Document:

exv10w1

EXHIBIT 10.1

[AMENDED AND
RESTATED] CHANGE-OF-CONTROL EMPLOYMENT AGREEMENT

AGREEMENT, effective as of the 1st day of January, 2009, by and between Smith
International, Inc., a Delaware Corporation (the “Company”) and [          ] (the “Executive”).

[WHEREAS, the Executive and the Company are parties to that certain change-of-control employment
agreement dated [      ] (the “Original Agreement”); and

WHEREAS, the Executive and the
Company desire to amend and restate the Original Agreement;
and]

WHEREAS, the Board of Directors of the Company (the “Board”), has determined that it is in
the best interests of the Company and its shareholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a
Change of Control (as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and
risks created by a pending or threatened Change of Control and to encourage the Executive’s full
attention and dedication to the Company currently and in the event of any threatened or pending
Change of Control, and to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations. Therefore, in order
to accomplish these objectives, the Board has caused the Company to enter into this Agreement.

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

                    Certain Definitions. (a) The “Effective Date”, shall mean the first date
during the Change of Control Period (as defined in Section l (b)) on which a Change of Control (as
defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a
Change of Control occurs and if the Executive’s employment with the Company is terminated by the
Company within the 12 months prior to the date on which the Change of Control occurs, which Change
of Control is a “change in control event” within the meaning of Section 409A of the Code, and if it
is reasonably demonstrated by the Executive that such termination of employment (i) was at the
request of a third party who has taken steps reasonably calculated to effect such Change of Control
or (ii) otherwise arose in connection with or anticipation of such Change of Control (such a
termination of employment, an “Anticipatory Termination”), then for all purposes of this
Agreement the “Effective Date” shall mean the date immediately prior to the date of such
termination of employment. Notwithstanding the foregoing, the Executive and the Company
acknowledge that, except as may otherwise be provided under this Agreement or any other written
agreement between the Executive and the Company, the employment of the Executive by the Company is
“at will.”

                    The “Change of Control Period” shall mean the period commencing on the date hereof and
ending on the third anniversary of the date hereof; provided, however, that commencing on the date
one year after the date hereof, and on each annual anniversary of such date (such date and each
annual anniversary thereof shall be hereinafter referred to as the “Renewal Date”), unless
previously terminated, the Change of Control Period shall be automatically extended so as to
terminate three years from such Renewal Date, unless at least 60 days prior to the Renewal Date the
Company shall give notice to the Executive that the Change of Control Period shall not be so
extended.

                    Change of Control. For the purpose of this Agreement, a “Change of Control”
shall mean:

                    The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a
“Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 30% or more of either (i) the then outstanding shares of common stock of the
Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided, however,
that for purposes of this subsection (a), the following acquisitions shall not constitute a Change
of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company or (iv) any acquisition pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or

                    Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”)
cease for any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company’s shareholders, 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 was 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 Board; or

 

 

                    Consummation of a reorganization, merger, statutory share exchange or consolidation or similar
transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or
substantially all of the assets of the Company, or the acquisition of assets or stock of another
entity by the Company or any of its subsidiaries (each, 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 Company Common Stock
and Outstanding Company 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 (or, for a non-corporate entity, equivalent securities) and the
combined voting power of the then outstanding voting securities entitled to vote generally in the
election of directors (or, for a non-corporate entity, equivalent securities), as the case may be,
of the corporation resulting from such Business Combination (including, without limitation, an
entity which as a result of such transaction owns the Company or all or substantially all of the
Company’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
Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person
(excluding any entity resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such entity resulting from such Business Combination) beneficially
owns, directly or indirectly, 30% or more of, respectively, the then outstanding shares of common
stock (or, for a non-corporate entity, equivalent securities) of the entity resulting from such
Business Combination or the combined voting power of the then outstanding voting securities (or,
for a non-corporate entity, equivalent securities) of such entity 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 (or, for a non-corporate entity, equivalent governing body) of the entity
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 Board, providing for such Business
Combination; or

                    Approval by the shareholders of the Company of a complete liquidation or dissolution of the
Company.

                    Employment Period. The Company hereby agrees to continue the Executive in its employ,
and the Executive hereby agrees to remain in the employ of the Company subject to the terms and
conditions of this Agreement, for the period commencing on the Effective Date and ending on the
third anniversary of such date (the “Employment Period”).

                    Terms of Employment. (a) Position and Duties. (i) During the Employment
Period, (A) the Executive’s position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least commensurate in all
material respects with the most significant of those held, exercised and assigned at any time
during the 120-day period immediately preceding the Effective Date and (B) the Executive’s services
shall be performed at the location where the Executive was employed immediately preceding the
Effective Date or any office or location less than 35 miles from such location.

                    During the Employment Period, and excluding any periods of vacation and sick leave to which
the Executive is entitled, the Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use the Executive’s
reasonable best efforts to perform faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage personal investments, so long as
such activities do not significantly interfere with the performance of the Executive’s
responsibilities as an employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive’s responsibilities to the
Company.

                    Compensation. (i) Base Salary. During the Employment Period, the Executive shall
receive an annual base salary (“Annual Base Salary”), which shall be paid at a monthly
rate, at least equal to 12 times the highest monthly base salary paid or payable, including any
base salary which has been earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed no
more than 12 months after the last salary increase awarded to the Executive prior to the Effective
Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit
or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not
be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement
shall refer to Annual Base Salary as so increased. As used in this Agreement, the term “affiliated
companies” shall include any company controlled by, controlling or under common control with the
Company.

                    Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each
fiscal year ending during the Employment Period, an annual bonus (the “Annual Bonus”) in
cash (i) under the Company’s annual incentive plan based upon meeting the targets in the Annual
Incentive Plan, provided that the Executive’s target bonus percentage shall be at least equal to
the Executive’s target bonus percentage for the fiscal year prior to the Effective Date or equal to
an increase in the target bonus percentage given to any similarly situated executive after the
Effective Date, or, if higher, (ii) under any annual incentive plan or discretionary award by the
Company to similarly situated executives which is enacted or approved after the Effective Date.
Each

 

 

such Annual Bonus shall be paid no later than two and a half months after the end of the
fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus pursuant to an arrangement that
meets the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”).

                    Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be
entitled to participate in all incentive, savings and retirement plans, practices, policies and
programs applicable generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the Executive with
incentive opportunities (measured with respect to both regular and special incentive opportunities,
to the extent, it any, that such distinction is applicable), savings opportunities and retirement
benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of
those provided by the Company and its affiliated companies for the Executive under such plans,
practices, policies and programs as in effect at any time during the 120-day period immediately
preceding the Effective Date or if more favorable to the Executive, those provided generally at any
time after the Effective Date to other peer executives of the Company and its affiliated companies.

                    Welfare Benefit Plans. During the Employment Period, the Executive and/or the
Executive’s-family, as the case may be, shall be eligible for participation in and shall receive
all benefits under welfare benefit plans, practices, policies and programs provided by the Company
and its affiliated companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident insurance plans and
programs) to the extent applicable generally to other peer executives of the Company and its
affiliated companies, but in no event shall such plans, practices, policies and programs provide
the Executive with benefits which are less favorable, in the aggregate, than the most favorable of
such plans, practices, policies and programs in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to the Executive,
those provided generally at any time after the Effective Date to other peer executives of the
Company and its affiliated companies.

                    Expenses. During the Employment Period, the Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the Company and its affiliated companies in effect
for the Executive at any time during the 120-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as in effect generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies.

                    Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe
benefits, including, without limitation, tax and financial planning services, payment of club dues,
and, if applicable, use of an automobile and payment of related expenses, in accordance with the
most favorable plans, practices, programs and policies of the Company and its affiliated companies
in effect for the Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and its affiliated companies.

                    Office and Support Staff. During the Employment Period, the Executive shall be entitled to an
office or offices of a size and with furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most favorable of the foregoing provided to
the Executive by the Company and its affiliated companies at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive, as provided
generally at any time thereafter with respect to other peer executives of the Company and its
affiliated companies.

                    Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in
accordance with the most favorable plans, policies, programs and practices of the Company and its
affiliated companies as in effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the Company and its
affiliated companies.

                    Termination of Employment. (a) Death or Disability. The Executive’s
employment shall terminate automatically upon the Executive’s death during the Employment Period.
If the Company determines in good faith that the Disability of the Executive has occurred during
the Employment Period (pursuant to the definition of Disability set forth below), it may give to
the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to
terminate the Executive’s employment. In such event, the Executive’s employment with the Company
shall terminate effective on the 30th day after receipt of such notice by the Executive (the
“Disability Effective Date”), provided that, within the 30 days after such receipt, the
Executive shall not have returned to full-time performance of the Executive’s duties. For purposes
of this Agreement, “Disability” shall mean the absence of the Executive from the
Executive’s duties with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be total and
permanent by a physician selected by the Company or its insurers and acceptable to the Executive or
the Executive’s legal representative.

                    Cause. The Company may terminate the Executive’s employment during the Employment
Period for Cause. For purposes of this Agreement, “Cause” shall mean:

 

 

                    the willful and continued failure of the Executive to perform substantially the Executive’s
duties with the Company or one of its affiliates (other than any such failure resulting from
incapacity due to physical or mental illness), after a written demand for substantial performance
is delivered to the Executive by the Board or the Chief Executive Officer of the Company which
specifically identifies the manner in which the Board or Chief Executive Officer believes that the
Executive has not substantially performed the Executive’s duties, or

                    the willful engaging by the Executive in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Company.

For purposes of this provision, no act or failure to act, on the part of the Executive, shall be
considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive’s action or omission was in the best interests of the
Company. Any act, or failure to act, based upon (A) authority given pursuant to a resolution duly
adopted by the Board or, if the Company is not the ultimate parent of a group of affiliated
companies and is not publicly-traded, the board of directors or equivalent governing body of the
ultimate parent of the Company (the “Applicable Board”), [(B) the instructions of the Chief
Executive Officer or a senior officer of the Company]1 or (C) the advice of counsel for
the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company. The cessation of employment of the Executive
shall not be deemed to be for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the Applicable Board (excluding the Executive, if the Executive is a member of
the Applicable Board) at a meeting of the Applicable Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Applicable Board), finding that, in the good faith opinion of
the Applicable Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii)
above, and specifying the particulars thereof in detail.

                    Good Reason. The Executive’s employment may be terminated by the Executive for Good
Reason. For purposes of this Agreement, “Good Reason” shall mean:

                    the assignment to the Executive of any duties inconsistent in any respect with the Executive’s
position (including status, offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the
Company which results in a diminution in such position, authority, duties or responsibilities
(including as a result of the Company’s ceasing to be a publicly traded entity), excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the Executive;

                    any failure by the Company to comply with any of the provisions of Section 4(b) of this
Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith
and which is remedied by the Company promptly after receipt of notice thereof given by the
Executive;

                    the Company’s requiring the Executive to be based at any office or location other than as
provided in Section 4(a)(i)(B) hereof or to travel on Company business to a substantially greater
extent than required immediately prior to the Effective Date;

                    any purported termination by the Company of the Executive’s employment otherwise than as
expressly permitted by this Agreement; or

                    any failure by the Company to comply with and satisfy Section 11(c) of this Agreement.

For purposes of this Section 5(c), any good faith determination of “Good Reason” made by
the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a
termination by the Executive for any reason during the 30-day period immediately following the
first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all
purposes of this Agreement. The Executive’s mental or physical incapacity following the occurrence
of any of the circumstances described in clauses (i) through (v) shall not affect the Executive’s
ability to terminate employment for Good Reason and the Executive’s death following delivery of a
Notice of Termination for Good Reason shall not affect the Executive’s estate’s entitlement to
severance payments and benefits provided hereunder upon a termination of employment for Good
Reason. Notwithstanding anything herein to the contrary, the Executive’s resignation under this
Agreement with or without Good Reason shall in no way affect the Executive’s ability to terminate
employment by reason of the Executive’s retirement or to be eligible to receive benefits under any
retirement or pension plan of the Company and its affiliates.

