Exhibit 10.3

 

[Execution Copy]

 

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AGREEMENT FOR THE RELEASE

OF CERTAIN INDEMNIFICATION OBLIGATIONS

 

UNDER THE FOLLOWING AGREEMENTS:

 

Purchase Agreement, dated April 18, 2003, as further amended, by and among,
Williams Energy Services, LLC, Williams Natural Gas Liquids, Inc, and Williams
GP LLC and Magellan Midstream Holdings, L.P. (formerly known as WEG
Acquisitions, L.P.);

 

Contribution Agreement, dated April 11, 2002, by and among, Williams Energy
Services, LLC, Williams GP LLC and Magellan Midstream Partners, L.P. (formerly
known as Williams Energy Partners L.P.); and

 

New Omnibus Agreement, dated June 17, 2003, as amended, by and among Magellan
Midstream Holdings, L.P. (formerly known as WEG Acquisitions, L.P.), Williams
Energy Services, LLC, Williams Natural Gas Liquids, Inc. and The Williams
Companies, Inc.

 

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AGREEMENT FOR THE RELEASE

OF CERTAIN INDEMNIFICATION OBLIGATIONS

 

THIS AGREEMENT (the “Agreement”) is entered into on, and effective as of May 26,
2004 by and among Magellan Midstream Holdings, L.P. (“MMH”), Magellan GP, LLC
(“Magellan GP”) and Magellan Midstream Partners, L.P. (“MMP,” and together with
MMH and Magellan GP, the “Magellan Parties”), on the one hand, and The Williams
Companies, Inc. (“Williams”), Williams Energy Services, LLC (“WES”), Williams
Natural Gas Liquids, Inc. (“WNGL”) and Williams GP LLC (“Williams GP,” and
together with Williams, WES and WNGL, the “Williams Parties”), on the other
hand, with respect to the following agreements, collectively, the “Subject
Agreements”:

 

NEW OMNIBUS AGREEMENT, dated June 17, 2003 (as amended, the “New Omnibus
Agreement”), by and among MMH (formerly known as WEG Acquisitions, L.P.), WES,
WNGL and Williams;

 

CONTRIBUTION AGREEMENT, dated April 11, 2002 (the “Contribution Agreement”), by
and among, WES, Williams GP and MMP (formerly known as Williams Energy Partners
L.P.); and

 

PURCHASE AGREEMENT, dated April 18, 2003, as amended by Amendment No. 1, dated
May 5, 2003 and Amendment No. 2, dated January 6, 2004 (as amended, the
“Purchase Agreement”), by and among WES, WNGL, Williams GP and MMH.

 

RECITALS

 

WHEREAS, pursuant to the New Omnibus Agreement, the Contribution Agreement and
the Purchase Agreement, the Williams Parties have certain obligations to
indemnify, defend and hold harmless the Magellan Parties; and

 

WHEREAS, in consideration of the payments to be made by the Williams Parties, in
accordance herewith, the Magellan Parties are willing to release the Williams
Parties from (i) certain obligations of indemnification that are set out in the
Subject Agreements, except as specifically provided herein and (ii) liabilities
that are environmental in nature that relate to the assets, businesses or
properties of the Magellan Parties as more specifically described herein; and

 

WHEREAS, currently with execution of this Agreement, the parties to the Purchase
Agreement have executed Amendment No. 3 thereto, which provides for the
reduction of the indemnification “cap” contained in Section 8.2(d)(i) thereof
from $175 million to $160 million.

 

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NOW, THEREFORE, in consideration of the mutual terms, conditions and other
agreements as set forth herein, the parties hereto hereby agree to as follows:

 

ARTICLE I

 

COMPENSATION

 

Section 1.1 Compensation

 

(a) As consideration for the release by the Magellan Parties and their
respective affiliates, successors and assigns of certain indemnity obligations
as more specifically set forth herein, Williams, WNGL, WES and Williams GP, each
hereby agree to pay to MMP One Hundred Seventeen Million Five Hundred Thousand
Dollars, $117,500,000 (the “Aggregate Payment”) in four annual payments, as
follows:

 

(i) the first payment of $35,000,000 shall be paid on or before July 1, 2004;

 

(ii) the second payment of $27,500,000 shall be paid on or before July 1, 2005;

 

(iii) the third payment of $20,000,000 shall be paid on or before July 1, 2006;
and

 

(iv) the fourth payment of $35,000,000 shall be paid on or before July 1, 2007.

 

(b) In the event that the Magellan Parties collect third-party receivables
pursuant to Section 5.4(b), an amount equal to 50% of the amounts collected, in
each case, net of any and all out-of-pocket costs and expenses paid to third
parties by the Magellan Parties, (i) shall be subtracted from the amount due on
the upcoming payment date and (ii) be added to the amount due on the final
payment date.

 

(c) In the event that Williams, WNGL, WES or Williams GP does not make the
annual payments specified under Section 1.1(a) above on or before the designated
due date therefor, such amount shall accrue interest at an annual rate of 9.0%
from the due date until the date of payment. If the payment due date does not
fall on a business day, such due date shall be the first business day succeeding
such date.

 

Section 1.2 Payment Procedure

 

Each payment specified under Section 1.1(a) above shall be paid by wire transfer
to MMP of immediately available funds made to a bank in the United States of
America, as designated in writing by MMP not less than three business days in
advance of the date specified for the applicable payment.

