UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q
(Mark One)

(X)          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended               June 30, 2003
                               ------------------------------------------------

                                       OR

( )         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to
                               -------------------    -------------------------

Commission file number                           1-4174
                       --------------------------------------------------------

                          THE WILLIAMS COMPANIES, INC.
- --------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

              DELAWARE                                  73-0569878
- ---------------------------------------    ------------------------------------
      (State of Incorporation)             (IRS Employer Identification Number)

            ONE WILLIAMS CENTER
               TULSA, OKLAHOMA                             74172
- ---------------------------------------    ------------------------------------
(Address of principal executive office)                 (Zip Code)

Registrant's telephone number:                        (918) 573-2000
                                           ------------------------------------

                                    NO CHANGE
- --------------------------------------------------------------------------------
         Former name, former address and former fiscal year, if changed
                               since last report.

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                              Yes   X       No
                                  -----        -----

     Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes   X       No
                                                -----        -----

    Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.

                Class                            Outstanding at July 31, 2003
- ---------------------------------------    ------------------------------------
       Common Stock, $1 par value                  517,954,889 Shares

                          The Williams Companies, Inc.
                                      Index

                                                                                                       Page
                                                                                                       ----
                                                                                                 
Part I.  Financial Information

     Item 1.  Financial Statements

        Consolidated Statement of Operations--Three and Six Months Ended June 30, 2003 and 2002           2

        Consolidated Balance Sheet--June 30, 2003 and December 31, 2002                                   3

        Consolidated Statement of Cash Flows--Six Months Ended June 30, 2003 and 2002                     4

        Notes to Consolidated Financial Statements                                                        5

     Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations      33

     Item 3.  Quantitative and Qualitative Disclosures about Market Risk                                 53

     Item 4.  Controls and Procedures                                                                    54

Part II.  Other Information                                                                              55

     Item 1.  Legal Proceedings

     Item 4.  Submission of Matters to a Vote of Security Holders

     Item 6.  Exhibits and Reports on Form 8-K

     Certain matters discussed in this report, excluding historical information,
include forward-looking statements - statements that discuss Williams' expected
future results based on current and pending business operations. Williams makes
these forward-looking statements in reliance on the safe harbor protections
provided under the Private Securities Litigation Reform Act of 1995.

     Forward-looking statements can be identified by words such as
"anticipates," "believes," "expects," "planned," "scheduled," "could,"
"continues," "estimates," "forecasts," "might," "potential," "projects" or
similar expressions. Although Williams believes these forward-looking statements
are based on reasonable assumptions, statements made regarding future results
are subject to a number of assumptions, uncertainties and risks that may cause
future results to be materially different from the results stated or implied in
this document. Additional information about issues that could lead to material
changes in performance is contained in The Williams Companies, Inc.'s 2002 Form
10-K.

                                       1

                          The Williams Companies, Inc.
                      Consolidated Statement of Operations
                                   (Unaudited)

                                                                   Three months                    Six months
(Dollars in millions, except per-share amounts)                   ended June 30,                  ended June 30,
- -----------------------------------------------           -----------------------------    -----------------------------
                                                              2003             2002*           2003             2002*
                                                          ------------     ------------    ------------     ------------

Revenues:
   Energy Marketing & Trading                             $    2,940.2     $     (195.6)   $    6,721.7     $      145.3
   Gas Pipeline                                                  312.0            290.5           635.3            595.5
   Exploration & Production                                      200.2            221.0           444.1            442.8
   Midstream Gas & Liquids                                       737.8            438.0         1,868.5            838.0
   Other                                                          20.1             26.0            48.1             52.7
   Intercompany eliminations                                    (446.5)           (32.8)       (1,004.2)           (55.3)
                                                          ------------     ------------    ------------     ------------
     Total revenues                                            3,763.8            747.1         8,713.5          2,019.0
                                                          ------------     ------------    ------------     ------------

Segment costs and expenses:
   Costs and operating expenses                                3,169.0            612.1         7,750.6          1,203.3
   Selling, general and administrative expenses                  116.8            162.6           232.2            294.6
   Other (income) expense - net                                 (225.2)           146.7          (224.6)           146.9
                                                          ------------     ------------    ------------     ------------
     Total segment costs and expenses                          3,060.6            921.4         7,758.2          1,644.8
                                                          ------------     ------------    ------------     ------------
General corporate expenses                                        21.8             34.1            44.7             72.3
                                                          ------------     ------------    ------------     ------------

Operating income (loss):
   Energy Marketing & Trading                                    364.7           (414.5)          234.2           (141.5)
   Gas Pipeline                                                  111.8            101.7           261.2            216.9
   Exploration & Production                                      176.2             91.4           287.9            198.3
   Midstream Gas & Liquids                                        58.9             48.1           179.4            100.8
   Other                                                          (8.4)            (1.0)           (7.4)             (.3)
   General corporate expenses                                    (21.8)           (34.1)          (44.7)           (72.3)
                                                          ------------     ------------    ------------     ------------
     Total operating income (loss)                               681.4           (208.4)          910.6            301.9
Interest accrued                                                (406.0)          (253.7)         (758.8)          (457.7)
Interest capitalized                                              11.2              6.3            23.2             11.1
Interest rate swap loss                                           (6.1)           (83.2)           (8.9)           (73.0)
Investing income (loss)                                          (43.1)            38.5             3.2           (178.2)
Minority interest in income and preferred returns
   of consolidated subsidiaries                                   (6.0)           (11.5)           (9.5)           (23.5)
Other income - net                                                14.0             23.8            36.0             18.5
                                                          ------------     ------------    ------------     ------------
Income (loss) from continuing operations before
   income taxes and cumulative effect of change
   in accounting principles                                      245.4           (488.2)          195.8           (400.9)
Provision (benefit) for income taxes                             127.4           (156.4)          116.6           (116.3)
                                                          ------------     ------------    ------------     ------------
Income (loss) from continuing operations                         118.0           (331.8)           79.2           (284.6)
Income (loss) from discontinued operations                       151.7            (17.3)          137.3             43.2
                                                          ------------     ------------    ------------     ------------
Income (loss) before cumulative effect of change
  in accounting principles                                       269.7           (349.1)          216.5           (241.4)
Cumulative effect of change in accounting principles                --               --          (761.3)              --
                                                          ------------     ------------    ------------     ------------
Net income (loss)                                                269.7           (349.1)         (544.8)          (241.4)
Preferred stock dividends                                         22.7              6.8            29.5             76.5
                                                          ------------     ------------    ------------     ------------
Income (loss) applicable to common stock                  $      247.0     $     (355.9)   $     (574.3)    $     (317.9)
                                                          ============     ============    ============     ============
Basic earnings (loss) per common share:
   Income (loss) from continuing operations               $        .19     $       (.65)   $        .09     $       (.69)
   Income (loss) from discontinued operations                      .29             (.03)            .27              .08
                                                          ------------     ------------    ------------     ------------
   Income (loss) before cumulative effect of change
     in accounting principles                                      .48             (.68)            .36             (.61)
   Cumulative effect of change in accounting principles             --               --           (1.47)              --
                                                          ------------     ------------    ------------     ------------
     Net income (loss)                                    $        .48     $       (.68)   $      (1.11)    $       (.61)
                                                          ============     ============    ============     ============
   Weighted-average shares (thousands)                         518,090          520,427         517,872          519,829

