Document:

exv10w16

 

Exhibit
10.16

WESTERN GAS HOLDINGS, LLC

EQUITY INCENTIVE PLAN

SECTION 1. Purpose of the Plan.

     The Western Gas Holdings, LLC Equity Incentive Plan (the “Plan”) has been adopted by Western
Gas Holdings, LLC, a Delaware limited liability company (the “Company”) and the general partner of
Western Gas Partners, LP, a Delaware limited partnership (the “Partnership”). The Plan is intended
to promote the interests of the Company and its indirect parent, Anadarko Petroleum Corporation
(“Anadarko”), by providing to key executives of the Company or an Affiliate incentive compensation
to encourage superior performance.

SECTION 2. Definitions.

     As used in the Plan, the following terms shall have the meanings set forth below:

     “Affiliate” means, with respect to any Person, any other Person that directly or indirectly
through one or more intermediaries controls, is controlled by or is under common control with, the
Person in question. As used herein, the term “control” means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of a Person, whether
through ownership of voting securities, by contract or otherwise.

     “Award” means an Incentive Unit and any associated DERs granted under the Plan.

     “Award Agreement” means the written or electronic agreement by which an Award shall be
evidenced.

     “Board” means the Board of Directors of the Company.

     “Change in Capitalization” means any increase in the members’ capital contribution, any change
(including, without limitation, in the case of a dividend or other distribution in respect of
member interests, a change in value) in the member interests or any exchange of member interests
for a different number or kind of shares of ownership or other securities of the Company or another
entity, by reason of a reclassification, recapitalization, merger, consolidation, reorganization,
spin-off, split-up, issuance of warrants or rights, stock dividend, stock split or reverse stock
split, property dividend, or combination or exchange of member interests, repurchase of member
interests, change in corporate structure or otherwise. The following events shall be considered a
Change in Capitalization for the purposes of this Plan, but shall not represent all scenarios for
which a Change in Capitalization could be deemed to have occurred: (a) the issuance by the
Company, Anadarko or any other Affiliate of other ownership interests in the Company; (b) the sale,
transfer or dividend/distribution of assets, member interests or other securities (including
Partnership units) representing more than five percent (5%) of the value of the Company’s total
assets as determined at the end of the most recently completed month, including but not limited to
any sale or transfer by the Company of the Partnership’s general partner interest, the
Partnership’s incentive distribution rights or any Class B units or common

 

 

units received from the Partnership as a result of the Company’s election to exercise the
incentive distribution rights reset option under the Partnership Agreement; and (c) the initial
public offering of the Company (or its successor in interest, including in the event the Company
has changed its structure to a corporation or partnership) which may not otherwise constitute a
Change of Control of the Company.

     “Change of Control” shall mean the occurrence of either of the following after the effective
date of the Plan with respect to either Anadarko or the Company:

     Change of Control of Anadarko:

a) any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act) (a “Person”) acquires beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding
shares of common stock of Anadarko (the “Outstanding Anadarko Common Stock”) or (ii) the
combined voting power of the then outstanding voting securities of Anadarko entitled to vote
generally in the election of directors (the “Outstanding Anadarko Voting Securities”);
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control of Anadarko: (i) any acquisition
directly from Anadarko, (ii) any acquisition by Anadarko, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by Anadarko or any
corporation controlled by Anadarko or (iv) any acquisition pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (c) of this definition; or

(b) individuals who, as of the effective date of the Plan, constitute the Anadarko Board of
Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of
the Anadarko Board of Directors; provided, however, that any individual becoming a
director subsequent to the effective date of the Plan whose election, or nomination for
election by Anadarko’s stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the Anadarko
Board of Directors; or

(c) consummation by Anadarko of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of Anadarko or the acquisition of
assets of another entity (a “Business Combination”), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Anadarko Common Stock and
Outstanding Anadarko Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business Combination (including,

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without limitation, a corporation which as a result of such transaction owns Anadarko or all
or substantially all of Anadarko’s assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Anadarko Common Stock and Outstanding Anadarko
Voting Securities, as the case may be, (ii) no person (excluding any employee benefit plan
(or related trust) of Anadarko or such corporation resulting from such Business Combination)
beneficially own, directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business Combination, and (iii) at
least a majority of the members of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Anadarko Board of Directors, providing for
such Business Combination; or

(d) approval by the stockholders of Anadarko of a complete liquidation or dissolution of
Anadarko.

Notwithstanding the foregoing, with respect to an Award that is (i) subject to Section 409A
and (ii) a Change of Control of Anadarko that would accelerate the timing of payment
thereunder pursuant to Section 6(i), the term “Change of Control” shall mean a change in the
ownership or effective control of Anadarko, or in the ownership of a substantial portion of
the assets of Anadarko as defined in Section 409A, but only to the extent inconsistent with
the above definition, and only to the minimum extent necessary to comply with Section 409A,
as determined by the Committee.

     Change of Control of the Company:

(a) any “person” or “group” within the meaning of those terms as used in Sections 13(d) and
14(d)(2) of the Exchange Act, other than an Affiliate of the Company, shall become the
beneficial owner, by way of merger, consolidation, recapitalization, reorganization or
otherwise, of 50% or more of the combined voting power of the equity interests in the
Company;

(b) the members of the Company approve, in one or a series of transactions, a plan of
complete liquidation of the Company;

(c) the sale or other disposition by the Company of all or substantially all of its assets
in one or more transactions to any Person other than or an Affiliate of the Company; or

(d) the Company (either directly or indirectly as a result of a corporate restructuring)
becomes wholly or partially owned by the public.

