EXHIBIT 10.41
CREDIT AGREEMENT
Dated as of February 23, 2007
among
WILLIAMS PRODUCTION RMT COMPANY
as Counterparty
WILLIAMS PRODUCTION COMPANY, LLC
as Guarantor
CITIBANK, N.A.
as Administrative Agent
CITIGROUP ENERGY INC.
as Computation Agent
CALYON NEW YORK BRANCH
as Collateral Agent and PV Determination Agent
and
THE BANKS NAMED HEREIN
as Banks
CITIGROUP GLOBAL MARKETS INC.
and
CALYON NEW YORK BRANCH
Joint Lead Arrangers and Co-Book Runners

 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

             
 
  ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS        
 
           
SECTION 1.1
  Certain Defined Terms     1  
SECTION 1.2
  Computation of Time Periods     20  
SECTION 1.3
  Accounting Terms     20  
SECTION 1.4
  Miscellaneous     20  
SECTION 1.5
  Ratings     20  
 
           
 
  ARTICLE II
TERMS OF THE FACILITY        
 
           
SECTION 2.1
  Terms     21  
SECTION 2.2
  Payments and Computations     21  
SECTION 2.3
  Taxes     22  
SECTION 2.4
  Fees     25  
SECTION 2.5
  Interest     25  
SECTION 2.6
  Engineering Reports and Present Value     25  
SECTION 2.7
  Present Value Deficiency     28  
SECTION 2.8
  Removal and Addition of Banks     29  
SECTION 2.9
  Sharing of Payments, Etc     29  
SECTION 2.10
  Bank Credit Support     29  
SECTION 2.11
  Collateral Account     30  
SECTION 2.12
  Use of Collateral; Interest     30  
 
           
 
  ARTICLE III
CLOSING        
 
           
SECTION 3.1
  Payment of Fees and Documents     31  
SECTION 3.2
  Effectiveness of Agreement     33  
 
           
 
  ARTICLE IV
REPRESENTATIONS AND WARRANTIES        
 
           
SECTION 4.1
  Representations and Warranties of the Credit Parties     33  
 
           
 
  ARTICLE V
COVENANTS OF THE CREDIT PARTIES        
 
           
SECTION 5.1
  Affirmative Covenants     36  
SECTION 5.2
  Negative Covenants     40  
 
           
 
  ARTICLE VI
EVENTS OF DEFAULT; CERTAIN REMEDIES        
 
           
SECTION 6.1
  Events of Default     43  
SECTION 6.2
  Abatement of Certain Defaults     45  
SECTION 6.3
  Additional Remedies     46  

 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS
(continued)

             
 
  ARTICLE VII
THE AGENTS        
SECTION 7.1
  Agents' Authorization and Action     46  
SECTION 7.2
  Agents' Reliance, Etc     47  
SECTION 7.3
  Rights     47  
SECTION 7.4
  Indemnification     48  
SECTION 7.5
  Successor Agents     48  
SECTION 7.6
  Decisions     50  
SECTION 7.7
  Certain Rights of the Agents     50  
SECTION 7.8
  Other Persons     50  
SECTION 7.9
  Additional Rights of Collateral Agent     50  
 
           
 
  ARTICLE VIII
MISCELLANEOUS        
 
           
SECTION 8.1
  Amendments, Etc     51  
SECTION 8.2
  Notices, Etc     51  
SECTION 8.3
  No Waiver; Remedies     53  
SECTION 8.4
  Costs and Expenses     53  
SECTION 8.5
  Binding Effect; Transfers     54  
SECTION 8.6
  Governing Law     56  
SECTION 8.7
  Interest     56  
SECTION 8.8
  Execution in Counterparts     56  
SECTION 8.9
  Survival of Agreements, Representations and Warranties, Etc     56  
SECTION 8.10
  Confidentiality     56  
SECTION 8.11
  Waiver of Jury Trial     57  
SECTION 8.12
  Severability     57  
SECTION 8.13
  Forum Selection and Consent to Jurisdiction; Damages     57  
SECTION 8.14
  Right of Set-off     58  
SECTION 8.15
  Separateness     58  
 
           
 
  ARTICLE IX
GUARANTY        
 
           
SECTION 9.1
  Guaranty     58  
SECTION 9.2
  Limit of Liability     58  
SECTION 9.3
  Guaranty Absolute     58  
SECTION 9.4
  Certain Rights and Waivers     60  
SECTION 9.5
  Continuing Guaranty     61  

 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS
(continued)

             
 
  Schedules and Exhibits        
 
           
Schedule I
  Bank Information        
Schedule II
  Notice Information for the Credit Parties        
Schedule III
  Bank Credit Support Thresholds        
Schedule IV
  Limited Permitted Liens        
Schedule V
  General Permitted Liens        
 
           
Exhibit A
  Opinion of In-House Counsel        
Exhibit B
  Opinion of Gibson, Dunn & Crutcher        
Exhibit C
  Form of Security Agreement        
Exhibit D
  Form of Engineering Report        
Exhibit E
  Form of ISDA Master Agreement        
Exhibit F
  Form of Subordination Agreement        
Exhibit G
  Form of Counterparty Daily Report        
Exhibit H
  Form of Computation Agent Daily Report        
Exhibit I
  Form of Acceptable Letter of Credit        
Exhibit J
  Form of New Bank Agreement        
Exhibit K
  Form of Bank Guaranty        
Exhibit L
  Form of Report Identifying Banks        
Exhibit M
  Pre-Approved Delivery Points        
Exhibit N
  Pre-Approved Hedge Types        

 

--------------------------------------------------------------------------------

 

CREDIT AGREEMENT
     This Credit Agreement dated as of February 23, 2007 (as it may be amended,
modified, supplemented, renewed, extended or restated from time to time, this
“Agreement”), is by and among Williams Production RMT Company, a Delaware
corporation (the “Counterparty”), Williams Production Company, LLC, a Delaware
limited liability company, as Guarantor, the Banks, Citibank, N.A., as
Administrative Agent, Citigroup Energy Inc., as Computation Agent, and Calyon
New York Branch, as Collateral Agent and as PV Determination Agent. In
consideration of the mutual covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
     SECTION 1.1 Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
     “Acceptable Bank Guaranty” means an agreement substantially in the form of
Exhibit K executed by a Bank or a direct or indirect parent of a Bank and
delivered to the Collateral Agent.
     “Acceptable Collateral” means cash and direct United States treasury
obligations having a remaining term to maturity of less than one year, in each
case, (i) deposited into the Collateral Account and (ii) in which the Collateral
Agent has an Acceptable Security Interest.
     “Acceptable Credit Support” means Acceptable Collateral and Acceptable
Letters of Credit (including the proceeds of any Acceptable Letter of Credit);
provided that Acceptable Credit Support does not include any Bank Credit Support
that is not Retained Bank Credit Support.
     “Acceptable Letter of Credit” means a letter of credit (i) that is issued
by a commercial bank domiciled in the United States having senior unsecured
long-term Dollar-denominated debt or deposit obligations rated at least A2 by
Moody’s and at least A by S&P, (ii) that is delivered to the Collateral Agent,
(iii) that names the Collateral Agent as sole beneficiary, subject to transfer
to any successor Collateral Agent, (iv) that is in substantially the form of
Exhibit I or is otherwise in form and substance satisfactory to the Collateral
Agent and (v) that is specifically made transferable to any successor Collateral
Agent. With respect to any Acceptable Letter of Credit, (a) phrases such as
“deposit into the Collateral Account” or “deposit to the Collateral Account” or
phrases of like import shall be deemed also to mean “delivered to the Collateral
Agent”, and (b) phrases such as “held in the Collateral Account”, “retained in
the Collateral Account”, or “in the Collateral Account” or phrases of like
import shall be deemed also to mean “delivered to and held by the Collateral
Agent”.
     “Acceptable Security Interest” in any property means a Lien granted
pursuant to a Security Document (a) which exists in favor of the Collateral
Agent for the benefit of the Agents and the Banks, (b) which is superior to all
other Liens, except Limited Permitted Liens, (c) which secures all of the
Obligations and secures only the Obligations and (d) which is perfected and is
enforceable by the Collateral Agent for the benefit of the Agents and the Banks
against all other Persons in preference to any rights of any such other Persons
therein (other than beneficiaries of Limited Permitted Liens); provided that
such Lien may be subject to Limited Permitted Liens.

 

--------------------------------------------------------------------------------

 

     “Acquired Reserves Engineering Report” means an Audited Report covering all
newly acquired Proved Reserves that the Counterparty desires to have included in
the Present Value determination and Forecasted Annual Production.
     “Administrative Agent” means Citibank, in its capacity as administrative
agent pursuant to Article VII, and any successor Administrative Agent pursuant
to Section 7.5.
     “Agents” means the Administrative Agent, the Collateral Agent, the
Computation Agent and the PV Determination Agent.
     “Aggregate Net MTM Exposure” means, at any time, the sum of (i) the net MTM
Exposure for all Qualifying Hedges most recently determined by the Computation
Agent (expressed as a positive number if the Counterparty would have a net MTM
Exposure to the Banks on all Qualifying Hedges (that is, such net MTM Exposure
represents a potential loss of the Counterparty) and expressed as a negative
number if the Banks would have a net MTM Exposure to the Counterparty on all
Qualifying Hedges (that is, such net MTM Exposure represents a potential gain of
the Counterparty)) plus (ii) the aggregate amount secured by any Limited
Permitted Lien (other than Liens described in clause (b) of Schedule IV) that
encumbers any Acceptable Credit Support (or, if less, the amount of the
Acceptable Credit Support so encumbered) or encumbers any amount that would be
payable by a Bank pursuant to the second sentence of Section 2.7 if a Present
Value Deficiency existed (or, if less, the portion of such amount that is so
encumbered) minus (iii) the amount of Acceptable Credit Support in the
Collateral Account.
     “Agreement” has the meaning specified in the first paragraph hereof.
     “Apco Argentina” means Apco Argentina, Inc., a Cayman Islands corporation.
     “Applicable Credit Support Threshold” means, for any Bank, the amount set
forth in the table on Schedule III opposite the heading “Applicable Credit
Support Threshold” for the relevant ratings applicable to such Bank. The
Applicable Credit Support Threshold for any Bank shall change when and as any
relevant rating applicable to such Bank changes.
     “Applicable Office” means, as to any Bank, the principal office through
which such Bank has entered into Qualifying Hedges.
     “Approved Engineer” means Netherland, Sewell & Associates, Inc., Miller and
Lents, Ltd., Ryder Scott Company, LP or other certified independent engineers of
recognized standing satisfactory to the PV Determination Agent.
     “Asset” or “property” (in each case, whether or not capitalized) means any
right, title or interest in any kind of property or asset, whether real,
personal or mixed, and whether tangible or intangible, including Equity
Interests and Hydrocarbon Interests.
     “Attributable Obligation” of any Person means, with respect to any Sale and
Leaseback Transaction of such Person as of any particular time, the present
value at such time discounted at the rate of interest implicit in the terms of
the lease of the obligations of the lessee under such lease for net rental
payments during the remaining term of the lease (including any period for which
such lease has been extended or may, at the option of such Person only, be
extended).
     “Audited Report” means an Engineering Report prepared by the Credit Party
Entities and/or an Approved Engineer (provided that a portion of such report
covering at least 90% of the Proved Reserves covered by such report shall be
audited and/or prepared by an Approved Engineer) and based upon

2

--------------------------------------------------------------------------------

 

pricing and other assumptions made in accordance with the rules, regulations and
other applicable requirements of the United States Securities and Exchange
Commission applicable to reserves reporting.
     “Authorized Financial Officer” of any Person means the chief financial
officer, chief accounting officer, chief risk officer or treasurer of such
Person.
     “Authorized Officer” of any Person means the president, the chief executive
officer, any Authorized Financial Officer, the general counsel, any vice
president, the secretary, any assistant secretary, the treasurer, any assistant
treasurer, or the controller of such Person or any other officer designated as
an “Authorized Officer” by the board of directors (or equivalent governing body)
of such Person.
     “Bank Credit Support” means, with respect to any Bank, (i) all collateral
that such Bank is required to provide to the Counterparty pursuant to the terms
of the ISDA Master Agreement to which such Bank is a party, which collateral
shall be in the form of cash or direct United States treasury obligations having
a remaining term to maturity of less than one year and (ii) all payments under
any Acceptable Bank Guaranty executed by such Bank or its direct or indirect
parent.
     “Banks” means the signatories hereto that are listed in Schedule I and each
other Person that becomes a Bank pursuant to Section 2.8 or Section 8.5(a). Each
reference to a “Bank” in any Credit Document shall include each of its
Designated Affiliates, and a Bank and its Designated Affiliates shall be treated
as one entity (including for purposes of computation of the Exposure Fee,
computation of net MTM Exposure, determining whether a Bank is Out of the Money,
removal of a Bank pursuant to Section 2.8 and voting matters). For avoidance of
doubt, a “Bank” need not be an institution that takes deposits, a bank or other
financial institution.
     “Bargath Asset Transfer” means the transfer, from time to time, by the
Counterparty to Bargath Inc., a Colorado corporation, of any and all gathering
system assets located in Garfield and Rio Blanco Counties, state of Colorado,
including gathering pipelines, delivery pipelines, lateral pipelines, easements,
rights-of-way, surface leases, surface use agreements, gas processing plants,
gas treatment facilities, gas compression facilities and gas dehydration
facilities, all equipment associated with any of the preceding and all relevant
contracts, agreements, permits, leases and licenses related to the ownership or
operation of any of the assets so transferred.
     “Base Rate” means a fluctuating interest rate per annum in effect from time
to time, which rate per annum shall at all times be equal to the higher of:
     (a) the rate of interest announced publicly by Citibank in New York, New
York, from time to time, as Citibank’s base rate; or
     (b) 1/2 of 1% per annum above the Federal Funds Rate.
     “Business Day” means a day of the year on which banks are not required or
authorized to close in New York City.
     “Business Entity” means a partnership, limited partnership, limited
liability partnership, corporation (including a business trust), limited
liability company, unlimited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity.
     “Calyon New York” means Calyon New York Branch.

3

--------------------------------------------------------------------------------

 

     “Capital Lease” means a lease that in accordance with GAAP must be
reflected on a Person’s balance sheet as an asset and corresponding liability.
     “Change of Control Event” means the occurrence of any of the following:
(i) any Person or two or more Persons acting in concert (other than
(1) Investment Grade Persons or (2) trustees or other fiduciaries holding
securities under an employee benefit plan of TWC or of any Subsidiary of TWC or
(3) employees of TWC or of any of its Subsidiaries) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934), directly or
indirectly, of securities of TWC (or other securities convertible into such
securities) representing 50% or more of the combined voting power of all
securities of TWC entitled to vote in the election of directors, other than
securities having such power only by reason of the happening of a contingency,
(ii) any Person or two or more Persons acting in concert (other than
(1) Investment Grade Persons or (2) TWC or Subsidiaries of TWC or (3) trustees
or other fiduciaries holding securities under an employee benefit plan of TWC or
of any Subsidiary of TWC or (4) employees of TWC or of any of its Subsidiaries)
shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of
the Securities and Exchange Commission under the Securities Exchange Act of
1934), directly or indirectly, of securities of any Credit Party (or other
securities convertible into such securities) representing 50% or more of the
combined voting power of all securities of such Credit Party entitled to vote in
the election of directors or managers, other than securities having such power
only by reason of the happening of a contingency or (iii) the first day on which
a majority of the members of the board of directors of TWC are not Continuing
Directors.
     “Citibank” means Citibank, N.A., a national banking association.
     “Class One Banks” shall be, at any time, all Banks that have an outstanding
Qualifying Hedge (whether or not any such Bank is Out of the Money) or that are
owed any obligation under a Qualifying Hedge that is no longer outstanding.
     “Class Two Banks” shall be, at any time, all Class One Banks other than any
Bank that is Out of the Money.
     “Close-out Amount”, with respect to any Qualifying Hedge, has the meaning
specified in the ISDA Master Agreement applicable to such Qualifying Hedge.
     “Code” means, as appropriate, the Internal Revenue Code of 1986, as
amended, or any successor federal tax code, and any reference to any statutory
provision shall be deemed to be a reference to any successor provision or
provisions.
     “Collar” means a Hedge consisting of a put and a call, each entered into on
the same day between the same parties, having the same expiration date and
covering the same notional volume.
     “Collateral Account” means an account established with the Collateral
Agent, and under its sole control (or, in the circumstances set forth in the
last paragraph of Section 2.11, the control of a collateral sub-agent), in which
Acceptable Credit Support and Bank Credit Support may be deposited.
     “Collateral Agent” means Calyon New York, in its capacity as collateral
agent pursuant to Article VII, and any successor Collateral Agent pursuant to
Section 7.5.
     “Computation Agent” means Citigroup Energy Inc., in its capacity as
computation agent pursuant to Article VII, and any successor Computation Agent
pursuant to Section 7.5.

4

--------------------------------------------------------------------------------

 

     “Confirmation” has the meaning specified in any ISDA Master Agreement
(including, for avoidance of doubt, any document or other confirming evidence
related to Pre-Existing Transactions).
     “Consolidated” refers to the consolidation of the accounts of any Person
and its Consolidated Subsidiaries in accordance with GAAP.
     “Consolidated Subsidiaries” of any Person means all Subsidiaries of such
Person the financial statements of which are consolidated with those of such
Person in accordance with GAAP.
     “Contingent Obligation” means any direct or indirect liability, contingent
or otherwise, of a Person (i) with respect to any Debt, lease, dividend or other
obligation of another if the primary purpose or intent thereof is to provide
assurance to the obligee of such Debt, lease, dividend or other obligation that
such Debt, lease, dividend or other obligation will be paid or discharged, or
that any agreements relating thereto will be complied with, or that the obligee
of such Debt, lease, dividend or other obligation will be protected (in whole or
in part) against loss in respect thereof or (ii) with respect to any letter of
credit issued for the account of such Person or as to which such Person is
otherwise liable for reimbursement of drawings. Contingent Obligations shall
include, without limitation, (a) the direct or indirect guaranty, endorsement
(other than for collection or deposit in the ordinary course of business),
co-making, discounting with recourse or sale with recourse by such Person of the
Debt, lease, dividend or other obligation of another, (b) the obligation to make
take-or-pay or similar payments if required regardless of non-performance by any
other party or parties to an agreement, and (c) any liability of such Person for
the Debt, lease, dividend or other obligation of another through any agreement
(contingent or otherwise) (1) to purchase, repurchase or otherwise acquire such
Debt, lease, dividend or other obligation or any security therefor, or to
provide funds for the payment or discharge of such Debt, lease, dividend or
other obligation (whether in the form of loans, advances, purchases of Equity
Interests, capital contributions or otherwise) or (2) to maintain the solvency
or any balance sheet item, level of income or financial condition of another if,
in the case of any agreement described under subclauses (1) or (2) of this
sentence, the primary purpose or intent thereof is as described in the preceding
sentence. The amount of any Contingent Obligation shall be equal to the amount
of the obligation so guaranteed or otherwise supported or, if less, the amount
to which such Contingent Obligation is specifically limited.
     “Continuing Directors” means, as of any date of determination, any member
of the board of directors of TWC who:
     (1) was a member of such board of directors on the Effective Date; or
     (2) was nominated for election or elected to such board of directors with
the approval of a majority of the Continuing Directors who were members of such
board of directors at the time of such nomination or election.
     “Counterparty” has the meaning specified in the first paragraph hereof.
     “Credit Documents” means this Agreement, the Hedge Documents, each Security
Document, each Subordination Agreement, each New Bank Agreement and each
document that amends, waives or otherwise modifies any Credit Document, in each
case at any time executed or delivered to any Agent or any Bank in connection
herewith.
     “Credit Party” means the Counterparty and the Guarantor.
     “Credit Party Entity” means each Credit Party and each Subsidiary of a
Credit Party.

5

--------------------------------------------------------------------------------

 

     “Debt” means, in the case of any Person, the principal or equivalent amount
(without duplication) of (i) indebtedness of such Person for borrowed money,
(ii) obligations of such Person evidenced by bonds, debentures, notes or similar
instruments (other than surety, performance and guaranty bonds),
(iii) obligations of such Person to pay the deferred purchase price of property
or services (other than trade payables), (iv) obligations of such Person as
lessee under Capital Leases, (v) obligations of such Person under any Financing
Transaction, (vi) any Attributable Obligations of such Person with respect to
any Sale and Leaseback Transaction, (vii) obligations of such Person under
guaranties in respect of, and obligations (contingent or otherwise) to purchase
or otherwise acquire, or otherwise to assure a creditor against loss in respect
of, and other Contingent Obligations in respect of, indebtedness or obligations
of others of the kinds referred to in clauses (i) through (vi) of this
definition, and (viii) Contingent Obligations in respect of any production
payment; provided that Debt shall not include (1) Performance Guaranties,
(2) monetary obligations or guaranties of monetary obligations of Persons as
lessee under leases (other than, to the extent provided hereinabove,
Attributable Obligations) that are, in accordance with GAAP, recorded as
operating leases, and (3) guarantees by such Person of obligations of others
which are not obligations described in clauses (i) through (vi) of this
definition, and provided further that where any such indebtedness or obligation
of such Person is made jointly, or jointly and severally, with any third party
or parties other than any Subsidiary of such Person, the amount thereof for the
purpose of this definition only shall be the pro rata portion thereof payable by
such Person, so long as such third party or parties have not defaulted on its or
their joint and several portions thereof and can reasonably be expected to
perform its or their obligations thereunder. For the avoidance of doubt, “Debt”
of a Person in respect of letters of credit shall include, without duplication,
only the principal amount of the obligations of such Person in respect of such
letters of credit that have been drawn upon by the beneficiaries to the extent
of the amount drawn, and shall include no other obligations in respect of such
letters of credit.
     “December 31 Engineering Report” means an Audited Report, dated as of
December 31 of any year, covering all Proved Reserves that the Counterparty
desires to have included in the Present Value determination and Forecasted
Annual Production.
     “Default” means any event or condition that, upon the giving of notice or
passage of time or both, if required by Section 6.1, would constitute an Event
of Default.
     “Defaulting Party”, in respect of any Qualifying Hedge, has the meaning
specified in the ISDA Master Agreement applicable to such Qualifying Hedge.
     “Designated Affiliate” of any Bank means an affiliate of such Bank that has
been designated as a Designated Affiliate of such Bank for purposes of this
Agreement by notice to the Counterparty and the Administrative Agent; provided
that a Bank may not so designate any Person that is, at the time of such
purported designation, a Designated Affiliate of another Bank. If a Designated
Affiliate of a Bank (i) is not a party to any outstanding Qualifying Hedge and
(ii) is neither owed nor owes any obligation to make any payment of delivery
under any Qualifying Hedge, such Bank may, by notice to the Counterparty and the
Administrative Agent, terminate the designation of such Designated Affiliate as
a Designated Affiliate.
     “Determining Party”, in respect of any Qualifying Hedge, means the
Computation Agent for purposes of determining a Close-out Amount to be used in
the determination of an Early Termination Amount with respect to such Qualifying
Hedge.
     “Dollars” and “$” means lawful money of the United States of America.
     “Early Termination Amount”, in respect of any Qualifying Hedge, has the
meaning specified in Section 6(e) of the ISDA Master Agreement applicable to
such Qualifying Hedge.

6

--------------------------------------------------------------------------------

 

     “Early Termination Date”, in respect of any Qualifying Hedge, has the
meaning specified in the ISDA Master Agreement applicable to such Qualifying
Hedge.
     “Early Termination Hedge” has the meaning specified in Section 2.6(g).
     “EDGAR” means the “Electronic Data Gathering, Analysis and Retrieval”
system (or any successor system thereof), a database maintained by the
Securities and Exchange Commission containing electronic filings of issuers of
certain securities.
     “Effective Date” means February 23, 2007.
     “El Furrial” means WilPro Energy Services (El Furrial) Limited, a Cayman
Islands corporation.
     “Engineering Report” means a report, in substantially the form of Exhibit D
or otherwise reasonably satisfactory to the PV Determination Agent, setting
forth, as of December 31 of any year (or as of such other date as comports with
Section 2.6(a)(ii) in the event of an Unscheduled Redetermination), covering the
Proved Reserves, together with a projection of the rate of production and future
revenue, severance or similar taxes, operating expenses and capital expenditures
with respect thereto as of such date. Such information shall be provided for
each basin comprising such Proved Reserves and by category of the reserves
contained in each basin, including proved developed producing, proved developed
non-producing and proved undeveloped.
     “Environment” shall have the meaning set forth in 42 U.S.C. § 9601(8) or
any successor statute and “Environmental” shall mean pertaining or relating to
the Environment.
     “Environmental Law” means any United States local, state or federal, or any
foreign, law, statute, regulation, order, consent decree, written agreement with
a Governmental Authority or Governmental Requirement arising from or in
connection with or relating to the protection or regulation of the Environment
including those laws, statutes, regulations, orders, decrees, written agreements
with a Governmental Authority and other Governmental Requirements relating to
the disposal, cleanup, production, storing, refining, handling, transferring,
processing or transporting of Hazardous Waste, Hazardous Substances or any
pollutant or contaminant.
     “Environmental Permits” mean all material permits, licenses, registrations,
exemptions and authorizations required under any Environmental Law.
     “Equity Interests” means any capital stock, partnership, joint venture,
member or limited liability or unlimited liability company interest, beneficial
interest in a trust or similar entity or other equity interest or investment of
whatever nature or any warrant, option or other right to acquire any Equity
Interest.
     “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder from time to time.
     “ERISA Affiliate” of any Credit Party means any trade or business (whether
or not incorporated) which is a member of a group of which such Credit Party is
a member and which is under common control or is treated as a single employer
with such Credit Party within the meaning of Section 414 of the Code and the
regulations promulgated thereunder.
     “Events of Default” has the meaning specified in Section 6.1.

