notice or other communication required or permitted pursuant to the terms hereof shall have been duly given when delivered or mailed by United States Mail, first-class, postage prepaid, addressed to the intended recipient at his, her or its last known address.

5.9 This Plan shall be construed and enforced according to the laws of the State of Delaware.

The Plan is hereby adopted effective as of the Effective Time and conditioned on the occurrence of the Distribution.

Executed this 24th day of April 2012, by a duly authorized officer of the Company.

/s/ Greg C. Garland

Greg C. Garland, President

Exhibit A

WAIVER AND RELEASE OF CLAIMS

In consideration of, and subject to, the payments to be made to me by Phillips 66, a Delaware corporation (the “Company”) or any of its subsidiaries, pursuant to the Phillips 66 Executive Severance Plan (the “Plan”), which I acknowledge that I would not otherwise be entitled to receive, I hereby waive any claims I may have for employment or re-employment by the Company or any subsidiary or parent of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary or parent of the Company, and their respective past and present officers, directors, shareholders, employees, and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary or parent of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act, Americans with Disabilities Act, or any other federal, state, or local legislation or common law relating to employment or discrimination in employment or otherwise.

Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the Plan; (ii) my rights to benefits other than severance benefits under plans, programs, and arrangements of the Company or any subsidiary or parent of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary or parent of the Company, and my rights under any director’s and officers’ liability insurance policy covering me.

I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company’s acknowledgement of my rights reserved under the second paragraph above.


Signature:		Dated:

Exhibit B

Employees Ineligible for Executive Severance Plan

[Reserved]

Exhibit 10.17

PHILLIPS 66 DEFERRED COMPENSATION PLAN

FOR

NON-EMPLOYEE DIRECTORS

Section 1. Purpose of the Plan

The purpose of the Phillips 66 Deferred Compensation Plan for Non-Employee Directors (“Plan”) is to provide a program whereby a member of the Board of Directors of Phillips 66 (“Company”) who is not an officer or present employee of the Company or any of its subsidiaries (“Non-Employee Director”) may elect to:

1)	receive the payment of part or all of the Cash Compensation payable to the Non-Employee Director (“Cash Payment”),

2)	defer the payment of part or all of the Cash Compensation payable to the Non-Employee Director (“Deferred Payment”), credited into an account or accounts established from time to time for that purpose (a “Deferred Compensation Account”),

3)	receive part or all of the Cash Compensation payable to the Non-Employee Director in shares of Unrestricted Stock under the terms of the Phillips 66 Omnibus Stock and Performance Incentive Plan, or a successor plan (“Unrestricted Stock Award”),

4)	receive part or all of the Cash Compensation in shares of Restricted Stock Units under the terms of the Phillips 66 Omnibus Stock and Performance Incentive Plan, or a successor plan (“Restricted Stock Unit Award”), and

5)	delay the settlement of Restricted Stock Units, issued under the terms of the Phillips 66 Omnibus Stock and Performance Incentive Plan, or a successor plan.

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The amount of total compensation which is paid to the Non-Employee Director for services rendered as a Non-Employee Director is set by resolution of the Board of Directors and is comprised of a portion paid in cash (“Cash Compensation”) and a portion paid in Restricted Stock Units and/or Unrestricted Stock (“Stock Compensation”) of Phillips 66 common stock $.01 par value (“Phillips 66 Common Stock”). Cash Compensation shall be earned for service as a Non-Employee Director over each calendar month in which the Non-Employee Director is a member of the Board of Directors of Phillips 66 and not an officer or employee of Phillips 66 or any of its subsidiaries. Any Cash Compensation payable as a result of assignment to a particular committee of the Board of Directors of Phillips 66, chairmanship of a committee, or similar duties shall be deemed to be earned for any calendar month in which the assignment, chairmanship, or similar duties exist. Stock Compensation shall be earned annually by those Non-Employee Directors who are members of the Board of Directors on the grant date of the Stock Compensation.

This Plan is amended and restated with the intention to comply with section 409A of the United States Internal Revenue Code of the Internal Revenue Code of 1986, as amended (the “IRC”), which became generally effective on January 1, 2005, and any regulations or other applicable guidance thereon, and shall be construed accordingly. It is intended that provisions of the Plan dealing with Cash Compensation or Stock Compensation earned and vested prior to January 1, 2005, shall continue as in effect prior to that date as “grandfathered” provisions and not be considered to be materially modified by this amendment and restatement.

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Section 2. Elections

(a)

Cash Payment . For each calendar year, a Non-Employee Director may elect to have payment of part or all of the Non-Employee Director’s Cash Compensation paid in cash in each month earned. On or before December 20 (or such other date in December as may be set from time to time for the orderly administration of the Plan) of each year, the election to receive Cash Compensation to be paid in the next calendar year may be made by giving written notice thereof in the manner prescribed by the Company, except that such election may be made by the end of the 30-day period after a Non-Employee Director is first elected to the Board of Directors. The election becomes irrevocable on December 31 of the calendar year prior to the year in which the Cash Compensation is to be earned. In default of a timely election otherwise, a Non-Employee Director shall receive Cash Compensation.

(b)

Deferred Payment . For each calendar year, a Non-Employee Director may elect to have payment of part or all of the Non-Employee Director’s Cash Compensation deferred. On or before December 20 (or such other date in December as may be set from time to time for the orderly administration of the Plan) of each year, the election to defer Cash Compensation that would otherwise be paid in the next calendar year may be made by giving written notice thereof in the manner prescribed by the Company, except that such election may be made by the end of the 30-day period after a Non-Employee Director is first elected to the Board of Directors, to be effective for any Cash Compensation for that year earned beginning the month after such election is made. The election becomes irrevocable on December 31 of the calendar year prior to the year in which the Cash Compensation is to be earned.

(c)	Unrestricted Stock Award . For each calendar year, a Non-Employee Director may elect to receive Unrestricted Stock for part or all of the Cash Compensation that would otherwise be paid in the next calendar year. On or before December 20 (or such other date in

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December as may be set from time to time for the orderly administration of the Plan) of each year, such election to receive Unrestricted Stock instead of cash may be made by giving written notice thereof in the manner prescribed by the Company, except that such election may be made by the end of the 30-day period after a Non-Employee Director is first elected to the Board of Directors, to be effective for any Cash Compensation for that year. Such election to receive Unrestricted Stock becomes irrevocable on December 31 of the calendar year prior to the year in which the Cash Compensation is to be earned.

(d)

Restricted Stock Unit Award . For each calendar year, a Non-Employee Director may elect to receive Restricted Stock Units for part or all of the Cash Compensation that would otherwise be paid in the next calendar year. On or before December 20 (or such other date in December as may be set from time to time for the orderly administration of the Plan) of each year, such election to receive Restricted Stock Units instead of cash may be made by giving written notice thereof in the manner prescribed by the Company, except that such election may be made by the end of the 30-day period after a Non-Employee Director is first elected to the Board of Directors, to be effective for any Cash Compensation for that year earned beginning the month after such election is made. Such election to receive Restricted Stock Units becomes irrevocable on December 31 of the calendar year prior to the year in which the Cash Compensation is to be earned.

(e)	Restricted Stock Units Settled .

(i)

Non-Employee Directors may elect to set the time and form of settlement of Restricted Stock Units as Phillips 66 Common Stock by elections made prior to the calendar year in which such Restricted Stock Units are granted. Such elections shall become irrevocable on December 31 of the calendar year in which they are made;

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provided, however, that a subsequent change in time or form of payment may be allowed pursuant to the subsequent election provisions of Section 4(b) of this Plan. Such elections shall be on the form or forms attached as Exhibits to this Plan from time to time, the terms of which shall be incorporated herein by reference. In the event an initial election is not timely made with regard to a particular Restricted Stock Unit Award described in this Section 2(e)(i), then restrictions on such Restricted Stock Unit Award shall lapse upon the earlier of the death or the date six months after the date of separation from service, whether by retirement, disability, or otherwise (than death), of the Non-Employee Director to whom the Restricted Stock Unit Award was granted. Notwithstanding anything in this Plan or on an election to the contrary, if the Plan or the election would otherwise lapse restrictions on a Restricted Stock Unit Award described in this Section 2(e)(i) on the separation from service of a Non-Employee Director, such settlement shall not be made until the earlier of the death of the Non-Employee Director or the date which is six months after the date of such Non-Employee Director’s separation from service.

(ii)

A Restricted Stock Unit Award is made for services performed by the Non-Employee Director in the year in which the Restricted Stock Unit Award is made, not with regard to any prior year or later year service.

Section 3. Deferred Compensation Accounts

(a)	Credit for Deferral . The Company will establish and maintain Deferred Compensation Accounts for each Non-Employee Director who defers Cash Compensation and/or Restricted Stock Units which will be credited with the amounts deferred for the year to

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which the deferral relates. Amounts deferred shall be credited as soon as practicable but not later than 30 days after the date the payment would otherwise have been made. The value of the underlying Restricted Stock Units, including all dividends that are reinvested, shall be the monthly average Fair Market Value of the calendar month preceding the month in which the cash payment or shares are to be delivered, as applicable. The monthly average Fair Market Value of the Phillips 66 Common Stock is the average of the daily Fair Market Value of the Phillips 66 Common Stock for each trading day of the month. The daily Fair Market Value of the Phillips 66 Common Stock shall be deemed equal to the average of the reported highest and lowest sales prices per share of such Phillips 66 Common Stock as reported on the composite tape of the New York Stock Exchange transactions.

(b)

Designation of Investments . The amount in each Non-Employee Director’s Deferred Compensation Account shall be deemed to have been invested and reinvested from time to time, in such “eligible securities” as the Non-Employee Director shall designate. Prior to or in the absence of a Non-Employee Director’s designation, the Company shall designate an “eligible security” in which the Non-Employee Director’s Deferred Compensation Account shall be deemed to have been invested until designation instructions are received from the Non-Employee Director. Eligible securities are those securities designated by the Chief Financial Officer of the Company. The Chief Financial Officer of the Company may include as eligible securities, stocks listed on a national securities exchange, and bonds, notes, debentures, corporate or governmental, either listed on a national securities exchange or for which price quotations are published in The Wall Street Journal and shares issued by investment companies commonly known as “mutual funds”. The Non-Employee

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Director’s Deferred Compensation Account will be adjusted to reflect the deemed gains, losses and earnings as though the amount deferred was actually invested and reinvested in the eligible securities for the Non-Employee Director’s Deferred Compensation Account.

Notwithstanding anything to the contrary in this Section 3(b), in the event the Company actually purchases or sells such securities in the quantities and at the times the securities are deemed to be purchased or sold for a Non-Employee Director’s Deferred Compensation Account, the Account shall be adjusted accordingly to reflect the price actually paid or received by the Company for such securities after adjustment for all transaction expenses incurred (including without limitation brokerage fees and stock transfer taxes).

In the case of any deemed purchase not actually made by the Company, the Deferred Compensation Account shall be charged with a dollar amount equal to the quantity and kind of securities deemed to have been purchased multiplied by the fair market value of such security on the date of reference and shall be credited with the quantity and kind of securities so deemed to have been purchased. In the case of any deemed sale not actually made by the Company, the account shall be charged with the quantity and kind of securities deemed to have been sold, and shall be credited with a dollar amount equal to the quantity and kind of securities deemed to have been sold multiplied by the fair market value of such security on the date of reference. As used herein “fair market value” means in the case of a listed security the closing price on the date of reference, or if there were no sales on such date, then the closing price on the nearest preceding day on which there were such sales, and in the case of an unlisted security the mean between the bid and asked prices on the date of reference, or if no such prices are available for such date, then the mean between the bid and asked prices to the nearest preceding day for which such prices are available.

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The Treasurer may also designate a Fund Manager to provide services which may include recordkeeping, Non-Employee Director accounting, Non-Employee Director communication, payment of installments to the Non-Employee Director, tax reporting and any other services specified by the Company in agreement with the Fund Manager.

(c)

Payments . A Non-Employee Director’s Deferred Compensation Account shall be debited with respect to payments made from the account pursuant to this Plan as of the date such payments are made from the account. The payment shall be made as soon as practicable, but no later than 2 ¹ / ₂ months after the end of the calendar year in which the payment date falls.

If any person to whom a payment is due hereunder is under legal disability as determined in the sole discretion of the Chief Executive Officer, the Company shall have the power to cause the payment due such person to be made to such person’s guardian or other legal representative for the person’s benefit, and such payment shall constitute a full release and discharge of the Company and any fiduciary of the Plan.

(d)

Statements . At least one time per year the Company or the Company’s designee will furnish each Non-Employee Director a written statement setting forth the current balance in the Non-Employee Director’s Deferred Compensation Account, the amounts credited or debited to such account since the last statement and the payment schedule of deferred amounts and deemed gains, losses and earnings accrued thereon as provided by the deferred payment option selected by the Non-Employee Director.

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Section 4. Deferred Payment Options

(a)

Payment Option . With regard to Deferred Compensation Accounts established for Cash Compensation or Stock Compensation that was not both earned and vested prior to January 1, 2005, a Non-Employee Director may make a subsequent change to an earlier election with regard to any such Deferred Compensation Account or Award. Such subsequent change may change either the time or the form of payment or both as to any particular Deferred Compensation Account or Award. Such subsequent change shall not become effective unless one year passes after such subsequent change is made and no event or time that would cause payment to be made under the election that is being changed has occurred. Any such subsequent change shall increase by at least five years the date on which payment will be made from the date on which payment would have been made under the election that is being changed. The Non-Employee Director is allowed to make no more than three such subsequent changes per Deferred Compensation Account or Award. With regard to a Deferred Compensation Account or Award as to which an election is in effect to take payments in installments, such installments shall be considered to be a single payment commencing on the first date an installment payment is scheduled to be made, in accordance with Treasury Regulation section 1.409A-2(b)(2)(iii).

(b)

Installment Amount . The amount of each installment shall be determined by dividing the balance in the Non-Employee Director’s Deferred Compensation Account as of the date the installment is to be paid, by the number of installments remaining to be paid (inclusive of the current installment) or such other installment option that may be offered.

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Section 5. Death of Non-Employee Director

Upon the death of a Non-Employee Director, the Non-Employee Director’s beneficiary or beneficiaries designated in accordance with Section 6 of this Plan, or, in the absence of an effective beneficiary designation, the surviving spouse, or the Estate of the deceased Non-Employee Director, in that order of priority, shall receive the beneficiary’s or beneficiaries’ portion of the payments in accordance with the deferred payment schedule selected by the Non-Employee Director, whether the Non-Employee Director’s death occurred before or after such payments have commenced.

Section 6. Designation of Beneficiary

Each Non-Employee Director who defers under this Plan shall designate a beneficiary or beneficiaries to receive the entire balance of the Non-Employee Director’s Deferred Compensation Account by giving signed written notice of such designation in the manner prescribed by the Company. Each Non-Employee Director who has Restricted Stock Unit Award shall designate a beneficiary or beneficiaries to receive any such Restricted Stock Units by giving signed written notice of such designation in the manner provided by the Company. The Non-Employee Director may from time to time change or cancel any previous beneficiary designation in the same manner. The last written beneficiary designation received by the Company shall be controlling over any prior designation and over any testamentary or other disposition. After receipt by the Company of such written designation, it shall take effect as of the date on which it was signed by the Non-Employee Director, whether the Non-Employee Director is living at the time of such receipt, but without prejudice to the Company on account of any payment made under this Plan before receipt of such designation.

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Section 7. Nonassignability

The right of a Non-Employee Director or beneficiary or other person who becomes entitled to receive payments under this Plan shall not be pledged, assigned or subject to garnishment, attachment or any other legal process by the creditors of or other claimants against the Non-Employee Director, beneficiary, or other such person.

Section 8. Administration, Interpretation and Amendment

The Plan shall be administered by the Chief Executive Officer of the Company or his designee. The decision of the Chief Executive Officer with respect to any questions arising as to the interpretation of this Plan, including the severability of any and all of the provisions thereof, shall be final, conclusive and binding. The Company reserves the right to amend this Plan from time to time or to terminate the Plan entirely, provided, however, that no amendment may affect the balance in a Non-Employee Director’s account on the effective date of the amendment and any termination of the Plan with respect to amounts subject to Code section 409A shall comply with the Treasury Regulation section 1.409A-3(j)(ix).

Section 9. Nonsegregation

Amounts deferred pursuant to this Plan and the crediting of amounts to a Non-Employee Director’s Deferred Compensation Account shall represent the Company’s unfunded and unsecured promise to pay compensation in the future. With respect to said amounts, the relationship of the Company and a Non-Employee Director shall be that of debtor and general unsecured creditor. While the Company may make investments for the purpose of measuring and

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meeting its obligations under this Plan such investments shall remain the sole property of the Company subject to claims of its creditors generally, and shall not be deemed to form or be included in any part of the Deferred Compensation Account.

Section 10. Funding

All amounts payable under the Plan are unfunded and unsecured benefits and shall be paid solely from the general assets of the Company and any rights accruing to the Non-Employee Director or the beneficiary under this Plan shall be those of an unsecured general creditor; provided, however, that the Company may establish a grantor trust to pay part or all of its Plan payment obligations so long as the Plan remains unfunded for federal tax purposes.

Section 11. Miscellaneous

(a)	Except as otherwise provided herein, the Plan shall be binding upon the Company, its successors and assigns, including but not limited to any corporation which may acquire all or substantially all of the Company’s assets and business or with or into which the Company may be consolidated or merged.

(b)	This Plan shall be construed, regulated, and administered in accordance with the laws of the State of Delaware except to the extent that said laws have been preempted by the laws of the United States.

Section 12. Effective Date of the Plan

The Phillips 66 Deferred Compensation Plan for Non-Employee Directors is effective May 1, 2012.

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Exhibit 10.18

PHILLIPS 66

KEY EMPLOYEE DEFERRED COMPENSATION PLAN

TITLE I

(Effective for benefits earned and vested prior to

January 1, 2005)

The Phillips 66 Key Employee Deferred Compensation Plan is hereby adopted effective as of the “Effective Time” defined in the Employee Matters Agreement by and between ConocoPhillips and Phillips 66 (the “Effective Time”) and conditioned on the occurrence of the “Distribution” defined in such Employee Matters Agreement (the “Distribution”).

See Appendix A for special rules related to the spin-off of Phillips 66 from ConocoPhillips.

PURPOSE

The purpose of the Phillips 66 Key Employee Deferred Compensation Plan (the “Plan”) is to attract and retain key employees by providing them with an opportunity to defer receipt of cash amounts which otherwise would be paid to them under various compensation programs or plans by the Company. This Plan is the continuation for certain employees of Phillips 66 and its Affiliated Group of the Key Employee Deferred Compensation Plan of ConocoPhillips, Key Employee Deferred Compensation Plan of Phillips Petroleum Company, of the Conoco Inc. Global Variable Compensation Deferral Program, and of the portions of the Conoco Inc. Salary Deferral & Savings Restoration Plan, consisting of Salary Deferral Obligations, and all deferrals made under any of those plans, programs, or arrangements shall continue under their terms and the terms of this Plan. Title I of this Plan is effective with regard to benefits earned and vested prior to January 1, 2005, while Title II of this Plan is effective with regard to benefits earned or vested after December 31, 2004. Other than earnings, gains, and losses, no further benefits shall accrue under Title I of this Plan after December 31, 2004.

This Title I of the Plan is intended (1) to be a “grandfathered” plan pursuant to Code section 409A, as enacted as part of the American Jobs Creation Act of 2004, and official guidance issued thereunder, and (2) to be “a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of sections 201(2), 301(a)(3), and 401(a)(1) of ERISA. Notwithstanding any other provision of this Plan, this Plan shall be interpreted, operated, and administered in a manner consistent with these intentions.

SECTION 1. Definitions.

(a)

“Affiliated Group” shall mean the Company plus other subsidiaries and affiliates in which it owns, directly or through a subsidiary or affiliate, a 5% or more equity interest.

(b)

“Award” shall mean the United States cash dollar amount (i) allotted to an Employee under the terms of an Incentive Compensation Plan or a Long Term Incentive Plan, or (ii) required to be credited to an Employee’s Deferred Compensation Account pursuant to an Incentive Compensation Plan, the Long Term Incentive Compensation Plan, the Strategic Incentive Plan, a Long Term Incentive Plan, or any similar plans, or any administrative procedure adopted pursuant thereto, or (iii) credited as a result of a Participant’s deferral of the receipt of the value of the Stock which would otherwise be delivered to an Employee in the event restrictions lapse on Restricted Stock or Restricted Stock Units or the settlement of Restricted Stock Units previously awarded or which may be awarded to the Participant pursuant to an Incentive Compensation Plan, the Long Term Incentive Compensation Plan, the Strategic Incentive Plan, a Long Term Incentive Plan, an Omnibus Securities Plan, or any similar plans, or any administrative procedure adopted pursuant thereto, or (iv) credited resulting from a lump sum distribution from any of the Company’s non-qualified retirement plans and/or plans which provide for a retirement supplement, or (v) resulting from the forfeiture of Restricted Stock, required by Phillips Petroleum Company, of key employees who became employees of GPM Gas Corporation, or (vi)

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credited as a result of an Employee’s deferral of the receipt of the lump sum cash payment from the Employee’s account in the Defined Contribution Makeup Plan, or (vii) credited as a result of an Employee’s voluntary reduction of Salary, or (viii) credited as a result of an Employee’s deferral of a Performance Based Incentive Award, or (ix) any other amount determined by the Committee to be an Award under the Plan. Sections 2 and 3 of this Plan shall not apply with respect to Awards included under (ii), (v), and (ix) above and a participant receiving such an Award shall be deemed, with respect thereto, to have elected a Section 5(b)(i) payment option - 10 annual installments commencing about one year after retirement at age 55 or above, but subject to revision under the terms of this Plan.

(c)

“Board of Directors” shall mean the board of directors of the Company.

(d)

“Chief Executive Officer” or “CEO” shall mean the Chief Executive Officer of the Company.

(e)

“Committee” shall mean the Compensation Committee of the Board of Directors of Phillips 66.

(f)

“Company” shall mean Phillips 66 Company.

(g)

“Conoco Inc. Global Variable Compensation Deferral Program” shall mean the Conoco Inc. Global Variable Compensation Deferral Program, prior to its merger into the Key Employee Deferred Compensation Plan of ConocoPhillips on October 3, 2003.

(h)

“Conoco Inc. Salary Deferral & Savings Restoration Plan” shall mean the Conoco Inc. Salary Deferral & Savings Restoration Plan, prior to its merger into the Key Employee Deferred Compensation Plan of ConocoPhillips on October 3, 2003.

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(i)

“Deferred Compensation Account” shall mean an account established and maintained for each Participant in which is recorded the amounts of Awards deferred by a Participant, the deemed gains, losses, and earnings accrued thereon, and payments made therefrom all in accordance with the terms of the Plan.

(j)

“Defined Contribution Makeup Plan” shall mean the Phillips 66 Defined Contribution Makeup Plan or any similar plan or successor plans.

(k)

“Disability” shall mean the inability, in the opinion of the Company’s Medical Director, of a Participant, because of an injury or sickness, to work at a reasonable occupation that is available with the Company, a Participating Subsidiary, or another subsidiary of the Company.