Diluted earnings (loss) per common share:
   Income (loss) from continuing operations               $        .18     $       (.65)   $        .09     $       (.69)
   Income (loss) from discontinued operations                      .28             (.03)            .26              .08
                                                          ------------     ------------    ------------     ------------
   Income (loss) before cumulative effect of
     change in accounting principles                               .46             (.68)            .35             (.61)
   Cumulative effect of change in accounting principles             --               --           (1.45)              --
                                                          ------------     ------------    ------------     ------------
     Net income (loss)                                    $        .46     $       (.68)   $      (1.10)    $       (.61)
                                                          ============     ============    ============     ============
   Weighted-average shares (thousands)                         534,839          520,427         523,553          519,829
Cash dividends per common share                           $        .01     $        .20    $        .02     $        .40

*Certain amounts have been reclassified as described in Note 2 of Notes to
Consolidated Financial Statements.

                            See accompanying notes.

                                       2

                          The Williams Companies, Inc.
                           Consolidated Balance Sheet
                                   (Unaudited)

(Dollars in millions, except per-share amounts)                   June 30,       December 31,
- -----------------------------------------------                     2003             2002*
                                                                ------------     ------------

ASSETS
Current assets:
   Cash and cash equivalents                                    $    3,227.1     $    1,650.4
   Restricted cash                                                      56.5            102.8
   Restricted investments                                              160.9               --
   Accounts and notes receivable less allowance
     of $116.2 ($111.8 in 2002)                                      1,696.5          2,415.4
   Inventories                                                         299.5            380.5
   Energy risk management and trading assets                              --            296.7
   Derivative assets                                                 6,934.3          5,024.3
   Margin deposits                                                     609.5            804.8
   Assets of discontinued operations                                   465.8          1,251.1
   Deferred income taxes                                               527.2            569.2
   Other current assets and deferred charges                           306.0            390.9
                                                                ------------     ------------
        Total current assets                                        14,283.3         12,886.1

Restricted cash                                                        175.2            188.1
Restricted investments                                                 300.3               --
Investments                                                          1,424.9          1,468.6

Property, plant and equipment, at cost                              15,984.8         15,810.6
Less accumulated depreciation and depletion                         (3,796.0)        (3,677.5)
                                                                ------------     ------------
                                                                    12,188.8         12,133.1

Energy risk management and trading assets                                 --          1,821.6

Derivative assets                                                    3,667.9          1,865.1
Goodwill                                                             1,059.5          1,059.5
Assets of discontinued operations                                         --          2,834.0
Other assets and deferred charges                                      753.1            732.4
                                                                ------------     ------------
        Total assets                                            $   33,853.0     $   34,988.5
                                                                ============     ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Notes payable                                                $        9.8     $      934.8
   Accounts payable                                                  1,434.4          1,939.8
   Accrued liabilities                                               1,153.8          1,406.4
   Liabilities of discontinued operations                               88.4            532.1
   Energy risk management and trading liabilities                         --            244.4
   Derivative liabilities                                            6,906.0          5,168.3
   Long-term debt due within one year                                1,806.5          1,082.7
                                                                ------------     ------------
        Total current liabilities                                   11,398.9         11,308.5

Long-term debt                                                      11,209.7         11,076.7
Deferred income taxes                                                2,842.8          3,353.6
Liabilities and minority interests of discontinued operations             --          1,258.0
Energy risk management and trading liabilities                            --            680.9
Derivative liabilities                                               3,249.8          1,209.8
Other liabilities and deferred income                                1,057.9            968.3
Contingent liabilities and commitments (Note 11)
Minority interests in consolidated subsidiaries                         92.4             83.7
Stockholders' equity:
   Preferred stock, $1 per share par value, 30 million shares
     authorized, 1.5 million issued in 2002                               --            271.3
   Common stock, $1 per share par value, 960 million shares
     authorized, 520.9 million issued in 2003, 519.9 million
     issued in 2002                                                    520.9            519.9
   Capital in excess of par value                                    5,191.0          5,177.2
   Accumulated deficit                                              (1,469.0)          (884.3)
   Accumulated other comprehensive income (loss)                      (174.8)            33.8
   Other                                                               (28.0)           (30.3)
                                                                ------------     ------------
                                                                     4,040.1          5,087.6
   Less treasury stock (at cost), 3.2 million shares of
     common stock in 2003 and 2002                                     (38.6)           (38.6)
                                                                ------------     ------------
        Total stockholders' equity                                   4,001.5          5,049.0
                                                                ------------     ------------
        Total liabilities and stockholders' equity              $   33,853.0     $   34,988.5
                                                                ============     ============

*Certain amounts have been reclassified as described in Note 2 of Notes to
Consolidated Financial Statements.

                             See accompanying notes.

                                       3

                          The Williams Companies, Inc.
                      Consolidated Statement of Cash Flows
                                   (Unaudited)

(Millions)                                                                                Six months ended June 30,
- ----------                                                                              ----------------------------
                                                                                            2003           2002*
                                                                                        ------------    ------------
                                                                                                  