7

--------------------------------------------------------------------------------

 

     “Exposure Fee” has the meaning specified in Section 2.4(b).
     “Federal Funds Rate” means, for any day, a fluctuating interest rate per
annum equal for such day to the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by the Administrative Agent from three federal funds brokers of
recognized standing selected by it.
     “Federal Reserve Board” means the Board of Governors of the Federal Reserve
System, or any federal agency or authority of the United States from time to
time succeeding to its function.
     “Financing Transaction” means, with respect to any Person (i) any prepaid
forward sale of oil, gas or minerals by such Person (other than gas balancing
arrangements in the ordinary course of business), that is intended primarily as
a borrowing of funds, excluding volumetric production payments and (ii) any
interest rate, currency, commodity or other swap, collar, cap, option or other
derivative that is intended primarily as a borrowing of funds (excluding
interest rate, currency, commodity or other swaps, collars, caps, options or
other derivatives to hedge against risks in the ordinary course of business),
with the amount of the obligations of such Person thereunder being the net
obligations of such Person thereunder.
     “Fiscal Quarter” means any quarter of a Fiscal Year.
     “Fiscal Year” means any period of twelve consecutive calendar months ending
on December 31.
     “Forecasted Annual Production” means, for any year, the projected amounts
of oil and natural gas production for such year from the Proved Reserves
(i) until the delivery of the first December 31 Engineering Report delivered
after the Effective Date, as set forth in Section 5.2(c) and (ii) on and after
the delivery of the first December 31 Engineering Report delivered after the
Effective Date, as outlined in the most recent December 31 Engineering Report
and any subsequent Acquired Reserves Engineering Reports. For avoidance of
doubt, the Forecasted Annual Production is determined solely for purposes of
determining compliance with Section 5.2(c) and is not necessarily the same as
annual production forecasted in connection with any redetermination of the
Present Value.
     “GAAP” means generally accepted accounting principles in the United States
as defined by the American Institute of Certified Public Accountants (the
“AICPA”) Statement of Auditing Standards Number 69, including pronouncements of
the Financial Accounting Standards Board and the AICPA.
     “Gas Transaction” shall have the meaning set forth in the ISDA Master
Agreements.
     “General Permitted Liens” means Liens specifically described on Schedule V.
     “Governmental Authority” means the government of the United States, any
other nation or any political subdivision thereof, whether state or local, and
any agency, authority, instrumentality, regulatory body, court, central bank or
other Person exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.
     “Governmental Requirements” means all judgments, orders, writs,
injunctions, decrees, awards, laws, ordinances, statutes, regulations, rules,
franchises, permits, certificates, licenses, authorizations and the like and any
other requirements of any government or any commission, board, court, agency,
instrumentality or political subdivision thereof.

8

--------------------------------------------------------------------------------

 

     “Guarantor” means WPC.
     “Hazardous Substance” shall have the meaning set forth in 42 U.S.C. §
9601(14) and shall also include each other substance considered to be a
hazardous substance under any Environmental Law.
     “Hazardous Waste” shall have the meaning set forth in 42 U.S.C. § 6903(5)
and shall also include each other substance considered to be a hazardous waste
under any Environmental Law (including 40 C.F.R. § 261.3).
     “Hedge” means, in each case whether settled physically, financially or
otherwise, (a) any transaction (including an agreement with respect to any such
transaction) now existing or hereafter entered into (i) which is a rate swap
transaction, swap option, basis swap, forward rate transaction, commodity swap,
commodity option, equity or equity index swap, equity or equity index option,
bond option, interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, currency swap transaction,
cross-currency rate swap transaction, currency option, credit protection
transaction, credit swap, credit default swap, credit default option, total
return swap, credit spread transaction, repurchase transaction, reverse purchase
transaction, buy/sell-back transaction, securities lending transaction, weather
index transaction or forward purchase or sale of a security, commodity or other
financial instrument or interest (including any option with respect to any of
these transactions) or (ii) which is a type of transaction that is similar to
any transaction referred to in clause (i) above that is currently, or in the
future becomes, recurrently entered into in the financial markets (including
terms and conditions incorporated by reference in such agreement) and which is a
forward, swap, future, option or other derivative on one or more rates,
currencies, commodities, equity securities or other equity instruments, debt
securities or other debt instruments, economic indices or measures of economic
risk or value, or other benchmarks against which payments or deliveries are to
be made and (b) any combination of these transactions.
     “Hedge Documents” means each ISDA Master Agreement and each Confirmation.
     “Hydrocarbon Interests” means all rights, titles, interests and estates now
owned or hereafter acquired in any and all oil, gas and other liquid or gaseous
hydrocarbon properties and interests, including mineral fee or lease interests,
concession agreements, license agreements or similar Hydrocarbon interests
granted by an appropriate Governmental Authority, farmout, overriding royalty
and royalty interests, net profit interests, oil payments, production payment
interests and similar interests in Hydrocarbons, including any reserved or
residual interests of whatever nature.
     “Hydrocarbons” means oil, gas, casing head gas, condensate, distillate,
liquid hydrocarbons, gaseous hydrocarbons, all products refined, separated,
settled and dehydrated therefrom, including kerosene, liquefied petroleum gas,
refined lubricating oils, diesel fuel, drip gasoline, natural gasoline, helium,
sulfur and all other minerals.
     “Indemnified Parties” has the meaning assigned to such term in
Section 8.4(b).
     “Insufficiency” means, with respect to any Plan, the amount, if any, by
which the present value of the vested benefits under such Plan exceeds the fair
market value of the assets of such Plan allocable to such benefits.
     “International Debt” means the Debt of any International Subsidiary.

9

--------------------------------------------------------------------------------

 

     “International Subsidiary” means each of El Furrial, Apco Argentina, PIGAP
II and any Subsidiary of any of them; provided that no Person shall be an
International Subsidiary if it is a TWC Credit Party or owns, directly or
indirectly, any Equity Interest in any TWC Credit Party.
     “Investment Grade Person” means any Person the senior unsecured long-term
Dollar-denominated debt of which is rated at least BBB- (stable) by S&P and at
least Baa3 (stable) by Moody’s immediately following the occurrence of any
circumstance that would have been a Change of Control Event had such Person not
been an Investment Grade Person.
     “ISDA Master Agreement” means an agreement in substantially the form of
Exhibit E between the Counterparty and a Bank. An agreement will be deemed to be
in substantially the form of Exhibit E only if (i) it is referred to in
Section 3.1(h) or (ii) it is attached to a New Bank Agreement and is not
designated by the Computation Agent within fifteen Business Days of its receipt
thereof as being not in substantially such form.
     “Joint Lead Arrangers” means Citigroup Global Markets Inc. and Calyon New
York, as joint lead arrangers and co-book runners.
     “Lien” means any mortgage, lien, pledge, charge, deed of trust, security
interest, encumbrance or other analogous type of preferential arrangement,
whether arising by contract, operation of law or otherwise (including the
interest of a vendor or lessor under any conditional sale agreement, Capital
Lease or other title retention agreement).
     “Limited Permitted Liens” means Liens specifically described on
Schedule IV.
     “Material Adverse Effect” means a material adverse effect on (a) the
business, assets, operations or condition, financial or otherwise, of the Credit
Parties and their Subsidiaries taken as a whole, or (b) the ability of the
Credit Parties and their Subsidiaries, taken as a whole, to perform their
obligations under any Credit Document taken as a whole.
     “Material Subsidiary” of any Credit Party means (i) each Subsidiary (other
than any Non-Recourse Subsidiary) of such Credit Party that owns in excess of
7.5% of the book value of the Consolidated assets of the Credit Parties and
their Consolidated Subsidiaries, (ii) each Subsidiary of such Credit Party that
is a Credit Party, (iii) each Subsidiary of such Credit Party that owns any
interest in any Oil and Gas Properties included in the most recent computation
of the Present Value, (iv) until the first Redetermination Date, Williams
Production Rocky Mountain Company, Williams Production Mid-Continent Company,
and Williams Gulf Coast and (v) each Subsidiary of such Credit Party that is a
party to any Permitted Hedge.
     “MLP” means Williams Partners L.P., a Delaware limited partnership.
     “Moody’s” means Moody’s Investor Service, Inc. or its successor.
     “MTM Exposure” means, for any particular calendar day for any Qualifying
Hedge, the amount, as determined by the Computation Agent for such calendar day
(or, if such calendar day is not a Business Day, for the next preceding Business
Day), that would be the Early Termination Amount in respect of such Qualifying
Hedge (subject, in the case of a negative amount, to adjustment as provided in
the next sentence hereof), if (i) an Early Termination Date occurred on such day
in respect of such Qualifying Hedge, (ii) the Counterparty were the Defaulting
Party in respect of such Qualifying Hedge, (iii) the Bank party to such
Qualifying Hedge were the Non-defaulting Party in respect of such Qualifying
Hedge and (iv) the Computation Agent were the Determining Party in respect of
such Qualifying Hedge. If (a) the

10

--------------------------------------------------------------------------------

 

net MTM Exposure for any day for the Qualifying Hedges to which any particular
Bank is a party determined pursuant to the preceding sentence is a negative
number and (b) such Bank party to such Qualifying Hedges is not in compliance on
such day with any requirement of the ISDA Master Agreement to which it is a
party that it provide Bank Credit Support, then for purposes of this Agreement
(other than for purposes of the determination of Exposure Fees), the net MTM
Exposure for such day for such Qualifying Hedges will be deemed to be an amount
equal to (1) negative one times (2) the Applicable Credit Support Threshold for
such Bank on such day. If the Counterparty reasonably determines, as to any
Bank, based on quotes from at least two reputable brokers or, to the extent such
quotes are not available, any other reasonable information, which may (but need
not) include indicative pricing from other Persons whether or not a party to
this Agreement (such quotes, if any, and any such other information being the
“Additional Information”), that the net MTM Exposure for any day for all
Qualifying Hedges to which such Bank is a party differs by more than 10% from
the amount the net MTM Exposure for such day for such Qualifying Hedges would
have been if the Computation Agent had used only such Additional Information and
notifies the Computation Agent of such determination by 6:00 p.m. (New York City
time) on the date the Counterparty receives the report relating to such day
contemplated by the penultimate sentence of Section 7.1 (which notice shall set
forth such Additional Information), then the Computation Agent will in good
faith redetermine the net MTM Exposure for such Qualifying Hedges by 6:00 p.m.
(New York City time) on the Business Day following its receipt of such notice,
using such Additional Information and such other quotes and information as the
Computation Agent reasonably believes appropriate; provided that the Computation
Agent may exclude any Additional Information provided by the Counterparty that
the Computation Agent in good faith believes is not appropriate for inclusion as
a result of illiquidity in the relevant market, market disruption, broker error
or other bona fide reason; provided further that until any such redetermination,
the MTM Exposures originally determined by the Computation Agent for such day
for such Qualifying Hedges shall continue to be the MTM Exposures for such day
for such Qualifying Hedges. The Computation Agent will advise the Counterparty,
the Collateral Agent and the Banks of any such redetermination by delivery to
each of them of a revised report for the relevant day in substantially the form
of Exhibit H. For purposes of Section 2.4(b) only, the MTM Exposure for any
Qualifying Hedge will be computed without taking into account clauses
6(e)(i)(1)(B) and 6(e)(i)(2) of the relevant ISDA Master Agreement (which
clauses adjust for Unpaid Amounts).
     “Multiemployer Plan” means any multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, which is maintained by (or to which there is an
obligation to contribute of) any Credit Party or an ERISA Affiliate of any
Credit Party.
     “Multiple Employer Plan” means an employee benefit plan as defined in
Section 3(2) of ERISA, other than a Multiemployer Plan, subject to Title IV of
ERISA to which any Credit Party or any ERISA Affiliate of any Credit Party, and
one or more employers other than any Credit Party or an ERISA Affiliate of any
Credit Party, is making or accruing an obligation to make contributions or, in
the event that any such plan has been terminated, to which any Credit Party or
any ERISA Affiliate of any Credit Party made or accrued an obligation to make
contributions during any of the five plan years preceding the date of
termination of such plan.
     “New Bank Agreement” means an agreement in substantially the form of
Exhibit J pursuant to which a Person becomes a new “Bank” under this Agreement.
     “Non-Credit Party TWC Entity” means TWC and each of its Subsidiaries that
is not a Credit Party Entity.
     “Non-defaulting Party”, in respect of any Qualifying Hedge, has the meaning
specified in the ISDA Master Agreement applicable to such Qualifying Hedge.

11

--------------------------------------------------------------------------------

 

     “Non-Producing Reserves” has the meaning assigned to that term in
Section 2.6(d).
     “Non-Recourse Debt” means any Debt incurred by any Non-Recourse Subsidiary
to finance the acquisition, improvement, installation, design, engineering,
construction, development, completion, maintenance or operation of, or otherwise
to pay costs and expenses relating to or provide financing for, any new project
commenced or acquired after the Effective Date, which Debt does not provide for
recourse against any Credit Party Entity (other than a Non-Recourse Subsidiary
and such recourse as exists under a Performance Guaranty) or any property or
asset of any Credit Party Entity (other than the Equity Interests in, or the
property or assets of, a Non-Recourse Subsidiary).
     “Non-Recourse Subsidiary” means (i) any non-material Subsidiary of any
Credit Party whose principal purpose is to incur Non-Recourse Debt and/or
construct, lease, own or operate the assets financed thereby, or to become a
direct or indirect partner, member or other equity participant or owner in a
Business Entity created for such purpose, and substantially all the assets of
which Subsidiary and such Business Entity are limited to (x) those assets being
financed (or to be financed), or the operation of which is being financed (or to
be financed), in whole or in part by Non-Recourse Debt, or (y) Equity Interests
in, or Debt or other obligations of, one or more other such Subsidiaries or
Business Entities, or (z) Debt or other obligations of any Person and (ii) any
Subsidiary of a Non-Recourse Subsidiary. For purposes of this definition, a
“non-material Subsidiary” shall mean any Consolidated Subsidiary of any Credit
Party that (a) is not a Material Subsidiary, (b) is not itself a Credit Party
and (c) is not an owner, directly or indirectly, of any Equity Interest in any
Credit Party or any Material Subsidiary.
     “Obligations” means all obligations of the Counterparty to make any payment
or delivery under any Qualifying Hedge, all obligations of the Guarantor under
this Agreement and all other Debt, advances, interest, debts, liabilities,
obligations, indemnities, fees, expenses, charges and other amounts owing by any
Credit Party to any Bank or any Agent under any Credit Document or to any other
Person required to be indemnified under any Credit Document, of any kind or
nature, present or future, arising under this Agreement or any other Credit
Document, whether or not for the payment of money, whether arising by reason of
an extension of credit, loan, guaranty, indemnification or in any other manner,
whether direct or indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising and however
acquired.
     “Obligors” has the meaning assigned to such term in Section 9.1.
     “Oil and Gas Properties” means (a) Hydrocarbon Interests; (b) all property
now or hereafter pooled or unitized with Hydrocarbon Interests; (c) all
presently existing or future unitization agreements, pooling agreements and
declarations of pooled units and the units created thereby (including all units
created under orders, regulations and rules of any Governmental Authority) which
may affect all or any portion of the Hydrocarbon Interests; (d) all operating
agreements, contracts and other agreements which relate to any of the
Hydrocarbon Interests or the production, sale, purchase, exchange or processing
of Hydrocarbons from or attributable to such Hydrocarbon Interests; (e) all
Hydrocarbons in and under and which may be produced and saved or attributable to
the Hydrocarbon Interests, the lands covered thereby and all oil in tanks and
all rents, issues, profits, proceeds, products, revenues and other income from
or attributable to the Hydrocarbon Interests; and (f) all tenements,
hereditaments, appurtenances and property in any manner appertaining, belonging,
affixed or incidental to the Hydrocarbon Interests, rights, titles, interests
and estates described or referred to above, including any and all property, now
owned or hereafter acquired and situated upon, used, held for use or useful in
connection with the operating, working or development of any of such Hydrocarbon
Interests or property (excluding drilling rigs, automotive equipment or other
personal property which may be on such premises for the purpose of drilling a
well or for other similar temporary uses) and including any and all oil wells,
gas wells, injection wells or other wells, buildings, structures, fuel
separators, liquid extraction plants, plant compressors,

12

--------------------------------------------------------------------------------

 

pumps, pumping units, field gathering systems, tanks and tank batteries,
fixtures, valves, fittings, machinery and parts, engines, boilers, meters,
apparatus, equipment, appliances, tools, implements, cables, wires, towers,
casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes, together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.
     “Other Present Value Obligation” means any Debt in respect of which any
Credit Party Entity has any obligation or liability, any Non-Recourse Debt or
any production payment to which any Credit Party Entity is a party; provided
that a Subordinated Intercompany Obligation shall not be an Other Present Value
Obligation.
     “Other Present Value Obligations Amount” means the aggregate principal
amount of Other Present Value Obligations. In determining the Other Present
Value Obligations Amount, the principal amount of (i) any Sale and Leaseback
Transaction shall be deemed to be the Attributable Obligation with respect
thereto, (ii) any production payment (other than a volumetric production
payment) shall be deemed to be the undischarged balance thereof, and (iii) any
volumetric production payment shall be deemed to be the value of the remaining
volumes to be delivered thereunder using the prices that the PV Determination
Agent most recently used to determine the Present Value (or, if the first
Redetermination Date has not occurred, using the prices used in the Engineering
Report referred to in Section 3.1(g)); provided that, if such volumes have not
been taken into account in determining the most recently determined Present
Value (or, if the first Redetermination Date has not occurred, in determining
the amount set forth in Section 2.6(b)), the aggregate principal amount of such
volumetric production payment shall be zero.
     “Out of the Money” means, with respect to any Bank, that the net MTM
Exposure, as most recently determined by the Computation Agent, for all
Qualifying Hedges to which such Bank is a party is a negative number.
     “PBGC” means the Pension Benefit Guaranty Corporation.
     “Performance Guaranty” means any guaranty issued in connection with any
Non-Recourse Debt that (i) if secured, is secured only by assets of, or Equity
Interests in, a Non-Recourse Subsidiary and (ii) guarantees the (a) performance
of the improvement, installation, design, engineering, construction,
acquisition, development, completion, maintenance or operation of, or otherwise
affects any such act in respect of, all or any portion of the project that is
financed by such Non-Recourse Debt, (b) completion of the minimum agreed equity
contributions to the relevant Non-Recourse Subsidiary or (c) performance by a
Non-Recourse Subsidiary of obligations to Persons other than the provider of
such Non-Recourse Debt.
     “Permitted Dispositions” means (i) dispositions to a Credit Party,
(ii) dispositions from a Subsidiary of a Credit Party to another Subsidiary of a
Credit Party if the aggregate direct and indirect ownership interest held by the
Credit Parties in such first Subsidiary is equal to the aggregate direct and
indirect ownership interest held by the Credit Parties in such other Subsidiary,
(iii) dispositions from a Credit Party to a Subsidiary of a Credit Party or from
a Subsidiary of a Credit Party to another Subsidiary of a Credit Party where the
aggregate direct and indirect ownership interest held by the Credit Parties in
such first Subsidiary is not equal to the aggregate direct and indirect
ownership interest held by the Credit Parties in such other Subsidiary if, in
such case, promptly following such disposition the Counterparty delivers a
certificate to the Banks certifying that, after giving effect to such
disposition, (a) Non-Producing Reserves continue to constitute 25% or less of
the Proved Reserves used to determine the Present Value then in effect and
(b) Proved Reserves attributable to Restricted Interests continue to constitute
15% or less of the Proved Reserves used to determine the Present Value then in
effect and (iv) the Bargath Asset Transfer.

13

--------------------------------------------------------------------------------

 

     “Permitted Hedge” means (i) any back-to-back Hedge between WPC or any of
its Subsidiaries and the Counterparty or any of its Subsidiaries that matches in
all material respects (other than price) any Qualifying Hedge entered into by
the Counterparty at the request of WPC or a Subsidiary of WPC if (a) such
back-to-back Hedge is changed each time such Qualifying Hedge is changed
(whether such Qualifying Hedge is changed by amendment, termination or
otherwise, but excluding changes related to price) and (b) all obligations of
each Credit Party under such back-to-back Hedge are Subordinated Intercompany
Obligations, and (ii) any WPX Hedge.
     “Person” means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture or other Business Entity, or a government or any political
subdivision or agency thereof.
     “PIGAP II” means WilPro Energy Services (PIGAP II) Limited, a Cayman
Islands corporation.
     “Plan” means an employee pension benefit plan (other than a Multiemployer
Plan) as defined in Section 3(2) of ERISA currently maintained by, or in the
event such plan has terminated, to which contributions have been made or an
obligation to make such contributions has accrued during any of the five plan
years preceding the date of the termination of such plan by, any Credit Party or
any ERISA Affiliate of any Credit Party for employees of any Credit Party or any
such ERISA Affiliate and covered by Title IV of ERISA or subject to the minimum
funding standards under Section 412 of the Code.
     “Pre-Approved Delivery Points” means the delivery points listed on
Exhibit M and any other delivery points agreed to in writing from time to time
by the Counterparty and Computation Agent, each in their sole discretion.
     “Pre-Approved Hedge Types” means the types of Hedges listed on Exhibit N
and any other types of Hedges agreed to in writing from time to time by the
Counterparty and the Computation Agent, each in their sole discretion
     “Pre-Existing Transactions” means the transactions entered into prior to
the Effective Date between the Counterparty and Calyon, Citibank or Citigroup
Energy Inc. that, pursuant to agreements dated the Effective Date executed by
the Counterparty and Calyon, Citibank or Citigroup Energy Inc., are transactions
governed by an ISDA Master Agreement referred to in Section 3.1(h) executed by
Calyon or Citigroup Energy Inc.
     “Present Value” means at any time (i) the net present value of the
projected future net revenues attributable to the Proved Reserves, determined in
accordance with Section 2.6 and in effect at such time minus (ii) the Terminated
Hedge Amount at such time.
     A “Present Value Deficiency” means, at any time when the Aggregate Net MTM
Exposure is positive, the amount (if any) needed to be added to the Collateral
Account to cause the ratio of the Present Value to the sum of (a) the Aggregate
Net MTM Exposure plus (b) the Other Present Value Obligations Amount to equal
1.50 to 1.00. A Present Value Deficiency will exist at all times that (i) the
Aggregate Net MTM Exposure is positive and (ii) an amount needs to be added to
the Collateral Account to cause such ratio to equal 1.50 to 1.00.
     “Present Value Matters” means Sections 2.6, 2.7 and 2.10 and each
definition used in any of such Sections.
     “Pro Forma Present Value Deficiency” means, as to any event, that a Present
Value Deficiency would have existed at the close of business one Business Day
prior to the time such event occurs, utilizing

14

--------------------------------------------------------------------------------

 

in the determination of such Present Value Deficiency a “pro forma” Present
Value (rather than the actual Present Value) with such “pro forma” Present Value
calculated using all the same assumptions used in the most recent Present Value
determination (or if the first Redetermination Date has not occurred, used in
the determination of the amount set forth in Section 2.6(b)), except for those
assumptions that would be directly changed by such event. If prior to any such
event, the Counterparty requests that the PV Determination Agent calculate a
“pro forma” Present Value using all the same assumptions used in the most recent
Present Value determination (or if the first Redetermination Date has not
occurred, used in the determination of the amount set forth in Section 2.6(b)),
except for those assumptions that would be directly changed by such event, then
within 4 Business Days of such request, the PV Determination Agent shall
calculate, and notify the Counterparty of the amount of, such “pro forma”
Present Value.
     “Property” has the meaning specified in the definition herein of Assets.
     “Proved Reserves” means those recoverable Hydrocarbons that have been
estimated with reasonable certainty, as demonstrated by geological and
engineering data, to be economically recoverable by existing operating methods
under existing economic conditions from the net interest owned directly by the
Credit Party Entities (other than Non-Recourse Subsidiaries) in oil and gas
reserves attributable to Oil and Gas Properties located in the United States.
Any such net interest owned by a Subsidiary (other than Williams Gulf Coast)
that is not wholly-owned by a Credit Party shall exclude the portion of such
interest attributable to the minority interests in such Subsidiary. Any such net
interest owned by Williams Gulf Coast shall include the entire net interest
owned by Williams Gulf Coast without reduction for any interest owned in
Williams Gulf Coast by any Person that is not a Credit Party Entity.
     “PV Determination Agent” means Calyon New York, in its capacity as PV
determination agent pursuant to Article VII, and any successor PV Determination
Agent pursuant to Section 7.5.
     “Qualifying Hedge” means the Pre-Existing Transactions and any bilateral
hedge transaction (other than a transaction settled by physical delivery of oil)
entered into pursuant to this Agreement between the Counterparty and any Bank
(i) pursuant to which the Counterparty (a) hedges against basis risk or hedges
against any decrease in the price of oil or natural gas (including hedges
effected by way of collars, swaps, puts, calls or any combination thereof and
hedges settled by physical delivery of natural gas) during all or a portion of
the period from the date of such Qualifying Hedge to the earlier of the
Termination Date and December 31 of the third calendar year following the date
of such Qualifying Hedge or (b) unwinds, lifts, terminates the effect of, or
otherwise reverses, in whole or in part, another Qualifying Hedge, and
(ii) which is documented by an ISDA Master Agreement and a Confirmation, each
properly completed.
     “Ratable Portion” means, as to any Bank, (a) with respect to any claim,
damage, loss, liability, cost, fee or expense referred to in Section 5.1(f) or
Section 7.4, (i) if such Bank was a party to this Agreement (a) at the time such
claim, damage, loss, liability, cost, fee or expense was incurred or (b) at the
time of the occurrence or existence of the event, condition, action or inaction
that constituted a basis or reason for such claim, damage, loss, liability,
cost, fee or expense, a fraction, the numerator of which is one and the
denominator of which is the total number of Banks that are referred to in this
clause (i) with respect to such claim, damage, loss, liability, cost, fee or
expense, and (ii) otherwise, zero; and (b) with respect to any specific
indemnity referred to in the last sentence of Section 7.7, (i) if such Bank was
a party to this Agreement at the time such specific indemnity was entered into,
a fraction, the numerator of which is one and the denominator of which is the
total number of Banks that are referred to in this clause (i) with respect to
such specific indemnity, and (ii) otherwise, zero.
     “Redetermination Date” means any date that a redetermined Present Value
becomes effective in accordance with Section 2.6.