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Notwithstanding the foregoing, with respect to an Award that is (i) subject to Section 409A
and (ii) a Change of Control of the Company that would accelerate the timing of payment
thereunder pursuant to Section 6(i), the term “Change of Control” shall mean a change in the
ownership or effective control of the Company, or in the ownership of a substantial portion
of the assets of the Company as defined in Section 409A and the authoritative guidance
issued thereunder, but only to the extent inconsistent with the above definition, and only
to the minimum extent necessary to comply with Section 409A as determined by the Committee.

     “Committee” means the Board or a committee of the Board appointed to administer the Plan.

     “DCF Valuation” means the aggregate dollar value derived by applying a discounted cash flow
methodology to the Company and its operations, and shall include all cash flows inuring to the
Company’s benefit, including but not limited to the cash flow related to assets owned by the
Company related to the Partnership (including but not limited to all incentive distribution rights
(“IDRs”), general partner units, common units, subordinated units, and Class B units (if any)),
calculated according to the following general description, but in any case subject to the sole
discretion and determination of the Committee:

(a) Cash available for distribution to all unitholders of the Partnership in the current (or
most recent) quarter will be multiplied by 4.0 to arrive at an annualized distribution
amount. Contractual IDR payments from the Partnership (with splits determined assuming the
calculated annualized distribution above) will be calculated and applied to determine the
relative general partner and limited partner dollar payout amounts from such annualized
distribution; and

(b) Expected annual distributions to all unitholders of the Partnership for each of the next
four years will then be calculated by using the annualized growth rate in the distribution
from the prior year. Such calculation will be determined by comparing the annualized
distribution calculated in clause (a) above to the actual distribution paid in the prior
year; and

(c) Contractual IDR payments from the Partnership in each of the next four years (with
splits determined by the amount of such future expected distributions) will be calculated
and applied to determine the relative general partner and limited partner dollar payout
amounts from such future expected distributions; and

(d) A terminal value will be calculated as of the fourth year based on the expected cash
payout to the general partner in year 4, multiplied by a number to be determined by the
Committee at the time of calculation, and a discount rate to be determined by the Committee
at the time of calculation; and

(e) The present value of all of the cash flows determined in the above paragraphs will be
determined, utilizing a discount rate to be determined by the Committee at the time of
calculation.

     “DER” means a distribution equivalent right which shall be granted in tandem with each
Incentive Unit, to receive (with respect to each Incentive Unit subject to the Award Agreement) a
credit equal to the value of the dividends or other distributions made by the Company to its
member(s) during the period such Award is outstanding.

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     “Determined Value” means the then-current value of the Company as determined from time-to-time
by the Committee, where (a) in advance of the initial public offering of the Company such value
shall be reflected by (i) the DCF Valuation amount, plus (ii) any other value related to any other
assets of the Company, which value has not otherwise been captured by the DCF Valuation
methodology, less (iii) indebtedness of the Company, if any, and (b) upon the closing of an initial
public offering of the Company such value shall be reflected by the aggregate equity value of the
Company as determined using the market price of the Company’s equity securities.

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

     “Executive” means an executive officer of the Company or an Affiliate thereof.

     “Fundamental Change” means:

	 	(a)	 	the Company ceases to be the general partner of the Partnership; or
	 
	 	(b)	 	the Company ceases to hold or to be entitled to receive the IDRs from the
Partnership, or any Class B units or common units received from the Partnership as a
result of the Company’s election to exercise the IDRs reset option under the
Partnership Agreement.

     “Incentive Unit” means a (notional) unit granted under the Plan which, upon the occurrence of
a Liquidation Event, entitles the Participant to receive an amount of cash equal to the Value of an
Incentive Unit (plus associated DERs, if any).

     “Liquidation Event” means an event that shall cause a Participant’s Awards to vest and become
payable pursuant to Section 6(g). A Liquidation Event shall occur upon the occurrence of both (a)
restrictions imposed on the Incentive Units pursuant to Section 6(b) lapse, and (b) the
earliest occurrence of any one of the following events with respect to an individual Participant:
(i) Change of Control; (ii) the closing of an initial public offering of the Company; (iii)
termination of employment (to the extent termination of employment is specified as a Liquidation
Event in the Award Agreement); (iv) death; (v) disability (as defined in the Anadarko benefit
plans); (vi) a date certain specified in the Award Agreement, if any; or (vii) such other time as
the Committee, in its sole discretion, may determine.

     “Participant” means an Executive granted an Award under this Plan.

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

     “Rule 16b-3” means Rule 16b-3 promulgated by the SEC under the Exchange Act or any successor
rule or regulation thereto as in effect from time to time.

     “SEC” means the Securities and Exchange Commission, or any successor thereto.

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     “Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder.

     “Value of an Incentive Unit” means the dollar value ascribed to an Incentive Unit and shall at
all times be calculated by dividing the then-current Determined Value by one million (1,000,000).

SECTION 3. Administration.

     The Plan shall be administered by the Committee. A majority of the Committee shall constitute
a quorum, and the acts of the members of the Committee who are present at any meeting thereof at
which a quorum is present, or acts unanimously approved by the members of the Committee in writing,
shall be the acts of the Committee. Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on the Committee by the Plan, the
Committee shall have full power and authority to: (i) designate Participants; (ii) determine the
number of Incentive Units (and associated DERs) to be covered by Awards; (iii) determine the terms
and conditions of any Award; (iv) interpret and administer the Plan and any instrument or agreement
relating to a grant made under the Plan; (v) establish, amend, suspend, or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the proper administration of
the Plan; and (vi) make any other determination and take any other action that the Committee deems
necessary or desirable for the administration of the Plan. Subject to Section 7 of the Plan, the
Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan
or an Award Agreement in such manner and to such extent as the Committee deems necessary or
appropriate. Unless otherwise expressly provided in the Plan, all designations, determinations,
interpretations, and other decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time and shall be final, conclusive, and
binding upon all Persons, including the Company, the Partnership, any Affiliate, any Participant,
and any beneficiary of any Award.

