Exhibit 2.1

CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT

by and among

PHILLIPS 66 COMPANY

PHILLIPS 66 PROJECT DEVELOPMENT INC.

PHILLIPS 66 PARTNERS GP LLC

and

PHILLIPS 66 PARTNERS LP

dated as of

February 17, 2016

TABLE OF CONTENTS

         

EXHIBITS AND SCHEDULES

Exhibit F            Form of Operational Services Agreement Amendment

CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT

This Contribution, Conveyance and Assumption Agreement (this “ Agreement ”) is made and entered into as of February 17, 2016 by and among Phillips 66 Company, a Delaware corporation (“ P66 Company ”), Phillips 66 Project Development Inc., a Delaware corporation (“ PDI ” and, together with P66 Company, the “ P66 Parties ”), Phillips 66 Partners GP LLC, a Delaware limited liability company (the “ General Partner ”), and Phillips 66 Partners LP, a Delaware limited partnership (the “ Partnership ”). P66 Company, PDI, the General Partner and the Partnership are sometimes referred to in this Agreement individually as a “ Party ” and collectively as the “ Parties .”

RECITALS :

WHEREAS, P66 Company owns 100% of the common stock of PDI, and PDI owns 100% of the limited liability company interests in each of: (a) Phillips 66 Sweeny Frac Alpha LLC, a Delaware limited liability company (“ Alpha LLC ”), (b) Phillips 66 Sweeny Frac Bravo LLC, a Delaware limited liability company (“ Bravo LLC ”), (c) Phillips 66 Sweeny Frac Charlie LLC, a Delaware limited liability company (“ Charlie LLC ”), and (d) Phillips 66 Sweeny Frac Delta LLC, a Delaware limited liability company (“ Delta LLC ” and, together with Alpha LLC, Bravo LLC and Charlie LLC, the “ Sponsor Entities ”), each of which is disregarded as an entity separate from PDI for U.S. federal income tax purposes;

WHEREAS, each of the Sponsor Entities owns a 25% limited liability company interest (collectively, the “ Sweeny Interests ”) in Phillips 66 Sweeny Frac LLC, a Delaware limited liability company (“ Sweeny Frac LLC ”), and Sweeny Frac LLC owns the Contributed Assets (as defined below);

WHEREAS, prior to the Closing Date (as defined below), (a) PDI will form a new Delaware limited liability company (“ Opco General Partner ” and, together with Alpha LLC, the “ Contributed Entities ”) and will be issued 100% of the limited liability company interests in Opco General Partner and (b) the Sponsor Entities and Opco General Partner will form a new Delaware limited partnership (“ P66 Opco ”), each of the Sponsor Entities will contribute its respective Sweeny Interests in exchange for a 25% limited partner interest in P66 Opco, and Opco General Partner will be issued a noneconomic general partner interest in P66 Opco and will be the sole general partner of P66 Opco (collectively, the “ Opco Formation Transactions ”);

WHEREAS, PDI intends to contribute 100% of the limited liability company interests in each of the Contributed Entities to the Partnership in exchange for the consideration, and on the other terms and conditions, set forth in this Agreement; and

WHEREAS, on the Closing Date (as defined below), each of the events and transactions set forth in Section 2.1 below shall occur.

NOW, THEREFORE, in consideration of the mutual undertakings and agreements contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms below:

“ Affiliate ” means, with respect to any Person, any other Person that, directly or indirectly, Controls, is Controlled by or is under common Control with, such specified Person through one or more intermediaries or otherwise; provided, however, that (a) with respect to P66 Company, the term “Affiliate” shall not include any Group Member and (b) with respect to the Partnership Group, the term “Affiliate” shall not include P66 Company or any of its Subsidiaries (other than a Group Member).

“ Agreement ” has the meaning set forth in the preamble to this Agreement.

“ Amended Partnership Agreement ” has the meaning set forth in Section 5.2 .

“ ASC 805-50 ” has the meaning set forth in Section 5.11(a) .

“ Alpha LLC ” has the meaning set forth in the recitals to this Agreement.

“ Assignment of Membership Interest ” means that certain Assignment of Membership Interest Agreement in the form attached as Exhibit A hereto.

“ Assignment of Note ” means an Assignment and Assumption of Note, in substantially the form attached as Exhibit B hereto.

“ Assumed Debt ” has the meaning set forth in Section 2.2 .

“ Assumed Liabilities ” has the meaning set forth in Section 2.4 .

“ Bravo LLC ” has the meaning set forth in the recitals to this Agreement.

“ Businesses ” means, collectively, the operations and business (a) as historically conducted by the P66 Parties and their Affiliates using the Contributed Assets, and (b) as contemplated to be conducted, consistent with prudent industry practice, beginning on the Effective Time, by P66 Opco using the Contributed Assets.

“ Cap ” has the meaning set forth in Section 8.8(a) .

“ Carrier ” means Phillips 66 Carrier LLC, a Delaware limited liability company.

“ caverns ” has the meaning set forth below in the definition of “Clemens Cavern Assets.”

“ Caverns Budget ” has the meaning set forth in Section 3.18 .

“ Charlie LLC ” has the meaning set forth in the recitals to this Agreement.

“ Clemens Cavern Assets ” means (a) those certain below ground storage facilities including the appurtenant and related piping, meters, and disposal wells, located on land owned by P66 Company in Brazoria, Texas (the “ Clemens Real Property ”), that are suitable for receiving and storing natural gas liquids and other permitted hydrocarbons (“ caverns ”), e.g. crude and condensate, including (i) three caverns that went in-service in the fourth quarter of 2015 (the “ Initial Caverns ”), and (ii) two additional caverns that will be in-service by the second quarter of 2016 (the “ In-Process Caverns ”) and which caverns will, in each case, require additional capital expenditures by P66 Opco as provided in the Caverns Budget, (b) the plans to expand such caverns in the future and/or develop up to three additional caverns on the Clemens Real Property that will require additional capital expenditures by P66 Opco as provided in the Caverns Budget, and (c) all other assets (other than Excluded Assets) owned, held, used or held for use by the P66 Parties in connection with the operation, construction, development, completion or expansion of the foregoing or that are otherwise necessary in order for P66 Opco to use and operate the caverns described in clauses (a) and (b) beginning on the Effective Time in a manner substantially similar to the planned use and operation of such caverns and in the manner contemplated by the Transaction Documents.

“ Clemens Cavern Construction Contracts ” means those Contracts relating to the construction of the Clemens Cavern Assets.

“ Clemens Cavern Construction Costs ” means all Liabilities (other than the P66 Opco Construction Obligation) incurred in connection with, arising out of or relating to the construction of the Clemens Cavern Assets prior to the time that the Clemens Cavern Assets are fully complete and ready in all respects for commercial operations at a capacity specified in the Caverns Budget, including costs under the Clemens Cavern Construction Contracts.

“ Clemens Cavern Storage Agreement ” means that certain Natural Gas Liquids Storage Agreement in substantially the form attached as Exhibit C hereto.

“ Clemens Real Property ” has the meaning set forth above in the definition of “Clemens Cavern Assets.”

“ Closing ” has the meaning set forth in Section 7.1 .

“ Closing Date ” has the meaning set forth in Section 7.1 .

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

“ Commission ” means the United States Securities and Exchange Commission.

“ Common Units ” has the meaning set forth in the Partnership Agreement.

“ Conflicts Committee ” has the meaning set forth in Section 3.6 .

“ Construction Contracts ” means the Sweeny Frac Construction Contracts and the Clemens Cavern Construction Contracts, collectively.

“ Construction Costs ” means the Sweeny Frac Construction Costs and the Clemens Cavern Construction Costs, collectively.

“ Contract ” means any contract, commitment, instrument, undertaking, lease, note, mortgage, indenture, settlement, Permit or other legally binding agreement.

“ Contributed Assets ” means the Sweeny Frac Assets and the Clemens Cavern Assets, collectively.

“ Contributed Entities ” has the meaning set forth in the recitals to this Agreement.

“ Contributed Interests ” has the meaning set forth in Section 2.1(c) .

“ Control ” means, where used with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “Controlling” and “Controlled” have correlative meanings.

“ Damages ” has the meaning set forth in Section 8.1 .

“ Deductible ” has the meaning set forth in Section 8.8(a) .

“ Delta LLC ” has the meaning set forth in the recitals to this Agreement.

“ Effective Time ” means 12:01 a.m. local time in Houston, Texas on the Closing Date, or such other time and date mutually agreed to by the Parties in writing.

“ Environmental Laws ” means any and all applicable federal, state and local laws and regulations and other legally enforceable requirements and rules of common law relating to the prevention of pollution or protection of human health or the environment or imposing liability or standards of conduct concerning any Hazardous Materials.

“ Excluded Assets ” means any of the assets set forth on Schedule 1.1(a) hereto.

“ Excluded Liabilities ” has the meaning set forth in Section 2.5 .

“ Financial Advisor ” has the meaning set forth in Section 3.6 .

“ Financial and Operational Information ” has the meaning set forth in Section 3.6 .

“ Financial Statements ” has the meaning set forth in Section 5.11(b) .

“ Fundamental Representations ” has the meaning set forth in Section 8.9(a) .

“ General Partner ” has the meaning set forth in the preamble to this Agreement.

“ General Partner Units ” has the meaning set forth in the Partnership Agreement.

“ Governmental Approval ” has the meaning set forth in Section 3.4 .

“ Governmental Authority ” means (a) the United States of America or any state or political subdivision thereof within the United States of America and (b) any court or any governmental or administrative department, commission, board, bureau or agency of the United States of America or of any state or political subdivision thereof within the United States of America.

“ GP Contribution ” has the meaning set forth in Section 2.1(a) .

“ Group Member ” means a member of the Partnership Group.

“ Hazardous Material ” means (a) any “hazardous substance” as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, (b) any “hazardous waste” as defined in the Resource Conservation and Recovery Act, as amended, (c) any petroleum or petroleum product, (d) any polychlorinated biphenyl and (e) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material, waste or substance regulated under or within the meaning of any applicable Environmental Law.

“ Holdings ” has the meaning set forth in Section 2.1(d) .

“ Indemnity Claim ” has the meaning set forth in Section 8.3 .

“ Initial Caverns ” has the meaning set forth above in the definition of “Clemens Cavern Assets.”

“ In-Process Caverns ” has the meaning set forth above in the definition of “Clemens Cavern Assets.”

“ Lease ” means that certain Lease Agreement with Option to Purchase, relating to the lease of real property at the location of the Sweeny Frac Assets, in substantially the form attached hereto as Exhibit D .

“ Liability ” or “ Liabilities ” means any direct or indirect liability, indebtedness, obligation, cost, expense, claim, loss, damage, deficiency, guaranty or endorsement of or by any Person, absolute or contingent, matured or unmatured, asserted or unasserted, accrued or unaccrued, due or to become due, liquidated or unliquidated.

“ Lien ” means any security interest, lien, deed of trust, mortgage, pledge, charge, claim, restriction, easement, encumbrance or other similar interest or right.

“ Litigation ” has the meaning set forth in Section 3.5 .

“ LP Contribution ” has the meaning set forth in Section 2.1(c) .

“ Material Adverse Effect ” means any change, circumstance, effect or condition that (a) is, or could reasonably be expected to be, materially adverse to the business, financial condition, assets, liabilities or results of operations of the Businesses or the Contributed Assets, taken as a whole, or (b) materially adversely affects, or could reasonably be expected to materially adversely affect, P66 Company’s ability to satisfy its obligations under the Transaction Documents or the Construction Contracts.

“ Material Contract ” means (a) the Construction Contracts, (b) any Contract relating to the ownership or operation of the Businesses or the ownership, use or operation of the Contributed Assets that, as of the date hereof, is reasonably expected to provide for revenues to or commitments of P66 Company or its Affiliates in an amount greater than $1,000,000 during any calendar year, and (c) any other Contract (other than any Contract granting any Permits, servitudes, easements or rights-of-way) materially affecting the ownership or operation of the Businesses or the ownership, use or operation of the Contributed Assets, the loss of which could, individually or in the aggregate, have a Material Adverse Effect.

“ New Common Units ” has the meaning set forth in Section 2.2 .

“ New GP Units ” means a number of General Partner Units having an aggregate value equal to the amount required to maintain the General Partner’s 2% interest in the Partnership as of the Closing.

“ NYSE ” has the meaning set forth in Section 5.5 .

“ Opco Assumed Liabilities ” has the meaning set forth in Section 2.4 .

“ Opco General Partner ” has the meaning set forth in the recitals to this Agreement.

“ Omnibus Agreement ” means that certain Omnibus Agreement dated effective July 26, 2013, as amended as of the date of this Agreement, by and among P66 Company, Partnership, Carrier, Holdings, Pipeline and the General Partner.

“ Omnibus Agreement Amendment ” means that certain Fourth Amendment to the Omnibus Agreement in substantially the form attached as Exhibit E hereto.

“ Operational Services Agreement ” means that certain Operational Services Agreement, dated effective July 26, 2013, as amended as of the date of this Agreement, by and among Carrier, Holdings and Pipeline.

“ Operational Services Agreement Amendment ” means that certain Third Amendment to the Operational Services Agreement in the form attached as Exhibit F hereto.

“ P66 Closing Certificate ” has the meaning set forth in Section 6.2(c) .

“ P66 Company ” has the meaning set forth in the preamble to this Agreement.

“ P66 Indemnitees ” has the meaning set forth in Section 8.1 .

“ P66 Opco ” has the meaning set forth in the recitals to this Agreement.

“ P66 Opco Construction Obligation ” means the Liabilities incurred in connection with, arising out of or relating to the construction and expansion of the Caverns following the Effective Time and prior to the time that the Caverns are ready for commercial operations at a capacity of 7 to 8.5 million barrels and certain costs associated with the Sweeny Frac Assets associated with post-start up activities, but, in each case, (i) only to the extent such Liabilities are contemplated in the Caverns Budget or are required to operate the Contributed Assets at the planned capacity and in the manner contemplated by the Transaction Documents, as applicable, (ii) only to the extent such Liabilities do not exceed the P66 Opco Construction Obligation Cap in the aggregate and (iii) excluding any Liabilities relating to a breach, default or noncompliance with the Construction Contracts or any other contract that the P66 Parties are party to (other than such contracts between the P66 Parties and the Group Members). For the avoidance of doubt, notwithstanding anything to the contrary in this Agreement, any amount of Liabilities related to this definition of P66 Opco Construction Obligation that is in excess of the P66 Opco Construction Obligation Cap will be considered Construction Costs.

“ P66 Opco Construction Obligation Cap ” means an amount equal to $28,302,498, as the same may be reduced pursuant to Section 2.7 .

“ P66 Parties ” has the meaning set forth in the preamble to this Agreement.

“ Partnership ” has the meaning set forth in the preamble to this Agreement.

“ Partnership Agreement ” means that certain First Amended and Restated Agreement of Limited Partnership of Phillips 66 Partners LP, dated as of July 26, 2013.

“ Partnership Assumed Liabilities ” has the meaning set forth in Section 2.4 .

“ Partnership Closing Certificate ” has the meaning set forth in Section 6.3(c) .

“ Partnership Group ” means, collectively, the Partnership and its Subsidiaries, including, after the Closing, the Contributed Entities and P66 Opco.

“ Partnership Indemnitees ” has the meaning set forth in Section 8.2 .

“ Partnership Material Adverse Effect ” means any change, circumstance, effect or condition that is, or could reasonably be expected to be, materially adverse to the business, financial condition, assets, liabilities or results of operations of the Partnership Group, taken as a whole.

“ Party ” or “ Parties ” has the meaning set forth in the preamble to this Agreement.

“ PDI ” has the meaning set forth in the preamble to this Agreement.

“ Permits ” means permits, licenses, certificates, orders, approvals, authorizations, grants, consents, concessions, warrants, franchises and similar rights and privileges.

“ Permitted Liens ” has the meaning set forth in Section 3.9(b) .

“ Person ” means an individual or a corporation, firm, limited liability company, partnership, joint venture, trust, unincorporated organization, association, government agency or political subdivision thereof or other entity.

“ Pipeline ” means Phillips 66 Pipeline LLC, a Delaware limited liability company.

“ Securities Act ” has the meaning set forth in Section 3.13 .

“ Shared Services Agreement (Sweeny Frac) ” means that certain Shared Facilities and Services Agreement (Sweeny Frac) in substantially the form attached as Exhibit G hereto.

“ Sponsor Entities ” has the meaning set forth in the recitals to this Agreement.

“ Subsidiary ” means, with respect to any Person, (a) a corporation of which more than 50% of the voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors or other governing body of such corporation is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person or a combination thereof, (b) a partnership (whether general or limited) in which such Person or a Subsidiary of such Person is, at the date of determination, a general or limited partner of such partnership, but only if more than 50% of the general partner interests of such partnership is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person, or a combination thereof; or (c) any other Person (other than a corporation or a partnership) in which such Person, one or more Subsidiaries of such Person, or a combination thereof, directly or indirectly, at the date of determination, has (i) at least a majority ownership interest or (ii) the power to elect or direct the election of a majority of the directors or other governing body of such Person.

“ Sweeny Frac Agreement ” means that certain Fractionation Agreement in substantially the form attached as Exhibit H hereto.