15

--------------------------------------------------------------------------------

 

     “Register” has the meaning specified in Section 8.5(c).
     “Related Party” of any Person means any other Person of which more than 10%
of the outstanding Equity Interests having ordinary voting power to elect a
majority of the board of directors of such other Person or others performing
similar functions (irrespective of whether or not at the time Equity Interests
of any other class or classes of such other Person shall or might have voting
power upon the occurrence of any contingency) is at the time directly or
indirectly owned by such first Person or which owns at the time directly or
indirectly more than 10% of the outstanding Equity Interests having ordinary
voting power to elect a majority of the board of directors of such first Person
or others performing similar functions (irrespective of whether or not at the
time Equity Interests of any other class or classes of such first Person shall
or might have voting power upon the occurrence of any contingency).
     “Relevant Amount” has the meaning specified in Section 2.6(g).
     “Required Banks” (i) means at all times when no Qualifying Hedge is
outstanding and no obligation exists under a Qualifying Hedge that is no longer
outstanding, (a) 2/3 in number of the Banks for all Present Value Matters, and
(b) a majority in number of the Banks for all other purposes, and (ii) at all
other times, shall have the meaning determined in accordance with the following:

      Action   Required Banks
Amendments and waivers (other than Present Value Matters) and all other matters
not covered below in this table
  A majority of the Class One Banks and a majority of the Class Two Banks
 
   
Enforcement of Article IX, directing the Collateral Agent to draw under an
Acceptable Letter of Credit or otherwise realize on Acceptable Credit Support,
exercise of all other rights and remedies during an Event of Default and
initiation of any Unscheduled Redetermination
  A majority of the Class One Banks or a majority of the Class Two Banks
 
   
Approval of Present Value
  The smaller of the Present Value approved by 2/3 of Class One Banks or the
Present Value approved by 2/3 of the Class Two Banks
 
   
Amendments and waivers pertaining to Present Value Matters
  2/3 of Class One Banks and 2/3 of Class Two Banks

     All voting by Class One Banks shall be done on a one-Bank-one-vote basis.
All voting by Class Two Banks shall be on the basis of each Class Two Bank’s net
MTM Exposure on all Qualifying Hedges.

16

--------------------------------------------------------------------------------

 

     “Restricted Interests” means (i) all Restricted Net Profits Interests and
(ii) all interests owned by any Subsidiary of a Credit Party that is not itself
a Credit Party.
     “Restricted Net Profits Interest” means a net profits interest in any
property if a Credit Party Entity does not own a working interest in such
property.
     “Retained Bank Credit Support” shall have the meaning set forth in
Section 2.10.
     “S&P” means Standard & Poor’s Rating Group, a division of The McGraw Hill
Companies, Inc. on the date hereof or its successor.
     “Sale and Leaseback Transaction” of any Person means any arrangement
entered into by such Person or any Subsidiary of such Person, directly or
indirectly, whereby such Person or any Subsidiary of such Person shall sell or
transfer any property, whether now owned or hereafter acquired to any other
Person (a “Transferee”), and whereby such first Person or any Subsidiary of such
first Person shall then or thereafter rent or lease as lessee such property or
any part thereof or rent or lease as lessee from such Transferee or any other
Person other property which such first Person or any Subsidiary of such first
Person intends to use for substantially the same purpose or purposes as the
property sold or transferred.
     “Scheduled Redetermination “ shall have the meaning set forth in
Section 2.6(c).
     “Security Documents” means (i) any security agreement in substantially the
form of Exhibit C (or other form acceptable to the Collateral Agent), as each
may be amended, modified, supplemented, renewed, extended or restated from time
to time, and (ii) for purposes of Section 2.3, any letter of credit in the
Collateral Account.
     “Solvent” and “Solvency” means, with respect to any Person on a particular
date, that on such date (a) the fair value of the property of such Person is
greater than the total amount of liabilities, including contingent liabilities,
of such Person, (b) the present fair salable value of the assets of such Person
is not less than the amount that will be required to pay the probable liability
of such Person on its debts as they become absolute and matured, (c) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person’s ability to pay such debts and liabilities as
they mature and (d) such Person is not engaged in business or a transaction, and
is not about to engage in business or a transaction, for which such Person’s
property would constitute an unreasonably small capital. The amount of
contingent liabilities at any time shall be computed as the amount that, in the
light of all the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured liability.
     “Specified Obligations” means any obligation under a loan or production
payment referred to in paragraph (i) of Schedule V.
     “Subordinated Intercompany Obligations” means all liabilities under
Permitted Hedges and Debt owed to TWC or any of its Subsidiaries if such
liabilities and Debt are subordinate to all Obligations pursuant to a
subordination agreement in substantially the form of Exhibit F.
     “Subordination Agreement” means each subordination agreement referred to in
the definition herein of Subordinated Intercompany Obligations (including any
subordination agreement delivered pursuant to Section 3.1).
     “Subsidiary” of any Person means any corporation, partnership, joint
venture or other Business Entity of which more than 50% of the outstanding
Equity Interests having ordinary voting power to elect

17

--------------------------------------------------------------------------------

 

a majority of the board of directors of such corporation, partnership, joint
venture or other Business Entity or others performing similar functions
(irrespective of whether or not at the time Equity Interests of any other class
or classes of such corporation, partnership, joint venture or other Business
Entity shall or might have voting power upon the occurrence of any contingency)
is at the time directly or indirectly owned by such Person, and in addition,
with respect to the Guarantor, includes Williams Gulf Coast, irrespective of the
Guarantor’s ownership of the Equity Interests of Williams Gulf Coast.
     “Terminated Hedge Amount” means at any time the net aggregate amount of all
Relevant Amounts for all Early Termination Hedges that have been terminated
prior to their stated expiration date since the most recent Redetermination
Date; provided that so long as the absolute value of such net aggregate amount
is less than $100 million, the Terminated Hedge Amount shall be zero.
     “Termination Date” means December 31, 2011.
     “Termination Event (ERISA)” means (i) a “reportable event”, as such term is
described in Section 4043(c) of ERISA (other than a “reportable event” not
subject to the provision for 30-day notice to the PBGC or a “reportable event”
as such term is described in Section 4043(c)(3) of ERISA) which could reasonably
be expected to result in a termination of, or the appointment of a trustee to
administer, a Plan, or which causes any Credit Party, due to actions of the
PBGC, to be required to contribute at least $125,000,000 in excess of the
contributions which otherwise would have been made to fund a Plan based upon the
contributions recommended by such Plan’s actuary, or (ii) the withdrawal of a
Credit Party or any ERISA Affiliate of a Credit Party from a Multiple Employer
Plan during a plan year in which it was a “substantial employer,” as such term
is defined in Section 4001(a)(2) of ERISA, or the incurrence of liability by a
Credit Party or any ERISA Affiliate of a Credit Party under Section 4064 of
ERISA upon the termination of a Plan or Multiple Employer Plan, or (iii) the
institution of proceedings to terminate a Plan by the PBGC under Section 4042 of
ERISA, or (iv) any other event or condition which could reasonably be expected
to result in the termination of, or the appointment of, a trustee to administer,
any Plan under Section 4042 of ERISA, other than (in the case of clauses (ii),
(iii) and (iv) of this definition) where the matters described on such clauses,
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
     “Transfer Agreement” means an assignment and assumption agreement in form
and substance reasonably satisfactory to the Administrative Agent and the
Computation Agent.
     “TWC” means The Williams Companies, Inc., a Delaware corporation.
     “TWC Credit Party” means TWC and any borrower or guarantor under a TWC
Principal Credit Facility.
     “TWC Default” means (i) TWC or any Subsidiary of TWC (other than any TWC
Excluded Entity) shall fail to pay any principal of or premium or interest on
the TWC Principal Credit Facility or any other TWC Principal Debt when the same
becomes due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such TWC Principal Credit Facility or such other TWC Principal Debt;
or (ii) the TWC Principal Credit Facility or any other TWC Principal Debt shall
be accelerated.
     “TWC Excluded Entity” means MLP, any Subsidiary of MLP, any TWC
Non-Recourse Subsidiary and any International Subsidiary.

18

--------------------------------------------------------------------------------

 

     “TWC Non-Recourse Debt” means any Debt incurred by any TWC Non-Recourse
Subsidiary to finance the acquisition, improvement, installation, design,
engineering, construction, development, completion, maintenance or operation of,
or otherwise to pay costs and expenses relating to or provide financing for, any
new project commenced or acquired after the Effective Date, which Debt does not
provide for recourse against TWC, or any Subsidiary of TWC (other than a TWC
Non-Recourse Subsidiary and such recourse as exists under a TWC Performance
Guaranty) or any property or asset of TWC, or any Subsidiary of TWC (other than
the Equity Interests in, or the property or assets of, a TWC Non-Recourse
Subsidiary).
     “TWC Non-Recourse Subsidiary” means (i) any non-material Subsidiary of TWC
whose principal purpose is to incur TWC Non-Recourse Debt and/or construct,
lease, own or operate the assets financed thereby, or to become a direct or
indirect partner, member or other equity participant or owner in a Business
Entity created for such purpose, and substantially all the assets of which
Subsidiary and such Business Entity are limited to (x) those assets being
financed (or to be financed), or the operation of which is being financed (or to
be financed), in whole or in part by TWC Non-Recourse Debt, or (y) Equity
Interests in, or Debt or other obligations of, one or more other such
Subsidiaries or Business Entities, or (z) Debt or other obligations of any
Person (other than a Credit Party Entity) and (ii) any Subsidiary of a TWC
Non-Recourse Subsidiary. For purposes of this definition, a “non-material
Subsidiary” shall mean any Consolidated Subsidiary of TWC that is not a TWC
Credit Party and is not an owner, directly or indirectly, of any Equity Interest
in any TWC Credit Party.
     “TWC Performance Guaranty” means any guaranty issued in connection with any
TWC Non-Recourse Debt or International Debt that (i) if secured, is secured only
by assets of, or Equity Interests in, a TWC Non-Recourse Subsidiary or
International Subsidiary, as applicable, and (ii) guarantees the (a) performance
of the improvement, installation, design, engineering, construction,
acquisition, development, completion, maintenance or operation of, or otherwise
affects any such act in respect of, all or any portion of the project that is
financed by such TWC Non-Recourse Debt or International Debt, (b) completion of
the minimum agreed equity contributions to the relevant TWC Non-Recourse
Subsidiary or International Subsidiary, as applicable, or (c) performance by a
TWC Non-Recourse Subsidiary or International Subsidiary of obligations to
Persons other than the provider of such TWC Non-Recourse Debt or International
Debt.
     “TWC Principal Credit Facility” means (i) the U.S. $1,500,000,000 Credit
Agreement dated as of May 1, 2006 among TWC, certain Subsidiaries of TWC,
Citibank and others, as amended, modified, supplemented, renewed, extended or
restated from time to time, and (ii) following termination of the agreement
referred to in clause (i) of this definition, any other credit agreement that
constitutes the principal credit facility of TWC.
     “TWC Principal Debt” means any “Debt” (as defined in the TWC Principal
Credit Facility or, if “Debt” is not therein defined or if no TWC Principal
Credit Facility then exists, as defined in the most recently existing TWC
Principal Credit Facility that defined “Debt”) of TWC or any Subsidiary of TWC
(other than any TWC Excluded Entity) in an aggregate principal amount
outstanding of $100,000,000 or more.
     “Unaudited Report” means an Engineering Report prepared by or under the
supervision of the manager of reserves of the Credit Party Entities and
certified by such manager as being true and correct in all material respects and
as having been prepared in accordance with the procedures used in the most
recent December 31 Engineering Report delivered pursuant to Section 2.6 or
Section 3.1(g). An Unaudited Report may take the form of an update to the most
recently delivered December 31 Engineering Report with adjustments for
acquisitions and dispositions, if any, and new pricing assumptions, if any,
provided by the PV Determination Agent.

19

--------------------------------------------------------------------------------

 

     “Unpaid Amounts” has the meaning specified in the relevant ISDA Master
Agreement.
     “Unrated” means, as to any Bank, that no senior unsecured long-term
Dollar-denominated debt or deposit obligations of such Bank is rated by S&P and
no senior unsecured long-term Dollar-denominated debt or deposit obligations of
such Bank is rated by Moody’s.
     “Unscheduled Redetermination” shall have the meaning set forth in
Section 2.6(c).
     “Williams Gulf Coast” means Williams Production-Gulf Coast Company, L.P., a
Delaware limited liability partnership.
     “‘Withdrawal Liability” shall have the meaning given such term under Part I
of Subtitle E of Title IV of ERISA.
     “WPC” means Williams Production Company, LLC, a Delaware limited liability
company.
     “WPX” means WPX Gas Resources Company, a Delaware corporation.
     “WPX Hedge” means a Hedge between WPX and any Non-Credit Party TWC Entity
if (i) such Hedge is entered into in the normal course of business by WPX and
(ii) the obligations, if any, of each Credit Party in respect of such Hedge are
Subordinated Intercompany Obligations.
     SECTION 1.2 Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word “from” means “from and including” and the words “to” and “until” each
means “to but excluding”.
     SECTION 1.3 Accounting Terms. All accounting terms not specifically defined
shall be construed in accordance with GAAP. To the extent there are any changes
in GAAP from December 31, 2005, the covenants set forth herein will continue to
be determined in accordance with GAAP in effect on December 31, 2005, as
applicable, until such time, if any, as such covenants are adjusted or reset to
reflect such changes in GAAP and such adjustments or resets are agreed to in
writing by the Counterparty and the Administrative Agent (after consultation
with the Required Banks).
     SECTION 1.4 Miscellaneous. The words “hereof”, “herein” and “hereunder” and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
Article, Section, Schedule and Exhibit references are to Articles and Sections
of and Schedules and Exhibits to this Agreement, unless otherwise specified. The
term “including” shall mean “including, without limitation”. References to any
document, instrument or agreement (a) shall include all exhibits, schedules and
other attachments thereto, (b) shall include all documents, instruments or
agreements issued or executed in replacement thereof and (c) shall mean such
document, instrument or agreement, or replacement or predecessor thereto, as
amended, modified and supplemented from time to time and in effect at any given
time so long as such amended, modified or supplemented document, instrument or
agreement does not violate the terms of this Agreement.
     SECTION 1.5 Ratings. A rating, whether public or private, by S&P or Moody’s
shall be deemed to be in effect on the date of announcement or publication by
S&P or Moody’s, as the case may be, of such rating or, in the absence of such
announcement or publication, on the effective date of such rating and will
remain in effect until the announcement or publication of, or in the absence of
such announcement or publication, the effective date of, any change in, or
withdrawal or termination of, such rating. In the event the standards for any
rating by Moody’s or S&P are revised, or any such rating is designated
differently (such as by changing letter designations to different letter
designations or to

20

--------------------------------------------------------------------------------

 

numerical designations), the references herein to such rating shall be deemed to
refer to the revised or redesignated rating for which the standards are closest
to, but not lower than, the standards at the date hereof for the rating which
has been revised or redesignated, all as determined by the Required Banks in
good faith. Long-term debt (or deposit obligations) supported by a letter of
credit, guaranty, insurance or other credit enhancement mechanism shall not be
considered as senior unsecured long-term debt (or deposit obligations).
ARTICLE II
TERMS OF THE FACILITY
     SECTION 2.1 Terms.
     (a) Procedure for Hedges. The Counterparty and any Bank may elect, each in
its sole discretion, to enter into one or more Qualifying Hedges in accordance
with the provisions of the ISDA Master Agreement between the Counterparty and
such Bank.
     (b) Uncommitted Facility. No Bank shall have any obligation whatsoever to
enter into any Qualifying Hedge.
     (c) No liability for other Banks’ Hedges. No Bank shall be responsible for
the obligations of any other Bank or the Counterparty, or have any liability, in
respect of any Qualifying Hedge entered into by such other Bank.
     (d) Bank Credit Support. The Counterparty agrees, and each Bank agrees,
that such Bank will not be required to provide, and will not provide, any
collateral, guaranty, letter of credit or other security in connection with any
Qualifying Hedge, except Bank Credit Support required by the ISDA Master
Agreement to which such Bank is a party and any Acceptable Bank Guaranty
contemplated hereby. No Bank Credit Support will be released or modified if a
Present Value Deficiency exists or would result therefrom, except as provided in
Section 2.10.
     (e) Acceptable Bank Guaranty. Each time a Bank designates a Designated
Affiliate of such Bank, such Bank shall deliver or cause to be delivered to the
Administrative Agent an Acceptable Bank Guaranty with respect to such Designated
Affiliate. No Acceptable Bank Guaranty shall be released or materially modified
so long as the Designated Affiliate referred to therein remains a Designated
Affiliate.
     (f) Advance Notice of Certain Qualifying Hedges. Neither the Counterparty
nor any Bank will enter into any Qualifying Hedge that either (i) relates to any
delivery point that is not a Pre-Approved Delivery Point or (ii) is not a
Pre-Approved Hedge Type, unless (a) the Computation Agent receives, at least
five Business Days prior to the date that the Counterparty proposes to enter
into such Qualifying Hedge, a notice from the Counterparty and the Bank
proposing to enter into such Qualifying Hedge describing such Qualifying Hedge
and (b) the Computation Agent has not given notice to the Counterparty and such
Bank by the end of such five Business Day period that the Computation Agent
(1) has diligently worked during such period to develop an appropriate valuation
mechanism for such Qualifying Hedge and (2) reasonably believes that it does not
have an appropriate valuation mechanism for such Qualifying Hedge.
     SECTION 2.2 Payments and Computations.
     (a) Each Credit Party shall make each payment hereunder to be made by it
not later than 2:00 p.m. (New York City time) on the day when due in Dollars
(i) to the Administrative Agent at its address

21

--------------------------------------------------------------------------------

 

referred to in Section 8.2 (excluding, for such purpose, any address to which
copies are to be sent), (ii) in the case of Exposure Fees, directly to the
respective Banks entitled thereto or (iii) in the case of fees referred to in
Section 2.4(a), directly to the respective Agent or Joint Lead Arranger entitled
thereto, in each case in same day funds, without deduction, counterclaim or
offset of any kind. In the case of the foregoing clause (i), the Administrative
Agent will promptly thereafter cause to be distributed like funds relating to
the payment of any amount payable to any Bank to such Bank. In no event shall
any Bank be entitled to share any fee paid to any Agent or a Joint Lead
Arranger, as such, or any amount applied to reimburse any Agent or a Joint Lead
Arranger, as such, as contemplated by any Credit Document.
     (b) All computations of interest and fees hereunder shall be made by the
Administrative Agent on the basis of a year of 365 or 366 days, as the case may
be, for the actual number of days (including the first day but excluding the
last day) occurring in the period for which such interest or fees are payable.
Each determination by the Administrative Agent of an interest rate or fee
hereunder shall be conclusive and binding for all purposes, absent manifest
error.
     (c) Whenever any payment hereunder shall be stated to be due on a day other
than a Business Day, such payment shall be made on the next succeeding Business
Day, and such extension of time shall in such case be included in the
computation of payment of interest or any fee hereunder, as the case may be.
     (d) Payments and deliveries under each Qualifying Hedge shall be effected
directly between the parties to, and in accordance with, such Qualifying Hedge,
except as provided in Sections 2.7 and 2.10. If the Counterparty or any Bank
fails to make any payment or delivery required under a Qualifying Hedge, the
Counterparty (or, if the Counterparty has so failed to make such a payment or
delivery, the Bank party to such Qualifying Hedge) shall notify the Computation
Agent of such failure by the end of the Business Day next following such failure
specifying the amount thereof and identifying the Qualifying Hedge to which such
failure pertains.
     SECTION 2.3 Taxes.
     (a) Any and all payments by any Credit Party under this Agreement or any
Security Document shall be made, in accordance with Section 2.2, free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings with respect thereto, and all
liabilities with respect thereto, excluding, in the case of each Bank and each
Agent, (i) taxes imposed on its net income or net profits, and franchise taxes
imposed on it, by the jurisdiction under the laws of which such Bank, or such
Agent (as the case may be) is organized or any political subdivision thereof and
(ii) taxes imposed as a result of a present or former connection between such
Bank or such Agent, as the case may be, and the jurisdiction imposing such tax
or any political subdivision thereof (other than any such connection arising
solely from such Bank or such Agent, as the case may be, having executed or
delivered, or performed its obligations or received a payment or delivery under,
or taken any other action related to, any Credit Document) and, in the case of
each Bank, taxes imposed on its net income or net profits, and franchise taxes
imposed on it, by the jurisdiction of such Bank’s Applicable Office or any
political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as “Taxes”). If any Credit Party shall be required by law to deduct any Taxes
from or in respect of any sum payable hereunder to any Bank or any Agent,
(i) the sum payable shall be increased as may be necessary so that after making
all required deductions for Taxes (including deductions for Taxes applicable to
additional sums payable under this Section 2.3), such Bank or such Agent, as the
case may be, receives an amount equal to the sum it would have received had no
such deductions for Taxes been made, (ii) such Credit Party shall make such
deductions and (iii) such Credit Party shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law.

22

--------------------------------------------------------------------------------

 

     (b) In addition, each Credit Party agrees to pay all present or future
filing or recording fees, stamp or documentary taxes and all other excise or
property taxes, charges or similar levies which arise from any payment made by
such Credit Party hereunder or from the execution, delivery, filing, recording
or registration of, or otherwise with respect to, this Agreement or any Security
Document (herein referred to as “Other Taxes”).
     (c) Each Credit Party will indemnify each Bank and each Agent for the full
amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by
any jurisdiction on amounts payable under this Section 2.3) owed and paid by
such Bank or such Agent, as the case may be, and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto.
This indemnification shall be made within 30 days from the date such Bank or
such Agent, as the case may be, makes written demand therefor; provided that
such Credit Party shall have no liability pursuant to this clause (c) of this
Section 2.3 to indemnify a Bank or an Agent for Taxes or Other Taxes which were
paid by such Bank or such Agent, as the case may be, more than ninety days prior
to such written demand for indemnification.
     (d) In the event that a Bank or an Agent receives a written communication
from any Governmental Authority with respect to an assessment or proposed
assessment of any Taxes, such Bank or such Agent, as the case may be, shall
promptly notify the Counterparty in writing and provide the Counterparty with a
copy of such communication. An Agent’s or a Bank’s failure to provide a copy of
such communication to the Counterparty shall not relieve the Counterparty of any
of its obligations hereunder.
     (e) Promptly following payment of Taxes by or at the direction of any
Credit Party, such Credit Party will furnish to the Administrative Agent, at its
address referred to in Section 8.2, the original or a certified copy of a
receipt evidencing payment thereof (or, if no such receipt is reasonably
available, other evidence of payment reasonably acceptable to the Administrative
Agent). Should any Bank or any Agent ever receive any refund, credit or
deduction from any taxing authority to which such Bank or such Agent, as the
case may be, would not be entitled but for the payment by such Credit Party of
Taxes or Other Taxes as required by this Section 2.3 (it being understood that
the decision as to whether or not to claim, and if claimed, as to the amount of
any such refund, credit or deduction shall be made by such Bank or such Agent,
as the case may be, in its reasonable judgment), such Bank or such Agent, as the
case may be, thereupon shall repay to such Credit Party an amount with respect
to such refund, credit or deduction equal to any net reduction in taxes actually
obtained by such Bank or such Agent, as the case may be, and determined by such
Bank or such Agent, as the case may be, to be attributable to such refund,
credit or deduction.
     (f) Each Bank organized under the laws of a jurisdiction outside the United
States shall on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank which is a party to this Agreement on the
date this Agreement becomes effective and on the date any other Person becomes a
Bank in the case of each other Bank, and from time to time thereafter as
necessary or appropriate (but only so long thereafter as such Bank remains
lawfully able to do so), provide the Administrative Agent and the Counterparty
with two original Internal Revenue Service Forms W-8BEN or W-8ECI (or, in the
case of a Bank that has provided a certificate to the Administrative Agent that
it is not (i) a “bank” as that term is used in Section 881(c)(3)(a) of the Code,
(ii) a ten-percent shareholder (within the meaning of Section 871(h)(3)(b) of
the Code) of any Credit Party or (iii) a controlled foreign corporation related
to any Credit Party (within the meaning of Section 864(d)(4) of the Code),
Internal Revenue Service Forms W-8BEN), or any successor or other form
prescribed by the Internal Revenue Service, certifying that such Bank is exempt
from or entitled to a reduced rate of United States withholding tax on payments
pursuant to this Agreement or any other Credit Document or, in the case of a
Bank that has certified that it is not a “bank” as described above, certifying
that such Bank is a foreign

23

--------------------------------------------------------------------------------

 

corporation. If the forms provided by a Bank at the time such Bank first becomes
a party to this Agreement indicate a United States interest withholding tax rate
in excess of zero, withholding tax at such rate shall be considered excluded
from Taxes unless and until such Bank provides the appropriate forms certifying
that a lesser rate applies, whereupon withholding tax at such lesser rate only
shall be considered excluded from Taxes for periods governed by such forms.
     (g) For any period with respect to which a Bank has failed to provide the
Counterparty with the appropriate form, certificate or other document required
by subsection (f) of this Section 2.3 (other than if such failure is due to a
change in the applicable law, or in the interpretation or application thereof,
occurring after the date on which a form, certificate or other document
originally was required to be provided) such Bank shall not be entitled to
indemnification under subsection (a) or (c) of this Section 2.3 with respect to
Taxes imposed by the United States by reason of such failure; provided, however,
that should a Bank become subject to Taxes because of its failure to deliver a
form, certificate or other document required hereunder, the Credit Parties shall
take such steps as such Bank shall reasonably request (at such Bank’s expense)
to assist such Bank in recovering such Taxes.
     (h) Any Bank claiming any additional amounts payable pursuant to this
Section 2.3 agrees to use reasonable efforts to change the jurisdiction of its
Applicable Office if the making of such a change would avoid the need for, or
reduce the amount of, any such additional amounts that may thereafter accrue and
would not, in the reasonable judgment of such Bank, be otherwise materially
disadvantageous to such Bank.
     (i) If a Credit Party determines in good faith that a reasonable basis
exists for contesting a Tax, the relevant Bank or Agent, as applicable, shall
provide reasonable cooperation to such Credit Party in challenging such Tax at
such Credit Party’s expense and if requested by such Credit Party in writing;
provided, however, that no Bank nor Agent, as applicable, shall be required to
take any action hereunder which, in the reasonable discretion of such Bank or
such Agent, as applicable, would cause such Bank or its Applicable Office or
such Agent, as applicable, to suffer a legal, regulatory or material economic
disadvantage.
     (j) Without prejudice to the survival of any other agreement of the Credit
Parties hereunder, the agreements and obligations of the Credit Parties
contained in this Section 2.3 shall survive the payment in full of the
Obligations and the Termination Date.
     (k) Notwithstanding any provision of this Agreement to the contrary, this
Section 2.3 shall be the sole provision governing indemnities for and claims for
Taxes under this Agreement and the Security Documents. For avoidance of doubt,
it is agreed that this Section 2.3 does not apply to payments or deliveries made
under any Qualifying Hedge (the tax aspects of which shall be governed by the
Hedge Documents, including Section 2(d) of the ISDA Master Agreement).
     (l) Notwithstanding any other provision in this Section 2.3, no additional
amount shall be required to be paid by any Credit Party under Section 2.3(a) or
2.3(c) to any Bank organized under the laws of a jurisdiction outside the United
States in respect of Taxes or any liabilities (including penalties, interest and
expenses arising therefrom or with respect thereto), except to the extent that
any change after the Effective Date (in the case of each Bank which was a party
to this Agreement on the Effective Date) or after the date on which another
Person becomes a Bank (in case of each other Bank) in any such requirement for a
deduction, withholding or payment of Taxes described in this Section 2.3 shall
result in an increase in the rate of such deduction, withholding or payment from
that in effect at the Effective Date (in the case of each Bank which was a party
to this Agreement on the Effective Date) or at the date of the relevant document
pursuant to which another Person becomes a Bank (in the case of each other
Bank). For avoidance of doubt, this Section 2.3(l) does not apply to Other
Taxes.