SECTION 4. Incentive Units.

     (a) Limits on Incentive Units Granted. Subject to adjustment as provided in Section
4(b), the number of Incentive Units (and associated DERs) that may be granted under the Plan is one
hundred thousand (100,000) Incentive Units. However, if any Award is forfeited, cancelled or
otherwise terminates or expires without payment, the Incentive Units subject to such Award shall
again be available for grants under other Awards under the Plan.

     (b) Adjustments.

     (i) In the event of a Change in Capitalization, the Committee shall, in such manner as
it may deem equitable in preventing the valuation dilution or enlargement of the potential
benefits intended to be provided with respect to all Awards granted under this Plan, adjust
the number of Incentive Units (or other securities or property) with respect to which Awards
are then outstanding and Awards that may be granted in the future. No adjustments may be
made under this Section (absent the written consent of the Participant) that would, in any
respect, reduce the value of such Participant’s Award.

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     (ii) In the event of a Fundamental Change, the Committee shall, in such manner as it
may deem equitable to prevent the substantial dilution of benefits intended to be provided
with respect to all Awards granted under this Plan, take all available action to preserve
such benefits, including to the extent possible by replacing Awards under this Plan with
similar awards at Affiliates which have succeeded the Company with regard to the underlying
Fundamental Change.

SECTION 5. Eligibility.

     Any Executive who performs services for the benefit of the Company shall be eligible to be
granted an Award under the Plan by the Committee.

SECTION 6. Awards.

     (a) Grant of Incentive Units. The Committee shall have the authority to
determine the Executives to whom Incentive Units shall be granted and the number of Incentive Units
to be granted to each such Participant. Awards may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution for any award granted under any
other plan of the Company, Anadarko, the Partnership, or any other Affiliate.

     (b) Restrictions. The Committee shall have the authority to determine the time period
over which the Incentive Units shall be restricted and/or the conditions if any (including but not
limited to any performance metrics) under which the Incentive Units may become unrestricted or may
become forfeited.

     (c) Term of Awards. The term of each Award shall be for such period as may be
determined by the Committee, up to a maximum period of ten years.

     (d) Consideration for Grants. Awards may be granted for such consideration, including
services, as the Committee determines.

     (e) DERs. Each grant of Incentive Units shall include rights to dividends or
distributions made by the Company to its member(s) or other owner(s), and such DER amounts credited
to an Award shall accrue and be subject to the same restrictions and payment requirements as the
Incentive Units with which such DERs are associated.

     (f) Lapse of Restrictions. Upon the satisfaction of the restrictions imposed on an
Award, such restrictions associated with such Award shall lapse, in whole or in part, as applicable
and defined in each Award Agreement.

     (g) Payment of Awards. Award payments shall be made in the form of a lump sum cash
payment to a Participant, equal to the Value of an Incentive Unit for each Incentive Unit (plus any
amounts credited and accrued with respect to DERs associated with such Incentive Units), less
applicable withholding taxes as provided in Section 8(c). Such payment(s) shall be paid as soon as
practicable following the occurrence a Liquidation Event, but in no event shall such payment be
made later than March 15th of the year following the calendar year in which such
Liquidation Event occurred.

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     (h) Forfeitures. Except as otherwise provided in the terms of the Award Agreement,
upon termination a Participant’s employment with Anadarko and its Affiliates all of such
Participant’s Incentive Units (and associated DERs, if any) that have not had restrictions lapse
shall be forfeited as of such termination, except in the event of termination of employment on or
following a Change of Control in which event such Participant’s Award shall vest pursuant to
Section 6(i) and be paid pursuant to Section 6(g). The Committee may, in its discretion, waive in
whole or in part such forfeiture with respect to a Participant’s Award(s).

     (i) Change of Control. Unless specifically provided otherwise in the Award Agreement,
upon a Change of Control all outstanding Awards shall automatically vest and become payable
pursuant to Section 6(g).

     (j) Valuation. The Committee shall from time-to-time calculate and define the
then-current Determined Value. The Committee shall have sole discretion in making such
determination, though it may seek the advice or input of third parties to assist it as it may deem
beneficial or necessary to the accuracy or timeliness of such determination.

SECTION 7. Amendment and Termination.

     Except to the extent prohibited by applicable law:

     (a) Amendments to the Plan. Subject to Section 7(b) below, the Board or
Committee may amend, alter, suspend, discontinue, or terminate the Plan in any manner,
including increasing the number of Incentive Units available for Awards under the Plan,
without the consent of any Participant, other holder or beneficiary of an Award, or any
other Person.

     (b) Amendments to Awards. The Committee may waive any conditions or rights
under, amend any terms of, or alter any Award theretofore granted, provided no change in any
Award shall materially reduce the benefit to a Participant without the consent of such
Participant.

     (c) Actions Upon the Occurrence of Certain Events. Upon the occurrence of any
change in applicable law or regulation affecting the Plan or Awards thereunder, or any
change in accounting principles materially affecting the financial statements of the
Company, the Committee, in its sole discretion and on such terms and conditions as it deems
appropriate, shall take any and all such action as necessary to prevent dilution or
enlargement of the benefits or potential benefits intended to be conferred under the Plan or
an outstanding Award; provided, however, that such actions shall not reduce the benefits or
potential benefits to be realized by a Participant without the express written consent of
such Participant (unless such actions were specifically required by applicable law).

SECTION 8. General Provisions.

     (a) Limits on Transfer of Awards. No Award and no right under any such Award may be
assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a

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Participant other than by will or the laws of descent and distribution, other than a sale or
disposition to the Company, Anadarko or any Affiliate.