 

Section 1.3 Use of funds

 

MMP shall be responsible for all known environmental liabilities associated with
the assets, business or properties of the Magellan Parties as provided herein
and shall use the funds received from Williams hereunder, or an equivalent
amount otherwise on hand or available through debt agreements or capital
markets, for such purposes.

 

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ARTICLE II

 

WILLIAMS PARTIES’ REPRESENTATIONS AND WARRANTIES

 

Section 2.1 Validity of Agreement: Authorization

 

Each of the Williams Parties has the power and authority to enter into this
Agreement and to carry out its obligations hereunder. No further proceedings on
the part of any of the Williams Parties are necessary to authorize such
execution, delivery and performance of this Agreement. This Agreement has been
duly executed and delivered by each of the Williams Parties and constitutes a
valid and binding obligation enforceable against each of the Williams Parties in
accordance with its terms (except to the extent that its enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
law affecting the enforcement of creditors’ rights generally or by general
equitable principles).

 

Section 2.2 Consents and Approvals

 

No consent, approval, waiver or authorization of, or filing, registration or
qualification with, any Governmental Authority or any other Person on the part
of Williams Parties is required to execute and deliver this Agreement or to
perform its respective obligations hereunder.

 

Section 2.3 Solvency

 

Each of the Williams Parties is, and immediately after entering into this
Agreement will be, Solvent. For purposes of this Agreement, “Solvent” means,
with respect to the applicable party on the date of this Agreement, that (a) the
fair value of the property of such party is greater than the total amount of
liabilities, including, without limitation, contingent liabilities of such party
that would constitute liabilities under GAAP, (b) the present fair saleable
value of the assets of such party is not less than the amount that will be
required to pay its debts as they become absolute and matured, taking into
account the possibility of refinancing such obligations and selling assets, (c)
such party does not intend to, and does not believe that it will, incur debts or
liabilities beyond such party’s ability to pay such debts as they mature taking
into account the possibility of refinancing such obligations and selling assets
and (d) such party is not engaged in business or a transaction, and does not
intend to engage in business or a transaction, for which such party’s property
remaining after such transaction would constitute unreasonably small capital.

 

Section 2.4 No Conflict or Violation

 

The execution, delivery and performance of this Agreement by any of the Williams
Parties does not and will not: (a) violate or conflict with any provision of the
certificates of incorporation, by-laws, certificates of formation, limited
liability company operating agreements, partnership or limited partnership
agreements or other formation or governing documents of Williams Parties; (b)
violate any applicable provision of law, statute, judgment, order, writ,
injunction, decree, award, rule, or regulation of any foreign, federal, tribal,
state or local

 

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government, court, arbitrator, agency or commission or other governmental or
regulatory body or authority (“Governmental Authority”); (c) violate, result in
a breach of, constitute (with due notice or lapse of time or both) a default or
cause any obligation, penalty or premium to arise or accrue under any material
contract, lease, loan agreement, mortgage, security agreement, trust indenture
or other agreement or instrument to which any of the Williams Parties is a party
or by which any of them is bound.

 

Section 2.5 Insurance

 

Set forth on Schedule 2.5(a) hereto is a complete and accurate list of all
policies of insurance currently maintained by the Williams Parties which were
purchased to provide coverage solely for the business, assets and properties of
the Magellan Parties, as described in the “Prospectus” (as defined in the New
Omnibus Agreement), for which a Williams Party or an affiliate is the named
insured or is an additional named insured (the “MMP Policies). To Williams’
Knowledge, no notice of cancellation has been given with respect to any such MMP
Polices and all premiums due on each MMP Policy have been paid in a timely
manner. The Magellan Parties have been provided with copies of all of the MMP
Policies including all endorsements, riders and other amendments in the
possession of the Williams Parties that define, limit or modify coverage. The
term “Williams’ Knowledge” as used in this Section 2.5 means the actual
knowledge of the person(s) identified on Schedule 2.5(b) hereto, without
independent inquiry.

 

ARTICLE III

 

MAGELLAN PARTIES’ REPRESENTATIONS AND WARRANTIES

 

Section 3.1 Validity of Agreement: Authorization

 

Each of the Magellan Parties has the power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement and the performance of each of the Magellan Parties
obligations hereunder have been duly authorized by the Board of Directors and
members, as applicable, and no other proceedings on the part of any of the
Magellan Parties is necessary to authorize such execution, delivery and
performance. This Agreement has been duly executed and delivered by each of the
Magellan Parties and constitutes a valid and binding obligation enforceable
against each of the Magellan Parties in accordance with its terms (except to the
extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other similar law affecting the enforcement of
creditors’ rights generally or by general equitable principles).

 

Section 3.2 Consents and Approvals

 

No consent, approval, waiver or authorization of, or filing, registration or
qualification with, any Governmental Authority or any other Person on the part
of Magellan Parties is required to execute and deliver this Agreement or to
perform its respective obligations hereunder.

 

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Section 3.3 No Conflict or Violation

 

The execution, delivery and performance of this Agreement by any of the Magellan
Parties does not and will not: (a) violate or conflict with any provision of the
certificates of incorporation, by-laws, certificates of formation, limited
liability company operating agreements, partnership or limited partnership
agreements or other formation or governing documents of Magellan Parties; (b)
violate any applicable provision of law, statute, judgment, order, writ,
injunction, decree, award, rule, or regulation of any Governmental Authority;
(c) violate, result in a breach of, constitute (with due notice or lapse of time
or both) a default or cause any obligation, penalty or premium to arise or
accrue under any material contract, lease, loan agreement, mortgage, security
agreement, trust indenture or other agreement or instrument to which any of the
Magellan Parties is a party or by which any of them is bound.