24

--------------------------------------------------------------------------------

 

     SECTION 2.4 Fees.
     (a) Agents’ Fees. The Counterparty agrees to pay directly to each Agent,
each collateral sub-agent referred to in Section 2.11 and each Joint Lead
Arranger, for its sole account, such fees as may be separately agreed to in
writing by the Counterparty and such Agent, such collateral sub-agent or such
Joint Lead Arranger, as the case may be.
     (b) Exposure Fees. The Counterparty agrees to pay to each Bank an exposure
fee (an “Exposure Fee”) in an amount equal to 0.625% per annum multiplied by the
daily average of the net MTM Exposure for all Qualifying Hedges to which such
Bank is a party (excluding in the computation of any Exposure Fee, those days on
which the net MTM Exposure for all Qualifying Hedges to which such Bank is a
party is negative). All Exposure Fees owed to any Bank will be computed by such
Bank based on the reports substantially in the form of Exhibit H furnished by
the Computation Agent pursuant to Section 7.1. Each Bank shall submit an invoice
to the Counterparty supporting its computation of any Exposure Fees owed to such
Bank with respect to each Fiscal Quarter that has elapsed and, if the
Termination Date has occurred, with respect to the period from the most recent
date through which its Exposure Fees have been invoiced (or the Effective Date,
if Exposure Fees have not previously been invoiced by it) through the
Termination Date. The Exposure Fee for each Bank will be payable in arrears
directly to such Bank within ten Business Days following the receipt of each
such invoice.
     SECTION 2.5 Interest. Upon the occurrence and during the continuance of an
Event of Default, each Credit Party agrees to pay, to the fullest extent
permitted by law, interest on any amount payable hereunder that is not paid when
due (after the expiration of any applicable grace period), from the date such
amount shall be due until such amount shall be paid in full, payable in arrears
on the date such amount shall be paid in full and on demand, at a rate per annum
equal at all times to 2% per annum above the Base Rate.
     SECTION 2.6 Engineering Reports and Present Value.
     (a) Engineering Reports.
          (i) Prior to May 1 of each year, the Counterparty agrees to deliver to
the PV Determination Agent and the Banks the December 31 Engineering Report as
of the immediately preceding December 31. Additionally, upon the request of the
PV Determination Agent, the Counterparty agrees to deliver to the PV
Determination Agent an Unaudited Report that is the same as such December 31
Engineering Report, except that such Unaudited Report will be based on the
pricing assumptions specified by the PV Determination Agent.
          (ii) For each Unscheduled Redetermination initiated by the
Counterparty pursuant to Section 2.6(e)(i), the Counterparty agrees to deliver
to the PV Determination Agent an Unaudited Report, as of a date reasonably
acceptable to the Counterparty and the PV Determination Agent; provided that if
such Unscheduled Redetermination was initiated pursuant to Section 2.6(e)(i)(1)
and the acquired Proved Reserves have a fair market value, in the aggregate,
equal to or greater than $300 million, an Acquired Reserves Engineering Report,
as of such date, covering the acquired Proved Reserves must be delivered to the
PV Determination Agent with such Unaudited Report. For each Unscheduled
Redetermination initiated by the Required Banks pursuant to Section 2.6(e)(ii),
the Counterparty agrees to deliver to the PV Determination Agent, an Unaudited
Report, as of a date reasonably acceptable to the Counterparty and the PV
Determination Agent, covering the Proved Reserves that the Counterparty desires
to have included in the Present Value determination.

25

--------------------------------------------------------------------------------

 

          (iii) Concurrently with the delivery of each Engineering Report, the
Counterparty agrees to deliver to the PV Determination Agent a production report
covering the net production of oil and gas of the Credit Party Entities, which
report shall include quantities or volumes of production, realized product
prices, operating expenses, taxes, capital expenditures and such other
information as the PV Determination Agent may reasonably request and covering
the one year period ending on the “as of” date of the Engineering Report being
delivered with such production report.
          (iv) Concurrently with the delivery of each Engineering Report, the
Counterparty agrees to deliver to the PV Determination Agent, a certificate from
an Authorized Officer of the Counterparty that, to the best of his knowledge and
in all material respects, (i) the oil and natural gas reserves information set
forth in such Engineering Report was estimated using generally accepted
engineering and evaluation principles and is reasonable in the aggregate by
basin, and any factual information contained in the reports delivered with such
Engineering Report is true and correct, (ii) a Credit Party Entity owns directly
good and defensible title (as defined in Section 4.1(m)) to the Proved Reserves
evaluated in such Engineering Report free of all Liens except for Liens not
prohibited by Section 5.2(a), (iii) except as set forth in the certificate or in
the Engineering Report, on a net basis there are no material (with such
materiality determined in relation to the total reserve base included in such
Engineering Report) gas imbalances, take or pay or other prepayments with
respect to the Proved Reserves evaluated in such Engineering Report which would
require any Credit Party Entity to deliver Hydrocarbons at some future time
without then or thereafter receiving full payment therefor, (iv) no Oil and Gas
Properties have been disposed by any Credit Party Entity since the date of the
last Present Value determination except as permitted by the terms of this
Agreement or, in any material respect, been destroyed or damaged (except to the
extent covered by insurance and except as set forth in such certificate),
(v) attached to the certificate are statements of each Credit Party’s
outstanding Qualifying Hedges and Permitted Hedges (other than WPX Hedges),
which statements shall include for each Qualifying Hedge and each such Permitted
Hedge (a) the termination date, (b) the notional amounts or volumes and the
periods covered by such volumes, and (c) the price to be paid or the basis for
calculating the price to be paid by such Credit Party and the other Person under
such Qualifying Hedge or such Permitted Hedge, as the case may be, for each of
the future periods covered by such Qualifying Hedge or such Permitted Hedge, as
the case may be, and (vi) the Other Present Value Obligations Amount on the date
of such certificate is the amount set forth in such certificate.
     (b) During the period from the Effective Date until the first
Redetermination Date, the amount of the Present Value shall be $2,659,047,000.
     (c) The Present Value shall be redetermined from time to time in accordance
with Section 2.6(d) by the PV Determination Agent with the concurrence of the
Required Banks. The Present Value shall be redetermined annually following
delivery of each December 31 Engineering Report (each being a “Scheduled
Redetermination”). Additionally, unscheduled redeterminations of the Present
Value may occur from time to time in accordance with Section 2.6(e) (each being
an “Unscheduled Redetermination”). Any redetermination of the Present Value
shall become effective as contemplated in Section 2.6(f) and shall remain in
effect until the next Redetermination Date.
     (d) Upon receipt of an Engineering Report and the other items required by
Section 2.6(a) and such other reports, data and supplemental information as may
from time to time be reasonably requested by the PV Determination Agent, the PV
Determination Agent will redetermine a new Present Value. Such redeterminations
will not take into account reserves forecasted to be produced during the next
twelve months and otherwise will be in accordance with the PV Determination
Agent’s normal and customary procedures for evaluating oil and gas reserves and
other related assets as such exist at that particular time using a 9% discount
rate (or such other discount rate as the PV Determination Agent may in good
faith elect based on market conditions) and giving effect to all Qualifying
Hedges (but not giving

26

--------------------------------------------------------------------------------

 

effect to (I) any such Qualifying Hedges that have been terminated and as to
which the PV Determination Agent has been notified of such termination
sufficiently in advance of such redetermination, based on the PV Determination
Agent’s judgment, to allow it to take such termination into account or (II) any
of the WPX Hedges) in effect on the date as of which the certificate referred to
in Section 2.6(a)(iv) relating to the relevant Engineering Report is given (or,
if such date is not a Business Day, on the next preceding Business Day) and all
Qualifying Hedges entered into after such date if, based on the PV Determination
Agent’s judgment, notice of those Qualifying Hedges has been received
sufficiently in advance of such redetermination to allow it to take such
Qualifying Hedges into account; provided that Proved Reserves that are not
proved developed producing reserves (“Non-Producing Reserves”) shall be excluded
from such redeterminations to the extent that inclusion thereof would result in
Non-Producing Reserves constituting more than 25% of the Present Value; provided
further that Proved Reserves attributable to Restricted Interests shall be
excluded from such redeterminations to the extent that inclusion thereof would
result in greater than 15% of the Present Value being attributable to such
Restricted Interests; provided further that as to any Collar taken into account
in any such redetermination (A) if the price data used by the PV Determination
Agent is higher than the strike price of the call that constitutes a portion of
such Collar, then such strike price and the notional volume of such call will be
used in such redetermination (and the put that constitutes a portion of such
Collar shall not be taken into account), (B) if the price data used by the PV
Determination Agent is lower than the strike price of the put that constitutes a
portion of such Collar, then such strike price and the notional volume of such
put will be used in such redetermination (and the call that constitutes a
portion of such Collar shall not be taken into account), and (C) if the price
data used by the PV Determination Agent is (x) equal to or less than the strike
price of the call that constitutes a portion of such Collar and (y) equal to or
greater than the strike price of the put that constitutes a portion of such
Collar, then neither such put nor such call shall be taken into account. The PV
Determination Agent, in accordance with its normal and customary procedures for
evaluating oil and gas reserves and other related assets as such exist at that
particular time, may make adjustments to the rates, volumes, prices and other
assumptions used in an Engineering Report. The PV Determination Agent shall
propose a new Present Value and (i) notify the Counterparty of such proposed new
Present Value, the PV Determination Agent’s price assumptions used for such
proposed new Present Value and other key assumptions used by the PV
Determination Agent for such proposed new Present Value within 30 days following
receipt by the PV Determination Agent of such Engineering Report and such other
items, reports, data and information in a timely and complete manner and
(ii) not less than three Business Days after such notification to the
Counterparty, notify the Banks of such proposal. After having received notice of
such proposal by the PV Determination Agent, each Bank shall have 10 days to
agree or disagree with such proposal. Any failure of a Bank to communicate its
approval or disapproval within such ten day period shall be deemed to be an
approval of such proposal. If the Required Banks approve (including any such
deemed approval) the PV Determination Agent’s proposal, then such proposal shall
be the new Present Value. If however, the Required Banks do not approve such
proposal within 10 days, then (1) the Required Banks may agree on, and notify
the PV Determination Agent of, a revised Present Value within seven Business
Days following such 10 day period or (2) if the Required Banks fail to so agree
or fail to so notify within such seven Business Day period, such proposal of the
PV Determination Agent will be deemed to have been approved by the Required
Banks.
     (e) In addition to Scheduled Redeterminations, (i) the Counterparty may
initiate an Unscheduled Redetermination (1) if the Credit Party Entities have
acquired directly Proved Reserves since the most recent Redetermination Date (or
December 31, 2005, if the first Redetermination Date has not occurred) having a
fair market value in the aggregate of $100 million or more, (2) at any time (but
not more often than once per calendar year for requests pursuant to this clause
(2)) or (3) if any Credit Party Entity has sold a volumetric production payment
since the most recent date as of which the Present Value was determined (or, if
the first Redetermination Date has not occurred, since December 31, 2005) at any
time before the next date as of which the Present Value is determined pursuant
to any provision hereof other than this clause (3) (but not more often than once
per calendar year for requests pursuant to this

27

--------------------------------------------------------------------------------

 

clause (3)), in each case by notifying the PV Determination Agent and providing
an Engineering Report in accordance with Section 2.6(a), and (ii) the Required
Banks may initiate an Unscheduled Redetermination (1) if Proved Reserves having
a fair market value in the aggregate of $100 million or more have, since the
most recent Redetermination Date (or the Effective Date, if the first
Redetermination Date has not occurred), been disposed by the Credit Party
Entities (other than in Permitted Dispositions), destroyed or damaged (except to
the extent covered by insurance) or taken by eminent domain or other
governmental action, (2) if Proved Reserves are restated or recategorized by a
Credit Party Entity and the effect thereof is to reduce the Present Value by
$100 million or more in the aggregate or (3) at any time (but not more than once
per calendar year pursuant to this clause (3)), in each case by specifying in
writing to the Counterparty the date (which shall in no event be less than ten
Business Days following Counterparty’s receipt of such writing) on which the
Counterparty is to furnish an Engineering Report in accordance with Section
2.6(a).
     (f) The PV Determination Agent shall promptly notify in writing the
Counterparty and the Banks of the new Present Value. Any redetermination of the
Present Value shall become effective on the date written notice thereof is
received by the Counterparty.
     (g) If
          (i) since the most recent Redetermination Date, any Hedge that was
taken into account in the most recent determination of the Present Value is
terminated prior to its stated expiration date (each, an “Early Termination
Hedge”), and
          (ii) had such Early Termination Hedge and all other Early Termination
Hedges terminated since the most recent Redetermination Date not been taken into
account in the most recent determination of the Present Value, the Present Value
would have been at least $100 million more or less than the Present Value
actually determined (for each Early Termination Hedge, the “Relevant Amount”
will be the amount by which the Present Value would have differed if such Early
Termination Hedge had not been taken into account in the most recent
determination of the Present Value, with any such difference that would have
increased such Present Value being expressed as a negative number and any such
difference that would have decreased such Present Value being expressed as a
positive number);
then, within 4 Business Days after any Early Termination Hedge is terminated,
the PV Determination Agent will determine, and notify the Counterparty and the
Banks of, the Relevant Amount for each Early Termination Hedge that has been
terminated prior to its stated expiration date since the most recent
Redetermination Date.
     SECTION 2.7 Present Value Deficiency. If at any time a Present Value
Deficiency exists, the Counterparty shall within three Business Days thereof
deliver to the Collateral Agent, for deposit into the Collateral Account,
Acceptable Credit Support in an amount equal to the amount of such Present Value
Deficiency. Each Bank will (i) during the existence of a Present Value
Deficiency of which it has received notice hereunder (and has not received
notice pursuant to clause (iii) of the last sentence of Section 7.1 that such
Present Value Deficiency does not exist), pay directly to the Collateral Agent
for deposit into the Collateral Account all payments under any Qualifying Hedge
to which such Bank is a party that would otherwise be paid to the Counterparty,
and such payments will be made without exercise of any offset, defense or
counterclaim (except that a Bank may net payments owed under any Qualifying
Hedge to which it is a party against payments owed under any other Qualifying
Hedge to which it is a party and may net payments under the same Qualifying
Hedge), and (ii) by 9:00 a.m. (New York City time) on the Business Day following
each day on which it has made a payment pursuant to clause (i) of this sentence
or pursuant to clause (3) of Section 6.1, notify the Counterparty, the
Collateral Agent and the Computation Agent of the amount of such payment. At
such time as no Present Value Deficiency

28

--------------------------------------------------------------------------------

 

exists and no Event of Default exists, the Counterparty will be entitled to
return (for avoidance of doubt, “return” includes, without limitation, any
delivery of interest accrued on Acceptable Credit Support) of the Acceptable
Credit Support (including appropriate reduction in the amount of an Acceptable
Letter of Credit) in accordance with customary procedures (but in any event
within 3 Business Days from the date the Collateral Agent determines that no
Present Value Deficiency exists and no Event of Default exists), to the extent
that such return (or reduction) will not cause a Present Value Deficiency;
provided that if a Hedge becomes an Early Termination Hedge, then no such return
or reduction will be effected during the period from the date such Hedge becomes
an Early Termination Hedge through and including the earlier of (x) the date
that is 4 Business Days following the date that such Hedge became an Early
Termination Hedge and (y) the date on which the Counterparty receives notice
from the PV Determination Agent of the Relevant Amount for such Early
Termination Hedge; provided further that the Collateral Agent shall not be
required to effect any such return or reduction if the Counterparty has not
given the Collateral Agent specific notice requesting such return or reduction.
     SECTION 2.8 Removal and Addition of Banks. Any Bank (i) that has no
Qualifying Hedges outstanding and (ii) that is neither owed nor owes any
obligation to make any payment or delivery under any Qualifying Hedge may be
removed as a party to this Agreement by the Counterparty by ten Business Days’
notice to such Bank and the Administrative Agent, or may remove itself as a
party to this Agreement by ten Business Days’ notice to the Counterparty and the
Administrative Agent, except the agreements and obligations of the Counterparty
contained in Sections 2.3 and 8.4 (and the obligations of the Guarantor related
thereto) shall continue. The Counterparty shall have the right to add to this
Agreement any new Bank if (i) the senior unsecured long-term Dollar-denominated
debt or deposit obligations of each added Bank is rated at least BBB by S&P and
Baa2 by Moody’s, (ii) following each such addition, the number of Banks does not
exceed ten and (iii) all “know your customer” Governmental Requirements
applicable to any Bank or Agent have been met. Each such addition shall be
effected by execution by such Bank and the Counterparty of a New Bank Agreement,
and shall be effective upon receipt by the Administrative Agent and the
Computation Agent of such executed New Bank Agreement.
     SECTION 2.9 Sharing of Payments, Etc. No Bank will be required to share
payments, set-offs or other amounts received by it under any Qualifying Hedge,
except that (i) following termination of all Qualifying Hedges pursuant to
clause (2) of Section 6.1 of this Agreement or (ii) if such termination is not
effected pursuant to such clause (2) and the Required Banks elect that this
clause (ii) apply, following termination of all Qualifying Hedges pursuant to
the other terms of the Credit Documents, the Acceptable Credit Support, any
amount received pursuant to any Subordination Agreement and amounts received
pursuant to the guaranties set forth in Article IX will be shared ratably by the
Banks (based on the respective amounts of the Obligations then owed to the Banks
and Agents and an amount estimated in good faith by the Collateral Agent to be
the amount of all other Obligations that may arise thereafter as contemplated by
Section 5.4 of the Security Agreement). For avoidance of doubt, this Section 2.9
does not modify the requirement set forth in the second sentence of Section 2.7
that certain payments be made without exercise of any offset, defense or
counterclaim (except as provided in such sentence).
     SECTION 2.10 Bank Credit Support. Each Bank agrees to deliver, directly to
the Collateral Agent to be held in the Collateral Account (whether or not a
Present Value Deficiency exists), all Bank Credit Support with respect to such
Bank, and the Counterparty agrees that such delivery shall satisfy the
requirements of the relevant Qualifying Hedge that such Bank provide such Bank
Credit Support to the Counterparty. Prior to termination of a Qualifying Hedge,
the Bank Credit Support provided by any Bank under such Qualifying Hedge shall
be redelivered to such Bank from time to time to the extent no longer required
under such Qualifying Hedge. At the termination of a Qualifying Hedge (or, in
the case of clauses (ii) and (iii) of this sentence, on the second Business Day
next following such termination), any remaining Bank Credit Support provided by
a Bank pursuant to such Qualifying Hedge (or by such Bank or its direct or
indirect parent pursuant to an Acceptable Bank Guaranty) shall be (i) if at such
termination

29

--------------------------------------------------------------------------------

 

(A) the Counterparty is entitled to a payment from such Bank and (B) a Present
Value Deficiency exists (or would result from such termination or payment),
retained (to the extent of such payment obligation) in the Collateral Account to
secure the Obligations (and such retention shall be deemed to satisfy such
payment obligation to the extent of the amount so retained, which amount in the
case of treasury obligations shall be the principal amount thereof plus interest
accrued to the date of such termination) (“Retained Bank Credit Support”),
(ii) if at such termination (A) the Counterparty is entitled to a payment from
such Bank, (B) a Present Value Deficiency does not exist (and would not result
from such termination or payment) and (C) by 5:00 p.m. (New York City time) on
the Business Day next following the date of such termination, the Bank has not
made all or part of such payment and the Counterparty notifies the Collateral
Agent of such non-payment by 5:00 p.m. (New York City time) on the second
Business Day next following the date of such termination, delivered by the
Collateral Agent to the Counterparty (to the extent of such unpaid payment
obligation), and such delivery shall be deemed to satisfy such unpaid payment
obligation to the extent of the amount so delivered or (iii) otherwise, returned
by the Collateral Agent to such Bank; provided that if a Hedge becomes an Early
Termination Hedge, then no action shall be taken pursuant to clause (i) or
clause (ii) of this sentence during the period from the date such Hedge becomes
an Early Termination Hedge through and including the earlier of (x) the date
that is 4 Business Days following the date that such Hedge became an Early
Termination Hedge and (y) the date on which the Counterparty receives notice
from the PV Determination Agent of the Relevant Amount for such Early
Termination Hedge.
     SECTION 2.11 Collateral Account. The Collateral Agent shall maintain
separate sub-accounts within the Collateral Account in order to keep separate
and readily identifiable all Acceptable Credit Support and Bank Credit Support
as follows:
     (i) one such sub-account shall contain only (a) Acceptable Credit Support
delivered pursuant to Section 2.7, (b) Retained Bank Credit Support and (c) all
proceeds, payments, collections and other amounts and rights in respect thereof;
and
     (ii) a separate such sub-account shall be maintained for each Bank and
shall contain only (a) Bank Credit Support delivered by such Bank pursuant to
Section 2.10 and (b) all proceeds, payments, collections and other amounts and
rights in respect thereof; provided that at the time any such Bank Credit
Support (or proceeds, payments, collections or other amounts or rights in
respect thereof) becomes Retained Bank Credit Support, such Retained Bank Credit
Support shall be transferred to the sub-account referred to in Section 2.11(i).
     Additionally, if the Bank that is the Collateral Agent provides any Bank
Credit Support, the Counterparty will appoint a collateral sub-agent to hold
such Bank Credit Support (and proceeds, payments, collections and other amounts
and rights in respect thereof); provided that at the time any such Bank Credit
Support (or proceeds, payments, collections or other amounts or rights in
respect thereof) becomes Retained Bank Credit Support, such Retained Bank Credit
Support shall be transferred to the Collateral Agent for inclusion in the
sub-account referred to in Section 2.11(i). Such collateral sub-agent (a) shall
hold and deal with Bank Credit Support provided by the Collateral Agent on the
same terms as the Collateral Agent holds and deals with other Bank Credit
Support, (b) shall have all of the rights, duties, responsibilities and
protections (including rights to indemnities) provided herein to the Collateral
Agent, (c) shall act as agent for the Banks (other than the Bank that is the
Collateral Agent in its capacity as the provider of the Bank Credit Support) and
not as agent for the Counterparty and (d) shall be a financial institution
acting through an office in New York City and shall have senior unsecured
long-term Dollar-denominated debt or deposit obligations that are rated A or
higher by S&P and A2 or higher by Moody’s. No Bank shall be required to accept
appointment as a collateral sub-agent.
     SECTION 2.12 Use of Collateral; Interest.

30

--------------------------------------------------------------------------------

 

     (a) So long as (i) the Collateral Agent is not in default of any of its
obligations under any Credit Document and (ii) the senior unsecured long-term
Dollar-denominated debt or deposit obligations of the Collateral Agent are rated
AA- or higher by S&P and Aa3 or higher by Moody’s, the Collateral Agent will,
notwithstanding Section 9-207 of the New York Uniform Commercial Code, have the
right to sell, pledge, rehypothecate, assign, invest, use, commingle or
otherwise dispose of, or otherwise use in its business any Acceptable Collateral
and Bank Credit Support it holds, free from any claim or right or any nature
whatsoever of the Counterparty or any Bank, including any equity or right of
redemption (each a “Permitted Usage”). For purposes of any obligation to deliver
Acceptable Collateral or Bank Credit Support under any Credit Document, the last
sentence of Section 7.1 and any rights or remedies authorized under any Credit
Document, the Collateral Agent will be deemed to continue to hold all Acceptable
Collateral and Bank Credit Support that are the subject of any Permitted Usage
until such Acceptable Collateral or Bank Credit Support is delivered to the
Counterparty or a Bank, as the case may be. At such time as (i) the Collateral
Agent is in default of any of its obligations under any Credit Document or
(ii) any senior unsecured long-term Dollar-denominated debt or deposit
obligations of the Collateral Agent are not rated AA- or higher by S&P or not
rated Aa3 or higher by Moody’s, the Collateral Agent will immediately return to
the Collateral Account all Acceptable Collateral and Bank Credit Support that
has been the subject of a Permitted Usage and has not been previously returned
to the Collateral Account by the Collateral Agent. Additionally, the Collateral
Agent will return Acceptable Collateral and Bank Credit Support, as the case may
be, that are the subject of a Permitted Usage as may be necessary from time to
time to meet any requirement it has under any Credit Document to return or
deliver any Acceptable Collateral or Bank Credit Support. If the Acceptable
Collateral or Bank Credit Support that was the subject of a Permitted Usage
(i) was cash, any return pursuant to this Section 2.12 shall be effected by
deposit by the Collateral Agent into the Collateral Account of cash in an amount
equal to the amount of cash that was the subject of such Permitted Usage plus
interest thereon as provided in Section 2.12(b) or (ii) was United States
treasury obligations, any such return shall be effected by deposit by the
Collateral Agent into the Collateral Account of United States treasury
obligations that are in all respects (including amount, interest rate and
maturity) the same as the treasury obligations that were the subject of such
Permitted Usage. If any treasury obligations deposited into the Collateral
Account mature, the amount of principal and interest paid in respect thereof
shall thereafter be treated as cash for purposes hereof. The Collateral Agent
shall have no obligation to invest any Acceptable Collateral or Bank Credit
Support. Any Permitted Usage shall be solely at the Collateral Agent’s risk.
     (b) If the Counterparty or any Bank (“Depositor”) delivers to the
Collateral Agent any amount of cash, then the Collateral Agent will pay to such
Depositor for each day from the date such amount is so delivered until such
amount is redelivered to such Depositor (or delivered to a Bank or a
Counterparty to the extent required pursuant to the terms hereof or of any other
Credit Document) interest on both such amount and on all interest accrued
thereon for each preceding day (or the portion of such amount and such interest
that has not been delivered to the Counterparty or Bank pursuant to the terms of
any Credit Document) at a per annum rate equal to the Federal Funds Rate for
such day; provided that such interest shall not accrue for any period during
which the Collateral Agent does not have the right of Permitted Usage set forth
in the first sentence of Section 2.12(a). Interest accrued or paid on any
treasury obligations shall be for the account of the Counterparty or Bank, as
the case may be, that delivered such treasury obligations to the Collateral
Agent; provided that interest accruing on Bank Credit Support with respect to
any Bank (whether in the form of cash or treasury obligations) shall accrue
(i) for the account of such Bank until such date, if any, as such Bank Credit
Support becomes Retained Bank Credit Support and (ii) on and after such date,
for the account of the Counterparty. Accrued interest in respect of any
Acceptable Collateral or Bank Credit Support shall constitute additional
Acceptable Collateral or Bank Credit Support, as the case may be, and be subject
to the terms of the Credit Documents to the same extent as the Acceptable
Collateral or Bank Credit Support, as the case may be, in respect of which such
interest accrued.