OPERATING ACTIVITIES:
   Income (loss) from continuing operations                                             $       79.2    $     (284.6)
   Adjustments to reconcile to cash provided (used) by operations:
      Depreciation, depletion and amortization                                                 339.6           320.2
      Provision (benefit) for deferred income taxes                                             80.8          (153.0)
      Payments of guarantees and payment obligations related to WilTel                            --          (753.9)
      Provision for loss on investments, property and other assets                             120.8            98.4
      Net gain on disposition of assets                                                       (100.6)           (7.8)
      Provision for uncollectible accounts:
         WilTel                                                                                   --           247.0
         Other                                                                                  13.8             7.6
      Minority interest in income and preferred returns of consolidated subsidiaries             9.5            23.5
      Amortization and taxes associated with stock-based awards                                 14.7            15.4
      Payment of deferred set-up fee and fixed rate interest on RMT note payable              (265.0)             --
      Accrual for fixed rate interest included in the RMT note payable                          99.3              --
      Amortization of deferred set-up fee and fixed rate interest on RMT note payable          154.5              --
      Cash provided (used) by changes in current assets and liabilities:
         Restricted cash                                                                         (.5)         (140.9)
         Accounts and notes receivable                                                         675.2          (561.4)
         Inventories                                                                            39.9          (116.0)
         Margin deposits                                                                       195.2          (174.8)
         Other current assets and deferred charges                                             (66.5)           (6.0)
         Accounts payable                                                                     (470.6)          597.4
         Accrued liabilities                                                                  (186.7)          (93.9)
      Changes in current and noncurrent derivative and energy risk management and
         trading assets and liabilities                                                       (356.8)          105.2
      Changes in noncurrent restricted cash                                                     (2.4)         (101.1)
      Other, including changes in noncurrent assets and liabilities                            (29.2)          (88.8)
                                                                                        ------------    ------------
         Net cash  provided (used) by operating activities of continuing operations            344.2        (1,067.5)
         Net cash provided by operating activities of discontinued operations                  124.7           152.6
                                                                                        ------------    ------------
         Net cash provided (used) by operating activities                                      468.9          (914.9)
                                                                                        ------------    ------------

FINANCING ACTIVITIES:
   Payments of notes payable                                                                  (892.8)       (1,714.1)
   Proceeds from long-term debt                                                              1,776.5         3,162.2
   Payments of long-term debt                                                                 (920.4)       (1,028.5)
   Proceeds from issuance of common stock                                                         .1            11.4
   Dividends paid                                                                              (42.9)         (206.5)
   Proceeds from issuance of preferred stock                                                      --           272.3
   Repurchase of preferred stock                                                              (275.0)             --
   Payments of debt issuance costs                                                             (54.9)         (100.4)
   Payments/dividends to minority and preferred interests                                        (.7)          (31.4)
   Changes in restricted cash                                                                   62.2              --
   Changes in cash overdrafts                                                                  (25.9)           54.0
   Other--net                                                                                    (.1)             --
                                                                                        ------------    ------------
         Net cash provided (used) by financing activities of continuing operations            (373.9)          419.0
         Net cash provided (used) by financing activities of discontinued operations           (92.0)          684.9
                                                                                        ------------    ------------
         Net cash provided (used) by financing activities                                     (465.9)        1,103.9
                                                                                        ------------    ------------

INVESTING ACTIVITIES:
   Property, plant and equipment:
      Capital expenditures                                                                    (452.1)         (799.8)
      Proceeds from dispositions                                                               467.9           105.6
   Purchases of investments/advances to affiliates                                             (13.3)         (289.3)
   Purchases of restricted investments                                                        (463.3)             --
   Proceeds from sales of businesses                                                         1,943.6           440.6
   Proceeds from disposition of investments and other assets                                    33.3              .6
   Other--net                                                                                   (3.5)           16.5
                                                                                        ------------    ------------
         Net cash provided (used) by investing activities of continuing operations           1,512.6          (525.8)
         Net cash used by investing activities of discontinued operations                      (21.9)         (191.0)
                                                                                        ------------    ------------
         Net cash provided (used) by investing activities                                    1,490.7          (716.8)
                                                                                        ------------    ------------
Increase (decrease) in cash and cash equivalents                                             1,493.7          (527.8)
Cash and cash equivalents at beginning of period**                                           1,736.0         1,301.1
                                                                                        ------------    ------------
Cash and cash equivalents at end of period**                                            $    3,229.7    $      773.3
                                                                                        ============    ============

*    Amounts have been restated or reclassified as described in Note 2 of Notes
     to Consolidated Financial Statements.

**   Includes cash and cash equivalents of discontinued operations of $2.6
     million, $85.6 million, $71.3 million and $60.7 million at June 30, 2003,
     December 31, 2002, June 30, 2002 and December 31, 2001, respectively.

                             See accompanying notes.

                                       4

                          The Williams Companies, Inc.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

1. General
- --------------------------------------------------------------------------------

Company outlook

     As discussed in The Williams Companies, Inc.'s (Williams or the Company)
Form 10-K for the year ended December 31, 2002, events in 2002 and the last half
of 2001 significantly impacted the Company's operations, both past and future.
On February 20, 2003, Williams outlined its planned business strategy for the
next several years which management believes to be a comprehensive response to
the events which have impacted the energy sector and Williams during 2002. The
plan focuses on retaining a strong, but smaller, portfolio of natural gas
businesses and bolstering Williams' liquidity through additional asset sales,
strategic levels of financing at the Williams and subsidiary levels and
additional reductions in its operating costs. The plan is designed to provide
Williams with a clear strategy to address near-term and medium-term liquidity
issues and further de-leverage the company with the objective of returning to
investment grade status, while retaining businesses with favorable returns and
opportunities for growth in the future. As part of this plan, Williams expects
to generate proceeds, net of related debt, of nearly $4 billion from asset sales
during 2003 and 2004. During the first half of 2003, Williams received $2.4
billion in net proceeds from the sales of assets and businesses, including the
retail travel centers, the Midsouth refinery, Texas Gas Transmission
Corporation, Williams' general partnership interest and limited partner
investment in Williams Energy Partners, Williams' interest in Williams
Bio-Energy L.L.C., certain natural gas exploration and production properties in
Kansas, Colorado and New Mexico and Williams' interest in the Rio Grande
Pipeline. As previously announced, the Company intends to reduce its commitment
to the Energy Marketing & Trading business, which may be realized by entering
into a joint venture with a third party or through the sale of a portion or all
of the marketing and trading portfolio. Additionally, through the six month
period ended June 30, 2003, Energy Marketing & Trading has sold contracts for
proceeds totaling approximately $206 million.

     During second-quarter 2003, Williams issued $300 million of 5.5 percent
junior subordinated convertible debentures due 2033 and $800 million of 8.625
percent notes due 2010, and a Williams subsidiary received proceeds from a $500
million term loan due 2007. Portions of the proceeds from these debt issues,
borrowings and asset sales were used to redeem $275 million of preferred stock,
the RMT note payable (including deferred fees and interest) (see Note 10) and
$888 million of other long-term debt that matured or required payments from the
proceeds of asset sales.

     As of June 30, 2003, the Company has maturing notes payable and long-term
debt through first-quarter 2004 totaling approximately $1.8 billion, consisting
largely of $1.4 billion of Williams senior unsecured 9.25 percent notes. The
Company anticipates that cash on hand, proceeds from additional asset sales and
cash flows from retained businesses will enable the Company to meet its
liquidity needs.