(l)

“Employee” shall mean any individual or Rehired Participant who satisfies the conditions of Section 5(j) who is a salaried employee of the Company or of a Participating Subsidiary who is eligible to receive an Award from an Incentive Compensation Plan, has Restricted Stock and/or Restricted Stock Units, and is classified as a Phillips 66 salary grade 19 or above or any equivalent salary grade at the Company or a Participating Subsidiary. Employee shall also include Participants who are employed by a member of the Affiliated Group and former employees of a member of the Affiliated Group who Retire or are Laid Off and are eligible to receive a lump sum distribution from non-qualified retirement plans. Employee shall also include any individual or Rehired Participant who was hired as a salaried employee of ConocoPhillips Services Inc. on or after January 1, 2003, and is classified as a ConocoPhillips salary grade 19 or above or any equivalent salary grade at a Participating Subsidiary. Notwithstanding the foregoing, prior to October 3, 2003, Employee shall not include anyone who is classified as a Heritage Conoco Employee. On and after October 3, 2003, Employee shall include anyone who is classified as a Heritage Conoco Employee.

(m)

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor statute.

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(n)

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended and in effect from time to time, or any successor statute.

(o)

“Heritage Conoco Employee” shall mean an individual employed by Conoco Inc., Conoco Pipe Line Company, or Louisiana Gas Systems Inc. prior to January 1, 2003; provided, however, that an individual who has been terminated from employment with a member of the Affiliated Group at any time and rehired by a member of the Affiliated Group after January 1, 2003, shall not be considered a Heritage Conoco Employee for purposes of this Plan.

(p)

“Incentive Compensation Plan” shall mean the ConocoPhillips Variable Cash Incentive Program, the Incentive Compensation Plan of Phillips Petroleum Company, or the Annual Incentive Compensation Plan of Phillips Petroleum Company, the Special Incentive Plan for Former Tosco Executives, the Conoco Inc. Global Variable Compensation Plan, or a similar plan of a Participating Subsidiary, or any similar or successor plans, or all, as the context may require.

(q)

“Layoff” or “Laid Off” shall mean an applicable termination of employment by reason of layoff under the Phillips 66 Severance Pay Plan, the Phillips 66 Executive Severance Plan, or the Phillips 66 Key Employee Change in Control Severance Plan, and, with regard to times prior to the Effective Time, the ConocoPhillips Severance Pay Plan, the ConocoPhillips Executive Severance Plan, the ConocoPhillips Key Employee Change in Control Severance Plan, the Phillips Layoff Plan or the Phillips Work Force Stabilization Plan, an applicable Qualifying Event (without there being a Disqualifying Event) under the Conoco Severance Pay Plan, or layoff or redundancy under any other layoff or redundancy plan which the Company, any Participating Subsidiary, or any other member of the Affiliated Group may adopt from time to time. If all or any portion of the benefits under the layoff or redundancy plan are contingent on the employee’s signing a general release of liability, such termination shall not be considered as a Layoff for purposes of this Plan unless the employee executes and does not revoke a general release of liability, acceptable to the Company, under the terms of such layoff or redundancy plan.

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(r)

“ Long-Term Incentive Compensation Plan” shall mean the Long-Term Incentive Compensation Plan of Phillips Petroleum Company, which was terminated December 31, 1985.

(s)

“Long-Term Incentive Plan” shall mean the ConocoPhillips Performance Share Program, the ConocoPhillips Restricted Stock Program, the Phillips Petroleum Company Long-Term Incentive Plan, or a similar or successor plan of any of them, established under an Omnibus Securities Plan.

(t)

“Newhire Employee” shall mean any Employee who is hired or rehired during a calendar year.

(u)

“Omnibus Securities Plan” shall mean the Phillips 66 Omnibus Stock and Performance Incentive Plan, the Omnibus Securities Plan of Phillips Petroleum Company, the 2002 Omnibus Securities Plan of Phillips Petroleum Company, the 1998 Stock and Performance Incentive Plan of ConocoPhillips, the 1998 Key Employee Stock Plan of ConocoPhillips, or a similar or successor plan of any of them.

(v)

“Participant” shall mean a person for whom a Deferred Compensation Account is maintained.

(w)

“Participating Subsidiary” shall mean a subsidiary of the Company, of which the Company beneficially owns, directly or indirectly, more than 50% of the aggregate voting power of all outstanding classes and series of stock, where such subsidiary has adopted one or more plans making participants eligible for participation in this Plan and one or more Employees of which are Potential Participants.

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(x)

“Plan Administrator” shall mean the Manager, Benefits of the Company, or such person’s successor.

(y)

“Potential Participant” shall mean a person who has received a notice specified in Section 2 or in Section 5(h).

(z)

“Rehired Participant” shall mean a Participant who, subsequent to Retirement or Layoff, is rehired by the Company, or any subsidiary of the Company, and whose employment status is classified as regular full-time or its equivalent.

(aa)

“Restricted Stock” and “Restricted Stock Units” shall mean respectively shares of Stock and units each of which shall represent a hypothetical share of Stock, which have certain restrictions attached to the ownership thereof or the delivery of shares pursuant thereto.

(bb)

“Retirement” or “Retire” or “Retiring” shall mean termination of employment with the Company or any subsidiary of the Company on or after the earliest early retirement date at age 55 or above as defined in the Phillips 66 Retirement Plan (or, with respect to a Heritage Conoco Employee, the Retirement Plan of Conoco) or of the applicable retirement plan of a member of the Affiliated Group.

(cc)

“Retirement Income Plan” shall mean the Phillips 66 Retirement Plan (or, with respect to a Heritage Conoco Employee, the Retirement Plan of Conoco) or a similar retirement plan of the Participating Subsidiary pursuant to the terms of which the Participant retires.

(dd)

“Salary Deferral Obligations” shall mean obligations to Employees who are Participants in this Plan arising from salary deferrals made as participants in the Conoco Inc. Salary Deferral & Savings Restoration Plan prior to its merger into the Key Employee Deferred Compensation Plan of ConocoPhillips.

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(ee)

“Settlement Date” shall mean the date on which all acts under an Incentive Compensation Plan or the Long-Term Incentive Compensation Plan or actions directed by the Committee, as the case may be, have been taken which are necessary to make an Award payable to the Participant.

(ff)

“Salary” shall mean the monthly equivalent rate of pay for an Employee before adjustments for any before-tax voluntary reductions.

(gg)

“Stock” means shares of common stock of Phillips 66, par value $.01.

(hh)

“Strategic Incentive Plan” shall mean the Strategic Incentive Plan portion of the 1986 Stock Plan of Phillips Petroleum Company, of the 1990 Stock Plan of Phillips Petroleum Company, of the Phillips Petroleum Company Omnibus Securities Plan, and of any successor plans of similar nature.

(ii)

“Trustee” shall mean the trustee of the grantor trust established for this Plan by a trust agreement between the Company and the trustee, or any successor trustee.

SECTION 2. Notification of Potential Participants.

(a)

Incentive Compensation Plan . Each year, during October, Employees who are eligible to receive an Award in the immediately following calendar year under an Incentive Compensation Plan will be notified and given the opportunity, in a manner prescribed by the Plan Administrator, to indicate a preference concerning deferral of all or part (in one percent increments) of such Award.

(b)

Restricted Stock and Restricted Stock Units Lapsing .

(i) Each year during October, Employees who are or will be 55 years of age or older prior to the end of the following calendar year will be notified and given the opportunity, in a manner prescribed by the Plan Administrator, to indicate a preference to delay the lapsing of the restrictions on part (in one percent increments)

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or all of the shares of Restricted Stock and/or Restricted Stock Units previously awarded or which may be awarded to the Employee under an Incentive Compensation Plan, the Long Term Incentive Compensation Plan, a Long-Term Incentive Plan, the Strategic Incentive Plan, or an Omnibus Securities Plan in the event the Compensation Committee takes action in the following calendar year to lapse restrictions on Restricted Stock and/or Restricted Stock Units and/or settle Restricted Stock Units.

(ii) Each year during October, Employees who have been granted a special Restricted Stock Award and/or Restricted Stock Unit Award will be notified and given the opportunity, in a manner prescribed by the Plan Administrator to indicate a preference to delay the lapsing of the restrictions on part (in one percent increments) or all of the shares of Restricted Stock and/or Restricted Stock Units when the restrictions lapse on the Special Restricted Stock and/or Restricted Stock Units or the Restricted Stock Units are settled based on the terms of the Special Restricted Stock and/or Restricted Stock Unit Awards in the following year.

(iii) Such indication of preference as outlined in (i) above may be made within 60 days of the amendment of this Plan providing for the notice; provided, however, that such indication of preference must be made no later than June 6, 2003, for such Awards that would otherwise be lapsed or settled later in 2003.

(i) Each year during October, Employees who are or will be 55 years of age or older prior to the end of the calendar year will be notified and given the opportunity, in a manner prescribed by the Plan Administrator, to indicate a preference concerning the deferral of the receipt of the value of all or part (in one percent increments) of the Stock which would otherwise be delivered to the Employees in the event, during the following calendar year, the Compensation Committee takes action to lapse restrictions on Restricted Stock and/or Restricted Stock Units and/or settle Restricted Stock Units previously awarded or which may be awarded to the Employees under an Incentive Compensation Plan, the Long Term Incentive Compensation Plan, a Long Term Incentive Plan, the Strategic Incentive Plan, or an Omnibus Securities Plan.

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(ii) Employees who have been granted a special Restricted Stock Award and/or Restricted Stock Units Award may, in the year preceding the year in which the restrictions are scheduled to lapse or the Restricted Stock Units are to be settled, indicate a preference concerning the deferral of the value of all or part (in one percent increments) of the stock which would otherwise be delivered to the Employees in the next calendar year when the restrictions lapse on the special Restricted Stock and /or Restricted Stock Units or the Restricted Stock Units are settled based on the terms of the special Restricted Stock Awards and/or Restricted Stock Units Awards.

(iii) Employees who are Laid Off during or after the year they reach age 50 may no later than 30 days after being notified of Layoff, in the manner prescribed by the Plan Administrator, indicate a preference concerning the deferral of the receipt of the value of all or part (in one percent increments) of the Stock which would be otherwise be delivered to the Employees in the event Restricted Stock Units, which have been granted in exchange for Restricted Stock pursuant to the Exchange offer initiated by the Company on December 17, 2001, are settled.

(iv) Such indication of preference as outlined in (i) above may be made within 60 days of the amendment of this Plan providing for the notice; provided, however, that such indication of preference must be made no later than June 6, 2003, for such Awards that would otherwise be lapsed or settled later in 2003.

(d)

Lump Sum Distribution from Non-Qualified Retirement Plans . With respect to the lump sum distribution permitted from the Company’s non-qualified retirement plans and/or plans which provide for a retirement supplement, Employees may indicate, in a manner prescribed by the Plan Administrator, a preference concerning deferral of all or part (in one percent increments) of such lump sum distribution.

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(e)

Lump Sum from Defined Contribution Makeup Plan . Employees who will receive a lump sum cash payment from their account under the Defined Contribution Makeup Plan, may indicate, in a manner prescribed by the Plan Administrator, a preference concerning deferral of all or part (in one percent increments) of such payment.

(f)

Salary Reduction . Annually, Employees and Newhire Employees on the U.S. dollar payroll may elect, in a manner prescribed by the Plan Administrator, a voluntary reduction of Salary for each pay period of the following calendar year, or for Newhire Employees the remainder of the calendar year in which they are hired, in which case the Company will credit a like amount as an Award hereunder, provided that the amount of such voluntary reduction shall not be less than 1% nor more than 50% of the Employee’s Salary per pay period (and may be further limited by the Plan Administrator such that the resulting salary that is paid is sufficient to satisfy all benefit plan deductions, tax deductions, elective deductions, and other deductions required to be withheld by the Company).

(g)

Performance Based Incentive Award . Each year, during October, Employees who are eligible to receive a Performance Based Incentive Award in the immediately following calendar year will be notified and given the opportunity, in a manner prescribed by the Plan Administrator, to indicate a preference for the award to be paid as cash, deferred to their KEDCP account, or issued as Restricted Stock or a combination of cash, deferred compensation and Restricted Stock.

SECTION 3. Indication of Preference or Election to Defer Award.

(a)

Incentive Compensation Plan . If a Potential Participant prefers to defer under this Plan all or any part of the Award to which a notice received under Section 2(a) pertains, the Potential Participant must indicate such preference, in a manner prescribed by the Plan Administrator, (i) if the Potential Participant is subject to Section 16 of the Exchange Act, to the Committee, or (ii) if the Potential Participant is not subject to Section 16 of the Exchange Act, to the CEO. The Potential

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Participant’s preference must be received on or before October 31 of the year in which said Section 2(a) notice was received. Such indication must state the portion of the Award the Potential Participant desires to be deferred. If an indication is not received by October 31, the Potential Participant will be deemed to have elected to receive and not to defer any such Incentive Compensation Plan award.

Such indication of preference, if accepted, becomes irrevocable on November 1 of the year in which the indication is submitted to the Committee or CEO, except that, in the event of any of the following:

the Employee is demoted to a job classification/grade that is no longer eligible to receive an Award from an Incentive Compensation Plan,

ii)

the Employee’s employment status is classified to a status other than regular full-time or its equivalent, or

iii)

the Employee is receiving Unavoidable Absence Benefits (UAB) pay such that the pay received is less than his/her pay had been prior to being on UAB,

the Employee can request, subject to approval by the Plan Administrator, that his/her indication of preference to defer, whether approved or not, be revoked for that Incentive Compensation Plan Award.

The Committee or CEO, as applicable, shall consider such indication of preference as submitted and shall decide whether to accept or reject the preference expressed.

(b)

Restricted Stock and Restricted Stock Unit Awards Lapsing . If a Potential Participant prefers to delay the lapsing of the restrictions on part or all of the shares of Restricted Stock and/or Restricted Stock Units to which a notice received under Section 2(b) pertains, the Potential Participant must indicate such preference in a manner prescribed by the Plan Administrator, (i) if the Potential Participant is subject to Section 16 of the Exchange Act, to the Committee, or (ii) if the Potential Participant is not subject to Section 16 of the Exchange Act, to the CEO. The Potential Participant’s preference must state the percentage of the shares and/or units on which the lapsing is to be delayed. If an indication is not received by October 31, the

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Potential Participant will be deemed to have elected to have the restrictions lapsed if the Compensation Committee takes action to lapse restrictions or as specified under the terms of the Special Restricted Stock and/or Restricted Stock Unit Awards. If the Potential Participant prefers to delay the lapsing of the restrictions on part or all of the shares of Restricted Stock or Restricted Stock Units awarded under an Incentive Compensation Plan, the Long Term Incentive Compensation Plan, a Long Term Incentive Plan, or Strategic Incentive Plan, those shares and/or units will be subject to another indication of preference in the following year. If the Potential Participant prefers to delay the lapsing of the restrictions on part or all of the shares of Restricted Stock or Restricted Stock Units from Special Stock Awards, those shares and/or units will remain restricted and the Employee will receive a notice to indicate a preference for such shares when the Employee is or will be 55 years of age or older prior to the end of the calendar year as specified in Section 2(b)(i).

(c)

Restricted Stock or Restricted Stock Unit Deferral . If a Potential Participant prefers to defer under this Plan the value of all or any part of the Restricted Stock or Restricted Stock Units to which a notice received under Section 2(c) pertains, the Potential Participant must indicate such preference, in a manner prescribed by the Plan Administrator, (i) if the Potential Participant is subject to Section 16 of the Exchange Act, to the Committee, or (ii) if the Potential Participant is not subject to Section 16 of the Exchange Act, to the CEO. The Potential Participant’s preference must be received on or before October 31 of the year in which said Section 2(c) notice was received. Such indication must state the portion of the value of the Restricted Stock or Restricted Stock Units the Potential Participant desires to be deferred. If an indication is not received by October 31, the Potential Participant will be deemed to have elected to receive any shares or units for which the restrictions are lapsed. Such indication of preference becomes irrevocable on November 1 of the year in which the indication is submitted to the Committee or CEO. The Committee or CEO, as applicable, shall consider such indication of preference as submitted and shall decide whether to accept or reject the preference expressed. A deferral of the value of the Restricted Stock or Restricted Stock Units will be paid under the terms of Section

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5(b)(i) hereof - 10 annual installments commencing about one year after Retirement at age 55 or above, but subject to revision under the terms of this Plan. Such approved indication of preference shall also apply to any Restricted Stock Units granted in exchange for shares of Restricted Stock pursuant to the Exchange offer initiated by the Company on December 17, 2001.

(d)

Lump Sum Distribution from Non-Qualified Retirement Plans . If a Potential Participant prefers to defer under this Plan all or part of the lump sum distribution to which Section 2(d) pertains, the Potential Participant must indicate such preference, in a manner prescribed by the Plan Administrator, (i) if the Potential Participant is subject to Section 16 of the Exchange Act, to the Committee or (ii) if the Potential Participant is not subject to Section 16 of the Exchange Act, to the CEO. The Potential Participant’s preference must be received in the period beginning 90 days prior to and ending no less than 30 days prior to the date of commencement of retirement benefits under such plans. Such indication must state the portion of the lump sum distribution the Potential Participant desires to be deferred. The Committee or CEO, as applicable, shall consider such indication of preference as submitted and shall decide whether to accept or reject the preference expressed as soon as practicable. Such indication of preference, if accepted, becomes irrevocable on the date of such acceptance.

(e)

Lump Sum from Defined Contribution Makeup Plan . If a Potential Participant prefers to defer under this Plan all or part of the lump sum cash payment to which Section 2(e) pertains, the Potential Participant must indicate such preference, in a manner prescribed by the Plan Administrator, (i) if the Potential Participant is subject to Section 16 of the Exchange Act, to the Committee or (ii) if the Potential Participant is not subject to Section 16 of the Exchange Act, to the CEO. The Potential Participant’s preference must be received in the period beginning 365 days prior to and ending no less than 90 days prior to the Participant’s retirement date at age 55 or above except that if a Potential Participant is notified of layoff during or after the year in which the Potential Participant reaches age 50, the Potential Participant’s

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preference must be received no later than 30 days after being notified of layoff. Such indication must state the portion of the lump sum payment the Potential Participant desires to be deferred. The Committee or CEO, as applicable, shall consider such indication of preference as submitted and shall decide whether to accept or reject the preference expressed as soon as practicable. Such indication of preference, if accepted, becomes irrevocable on the date of such acceptance. A deferral of the lump sum from the Defined Contribution Makeup Plan will be paid under the terms of Section 5(b)(i) hereof - 10 annual installments commencing about one year after Retirement at age 55 or above, but subject to revision under the terms of the Plan.

(f)

Salary Reduction . If a Potential Participant elects to voluntarily reduce Salary and receive an Award hereunder in lieu thereof, the Potential Participant must make an election, in the manner prescribed by the Plan Administrator, which must be received on or before October 31 prior to the beginning of the calendar year of the elected deferral or for Newhire Employees as soon as practicable within a 30-day period after their first day of employment or reemployment. Such election must be in writing signed by the Potential Participant, and must state the amount of the salary reduction the Potential Participant elects. Such election becomes irrevocable on October 31 prior to the beginning of the calendar year or for Newhire Employees after the 30-day period after their first day of employment or reemployment, except that in the event of any of the following:

the Employee is demoted to a job classification/grade that is no longer eligible to receive an Award from an Incentive Compensation Plan,

ii)

the Employee’s employment status is classified to a status other than regular full-time or its equivalent, or

iii)

the Employee is receiving Unavoidable Absence Benefits (UAB) pay such that the pay received is less than his/her pay had been prior to being on UAB,

the Employee can request, subject to approval by the Plan Benefits Administrator, that his/her election to voluntarily reduce his/her salary be revoked for the remainder of the calendar year.

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An Award in lieu of voluntarily reduced salary will be paid under the terms of Section 5(b)(i) hereof - 10 annual installments commencing about one year after Retirement at age 55 or above, but subject to revision under the terms of the Plan.

(g)

Performance Based Incentive Award . The Potential Participant who is eligible to receive a Performance Based Incentive Award in the immediately following calendar year, must indicate a preference, in a manner prescribed by the Plan Administrator, (i) if the Potential Participant is subject to Section 16 of the Exchange Act, to the Committee, or (ii) if the Potential Participant is not subject to Section 16 of the Exchange Act, to the CEO. The Potential Participant’s preference must be received on or before October 31 of the year in which said Section 2(g) notice was received. Such indication must state the portion of the award the Potential Participant desires to be in cash, the portion to be deferred and the portion to be in Restricted Stock. If an indication is not received by October 31 the Potential Participant will be deemed to have elected to receive the award as cash. Such indication of preference becomes irrevocable on November 1 of the year in which the indication is submitted to the Committee or CEO. The Committee or CEO, as applicable, shall consider such indication of preference as submitted and shall decide whether to accept or reject the preference expressed.

SECTION 4. Deferred Compensation Accounts.

(a)

Credit for Deferral . Amounts deferred pursuant to Section 3(a) and Section 5(h)(1) will be credited to the Participant’s Deferred Compensation Account as soon as practicable, but not less than 30 days after the Settlement Date of the Incentive Compensation Plan. Amounts deferred pursuant to Section 3(c) and Section 5(h)(2) will be credited, as applicable, as soon as practicable, but not later than 30 days after the date as of which the restrictions lapse at the market value of the underlying Restricted Stock or the shares represented by the Restricted Stock Units awarded under an Incentive Compensation Plan, the Long Term Incentive Compensation Plan,

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a Long Term Incentive Plan or a Strategic Incentive Plan Performance Period which began prior to January 1, 2003. For this purpose, the market value of the underlying Restricted Stock or the shares represented by the Restricted Stock Units, as applicable, shall be based on the higher of (i) the average of the high and low selling prices of the Stock on the date the restrictions lapse or the last trading day before the day the restrictions lapse if such date is not a trading day or (ii) the average of the high three monthly Fair Market Values of the Stock during the twelve calendar months preceding the month in which the restrictions lapse. The monthly Fair Market Value of the Stock is the average of the daily Fair Market Value of the Stock for each trading day of the month.

The market value of the underlying Restricted Stock or the shares represented by the Restricted Stock Units awarded under a Long Term Incentive Plan, under an Incentive Compensation Plan that began on or after January 1, 2003, under an Omnibus Securities Plan (with regard to awards made on or after January 1, 2003), and for the Special Stock Awards issued on October 22, 2002, shall be the monthly average Fair Market Value of the Stock during the calendar month preceding the month in which the restrictions lapse or shares are to be delivered as applicable. The monthly average Fair Market Value of the Stock is the average of the daily Fair Market Value of the Stock for each trading day of the month.

The daily Fair Market Value of the Stock shall be deemed equal to the average of the high and low selling prices of the Stock on the New York Stock Exchange.

Amounts deferred pursuant to Section 3(e) and 3(f) and Section 5(h)(3) will be credited to the Participant’s Deferred Compensation Account as soon as practicable, but not later than 30 days after the cash payment would have been made had it not been deferred. Amounts deferred pursuant to other provisions of this Plan shall be credited as soon as practicable but not later than 30 days after the date the Award would otherwise be payable.

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(b)

Designation of Investments . The amount in each Participant’s Deferred Compensation Account shall be deemed to have been invested and reinvested from time to time, in such “eligible securities” as the Participant shall designate. Prior to or in the absence of a Participant’s designation, the Company shall designate an “eligible security” in which the Participant’s Deferred Compensation Account shall be deemed to have been invested until designation instructions are received from the Participant. Eligible securities are those securities designated by the Chief Financial Officer of the Company, or his successor. The Chief Financial Officer of the Company may include as eligible securities, stocks listed on a national securities exchange, and bonds, notes, debentures, corporate or governmental, either listed on a national securities exchange or for which price quotations are published in The Wall Street Journal and shares issued by investment companies commonly known as “mutual funds”. The Participant’s Deferred Compensation Account will be adjusted to reflect the deemed gains, losses, and earnings as though the amount deferred was actually invested and reinvested in the eligible securities for the Participant’s Deferred Compensation Account.

