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                                                                     EXHIBIT 4-U

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                    PREFERRED SECURITIES GUARANTEE AGREEMENT

                             Phillips 66 Capital V

                          Dated as of _______ __, 1998





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                               TABLE OF CONTENTS

<TABLE>
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<S>                             <C>                                                                        <C>
                                ARTICLE I
                                DEFINITIONS AND INTERPRETATION                                               1
SECTION 1.1                     Definitions and Interpretation                                               1

                                ARTICLE II
                                TRUST INDENTURE ACT                                                          4
SECTION 2.1                     Trust Indenture Act; Application                                             4
SECTION 2.2                     Lists of Holders of Securities                                               5
SECTION 2.3                     Reports by the Preferred Guarantee Trustee                                   5
SECTION 2.4                     Periodic Reports to Preferred Guarantee Trustee                              5
SECTION 2.5                     Evidence of Compliance with Conditions Precedent                             5
SECTION 2.6                     Events of Default; Waiver                                                    5
SECTION 2.7                     Event of Default; Notice                                                     6
SECTION 2.8                     Conflicting Interests                                                        6

                                ARTICLE III
                                POWERS, DUTIES AND RIGHTS OF
                                PREFERRED GUARANTEE TRUSTEE                                                  6
SECTION 3.1                     Powers and Duties of the Preferred Guarantee Trustee                         6
SECTION 3.2                     Certain Rights of Preferred Guarantee Trustee                                8
SECTION 3.3                     Not Responsible for Recitals of Issuance of Guarantee                        10

                                ARTICLE IV
                                PREFERRED GUARANTEE TRUSTEE                                                  10
SECTION 4.1                     Preferred Guarantee Trustee; Eligibility                                     10
SECTION 4.2                     Appointment, Removal and Resignation of Preferred Guarantee                  10
                                Trustees

                                ARTICLE V
                                GUARANTEE                                                                    11
SECTION 5.1                     Guarantee                                                                    11
SECTION 5.2                     Waiver of Notice and Demand                                                  11
SECTION 5.3                     Obligations Not Affected                                                     12
SECTION 5.4                     Rights of Holders                                                            12
SECTION 5.5                     Guarantee of Payment                                                         13
SECTION 5.6                     Subrogation                                                                  13
SECTION 5.7                     Independent Obligations                                                      13

                                ARTICLE VI
                                LIMITATION OF TRANSACTIONS; SUBORDINATION
                                                                                                             14
SECTION 6.1                     Limitation of Transactions                                                   14
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<TABLE>
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<S>                             <C>                                                                         <C>
SECTION 6.2                     Ranking                                                                      14

                                ARTICLE VII
                                TERMINATION                                                                  14
SECTION 7.1                     Termination                                                                  14

                                ARTICLE VIII
                                INDEMNIFICATION                                                              15
SECTION 8.1                     Exculpation                                                                  15
SECTION 8.2                     Indemnification                                                              15

                                ARTICLE IX
                                MISCELLANEOUS                                                                15
SECTION 9.1                     Successors and Assigns                                                       15
SECTION 9.2                     Amendments                                                                   16
SECTION 9.3                     Notices                                                                      16
SECTION 9.4                     Benefit                                                                      17
SECTION 9.5                     Governing Law                                                                16
</TABLE>





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                    PREFERRED SECURITIES GUARANTEE AGREEMENT

                 This GUARANTEE AGREEMENT (the "Preferred Securities
Guarantee"), dated as of _______ __, 1998, is executed and delivered by
Phillips Petroleum Company, a Delaware corporation (the "Guarantor"), and The
Bank of New York, a New York banking corporation, as trustee (the "Preferred
Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Preferred Securities (as defined herein) of Phillips 66
Capital V, a Delaware statutory business trust (the "Issuer").

                 WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of ________, 1998, among the trustees of
the Issuer named therein, the Guarantor, as sponsor, and the holders from time
to time of undivided beneficial interests in the assets of the Issuer, the
Issuer is issuing on the date hereof [ ] preferred securities, having an
aggregate liquidation amount of $[ ] (plus up to an additional [ ] preferred
securities, having an aggregate liquidation amount of $[           ], to cover
over-allotments)], designated the _____% Trust Originated Preferred Securities
(the "Preferred Securities");

                 WHEREAS, as incentive for the Holders to purchase the
Preferred Securities, the Guarantor desires irrevocably and unconditionally to
agree, to the extent set forth in this Preferred Securities Guarantee, to pay
to the Holders of the Preferred Securities the Guarantee Payments (as defined
herein) and to make certain other payments on the terms and conditions set
forth herein.