                    Notice of Termination. Any termination by the Company for Cause, or by the Executive
for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in
accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a “Notice of
Termination” means a written notice which indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to

 

			
	1	 	For all but CEO.

 

 

provide a basis for termination of the Executive’s employment under the provision so indicated
and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty days after the
giving of such notice). The failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall
not waive any right of the Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the
Executive’s or the Company’s rights hereunder.

                    Date of Termination. “Date of Termination” means (i) if the Executive’s
employment is terminated by the Company for Cause, or by the Executive for or without Good Reason,
the date of receipt of the Notice of Termination or any later date specified therein, as the case
may be, (ii) if the Executive’s employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which the Company notifies the Executive
of such termination and (iii) if the Executive’s employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be. Notwithstanding the foregoing, unless mutually agreed in
writing by the Company and the Executive, in no event shall the Date of Termination occur until the
Executive experiences, and the Company and the Executive shall take all steps necessary (including
with regard to any post-termination services by the Executive) to ensure that any termination
described in this Section 5 constitutes a “separation from service” within the meaning of Section
409A of the Code, and notwithstanding anything contained herein to the contrary, the date on which
such separation from service takes place shall be the “Date of Termination.”

                    Obligations of the Company upon Termination. (a) Good Reason; Other Than for
Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the
Executive’s employment other than for Cause or Disability or the Executive shall terminate
employment for Good Reason:

                    the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of
Termination the aggregate of the following amounts:

               the sum of (1) the Executive’s Annual Base Salary through the Date of Termination
to the extent not theretofore paid, (2) the product of (x) the higher of (I) the
highest Annual Bonus paid to the Executive for the last three full fiscal years prior
to the Effective Date and (II) the Annual Bonus paid or payable, including any bonus
or portion thereof which has been earned but deferred (and annualized for any fiscal
year consisting of less than twelve full months or during which the Executive was
employed for less than twelve full months), for the most recently completed fiscal
year during the Employment Period, if any (such higher amount being referred to as the
“Highest Annual Bonus”) and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of Termination, and the
denominator of which is 365 (the “Pro-Rata Bonus”) and (3) any accrued
vacation pay, in each case to the extent not theretofore paid (the sum of the amounts
described in clauses (1) and (3) shall be hereinafter referred to as the “Accrued
Obligations”); provided, that notwithstanding the foregoing, if the
Executive has made an irrevocable election under any deferred compensation arrangement
subject to Section 409A of the Code to defer any portion of the Annual Base Salary
Bonus described in clause (1) above, then for all purposes of this Section 6
(including, without limitation, Sections 6(b) through 6(d)), such deferral election,
and the terms of the applicable plan, agreement, or other arrangement shall apply to
the same portion of the amount described in such clause (1), and such portion shall
not be considered as part of the “Accrued Obligations” but shall instead be an “Other
Benefit” (as defined below); and

               the amount equal to the product of (1) the Termination Multiple (as defined
below) and (2) the sum of (x) the Executive’s Annual Base Salary and (y) the Highest
Annual Bonus; and

               an amount equal to the excess of (a) the actuarial equivalent of the benefit
under any excess or supplemental retirement plan in which the Executive participates
(the “SERP”) which the Executive would receive if the Executive’s employment
continued for a number of years after the Date of Termination equal to the Termination
Multiple, assuming for this purpose that all accrued benefits are fully vested, and,
assuming that the Executive’s compensation in each of such years is that required by
Section 4(b)(i) and Section 4(b)(ii), over (b) the actuarial equivalent of the
Executive’s actual benefit (paid or payable), if any, under the SERP as of the Date of
Termination (the “Additional SERP Payment”);

                    for a number of years after the Executive’s Date of Termination equal to the Termination
Multiple, or such longer period as may be provided by the terms of the appropriate plan, program,
practice or policy (the “Benefits Continuation Period”), the Company shall continue health
care and life insurance benefits to the Executive and/or the Executive’s family at least equal to
those which would have been provided to them in accordance with the plans, programs, practices and
policies described in Section 4(b)(iv) of this Agreement if the Executive’s employment had not been
terminated or, if more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated companies and their
families; provided, however, that, the health care benefits provided during the
Benefit Continuation Period shall be provided in such a manner that such benefits (and the costs
and premiums thereof) are excluded from the Executive’s income for federal income tax

 

 

purposes and, if the Company reasonably determines that providing continued coverage under one
or more of its health care benefit plans contemplated herein could be taxable to the Executive, the
Company shall provide such benefits at the level required hereby through the purchase of individual
insurance coverage; provided, however, that if the Executive becomes reemployed
with another employer and is eligible to receive medical or other welfare benefits under another
employer provided plan, the medical and other welfare benefits described herein shall be secondary
to those provided under such other plan during such applicable period of eligibility. For purposes
of determining eligibility (but not the time of commencement of benefits) of the Executive for
retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be
considered to have remained employed until a number of years after the Date of Termination equal to
the Termination Multiple and to have retired on the last day of such period and the Company shall
take such actions as are necessary to cause the Executive to commence in the applicable retiree
benefit plans as of the applicable benefit commencement date;

                    the Company shall, at its sole expense as incurred, provide the Executive with outplacement
services the scope and provider of which shall be selected by the Executive in his sole discretion;
provided, that such outplacement benefits shall end not later than the last day of the second
calendar year that begins after the Date of Termination; and

                    to the extent not theretofore paid or provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred
to as the “Other Benefits”).

Notwithstanding the foregoing provisions of Section 6(a)(i), and except as otherwise provided in
Section 12(h) with respect to an Anticipatory Termination, in the event that the Executive is a
“specified employee” within the meaning of Section 409A of the Code (as determined in accordance
with the methodology established by the Company as in effect on the Date of Termination) (a
“Specified Employee”), amounts that constitute “nonqualified deferred compensation” within
the meaning of Section 409A of the Code and that would otherwise be payable under this Section
6(a)(i) during the six-month period immediately following the Date of Termination (other than the
Accrued Obligations) shall instead be paid, with interest on any delayed payment at the applicable
federal rate provided for in Section 7872(f)(2)(A) of the Code (“Interest”), or provided on
the first business day after the date that is six months following the Executive’s “separation from
service” within the meaning of Section 409A of the Code (the “Delayed Payment Date”).

For purposes of this Section 6, “Termination Multiple” shall mean (x) three, if the Date of
Termination occurs on or prior to the first anniversary of the Effective Date, (y) two, if the Date
of Termination occurs after the first anniversary of the Effective Date and on or prior to the
second anniversary of the Effective Date and (z) one, if the Date of Termination occurs after the
second anniversary of the Effective Date and on or prior to the third anniversary of the Effective
Date.

                    Death. If the Executive’s employment is terminated by reason of the Executive’s death
during the Employment Period, this Agreement shall terminate without further obligations to the
Executive’s legal representatives under this Agreement, other than for payment of Accrued
Obligations, payment of the Pro-Rata Bonus and the timely payment or provision of Other Benefits.
Accrued Obligations (subject to the proviso set forth in Section 6(a)(i)(A) to the extent
applicable) and the Pro-Rata Bonus shall be paid to the Executive’s estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall
include, without limitation, and the Executive’s estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits provided by the Company and
affiliated companies to the estates and beneficiaries of peer executives of the Company and such
affiliated companies under such plans, programs, practices and policies relating to death benefits,
if any, as in effect with respect to other peer executives and their beneficiaries at any time
during the 120-day period immediately preceding the Effective Date or, if more-favorable to the
Executive’s estate and/or the Executive’s beneficiaries, as in effect on the date of the
Executive’s death with respect to other peer executives of the Company and its affiliated companies
and their beneficiaries.

                    Disability. If the Executive’s employment is terminated by reason of the Executive’s
Disability during the Employment Period, this Agreement shall terminate without further obligations
to the Executive, other than for payment of Accrued Obligations and the timely payment or provision
of Other Benefits. Accrued Obligations (subject to the proviso set forth in Section 6(a)(i)(A) to
the extent applicable) and the Pro-Rata Bonus shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination; provided, that in the event that the Executive
is a Specified Employee, the Pro-Rata Bonus shall be paid, with Interest, to the Executive on the
Delayed Payment Date. With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 6(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least equal to the most
favorable of those generally provided by the Company and its affiliated companies to disabled
executives and/or their families in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with respect to other peer executives and
their families at any time during the 120-day period immediately preceding the Effective Date or,
if more favorable to the Executive and/or the Executive’s family, as in effect at any time
thereafter generally with respect to other peer executives of the Company and its affiliated
companies and their families.

                    Cause; Other than for Good Reason. If the Executive’s employment shall be terminated
for Cause during the Employment Period, this Agreement shall terminate without further obligations
to the Executive other than the obligation to pay to the Executive (x) his Annual Base Salary
through the Date of Termination (subject to the proviso set forth in Section 6(a)(i)(A) to the

 

 

extent applicable) and (y) Other Benefits, in each case to the extent theretofore unpaid. If
the Executive voluntarily terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate without further obligations to the
Executive, other than for payment of the Accrued Obligations and the Pro-Rata Bonus and the timely
payment or provision of Other Benefits. In such case, all Accrued Obligations (subject to the
proviso set forth in Section 6(a)(i)(A) to the extent applicable) and the Pro-Rata Bonus shall be
paid to the Executive in a lump sum in cash within 30 days of the Date of Termination;
provided, that in the event that the Executive is a Specified Employee, the Pro-Rata Bonus
shall be paid, with Interest, to the Executive on the Delayed Payment Date.

                    Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the
Executive’s continuing or future participation in any plan, program, policy or practice provided by
the Company or any of its affiliated companies and for which the Executive may qualify, nor,
subject to Section 12(g), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or agreement except
as explicitly modified by this Agreement.

                    Full Settlement. The Company’s obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be affected by any setoff,
counterclaim, recoupment, defense or other claim, right or action which the Company may have
against the Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement and such amounts shall not be reduced whether or not
the Executive obtains other employment. The Company agrees to pay as incurred (within 10 days
following the Company’s receipt of an invoice from the Executive) at any time from the Effective
Date of this Agreement through the Executive’s remaining lifetime (or, if longer, through the
20th anniversary of the Effective Date), to the full extent permitted by law, all legal
fees and expenses which the Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Company, the Executive or others of the validity or enforceability
of, or liability under, any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any payment pursuant to
this Agreement), plus in each case Interest. In order to comply with Section 409A of the Code, in
no event shall the payments by the Company under this Section 8 be made later than the end of the
calendar year next following the calendar year in which such fees and expenses were incurred,
provided, that the Executive shall have submitted an invoice for such fees and expenses at least 10
days before the end of the calendar year next following the calendar year in which such fees and
expenses were incurred. The amount of such legal fees and expenses that the Company is obligated
to pay in any given calendar year shall not affect the amount of legal fees and expenses that the
Company is obligated to pay in any other calendar year, and the Executive’s right to have the
Company pay such legal fees and expenses may not be liquidated or exchanged for any other benefit.