31

--------------------------------------------------------------------------------

 

ARTICLE III
CLOSING
     SECTION 3.1 Payment of Fees and Documents. On or before the date hereof,
the Counterparty agrees to (i) pay to the Administrative Agent, for the account
of the respective Agents and Joint Lead Arrangers, all accrued fees of the
Agents and the Joint Lead Arrangers to the extent required to be paid hereunder
(or to the extent otherwise agreed to by the Administrative Agent and the
Counterparty) and presented for payment, and (ii) deliver, or cause to be
delivered, to the Banks counterparts of this Agreement duly executed by the
Counterparty and the Guarantor and the following:
     (a) Certified copies of (1) the resolutions of the Board of Directors, or
an authorized committee thereof or other relevant Person, of each Credit Party
authorizing the execution of this Agreement and each other Credit Document to
which such Credit Party is a party and (2) all other documents, in each case
evidencing any necessary company action, if any, with respect to each Credit
Document and the transactions thereunder and hereunder.
     (b) A certificate of the Secretary or an Assistant Secretary of each Credit
Party certifying the name and true signature of an officer of such Credit Party
or other relevant Person authorized to sign each Credit Document to which it is
a party and the other documents to be delivered by it hereunder and thereunder.
     (c) A copy of a certificate of the Secretary of State of the jurisdiction
of formation of, or of an Authorized Officer or other representative of, each
Credit Party, dated reasonably near the date hereof, certifying (i) as to a true
and correct copy of the charter or other organizational documents of such Credit
Party, and each amendment thereto on file in such Secretary’s office and
(ii) that such Credit Party has paid all franchise taxes due prior to the date
of such certificate.
     (d) Opinions of each of (i) an in-house counsel of the Counterparty or of
any of its affiliates, substantially in the form of Exhibit A and (ii) Gibson,
Dunn & Crutcher LLP, counsel to the Credit Parties, substantially in the form of
Exhibit B.
     (e) A certificate of each Credit Party (or of its representative), signed
on behalf of such Credit Party by an Authorized Officer thereof or signed by
another representative, dated as of the date hereof (the statements made in
which certificate shall be true on and as of the date hereof), certifying as to
(i) the absence of any amendments to the charter or other organizational
documents of such Credit Party not included in the certificate referred to in
clause (c) above, (ii) a true and correct copy of the bylaws, if any, of such
Credit Party as in effect on the date on which the resolutions referred to in
clause (a) were adopted and on the date hereof, (iii) the due incorporation or
formation and good standing and valid existence of such Credit Party as an
entity organized under the laws of the jurisdiction of its incorporation or
organization, (iv) the truth, in all material respects, of the representations
and warranties of such Credit Party and its Subsidiaries contained in this
Agreement and the Credit Documents delivered on or before the date hereof as
though made on and as of the date hereof other than any such representations or
warranties that, by their terms, refer to a specific date other than the date
hereof, in which case as of such specific date and (v) the absence of any event
occurring and continuing, or resulting from, the consummation of the
transactions hereunder or pursuant to the Credit Documents delivered on or
before the date hereof, that constitutes a Present Value Deficiency, a Pro Forma
Present Value Deficiency, a Default or an Event of Default.
     (f) A certificate of an Authorized Officer of the Counterparty setting
forth all Hedges to which any Credit Party or any Subsidiary of a Credit Party
is a party on the Effective Date.

32

--------------------------------------------------------------------------------

 

     (g) The December 31 Engineering Report for 2005 comporting with the
requirements of Section 2.6(a)(i), the related report contemplated by
Section 2.6(a)(iii), and the certificate contemplated by Section 2.6(a)(iv).
     (h) An ISDA Master Agreement for each Bank listed on the signature pages
hereof, duly executed by the Counterparty.
     (i) Executed subordination agreements, each in substantially the form of
Exhibit F, (i) among the Administrative Agent, WPC and the Counterparty
specifying WPC as the “Subordinated Creditor” and the Counterparty as the
“Debtor”, (ii) among the Administrative Agent, WPC and the Counterparty
specifying the Counterparty as the “Subordinated Creditor” and WPC as the
“Debtor” and (iii) among the Administrative Agent, the Credit Parties and one or
more Non-Credit Party TWC Entities specifying such Non-Credit Party TWC Entities
as the “Subordinated Creditors” and the Credit Parties as the “Debtors”.
     (j) A Security Document duly executed by the Counterparty.
     (k) Recent lien searches in respect of the Counterparty in all relevant
jurisdictions.
     (l) A certificate of an Authorized Officer of each Credit Party certifying
that the balance sheets and statements of income and cash flows that are
referred to in Section 4.1(e) fairly present in all material respects the
combined financial position of the Credit Party Entities as of December 31, 2005
and September 30, 2006 and the combined results of operations of the Credit
Party Entities for the year and nine months, respectively, then ended.
     SECTION 3.2 Effectiveness of Agreement. The Administrative Agent shall
notify the Counterparty when it reasonably believes that this Agreement has
become effective, and such notice shall be conclusive and binding on all parties
to the Credit Documents (provided that such effectiveness shall not be
conditioned on such notice).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
     SECTION 4.1 Representations and Warranties of the Credit Parties. Each
Credit Party, with respect to itself and its Subsidiaries only, represents and
warrants, on the date hereof and on each date that a Qualifying Hedge is entered
into, as follows:
     (a) Each Credit Party is duly organized or validly formed, validly existing
and (if applicable) in good standing under the laws of the State of Delaware and
has all corporate, limited partnership or limited liability company powers and
all governmental licenses, authorizations, certificates, consents and approvals
required to carry on its business as now conducted in all material respects,
except where failure to be in good standing or to have those licenses,
authorizations, certificates, consents and approvals could not reasonably be
expected to have a Material Adverse Effect. Each Subsidiary of each Credit Party
is duly organized or validly formed, validly existing and (if applicable) in
good standing under the laws of its jurisdiction of incorporation or formation,
except where the failure to be so organized or formed, existing and in good
standing could not reasonably be expected to have a Material Adverse Effect.
Each Subsidiary of a Credit Party has all corporate, limited partnership or
limited liability company powers and all governmental licenses, authorizations,
certificates, consents and approvals required to carry on its business as now
conducted in all material respects, except for those licenses, authorizations,
certificates,

33

--------------------------------------------------------------------------------

 

consents and approvals the failure to have which could not reasonably be
expected to have a Material Adverse Effect.
     (b) The execution, delivery and performance by each Credit Party of the
Credit Documents to which it is shown as being a party and the consummation of
the transactions contemplated thereby are within such Credit Party’s corporate,
limited partnership or limited liability company powers, have been duly
authorized by all necessary corporate, limited partnership or limited liability
company action, do not contravene (i) such Credit Party’s charter, by-laws or
formation agreement or (ii) law or any restriction under any material agreement
binding on or affecting such Credit Party and will not result in or require the
creation or imposition of any Lien prohibited by this Agreement.
     (c) No material authorization or approval or other action by, and no notice
to or filing with, any Governmental Authority is required for the due execution,
delivery and performance by any Credit Party of any Credit Document to which it
is a party, or the consummation of the transactions contemplated thereby.
     (d) Each Credit Document has been duly executed and delivered by each
appropriate Credit Party, and is the legal, valid and binding obligation of each
such Credit Party, enforceable against each such Credit Party, in accordance
with its terms, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or similar law affecting
creditors’ rights generally and by general principles of equity.
     (e) The combined balance sheets of the Credit Party Entities as at
December 31, 2005 and September 30, 2006, and the related combined statements of
income and cash flows of the Credit Party Entities for the fiscal year ended
December 31, 2005, and the nine months ended September 30, 2006, copies of which
have been furnished to each Bank, have been prepared in accordance with GAAP and
fairly present in all material respects the combined financial condition of the
Credit Party Entities as at such dates and the combined results of operations of
the Credit Party Entities for the periods indicated, subject, in the case of the
September 30, 2006 financial statements, to normal year-end adjustments and
subject, in the case of both sets of financial statements, to the omission of
footnotes. As of the date hereof only, from December 31, 2005 to the date of
this Agreement, there has been no material adverse change in the business,
condition (financial or otherwise), operations, properties or prospects of the
Credit Party Entities (other than Non-Recourse Subsidiaries), taken as a whole.
     (f) There is, as to each Credit Party, no pending or, to the knowledge of
such Credit Party as of the date hereof only, threatened action or proceeding
affecting such Credit Party or any Subsidiary of such Credit Party before any
court, governmental agency or arbitrator, (i) which could reasonably be expected
to have a Material Adverse Effect or (ii) which purports to affect the legality,
validity, binding effect or enforceability of any Credit Document.
     (g) No Credit Party is an “investment company” or a company “controlled” by
an “investment company” within the meaning of the Investment Company Act of
1940, as amended.
     (h) No Termination Event (ERISA) has occurred or is reasonably expected to
occur with respect to any Plan that could reasonably be expected to have a
Material Adverse Effect. No Credit Party nor any Subsidiary or ERISA Affiliate
of any Credit Party has received any notification that any Multiemployer Plan is
in reorganization or has been terminated, within the meaning of Title IV of
ERISA that could reasonably be expected to have a Material Adverse Effect, and
no Credit Party is aware of any reason to expect that any Multiemployer Plan is
to be in reorganization or to be terminated within the meaning of Title IV of
ERISA that would have a Material Adverse Effect.

34

--------------------------------------------------------------------------------

 

     (i) Except as disclosed in writing by the Counterparty to the Banks and the
Administrative Agent after the date hereof and approved in writing by the
Required Banks, each Credit Party and its Subsidiaries are in compliance with
all applicable Environmental Laws, except as could not reasonably be expected to
have a Material Adverse Effect. Except as disclosed in writing by any Credit
Party to the Banks and the Administrative Agent after the date hereof and
approved in writing by the Required Banks, the aggregate contingent and
non-contingent liabilities of each Credit Party and its Subsidiaries (other than
those reserved for in accordance with GAAP and excluding liabilities to the
extent covered by insurance if the insurer has confirmed that such insurance
covers such liabilities or which such Credit Party reasonably expects to recover
from ratepayers) which to such Credit Party’s knowledge are reasonably expected
to arise in connection with (i) the requirements of any Environmental Law or
(ii) any obligation or liability to any Person in connection with any
Environmental matters (including any release or threatened release (as such
terms are defined or used in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980) of any Hazardous Waste, Hazardous
Substance, other waste, petroleum or petroleum products into the Environment)
could not reasonably be expected to have a Material Adverse Effect. Each Credit
Party and its Subsidiaries holds, or has submitted a good faith application for
all Environmental Permits (none of which have been terminated or denied)
required for any of its current operations or for any property owned, leased, or
otherwise operated by it; and is, and within the period of all applicable
statutes of limitation has been, in compliance with all of its Environmental
Permits, except where the failure to comply with the matters set forth in this
sentence, in the aggregate, could not reasonably be expected to have a Material
Adverse Effect.
     (j) No Default or Event of Default has occurred and is continuing. After
giving effect to all Qualifying Hedges outstanding or to be entered into on any
date this representation is made, no Present Value Deficiency exists and no
Default or Event of Default would result therefrom.
     (k) As of the date hereof only, after giving effect to the Credit Documents
and each transaction thereunder (including each Hedge), each Credit Party,
individually and together with its Subsidiaries, is Solvent.
     (l) As of the date hereof only, none of the reports, financial statements,
certificates or other written information furnished by or on behalf of any
Credit Party to any Agent or any Bank on or prior to the date hereof (as
modified or supplemented by other information so furnished on or prior to the
date hereof), taken as a whole, contains any material misstatement of fact or
omits to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not materially
misleading, provided that, with respect to any projected financial information,
the Credit Parties represent only that such information was prepared in good
faith based upon assumptions believed by the Credit Parties to be reasonable at
the time (it being recognized, however, that projections as to future events are
not to be viewed as facts and that the actual results during the period or
periods covered by any projections may materially differ from the projected
results). None of the reports, financial statements, certificates or other
written information furnished by or on behalf of any Credit Party to any Agent
or any Bank after the date hereof (as modified or supplemented by other
information so furnished after the date hereof), taken as a whole, contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not materially misleading.
     (m) Except as set out in the most recent certificate delivered pursuant to
Section 3.1(g) or 2.6(a)(iv), each Credit Party and its Subsidiaries has good
and defensible title to its material Oil and Gas Properties, free and clear of
all Liens except Liens not prohibited by Section 5.2(a). As used in this
Agreement, “good and defensible title” to Oil and Gas Properties shall be based
on the standard that a prudent Person engaged in the business of ownership,
development and operation of Oil and Gas Properties where such Oil and Gas
Properties are located with knowledge of all of the facts and their legal

35

--------------------------------------------------------------------------------

 

bearing would be willing to accept as good and defensible title. Except as set
forth in the most recent certificate delivered pursuant to Section 3.1(g) or
2.6(a)(iv), subject to the Liens not prohibited by Section 5.2(a) and subject to
permitted sales under this Agreement, the Credit Parties own the net interests
in production attributable to the Hydrocarbon Interests reflected in the most
recently delivered Engineering Report in all material respects and the ownership
of such Properties shall not in any material respect obligate (other than
obligations entered into in the ordinary course of business) any Credit Party or
any Subsidiary to bear the costs and expenses relating to the maintenance,
development and operation of any such Property in an amount in excess of the
working interest of such Property set forth in the most recently delivered
Engineering Report. All factual information contained in the most recently
delivered Engineering Report is true and correct in all material respects as of
the date of such Engineering Report.
     (n) All leases and agreements necessary for the conduct of the business of
each Credit Party and its Subsidiaries are valid and subsisting and in full
force and effect and there exists no default that if not cured could lead to a
right to terminate or event or circumstance which with the giving of notice or
the passage of time or both would give rise to such a default under any such
lease or agreement, except in either case as would not reasonably be expected to
have a Material Adverse Effect.
     (o) The rights, Properties and other assets presently owned, leased or
licensed by each Credit Party and its Subsidiaries including all easements and
rights of way, include all rights, Properties and other assets necessary to
permit each Credit Party and its Subsidiaries to conduct their business in all
material respects in the same manner as their business has been conducted prior
to the Effective Date.
     (p) All of the assets and Properties of each Credit Party and its
Subsidiaries which are reasonably necessary for the operation of their business
are in good working condition for their current use and are maintained in
accordance with business standards of a reasonably prudent operator where such
assets and Properties are located, except in either case as would not reasonably
be expected to have a Material Adverse Effect.
     (q) Each representation made by the Counterparty in a Hedge Document was
true and correct in all material respects at the time made.
     (r) The Counterparty has delivered to each Bank a copy of each executed
amendment, waiver or modification of, and each consent pertaining to, this
Agreement or any Security Document.
ARTICLE V
COVENANTS OF THE CREDIT PARTIES
     SECTION 5.1 Affirmative Covenants. So long as any Qualifying Hedge or any
obligation to make any payment or delivery under any Qualifying Hedge shall
remain outstanding, each Credit Party will, unless the Required Banks shall
otherwise consent in writing:
     (a) Compliance with Laws, Etc. Comply, and cause each of its Material
Subsidiaries to comply, with all applicable laws, rules, regulations and orders,
including ERISA and all Environmental Laws, such compliance to include, without
limitation, the payment and discharge before the same become delinquent of all
taxes, assessments and governmental charges or levies imposed upon it or any of
its Material Subsidiaries or upon any of its property or any property of any of
its Material Subsidiaries, and all lawful claims which, if unpaid, would become
a Lien upon any property of it or any of its Material Subsidiaries (except where
failure to comply could not reasonably be expected to have a Material Adverse
Effect); provided that no Credit Party nor any Subsidiary of a Credit Party
shall be required to pay any such tax, assessment, charge, levy or claim which
is being contested in good faith and by proper

36

--------------------------------------------------------------------------------

 

proceedings and with respect to which reserves in conformity with GAAP, if
required by GAAP, have been provided on the books of such Credit Party or such
Subsidiary, as the case may be.
     (b) Reporting Requirements. Furnish to the Administrative Agent (in the
case of clauses (i) through (ix) and clause (xii) of this Section 5.1(b)), to
the Computation Agent (in the case of clause (x) of this Section 5.1(b)), to the
Collateral Agent (in the case of clause (xi) of this Section 5.1(b)) and to the
PV Determination Agent (in the case of clause (xiii) of this Section 5.1(b)):
          (i) as soon as possible and in any event within five Business Days
after an Authorized Officer of such Credit Party obtains knowledge of the
occurrence of any Default or Event of Default, continuing on the date of such
statement, a statement of an Authorized Financial Officer of such Credit Party
setting forth the details of such Default or Event of Default and the actions,
if any, which such Credit Party has taken and proposes to take with respect
thereto;
          (ii) in the case of the Counterparty, as soon as available and in any
event not later than 60 days after the end of each of the first three Fiscal
Quarters of each Fiscal Year of the Counterparty, (1) the unaudited combined
balance sheet of the Credit Party Entities as of the end of such Fiscal Quarter
and the unaudited combined statements of income and cash flows of the Credit
Party Entities for the period commencing at the end of the previous year and
ending with the end of such Fiscal Quarter, all in reasonable detail and duly
certified by an Authorized Financial Officer of the Counterparty as fairly
presenting in all material respects the combined financial condition of the
Credit Party Entities as of the end of such Fiscal Quarter and the combined
results of operations of the Credit Party Entities for such period and (2) a
certificate of an Authorized Financial Officer of the Counterparty stating that
he has no knowledge that a Default or Event of Default has occurred and is
continuing or, if a Default or Event of Default has occurred and is continuing,
a statement as to the nature thereof and the action, if any, which the
Counterparty proposes to take with respect thereto;
          (iii) in the case of the Counterparty, as soon as available and in any
event not later than 105 days after the end of each Fiscal Year of the
Counterparty, (1) the unaudited combined balance sheet of the Credit Party
Entities as of the end of such Fiscal Year and the unaudited combined statements
of income and cash flows of the Credit Party Entities for such Fiscal Year, in
each case prepared in accordance with GAAP and duly certified by an Authorized
Financial Officer of such Credit Party as fairly presenting in all material
respects the combined financial condition of the Credit Party Entities as of the
end of such Fiscal Year and the combined results of operations of the Credit
Party Entities for such Fiscal Year and (2) a certificate of an Authorized
Financial Officer of the Counterparty stating that he has no knowledge that a
Default or Event of Default has occurred and is continuing, or if a Default or
Event of Default has occurred and is continuing, a statement as to the nature
thereof, and the action, if any, which the Counterparty proposes to take with
respect thereto;
          (iv) such other information (other than projections) respecting the
business or properties, or the condition or operations, financial or otherwise,
of such Credit Party or any of its Subsidiaries as any Bank through the
Administrative Agent may from time to time reasonably request;
          (v) promptly after the sending or filing thereof, copies of all final
reports and final registration statements which such Credit Party or any
Subsidiary of such Credit Party files with the Securities and Exchange
Commission or any national securities exchange; provided that, if such reports
and registration statements are readily available on-line through EDGAR, such
Credit Party or Subsidiary shall not be obligated to furnish copies thereof;
          (vi) as soon as possible and in any event within 30 Business Days
after such Credit Party or any Subsidiary or ERISA Affiliate of such Credit
Party knows or has reason to know that any

37

--------------------------------------------------------------------------------

 

Termination Event (ERISA) with respect to any Plan has occurred or is reasonably
expected to occur that could reasonably be expected to have a Material Adverse
Effect, a statement of an Authorized Financial Officer of such Credit Party
describing such Termination Event (ERISA) and the action, if any, which such
Credit Party proposes to take with respect thereto;
          (vii) promptly and in any event within 25 Business Days after receipt
thereof by such Credit Party or any ERISA Affiliate of such Credit Party, copies
of each notice received by such Credit Party or any ERISA Affiliate of such
Credit Party from the PBGC stating its intention to terminate any Plan or to
have a trustee appointed to administer any Plan;
          (viii) promptly and in any event within 25 Business Days after receipt
thereof by such Credit Party or any ERISA Affiliate of such Credit Party from
the sponsor of a Multiemployer Plan, a copy of each notice received by such
Credit Party or any ERISA Affiliate of such Credit Party concerning (A) the
imposition of a Withdrawal Liability by a Multiemployer Plan, (B) the
determination that a Multiemployer Plan is, or is expected to be, in
reorganization within the meaning of Title IV of ERISA, (C) the termination of a
Multiemployer Plan within the meaning of Title IV of ERISA, or (D) the amount of
liability incurred, or expected to be incurred, by such Credit Party or any
ERISA Affiliate of such Credit Party in connection with any event described in
clause (A), (B) or (C) above that, in the aggregate, could reasonably be
expected to have a Material Adverse Effect;
          (ix) within five Business Days after the occurrence of any event that
would permit the Required Banks to initiate an Unscheduled Redetermination
pursuant to Section 2.6(e)(ii)(1) or Section 2.6(e)(ii)(2), (a) notice of such
event and (b) if such event was a Transfer referred to in Section 5.2(l), a
certificate of an Authorized Officer of the Counterparty certifying that the
Credit Parties are in compliance with Section 5.2(l);
          (x) no later than 5:00 p.m. (central time) on each Business Day, (i) a
report in the form of Exhibit G setting forth (A) the Other Present Value
Obligations Amount as of the close of such Business Day, (B) as to each
Qualifying Hedge, the information contemplated by Exhibit G as of the close of
such Business Day, other than the name of the Bank party thereto and (C) the
aggregate amount referred to in clause (ii) of the definition herein of
Aggregate Net MTM Exposure as of the close of such Business Day and (ii) a
report setting forth, as to each Hedge referred to in Section 5.2(c)(i)(b) or
5.2(c)(i)(c), all of the terms thereof and all amounts owed thereunder as of the
close of such Business Day;
          (xi) no later than 5:00 p.m. (central time) on each Business Day, a
report in the form of Exhibit L, identifying for each Qualifying Hedge in effect
as of the close of such Business Day the name of the Bank that is (or a
Designated Affiliate of which is) a party thereto;
          (xii) within five Business Days after any disposition of Proved
Reserves by a Credit Party to a Subsidiary of a Credit Party, if the sum of
(a) the fair market value of such Proved Reserves plus (b) the fair market value
of all other Proved Reserves disposed by a Credit Party to a Subsidiary of a
Credit Party since the most recent Redetermination Date (or the Effective Date,
if the first Redetermination Date has not occurred) would equal or exceed
$100 million, a brief description of such disposition; and
          (xiii) immediately upon any Hedge becoming an Early Termination Hedge,
notice of such event and a copy of such Hedge.
     (c) Maintenance of Insurance. Maintain, and cause each of its Subsidiaries
to maintain, insurance with responsible and reputable insurance companies or
associations in such amounts and

38

--------------------------------------------------------------------------------

 

covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which such
Credit Party or such Subsidiaries operate; provided that such Credit Party or
any such Subsidiary may self-insure to the extent and in the manner normal for
companies of like size, type and financial condition, provided further that any
insurance required by this Section 5.1(c) may be maintained by TWC on behalf of
the Credit Parties and their Subsidiaries.
     (d) Preservation of Existence, Etc. Preserve and maintain, and cause each
of its Material Subsidiaries to preserve and maintain, its existence as a
corporation or other Business Entity, rights and franchises in the jurisdiction
of its incorporation or formation, and qualify and remain qualified, and cause
each Material Subsidiary to qualify and remain qualified, as a foreign entity in
each jurisdiction in which qualification is necessary or desirable in view of
its business and operations or the ownership of its properties, except (i) in
the case of any Material Subsidiary of such Credit Party (other than another
Credit Party), where the failure of such Material Subsidiary to so maintain its
existence could not reasonably be expected to have a Material Adverse Effect,
(ii) where the failure to preserve and maintain such rights and franchises
(other than existence) or to so qualify and remain qualified could not
reasonably be expected to have a Material Adverse Effect, and (iii) such Credit
Party and its Material Subsidiaries may consummate any merger or consolidation
permitted pursuant to Section 5.2(d) and other dispositions permitted hereunder.
     (e) Oil and Gas Properties. Each Credit Party will and will cause each of
its Subsidiaries to, at its own expense, (i) operate, and cause each of its
Subsidiaries to operate, its Oil and Gas Properties or cause such Oil and Gas
Properties to be operated in accordance with such Credit Party’s or its
Subsidiaries’, as the case may be, practices on the Effective Date or in
accordance with the practices of the industry and in compliance with all
applicable contracts and agreements and in compliance in all respects with all
requirements of any Governmental Authority, except where the failure to do so
could not reasonably be expected to result in a Material Adverse Effect; and
(ii) do or cause to be done all things reasonably necessary to preserve and keep
in good repair and working order (ordinary wear and tear excepted) all of its
Oil and Gas Properties and other material Properties including all equipment,
machinery and facilities, except to the extent a portion of such Properties is
no longer capable of producing Hydrocarbons in economically reasonable amounts
or where the failure to do so could not reasonably be expected to result in a
Material Adverse Effect. Each Credit Party will and will cause each of its
Subsidiaries to promptly: (i) pay and discharge, or make reasonable and
customary efforts to cause to be paid and discharged, all delay rentals accruing
under the leases or other agreements affecting or pertaining to its Oil and Gas
Properties, except where the failure to do so could not reasonably be expected
to result in a Material Adverse Effect, (ii) perform or make reasonable and
customary efforts to cause to be performed the obligations required by each and
all of the assignments, deeds, leases, sub-leases, contracts and agreements
affecting its interests in its Oil and Gas Properties and other material
Properties, except where the failure to do so could not reasonably be expected
to result in a Material Adverse Effect, (iii) do all other things necessary to
keep unimpaired, except for Liens not prohibited by Section 5.2(a), its rights
with respect thereto and prevent any forfeiture thereof or a default thereunder,
except where the failure to do so could not reasonably be expected to result in
a Material Adverse Effect and (iv) maintain all rights of way, easements,
grants, privileges, licenses, certificates, and permits necessary for the use of
any Oil and Gas Property, the failure of which to maintain could reasonably be
expected to result in a Material Adverse Effect.
     (f) Inspection Rights. Permit, and cause each of its Material Subsidiaries
to permit, any representatives designated by the Administrative Agent or the
Required Banks, upon reasonable prior notice, at the Banks’ expense (with each
Bank to pay its Ratable Portion of such expense) so long as no Event of Default
exists and no Present Value Deficiency exists and at the Counterparty’s expense
during the continuance of an Event of Default or a Present Value Deficiency, to
visit and inspect the properties of such Credit Party or any Material Subsidiary
of such Credit Party with an Authorized Officer of a