                 WHEREAS, the Guarantor is also executing and delivering a
guarantee agreement (the "Common Securities Guarantee") in substantially
identical terms to this Preferred Securities Guarantee for the benefit of the
holders of the Common Securities (as defined herein), except that if an Event
of Default (as defined in the Indenture), has occurred and is continuing, the
rights of holders of the Common Securities to receive Guarantee Payments under
the Common Securities Guarantee are subordinated to the rights of Holders of
Preferred Securities to receive Guarantee Payments under this Preferred
Securities Guarantee.

                 NOW, THEREFORE, in consideration of the purchase by each
Holder of Preferred Securities, which purchase the Guarantor hereby agrees
shall benefit the Guarantor, the Guarantor executes and delivers this Preferred
Securities Guarantee for the benefit of the Holders.


                                   ARTICLE I
                         DEFINITIONS AND INTERPRETATION

SECTION 1.1               Definitions and Interpretation

                 In this Preferred Securities Guarantee, unless the context
otherwise requires:





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                          (a)     Capitalized terms used in this Preferred
Securities Guarantee but not defined in the preamble above have the respective
meanings assigned to them in this Section 1.1;

                          (b)     a term defined anywhere in this Preferred
Securities Guarantee has the same meaning throughout;

                          (c)     all references to "the Preferred Securities
Guarantee" or "this Preferred Securities Guarantee" are to this Preferred
Securities Guarantee as modified, supplemented or amended from time to time;

                          (d)     all references in this Preferred Securities
Guarantee to Articles and Sections are to Articles and Sections of this
Preferred Securities Guarantee, unless otherwise specified;

                          (e)     a term defined in the Trust Indenture Act has
the same meaning when used in this Preferred Securities Guarantee, unless
otherwise defined in this Preferred Securities Guarantee or unless the context
otherwise requires; and

                          (f)     a reference to the singular includes the
plural and vice versa.

                 "Affiliate" has the same meaning as given to that term in Rule
405 of the Securities Act of 1933, as amended, or any successor rule
thereunder.

                 "Business Day" means any day other than a day on which banking
institutions in the City of New York, New York are authorized or required by
any applicable law to close.

                 "Common Securities" means the securities representing common
undivided beneficial interests in the assets of the Issuer.

                 "Corporate Trust Office" means the office of the Preferred
Guarantee Trustee at which the corporate trust business of the Preferred
Guarantee Trustee shall, at any particular time, be principally administered,
which office at the date of execution of this Agreement is located at 101
Barclay Street, 21 West, New York, New York 10286.

                 "Covered Person" means any Holder or beneficial owner of
Preferred Securities.

                 "Debentures" means the series of junior subordinated debt
securities of the Guarantor designated the ___% [Junior Subordinated Deferrable
Interest Debentures] due [      ] held by the Institutional Trustee (as defined
in the Declaration) of the Issuer.

                 "Event of Default" means a default by the Guarantor on any of
its payment or other obligations under this Preferred Securities Guarantee.

                 "Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Preferred Securities,
to the extent not paid or made by the Issuer:





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(i) any accrued and unpaid Distributions (as defined in the Declaration) that
are required to be paid on such Preferred Securities to the extent the Issuer
shall have funds available therefor, (ii) the redemption price, including all
accrued and unpaid Distributions to the date of redemption (the "Redemption
Price") to the extent the Issuer has funds available therefor, with respect to
any Preferred Securities called for redemption by the Issuer, and (iii) upon a
voluntary or involuntary dissolution, winding-up or termination of the Issuer
(other than in connection with the distribution of Debentures to the Holders in
exchange for Preferred Securities as provided in the Declaration), the lesser
of (a) the aggregate of the liquidation amount and all accrued and unpaid
Distributions on the Preferred Securities to the date of payment, to the extent
the Issuer shall have funds available therefor, and (b) the amount of assets of
the Issuer remaining available for distribution to Holders in liquidation of
the Issuer (in either case, the "Liquidation Distribution").  If an event of
default under the Indenture has occurred and is continuing, the rights of
holders of the Common Securities to receive payments under the Common
Securities Guarantee Agreement are subordinated to the rights of Holders of
Preferred Securities to receive Guarantee Payments.

                 "Holder" shall mean any holder, as registered on the books and
records of the Issuer of any Preferred Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder,
"Holder" shall not include the Guarantor or any Affiliate of the Guarantor.

                 "Indemnified Person" means the Preferred Guarantee Trustee,
any Affiliate of the Preferred Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the Preferred Guarantee Trustee.

                 "Indenture" means the Indenture dated as of _______, 1998,
among the Guarantor (the "Debenture Issuer") and The Bank of New York, N.A., as
trustee, and any indenture supplemental thereto pursuant to which certain
subordinated debt securities of the Debenture Issuer are to be issued to the
Property Trustee of the Issuer.