                    Certain Additional Payments by the Company. (a) Anything in this Agreement to the
contrary notwithstanding and except as set forth below, in the event it shall be determined that
any payment or distribution by the Company or its affiliates to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required under this Section 9)
(a “Payment”) would be subject to excise or other similar tax (but excluding penalties
imposed pursuant to Section 409A of the Code), or federal income tax above the rate ordinarily
applicable to wages and salaries paid in the ordinary course of business, whether as a result of
the provisions of Sections 280G and 4999 of the Code, any similar or analogous provisions of any
statute or regulation adopted subsequent to the date hereof, or otherwise, or any interest or
penalties are incurred by the Executive with respect to such tax (such excise tax, other similar
tax or federal income tax, together with any such interest and penalties, are hereinafter
collectively referred to as the “Excise Tax”), then the Executive shall be entitled to
receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment
by the Executive of all taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, but excluding penalties
imposed pursuant to Section 409A of the Code, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 9(a), if it shall be determined that the Executive is entitled to a
Gross-Up Payment, but that the Payments do not exceed 110% of the greatest amount (the “Reduced
Amount”) that could be paid to the Executive such that the receipt of Payments would not give
rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive and the Payments,
in the aggregate, shall be reduced to the Reduced Amount. The reduction of the amounts payable
hereunder, if applicable, shall be made by reducing the payments and benefits under the following
sections in the following order: (i) Section 6(a)(i)(B),(ii) Section 6(a)(i)(C), (iii) Section
6(a)(i)(A)(2) and (iv) Section 6(a)(ii). For purposes of reducing the Payments to the Reduced
Amount, only amounts payable under this Agreement (and no other Payments) shall be reduced. If the
reduction of the amount payable under this Agreement would not result in a reduction of the
Payments to the Reduced Amount, no amounts payable under the Agreement shall be reduced pursuant to
this Section 9(a). The Company’s obligation to make Gross-Up Payments under this Section 9 shall
not be conditioned upon the Executive’s termination of employment.

                    Subject to the provisions of Section 9(c), all determinations required to be made under this
Section 9, including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be

 

 

utilized in arriving at such determination, shall be made by a certified public accounting
firm as may be designated by the Executive (the “Accounting Firm”) which shall provide
detailed supporting calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control, the Executive shall
appoint another nationally recognized accounting firm to make the determinations required hereunder
(which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been
made by the Company should have been made (“Underpayment”), consistent with the
calculations required to be made hereunder. In the event that the Company exhausts its remedies
pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any
such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.

                    The Executive shall notify the Company in writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the Company of the Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than ten business days after the
Executive is informed in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive shall not pay such
claim prior to the expiration of the 30-day period following the date on which the Executive gives
such notice to the Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Executive in writing prior to the
expiration of such period that the Company desires to contest such claim, the Executive shall:

                    give the Company any information reasonably requested by the Company relating to such claim,

                    take such action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting legal representation
with respect to such claim by an. attorney reasonably selected by the Company,

                    cooperate with the Company in good faith in order effectively to contest such claim, and

                    permit the Company to participate in any proceedings relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in connection with such
contest and, at its sole discretion, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the applicable taxing authority in respect of such claim
and may, at its sole discretion, either pay the tax claimed to the appropriate taxing authority on
behalf of the Executive and direct the Executive to sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if the Company pays
such claim and directs the Executive to sue for a refund, the Company shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such payment or with respect to any imputed
income with respect to such payment; and further provided that any extension of the
statute of limitations relating to payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.

                    If, after the receipt by the Executive of a Gross-Up Payment or payment by the Company of an
amount on the Executive’s behalf pursuant to Section 9(c), the Executive becomes entitled to
receive any refund with respect to the Excise Tax to which such Gross-Up Payment relates or with
respect to such claim, the Executive shall (subject to the Company’s complying with the
requirements of Section 9(c), if applicable) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable thereto). If, after
payment by the Company of an amount on the Executive’s behalf pursuant to Section 9(c), a
determination is made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to contest such denial
of refund prior to the expiration of 30 days after such determination, then the amount of such
payment shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

                    Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company
to the Executive within five days of the receipt of the Accounting Firm’s determination;
provided that, the Gross-Up Payment shall in all events be paid no later than the end of
the Executive’s taxable year next following the Executive’s taxable year in which the Excise

 

 

Tax (and any income or other related taxes or interest or penalties thereon) on a Payment are
remitted to the Internal Revenue Service or any other applicable taxing authority or, in the case
of amounts relating to a claim described in Section 9(c) that does not result in the remittance of
any federal, state, local and foreign income, excise, social security and other taxes, the calendar
year in which the claim is finally settled or otherwise resolved. Notwithstanding any other
provision of this Section 9, the Company may, in its sole discretion, withhold and pay over to the
Internal Revenue Service or any other applicable taxing authority, for the benefit of the
Executive, all or any portion of any Gross-Up Payment, and the Executive hereby consents to such
withholding.

                    Confidential Information. The Executive shall hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge or data relating to the
Company or any of its affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive’s employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After termination of the
Executive’s employment with the Company, the Executive shall not, without the prior written consent
of the Company or as may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those designated by it.
In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under this Agreement.

                    Successors. (a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive otherwise than by will or
the laws of descent and distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive’s legal representatives.

                    This Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns.

                    The Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession had taken place. As
used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.

                    Miscellaneous. (a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas, without reference to principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof and shall have no force or effect.
This Agreement may not be amended or modified otherwise than by a written agreement executed by
the parties hereto or their respective successors and legal representatives.

                    All notices and other communications hereunder shall be in writing and shall be given by hand
delivery to the other party or by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:

	 	 	 
	If to the Executive:
	 	 
	 
	 	 
	 

	 	[                    ]
	 

	 	at the address set forth in his personnel file at Smith International, Inc.
	 
	 	 
	If to the Company:
	 	 
	 
	 	 
	 

	 	Smith International, Inc.
	 

	 	16740 Hardy Street
	 

	 	Houston, TX 77032
	 

	 	Fax: (281) 233-5996
	 

	 	Attention: General Counsel

or to such other address as either party shall have furnished to the other in writing in accordance
herewith. Notice and communications shall be effective when actually received by the addressee.

                    The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement.

                    The Company may withhold from any amounts payable under this Agreement such Federal, state,
local or foreign taxes as shall be required to be withheld pursuant to any applicable law or
regulation.

                    The Executive’s or the Company’s failure to insist upon strict compliance with any provision
of this Agreement or the failure to assert any right the Executive or the Company may have
hereunder, including, without limitation, the right

 

 

of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of
this Agreement, shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.

                    The Agreement is intended to comply with the requirements of Section 409A of the Code or an
exemption or exclusion therefrom and, with respect to amounts that are subject to Section 409A of
the Code, shall in all respects be administered in accordance with Section 409A of the Code. Each
payment under this Agreement shall be treated as a separate payment for purposes of Section 409A of
the Code. In no event may the Executive, directly or indirectly, designate the calendar year of
any payment to be made under this Agreement. If the Executive dies following the Date of
Termination and prior to the payment of any amounts delayed on account of Section 409A of the Code,
such amounts shall be paid to the personal representative of the Executive’s estate within 30 days
after the date of the Executive’s death. All reimbursements and in-kind benefits provided under
this Agreement that constitute deferred compensation within the meaning of Section 409A of the Code
shall be made or provided in accordance with the requirements of Section 409A of the Code,
including, without limitation, that (i) in no event shall reimbursements by the Company under this
Agreement be made later than the end of the calendar year next following the calendar year in which
the applicable fees and expenses were incurred, provided, that the Executive shall have submitted
an invoice for such fees and expenses at least 10 days before the end of the calendar year next
following the calendar year in which such fees and expenses were incurred; (ii) the amount of
in-kind benefits that the Company is obligated to pay or provide in any given calendar year shall
not affect the in-kind benefits that the Company is obligated to pay or provide in any other
calendar year; (iii) the Executive’s right to have the Company pay or provide such reimbursements
and in-kind benefits may not be liquidated or exchanged for any other benefit; and (iv) in no event
shall the Company’s obligations to make such reimbursements or to provide such in-kind benefits
apply later than the Executive’s remaining lifetime (or if longer, through the 20th anniversary of
the Effective Date). Prior to the Effective Date but within the time period permitted by the
applicable Treasury Regulations or other applicable guidance, the Company may, in consultation with
the Executive, modify the Agreement, in the least restrictive manner necessary and without any
diminution in the value of the payments to the Executive, in order to cause the provisions of the
Agreement to comply with the requirements of Section 409A of the Code, so as to avoid the
imposition of accelerated tax, additional tax and/or penalties on the Executive pursuant to Section
409A of the Code.

                    Subject to Section 1(a), the Executive’s employment may be terminated by either the Executive
or the Company at any time prior to the Effective Date, in which case the Executive shall have no
further rights under this Agreement. From and after the Effective Date, except as specifically
provided herein, this Agreement shall supersede any other agreement between the parties with
respect to the subject matter hereof[; provided, that the terms of the Employment Agreement
by and between the Company and the Executive dated as of December 10, 1987 (the “Employment
Agreement”), without giving effect to any amendments entered into thereto prior to the Effective
Date shall remain in full force and effect; provided, further, that in the event of
a Change of Control or an Anticipatory Termination, the terms of this Agreement shall control,
except with respect to any Accrued Obligations (as defined herein)].

                    Notwithstanding any provision in this Agreement to the contrary, in the event of an
Anticipatory Termination, any payments that are deferred compensation within the meaning of Section
409A of the Code that the Company shall be required to pay pursuant to Section 6(a)(i) of this
Agreement shall be paid on the date of such Change of Control and any payments or benefits that are
not deferred compensation within the meaning of Section 409A of the Code that the Company shall be
required to pay or provide pursuant to Section 6(a) of this Agreement shall be paid or shall
commence being provided on the date of the Change of Control. Interest with respect to the period,
if any, from the date of the Change of Control through the actual date of payment shall be paid on
any delayed cash amounts.

IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the
authorization from its Board of Directors, the Company has caused these presents to be executed in
its name on its behalf, all as of the day and year first above written.

	 	 	 	 	 
	 	
[Executive]
	 
	 
	SMITH
INTERNATIONAL, INC.