“ Sweeny Frac Assets ” means, collectively, the Sweeny Fractionator (G0044) located at Phillips 66’s Sweeny Refinery, the associated cooling tower (G0054022), flare (G0056044), substation (G0060MID), offplots (G0068044) and all other assets (other than the Excluded Assets) owned, held, used or held for use in connection with the operation of the Sweeny Fractionator (including the completion or maintenance thereof) after the Effective Time in a manner substantially similar to the use and operation of the Sweeny Fractionator prior to the Effective Time (but, in any event, in a manner allowing the Sweeny Frac Assets to operate at the planned capacity) and in the manner contemplated by the Transaction Documents.

“ Sweeny Frac Construction Contracts ” means those Contracts relating to the construction of the Sweeny Frac Assets.

“ Sweeny Frac Construction Costs ” means all Liabilities (other than the P66 Opco Construction Obligation) incurred in connection with, arising out of or relating to the construction of the Sweeny Fractionator prior to the time that the Sweeny Fractionator is fully complete and ready in all respects for commercial operations at its planned capacity, including under the Sweeny Frac Construction Contracts.

“ Sweeny Frac LLC ” has the meaning set forth in the recitals to this Agreement.

“ Sweeny Interests ” has the meaning set forth in the recitals to this Agreement.

“ Tax ” or “ Taxes ” means any federal, state, local or foreign income tax, ad valorem tax, excise tax, sales tax, use tax, franchise tax, real or personal property tax, transfer tax, gross receipts tax or other tax, assessment, duty, fee, levy or other governmental charge, together with and including, any and all interest, fines, penalties, assessments, and additions to Tax resulting from, relating to, or incurred in connection with any of those or any contest or dispute thereof.

“ Tax Authority ” means any Governmental Authority having jurisdiction over the payment or reporting of any Tax.

“ Tax Proceeding ” has the meaning set forth in Section 5.7(b) .

“ Tax Return ” means any report, statement, form, return or other document or information required to be supplied to a Tax Authority in connection with Taxes.

“ Transaction Documents ” means this Agreement, the Omnibus Agreement Amendment, the Operational Services Agreement Amendment, the Lease, the Sweeny Frac Agreement, the Clemens Cavern Storage Agreement and the Shared Services Agreement (Sweeny Frac).

“ Transaction Taxes ” has the meaning set forth in Section 2.6 .

“ Working Capital Statement ” has the meaning set forth in Section 2.7(a) .

ARTICLE II

CONTRIBUTIONS, CONVEYANCES, ACKNOWLEDGMENTS AND DISTRIBUTIONS

2.1. Contributions. On the Closing Date, on the terms and subject to the conditions of this Agreement, each of the following shall occur:

(a) PDI shall contribute, assign, transfer and convey to the General Partner, as a capital contribution, limited liability company interests in Alpha LLC with an aggregate value equal to an amount such that, immediately following the Closing, the General Partner will maintain its 2% general partner interest in the Partnership (the “ GP Contribution ”), and the General Partner shall accept the contribution of the GP Contribution;

(b) the General Partner shall contribute, assign, transfer and convey the GP Contribution to the Partnership in exchange for the consideration set forth in Section 2.2 , and the Partnership shall accept the contribution of the GP Contribution;

(c) PDI shall contribute, assign, transfer and convey to the Partnership 100% of the limited liability company interests in Opco General Partner and its remaining limited liability company interests in Alpha LLC (collectively, the “ LP Contribution ” and, together with the GP Contribution, the “ Contributed Interests ”), in exchange for the consideration set forth in Section 2.2 , and the Partnership shall accept the contribution of the LP Contribution; and

(d) the Partnership shall contribute, assign, transfer and convey the Contributed Interests to Phillips 66 Partners Holdings LLC, a Delaware limited liability company and wholly owned Subsidiary of the Partnership (“ Holdings ”), and Holdings shall accept the contribution of the Contributed Interests.

2.2. Consideration . At the Closing, in consideration for the contribution of the Contributed Interests, the Partnership shall: (a) deliver to PDI a duly executed Assignment of Note pursuant to which the Partnership shall assume $212,000,000 of debt (as such amount may be adjusted pursuant to Section 2.7 , the “ Assumed Debt ”), in the aggregate, under which Alpha LLC is currently the primary obligor, (b) issue to the General Partner the New GP Units, and (c) issue to PDI a number of Common Units equal to 421,248 less the number of New GP Units (the “ New Common Units ”).

2.3. Effective Time of Conveyances . Notwithstanding anything to the contrary contained herein, to the extent the Closing occurs in accordance with the terms and conditions of this Agreement, the Parties acknowledge and agree that the Partnership shall be entitled to all of the rights of ownership of the Contributed Interests and shall be liable for and shall bear all of the Assumed Liabilities, in each case, from and after the Effective Time.

2.4. Assumed Liabilities . Except for Excluded Liabilities as provided in Section 2.5 , at the Effective Time, the Partnership Group agrees (a) to assume and to pay, discharge and perform as and when due, all Liabilities that first accrue, are caused by, arise out of, are associated with, are in respect of, or are incurred, in each case, at any time from and after the Effective Time, in connection with the ownership of the Contributed Interests or other activities occurring in connection with and attributable to the ownership of the Contributed Interests (the “ Partnership Assumed Liabilities ”) and (b) to cause P66 Opco, solely from the assets of P66 Opco and/or its Subsidiaries (including any capital contribution made by the limited partners of P66 Opco in accordance with the Amended Partnership Agreement), to assume and to pay, discharge and perform as and when due, all Liabilities that first accrue, are caused by, arise out of, are associated with, are in respect of, or are incurred, in each case, at any time from and after the Effective Time, in connection with and attributable to the operation of the Businesses from and after the Effective Time (the “ Opco Assumed Liabilities ” and, collectively with the Partnership Assumed Liabilities, the ” Assumed Liabilities ”). The term “Partnership Assumed Liabilities” shall also include the P66 Opco Construction Obligation. Notwithstanding anything to the contrary set forth in this Agreement, the term “Assumed Liabilities” shall not include any Liabilities directly or indirectly incurred by, or attributable to, the P66 Parties by virtue of the ownership of limited partner interests of P66 Opco by Bravo LLC, Charlie LLC and/or Delta LLC, all of which Liabilities shall be “Excluded Liabilities.” For the avoidance of doubt, neither this Section 2.4 nor any other provision of the Contribution Agreement shall be deemed to limit a

limited partner’s obligation to make capital contributions to P66 Opco following a valid capital call made by Opco General Partner in accordance with the Amended Partnership Agreement.

2.5. Excluded Liabilities . The Parties agree that any Liabilities arising out of or attributable to the ownership of the Contributed Interests, the ownership, use, operation, construction, development, completion or expansion of the Contributed Assets or the operation of the Businesses or other activities occurring in connection with and attributable to the ownership of the Contributed Interests, the ownership, use, operation, construction, development, completion or expansion of the Contributed Assets or the operation of the Businesses prior to the Effective Time that are not expressly identified as Assumed Liabilities in Section 2.4 are not part of the Assumed Liabilities, and neither P66 Opco nor the Partnership Group nor any member thereof has assumed, and shall not assume or become obligated with respect to, any Liability first incurred, accrued or arising out of or attributable to the ownership of the Contributed Interests, the ownership, use, operation, construction, development, completion or expansion of the Contributed Assets or the operation of the Businesses or other activities occurring in connection with and attributable to the ownership of the Contributed Interests, the ownership, use, operation, construction, development, completion or expansion of the Contributed Assets or the operation of the Businesses prior to the Effective Time, including any Liabilities of the P66 Parties or their Affiliates existing immediately prior to the Effective Time, whether or not described specifically in this Section 2.5 (collectively, the “ Excluded Liabilities ”), all of which shall remain the sole responsibility of, and be discharged and performed as and when due by, the P66 Parties or their Affiliates from and after the Effective Time; provided, that, notwithstanding the foregoing, the term “Excluded Liabilities” shall not include the portion of 2016 property taxes owed by the Sponsor Entities prior to the Effective Time to the extent Sweeny Frac LLC receives from the P66 Parties aggregate Service Fees (as such term is defined in each of the Clemens Cavern Storage Agreement and Sweeny Frac Agreement) in 2016 of not less than the aggregate property taxes owed by the Sponsor Entities for 2016. The term “Excluded Liabilities” shall also include (a) the Construction Costs, (b) any cost or expense associated with updating or amending the existing Fractionator permit to the extent necessary to reflect the operation of the Fractionator as of the Effective Time and (c) all Liabilities directly or indirectly incurred by, or attributable to, the P66 Parties by virtue of the ownership of limited partner interests of P66 Opco by Bravo LLC, Charlie LLC and/or Delta LLC.

2.6. Transaction Taxes . All sales, use, transfer, real property transfer, filing, recordation, registration, business and occupation and similar Taxes arising from or associated with the transactions contemplated by this Agreement other than Taxes based on income (“ Transaction Taxes ”), shall be borne fifty percent (50%) by PDI and fifty percent (50%) by the Partnership. To the extent under applicable law the transferee is responsible for filing Tax Returns in respect of Transaction Taxes, the Partnership shall prepare and file all such Tax Returns. The Parties shall provide such certificates and other information and otherwise cooperate to the extent reasonably required to minimize Transaction Taxes. The Party that is not responsible under applicable law for paying the Transaction Taxes shall pay its share of the Transaction Taxes to the responsible Party prior to the due date of such Taxes.

2.7. Adjustment for Assumed Debt and P66 Opco Construction Obligation Cap . If, on the Closing Date, the Assumed Debt is more than $212,000,000, then the amount of the P66

Opco Construction Obligation Cap shall be decreased by an amount equal to the product of (i)(a) the aggregate amount of Assumed Debt minus (b) $212,000,000, and (ii) four (4).

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF P66 COMPANY

 

The P66 Parties, jointly and severally, hereby represent and warrant to the Partnership that, as of the date hereof and as of Closing:

3.1. Organization and Existence .

(a) P66 Company has been duly organized and is validly existing and in good standing under the laws of the State of Delaware, with full corporate power and authority to own, lease and operate the properties and assets it now owns, leases and operates and to carry on its business as and where such properties and assets are now owned or held and such business is now conducted. P66 Company is duly qualified to transact business and is in good standing as a foreign entity in each other jurisdiction in which such qualification is required for the conduct of its business, except where the failure to so qualify or to be in good standing does not have a Material Adverse Effect.

(b) PDI has been duly organized and is validly existing and in good standing under the laws of the State of Delaware, with full corporate power and authority to own, lease and operate the properties and assets it now owns, leases and operates and to carry on its business as and where such properties and assets are now owned or held and such business is now conducted. PDI is duly qualified to transact business and is in good standing as a foreign entity in each other jurisdiction in which such qualification is required for the conduct of its business, except where the failure to so qualify or to be in good standing does not have a Material Adverse Effect.

(c) Each of Alpha LLC and Sweeny Frac LLC has been and, as of the Closing each of P66 Opco and Opco General Partner will be, duly organized and is validly existing and is in good standing under the laws of the State of Delaware, with full limited liability company or limited partnership, as applicable, power and authority to own, lease and operate the properties and assets it now owns, leases and operates and to carry on its business as and where such properties and assets are now owned or held and such business is now conducted. Sweeny Frac LLC is duly qualified to transact business and is in good standing as a foreign entity in each other jurisdiction in which such qualification is required for the conduct of its business, except where the failure to so qualify or to be in good standing does not have a Material Adverse Effect. None of the Contributed Entities nor P66 Opco is or will be qualified to transact business as a foreign entity in any jurisdiction. The P66 Parties have delivered to the Partnership correct and complete copies of the organizational documents of each of Alpha LLC and Sweeny Frac LLC, each as amended to date and, prior to the Closing, the P66 Parties will deliver to the Partnership correct and complete copies of the organizational documents of each of P66 Opco and Opco General Partner. There is no pending or, to the knowledge of the P66 Parties, threatened action for the dissolution, liquidation or insolvency of Alpha LLC or Sweeny Frac LLC.

(d) Alpha LLC is a holding company formed for the sole purpose of (directly or indirectly) owning a 25% limited liability company interest in Sweeny Frac LLC, and Sweeny Frac LLC is a holding company formed for the sole purpose of owning the Contributed Assets. Since its respective date of formation, neither Alpha LLC nor Sweeny Frac LLC has (i) conducted any business or owned any assets (other than its ownership of (A) limited partner interests in P66 Opco, (B) limited liability company interests in Sweeny Frac LLC or (C) the Contributed Assets, as applicable) or (ii) incurred any material Liabilities (other than the Assumed Debt).

(e) As of the Closing, from and after the date of its formation, (i) P66 Opco will be a holding company formed for the sole purpose of owning a 100% interest in Sweeny Frac LLC and (ii) Opco General Partner will be a holding company formed for the sole purpose of owning the noneconomic general partner interest in P66 Opco. As of the Closing, since its respective date of formation, neither P66 Opco nor Opco General Partner has (i) conducted any business or owned any assets (other than its ownership of (A) limited partner interests in P66 Opco or (B) limited liability company interests in Sweeny Frac LLC, as applicable) or (ii) incurred any material Liabilities.

3.2. Authority and Approval; Enforceability.

(a) P66 Company has the corporate power and authority to execute and deliver this Agreement and any Transaction Document to which it is or will be a party, to consummate the transactions contemplated hereby and thereby and to perform all the terms and conditions hereof and thereof to be performed by it. The execution and delivery by P66 Company of this Agreement and any Transaction Document to which it is or will be a party, the performance by it of all the terms and conditions hereof and thereof to be performed by it and the consummation of the transactions contemplated hereby and thereby have been duly authorized and approved by all requisite corporate action of P66 Company. Each of this Agreement and any Transaction Document to which P66 Company is or will be a party constitutes or will constitute, upon execution and delivery by P66 Company, the valid and binding obligation of P66 Company, enforceable against P66 Company in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting enforcement of creditors’ rights generally and by general principles of equity (whether applied in a proceeding at law or in equity).

(b) PDI has the corporate power and authority to execute and deliver this Agreement and any Transaction Document to which it is or will be a party, to consummate the transactions contemplated hereby and thereby and to perform all the terms and conditions hereof and thereof to be performed by it. The execution and delivery by PDI of this Agreement and any Transaction Document to which it is or will be a party, the performance by it of all the terms and conditions hereof and thereof to be performed by it and the consummation of the transactions contemplated hereby and thereby have been duly authorized and approved by all requisite corporate action of PDI. Each of this Agreement and any Transaction Document to which PDI is or will be a party constitutes or will constitute, upon execution and delivery by PDI, the valid and binding obligation of PDI, enforceable against PDI in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other

similar laws affecting enforcement of creditors’ rights generally and by general principles of equity (whether applied in a proceeding at law or in equity).

3.3. No Conflict . This Agreement, the Transaction Documents to which any P66 Party is or will be a party and the execution and delivery hereof and thereof by such P66 Party do not, and the fulfilment and compliance with the terms and conditions hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not:

(a) conflict with any of the provisions of the certificate of incorporation or bylaws of any P66 Party or with any of the provisions of the organizational documents of any of the Contributed Entities, P66 Opco or Sweeny Frac LLC;

(b) conflict with any provision of any law or administrative regulation or any judicial, administrative or arbitration order, award, judgment, writ, injunction or decree applicable to any P66 Party, any of the Contributed Entities, P66 Opco or Sweeny Frac LLC;

(c) conflict with, result in a breach of, constitute a default under (whether with notice or the lapse of time or both) or accelerate or permit the acceleration of the performance required by, or require any consent, authorization or approval under, any material indenture, mortgage, lien or material agreement, contract, commitment or instrument to which any P66 Party, any of the Contributed Entities, P66 Opco or Sweeny Frac LLC is a party or by which any of them is bound or to which any of the Contributed Assets are subject;

(d) result in the creation of, or afford any person the right to obtain, any material Lien on the capital stock or other equity interests, property or assets of any P66 Party, any of the Contributed Entities, P66 Opco or Sweeny Frac LLC under any such material indenture, mortgage, lien, agreement, contract, commitment or instrument; or

(e) result in the revocation, cancellation, suspension or material modification, singly or in the aggregate, of any Governmental Approval (as defined below) possessed by any P66 Party, any of the Contributed Entities, P66 Opco or Sweeny Frac LLC that is necessary or desirable for the ownership, lease or operation of its properties and other assets in the conduct of its business as now conducted, including any Governmental Approvals under any applicable Environmental Law; except, in the case of clauses (b) , (c) , (d) and (e) , as would not have, individually or in the aggregate, a Material Adverse Effect and except for such as will have been cured at or prior to the Closing.

3.4. Consents . Except for notice to, or consent of, Governmental Authorities related to the transfer of environmental Permits, no consent, approval, license, permit, order, waiver, or authorization of, or registration, declaration, or filing with any Governmental Authority (each a “ Governmental Approval ”) or other person or entity is required to be obtained or made by or with respect to any of the P66 Parties, any Contributed Entity, P66 Opco, Sweeny Frac LLC or any of the Contributed Interests or Contributed Assets in connection with:

(a) the execution, delivery, and performance of this Agreement or the Transaction Documents, or the consummation of the transactions contemplated hereby and thereby;

(b) the enforcement against the P66 Parties of their obligations hereunder and thereunder; or

(c) following the Closing, the ownership of the Contributed Entities by the Partnership, the conduct by P66 Opco of the Businesses or the ownership of Sweeny Frac LLC by P66 Opco;

except, in each case, as would not have, individually or in the aggregate, a Material Adverse Effect.