     (b) No Rights to Award. No Person shall have any claim to be granted any Award under
the Plan, and there is no obligation for uniformity of treatment of Participants. The terms and
conditions of Awards need not be the same with respect to each Participant.

     (c) Tax Withholding. The Company shall withhold from an Award any applicable taxes
payable in respect of the grant of the Award, the lapse of restrictions thereon, or any payment
made under the Award and shall take such other action as may be necessary in the opinion of the
Company to satisfy its withholding obligations for the payment of such taxes.

     (d) No Right to Employment. The grant of an Award shall not be construed as giving a
Participant the right to be retained in the employ of the Company, Anadarko or any Affiliate.

     (e) Governing Law. The validity, construction, and effect of the Plan and any rules
and regulations relating to the Plan shall be determined in accordance with the laws of the State
of Texas without regard to its conflict of laws principles.

     (f) Severability. If any provision of the Plan or any Award is or becomes or is
deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award,
or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to the applicable law, or if it cannot be
construed or deemed amended without, in the determination of the Committee, materially altering the
intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person
or Award and the remainder of the Plan and any such Award shall remain in full force and effect.

     (g) Other Laws. The Committee may refuse to pay any consideration under an Award if,
in its sole discretion, it determines that the payment of such consideration might violate any
applicable law or regulation, the rules of the principal securities exchange on which any
applicable Company securities are then traded, or entitle the Company or an Affiliate to recover
the same under Section 16(b) of the Exchange Act, if applicable.

     (h) No Trust or Fund Created. Neither the Plan nor any Award shall create or be
construed to create a trust or separate fund of any kind or a fiduciary relationship between the
Company and a Participant or any other Person. To the extent that any Person acquires a right to
receive payments from the Company pursuant to an Award, such right shall be no greater than the
right of any general unsecured creditor of the Company or any participating Affiliate.

     (i) Headings. Headings are given to the Sections and subsections of the Plan solely
as a convenience to facilitate reference. Such headings shall not be deemed in any way material or
relevant to the construction or interpretation of the Plan or any provision thereof.

     (j) Facility Payment. Any amounts payable hereunder to any person under legal
disability or who, in the judgment of the Committee, is unable to manage properly his financial
affairs, may be paid to the legal representative of such person, or may be applied for the benefit

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of such person in any manner that the Committee may select, and the Company shall be relieved
of any further liability for payment of such amounts.

     (k) Gender and Number. Words in the masculine gender shall include the feminine
gender, the plural shall include the singular and the singular shall include the plural.

     (l) Compliance with Section 409A. Nothing in the Plan or any Award Agreement shall
operate or be construed to cause the Plan or an Award to fail to comply with the requirements of
Section 409A. The applicable provisions of Section 409A and the regulations and guidelines issued
thereunder are hereby incorporated by reference and shall control over any Plan or Award Agreement
provision in conflict therewith.

SECTION 9. Term of the Plan.

     The Plan shall be effective on the date of its approval by the Board and shall continue until
the earlier of (a) the date terminated by the Board or Committee or (b) all Incentive Units
available under the Plan have been paid to Participants. Unless otherwise expressly provided in
the Plan or in an applicable Award Agreement, however, any Award granted prior to such termination,
and the authority of the Committee to amend, alter, adjust, suspend, discontinue, or terminate any
such Award or to waive any conditions or rights under such Award, shall extend beyond such
termination date.

     IN WITNESS WHEREOF, the Company has caused the Plan to be executed effective as of January
     , 2008.

	 	 	 	 	 
	 

	 	WESTERN GAS HOLDINGS, LLC	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Robert G. Gwin	 	 
	 

	 	President and Chief Executive Officer	 	 

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Exhibit 10.1

ADMINISTRATIVE SERVICES AGREEMENT

     This Administrative Services Agreement (“Agreement”) is effective as of October 1, 2007 (the
“Effective Date”), by and between Northwest Pipeline Services LLC, a Delaware limited liability
company (“Contractor”), and Northwest Pipeline GP, a Delaware general partnership (“Northwest”).

RECITALS

     A. Northwest is in the business of owning and operating natural gas pipeline, storage, and
related facilities used in the transportation and storage of natural gas in interstate commerce
(the “Business”).

     B. Effective as of September 30, 2007 at 11:59 p.m., Contractor entered into a Personnel
Services Agreement with Williams WPC — I , a Delaware corporation (“WPC”), pursuant to which WPC
will be the employer primarily for payroll, benefits and administrative operations and Contractor
will be the employer primarily with respect to business operations (the “WPC Agreement”).

     C. Northwest requires certain services to operate the Business and to fulfill other general
and administrative functions relating to the Business.

     D. Contractor has agreed to provide such services in accordance with the terms of this
Agreement, and Northwest is willing to engage Contractor subject to the terms and conditions of
this Agreement.

AGREEMENT

     In consideration of the foregoing recitals, which are incorporated herein by this reference,
and for other good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:

1. Definitions.

     1.1 Definitions. In addition to the terms defined above and the other terms defined herein,
as used in this Agreement, the following capitalized terms shall have the meanings set forth below:

     “Affiliate” means, with respect to any Person, any other Person that directly or indirectly
through one or more intermediaries controls, is controlled by or is under common control with, the
Person in question, with the term “control” meaning the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a Person, whether through
ownership of voting securities, by contract or otherwise.

     “Bankrupt” with respect to any Person means the Person shall generally be unable to pay its
debts as such debts become due, or shall so admit in writing or shall make a general assignment for
the benefit of creditors; or any proceeding shall be instituted by or against the Person 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 30 days; or the Person shall take any action to authorize any of the actions set forth above.