                 "Majority in liquidation amount of the Securities" means,
except as provided by the Trust Indenture Act, a vote by Holder(s) of Preferred
Securities, voting separately as a class, of more than 50% of the liquidation
amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date
upon which the voting percentages are determined) of all Preferred Securities.

                 "Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person.  Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Preferred Securities Guarantee shall include:

                          (a)     a statement that each officer signing the
Officers' Certificate has read the covenant or condition and the definition
relating thereto;

                          (b)     a brief statement of the nature and scope of
the examination or investigation undertaken by each officer in rendering the
Officers' Certificate;





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                          (c)     a statement that each such officer has made
such examination or investigation as, in such officer's opinion, is necessary
to enable such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and

                          (d)     a statement as to whether, in the opinion of
each such officer, such condition or covenant has been complied with.

                 "Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.

                 "Preferred Guarantee Trustee" means The Bank of New York, a
New York banking corporation, until a Successor Preferred Guarantee Trustee has
been appointed and has accepted such appointment pursuant to the terms of this
Preferred Securities Guarantee and thereafter means each such Successor
Preferred Guarantee Trustee.

                 "Responsible Officer" means, with respect to the Preferred
Guarantee Trustee, any officer within the Corporate Trust Office of the
Preferred Guarantee Trustee, including any vice president, any assistant vice
president, any assistant secretary, the treasurer, any assistant treasurer or
other officer of the Corporate Trust Office of the Preferred Guarantee Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject.

                 "Successor Preferred Guarantee Trustee" means a successor
Preferred Guarantee Trustee possessing the qualifications to act as Preferred
Guarantee Trustee under Section 4.1.

                 "Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.

                 "Trust Securities" means the Common Securities and the
Preferred Securities.


                                   ARTICLE II
                              TRUST INDENTURE ACT

SECTION 2.1               Trust Indenture Act; Application

                          (a)     This Preferred Securities Guarantee is
subject to the provisions of the Trust Indenture Act that are required to be
part of this Preferred Securities Guarantee and shall, to the extent
applicable, be governed by such provisions; and

                          (b)     if and to the extent that any provision of
this Preferred Securities Guarantee limits, qualifies or conflicts with the
duties imposed by Section 310 to 317, inclusive, of the Trust Indenture Act,
such imposed duties shall control.





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SECTION 2.2               Lists of Holders of Securities

                          (a)     The Guarantor shall provide the Preferred
Guarantee Trustee with a list, in such form as the Preferred Guarantee Trustee
may reasonably require, of the names and addresses of the Holders of the
Preferred Securities ("List of Holders") as of such date, (i) within 1 Business
Day after January 1 and June 30 of each year, and (ii) at any other time within
30 days of receipt by the Guarantor of a written request for a List of Holders
as of a date no more than 14 days before such List of Holders is given to the
Preferred Guarantee Trustee provided, that the Guarantor shall not be obligated
to provide such List of Holders at any time the List of Holders does not differ
from the most recent List of Holders given to the Preferred Guarantee Trustee
by the Guarantor.  The Preferred Guarantee Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.

                          (b)     The Preferred Guarantee Trustee shall comply
with its obligations under Sections 311(a), 311(b) and Section 312(b) of the
Trust Indenture Act.

SECTION 2.3               Reports by the Preferred Guarantee Trustee

                 Within 60 days after May 15 of each year, the Preferred
Guarantee Trustee shall provide to the Holders of the Preferred Securities such
reports as are required by Section 313 of the Trust Indenture Act, if any, in
the form and in the manner provided by Section 313 of the Trust Indenture Act.
The Preferred Guarantee Trustee shall also comply with the requirements of
Section 313(d) of the Trust Indenture Act.

SECTION 2.4               Periodic Reports to Preferred Guarantee Trustee

                 The Guarantor shall provide to the Preferred Guarantee Trustee
such documents, reports and information as required by Section 314 (if any) and
the compliance certificate required by Section 314 of the Trust Indenture Act
in the form, in the manner and at the times required by Section 314 of the
Trust Indenture Act.

SECTION 2.5               Evidence of Compliance with Conditions Precedent

                 The Guarantor shall provide to the Preferred Guarantee Trustee
such evidence of compliance with any conditions precedent, if any, provided for
in this Preferred Securities Guarantee that relate to any of the matters set
forth in Section 314(c) of the Trust Indenture Act.  Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given
in the form of an Officers' Certificate.

SECTION 2.6               Events of Default; Waiver

                 The Holders of a Majority in liquidation amount of Preferred
Securities may, by vote, on behalf of the Holders of all of the Preferred
Securities, waive any past Event of Default and its consequences.  Upon such
waiver, any such Event of Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this





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Preferred Securities Guarantee, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.