3.5. Laws and Regulations; Litigation . As of the date hereof, there are no pending or, to P66 Company’s knowledge, threatened claims, fines, actions, suits, demands, investigations or proceedings or any arbitration or binding dispute resolution proceeding (collectively, “ Litigation ”) against any of the P66 Parties, the Contributed Entities, P66 Opco or Sweeny Frac LLC, or against or affecting the Businesses or Contributed Interests or Contributed Assets or the ownership of the Contributed Interests, ownership or operation of the Contributed Assets or the operation of the Businesses (other than Litigation under any Environmental Law, which is the subject of Section 3.7 ) that (i) would individually, or in the aggregate, have a Material Adverse Effect or (ii) seek any material injunctive relief with respect to the Businesses or the Contributed Assets. Except as would not, individually or in the aggregate, have a Material Adverse Effect, (x) none of the Contributed Entities, P66 Opco or Sweeny Frac is the subject of any violation of or default under any law or regulation or under any order (other than Environmental Laws, which are the subject of Section 3.7 ) of any Governmental Authority and (y) there is no Litigation (other than Litigation under any Environmental Law, which is the subject of Section 3.7 ) pending or, to the P66 Parties’ knowledge, threatened against or affecting the Businesses or Contributed Assets or the Contributed Entities, P66 Opco or Sweeny Frac or PDI’s ownership of the Contributed Interests, at law or in equity, by or before any Governmental Authority having jurisdiction over the P66 Parties. Except as would not, individually or in the aggregate, have a Material Adverse Effect, no Litigation is pending or, to the P66 Parties’ knowledge, threatened to which any P66 Party is or may become a party that questions or involves the validity or enforceability of any of their respective obligations under this Agreement or seeks to prevent or delay, or damages in connection with, the consummation of the transactions contemplated hereby.

3.6. Management Projections and Budgets . The projections and budgets (the “ Financial and Operational Information ”) provided to the Partnership (including those provided to Evercore Partners (“ Financial Advisor ”), the financial advisor to the conflicts committee of the Board of Directors of the General Partner (the “ Conflicts Committee ”), and including the Caverns Budget) by P66 Company as part of the Partnership’s review of the Businesses and the Contributed Assets in connection with this Agreement have a reasonable basis, were prepared in good faith and are consistent with P66 Company’s management’s current expectations. The other financial and operational information provided by P66 Company to Financial Advisor as part of its review of the proposed transaction for the Conflicts Committee is complete and correct in all material respects for the periods covered and is derived from and is consistent with the books and records of P66 Company.

3.7. Environmental Matters . Except as does not (individually or in the aggregate) have a Material Adverse Effect, (i) the P66 Parties’, Sponsor Entities’ and Sweeny Frac LLC’s

ownership and operation of the Contributed Assets as presently owned and operated is in compliance with Environmental Laws, (ii) none of the P66 Parties, the Contributed Entities, P66 Opco, Sweeny Frac LLC or the Contributed Assets is the subject of any outstanding administrative or judicial order of judgment, agreement or arbitration award from any Governmental Authority under any Environmental Law relating to the Contributed Assets and requiring remediation, the payment of a fine or penalty or a change in method of operation, (iii) each of the P66 Parties, the Contributed Entities, P66 Opco and Sweeny Frac LLC has received all Permits required under applicable Environmental Laws necessary to operate the Businesses and to own and operate the Contributed Assets as presently owned or operated or in light of the current stage of development or construction, (iv) each of the P66 Parties, the Contributed Entities, P66 Opco and Sweeny Frac LLC is in compliance with all terms and conditions of any such Permits, (v) none of the P66 Parties, the Contributed Entities, P66 Opco or Sweeny Frac LLC is subject to any pending Litigation under any Environmental Law with respect to the ownership or operation of the Contributed Assets, and (vi) none of the P66 Parties with respect to the Contributed Assets, and none of the Contributed Entities, P66 Opco or Sweeny Frac LLC, have any Liability in connection with the release of any Hazardous Material into the environment.

3.8. Contributed Interests .

(a) The Contributed Interests (i) constitute 100% of the limited liability company interests in the Contributed Entities and (ii) were duly authorized and validly issued and are fully paid and non-assessable (except as such non-assessability may be affected by Sections 18-607 and 18-804 of the Delaware Limited Liability Company Act). The Sweeny Interests (i) constitute 100% of the limited liability company interests in Sweeny Frac LLC and (ii) were duly authorized and validly issued and are fully paid and non-assessable (except as such non-assessability may be affected by Sections 18-607 and 18-804 of the Delaware Limited Liability Company Act). None of the Contributed Interests, the Sweeny Interests or the partnership interests in P66 Opco are subject to or were issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of local or state law applicable to the Contributed Interests, Sweeny Frac LLC or P66 Opco, as applicable, the organizational documents of any Contributed Entity, Sweeny Frac LLC or P66 Opco, or any contract, arrangement or agreement to which P66 Company, PDI, any Contributed Entity, Sweeny Frac LLC, P66 Opco or any of their respective Subsidiaries is a party or to which it or any of their respective properties or assets (including the Contributed Assets) is otherwise bound.

(b) PDI has good and valid record and beneficial title to the Contributed Interests, free and clear of any and all Liens, and, except as provided or created by the limited liability company agreement or other organizational or governance documents of any Contributed Entity, the Securities Act or applicable securities laws, the Contributed Interests are free and clear of any restrictions on transfer, Taxes or claims. There are no options, warrants, purchase rights, contracts, commitments or other securities exercisable or exchangeable for any equity interests of the Contributed Entities or any other commitments or agreements providing for the issuance of additional equity interests in the Contributed Entities or P66 Opco, or for the repurchase or redemption of the Contributed Interests, or any agreements of any kind that may

obligate any Contributed Entity or P66 Opco to issue, purchase, register for sale, redeem or otherwise acquire any of its equity interests. Immediately after the Closing, the Partnership will have good and valid record and beneficial title to the Contributed Interests, free and clear of any Liens.

(c) As of the Closing, Opco General Partner and Alpha LLC will have good and valid record and beneficial title to the noneconomic general partner interest and a 25% limited partner interest, respectively, in P66 Opco, free and clear of any and all Liens, and, except as provided or created by the limited partnership agreement or other organizational or governance documents of P66 Opco, the Securities Act or applicable securities laws, such general partner interest and limited partner interest will be free and clear of any restrictions on transfer, Taxes or claims. As of the Closing, there will not be any options, warrants, purchase rights, contracts, commitments or other securities exercisable or exchangeable for any equity interests of P66 Opco or any other commitments or agreements providing for the issuance of additional equity interests in P66 Opco, or for the repurchase or redemption of the general partner interest or limited partner interest in P66 Opco held by Opco General Partner and Alpha LLC, respectively, or any agreements of any kind that may obligate P66 Opco to issue, purchase, register for sale, redeem or otherwise acquire any of its equity interests. As of the Closing, Opco General Partner will be the sole general partner of P66 Opco.

(d) The Sponsor Entities have, and as of the Closing, P66 Opco will have, good and valid record and beneficial title to the Sweeny Interests, free and clear of any and all Liens, and, except as provided or created by the limited liability company agreement or other organizational or governance documents of Sweeny Frac LLC, the Securities Act or applicable securities laws, the Sweeny Interests are free and clear of any restrictions on transfer, Taxes or claims. Except as expressly contemplated by this Agreement, there are no options, warrants, purchase rights, contracts, commitments or other securities exercisable or exchangeable for any equity interests of Sweeny Frac LLC or any other commitments or agreements providing for the issuance of additional equity interests in Sweeny Frac LLC, or for the repurchase or redemption of the Sweeny Interests, or any agreements of any kind that may obligate Sweeny Frac LLC to issue, purchase, register for sale, redeem or otherwise acquire any of its equity interests.

3.9. Contributed Assets .

(a) The Contributed Assets, when considered together with the Lease and the services provided by P66 Company and its Affiliates pursuant to the Omnibus Agreement, the Operational Services Agreement, and the Shared Services Agreement (Sweeny Frac), are sufficient to conduct the Businesses in a manner materially consistent with the Financial and Operational Information (including to provide the services in the manner contemplated by the Transaction Documents).

(b) The P66 Parties or their Affiliates are the owners, and as of the Effective Time, Sweeny Frac LLC will be the owner, of such valid easement rights, leasehold and/or fee ownership interests (including rights of way) in and to the lands on which any Contributed Assets are located that, when considered together with the Lease and the services provided by P66 Company and its Affiliates pursuant to the Omnibus Agreement, the Operational Services Agreement, and the Shared Services Agreement (Sweeny Frac), are sufficient to enable Sweeny

Frac LLC to use or operate the Contributed Assets in substantially the same manner that the Contributed Assets were used and operated historically by P66 Company and its Affiliates or as such Contributed Assets are intended to be used and operated as of the Effective Time or when fully constructed as contemplated by the Transaction Documents, P66 Company or its Affiliates have, and as of the Effective Time, Sweeny Frac LLC will have, valid and indefeasible title in fee to all real property and interests in real property constituting part of the Contributed Assets and purported to be owned in fee, and good and valid title to the leasehold estates in all other real property and interests in real property (including rights of way) constituting part of the Contributed Assets, in each case except as would not have a Material Adverse Effect. Neither P66 Company nor its Affiliates has any knowledge of any default or breach (or event which, with the giving of notice or passage of time, or both, would become a default or breach) under any lease, right of way or similar instrument pursuant to which it holds any such non-fee real property interest, in each case except as would not have a Material Adverse Effect. P66 Company or its Affiliates own or lease, as applicable, and as of the Effective Time, Sweeny Frac LLC will own or lease, as applicable, all such real property and interests in real property free and clear of any Liens except (i) those set forth in Schedule 3.9(b) , (ii) mechanics’, carriers’, workmen’s, repairmen’s or other similar Liens arising or incurred in the ordinary course of business that are not yet delinquent or can be paid without penalty or are being contested in good faith and by appropriate proceedings in respect thereof and for which an appropriate reserve has been established on the books and records of [P66 Company and provided in the Financial and Operational Information] in accordance with U.S. generally accepted accounting principles, (iii) Liens for current Taxes that are not yet due and payable or are being contested in good faith and by appropriate proceedings in respect thereof and for which an appropriate reserve has been established on the books and records of [P66 Company and provided in the Financial and Operational Information] in accordance with U.S. generally accepted accounting principles and (iv) other imperfections of title or encumbrances that, individually or in the aggregate, could not reasonably be expected to materially interfere with the ordinary conduct of the Businesses (the Liens described in clauses (i ), ( ii ), ( iii ) and ( iv ) above, being referred to collectively as “ Permitted Liens ”). The P66 Parties or their Affiliates have, and as of the Effective Time, Sweeny Frac LLC will have, all material consents, licenses and permits necessary to (x) own and operate the Business in the manner contemplated by the Transaction Documents (including to develop up to three caverns on the Clemens Real Property in addition to the Initial Caverns and the In-Process Caverns) and (y) allow for ingress and egress to and from the Clemens Cavern Assets and the Sweeny Frac Assets.

(c) The P66 Parties or their Affiliates have, and as of the Effective Time, Sweeny Frac LLC will have, good and marketable title to all tangible personal property included in the Contributed Assets, free and clear of all Liens except Permitted Liens, other than tangible personal property owned on the date of this Agreement but subsequently sold or otherwise disposed of in the ordinary course of business consistent with prior practice. All tangible personal property included in the Contributed Assets is, in the aggregate, in good operating condition and repair (normal wear and tear excepted) and has been maintained in accordance with applicable laws and regulations, as well as generally accepted industry practice, and is sufficient for the purposes for which it is currently being used or held for use.

3.10. Permits

(a) The P66 Parties or their Affiliates hold or have a valid right to use, and as of the Effective Time, Sweeny Frac LLC will hold or have a valid right to use, all Permits (other than environmental Permits, which are the subject of Section 3.7 ) that are necessary for the conduct of the Businesses and the ownership or operation of the Contributed Assets, each in compliance with applicable laws and regulations of applicable Governmental Authorities, except for those the failure of which to have, individually or in the aggregate, does not have a Material Adverse Effect. The P66 Parties or their Affiliates have complied in all material respects with all terms and conditions thereof.

3.11. Insurance . The P66 Parties or their Affiliates maintain policies of fire and casualty, liability and other forms of property and liability insurance related to the Contributed Assets and the Businesses in such amounts, with such deductibles, and against such risks and losses as are, in their judgment, reasonable for the Businesses and the Contributed Assets. All such policies are in full force and effect, all premiums due and payable thereon have been paid, and no notice of cancellation or termination has been received with respect to any such policy that has not been replaced on substantially similar terms prior to the date of such cancellation. To the P66 Parties’ knowledge, the activities and operations of the Businesses have been conducted in a manner so as to conform in all material respects to all applicable provisions of those insurance policies.

3.12. Brokerage Arrangements . None of the P66 Parties or any of their Affiliates has entered, directly or indirectly, into any agreement with any person, firm or corporation that would obligate any Group Member to pay any commission, brokerage or “finder’s fee” or other fee in connection with this Agreement or the transactions contemplated hereby.

3.13. Investment. PDI is an “accredited investor” as such term is defined in Rule 501 promulgated under the Securities Act, as amended (the “ Securities Act ”). PDI is not acquiring the New Common Units with a view to or for sale in connection with any distribution thereof or any other security related thereto within the meaning of the Securities Act. PDI is familiar with investments of the nature of the New Common Units, understands that this investment involves substantial risks, has adequately investigated the Partnership and the New Common Units, and has substantial knowledge and experience in financial and business matters such that it is capable of evaluating, and has evaluated, the merits and risks inherent in purchasing the New Common Units, and is able to bear the economic risks of such investment. PDI has had the opportunity to visit with the Partnership and meet with the officers of the General Partner and other representatives to discuss the business, assets, liabilities, financial condition, and operations of the Partnership, has received all materials, documents and other information that PDI deems necessary or advisable to evaluate the Partnership and the New Common Units, and has made its own independent examination, investigation, analysis and evaluation of the Partnership and the New Common Units, including its own estimate of the value of the New Common Units. PDI has undertaken such due diligence (including a review of the properties, liabilities, books, records and contracts of the Partnership) as PDI deems adequate. PDI acknowledges that the New Common Units have not been registered under applicable federal and state securities laws and that the New Common Units may not be sold, transferred, offered for sale, pledged,

hypothecated or otherwise disposed of unless such transfer, sale, assignment, pledge, hypothecation or other disposition is registered under applicable federal and state securities laws or pursuant to an exemption from registration under any federal or state securities laws.

3.14. Taxes .

(a) All Tax Returns that are required to be filed by or with respect to the Contributed Entities, P66 Opco, Sweeny Frac LLC or the Contributed Assets on or prior to the Closing Date (taking into account any valid extension of time within which to file) have been or will be timely filed on or prior to the Closing Date and all such Tax Returns are or will be true, correct and complete in all material respects.

(b) All Taxes due and payable with respect to the Contributed Entities , Sweeny Frac LLC, P66 Opco or the Contributed Assets (whether or not shown on any Tax Return) have been fully paid and all deficiencies asserted or assessments made with respect to such Tax Returns have been paid in full or properly accrued for by the applicable Contributed Entity, Sweeny Frac LLC or P66 Opco.

(c) No examination, audit, claim, assessment, levy, or administrative or judicial proceeding regarding any of the Tax Returns described in Section 3.14(a) or any Taxes with respect to the Contributed Entities, Sweeny Frac LLC, P66 Opco or the Contributed Assets are currently pending or have been proposed in writing or have been threatened.

(d) No waivers or extensions of statutes of limitations have been given or requested in writing with respect to any amount of Taxes with respect to the Contributed Entities, Sweeny Frac LLC, P66 Opco or the Contributed Assets or any Tax Returns with respect to the Contributed Entities, Sweeny Frac LLC, P66 Opco or the Contributed Assets.

(e) For U.S. federal income Tax purposes, each of the Contributed Entities, Sweeny Frac LLC and P66 Opco is currently, and has been since its respective inception, properly classified as an entity disregarded as separate from its owner.

3.15. Material Contracts . The P66 Parties have made available to the Partnership a correct and complete copy of each Material Contract. Each Material Contract is in full force and effect, and none of the P66 Parties, any Contributed Entity, Sweeny Frac, P66 Opco or, to the knowledge of the P66 Parties, any other party, is in breach or default thereunder and no event has occurred that upon receipt of notice or lapse of time or both would constitute any breach or default thereunder, except for such breaches or defaults as would not, individually or in the aggregate, have a Material Adverse Effect. None of the P66 Parties, the Contributed Entities, Sweeny Frac or P66 Opco has given or received from any third party any notice of any action or intent to terminate or amend in any material respect any Material Contract.