39

--------------------------------------------------------------------------------

 

Credit Party present, to examine and make extracts from its books and records,
and to discuss its affairs, finances and condition with its officers, all at
such reasonable times and as often as reasonably requested but no more
frequently than quarterly so long as no Event of Default exists and no Present
Value Deficiency exists.
     (g) Payment of Obligations. Pay, and cause each of its Material
Subsidiaries to pay, before the same shall become delinquent or in default, all
obligations that, if not paid, could reasonably be expected to have a Material
Adverse Effect, except where (a) the validity or amount thereof is being
contested in good faith by appropriate proceedings and (b) such Credit Party or
such Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP.
     (h) Books and Records. Keep, and cause each of its Subsidiaries to keep,
books of record and account in accordance with GAAP.
     SECTION 5.2 Negative Covenants. So long as any Qualifying Hedge or any
obligation to make any payment or delivery under any Qualifying Hedge shall
remain outstanding, no Credit Party will, without the written consent of the
Required Banks (it being understood that each of the permitted exceptions to
each of the covenants in this Section 5.2 is in addition to, and not overlapping
with, any other of such permitted exceptions to such covenant, except to the
extent expressly provided therein):
     (a) Liens, Etc. Create, assume, incur or suffer to exist, or permit any of
its Subsidiaries (other than Non-Recourse Subsidiaries) to create, assume, incur
or suffer to exist, any Lien on or in respect of any of its property, whether
now owned or hereafter acquired, in each case to secure or provide for the
payment of any Debt or Specified Obligation; provided that notwithstanding the
foregoing, the Credit Parties or any of their Subsidiaries may create, incur,
assume or suffer to exist General Permitted Liens securing obligations of any
Person and Limited Permitted Liens.
     (b) Other Obligations. Create, incur, assume or permit to exist, or permit
any of its Subsidiaries to create, incur, assume or permit to exist, any Other
Present Value Obligation if, after giving effect thereto, the Other Present
Value Obligations Amount would exceed $250,000,000.
     (c) Hedges. Enter into, or permit any Subsidiary to, enter into (i) any
Hedge, except (a) Qualifying Hedges, (b) Permitted Hedges and (c) Hedges entered
into in the ordinary course of business in order to effectively cap, collar or
exchange interest rates (from fixed to floating rates, from one floating rate to
another floating rate or otherwise) with respect to any interest-bearing
liability or investment of such Credit Party or any Subsidiary, (ii) any Hedge
against any change in the price of natural gas if after giving effect to such
Hedge, more than 70% (on a volumetric basis) of Forecasted Annual Production of
natural gas for the year in which such Hedge is entered into or for any of the
three subsequent calendar years would be covered by Hedges to which any Credit
Party Entity is a party, or (iii) any Hedge against any change in the price of
oil if after giving effect to such Hedge, more than 70% (on a volumetric basis)
of Forecasted Annual Production of oil for the year in which such Hedge is
entered into or for any of the three subsequent calendar years would be covered
by Hedges to which any Credit Party Entity is a party. For purposes of any
Collar, the volume hedged will be the notional volume of the put that
constitutes a portion of such Collar, and the call that constitutes a portion of
such Collar shall not be taken into account. Until the delivery of the first
December 31 Engineering Report delivered after the Effective Date, the
Forecasted Annual Production for oil and natural gas shall be as follows for the
following years:

40

--------------------------------------------------------------------------------

 

                  Year   Oil   Natural Gas
 
               
2007
  0.753 MBO/day   841 MMcf/day
 
               
2008
  0.866 MBO/day   914 MMcf/day
 
               
2009
  0.713 MBO/day   774 MMcf/day
 
               
2010
  0.559 MBO/day   634 MMcf/day

     (d) Merger and Sale of Assets. Merge or consolidate with or into any other
Person, or sell, lease or otherwise transfer all or substantially all of its
assets, except that this Section 5.2(d) shall not prohibit any merger or
consolidation (i) by any Credit Party with any Person that is not a Credit
Party, if (A) such Credit Party is the surviving entity, (B) at the time of such
merger or consolidation, no Event of Default exists and no Present Value
Deficiency exists and (C) immediately after giving effect thereto, no Event of
Default would exist and no Pro Forma Present Value Deficiency would result or
(ii) by any Credit Party with the other Credit Party, if (A) the Counterparty is
the surviving entity, (B) at the time of such merger or consolidation, no Event
of Default exists and no Present Value Deficiency exists and (C) immediately
after giving effect thereto, no Event of Default would exist and no Pro Forma
Present Value Deficiency would result.
     (e) Agreements to Restrict Certain Transfers. Enter into or suffer to
exist, or permit any of its Subsidiaries to enter into or suffer to exist, any
consensual encumbrance or consensual restriction on its ability or the ability
of any of its Subsidiaries (i) to pay, directly or indirectly, dividends or make
any other distributions in respect of its Equity Interests or pay any Debt or
other obligation owed, in any case, to a Credit Party or to any Subsidiary of
any Credit Party or (ii) to make loans or advances to a Credit Party or any
Subsidiary thereof, except (1) encumbrances and restrictions on any Subsidiary
that is not a Material Subsidiary, (2) those encumbrances and restrictions
existing on May 3, 2004, and other customary encumbrances and restrictions
existing after May 3, 2004 that are not more restrictive in any material
respect, taken as a whole, than the encumbrances and restrictions existing on
May 3, 2004 (provided that the application of any such restrictions and
encumbrances to additional Subsidiaries not subject thereto on May 3, 2004 shall
not be deemed to make such restrictions and encumbrances more restrictive),
(3) encumbrances or restrictions on any Non-Recourse Subsidiary, including those
arising in connection with Non-Recourse Debt, (4) encumbrances or restrictions
existing under or by reason of (a) applicable law (including rules, regulations
and agreements with regulatory authorities), (b) any agreement or instrument in
effect at the time a Person is acquired by a Credit Party or any Subsidiary of a
Credit Party, so long as such agreement was not entered into in contemplation of
such acquisition, (c) any agreement for the sale or other disposition of a
Subsidiary of a Credit Party that restricts distributions by that Subsidiary
pending its sale or other disposition or (d) provisions with respect to
distributions of assets or property in joint venture agreements, asset sale
agreements, stock sale agreements and other similar agreements; provided that
such encumbrances or restrictions apply only to the assets or property subject
to such joint venture, asset sale, stock sale or similar agreement or to the
assets or property being sold, as the case may be, and (5) encumbrances or
restrictions existing under or by reason of Limited Permitted Liens or General
Permitted Liens securing debt otherwise permitted to be incurred under this
Section 5.2 that limit the right of the debtor to dispose of the assets subject
to such Limited Permitted Liens or General Permitted Liens.
     (f) Contingent Obligations. Create, incur, assume or permit to exist, or
permit any of its Subsidiaries to create, incur, assume or permit to exist, any
Contingent Obligation, except (i) Other

41

--------------------------------------------------------------------------------

 

Present Value Obligations permitted by Section 5.2(b), (ii) Hedges permitted by
Section 5.2(c), (iii) Contingent Obligations created by the Credit Documents,
(iv) Contingent Obligations incurred in the ordinary course of business,
(v) Contingent Obligations with respect to Other Present Value Obligations or
letters of credit backing any Qualifying Hedge and (vi) Contingent Obligations
that are, in the aggregate, not material to the Credit Parties and their
Subsidiaries, taken as a whole.
     (g) Compliance with ERISA. (i) Terminate, or permit any ERISA Affiliate of
such Credit Party to terminate, any Plan so as to result in any material
liability of such Credit Party, any Material Subsidiary of such Credit Party or
any such ERISA Affiliate to the PBGC, if such material liability of such ERISA
Affiliate could reasonably be expected to have a Material Adverse Effect or
(ii) permit to occur any Termination Event (ERISA) with respect to a Plan that
would have a Material Adverse Effect.
     (h) Transactions with Related Parties. Make any sale to, make any purchase
from, extend credit to, make payment for services rendered by, or enter into any
other transaction with, or permit any Subsidiary of such Credit Party to make
any sale to, make any purchase from, extend credit to, make payment for services
rendered by, or enter into any other transaction with, any Related Party of such
Credit Party or of such Subsidiary, unless as a whole such sales, purchases,
extensions of credit, rendition of services and other transactions are (at the
time such sale, purchase, extension of credit, rendition of services or other
transaction is entered into) on terms and conditions reasonably fair in all
material respects to such Credit Party or such Subsidiary in the good faith
judgment of such Credit Party; provided that the following items will not be
deemed to be subject to the provisions of this Section 5.2(h): (i) declaring or
paying any dividend or distribution or purchasing, redeeming, retiring,
defeasing or otherwise acquiring for value any Equity Interests, in each case
not otherwise prohibited hereunder, (ii) any agreement, instrument or
arrangement as in effect on the date hereof or any amendment thereto or any
transaction contemplated thereby (including pursuant to any amendment thereto)
or in any replacement agreement thereto so long as any such amendment or
replacement agreement is not more disadvantageous to the Banks in any material
respect than the original agreement as in effect on the date hereof as
determined in good faith by an Authorized Financial Officer of such Credit
Party, (iii) (a) corporate sharing agreements among a Credit Party and its
Subsidiaries with respect to tax sharing and general overhead and other
administrative matters and (b) any other intercompany arrangements disclosed or
described in TWC’s report on Form 10-K for the year ended December 31, 2005
(including the exhibits attached to each), all as in effect on December 31,
2005, and any amendment or replacement of any of the foregoing so long as such
amendment or replacement agreement is not less advantageous to any Credit Party
thereto in any material respect than the agreement so amended or replaced, as
such agreement was in effect on December 31, 2005, (iv) any transaction wholly
between the Counterparty and WPC or (v) the Bargath Asset Transfer.
     (i) Restricted Payments. (i) Declare or pay any dividends (other than in
common stock of such Credit Party), purchase, redeem, retire, defease or
otherwise acquire for value any of its Equity Interests now or hereafter
outstanding, return any capital to its stockholders, partners or members (or the
equivalent Persons thereof) as such, make any other distribution of assets,
Equity Interests, obligations or securities to its stockholders, partners or
members (or the equivalent Persons thereof) as such, or (ii) permit any of its
Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for value
any Equity Interests in any Credit Party (any action described in clause (i) or
(ii) of this sentence being a “Restricted Payment”), except (x) cash dividends
paid to a parent of a Credit Party to the extent necessary to permit such parent
to pay any taxes that are due and payable by the Credit Party Entities as part
of a consolidated group, (y) any Restricted Payment made if no Present Value
Deficiency shall exist and no Event of Default shall have occurred and be
continuing at the time of such Restricted Payment and no Pro Forma Present Value
Deficiency or Event of Default would result therefrom and (z) cash dividends
paid to a Credit Party Entity.

42

--------------------------------------------------------------------------------

 

     (j) Sale and Leaseback Transactions. Enter into, or permit any of its
Subsidiaries to enter into, any Sale and Leaseback Transaction, if after giving
effect thereto the sum of (i) the aggregate amount of all Attributable
Obligations of such Credit Party and its Subsidiaries plus (ii) the aggregate
amount of all obligations of such Credit Party and its Subsidiaries secured by
any Lien referred to in paragraph (k) of Schedule V would exceed $40,000,000.
     (k) Change of Business. Enter into, or permit any of its Subsidiaries to
enter into, any business except for those businesses in which the Credit Party
Entities are engaged on the Effective Date or that are reasonably related or
incidental thereto.
     (l) Sale of Oil and Gas Properties. Except for (i) Hydrocarbons sold in the
ordinary course of business as and when produced, (ii) Hydrocarbon Interests
transferred in the ordinary course of business to Persons that are neither a
Credit Party Entity nor TWC nor an Affiliate of either a Credit Party Entity or
TWC and (iii) Permitted Dispositions, sell, assign, transfer, dispose, farm-out
or convey, directly or indirectly, by way of merger or sale of Equity Interests
in a Subsidiary or otherwise (“Transfer”), or permit any Subsidiary to do so,
any interest in any of its Oil and Gas Properties, unless no Present Value
Deficiency exists and no Event of Default shall have occurred and be continuing
at the time thereof and no Pro Forma Present Value Deficiency or Event of
Default would result therefrom.
ARTICLE VI
EVENTS OF DEFAULT; CERTAIN REMEDIES
     SECTION 6.1 Events of Default. Subject to Section 6.2, if any of the
following events (“Events of Default”) shall occur and be continuing:
     (a) Any Credit Party (i) shall fail to comply with Section 2.7 when
required by Section 2.7 or shall fail to comply with Section 6.2 when required
by Section 6.2, (ii) shall fail to make any payment or, except with respect to
Gas Transactions, delivery when required by any Qualifying Hedge, or (iii) shall
fail to pay any interest, fee or other amount (other than any amount referred to
in clause (i) or (ii) of this Section 6.1(a)) presented in writing to be paid by
it hereunder or under any Credit Document to which it is a party within ten days
after the same becomes due and payable; or
     (b) Any certification, representation or warranty made by any Credit Party
herein or in any other Credit Document or by any Credit Party (or any Authorized
Officer of any Credit Party) in writing under or in connection with this
Agreement or any other Credit Document or any instrument executed in connection
herewith shall prove to have been incorrect in any material respect when made or
deemed made; or
     (c) Any Credit Party shall fail to perform or observe (i) any term,
covenant or agreement contained in this Agreement (other than a term, covenant
or agreement contained in Section 2.7 or Section 5.2) or any other Credit
Document (other than a Qualifying Hedge or a Subordination Agreement) on its
part to be performed or observed and such failure shall continue for 30 days
after the earlier of the date notice thereof shall have been given to the
Counterparty by the Administrative Agent or any Bank or the date an Authorized
Officer of such Credit Party shall have knowledge of such failure or (ii) any
term, covenant or agreement contained in Section 5.2; or
     (d) Any Credit Party or any Subsidiary of any Credit Party (other than a
Non-Recourse Subsidiary) shall fail to pay any principal of or premium or
interest on any Debt which is outstanding in a principal amount of at least
$50,000,000 in the aggregate of such Credit Party or any Subsidiary of such
Credit Party (as the case may be) (other than a Non-Recourse Subsidiary), when
the same becomes due

43

--------------------------------------------------------------------------------

 

and payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such Debt;
or any such Debt shall be accelerated; or
     (e) Any Credit Party or any Material Subsidiary of any Credit Party shall
generally not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general assignment for
the benefit of creditors; or any proceeding shall be instituted by or against
any Credit Party or any Material Subsidiary of any Credit Party seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, or other similar official for it or
for any substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it), shall remain undismissed or
unstayed for a period of 60 days; or any Credit Party or any Material Subsidiary
of any Credit Party shall take any action to authorize any of the actions set
forth above in this subsection (e) (for the avoidance of doubt, Non-Recourse
Subsidiaries are not subject to this clause (e)); or
     (f) One or more judgments or orders for the payment of money in excess of
$50,000,000 in the aggregate (to the extent not paid or to the extent not
covered by insurance or indemnities that the Counterparty, in its reasonable
good faith judgment, believes will be paid when due by the parties providing
such indemnities or insurance) shall be rendered against any Credit Party or any
Material Subsidiary of any Credit Party and remain unsatisfied and either
(i) enforcement proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of 30 consecutive days
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect (for the avoidance of doubt,
Non-Recourse Subsidiaries are not subject to this clause (f)); or
     (g) Any Termination Event (ERISA) with respect to a Plan shall have
occurred and, 30 days after notice thereof shall have been given to the
Counterparty by the Administrative Agent, (i) such Termination Event
(ERISA) shall still exist and (ii) the sum (determined as of the date of
occurrence of such Termination Event (ERISA)) of the Insufficiency of such Plan
and the Insufficiency of any and all other Plans with respect to which a
Termination Event (ERISA) shall have occurred and then exist (or in the case of
a Plan with respect to which a Termination Event (ERISA) described in clause
(ii) of the definition herein of Termination Event (ERISA) shall have occurred
and then exist, the liability related thereto) is equal to or greater than
$125,000,000; or
     (h) Any Credit Party or any Subsidiary or ERISA Affiliate of any Credit
Party shall have been notified by the sponsor of a Multiemployer Plan that it
has incurred Withdrawal Liability to such Multiemployer Plan in an amount which,
when aggregated with all other amounts required to be paid to Multiemployer
Plans in connection with Withdrawal Liabilities (determined as of the date of
such notification), exceeds $125,000,000 in the aggregate; or
     (i) Any Credit Party or any Subsidiary or ERISA Affiliate of any Credit
Party shall have been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or is being terminated, within the
meaning of Title IV of ERISA, if as a result of such reorganization or
termination the aggregate annual contributions of the Credit Parties and their
respective ERISA Affiliates to all Multiemployer Plans which are then in
reorganization or being terminated have been or will be increased over the
amounts contributed to such Multiemployer Plans for the respective plan years
which include the Effective Date by an amount exceeding $125,000,000; or

44

--------------------------------------------------------------------------------

 

     (j) The guarantee given by the Guarantor pursuant to Article IX for any
reason is not a legal, valid, binding and enforceable obligation of the
Guarantor or any Credit Party shall so state in writing; or
     (k) A Change of Control Event shall occur; or
     (l) Any TWC Default shall occur; or
     (m) Any party to a Subordination Agreement (other than the Administrative
Agent) shall fail to perform or observe any term, covenant or agreement
contained in such Subordination Agreement on its part to be performed or
observed (provided that a five Business Day grace period shall apply to breaches
of Section 1.6 of any Subordination Agreement, the last sentence of Section 1.11
of any Subordination Agreement and Section 4.1 of any Subordination Agreement);
or
     (n) Any Subordination Agreement for any reason is not a legal, valid,
binding and enforceable obligation of any party thereto (other than the
Administrative Agent) or any such party shall so state in writing;
then, and in any such event, (1) each Bank shall have the right to terminate all
(but not less than all) of the Qualifying Hedges to which it is a party (which,
for avoidance of doubt, includes, without limitation, any Qualifying Hedge to
which any of its Designated Affiliates is a party) and shall have all other
rights and remedies provided by the Hedge Documents to which it is a party, by
law or otherwise, (2) as of the Business Day specified by notice to the
Counterparty given by the Administrative Agent at the request of the Required
Banks, all Qualifying Hedges shall be deemed terminated in accordance with
Section 6(a) of each ISDA Master Agreement, (3) each Bank will, so long as it
has actual knowledge of the continuance of such event, pay directly to the
Collateral Agent for deposit into the Collateral Account all payments under any
Qualifying Hedge that would otherwise be paid to the Counterparty, and such
payments will be made without exercise of any offset, defense or counterclaim
(except that a Bank may net payments owed under any Qualifying Hedge to which it
is a party against payments owed under any other Qualifying Hedge to which it is
a party and may net payments under the same Qualifying Hedge) and (4) the
Administrative Agent while such event exists shall at the request, or may with
the consent, of the Required Banks, by notice to the Counterparty, declare all
amounts payable by any Credit Party under this Agreement and any other Credit
Document to be forthwith due and payable, whereupon all such amounts shall
become and be forthwith due and payable, without requirement of any presentment,
demand, protest, notice of intent to accelerate, further notice of acceleration
or other further notice of any kind (other than the notice expressly provided
for above), all of which are hereby expressly waived by the Credit Parties;
provided, however, that in the event of any Event of Default described in
Section 6.1(e), all such amounts (other than amounts payable under any Hedge
Document) shall automatically become and be due and payable, without
presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or any other notice of any kind, all of which are hereby expressly
waived by the Credit Parties.
     SECTION 6.2 Abatement of Certain Defaults. Notwithstanding Section 6.1, if
(i) any event (other than an event referred to in Section 6.1(a) or 6.1(e))
occurs that would constitute an Event of Default, (ii) within one Business Day
of such occurrence, the Counterparty delivers to the Collateral Agent, for
deposit into the Collateral Account, Acceptable Credit Support in an amount
sufficient to cause the aggregate amount of all Acceptable Credit Support in the
Collateral Account to be equal to the aggregate of the net MTM Exposure of each
Bank for the day of such occurrence for all Qualifying Hedges to which such Bank
is a party (determined separately for each Bank and then aggregated, but
excluding any Bank as to which such net MTM Exposure is negative), and (iii) on
each subsequent Business Day so long as such occurrence continues, the
Counterparty delivers to the Collateral Agent, for deposit into the Collateral
Account, Acceptable Credit Support in an amount, if any, sufficient to cause the
aggregate amount of all Acceptable Credit Support in the Collateral Account to
be equal to the

45

--------------------------------------------------------------------------------

 

aggregate of the net MTM Exposure of each Bank for the immediately preceding
Business Day for all Qualifying Hedges to which such Bank is a party (determined
separately for each Bank and then aggregated, but excluding any Bank as to which
such net MTM Exposure is negative), then (I) such event shall not constitute an
Event of Default hereunder or under any other Credit Document, except such event
shall constitute an “Event of Default” as such term is used in Sections 2.7,
5.1(f), 5.2(d), 5.2(i), 5.2(l) and 8.4 and this Section 6.2, and (II) the rights
and remedies that would otherwise exist, in respect of such event, pursuant to
clauses (1), (2) and (4) of Section 6.1 shall not be applicable so long as the
Counterparty is in compliance with this Section 6.2, provided that this clause
(II) shall not apply to the extent any such event would constitute an Event of
Default as a result of a failure to comply with any of Sections 5.1(f), 5.2(d),
5.2(i), 5.2(l) or 8.4 at a time when another event constitutes an “Event of
Default”, as such term is used in such Section pursuant to the exception set
forth in clause (I) of this sentence. The Counterparty agrees to make the
deliveries contemplated by clause (ii) of the foregoing sentence and the
deliveries contemplated by clause (iii) of the foregoing sentence, in each case
on the days contemplated therein.
     SECTION 6.3 Additional Remedies. Upon the occurrence and during the
continuance of any “Event of Default” (as defined in any Qualifying Hedge) with
respect to the Counterparty, the Bank party to such Qualifying Hedge shall have
all rights and remedies provided therein.
ARTICLE VII
THE AGENTS
     SECTION 7.1 Agents’ Authorization and Action. Each of the Banks hereby
appoints and authorizes (i) the Administrative Agent to take such action as
agent on its behalf and to exercise such powers under this Agreement and the
other Credit Documents as are delegated to the Administrative Agent by the terms
hereof and thereof, together with such powers as are reasonably incidental
thereto, (ii) the Computation Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement and the other Credit Documents
as are delegated to the Computation Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto, (iii) the
Collateral Agent to take such action as agent on its behalf and to exercise such
powers under this Agreement and the other Credit Documents as are delegated to
the Collateral Agent by the terms hereof and thereof, together with such powers
as are reasonably incidental thereto, and (iv) the PV Determination Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement and the other Credit Documents as are delegated to the PV
Determination Agent by the terms hereof and thereof, together with such powers
as are reasonably incidental thereto. As to any matters not expressly provided
for by the Credit Documents (including enforcement of the terms of this
Agreement or collection of any amount) no Agent shall be required to exercise
any discretion or take any action, but shall be required to act or to refrain
from acting (and shall be fully protected in so acting or refraining from
acting) upon the instructions of the Required Banks, and such instructions shall
be binding upon all Banks; provided, however, that no Agent shall be required to
take any action which exposes such Agent to personal liability, is contrary to
the Credit Documents or applicable law or is an action within the power or
authority of another Agent. Each Agent agrees to give to each Bank and each of
the other Agents prompt notice of each notice given to it, in its capacity as
such Agent, by any Credit Party pursuant to the terms of this Agreement (other
than Section 5.1(b)(xi)) or any other Credit Document. The Administrative Agent
will promptly furnish to each Bank all items furnished to the Administrative
Agent pursuant to Section 5.1(b). The Computation Agent will furnish to each
Bank and the Counterparty by noon (central time) on the Business Day following
each day on which the Computation Agent receives a report from the Counterparty
pursuant to Section 5.1(b)(x), a report (which report shall be as of the close
of business of the same Business Day as to which such report from the
Counterparty pursuant to Section 5.1(b)(x) relates) in substantially the form of
Exhibit H, but will not be obligated to send to any Bank or Agent any