Notwithstanding anything to the contrary in this section 4(b), in the event the Company (or any trust maintained for this purpose) actually purchases or sells such securities in the quantities and at the times the securities are deemed to be purchased or sold for a Participant’s Deferred Compensation Account, the Account shall be adjusted accordingly to reflect the price actually paid or received by the Company for such securities after adjustment for all transaction expenses incurred (including without limitation brokerage fees and stock transfer taxes).

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sale not actually made by the Company, the account shall be charged with the quantity and kind of securities deemed to have been sold, and shall be credited with a dollar amount equal to the quantity and kind of securities deemed to have been sold multiplied by the fair market value of such security on the date of reference. As used in this paragraph “fair market value” means in the case of a listed security the closing price on the date of reference, or if there were no sales on such date, then the closing price on the nearest preceding day on which there were such sales, and in the case of an unlisted security the mean between the bid and asked prices on the date of reference, or if no such prices are available for such date, then the mean between the bid and asked prices to the nearest preceding day for which such prices are available.

The Chief Financial Officer of the Company may also designate a third party to provide services that may include record keeping, Participant accounting, Participant communication, payment of installments to the Participant, tax reporting, and any other services specified by the Company in agreement with such third party.

(c)

Payments . A Participant’s Deferred Compensation Account shall be debited with respect to payments made from the account pursuant to this Plan as of the date such payments are made from the account. The payment shall be made as soon as practicable, but no later than 30 days, after the installment payment date.

If any person to whom a payment is due hereunder is under legal disability as determined in the sole discretion of the Plan Administrator, the Plan Administrator shall have the power to cause the payment due such person to be made to such person’s guardian or other legal representative for the person’s benefit, and such payment shall constitute a full release and discharge of the Company, the Plan Administrator, and any fiduciary of the Plan.

(d)

Statements . At least one time per year the Company or the Company’s designee will furnish each Participant a written statement setting forth the current balance in the Participant’s Deferred Compensation Account, the amounts credited or debited to

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such account since the last statement and the payment schedule of deferred Awards, and deemed gains, losses, and earnings accrued thereon as provided by the deferred payment option selected by the Participant.

SECTION 5. Payments from Deferred Compensation Accounts.

(a)

Election of Method of Payment for an Incentive Compensation Plan Award . At the time a Potential Participant submits an indication of preference to defer all or any part of an Award under an Incentive Compensation Plan as provided in Section 3(a) above, the Potential Participant shall also elect in a manner prescribed by the Plan Administrator, which of the payment options, provided for in Paragraph (b) of this Section, shall apply to the deferred portion of said Award adjusted for any deemed gains, losses, and earnings accrued thereon credited to the Participant’s Deferred Compensation Account under this Plan. Subject to Paragraphs (e), (g), and (h) of this Section, if the Committee or CEO, as appropriate, accepts the Potential Participant’s indication of preference, the election of the method of payment of the amount deferred shall become irrevocable.

(b)

Payment Options . A Potential Participant may elect to have the deferred portion of an Incentive Compensation Plan Award adjusted for any deemed gains, losses, and earnings accrued thereon paid:

(i)

(Post-Retirement) in 1 to 15 annual installments, in 2 to 30 semi-annual installments, or in 4 to 60 quarterly installments, the payment of the first of any of such installments to commence on the first day of the first calendar quarter which is on or after the first anniversary of (x) the Potential Participant’s first day of Retirement at age 55 or above (or at age 50 or above for a Heritage Conoco Employee who was employed by Conoco Inc. or its affiliates on August 30, 2002 if such Heritage Conoco Employee is eligible for early retirement under the Retirement Plan of Conoco) or (y) the Potential Participant’s first day of Layoff at age 50 or above, or

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(ii)

(Date Certain) with regard only to the deferred portion of an Incentive Compensation Award, in 1 to 15 annual installments, in 2 to 30 semi-annual installments, or in 4 to 60 quarterly installments, the payment of the first of any of such installments to commence on the first day of calendar quarter which is designated by the Participant, is at least one year after the date on which the election is made, and is not later than the 65 ^th birthday of the Participant; provided, however, that in the event of termination of employment from the Affiliated Group by a Heritage Conoco Employee who had made deferral of amounts from the Conoco Inc. Global Variable Compensation Plan, the balance of such deferred amounts (adjusted for earnings, gains, and losses) shall be paid in a lump sum as soon as practicable after termination, notwithstanding an installment election made pursuant to this Paragraph, or

(iii)

(Pre-Retirement) otherwise, in a lump sum paid as soon as practicable following the Participant’s termination from employment with the Affiliated Group.

(iv)

In the event that no election is properly and timely made with regard to the time and method of payment under Section 5(b)(i) or (ii), payment shall be made in 10 annual installments, the payment of the first of any of such installments to commence on the first day of the first calendar quarter which is on or after the first anniversary of (x) the Potential Participant’s first day of Retirement at age 55 or above (or at age 50 or above for a Heritage Conoco Employee who was employed by Conoco Inc. or its affiliates on August 30, 2002 if such Heritage Conoco Employee is eligible for early retirement under the Retirement Plan of Conoco) or (y) the Potential Participant’s first day of Layoff at age 50 or above.

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(c)

Election of Method of Payment of the Value of Restricted Stock and Restricted Stock Units . As provided in Section 3(c) above, a deferral of the value of all or part of the Restricted Stock or Restricted Stock Units will be considered payment option (b)(i) of this Section subject to Paragraphs (e) and (g) of this Section.

(d)

Election of Method of Payment of a Lump Sum Distribution from Non-Qualified Retirement Plans . At the time a Potential Participant submits an indication of preference to defer all or part of the lump sum distribution as provided in Section 3(d) above, the Potential Participant shall also elect in a manner prescribed by the Plan Administrator which payment option shall apply to the deferred lump sum adjusted for any gains, losses, and earnings to be accrued thereon credited to the Participant’s Deferred Compensation Account under this Plan. The payment options are annual installments of not less than 1 nor more than 15, semi-annual installments of not less than 2 nor more than 30, or quarterly installments of not less than 4 nor more than 60. The first installment shall commence as soon as practicable after any date specified by the Potential Participant, so long as such date is the first day of a calendar quarter and is at least one year and not later than five years from the date the payout option was elected. Subject to Paragraph (g) of this Section, if the Committee or CEO, as appropriate, accepts the Potential Participant’s indication of preference, the election of the method of payment of the amount deferred shall become irrevocable.

(e)

Payment Option Revisions . If a Section 5(b)(i) payment option applies to any part of the balance of a Participant’s Deferred Compensation Account, the Participant may revise such payment option as follows:

(i)

Prior to Retirement . The Participant at any time during a period beginning 365 days prior to and ending 90 days prior to the date the Participant Retires at age 55 or above may, with respect to the total of all amounts subject to such payment option at the time of the Participant’s Retirement at age 55 or above, in the manner prescribed by the Plan Administrator, revise such payment option and elect one of the payment options specified in (e)(iv) of this Section to apply to such total amount in place of such payment option.

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(ii)

Upon Layoff . If a Participant who is eligible to Retire or who is Laid Off during or after the year in which the Participant reaches age 50 is notified of Layoff, the Participant may, no later than 30 days after being notified of Layoff, in the manner prescribed by the Plan Administrator, revise such payment option and elect one of the payment options specified in (e)(iv) of this Section to apply to such total amount in place of such payment option.

(iii)

If Disabled . The Participant may at any time during a period from the date of the beginning of the qualifying period for the Company’s Long Term Disability Plan or similar plan to no later than 90 days prior to the end of such period, or within 30 days of the amendment of this Plan providing for such election, in the manner prescribed by the Plan Administrator, revise such payment option and elect one of the payment options specified in (e)(iv) of this Section to apply to the total of all amounts subject to such payment option; provided, however, that after the payments have begun, such payments may be made in a different manner if, the Participant due to an unanticipated emergency caused by an event beyond the control of the Participant results in financial hardship to the Participant, so request and the CEO gives written consent to the method of payment requested.

(iv)

Payment Options After Revision . If a Participant revises a Section 5(b)(i) payment option as specified in (e)(i), (e)(ii), or (e)(iii) of this Section, the Participant may select payments in annual installments of not less than 1 nor more than 15, in semi-annual installments of not less than 2 nor more than 30, or in quarterly installments of not less than 4 nor more than 60, with the first installment to commence as soon as practicable following any date specified by the Participant so long as such date is the first day of a calendar quarter, is on or after the Participant’s first day of Retirement at age 55 or above or the first day the Participant is no longer an Employee following Layoff, is at least one year and no more than five years from the date the payment option was revised.

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(f)

Installment Amount . The amount of each installment shall be determined by dividing the balance in the Participant’s Deferred Compensation Account as of the date the installment is to be paid, by the number of installments remaining to be paid (inclusive of the current installment).

(g)

Death of Participant . Upon the death of a Participant, the Participant’s beneficiary or beneficiaries designated in accordance with Section 6, or in the absence of an effective beneficiary designation, the surviving spouse, surviving children (natural or adopted) in equal shares, or the Estate of the deceased Participant, in that order of priority, shall receive payments in accordance with the payment option selected by the Participant, if death occurred after such payments had commenced; or if death occurred before payments have commenced, the beneficiary may select payments in annual installments of not less than 1 nor more than 15, in semi-annual installments of not less than 2 nor more than 30, or in quarterly installments of not less than 4 nor more than 60 with the first installment to commence as soon as practicable following any date specified by the beneficiary so long as such date is the first day of a calendar quarter and is at least one year and no more than five years from the date the payment option is selected and is not later than the date the deceased Participant would have been age 65; provided, however, such payments may be made in a different manner if the beneficiary or beneficiaries entitled to receive or receiving such payments, due to an unanticipated emergency caused by an event beyond the control of the beneficiary or beneficiaries that results in financial hardship to the beneficiary or beneficiaries, so requests and the CEO gives written consent to the method of payment requested.

(h)

Disability of Participant . In the event a Participant or Employee becomes disabled, the individual may, in the period from the date of the beginning of the qualifying period for the Company’s Long Term Disability Plan to no later than 90 days prior to the end of such period, or within 30 days of the amendment of this Plan providing for such election, indicate a preference, in a manner prescribed by the Plan Administrator, for any of the following:

(1)

To defer part or all of any Incentive Compensation Plan Award the Employee is eligible to receive in the immediately following calendar year,

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(2)

To defer part or all of the value of the Stock which would otherwise be delivered to the Employee when the restrictions lapse on any Restricted Stock or Restricted Stock Units or Restricted Stock Units are settled, or

(3)

To defer part or all of the value from their account under the Defined Contribution Makeup Plan which would otherwise be paid as a lump sum to the Participant.

Such indications of preference shall be subject to approval by the Committee if the Potential Participant is subject to Section 16 of the Exchange Act or by the CEO if the Potential Participant is not subject to Section 16 of the Exchange Act. The Committee or CEO, as applicable, shall consider such indication or preference as submitted and shall decide whether to accept or reject the preference expressed.

Such indications of preference, if accepted, become irrevocable on the date of such acceptance. A deferral of any amount will be paid under the terms of Section 5(b)(i) hereof - ten (10) annual installments, but subject to revision as specified under the terms of this Plan.

(i)

Termination of Employment . In the event a Participant’s employment with the Company, any Participating Subsidiary, or any other subsidiary of the Company terminates for any reason other than death, Retirement at age 55 or above, Disability, or Layoff during or after the year in which the Participant reaches age 50, the entire balance of the Participant’s Deferred Compensation Account shall be paid to the Participant in one lump sum as soon as practicable after the date the Participant terminates employment, except that a Participant who becomes employed by a member of the Affiliated Group immediately after terminating employment with the Company or Participating Subsidiary shall not receive their benefit under the Plan

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until the Participant terminates employment from the Affiliated Group; provided, however, the Committee, in its sole discretion, may elect to make such payments in the amounts and on such schedule as it may determine.

(j)

Rehire of Participant . In the event a Participant is a Rehired Participant, he/she will be eligible to receive notifications as specified in Section 2 and will be eligible to submit an Indication of Preference or Election to Defer as specified in Section 3, if the Participant agrees to the suspension of payments from his/her Deferred Compensation Account during the period of reemployment by the Company. Upon termination of reemployment, such payments shall resume on the same schedule as was in effect at the time the Participant previously Retired or was Laid Off.

SECTION 6. Special Provisions for Former ARCO Alaska Employees.

Notwithstanding any provisions to the contrary, in order to comply with the terms of the Master Purchase and Sale Agreement (“Sale Agreement”) by which the Company acquired certain Alaskan assets of Atlantic Richfield Company (“ARCO”), a Participant who was eligible to participate in the ARCO employee benefit plans immediately prior to becoming an Employee and who was not employed by ARCO Marine, Inc. (a “former ARCO Alaska employee”) may, in a manner prescribed by the Plan Administrator, indicate a preference or make an election:

(a)

To reduce voluntarily salary and receive an Award in the amount of the reduction credited to, at the Employee’s election, (i) an account under this Plan or (ii) for so long as the ARCO Executive Deferral Plan will accept such deferrals of salary, but not beyond December 31, 2001, an account under the ARCO Executive Deferral Plan; or

(b)

To defer any Award payable to a former ARCO employee who is involuntarily terminated prior to April 18, 2002, in lieu of a target ARCO Annual Incentive Plan (AIP) award, and at the Employee’s election credit the Award to (i) an account under this Plan or (ii) to the ARCO Executive Deferral Plan; or

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(c)

To defer the Final ARCO Supplemental Executive Retirement Plan (SERP) benefit that will be calculated as of the earlier of April 17, 2002, or the date the former ARCO employee voluntarily or involuntarily terminates employment from the Company or any Participating Subsidiary to the ARCO Executive Deferral Plan; or

(d)

To defer the value of the restricted stock granted on July 31, 2000, to an account under this Plan when the restrictions lapse on July 31, 2001, July 31, 2002, and July 31, 2003; provided that such indications of preference shall be made in July of the year preceding the calendar year when the restrictions are scheduled to lapse or as soon as practicable after July 31, 2000, for the restrictions on the shares that are to be lapsed on July 31, 2001; or

(e)

For a former ARCO Alaska employee who was classified as a grade 7 or 8 under ARCO’s job classification system and was eligible under ARCO’s Executive Deferral Plan to voluntarily reduce salary and defer the amount of the voluntary salary reduction and who was classified as a grade 31 or below at that time under Phillips Petroleum Company’s job classification system, to make an annual election to voluntarily reduce salary and defer the amount of the voluntary salary reduction for salary received from July 31, 2000, through December 31, 2000, and for the five years from 2001 through 2005 and receive a salary deferral credit under this Plan.

All indications of preference in Sections 6(a), (b), and (c) are subject to approval by the Compensation Committee if the Employee is subject to Section 16 of the Exchange Act and by the CEO if the Employee is not subject to Section 16 of the Exchange Act.

SECTION 7. Designation of Beneficiary.

Each Participant shall designate a beneficiary or beneficiaries to receive the entire balance of the Participant’s Deferred Compensation Account by giving signed written notice of such

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designation to the Plan Administrator. The Participant may from time to time change or cancel any previous beneficiary designation in the same manner. The last beneficiary designation received by the Plan Administrator shall be controlling over any prior designation and over any testamentary or other disposition. After acceptance by the Plan Administrator of such written designation, it shall take effect as of the date on which it was signed by the Participant, whether the Participant is living at the time of such receipt, but without prejudice to the Company or the CEO on account of any payment made under this Plan before receipt of such designation.

SECTION 8. Nonassignability.

The right of a Participant, or beneficiary, or other person who becomes entitled to receive payments under this Plan, shall not be assignable or subject to garnishment, attachment, or any other legal process by the creditors of, or other claimants against, the Participant, beneficiary, or other such person.

SECTION 9. Administration.

(a)

The Plan Administrator may adopt such rules, regulations, and forms as deemed desirable for administration of the Plan and shall have the discretionary authority to allocate responsibilities under the Plan to such other persons as may be designated.

(b)

(1)

a statement of the specific reason or reasons for the denial;

(2)

specific references to the pertinent provisions hereunder on which such denial is based;

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(3)

a description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is necessary; and

(4)

an explanation of the following claims review procedure set forth in paragraph (c) below.

(c)

Any claimant who feels that a claim has been improperly denied in whole or in part by the Plan Administrator may request a review of the denial by making written application to the Trustee. The claimant shall have the right to review all pertinent documents relating to said claim and to submit issues and comments in writing to the Trustee. Any person filing an appeal from the denial of a claim must do so in writing within sixty days after receipt of written notice of denial. The Trustee shall render a decision regarding the claim within sixty days after receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered within a reasonable time, but not later than 120 days after receipt of the request for review. The decision of the Trustee shall be in writing and, in the case of the denial of a claim in whole or in part, shall set forth the same information as is required in an initial notice of denial by the Plan Administrator, other than an explanation of this claims review procedure. The Trustee shall have absolute discretion in carrying out its responsibilities to make its decision of an appeal, including the authority to interpret and construe the terms hereunder, and all interpretations, findings of fact, and the decision of the Trustee regarding the appeal shall be final, conclusive and binding on all parties.

(d)

Compliance with the procedures described in paragraphs (b) and (c) shall be a condition precedent to the filing of any action to obtain any benefit or enforce any right which any individual may claim hereunder. Notwithstanding anything to the contrary in the Plan, these paragraphs (b), (c), and (d) may not be amended without the written consent of a seventy-five percent (75%) majority of Participants and Beneficiaries and such paragraphs shall survive the termination of this Plan until all benefits accrued hereunder have been paid.

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SECTION 10. Employment not Affected by Plan.

Participation or nonparticipation in this Plan shall neither adversely affect any person’s employment status nor confer any special rights on any person other than those expressly stated in the Plan. Participation in the Plan by an Employee of the Company or of a Participating Subsidiary shall not affect the Company’s or the Participating Subsidiary’s right to terminate the Employee’s employment or to change the Employee’s compensation or position.

SECTION 11. Determination of Recipients of Awards.

The determination of those persons who are entitled to Awards under an Incentive Compensation Plan and any other such plans shall be governed solely by the terms and provisions of the applicable plan, and the selection of an Employee as a Potential Participant or the acceptance of an indication of preference to defer an Award hereunder shall not in any way entitle such Potential Participant to an Award.

SECTION 12. Method of Providing Payments.

(a)

Nonsegregation . Amounts deferred pursuant to this Plan and the crediting of amounts to a Participant’s Deferred Compensation Account shall represent the Company’s unfunded and unsecured promise to pay compensation in the future. With respect to said amounts, the relationship of the Company and a Participant shall be that of debtor and general unsecured creditor. While the Company may make investments for the purpose of measuring and meeting its obligations under this Plan such investments shall remain the sole property of the Company subject to claims of its creditors generally, and shall not be deemed to form or be included in any part of the Deferred Compensation Account.

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(b)

Funding . It is the intention of the Company that this Plan shall be unfunded for federal tax purposes and for purposes of Title I of ERISA; provided, however, that the Company may establish a grantor trust to satisfy part or all of its Plan payment obligations so long as the Plan remains unfunded for federal tax purposes and for purposes of Title I of ERISA.

SECTION 13. Amendment or Termination of Plan.

Subject to Paragraph 9(d), the Company reserves the right to amend this Plan from time to time or to terminate the Plan entirely, provided, however, that no amendment may affect the balance in a Participant’s account on the effective date of the amendment. No Participant shall participate in a decision to amend or terminate this Plan. In the event of termination of the Plan, the Chief Executive Officer, in his sole discretion, may elect to have the Company pay to the Participant in one lump sum as soon as practicable after termination of the Plan, the balance then in the Participant’s account.

SECTION 14. Miscellaneous Provisions.

(a)

Except as otherwise provided herein, the Plan shall be binding upon the Company, its successors and assigns, including but not limited to any corporation which may acquire all or substantially all of the Company’s assets and business or with or into which the Company may be consolidated or merged.

(b)

This Plan shall be construed, regulated, and administered in accordance with the laws of the State of Texas except to the extent that said laws have been preempted by the laws of the United States.

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SECTION 15. Effective Date of Existing Restatement of the Plan.

Title I of the Phillips 66 Key Employee Deferred Compensation Plan is hereby adopted effective as of the Effective Time and conditioned on the occurrence of the Distribution.

Executed this 24th day of April 2012, by a duly authorized officer of the Company.

/s/ Chantal D. Veevaete

Chantal D. Veevaete

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APPENDIX A

CONOCOPHILLIPS SPIN-OFF

1.	Background . Phillips 66 was a subsidiary of ConocoPhillips (“COP”) prior to the Distribution. As a result of the Distribution, COP distributed its interest in Phillips 66 to its shareholders.

As of the Effective Time, pursuant to an agreement between Phillips 66 and COP that was conditioned on the Distribution occurring, the liabilities for certain participants’ benefits under the Key Employee Deferred Compensation Plan of ConocoPhillips (the “COP Plan”), including amounts grandfathered from Code section 409A (i.e., amounts deferred and vested prior to January 1, 2005), were transferred to the Company and to this Plan. The Participants whose benefits were transferred to this Plan on the Effective Time are referred to below as “COP Participants.” The rules in this Appendix shall apply to COP Participants and certain other Plan terms notwithstanding any Plan provisions to the contrary.

3.	Distributions . The terms of this Plan shall govern the distribution of all benefits payable to a COP Participant or any other person with a right to receive such benefits, including amounts accrued under the COP Plan and then transferred to this Plan.

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5.	Participant Elections . All elections made by COP Participants under the COP Plan, including any payment elections or beneficiary designations, shall apply to the same effect under this Plan as if made under the terms of this Plan.

6.	References to Plan . All references in this Plan to the “Plan” as in effect before the Effective Time shall be read as references to the COP Plan as it was in effect at such time.

Right to Benefits . With respect to any recordkeeping account established to determine a benefit provided or due under the COP Plan at any time, no benefit will be due under the Plan except with respect to the portion of such recordkeeping account reflecting the liability transferred from the COP Plan to the Plan on the Effective Time. Additionally, on and after the Effective Time, COP, any subsidiary of COP that remains a subsidiary after the Distribution (“COP Subsidiary”), the COP Plan, any directors, officers, or employees of COP or a COP Subsidiary, and any successors to any of the aforementioned entities or individuals shall have no further obligation or liability to any COP Participant with respect to any benefit, amount, or right due under the COP Plan.

Stock .

For the period prior to the Distribution, “Stock” may also include any common stock of ConocoPhillips, par value $.01 (“ConocoPhillips Common Stock”).

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Restricted Stock Units of Phillips 66 and restricted stock and restricted stock units of ConocoPhillips after the Distribution. To the extent necessary, the Plan Administrator shall use reasonable interpretations and adjustments to determine the Fair Market Value of the Stock. Furthermore, with regard to any valuation that occurs after the Distribution and which requires valuation of ConocoPhillips Common Stock or of Stock, or of both, from a time on or before the Distribution and from a time after the Distribution, then the following shall apply, in order to allow the valuation to take into account the distribution by stock dividend of one share of Stock for each two shares of ConocoPhillips Common Stock held at the Distribution:

(a)

The value of ConocoPhillips Common Stock or of Stock determined as of any date after the Distribution shall be determined using market information related to each;

(b)

The value of ConocoPhillips Common Stock determined as of any date on or before the Distribution that does not also require a valuation of ConocoPhillips Common Stock as of any date after the Distribution shall be determined using market information related to ConocoPhillips Common Stock as it traded on or before the Distribution;

(c)

The value of ConocoPhillips Common Stock determined as of any date on or before the Distribution that also requires a valuation of ConocoPhillips Common Stock or of Stock as of any date after the Distribution shall be deemed to be two-thirds of the value of ConocoPhillips Common Stock determined using market information related to ConocoPhillips Common Stock as it traded on or before the Distribution; and

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(d)

The value of Stock determined as of any date on or before the Distribution that also requires a valuation of ConocoPhillips Common Stock or of Stock as of any date after the Distribution shall be deemed to be one-third of the value of ConocoPhillips Common Stock determined using market information related to ConocoPhillips Common Stock as it traded on or before the Distribution.