	 

	 	 	 	 	 
	 	By:exv10w1

Exhibit 10.1

SPONSOR PAYMENT GUARANTY

made by

ANADARKO PETROLEUM CORPORATION

Dated as of December 19, 2008

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	 	 	 	 
	 

	 	ARTICLE 1	 	 	 	 
	 

	 	DEFINED TERMS	 	 	 	 
	 
	 	 	 	 	 	 
	Section 1.01

	 	Definitions
	 	 	2	 
	Section 1.02

	 	Other Definitional Provisions
	 	 	2	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE 2	 	 	 	 
	 

	 	GUARANTEE AND INDEMNIFICATION	 	 	 	 
	 
	 	 	 	 	 	 
	Section 2.01

	 	Guarantee
	 	 	2	 
	Section 2.02

	 	No Subrogation
	 	 	3	 
	Section 2.03

	 	Amendments, etc. with Respect to the WGRAH Obligations
	 	 	4	 
	Section 2.04

	 	Guarantee Absolute and Unconditional
	 	 	4	 
	Section 2.05

	 	Reinstatement
	 	 	5	 
	Section 2.06

	 	Payments to Trinity
	 	 	5	 
	Section 2.07

	 	Indemnification in Respect of Substantive Consolidation
	 	 	5	 
	Section 2.08

	 	Survival of Indemnification Obligations
	 	 	7	 
	Section 2.09

	 	Limitations on Indemnification Obligations
	 	 	7	 
	Section 2.10

	 	Procedural Requirements
	 	 	8	 
	Section 2.11

	 	Contributory Negligence
	 	 	9	 
	Section 2.12

	 	Indemnification of Pecos Administrator and Trinity Custodian
	 	 	9	 
	Section 2.13

	 	Payments in Respect of Indemnification Sections
	 	 	9	 
	Section 2.14

	 	Taxes
	 	 	9	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE 3	 	 	 	 
	 

	 	REPRESENTATIONS AND WARRANTIES	 	 	 	 
	 
	 	 	 	 	 	 
	Section 3.01

	 	Representations of Anadarko 	 	 	11 	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE 4	 	 	 	 
	 

	 	AFFIRMATIVE COVENANTS	 	 	 	 
	 
	 	 	 	 	 	 
	Section 4.01

	 	Financial Statements and Other Information
	 	 	13	 
	Section 4.02

	 	Notices of Material Events
	 	 	14	 
	Section 4.03

	 	Compliance with Laws
	 	 	14	 
	Section 4.04

	 	Compliance with Indenture
	 	 	14	 
	Section 4.05

	 	Insurance
	 	 	14	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE 5	 	 	 	 
	 

	 	NEGATIVE COVENANTS	 	 	 	 
	 
	 	 	 	 	 	 
	Section 5.01

	 	Indebtedness to Capitalization Ratio
	 	 	15	 
	Section 5.02

	 	Limitation on Certain Secured Indebtedness
	 	 	15	 
	Section 5.03

	 	Limitations on Sales and Leasebacks
	 	 	15	 

i

 

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 	 	 	 	 	 	 
	Section 5.04

	 	Fundamental Changes of Anadarko
	 	 	16	 
	Section 5.05

	 	Fundamental Changes of Trinity
	 	 	16	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE 6	 	 	 	 
	 

	 	MISCELLANEOUS	 	 	 	 
	 
	 	 	 	 	 	 
	Section 6.01

	 	Amendments in Writing
	 	 	16	 
	Section 6.02

	 	Notices
	 	 	16	 
	Section 6.03

	 	No Waiver by Course of Conduct; Cumulative Remedies
	 	 	17	 
	Section 6.04

	 	Enforcement Expenses; Indemnification
	 	 	17	 
	Section 6.05

	 	Successors and Assigns
	 	 	18	 
	Section 6.06

	 	Set-off
	 	 	18	 
	Section 6.07

	 	Delivery by Telecopy
	 	 	19	 
	Section 6.08

	 	Severability
	 	 	19	 
	Section 6.09

	 	Section Headings
	 	 	19	 
	Section 6.10

	 	Integration
	 	 	19	 
	Section 6.11

	 	Governing Law
	 	 	19	 
	Section 6.12

	 	Submission to Jurisdiction
	 	 	19	 
	Section 6.13

	 	Acknowledgements
	 	 	20	 
	Section 6.14

	 	Releases
	 	 	20	 
	Section 6.15

	 	Effectiveness
	 	 	20	 

ii

 

SPONSOR PAYMENT GUARANTY

     This SPONSOR PAYMENT GUARANTY (the “Sponsor Payment Guaranty”), dated as of December 19, 2008,
is made by ANADARKO PETROLEUM CORPORATION, a Delaware corporation (“Anadarko”), in favor of TRINITY
ASSOCIATES LLC, a Delaware limited liability company and its successors and assigns (“Trinity”),
Pecos Investors LLC, a Delaware limited liability company (“Pecos”), and the other Indemnified
Persons.

INTRODUCTION

A. WGR ASSET HOLDING COMPANY LLC (“WGRAH”), Trinity and the WGRAH Collateral Agent are parties to
that certain WGRAH Loan Agreement, dated as of December 27, 2007 (as amended, restated,
supplemented or otherwise modified from time to time, the “WGRAH Loan Agreement”).

B. WGRAH, Trinity and the WGRAH Collateral Agent desire to amend the WGRAH Loan Agreement
contemporaneously with the execution of this Sponsor Payment Guaranty by executing and delivering
Amendment No. 1 to the WGRAH Term Loan Agreement dated as of December 19, 2008 (“Amendment No. 1 to
the WGRAH Loan Agreement”).

C. WGRAH and Pecos desire to terminate the Sponsor Agreement contemporaneously with the execution
of this Sponsor Payment Guaranty by executing and delivering the Agreement to Terminate the Sponsor
Agreement dated as of December 19, 2008 (the “Agreement to Terminate”)

D. WGRAH and Anadarko are engaged in related businesses, and Anadarko will derive substantial
direct and indirect benefit from the adoption of Amendment No. 1 to the WGRAH Loan Agreement.

E. It is a condition precedent to the effectiveness of Amendment No. 1 to the WGRAH Loan Agreement
and the Agreement to Terminate that Anadarko shall have executed and delivered this Sponsor Payment
Guaranty in favor of Trinity, Pecos and the other Indemnified Persons.

F. Subject to the conditions stated therein, Pecos in its capacity as the Trinity Class B Member
has agreed to execute that certain Trinity Class B Member Consent (the “Trinity Class B Member
Consent”) of even date herewith with respect to the matters contemplated herein and therein and in
the documents set forth in the foregoing Preliminary Statements.

G. Subject to the conditions stated therein, the Pecos Members have agreed to execute that certain
Pecos Member Consent (the “Pecos Member Consent”) of even date herewith with respect to the matters
contemplated herein and therein and in the documents set forth in the foregoing Preliminary
Statements.

H. Subject to the conditions stated therein, the Pecos First Lien Lenders have agreed to execute
that certain Pecos First Lien Lender Consent (the “Pecos First Lien Lender Consent”) of even date
herewith with respect to the matters contemplated herein and therein and in the documents set forth
in the foregoing Preliminary Statements.

1

 

     NOW, THEREFORE, in consideration of the premises and to induce Trinity to enter into Amendment
No. 1 to the WGRAH Loan Agreement, Anadarko hereby agrees with and for the benefit of Trinity,
Pecos and the other Indemnified Persons as follows:

ARTICLE 1

Defined Terms

     Section 1.01 Definitions. Unless otherwise defined herein (including Exhibit A hereto), terms defined in
Exhibit A to the Amended and Restated Limited Liability Company Agreement of Trinity, dated as of
December 27, 2007, as amended as of even date herewith (the “Trinity Company Agreement”) shall have
the same meanings in this Sponsor Payment Guaranty.

     Section 1.02 Other Definitional Provisions. The definitions of terms herein shall apply equally to the singular
and plural forms of the terms defined. Whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and
“including” shall be deemed to be followed by the phrase “without limitation”. The word “will”
shall be construed to have the same meaning and effect as the word “shall”. Unless the context
requires otherwise (a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or other document as
from time to time amended, supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference herein to any Person
shall be construed to include such Person’s successors and assigns, (c) any reference herein to any
Applicable Law means such Applicable Law as amended, modified, codified, replaced or reenacted, in
whole or in part, and in effect from time to time, including rules and regulations promulgated
thereunder and reference to any section or other provision of any Applicable Law means that section
or provision of such Applicable Law from time to time in effect and any amendment, modification
codification, replacement, or reenactment of such section or other provision, (d) the words
“herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to
this Sponsor Payment Guaranty in its entirety and not to any particular provision hereof, (e) all
references herein to Articles, Sections, Exhibits, Appendices and Schedules shall be construed to
refer to Articles and Sections of, and Exhibits, Appendices and Schedules to, this Sponsor Payment
Guaranty, (f) all references to “days” shall mean calendar days and (g) the words “asset” and
“property” shall be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities, Equity Interests,
accounts and contract rights. This Sponsor Payment Guaranty is the result of negotiations among
the parties hereto and their respective counsel. Accordingly, this Sponsor Payment Guaranty shall
be deemed the product of all parties hereto, and no ambiguity in this Sponsor Payment Guaranty
shall be construed in favor of or against Anadarko or Trinity.

ARTICLE 2

Guarantee and Indemnification

     Section 2.01 Guarantee.

          (a) Without limiting Section 2.09(c), Anadarko hereby unconditionally and irrevocably
guarantees to Trinity and its indorsees, transferees, successors and assigns, the

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prompt and complete payment when due (whether at the stated maturity, by acceleration or
otherwise) of the WGRAH Obligations. For the sake of clarity, WGRAH shall remain the primary
obligor for payment of the WGRAH Obligations and Anadarko is the guarantor of such obligations.

          (b) Anadarko and by its acceptance of this Sponsor Payment Guaranty and the rights hereunder
or benefits hereof, Trinity, hereby agrees and confirms that it is the intention of all such
Persons that this Sponsor Payment Guaranty and the obligations of Anadarko under this Article
2 not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Laws, the
Uniform Fraudulent Conveyance Act (as adopted by any applicable state), the Uniform Fraudulent
Transfer Act (as adopted by any applicable state) or any similar foreign, federal or state law to
the extent applicable to this Sponsor Payment Guaranty and the obligations of Anadarko under this
Article 2 and (ii) the aggregate liability of Anadarko under this Article 2 at any
time shall not exceed its Maximum Liability.

          (c) Anadarko agrees that the WGRAH Obligations may at any time and from time to time exceed
the Maximum Liability of Anadarko hereunder without impairing the guarantee contained in this
Article 2 or affecting the rights and remedies of Trinity hereunder.

          (d) Without limiting Section 2.09(c), the guarantee contained in this Article
2 shall remain in full force and effect until the earlier of irrevocable payment in full of the
WGRAH Obligations or irrevocable payment in full of the Liquidated Damages and any other Sponsor
Indemnified Amounts.

          (e) Without limiting Section 2.09(c), no payment or payments made by WGRAH, Anadarko,
any other guarantor or any other Person, or received or collected by Trinity from WGRAH, Anadarko,
any other guarantor or any other Person, by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in reduction of or in payment of
WGRAH Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of
Anadarko under this Article 2 which shall, notwithstanding any such payment or payments
(other than any payment or payments made by Anadarko in respect of the WGRAH Obligations or any
payment received or collected from Anadarko in respect of the WGRAH Obligations), remain liable for
the WGRAH Obligations up to the Maximum Liability of Anadarko under this Article 2 until
the earlier of irrevocable payment in full of the WGRAH Obligations or irrevocable payment in full
of the Liquidated Damages and any other Sponsor Indemnified Amounts.

          (f) Without limiting Section 2.09(c), Anadarko hereby absolutely, unconditionally and
irrevocably guarantees, for the benefit of the Indemnified Persons, the due and punctual payment,
performance and observance by each of Trinity and the Trinity Managing Member (in the case of the
Trinity Managing Member, such guarantee provided as long as the Trinity Class A Member is an
Affiliate of Anadarko) of their respective Responsibilities under each Transaction Agreement to
which they are a party.

     Section 2.02 No Subrogation. Notwithstanding any payment made by Anadarko hereunder or any set-off or
application of funds of Anadarko by Trinity, Anadarko shall not be entitled to be subrogated to any
of the rights of Trinity against WGRAH or any collateral

3

 

security or guarantee or right of offset held by Trinity for the payment of WGRAH Obligations, nor
shall Anadarko seek or be entitled to seek any contribution or reimbursement from WGRAH in respect
of payments made by Anadarko hereunder, until the earlier of irrevocable payment in full of the
WGRAH Obligations or irrevocable payment in full of the Liquidated Damages and any other Sponsor
Indemnified Amounts. All debts, obligations and liabilities of WGRAH to Anadarko, whether now
existing or hereafter arising, shall be expressly subordinate in payment to the payment and
satisfaction in full of the WGRAH Obligations until the earlier of the irrevocable payment in full
of the WGRAH Obligations and the irrevocable payment in full of the Liquidated Damages and any
other Sponsor Indemnified Amounts. If any amount shall be paid to Anadarko on account of such
subrogation rights prior to the payment in full of the WGRAH Obligations or the Liquidated Damages
and any other Sponsor Indemnified Amounts, such amount shall be held by Anadarko in trust for
Trinity, segregated from other funds of Anadarko, and shall, forthwith upon receipt by Anadarko, be
turned over to Trinity in the exact form received by Anadarko (duly indorsed by Anadarko to
Trinity, if required), to be applied against WGRAH Obligations, whether matured or unmatured, in
accordance with the terms and provisions of the WGRAH Loan Agreement.