 

Section 3.4 Solvency

 

Each of the Magellan Parties is, and immediately after entering into this
Agreement will be, Solvent.

 

ARTICLE IV

 

RELEASE OF CERTAIN INDEMNIFICATION OBLIGATIONS

 

Section 4.1 Release

 

(a) Each of the Magellan Parties, on behalf of themselves and any persons or
entities that may be entitled to assert rights and remedies under any of the
Subject Agreements, hereby fully and completely covenants not to sue, waives and
releases and forever discharges the Williams Parties and their respective
members, officers, directors, employees, agents, successors and assigns, and
their affiliates, subsidiaries and their respective members, officers,
directors, employees, agents, successors and assigns from any and all past,
present and future indemnification obligations that are a result of or arise out
of the obligations contained in the following provisions of the Subject
Agreements:

 

(i) Article IV of the New Omnibus Agreement;

 

(ii) (A) clause (a) of Section 10.1 of the Contribution Agreement, except for
those indemnification obligations that are a result of or arise out of Section
3.12(c) (Employees and Benefits) and, to the extent it relates to employee
benefit matters, Section 3.12(d) (Employees and Benefits), and Section 3.27
(Excluded Assets), and (B) clause (b) of Section 10.1 of the Contribution
Agreement;

 

(iii) (A) clause (a) of Section 8.2 of the Purchase Agreement, but only to the
extent relating to, arising out of or resulting from any breach or inaccuracy of
any representation in Section 2.15 (Compliance with Law), and Section 2.21
(Environmental, Health and Safety Matters), and (B) any of the matters listed on
Schedule 2.15 or Schedule 2.21 of the Purchase Agreement, including all
supplemental disclosures made thereto, except as disclosed on Schedule 4.1.1
hereto; provided, however, for the avoidance of doubt, that nothing in this
Section 4.1(a)(iii)(B) releases or is intended to release the Williams Parties
from any breaches of or inaccuracies in Section 2.12 of the Purchase Agreement.

 

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The foregoing release shall apply to any claims or notices for indemnification
previously made by any of the Magellan Parties to any of the Williams Parties,
by the delivery of notice or otherwise, pursuant to any of the provisions of, or
schedules to, the Subject Agreements that are subject to release as provided for
in clauses (i) through (iii) above; provided, however that Williams shall make
payment of $2.1 million as a full and complete settlement of all liabilities in
connection with all invoices submitted prior to the Effective Date of this
Agreement by the Magellan Parties within ten (10) business days of execution of
this Agreement.

 

To the extent not covered by the foregoing provisions of this Section 4.1(a),
each of the Magellan Parties, on behalf of themselves and any persons or
entities that may be entitled to assert rights and remedies under any of the
Subject Agreements, also hereby fully and completely covenants not to sue,
waives and releases and forever discharges the Williams Parties and their
respective members, officers, directors, employees, agents, successors and
assigns, and their affiliates, subsidiaries and their respective members,
officers, directors, employees, agents, successors and assigns from any and all
past, present or future causes of action, rights of contribution or
indemnification obligations that are environmental in nature on the part of any
of the Williams Parties or any of their affiliates in favor of any of the
Magellan Parties arising under the Subject Agreements, any other written or oral
agreements among the parties or under applicable law with respect to the assets,
businesses or properties of the Magellan Parties or their affiliates or
predecessors that arise out of or that are a result of facts, occurrences,
conditions, events or circumstances (collectively, “Occurrences”) that occur
before the Closing Date (as defined in the Purchase Agreement) without regard to
the date of discovery of such Occurrences, including without limitation (i) the
breach of or failure to comply with or liability arising under any Environmental
Laws (as defined in the Purchase Agreement), (ii) the presence of Hazardous
Materials (as defined in the Purchase Agreement) in, or their release into the
air, surface or subsurface soils or in the groundwater at, on, in, under or in
the vicinity of the assets, businesses or properties of the Magellan Parties or
(iii) the matters listed on Schedule 4.1.2 hereto, notwithstanding the fact in
any such case that the Occurrence giving rise to such cause of action,
obligation or right may also involve the breach of a provision of any of the
Subject Agreements that is not subject to the release contained in the foregoing
provisions of this Section 4.1(a) and which is not released under this Section
4.1(a).

 

For the avoidance of doubt, Schedule 4.1.3 hereto provides examples of the types
of Claims or other matters that would be subject to the provisions of the
immediately preceding paragraph and this Section 4.1 if such Claims or other
matters arise out of, are caused by or result of from, whether directly or
indirectly, an Occurrence that is environmental in nature. However, also for the
avoidance of doubt, the provisions of the immediately preceding paragraph and
this Section 4.1 do not reach and are not intended to release or discharge the
Williams Parties or their respective members, officers, directors, employees,
agents, successors and assigns, or their affiliates, subsidiaries or their
respective members, officers, directors, employees, agents, successors or
assigns from any past, present or future causes of action, rights of
contribution or indemnification obligation arising under the Subject Agreements,
any other written or oral agreements among the parties or under applicable law
in connection with the Excluded Assets (as defined in the Contribution
Agreement, the Purchase Agreement or the Contribution, Conveyance and Assumption
Agreement, dated February 9, 2001, entered into in connection with the initial
public offering of MMP).