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Exhibit 10.19

PHILLIPS 66

KEY EMPLOYEE DEFERRED COMPENSATION PLAN

TITLE II

(Effective for benefits earned or vested after

December 31, 2004)

See Appendix B for special rules related to the spin-off of Phillips 66 from ConocoPhillips.

PURPOSE

employees” within the meaning of sections 201(2), 301(a)(3), and 401(a)(1) of ERISA. Notwithstanding any other provision of this Plan, this Plan shall be interpreted, operated, and administered in a manner consistent with these intentions.

SECTION 1. Definitions.

(a)

“Award” shall mean the United States cash dollar amount (i) allotted to an Employee under the terms of an Incentive Compensation Plan or a Long Term Incentive Plan, or (ii) required to be credited to an Employee’s Deferred Compensation Account pursuant to the terms of an Award or of an Incentive Compensation Plan, the Long Term Incentive Compensation Plan, the Strategic Incentive Plan, a Long Term Incentive Plan, or any similar plans, or any administrative procedure adopted pursuant thereto, or (iii) credited as a result of an Employee’s voluntary reduction of Salary, or (iv) any other amount determined by the Committee to be an Award under the Plan.

(b)

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute.

(c)

“Committee” shall mean the Compensation Committee of the Board of Directors of Phillips 66.

(d)

“Company” shall mean Phillips 66 Company, a Delaware corporation, or any successor corporation. The Company is a Subsidiary of Phillips 66.

(e)

“Phillips 66” shall mean Phillips 66, a Delaware corporation, or any successor corporation. Phillips 66 is a publicly held corporation and the parent of the Company.

(f)

“Controlled Group” shall mean Phillips 66 and its Subsidiaries.

(g)

“Deferred Compensation Account” shall mean an account established and maintained for each Participant in which is recorded the amounts of Awards deferred by a Participant, the deemed gains, losses, and earnings accrued thereon, and payments made therefrom all in accordance with the terms of the Plan.

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(h)

“Election Form” shall mean a written form, including one in electronic format, provided by the Plan Administrator pursuant to which a Participant may elect the time and form of payment of his or her Benefit.

(i)

“Employee” shall mean any individual who is a salaried employee of the Company or of a Participating Subsidiary who is eligible to receive an Award from an Incentive Compensation Plan and at the time of the Award is classified as a Phillips 66 salary grade 19 or above, or any equivalent salary grade at a Participating Subsidiary.

(j)

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor statute.

(k)

“Incentive Compensation Plan” shall mean the Phillips 66 Variable Cash Incentive Plan, ConocoPhillips Variable Cash Incentive Program, the Incentive Compensation Plan of Phillips Petroleum Company, or the Annual Incentive Compensation Plan of Phillips Petroleum Company, the Special Incentive Plan for Former Tosco Executives, the Conoco Inc. Global Variable Compensation Plan, or a similar plan of a Participating Subsidiary, or any similar or successor plans, or all, as the context may require.

(l)

“Long-Term Incentive Compensation Plan” shall mean the Long-Term Incentive Compensation Plan of Phillips Petroleum Company, which was terminated December 31, 1985.

(m)

“Long-Term Incentive Plan” shall mean the Phillips 66 Performance Share Program, the Phillips 66 Restricted Stock Program, the ConocoPhillips Performance Share Program, the ConocoPhillips Restricted Stock Program, the Phillips Petroleum Company Long-Term Incentive Plan, or a similar or successor plan of any of them, established under an Omnibus Securities Plan.

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(n)

“Omnibus Securities Plan” shall mean the Phillips 66 Omnibus Stock and Performance Incentive Plan, the 2011 Omnibus Stock and Performance Incentive Plan of ConocoPhillips, the 2009 Omnibus Stock and Performance Incentive Plan of ConocoPhillips, the 2004 Omnibus Stock and Performance Incentive Plan of ConocoPhillips, the 2002 Omnibus Securities Plan of Phillips Petroleum Company, the Omnibus Securities Plan of Phillips Petroleum Company, the 1998 Stock and Performance Incentive Plan of ConocoPhillips, the 1998 Key Employee Stock Plan of ConocoPhillips, or a similar or successor plan of any of them.

(o)

“Participant” shall mean a person for whom a Deferred Compensation Account is maintained.

(p)

“Participating Subsidiary” shall mean a Subsidiary that has adopted one or more plans making participants eligible for participation in this Plan and one or more Employees of which are Potential Participants.

(q)

“Plan Administrator” shall mean the Manager, Benefits of the Company, or such person’s successor.

(r)

“Potential Participant” shall mean a person who has received a notice specified in Section 2.

(s)

“Restricted Stock” and “Restricted Stock Units” shall mean respectively shares of Stock and units each of which shall represent a hypothetical share of Stock, which have certain restrictions attached to the ownership thereof or the delivery of shares pursuant thereto.

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(t)

“Retirement” or “Retire” or “Retiring” shall mean Separation from Service from the Controlled Group on or after age 55 or above and on or after the earliest early retirement date as defined in applicable title of the Phillips 66 Retirement Plan or of the applicable retirement plan of a Participating Company.

(u)

“Separation from Service” shall mean the date on which the Participant separates from service with the Controlled Group within the meaning of Code section 409A, whether by reason of death, disability, retirement, or otherwise. In determining Separation from Service, with regard to a bona fide leave of absence that is due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months, where such impairment causes the Employee to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, a 29-month period of absence shall be substituted for the six-month period set forth in section 1.409A-1(h)(1)(i) of the regulations issued under section 409A of the Code, as allowed thereunder.

(v)

“Settlement Date” shall mean the date on which all acts under an Incentive Compensation Plan or the Long-Term Incentive Compensation Plan or actions directed by the Committee, as the case may be, have been taken which are necessary to make an Award payable to the Participant.

(w)

“Salary” shall mean the monthly equivalent rate of pay for an Employee before adjustments for any before-tax voluntary reductions.

(x)

“Stock” means shares of common stock of Phillips 66, par value $.01.

(y)

“Strategic Incentive Plan” shall mean the Strategic Incentive Plan portion of the 1986 Stock Plan of Phillips Petroleum Company, of the 1990 Stock Plan of Phillips Petroleum Company, of the Phillips Petroleum Company Omnibus Securities Plan, and of any successor plans of similar nature.

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(z)

(aa)

“Trustee” shall mean the trustee of the grantor trust established for this Plan by a trust agreement between the Company and the trustee, or any successor trustee.

SECTION 2. Notification of Potential Participants.

(a)

Incentive Compensation Plan . At such times as the Plan Administrator may determine, Employees who are expected to be eligible to receive an Award for the immediately following calendar year under an Incentive Compensation Plan will be notified and given the opportunity to make an election, using the Election Form or in such other manner prescribed by the Plan Administrator, to defer all or part of such Award; provided, however, that in the case of an Award under an Incentive Compensation Plan determined by the Plan Administrator to be “performance-based compensation” under Code section 409A, the Plan Administrator may delay the notification and opportunity to make an election until no later than June 30 of the year for which the Award is to be made.

(b)

Salary Reduction . With regard to each year, at such times as the Plan Administrator may determine, Employees on the U.S. dollar payroll will be notified and given the opportunity to make an election, using the Election Form or in such other manner prescribed by the Plan Administrator, to make a voluntary reduction of Salary for each pay period of the following calendar year, in which case the Company will credit

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a like amount as an Award hereunder, provided that the amount of such voluntary reduction shall not be less than 1% nor more than 50% of the Employee’s Salary per pay period.

SECTION 3. Election to Defer Award or Reduce Salary.

(a)

Incentive Compensation Plan . If a Potential Participant elects to defer under this Plan all or any part of the Award to which a notice received under Section 2(a) pertains, the Potential Participant must make such election, using the Election Form or in such other manner prescribed by the Plan Administrator, which must be received on or before December 31 of the year in which said Section 2(a) notice was received (or at such earlier time as may be prescribed by the Plan Administrator). The Potential Participant’s election shall become irrevocable on December 31 of the year in which said Section 2(a) notice was received (except in the case of an election for an Award under an Incentive Compensation Plan determined by the Plan Administrator to be “performance-based compensation” under Code section 409A, the election shall become irrevocable on June 30 of the year for which the Award is to be made), subject to the provisions Section 5(d). If an election is not properly made and timely received, the Potential Participant will be deemed to have elected to receive and not to defer any such Incentive Compensation Plan Award.

(b)

Salary Reduction . If a Potential Participant elects to voluntarily reduce Salary to which a notice received under Section 2(b) pertains and receive an Award hereunder in lieu thereof, the Potential Participant must make an election, using the Election Form or in such other manner prescribed by the Plan Administrator, which must be received on or before December 31 (or such earlier time as may be prescribed by the Plan Administrator) prior to the beginning of the calendar year of the elected deferral. Such election must be in writing signed by the Potential Participant, and must state the amount of the salary reduction the Potential Participant elects. Such election becomes irrevocable on December 31 prior to the beginning of the calendar year, subject to the provisions Section 5(d). If an election is not properly made and timely received, the Potential Participant will be deemed to have elected to receive and not to defer any such Salary.

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SECTION 4. Deferred Compensation Accounts.

(a)

Credit for Deferral . Amounts deferred pursuant to Section 3(a) will be credited to a Deferred Compensation Account for the Participant for the calendar year in which the amounts are deferred not later than 30 days after the Settlement Date of the Incentive Compensation Plan.

If an Award in the form of Restricted Stock or Restricted Stock Units provides that, in certain instances the Restricted Stock or Restricted Stock Units shall be cancelled and a market value in lieu thereof be credited to a Deferred Compensation Account for the Participant, then the market value shall be credited to a Deferred Compensation Account for the Participant as of the day that the Award in the form of Restricted Stock or Restricted Stock Units is cancelled. The market value of the underlying Restricted Stock or the shares represented by the Restricted Stock Units awarded under a Long Term Incentive Plan, under an Incentive Compensation Plan that began on or after January 1, 2003, under an Omnibus Securities Plan (with regard to awards made on or after January 1, 2003), and for the Special Stock Awards issued on October 22, 2002, shall be the monthly average Fair Market Value of the Stock during the calendar month preceding the month in which the restrictions lapse or shares are to be delivered as applicable. The monthly average Fair Market Value of the Stock is the average of the daily Fair Market Value of the Stock for each trading day of the month. For Awards made prior to those times, the market value of the underlying Restricted Stock or the shares represented by the Restricted Stock Units, as applicable, shall be based on the higher of (i) the average of the high and low selling prices of the Stock on the date the restrictions lapse or the last trading day before the day the restrictions lapse if such date is not a trading day or (ii) the average of the high three monthly Fair Market Values of the Stock during the twelve calendar months preceding the month in which the restrictions lapse. The

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monthly Fair Market Value of the Stock is the average of the daily Fair Market Value of the Stock for each trading day of the month. The daily Fair Market Value of the Stock shall be deemed equal to the average of the high and low selling prices of the Stock on the New York Stock Exchange.

Amounts deferred pursuant to other provisions of this Plan shall be credited to a Deferred Compensation Account for the Participant for the calendar year in which such amounts are deferred not later than 30 days after the date the Award or Salary would otherwise be payable.

(b)

Designation of Investments . The amount in each Deferred Compensation Account of a Participant shall be deemed to have been invested and reinvested from time to time, in such “eligible securities” as the Participant shall designate. Prior to or in the absence of a Participant’s designation, the Company shall designate an “eligible security” in which the Participant’s Deferred Compensation Account shall be deemed to have been invested until designation instructions are received from the Participant. Eligible securities are those securities designated by the Chief Financial Officer of Phillips 66, or his successor. The Chief Financial Officer of Phillips 66 may include as eligible securities, stocks listed on a national securities exchange, and bonds, notes, debentures, corporate or governmental, either listed on a national securities exchange or for which price quotations are published in The Wall Street Journal and shares issued by investment companies commonly known as “mutual funds.” The Deferred Compensation Accounts of a Participant will be adjusted to reflect the deemed gains, losses, and earnings as though the amount deferred was actually invested and reinvested in the eligible securities for each Deferred Compensation Account of the Participant.

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Account shall be adjusted accordingly to reflect the price actually paid or received by the Company for such securities after adjustment for all transaction expenses incurred (including without limitation brokerage fees and stock transfer taxes).

In the case of any deemed purchase not actually made by the Company, the Deferred Compensation Account shall be charged with a dollar amount equal to the quantity and kind of securities deemed to have been purchased multiplied by the fair market value of such security on the date of reference and shall be credited with the quantity and kind of securities so deemed to have been purchased. In the case of any deemed sale not actually made by the Company, the account shall be charged with the quantity and kind of securities deemed to have been sold, and shall be credited with a dollar amount equal to the quantity and kind of securities deemed to have been sold multiplied by the fair market value of such security on the date of reference. As used in this paragraph “fair market value” means in the case of a listed security the closing price on the date of reference, or if there were no sales on such date, then the closing price on the nearest preceding day on which there were such sales, and in the case of an unlisted security the mean between the bid and asked prices on the date of reference, or if no such prices are available for such date, then the mean between the bid and asked prices to the nearest preceding day for which such prices are available.

The Plan Administrator may designate a third party to provide services that may include record keeping, Participant accounting, Participant communication, payment of installments to the Participant, tax reporting, and any other services specified in an agreement with such third party.

(c)

Payments . A Participant’s Deferred Compensation Account shall be debited with respect to payments made from the account pursuant to this Plan as of the date such payments are made from the account. Payments shall be made on the dates specified in the elections of the Participant; provided, however, that the Participant shall have no right to complain or make a claim about the date of a payment if such payment is

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made no earlier than 30 days prior to the specified date and no later than the end of the calendar year in which such specified date falls (or, if later, by the 15 ^th day of the third calendar month following the specified date).

If any person to whom a payment is due hereunder is under legal disability as determined in the sole discretion of the Plan Administrator, the Plan Administrator shall have the power to cause the payment due such person to be made to such person’s guardian or other legal representative for the person’s benefit, and such payment shall constitute a full release and discharge of the Company, all members of the Controlled Group, the Plan Administrator, and any fiduciary of the Plan.

(d)

Statements . At least one time per year the Plan Administrator (or a third party acting for the Plan Administrator) will furnish each Participant a written statement setting forth the current balance in the Participant’s Deferred Compensation Account, the amounts credited or debited to such account since the last statement and the payment schedule of deferred Awards, and deemed gains, losses, and earnings accrued thereon as provided by the deferred payment option selected by the Participant. This provision shall be deemed satisfied if the Plan Administrator (or a third party acting for the Plan Administrator) makes such information available through electronic means, such as a web site, and informs affected Participants of the availability of the information and the manner of accessing it.

SECTION 5. Payments from Deferred Compensation Accounts.

(a)

Election of Method of Payment . At the time a Potential Participant submits an election to defer all or any part of an Award under an Incentive Compensation Plan as provided in Section 3(a) above or to reduce any part of salary as provided in Section 3(b) above, the Potential Participant shall also elect, using the Election Form or in such other manner prescribed by the Plan Administrator, which of the payment options, provided for in Paragraph (b) of this Section, shall apply to the deferred portion of said Award or salary adjusted for any deemed gains, losses, and earnings

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accrued thereon credited to the Participant’s Deferred Compensation Account under this Plan. Subject to Paragraph (d) of this Section, the election of the method of payment of the amount deferred shall become irrevocable on December 31 of the year in which the applicable Section 2(a) or (b) notice was received (except in the case of an election for an Award under an Incentive Compensation Plan determined by the Plan Administrator to be “performance-based compensation” under Code section 409A, the election shall become irrevocable on June 30 of the year in which said Section 2(a) or (b) notice was received). If an election does not properly indicate a time and method of payment, the Potential Participant will be deemed to have elected to receive such payment in a single lump sum at the earlier of death or the date which is the first of the calendar quarter six months after Separation from Service other than by death.

(b)

Payment Options . A Potential Participant may elect, using an Election Form or in such other manner prescribed by the Plan Administrator, to have the deferred portion of an Incentive Compensation Plan Award or salary adjusted for any deemed gains, losses, and earnings accrued thereon paid:

(i)

(After Separation from Service) in 1 to 15 annual installments, in 2 to 30 semi-annual installments, or in 4 to 60 quarterly installments, the payment of the first of any of such installments to commence on the first day of the first calendar quarter which is on or after one year from the Participant’s Separation from Service and is no longer than five years from the Participant’s Separation from Service, subject to Paragraph (d) of this Section, or

(ii)

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(iii)

In the event that no election is properly and timely made with regard to the time and method of payment under Section 5(b)(i), payment shall be made on the earlier of the death or the date which is the first of the calendar quarter following six months after the date of Separation from Service, whether by retirement, disability, or otherwise (other than by death), of the Participant, subject to Paragraph (d) of this Section.

(c)

Method of Payment of the Value of Restricted Stock and Restricted Stock Units . If an Award in the form of Restricted Stock or Restricted Stock Units provides that, in certain instances the Restricted Stock or Restricted Stock Units shall be cancelled and a market value in lieu thereof be credited to a Deferred Compensation Account for the Participant, payment of such Deferred Compensation Account shall be made on the earlier of the death or the date which is the first of the calendar quarter following six months after the date of Separation from Service, whether by retirement, disability, or otherwise (than death), of the Participant, subject to Paragraph (d) of this Section.

(d)

Change in Time or Form of Payment . A Participant may make an election to change the time or form of payment elected or set under Section 5 (including this Paragraph (d)), but only if the following rules are satisfied:

(1)

The election to change the time or form of payment may not take effect until at least twelve months after the date on which such election is made;

(2)

Payment under such election may not be made earlier than at least five years from the date the payment would have otherwise been made or commenced;

(3)

Such payment may commence as of the beginning of any calendar quarter;

(4)

An election to receive payments in installments shall be treated as a single payment for purposes of these rules;

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(5)

The election may not result in an impermissible acceleration of payment prohibited under Code section 409A;

(6)

No more than four such elections shall be permitted with respect to each Deferred Compensation Account of a Participant; and

(7)

No payment may be made after the date that is twenty (20) years after the date of the Participant’s Separation from Service.

(e)

Effect of Taxation . If a portion of a Participant’s Benefit (and earnings, gains, and losses thereon) is includible in income under Code section 409A, such portion shall be distributed immediately to the Participant.

(f)

(g)

Death of Participant . Upon the death of a Participant, the Participant’s beneficiary or beneficiaries designated in accordance with Section 8, or in the absence of an effective beneficiary designation, the surviving spouse, surviving children (natural or adopted) in equal shares, or the Estate of the deceased Participant, in that order of priority, shall receive payments in accordance with the payment option selected by the Participant or, if no payment option was properly and timely selected by the Participant with regard to a Deferred Compensation Account, upon the death of the Participant.

SECTION 6. Reserved.

SECTION 7. Reserved.

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SECTION 8. Designation of Beneficiary.

Each Participant shall designate a beneficiary or beneficiaries to receive the entire balance of the Participant’s Deferred Compensation Account by giving signed written notice of such designation to the Plan Administrator. The Participant may from time to time change or cancel any previous beneficiary designation in the same manner. The last beneficiary designation received by the Plan Administrator shall be controlling over any prior designation and over any testamentary or other disposition. After acceptance by the Plan Administrator of such written designation, it shall take effect as of the date on which it was signed by the Participant, whether the Participant is living at the time of such receipt, but without prejudice to the Company or any member of the Controlled Group or the Plan Administrator or their respective employees and agents on account of any payment made under this Plan before receipt of such designation.

SECTION 9. Nonassignability.

SECTION 10. Administration.

(a)

The Plan shall be administered by the Plan Administrator. The Plan Administrator may delegate to employees of the Company or any member of the Controlled Group the authority to execute and deliver such instruments and documents, to do all such acts and things, and to take such other steps deemed necessary, advisable, or convenient for the effective administration of the Plan in accordance with its terms and purpose, except that the Plan Administrator may not delegate any discretionary authority with respect to substantive decisions or functions regarding the Plan or Benefits hereunder. The Plan Administrator may adopt such rules, regulations, and

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forms as deemed desirable for administration of the Plan and shall have the discretionary authority to allocate responsibilities under the Plan to such other persons as may be designated.

(b)

Any claim for benefits hereunder shall be presented in writing to the Plan Administrator for consideration, grant, or denial. Claimants will be notified in writing of approved claims, which will be processed as claimed. A claim is considered approved only if its approval is communicated in writing to a claimant.

(c)

(1)

the specific reason or reasons for the denial;

(2)

specific reference to pertinent Plan provisions on which the denial is based;

(3)

a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and

(4)

an explanation of the procedure for review of the denied or partially denied claim set forth below, including the claimant’s right to bring a civil action under ERISA section 502(a) following an adverse benefit determination on review.

(d)

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the claim. A claimant or the claimant’s authorized representative will have, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits and may submit issues and comments in writing. The review will take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. If the claimant fails to file a request for review within 60 days of the denial notification, the claim will be deemed abandoned and the claimant precluded from reasserting it. If the claimant does file a request for review, his request must include a description of the issues and evidence he deems relevant. Failure to raise issues or present evidence on review will preclude those issues or evidence from being presented in any subsequent proceeding or judicial review of the claim.

(e)

The Trustee will provide a prompt written decision on review. If the claim is denied on review, the decision shall set forth:

(1)

the specific reason or reasons for the adverse determination;

(2)

specific reference to pertinent Plan provisions on which the adverse determination is based;

(3)

(4)

a statement describing any voluntary appeal procedures offered by the Plan and the claimant’s right to obtain the information about such procedures, as well as a statement of the claimant’s right to bring an action under ERISA section 502(a).

(f)

A decision will be rendered no more than 60 days after the Trustee’s receipt of the request for review, except that such period may be extended for an additional 60 days if the Trustee determines that special circumstances (such as for a hearing) require such extension. If an extension of time is required, written notice of the extension will be furnished to the claimant before the end of the initial 60-day period.

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(g)

SECTION 11. Employment not Affected by Plan.

Participation or nonparticipation in this Plan shall neither adversely affect any person’s employment status nor confer any special rights on any person other than those expressly stated in the Plan. Participation in the Plan by an Employee of the Company or of a Participating Subsidiary shall not affect the Company’s or any Controlled Group member’s right to terminate the Employee’s employment or to change the Employee’s compensation or position.

SECTION 12. Determination of Recipients of Awards.

The determination of those persons who are entitled to Awards under an Incentive Compensation Plan and any other such plans shall be governed solely by the terms and provisions of the applicable plan or program, and the selection of an Employee as a Potential Participant or the acceptance of an indication of preference to defer an Award hereunder shall not in any way entitle such Potential Participant to an Award.

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SECTION 13. Method of Providing Payments.

(a)

(b)

SECTION 14. Amendment or Termination of Plan.

The Company reserves the right to amend this Plan from time to time or to terminate the Plan entirely, provided, however, that no amendment may affect the balance in a Participant’s account on the effective date of the amendment.

SECTION 15. Miscellaneous Provisions.

(a)

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(b)

This Plan shall be construed, regulated, and administered in accordance with the laws of the State of Texas except to the extent that said laws have been preempted by the laws of the United States.

(c)

It is the intention of the Company that, so long as any of Phillips 66’s equity securities are registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, this Plan shall be operated in compliance with 16(b) and, if any Plan provision or transaction is found not to comply with Section 16(b), that provision or transaction, as the case may be, shall be deemed null and void ab initio . Notwithstanding anything in the Plan to the contrary, the Company, in its absolute discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan to Participants who are officers and directors subject to Section 16(b) without so restricting, limiting or conditioning the Plan with respect to other Participants.