3.16. No Adverse Changes . To the knowledge of the P66 Parties, since September 30, 2015:

(a) there has not been a Material Adverse Effect;

(b) the Businesses and the Contributed Assets have been operated and maintained (and, in the case of the Contributed Assets, have been constructed) in the ordinary

course of business consistent with past practices and, as applicable, prudent industry standards; and

(c) there has not been any material damage or destruction to any material portion of the Contributed Assets other than such damage or destruction that has been repaired.

3.17. Sweeny Frac . The Sweeny Frac Assets have been operated, constructed, and developed in accordance with the terms of the Construction Contracts in all material respects, are mechanically complete, have commenced commercial operations, and are capable of operating at the planned capacity.

3.18. Clemens Cavern Assets . The construction budget for the Initial Caverns and In-Process Caverns included in the Financial and Operational Information (the “ Caverns Budget ”) is based on the estimated remaining construction and completion costs of the Initial Caverns and the In-Process Caverns as of the date hereof. As of the date hereof, the In-Process Caverns are under construction in accordance with the terms of the Clemens Cavern Construction Contracts and the Caverns Budget in all material respects, and as of Closing, the In-Process Caverns will have undergone construction in accordance with the terms of the Clemens Cavern Construction Contracts and the Caverns Budget in all material respects. Upon completion of construction of the Initial Caverns and In-Process Caverns in accordance with the Clemens Cavern Construction Contracts, the Initial Caverns and In-Process Caverns will be sufficient to conduct the portion of the Businesses relating to the Clemens Cavern Assets consistent with prudent industry practice.

3.19. No Other Representations or Warranties; Schedules . The P66 Parties make no other express or implied representation or warranty with respect to the Businesses, the Contributed Entities, P66 Opco, the Contributed Assets or the transactions contemplated by this Agreement, and disclaim any other representations or warranties. The disclosure of any matter or item in any schedule to this Agreement shall not be deemed to constitute an acknowledgment that any such matter is required to be disclosed.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP

The Partnership hereby represents and warrants to the P66 Parties that as of the date hereof:

4.1. Organization and Existence . The Partnership is an entity duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all limited partnership power and authority to own the Contributed Interests and the Contributed Assets. The Partnership is duly qualified to transact business as a limited partnership and is in good standing in each other jurisdiction in which such qualification is required for the conduct of its business, except where the failure to so qualify or to be in good standing does not have a Partnership Material Adverse Effect.

4.2. Authority and Approval; Enforceability . The Partnership has the requisite power and authority to execute and deliver this Agreement and any Transaction Document to which it is a party, to consummate the transactions contemplated hereby and thereby and to perform all the terms and conditions hereof and thereof to be performed by it. The execution and delivery by the

Partnership of this Agreement and any Transaction Document to which it is a party, the performance by it of all the terms and conditions hereof and thereof to be performed by it and the consummation of the transactions contemplated hereby and thereby have been duly authorized and approved by all requisite action of the Partnership. Each of this Agreement and any Transaction Document to which the Partnership is a party constitutes the valid and binding obligation of the Partnership, enforceable against the Partnership in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting enforcement of creditors’ rights generally and by general principles of equity (whether applied in a proceeding at law or in equity).

4.3. Delivery of Fairness Opinion . Financial Advisor has delivered an opinion to the Conflicts Committee that the aggregate consideration to be paid by the Partnership as consideration for the Contributed Interests pursuant to this Agreement is fair to the Partnership and to the common unitholders of the Partnership (other than the P66 Parties) from a financial point of view.

4.4. Brokerage Arrangements . The Partnership has not entered, directly or indirectly, into any agreement with any person, firm or corporation that would obligate the P66 Parties or any of their Affiliates (other than the Partnership) to pay any commission, brokerage or “finder’s fee” or other fee in connection with this Agreement or the transactions contemplated hereby.

4.5. New Common Units and New GP Units . The New Common Units and the New GP Units being issued at Closing will be, when issued in consideration for the contribution by the P66 Parties of the Contributed Interests, duly authorized, validly issued, fully paid and nonassessable (except as such nonassessability may be affected by the Delaware Revised Uniform Limited Partnership Act) and free of any preemptive or similar rights (other than those set forth in the Partnership’s limited partnership agreement).

ARTICLE V

COVENANTS, ETC.

5.1. Conduct of the Businesses . The P66 Parties covenant and agree that from and after the execution of this Agreement and until the Closing:

(a) without the prior written consent of the Partnership, the P66 Parties will not, and will not permit any of the Contributed Entities, P66 Opco or Sweeny Frac LLC to, sell, transfer, assign, convey or otherwise dispose of any of the Contributed Interests, partnership interests in P66 Opco or the Contributed Assets;

(b) the P66 Parties will, and will cause P66 Opco, Opco General Partner and Sweeny Frac LLC to, maintain the Contributed Assets in as good working order and condition as they are as of the date of this Agreement, ordinary wear and tear excepted;

(c) the P66 Parties will, and will cause P66 Opco, Opco General Partner and Sweeny Frac LLC to, operate the Contributed Assets in the ordinary course consistent with past practices; and

(d) the P66 Parties will not, and will not permit P66 Opco or any of the Contributed Entities to, permit any Lien to be imposed on the Contributed Interests or the Contributed Assets, other than Permitted Liens.

5.2. Opco Formation Transactions . Prior to the Closing Date, the P66 Parties shall, and shall cause the Sponsor Entities and Opco General Partner to, as applicable, (a) effect the Opco Formation Transactions and (b) amend and restate the initial limited partnership agreement of P66 Opco to be in a form acceptable to the Partnership and to reflect substantially the governance terms set forth in Exhibit I (the “ Amended Partnership Agreement ”).

5.3. Independent Investigation . The Partnership acknowledges that in making the decision to enter into this Agreement and to consummate the transactions contemplated hereby, it has relied solely on its own independent investigation of the Businesses, P66 Opco, the Contributed Assets and the Contributed Interests and upon the express written representations, warranties and covenants in this Agreement or in the other Transaction Documents. Without diminishing the scope of the express written representations, warranties and covenants of the Parties and without affecting or impairing its right to rely thereon, THE PARTNERSHIP ACKNOWLEDGES THAT THE P66 PARTIES HAVE NOT MADE, AND THE P66 PARTIES HEREBY EXPRESSLY DISCLAIM AND NEGATE, ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, RELATING TO THE CONTRIBUTED INTERESTS, P66 OPCO, THE CONTRIBUTED ASSETS OR THE BUSINESSES (INCLUDING, WITHOUT LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS), other than the representations and warranties in this Agreement and the other transaction documents.

5.4. Post-Closing Payments . Should any of the P66 Parties or any of their respective Subsidiaries, after Closing, receive any payments or distributions related to the Contributed Entities, P66 Opco or the Contributed Assets to which the Partnership or any of its Subsidiaries is entitled pursuant to this Agreement, then such P66 Party or its applicable Subsidiary shall, within thirty (30) days of receipt of such payments, forward such payments or distributions to the Partnership. If any demand is made on the P66 Parties or any of their respective Subsidiaries after Closing to pay any invoice or other obligation contracted or incurred in connection with the ownership of the Contributed Entities on or after the Effective Time, the Partnership shall pay the same to the extent such invoice or obligation constitutes a Partnership Assumed Liability. If any demand is made on the P66 Parties or any of their respective Subsidiaries after Closing to pay any invoice or other obligation contracted or incurred in connection with the ownership or operation of the Contributed Assets or the operation of the Businesses on or after the Effective Time, the Partnership shall cause P66 Opco, solely from the assets of P66 Opco and/or its Subsidiaries (including any capital contribution made by the limited partners of P66 Opco in accordance with the Amended Partnership Agreement), to pay the same to the extent such invoice or obligation constitutes an Opco Assumed Liability. If any demand is made on the Partnership or any of its Subsidiaries to pay any invoice or other obligation contracted or incurred in connection with the ownership of the Contributed Entities or Contributed Interests, the ownership or operation of the Contributed Assets or the operation of the Businesses prior to the Effective Time, the P66 Parties shall be responsible for the same.

5.5. Further Assurances . On and after the Closing Date, the Parties shall cooperate and use their respective commercially reasonable efforts to take or cause to be taken all appropriate actions and do, or cause to be done, all things necessary or appropriate to make effective the transactions contemplated hereby, including the execution of any additional assignment or similar documents or instruments of transfer of any kind, the obtaining of consents which may be reasonably necessary or appropriate to carry out any of the provisions hereof and the taking of all such other actions as such Party may reasonably be requested to take by the other Party from to time to time, consistent with the terms of this Agreement, in order to effectuate the provisions and purposes of this Agreement and transactions contemplated hereby.

5.6. NYSE Listing . Prior to the Closing, the Partnership will use its reasonable best efforts to obtain approval for listing, subject to notice of issuance, the New Common Units on the New York Stock Exchange (the “ NYSE ”).

5.7. Tax Covenants .

(a) The Parties agree that the income related to the Contributed Assets for the period up to and including the Closing Date will be reflected on the federal income Tax Return of PDI and that PDI shall bear the liability for any Taxes associated with such income. The Parties further agree that the income related to the Contributed Assets for the period after the Closing Date will be reflected on the federal income Tax Return of P66 Opco and that the limited partners of P66 Opco shall bear the liability for any Taxes associated with such income.

(b) The Parties shall cooperate fully, and cause their Affiliates to cooperate fully, as and to the extent reasonably requested by the other Party, to accomplish the apportionment of income described pursuant to Section 5.7(a) , requests for the provision of any information or documentation within the knowledge or possession of the other Party as reasonably necessary to facilitate compliance with financial reporting obligations arising under ASC 740 (formerly FASB Statement No. 109) (including compliance with FIN 48) promulgated by the Financial Accounting Standards Board, and any audit, litigation or other proceeding (each a “ Tax Proceeding ”) with respect to Taxes. Such cooperation shall include access to, the retention and (upon the other Party’s request) the provision of records and information which are reasonably relevant to any Tax Return or Tax Proceeding, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Partnership and the P66 Parties will use their respective commercially reasonable efforts to retain all books and records with respect to Tax matters pertinent to the Contributed Entities, P66 Opco and the Contributed Assets relating to any taxable period beginning before the Closing Date until the later of six years after the Closing Date or the expiration of the applicable statute of limitations of the respective taxable periods (including any extensions thereof), and to abide by all record retention agreements entered into with any Tax Authority. The Partnership and the P66 Parties each agree, upon request, to use their respective commercially reasonable efforts to obtain any certificate or other document from any Tax Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed with respect to the transactions contemplated by this Agreement.

(c) To the extent that the assumption of the Assumed Debt as provided for in Section 2.2 results in a deemed distribution of cash by the Partnership to PDI for U.S. federal

income Tax purposes, such deemed distribution of cash is intended to represent a reimbursement of pre-formation capital expenditures with respect to the Contributed Assets to the maximum extent provided by Treasury regulations section 1.707-4(d).

5.8. Assignment of Construction Contracts . Upon a mutual determination by the Parties that all of the P66 Parties’ obligations have been satisfied and no P66 Party has any further Liability under the Construction Contracts, the P66 Parties shall, or shall cause their Subsidiaries to, assign the Construction Contracts to Sweeny Frac LLC, unless assignment automatically occurs as a matter of law.

5.9. Construction .

(a) During the period from the date hereof and continuing until the Closing Date, the P66 Parties shall make, and shall cause their respective Affiliates to make, all payments required to be made under the Construction Contracts in respect of the Sweeny Frac Assets and the Clemens Cavern Assets, and any other payments required to achieve final completion of construction on the Sweeny Frac Assets and the Clemens Cavern Assets or to prevent the attachment or creation of any Liens (other than Permitted Liens) thereto or thereon (it being understood that such obligations to make such payments shall be Excluded Liabilities). From and after the date hereof, the P66 Parties shall, and shall cause their respective Affiliates to, use all commercially reasonable efforts to ensure that the construction of the Sweeny Frac Assets and the Clemens Cavern Assets continues in all material respects in accordance with the milestones, scope, budget and other terms and provisions of the Construction Contracts.

(b) From and after the date hereof, without the consent of the Partnership, none of the P66 Parties shall materially amend, modify or terminate, and each shall cause its respective Affiliates not to materially amend, modify or terminate, the Construction Contracts or waive any material rights under the Construction Contracts.

(c) Prior to and (if applicable) following the Closing, the P66 Parties shall, and shall cause their respective Affiliates to, use their commercially reasonable efforts to (i) achieve final completion of construction on the Sweeny Frac Assets and the Clemens Cavern Assets as promptly as practical, (ii) comply with their obligations under the Construction Contracts and (iii) enforce all rights and/or remedies under the Construction Contracts.

(d) Prior to and (if applicable) following the Closing, the P66 Parties shall, and shall cause their respective Affiliates to, assume and discharge all Construction Costs that are required to achieve full completion of the Sweeny Frac Assets and the Clemens Cavern Assets (it being understood that such obligations shall be Excluded Liabilities); provided , that P66 Opco shall be required to pay costs that constitute the P66 Opco Construction Obligation. In the event the P66 Opco Construction Obligation exceeds the P66 Opco Construction Obligation Cap, the P66 Parties shall be required to pay 100% of such excess costs.

5.10. Financial Statements .

(a) The P66 Parties and the Partnership contemplate the transactions contemplated by this Agreement will be subject to the provisions of the Financial Accounting

Standards Board’s Accounting Standards Codification, section 805-50, Business Combinations, Related Issues (“ ASC 805-50 ”), as a transaction between entities under common control.

(b) The P66 Parties will cooperate with the Partnership to deliver on a timely basis the unaudited financial statements (including balance sheets, and statements of income, cash flows and changes in net investment), in each case with respect to the Businesses and the Contributed Assets, necessary for the Partnership to comply with the provisions of ASC 805-50, (the “ Financial Statements ”).

(c) The Financial Statements will be prepared from the books and records of the P66 Parties and their Subsidiaries in accordance with U.S. generally accepted accounting principles applied on a consistent basis throughout the periods covered thereby.

ARTIVE VI

CONDITIONS TO CLOSING

6.1. Conditions to Each Party’s Obligation to Effect the Transactions . The respective obligation of each Party to proceed with the Closing is subject to the satisfaction or waiver by each of the Parties (subject to applicable laws) on or prior to the Closing Date of all of the following conditions:

(a) all necessary filings with and consents of any Governmental Authority required for the consummation of the transactions contemplated by this Agreement shall have been made and obtained; provided, however, that, prior to invoking this condition, the invoking Party shall have used commercially reasonable efforts to make or obtain such filings and consents.

(b) no Party shall be subject to any decree, order or injunction of a court of competent jurisdiction that prohibits the consummation of the transactions contemplated hereby and no statute, rule, regulation, order, decree or injunction enacted, entered, or issued by any Governmental Authority, or other legal restraint or prohibition preventing the consummation of the transactions contemplated by this Agreement, shall be in effect; and

(c) the New Common Units shall have been approved for listing upon notice of issuance on the NYSE.

6.2. Conditions to the Obligation of the Partnership . The obligation of the Partnership to proceed with the Closing is subject to the satisfaction or waiver by the Partnership on or prior to the Closing Date of the following conditions:

(a) the P66 Parties shall have performed the covenants and agreements contained in this Agreement required to be performed by them on or prior to the Closing Date;

(b) (i) the Fundamental Representations shall be true and correct (without regard to qualifications as to materiality or Material Adverse Effect contained therein) in all material respects as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), and (ii) the other representations and warranties of the P66 Parties made in this Agreement shall be true and

correct in all respects (without regard to qualifications as to materiality or Material Adverse Effect contained therein, except in the case of the representation and warranty contained in Section 3.16(a) ) as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), except in the case of clause (ii) where the failure of the representations and warranties to be true and correct, individually or in the aggregate, has not had a Material Adverse Effect;

(c) the P66 Parties shall have delivered to the Partnership a certificate dated the Closing Date and signed by an authorized officer of the P66 Parties confirming the foregoing matters set forth in clauses (a) and (b) of this Section 6.2 (the “ P66 Closing Certificate ”);

(d) the Sweeny Frac Assets and the Initial Clemens Caverns shall be in commercial operations in accordance with the Construction Contracts, and the Sweeny Frac Assets and the Initial Clemens Caverns shall be mechanically complete and shall be ready in all respects to operate at their planned capacities;

(e) the P66 Parties shall have delivered or caused the delivery of the Closing deliverables set forth in Section 7.2 ;

(f) the Opco Formation Transactions shall have been completed in accordance with Section 5.2(a) and the Amended Partnership Agreement shall have been executed and delivered by the parties thereto in accordance with Section 5.2(b) and shall be in full force and effect in accordance with its terms; and

(g) between the date hereof and the Closing Date, there shall not have been a Material Adverse Effect.

6.3. Conditions to the Obligation of the P66 Parties . The obligation of the P66 Parties to proceed with the Closing is subject to the satisfaction or waiver by the P66 Parties on or prior to the Closing Date of the following conditions:

(a) the Partnership shall have performed in all material respects the covenants and agreements contained in this Agreement required to be performed by it on or prior to the Closing Date;

(b) the representations and warranties of the Partnership made in this Agreement shall be true and correct in all respects (without regard to qualifications as to materiality or Partnership Material Adverse Effect contained therein) as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), except where the failure of the representations and warranties to be true and correct, individually or in the aggregate, has not had a Partnership Material Adverse Effect;

(c) the Partnership shall have delivered to the P66 Parties a certificate dated the Closing Date and signed by an authorized officer of the General Partner confirming the foregoing matters set forth in clauses (a) and (b) of this Section 6.3 (the “ Partnership Closing Certificate ”);

(d) the Partnership shall have delivered or caused the delivery of the Closing deliverables set forth in Section 7.3 ; and

(e) between the date hereof and the Closing Date, there shall not have been a Partnership Material Adverse Effect.