Other

     The accompanying interim consolidated financial statements of Williams do
not include all notes in annual financial statements and therefore should be
read in conjunction with the consolidated financial statements and notes thereto
in Williams' Annual Report on Form 10-K. The accompanying unaudited financial
statements include all normal recurring adjustments and others, including asset
impairments, loss accruals, and the change in accounting principles which, in
the opinion of Williams' management, are necessary to present fairly its
financial position at June 30, 2003, its results of operations for the three and
six months ended June 30, 2003 and 2002 and cash flows for the six months ended
June 30, 2003 and 2002.

     During the second quarter of 2003 Energy Marketing & Trading corrected the
accounting treatment previously given to certain third party derivative
contracts during 2002 and 2001. As a result, Energy Marketing & Trading
recognized $80.7 million of revenue for the second quarter 2003 attributable to
prior periods. Approximately $46.6 million of this revenue relates to a
correction of net energy trading assets for certain derivative contract
terminations occurring in 2001. The remaining $34.1 million relates to net
gains on certain other derivative contracts entered into in 2002 and 2001 which
the Company now believes that it should not have deferred as a component of
other comprehensive income due to the incorrect designation of these contracts
as cash flow hedges. Management, after consultation with its independent
auditor, concluded that the effect of the previous accounting treatment was not
material to prior periods, expected 2003 results and trend of earnings.

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.

                                       5

Notes (Continued)

2. Basis of presentation
- --------------------------------------------------------------------------------

   In accordance with the provisions related to discontinued operations within
Statement of Financial Accounting Standard (SFAS) No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," the accompanying consolidated
financial statements and notes reflect the results of operations, financial
position and cash flows of the following components as discontinued operations
(see Note 6):

     o    Kern River Gas Transmission (Kern River), previously one of Gas
          Pipeline's segments

     o    Two natural gas liquids pipeline systems, Mid-American Pipeline and
          Seminole Pipeline, previously part of the Midstream Gas & Liquids
          segment

     o    The Colorado soda ash mining operations, part of the previously
          reported International segment

     o    Central natural gas pipeline, previously one of Gas Pipeline's
          segments

     o    Retail travel centers concentrated in the Midsouth, part of the
          previously reported Petroleum Services segment

     o    Refining and marketing operations in the Midsouth, including the
          Midsouth refinery, part of the previously reported Petroleum Services
          segment

     o    Bio-energy operations, part of the previously reported Petroleum
          Services segment

     o    Texas Gas Transmission Corporation, previously one of Gas Pipeline's
          segments

     o    Williams' general partnership interest and limited partner investment
          in Williams Energy Partners, previously the Williams Energy Partners
          segment

     o    Refining, retail and pipeline operations in Alaska, part of the
          previously reported Petroleum Services segment

     o    Gulf Liquids New River Project LLC, previously part of the Midstream
          Gas & Liquids segment

     o    Natural gas properties in the Hugoton and Raton basins, previously
          part of the Exploration & Production segment.

     Unless indicated otherwise, the information in the Notes to the
Consolidated Financial Statements relates to the continuing operations of
Williams. Williams expects that other components of its business may be
classified as discontinued operations in the future as those operations are sold
or classified as held-for-sale.

     Certain other statement of operations, balance sheet and cash flow amounts
have been reclassified to conform to the current classifications.

3. Changes in accounting policies and cumulative effect of change in accounting
principles
- --------------------------------------------------------------------------------

Energy commodity risk management and trading activities and revenues

     Effective January 1, 2003, Williams adopted Emerging Issues Task Force
(EITF) Issue No. 02-3, "Issues Related to Accounting for Contracts Involved in
Energy Trading and Risk Management Activities." The Issue rescinded EITF Issue
No. 98-10, "Accounting for Contracts Involved in Energy Trading and Risk
Management Activities." Issue No. 02-3 precludes fair value accounting for
energy trading contracts that are not derivatives pursuant to SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," and for
commodity trading inventories. As a result of initial application of this Issue
in first-quarter 2003, Williams reduced energy risk management and trading
assets (including inventories) by $2,159.2 million, energy risk management and
trading liabilities by $925.3 million and net income by $762.5 million (net of a
$471.4 million benefit for income taxes). Of this amount, approximately $755
million relates to Energy Marketing & Trading's portion with the remainder
relating to Midstream Gas & Liquids. The reduction of net income is reported as
a cumulative effect of a change in accounting principle. The change resulted
primarily from power tolling, load serving, transportation and storage contracts
not meeting the definition of a derivative and no longer being reported at fair
value.

     The power tolling, load serving, transportation and storage contracts are
now accounted for on an accrual basis. Under this model, revenues for sales of
products are recognized in the period of delivery. Revenues and costs associated
with these non-derivative energy contracts, other non-derivative activities and
physically settled derivative contracts are reflected gross in revenues and
costs and operating expenses in the Consolidated Statement of Operations
beginning January 1, 2003. This change significantly impacts the presentation of
revenues and costs and operating expenses. Physical commodity inventories
previously reflected at fair value are now stated at average cost, not in excess
of market. Derivative energy contracts are reflected at fair value, and gains
and losses due to changes in fair value of derivatives not designated as hedges
under SFAS No. 133 are reflected net in revenues. Derivative energy contracts
are classified in the Consolidated Balance Sheet as current and noncurrent
assets and current and noncurrent liabilities based on the timing of expected
future cash flows used in determining fair value of individual contracts. In
addition, derivative assets and liabilities on the Consolidated Balance Sheet
include a net asset representing the fair value of certain derivative contracts
at the time that Energy Marketing & Trading elected the normal purchases and
sales exclusion in accordance with SFAS No. 133. The approximately $500 million
fair value of these contracts at the time the election was made will be realized
into earnings over the remaining periods of the contracts' term in accordance
with the estimated cash flows of the contracts at the time of election. As of
June 30, 2003, the remaining terms of contracts for which the normal purchases
and sales exclusion has been elected ranges from approximately 4 to 8 years.