 

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(b) The parties hereto acknowledge and agree that this Section 4.1 shall require
MMP to indemnify and defend, save and hold the Williams Parties and their
affiliates harmless against any Claim (as defined below) by a third-party
arising out of, resulting from or any of the matters covered by the provisions
of Section 4.1(a) above as to which the Magellan Parties provided a release
pursuant to this Section 4.1.

 

(c) For the avoidance of doubt, the parties hereto acknowledge and agree that
this Section 4.1 shall include any damage, judgment, fine, penalty, demand,
settlement, liability, loss, cost, expense (including attorneys’, consultants’
and experts’ fees) claim or cause of action whether fixed, contingent or
unliquidated, including but not limited to the Comprehensive, Environmental
Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq., as now or as
hereafter amended (“CERCLA”) or any similar or successor Federal law or any
state equivalent to CERCLA, as may now or hereafter be in effect.

 

Section 4.2 Discharge and Settlement of Obligations

 

(a) This Agreement settles and is in satisfaction of all past, present and
future indemnification obligations set forth in Section 4.1 on the part of the
Williams Parties or any affiliate thereof in favor of Magellan Parties, any of
their affiliates, successors or assigns with respect to any damage, judgment,
fine, penalty, demand, settlement, liability, loss, cost, expense, claim, suit
or cause of action (including reasonable attorneys’, consultants’ or experts’
fees related thereto) of any kind or nature whatsoever, both known and unknown,
except for the performance by Williams Parties of their obligations as set forth
in this Agreement.

 

(b) For purposes of clarity, this Agreement has no effect on (i) MMH’s
obligations under Section 8.2(b) of the Purchase Agreement, (ii) MMH’s
obligations to MMP under Section 1.3(e) and Section 8.2(c) of the Purchase
Agreement or (iii) MMP’s obligations under Section 10.2 of the Contribution
Agreement.

 

Section 4.3 Indemnification Relating to Certain Matters

 

(a) MMP agrees to indemnify and defend, save and hold the Williams Parties and
their affiliates harmless if any such Williams Party or affiliate thereof shall
suffer any damage, judgment, fine, penalty, demand, settlement, liability, loss,
cost, expense, claim, suit or cause of action (including reasonable attorneys’
fees related thereto) (collectively, a “Claim”) filed by, arising out of,
resulting from or relating to (i) the Claims set forth on Schedule 4.3(a)
hereto, and (ii) any current or former employees of the Williams Parties or any
of their predecessors, subsidiaries or affiliates as to whom 50% or more of
their work assignment was to perform work or services benefiting for or on
behalf of Magellan GP, MMP or any of their predecessors, subsidiaries or
affiliates (“Subject Parties”) subsequent to February 9, 2001 or pursuant to the
Transition Services Agreement, dated June 17, 2003, between Williams and MMH;
provided, however, that such Claim arose out of or occurred during the
performance of work or services performed by such current or former employees
for the benefit or on behalf of such Subject Parties. To the extent allowable
under applicable law, the Williams Parties shall provide MMP copies of those
portions of the employment files for any employee for which the Williams Parties
seeks indemnification from under this Section 4.3 that are necessary for the
defense of such Claim and shall fully cooperate in responding to any reasonable
request for

 

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access to data, employees or other information necessary to the defense of the
matter; provided, however, MMP will comply with all applicable confidentiality
requirements with respect to any such files, data or information so provided. If
the Williams Parties do not provide MMP with such necessary portions of the
employee files relating to any such Claim, the indemnification obligations of
MMP under this Section 4.3 relating to such Claim shall be extinguished. The
foregoing indemnification obligations of MMP shall not be reduced as a result of
the availability of insurance coverage under policies held by the Williams
Parties; provided, however, the Williams Parties will use commercially
reasonable efforts (which, in all cases, for purposes of this Agreement shall
not require any party to file or initiate any judicial claim or action), to
pursue claims under any applicable insurance policies held by the Williams
Parties that may provide coverage in connection with the defense or resolution
of any matter covered under this Section 4.3. Any amounts recovered by the
Williams Parties pursuant to any such claim shall be paid to MMP, provided, that
such amounts paid shall in no event exceed that total amount expended by MMP in
connection with its indemnification obligations hereunder less any out-of-pocket
costs and expenses paid to third parties by the Williams Parties in connection
with pursuing such claim. This Section 4.3(a) does not apply to any employee
benefit matters and in no way waives, limits or resolves, in whole or in part,
the indemnification obligations of the Williams Parties for breaches of the
representation and warranty contained in (i) Section 3.12(c) of the Contribution
Agreement and, (ii) to the extent they relate to employee benefit matters,
Section 3.12 (d) of the Contribution Agreement or Section 4.3 of the Purchase
Agreement.

 

(b) With respect to the matters set forth on Schedule 4.3(b) hereto, MMP shall
bear the costs of defending the Williams Parties and the Magellan Parties
against the claims asserted in that case up to final resolution of the matter.
In the event that Williams determines that it needs separate counsel in the
matters set forth on Schedule 4.3(b) hereto, it shall be entitled to retain one
at its own costs and expense. The costs of satisfying any settlement or judgment
in those matters shall be determined by reference to the evidence concerning the
parties’ respective liability for the claims asserted. MMP shall be responsible
for that portion of the matters on Schedule 4.3(b) hereto that relate to work or
services benefiting the Subject Parties and the Williams Parties shall be
responsible for that portion of such matters that relate to work or services
that do not benefit the Subject Parties. In the event that the parties are not
able to agree upon their respective liability for the claims asserted, they
shall initiate a mediation of the dispute using Judge Thomas A. Brett, or if
unavailable a substitute mediator mutually agreeable to the parties, and shall
be bound by such mediator’s decision regarding their respective shares of the
liability for the claims asserted and the costs of any settlement or judgment
entered shall be allocated according to those shares.