46

--------------------------------------------------------------------------------

 

such report received from the Counterparty. The Collateral Agent (i) will
promptly notify each Bank if, based on the information contained in the most
recent Computation Agent’s report in substantially the form of Exhibit H, the
information delivered pursuant to Section 5.1(b)(xi) and the relevant S&P and
Moody’s ratings, a Bank has not provided the Bank Credit Support required by the
ISDA Master Agreement to which such Bank is a party, which notice shall include
the name of such Bank, the Applicable Credit Support Threshold for such Bank,
the amount of Bank Credit Support so required and the amount of Bank Credit
Support with respect to such Bank then held in the Collateral Account, (ii) if,
based on the information contained in the most recent Computation Agent’s report
in substantially the form of Exhibit H, a Present Value Deficiency exists, will
promptly notify each Bank that compliance with the second sentence of
Section 2.7 is required as a result of such Present Value Deficiency, (iii) if a
notice pursuant to clause (ii) of this sentence has been given and thereafter,
based on the information contained in the most recent Computation Agent’s report
in substantially the form of Exhibit H, no Present Value Deficiency exists, will
promptly notify each Bank that such compliance is no longer required as a result
of the Present Value Deficiency that resulted in such notice (but without
limiting any further requirement of compliance with the second sentence of
Section 2.7 if a Present Value Deficiency subsequently exists), and (iv) will
notify the Computation Agent no later than 5:00 p.m. (central time) on each
Business Day of the amount of Acceptable Credit Support then in the Collateral
Account.
     SECTION 7.2 Agents’ Reliance, Etc. To the extent that the information
provided to the Computation Agent, in its capacity as the Computation Agent,
with respect to any Qualifying Hedge is sensitive market information, the
Computation Agent agrees to use reasonable business efforts to keep such
information confidential and separate and apart from its personnel (or personnel
of its subsidiaries and other subsidiaries of the Computation Agent’s ultimate
parent) that are engaged in energy trading activities with any Credit Party,
except as otherwise provided in any Credit Document. Without limiting other
actions that may constitute reasonable business efforts, the Computation Agent
will be deemed to have satisfied the requirements of the preceding sentence to
the extent it affords such information the same treatment as it affords other
similar information in similar circumstances. No Agent nor any director,
officer, agent or employee of any Agent shall be liable for any action taken or
omitted to be taken by any of them or under or in connection with this Agreement
or any other Credit Document, except for its or their own gross negligence or
willful misconduct. Without limitation of the generality of the foregoing, each
Agent: (i) may consult with legal counsel (including counsel for any Credit
Party), accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (ii) makes no warranty or
representation to any Bank or Agent and shall not be responsible to any Bank or
Agent for any statements, warranties or representations (whether written or
oral) made in or in connection with this Agreement or any other Credit Document;
(iii) shall not have any duty to ascertain or to inquire as to the title to any
property or as to the satisfaction, performance or observance of any of the
terms, covenants or conditions of this Agreement or any other Credit Document on
the part of any Credit Party Entity or to inspect the property (including the
books and records) of any Credit Party Entity; (iv) shall not be responsible to
any Bank or Agent for the perfection, priority, existence, sufficiency or value
of any security, security interest, guaranty or insurance or for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement, any other Credit Document or any other instrument or document
furnished pursuant hereto or thereto; (v) shall incur no liability under or in
respect of any Credit Document by acting upon any notice, consent, certificate
or other instrument or writing (which may be by telecopier, telegram, email,
telex or otherwise) believed by it in its reasonable judgment to be genuine and
signed or sent by the proper party or parties; and (vi) may treat a Bank as the
obligee of any Obligation at any time owed to such Bank, until such Agent
receives a Transfer Agreement executed by such Bank and all other required
parties. Without limiting the generality of the foregoing, insofar as the
Administrative Agent is concerned, each Bank shall be deemed to have consented
to, approved and accepted and to be satisfied with each matter required under
Section 3.1 of this Agreement, unless the officer of the Administrative Agent
responsible for the transactions contemplated by the Credit

47

--------------------------------------------------------------------------------

 

Documents shall have received written notice from such Bank prior to such Bank
entering into any Qualifying Hedge specifying its objection thereto; provided
that this sentence is solely for the benefit of the Administrative Agent (and
not any Credit Party) and shall not amend, waive or otherwise modify
Section 3.1, Section 6.1(b) or any other provision applicable to any Credit
Party.
     SECTION 7.3 Rights. With respect to its Qualifying Hedges, each of
Citibank, Citigroup Energy Inc. and Calyon New York shall have the same rights
and powers under the Credit Documents as any other Bank and may exercise the
same as though it was not an Agent. Citibank, Citigroup Energy Inc., Calyon New
York and the respective affiliates of each may accept deposits from, lend money
to, act as trustee under indentures of, and generally engage in any kind of
business with, any Credit Party, any Person who may do business with or own,
directly or indirectly, securities of any Credit Party and any other Person, all
as if Citibank, Citigroup Energy Inc. and Calyon New York were not Agents, in
each case without any duty to account therefor to the Banks. In the event that
Citibank or any of its affiliates shall be or become an indenture trustee under
the Trust Indenture Act of 1939 (as amended, the “Trust Indenture Act”) in
respect of any securities issued or guaranteed by any Credit Party, the parties
hereto acknowledge and agree that any payment or property received in
satisfaction of or in respect of any Obligation of such Credit Party hereunder
or under any other Credit Document by or on behalf of Citibank (or any of its
affiliates) in its capacity as an Agent for the benefit of any Bank under any
Credit Document (other than Citibank or an affiliate of Citibank) and which is
applied in accordance with the Credit Documents shall be deemed to be exempt
from the requirements of Section 311 of the Trust Indenture Act pursuant to
Section 311(b)(3) of the Trust Indenture Act.
     SECTION 7.4 Indemnification. Each Bank agrees to indemnify each Agent (to
the extent not reimbursed by the Credit Parties), from and against such Bank’s
Ratable Portion of all claims, damages, losses, liabilities, costs, fees and
expenses (including reasonable fees and disbursements of external counsel) of
any kind or nature whatsoever which may be imposed on, incurred by, or asserted
against any Agent in any way relating to or arising out of this Agreement or any
other Credit Document or any action taken or omitted by any Agent under this
Agreement or any other Credit Document, including any of the foregoing incurred
in connection with any action taken under Section 5.1(f) (expressly including
any such claim, damage, loss, liability, cost, fee or expense attributable to
the ordinary, sole or contributory negligence of such Agent, but excluding any
such claim, damage, loss, liability, cost, fee or expense attributable to the
gross negligence or willful misconduct of such Agent). It is the intent of the
parties hereto that each Agent shall, to the extent provided in this
Section 7.4, be indemnified for its own ordinary, sole or contributory
negligence. Without limitation of the foregoing, each Bank agrees to reimburse
each Agent promptly upon demand for such Bank’s Ratable Portion of any
out-of-pocket expenses (including external counsel fees) incurred by such Agent
in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement or any other Credit Document to the
extent that such Agent is not reimbursed for such expenses by the Credit
Parties.
     SECTION 7.5 Successor Agents. (a) The Administrative Agent may resign at
any time as Administrative Agent under this Agreement by giving written notice
thereof to the Banks, the other Agents and the Counterparty and may be removed
at any time with or without cause by the Required Banks. Upon any such
resignation or removal, the Required Banks shall have the right to appoint, with
the consent of the Counterparty (which consent shall not be unreasonably
withheld and shall not be required if an Event of Default under Section 6.1(a)
or 6.1(e) exists), a successor Administrative Agent, which shall be a Bank or a
Designated Affiliate of a Bank. If no successor Administrative Agent shall have
been so appointed by the Required Banks with such consent (if required), and
shall have accepted such appointment, within 30 days after the retiring
Administrative Agent’s giving of notice of resignation or the Required Banks’
removal of the retiring Administrative Agent, then the retiring Administrative

48

--------------------------------------------------------------------------------

 

Agent may, on behalf of the Banks, appoint a successor Administrative Agent,
which shall be a Bank that is a commercial bank organized under the laws of the
United States of America or of any State thereof and having a combined capital
and surplus of at least $500,000,000 or a Designated Affiliate of a Bank. Upon
the acceptance of any appointment as Administrative Agent under this Agreement
by a successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Administrative Agent and shall function as the
Administrative Agent under this Agreement, and the retiring Administrative Agent
shall be discharged from its duties and obligations as Administrative Agent
under this Agreement. After any retiring Administrative Agent’s resignation or
removal hereunder as Administrative Agent, the provisions of this Article VII
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement.
     (b) The Computation Agent may resign at any time as Computation Agent under
this Agreement by giving written notice thereof to the Banks, the other Agents
and the Counterparty and may be removed at any time with or without cause by the
Required Banks. Upon any such resignation or removal, the Required Banks shall
have the right to appoint, with the consent of the Counterparty (which consent
shall not be unreasonably withheld and shall not be required if an Event of
Default under Section 6.1(a) or 6.1(e) exists), a successor Computation Agent,
which shall be a Bank or a Designated Affiliate of a Bank. If no successor
Computation Agent shall have been so appointed by the Required Banks with such
consent (if required), and shall have accepted such appointment, within 30 days
after the retiring Computation Agent’s giving of notice of resignation or the
Required Banks’ removal of the retiring Computation Agent, then the retiring
Computation Agent may, on behalf of the Banks, appoint a successor Computation
Agent, which shall be a Bank that is a commercial bank organized under the laws
of the United States of America or of any State thereof and having a combined
capital and surplus of at least $500,000,000 or a Designated Affiliate of a
Bank. Upon the acceptance of any appointment as Computation Agent under this
Agreement by a successor Computation Agent, such successor Computation Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Computation Agent and shall function as
the Computation Agent under this Agreement, and the retiring Computation Agent
shall be discharged from its duties and obligations as Computation Agent under
this Agreement. After any retiring Computation Agent’s resignation or removal
hereunder as Computation Agent, the provisions of this Article VII shall inure
to its benefit as to any actions taken or omitted to be taken by it while it was
Computation Agent under this Agreement.
     (c) The Collateral Agent may resign at any time as Collateral Agent under
this Agreement by giving written notice thereof to the Banks, the other Agents
and the Counterparty and may be removed at any time with or without cause by the
Required Banks. Upon any such resignation or removal, the Required Banks shall
have the right to appoint, with the consent of the Counterparty (which consent
shall not be unreasonably withheld and shall not be required if an Event of
Default under Section 6.1(a) or 6.1(e) exists), a successor Collateral Agent,
which shall be a Bank or a Designated Affiliate of a Bank. If no successor
Collateral Agent shall have been so appointed by the Required Banks with such
consent (if required), and shall have accepted such appointment, within 30 days
after the retiring Collateral Agent’s giving of notice of resignation or the
Required Banks’ removal of the retiring Collateral Agent, then the retiring
Collateral Agent may, on behalf of the Banks, appoint a successor Collateral
Agent, which shall be a Bank that is a commercial bank organized under the laws
of the United States of America or of any State thereof and having a combined
capital and surplus of at least $500,000,000 or a Designated Affiliate of a
Bank. Upon the acceptance of any appointment as Collateral Agent under this
Agreement by a successor Collateral Agent, (i) the retiring Collateral Agent
shall deliver to such successor Collateral Agent all collateral and letters of
credit in the Collateral Account and all assignments and other transfers
necessary to transfer such collateral and letters of credit to the successor
Collateral Agent, (ii) such successor Collateral Agent shall thereupon succeed
to and become vested with all the rights, powers, privileges and duties of the
retiring Collateral Agent and shall function as the Collateral Agent under this

49

--------------------------------------------------------------------------------

 

Agreement, and (iii) the retiring Collateral Agent shall be discharged from its
duties and obligations as Collateral Agent under this Agreement and the Security
Documents. After any retiring Collateral Agent’s resignation or removal
hereunder as Collateral Agent, the provisions of this Article VII shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Collateral Agent under this Agreement.
     (d) The PV Determination Agent may resign at any time as PV Determination
Agent under this Agreement by giving written notice thereof to the Banks, the
other Agents and the Counterparty and may be removed at any time with or without
cause by the Required Banks. Upon any such resignation or removal, the Required
Banks shall have the right to appoint, with the consent of the Counterparty
(which consent shall not be unreasonably withheld and shall not be required if
an Event of Default under Section 6.1(a) or 6.1(e) exists), a successor PV
Determination Agent, which shall be a Bank or a Designated Affiliate of a Bank.
If no successor PV Determination Agent shall have been so appointed by the
Required Banks with such consent (if required), and shall have accepted such
appointment, within 30 days after the retiring PV Determination Agent’s giving
of notice of resignation or the Required Banks’ removal of the retiring PV
Determination Agent, then the retiring PV Determination Agent may, on behalf of
the Banks, appoint a successor PV Determination Agent, which shall be a Bank
that is a commercial bank organized under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of at
least $500,000,000 or a Designated Affiliate of a Bank. Upon the acceptance of
any appointment as PV Determination Agent under this Agreement by a successor PV
Determination Agent, such successor PV Determination Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring PV Determination Agent and shall function as the PV
Determination Agent under this Agreement, and the retiring PV Determination
Agent shall be discharged from its duties and obligations as PV Determination
Agent under this Agreement. After any retiring PV Determination Agent’s
resignation or removal hereunder as PV Determination Agent, the provisions of
this Article VII shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was PV Determination Agent under this Agreement.
     SECTION 7.6 Decisions. Each of the Agents and the Banks acknowledges that
it has, independently and without reliance upon any Agent, the Joint Lead
Arrangers or any Bank and based on the financial statements referred to in
Section 4.1(e) and such other documents and information as it has deemed
appropriate, made its own credit analysis and its own decision to enter into
this Agreement. Each of the Agents and the Banks (in each case, both on its own
behalf and on behalf of its affiliates, directors, officers, employees and
agents that are Indemnified Parties) also acknowledges that it will,
independently and without reliance upon any Agent, the Joint Lead Arrangers or
any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own decisions in taking or not
taking action under this Agreement and the other Credit Documents.
     SECTION 7.7 Certain Rights of the Agents. If any Agent shall request
instructions from the Required Banks with respect to any act or action
(including failure to act) in connection with this Agreement or any other Credit
Document, such Agent shall be entitled to refrain from such act or taking such
action unless and until such Agent shall have received instructions from the
Required Banks; and it shall not incur liability to any Person by reason of so
refraining. Without limiting the foregoing, no Bank nor any Indemnified Party
shall have any right of action whatsoever against any Agent as a result of its
acting or refraining from acting hereunder or under any other Credit Document in
accordance with the instructions of the Required Banks. Furthermore, except for
action expressly required of an Agent hereunder, such Agent shall in all cases
be fully justified in failing or refusing to act hereunder unless it shall be
specifically indemnified to its satisfaction by the Banks (ratably, in
accordance with their respective Ratable Portions) against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action.

50

--------------------------------------------------------------------------------

 

     SECTION 7.8 Other Persons. The Joint Lead Arrangers have no duties or
obligations under any Credit Document. None of the Joint Lead Arrangers shall
have, by reason of this Agreement or the other Credit Documents, a fiduciary
relationship in respect of any Bank or any Agent and nothing in this Agreement
or other Credit Documents, express or implied, is intended or shall be so
construed to impose on any Joint Lead Arranger any obligation in respect of this
Agreement or other Credit Documents.
     SECTION 7.9 Additional Rights of Collateral Agent. In the event of any
ambiguity or uncertainty hereunder regarding the Collateral Agent or its duties
or in any notice, instruction or other communication received by the Collateral
Agent hereunder, the Collateral Agent may, in its sole discretion, refrain from
taking any action other than retaining possession of the Collateral, unless the
Collateral Agent receives written instructions, signed by the Counterparty and
the Required Banks, which eliminates such ambiguity or uncertainty.
     In the event of any dispute between or conflicting claims by or among the
Banks and any other Person with respect to any Collateral, the Collateral Agent
shall be entitled, in its sole discretion, to refuse to comply with any and all
claims, demands or instructions with respect to such Collateral so long as such
dispute or conflict shall continue, and the Collateral Agent shall not be or
become liable in any way to the Banks for failure or refusal to comply with such
conflicting claims, demands or instructions. The Collateral Agent shall be
entitled to refuse to act until, in its sole discretion, either (i) such
conflicting or adverse claims or demands shall have been determined by a final
order, judgment or decree of a court of competent jurisdiction, which order,
judgment or decree is not subject to appeal, or settled by agreement between the
conflicting parties as evidenced in a writing satisfactory to the Collateral
Agent or (ii) the Collateral Agent shall have received security or an indemnity
satisfactory to it sufficient to hold it harmless from and against any and all
losses which it may incur by reason of so acting. The Collateral Agent may, in
addition, elect, in its sole discretion, to commence an interpleader action or
seek other judicial relief or orders as it may deem, in its sole discretion,
necessary. The costs and expenses (including reasonable attorneys’ fees and
expenses) incurred in connection with such proceeding shall be paid by the
Counterparty.
ARTICLE VIII
MISCELLANEOUS
     SECTION 8.1 Amendments, Etc. No amendment or waiver of any provision of
this Agreement or any Credit Document (other than any Confirmation and any
amendment, waiver or other modification of any Confirmation), nor consent to any
departure by any Credit Party therefrom, shall in any event be effective unless
the same shall be in writing and signed by the Required Banks and the Credit
Parties, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however, that
no amendment, waiver or consent shall, unless in writing and signed by the
Required Banks and by all the Banks directly affected thereby, do any of the
following: (a) subject any Bank to any liability, commitment or obligation,
(b) reduce any fees or other amounts payable hereunder or under any Credit
Document, (c) postpone any date fixed for any payment of any fees or other
amounts payable hereunder or under any Credit Document, (d) change the
definition of Required Banks, (e) release or limit the liability of any Credit
Party, (f) amend or waive any provision of, or consent to any departure by any
Credit Party from, Section 2.9 or this Section 8.1 or (g) modify any indemnity;
and provided further that no amendment, waiver or consent shall affect the
rights or duties of any Agent under any Credit Document, unless in writing and
signed by such Agent in addition to the Banks required above to take such
action. No amendment or waiver of, or consent relating to, this Agreement or any
Credit Document (other than any Confirmation and any amendment, waiver or other
modification of any Confirmation) shall be effective until delivered to all
Banks.

51

--------------------------------------------------------------------------------

 

     SECTION 8.2 Notices, Etc. (a) Except as otherwise provided in
Section 8.2(b), all notices and other communications provided for hereunder or
under any Security Document shall be in writing (including telecopy
communication) and mailed, telecopied or delivered, if to any Bank, as specified
opposite its name on Schedule I hereto or specified in any New Bank Agreement or
a Transfer Agreement for any assignee Bank delivered pursuant to Section 8.5(a);
if to a Credit Party, as specified opposite its name on Schedule II hereto; if
to Citibank, as an Agent, to its address at 250 West Street, 10th Floor, New
York, New York 10013 (telecopier number: (212) 723-2956), Attention: Director
Derivatives Operations, with a copy to Citicorp North America, Inc., 333 Clay
Street, Suite 3700, Houston, Texas 77002 (telecopier number: (713) 481-0247),
Attention: The Williams Companies, Inc. Account Officer; if to Citigroup Energy
Inc., as an Agent, to its address at 2800 Post Oak Blvd., Suite 500, Houston,
Texas 77056 (telecopier number: (713) 752-5244) Attention: Legal Department,
with a copy to Legal Department, 77 Water Street, 9th Floor, New York, New York
10004 (telecopier number: (212) 657-1452), Attention: Department Head; if to
Calyon New York, as Collateral Agent, to its address at 1301 Avenue of the
Americas, New York, New York 10019 (telecopier number: (212) 261-3315),
Attention: Collateral Department; if to Calyon New York, as PV Determination
Agent, to its address at 1301 Travis Suite 2100 Houston, TX 77002 (Telecopier:
(713) 890-8668), Attention: Reservoir Engineer; or, as to any Credit Party, any
Bank or any Agent, at such other address as shall be designated by such party in
a written notice to the other parties; provided that materials required to be
delivered pursuant to Section 5.1(b)(ii), (iii) and (iv) shall be delivered to
the Administrative Agent as specified in Section 8.2(b) or as otherwise
specified to any Credit Party by the Administrative Agent; provided, further,
that any communication that (a) relates to the payment of any amount due under
this Agreement prior to the scheduled date therefor, (b) provides notice of any
Default or Event of Default or (c) is required to be delivered to satisfy any
condition precedent to the effectiveness of any provision of this Agreement or
pertains to a Qualifying Hedge shall be in writing (including telecopy
communication) and mailed, telecopied or delivered pursuant to this
Section 8.2(a). All such notices and communications shall, when mailed,
telecopied or e-mailed, be effective when received in the mail, sent by
telecopier to any party to the telecopier number as set forth herein or on
Schedule I or Schedule II or specified in a New Bank Agreement or a Transfer
Agreement for any assignee Bank delivered pursuant to Section 8.5(a) (or other
telecopy number specified by such party in a written notice to the other parties
hereto) or confirmed by e-mail, respectively, except that notices and
communications to any Agent shall not be effective until received by such Agent.
Any notice or communication to a Bank hereunder or under any Security Document
(but not notices and communications under a Hedge Document) shall be deemed to
be a notice or communication to any Designated Affiliate of such Bank. Delivery
by telecopier of an executed counterpart of this Agreement, any other Credit
Document or any amendment or waiver of any provision of this Agreement or any
other Credit Document shall be effective as delivery of a manually executed
counterpart thereof.
     (b) The Credit Parties will have the option to provide to the
Administrative Agent all information, documents and other materials that they
are obligated to furnish to the Administrative Agent pursuant to this Agreement,
including all notices, requests, financial statements, financial and other
reports, certificates and other information materials, but excluding any such
communication that (i) relates to the payment of any principal or other amount
due under this Agreement prior to the scheduled date therefor, (ii) provides
notice of any Default or Event of Default or (iii) is required to be delivered
to satisfy any condition precedent to the effectiveness of any provision of this
Agreement or pertains to a Qualifying Hedge (all such non-excluded
communications being referred to herein collectively as “Communications”), by
transmitting the Communications in an electronic/soft medium to
oploanswebadmin@citigroup.com.
The Credit Parties further agree that the Administrative Agent may make the
Communications available to the Banks and the Agents by posting the
Communications on Intralinks or a substantially similar electronic transmission
system (the “Platform”). The Credit Parties acknowledge that the distribution of

52

--------------------------------------------------------------------------------

 

material through an electronic medium is not necessarily secure and that there
are confidentiality and other risks associated with such distribution.
THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE”. THE AGENT PARTIES (AS
DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE
COMMUNICATIONS, OR THE ADEQUACY OF THE PLATFORM AND EXPRESSLY DISCLAIM LIABILITY
FOR ERRORS OR OMISSIONS IN THE COMMUNICATIONS. NO WARRANTY OF ANY KIND, EXPRESS,
IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD
PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY THE AGENT
PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM. IN NO EVENT SHALL
THE ADMINISTRATIVE AGENT OR ANY OF ITS AFFILIATES OR ANY OF THE RESPECTIVE
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS OR REPRESENTATIVES OF THE
ADMINISTRATIVE AGENT OR ANY OF ITS AFFILIATES (COLLECTIVELY, “AGENT PARTIES”)
HAVE ANY LIABILITY TO ANY CREDIT PARTY, ANY BANK OR ANY OTHER PERSON OR ENTITY
FOR DAMAGES OF ANY KIND, INCLUDING DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR
OTHERWISE) ARISING OUT OF THE TRANSMISSION BY ANY CREDIT PARTY, ANY OF THE AGENT
PARTIES OR ANY OTHER PERSON OF COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO
THE EXTENT THE LIABILITY OF ANY AGENT PARTY IS FOUND IN A FINAL NON-APPEALABLE
JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM
SUCH AGENT PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
The Administrative Agent agrees that the receipt of the Communications by such
Agent at its e-mail address set forth above shall constitute effective delivery
of the Communications to such Agent for purposes of the Credit Documents. Each
of the Banks agrees that notice to it (as provided in the next sentence)
specifying that the Communications have been posted to the Platform shall
constitute effective delivery of the Communications to such Bank, for purposes
of the Credit Documents. Each of the Banks agrees (i) to notify the
Administrative Agent in writing (including by electronic communication) from
time to time of such Bank’s e-mail address to which the foregoing notice may be
sent by electronic transmission and (ii) that the foregoing notice may be sent
to such e-mail address.
Nothing herein shall prejudice the right of any Agent or any Bank to give any
notice or other communication pursuant to any Credit Document in any other
manner specified in such Credit Document.
     SECTION 8.3 No Waiver; Remedies. No failure on the part of any Bank or any
Agent to exercise, and no delay in exercising, any right under this Agreement or
any other Credit Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies provided in
this Agreement are cumulative and not exclusive of any remedies provided by law
or in any other Credit Document.
     SECTION 8.4 Costs and Expenses.
     (a) (i) The Counterparty agrees to pay, within 30 days of receipt by the
Counterparty of request therefor, all reasonable out-of-pocket costs and
expenses of the Joint Lead Arrangers and the Agents in connection with the
syndication, preparation, execution, delivery, administration, modification and
amendment of this Agreement or any other Credit Document and the other documents
to be delivered under this Agreement, including the reasonable fees and
out-of-pocket expenses of Bracewell & Giuliani,

53

--------------------------------------------------------------------------------

 

LLP, counsel for the Agents, with respect thereto and with respect to advising
the Administrative Agent as to its rights and responsibilities under this
Agreement and any other Credit Document, and including reasonable fees of
counsel relating to review of any New Bank Agreement or any attachment thereto,
and (ii) the Counterparty agrees to pay on demand all costs and expenses, if any
(including reasonable counsel fees and out-of-pocket expenses), of the Agents
and each Bank in connection with the enforcement (after the occurrence and
during the continuance of an Event of Default and whether through negotiations
(including formal workouts or restructurings), legal proceedings or otherwise)
against any Credit Party of any Credit Document.
     (b) The Counterparty agrees, to the fullest extent permitted by law, to
indemnify and hold harmless each Agent, the Joint Lead Arrangers and each Bank
and each of their respective affiliates, directors, officers, employees and
agents (the “Indemnified Parties”) from and against any and all claims, damages,
losses, liabilities, costs, fees and expenses (including reasonable fees and
disbursements of counsel) of any kind or nature whatsoever for which any of them
may become liable or which may be incurred by or asserted against any of the
Indemnified Parties (other than claims and related damages, losses, liabilities,
costs, fees and expenses made by one Bank (or its successors or assignees)
against another Bank) arising out of, related to or in connection with (i) any
Credit Document or any other document or instrument delivered in connection
herewith, (ii) any violation by any Credit Party or any Subsidiary of any Credit
Party of any Environmental Law or any other law, rule, regulation or order,
(iii) any Qualifying Hedge or the use or proposed use of any Qualifying Hedge,
(iv) any transaction in which any Qualifying Hedge is used or (v) any
investigation, litigation or proceeding, whether or not any of the Indemnified
Parties is a party thereto, related to or in connection with any of the
foregoing or any Credit Document (expressly including any such claim, damage,
loss, liability, cost, fee or expense attributable to the ordinary, sole or
contributory negligence of such Indemnified Party, but excluding any such claim,
damage, loss, liability, cost, fee or expense sought to be recovered by any
Indemnified Party to the extent such claim, damage, loss, liability, cost, fee
or expense is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct of
such Indemnified Party or the gross negligence or willful misconduct of the
affiliates, advisors, directors, officers, employees or agents of such
Indemnified Party). It is the intent of the parties hereto that each Indemnified
Party shall, to the extent provided in this Section 8.4(b), be indemnified for
its own ordinary, sole or contributory negligence.
     (c) Without prejudice to the survival of any other agreement of the
Counterparty hereunder, the agreements and obligations of the Counterparty
contained in Section 2.3 and this Section 8.4 shall survive the payment in full
of all amounts payable hereunder and under the other Credit Documents and the
occurrence of the Termination Date.
     SECTION 8.5 Binding Effect; Transfers.
     (a) This Agreement shall become effective when (i) it shall have been
executed by the Credit Parties and the Agents and (ii) each Bank listed on the
signature pages hereof has delivered an executed counterpart hereof to the
Administrative Agent, has sent to the Administrative Agent a facsimile copy of
its signature hereon or of its signature on a signature page hereof or has
notified the Administrative Agent that such Bank has executed this Agreement and
thereafter shall be binding upon and inure to the benefit of the Credit Parties,
the Banks, the Agents and their respective successors and assigns; provided that
the Credit Parties shall not have the right to assign any of their rights
hereunder or any interest herein without the prior written consent of the Banks.
Each Bank shall transfer all of its rights and obligations under this Agreement
to the same Person to which it has transferred all of its Qualifying Hedges
pursuant to Section 7 of the ISDA Master Agreement to which it is a party or
pursuant to the written consent of the Counterparty, with the transfer of such
rights and obligations to occur simultaneously with such transfer pursuant to
such Section 7 or pursuant to such consent. Each such transfer of such rights
and obligations