(d)

For purposes of this Plan, electronic communications and signatures shall be considered to be in writing if made in conformity with procedures which the Plan Administrator may adopt from time to time.

SECTION 16. Effective Date of the Plan.

Title II of the Phillips 66 Key Employee Deferred Compensation Plan is hereby adopted effective as of the Effective Time and conditioned on the occurrence of the Distribution.

Executed this 24th day of April 2012, by a duly authorized officer of the Company.

/s/ Chantal D. Veevaete

Chantal D. Veevaete

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APPENDIX A

SELECT NEW HIRES TO TITLE II OF

THE PHILLIPS 66 KEY EMPLOYEE DEFERRED COMEPNSATION PLAN

1. The Select New Hire will, effective on the first day of employment with the Controlled Group, become a Participant in Title II of the Phillips 66 Key Employee Deferred Compensation Plan. A Deferred Compensation Account will be created for the Select New Hire in the Plan. The amount set forth in the applicable resolution will be credited to the Deferred Compensation Account for the Select New Hire not later than 30 days after the first day of employment of the Select New Hire. Section 5(a) of the Plan shall be disregarded with respect to the Deferred Compensation Account, and in lieu thereof the Select New Hire shall be asked to complete and return to the Plan Administrator election forms to set the time and form of distribution with regard to the Deferred Compensation Account either before the first day of employment or no later than 30 days after the first day of employment. Other than with regard to the timing of the initial distribution election (as set forth in the preceding sentence), other provisions of Section 5 of the Plan shall apply to the Deferred Compensation Account, including default provisions in the event that a properly completed initial distribution election form is not received within the time set forth in the preceding sentence. For purposes of Section 5(b)(ii) of the Plan, the amount set forth in the applicable resolution shall be considered to be a deferred portion of an Incentive Compensation Plan award.

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2. The resolution granting participation to the Select New Hire will also set the vesting schedule for the Deferred Compensation Account provided pursuant to paragraph 1 of this Appendix.

3. All other provisions of the Plan will apply to the Deferred Compensation Account and the Select New Hire as a Participant in the Plan.

4. Nothing in this Appendix is intended to affect the other operations of the Plan, such as Salary reductions and deferrals or Incentive Compensation Plan deferrals. If the Select New Hire is, under the provisions of the Plan, otherwise eligible to, participate in the Plan, the Select New Hire may do so in accordance with those provisions.

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APPENDIX B

CONOCOPHILLIPS SPIN-OFF

1.	Background . Phillips 66 was a subsidiary of ConocoPhillips (“COP”) prior to the Distribution. As a result of the Distribution, COP distributed its interest in Phillips 66 to its shareholders.

As of the Effective Time, pursuant to an agreement between Phillips 66 and COP that was conditioned on the Distribution occurring, the liabilities for certain participants’ benefits under the Key Employee Deferred Compensation Plan of ConocoPhillips (the “COP Plan”), including amounts grandfathered from Code section 409A (i.e., amounts deferred and vested prior to January 1, 2005), were transferred to the Company and to this Plan. The Participants whose benefits were transferred to this Plan on the Effective Time are referred to below as “COP Participants.” The rules in this Appendix shall apply to COP Participants and certain other Plan terms notwithstanding any Plan provisions to the contrary.

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3.	Distributions . The terms of this Plan shall govern the distribution of all benefits payable to a COP Participant or any other person with a right to receive such benefits, including amounts accrued under the COP Plan and then transferred to this Plan.

5.	Participant Elections . All elections made by COP Participants under the COP Plan, including any payment elections or beneficiary designations, shall apply to the same effect under this Plan as if made under the terms of this Plan.

6.	References to Plan . All references in this Plan to the “Plan” as in effect before the Effective Time shall be read as references to the COP Plan as it was in effect at such time.

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after the Distribution (“COP Subsidiary”), the COP Plan, any directors, officers, or employees of COP or a COP Subsidiary, and any successors to any of the aforementioned entities or individuals shall have no further obligation or liability to any COP Participant with respect to any benefit, amount, or right due under the COP Plan.

Stock .

For the period prior to the Distribution, “Stock” may also include any common stock of ConocoPhillips, par value $.01 (“ConocoPhillips Common Stock”).

As of the Distribution, the Restricted Stock and Restricted Stock Units of ConocoPhillips shall be converted into Restricted Stock and Restricted Stock Units of Phillips 66 and restricted stock and restricted stock units of ConocoPhillips as provided in the Employee Matters Agreement. The amounts to be credited to a Participant’s Deferred Compensation Account under Section 4(a) will be based on such Restricted Stock and Restricted Stock Units of Phillips 66 and restricted stock and restricted stock units of ConocoPhillips after the Distribution. To the extent necessary, the Plan Administrator shall use reasonable interpretations and adjustments to determine the Fair Market Value of the Stock. Furthermore, with regard to any valuation that occurs after the Distribution and which requires valuation of ConocoPhillips Common Stock or of Stock, or of both, from a time on or before the Distribution and from a time after the Distribution, then the following shall apply, in order to allow the valuation to take into account the distribution by stock dividend of one share of Stock for each two shares of ConocoPhillips Common Stock held at the Distribution:

(a)

The value of ConocoPhillips Common Stock or of Stock determined as of any date after the Distribution shall be determined using market information related to each;

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(b)

(c)

(d)

The value of Stock determined as of any date on or before the Distribution that also requires a valuation of ConocoPhillips Common Stock or Stock as of any date after the Distribution shall be deemed to be one-third of the value of ConocoPhillips Common Stock determined using market information related to ConocoPhillips Common Stock as it traded on or before the Distribution.

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Exhibit 10.20

PHILLIPS 66

DEFINED CONTRIBUTION MAKE-UP PLAN

TITLE I

(Effective for benefits earned and vested prior to

January 1, 2005)

The Phillips 66 Defined Contribution Make-Up Plan is hereby adopted effective as of the “Effective Time” defined in the Employee Matters Agreement by and between ConocoPhillips and Phillips 66 (the “Effective Time”) and conditioned on the occurrence of the “Distribution” defined in such Employee Matters Agreement (the “Distribution”).

See Appendix A for special rules related to the spin-off of Phillips 66 from ConocoPhillips.

The Phillips 66 Defined Contribution Make-Up Plan is intended to provide certain specified benefits to Highly Compensated Employees whose benefits under the Phillips 66 Savings Plan might otherwise be limited. This Plan is a continuation for certain employees of Phillips 66 and its Affiliated Group of the Defined Contribution Make-Up Plan of ConocoPhillips, and all amounts contributed under that plan shall continue under the terms of this Plan. Title I of this Plan is effective with regard to benefits earned and vested prior to January 1, 2005, while Title II of this Plan is effective with regard to benefits earned or vested after December 31, 2004. Other than earnings, gains, and losses, no further benefits shall accrue under Title I of this Plan after December 31, 2004.

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Section 1. Definitions.

For purposes of the Plan, the following terms, as used herein, shall have the meaning specified:

(a)	“Affiliated Company” shall mean Phillips 66 and any company or other legal entity that is controlled, either directly or indirectly, by Phillips 66.

(b)	“Affiliated Group” shall mean Phillips 66 and its subsidiaries and affiliates in which it owns a 5% or more equity interest.

(c)

“Allocation Ratio” shall mean the ratio determined by dividing (i) an amount equal to the total value of the unallocated shares of Stock allocated to Stock Savings Feature participants and beneficiaries as of a Stock Savings Feature Semiannual Allocation Date or Supplemental Allocation Date (as defined in the Savings Plan) by (ii) an amount equal to the total net Stock Savings Feature employee deposits used in the calculation of the Stock Savings Feature Semiannual Allocation or Supplemental Allocation (as defined in the Savings Plan).

(d)

“Beneficiary” shall mean a person or persons designated by a Participant to receive, in the event of death, any unpaid portion of a Participant’s Benefit from this Plan. Any Participant may designate one or more persons primarily or contingently as beneficiaries in writing upon forms supplied by and delivered to the Company, and may revoke such designations in writing. If a Participant fails to properly designate a beneficiary, then the Benefits will be paid in the following order of priority:

(i)

Surviving spouse; then

(ii)

Surviving children in equal shares; then

(iii)

To the estate of the Participant.

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(e)	“Benefit” shall mean an obligation of the Company to pay amounts from this Plan.

(f)	“Board” shall mean the Board of Directors of the Company, as it may be comprised from time to time.

(g)	“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute.

(h)	“Committee” shall mean the Compensation Committee of the Board of Directors of Phillips 66 or any successor committee with substantially the same responsibilities.

(i)	“Company” shall mean Phillips 66 Company, a Delaware corporation, or any successor corporation.

(j)	“Company Stock Fund” shall mean an investment fund under this Plan that is accounted for as if investments were made in the common stock, $0.01 par value, of Phillips 66, although no such actual investments need be made, with accounting entries being sufficient therefor.

(k)	“Disability” shall mean the inability, in the opinion of the Medical Director of Phillips 66, of a Participant, because of an injury or sickness, to work at a reasonable occupation that is available with a member of the Affiliated Group.

(l)	“Employee” shall mean any individual who is a salaried employee of the Company or any Participating Subsidiary.

(m)	“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended and in effect from time to time, or any successor statute.

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(n)	“Highly Compensated Employee” shall mean an Employee whose compensation exceeds the amount set forth in Code Section 401(a)(17), as amended from time to time, or who is eligible to elect a voluntary salary reduction under the provisions of the KEDCP.

(o)	“KEDCP” shall mean the Key Employee Deferred Compensation Plan of ConocoPhillips, the Phillips 66 Key Employee Deferred Compensation Plan or any similar or successor plan maintained by an Affiliated Company.

(p)

“Layoff” or “Laid Off” shall mean layoff under the Phillips 66 Severance Pay Plan, the Phillips 66 Executive Severance Plan, or the Phillips 66 Key Employee Change in Control Severance Plan, and, with regard to times prior to the Effective Time, the ConocoPhillips Severance Pay Plan, the ConocoPhillips Executive Severance Plan, the ConocoPhillips Key Employee Change in Control Severance Plan, the Phillips Layoff Plan, the Work Force Stabilization Plan of Phillips Petroleum Company, the Phillips Petroleum Company Executive Severance Plan, the Conoco Severance Pay Plan, the Conoco Inc. Key Employee Severance Plan, or any similar plan which the Company, any Participating Subsidiary, or a member of the Affiliated Group may adopt from time to time under the terms of which the Participant executes and does not revoke a general release of liability, acceptable to the Company, Participating Subsidiary, or a member of the Affiliated Group, as applicable, under such layoff plan.

(q)

“Other Obligations” shall mean the “ Other Obligations ” as defined in the Amendment to and Merger of Amended and Restated Conoco Inc. Salary Deferral & Savings Restoration Plan into Key Employee Deferred Compensation Plan of ConocoPhillips and Defined Contribution Make-Up Plan of ConocoPhillips, pursuant to which a portion of the Amended and Restated Conoco Inc. Salary Deferral & Savings Restoration Plan is merged into the Defined Contribution Make-Up Plan of ConocoPhillips effective October 3, 2003.

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(r)	“Participant” shall mean an Employee who is eligible to receive a Benefit from this Plan as a result of being a Highly Compensated Employee and any person for whom a Supplemental Thrift Feature Account and/or a Supplemental Stock Savings Feature Account is maintained.

(s)	“Participating Subsidiary” shall mean a subsidiary of Phillips 66, which has adopted the Savings Plan, and one or more Employees of which are Participants eligible to make deposits to the Savings Plan, or are eligible for Benefits pursuant to this Plan.

(t)	“Pay” shall mean “ Pay ” as defined in the Savings Plan except without regard to Pay Limitations or voluntary Salary Reduction under provisions of the KEDCP.

(u)	“Pay Limitations” shall mean the compensation limitations applicable to the Savings Plan that are set forth in Code section 401(a)(17), as adjusted.

(v)	“ Plan Administrator” shall mean the Manager, Benefits of the Company, or such person’s successor.

(w)

“Retirement” shall mean termination of employment with the Company, a Participating Subsidiary, or a member of the Affiliated Group that qualifies the Employee for Retirement as that term is defined in the applicable provisions of the Phillips 66 Retirement Plan or of the applicable retirement plan of a member of the Affiliated Group, or, with respect to times prior to the Effective Time, the ConocoPhillips Retirement Plan or any predecessor plan to the ConocoPhillips Retirement Plan. Notwithstanding the foregoing, an Employee will not be considered to be in Retirement for purposes of this Plan if he is entering Retirement under the Retirement Plan of Conoco prior to age 55, unless he had attained age 50 on or before August 30, 2002.

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(x)	“Savings Plan” shall mean the Phillips 66 Savings Plan; provided that for the periods prior to the Effective Time, Savings Plan shall mean the ConocoPhillips Savings Plan.

(y)	“Stock” shall mean shares of common stock, $0.01 par value, issued by Phillips 66.

(z)	“Stock Savings Feature” shall mean the Stock Savings Feature of the Savings Plan.

(aa)

“Supplemental Thrift Contributions” shall mean, (i) prior to the month in which the Participant’s Pay first exceeds the Pay Limitations in a year, the same percentage of a Participant’s Pay that the Participant is depositing as a Basic Deposit to the Thrift Feature for that month multiplied by the amount of the Participant’s voluntary salary reduction under the KEDCP for that month, and (ii) provided the Participant is making deposits to the Thrift Feature for the month in which the Participant’s Pay exceeds the Pay Limitations and each month thereafter until the end of the year, the same percentage of the Participant’s Pay that the Participant was depositing as a Basic Deposit to the Thrift Feature for the month in which he or she reached the Pay Limitations for the year, multiplied by the sum of the amount of the Participant’s voluntary salary reduction under the KEDCP for that month plus the amount of the Participant’s Pay for that month that is in excess of the Pay Limitations for that year.

(bb)

“Supplemental Stock Savings Feature Account” shall mean the Plan Benefit account of a Participant that reflects the portion of his or her Benefit that is intended to replace certain Stock Savings Feature benefits to which the Participant might otherwise be entitled but for the application of the Pay Limitations and/or a voluntary salary reduction under the KEDCP.

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(cc)

“Supplemental Stock Savings Contributions” shall mean (i) prior to the month in which the Participant’s Pay first exceeds the Pay Limitations in a year, for each month that the Participant makes deposits to the Stock Savings Feature, 1% of the amount of the Participant’s voluntary salary reduction under the KEDCP for that month, and (ii) provided the Participant is making deposits to the Stock Savings Feature in the month in which the Participant’s Pay exceeds the Pay Limitations, for that month and for each month thereafter until the end of the year, 1% of the sum of the amount of the Participant’s voluntary salary reduction under the KEDCP for that month plus the amount of the Participant’s Pay for that month that is in excess of the Pay Limitations for that year.

(dd)

“Supplemental Thrift Feature Account” shall mean the Plan Benefit account of a Participant which reflects the portion of his or her Benefit which is intended to replace certain Thrift Feature benefits to which the Participant might otherwise be entitled but for the application of the Pay Limitations and/or a voluntary salary reduction under the KEDCP.

(ee)	“Thrift Feature” shall mean the Thrift Feature of the Savings Plan.

(ff)	“Trustee” shall mean the trustee of the grantor trust established for this Plan by a trust agreement between the Company and the trustee, or any successor trustee.

(gg)	“Valuation Date” shall mean “Valuation Date” as defined in the Savings Plan.

Section 2. Purpose.

The purpose of this Plan is to provide supplemental benefits for those Highly Compensated Employees whose benefits under the Savings Plan are affected by Pay Limitations or by a voluntary reduction in salary under provisions of KEDCP. This Plan is intended to be and shall be administered as an unfunded benefit plan for those Highly Compensated Employees, who are considered to be a select group of management or highly compensated employees.

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Section 3. Eligibility.

Benefits may only be granted to Highly Compensated Employees.

Section 4. Supplemental Thrift Feature Account Benefits.

For each payroll period in which Company contributions to a Participant’s account in the Thrift Feature are, or would be, limited by the Pay Limitations and/or by a voluntary salary reduction to the KEDCP, a Benefit amount shall be credited to his or her Supplemental Thrift Feature Account no later than the end of the month following the Valuation Date that Company contributions are made to the Participant’s Thrift Feature Account, or would be made to such account but for Pay Limitations. The Participant will be credited with an amount equal to the amount of his or her Supplemental Thrift Contributions each month to the same investment funds and in the same proportions as the Participant has directed his or her latest available investment allocation for Deposits to the Thrift Feature.

Section 4.1 Supplemental Thrift Feature Account Earnings

The Supplemental Thrift Feature Account shall be eligible to be invested in the same investment funds as are made available to Participants in the Thrift Feature from time to time. While such investments shall consist solely of book entries and shall not actually be invested in such funds, the book entry share value of such deemed investment funds in this Plan shall be determined to be the same share value as the actual value of shares in the investment funds of the Savings Plan. The amounts deemed invested in this Plan shall be valued at the same time and in the same manner as though they were actually invested in the Savings Plan. Also, deemed investments in the Participant’s Supplemental Thrift Feature Account may be exchanged into other available

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investment funds in the same manner, at the same times, and subject to the same limitations as though the deemed amounts were actually invested in the Savings Plan. However, to the extent that earnings in the form of dividends on Stock in the Savings Plan are eligible to be passed through to the Participant, such dividends will be deemed to have been reinvested in the Company Stock Fund of this Plan, without regard to whether the Participant has made a pass through election under the Savings Plan.

Section 5. Supplemental Stock Savings Feature Account Benefits.

For each month in which a Semiannual Allocation or Supplemental Allocation (as defined in the Savings Plan) to a Participant’s account in the Stock Savings Feature is, or would be, limited by the Pay Limitations and/or by a voluntary salary reduction under the KEDCP, a Benefit amount shall be credited to his or her Supplemental Stock Savings Feature Account. The amount to be credited shall be calculated in shares in the Company Stock Fund of this Plan as though the Participant had made Supplemental Stock Savings Contributions and shall be equal to (i) the Participant’s Supplemental Stock Savings Contributions during the applicable Allocation Period (as defined in the Savings Plan) multiplied by the applicable Allocation Ratio, divided by (ii) the share value for the Company Stock Fund of the Savings Plan on the applicable Allocation Date. This amount shall be credited no later than the end of the month following the Valuation Date that the Semiannual Allocation or Supplemental Allocation to the Company Stock Fund would have been made had the Participant received a Semiannual Allocation or Supplemental Allocation under the Stock Savings Feature. A share in the Company Stock Fund of the Supplemental Stock Savings Feature Account shall have a value equivalent to a share in the Company Stock Fund of the Savings Plan.

Section 5.1 Supplemental Stock Savings Account Feature Earnings

After being initially invested in the Company Stock Fund account, the amounts in the Participant’s Supplemental Stock Savings Feature Account shall thereafter be eligible to be

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invested in the same investment funds as are made available to Participants in the Savings Plan from time to time. While such investments shall consist solely of book entries and shall not actually be invested in such funds, the book entry share value of such deemed investment funds in this Plan shall be determined to be the same share value as the actual value of shares in the investment funds of the Savings Plan. The amounts deemed invested in this Plan shall be valued at the same time and in the same manner as though they were actually invested in the Savings Plan. Also, deemed investments in the Participant’s Supplemental Stock Savings Feature Account may be exchanged into other available investment funds in the same manner, at the same times, and subject to the same limitations as though the deemed amounts were actually invested in the Savings Plan. However, to the extent that earnings in the form of dividends on Stock in the Savings Plan are eligible to be passed through to the Participant, such dividends will be deemed to have been reinvested in the Stock Fund of this Plan, without regard to whether the Participant has made a pass through election under the Savings Plan.

Section 6. Payment.

If a Participant terminates employment with the Affiliated Group for any reason except death, Disability, Layoff during or after the year in which the Participant reaches age 50, or Retirement, Benefits which the Participant is eligible to receive under this Plan shall be paid in one lump sum cash payment as soon as practicable following his or her termination. If a Participant dies prior to Retirement, Benefits which the Participant is eligible to receive under this Plan shall be paid in one lump sum cash payment to the Participant’s Beneficiary as soon as practicable after his or her death. If a Participant Retires, is Laid off during or after the year in which the Participant reaches age 50, or becomes Disabled, Benefits which the Participant is eligible to receive under this Plan shall be paid in one lump sum cash payment as soon as practicable following the Participant’s Retirement, Layoff, determination of Disability, or termination of employment; provided that such a Participant may indicate a preference to defer part or all of such lump sum cash payment under the terms of the KEDCP.

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All lump sum cash payments shall be made only as of a Valuation Date and shall be net of withholding for applicable taxes required by law.

The Chief Executive Officer of Phillips 66, with respect to Participants who are not subject to section 16 of the Exchange Act, and the Committee, with respect to Participants who are subject to section 16 of the Exchange Act, shall consider such indication of preference and shall respectively decide in the Chief Executive Officer’s or the Committee’s sole discretion whether to accept or reject the preference expressed. In the event the Chief Executive Officer or the Committee, as applicable, accepts such Participant’s preference, the Participant’s Benefit from this Plan shall be credited as an Award under the KEDCP as soon as practicable after the Participant’s Retirement, Layoff, or the date the Participant is determined to be Disabled.

Section 7. Administration.

(a)

The Plan shall be administered by the Plan Administrator. The Plan Administrator may delegate to employees of the Company or any Affiliated Company the authority to execute and deliver such instruments and documents, to do all such acts and things, and to take such other steps deemed necessary, advisable, or convenient for the effective administration of the Plan in accordance with its terms and purpose, except that the Plan Administrator may not delegate any discretionary authority with respect to substantive decisions or functions regarding the Plan or Benefits hereunder.

(b)

Any claim for benefits hereunder shall be presented in writing to the Plan Administrator for consideration, grant, or denial. In the event that a claim is denied in whole or in part by the Plan Administrator, the claimant, within ninety days of receipt of said claim by the Plan Administrator, shall receive written notice of denial. Such notice shall contain:

(1)

A statement of the specific reason or reasons for the denial;

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(2)

Specific references to the pertinent provisions hereunder on which such denial is based;

(3)

A description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is necessary; and

(4)

An explanation of the following claims review procedure set forth in paragraph (c) below.

(c)

Any claimant who feels that a claim has been improperly denied in whole or in part by the Plan Administrator may request a review of the denial by making written application to the Trustee. The claimant shall have the right to review all pertinent documents relating to the claim and to submit issues and comments in writing to the Trustee. Any person filing an appeal from the denial of a claim must do so in writing within sixty days after receipt of written notice of denial. The Trustee shall render a decision regarding the claim within sixty days after receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered within a reasonable time, but not later than 120 days after receipt of the request for review. The decision of the Trustee shall be in writing and, in the case of the denial of a claim in whole or in part, shall set forth the same information as is required in an initial notice of denial by the Plan Administrator, other than an explanation of this claims review procedure. The Trustee shall have absolute discretion in carrying out its responsibilities to make its decision of an appeal, including the authority to interpret and construe the terms hereunder, and all interpretations, findings of fact, and the decision of the Trustee regarding the appeal shall be final, conclusive, and binding on all parties.

(d)	Compliance with the procedures described in paragraphs (b) and (c) shall be a condition precedent to the filing of any action to obtain any benefit or enforce any right that any individual may claim hereunder. Notwithstanding anything to the contrary in this Plan,

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these paragraphs (b), (c) and (d) may not be amended without the written consent of a seventy-five percent (75%) majority of Participants and Beneficiaries and such paragraphs shall survive the termination of this Plan until all benefits accrued hereunder have been paid.

Section 8. Rights of Employees and Participants.