     Section 2.03 Amendments, etc. with Respect to the WGRAH Obligations. Anadarko shall remain obligated under this
Article 2 notwithstanding that, without any reservation of rights against Anadarko and
without notice to or further assent by Anadarko, (a) any demand for payment of any of the WGRAH
Obligations made by Trinity may be rescinded by Trinity and any of the WGRAH Obligations continued,
(b) any WGRAH Obligations, or the liability of any other Person upon or for any part thereof, or
any collateral security or guarantee therefor or right of offset with respect thereto, may, from
time to time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by Trinity, and (c) the WGRAH Loan Agreement or the
other WGRAH Loan Documents and any other documents executed and delivered in connection therewith,
in each case may be amended, modified, supplemented or terminated, in whole or in part, pursuant to
the terms and conditions of each such applicable document from time to time, and any collateral
security, guarantee or right of offset at any time held by Trinity for the payment of any WGRAH
Obligations may be sold, exchanged, waived, surrendered or released.

     Section 2.04 Guarantee Absolute and Unconditional. Anadarko waives any and all notice of the creation, renewal,
extension or accrual of any of the WGRAH Obligations and notice of or proof of reliance by Trinity
upon the guarantee contained in this Article 2 or acceptance of the guarantee contained in
this Article 2. Anadarko waives diligence, presentment, protest, demand for payment
(except as expressly set forth in this Section 2.04), notice of intent to accelerate,
notice of acceleration and notice of default or nonpayment to or upon WGRAH or Anadarko with
respect to WGRAH Obligations. Anadarko further waives any requirement that suit be brought against
WGRAH, or any other action by Trinity be taken against WGRAH or any other Person, or that any other
action to be taken or not taken as a condition to Anadarko’s liability for the WGRAH Obligations
under this Sponsor Payment Guaranty or as a condition to the enforcement of this Sponsor Payment
Guaranty against Anadarko. Anadarko understands and agrees that the guarantee contained in this
Article 2 shall, without limiting Section 2.09(c), be construed as a continuing,
absolute, irrevocable and unconditional guarantee of payment without regard to (a) the validity or
enforceability or perfection of the WGRAH Loan Agreement or any other WGRAH Loan Document or
Transaction Agreement, any of the WGRAH

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Obligations or any other collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by Trinity, (b) any defense (including any defense
arising from the bankruptcy or insolvency of WGRAH or Anadarko), set-off or counterclaim whatsoever
(other than a defense of payment or performance) which may at any time be available to or be
asserted by WGRAH or any other Person against Trinity, or (c) any other circumstance whatsoever
(with or without notice to or knowledge of WGRAH or Anadarko), other than payment or performance,
which constitutes, or might be construed to constitute, an equitable or legal discharge of WGRAH or
Anadarko for any of its respective portion of the WGRAH Obligations or of Anadarko under the
guarantee contained in this Article 2, in bankruptcy or in any other instance. Without
limiting Section 2.09(c), Anadarko shall pay the WGRAH Obligations when due upon written
demand therefor specifying the WGRAH Obligation due and amount thereof; provided, that when making
any demand hereunder or otherwise pursuing its rights and remedies hereunder against Anadarko,
Trinity may, but shall be under no obligation to, make a similar demand on or otherwise pursue such
rights and remedies as it may have against WGRAH or any other Person or against any collateral
security or guarantee for the WGRAH Obligations or any right of offset with respect thereto, and
any failure by Trinity to make any such similar demand, to pursue such other rights or remedies or
to collect any payments from WGRAH or any other Person or to realize upon any such collateral
security or guarantee or to exercise any such right of offset, or any release of WGRAH or any other
Person or any such collateral security, guarantee or right of offset, shall not relieve Anadarko of
any obligation or liability hereunder, and shall not impair or affect the rights and remedies,
whether express, implied or available as a matter of law, of Trinity against Anadarko. For the
purposes hereof “demand” shall include the commencement and continuance of any legal proceedings.
It shall not be necessary for Trinity, in order to enforce payment by Anadarko under this Sponsor
Payment Guaranty, to institute or exhaust its remedies against WGRAH, any other guarantor, or any
other person liable for the payment or performance of the WGRAH Obligations.

     Section 2.05 Reinstatement. The guarantee contained in this Article 2 shall continue to be effective,
or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the
WGRAH Obligations is rescinded or must otherwise be restored or returned by Trinity upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of WGRAH or Anadarko, or upon or
as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, WGRAH, or Anadarko or any substantial part of its property, or otherwise, all as
though such payments had not been made.

     Section 2.06 Payments to Trinity. Anadarko hereby agrees that payments required to be made by it hereunder to
Trinity will be paid to Trinity without set-off or counterclaim in dollars before 12:00 noon, New
York City time, on the day when due and shall be made to the Trinity Operating Account.

     Section 2.07 General Indemnities. Without limiting Section 2.09 below, Anadarko agrees to the fullest
extent permitted by Applicable Law to indemnify and hold harmless each Indemnified Person for and
against and to pay on an After Tax-Basis, all Expenses (the Expenses on an After-Tax Basis and any
liquidated damages provided for under the second sentence of Section 2.07(a) being referred
to collectively as the “Sponsor Indemnified Amounts‘) that may
be incurred or realized by or asserted against such Indemnified Person relating to, growing out of
or resulting from:

5

 

          (a) Trinity Bankruptcy Event. Any Trinity Bankruptcy Event; provided, that forthwith
upon the occurrence of a Trinity Bankruptcy Event and in respect of Sponsor Indemnified Amounts
under the first clause of this sentence the Indemnified Parties shall be entitled to receive (and
Anadarko shall pay) as liquidated damages (the “Liquidated Damages”) but without prejudice to
amounts recoverable under Section 2.07(c) or Section 2.07(e) below or any other
provision of the Transaction Agreements, and not as a penalty, an aggregate amount equal to the sum
of all (x) Unrecovered Capital plus (y) the Cumulative Preferred Return Distribution Amount at the
time of redemption, plus (z) all Trinity Expenses then unpaid in addition to, but without
duplication of, all Expenses payable pursuant to the first sentence of this Section 2.07;
or

          (b) Failure to Perform. The failure of the Trinity Managing Member to timely perform
any Trinity Required Action; or

          (c) Enforcement or Defense. (i) Enforcement of this Sponsor Payment Guaranty or any
other Transaction Agreement and (ii) any investigation, litigation or proceeding, whether or not
such Indemnified party is a party thereto, that: (A) relates to, grows out of or results from any
action or omission, or alleged action or omission, by or on behalf of or attributable to any
Transaction party in the performance or observance of its obligations under or in relation to the
Transaction Agreements or the transactions contemplated thereby; and (B) would not have resulted in
Sponsor Indemnified Amounts incurred or realized by or asserted against such Indemnified Person but
for their being a party to, or a direct or indirect participant in, or having a relationship
described in the definition of “Indemnified Person” to a party to, or a direct or indirect
participant in, the Transaction Agreement or any of the transactions contemplated thereby; or

          (d) ERISA. Any liability or other Sponsor Indemnified Amounts that Trinity or any
other Transaction Party may incur in connection with any Plan or Multiemployer Plan or otherwise
under Title IV of ERISA; or

          (e) Expenses. Any amendment, supplement, modification, consent or waiver of, to or
under any Transaction Agreement (to the extent not otherwise reimbursed pursuant to any Transaction
Agreement); or

          (f) Fraudulent Transfer or Conveyance. Any transfer, pledge or conveyance by any
Transaction Party to Trinity Holdings, WGRAH or any of their Subsidiaries or the transfer, pledge
or conveyance thereof under the WGRAH Loan Documents to the extent found in any bankruptcy,
insolvency, receivership or other similar proceeding to be a “fraudulent transfer” or “fraudulent
conveyance” or “fraudulent preference”; or

          (g) Tax Liability. All Taxes for which Anadarko or any of its Subsidiaries is liable
(including with respect to any assets or income of a partnership or disregarded entity owned in
whole or in part by Anadarko or any of its Subsidiaries). If the shares of any Transaction Party
and any assets directly or indirectly held thereby (including any assets hold by any partnership or

6

 

disregarded entity in which a Transaction Party is a partner or owner) are sold following a
Liquidating Event, the benefits of this Section 2.07(g) shall inure to the purchaser of
such shares or assets with respect to any taxable period or portion thereof ending on or prior to
the date of such sale.

     Section 2.08 Survival of Indemnification Obligations. All indemnities provided for in this Sponsor Payment
Guaranty shall survive the Transfer of any Trinity Membership Interest or the liquidation of
Trinity. After any such Transfer or liquidation, the provisions of Section 2.07 shall
inure to the benefit of each Indemnified Person with respect to Sponsor Indemnified Amounts arising
in respect of the period during which the member or shareholder or other holder of an Equity
Interest (as applicable) who has Transferred its Trinity Membership Interest was a member
(including with respect to actions taken or omitted to be taken, and events occurring and
circumstances existing, during such period) of Trinity.

     Section 2.09 Limitations on Indemnification Obligations. The indemnities provided in Section 2.07 and
Section 2.12 shall be subject to the following limitations:

          (a) Limitation by Law. Such Sections shall be enforced only to the maximum extent
permitted by Applicable Law.

          (b) Misconduct, Etc. No Person shall be indemnified or held harmless for, and
Anadarko shall have no liability for or in respect of, any Expenses with respect to such Person to
the extent caused by or resulting from (i) the actual fraud, willful misconduct, bad faith or gross
negligence of such Person or any of its Related Persons or (ii) any inaccuracy in, or breach of,
any written certification, representation or warranty made by such Person or any of its Related
Persons in any Transaction Agreement or in any written report or certification required hereunder
or under any other Transaction Agreement (unless and to the extent such inaccuracy or breach is
attributable to any written information provided by any Transaction Party), in each case under this
clause (ii): (x) if, but only if, such certification, representation or warranty is made as of a
specific date, as of the date as of which the facts stated therein were certified, represented or
warranted and (y) in all other cases as of any date or during any period to which such
certification, representation or warranty may be applicable. For purposes of this Section
2.09(b), it is agreed that Trinity is not a Related Person of Pecos.

          (c) No Duplication. Sponsor Indemnified Amounts under Section 2.07 shall be
without duplication of (i) any amounts paid under indemnification provisions of any other
Transaction Agreement or other agreement or any amounts actually paid thereunder and (ii) any
amounts paid by the Sponsor in respect of WGRAH Obligations pursuant to Section 2.04.

          (d) Exculpation. ANADARKO, ON BEHALF OF ITSELF AND ITS AFFILIATES, AGREES THAT NO
INDEMNIFIED PERSON SHALL BE LIABLE TO ANADARKO OR ANY OF ITS AFFILIATES FOR ANY ACTION IN GOOD
FAITH TAKEN OR OMITTED TO BE TAKEN BY SUCH INDEMNIFIED PERSON PURSUANT TO, IN CONNECTION WITH, OR
IN ANY WAY RELATED TO THIS SPONSOR PAYMENT GUARANTY OR ANY OTHER TRANSACTION AGREEMENT, INCLUDING
AN INDEMNIFIED PERSON’S OWN NEGLIGENCE OR CO-NEGLIGENCE EXCEPT TO THE
EXTENT SUCH ACTION OR OMISSION CONSTITUTES WILLFUL MISCONDUCT, FRAUD OR GROSS NEGLIGENCE ON
THE PART OF SUCH INDEMNIFIED PERSON.