SECTION 2.7               Event of Default; Notice

                          (a)     The Preferred Guarantee Trustee shall, within
90 days after the occurrence of an Event of Default, transmit by mail, first
class postage prepaid, to the Holders of the Preferred Securities, notices of
all Events of Default actually known to a Responsible Officer of the Preferred
Guarantee Trustee, unless such defaults have been cured before the giving of
such notice, provided, that, the Preferred Guarantee Trustee shall be protected
in withholding such notice if and so long as a Responsible Officer of the
Preferred Guarantee Trustee in good faith determines that the withholding of
such notice is in the interests of the Holders of the Preferred Securities.

                          (b)     The Preferred Guarantee Trustee shall not be
deemed to have knowledge of any Event of Default unless the Preferred Guarantee
Trustee shall have received written notice, or of which a Responsible Officer
of the Preferred Guarantee Trustee charged with the administration of the
Declaration shall have obtained actual knowledge.

SECTION 2.8               Conflicting Interests

                 The Declaration shall be deemed to be specifically described
in this Preferred Securities Guarantee for the purposes of clause (i) of the
first proviso contained in Section 310(b) of the Trust Indenture Act.

                                  ARTICLE III
                          POWERS, DUTIES AND RIGHTS OF
                          PREFERRED GUARANTEE TRUSTEE

SECTION 3.1               Powers and Duties of the Preferred Guarantee Trustee

                          (a)     This Preferred Securities Guarantee shall be
held by the Preferred Guarantee Trustee for the benefit of the Holders of the
Preferred Securities, and the Preferred Guarantee Trustee shall not transfer
this Preferred Securities Guarantee to any Person except a Holder of Preferred
Securities exercising his or her rights pursuant to Section 5.4(b) or to a
Successor Preferred Guarantee Trustee on acceptance by such Successor Preferred
Guarantee Trustee of its appointment to act as Successor Preferred Guarantee
Trustee.  The right, title and interest of the Preferred Guarantee Trustee
shall automatically vest in any Successor Preferred Guarantee Trustee, and such
vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered pursuant to the appointment of such
Successor Preferred Guarantee Trustee.

                          (b)     If an Event of Default actually known to a
Responsible Officer of the Preferred Guarantee Trustee has occurred and is
continuing, the Preferred Guarantee Trustee shall enforce this Preferred
Securities Guarantee for the benefit of the Holders of the Preferred
Securities.





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                          (c)      Preferred Guarantee Trustee, before the
occurrence of any Event of Default and after the curing of all Events of
Default that may have occurred, shall undertake to perform only such duties as
are specifically set forth in this Preferred Securities Guarantee, and no
implied covenants shall be read into this Preferred Securities Guarantee
against the Preferred Guarantee Trustee.  In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.6) and is
actually known to a Responsible Officer of the Preferred Guarantee Trustee, the
Preferred Guarantee Trustee shall exercise such of the rights and powers vested
in it by this Preferred Securities Guarantee, and use the same degree of care
and skill in its exercise thereof, as a prudent person would exercise or use
under the circumstances in the conduct of his or her own affairs.

                          (d)     provision of this Preferred Securities
Guarantee shall be construed to relieve the Preferred Guarantee Trustee from
liability for its own negligent action, its own negligent failure to act, or
its own willful misconduct, except that:

                                  (i)      prior to the occurrence of any Event
of Default and after the curing or waiving of all such Events of Default that
may have occurred:

                 (A)      the duties and obligations of the Preferred Guarantee
Trustee shall be determined solely by the express provisions of this Preferred
Securities Guarantee, and the Preferred Guarantee Trustee shall not be liable
except for the performance of such duties and obligations as are specifically
set forth in this Preferred Securities Guarantee, and no implied covenants or
obligations shall be read into this Preferred Securities Guarantee against the
Preferred Guarantee Trustee; and

                 (B)      in the absence of bad faith on the part of the
Preferred Guarantee Trustee, the Preferred Guarantee Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to the Preferred
Guarantee Trustee and conforming to the requirements of this Preferred
Securities Guarantee; but in the case of any such certificates or opinions that
by any provision hereof are specifically required to be furnished to the
Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall be under a
duty to examine the same to determine whether or not they conform to the
requirements of this Preferred Securities Guarantee;

                                  (ii)     the Preferred Guarantee Trustee
shall not be liable for any error of judgment made in good faith by a
Responsible Officer of the Preferred Guarantee Trustee, unless it shall be
proved that the Preferred Guarantee Trustee was negligent in ascertaining the
pertinent facts upon which such judgment was made;