                                       6

Notes (Continued)

Asset retirement obligations

     Effective January 1, 2003, Williams adopted SFAS No. 143, "Accounting for
Asset Retirement Obligations." This Statement requires that the fair value of a
liability for an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made, and
that the associated asset retirement costs be capitalized as part of the
carrying amount of the long-lived asset. The Statement also amends SFAS No. 19,
"Financial Accounting and Reporting by Oil and Gas Producing Companies." As
required by the new standard, Williams recorded liabilities equal to the present
value of expected future asset retirement obligations at January 1, 2003. The
obligations relate to producing wells, offshore platforms, underground storage
caverns and gas gathering well connections. At the end of the useful life of
each respective asset, Williams is legally obligated to plug both producing
wells and storage caverns and remove any related surface equipment, to dismantle
offshore platforms, and to cap certain gathering pipelines at the wellhead
connection and remove any related surface equipment. The liabilities are
partially offset by increases in property, plant and equipment, net of
accumulated depreciation, recorded as if the provisions of the Statement had
been in effect at the date the obligation was incurred. As a result of the
adoption of SFAS No. 143, Williams recorded a long-term liability of $33.4
million; property, plant and equipment, net of accumulated depreciation, of
$24.8 million and a credit to earnings of $1.2 million (net of a $.1 million
benefit for income taxes) reflected as a cumulative effect of a change in
accounting principle. Williams also recorded a $9.7 million regulatory asset for
retirement costs of dismantling offshore platforms expected to be recovered
through regulated rates. In connection with adoption of SFAS No. 143, Williams
changed its method of accounting to include salvage value of equipment related
to producing wells in the calculation of depreciation. The impact of this change
is included in the amounts discussed above. Williams has not recorded
liabilities for pipeline transmission assets, processing and refining assets,
and gas gathering systems pipelines. A reasonable estimate of the fair value of
the retirement obligations for these assets cannot be made as the remaining life
of these assets is not currently determinable. Had the Statement been adopted at
the beginning of 2002, the impact to Williams' income from continuing operations
and net income would have been immaterial. There would have been no impact on
earnings per share.

                                       7

Notes (Continued)

4.  Asset sales, impairments and other items
- --------------------------------------------------------------------------------

     Williams evaluates its equity investments for impairment when events or
changes in circumstances indicate, in management's judgment, that the carrying
value of such assets may have experienced an other-than-temporary decline in
value. When evidence of loss in value has occurred, management's estimate of
fair value of the investment is compared to the carrying value of the investment
to determine whether an impairment has occurred. If the estimated fair value is
less than the carrying cost and the decline in value is considered other than
temporary, the excess of the carrying cost over the fair value is recognized in
the financial statements as an impairment.

     Judgments and assumptions are inherent in management's assessment of
whether there has been any evidence of a loss in value that warrants an
estimation of fair value. Judgments and assumptions are also inherent in
management's estimate of an investment's fair value used to determine whether a
loss in value has occurred and to measure the amount of impairment to recognize.
In addition, judgements and assumptions are involved in determining if the
decline in value is other than temporary. The use of alternate judgments and/or
assumptions could result in the recognition of different levels of impairment
charges in the financial statements.

     Significant gains or losses from asset sales, impairments and other items
included in other (income) expense - net within segment costs and expenses and
investing income (loss) are included in the following table.

                                                  Three months ended           Six months ended
                                                        June 30,                   June 30,
                                               ------------------------    ------------------------
(Millions)                                        2003          2002          2003          2002
- ----------                                     ----------    ----------    ----------    ----------

OTHER (INCOME) EXPENSE-NET:
  ENERGY MARKETING & TRADING
     Net loss accruals and write-offs          $       --    $     83.7    $       --    $     83.7
     Impairment of goodwill                            --          57.5            --          57.5
     Gain on sale of Jackson power
       contract                                    (175.0)           --        (175.0)           --
     Commodity Futures Trading
       Commission settlement
         (see Note 11)                               20.0            --          20.0            --
  GAS PIPELINE
     Write-off of software development
       costs due to cancelled implementation         25.5            --          25.5            --
  EXPLORATION & PRODUCTION
     Net gain on sale of natural gas
       properties                                   (91.5)           --         (91.5)           --

 INVESTING INCOME (LOSS):
  GAS PIPELINE
     Write-down of investment in
       cancelled Independence Pipeline project         --         (12.3)           --         (12.3)
     Contractual construction completion
       fee received by equity investee                 --          27.4            --          27.4
  MIDSTREAM GAS & LIQUIDS
     Impairment of Aux Sable investment              (8.5)           --          (8.5)           --
  OTHER
     Impairment of cost based investment            (13.5)           --         (13.5)           --
     Impairment of Longhorn
       Partners Pipeline, L.P.
       investment/debt securities                   (42.4)           --         (42.4)           --
     Impairment of Algar Telecom
       S.A. investment                                 --            --         (12.0)           --
     Provision for loss on estimated
       recoverability of WilTel
       Communications Group, Inc.
       receivables                                     --         (15.0)           --        (247.0)

                                       8

Notes (Continued)

5. Provision (benefit) for income taxes
- --------------------------------------------------------------------------------

     The provision (benefit) for income taxes from continuing operations
includes:

                                   Three months ended             Six months ended
                                       June 30,                        June 30,
                             ----------------------------    ----------------------------
 (Millions)                      2003            2002            2003            2002
                             ------------    ------------    ------------    ------------

 Current:
   Federal                   $        6.2    $       29.1    $       12.4    $       36.7
   State                              8.5            (2.6)           13.2              --
   Foreign                           10.2            (3.6)           10.2              --
                             ------------    ------------    ------------    ------------
                                     24.9            22.9            35.8            36.7

Deferred:
   Federal                          103.2          (156.6)           86.6          (142.4)
   State                             (2.2)          (16.1)           (5.1)          (10.7)
   Foreign                            1.5            (6.6)            (.7)             .1
                             ------------    ------------    ------------    ------------
                                    102.5          (179.3)           80.8          (153.0)
                             ------------    ------------    ------------    ------------
 Total provision (benefit)   $      127.4    $     (156.4)   $      116.6    $     (116.3)
                             ============    ============    ============    ============

     The effective income tax rate for the three and six months ended June 30,
2003, is greater than the federal statutory rate due primarily to the financial
impairment of certain investments, capital losses generated for which valuation
allowances were established and nondeductible expenses.

     The effective income tax rate for the three and six months ended June 30,
2002, is less than the federal statutory rate due primarily to the impairment of
goodwill which is not deductible for income tax purposes and reduces the benefit
of the pretax loss.

6. Discontinued operations
- --------------------------------------------------------------------------------

     During 2002, Williams began the process of selling assets and/or businesses
to address liquidity issues. The businesses discussed below represent components
of Williams that have been sold or approved for sale by the board of directors
as of June 30, 2003; therefore, their results of operations (including any
impairments, gains or losses), financial position and cash flows have been
reflected in the consolidated financial statements and notes as discontinued
operations.