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     Section 2.10 Procedural Requirements.

          (a) Notice of Claims. Any Indemnified Person that proposes to assert a right to be
indemnified under Section 2.07 or Section 2.12 (together, the “Indemnification
Sections”) will, promptly after receipt of notice of commencement of any action, suit, or
proceeding against such Indemnified Person in respect of which a claim is to be made against
Anadarko under an Indemnification Section (a “Sponsor Indemnified Proceeding”), or the incurrence
or realization of Sponsor Indemnified Amounts in respect of which a claim is to be made against
Anadarko, under an Indemnification Section, notify Anadarko of the commencement of such Sponsor
Indemnified Proceeding or of such incurrence or realization, enclosing a copy of all relevant
documents, including all papers served and claims made, but the omission so to notify Anadarko
promptly of any such Sponsor Indemnified Proceeding or incurrence or realization shall not relieve
(i) Anadarko from any liability that it may have to such Indemnified Person under the
Indemnification Sections or otherwise, except, as to Anadarko’s liability, under the
Indemnification Sections, to the extent, but only to the extent, that Anadarko shall have been
prejudiced by such omission or (ii) any other indemnitor from liability that it may have to any
Indemnified Person under the Transaction Agreements.

          (b) Defense of Proceedings. In case any Sponsor Indemnified Proceeding shall be
brought against any Indemnified Person and it shall notify Anadarko of the commencement thereof,
Anadarko shall be entitled to participate in, and to assume the defense of, such Sponsor
Indemnified Proceeding with counsel reasonably satisfactory to such Indemnified Person, and after
notice from Anadarko to such Indemnified Person of Anadarko’s election so to assume the defense
thereof and the failure by such Indemnified Person to object to such counsel within ten (10)
Business Days following its receipt of such notice, Anadarko shall not be liable to such
Indemnified Person for legal or other expenses incurred after such notice of election to assume
such defense except as provided below and except for the reasonable costs of investigating,
monitoring or cooperating in such defense subsequently incurred by such Indemnified Person
reasonably necessary, in connection with the defense thereof; provided that without the
prior written consent of such Indemnified Person, Anadarko shall not settle or compromise, or
consent to the entry of any judgment in, any pending or threatened Sponsor Indemnified Proceeding,
unless such settlement, compromise or consent or related judgment includes an unconditional release
of such Indemnified Person from all liability for Expenses arising out of such claim, action,
investigation, suit or other legal proceeding. No Indemnified Person shall settle or compromise,
or consent to the entry of any judgment in, any pending or threatened Sponsor Indemnified
Proceeding in respect of which any payment would result hereunder or under the other Transaction
Agreements without the prior written consent of Anadarko, such consent not to be unreasonably
withheld or delayed. Such Indemnified Person shall have the right to employ its separate counsel
in any such Sponsor Indemnified Proceeding, in which case the fees and expenses of counsel for such
Indemnified Person shall be at the expense of the Indemnified Person unless (i) Anadarko and the
Indemnified Person shall have mutually agreed to the retention of such counsel and the payment of
fees and expenses thereof by Anadarko, (ii) the use of counsel chosen by Anadarko to represent the
Indemnified Person would present such counsel with a conflict of interest, (iii) the actual or
potential parties to any Sponsor Indemnified

8

 

Proceeding (including any impleaded parties) include both Anadarko and an Indemnified Party
and the Indemnified Party shall have reasonably concluded that there may be legal defenses
available to it which are different from or additional to those available to Anadarko, or (iv)
Anadarko shall have failed to retain satisfactory counsel as provided herein

     Section 2.11 Contributory Negligence. The indemnities set forth herein shall expressly include any Sponsor
Indemnified Amounts attributable to the ordinary, sole or contributory negligence of any
Indemnified Person.

     Section 2.12 Indemnification of Pecos Administrator and Trinity Custodian. Without limiting Section
2.09, Anadarko agrees to the fullest extent permitted by Applicable Law to (a) indemnify and
hold harmless each of the “Indemnified Parties” (as such term is defined in the Pecos
Administration Agreement) to the same extent that Pecos is required to indemnify such persons in
accordance with Section 7 of the Pecos Administration Agreement, and (b) indemnify and hold
harmless each of the “Indemnified Parties” (as such term is defined in the Trinity Custodian
Agreement) to the same extent that Trinity is required to indemnify such persons in accordance with
Section 7 of the Trinity Custodian Agreement.

     Section 2.13 Payments in Respect of Indemnification Sections. All payments to be made by Anadarko under the
Indemnification Sections shall be paid by Anadarko within five (5) Business Days following demand
therefor, accompanied, as may be appropriate in the context, by supporting documentation in
reasonable detail. Payment shall be made to the bank account or at another location as such
Indemnified Person shall designate in writing or as is expressly required under any Transaction
Agreement the obligations under which are the subject of any such payment, not later than 1:00 P.M.
(New York time) on the date for such payment in immediately available funds.

     Section 2.14 Taxes.

          (a) Any and all payments by Anadarko under the Indemnification Sections to each Indemnified
Person shall be made, in accordance with Section 2.14, free and clear of and without
deduction for any and all present or future Taxes. If Anadarko shall be required by Applicable Law
to deduct any Taxes from or in respect of any sum payable under the Indemnification Sections to any
Indemnified Person, (i) the sum payable shall be increased as may be necessary so that after making
all required deductions (including deductions applicable to additional sums payable under this
Section 2.14) such Indemnified Person receives an amount equal to the sum it would have
received had no such deductions been made, (ii) Anadarko shall make or cause to be made such
deductions and (iii) Anadarko shall pay or cause to be paid the full amount deducted to the
relevant taxation authority or other authority in accordance with Applicable Law, provided that
should an Indemnified Person become subject to Taxes because of its failure to deliver a form
required under Section 2.14(d), Anadarko shall take such steps as such Indemnified Person
shall reasonably request to assist such Indemnified Person to recover such Taxes, and provided
further; that each Indemnified Person, with respect to itself, agrees to indemnify and hold
harmless Anadarko from any taxes, penalties, interest or other expenses, costs and losses incurred
or payable by Anadarko as a result of the failure of Anadarko to comply with its obligations under
Section 2.14(a)(ii) or (iii) in reliance on any form or certificate provided to it
by such Indemnified Person pursuant to Section 2.14(d). If any Indemnified

9

 

Person receives a net credit, refund or reduction in Taxes in respect of such Taxes or amounts
so paid by Anadarko, it shall promptly notify Anadarko of such net credit, refund or reduction in
Taxes and shall promptly pay such net credit, refund or reduction in Taxes to Anadarko, provided
that Anadarko agrees to return such net credit, refund or reduction in Taxes if the Indemnified
Person to which such net credit, refund or reduction in Taxes is applicable is required to repay
it.

          (b) In addition, Anadarko agrees to pay any present or future stamp or documentary Taxes or
any other excise or property Taxes, charges or similar levies, which arise from any payment made by
Anadarko under the Indemnification Sections or from the execution, delivery or performance of, or
otherwise with respect to, this Sponsor Payment Guaranty (hereinafter referred to as “Other Sponsor
Taxes”).

          (c) Anadarko will indemnify each Indemnified Person for the full amount of Taxes or Other
Sponsor Taxes (including, without limitation, any Taxes or Other Sponsor Taxes imposed by any
jurisdiction on amounts payable under this Section 2.14) paid by such Indemnified Person
and any liability (including penalties, interest and expenses) arising, therefrom or with respect
thereto except as a result of the gross negligence (which shall in any event include the failure of
such Indemnified Person to provide to Anadarko any form or certificate that it was required to
provide pursuant to subsection (d) below and such Indemnified Person was able to provide under
Applicable Law) or willful misconduct of such Indemnified Person, whether or not such Taxes or
Other Sponsor Taxes were correctly or legally asserted. This indemnification shall be made within
thirty (30) days from the date such Indemnified Person makes written demand therefor.

          (d) On or prior to the date on which each Indemnified Person organized under the laws of a
jurisdiction outside the United States becomes an Indemnified Person hereunder, such Indemnified
Person to the extent permitted under Applicable Law, shall provide Anadarko with U.S. Internal
Revenue Service form W-BEN or W-8ECI, as appropriate, or any successor form prescribed by the U.S.
Internal Revenue Service, certifying that such Indemnified Person is fully exempt from or subject
to a reduced rate of United States withholding taxes with respect to all payments to be made to
such Indemnified Person under the Indemnification Sections, or other documents satisfactory to
Anadarko indicating that all payments to be made to such Indemnified Person under the
Indemnification Sections are fully exempt from or subject to a reduced rate of such taxes.
Thereafter and from time to time (but only so long as such Indemnified Person remains lawfully able
to do so), each such Indemnified Person shall submit to Anadarko such additional duly completed and
signed copies of one or the other of such forms (or such successor forms as shall be adopted from
time to time by the relevant U.S. taxing authorities) as may be (i) requested by Anadarko from such
Indemnified Person and (ii) required under then-current U.S. law or regulations to avoid or reduce
U.S. withholding taxes on payments in respect of all amounts to be received by such Indemnified
Person pursuant to this Sponsor Payment Guaranty. Each Indemnified Person that is a U.S. person
(as such term is defined in Section 7701(a)(30) of the Code) shall submit to Anadarko a certificate
to the effect that it is such a U.S. person. If any Indemnified Person determines as a result of
any change in Applicable Law, or in any official application or interpretation thereof, that it is
unable to submit to Anadarko any form or certificate that such Indemnified Person is obligated to
submit pursuant to this subsection (d), or that such Indemnified Person is required to withdraw or
cancel any such
form or certificate previously submitted, such Indemnified Person shall promptly notify
Anadarko of such fact.

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          (e) Without prejudice to the survival of any other agreement of Anadarko hereunder, the
agreements and obligations of Anadarko and each Indemnified Person contained in this Section
2.14 shall survive the payment in full of principal and interest owing under the WGRAH Loan
Agreement.

          (f) Any other provision of this Sponsor Payment Guaranty to the contrary notwithstanding, any
amounts which are payable by Anadarko under this Section 2.14 shall not also be payable
under the Indemnification Sections.

ARTICLE 3

Representations and Warranties

     Section 3.01 Representations of Anadarko. Anadarko represents and warrants to Trinity, Pecos and the other
Indemnified Persons that:

          (a) (i) Anadarko is a corporation duly incorporated and is validly existing and in good
standing under the laws of the State of Delaware and (ii) Anadarko is qualified to do business as a
foreign corporation and is in good standing in each jurisdiction of the United States in which the
ownership of its properties or the conduct of its business requires such qualification and where
the failure to so qualify would constitute a Material Adverse Change.

          (b) This Sponsor Payment Guaranty been duly authorized, executed and delivered by Anadarko and
constitutes a valid and binding agreement of Anadarko, enforceable in accordance with its terms,
subject to the effect of applicable bankruptcy, insolvency or similar laws affecting creditors’
rights generally and equitable principals of general applicability. There are no actions, suits or
proceedings pending or, to the knowledge of Anadarko, threatened against Anadarko which purport to
affect the legality, validity or enforceability of this Sponsor Payment Guaranty.

          (c) The execution, delivery and performance of this Sponsor Payment Guaranty by Anadarko will
not violate or conflict with (i) the restated certificate of incorporation or bylaws of Anadarko,
(ii) any indenture (including the Public Indenture), loan agreement or other similar agreement or
instrument binding on Anadarko, or (iii) any Applicable Law.