                                  (iii)    the Preferred Guarantee Trustee
shall not be liable with respect to any action taken or omitted to be taken by
it in good faith in accordance with the direction of the Holders of not less
than a Majority in liquidation amount of the Preferred Securities relating to
the time, method and place of conducting any proceeding for any remedy
available to the Preferred Guarantee Trustee, or exercising any trust or power
conferred upon the Preferred Guarantee Trustee under this Preferred Securities
Guarantee; and





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                                  (iv)     no provision of this Preferred
Securities Guarantee shall require the Preferred Guarantee Trustee to expend or
risk its own funds or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of its rights or
powers, if the Preferred Guarantee Trustee shall have reasonable grounds for
believing that the repayment of such funds or liability is not reasonably
assured to it under the terms of this Preferred Securities Guarantee or
indemnity, reasonably satisfactory to the Preferred Guarantee Trustee, against
such risk or liability is not reasonably assured to it.

SECTION 3.2               Certain Rights of Preferred Guarantee Trustee

                          (a)     Subject to the provisions of Section 3.1:

                                  (i)      The Preferred Guarantee Trustee may
conclusively rely, and shall be fully protected in acting or refraining from
acting upon, any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed by it to be
genuine and to have been signed, sent or presented by the proper party or
parties.

                                  (ii)     Any direction or act of the
Guarantor contemplated by this Preferred Securities Guarantee shall be
sufficiently evidenced by an Officers' Certificate.

                                  (iii)    Whenever, in the administration of
this Preferred Securities Guarantee, the Preferred Guarantee Trustee shall deem
it desirable that a matter be proved or established before taking, suffering or
omitting any action hereunder, the Preferred Guarantee Trustee (unless other
evidence is herein specifically prescribed) may, in the absence of bad faith on
its part, request and conclusively rely upon an Officers' Certificate which,
upon receipt of such request, shall be promptly delivered by the Guarantor.

                                  (iv)     The Preferred Guarantee Trustee
shall have no duty to see to any recording, filing or registration of any
instrument (or any rerecording, refiling or registration thereof).

                                  (v)      The Preferred Guarantee Trustee may
consult with counsel, and the written advice or opinion of such counsel with
respect to legal matters shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with such advice or opinion. Such counsel may
be counsel to the Guarantor or any of its Affiliates and may include any of its
employees.  The Preferred Guarantee Trustee shall have the right at any time to
seek instructions concerning the administration of this Preferred Securities
Guarantee from any court of competent jurisdiction.

                                  (vi)     The Preferred Guarantee Trustee
shall be under no obligation to exercise any of the rights or powers vested in
it by this Preferred Securities Guarantee at the request or direction of any
Holder, unless such Holder shall have provided to the Preferred Guarantee
Trustee such security and indemnity, reasonably satisfactory to the Preferred
Guarantee Trustee, against the costs, expenses (including attorneys' fees and
expenses





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and the expenses of the Preferred Guarantee Trustee's agents, nominees or
custodians) and liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be requested by
the Preferred Guarantee Trustee; provided that, nothing contained in this
Section 3.2(a)(vi) shall be taken to relieve the Preferred Guarantee Trustee,
upon the occurrence of an Event of Default, of its obligation to exercise the
rights and powers vested in it by this Preferred Securities Guarantee.

                                  (vii)    The Preferred Guarantee Trustee
shall not be bound to make any investigation into the facts or matters stated
in any resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Preferred Guarantee Trustee,
in its discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit.

                                  (viii) The Preferred Guarantee Trustee may
execute any of the trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents, nominees, custodians or attorneys, and
the Preferred Guarantee Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.

                                  (ix)     Any action taken by the Preferred
Guarantee Trustee or its agents hereunder shall bind the Holders of the
Preferred Securities, and the signature of the Preferred Guarantee Trustee or
its agents alone shall be sufficient and effective to perform any such action.
No third party shall be required to inquire as to the authority of the
Preferred Guarantee Trustee to so act or as to its compliance with any of the
terms and provisions of this Preferred Securities Guarantee, both of which
shall be conclusively evidenced by the Preferred Guarantee Trustee's or its
agent's taking such action.

                                  (x)      Whenever in the administration of
this Preferred Securities Guarantee the Preferred Guarantee Trustee shall deem
it desirable to receive instructions with respect to enforcing any remedy or
right or taking any other action hereunder, the Preferred Guarantee Trustee (i)
may request instructions from the Holders of a Majority in liquidation amount
of the Preferred Securities, (ii) may refrain from enforcing such remedy or
right or taking such other action until such instructions are received, and
(iii) shall be protected in conclusively relying on or acting in accordance
with such instructions.