 

ARTICLE V

 

PRIOR OBLIGATIONS, COSTS, EXPENSES AND INSURANCE

 

Section 5.1 Payment of Costs and Expenses

 

Each party to this Agreement shall be solely responsible for the payment of any
and all direct or indirect costs or services, provided by, but not limited to,
consultants, attorneys, contractors, agents and advisors relating to or arising
out of any matters covered under Section 4.1 above for costs and services
provided for said party prior to the Effective Date.

 

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Section 5.2 Notice to Service Providers

 

The Williams Parties have entered into certain contracts with third parties for
services or goods in connection with or arising out of the matters covered under
Section 4.1 and Section 4.3 above. The Williams Parties shall give notice to all
such third parties to such contracts to the effect that MMP will be
administering these matters after the Effective Date, and MMP and entities
controlled by MMP may contact and/or enter into contracts with any of such third
parties for the provisions of the same or similar services or goods after the
Effective Date. This Section 5.2 above does not apply to any legal counsel
retained by the Williams Parties.

 

Section 5.3 Procedures for Transfer of Matters and Litigation Currently Managed
by Williams to Magellan Parties

 

The Williams Parties shall cooperate with MMP and provide appropriate and timely
assistance in the transfer to MMP of all matters and litigation covered under
Section 4.1 and Section 4.3 above that are currently managed by Williams,
including all matters that are listed on Schedule 2.16 to the Purchase
Agreement. The Williams Parties shall direct any legal counsel retained by the
Williams Parties to provide copies of their files, correspondence, date and
records to the Magellan Parties so long as the Williams Parties are advised by
such or other legal counsel that the provision of any of such files,
correspondence, date and records would not jeopardize the ability of the
Williams Parties to maintain attorney-client privilege as to third parties with
respect to the matters to which such files relate. The Williams Parties will
consider in good faith any request by the Magellan Parties that both such
parties enter into or execute a joint defense agreement satisfactory to both
parties.

 

Section 5.4 Insurance and Other Receivables

 

(a) Beginning on the Effective Date, the Williams Parties shall make a written
request to the appropriate insurers that they consent to the assignment and
transfer to the entity designated by MMP, all of the Williams Parties’ rights
and interests, including the rights and interests of any beneficiaries, held
under the MMP Policies. In addition, the Williams Parties shall request in
writing to such insurers that the MMP Policies be amended to reflect MMP and its
subsidiaries as primary named insureds. Any proceeds received from insurance
claims under the MMP Polices assigned or transferred under this Section 5.4(a)
that have not been completely settled between the insurance carrier and the
policy owner or beneficiary that were filed prior to the Effective Date shall be
for the benefit of MMP or its designee; provided, however, the Williams Parties
or any affiliate thereof shall be promptly reimbursed by MMP for any
out-of-pocket costs and expenses paid to third parties in connection with the
receipt of such proceeds. From and after the Effective Date, the Williams
Parties shall have no obligation to provide any insurance coverage or benefits
to the Magellan Parties, their affiliates or their business or properties.

 

(b) The provisions of Section 1.1(b) above shall apply to any amounts paid to
the Magellan Parties (“Third-Party Receivables”) in settlement or to satisfy a
judgment (excluding, for clarity purposes, any insurance proceeds from the MMP
Policies referred to in Section 5.4(a)) arising out of any request, claim or
action made, controlled or filed by the Magellan Parties or Williams Parties or
any affiliates thereof but only to the extent that such

 

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request, claim or action is covered by the indemnity provisions of the Subject
Agreements as to which the Magellan Parties are herein providing a release
pursuant to Section 4.1. The Magellan Parties shall promptly provide notice to
the Williams Parties of any Third-Party Receivables collected under this Section
5.4(b) and shall provide the Williams Parties a full accounting related to such
third party receivables from the Magellan Parties, within 60 days of a request
by the Williams Parties.

 

(c) Notwithstanding the foregoing provisions of this Section 5.4, nothing in
this Agreement shall have any effect on the Williams Parties obligations under
Section 4.23 (WEG Insurance Continuation) of the Purchase Agreement.

 

ARTICLE VI

 

COOPERATION AND CONTROL

 

Section 6.1 Cooperation

 

Each party to this Agreement shall use its commercially reasonable efforts to
cooperate in good faith and assist with consummating the actions contemplated by
this Agreement. Each party to this Agreement shall comply with and fulfill the
requirements of the attached Schedule 6.1 hereto.

 

ARTICLE VII

 

[Reserved]

 

ARTICLE VIII

 

MISCELLANEOUS PROVISIONS

 

Section 8.1 Successors and Assigns

 

This Agreement shall inure to the benefit of, and be binding upon, the parties
hereto and their respective successors and permitted assigns. No party shall
sell, assign or otherwise transfer all or any of its obligations hereunder
without the prior written consent of the other parties, such consent not to be
unreasonably withheld or delayed.

 

Section 8.2 Notices

 

All notices and other communications given or made pursuant hereto shall be in
writing and shall be deemed to have been duly given or made if delivered
personally or sent by overnight courier or sent by facsimile (with evidence of
confirmation of receipt) to the parties at the following address:

 

  (a) If to any of the Williams Parties:

 

The Williams Companies, Inc.