          (d) On the date of this Sponsor Payment Guaranty there are no actions, suits, proceedings or,
to the knowledge of Anadarko, investigations pending or, to the knowledge of Anadarko (with respect
to any of the representations in this Section 3.01(d)), threatened against Anadarko before
any Governmental Authority as to which, in the opinion of Anadarko, there is a reasonable
possibility of an adverse determination and that, if adversely determined, could reasonably be
expected, individually or in the aggregate, to constitute a Material Adverse Change.

          (e) The consolidated balance sheets of Anadarko and its consolidated Subsidiaries as of
December 31, 2006 and 2007, and the related consolidated statements of income, stockholders’ equity
and cash flows for each of the years in the three-year period ended December 31, 2007, audited by
KPMG LLP, present fairly, in all material respects, the

11

 

consolidated financial position of Anadarko and its consolidated Subsidiaries as of December
31, 2006 and 2007, and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 2007, in conformity with GAAP applied on a consistent
basis.

          (f) From December 31, 2007 through the date of this Sponsor Payment Guaranty, there has been
no Material Adverse Change.

          (g) Neither Anadarko nor any Subsidiary is (i) an “investment company” as defined in, or
subject to regulation under, the Investment Company Act of 1940, or (ii) “holding company” as
defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935.

          (h) No ERISA Event has occurred or is reasonably expected to occur that, when taken together
with all other such ERISA Events for which liability is reasonably expected to occur, could
reasonably be expected to result in a Material Adverse Change. The present value of all
accumulated benefit obligations of all underfunded Plans (based on the assumptions used for
purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most
recent financial statements reflecting such amounts, exceed the fair market value of the assets of
all such underfunded Plans by an amount that could reasonably be expected to be a Material Adverse
Change.

          (i) None of the other reports, financial statements, certificates or other information made
available to Trinity in connection with the negotiation of this Sponsor Payment Guaranty or
delivered hereunder (as modified or supplemented by other information so furnished), taken as a
whole, contains any material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they were made, not
misleading; provided that, with respect to projected financial information, Anadarko represents
only that such information was prepared in good faith based upon assumptions believed to be
reasonable at the time.

          (j) Anadarko has filed all United States Federal income tax returns and all other material tax
returns and reports required to be filed (or obtained extensions with respect thereto) and has paid
all taxes required to have been paid by it, except (i) taxes the validity of which is being
contested in good faith by appropriate proceedings, and with respect to which Anadarko, to the
extent required by GAAP, has set aside on its books adequate reserves or (ii) to the extent the
failure to do so (individually or collectively) would not reasonably be expected to result in a
Material Adverse Change.

          (k) No Sponsor Payment Guaranty Event of Default has occurred and is continuing.

          (l) Subject to Section 6.14, the obligations of Anadarko under this Sponsor Payment
Guaranty (a) are and will at all times be direct and unconditional general obligations of Anadarko
and (b) rank and will at all times rank (i) senior in right of payment to any Indebtedness of
Anadarko that by its terms is subordinated in right of payment to such obligations and (ii) equal
in right of payment to (i.e., pari passu in right of payment with) all
other Indebtedness of Anadarko, in each case whether such Indebtedness is now existing or
hereafter outstanding.

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ARTICLE 4

Affirmative Covenants

     Until the payment in full of the WGRAH Obligations or the Liquidated Damages and any other
Sponsor Indemnified Amounts, Anadarko covenants and agrees that:

     Section 4.01 Financial Statements and Other Information. Anadarko will furnish to Trinity:

          (a) Within the period required by applicable law (and concurrently with the filing thereof
with the Commission), copies of the annual reports, information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may from time to time by rules
and regulations prescribe) which Anadarko may be required to file with the Commission pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or, if Anadarko is not required
to file information, documents or reports pursuant to either of said Sections, then such of the
supplementary and periodic information, documents and reports which may be required pursuant to
Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on
a national securities exchange as may be prescribed from time to time in such rules and
regulations; provided, however, that Anadarko shall be deemed to have furnished the information
required by this Section 4.01(a) if it shall have timely made the same available on “EDGAR”
and/or through its home page on the worldwide web (at the date of this Sponsor Payment Guaranty
located at http://www.anadarko.com) and complied with Section 4.01(e) in respect
thereof; provided further, however, that if Trinity is unable to access EDGAR or Anadarko’s home
page on the worldwide web, Anadarko agrees to provide Trinity with paper copies of the information
required to be furnished pursuant to this Section 4.01(a) promptly following notice from
Trinity.

          (b) Within sixty (60) days after the close of each of the first three quarters of each fiscal
year of Anadarko, a statement by a responsible officer of Anadarko calculating compliance or
non-compliance, as the case may be, with Section 5.01 as of the close of such period and
stating whether to the knowledge of Anadarko an event has occurred during such period and is
continuing which constitutes an Sponsor Payment Guaranty Event of Default, and, if so, stating the
facts with respect thereto.

          (c) Within one hundred twenty (120) days after the close of each fiscal year of Anadarko, a
statement by a responsible officer of Anadarko calculating compliance or non-compliance, as the
case may be, with Section 5.01 as of the close of such period and stating whether to the
knowledge of Anadarko an event has occurred during such period and is continuing which constitutes
an Sponsor Payment Guaranty Event of Default, and, if so, stating the facts with respect thereto.

          (d) Such other information respecting the financial condition or operations of Anadarko and
its Subsidiaries as Trinity may from time to time reasonably request.

13

 

          (e) Information required to be delivered pursuant to Section 4.01(a) above shall be
deemed to have been delivered on the date on which Anadarko provides notice to Trinity that such
information has been posted on “EDGAR” or Anadarko’s website or another website identified in such
notice and accessible by Trinity without charge (and Anadarko hereby agrees to provide such
notice).

     Section 4.02 Notices of Material Events. Anadarko will furnish to Trinity prompt written notice of the following:

          (a) the occurrence of any Sponsor Payment Guaranty Event of Default;

          (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator
or Governmental Authority against or affecting Anadarko that if adversely determined, could
reasonably be expected to result in a Material Adverse Change; and

          (c) any other development that results in, or could reasonably be expected to result in, a
Material Adverse Change.

Each notice delivered under this Section 4.02 shall be accompanied by a statement of a
Financial Officer or other executive officer of Anadarko setting forth the details of the event or
development requiring such notice and any action taken with respect thereto.

     Section 4.03 Compliance with Laws. Anadarko will, and will cause each of the Subsidiaries to, comply with all laws, rules,
regulations and orders of any Governmental Authority applicable to it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be expected to result
in a Material Adverse Change.

     Section 4.04 Compliance with Indenture. Anadarko will comply with the provisions of Sections 1004 and 1005 of the Public Indenture,
which provisions, together with related definitions, are hereby incorporated herein by reference
for the benefit of Trinity and shall continue in effect for purposes of this Section 4.04
regardless of termination, or any amendment or waiver of, or any consent to any deviation from or
other modification of, the Public Indenture; provided, however, that, for purposes of this
Section 4.04, (a) references in the Public Indenture to “the Securities” shall be deemed to
refer to the obligation of Anadarko to pay its obligations under this Sponsor Payment Guaranty, (b)
references in the Public Indenture to “the Trustee” shall be deemed to refer to Trinity, (c)
references in the Public Indenture to “this Indenture” shall be deemed to refer to this Sponsor
Payment Guaranty, and (d) references in the Public Indenture to “supplemental indentures” shall be
deemed to refer to amendments or supplements to this Sponsor Payment Guaranty.

     Section 4.05 Insurance. Anadarko will at all times maintain, with financially sound and reputable insurers, insurance of
the kinds, covering the risks and in the relative proportionate amounts (including as to self-
insurance) customarily carried by companies engaged in the same or similar business and similarly
situated; provided that Anadarko shall not be required to maintain insurance against risks or in
amounts no longer economically available on a de novo or renewal basis, as applicable, to other
companies engaged in the same or similar business and similarly situated.

14

 

ARTICLE 5

Negative Covenants

          Until the payment in full of the WGRAH Obligations or the Liquidated Damages and any other
Sponsor Indemnified Amounts, Anadarko covenants and agrees that:

     Section 5.01 Indebtedness to Capitalization Ratio. At the end of each calendar quarter of Anadarko, Anadarko’s Consolidated Indebtedness divided by
Anadarko’s Total Capital shall not exceed 65%. For purposes of this provision, “Total Capital” is
equal to the sum (without duplication) of Consolidated Stockholders’ Equity of Anadarko, exclusive
of the effect of any noncash writedowns made subsequent to the date hereof, plus Consolidated
Indebtedness of Anadarko.

     Section 5.02 Limitation on Certain Secured Indebtedness. Anadarko will not incur, issue, assume or guarantee any Indebtedness secured by a mortgage on
oil, gas, coal or other minerals in place, or on related leasehold or other property interest,
which is incurred to finance development or production costs if the aggregate amount of all such
Indebtedness exceeds 10% of Total Assets. For purposes of this provision, “Total Assets” means the
aggregate amount of assets of Anadarko and its Subsidiaries, determined on a consolidated basis in
accordance with GAAP, as of the date such Indebtedness is to be incurred, issued, assumed or
guaranteed.

     Section 5.03 Limitations on Sales and Leasebacks. Anadarko will not itself, and will not permit any Subsidiary to, enter into any arrangement with
any bank, insurance company or other lender or investor (not including Anadarko or any Subsidiary)
or to which any such lender or investor is a party, providing for the leasing by Anadarko or a
Subsidiary for a period, including renewals, in excess of three years, of any Principal Property
(as defined in the Public Indenture) which has been or is to be sold or transferred more than one
hundred eighty (180) days after the completion of construction and commencement of full operation
thereof, by Anadarko or any Subsidiary to such lender or investor or to any Person to whom funds
have been or are to be advanced by such lender or investor on the security of such Principal
Property (herein referred to as a “sale and leaseback transaction”) unless either:

          (a) Anadarko or such Subsidiary could create Indebtedness secured by a security interest or
lien on the Principal Property to be leased back in an amount equal to the Attributable Debt with
respect to the lease resulting from such sale and leaseback transaction without equally and ratably
securing the “Securities” issued pursuant to and as defined in the Public Indenture in accordance
with Section 1005 of the Public Indenture; or

          (b) Anadarko within one hundred eighty (180) days after the sale or transfer shall have been
made by Anadarko or by a Subsidiary, applies an amount equal to the greater of (i) the net proceeds
of the sale of the Principal Property sold and leased back pursuant to such arrangement or (ii) the
net amount (after deducting applicable reserves) at which such Principal Property is carried on the
books of Anadarko or such Subsidiary at the time of entering into such arrangement, to the
retirement of Indebtedness of Anadarko.

For purposes of this Section 5.03, neither Anadarko Tower nor the Timberloch Building, each
in The Woodlands, Texas, shall be a Principal Property.

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     Section 5.04 Fundamental Changes of Anadarko. Anadarko shall not consolidate with or merge into any other Person or convey, transfer or lease
its properties and assets substantially as an entirety to any Person unless:

          (a) (i) in the case of a merger or amalgamation, Anadarko is the surviving entity; or

     (ii) the Person formed by such consolidation or into which Anadarko is merged or the
Person which acquires by conveyance or transfer, or which leases, the properties and assets
of Anadarko substantially as an entirety shall be a corporation, partnership, limited
liability company or trust, shall be organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia, shall have unsecured
non-credit enhanced publicly held indebtedness rated “investment grade” by S&P or Moody’s,
and shall expressly assume, by an agreement supplemental hereto, executed and delivered to
Trinity, in form satisfactory to Trinity, the obligations of Anadarko; and

          (b) immediately after giving effect to such transaction, no Sponsor Payment Guaranty Event of
Default or Default shall have occurred and be continuing.