     “Confidential Information” means non-public information about the disclosing party’s or any of
its Affiliates’ business or activities that is proprietary and confidential, which shall include
all business, financial, technical and other information, including software (source and object
code) and programming code, of a party or its Affiliates marked or designated “confidential” or
“proprietary” or by its nature or the circumstances surrounding its disclosure it should reasonably
be regarded as confidential, regardless of the means by which it was disclosed. Confidential
Information does not include information that (i) is in or enters the public domain without breach
of this Agreement, or (ii) the receiving party lawfully receives from a third party without
restriction on disclosure and to the receiving party’s knowledge without breach of a nondisclosure
obligation.

     “Default Rate” means an interest rate (which shall in no event be higher than the rate
permitted by applicable law) equal to the prime interest rate of Contractor’s principal lender.

     “Governmental Approval” means any material consent, authorization, certificate, permit,
right-of-way grant or approval of any Governmental Authority that is necessary for the
construction, ownership, or operation of the Business in accordance with applicable Laws.

     “Governmental Authority” means any court or tribunal in any jurisdiction or any federal,
state, tribal, municipal, or local government or other governmental body, agency, authority,
department, commission, board, bureau, instrumentality, arbitrator, or arbitral body or any
quasi-governmental or private body lawfully exercising any regulatory or taxing authority.

     “Laws” means any applicable statute, common law, rule, regulation, judgment, order, ordinance,
writ, injunction, or decree issued or promulgated by any Governmental Authority.

     “Payment Amount” has the meaning set forth in Section 5.1.

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

     “Services” has the meaning set forth in Section 2.2.

     1.2 Construction. Unless a clear contrary intention appears, as used herein (a) the singular
includes the plural and vice versa, (b) reference to any document means such document as amended
from time to time, (c) “include” or “including” means including without limiting the generality of
any description preceding such term, (d) the word “or” is not exclusive, unless otherwise expressly
stated, (e) the terms “hereof,” “herein,” “hereby,” and derivative or similar words refer to this
entire Agreement including the Exhibits attached hereto and incorporated herein by this reference,
as the same may be amended from time to time, (f) headings are for

2

 

convenience only and do not constitute a part of this Agreement, (g) references to money refer
to legal currency of the United States of America, and (h) all accounting terms shall be
interpreted and all accounting determinations shall be made in accordance with U.S. generally
accepted accounting principles.

2. Retention of Contractor; Scope of Services.

     2.1 Retention of Contractor. Northwest engages Contractor to perform the Services and to
provide all personnel and any facilities, goods, and equipment not otherwise provided by Northwest
necessary to operate the Business as provided below, and Contractor accepts such engagement.

     2.2 Scope of Services; Performance Standards. The “Services” shall consist of such services
Northwest determines may be reasonable and necessary to operate the Business, including employees
(subject to the terms and conditions of the WPC Agreement), accounting, information technology,
company development, operations, administration, insurance, risk management, tax, audit, finance,
land, marketing, legal, and engineering, which Services may be expanded, modified, or reduced from
time to time as agreed upon by the parties. Contractor shall perform the Services substantially in
accordance with industry standards and substantially in accordance with all applicable material
Governmental Approvals and Laws. Except as provided above, Contractor makes no representations or
warranties regarding the Services and Contractor does not warrant or guarantee any particular
outcome as a result of the Services.

     2.3 Intellectual Property.

          2.3.1 Any (i) inventions, whether patentable or not, developed or invented, or (ii)
copyrightable material (and the intangible rights of copyright therein) developed, by
Contractor or its Affiliates or its or their employees in connection with the performance of
the Services shall be the property of Contractor except that during the term of this
Agreement (A) Northwest shall be granted an irrevocable, royalty-free, non-exclusive and
non-transferable right and license to use such inventions or material, and (B) Northwest
shall only be granted such a right and license to the extent such grant does not conflict
with, or result in a breach, default, or violation of a right or license to use such
inventions or material granted to Contractor by any Person other than an Affiliate of
Contractor. Notwithstanding the foregoing, Contractor shall use commercially reasonable
efforts to grant such right and license to Northwest.

          2.3.2 Northwest grants to Contractor and its Affiliates an irrevocable, royalty-free,
non-exclusive, and non-transferable right and license to use, during the term of this
Agreement, any intellectual property provided by Northwest to Contractor or its Affiliates,
but only to the extent such use is necessary for the performance of the Services.
Contractor shall, and shall cause its Affiliates to, utilize such intellectual property
solely in connection with the performance of the Services.

     2.4 Limitation of Authority. Northwest shall have the exclusive authority to appoint an
independent registered public accounting firm to audit the financial statements of Northwest.
Notwithstanding such right, nothing in this Agreement shall limit Contractor’s or Contractor’s

3

 

Affiliates’ right to audit the books and records of Northwest pursuant to any other agreement
between the parties.

3. Relationship; Delegation of Duty.

     3.1 Independent Contractor. The parties to this Agreement are independent contractors, and
none of the provisions of this Agreement shall be interpreted or deemed to create any relationship
between or between the parties other than that of independent contractors. Nothing contained in
this Agreement shall be construed to create a relationship of employer and employee, master and
servant, principal and agent, or partners or joint-venturers between Northwest and Contractor,
between Northwest and any employee or agent of Contractor, or between Contractor and any employee
or agent of Northwest. Without limiting the generality of the foregoing, Northwest shall have no
right to control or direct the details, manner, or means by which Contractor perform the Services.
Under no circumstances shall Contractor’s or Contractor’s Affiliates’ employees be considered or
deemed to be employees of Northwest.