Nothing contained in the Plan (or in any other documents related to this Plan or to any Benefit) shall confer upon any Employee or Participant any right to continue in the employ or other service of the Company or any member of the Affiliated Group or constitute any contract or limit in any way the right of the Company or any member of the Affiliated Group to change such person’s compensation or other benefits or to terminate the employment of such person with or without cause.

Section 9. Awards in Foreign Countries.

The Board or its delegate shall have the authority to adopt such modifications, procedures, and subplans as may be necessary or desirable to comply with provisions of the laws of foreign countries in which the Company or Participating Subsidiaries may operate to assure the viability of the Benefits of Participants employed in such countries and to meet the purpose of this Plan.

Section 10. Amendment and Termination.

The Board reserves the right to amend or terminate this Plan at any time, and to delegate such authority as the Board deems necessary or desirable; provided that no member of the Board who is also a Participant shall participate in any action which has the actual or potential effect of increasing his or her Benefits hereunder; and further provided, the Company shall remain liable for any Benefits accrued under this Plan prior to the date of amendment or termination.

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Section 11. Unfunded Plan.

All amounts payable under this Plan shall be paid solely from the general assets of the Company and any rights accruing to a Participant under the Plan shall be those of a general creditor; provided, however, that the Company or Phillips 66 may establish one or more grantor trusts to satisfy part or all of the Company’s Plan payment obligations so long as the Plan remains unfunded for purposes of Title I of ERISA.

Section 12. Miscellaneous Provisions.

(a)	No right or interest of a Participant under this Plan shall be assignable or transferable, in whole or in part, directly or indirectly, by operation of law or otherwise (excluding devolution upon death or mental incompetency), without the prior consent of the Board.

(b)

This Plan is a continuation for certain employees of Phillips 66 and its Affiliated Group of the Defined Contribution Make-Up Plan of ConocoPhillips which was restated and amended on December 29, 2005, effective as of January 1, 2005, and was previously amended and restated effective as of October 3, 2003. Effective at that time, the Defined Contribution Make-Up Plan of ConocoPhillips assumed the Other Obligations and any other obligations, claims, benefits, rights, and duties as set forth in the Amendment to and Merger of Amended and Restated Conoco Inc. Salary Deferral & Savings Restoration Plan into Key Employee Deferred Compensation Plan of ConocoPhillips and Defined Contribution Make-Up Plan of ConocoPhillips, pursuant to which a portion of the Amended and Restated Conoco Inc. Salary Deferral & Savings Restoration Plan was merged into the Defined Contribution Make-Up Plan of ConocoPhillips effective October 3, 2003. Such Other Obligations were deemed to be part of the Supplemental Thrift Benefit Feature account of each affected Participant and book entries made in accordance with the investment directions for each affected Participant at such time, and such amounts shall be included in this Plan to the extent such liabilities were transferred to this Plan as described in Appendix A.

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(c)	No amount accrued or payable hereunder shall be deemed to be a portion of an Employee’s compensation or earnings for the purpose of any other employee benefit plan adopted or maintained by the Company, nor shall this Plan be deemed to amend or modify the provisions of the Savings Plan.

(d)	This Plan shall be construed, regulated, and administered in accordance with the laws of the State of Texas except to the extent that said laws have been preempted by the laws of the United States.

(e)	Except as otherwise provided herein, the Plan shall be binding upon the Company, its successors and assigns, including but not limited to any corporation which may acquire all or substantially all of the Company’s assets and business or with or into which the Company may be consolidated or merged.

Section 13. Effective Date of Plan.

Title I of the Phillips 66 Defined Contribution Make-Up Plan is hereby adopted effective as of the Effective Time and conditioned on the occurrence of the Distribution.

Executed this 24th day of April 2012, by a duly authorized officer of the Company.

/s/ Chantal D. Veevaete

Chantal D. Veevaete

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APPENDIX A

CONOCOPHILLIPS SPIN-OFF

1.	Background . Phillips 66 was a subsidiary of ConocoPhillips (“COP”) prior to the Distribution. As a result of the Distribution, COP distributed its interest in Phillips 66 to its shareholders.

As of the Effective Time, pursuant to an agreement between Phillips 66 and COP that was conditioned on the Distribution occurring, the liabilities for certain participants’ benefits under the Defined Contribution Make-Up Plan of ConocoPhillips (the “COP Plan”), including amounts grandfathered from Code section 409A (i.e., amounts deferred and vested prior to January 1, 2005), were transferred to the Company and to this Plan. The Participants whose benefits were transferred to this Plan on the Effective Time are referred to below as “COP Participants.” The rules in this Appendix shall apply to COP Participants and certain other Plan terms notwithstanding any Plan provisions to the contrary.

3.	Distributions . The terms of this Plan shall govern the distribution of all benefits payable to a COP Participant or any other person with a right to receive such benefits, including amounts accrued under the COP Plan and then transferred to this Plan.

4.	Separation from Service . For avoidance of doubt, no COP Participant shall be treated as incurring a separation from service, termination of employment, retirement, or similar event for purposes of determining the right to a distribution (for amounts subject to Code

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section 409A or otherwise), benefits, or any other purpose under the Plan as a result of COP’s distribution of Phillips 66 shares to COP’s shareholders or the COP Participant’s transfer of employment to the Company or any other subsidiary of Phillips 66.

5.	Participant Elections . All elections made by COP Participants under the COP Plan, including any payment elections or beneficiary designations, shall apply to the same effect under this Plan as if made under the terms of this Plan.

6.	References to Plan . All references in this Plan to the “Plan” as in effect before the Effective Time shall be read as references to the COP Plan as it was in effect at such time.

Stock . As of the Distribution, any ConocoPhillips common stock (“COP Stock”) held in the Company Stock Fund shall be transferred to a separate investment fund under this Plan that is accounted for as if investments were made in COP Stock, although no such actual investments need be made, with accounting entries being sufficient therefor. Investments in the COP Stock fund will be determined as of the Distribution. On and after the Distribution, a Participant will be allowed to hold or liquidate his or her deemed investment in COP Stock. No additional deemed investments in COP Stock will be allowed to be elected.

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Exhibit 10.21

PHILLIPS 66

DEFINED CONTRIBUTION MAKE-UP PLAN

TITLE II

(Effective for benefits earned or vested after

December 31, 2004)

The Phillips 66 Defined Contribution Make-Up Plan is intended to provide certain specified benefits to Highly Compensated Employees whose benefits under the Phillips 66 Savings Plan might otherwise be limited. Title I of this Plan is effective with regard to benefits earned and vested prior to January 1, 2005, while Title II of this Plan is effective with regard to benefits earned or vested after December 31, 2004. Earnings, gains, and losses shall be allocated to the Title of the Plan to which the underlying obligations giving rise to them are allocated.

This Title II of the Plan is intended (1) to comply with Code section 409A, as enacted as part of the American Jobs Creation Act of 2004, and official guidance issued thereunder, and (2) to be “a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of sections 201(2), 301(a)(3), and 401(a)(1) of ERISA. Notwithstanding any other provision of this Plan, this Plan shall be interpreted, operated, and administered in a manner consistent with these intentions.

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Section 1. Definitions.

For purposes of the Plan, the following terms, as used herein, shall have the meaning specified:

(a)

(b)

(i)

Surviving spouse; then

(ii)

Surviving children in equal shares; then

(iii)

To the estate of the Participant.

(c)	“Benefit” shall mean an obligation of the Company to pay amounts from this Plan.

(d)	“Board” shall mean the Board of Directors of the Company, as it may be comprised from time to time.

(e)	“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute.

(f)	“Company” shall mean Phillips 66 Company, a Delaware corporation, or any successor corporation. The Company is a Subsidiary of Phillips 66.

(g)	“Company Stock Fund” shall mean an Investment Option under this Plan that is

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accounted for as if investments were made in the common stock, $0.01 par value, of Phillips 66, although no such actual investments need be made, with accounting entries being sufficient therefor.

(h)	“Controlled Group” shall mean Phillips 66 and its Subsidiaries.

(i)	“DCMP Pay” shall mean “ Pay ” as defined in the Savings Plan without regard to Pay Limitations or voluntary salary reduction under provisions of the KEDCP.

(j)	“Election Form” shall mean a written form, including one in electronic format, provided by the Plan Administrator pursuant to which a Participant may elect the time and form of payment of his or her Benefit.

(k)	“Employee” shall mean any individual who is a salaried employee of the Company or any Participating Subsidiary.

(l)	“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor statute.

(m)	“Frozen Plan” shall mean Title I of the Phillips 66 Defined Contribution Make-Up Plan.

(n)	“Highly Compensated Employee” shall mean an Employee whose DCMP Pay exceeds the amount set forth in Code section 401(a)(17), as amended from time to time, or who is eligible to elect a voluntary salary reduction under the provisions of the KEDCP.

(o)	“Investment Options” shall mean the investment options, as determined from time to time by the Plan Administrator, used to credit earnings, gains, and losses on Supplemental Thrift Feature Account and Supplemental Stock Savings Feature Account balances.

(p)	“KEDCP” shall mean the Phillips 66 Key Employee Deferred Compensation Plan or any similar or successor plan maintained by a member of the Controlled Group.

(q)	“Ongoing Plan” shall mean Title II of the Phillips 66 Defined Contribution Make-Up Plan.

(r)	“Participant” shall mean an Employee who is eligible to receive a Benefit from this Plan as a result of being a Highly Compensated Employee and any person for whom a Supplemental Thrift Feature Account and/or a Supplemental Stock Savings Feature Account is maintained.

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(s)	“Participating Subsidiary” shall mean a Subsidiary which has adopted the Savings Plan, and one or more Employees of which are Participants eligible to make deposits to the Savings Plan, or are eligible for Benefits pursuant to this Plan.

(t)	“Pay Limitations” shall mean the compensation limitations applicable to the Savings Plan that are set forth in Code section 401(a)(17), as adjusted.

(u)	“Phillips 66” shall mean Phillips 66, a Delaware corporation, or any successor corporation. Phillips 66 is a publicly held corporation and the parent of the Company.

(v)	“Plan” shall mean the Phillips 66 Defined Contribution Make-Up Plan. The Plan is sponsored and maintained by the Company.

(w)	“Plan Administrator” shall mean the Manager, Benefits of the Company, or such person’s successor.

(x)	“Plan Year” means January 1 through December 31.

(y)	“Pay” shall mean “ Pay ” as defined in the Savings Plan.

(z)	“Savings Plan” shall mean the Phillips 66 Savings Plan.

(aa)

“Separation from Service” shall mean the date on which the Participant separates from service with the Controlled Group within the meaning of Code section 409A, whether by reason of death, disability, retirement, or otherwise. In determining Separation from Service, with regard to a bona fide leave of absence that is due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months, where such impairment causes the Employee to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, a 29-month period of absence shall be substituted for the six-month period set forth in section 1.409A-1(h)(1)(i) of the regulations issued under section 409A of the Code, as allowed thereunder.

(bb)	“Stock” shall mean shares of common stock, $0.01 par value, issued by Phillips 66.

(cc)	“Stock Savings Feature” shall mean the Stock Savings Feature of the Savings Plan.

(dd)	“Subsidiary” shall mean any corporation or other entity that is treated as a single employer with Phillips 66 under section 414(b) or (c) of the Code. In applying section

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1563(a)(1), (2), and (3) of the Code for purposes of determining a controlled group of corporations under section 414(b) of the Code and for purposes of determining trades or businesses (whether or not incorporated) under common control under regulation section 1.414(c)-2 for purposes of section 414(c) of the Code, the language “at least 80%” shall be used without substitution as allowed under regulations pursuant to section 409A of the Code.

(ee)	“Supplemental Stock Savings Contributions” shall mean an amount equal to 1% of the amount of the Participant’s DCMP Pay for a Plan Year that is in excess of the Participant’s Pay for such Plan Year.

(ff)

(gg)	“Supplemental Thrift Contributions” shall mean an amount equal to 1.25% of the amount of the Participant’s DCMP Pay for a Plan Year that is in excess of the Participant’s Pay for such Plan Year.

(hh)

(ii)	“Thrift Feature” shall mean the Thrift Feature of the Savings Plan.

(jj)	“Trustee” shall mean the trustee of the grantor trust established for this Plan by a trust agreement between the Company and the trustee, or any successor trustee.

(kk)	“Valuation Date” shall mean “Valuation Date” as defined in the Savings Plan.

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Section 2. Purpose.

The purpose of this Plan is to provide supplemental benefits for those Highly Compensated Employees whose benefits under the Savings Plan might otherwise be affected by Pay Limitations or by a voluntary reduction in salary under provisions of KEDCP.

Section 3. Eligibility.

Benefits may only be granted to Highly Compensated Employees.

Section 4. Supplemental Thrift Feature Account Benefits.

For any payroll period in which a Highly Compensated Employee’s DCMP Pay exceeds his or her Pay, a Benefit amount shall be credited to a Highly Compensated Employee’s Supplemental Thrift Feature Account for the Ongoing Plan no later than the end of the month following the Valuation Date that Company contributions are made to the Highly Compensated Employee’s Thrift Feature account, or would have been made to such account if the Highly Compensated Employee had received Company contributions under the Thrift Feature. The Benefit amount so credited shall equal 1.25% of the amount by which the Highly Compensated Employee’s DCMP Pay for that payroll period exceeds his or her Pay for that payroll period.

Section 4.1 Supplemental Thrift Feature Account Earnings

The Company shall periodically credit earnings, gains, and losses to a Participant’s Supplemental Thrift Feature Account, until the full balance of such Account has been distributed. Earnings, gains, and losses shall be credited to a Participant’s Supplemental Thrift Feature Account under this Section based on the results that would have been achieved had amounts credited to such Account been invested as soon as practicable after crediting into Investment Options selected by the Participant. The Plan Administrator shall specify procedures to allow Participants to make

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elections as to the deemed investment of amounts newly credited to their Supplemental Thrift Feature Accounts, as well as the deemed investment of amounts previously credited to their Supplemental Thrift Feature Accounts. Nothing in this Section or otherwise in the Plan, however, will require the Company to actually invest any amounts in such Investment Options or otherwise.

Section 5. Supplemental Stock Savings Feature Account Benefits.

For each month in which a Semiannual or Supplemental Allocation (as defined in the Savings Plan) is made to a Highly Compensated Employee’s Stock Savings Feature Account, or would have been made to such account if the Highly Compensated Employee had received a Semiannual or Supplemental Allocation, a Benefit amount shall be credited to his or her Supplemental Stock Savings Feature Account. The Benefit amount to be credited shall be calculated in shares in the Company Stock Fund of this Plan and shall be equal to (i) the Highly Compensated Employee’s Supplemental Stock Savings Contributions during the applicable Allocation Period (as defined in the Savings Plan) multiplied by the applicable Allocation Ratio, divided by (ii) the share value for the Company Stock Fund of the Savings Plan on the applicable Allocation Date (as defined in the Savings Plan). This amount shall be credited no later than the end of the month following the Valuation Date that a Semiannual Allocation or Supplemental Allocation is made under the Stock Savings Feature, or would have been made had the Highly Compensated Employee received such a Semiannual Allocation or Supplemental Allocation under the Stock Savings Feature. A share in the Company Stock Fund of this Plan shall have a value equivalent to a share in the Company Stock Fund of the Savings Plan.

Section 5.1 Supplemental Stock Savings Feature Account Earnings

After being initially invested in the Company Stock Fund account, the amounts in the Participant’s Supplemental Stock Savings Feature Account shall thereafter be eligible to be invested in Investment Options selected by the Participant. The Company shall periodically

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credit earnings, gains and losses to a Participant’s Supplemental Stock Savings Feature Account, until the full balance of such Account has been distributed. Earnings, gains, and losses shall be credited to a Participant’s Supplemental Stock Savings Feature Account under this Section based on the results that would have been achieved had amounts credited to such Account been invested as soon as practicable after crediting into the Company Stock Fund of this Plan or the Investment Options selected by the Participant. The Plan Administrator shall specify procedures to allow Participants to make elections as to the deemed investment of amounts previously credited to their Supplemental Stock Savings Feature Accounts. Nothing in this Section or otherwise in the Plan, however, will require the Company to actually invest any amounts in Stock or in such Investment Options or otherwise.

Section 6. Payment.

In the absence of an effective election under Section 6.1 or Section 6.2, Benefits that a Participant is eligible to receive under the Ongoing Plan (and earnings, gains, and losses thereon) shall normally be paid in one lump sum payment on the date that is six months after the date of the Participant’s Separation from Service. Furthermore, in the absence of an effective election under Section 6.1 or Section 6.2, if the Participant dies prior to his or her Separation from Service, or after his or her Separation from Service but prior to the date that the Benefits which the Participant is eligible to receive under the Ongoing Plan (and earnings, gains, and losses thereon) commence to be paid, the Benefits that the Participant is eligible to receive under the Ongoing Plan (and earnings, gains, and losses thereon) shall be paid in one lump sum cash payment to the Participant’s Beneficiary on the date of the Participant’s death.

Section 6.1 Payment Election by Participant.

A Participant may elect on an Election Form delivered to the Plan Administrator at a time set by the Plan Administrator (which shall be prior to the beginning of the Plan Year) to have the amounts attributable to Benefits under the Ongoing Plan that are credited to his or her

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Supplemental Thrift Feature Account (and earnings, gains, and losses thereon) with respect to such Plan Year and the amounts attributable to Benefits credited to his or her Supplemental Stock Savings Feature Account (and earnings, gains, and losses thereon) with respect to such Plan Year paid to the Participant in either:

(a)	one lump sum payment, or

(b)	annual, semi-annual, or quarterly installments, using a declining balance method, over a period ranging from one to fifteen years.

A Participant may elect to have payments commence as of the beginning of any calendar quarter that is at least one year after the date of the Participant’s Separation from Service, provided that no payment shall be made after the date that is twenty years after the date of the Participant’s Separation from Service.

Section 6.2 Change in Time or Form of Payment.

A Participant may make an election to change the time or form of payment elected under Section 6.1 or the payment to be made under Section 6, but only if the following rules are satisfied:

(a)

The election to change the time or form of payment may not take effect until at least twelve months after the date on which such election is made;

(b)

Payment under such election may not be made earlier than at least five years from the date the payment would have otherwise been made or commenced;

(c)

Such payment may commence as of the beginning of any calendar quarter;

(d)

An election to receive payments in installments shall be treated as a single payment for purposes of these rules;

(e)

The election may not result in an impermissible acceleration of payment prohibited under Code section 409A;

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(f)

No more than four such elections shall be permitted with respect to Benefits credited to a Participant’s Accounts for a Plan Year; and

(g)

No payment may be made after the date that is twenty (20) years after the date of the Participant’s Separation from Service.

Section 6.3 Effect of Taxation.

If a portion of a Participant’s Benefit (and earnings, gains, and losses thereon) is includible in income under Code section 409A, such portion shall be distributed immediately to the Participant.

Section 7. Administration.

(a)

(b)

(c)

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the expiration of the 90-day period, of the reasons for an extension of time; provided, however, that no extensions will be permitted beyond 90 days after the expiration of the initial 90-day period. A denial or partial denial of a claim will be dated and signed by the Plan Administrator and will clearly set forth:

(1)

the specific reason or reasons for the denial;

(2)

specific reference to pertinent Plan provisions on which the denial is based;

(3)

a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and

(4)

(d)

Upon denial of a claim, in whole or in part, a claimant or his duly authorized representative will have the right to submit a written request to the Trustee for a full and fair review of the denied claim by filing a written notice of appeal with the Trustee within 60 days of the receipt by the claimant of written notice of the denial of the claim. A claimant or the claimant’s authorized representative will have, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits and may submit issues and comments in writing. The review will take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. If the claimant fails to file a request for review within 60 days of the denial notification, the claim will be deemed abandoned and the claimant precluded from reasserting it. If the claimant does file a request for review, his request must include a description of the issues and evidence he deems relevant. Failure to raise issues or present evidence on review will preclude those issues or evidence from being presented in any subsequent proceeding or judicial review of the claim.

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(e)	The Trustee will provide a prompt written decision on review. If the claim is denied on review, the decision shall set forth:

(1)

the specific reason or reasons for the adverse determination;

(2)

specific reference to pertinent Plan provisions on which the adverse determination is based;

(3)

(4)

(f)

(g)

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Section 8. Rights of Employees and Participants.

Nothing contained in the Plan (or in any other documents related to this Plan or to any Benefit) shall confer upon any Employee or Participant any right to continue in the employ or other service of the Company or any member of the Controlled Group or constitute any contract or limit in any way the right of the Company or any member of the Controlled Group to change such person’s compensation or other benefits or to terminate the employment of such person with or without cause.

Section 9. Awards in Foreign Countries.

Section 10. Amendment and Termination.

Section 11. Unfunded Plan.

All amounts payable under this Plan shall be paid solely from the general assets of the Company and any rights accruing to a Participant under the Plan shall be those of a general creditor;

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provided, however, that the Company may establish one or more grantor trusts to satisfy part or all of the Company’s Plan payment obligations so long as the Plan remains unfunded for purposes of sections 201(2), 301(a)(3), and 401(a)(1) of ERISA.

Section 12. Miscellaneous Provisions.

(a)	No right or interest of a Participant under this Plan shall be assignable or transferable, in whole or in part, directly or indirectly, by operation of law or otherwise (excluding devolution upon death or mental incompetency).

(b)

This Ongoing Plan applies to amounts that were earned or vested after December 31, 2004. The distribution of amounts that were earned and vested (within the meaning of Code section 409A and official guidance issued thereunder) under the Frozen Plan prior to January 1, 2005 (and earnings thereon), and are exempt from the requirements of Code section 409A, shall be made in accordance with the terms of the Frozen Plan as in effect on December 31, 2004.

(c)	No amount accrued or payable hereunder shall be deemed to be a portion of an Employee’s compensation or earnings for the purpose of any other employee benefit plan adopted or maintained by the Company, nor shall this Plan be deemed to amend or modify the provisions of the Savings Plan.

(d)	This Plan shall be construed, regulated, and administered in accordance with the laws of the State of Texas except to the extent that said laws have been preempted by the laws of the United States.

(e)	Except as otherwise provided herein, the Plan shall be binding upon the Company, its successors and assigns, including but not limited to any corporation which may acquire all or substantially all of the Company’s assets and business or with or into which the Company may be consolidated or merged.

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(f)

SECTION 13. Effective Date of the Plan.

Title II of the Phillips 66 Defined Contribution Make-Up Plan is hereby adopted effective as of the Effective Time and conditioned on the occurrence of the Distribution.

Executed this 24th day of April 2012, by a duly authorized officer of the Company.

/s/ Chantal D. Veevaete

Chantal D. Veevaete

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APPENDIX A

CONOCOPHILLIPS SPIN-OFF

1.	Background . Phillips 66 was a subsidiary of ConocoPhillips (“COP”) prior to the Distribution. As a result of the Distribution, COP distributed its interest in Phillips 66 to its shareholders.

As of the Effective Time, pursuant to an agreement between Phillips 66 and COP that was conditioned on the Distribution occurring, the liabilities for certain participants’ benefits under the Defined Contribution Make-Up Plan of ConocoPhillips (the “COP Plan”), including amounts grandfathered from Code section 409A (i.e., amounts deferred and vested prior to January 1, 2005), were transferred to the Company and to this Plan. The Participants whose benefits were transferred to this Plan on the Effective Time are referred to below as “COP Participants.” The rules in this Appendix shall apply to COP Participants and certain other Plan terms notwithstanding any Plan provisions to the contrary.

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3.	Distributions . The terms of this Plan shall govern the distribution of all benefits payable to a COP Participant or any other person with a right to receive such benefits, including amounts accrued under the COP Plan and then transferred to this Plan.

5.	Participant Elections . All elections made by COP Participants under the COP Plan, including any payment elections or beneficiary designations, shall apply to the same effect under this Plan as if made under the terms of this Plan.