     Section 5.05 Fundamental Changes of Trinity. Except as otherwise permitted under the Transaction Agreements, Anadarko will not permit Trinity
to consolidate with or merge into any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any other Person unless immediately after giving effect to
such transaction, no Notice Event, Liquidating Event, Termination Event, Event of Default or
Incipient Event or any “Event of Default” as such term is defined in the Sponsor Term Credit
Agreement shall have occurred and be continuing.

     Section 5.06. Subsidiaries. Anadarko will not permit at any time Holdings to fail to be a
Wholly-Owned Subsidiary of Anadarko. In the event of any transfer of the Trinity Class A
Membership Interest to a Subsidiary of Anadarko, Anadarko will not permit at any time such
Subsidiary to fail to be a Wholly-Owned Subsidiary of Anadarko.

ARTICLE 6

Miscellaneous

     Section 6.01 Amendments in Writing. None of the terms or provisions of this Sponsor Payment Guaranty may be waived, amended,
supplemented or otherwise modified except pursuant to an agreement or agreements in writing entered
into by Anadarko and Trinity.

     Section 6.02 Notices. All notices and other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or registered mail or sent by
telecopy, as follows:

          (a) if to Trinity, at 1201 Lake Robbins Drive, The Woodlands, Texas 77380, Attention of the
Treasurer, Telecopy No. (832) 636-5029; messenger delivery to 1201 Lake Robbins Drive, The
Woodlands, Texas 77380.

16

 

          (b) if to Anadarko, at 1201 Lake Robbins Drive, The Woodlands, Texas 77380, Attention of the
Treasurer, Telecopy No. (832) 636-5029; messenger delivery to 1201 Lake Robbins Drive, The
Woodlands, Texas 77380.

Any party hereto may change its address or telecopy number for notices and other communications
hereunder by notice to the other parties hereto. All notices and other communications given to any
party hereto in accordance with the provisions of this Sponsor Payment Guaranty shall be deemed to
have been given on the date of receipt.

     Section 6.03 No Waiver by Course of Conduct; Cumulative Remedies. Trinity shall not by any act (except by a written instrument in accordance with Section
5.01), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Sponsor Payment Guaranty Event of Default. No failure to
exercise, nor any delay in exercising, on the part of Trinity, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. A waiver by Trinity of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which Trinity would otherwise have
on any future occasion. The rights and remedies herein provided are cumulative, may be exercised
singly or concurrently and are not exclusive of any other rights or remedies provided by law.

     Section 6.04 Enforcement Expenses; Indemnification.

          (a) Anadarko shall indemnify each Indemnified Person against, and hold each Indemnified Person
harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnified
Person, incurred by or asserted against any Indemnified Person arising out of, in connection with,
or as a result of (i) the execution, delivery, negotiation, or preparation of this Sponsor Payment
Guaranty, the WGRAH Loan Agreement or any agreement or instrument contemplated hereby or thereby,
the performance by the parties hereto of their respective obligations hereunder or the consummation
of the WGRAH Loan Transactions or any other transactions contemplated hereby, (ii) the WGRAH Loan
or the use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous
Materials or Hazardous Waste on or from any property owned or operated by WGRAH or Anadarko, or any
environmental liability related in any way to WGRAH or Anadarko, or (iv) any actual or prospective
claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnified Person is a party
thereto; provided that such indemnity shall not, as to any Indemnified Person, be available to the
extent that such losses, claims, damages, liabilities or related expenses resulted from the gross
negligence or willful misconduct of such Indemnified Person, as determined in a final,
nonappealable judgment by a court of competent jurisdiction. The foregoing indemnities shall
expressly include any indemnified amounts attributable to the ordinary, sole or contributory
negligence of any Indemnified Person not constituting gross negligence.

          (b) Anadarko shall pay (i) all reasonable costs and expenses of each Indemnified Person,
including the reasonable fees, charges and disbursements of counsel for such Indemnified Person, in
connection with the preparation, execution, delivery and administration

17

 

of this Sponsor Payment
Guaranty or any amendments, modifications or waivers of the provisions hereof (whether or not the
transactions (including the WGRAH Loan Transactions) contemplated hereby or thereby shall be
consummated) and (ii) all costs and expenses incurred by each Indemnified Person, including the
fees, charges and disbursements of any counsel for such Indemnified Person, in connection with the
enforcement or protection of its rights under this Sponsor Payment Guaranty and the other WGRAH
Loan Documents, including its rights under this Section, or in connection with the WGRAH Loan made
under the WGRAH Loan Agreement, including all such costs and expenses incurred during any workout,
restructuring or negotiations in respect of the WGRAH Loan.

          (c) Anadarko shall indemnify each Indemnified Person for the full amount of any Indemnified
Taxes or Other Taxes paid by such Indemnified Person on or with respect to any payment by or on
account of any obligation of Anadarko under each WGRAH Loan Document and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified
Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental
Entity. A certificate as to the amount of such payment or liability delivered to Anadarko by such
Indemnified Person shall be conclusive absent manifest error.

          (d) The indemnities set forth in this Section 6.04 shall be in addition to any other
obligations or liabilities of Anadarko or hereunder or at common law or otherwise and shall survive
any assignment by each Indemnified Person of its rights hereunder, any Liquidating Event, the
termination of this Sponsor Payment Guaranty or the WGRAH Loan Agreement, the termination of the
WGRAH Commitment, and the repayment, satisfaction or discharge of all the WGRAH Obligations.

          (e) All amounts due under this Section shall be payable promptly after written demand therefor
together with a copy of the invoice(s) or other documentation setting forth in reasonable detail
the amount demanded and the matter(s) to which it relates.

     Section 6.05 Successors and Assigns. This Sponsor Payment Guaranty shall be binding upon the successors and assigns of Anadarko and
shall inure to the benefit of each Indemnified Person and its successors and assigns; provided
that, except in connection with a transaction expressly permitted by Section 5.04 of this
Sponsor Payment Guaranty, Anadarko may not assign, transfer or delegate any of its rights or
obligations under this Sponsor Payment Guaranty without the prior written consent of Trinity.

     Section 6.06 Set-off. Anadarko hereby irrevocably authorizes each Indemnified Person at any time and from time to time
while an Sponsor Payment Guaranty Event of Default shall have occurred and be continuing, without
prior notice to Anadarko, any such notice being expressly waived by Anadarko to set-off and
appropriate and apply any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any currency, in each
case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Indemnified Person to or for the credit or the account of Anadarko, or any part
thereof in such amounts as such Indemnified Person may elect, against and on account of the
obligations and liabilities of Anadarko to such Indemnified Person hereunder or under the other
WGRAH Loan Documents

18

 

and claims of every nature and description of such Indemnified Person against
Anadarko, in any currency, whether arising hereunder, under the WGRAH Loan Agreement or any other
WGRAH Loan Document, as such Indemnified Person may elect, whether or not such Indemnified Person
has made any demand for payment and although such obligations, liabilities and claims may be
contingent or unmatured. Each Indemnified Person shall notify Anadarko promptly of any such
set-off and the application made by such Indemnified Person of the proceeds thereof, provided that
the failure to give such notice shall not affect the validity of such set-off and application. The
rights of each Indemnified Person under this Section 6.06 are in addition to other rights
and remedies (including, without limitation, other rights of set-off) which such Indemnified Person
may have under Applicable Law.

     Section 6.07 Delivery by Telecopy. Delivery of an executed counterpart of a signature page to this Sponsor Payment Guaranty by
telecopier shall be effective as delivery of an original executed counterpart of this Sponsor
Payment Guaranty.

     Section 6.08 Severability. Any provision of this Sponsor Payment Guaranty that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.

     Section 6.09 Section Headings. The Section headings used in this Sponsor Payment Guaranty are for convenience of reference only
and are not to affect the construction hereof or be taken into consideration in the interpretation
hereof.

     Section 6.10 Integration. This Sponsor Payment Guaranty and the other WGRAH Loan Documents to which Anadarko is a party
represent the agreement of Anadarko and Trinity with respect to the subject matter hereof and
thereof, and there are no promises, undertakings, representations or warranties by Trinity relative
to the subject matter hereof and thereof not expressly set forth or referred to herein or in such
other WGRAH Loan Documents.

     Section 6.11 Governing Law. THIS SPONSOR PAYMENT GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF
THE STATE OF NEW YORK.

     Section 6.12 Submission to Jurisdiction.

          (a) Each party hereto hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in
New York County and of the United States District Court of the Southern District of New York, and
any appellate court from either thereof, in any action or proceeding arising out of or relating to
this Sponsor Payment Guaranty or any other WGRAH Loan Document, or for recognition or enforcement
of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and determined in such New York
State court or, to the extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the

19

 

judgment or in any other manner provided by law.
Nothing in this Sponsor Payment Guaranty or any other WGRAH Loan Document shall affect any right
that Trinity or any other Indemnified Person may otherwise have to bring any action or proceeding
relating to this Sponsor Payment Guaranty against Anadarko or its properties in the courts of any
jurisdiction. Each party to this Sponsor Payment Guaranty hereby irrevocably waives any objection,
including any objection to the laying of venue or based on the grounds of forum non conveniens,
which it may now or hereafter have to the bringing of any such action or proceeding in such
respective jurisdictions.

          (b) Each party to this Sponsor Payment Guaranty irrevocably consents to service of process in
the manner provided for notices in Section 6.02. Nothing in this Sponsor Payment Guaranty
will affect the right of any party to this Sponsor Payment Guaranty to serve process in any other
manner permitted by law.

     Section 6.13 Acknowledgements. Anadarko hereby acknowledges that:

          (a) it has been advised by counsel in the negotiation, execution and delivery of this Sponsor
Payment Guaranty and the other WGRAH Loan Documents to which it is a party;

          (b) Trinity has no fiduciary relationship with or duty to Anadarko arising out of or in
connection with this Sponsor Payment Guaranty or any of the other WGRAH Loan Documents, and the
relationship between Anadarko, on the one hand, and Trinity, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor; and

          (c) no joint venture is created hereby or by the other WGRAH Loan Documents or otherwise
exists by virtue of the transactions contemplated hereby among Anadarko and Trinity.

     Section 6.14 Releases.

          Upon irrevocable payment in full of the WGRAH Obligations, and all other obligations owed by
Anadarko hereunder, this Sponsor Payment Guaranty and all obligations (other than those expressly
stated to survive such termination and in all cases subject to Section 2.05 hereof) of
Anadarko and any other party hereto shall terminate, all without delivery of any instrument or
performance of any act by any Person. At the request and sole expense of WGRAH or Anadarko
following any such termination, Trinity shall promptly execute and deliver to WGRAH or Anadarko, as
the case may be, such agreements, instruments and other documents as Anadarko shall reasonably
request to evidence such termination.

     Section 6.15 Effectiveness. This Sponsor Payment Guaranty shall become effective upon and simultaneously with the
effectiveness of the Amendment No. 1 to the WGRAH Loan Agreement and of the Agreement to Terminate.

[Remainder of Page Intentionally Left Blank]

20

 

          IN WITNESS WHEREOF, each of the undersigned has caused this Sponsor Payment Guaranty to be
duly executed and delivered as of the date first above written.

	 	 	 	 	 
	 	ANADARKO PETROLEUM CORPORATION

 	 
	 	By:  	/s/ Bruce W. Busmire
 	 
	 	 	Bruce W. Busmire 	 
	 	 	Treasurer and Vice-President 	 
	 

Signature Page to Sponsor Payment Guaranty

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