ARTICLE VII

CLOSING

7.1. Closing . Subject to the terms and conditions of this Agreement and unless otherwise agreed in writing by the P66 Parties and the Partnership, the closing (the “ Closing ”) of the transactions contemplated by this Agreement will be held at the offices of Latham & Watkins LLP, 811 Main Street, 37th Floor, Houston, Texas at 9:00 a.m., Houston, Texas time on March 1, 2016, or such other time and date mutually agreed to by the Parties in writing. The date on which the Closing occurs is referred to as the “ Closing Date .”

7.2. Deliveries by the P66 Parties . At the Closing, the P66 Parties will deliver (or cause to be delivered) the following:

(a) a counterpart to the Assignment of Membership Interest, duly executed by PDI;

(b) a counterpart to the Clemens Cavern Storage Agreement, duly executed by P66 Company;

(c) a counterpart to the Sweeny Frac Agreement, duly executed by P66 Company;

(d) a counterpart to the Omnibus Agreement Amendment, duly executed by P66 Company and Pipeline;

(e) a counterpart to the Operational Services Agreement Amendment, duly executed by Pipeline;

(f) a counterpart to the Shared Services Agreement (Sweeny Frac), duly executed by P66 Company;

(g) a counterpart to the Lease, duly executed by P66 Company;

(h) the P66 Closing Certificate, duly executed by an officer of the P66 Parties;

(i) an executed statement described in Treasury regulations section 1.1445-2(b)(2) certifying that PDI is neither a disregarded entity nor a foreign person within the meaning of the Code; and

(j) such other documents, certificates and other instruments as may be reasonably requested by the Partnership prior to the Closing Date to carry out the intent and purposes of this Agreement.

7.3. Deliveries by the Partnership . At the Closing, the Partnership will deliver (or cause to be delivered) the following:

(a) the New Common Units, by issuance of such New Common Units (in book-entry form) to PDI, by instruction to the Partnership’s transfer agent or otherwise;

(b) the New GP Units, by issuance of such New GP Units (in certificated or book-entry form) to the General Partner, by instruction to the Partnership’s transfer agent or otherwise;

(c) an Assignment of Note evidencing the Partnership’s assumption of the Assumed Debt held by Alpha LLC, duly executed by the Partnership and Alpha LLC;

(d) a counterpart to the Assignment of Membership Interest, duly executed by the Partnership, the General Partner and Holdings;

(e) a counterpart to the Clemens Cavern Storage Agreement, duly executed by Sweeny Frac;

(f) a counterpart to the Sweeny Frac Agreement, duly executed by Sweeny Frac;

(g) a counterpart to the Omnibus Agreement Amendment, duly executed by the Partnership, the General Partner, Holdings and Carrier;

(h) a counterpart to the Operational Services Agreement Amendment, duly executed by Holdings and Carrier;

(i) a counterpart to the Shared Services Agreement (Sweeny Frac), duly executed by Sweeny Frac;

(j) a counterpart to the Lease, duly executed by Sweeny Frac;

(k) the Partnership Closing Certificate, duly executed by an officer of the General Partner; and

(l) such other documents, certificates and other instruments as may be reasonably requested by the P66 Parties prior to the Closing Date to carry out the intent and purposes of this Agreement.

ARTICLE VIII

INDEMNIFICATION

8.1. Indemnification of P66 Company and Other Parties . Solely for the purpose of indemnification in this Section 8.1 , the representations and warranties of the Partnership in this Agreement shall be deemed to have been made without regard to any materiality or Partnership Material Adverse Effect or knowledge qualifiers. From and after the Closing Date, subject to the other provisions of this Article VIII , the Partnership shall indemnify and hold the P66 Parties and their respective Affiliates, directors, officers, employees, agents and representatives (together

with the P66 Parties, the “ P66 Indemnitees ”) harmless from and against any and all damages (including exemplary damages and penalties), losses, deficiencies, costs, expenses, obligations, fines, expenditures, claims and liabilities, including reasonable counsel fees and reasonable expenses of investigation, defending and prosecuting litigation (collectively, the “ Damages ”), suffered by the P66 Indemnitees as a result of, caused by, arising out of, or in any way relating to (a) any breach of a representation or warranty of the Partnership in this Agreement, (b) any breach of any agreement or covenant under this Agreement on the part of the Partnership or (c) any of the Partnership Assumed Liabilities. From and after the Closing Date, subject to the other provisions of this Article VIII , the Partnership shall cause P66 Opco, solely from the assets of P66 Opco and/or its Subsidiaries (including any capital contribution made by the limited partners of P66 Opco in accordance with the Amended Partnership Agreement), to indemnify and hold the P66 Indemnitees harmless from and against any and all Damages suffered by the P66 Indemnitees as a result of, caused by, arising out of, or in any way relating to any of the Opco Assumed Liabilities.

8.2. Indemnification of the Partnership and other Parties .

(a) Solely for the purpose of indemnification in this Section 8.2 , the representations and warranties of the P66 Parties in this Agreement (other than the representation and warranty contained in Section 3.16(a) ) shall be deemed to have been made without regard to any materiality or Material Adverse Effect or knowledge qualifiers. From and after the Closing Date, subject to the other provisions of this Article VIII , the P66 Parties shall, jointly and severally, indemnify and hold the Group Members and their respective directors, officers, employees, agents and representatives (together with the Partnership, the “ Partnership Indemnitees ”) harmless from and against any and all Damages suffered by the Partnership Indemnitees (including indirectly as a result of any Partnership Indemnitee’s ownership of partnership interests of P66 Opco) as a result of, caused by, arising out of, or in any way relating to (i) any breach of a representation or warranty of the P66 Parties in this Agreement, (ii) any breach of any agreement or covenant in this Agreement on the part of the P66 Parties or (iii) any of the Excluded Liabilities.

(b) To the extent that the Partnership Indemnitees are entitled to indemnification and to the extent such indemnification relates solely to Damages suffered by P66 Opco or Sweeny Frac LLC or any other Subsidiaries of P66 Opco, then (i) the P66 Parties shall make any and all indemnification payments to P66 Opco or Sweeny Frac LLC or such other Subsidiary of P66 Opco (as directed by Opco General Partner) and (ii) the calculation of Damages (A) for purposes of determining the Deductible and Cap (to the extent applicable to such indemnification claim) shall be (x) 100% of the amount of the Damages so suffered by such Partnership Indemnitee multiplied by (y) twenty-five percent (25%) and (B) for all other purposes of this Article VIII (including in determining the amount payable by the P66 Parties to P66 Opco or Sweeny Frac LLC or such other Subsidiary of P66 Opco) shall be 100% of the amount of the Damages so suffered by P66 Opco or Sweeny Frac LLC or such other Subsidiary of P66 Opco.

(c) To the extent that the Partnership Indemnitees are entitled to indemnification and to the extent such indemnification relates solely to Damages suffered by a

Partnership Indemnitee other than P66 Opco or Sweeny Frac LLC, then (i) the P66 Parties shall make any and all indemnification payments to the applicable Partnership Indemnitee suffering such Damages (or as otherwise directed by the Partnership but, in any event, not to P66 Opco or Sweeny Frac LLC or any other Subsidiaries of P66 Opco) and (ii) the calculation of Damages for all purposes of this Article VIII (including in determining the Deductible or the Cap and/or the amount payable by the P66 Parties to the applicable Partnership Indemnitee) shall be 100% of the amount of the Damages so suffered by such Partnership Indemnitee.

8.3. Demands . Each indemnified party agrees that promptly upon its discovery of facts giving rise to a claim for indemnity under the provisions of this Agreement, including receipt by it of notice of any demand, assertion, claim, action or proceeding, judicial or otherwise, by any third party (such third party actions being collectively referred to herein as the “ Indemnity Claim ”), with respect to any matter as to which it claims to be entitled to indemnity under the provisions of this Agreement, it will give prompt notice thereof in writing to the indemnifying party, together with a statement of such information respecting any of the foregoing as it shall have. Such notice shall include a formal demand for indemnification under this Agreement. The indemnifying party shall not be obligated to indemnify the indemnified party with respect to any Indemnity Claim if the indemnified party knowingly failed to notify the indemnifying party thereof in accordance with the provisions of this Agreement to the extent that knowing failure to notify actually results in material prejudice or damage to the indemnifying party.

8.4. Right to Contest and Defend .

(a) The indemnifying party shall be entitled at its cost and expense to contest and defend by all appropriate legal proceedings any Indemnity Claim with respect to which it is called upon to indemnify the indemnified party under the provisions of this Agreement; provided, however, that notice of the intention to so contest shall be delivered by the indemnifying party to the indemnified party within 20 days from the date of receipt by the indemnifying party of notice by the indemnified party of the assertion of the Indemnity Claim. Any such contest may be conducted in the name and on behalf of the indemnifying party or the indemnified party as may be appropriate. Such contest shall be conducted and prosecuted diligently to a final conclusion or settled in accordance with this Section 8.4 by reputable counsel employed by the indemnifying party and not reasonably objected to by the indemnified party, but the indemnified party shall have the right but not the obligation to participate in such proceedings and to be represented by counsel of its own choosing at its sole cost and expense. The indemnifying party shall have full authority to determine all action to be taken with respect thereto; provided , however , that the indemnifying party will not have the authority to subject the indemnified party to any obligation whatsoever, other than the performance of purely ministerial tasks or obligations not involving material expense. If the indemnifying party does not elect to contest any such Indemnity Claim or elects to contest such Indemnity Claim but fails diligently and promptly to prosecute or settle such claim, the indemnifying party shall be bound by the result obtained with respect thereto by the indemnified party. If the indemnifying party shall have assumed the defense of an Indemnity Claim, the indemnified party shall agree to any settlement, compromise or discharge of an Indemnity Claim that the indemnifying party may recommend and that by its terms obligates the indemnifying party to pay the full amount of the liability in

connection with such Indemnity Claim, which releases the indemnified party completely in connection with such Indemnity Claim and which would not otherwise adversely affect the indemnified party.

(b) Notwithstanding the foregoing, the indemnifying party shall not be entitled to assume the defense of any Indemnity Claim (and shall be liable for the reasonable fees and expenses of counsel incurred by the indemnified party in defending such Indemnity Claim) if the Indemnity Claim seeks an order, injunction or other equitable relief or relief for other than money damages against the indemnified party which the indemnified party reasonably determines, after conferring with its outside counsel, cannot be separated from any related claim for money damages. If such equitable relief or other relief portion of the Indemnity Claim can be so separated from that for money damages, the indemnifying party shall be entitled to assume the defense of the portion relating to money damages.

8.5. Cooperation . If requested by the indemnifying party, the indemnified party agrees to cooperate with the indemnifying party and its counsel in contesting any Indemnity Claim that the indemnifying party elects to contest or, if appropriate, in making any counterclaim against the person asserting the Indemnity Claim, or any cross-complaint against any person, and the indemnifying party will reimburse the indemnified party for any expenses incurred by it in so cooperating. At no cost or expense to the indemnified party, the indemnifying party shall cooperate with the indemnified party and its counsel in contesting any Indemnity Claim.

8.6. Right to Participate . The indemnified party agrees to afford the indemnifying party and its counsel the opportunity to be present at, and to participate in, conferences with all persons, including Governmental Authorities, asserting any Indemnity Claim against the indemnified party or conferences with representatives of or counsel for such persons.

8.7. Payment of Damages . The indemnification required hereunder shall be made by periodic payments of the amount thereof during the course of the investigation or defense, within 10 days as and when reasonably specific bills are received or loss, liability, claim, damage or expense is incurred and reasonable evidence thereof is delivered. In calculating any amount to be paid by an indemnifying party by reason of the provisions of this Agreement, the amount shall be reduced by all reimbursements (including, without limitation, insurance proceeds) credited to or received by the other party related to the Damages.

8.8. Limitations on Indemnification .

(a) To the extent the Partnership Indemnitees are entitled to indemnification for Damages pursuant to Section 8.2(a) (but not including Damages for breaches of Fundamental Representations), the P66 Parties shall not be liable for those Damages unless the aggregate amount of Damages exceeds $2,360,000 (the “ Deductible ”), and then only to the extent of any such excess; provided , however , that the P66 Parties shall not be liable for Damages pursuant to Section 8.2(a) (but not including Damages for breaches of Fundamental Representations) that exceed, in the aggregate, $23,600,000 (the “ Cap ”) less the Deductible.

(b) Notwithstanding clause (a) above, to the extent the Partnership Indemnitees are entitled to indemnification for Damages for claims arising from fraud or related

to or arising from Taxes (including, without limitation, Damages for breach of the representations or warranties in Section 3.14 ), the P66 Parties shall be fully liable for such Damages without regard to the Deductible or the Cap. For the avoidance of doubt, the P66 Parties shall be fully liable for Damages pursuant to Sections 8.2(b) or 8.2(c) and for breaches of Fundamental Representations without regard to the Deductible or the Cap.

(c) To the extent the P66 Indemnitees are entitled to indemnification for Damages pursuant to Section 8.1(a) , the Partnership shall not be liable for those Damages unless the aggregate amount of Damages exceeds, in the aggregate, the Deductible, and then only to the extent of any such excess; provided , however , that the Partnership shall not be liable for Damages that exceed, in the aggregate, the Cap less the Deductible.

(d) Notwithstanding clause (c) above, to the extent the P66 Indemnitees are entitled to indemnification for Damages arising from fraud, the Partnership shall be fully liable for such Damages without regard to the Deductible or the Cap. For the avoidance of doubt, the Partnership shall be fully liable for Damages pursuant to Sections 8.1(b) or 8.1(c) without regard to the Deductible or the Cap.

8.9. Survival .

(a) The liability of the P66 Parties for the breach of any of the representations and warranties of the P66 Parties set forth in Sections 3.1 , 3.2 , 3.8 and 3.9 (the “ Fundamental Representations ”) shall be limited to claims for which the Partnership delivers written notice to the P66 Parties on or before the date that is three years after the Closing Date. The liability of the P66 Parties for the breach of any of the representations and warranties of the P66 Parties set forth in Article III other than the Fundamental Representations shall be limited to claims for which the Partnership delivers written notice to the P66 Parties on or before the date that is eighteen months after the Closing Date. The liability of the P66 Parties for Damages for claims related to or arising from Taxes (including, without limitation, Damages for claims for breach of the representations or warranties in Section 3.14 ) shall be limited to claims for which the Partnership delivers written notice to the P66 Parties on or before the date that is ninety (90) days after the expiration of the applicable statute of limitations for assessment of the applicable Tax.

(b) The liability of the Partnership for the breach of any of the representations and warranties of the Partnership set forth in Article IV shall be limited to claims for which the P66 Parties delivers written notice to the Partnership on or before the date that is eighteen (18) months after the Closing Date.

8.10. Sole Remedy . After the Closing, no Party shall have liability under this Agreement or the transactions contemplated hereby except as is provided in this Article VIII (other than claims or causes of action arising from fraud, and other than claims for specific performance or claims arising under any Transaction Documents (which claims shall be subject to the liability provisions of such Transaction Documents)).

8.11. Express Negligence Rule . THE INDEMNIFICATION AND ASSUMPTION PROVISIONS PROVIDED FOR IN THIS AGREEMENT HAVE BEEN EXPRESSLY NEGOTIATED IN EVERY DETAIL, ARE INTENDED TO BE GIVEN FULL AND LITERAL

EFFECT, AND SHALL BE APPLICABLE WHETHER OR NOT THE LIABILITIES, OBLIGATIONS, CLAIMS, JUDGMENTS, LOSSES, COSTS, EXPENSES OR DAMAGES IN QUESTION ARISE OR AROSE SOLELY OR IN PART FROM THE GROSS, ACTIVE, PASSIVE OR CONCURRENT NEGLIGENCE, STRICT LIABILITY, OR OTHER FAULT OF ANY INDEMNIFIED PARTY. THE PARTNERSHIP AND P66 COMPANY ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND CONSTITUTES CONSPICUOUS NOTICE. NOTICE IN THIS CONSPICUOUS NOTICE IS NOT INTENDED TO PROVIDE OR ALTER THE RIGHTS AND OBLIGATIONS OF THE PARTIES, ALL OF WHICH ARE SPECIFIED ELSEWHERE IN THIS AGREEMENT.

8.12. Knowledge . The Partnership Indemnitees’ and the P66 Indemnitees’ rights under this Agreement or otherwise shall not be diminished by any investigation performed or knowledge acquired or capable of being acquired, whether before or after the date of this Agreement, regarding the accuracy or inaccuracy of any representation or warranty or the performance or non-performance of any covenant.

8.13. Consideration Adjustment . The Parties agree to treat all payments made pursuant to this Article VIII as adjustments to the consideration set forth in Section 2.2 for U.S. federal income Tax purposes, except as otherwise required by Law following a final determination by the U.S. Internal Revenue Service or a Governmental Authority with competent jurisdiction.