     Summarized results of discontinued operations for the three and six months
ended June 30, 2003 and 2002 are as follows:

                                              Three months ended              Six months ended
                                                   June 30,                        June 30,
                                         ----------------------------    ----------------------------
(Millions)                                   2003            2002            2003            2002
- ----------                               ------------    ------------    ------------    ------------

  Revenues                               $      466.9    $    1,398.8    $    1,490.3    $    2,639.2

  Income from discontinued operations
     before income taxes                 $       17.0    $       45.4    $      107.7    $      181.9
  (Impairments) and gain (loss) on
     sales - net                                232.9           (71.1)          115.6          (109.2)
  (Provision) benefit for income taxes          (98.2)            8.4           (86.0)          (29.5)
                                         ------------    ------------    ------------    ------------
Total income (loss) from discontinued
  operations                             $      151.7    $      (17.3)   $      137.3    $       43.2
                                         ============    ============    ============    ============

                                       9

Notes (Continued)

     Summarized assets and liabilities of discontinued operations as of June 30,
2003 and December 31, 2002, are as follows:

                                             June 30,     December 31,
(Millions)                                     2003           2002
                                           ------------   ------------

   Total current assets                    $      163.9   $      711.4
                                           ------------   ------------
Property, plant and equipment - net               300.0        3,105.2
Other noncurrent assets                             1.9          268.5
                                           ------------   ------------
   Total noncurrent assets                        301.9        3,373.7
                                           ------------   ------------
   Total assets                            $      465.8   $    4,085.1
                                           ============   ============
Reflected on balance sheet as:
   Current assets                          $      465.8   $    1,251.1
   Noncurrent assets                                 --        2,834.0
                                           ------------   ------------
   Total assets                            $      465.8   $    4,085.1
                                           ============   ============
Long-term debt due within one year         $         --   $       68.7
Other current liabilities                          85.8          445.1
                                           ------------   ------------
   Total current liabilities                       85.8          513.8
                                           ------------   ------------
Long-term debt                                       --          828.3
Minority interests                                   --          340.0
Other noncurrent liabilities                        2.6          108.0
                                           ------------   ------------
   Total noncurrent liabilities                     2.6        1,276.3
                                           ------------   ------------
   Total liabilities                       $       88.4   $    1,790.1
                                           ============   ============
Reflected on balance sheet as:
   Current liabilities                     $       88.4   $      532.1
   Noncurrent liabilities                            --        1,258.0
                                           ------------   ------------
   Total liabilities                       $       88.4   $    1,790.1
                                           ============   ============

HELD FOR SALE AT JUNE 30, 2003

Soda ash operations

     In March 2002, Williams announced its intention to sell its soda ash mining
facility located in Colorado. During third-quarter 2002, Williams' board of
directors approved a plan authorizing management to negotiate and facilitate a
sale of its interest in the soda ash operations pursuant to terms of a proposed
sales agreement. The soda ash facility was previously written-down to its
estimated fair value less cost to sell at December 31, 2002. This estimate was
reflective of terms of the negotiations to sell the operations. During 2003,
ongoing sale negotiations continue to provide new information regarding
estimated fair value. As a result, additional impairment charges of $5 million
and $11.1 million were recognized during the first and second quarters of 2003,
respectively. These impairments and a $44.1 million second-quarter 2002
impairment are included in (impairments) and gain (loss) on sales in the
preceding table. Williams believes that these ongoing negotiations provide
sufficient evidence that it remains committed to its plan to sell the soda ash
operations within one year. Therefore, soda ash operations continue to be
presented as held for sale. The soda ash operations were part of the previously
reported International segment.

Alaska refining, retail and pipeline operations

     The company is currently engaged in negotiations to sell its Alaska
refinery and related assets. During first-quarter 2003, management revised its
assessment of the estimated fair value of these assets, reflective of recent
information obtained through continuing sales negotiations, using a
probability-weighted approach. As a result, an impairment charge of $8 million
was recognized in first-quarter 2003 and is included in (impairments) and gain

                                       10

Notes (Continued)

(loss) on sales in the preceding table. During second-quarter 2003, Williams'
board of directors approved a plan authorizing management to negotiate and
facilitate a sale of these operations. A sale is expected to be completed within
one year. These operations were part of the previously reported Petroleum
Services segment.

Gulf Liquids New River Project LLC

     Williams' Gulf Liquids operations have been identified as assets not
related to the new, more narrowly focused business. During second-quarter 2003,
Williams' board of directors approved a plan authorizing management to negotiate
and facilitate a sale of these assets. An impairment charge of $92.6 million was
recognized during second-quarter 2003 to reduce the carrying cost of the
long-lived assets to management's estimate of fair value less estimated costs to
sell the assets, and is included in (impairments) and gain (loss) on sales in
the preceding table. Fair value was estimated based on a discounted cash flow
analysis. The sale of these operations is expected to be completed within one
year. These operations were part of the Midstream Gas & Liquids segment.

2003 COMPLETED TRANSACTIONS

Williams Energy Partners

     On June 17, 2003, Williams completed the sale of its 100 percent general
partnership interest and 54.6 percent limited partner investment in Williams
Energy Partners for approximately $512 million in cash and assumption by the
purchasers of $570 million in debt. Williams recognized a gain of $275.6 million
on the sale, which is included in (impairments) and gain (loss) on sales in the
preceding table, and deferred an additional $113 million associated with
Williams' indemnifications of the purchasers under the sales agreement. Williams
has indemnified the purchasers for a variety of matters, including obligations
that may arise associated with environmental contamination relating to
operations prior to April 2002 and identified prior to April 2008 (see Note 11).

Bio-energy facilities

     On May 30, 2003, Williams completed the sale of its bio-energy operations
to Morgan Stanley Capital Partners for approximately $59 million in cash. The
December 31, 2002 carrying value reflected the estimated fair value less cost to
sell. During second-quarter 2003, Williams recognized an additional loss on the
sale of $6.4 million which is included in (impairments) and gain (loss) on sales
in the preceding table. These operations were part of the previously reported
Petroleum Services segment.

Texas Gas

     On May 16, 2003, Williams completed the sale of its Texas Gas Transmission
Corporation for $795 million in cash and the assumption by the purchaser of $250
million in existing Texas Gas debt. This business was evaluated for
recoverability on a held-for-use basis pursuant to SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets," at March 31, 2003. A $109
million impairment charge was recorded in first-quarter 2003 reflecting the
excess of the carrying cost of the long-lived assets over management's estimate
of fair value, and is included in (impairments) and gain (loss) on sales in the
preceding table. Fair value was based on management's assessment of the expected
sales price pursuant to the purchase and sale agreement. No significant gain or
loss was recognized on the sale. Texas Gas was a segment within Gas Pipeline.

Natural gas properties

     During second-quarter 2003, Williams completed the sale of natural gas
exploration and production properties in the Raton Basin in southern Colorado
and the Hugoton Embayment of the Anadarko Basin in southwestern Kansas. This
sale included all of Williams' interests within these basins. A $39.9 million
gain on the sale was recognized in the second quarter of 2003 and is included in
(impairments) and gain (loss) on sale in the preceding table. These properties
were part of the Exploration & Production segment.