One Williams Center

Tulsa, Oklahoma 74172

Facsimile: (918) 573-8705

Attention: James Bender, General Counsel and

Senior Vice President

 

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  (b) If to any of the Magellan Parties:

 

Magellan Midstream Partners, L.P.

One Williams Center

Tulsa, Oklahoma 74172

Facsimile: (918) 573 -1005

Attention: Lonny Townsend, General Counsel

 

Section 8.3 Entire Agreement

 

This Agreement including the schedules hereto represents the entire agreement
and understanding of the parties with reference to the transactions set forth
herein and no representations and warranties have been made in connection
herewith other than those expressly set forth herein. This Agreement supersedes
all prior negotiations, discussion, correspondence, communications,
understandings and agreements between the parties relating to the subject matter
hereof.

 

Section 8.4 Titles and Headings

 

The Article and Section headings contained in this Agreement are solely for
convenience of reference and shall not affect the meaning or interpretation of
this Agreement or of any term or provision hereof.

 

Section 8.5 Signatures and Counterparts

 

The Agreement may be executed in two or more counterparts, each of which shall
be deemed an original and all of which together shall be consider one and the
same agreement.

 

Section 8.6 Severability

 

If any provision of the Agreement is declared illegal or unenforceable by reason
of a decree of a court of last resort, then the parties shall promptly meet and
negotiate substitute provisions for those rendered or declared illegal or
unenforceable, but all of the remaining provisions of this Agreement shall
remain in full force and effect.

 

Section 8.7 Governing Law

 

This Agreement shall be governed and construed in accordance with the
substantive laws of the State of Oklahoma.

 

- 12 -

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Section 8.8 Waiver and Amendments

 

This waiver by any party hereto of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach, whether
or not similar, unless such waiver specifically states that it is to be
construed as a continuing wavier. Agreement may be amended, modified or
supplement only by a written instrument executed by the parties hereto.

 

*    *    *    *    *

 

- 13 -

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written, the “Effective Date:”

 

WILLIAMS PARTIES WILLIAMS ENERGY SERVICES, LLC By:  

/s/ Phillip D. Wright

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Name:   Phillip D. Wright Title:   Authorized Signatory WILLIAMS NATURAL GAS
LIQUIDS, INC. By:  

/s/ Phillip D. Wright

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Name:   Phillip D. Wright Title:   Authorized Signatory WILLIAMS GP LLC By:  

/s/ Phillip D. Wright

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Name:   Phillip D. Wright Title:   Authorized Signatory THE WILLIAMS COMPANIES
By:  

/s/ Phillip D. Wright

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Name:   Phillip D. Wright Title:   Authorized Signatory MAGELLAN PARTIES
MAGELLAN MIDSTREAM PARTNERS, L.P. By Its General Partner, Magellan GP, LLC By:  

/s/ Don R. Wellendorf

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Name:   Don R. Wellendorf Title:   Chief Executive Officer

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

MAGELLAN GP, LLC

By:

 

/s/ Don R. Wellendorf

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

Name:

 

Don R. Wellendorf

Title:

 

Chief Executive Officer

MAGELLAN MIDSTREAM HOLDINGS, L.P.

By: Magellan Midstream Management, LLC, its

        General Partner:

By:

 

/s/ Don R. Wellendorf

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

Name:

 

Don R. Wellendorf

Title:

 

Chief Executive Officer

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Schedule 2.5(a)

 

MMP Policies

 

COVERAGE TYPE

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POLICY PERIOD

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POLICY NUMBER

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

 

INSURER

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LOCATION
REFERENCE

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Pollution Legal Liability

  6-10-99/04   PLS 2679754   AIG   Amerada Hess

Pollution Legal Liability

  8-31-00/05   PLS 6190141   AIG   Wyatt Terminal

Pollution Legal Liability

  12-1-01/06   PLS 6191651   AIG   Gibson/Geonet

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Schedule 2.5(b)

 

Williams’ Knowledge Person(s)

 

1. David Ensminger, Director of Risk Management and Insurance

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Schedule 4.1.1

 

1. All of the matters in Schedule 2.21 referred to as “Williams Pipe Line
Company, L.L.C. Divestitures” including:

 

  a. State Line Station, Union City, In;

 

  b. Augusta Refinery (former), Augusta, KS;

 

  c. Kenneth Station, Kenneth, KS;

 

  d. Neodesha Refinery, Neodesha, KS;

 

  e. Read Street Facility, Omaha, NE;

 

  f. Former Sioux Falls – 41st Street Terminal – Historical, Sioux Falls, SD

 

  g. Coffeyville, Coffeyville KS

 

  h. Lower Afton Road, Maplewood MN

 

  i. Bond Property – Turner Property Road, East of Columbia, MO.

 

  j. Broadwell (IL – Wilmington #3-12)

 

  k. 25th North 57th Avenue Facility, Phoenix, Az.

 

  l. 125 North 53rd Avenue Facility, Phoenix, Az

 

2. Notwithstanding the provisions of Schedule 6.1, with respect to the matters
in g, h, i and j above, the Williams Parties shall continue to manage the
investigation and remediation consistent with the provisions of the Purchase
Agreement and the Magellan Parties shall continue to reimburse those expenses in
accordance with such provisions.