                          (b)     No provision of this Preferred Securities
Guarantee shall be deemed to impose any duty or obligation on the Preferred
Guarantee Trustee to perform any act or acts or exercise any right, power, duty
or obligation conferred or imposed on it in any jurisdiction in which it shall
be illegal, or in which the Preferred Guarantee Trustee shall be unqualified or
incompetent in accordance with applicable law, to perform any such act or acts
or to exercise any such right, power, duty or obligation.  No permissive power
or authority available to the Preferred Guarantee Trustee shall be construed to
be a duty.





                                     - 9 -
<PAGE>   13
SECTION 3.3.              Not Responsible for Recitals or Issuance of Preferred
Securities Guarantee.

                 The recitals contained in this Preferred Securities Guarantee
shall be taken as the statements of the Guarantor, and the Preferred Guarantee
Trustee does not assume any responsibility for their correctness.  The
Preferred Guarantee Trustee makes no representation as to the validity or
sufficiency of this Preferred Securities Guarantee.


                                   ARTICLE IV
                          PREFERRED GUARANTEE TRUSTEE

SECTION 4.1               Preferred Guarantee Trustee; Eligibility

                          (a)     There shall at all times be a Preferred
Guarantee Trustee which shall:

                                  (i)      not be an Affiliate of the
Guarantor; and

                                  (ii)     be a corporation organized and doing
business under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia, or a corporation or Person
permitted by the Securities and Exchange Commission to act as an institutional
trustee under the Trust Indenture Act, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least 50
million U.S.  dollars ($50,000,000), and subject to supervision or examination
by Federal, State, Territorial or District of Columbia authority.  If such
corporation publishes reports of condition at least annually, pursuant to law
or to the requirements of the supervising or examining authority referred to
above, then, for the purposes of this Section 4.1(a)(ii), the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.

                          (b)     If at any time the Preferred Guarantee
Trustee shall cease to be eligible to so act under Section 4.1(a), the
Preferred Guarantee Trustee shall immediately resign in the manner and with the
effect set out in Section 4.2(c).

                          (c)     If the Preferred Guarantee Trustee has or
shall acquire  any "conflicting interest" within the meaning of Section 310(b)
of the Trust Indenture Act, the Preferred Guarantee Trustee and Guarantor shall
in all respects comply with the provisions of Section 310(b) of the Trust
Indenture Act.

SECTION 4.2               Appointment, Removal and Resignation of Preferred
Guarantee Trustee

                          (a)     Subject to Section 4.2(b), the Preferred
Guarantee Trustee may be appointed or removed without cause at any time by the
Guarantor.





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<PAGE>   14
                          (b)      The Preferred Guarantee Trustee shall not be
removed in accordance with Section 4.2(a) until a Successor Preferred Guarantee
Trustee has been appointed and has accepted such appointment by written
instrument executed by such Successor Preferred Guarantee Trustee and delivered
to the Guarantor.

                          (c)     The Preferred Guarantee Trustee appointed to
office shall hold office until a Successor Preferred Guarantee Trustee shall
have been appointed or until its removal or resignation.  The Preferred
Guarantee Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing executed by the Preferred Guarantee
Trustee and delivered to the Guarantor, which resignation shall not take effect
until a Successor Preferred Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Preferred Guarantee Trustee and delivered to the Guarantor and the resigning
Preferred Guarantee Trustee.

                          (d)     If no Successor Preferred Guarantee Trustee
shall have been appointed and accepted appointment as provided in this Section
4.2 within 60 days after delivery to the Guarantor of an instrument of removal
or resignation, the resigning Preferred Guarantee Trustee may petition any
court of competent jurisdiction for appointment of a Successor Preferred
Guarantee Trustee.  Such court may thereupon, after prescribing such notice, if
any, as it may deem proper, appoint a Successor Preferred Guarantee Trustee.

                          (e)     No Preferred Guarantee Trustee shall be
liable for the acts or omissions to act of any Successor Preferred Guarantee
Trustee.

                          (f)     Upon termination of this Preferred Securities
Guarantee or removal or resignation of the Preferred Guarantee Trustee pursuant
to this Section 4.2, the Guarantor shall pay to the Preferred Guarantee Trustee
all amounts accrued to the date of such termination, removal or resignation.

                                   ARTICLE V
                                   GUARANTEE

SECTION 5.1               Guarantee

                 The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim that the Issuer may have or assert.  The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the Holders.

SECTION 5.2               Waiver of Notice and Demand

                 The Guarantor hereby waives notice of acceptance of this
Preferred Securities Guarantee and of any liability to which it applies or may
apply, presentment, demand for payment, any right to require a proceeding first
against the Issuer or any other Person before





                                     - 11 -
<PAGE>   15
proceeding against the Guarantor, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.