6.	References to Plan . All references in this Plan to the “Plan” as in effect before the Effective Time shall be read as references to the COP Plan as it was in effect at such time.

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on and after the Effective Time, COP, any subsidiary of COP that remains a subsidiary after the Distribution (“COP Subsidiary”), the COP Plan, any directors, officers, or employees of COP or a COP Subsidiary, and any successors to any of the aforementioned entities or individuals shall have no further obligation or liability to any COP Participant with respect to any benefit, amount, or right due under the COP Plan.

Stock . As of the Distribution, any ConocoPhillips common stock (“COP Stock”) held in the Company Stock Fund shall be transferred to a separate Investment Option under this Plan that is accounted for as if investments were made in COP Stock, although no such actual investments need be made, with accounting entries being sufficient therefor. Investments in the COP Stock fund will be determined as of the Distribution. On and after the Distribution, a Participant will be allowed to hold or liquidate his or her deemed investment in COP Stock. No additional deemed investments in COP Stock will be allowed to be elected.

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Exhibit 10.22

PHILLIPS 66

KEY EMPLOYEE CHANGE IN CONTROL SEVERANCE PLAN

The Phillips 66 Key Employee Change in Control Severance Plan (the “Plan”) is hereby adopted effective as of the “Effective Time” defined in the Employee Matters Agreement by and between ConocoPhillips and Phillips 66 (the “Effective Time”) and conditioned on the occurrence of the “Distribution” defined in such Employee Matters Agreement (the “Distribution”).

Phillips 66 was a subsidiary of ConocoPhillips (“COP”) prior to the Distribution. As a result of the Distribution, COP distributed its interest in Phillips 66 to its shareholders. Certain employees of ConocoPhillips Company and other subsidiaries of COP whose employment duties were primarily related to the business activities of Phillips 66 and its subsidiaries transferred employment to Phillips 66 Company or other subsidiaries of Phillips 66 as of the Effective Time. No Eligible Employee shall be treated as incurring a Severance or Separation from Service for purposes of determining the right to benefits, or any other purpose under the Plan as a result of (i) the Distribution, (ii) the Eligible Employee’s transfer to the Controlled Group in connection with the Distribution, or (iii) the Eligible Employee's transfer to ConocoPhillips Company or any other subsidiary of COP in connection with the Distribution.

The Company adopted the Plan for the benefit of certain employees of the Company and its Subsidiaries. All capitalized terms used herein are defined in Section 1 hereof. This Plan is intended to be a plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, within the meaning of Title I of the Employee Retirement Income Security Act of 1974, as amended and shall be interpreted in a manner consistent with such intention.

SECTION 1. DEFINITIONS . As hereinafter used:

1.1 “Affiliate” has the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the Effective Date.

1.2 “Associate” means, with reference to any Person, (a) any corporation, firm, partnership, association, unincorporated organization, or other entity (other than the Company or a Subsidiary of the Company) of which such Person is an officer or general partner (or officer or general partner of a general partner) or is, directly or indirectly, the Beneficial Owner of 10% or more of any class of equity securities, (b) any trust or other estate in which such Person has a substantial beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity, and (c) any relative or spouse of such Person, or any relative of such spouse, who has the same home as such Person.

1.3 “Beneficial Owner” means, with reference to any securities, any Person if:

(a) such Person or any of such Person’s Affiliates and Associates, directly or indirectly, is the “beneficial owner” of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act, as in effect on the Effective Date) such securities or otherwise has the right to vote or dispose of such securities, including pursuant to any agreement, arrangement, or understanding (whether or not in writing); provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own," any security under this subsection (a) as a result of an agreement, arrangement, or understanding to vote such security if such agreement, arrangement, or understanding: (i) arises solely from a revocable proxy or consent given in response to a public ( i.e. , not including a solicitation exempted by Rule 14a-2(b)(2) of the General Rules and Regulations under the Exchange Act) proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (ii) is not then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report);

(b) such Person or any of such Person’s Affiliates and Associates, directly or indirectly, has the right or obligation to acquire such securities (whether such right or obligation is exercisable or effective immediately or only after the passage of time or the occurrence of an event) pursuant to any agreement, arrangement, or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, other rights, warrants, or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to “beneficially own,” (i) securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or exchange or (ii) securities issuable upon exercise of Exempt Rights; or

(c) such Person or any of such Person’s Affiliates or Associates (i) has any agreement, arrangement, or understanding (whether or not in writing) with any other Person (or any Affiliate or Associate thereof) that beneficially owns such securities for the purpose of acquiring, holding, voting (except as set forth in the proviso to subsection (a) of this definition), or disposing of such securities or (ii) is a member of a group (as that term is used in Rule 13d-5(b) of the General Rules and Regulations under the Exchange Act) that includes any other Person that beneficially owns such securities;

provided, however, that nothing in this definition shall cause a Person engaged in business as an underwriter of securities to be the Beneficial Owner of, or to “beneficially own,” any securities acquired through such Person’s participation in good faith in a firm commitment underwriting until the expiration of 40 days after the date of such acquisition. For purposes hereof, “voting” a security shall include voting, granting a proxy, consenting or making a request or demand relating to corporate action (including, without limitation, a demand for a stockholder list, to call a stockholder meeting or to inspect corporate books and records), or otherwise giving an authorization (within the meaning of Section 14(a) of the Exchange Act) in respect of such security.

The terms “beneficially own” and “beneficially owning” have meanings that are correlative to this definition of the term "Beneficial Owner.”

1.4 “Board” means the Board of Directors of the Company.

1.5 “Cause” means (i) the willful and continued failure by the Eligible Employee to substantially perform the Eligible Employee’s duties with the Employer (other than any such failure resulting from the Eligible Employee's incapacity due to physical or mental illness), or (ii) the willful engaging, not in good faith, by the Eligible Employee in conduct which is demonstrably injurious to the Company or any of its Subsidiaries, monetarily or otherwise.

1.6 “Change in Control” means any of the following occurring after the Effective Date:

(a) any Person (other than an Exempt Person) shall become the Beneficial Owner of 20% or more of the shares of Common Stock then outstanding or 20% or more of the combined voting power of the Voting Stock of the Company then outstanding; provided, however, that no Change of Control shall be deemed to occur for purposes of this subsection (a) if such Person shall become a Beneficial Owner of 20% or more of the shares of Common Stock or 20% or more of the combined voting power of the Voting Stock of the Company solely as a result of (i) an Exempt Transaction or (ii) an acquisition by a Person pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of subsection (c) of this definition are satisfied;

(b) individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date, whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board; provided, further, that there shall be excluded, for this purpose, any such individual whose initial assumption of office occurs as a result of any actual or threatened Election Contest that is subject to the provisions of Rule 14a-11 of the General Rules and Regulations under the Exchange Act;

(c) the Company shall consummate a reorganization, merger, or consolidation, in each case, unless, following such reorganization, merger, or consolidation, (i) 50% or more of the then outstanding shares of common stock of the corporation resulting from such reorganization, merger, or consolidation and the combined voting power of the then outstanding Voting Stock of such corporation are beneficially owned, directly or indirectly, by all or substantially all of the Persons who were the Beneficial Owners of the outstanding Common Stock immediately prior to such reorganization, merger, or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger, or consolidation, of the outstanding Common Stock, (ii) no Person (excluding any Exempt Person or any Person beneficially owning, immediately prior to such reorganization, merger, or consolidation, directly or indirectly, 20% or more of the Common Stock then outstanding or 20% or more of the combined voting power of the Voting Stock of the Company then outstanding) beneficially owns, directly or indirectly, 20% or more of the then outstanding shares of common stock of the corporation resulting from such reorganization, merger, or consolidation or the combined voting power of the then outstanding Voting Stock of such corporation, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger, or consolidation were members of the Incumbent Board at the time of the initial agreement or initial action by the Board providing for such reorganization, merger, or consolidation; or

(d) (i) the shareholders of the Company shall approve a complete liquidation or dissolution of the Company unless such liquidation or dissolution is approved as part of a plan of liquidation and dissolution involving a sale or disposition of all or substantially all of the assets of the Company to a corporation with respect to which, following such sale or other disposition, all of the requirements of clauses (ii)(A), (B), and (C) of this subsection (d) are

satisfied, or (ii) the Company shall consummate the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which, following such sale or other disposition, (A) 50% or more of the then outstanding shares of common stock of such corporation and the combined voting power of the Voting Stock of such corporation is then beneficially owned, directly or indirectly, by all or substantially all of the Persons who were the Beneficial Owners of the outstanding Common Stock immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the outstanding Common Stock, (B) no Person (excluding any Exempt Person and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 20% or more of the Common Stock then outstanding or 20% or more of the combined voting power of the Voting Stock of the Company then outstanding) beneficially owns, directly or indirectly, 20% or more of the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding Voting Stock of such corporation, and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the initial agreement or initial action of the Board providing for such sale or other disposition of assets of the Company.

1.7 “Code” means the Internal Revenue Code of 1986, as it may be amended from time to time.

1.8 “Common Stock” means the common stock, par value $.01 per share, of the Company.

1.9 “Company” means Phillips 66 or any successors thereto.

1.10 “Controlled Group” shall mean Phillips 66 and its Subsidiaries.

1.11 “Credited Compensation” of a Severed Employee means the aggregate of the Severed Employee’s annual base salary plus his or her annual incentive compensation, each as further described below. For purposes of this definition, (a) annual base salary shall be determined immediately prior to the Severance Date (without regard to any reductions therein which constitute Good Reason) and (b) annual incentive compensation shall be deemed to equal the higher of (i) the Severed Employee’s most recently established target (determined at one hundred percent of target) for annual incentive compensation for such employee prior to such employee’s Severance Date or (ii) the average of the most recent two annual incentive compensation payments to such Severed Employee pursuant to the Variable Cash Incentive Program or its successor

program maintained by the Employer made before his or her Severance Date; provided, however, that for purposes of this clause (ii), (I) if such Severed Employee has been eligible to receive only one such annual incentive compensation payment for a period ending before his or her Severance Date, the amount of annual incentive compensation for purposes of determining Credited Compensation shall be equal to the amount of such single annual incentive compensation payment (if any), (II) if such Severed Employee has not been eligible for any such annual incentive compensation payment, the amount of annual incentive compensation for purposes of determining Credited Compensation shall be equal to his or her most recently established target (determined at one hundred percent of target) for annual incentive compensation for such employee prior to such employee’s Severance Date; and (III) if such Severed Employee transferred to the Controlled Group in connection with the Distribution, the most recent two annual incentive compensation payments to such Severed Employee pursuant to the ConocoPhillips Variable Cash Incentive Program, if any, will be treated as annual incentive compensation payments under the Variable Cash Incentive Program maintained by the Employer until replaced by annual incentive compensation payments made under the Variable Cash Incentive Program.

1.12 “Effective Date” means the date first stated above as the effective date of this Plan.

1.13 “Eligible Employee” means any employee that is a Tier 1 Employee or a Tier 2 Employee.

1.14 “Employer” means the Company or any of its Subsidiaries.

1.15 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

1.16 “Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax.

1.17 “Exempt Person” means any of the Employers, any employee benefit plan of any of the Employers, and any Person organized, appointed, or established by any Employer for or pursuant to the terms of any such plan.

1.18 “Exempt Rights” means any rights to purchase shares of Common Stock or other Voting Stock of the Company if at the time of the issuance thereof such rights are not separable from such Common Stock or other Voting Stock ( i.e. , are not transferable otherwise than in connection with a transfer of the underlying Common Stock or other Voting Stock), except upon the occurrence of a contingency, whether such rights exist as of the Effective Date, or are thereafter issued by the Company as a dividend on shares of Common Stock or other Voting Securities or otherwise.

1.19 “Exempt Transaction” means an increase in the percentage of the outstanding shares of Common Stock or the percentage of the combined voting power of the outstanding Voting Stock of the Company beneficially owned by any Person solely as a result of a reduction in the number of shares of Common Stock then outstanding due to the repurchase of Common Stock or Voting Stock by the Company, unless and until such time as (a) such Person or any Affiliate or Associate of such Person shall purchase or otherwise become the Beneficial Owner of additional shares of Common Stock constituting 1% or more of the then outstanding shares of Common Stock or additional Voting Stock representing 1% or more of the combined voting power of the then outstanding Voting Stock, or (b) any other Person (or Persons) who is (or collectively are) the Beneficial Owner of shares of Common Stock constituting 1% or more of the then outstanding shares of Common Stock or Voting Stock representing 1% or more of the combined voting power of the then outstanding Voting Stock shall become an Affiliate or Associate of such Person.

1.20 “Good Reason” means the occurrence, on or after the date of a Change in Control, and without the Eligible Employee’s written consent, of (i) the assignment to the Eligible Employee of duties in the aggregate that are inconsistent with the Eligible Employee’s level of responsibility immediately prior to the date of the Change in Control or any diminution in the nature of the Eligible Employee’s responsibilities from those in effect immediately prior to the date of the Change in Control; (ii) a reduction by the Employer in the Eligible Employee’s annual base salary or any adverse change in the Eligible Employee’s aggregate annual and long term incentive compensation opportunity from that in effect immediately prior to the Change in Control which change is not pursuant to a program applicable to all comparably situated executives of the Employer; or (iii) the relocation of the Eligible Employee’s principal place of employment to a location more than 50 miles from the Eligible Employee’s principal place of employment immediately prior to the date of the Change in Control; provided, however, that this clause (iii) shall not be considered to be Good Reason if the Employer undertakes to pay all reasonable relocation expenses of the Eligible Employee in connection with such relocation, whether through a relocation plan, program, or policy of the Employer or otherwise.

1.21	“Gross-Up Payment” has the meaning set forth in Section 2.5 hereof.

1.22 “Parachute Value” of a Payment shall mean the present value as of the date of the change of control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2), as determined by the Accounting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.

1.23 “Payment” shall mean any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of an Eligible Employee, whether paid or payable pursuant to this Plan or otherwise, by any Employer or by a Person that is a party to the Change in Control.

1.24 “Person” means any individual, firm, corporation, partnership, association, trust, unincorporated organization, or other entity.

1.25 “Plan” means the Phillips 66 Key Employee Change in Control Severance Plan, as set forth herein, as it may be amended from time to time.

1.26 “Plan Administrator” means the person or persons appointed from time to time by the Board, which appointment may be revoked at any time by the Board.

1.27 “Public Offering” means the initial sale of common equity securities of the Company pursuant to an effective registration statement (other than a registration on Form S-4 or S-8 or any successor or similar forms) filed under the Securities Act of 1933.

1.28 “Retirement Plans” means the Phillips 66 Retirement Plan and the Phillips 66 Key Employee Supplemental Retirement Plan.

1.29 “Safe Harbor Amount” means, with respect to an Eligible Employee, 2.99 times the Eligible Employee’s “base amount,” within the meaning of Section 280G(b)(3) of the Code.

1.30 “Separation from Service” means the date on which the Participant separates from service with the Controlled Group within the meaning of Code section 409A, whether by reason of death, disability, retirement, or otherwise. In determining Separation from Service, with regard to a bona fide leave of absence that is due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months, where such impairment causes the Employee to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, a 29-month period of absence shall be substituted for the six-month period set forth in section 1.409A-1(h)(1)(i) of the regulations issued under section 409A of the Code, as allowed thereunder.

1.31 “Severance” means the termination of an Eligible Employee’s employment with the Employer on or within two years following the date of a Change in Control, (i) by the Employer other than for Cause, or (ii) by the Eligible Employee for Good Reason. An Eligible Employee will not be considered to have incurred a Severance if his employment is discontinued by reason of the Eligible Employee’s death or a physical or mental condition causing such Eligible Employee’s inability to substantially perform his duties with the Employer and entitling him or her to benefits under any long-term sick pay or disability income policy or program of the Employer. Furthermore, an Eligible Employee will not be considered to have incurred a Severance if employment with the Employer is discontinued after the Eligible Employee has been offered employment with another employer that has purchased a Subsidiary or division of the Company or all or substantially all of the assets of an a Subsidiary or division of the Company and the offer of employment from the other employer is at the same or greater salary and the same or greater target bonus as the Eligible Employee has at that time from the Employer. An Eligible Employee will not be considered to have incurred a Severance as a result of (a) the Distribution, (b) the Eligible Employee’s transfer to the Controlled Group in connection with the Distribution, or (c) the Eligible Employee’s transfer to ConocoPhillips Company or any other subsidiary of COP in connection with the Distribution. Notwithstanding anything herein to the contrary, Good Reason shall not be deemed to have occurred unless the Company shall have been given (1) written notice of the Eligible Employee’s assertion that an event constituting Good Reason has occurred, which notice shall be given not less than 30 days prior to the Severance Date to which such notice relates, and (2) a reasonable opportunity to cure such occurrence during such 30-day period. Furthermore, in order to be considered a Severance, the termination must also meet the requirements of a Separation from Service.

1.32 “Severance Date” means the date on which an Eligible Employee incurs a Severance.

1.33 “Severance Pay” means the payment determined pursuant to Section 2.1 hereof.

1.34 “Severed Employee” means an Eligible Employee who has incurred a Severance.

1.35 “Subsidiary” means any corporation or other entity that is treated as a single employer with Phillips 66 after the Distribution, under section 414(b) or (c) of the Code; provided, that in making this determination, in applying section 1563(a)(1), (2), and (3) of the Code for purposes of determining a controlled group of corporations under section 414(b) of the Code and for purposes of determining trades or businesses (whether or not incorporated) under common control under regulation section 1.414(c)-2 for purposes of section 414(c) of the Code, the language “at least 80%” shall be used without substitution as allowed under regulations pursuant to section 409A of the Code.

1.36 “Tier 1 Employee” means any employee of the Employer who is in salary grade 26 or above (under the salary grade schedule of the Company on the Effective Date, with appropriate adjustment for any subsequent change in such salary grade schedule), at or subsequent to the time of the Change in Control.

1.37 “Tier 2 Employee” means any employee of the Employer, other than a Tier 1 Employee, who is in salary grade 23 or above (under the salary grade schedule of the Company on the Effective Date, with appropriate adjustment for any subsequent change in such salary grade schedule) at or subsequent to the time of the Change in Control.

1.38 “Value” of a Payment shall mean the economic present value of a Payment as of the date of the change of control for purposes of Section 280G of the Code, as determined by the Accounting Firm using the discount rate required by Section 280G(d)(4) of the Code.

1.39 “Voting Stock” means, with respect to a corporation, all securities of such corporation of any class or series that are entitled to vote generally in the election of directors of such corporation (excluding any class or series that would be entitled so to vote by reason of the occurrence of any contingency, so long as such contingency has not occurred).

SECTION 2. BENEFITS .

2.1 Subject to Section 2.9, each Severed Employee shall be entitled to receive Severance Pay equal to the sum of the amounts determined under Sections 2.1(a), (b), and (c). Furthermore, for purposes of Employer compensation plans, programs, and arrangements, each Severed Employee shall be considered to have been laid off by the Employer.

(a)

The amount that is the Severed Employee’s Credited Compensation, multiplied by (i) 3, in the case of a Tier 1 Employee or (ii) 2 in the case of a Tier 2 Employee.

(b)

The amount that is the present value, determined as of the Severed Employee’s Severance Date, of the increase in benefits under the Retirement Plans that would result if the Severed Employee was credited with the following number of additional years of age and service under the Retirement Plans: (i) 3, in the case of a Tier 1 Employee or (ii) 2, in the case of a Tier 2 Employee; provided, however, that in calculating (b), if the Severed Employee is entitled under the Retirement Plans to any additional credited service due to the circumstances of the Severed Employee’s termination, then the amount of the present value of the increased benefits called for in the determination of (b) shall be reduced by the amount of the present value of the increased benefits under the Retirement Plans calculated after taking into account the circumstances of the Severed Employee’s termination, but not below zero. Present value shall be determined based on the assumptions utilized under the Phillips 66 Retirement Plan for purposes of determining contributions under Code Section 412 for the most recently completed plan year.

(c)

The amount that is equal to either (i) or (ii), as applicable, plus either (iii) or (iv), as applicable, plus (v), if applicable, plus (vi), if applicable:

(i)

(ii)

(iii)

(iv)

(v)

(vi)

If any persons qualified as eligible dependents of the Severed Employee under the applicable company-sponsored medical or dental coverage in which the Severed Employee was enrolled on the Severance Date, an amount equal to the sum of the differences, for each such eligible dependent, between the COBRA eligible dependent contribution rate and the eligible dependent contribution rate for eligible dependents of active employees, each as of the Severance Date, for the medical and/or dental coverage in which the Severed Employee was enrolled on the Severance Date, as applicable, times the factor set forth in the applicable Section 2.1(c)(i) or (ii), (c)(iii) or (iv), and (c)(v); provided, that if the Severed Employee was not enrolled for medical or dental coverage, then the eligibility and amount for each dependent shall be determined as if the Severed Employee had been enrolled in the PPO medical coverage or dental coverage (using the Phillips 66dental option coverage), as applicable, on the Severance Date.

2.2 Severance Pay (as well as any amount payable pursuant to Section 2.6 hereof) shall be paid to an eligible Severed Employee in a cash lump sum on the first business day immediately following 10 days after the end of the period for executing and delivering the Severed Employee's release, as set forth in Section 2.9.

2.3 Subject to Section 2.9, for a period of (a) 36 months, in the case of a Tier 1 Employee or (b) 24 months, in the case of a Tier 2 Employee, beginning the first of the month following the termination of active employee benefits, the Company shall arrange to provide the Severed Employee and his dependents benefits similar to those the

Severed Employee and his dependents had immediately prior to the Severed Employee's Severance Date. Only those dependents who were eligible for coverage on the Severed Employee's Severance Date may be covered thereafter, but no amendment to any plan or program providing these benefits made after the Severed Employee's Severance Date shall prevent eligibility for dependents who would otherwise have been eligible for coverage on the Severed Employee's Severance Date. These benefits will be provided at no greater cost to the Severed Employee than active employee rates for the plan year of coverage provided the benefits continue to be offered by the Company to active employees and the Severed Employee and his dependents meet the same eligibility criteria for the benefits as an active employee and dependents of an active employee. Depending on coverages prior to the Severed Employee’s Severance Date, these benefits could include the following, but do not include any other benefits offered by the Company: Life Insurance, which includes Basic, Executive Basic, Supplemental, and Dependent Life; and Personal Accident Insurance. Severed employees may also continue Executive Life directly through the vendor to be paid for by the Severed Employee. Nothing herein shall prevent a Severed Employee or eligible dependents of a Severed Employee from electing to receive COBRA continuation coverage of health benefits subject to COBRA, in accordance with the applicable provisions of the law and the applicable plans. While as an active employee the Severed Employee may have been able to make employee contributions or pay premiums for certain coverage through a pre-tax salary reduction arrangement, that will not continue after the Severed Employee's Severance Date. The cost of these benefits will not be adjusted to reflect that the Severed Employee's cost will no longer be pre-tax. All other active employee benefits, not specifically mentioned above, are excluded, although if any of the benefits specifically mentioned above are replaced with a similar benefit after the Severed Employee's Severance Date, such replacement benefits are to be considered as mentioned specifically above even though their names, terms, and conditions may have been changed. Such benefits shall not be provided (except to the extent as may be required by law) during any period when the Severed Employee is eligible to receive such benefits from another employer or from an Employer or if the Severed Employee has resumed working for an Employer. The Severed Employee is obligated to inform the Company when or if they become eligible to receive such benefits from another employer.

2.4 Upon Change in Control, each Eligible Employee shall immediately become fully vested in all outstanding equity awards and shall not thereafter be forfeitable for any reason (except that options shall expire and be cancelled ten years from the date of their grant). Any options granted to the Eligible Employee shall be exercisable at the times set forth in the applicable award documents. Each such option shall remain outstanding until ten years from the date of grant, notwithstanding any provision of the option grant or any plan under which the option may have been granted to the contrary.