ARTICLE IX

TERMINATION

9.1. Events of Termination . This Agreement may be terminated at any time prior to the Closing Date:

(a) by mutual written consent of the P66 Parties and the Partnership;

(b) by either the P66 Parties or the Partnership in writing after May 1, 2016, if the Closing has not occurred by that date, provided that as of such date the terminating Party is not in default under this Agreement;

(c) by either the P66 Parties or the Partnership in writing without prejudice to other rights and remedies the terminating Party or its Affiliates may have (provided the terminating Party and its Affiliates are not otherwise in material default or breach of this Agreement, or have not failed or refused to close without justification hereunder), if the other Party or its Affiliates shall have (i) materially failed to perform its covenants or agreements contained herein required to be performed by such Party or its Affiliates on or prior to the Closing Date or (ii) materially breached any of its representations or warranties contained herein; provided , however , that in the case of clauses (i) or (ii) , the defaulting Party shall have a period of 30 days following written notice from the non-defaulting Party to cure any breach of this Agreement if the breach is curable; or

(d) by either the P66 Parties or the Partnership in writing, without liability, if there shall be any order, writ, injunction or decree of any Governmental Authority binding on the Parties that prohibits or restrains any Party from consummating the transactions contemplated

hereby; provided , however , that the applicable Party shall have used its reasonable best efforts to have any such order, writ, injunction or decree removed but it shall not have been removed within 30 days after entry by the Governmental Authority.

9.2. Effect of Termination . In the event of the termination of this Agreement by a Party as provided in Section 9.1 , this Agreement shall thereafter become void except for this Section 9.2 and Section 10.4 . Nothing in this Section 9.2 shall be deemed to release any Party from any liability for any breach by such Party of the terms and provisions of this Agreement or to impair any rights of any Party under this Agreement. If this Agreement is terminated by either Party pursuant to Section 9.1(c) , then the other Party shall reimburse such Party for its out-of-pocket expenses incurred in connection with the negotiation, execution and performance of this Agreement (including legal fees and fees paid to Financial Advisor, in either case incurred by the Partnership or the Conflicts Committee).

ARTICLE X

MISCELLANEOUS

10.1. Expenses . Unless otherwise specifically provided in this Agreement, each Party shall pay its own expenses incident to this Agreement or the other Transaction Documents and all action taken in preparation for effecting the provisions of this Agreement and the other Transaction Documents.

10.2. Deed; Bill of Sale; Assignment . To the extent required and permitted by applicable law, this Agreement shall also constitute a “deed,” “bill of sale” or “assignment” of the assets and the liabilities referenced herein.

10.3. Right of Offset . Each Party agrees that, in addition to, and without limitation of, any right of set-off, lien or counterclaim a Party may otherwise have, each Party shall have the right and be entitled, at its option, to offset (a) balances held by it or by any of its Affiliates for account of any other Party at any of its offices and (b) other obligations at any time owing by such Party in connection with any obligations to or for the credit or account of the other Party, against any principal of or interest on any of such other Party’s indebtedness or any other amount due and payable to such other Party hereunder that is not paid when due.

10.4. Notices . Unless otherwise specifically provided in this Agreement, any notice, request, instruction, correspondence or other document to be given under or in relation to this Agreement shall be made in writing and shall be deemed to have been properly given if: (i) personally delivered (with written confirmation of receipt); or (ii) delivered by a recognized overnight delivery service (delivery fees prepaid), in either case to the appropriate address set forth below:

If to any of the P66 Parties, addressed to:

Phillips 66 Company

3010 Briarpark Drive

Houston, Texas 77042

Attention: General Counsel

If to the Partnership or the General Partner, addressed to:

Phillips 66 Partners LP

c/o Phillips 66 Partners GP LLC

3010 Briarpark Drive

Houston, Texas 77042

Attention: General Counsel

Any Party may change any address to which notice is to be given to it by giving notice as provided above of such change of address.

10.5. Governing Law . This Agreement shall be governed and construed in accordance with the substantive laws of the State of Texas without reference to principles of conflicts of law that would result in the application of the laws of another jurisdiction.

10.6. Public Statements . The Parties shall consult with each other and no Party shall issue any public announcement or statement with respect to the transactions contemplated hereby without the consent of the other Parties, which shall not be unreasonably withheld or delayed, unless the Party desiring to make such announcement or statement, after seeking such consent from the other Parties, obtains advice from legal counsel that a public announcement or statement is required by applicable law or securities exchange regulations.

10.7. Form of Payment . All payments hereunder shall be made in United States dollars and, unless the Parties making and receiving such payments shall agree otherwise or the provisions hereof provide otherwise, shall be made by wire or interbank transfer of immediately available funds on the date such payment is due to such account as the Party receiving payment may designate at least three business days prior to the proposed date of payment.

10.8. Entire Agreement; Amendments and Waivers . This Agreement and the documents and instruments and other agreements specifically referred to herein or delivered pursuant hereto, including the exhibits and schedules hereto, (a) constitute the entire agreement among the Parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter hereof and (b) are not intended to confer upon any other Person or entity any rights or remedies hereunder except as Article VIII or Article X contemplates or except as otherwise expressly provided herein or therein. Each Party agrees that (i) no other Party (including its agents and representatives) has made any representation, warranty, covenant or agreement to or with such Party relating to this Agreement or the transactions contemplated hereby, other than those expressly set forth in the documents and instruments and other agreements specifically referred to herein or delivered pursuant hereto, including the exhibits and schedules hereto, and (ii) such Party has not relied

upon any representation, warranty, covenant or agreement relating to this Agreement or the transactions contemplated hereby other than those referred to in clause (i) above. No supplement, modification or waiver of this Agreement shall be binding unless executed in writing by the Parties. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (regardless of whether similar), nor shall any such waiver constitute a continuing waiver unless otherwise expressly provided.

10.9. Binding Effect and Assignment . This Agreement shall be binding upon and inure to the benefit of the Parties and their respective permitted successors and assigns, but neither this Agreement nor any of the rights, benefits or obligations hereunder shall be assigned, by operation of law or otherwise, by any Party without the prior written consent of the other Parties.

10.10. Severability . If any provision of the Agreement is rendered or declared illegal or unenforceable by reason of any existing or subsequently enacted legislation or by decree of a court of last resort, the Parties shall meet promptly and negotiate substitute provisions for those rendered or declared illegal or unenforceable, but all of the remaining provisions of this Agreement shall remain in full force and effect and will not be affected or impaired in any way thereby.

10.11. Interpretation . The Parties agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the Party drafting such agreement or document.

10.12. Headings and Schedules . The headings of the several Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. The schedules referred to herein are attached hereto and incorporated herein by this reference, and unless the context expressly requires otherwise, those schedules are incorporated in the definition of “Agreement.”

10.13. Counterparts . This Agreement may be executed in one or more counterparts, including electronic, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

10.14. Consent of Conflicts Committee . Any amendment or waiver by the Partnership made prior to Closing shall be approved by the Conflicts Committee.

[Signature page follows]

IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the date first written above.

EXHIBIT A

FORM OF ASSIGNMENT OF MEMBERSHIP INTEREST

FORM OF ASSIGNMENT OF MEMBERSHIP INTERESTS

Phillips 66 Sweeny Frac Alpha LLC

[Opco General Partner]

THIS ASSIGNMENT OF MEMBERSHIP INTERESTS (this “ Agreement ”) is made effective as of March ___, 2016 (the “ Effective Time ”), by and between Phillips 66 Project Development Inc. , a Delaware corporation (“ PDI ”), Phillips 66 Partners GP LLC , a Delaware limited liability company (the “ General Partner ”), Phillips 66 Partners LP , a Delaware limited partnership (the “ Partnership ”), and Phillips 66 Partners Holdings LLC , a Delaware limited liability company (“ Holdings ”). Capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in the Contribution Agreement (as defined below).

RECITALS

WHEREAS, reference is made to that certain Contribution, Conveyance and Assumption Agreement (the “ Contribution Agreement ”), dated as of February ___, 2016, by and among Phillips 66 Company, a Delaware corporation (“ P66 Company ”), PDI, the General Partner, and the Partnership;

WHEREAS, reference is also made to that certain Amended and Restated Limited Liability Company Agreement (the “ Alpha LLC Agreement ”) of Phillips 66 Sweeny Frac Alpha LLC, a Delaware limited liability company (“ Alpha LLC ”), effective as of December 18, 2013;

WHEREAS, reference is also made to that certain Limited Liability Company Agreement (the “ GP LLC Agreement ” and, together with the Alpha LLC Agreement, the “ LLC Agreements ”) of [  ], a Delaware limited liability company (“ Opco General Partner ” and, together with Alpha LLC, the “ Contributed Entities” ), dated ____________, 2016;

WHEREAS, pursuant to the LLC Agreements, PDI is the sole member of the Contributed Entities;

WHEREAS, pursuant to this Agreement:

(a) PDI desires to assign all of its right, title and interest in and to (i) [2]% of the limited liability company interests in Alpha LLC (the “ GP Membership Interests ”) to the General Partner and (ii) (A) 100% of the limited liability company interests in Opco General Partner and (B) the remaining limited liability company interests in Alpha LLC (such limited liability company interests referenced in clauses (A) and (B), the “ LP Membership Interests ” and, together with the GP Membership Interests, the “ Membership Interests ”) to the Partnership; and the Partnership desires to accept PDI’s assignment of the LP Membership Interests;

(b) the General Partner desires to (i) accept the GP Membership Interests and (ii) effective immediately following such acceptance (the “ Interim Effective Time ”), assign all of its right, title and interest in and to the GP Membership Interests to the Partnership; and the Partnership desires to accept the General Partner’s assignment of the GP Membership Interests; and

(c) effective immediately following the Partnership’s acceptance of the GP Membership Interests (the “ New Effective Time ”), the Partnership desires to assign all of its right, title and interest in and to the Membership Interests to Holdings, and Holdings desires to accept the Partnership’s assignment of the Membership Interests (collectively, the “ Assignments ”);

 

WHEREAS, after giving effect to (a) PDI’s assignment of the GP Membership Interests and LP Membership Interests to the General Partner and the Partnership, respectively, and the admission of the General Partner and Partnership as substitute members of Alpha LLC and Opco General Partner, as applicable, PDI shall cease to be a member of the Contributed Entities, (b) the General Partner’s assignment of the GP Membership Interests to the Partnership, the General Partner shall cease to be a member of Alpha LLC, and (c) the Partnership’s assignment of the Membership Interests to Holdings and the admission of Holdings as a substitute member of the Contributed Entities, the Partnership shall cease to be a member of the Contributed Entities; and

WHEREAS, after giving effect to the Assignments, Holdings will hold all of the Membership Interests and be the sole member of the Contributed Entities.

NOW, THEREFORE, in consideration of the mutual agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:

1. Assignment .

(a) Effective as of the Effective Time, PDI hereby irrevocably assigns, transfers, and conveys (i) to the General Partner all of its right, title and interest in and to the GP Membership Interests and (ii) to the Partnership all of its right, title and interest in and to the LP Membership Interests, together with, in the case of clauses (i) and (ii) , all such rights and obligations as set forth in the LLC Agreements and the Delaware Limited Liability Company Act, as amended (the “ Act ”).

(b) Effective as of the Interim Effective Time, the General Partner hereby irrevocably assigns, transfers, and conveys to the Partnership all of its right, title and interest in and to the GP Membership Interests, together with all such rights and obligations as set forth in the Alpha LLC Agreement and the Act.

(c) Effective as of the New Effective Time, the Partnership hereby irrevocably assigns, transfers, and conveys to Holdings all of its right, title and interest in and to the Membership Interests, together with all such rights and obligations as set forth in the LLC Agreements and the Act.

2. Acceptance, Assumption and Acknowledgment .

(a)      Effective as of the Effective Time, the General Partner hereby accepts PDI’s assignment of the GP Membership Interests pursuant to Section 1(a) and hereby acknowledges and agrees to be bound by the terms of the Alpha LLC Agreement as a member of Alpha LLC and assumes and agrees to perform all of PDI’s agreements and obligations existing or arising with respect to the GP Membership Interests.

(b)      Effective as of the Effective Time, the Partnership hereby accepts PDI’s assignment of the LP Membership Interests pursuant to Section 1(a) and hereby acknowledges and agrees to be bound by the terms of the LLC Agreements as a member of the Contributed Entities and assumes and agrees to perform all of PDI’s agreements and obligations existing or arising with respect to the LP Membership Interests.

(c)      Effective as of the Interim Effective Time, the Partnership hereby accepts the General Partner’s assignment of the GP Membership Interests pursuant to Section 1(b) and hereby acknowledges and agrees to be bound by the terms of the Alpha LLC Agreement as a member of Alpha LLC and assumes and agrees to perform all of the General Partner’s agreements and obligations existing or arising with respect to the GP Membership Interests.

(d)      Effective as of the New Effective Time, Holdings hereby accepts the Partnership’s assignment of the Membership Interests pursuant to Section 1(c) and hereby acknowledges and agrees to be bound by the terms of the LLC Agreements as the sole member of the Contributed Entities, and assumes and agrees to perform all of the Partnership’s agreements and obligations existing or arising with respect to the Membership Interests.

3. Effect of Assignment .

(a)      Effective as of the Effective Time and notwithstanding any provision of the LLC Agreements to the contrary: (i) the General Partner and the Partnership shall own the GP Membership Interests and the LP Membership Interests, respectively, in accordance with this Agreement; (ii) the General Partner is hereby admitted as a member of Alpha LLC with respect to the GP Membership Interests, and this Agreement shall be included in the books and records of Alpha LLC to reflect such admission; (iii) the Partnership is hereby admitted as a member of the Contributed Entities with respect to the LP Membership Interests, and this Agreement shall be included in the books and records of the Contributed Entities to reflect such admission; (iv) immediately following the admission of the General Partner and the Partnership as members of the applicable Contributed Entities, PDI hereby ceases to be a member of the Contributed Entities and ceases to have any right, title or interest in or to the Membership Interests and shall have no further obligations with respect to the Membership Interests or otherwise under the LLC Agreements, and (v) each of the Contributed Entities is hereby continued without dissolution.

(b)      Effective as of the Interim Effective Time and notwithstanding any provision of the Alpha LLC Agreement to the contrary: (i) the Partnership shall own the GP Membership Interests in accordance with this Agreement; (ii) the Partnership is hereby admitted as a member of Alpha LLC with respect to the GP Membership Interests, (iii) immediately following such admission, the

General Partner hereby ceases to be a member of Alpha LLC and ceases to have any right, title or interest in or to the GP Membership Interests and shall have no further obligations with respect to the GP Membership Interests or otherwise under the Alpha LLC Agreement, (iv) the Partnership hereby continues as the sole member of Alpha LLC, and (v) Alpha LLC is hereby continued without dissolution.

(c)      Effective as of the New Effective Time and notwithstanding any provision of the LLC Agreements to the contrary: (i) Holdings shall own the Membership Interests in accordance with this Agreement; (ii) Holdings is hereby admitted as the sole member of each of the Contributed Entities, and this Agreement shall be included in the books and records of each of the Contributed Entities to reflect such admission; (iii) immediately following the admission of Holdings as a substitute member of the Contributed Entities, the Partnership hereby ceases to be a member of the Contributed Entities and ceases to have any right, title or interest in or to the Membership Interests and shall have no further obligations with respect to the Membership Interests or otherwise under the LLC Agreements, (iv) each of the Contributed Entities is hereby continued without dissolution, and (v) all references in the LLC Agreements to PDI are hereby deleted and "Phillips 66 Partners Holdings LLC" is hereby substituted in lieu thereof.

4. Choice of Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflict of laws of that state.

5. Further Assurances. The General Partner, Partnership, PDI and Holdings agree to take such further action as may be necessary or appropriate to effect the purposes of this Agreement.

6. General . This Agreement is binding on and shall inure to the benefit of the signatories hereto and their respective successors and assigns. This Agreement is expressly subject to the terms, provisions and limitations of the Contribution Agreement and, in the event of any conflict between the terms of this Agreement and the terms of the Contribution Agreement, the terms of the Contribution Agreement shall control. This instrument may be executed in one or more counterparts, including electronic, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. In the event that any signature is delivered by facsimile or other electronic transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

[Remainder of page intentionally left blank.]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Time.

PDI:

Phillips 66 Project Development Inc.

By:                         

Name:

         Title:     

THE GENERAL PARTNER:

Phillips 66 Partners GP LLC

    

By:                         

Name:     

         Title:     

THE PARTNERSHIP:

Phillips 66 Partners LP

By: Phillips 66 Partners GP LLC, its General Partner

    

By:                         

Name:     

         Title:     

    

HOLDINGS:

Phillips 66 Partners Holdings LLC

By: Phillips 66 Partners LP, its Sole Member

By: Phillips 66 Partners GP LLC, General Partner of

Phillips 66 Partners LP

By:                         

Name:     

         Title:     

EXHIBIT B

FORM OF ASSIGNMENT OF NOTE

ASSIGNMENT AND ASSUMPTION OF NOTE

THIS ASSIGNMENT AND ASSUMPTION OF NOTE (“ Assumption ”) is dated effective as of March ___, 2016 by and among Phillips 66 Sweeny Frac Alpha LLC, a Delaware limited liability company (“ Assignor ”), Phillips 66 Partners LP, a Delaware limited partnership (“ Assignee ”), and Phillips 66 Company, a Delaware corporation (“ Lender ”).