SECTION 5.3               Obligations Not Affected

                 The obligations, covenants, agreements and duties of the
Guarantor under this Preferred Securities Guarantee shall in no way be affected
or impaired by reason of the happening from time to time of any of the
following:

                          (a)     the release or waiver, by operation of law or
otherwise, of the performance or observance by the Issuer of any express or
implied agreement, covenant, term or condition relating to the Preferred
Securities to be performed or observed by the Issuer;

                          (b)     extension of time for the payment by the
Issuer of all or any portion of the Distributions, Redemption Price,
Liquidation Distribution or any other sums payable under the terms of the
Preferred Securities or the extension of time for the performance of any other
obligation under, arising out of, or in connection with, the Preferred
Securities (other than an extension of time for payment of Distributions,
Redemption Price, Liquidation Distribution or other sum payable that results
from the extension of any interest payment period on the Debentures or any
extension of the maturity date of the Debentures permitted by the Indenture);

                          (c)     failure, omission, delay or lack of diligence
on the part of the Holders to enforce, assert or exercise any right, privilege,
power or remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;

                          (d)     voluntary or involuntary liquidation,
dissolution, sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt of, or other similar proceedings affecting,
the Issuer or any of the assets of the Issuer;

                          (e)     invalidity of, or defect or deficiency in,
the Preferred Securities;

                          (f)     settlement or compromise of any obligation
guaranteed hereby or hereby incurred; or

                          (g)     other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a guarantor,
it being the intent of this Section 5.3 that the obligations of the Guarantor
hereunder shall be absolute and unconditional under any and all circumstances.

                 There shall be no obligation of the Holders to give notice to,
or obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.





                                     - 12 -
<PAGE>   16
SECTION 5.4               Rights of Holders

                          (a)     Holders of a Majority in liquidation amount
of the Preferred Securities have the right to direct the time, method and place
of conducting of any proceeding for any remedy available to the Preferred
Guarantee Trustee in respect of this Preferred Securities Guarantee or
exercising any trust or power conferred upon the Preferred Guarantee Trustee
under this Preferred Securities Guarantee.

                          (b)     the Preferred Guarantee Trustee fails to
enforce such Preferred Securities Guarantee, any Holder of Preferred Securities
may institute a legal proceeding directly against the Guarantor to enforce the
Preferred Guarantee Trustee's rights under this Preferred Securities Guarantee,
without first instituting a legal proceeding against the Issuer, the Preferred
Guarantee Trustee or any other person or entity.  The Guarantor waives any
right or remedy to require that any action be brought first against the Issuer
or any other person or entity before proceeding directly against the Guarantor.

SECTION 5.5               Guarantee of Payment

                 This Preferred Securities Guarantee creates a guarantee of
payment and not of collection.

SECTION 5.6               Subrogation

                 The Guarantor shall be subrogated to all (if any) rights of
the Holders of Preferred Securities against the Issuer in respect of any
amounts paid to such Holders by the Guarantor under this Preferred Securities
Guarantee; provided, however, that the Guarantor shall not (except to the
extent required by mandatory provisions of law) be entitled to enforce or
exercise any right that it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under
this Preferred Securities Guarantee, if, at the time of any such payment, any
amounts are due and unpaid under this Preferred Securities Guarantee.  If any
amount shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.

SECTION 5.7               Independent Obligations

                 The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Preferred
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Preferred
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (g), inclusive, of Section 5.3 hereof.





                                     - 13 -
<PAGE>   17
                                   ARTICLE VI
                   LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 6.1               Limitation of Transactions

                 So long as any Preferred Securities remain outstanding, if
there shall have occurred an Event of Default or an event of default under the
Declaration, then (a) the Guarantor shall not declare or pay any dividend on,
make any distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock (other than (i)
purchases or acquisitions of shares of Common Stock in connection with the
satisfaction by the Guarantor of its obligations under any employee benefit
plans, (ii) as a result of a reclassifica- tion of the Guarantor's capital
stock or the exchange or conversion of one class or series of the Guarantor's
capital stock for another class or series of the Guarantor's capital stock or,
(iii) the purchase of fractional interests in shares of the Guarantor's capital
stock pursuant to the conversion or exchange provisions of such capital stock
of the Guarantor or the security being converted or exchanged) or make any
guarantee payments with respect to the foregoing or (b) the Guarantor shall not
make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities (including guarantees) issued by the
Guarantor which rank pari passu with or junior to the Debentures.

SECTION 6.2               Ranking

                 This Preferred Securities Guarantee will constitute an
unsecured obligation of the Guarantor and will rank (i) subordinate and junior
in right of payment to all other liabilities of the Guarantor, (ii) pari passu
with the most senior preferred or preference stock now or hereafter issued by
the Guarantor and with any guarantee now or hereafter entered into by the
Guarantor in respect of any Preferred or preference stock of any Affiliate of
the Guarantor, and (iii) senior to the Guarantor's common stock.