 

3. All of the matters listed on Schedule 2.21 under “Ethanol (Williams Ethanol
Services, Inc. and Nebraska Energy, L.L.C.)” including the matters listed for
Williams Ethanol Services, Inc. and the matters listed for Nebraska Energy.
L.L.C:

 

4. The following matters identified in the Response To United States
Environmental Protection Agency Section 308 Clean Water Act Information Request
Dated July 2, 2001

 

  a. Event 10        Coffeyville, Kansas August 3, 1999 Release

 

  b. Event 29        Sandoval, New Mexico, April 13, 2001 Release

 

  c. Event 75        Longhorn/Cat Springs Station, Texas October 7, 1998
Discharge

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Schedule 4.1.2

 

  a. Lone Jack indemnity claim involving WPL and a pump station site

 

  b. WPL v. Luttrell Construction Company

 

  c. Luttrell Construction Company v. WPL

 

  d. Patricia and David Raffel, and Kalney Teel, and Woodland Place Homes
Association v. WPL and Luttrell Construction Company and Hoelting Enterprises
L.L.C. and Crosse Pointe Development LLC

 

  e. Hoelting Enterprises L.L.C. v Magellan Pipeline Company LLC

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Schedule 4.1.3

 

a. Economic losses of third parties

 

b. Operation and maintenance expenses

 

c. Grass cutting, right of way clearing

 

d. Pipeline safety or integrity issues

 

e. any personal injury claims by third parties, including claims for emotional
distress

 

f. Injunctive relief arising under any Environmental Laws or Common Law

 

g. MTBE, including any cause of action, such as product liability.

 

h. Replacement, repair or maintenance of above ground or underground storage
tanks or tank foundations

 

i. Additional infrastructure or monitoring systems for any pipeline or pipeline
related assets

 

j. PCBs.

 

j. TOSCA claims

 

j. Facility Response Plans

 

k. Spill Prevention, Control, and Countermeasure Plans

 

l. Internal costs of the Magellan Parties of any kind

 

m. Abandoning of Wells

 

n. Monitoring of wells

 

o. Attorney’s fees claimed by third parties

 

p. Natural resource damages claims

 

q. Engineering and construction costs and expenses

 

r. Asbestos Containing Materials

 

s. Environmental Justice Claims

 

t. Groundwater Contamination

 

u. Soil Contamination

 

v. Surface Water Contamination

 

w. Air Emissions

 

x. Environmental Impact evaluations under NEPA and state equivalents

 

y. Leak detection and cathodic protection claims

 

z. the Department of Transportation Regulations, Title 49 CFR Part 195

 

aa. any statutes or regulations promulgated by or administered under the
authority of the Office of Pipeline Safety, the Occupational Safety and Health
Administration, the Mineral Management Services, the Environmental Protection
Agency, the National Oceanographic Atmospheric Administration, the U.S. Army
Corps of Engineers or any similar or successor federal law or any state
equivalent of any of the foregoing, as may now or hereafter be in effect.

 

bb. the presence of Hazardous Materials (as defined in the Purchase Agreement)
in, or their release into the air, surface or subsurface soils or in the
groundwater at, on, in, under in the vicinity of any third-party disposal
site(s).

 

In addition, for purposes of clarification, if during remediation or
investigation of any asset, business or property of the Magellan Parties a
right-of-way defect or similar matter is discovered, the release and
indemnification of the Williams Parties provided for under Section 4.1 of the
Agreement shall nevertheless apply. The Magellan Parties may not assert that
such right-of-way defect or similar matter relieves them of their obligations
under such Section 4.1.

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The Williams Parties acknowledge and agree that nothing in this Section 4.1(a)
was intended to or does relieve them of their responsibility for solely those
matters within the scope of Section 2.12 of the Purchase Agreement or Article V
of the New Omnibus Agreement.

 

For the avoidance of doubt, nothing in Section 4.1(a) of this Agreement is
intended to include nor does it include any causes of action, rights of
contribution or indemnification that may relate to The EPA Toxics Baseline
Agreement by and between the Williams Companies, Inc. and Magellan Midstream
Holdings, L.P.

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Schedule 4.3(a)

 

Certain Claims Subject to Indemnification by MMP

 

  a. Jolly v. WPL

 

  b. WPL v. Falletti

 

  c. WPL v. Henkle

 

  d. WPL v. Luttrell Construction Company

 

  e. Luttrell Construction Company v. WPL

 

  f. Patricia and David Raffel, and Kalney Teel, and Woodland Place Homes
Association v. WPL and Luttrell Construction Company and Hoelting Enterprises
L.L.C. and Crosse Pointe Development LLC

 

  g. WPL v. Simmons

 

  h. Moody v. WPL

 

  i. Wyandotte Nation v. WPL

 

  j. Willey v. WPL

 

  k. WilTel Communications v. WPL

 

  l. Lee Olson v. WPL

 

  m. Firstworthing Company Limited and Arbors of Olathe, L.P. v. WPL

 

  n. William Green, et al. v. WilTel Communications Group, L.L.C.

 

  o. WTH v. Amerada Hess Corporation

 

  p. Graves v. WTH

 

  q. Hernandez v. WTH

 

  r. Elementis Chromium v. Coastal & El Paso v. Amerada Hess, the Williams
Companies, Inc.

 

  s. Carroll Ray Lewis and Jeanna Lewis v. The Williams Companies, et al

 

  t. Motiva Enterprises LLC v. Williams Energy Services

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Schedule 4.3(b)

 

  a. Vonna Seeber v. The Williams Companies, Inc. et al.

 

  b. Any new claims brought by the plaintiff or related person related to her
employment by the Subject Parties or the Williams Parties.