WITNESSETH:

WHEREAS, Assignor executed and delivered to Lender a Term Promissory Note dated January 20, 2014, which note was amended and restated by an Amended and Restated Term Promissory Note dated October 15, 2015 (as so amended and restated, the “ Note ”), which Note is attached hereto as Exhibit A ;

WHEREAS, as partial consideration for the contribution to Assignee of certain assets, including the membership interests in Assignor, Assignee will, with Lender’s consent, assume Assignor’s obligations and liabilities under the Note;

NOW THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Assignor hereby irrevocably assigns to Assignee, without recourse to Assignor, all of Assignor’s obligations under the Note. Assignee hereby assumes, as its direct and primary obligation, all of Assignor’s obligations under the Note, and agrees to pay Lender the outstanding principal balance due on, and all interest which accrues on and in accordance with the terms of, the Note. From and after the date hereof, all references in the Note to “Maker” as defined in the Note shall be deemed to be a reference to Assignee as the Maker.

2. The parties hereto agree that, as of the date hereof (a) the outstanding principal balance on the Note is                      and      /100’s Dollars ($                  ) and (b) there is no “Event of Default” (as defined under the Note) or any event which, with the passage of time or the giving of notice, or both, would become an “Event of Default.”

3. The parties hereto intend that, except as provided in this Assumption, this Assumption shall not release, diminish, impair, reduce, or, except as expressly stated herein, otherwise affect any of the obligations under the Note. The parties hereto agree to take such further action as may be necessary or appropriate to effect the purposes of this Assignment.

4. Lender hereby consents to the assignment of the Note and releases the Assignor from its obligations under the Note, and agrees that Assignor is no longer a “Maker” under the Note.

5. This Assumption and the rights and obligations of the parties under this Assumption shall be governed by and construed and interpreted in accordance with the laws of the State of Texas, without giving effect to the principles of conflicts of laws of that state. This Assumption is binding on and shall inure to the benefit of the signatories hereto and their respective successors and assigns. This instrument may be executed in one or more counterparts, including electronic, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. In the event that any signature is delivered by facsimile or other electronic transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

6. THIS ASSUMPTION REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES HERETO.

    

[ Remainder of Page Intentionally Left Blank. Signature Pages Follow.]

ASSIGNOR:

PHILLIPS 66 SWEENY FRAC ALPHA LLC

By:     

Name: John D. Zuklic

Title: Vice President and Treasurer

ASSIGNEE:

Phillips 66 Partners LP

By: Phillips 66 Partners GP LLC, its

General Partner

By:

Name: John D. Zuklic                 

Title: Vice President and Treasurer

LENDER:

Phillips 66 Company

By:

Name: John D. Zuklic

Title: Vice President and Treasurer

EXHIBIT A

[Attach Executed Note]

EXHIBIT C

FORM OF CLEMENS STORAGE AGREEMENT

        

NATURAL GAS LIQUIDS STORAGE AGREEMENT

(CLEMENS FACILITY)

This Natural Gas Liquids Storage Agreement (this “ Agreement ”) is entered into as of the ___ day of ___________, 2016 by and between PHILLIPS 66 SWEENY FRAC LLC (“ P66SF ”), a Delaware limited liability company and PHILLIPS 66 COMPANY (“ Customer ”), a Delaware corporation .

The parties hereto agree as follows:

The following terms shall have the meaning specified below:

are not reasonably in the control of the party claiming suspension and could not have been prevented by such party’s due diligence.

This Agreement shall be a binding agreement of the parties hereto upon execution, but the obligations to store Product will commence on March 1, 2016 (the “ Effective Date ”), and will continue through and including February 28, 2026 (the “ Initial Term ”). After expiration of the Initial Term, the Parties may mutually agree to extend the term of this Agreement (the

“ Renewal Term ”). The Initial Term, together with the Renewal Term, if applicable, shall be referred to in this Agreement as the “ Term .”

(a) P66SF shall provide to Customer for the storage of Product all of the working capacity, as described below, of each of the eight permitted salt caverns located at the Facilities (each a “ Cavern ”). The maximum storage capacity for each Cavern (other than the Caverns in the planning stages discussed in the following paragraph) is at or within the working range listed in the table below and is dependent on Customer’s production and discharge forecast and the available brine storage and flow capacity of such Cavern.

Notwithstanding the foregoing, the parties hereto acknowledge and agree that, as of the date of this Agreement, three of the eight Caverns subject to this Agreement (and as indicated below) are in planning stages and will be available for use only if such Caverns become operational. P66SF shall have no liability to Customer if such Caverns do not become available and no obligation to make such Caverns available for Customer’s use. If such Caverns are available for use in the future, P66SF shall store Product for Customer on terms and conditions to be mutually agreed upon by P66SF and Customer .

maximum capacity of the substitute Cavern is greater than the original Cavern; and (ii) the substituted Cavern has similar receipt, storage, and redelivery facility access capabilities. Except in the event of an emergency or due to unscheduled maintenance, P66SF shall provide Customer with fifteen days’ prior written notice of any substitution. Any substitute Cavern while in use hereunder shall be considered the original Cavern for purposes of this Agreement, and all terms and conditions of this Agreement shall apply to such Cavern. If the original Cavern is unavailable after being placed into commercial service and no substitute Cavern has been provided for Customer’s use, P66SF shall adjust the fees described herein so that such fees will be calculated based on actual Cavern availability. Furthermore, any operational activities undertaken that are not being performed at the Customer’s request, which would otherwise result in an increase in the calculation of fees, may be excluded from the monthly fee calculations.

(d) Beginning in 2018, a Cavern will be taken out of service to establish an annual sequence of inspections to comply with applicable regulatory requirements. P66SF will provide Customer with annual updates of Cavern availability.

(e) At the end of the Term, Customer will bear the cost of returning each Cavern and related Cavern-manifold pipelines to the same condition as on commencement of service to Customer in respect of such Cavern, subject to reasonable wear and tear.

(f) The parties acknowledge that prudent operation of the Caverns includes necessary repairs and maintenance consistent with generally accepted industry standards, which will result in temporary unavailability of the Caverns during which P66SF will be unable to provide the storage contracted for herein. So long as P66SF endeavors to work with Customer to minimize the duration, frequency, and effect of such unavailability on Customer and the duration, frequency, and effect of such unavailability on Customer are consistent with generally accepted industry standards, P66SF shall not be deemed to breach this Agreement in respect thereof and shall not be liable to Customer for any failure to perform its obligations set forth herein.

(a) Customer shall make nominations to P66SF no later than the 15 ^th day of the month before delivery or redelivery of quantities of Product that Customer desires to tender for delivery at the Delivery Point or for redelivery at the Redelivery Point. Custody and control of Product (i) delivered hereunder shall be deemed to be transferred to P66SF at the Delivery Point as the Product in question passes the Facilities’ boundary on discharge into the Facilities; and (ii) redelivered hereunder shall be deemed to be transferred to Customer at the Redelivery Point as the Product in question passes the Facilities’ boundary on exit from the Facilities.

(b) P66SF will not recognize sales or assignments of, or other transfers of title to, Product while in storage unless approved in advance in writing by P66SF (such approval not to be unreasonably withheld) and then only to another person or entity that has a valid storage agreement with P66SF for storage of such Product at the Facilities.

(c)      Customer has the right to request delivery and storage of crude oil or other commodities and P66SF’s consent to such requests shall not be unreasonably withheld; provided, however,

that the delivery and storage of the requested crude oil or commodity must be within the authorization granted in the H-4 permit issued on July 9, 2014 by the Railroad Commission of Texas (as may be amended or supplemented) and permitted under all other applicable law, regulation, or administrative requirement. In the event Customer seeks storage of a crude oil or any other commodity, Customer must submit written Notice to P66SF with the details regarding the proposed change in commodity. P66SF shall act in good faith and use commercially reasonable efforts to work diligently to modify the Facilities as necessary, in its sole opinion, to accommodate the change in commodity. All costs and expenses for such modifications, if any, shall be at the sole cost and expenses of the Customer. Any other approvals or authorizations required for such conversion shall be the sole responsibility of Customer.

P66SF shall maintain brine levels sufficient to permit the requested injections and withdrawals of Product; provided, however, that P66SF shall not be obligated to maintain brine levels at a level in excess of the maximum brine system storage capacity of the Facilities of approximately [___] million Barrels and the maximum designed brine flow rate of approximately [____] Barrels per hour (or [________] Barrels per day). Without limiting the foregoing, P66SF’s redelivery of Product to Customer will be subject to operating conditions, rates of delivery, delivery pressures, scheduling and other requirements of the Facilities and the applicable Pipeline to which Product is to be redelivered.

Except as described below, measurements, volume corrections, and calibrations shall be performed in accordance with API Manual of Petroleum Measurement Standards (“ API MPMS ”) latest revision. Volumes shall be based on 42 Gallons per Barrel at 60 degrees Fahrenheit. Measured Product volumes shall be adjusted to a temperature of 60 degrees Fahrenheit and a pressure of one standard atmosphere (14.7 PSIA) per the most recent Gas Processors Association TP-27/API MPMS, Chapter 11 ( e.g., Table 24E, 54E, or other table relevant to the applicable Product). Cavern pump-out fees and Cavern pump-over fees will be based on measurement from meters at the Cavern well-head.  The Customer acknowledges that these meters do not meet API measurement standards.

(a) P66SF shall have the right to sample all Products nominated by Customer for delivery and may refuse to take delivery of any Product if such Product does not meet the specifications set forth on Exhibit A. If P66SF takes delivery of any Product and within a commercially reasonable period of time determines that such Product does not meet the specifications set forth on Exhibit A, P66SF shall promptly provide notice to Customer. In such event, Customer shall take redelivery of such non-conforming Product and shall indemnify P66SF for any damage or loss to the Facilities caused by such non-conforming Product. If a sample indicates presence of Product that does not meet specifications, Customer shall be promptly informed. The quality of the Product delivered to P66SF will be verified by pipeline batch specifications, a refinery analysis, supplier’s certificate or, at Customer’s request, an independent laboratory’s analysis.

P66SF will be responsible for the appointment and cost of its own sampling, testing, and/or other laboratory services with respect to sampling the Product. Customer will be responsible for any costs associated with an independent laboratory analysis requested by it. For any service or function requested by Customer not specifically provided for in this Agreement, P66SF may provide such service at its actual cost, or may retain a third party to provide such service, as agreed in advance by the parties in writing.

(b) P66SF will make reasonable efforts to minimize any commingling of dissimilar Products transferred within the Caverns’ storage system. Customer acknowledges, accepts, and waives its right to claim damages for contamination of Customer’s Products due to commingling, line displacements and/or use of common lines.

It is understood and agreed that (i) Customer shall retain title to the Products stored hereunder, subject to such Products being commingled with like Products belonging to P66SF or other parties, and (ii) Products redelivered to Customer by P66SF may not be identical to Products delivered by Customer into P66SF’s Facilities, but shall be considered as fungible goods. However, with P66SF’s prior written consent, Customer may allow a third party to store Products in the Caverns by contract or otherwise. In such event, Customer will continue to be liable for all obligations and requirements set forth in this Agreement with respect to such third party Product as if such Product were owned by Customer (including payment of fees with respect thereto), Customer will continue to be liable for its own acts and omissions under this Agreement, and the third party shall warrant in a writing acceptable to P66SF that it has title to all Product received, stored and handled on its behalf by P66SF pursuant to this Agreement.

For the services described herein, the following fees shall apply:

(b) Cavern to Cavern Transfer Fee : $[___] per Barrel

(c) Cavern Pump-out Fee (Cavern to Pipeline at the Redelivery Point): $[___] per Barrel

(d) Cavern Receipt Fee (Pipeline to Cavern at the Delivery Point): [___]

Each of the above-referenced rates shall be increased, but never decreased, annually on the anniversary date of the Effective Date by an amount equal to 25% of the annual change in the percentage increase in the Consumer Price Index for All Urban Consumers (the “ CPI-U ”), as reported during the month of January immediately before the effective date of the adjustment, with respect to the 12-month period ending at the end of the month of December immediately preceding such publication.

If applicable, P66SF will provide notice by the 15 ^th day of each month to Customer that the aggregate working capacity of the Caverns has increased or decreased from one tier to another in the Storage Commitment Table above. Any adjustment in Customer’s monthly storage fee and minimum storage volume based on such increase or decrease in the aggregate working capacity will be effective as of the first day of the following month following such notice.

(e) In the fourth quarter of each Year, P66SF shall determine, in good faith, an estimate of the total annual property taxes owed on the improvements owned by P66SF and located on the real property at the Clemens Salt Dome Lease, Clemens, NE (Frio B) Field (the “ Improvements ”), which include, but are not limited to, the Facilities, for the next Year and then use the estimate to calculate a per-Barrel fee (“ Service Fee ”) to be assessed on the Customer’s applicable Minimum Storage Volume each month, regardless of whether the Customer stores Product in an amount equal to the Customer’s Minimum Storage Volume. The Service Fee will be calculated by dividing the estimate by the Minimum Storage Volume, i.e. , [x] * [y]. P66SF will provide Notice to Customer of the Service Fee to be assessed in the upcoming year in accordance with the notice provisions in Section 18 below. As between the parties, P66SF shall pay all property taxes on the Improvements that become due after the Effective Date. The Service Fee for the remaining portion of Year 2016 shall be calculated in accordance with the Service Fee Table below. The Service Fee shall be included on the monthly invoice described in Article XI below.

(f)      Change in Law . If new Laws require P66SF to make substantial and unanticipated expenditures in connection with the services P66SF provides to Customer under this Agreement, P66SF shall use commercially reasonable efforts to attempt to secure a waiver, exception or extension for the time of compliance with the new Law in an effort to secure continued operation under existing applicable Laws during the term of this Agreement. If P66SF is unable to secure a waiver, exception or extension for continued operation using commercially reasonable efforts, then P66SF will find a commercially reasonable manner to conform to the new Laws and give Customer commercially reasonable advance notice of any planned expenditures necessary for such compliance. Customer will reimburse P66SF for Customer's proportionate share of the costs of complying with such Laws, or at P66SF’s option, and if the Parties agree, relevant fees will be increased or an alternate mechanism shall be adopted to allow P66SF to recover the amount paid for such costs over time from Customer or another entity. The Customer’s “proportionate share” of the costs of complying with such Laws referenced in the immediately preceding sentence shall be 100% if Customer is P66SF’s sole customer.

Customer shall pay all taxes, if any, levied or assessed on the Product stored or on the services rendered or storage capacity contracted hereunder. In the event it becomes necessary for P66SF to pay any such tax, Customer shall promptly reimburse P66SF for such amount upon receipt of invoice therefor.

The fees payable by Customer under this Agreement shall be paid by automated clearing house to the account specified on P66SF’s invoice or to such other account as P66SF may hereafter designate in writing, provided that as long as P66SF is an affiliate of Customer, P66SF and Customer may settle Customer’s financial obligations to P66SF through Customer’s normal inter-affiliate settlement processes. Payment shall be made by the later of two (2) Business Days from the receipt date of P66SF’s invoice and the 22 ^nd day of the month in which such invoice is received, provided that if such day is not a Business Day, then such payment shall be due, without interest, on the next Business Day. Any amounts which remain due and owing after the due date shall bear interest thereon at a per annum rate of interest equal to 1.5% per month or the maximum lawful rate of interest, whichever is lower (the “ Base Rate ”). If a good faith dispute arises as to the amount payable in any invoice, the amount not in dispute shall promptly be paid.

If Customer elects to withhold any payment otherwise due as a consequence of a good faith dispute, Customer shall provide P66SF with written notice of its specific reasons for withholding payment. The parties hereto agree to use all reasonable efforts to resolve any such disputes in a timely manner. If it is subsequently determined, whether by mutual agreement of the parties or otherwise, that Customer is required to pay all or any portion of the disputed amounts to P66SF, in addition to paying over such amounts, Customer also shall pay interest accrued on such amounts at the Base Rate from the original due date until paid in full.

P66SF shall have a statutory warehouseman’s lien on all Product of Customer stored hereunder to cover any accrued and unpaid amounts payable hereunder and may withhold redelivery of any such Product until such accrued and unpaid amounts are paid. If any undisputed amounts remain unpaid for more than thirty (30) days after notice of failure to pay, P66SF may sell said Product at a public auction at the offices of P66SF on any Business Day not less than forty-eight (48) hours after publication of notice in a daily newspaper of general circulation published near the Facility with copy of such notice sent to Customer, said notice giving the time and place of the sale and the quantity and Product to be sold. P66SF may be a bidder and a purchaser at such sale. From the proceeds of such sale, P66SF may pay itself all charges lawfully accruing and all expenses of such sale (including, without limitation, reasonable attorneys’ fees and court costs), and the net balance may be held for whomsoever may be lawfully entitled thereto.