                                       11

Notes (Continued)

Midsouth refinery and related assets

     On March 4, 2003, Williams completed the sale of its refinery and other
related operations located in Memphis, Tennessee to Premcor, Inc. for
approximately $455 million in cash. These assets were previously written down by
$240.8 million to their estimated fair value less cost to sell at December 31,
2002. A gain on sale of $4.7 million was recognized in the first quarter of
2003. During the second quarter of 2003, Williams recognized a $24.7 million
gain on the sale of an earn-out agreement retained by Williams in the sale of
the refinery. This agreement would have allowed Williams to potentially receive
up to an additional $75 million over the next seven years depending on refining
margins. These gains are included in (impairments) and gain (loss) on sale in
the preceding table. These operations were part of the previously reported
Petroleum Services segment.

Williams travel centers

     On February 27, 2003, Williams completed the sale of the travel centers to
Pilot Travel Centers LLC for approximately $189 million in cash. The December
31, 2002 carrying value reflected the estimated fair value less cost to sell. A
second-quarter 2002 impairment of $27 million is reflected in (impairments) and
gain (loss) on sale in the preceding table. No significant gain or loss was
recognized on the sale. These operations were part of the previously reported
Petroleum Services segment.

2002 COMPLETED TRANSACTIONS

Kern River

     On March 27, 2002, Williams completed the sale of its Kern River pipeline
for $450 million in cash and the assumption by the purchaser of $510 million in
debt. As part of the agreement, $32.5 million of the purchase price was
contingent upon Kern River receiving a certificate from the FERC to construct
and operate a future expansion. This certificate was received in July 2002, and
the contingent payment plus interest was recognized as income from discontinued
operations in third-quarter 2002. Included as a component of (impairments) and
gain (loss) on sales in the preceding table is a pre-tax loss of $38.1 million
for the six months ended June 30, 2002. Kern River was a segment within Gas
Pipeline.

Mid-America and Seminole Pipelines

     On August 1, 2002, Williams completed the sale of its 98 percent interest
in Mid-America Pipeline and 98 percent of its 80 percent ownership interest in
Seminole Pipeline for $1.2 billion. The sale generated net cash proceeds of
$1.15 billion. These assets were part of the Midstream Gas & Liquids segment.

Central

     On November 15, 2002, Williams completed the sale of its Central natural
gas pipeline for $380 million in cash and the assumption by the purchaser of
$175 million in debt. Central was a segment within Gas Pipeline.

                                       12

Notes (Continued)

7. Earnings (loss) per share
- --------------------------------------------------------------------------------

   Basic and diluted earnings (loss) per common share are computed as follows:

(Dollars in millions, except per-share                      Three months ended                Six months ended
amounts; shares in thousands)                                     June 30,                        June 30,
- --------------------------------------                  ----------------------------    ----------------------------
                                                             2003            2002            2003            2002
                                                        ------------    ------------    ------------    ------------

Income (loss) from continuing operations                $      118.0    $     (331.8)   $       79.2    $     (284.6)
Convertible preferred stock dividends                          (22.7)           (6.8)          (29.5)          (76.5)
                                                        ------------    ------------    ------------    ------------
Income (loss) from continuing operations
   available to common stockholders
   for basic earnings per share                                 95.3          (338.6)           49.7          (361.1)
Effect of dilutive securities:
   Interest on convertible debentures (see Note 10)               .9              --              --              --
                                                        ------------    ------------    ------------    ------------
Income (loss) from continuing operations
   available to common stockholders for
   diluted earnings per share                           $       96.2    $     (338.6)   $       49.7    $     (361.1)
                                                        ============    ============    ============    ============
Basic weighted-average shares                                518,090         520,427         517,872         519,829
Effect of dilutive securities:
   Stock options                                               3,889              --           2,814              --
   Deferred shares unvested                                    2,567              --           2,867              --
   Convertible debentures (see Note 10)                       10,293              --              --              --
                                                        ------------    ------------    ------------    ------------
Diluted weighted-average shares                              534,839         520,427         523,553         519,829
                                                        ------------    ------------    ------------    ------------
Earnings (loss) per share from continuing operations:
   Basic                                                $        .19    $       (.65)   $        .09    $       (.69)
   Diluted                                              $        .18    $       (.65)   $        .09    $       (.69)
                                                        ============    ============    ============    ============

   For the three and six months ended June 30, 2003, approximately 11.3 million
and 13 million weighted average shares, respectively, related to the assumed
conversion of 9 7/8 percent cumulative convertible preferred stock have been
excluded from the computation of diluted earnings per common share as their
inclusion would be antidilutive. The preferred stock was redeemed in June 2003.

   For the six months ended June 30, 2003, approximately 5.2 million
weighted-average shares related to the assumed conversion of convertible
debentures, as well as the related interest, were excluded from the computation
of diluted earnings per common share as their inclusion would be antidilutive.

   For the three and six months ended June 30, 2002, diluted earnings (loss) per
share is the same as the basic calculation. The inclusion of any stock options
and convertible preferred stock would be antidilutive as Williams reported a
loss from continuing operations for these periods. As a result, approximately .6
million and 1.3 million weighted-average stock options for the three and six
months ended June 30, 2002, respectively, that otherwise would have been
included, were excluded from the computation of diluted earnings per common
share. Additionally, approximately 14.7 million and 7.8 million weighted-average
shares for the three and six months ended June 30, 2002, respectively, related
to the assumed conversion of 9 7/8 percent cumulative convertible preferred
stock have been excluded from the computation of diluted earnings per common
share.

                                       13

Notes (Continued)

8. Stock-based compensation
- --------------------------------------------------------------------------------

          Employee stock-based awards are accounted for under Accounting
     Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
     (APB 25) and related interpretations. Fixed-plan common stock options
     generally do not result in compensation expense because the exercise price
     of the stock options equals the market price of the underlying stock on the
     date of grant. The following table illustrates the effect on net income and
     earnings per share if the company had applied the fair value recognition
     provisions of SFAS No. 123 "Accounting for Stock-Based Compensation."