The date of distribution of any stock or other value from such awards shall be as set forth in the applicable terms and conditions of the award.


2.5	(a)	Anything in this Plan to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any Payment to an Eligible Employee would be subject to the Excise Tax, then the Eligible Employee shall be entitled to receive an additional payment (the “Gross-Up Payment”) in an amount such that, after payment by the Eligible Employee of all taxes (and any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Eligible Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 2.5(a), if it shall be determined that an Eligible Employee is entitled to the Gross-Up Payment, but that the Parachute Value of all Payments does not exceed 110% of the Safe Harbor Amount, then no Gross-Up Payment shall be made to the Eligible Employee and the amounts payable under this Plan shall be reduced so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount. The reduction of the amounts payable hereunder, if applicable, shall be made by first reducing the payments under Section 2.1, unless an alternative method of reduction is elected by the Eligible Employee, and in any event shall be made in such a manner as to maximize the Value of all Payments actually made to the Eligible Employee. For purposes of reducing the Payments to the Safe Harbor Amount, only amounts payable under this Plan (and no other Payments) shall be reduced. If the reduction of the amount payable under this Plan to an Eligible Employee would not result in a reduction of the Parachute Value of all Payments to the Safe Harbor Amount, no amounts payable to the Eligible Employee under the Plan shall be reduced pursuant to this Section 2.5(a). The Company’s obligation to make Gross-Up Payments to an Eligible Employee under this Section 2.5 shall not be conditioned upon the Eligible Employee’s termination of employment.

	(b)	Subject to the provisions of Section 2.5(c), all determinations required to be made under this Section 2.5, including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized certified public accounting firm designated by the Plan Administrator (the “Accounting Firm”). The


				Accounting Firm shall provide detailed supporting calculations both to the Company and each Eligible Employee Eligible Employee within 15 business days of the receipt of notice from the Eligible Employee that there has been a Payment or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 2.5, shall be paid by the Company to the Eligible Employee within 5 days of the receipt of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Company and the Eligible Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (the “Underpayment”), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies pursuant to Section 2.5(c) and the Eligible Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Eligible Employee.

		(c)		As a condition to being entitled to Gross-Up Payment hereunder, each Eligible Employee shall be required to notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable, but no later than 10 business days after the Eligible Employee is informed in writing of such claim. The Eligible Employee shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Eligible Employee shall not pay such claim prior to the expiration of the 30-day period following the date on which the Eligible Employee gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Eligible Employee in writing prior to the expiration of such period that the Company desires to contest such claim, the Eligible Employee shall:

				(i) give the Company any information reasonably requested by the Company relating to such claim,


				(ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,

				(iii) cooperate with the Company in good faith in order effectively to contest such claim, and

				(iv) permit the Company to participate in any proceedings relating to such claim;

				provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest, and shall indemnify and hold the Eligible Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 2.5(c), the Company shall control all proceedings taken in connection with such contest, and, at its sole discretion, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the applicable taxing authority in respect of such claim and may, at its sole discretion, either direct the Eligible Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Eligible Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that, if the Company directs the Eligible Employee to pay such claim and sue for a refund, the Company shall make such payment and shall indemnify and hold the Eligible Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties) imposed with respect to such payment or with respect to any imputed income in connection with such payment; and provided, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Eligible Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which the Gross-Up Payment would be payable hereunder, and the Eligible Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.



		(d)		If, after the Company has made a Gross-Up Payment or a payment pursuant to Section 2.5(c), an Eligible Employee becomes entitled to receive any refund with respect to the Excise Tax to which such Gross-Up Payment relates or with respect to the claim to which such payment relates, the Eligible Employee shall (subject to the Company’s complying with the requirements of Section 2.5(c), if applicable) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the Company has paid any amount pursuant to Section 2.5(c), a determination is made that the Eligible Employee shall not be entitled to any refund with respect to such claim and the Company does not notify the Eligible Employee in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then the amount of such payment shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

		(e)		Notwithstanding any other provision of this Section 2.5, the Company may, in its sole discretion, withhold and pay over to the Internal Revenue Service or any other applicable taxing authority, for the benefit of any Eligible Employee, all or any portion of any Gross-Up Payment, and each Eligible Employee shall be required to consent to such withholding as a condition to being entitled to any Gross-Up Payment.

2.6 Each Severed Employee shall be entitled to receive the employee’s full salary through the Severance Date and, subject to Section 2.9 but notwithstanding any provision of the Company’s Variable Cash Incentive Program or similar annual bonus incentive plan to the contrary, shall be eligible for consideration for an award under such program or plan when awards are made with regard to the fiscal year under such program or plan in which the Severance Date occurred.

2.7 The Company will pay to each Eligible Employee all reasonable legal fees and expenses incurred by such Eligible Employee in pursuing any claim under the Plan, unless the applicable finder of fact determines that the Eligible Employee’s claim was frivolous or not maintained in good faith.

2.8 The Company shall be entitled to withhold and/or to cause to be withheld from amounts to be paid to the Severed Employee hereunder any federal, state, or local withholding or other taxes or charges which it is from time to time required to withhold.

2.9 No Severed Employee shall be eligible to receive Severance Pay or other benefits under the Plan unless he or she first executes a written release substantially in the form attached as Exhibit A hereto (or, if the Severed Employee was not a United States employee, a similar release which is in accordance with the applicable laws in the relevant jurisdiction) and, to the extent such release is revocable by its terms, only if the Severed Employee does not revoke it. Such release must be executed and delivered to the Company within 30 days of the Employee’s Severance Date.

SECTION 3. PLAN ADMINISTRATION .

(a)

(i)

the specific reason or reasons for the denial;

(ii)

specific reference to pertinent Plan provisions on which the denial is based;

(iii)

a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and

(iv)

an explanation of the procedure for review of the denied or partially denied claim set forth below.

(b)

Upon denial of a claim, in whole or in part, a claimant or his duly authorized representative will have the right to submit a written request to a committee of individuals established by the Board (the "Claims Committee") for a full and fair review of the denied claim by filing a written notice of appeal with the Claims Committee within 60 days of the receipt by the claimant of written notice of the denial of the claim. A claimant or the claimant’s authorized representative will have, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits and may submit issues and comments in writing. The review will take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. If the claimant fails to file a request for review within 60 days of the denial notification, the claim will be deemed abandoned and the claimant precluded from reasserting it. If the claimant does file a request for review, his request must include a description of the issues and evidence he deems relevant. Failure to raise issues or present evidence on review will preclude those issues or evidence from being presented in any subsequent proceeding or judicial review of the claim.

(c)

The Claims Committee will provide a prompt written decision on review. If the claim is denied on review, the decision shall set forth:

(i)

the specific reason or reasons for the adverse determination;

(ii)

specific reference to pertinent Plan provisions on which the adverse determination is based;

(iii)

(iv)

a statement describing any voluntary appeal procedures offered by the Plan and the claimant’s right to obtain the information about such procedures.

(d)

(e)

(f)

3.3 The Plan Administrator may delegate any of its duties hereunder to such person or persons from time to time as it may designate.

SECTION 4. DURATION; AMENDMENT; AND TERMINATION .

4.1 This Plan shall be effective on the Effective Date. If a Change in Control has not occurred, this Plan shall continue in effect unless and until it is terminated as provided in Section 4.2. If a Change in Control occurs, this Plan shall continue in full force and effect and shall not terminate or expire until after all Eligible Employees who become or may become entitled to any payments hereunder shall have received such payments in full and all adjustments required to be made pursuant to Section 2 have been made.


4.2	(a)	If a Change in Control has not occurred, this Plan may be amended from time to time during its term by the Company acting through its Board of Directors or, to the extent authorized by the Board of Directors, its officers, provided that any such amendment which shall in any manner reduce, diminish, or otherwise adversely affect any benefit which is or may at any time in the future become payable hereunder, or any such amendment which shall alter the definition of Change in Control shall be made effective not less than two years after the action of the Company authorizing such amendment, unless, and then only to the extent that such amendment is or becomes necessary in order to assure continued compliance by this Plan with any applicable state or federal law or regulation.

	(b)	The Company may, by action of its Board of Directors, terminate this Plan, provided, however, that the effective date of such termination shall be not less than two years from the date of such Board action. Provided further that in the event a Change in Control shall occur prior to the effective date of termination, the provisions of Section 4.2(c) shall apply.

	(c)	If a Change in Control shall occur while this Plan is in effect, no then-pending amendment or termination shall take effect, this Plan shall remain in full force and effect as at the Change in Control, and this Plan shall terminate automatically without further action on behalf of the Company immediately following the making of all payments to Eligible Employees under this Plan.

SECTION 5. GENERAL PROVISIONS .

5.2 If any Employer is obligated by law or by contract to pay severance pay, a termination indemnity, notice pay, or the like, to a Severed Employee, or if any Employer is obligated by law to provide advance notice of separation (“Notice Period”) to a Severed Employee, then any Severance Pay hereunder to such Severed Employee shall be reduced by the amount of any such severance pay, termination indemnity, notice pay, or the like, as applicable, and by the amount of any compensation received during any Notice Period. This provision specifically includes any payments or obligations under the Phillips 66 Severance Pay Plan, or under the Phillips 66 Executive Severance Plan. Furthermore, if an Eligible Employee has willful and bad faith conduct demonstrably injurious to Company or its Subsidiaries, monetarily or otherwise, after receiving Severance Pay, the Company may offset an amount equal to such Severance Pay against any other amounts due from other plans or programs, unless otherwise required by law.

5.6 The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan.

5.9 This Plan shall be construed and enforced according to the laws of the State of Delaware.

The Plan is hereby adopted effective as of the Effective Time and conditioned on the occurrence of the Distribution.

Executed this 24th day of April 2012, by a duly authorized officer of the Company.

/s/ Greg C. Garland

Greg C. Garland, President

Exhibit A

WAIVER AND RELEASE OF CLAIMS

In consideration of, and subject to, the payments to be made to me by Phillips 66, a Delaware corporation (the “Company”) or any of its subsidiaries, pursuant to the Phillips 66 Key Employee Change in Control Severance Plan (the “Plan”), which I acknowledge that I would not otherwise be entitled to receive, I hereby waive any claims I may have for employment or re-employment by the Company or any subsidiary or parent of the Company after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary or parent of the Company, and their respective past and present officers, directors, shareholders, employees, and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary or parent of the Company, or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Acts, Age Discrimination in Employment Act, Employee Retirement Income Security Act, Americans with Disabilities Act, or any other federal, state, or local legislation or common law relating to employment or discrimination in employment or otherwise.


Signature:						Dated:

Exhibit 10.23

Annex to the Phillips 66

Nonqualified Deferred Compensation Arrangements

Preamble .

Phillips 66 was a subsidiary of ConocoPhillips (“COP”) prior to the Distribution defined in the Employee Matters Agreement by and between ConocoPhillips and Phillips 66 (the “Distribution”). As a result of the Distribution, COP distributed its interest in Phillips 66 to its shareholders.

As of the Effective Time defined in the Employee Matters Agreement by and between ConocoPhillips and Phillips 66 (the “Effective Time”), pursuant to an agreement between Phillips 66 and COP that was conditioned on the Distribution occurring, the liabilities for certain participants’ benefits under the nonqualified plans of COP, including amounts grandfathered from Code section 409A (i.e., amounts deferred and vested prior to January 1, 2005), were transferred to the Company and to respective mirror plans established by the Company. This Annex applies to all such plans established by the Company or any other member of Phillips 66 controlled group, as well as such other arrangements as described below.

Phillips 66 is a Delaware corporation which has publicly traded stock. Phillips 66, while having its headquarters and substantial operations, assets, and employees in the United States, operates through numerous subsidiaries throughout the world, some of which have, or have had, services performed by directors, officers, employees, and independent contractor personnel. In some instances, compensation for services performed may include nonqualified deferred compensation plans as that term is defined in section 409A of the Internal Revenue Code and the regulations issued thereunder. The purpose of this Annex is to add certain provisions to any nonqualified deferred compensation plan to which section 409A applies so as to make such plan compliant with the provisions of the law. In the event that the provisions herein conflict with provisions in a written plan document governing a particular arrangement to which section 409A applies, the provisions herein shall apply, but only to the extent necessary to comply with section 409A. Even in situations where an arrangement is unwritten, the provisions herein shall apply. Likewise, in situations where an arrangement generally falls outside of the scope of section 409A, but due to particular circumstances or conditions the arrangement becomes subject to section 409A, the provisions herein shall apply, but only to the extent necessary to comply with section 409A. The provisions herein shall not apply to any arrangements that existed prior to the effective dates of section 409A and were grandfathered under section 409A so that the provisions of section 409A do not apply to such arrangements; provided, however, that in the event such an arrangement becomes subject to section 409A, for instance, through a material amendment (as that term is used in the regulations), then the provisions herein shall apply to such arrangement, but only to the extent necessary to comply with section 409A. The provisions herein shall apply only to nonqualified deferred compensation arrangements maintained or sponsored by Phillips 66 or any member of its controlled group (as hereinafter defined).

Section 1. Definitions .

Unless otherwise specified in a particular document relating to an NQDC Arrangement, the following definitions will apply (1) to all NQDC Arrangements under which benefits are earned or vested on or after January 1, 2005, and (2) to any other NQDC Arrangement to which there has been a “material modification” (as that term is used in section 409A of the Code and regulations thereunder) on or after October 3, 2004.

(a)

“Affiliated Company” shall mean any corporation or other entity that is not a Subsidiary but that would be treated as a single employer with Phillips 66, under section 414(b) or (c) of the Code if, in making this determination, in applying section 1563(a)(1), (2), and (3) of the Code for purposes of determining a controlled group of corporations under section 414(b) of the Code and for purposes of determining trades or businesses (whether or not incorporated) under common control under regulation section 1.414(c)-2 for purposes of section 414(c) of the Code, the language “at least 50%” were used.

(b)

“Affiliated Group” shall mean Phillips 66, its Subsidiaries, and its Affiliated Companies.

(c)

“Board” shall mean the Board of Directors of Phillips 66.

(d)

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

(e)

“Company” shall mean Phillips 66 Company, a Delaware corporation, which is a Subsidiary of Phillips 66.

(f)

“Consultant” shall mean Independent Contractor.

(g)

“Controlled Group” shall mean Phillips 66 and its Subsidiaries.

(h)

“Director” shall mean a member of the Board of Directors of Phillips 66.

(i)

“Employee” shall mean an employee of Phillips 66 or any of its Subsidiaries.

(j)

“Employer” shall mean Phillips 66 or its Subsidiary or Affiliated Company, as the case may be, that employs an Employee.

(k)

“Independent Contractor” shall mean a person other than an Employee or a Nonemployee Director providing bona fide services to Phillips 66 or any of its Subsidiaries as a consultant, advisor, or other service provider, as applicable.

(l)

“International NQDC Arrangement” shall mean a compensation or benefit plan, program, or arrangement that is maintained by a Subsidiary for its Employees who are performing services outside of the United States (or other jurisdictions subject to section 409A of the Code) which, if maintained for Employees of Phillips 66 or its Subsidiaries who perform services within the United States (or other jurisdictions subject to section 409A of the Code), would be considered a “nonqualified deferred compensation plan” under section 409A of the Code and the regulations issued thereunder.

(m)

“Non-Employee Director” shall mean a Director who is not also an Employee.

(n)

“NQDC Arrangement” shall mean a “nonqualified deferred compensation plan” within the meaning of section 409A of the Code and the regulations issued thereunder that is sponsored or maintained by Phillips 66 or any of its Subsidiaries.

(o)

“Participant” shall mean an Employee or other Service Provider who is eligible to participate in a particular NQDC Arrangement.

(p)

“Participating Company” shall mean a Subsidiary that has adopted a particular NQDC Arrangement and one or more Employees of which are Participants in the particular NQDC Arrangement.

(q)

“Phillips 66” shall mean Phillips 66, a Delaware corporation.

(r)

“Separation from Service” shall mean the date on which the Participant separates from service with the Controlled Group within the meaning of Code section 409A, whether by reason of death, disability, retirement, or otherwise. In determining Separation from Service, with regard to a bona fide leave of absence that is due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months, where such impairment causes the Employee to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, a 29-month period of absence shall be substituted for the six-month period set forth in section 1.409A-1(h)(1)(i) of the regulations issued under section 409A of the Code, as allowed thereunder.

(s)

“Specified Employee” shall mean an individual who is a “specified employee” under section 409A of the Code and the regulations issued thereunder. For purposes of the spin-off of Phillips 66 from ConocoPhillips, a specified employee shall be determined in accordance with the special rules for spin-offs under Treas. Reg. §1.409A-1(i)(6)(iii), or any successor thereto, for the period indicated in such regulation.

(t)

“Subsidiary” shall mean any corporation or other entity that is treated as a single employer with Phillips 66, under section 414(b) or (c) of the Code; provided, that in making this determination, in applying section 1563(a)(1), (2), and (3) of the Code for purposes of determining a controlled group of corporations under section 414(b) of the Code and for purposes of determining trades or businesses (whether or not incorporated) under common control under regulation section 1.414(c)-2 for purposes of section 414(c) of the Code, the language “at least 80%” shall be used without substitution as allowed under regulations pursuant to section 409A of the Code.

(u)

“Wholly-Owned Subsidiary” shall mean a Subsidiary that also meets the following criteria, as applicable: (i) in the case of a corporation, any corporation of which Phillips 66 directly or indirectly owns shares representing 100% or more of the combined voting power of the shares of all classes or series of capital stock of such corporation which have the right to vote generally on matters submitted to a vote of the shareholders of such corporation, or (ii) in the case of a partnership or other business entity not organized as a corporation, any such business entity of which Phillips 66 directly or indirectly owns 100% or more of the voting, capital, or profits interests (whether in the form of partnership interests, membership interests or otherwise).

Section 2. Substitution of Language .

Wherever in a particular document relating to an NQDC Arrangement the phrases “as soon as practicable,” “as soon as possible,” or the like is used, it is hereby excised. Instead, the date of the related event or date or time otherwise specified in the document shall be set as the relevant date or time for an action to be performed or a determination to be made. Participants shall have no right to complain or make a claim about an action or determination, including any payment due, that is to be made on a specified date or time if the action or determination is made no earlier than 30 days prior to the specified date, time, or event and no later than the end of the calendar year in which such specified date, time, or event falls (or, if later, by the 15 ^th day of the third calendar month following the specified date, time, or event).

Section 3. No Suspension of Payments .

In the event that a particular NQDC Arrangement provides that there will be a suspension of any payment obligation upon the rehire of a former Employee on or after January 1, 2005, such provision shall be given no force or effect and payment obligations shall be made as if the former Employee had not been rehired.

Section 4. Payments to Specified Employees Due to Separation from Service .

In the event that a payment from an NQDC Arrangement is payable to an Employee due to a Separation from Service and the Employee is a Specified Employee on the date of Separation from Service, no payment may be made to such Specified Employee from the NQDC Arrangement before the date that is six months after the date of Separation from Service or, if earlier, the date of death; provided, however, that this does not apply to payments that are excepted pursuant to the last sentence of section 1.409A-3(i)(2)(i) of the regulations issued under section 409A of the Code.

Section 5. Modification of Single Trigger Payments .

In the event that an NQDC Arrangement provides for payment due to a Change of Control, Change in Control, or similar term as defined in the NQDC Arrangement, then the definition of Change of Control, Change in Control, or similar term in the NQDC Arrangement shall be replaced in determining whether such payment is due and shall have the same meaning as the term “change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets of the corporation” under section 409A of the Internal Revenue Code; provided, however, that this provision shall not apply to payments made due to another reason, such as Separation from Service or death, following the change event.

Section 6. International Plans and Employees .

In the event that an Employee who is a taxpayer subject to the Code becomes a Participant in an International NQDC Arrangement, then, to the extent that no exceptions or exclusions apply to prevent taxation pursuant to section 409A of the Code of the benefits under that International NQDC Arrangement, the Employee shall have the right to elect payment of the amount of the benefits earned or vested under that International NQDC Arrangement that are in excess of the exceptions or exclusions from application of section 409A of the Code. Such payment, if elected, shall be made on December 31 of the year in which such benefits accrue.

Section 7. Compliance with Code Section 409A .

It is intended that the NQDC Arrangements comply with section 409A of the Code and any regulations, guidance and transitional rules issued thereunder, and the NQDC Arrangements shall be interpreted and operated consistently with that intent. If any person with authority to interpret an NQDC Arrangement shall determine that any provisions of the NQDC Arrangement do not comply with the requirements of section 409A of the Code, such person shall inform the person having authority to amend the NQDC Arrangement who may amend the NQDC Arrangement in any respect it deems necessary (including retroactively) in order to preserve compliance with said section 409A; provided, however, that any such amendment affecting amounts previously deferred under the NQDC Arrangement shall be made in a manner that seeks to preserve the economic value of such deferred amounts to the Participant.

This Annex to the Phillips 66 Nonqualified Deferred Compensation Arrangements is hereby adopted effective as of the “Effective Time” and conditioned on the occurrence of the “Distribution” as those terms are defined in the Employee Matters Agreement by and between ConocoPhillips and Phillips 66.

Executed this 24th day of April 2012, by a duly authorized officer of the Company.

/s/ Chantal D. Veevaete

Chantal D. Veevaete

Exhibit 12

PHILLIPS 66 AND CONSOLIDATED SUBSIDIARIES

TOTAL ENTERPRISE

Computation of Ratio of Earnings to Fixed Charges


	Millions of Dollars
	Six Months Ended June 30 2012			Years Ended December 31
	Six Months Ended June 30 2012			2011			2010			2009			2008			2007

Earnings Available for Fixed Charges
Income from continuing operations before income taxes and noncontrolling interests that have not incurred fixed charges	$	2,960			6,619			1,314			843			4,111			9,290
Distributions less than equity in earnings of affiliates		(561	)		(951	)		(723	)		(562	)		(106	)		(86	)
Fixed charges, excluding capitalized interest*		159			142			153			160			208			165

	$	2,558			5,810			744			441			4,213			9,369


Fixed Charges
Interest and expense on indebtedness, excluding capitalized interest	$	96			17			1			1			42			27
Capitalized interest		—			—			4			57			41			14
Interest portion of rental expense		58			116			133			153			160			132

	$	154			133			138			211			243			173

Ratio of Earnings to Fixed Charges		16.6			43.7			5.4			2.1			17.3			54.2

Includes amortization of capitalized interest totaling approximately $5 million for the six months ended June 30, 2012. Amortization of capitalized interest for the years ended December 31, totaled approximately $9 million in 2011, $19 million in 2010, $6 million in 2009, $6 million in 2008 and $6 million in 2007.

Exhibit 31.1

CERTIFICATION

I, Greg C. Garland, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Phillips 66;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 3, 2012

/s/ Greg C. Garland

Greg C. Garland

Chairman, President and

Chief Executive Officer

Exhibit 31.2

CERTIFICATION

I, Greg G. Maxwell, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Phillips 66;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(a)

(b)

(c)

(d)

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 3, 2012

/s/ Greg G. Maxwell

Greg G. Maxwell

Executive Vice President and

Chief Financial Officer

Exhibit 32

CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Phillips 66 (the Company) on Form 10-Q for the period ended June 30, 2012, as filed with the U.S. Securities and Exchange Commission on the date hereof (the Report), each of the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to their knowledge:

(1)

The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



August 3, 2012

		/s/ Greg C. Garland
		Greg C. Garland
		Chairman, President and Chief Executive Officer

		/s/ Greg G. Maxwell
		Greg G. Maxwell
		Executive Vice President and Chief Financial Officer