                                  ARTICLE VII
                                  TERMINATION

SECTION 7.1               Termination

                 This Preferred Securities Guarantee shall terminate upon (i)
full payment of the Redemption Price of all Preferred Securities, (ii) upon the
distribution of the Debentures to the Holders of all of the Preferred
Securities or (iii) upon full payment of the amounts payable in accordance with
the Declaration upon liquidation of the Issuer.  Notwithstanding the foregoing,
this Preferred Securities Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder of Preferred
Securities must restore payment of any sums paid under the Preferred Securities
or under this Preferred Securities Guarantee.





                                     - 14 -
<PAGE>   18
                                  ARTICLE VIII
                                INDEMNIFICATION

SECTION 8.1               Exculpation

                          (a)     Indemnified Person shall be liable,
responsible or accountable in damages or otherwise to the Guarantor or any
Covered Person for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Indemnified Person in good faith in
accordance with this Preferred Securities Guarantee and in a manner that such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Preferred Securities Guarantee or
by law, except that an Indemnified Person shall be liable for any such loss,
damage or claim incurred by reason of such Indemnified Person's negligence or
willful misconduct with respect to such acts or omissions.

                          (b)     Indemnified Person shall be fully protected
in relying in good faith upon the records of the Guarantor and upon such
information, opinions, reports or statements presented to the Guarantor by any
Person as to matters the Indemnified Person reasonably believes are within such
other Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which Distributions to Holders of Preferred Securities
might properly be paid.

SECTION 8.2               Indemnification

                 The Guarantor agrees to indemnify each Indemnified Person for,
and to hold each Indemnified Person harmless against, any loss, liability or
expense incurred without negligence or bad faith on its part, arising out of or
in connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees
and expenses) of defending itself against, or investigating, any claim or
liability in connection with the exercise or performance of any of its powers
or duties hereunder.  The obligation to indemnify as set forth in this Section
8.2 shall survive the termination of this Preferred Securities Guarantee.


                                   ARTICLE IX
                                 MISCELLANEOUS

SECTION 9.1               Successors and Assigns

                 All guarantees and agreements contained in this Preferred
Securities Guarantee shall bind the successors, assigns, receivers, trustees
and representatives of the Guarantor and shall inure to the benefit of the
Holders of the Preferred Securities then outstanding.





                                     - 15 -
<PAGE>   19
SECTION 9.2               Amendments

                 Except with respect to any changes that do not adversely
affect the rights of Holders (in which case no consent of Holders will be
required), this Preferred Securities Guarantee may only be amended with the
prior approval of the Holders of at least a Majority in liquidation amount
(including the stated amount that would be paid on redemption, liquidation or
otherwise, plus accrued and unpaid Distributions to the date upon which the
voting percentages are determined) of all the outstanding Preferred Securities.
The provisions of Section 12.2 of the Declaration with respect to meetings of
Holders of the Securities apply to the giving of such approval.

SECTION 9.3               Notices

                 All notices provided for in this Preferred Securities
Guarantee shall be in writing, duly signed by the party giving such notice, and
shall be delivered, telecopied or mailed by registered or certified mail, as
follows:

                          (a)     given to the Preferred Guarantee Trustee, at
the Preferred Guarantee Trustee's mailing address set forth below (or such
other address as the Preferred Guarantee Trustee may give notice of to the
Holders of the Preferred Securities):

                 The Bank of New York 101 Barclay Street, 21 West New York, New
York 10286 Attention:  Corporate Trust Trustee Administration

                          (b)     given to the Guarantor, at the Guarantor's
mailing address set forth below (or such other address as the Guarantor may
give notice of to the Holders of the Preferred Securities):

                 Phillips Petroleum Company Phillips Building Bartlesville,
Oklahoma  74004 Attention:

                          (c)     given to any Holder of Preferred Securities,
at the address set forth on the books and records of the Issuer.

                 All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.

SECTION 9.4               Benefit

                 This Preferred Securities Guarantee is solely for the benefit
of the Holders of the Preferred Securities and, subject to Section 3.1(a), is
not separately transferable from the Preferred Securities.





                                     - 16 -
<PAGE>   20
SECTION 9.5               Governing Law

                 THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.

                 THIS PREFERRED SECURITIES GUARANTEE is executed as of the day
and year first above written.


                                       PHILLIPS PETROLEUM COMPANY,
                                       as Guarantor



                                       By:
                                          ------------------------------
                                          Name:
                                          Title:



                                       THE BANK OF NEW YORK,
                                       as Preferred Guarantee Trustee



                                       By:
                                          ------------------------------
                                          Name:
                                          Title:




                                     - 17 -