     3.2 Delegation of Duty. In the performance of its obligations under this Agreement, Contractor
may act directly or through its Affiliates, agents, counsel (in-house or outside) or other persons,
may delegate the performance of functions and may consult with agents, counsel (in-house or
outside) and other Persons. Contractor, and any Person to whom its obligations have been delegated
including any of its Affiliates, shall be entitled to conclusively rely for all purposes upon any
notice, document, correspondence, request or directive received by it from Northwest or its
Affiliates, or any officer or director of Northwest or its Affiliates, and shall not be obligated
to inquire (a) as to the authority or power of any person executing or presenting any such notice,
document, correspondence, request or directive, or (b) as to the truthfulness of any statements set
forth therein.

4. Books, Records and Reporting.

     4.1 Books and Records. Contractor shall maintain accurate books and records regarding the
performance of the Services and its calculation of the Payment Amount, and shall maintain such
books and records for the period required by applicable accounting practices or Law.

     4.2 Audits. Northwest shall have the right, upon reasonable notice, and at all reasonable
times during usual business hours, to inspect, audit, examine, and make copies of the books and
records referred to above, which right may be exercised through any agent or employee of Northwest
designated in writing by it or by an independent public accountant, engineer, attorney, or other
agent so designated. Northwest shall bear all costs and expenses incurred in any inspection,
examination, or audit unless an audit determines that Northwest has been overcharged, in which
case, in addition to refunding to Northwest the amount of the overcharge, Contractor shall
reimburse Northwest for the cost of the audit together with interest thereon at the Default Rate
from the time of the overcharge until refunded. Contractor shall review and respond in a timely
manner to any claims or inquiries made by Northwest regarding matters revealed by any such
inspection, examination or audit.

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     4.3 Reports. Contractor shall prepare and deliver to Northwest any reports provided for in
this Agreement and such other reports as Northwest may reasonably request from time to time
regarding the performance of the Services.

5. Payment to Contractor.

     5.1 Payment to Contractor. Contractor shall be reimbursed by Northwest on a monthly basis, or
such other basis as the Contractor may determine (including on a cash or accrual basis), for
(a) all direct and indirect expenses it incurs or payments it makes on behalf of Northwest
(including salary, bonus, incentive compensation, benefits, and other amounts paid to any Person,
including Affiliates of Contractor) to perform the Services, including expenses allocated to
Northwest by Affiliates of Contractor, and (b) all other expenses allocable to the Business or
otherwise incurred by Contractor in connection with operating the Business (including expenses
allocated to Contractor by its Affiliates) (collectively, the “Payment Amount”). Contractor shall
determine the expenses that are allocable to Northwest. Reimbursements pursuant to this Section
shall be in addition to any reimbursement to Contractor as a result of indemnification pursuant to
any other Section in this Agreement. Any allocation of expenses to Northwest by Affiliates of
Contractor in a manner consistent with then-applicable accounting and allocation methodologies
generally permitted by FERC for rate-making purposes (or in the absence of then-applicable
methodologies permitted by FERC, consistent with the most-recently applicable methodologies) and
past business practices shall be deemed to be fair and reasonable to Northwest.

     5.2 Benefit Plans. Contractor, directly or through its Affiliates, may adopt and participate
in employee benefit plans, employee programs, and employee practices (including COBRA obligations,
paid time off payments, severance, retiree medical, retiree life, equity related awards, bonuses,
vesting of employee benefits, retirement plans, and other employee or retiree related payments,
obligations, liabilities or benefits) (collectively, “Plans and Practices”), in each case for the
benefit of employees, former employees, and directors of Contractor or any of its Affiliates, in
respect of Services performed, directly or indirectly, for the benefit of Northwest. Contractor,
directly or through its Affiliates, has adopted and participates in (or in the future may adopt and
participate in) Plans and Practices for the benefit of employees and former employees of Northwest
Pipeline Corporation, the predecessor of Northwest, and its Affiliates, in respect of services
previously performed, directly or indirectly, for the benefit of Northwest Pipeline Corporation.
Any and all expenses incurred or accrued by Contractor or its Affiliates in connection with any
such Plans and Practices shall be reimbursed by Northwest in accordance with the procedures
described in Section 5.1.

6. Confidential Information.

     6.1 Nondisclosure. Each of Contractor and Northwest shall (a) not disclose to any third party
or use any Confidential Information disclosed to it by the other except as necessary to carry out
its obligations under this Agreement, and (b) take all reasonable measures to maintain the
confidentiality of all Confidential Information of the other party in its possession or control,
which will in no event be less than the measures it uses to maintain the confidentiality of its own
information of similar type and importance.

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     6.2 Permitted Disclosure. Notwithstanding the foregoing, each party may disclose Confidential
Information (a) to the extent required by a court of competent jurisdiction or other governmental
authority or otherwise as required by law, including without limitation disclosure obligations
imposed under the federal securities laws, provided that such party has given the other party prior
notice of such requirement when legally permissible to permit the other party to take such legal
action to prevent the disclosure as it deems reasonable, appropriate or necessary, or (b) to its
and its Affiliates’ consultants, legal counsel, accountants, financing sources, and their advisors
including Persons performing duties pursuant to Section 3.2.

7. Term and Termination.

     7.1 Term. Unless terminated earlier as provided below, this Agreement shall remain in full
force and effect except that (a) Contractor may terminate this Agreement upon 60 days’ advance
written notice to the other party, and (b) Contractor or Northwest may terminate this Agreement
immediately upon notice at any time at which neither Contractor nor an Affiliate of Contractor is
the general partner of Williams Pipeline Partners L.P. or its successor in interest.