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Schedule 6.1

 

Control

 

(a) Subject to Item 2 on Schedule 4.1.1, notwithstanding any other provision to
the contrary in any of the Subject Agreements, subject to the requirements of
Subsection (c) of this Schedule 6.1 below, from and after the Effective Date the
Magellan Parties shall have the sole authority to conduct and control the
investigation or remediation of any site and the defense, settlement or
resolution of any claim, action or matter in connection with or arising out of
any matters covered under Sections 4.1 and 4.3 of the Agreement.

 

(b) Subject to Item 2 on Schedule 4.1.1, with respect to all sites, proceedings,
claims, actions or matters in connection with or arising out of any matters
covered under Sections 4.1 and 4.3 of the Agreement and as to which the Williams
Parties are currently involved, or in the future are named by any third party,
subject to the requirements of Subsection (c) of this Schedule 6.1 below, the
Williams Parties hereby covenant from and after the Effective Date as follows:

 

(i) the Magellan Parties shall have the sole authority to conduct and control
the defense or resolution of any such sites, proceedings, matters, claims or
actions, including sole responsibility to pay any fees, costs or expenses of
counsel or any other advisors, consultants or third parties engaged in
connection therewith;

 

(ii) the Williams Parties shall not initiate or engage in any discussions with
third parties or any Governmental Authority about any such sites, proceedings,
matters, claims without the knowledge of the Magellan Parties, except in the
case of communications by the Williams Parties with their insurance carriers;

 

(iii) the Williams Parties agree to be represented by counsel for the Magellan
Parties unless the applicable rules of ethics prevent the dual representation of
the Williams Parties and the Magellan Parties by common counsel; and

 

(iv) the Williams Parties, where necessary, shall use all commercially
reasonable best efforts to cooperate with the Magellan Parties in their handling
or resolution of any such sites, proceedings, matters or claims.

 

(c) The provisions of subsection (b) of this Schedule 6.1 shall not apply to the
defense or resolution of the matter relating to the Environmental Protection
Agency’s Request for Information and the Williams Parties’ January 2001
responses as well as the letter, dated March 11, 2004, from the U.S. Department
of Justice received by MMP concerning potential violations of the Clean Water
Act insofar as they concern the assets, business and properties of the Magellan
Parties (the “308 Matter”) and instead the following provisions shall apply:

 

(i) counsel for the Williams Parties, at the sole cost and expense of the
Williams Parties, shall have the right, but not the obligation, to fully
participate in preparing the defense of this matter, including providing advice
to the Parties regarding procedural, substantive

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and strategic decisions, which the Magellan Parties shall consider in good
faith, taking into consideration the respective interests of the parties and
their mutual interests in maintaining and preserving good relationships and
their good-standing and reputation with federal and state regulators. In
addition, James Scheel (or such other person to which the Magellan Parties
consent, not to be unreasonably withheld), on behalf of the Williams Parties,
and counsel for the Williams Parties (to which the Magellan Parties consent, not
to be unreasonably withheld), shall have the right, but not the obligation, to
attend all meetings, telephone conferences or other types of communications
between the Magellan Parties or any governmental agencies, including any
presentations in person to any such governmental agencies. The Magellan Parties
shall arrange meetings and telephone conferences or other types of
communications with the Williams Parties as necessary to implement these
requirements. The Magellan Parties shall keep the Williams Parties fully
informed of any discussions with or inquiries from the federal or state
regulators relative to the 308 Matter to the extent that the Williams Parties
did not participate in those discussions. Counsel for the Williams Parties shall
be provided simultaneous copies of all correspondence regarding this matter and
shall have the right, but not the obligation, to review and comment in advance
on any written submission to any governmental agency or third party, including
any exhibits to such submission, based on reasonable deadlines agreed to by the
Parties;

 

(ii) The Williams Parties shall not initiate any discussions with third parties
or any federal or state regulator about the 308 Matters without the advance
consent of the Magellan Parties; which shall not be unreasonably withheld;
provided, however, that this shall not prevent the Williams Parties or their
counsel from responding to questions or inquiries from the state or federal
regulators regarding the 308 Matter; provided, further, that the Williams
Parties shall keep the Magellan Parties fully informed of any discussions with
or inquiries from the federal or state regulators relative to the 308 Matter to
the extent that the Magellan Parties did not participate in those discussions;

 

(iii) at any time that counsel for the Williams Parties reasonably believes that
the interests of the Williams Parties are divergent from the interests of the
Magellan Parties and to the extent that the Williams Parties’ counsel’s advice
is rejected and or that the Magellan Parties are acting adversely or plan to act
adversely to the interests of the Williams Parties, counsel for the Williams
Parties shall bring that issue to the attention of the Magellan Parties and
Williams Parties;

 

(iv) in the event that Counsel for the Williams Parties brought a matter to the
attention of the Magellan Parties pursuant to clause (iii) above, counsel for
both Parties will meet in an attempt to resolve the matter to the mutual
satisfaction of the Parties;

 

(v) if the attorneys for the Parties are not able to resolve the matter on terms
that are mutually acceptable, then the matter will be referred to Rick Olson of
Magellan GP and James Scheel of WES for them to resolve to the mutual
satisfaction of the Parties; and

 

(vi) if the individuals named in clause (v) above are not able to resolve the
matter on terms that are mutually acceptable, then the matter will be referred
to the Chief Executive Officers of Magellan GP and WES for them to resolve to
the mutual satisfaction of the Parties.