Customer shall bear any losses or gains that may occur while Customer’s Products are in storage at the Facility (such losses or gains, the “ Storage Variations ”), except to the extent that Storage Variations result from P66SF’s gross negligence or willful misconduct or the gross negligence or willful misconduct of P66SF’s employees, agents, contractors or subcontractors. P66SF’s maximum liability, if any, for loss or damages to the Products will be limited to the monthly average Non-TET price on the Texas Gulf Coast for such Product on the date of such loss or damage as reported or published by OPIS, multiplied by the volume of the Product lost or damaged. Periodically, P66SF shall determine the physical inventory of Products and calculate the Storage Variation.  Customer’s inventory of Products in storage at the Facilities shall then be adjusted (increased or decreased) to reflect the Storage Variation.

(a) As soon as possible upon the occurrence of a Force Majeure, if any party hereto is affected by a Force Majeure event, such party shall provide the other party with written notice of the occurrence of such Force Majeure event. Each party’s obligations (other than a party’s obligation to indemnify the other party or a party’s obligation to pay any amounts due to the other party which have accrued prior to the commencement of such Force Majeure event) shall be temporarily suspended during the occurrence of, and for the entire duration of, a Force Majeure event to the extent that such an event prevents P66SF from performing its obligations under this Agreement. Each party’s obligations (other than a party’s obligation to indemnify the other party or a party’s obligation to pay any amounts due to the other party which have accrued prior to the commencement of such Force Majeure event) shall be temporarily suspended beginning [___] days after the commencement of, and for the entire remaining duration of, a

Force Majeure event to the extent that such event prevents Customer from performing its obligations under this Agreement. For clarity, fees shall not accrue while each party’s obligations are suspended. At the conclusion of the Force Majeure event, the fees applicable to the month in which the suspension due to the Force Majeure event remained in effect shall be ratably reduced to reflect such suspension.

(b) A party affected by a Force Majeure event shall take commercially reasonable steps to remedy such situation so that it may resume the full performance of its obligations under this Agreement within a reasonable period of time.

(c) The settlement of strikes, lockouts and other labor disturbances shall be entirely within the discretion of the affected party and the requirement to remedy a Force Majeure event within a reasonable period of time shall not require the settlement of strikes or lockouts by acceding to the demands of an opposing person or entity when such course is inadvisable in the discretion of the affected party.

(d) P66SF may suspend performance of the services to the extent reasonably necessary to prevent injuries to persons, damage to property or harm to the environment.

(e) If a Force Majeure event prevents either P66SF or Customer from performing its respective obligations under this Agreement for a period of more than 12 consecutive months, this Agreement may be terminated by either party at any time after the expiration of such 12-month period upon at least 30 days’ notice to the other party.

(a) EXCEPT AS PROVIDED IN SECTION 7, CUSTOMER SHALL DEFEND, RELEASE, INDEMNIFY AND HOLD P66SF AND ITS AFFILIATES, OFFICERS, DIRECTORS, AGENTS AND EMPLOYEES HARMLESS FROM AND AGAINST ANY AND ALL CAUSES OF ACTION, SUITS, LOSSES, LIABILITIES, COSTS AND EXPENSES, INCLUDING, WITHOUT LIMITATION, COURT COSTS AND ATTORNEY’S FEES, (“ CLAIMS ”) ARISING OUT OF OR RELATED IN ANY WAY TO INJURY TO OR DEATH OF CUSTOMER’S EMPLOYEES, AGENTS, OFFICERS OR INVITEES ARISING OUT OF OR OCCURRING IN CONNECTION WITH PERFORMANCE OF THIS AGREEMENT, REGARDLESS OF THE TIMING OR NATURE OR STYLE OF SUCH CLAIMS AND REGARDLESS OF THE IDENTITY OF THE CLAIMANT, INCLUDING BUT NOT LIMITED TO THE EMPLOYEE OR INVITEE THEMSELVES AND THEIR RESPECTIVE REPRESENTATIVES, AGENTS, HEIRS, BENEFICIARIES, ASSIGNS, AND FAMILY MEMBERS.

(b) SUBJECT TO SECTION 7, P66SF SHALL DEFEND, RELEASE, INDEMNIFY AND HOLD CUSTOMER AND ITS AFFILIATES, OFFICERS, DIRECTORS, AGENTS, AND EMPLOYEES HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS ARISING OUT OF OR RELATED IN ANY WAY TO DAMAGE TO P66SF’S PROPERTY, INJURY TO OR DEATH OF THE P66SF’S EMPLOYEES, PORT AGENTS, AUTHORIZED SUBCONTRACTORS, VENDORS, AGENTS, OFFICERS OR INVITEES ARISING OUT OF OR OCCURRING IN CONNECTION WITH PERFORMANCE OF THIS AGREEMENT , REGARDLESS OF THE TIMING OR NATURE OR STYLE OF SUCH CLAIMS AND REGARDLESS OF THE IDENTITY OF THE CLAIMANT, INCLUDING BUT NOT

LIMITED TO THE EMPLOYEE OR INVITEE THEMSELVES AND THEIR RESPECTIVE REPRESENTATIVES, AGENTS, HEIRS, BENEFICIARIES, ASSIGNS, AND FAMILY MEMBERS.

(a) Notice of Claims by Customer for any liability, loss, damage, or expense arising out of this Agreement must be made to P66SF in writing within one hundred eighty (180) days after the same shall have accrued. Such claims, described in reasonable detail, must be sent to P66SF within said one hundred eighty (180) days and unless so made and filed, P66SF shall be wholly released and discharged therefrom and shall not be liable therefore in any court of justice. No suit at law or in equity shall be maintained upon any claim unless instituted within two (2) years and one (1) day after the cause of action accrued.

(b) IN NO EVENT SHALL EITHER PARTY HERETO BE LIABLE TO THE OTHER PARTY FOR ANY PROSPECTIVE OR SPECULATIVE PROFITS, OR SPECIAL, INDIRECT, INCIDENTAL, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL DAMAGES, WHETHER BASED UPON CONTRACT, TORT, STRICT LIABILITY, OR NEGLIGENCE, OR IN ANY OTHER MANNER ARISING OUT OF THIS AGREEMENT, AND EACH PARTY HEREBY RELEASES THE OTHER PARTY FROM ANY CLAIM THEREFOR.

If either party hereto is in material default of the provisions of this Agreement and such default has not been remedied within 60 days after written notice from the non-defaulting party (the “ Cure Period ”), then the non-defaulting party may, in addition to any other rights or remedies available to it, terminate this Agreement by giving written notice of termination to the defaulting party within five (5) days following expiration of said Cure Period.

All notices, demands, requests, and other communications to be given hereunder shall be in writing and deemed given if personally delivered, forwarded by facsimile (with proof of transmission), or mailed by either certified mail, return receipt requested, or sent by overnight carrier to the receiving party at its address below:

3010 Briarpark Drive

Houston, TX 77042

Attn: President

Copy to General Counsel

3010 Briarpark Drive

Houston, TX 77042

Attn: President

This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. No party may assign this Agreement, nor any interest herein, without the prior written consent of the other parties, which consent shall not be unreasonably withheld, except that either party may (i) assign its rights and delegate its duties hereunder (other than any payment obligations under this Agreement) to an affiliate without the consent of the other or (ii) make collateral assignments of this Agreement to secure working capital or other financing without the consent of the other party. Such assignment shall be effective upon notice sent by the assigning party. Upon the occurrence of a Partnership Change in Control, P66SF shall provide Customer with a notice of any Partnership Change in Control at least 60 days prior to the effective date thereof. Within 180 days following receipt of such Notice, Customer may elect to terminate this Agreement, effective no earlier than the effective date of such Partnership Change in Control. In the event this Agreement is terminated early as a result of Partnership Change in Control, Customer shall have no further payment obligations to P66SF except for those incurred prior to the early termination date. A “ Partnership Change in Control ” means Phillips 66 Company ceases to Control the general partner of Phillips 66 Partners LP.

This Agreement and the provisions hereof shall be subject to all applicable state and federal laws and to all applicable rules, regulations, orders, and directives of any governmental authority, agency, commission, or regulatory body in connection with any and all matters or things under or incident to this Agreement.

This Agreement embodies the entire agreement between P66SF and Customer and there are no promises, assurances, terms, conditions, or obligations, whether by precedent or otherwise, other than those contained herein. No variation, modification, or reformation hereof shall be deemed valid until reduced to writing and signed by the parties hereto.

THIS AGREEMENT, AND ANY ACTIONS, CLAIMS, DEMANDS OR SETTLEMENTS HEREUNDER, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REFERENCE TO ANY CONFLICTS OF LAW PRINCIPLES WHICH MIGHT REQUIRE THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS (AS APPLICABLE) LOCATED IN HOUSTON, TEXAS, AND TO ALL COURTS COMPETENT TO HEAR AND DETERMINE APPEALS THEREFROM, AND WAIVES ANY OBJECTIONS THAT A SUIT, ACTION OR PROCEEDING SHOULD BE BROUGHT IN ANOTHER COURT AND ANY OBJECTIONS TO INCONVENIENT FORUM.

23. Relationship of the Parties. It is not the intention of the parties to create, and this Agreement shall not be deemed or construed to create, a partnership, joint venture or association or a trust. This Agreement shall not be deemed or construed to authorize any party to act as an agent, servant or employee for any other party for any purpose whatsoever except as explicitly set forth in this Agreement.

(a) This Agreement may be scanned and stored electronically, or stored on computer tapes and disks, as may be practicable (the “ Imaged Agreement ”). The Imaged Agreement if introduced as evidence in printed format, in any judicial, arbitration, mediation or administrative proceedings, will be admissible as between the parties hereto to the same extent and under the same conditions as other business records originated and maintained in documentary form. Neither party hereto shall object to the admissibility of any Imaged Agreement (or photocopies of the transcription of such Imaged Agreement) on the basis that such were not originated or maintained in documentary form under either the hearsay rule or the best evidence rule. However, nothing herein shall be construed as a waiver of any other objection to the admissibility of such evidence.

(b) P66SF shall in good faith endeavor to promptly notify Customer of any Product spills or other environmentally polluting discharges. Notice may be sent by email to Customer’s scheduler or operational personnel.

(c) No waiver by either party hereto of any default under this Agreement shall be deemed to be a waiver of any future default, whether of a like or a different character. In the event that one or more of the provisions contained in this Agreement shall be held to be invalid or legally unenforceable in any respect under applicable law, the validity, legality or enforceability of the remaining provisions hereof shall not be affected or impaired thereby. Each of the provisions of this Agreement is hereby declared to be separate and distinct.

[ The signature page follows .]

The parties hereto have executed this Agreement as of the date hereof.

P66SF:

PHILLIPS 66 SWEENY FRAC LLC

BY:

Name: Robert A. Herman

Title: President

CUSTOMER:

PHILLIPS 66 COMPANY

BY:

Name: Robert A. Herman

Title: Executive Vice President, Midstream

EXHIBIT A

Product Specifications:

(to be added)

EXHIBIT D

FORM OF LEASE

LEASE AGREEMENT WITH OPTION TO PURCHASE

BETWEEN

PHILLIPS 66 COMPANY

AS LESSOR

AND

PHILLIPS 66 SWEENY FRAC LLC

AS LESSEE

DATED AS OF

February ____, 2016

LEASE

TABLE OF CONTENTS

EXHIBIT A - LEGAL DESCRIPTION OF THE LEASED PROPERTY

EXHIBIT B - PERMITTED ENCUMBRANCES

EXHIBIT C - MEMORANDUM OF LEASE WITH OPTION TO PURCHASE

    

This Lease is made and entered into this __ day of February, 2016 by and between Phillips 66 Company, a Delaware corporation, herein referred to as Lessor, and Phillips 66 Sweeny Frac LLC, a Delaware limited liability company, herein referred to as Lessee.

RECITALS

WHEREAS, Lessor and Lessee’s Affiliates have entered into a Contribution, Conveyance and Assumption Agreement, dated February ______, 2016 (“Contribution Agreement”) for Lessor to sell and Lessee and Lessee’s Affiliates to purchase certain Assets located at or near the Refinery; and

WHEREAS, Lessee wishes to lease the Premises associated with the Assets with an option to purchase the Premises from Lessor, and Lessor desires to lease the Premises associated with the Assets with an option for Lessee to purchase the Premises.

NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

    

ARTICLE I

DEFINITIONS AND INTERPRETATIONS .

1.1      Definitions . Capitalized terms used in this Lease without other definition shall have the meanings specified in this Section 1.1 unless the context requires otherwise .

“ Affiliate ” means, with respect to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with, such specified Person through one or more intermediaries or otherwise; provided, however, that (a) with respect to Lessor, the term “Affiliate” shall not include any Group Member and (b) with respect to the Partnership Group, the term “Affiliate” shall not include Lessor or any of its Subsidiaries (other than a Group Member).

 

“ Appurtenant Easements ” shall mean those third-party easements, licenses, leases or other interests in real property that are in Lessor’s Affiliates names that are located at or near the Refinery and which benefit the Premises or the Assets.

“ Assessor ” shall mean the Brazoria County (Texas) Chief Appraiser.

“ Assets ” shall mean the Sweeny Fractionator, and all other assets owned, held for use by Lessor or any of Lessor’s Affiliates in connection with the operation of the Sweeny Fractionator that are necessary for Lessee and Lessee’s Affiliates to use and operate the Sweeny Fractionator after the Effective Date in a manner substantially similar to the use and operation of the Sweeny Fractionator prior to the Effective Date and in a manner contemplated by the Contribution Agreement. However, fee ownership of the real property on which the Sweeny Fractionator is located shall remain vested in Lessor.

“ Base Price Index ” shall mean the Price Index for the month nearest before the Effective Date for which the Price Index is published.

“ Base Term ” shall have the meaning as defined in Section 2.2.

“ Base Year ” shall mean the full calendar year during which the Term of this lease commences.

“Closing” shall have the meaning as defined in Section 3.2(b).

“Closing Date” shall have the meaning as defined in Section 3.2(b).

    

“ Condemnation ” shall mean the taking or expropriation of property by any Person in the exercise of the power of eminent domain or a conveyance of property in lieu of such taking or expropriation.

“ Corrective Action ” shall mean any response action, corrective action, investigation, monitoring, operation and maintenance, abatement, clean up, removal, disposal, treatment, equipment installation, covering or remediation with respect to a Release (other than a Release into the air) at, on, under or from the Premises or the Refinery, including preparing and signing any manifests required for the off-site transportation, treatment or disposal of Hazardous Materials and actions to prevent or abate migration of Hazardous Materials (other than through the air) at or from the Assets to real property owned, leased or used by Lessor or any third party or at or from any of Lessor’s assets at the Refinery to real property owned, leased or used by Lessee or any third party.

“ Effective Date ” shall mean March 1, 2016, all in accordance with the terms for closing set forth in the Contribution Agreement.

“ Environmental Laws ” all applicable federal, state and local laws and regulations and other legally enforceable requirements and rules of common law relating to the prevention of pollution or protection of human health or the environment or imposing liability or standards of conduct concerning any Hazardous Materials.

“ Force Majeure ” shall mean any cause that is beyond the reasonable control of a Party, and either results from an event or condition which is unforeseeable, or if reasonably foreseeable cannot by the exercise of reasonable diligence be prevented or avoided, including flood, landslide, earthquake, hurricane, tornado, storm or other unusually adverse weather condition, fire, lightning and other acts of God, acts of war, invasion, acts of foreign enemies, hostilities (whether war be declared or not), acts of terrorism, civil war, rebellion, revolution, insurrection or military or usurped power, martial law, embargo, blockade, riot or civil disturbance, epidemic, famine, sabotage, explosions, theft, casualty, injunction, strikes, lockouts or other labor difficulties; or any restrictions by governmental agencies or authorities or changes in the law which would make the performance of an obligation impossible or illegal. Force Majeure shall not include the non‑availability of financing, lack of funds, or changes in market conditions.

“ Group Member ” means a member of the Partnership Group.

“ Hazardous Material ” means a) any “hazardous substance” as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, (b) any “hazardous waste” as defined in the Resource Conservation and Recovery Act, as amended, (c) any petroleum or petroleum product, (d) any polychlorinated biphenyl and (e) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material, waste or substance regulated under or within the meaning of any applicable Environmental Law.

“ Improvements ” shall mean all improvements, facilities, fixtures, machinery, equipment, buildings and any other property constructed, built, installed, placed, equipped or otherwise located on or within the Premises by Lessee or on Lessee’s behalf, whether classified as real or personal property.

“ Invitee ” shall mean any Person whose presence at the Premises or Refinery, as applicable, is at the invitation of a Party hereto as a guest and not as a result of a contract or subcontract with such Party.

“ Late Payment Rate ” shall mean the lesser of the maximum legal interest rate and 1.5% per month.

“ Lease ” shall mean this Lease.

“ Legal Requirements ” shall mean any federal, state or local charter, act, statute, law, ordinance, code, rule, regulation or order or other applicable legislative or administrative action of the United States of America or the State of Texas, or any agency, department, authority, political subdivision or other instrumentality thereof, or a final decree, judgment or order of a court.

“ Lessee ” shall mean Phillips 66 Sweeny Frac LLC.

“ Lessee’s Operations ” means the operation of the Sweeny Fractionator for the purpose of fractionating raw product into specification product, transportation of raw product and specification product, and for any other uses or activities related to or associated with such operations, subject to any Reasonable Restrictions.