     7.2 Termination for Breach. If a party shall be in breach of any provision of this Agreement
(the “Breaching Party”), the non-breaching party (“Non-breaching Party”) shall give the Breaching
Party written notice of such breach (the “Notice”), and, subject to the terms of this Section, the
Breaching Party shall have 30 days after receipt of the Notice within which to cure the breach
except that no Notice shall be required if (a) the breach is an obligation to pay money, in which
case the Breaching Party shall have five business days to cure the breach; (b) the same breach
occurs in any six-month period; (c) the breach pertains to the Breaching Party’s obligations under
Section 6; or (d) a party files a petition in Bankruptcy (or is the subject of an involuntary
petition in Bankruptcy that is not dismissed within 60 days after the effective filing date
thereof). With respect to a breach of the obligations of a Breaching Party contained in Section 6,
there is no adequate remedy at law, and the Non-Breaching Party will suffer irreparable harm as a
result of such a breach. Therefore, if a breach or threatened breach by a Breaching Party of
Section 6 occurs, the Non-Breaching Party shall be entitled to injunctive relief restraining the
breaching party from doing any act in violation thereof without the obligation of posting a bond,
cash, or otherwise.

     7.3 Effect of Termination. If this Agreement is terminated in accordance with Section 7.1 or
7.2, all rights and obligations under this Agreement shall cease except for (a) obligations that
expressly survive termination of this Agreement; (b) liabilities and obligations that have accrued
prior to such termination, including the obligation to pay any amounts that have become due and
payable prior to such termination, (c) the obligation to pay any portion of the Payment Amount that
has accrued prior to such termination, even if such portion has not become due and payable at that
time, and (d) all liabilities and other obligations attributable, or in any way related to,
employees and former employees of Northwest, Contractor, and their respective Affiliates, and the
predecessors in interest (including Northwest Pipeline Corporation) of each and the estates, heirs,
personal representatives, successors, and assigns of each such employee and former employee (each,
a “Subject Employee”) including with respect to current and former Plans and Practices and any
benefit, equity, or incentive related plans, programs, policies, or practices of Northwest or its
predecessors, all of which shall be paid when due by Northwest, recognizing that the amount of some
of such liabilities and other

6

 

obligations shall not be known at the time of termination of this Agreement and the obligation
to pay shall continue after such termination.

8.  Release; Indemnification; and limitation of liability.

     8.1 Release. Northwest, for itself and on behalf of its Affiliates, and the predecessors in
interest, successors, and assigns of each, releases and forever discharges Contractor, Contractor’s
Affiliates, and the successors and assigns of each, and the officers, directors, shareholders,
members, partners, employees, contractors, and agents of each (as applicable, a “Releasee”) of and
from any and all causes of action, claims, demands, assessments, losses, liabilities, fines,
penalties, suits, damages, liabilities, liens, rights, compensation, costs, and expenses of
whatsoever kind or nature including reasonable legal and expert fees and expenses (each, a
“Damage”), whether now known or unknown, and whether they exist now or in the future, arising from
or relating to performance of, error or delay in performance, attempting to perform or failing to
perform, any responsibilities hereunder, or any Damages related thereto, including claims arising
as a result of the express negligence of the Releasee unless the Damage resulted from the gross
negligence or willful misconduct of the Releasee.

     8.2 Indemnification. Notwithstanding the definitions provided in Section1.1, as used in this
Subsection  8.2: (a) the term Affiliate, when used with reference to Contractor, shall not include
Northwest or any of its subsidiaries, and, when used with reference to Northwest, shall not include
Contractor and its Affiliates; (b) references to Contractor and Northwest, as applicable, as the
Indemnified Party, shall include their respective Affiliates, the successors and assigns of each,
and the officers, directors, shareholders, members, partners, employees, contractors, and agents of
each, and their respective successors, assigns, and, in the case of individuals, their estates,
heirs, and personal representatives; and (c) the “Subject Employees” are deemed to be third
parties.

          8.2.1 Indemnification Obligations. Northwest, for itself and on behalf of its Affiliates, and
the predecessors in interest, successors, and assigns of each (the “Northwest “Indemnifying Party”)
shall indemnify Contractor (the “Contractor Indemnified Party”) from and against all Damages
sustained or incurred as a result of or arising out of or by virtue of any claim made by a third
party against a Contractor Indemnified Party, which claim arises out of or is caused by (a) a
breach of this Agreement by a Northwest Indemnifying Party, or (b) any action or omission,
including negligence (but excluding gross negligence or willful misconduct) of a Contractor
Indemnifying Party (as defined below) or its employees or subcontractors in connection with
Contractor’s obligations hereunder.

          Contractor, for itself and on behalf of its Affiliates, and the predecessors in interest,
successors, and assigns of each (the “Contractor “Indemnifying Party”) shall indemnify Northwest
(the “Northwest Indemnified Party”) from and against all Damages sustained or incurred as a result
of or arising out of or by virtue of any claim made by a third party against a Northwest
Indemnified Party, which claim arises out of or is caused by the gross negligence or willful
misconduct of a Contractor Indemnifying Party or its employees or subcontractors.

          8.2.2 Procedure. Each of Contractor and Northwest shall give the other party prompt written
notice and information in such party’s possession concerning any claim that could result in a
Damage. In performing its indemnity obligation, the Northwest Indemnifying

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Party or the Contractor Indemnifying Party (as applicable, the “Indemnifying Party”) shall
have the right to assume the settlement in the defense of any suit or suits or other legal
proceedings brought to enforce all such Damages and shall pay all judgments entered in any such
suit or other legal proceedings. Except in the case where the Indemnifying Party refuses to assume
such defense in settlement, the Indemnifying Party shall have no liability for any settlement in or
compromise made without its written consent.

     8.3 Disclaimer; Limitation of Liability. Neither party shall be responsible for any
incidental, indirect, consequential, special, punitive, or exemplary damages. Regardless of the
basis on which Northwest makes a claim against Contractor for damages, Contractor shall not be
liable for any amount in excess of the lesser of (a) the amount of any actual and direct loss or
damage incurred, or (b) the amount paid to Contractor in excess of reimbursement for direct and
indirect costs in performance of the Services. All claims against Contractor shall be deemed
waived unless made by Northwest in writing and received by Contractor within one month after
completion of the Services with respect to which the claim is being made.