54

--------------------------------------------------------------------------------

 

shall be evidenced by a Transfer Agreement executed by the transferor Bank, the
transferee, the Administrative Agent and the Computation Agent. Upon such
execution, from and after the effective date specified in each Transfer
Agreement (which shall not be on or prior to the date on which all required
parties have executed), (x) the assignee thereunder shall be a party hereto as a
“Bank” and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Transfer Agreement, have the rights and
obligations of a Bank hereunder (including obligations to the Agents pursuant to
Section 7.4) and (y) the Bank assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Transfer Agreement, relinquish its rights and be released from its obligations
under this Agreement, except for rights and obligations which continue after
repayment of the Obligations or termination of this Agreement pursuant to the
express terms of this Agreement and such Bank shall cease to be a party hereto,
except as to such rights and obligations. No Bank will transfer any Qualifying
Hedge pursuant to this Section 8.5(a) to any Person other than to another Bank,
a Designated Affiliate of a Bank or to a Person that becomes a Bank party hereto
contemporaneously with such transfer.
     (b) By executing and delivering a Transfer Agreement, the Bank assignor
thereunder and the assignee thereunder confirm to and agree with each other and
the other parties hereto as follows: (i) other than as provided in such Transfer
Agreement, such assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
(whether written or oral) made in or in connection with this Agreement, any
other Credit Document or any other instrument or document furnished pursuant
hereto or in connection herewith, the perfection, priority, existence,
sufficiency or value of any security, guaranty or insurance or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of any
Credit Document or any other instrument or document furnished pursuant hereto or
in connection herewith, (ii) such assignor makes no representation or warranty
and assumes no responsibility with respect to the financial condition of any
Credit Party or any other Person or the performance or observance by any Credit
Party or any other Person of any of its respective obligations under the Credit
Documents or any other instrument or document furnished pursuant hereto or in
connection herewith; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of such financial statements and such other
documents and information as it has deemed appropriate to make its own credit
analysis and its own decision to enter into such Transfer Agreement; (iv) such
assignee will, independently and without reliance upon any Agent, such assignor
or any other Bank and based on such financial statements and such other
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis and its own decisions in taking or not taking
action under this Agreement, any of the other Credit Documents or any other
instrument or document; (v) such assignee appoints and authorizes the
Administrative Agent to act as Administrative Agent on its behalf and to
exercise such powers and discretion under this Agreement, any other Credit
Document or any other document executed in connection herewith or therewith as
are delegated to the Administrative Agent by the terms hereof or thereof,
together with such powers and discretion as are reasonably incidental thereto;
(vi) such assignee appoints and authorizes the Computation Agent to act as
Computation Agent on its behalf and to exercise such powers and discretion under
this Agreement, any other Credit Document or any other document executed in
connection herewith or therewith as are delegated to the Computation Agent by
the terms hereof or thereof, together with such powers and discretion as are
reasonably incidental thereto; (vii) such assignee appoints and authorizes the
Collateral Agent to act as Collateral Agent on its behalf and to exercise such
powers and discretion under this Agreement, any other Credit Document or any
other document executed in connection herewith or therewith as are delegated to
the Collateral Agent by the terms hereof or thereof, together with such powers
and discretion as are reasonably incidental thereto; (viii) such assignee
appoints and authorizes the PV Determination Agent to act as PV Determination
Agent on its behalf and to exercise such powers and discretion under this
Agreement, any other Credit Document or any other document executed in
connection herewith or therewith as are delegated to the PV Determination Agent
by the terms hereof or thereof, together with such powers and discretion as are
reasonably incidental

55

--------------------------------------------------------------------------------

 

thereto; and (ix) such assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of this Agreement are
required to be performed by it as a Bank.
     (c) The Administrative Agent shall maintain a copy of each Transfer
Agreement delivered to it and a register for the recordation of the names and
addresses of each Bank and the outstanding Qualifying Hedges (the “Register”).
The entries in the Register made pursuant to this Section 8.5(c) shall be
conclusive and binding for all purposes, absent manifest error, and the Credit
Parties, the Agents, and the Banks may treat as a Bank each Person whose name is
recorded in the Register as a Bank hereunder for all purposes of this Agreement.
The Register shall be available for inspection by any Credit Party, any Agent or
any Bank at any reasonable time and from time to time upon reasonable prior
notice.
     (d) Upon its receipt of a Transfer Agreement or a New Bank Agreement, the
Administrative Agent shall record the information contained therein in the
Register and give prompt notice thereof to the Banks and other Agents.
     (e) Each Bank may sell participations to one or more banks or other
entities (other than the Credit Parties or any of their Affiliates) in or to all
or a portion of its rights and obligations under this Agreement (including all
or a portion of the Obligations held by it); provided, that (i) such Bank’s
obligations under this Agreement shall remain unchanged, (ii) such Bank shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (iii) such Bank shall remain the holder of any such
Obligations for all purposes of this Agreement, (iv) the Credit Parties, the
Agents, and the other Banks shall continue to deal solely and directly with such
Bank in connection with such Bank’s rights and obligations under this Agreement,
(v) all amounts payable under this Agreement shall be calculated as if such Bank
had not sold such participation, and (vi) the terms of any such participation
shall not restrict such Bank’s ability to consent to any departure by any Credit
Party herefrom without the approval of the participant, except that the approval
of the participant may be required to the extent that such amendment, waiver or
consent would reduce any amounts payable hereunder, in each case to the extent
subject to such participation, or postpone any date fixed for any payment of any
amount payable hereunder, in each case to the extent subject to such
participation.
     SECTION 8.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York. Additionally,
as contemplated by Sections 8-110(e)(1) and 9-304(b)(1) of the New York Uniform
Commercial Code, it is agreed that New York is the Collateral Agent’s
jurisdiction for purposes of the New York Uniform Commercial Code.
     SECTION 8.7 Interest. It is the intention of the parties hereto that each
Agent and each Bank shall conform strictly to usury laws applicable to it, if
any. Accordingly, if the transactions with any Agent or any Bank contemplated
hereby would be usurious under applicable law, then, in that event,
notwithstanding anything to the contrary in any Credit Document or any other
agreement entered into in connection with or as security for any Credit
Document, it is agreed as follows: (i) the aggregate of all consideration which
constitutes interest under applicable law that is contracted for, taken,
reserved, charged or received by such Agent, or such Bank, as the case may be,
under any Credit Document or under any other agreement entered into in
connection with or as security for any Credit Document shall under no
circumstances exceed the maximum amount allowed by such applicable law and any
excess shall be canceled automatically and, if theretofore paid, shall at the
option of such Agent, or such Bank, as the case may be, be credited by such
Agent or such Bank, as the case may be, on the principal amount of the
obligations owed to such Agent or such Bank, as the case may be, by the
applicable Credit Party or refunded by such Agent or such Bank, as the case may
be, to the applicable Credit Party, and (ii) in the event that the maturity of
any obligation payable to such Agent or such Bank, as the case may be, is
accelerated or in the event of any required or permitted prepayment, then such
consideration that constitutes interest under law applicable to such Agent or
such Bank, as the case may be, may never

56

--------------------------------------------------------------------------------

 

include more than the maximum amount allowed by such applicable law and excess
interest, if any, to such Agent or such Bank, as the case may be, provided for
in this Agreement or otherwise shall be canceled automatically as of the date of
such acceleration or prepayment and, if theretofore paid, shall, at the option
of such Agent or such Bank, as the case may be, be credited by such Agent or
such Bank, as the case may be, on the principal amount of the obligations owed
to such Agent or such Bank, as the case may be, by the applicable Credit Party
or refunded by such Agent or such Bank, as the case may be, to the applicable
Credit Party.
     SECTION 8.8 Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of a counterpart of a signature page hereof by telecopier shall be as
effective as delivery of an original executed counterpart hereof.
     SECTION 8.9 Survival of Agreements, Representations and Warranties, Etc.
All warranties, representations and covenants made by any Credit Party or any
Authorized Officer of any Credit Party herein or in any certificate or other
document delivered in connection with this Agreement shall be considered to have
been relied upon by the Banks and the Agents and shall survive the execution and
delivery of any Credit Document, regardless of any investigation.
     SECTION 8.10 Confidentiality. Each Bank agrees that it will not disclose
without the prior consent of the Counterparty (other than to employees,
auditors, accountants, counsel or other professional advisors of any Agent or
any Bank) any information with respect to the Credit Parties, which is furnished
pursuant to this Agreement; provided that any Bank may disclose any such
information (1) as has become generally available to the public, (2) as may be
required or appropriate in any report, statement or testimony submitted to or
required by any regulatory body having or claiming to have jurisdiction over
such Bank or submitted to or required by the Federal Reserve Board or the
Federal Deposit Insurance Corporation or similar organizations (whether in the
United States or elsewhere) or their successors, (3) as may be required or
appropriate in response to any summons or subpoena in connection with any
litigation, (4) in order to comply with any law, order, regulation or ruling
applicable to such Bank, (5) to the prospective transferee or grantee in
connection with any contemplated transfer of any interest herein by such Bank;
provided that such prospective transferee executes an agreement with or for the
benefit of the Counterparty containing provisions substantially identical to
those contained in this Section 8.10, (6) in connection with the exercise of any
remedy by such Bank following an Event of Default, (7) in connection with any
litigation involving such Bank pertaining to this Agreement or any of the other
Credit Documents or any other document delivered in connection herewith, (8) to
any Bank, any Designated Affiliate of a Bank or any Agent, (9) to any affiliate
of any Bank; provided that such affiliate has agreed with or for the benefit of
the Credit Parties to be bound by provisions substantially identical to those
contained in this Section 8.10 or (10) to TWC or any of its Subsidiaries.
     SECTION 8.11 Waiver of Jury Trial. The Credit Parties, the Agents and the
Banks hereby irrevocably waive any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement, any other Credit
Document or any of the transactions contemplated hereby.
     SECTION 8.12 Severability. In the event any one or more of the provisions
contained in this Agreement, any New Bank Agreement or any document that amends,
waives or otherwise modifies this Agreement or any New Bank Agreement should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby. The parties shall endeavor
in good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.

57

--------------------------------------------------------------------------------

 

     SECTION 8.13 Forum Selection and Consent to Jurisdiction; Damages. Any
litigation based hereon, or arising out of, under, or in connection with, any
Credit Document, or any course of conduct, course of dealing, statements
(whether oral or written) or actions of any Agent, any Bank or any Credit Party
in connection herewith or therewith may be brought and maintained in the courts
of the State of New York sitting in the County of New York or in the United
States District Court for the Southern District of New York; provided, however,
that any suit seeking enforcement against any security may be brought, at the
Collateral Agent’s option, in the courts of any jurisdiction where such security
may be            found. The Credit Parties irrevocably consent to the service
of process by registered mail, postage prepaid, or by personal service within or
without the State of New York at the address for notices specified in accordance
with Section 8.2. The Credit Parties hereby expressly and irrevocably waive, to
the fullest extent permitted by law, any objection which they may have or
hereafter may have to the laying of venue of any such litigation brought in any
such court referred to above and any claim that any such litigation has been
brought in an inconvenient forum. To the extent that any Credit Party has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution or otherwise) with respect to itself or its
property, such Credit Party hereby irrevocably waives to the fullest extent
permitted by law such immunity in respect of its obligations under the Credit
Documents. Each of the Credit Parties, the Agents and the Banks hereby
irrevocably and unconditionally waives, to the fullest extent it may effectively
do so under applicable law, any right it may have to claim or recover in any
action or proceeding referred to in this Section 8.13 any exemplary or punitive
damages.
     SECTION 8.14 Right of Set-off. Upon (i) the occurrence and during the
continuance of any Event of Default and (ii) the making of the request or the
granting of the consent specified by Section 6.1 to authorize the Administrative
Agent to take any action pursuant to Section 6.1, each Bank is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Bank to or for the credit or the account of any Credit Party against any
and all of the Obligations of such Credit Party now or hereafter existing,
irrespective of whether or not such Bank shall have made any demand under this
Agreement or any other Credit Document and although such Obligations may be
unmatured. Each Bank agrees promptly to notify such Credit Party and the
Administrative Agent after such set-off and application made by such Bank,
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Bank under this Section 8.14
are in addition to other rights and remedies (including other rights of set-off)
which such Bank may have.
     SECTION 8.15 Separateness. The Credit Parties acknowledge that the Banks
are entering into the transactions contemplated by this Agreement in reliance
upon each Credit Party’s identity as a legal entity that is separate from each
other Credit Party, each affiliate thereof and each other Person. Each Credit
Party agrees to maintain itself as a separate legal entity.
ARTICLE IX
GUARANTY
     SECTION 9.1 Guaranty. The Guarantor hereby unconditionally and irrevocably
guarantees the punctual payment and performance when due, whether at stated
maturity, by acceleration or otherwise, of all Obligations. Without limiting the
generality of the foregoing, the Guarantor’s liability shall extend to all
amounts which constitute part of the Obligations even if such Obligations are
declared unenforceable or not allowable in a bankruptcy, reorganization, or
similar proceeding involving the Counterparty or any guarantor of any portion of
the Obligations (collectively such guarantors together with the Guarantor and

58

--------------------------------------------------------------------------------

 

the Counterparty are referred to herein as the “Obligors”). This Article IX
constitutes a guarantee of payment, and the Guarantor is primarily liable for
the payment of the Obligations. In the event that the Administrative Agent
wishes to enforce the guarantee contained in this Section 9.1 against the
Guarantor, it shall make written demand for payment from the Guarantor, provided
that no such demand shall be required if the Guarantor is in bankruptcy,
liquidation, or other insolvency proceedings of if doing so would otherwise
violate any stay, order or law, and provided further that failure by the
Administrative Agent to make such demand shall not affect the Guarantor’s
obligations under this Agreement. The Guarantor shall make each payment to be
made by it hereunder promptly following demand therefor.
     SECTION 9.2 Limit of Liability. The liabilities and obligations of the
Guarantor hereunder shall be limited to an aggregate amount equal to the largest
amount that would not render the Guarantor’s obligations hereunder subject to
avoidance under Section 548 of the United States Bankruptcy Code or any
comparable provisions of any applicable state law.
     SECTION 9.3 Guaranty Absolute. The Guarantor guarantees that the
Obligations will be paid and performed strictly in accordance with the Credit
Documents, regardless of any law, regulation, or order now or hereafter in
effect in any jurisdiction affecting any of the Obligations or the rights of any
Person with respect thereto. The obligations of the Guarantor under this
Agreement are independent of the Obligations in each and every particular, and a
separate action or actions may be brought and prosecuted against any other
Obligor, or any other Person, regardless of whether any other Obligor or any
other Person is joined in any such action or actions. The liability of the
Guarantor under this Agreement shall be absolute and unconditional irrespective
of:
     (a) The lack of validity or unenforceability of the Obligations or any
Credit Document (other than this Agreement against the Guarantor) for any reason
whatsoever, including that the act of creating the Obligations is ultra vires,
that the officers or representatives executing the documents creating the
Obligations exceeded their authority, that the Obligations violate usury or
other laws, or that any Obligor has defenses to the payment of the Obligations,
including breach of warranty, statute of frauds, bankruptcy, statute of
limitations, lender liability, or accord and satisfaction;
     (b) Any change in the time, manner, or place of payment or delivery of, or
in any term of, any of the Obligations, any increase, reduction, extension, or
rearrangement of the Obligations, any amendment, supplement, or other
modification of the Credit Documents, or any waiver or consent granted under the
Credit Documents, including waivers of the payment and performance of the
Obligations;
     (c) Any release, exchange, subordination, waste, or other impairment
(including negligent, willful, unreasonable, or unjustifiable impairment) of any
collateral securing payment of the Obligations; the failure of any Agent, any
Bank or any other Person to exercise diligence or reasonable care in the
preservation, protection, enforcement, sale, or other handling of any
collateral; the fact that any Lien or assignment related to any collateral for
the Obligations shall not be properly perfected, or shall prove to be
unenforceable or subordinate to any other Lien or assignment;
     (d) Any full or partial release of any Obligor (other than the full or
partial release of the Guarantor);
     (e) The failure to apply or the manner of applying payments, collateral or
the proceeds of collateral against the Obligations;
     (f) Any change in the existence, organization or structure of any Obligor;
any change in the shareholders, directors, or officers of any Obligor; or the
insolvency, bankruptcy, liquidation, or

59

--------------------------------------------------------------------------------

 

dissolution of any Obligor or any defense that may arise in connection with or
as a result of any such insolvency, bankruptcy, liquidation or dissolution;
     (g) The failure to give notice of any extension of credit made by any Bank
or other Person to any Obligor, notice of acceptance of any guaranty
contemplated by this Agreement, notice of any amendment, supplement, or other
modification of any Credit Document, notice of the execution of any document or
agreement creating new Obligations, notice of any default or event of default,
however denominated, under the Credit Documents, notice of intent to demand,
notice of demand, notice of presentment for payment, notice of nonpayment,
notice of intent to protest, notice of protest, notice of grace, notice of
dishonor, notice of intent to accelerate, notice of acceleration, notice of
bringing of suit, notice of any Person’s transfer of Obligations, notice of the
financial condition of or other circumstances regarding any Obligor, notice of
any Present Value Deficiency or any other notice of any kind;
     (h) Any payment or grant of collateral by any Obligor to any Bank, Agent or
other Person being held to constitute a preference under bankruptcy laws, or for
any reason any Bank, Agent or other Person is required to refund such payment or
release such collateral;
     (i) Any other action taken or omitted which affects the Obligations,
whether or not such action or omission prejudices the Guarantor or increases the
likelihood that the Guarantor will be required to pay the Obligations pursuant
to the terms hereof;
     (j) The fact that all or any of the Obligations cease to exist by operation
of law, including by way of discharge, limitation or tolling thereof under
applicable bankruptcy laws;
     (k) Any claim or right of set-off that the Guarantor may have; and
     (l) Any other circumstances which might otherwise constitute a defense
available to, or a discharge of any Obligor or other surety (other than the
termination of this Article IX in accordance with Section 9.5).
     SECTION 9.4 Certain Rights and Waivers.
     (a) Notice and Other Remedies. The Guarantor hereby waives promptness,
diligence, notice of acceptance, notice of acceleration, notice of intent to
accelerate, and any other notice with respect to any of the Obligations and this
Agreement and any requirement that any Bank, Agent or other Person protect,
secure, perfect or insure any security interest or other Lien or any property
subject thereto or exhaust any right to take any action against any Obligor or
any other Person or any collateral.
     (b) Waiver of Subrogation and Contribution; Indemnity.
          (i) Until such time as the Obligations are irrevocably paid in full
and each guaranty granted in this Article IX is terminated in accordance with
Section 9.5, the Guarantor hereby irrevocably waives any claim or other rights
which it may acquire against any Obligor that arise from the Guarantor’s
obligations under this Agreement or any other Credit Document or the payment
thereof, including any right of subrogation (including any statutory rights of
subrogation under Section 509 of the Bankruptcy Code, 11 U.S.C. § 509),
reimbursement, exoneration, contribution or indemnification, or any right to
participate in any claim or remedy of any Bank, Agent or other Person against
any Obligor, or any collateral which any Bank, Agent or other Person now has or
hereafter acquires. If any amount shall be paid to the Guarantor in violation of
the preceding sentence and the Obligations shall not have been paid in full or
any guaranty granted in this Article IX shall not have been terminated in
accordance with Section 9.5, such amount shall be held in trust for the benefit
of the obligees of the Obligations and shall

60

--------------------------------------------------------------------------------

 

promptly be paid to the Administrative Agent to be applied to the Obligations,
whether matured or unmatured, in accordance with Section 2.2(a) and Section 2.9.
The Guarantor acknowledges that it will receive direct and indirect benefits
from the arrangements contemplated by the Credit Documents and that the waiver
set forth in this Section 9.4(b) is knowingly made in contemplation of such
benefits.
          (ii) The Guarantor agrees that, to the extent that any Credit Party
makes payments to the Administrative Agent or any other obligee of the
Obligations, or the Administrative Agent or any such obligee receives any
proceeds of collateral, and such payments or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
or otherwise required to be repaid, then to the extent of such repayment the
obligations of the Guarantor hereunder shall be reinstated and continued in full
force and effect as of the date such initial payment or collection of proceeds
occurred. The Guarantor shall indemnify each Agent, each Bank, each Joint Lead
Arranger and each affiliate thereof and their respective directors, officers,
employees and agents from, and discharge, release, and hold each of them
harmless against, any and all losses, liabilities, penalties, actions,
judgments, suits, costs, disbursements, claims or damages to which any of them
may become subject, insofar as such losses, liabilities, penalties, actions,
judgments, suits, costs, disbursements, claims or damages arise out of or result
from (1) any actual or proposed use by the Counterparty, or any affiliate of the
Counterparty, of any Qualifying Hedge, (2) any breach by the Guarantor of any
provision of any Credit Document, (3) any investigation, litigation or other
proceeding (including any threatened investigation or proceeding) relating to
the foregoing, or (4) any Environmental claim or requirement of Environmental
Laws concerning or relating to the presently or previously-owned or operated
properties, or the operations or business, of the Guarantor or any of its
Subsidiaries, and the Guarantor shall reimburse each Agent, each Bank, each
Joint Lead Arranger and each affiliate thereof and their respective directors,
officers, employees and agents, upon demand, for any reasonable out-of-pocket
expenses (including reasonable legal fees) incurred in connection with any such
investigation, litigation or other proceeding; and such indemnification and
reimbursement obligations expressly include any such losses, liabilities,
penalties, actions, judgments, suits, costs, disbursements, claims, damages, or
expenses incurred by reason of the negligence (other than gross negligence) of
the Person being indemnified, but exclude any such losses, liabilities,
penalties, actions, judgments, suits, costs, disbursements, claims, damages or
expenses incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified.
          (iii) The Administrative Agent shall have the sole and absolute right
to make demands, file suits and claims, engage in other proceedings and exercise
any other rights or remedies available to collect amounts owed pursuant to the
terms of the guaranties and indemnities set forth in this Article IX and shall
do so on the instructions of the Required Banks, subject to Article VII, and the
Administrative Agent shall not need the consent of any other Agent, any Bank or
any other Person (other than the Required Banks) to do so.
     (c) Modifications and Amendment to the Credit Documents. The parties to the
Credit Documents shall have the right to amend or modify such Credit Documents
without affecting the rights provided for in this Article IX.
     SECTION 9.5 Continuing Guaranty. This Article IX is a continuing guaranty
and shall (a) remain in full force and effect until the indefeasible payment in
full and termination of the Obligations, the termination of all Qualifying
Hedges, the removal by the Counterparty of all Banks as parties to the Credit
Agreement and the giving of notice to the Administrative Agent by the
Counterparty of such matters, (b) be binding upon the Guarantor and its
respective successors and assigns, (c) inure to the benefit of each of the
Agents, Banks and Joint Lead Arrangers and their respective successors,
transferees and permitted assigns, and (d) not be terminated by the Guarantor or
any other Person.

61

--------------------------------------------------------------------------------

 

Without limiting the generality of the foregoing clause (c), any Bank may assign
or otherwise transfer all or any portion of its rights and obligations under
this Agreement and the assignee shall thereupon become vested with all the
benefits in respect thereof granted to such Bank herein or otherwise, provided
that such assignment shall be subject to the limitations on assignments set
forth in this Agreement. Upon the indefeasible payment in full and termination
of the Obligations, the termination of all Qualifying Hedges, the removal by the
Counterparty of all Banks as parties to the Credit Agreement and the giving of
notice to the Administrative Agent by the Counterparty of such matters, each
guaranty granted by this Article IX shall terminate. Upon any such termination
hereof, the Administrative Agent will, at the Guarantor’s expense, execute and
deliver to the Guarantor such documents as the Guarantor shall reasonably
request and take any other actions reasonably requested to evidence or effect
such termination.
     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

62

--------------------------------------------------------------------------------

 

          COUNTERPARTY:    
 
        WILLIAMS PRODUCTION RMT COMPANY    
 
       
By:
  /s/ Gary R. Belitz    
 
       
Name:
  Gary R. Belitz    
 
       
Title:
  Vice President — Finance & Accounting    
 
       
 
        GUARANTOR:    
 
        WILLIAMS PRODUCTION COMPANY, LLC    
 
       
By:
       /s/ Gary R. Belitz    
 
       
 
            Authorized Officer    
 
        ADMINISTRATIVE AGENT:    
 
        CITIBANK, N.A., as Administrative Agent and as Computation Agent    
 
       
By:
       /s/ Todd J. Mogil    
 
       
 
            Authorized Officer    
 
        COMPUTATION AGENT:    
 
        CITIGROUP ENERGY INC., as Computation Agent    
 
       
By:
       /s/ Joseph W. Tousssaint    
 
       
 
            Authorized Officer    
 
        COLLATERAL AGENT and PV DETERMINATION AGENT:    
 
        CALYON NEW YORK BRANCH, as Collateral Agent and as PV Determination
Agent    
 
       
By:
       /s/ Darrell Stanley    
 
       
 
            Authorized Officer    
 
       
By:
       /s/ Michael D. Willis    
 
       
 
            Authorized Officer    

Signature Page to Credit Agreement

 

--------------------------------------------------------------------------------

 

          BANKS:    
 
        CITIBANK, N.A.    
 
       
By:
       /s/ Todd J. Mogil    
 
       
 
            Authorized Officer    
 
        CALYON    
 
       
By:
       /s/ Ricardo L. Gomes    
 
       
 
            Authorized Officer    
 
       
By:
       /s/ Ian Cheung    
 
       
 
            Authorized Officer    

Signature Page to Credit Agreement