9.  General Provisions.

     9.1 Force Majeure. A party’s obligation under this Agreement, other than an obligation to pay
money and the indemnification obligations hereunder, shall be excused when and to the extent its
performance of that obligation is prevented due to any cause beyond the reasonable control of a
party, including the following causes (unless they are within such party’s reasonable control):
acts of God, strikes, lockouts, acts of the public enemy, wars or warlike action (whether actual or
impending), arrests and other restraints of government (civil or military), blockades, embargoes,
insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, sabotage, tornadoes,
named tropical storms and hurricanes, floods, civil disturbances, terrorism, mechanical breakdown
of machinery or equipment, explosions, confiscation or seizure by any government or other public
authority and any order of any court of competent jurisdiction, regulatory agency or governmental
body having jurisdiction. The party that is prevented from performing its obligation by reason of
one or more of the foregoing events (the “Delayed Party”) shall promptly notify the other party of
that fact and shall exercise due diligence to end its inability to perform as promptly as
practicable. However, in no event shall a Delayed Party be required to settle any strike, lockout,
or other labor dispute in which it may be involved, but in the event of a strike, lockout, or other
labor dispute affecting Contractor, Contractor shall use reasonable efforts to continue to perform
the Services by utilizing its management personnel and that of its Affiliates.

     9.2 Assignments. Except as otherwise provided herein (including Contractor’s right to
delegate performance of the Services under Section 3.2), neither party shall sell, assign, or
transfer any of its rights, or delegate any of its obligations, under this Agreement to any Person
without the prior consent of the other party except that such prior consent shall not be required
if such sale, assignment, or transfer is to an Affiliate of a party or in connection with a merger,
consolidation, or the sale of substantially all of its assets.

     9.3 Notices. All notices and other communications that are required or permitted to be given
to a party under this Agreement shall be sufficient in all respects if given in writing and
delivered in person, by electronic mail, by facsimile, by overnight courier, or by certified mail,
postage prepaid, return receipt requested, to the receiving party at the following address:

8

 

	 	 	 
	if to Northwest:

	 	Northwest Pipeline GP
	 

	 	2800 Post Oak Blvd.
	 

	 	Houston, TX 77056
	 

	 	Attention: General Counsel
	 

	 	Facsimile: 713-215-2229
	 

	 	E-Mail: Randall.R.Conklin@Williams.com
	 
	 	 
	if to Contractor:

	 	Northwest Pipeline Services Company LLC
	 

	 	2800 Post Oak Blvd.
	 

	 	Houston, TX 77056
	 

	 	Attention: Senior Vice President
	 

	 	Facsimile: 713-215-4269
	 

	 	E-Mail: Phil.Wright@Williams.com

or to such other address as such party may have given to the other by notice pursuant to this
Section. Notice shall be deemed given on the date of delivery, in the case of personal delivery,
electronic mail, or facsimile, or on the delivery or refusal date, as specified on the return
receipt in the case of certified mail or on the tracking report in the case of overnight courier.

     9.4 Further Assurances. The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or appropriate to achieve
the purposes of this Agreement.

     9.5 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal representatives, and
permitted assigns.

     9.6 Invalidity of Provisions. If any provision of this Agreement is or becomes invalid,
illegal, or unenforceable in any respect, the validity, legality, and enforceability of the
remaining provisions contained herein shall not be affected thereby.

     9.7 Third Party Beneficiaries. None of the provisions of this Agreement shall be for the
benefit of, or shall be enforceable by, any Person not a party to this Agreement.

     9.8 Waiver. No failure by any party to insist upon the strict performance of any covenant,
duty, agreement, or condition of this Agreement or to exercise any right or remedy consequent upon
a breach thereof shall constitute waiver of any such breach of any other covenant, duty, agreement
or condition.

     9.9 Applicable Law. This Agreement shall be construed in accordance with and governed by the
laws of the State of Oklahoma, without regard to the principles of conflicts of law. The proper
venue for any lawsuit shall only exist in Tulsa, Oklahoma.

     9.10 Attorneys’ Fees. If a party shall commence any action or proceeding against another
party in order to enforce the provisions of this Agreement or to recover damages as a result of the
alleged breach of any of the provisions of this Agreement, the prevailing party shall be entitled
to recover from the other party all reasonable costs in connection therewith, including reasonable
attorneys’ fees.

9

 

     9.11 Survival of Terms and Conditions. The terms and condition of this Agreement shall
survive the expiration or termination of this Agreement to the full extent necessary for their
enforcement and for the protection of the party in whose favor they operate, including the terms
and conditions contained in Sections 2.3, 5.1, 5.2, 6.1, 6.2, 7.3, 8.1 through 8.3, and 9.2 through
9.12.

     9.12 Integration; Amendments. This Agreement constitutes the entire Agreement among the
parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and
understandings pertaining thereto. This Agreement may be amended or restated only by a written
instrument executed by both parties.

     9.13 Counterparts. This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same instrument. A
facsimile or electronic signature to this Agreement shall be deemed an original and binding upon
the party against whom enforcement is sought.

[This page intentionally left blank]

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     The parties have executed this Administrative Services Agreement on, and effective as of, the
Effective Date.

	 	 	 	 	 	 	 
	 	 	NORTHWEST PIPELINE GP	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Phillip D. Wright	 	 
	 

	 	Name:
	 	 

Phillip D. Wright
	 	 
	 

	 	Title:
	 	Senior Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	NORTHWEST PIPELINE SERVICES LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Steven J. Malcolm	 	 
	 

	 	Name:
	 	 

Steven J. Malcolm
	 	 
	 

	 	Title:
	 	Chairman	 	 

11

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