                                                            Three months ended              Six months ended
                                                                 June 30,                        June 30,
                                                       ----------------------------    ----------------------------
(Millions)                                                 2003            2002            2003            2002
- ----------                                             ------------    ------------    ------------    ------------

Net income (loss), as reported                         $      269.7    $     (349.1)   $     (544.8)   $     (241.4)
Add:  Stock-based employee compensation included
    in the Consolidated Statement of Operations, net
    of related tax effects                                      3.3             4.3            13.9             8.1
Deduct:  Stock-based employee compensation expense
    determined under fair value based method for all
    awards, net of related tax effects                         (6.3)           (8.2)          (21.0)          (15.5)

                                                       ------------    ------------    ------------    ------------
Pro forma net income (loss)                            $      266.7    $     (353.0)   $     (551.9)   $     (248.8)
                                                       ============    ============    ============    ============
Earnings (loss) per share:
    Basic-as reported                                  $        .48    $       (.68)   $      (1.11)   $       (.61)
    Basic-pro forma                                    $        .47    $       (.69)   $      (1.12)   $       (.63)

    Diluted-as reported                                $        .46    $       (.68)   $      (1.10)   $       (.61)
    Diluted-pro forma                                  $        .46    $       (.69)   $      (1.11)   $       (.63)
                                                       ============    ============    ============    ============

     Pro forma amounts for 2003 include compensation expense from Williams
awards made in 2003, 2002 and 2001. Pro forma amounts for 2002 include
compensation expense from certain Williams awards made in 1999 and compensation
expense from Williams awards made in 2002 and 2001.

     Since compensation expense for stock options is recognized over the future
years' vesting period for pro forma disclosure purposes and additional awards
are generally made each year, pro forma amounts may not be representative of
future years' amounts.

     On May 15, 2003, Williams' shareholders approved a stock option exchange
program. Under this exchange program, eligible Williams employees were given a
one-time opportunity to exchange certain outstanding options for a
proportionately lesser number of options at an exercise price to be determined
at the grant date of the new options. Surrendered options were cancelled June
26, 2003, and replacement options will be granted no earlier than six months and
one day after the cancellation date of each surrendered option. Under APB 25,
Williams will not recognize any expense pursuant to the stock option exchange.
However, for purposes of pro forma disclosures, Williams will recognize
additional expense related to these new options and the remaining expense on the
cancelled options.

                                       14

Notes (Continued)

9. Inventories
- --------------------------------------------------------------------------------

     Inventories at June 30, 2003 and December 31, 2002 are as follows:

                               June 30,     December 31,
(Millions)                       2003           2002
                             ------------   ------------
                                      
Raw materials:
  Crude oil                  $        8.7   $        3.8
                             ------------   ------------
                                      8.7            3.8
Finished goods:
  Refined products                   27.7           47.7
  Natural gas liquids                78.3          115.3
  General merchandise                 1.1            1.1
                             ------------   ------------
                                    107.1          164.1
Materials and supplies               67.2           87.2
Natural gas in underground
   storage                          116.5          125.4
                             ------------   ------------
                             $      299.5   $      380.5
                             ============   ============

     Effective January 1, 2003, Williams adopted EITF Issue No. 02-3 (see Note
3). As a result, Williams reduced the recorded value of natural gas in
underground storage by $37 million, refined products by $2.9 million and natural
gas liquids by $1 million.

                                       15

Notes (Continued)

10. Debt and banking arrangements
- --------------------------------------------------------------------------------

NOTES PAYABLE AND LONG-TERM DEBT

     Notes payable and long-term debt at June 30, 2003 and December 31, 2002,
are as follows:

                                                      Weighted-
                                                       Average
                                                      Interest         June 30,      December 31,
(Millions)                                             Rate(1)           2003            2002
- ----------                                          ------------     ------------    ------------
                                                                            
Secured notes payable                                       6.57%    $        9.8    $      934.8
                                                    ============     ============    ============
Long-term debt:
  Secured long-term debt
    Revolving credit loans                                    --%    $         --    $       81.0
    Debentures, 9.875%, payable 2020                         9.9             28.7            28.7
    Notes, 9.17%-9.45%, payable through 2013                 9.4            124.6           256.8
    Notes, adjustable rate, payable through 2007             5.1            584.7             5.2
    Other, payable 2003                                      6.7              8.3            20.9
  Unsecured long-term debt
    Debentures, 5.5%-10.25%, payable through 2033            7.1          1,749.6         1,449.0
    Notes, 6.125%-9.25%, payable through 2032(2)             7.8         10,440.9         9,349.9
    Notes, adjustable rate                                    --               --           669.9
    Other, payable through 2005                              7.5             79.4           158.1

Capital leases                                                --               --           139.9
                                                    ------------     ------------    ------------
                                                                         13,016.2        12,159.4
Long-term debt due within one year                                       (1,806.5)       (1,082.7)
                                                                     ------------    ------------
Total long-term debt                                                 $   11,209.7    $   11,076.7
                                                                     ============    ============

(1)  At June 30, 2003.

(2)  Includes $1.1 billion of 6.5 percent notes, payable 2007 subject to
     remarketing in 2004 (FELINE PACS). If a remarketing is unsuccessful in 2004
     and a second remarketing in February 2005 is unsuccessful as defined in the
     offering document for the FELINE PACS, then Williams could exercise its
     right to foreclose on the notes in order to satisfy the obligation of the
     holders of the equity forward contracts requiring the holder to purchase
     Williams common stock.

     Notes payable at December 31, 2002, included a $921.8 million secured note
(the RMT note payable) of Williams Production RMT Company (RMT), which was
repaid in May 2003 with proceeds from asset sales and proceeds from a $500
million new long-term debt obligation (described below under "Issuances and
Retirements").

     Williams ensures that the interest rates received by foreign lenders under
various loan agreements are not reduced by taxes by providing for the
reimbursement of any domestic taxes required to be paid by the foreign lender.
The maximum potential amount of future payments under these indemnifications is
based on the related borrowings; they generally continue indefinitely unless
limited by the underlying tax regulations; and they have no carrying value.
Williams has never been called upon to perform under these indemnifications.

REVOLVING CREDIT AND LETTER OF CREDIT FACILITIES

         On June 6, 2003, Williams entered into a two-year $800 million
revolving credit facility, primarily for the purpose of issuing letters of
credit. Williams, Northwest Pipeline and Transco have access to all unborrowed
amounts. The facility must be secured by cash and/or acceptable government
securities with a market value of at least 105 percent of the then outstanding
aggregate amount available for drawing under all letters of credit, plus the
aggregate amount of all loans then outstanding. The restricted cash and
investments used as collateral are classified on the balance sheet as current or
non-current based on the expected termination date of the underlying debt or
letters of credit. The new credit facility replaces a $1.1 billion credit line
entered into in July 2002 that was comprised of a

                                       16

Notes (Continued)

$700 million secured revolving credit facility and a $400 million secured letter
of credit facility. The previous agreements were secured by substantially all of
the company's Midstream Gas & Liquids assets. The new agreement releases these
assets as collateral. The interest rate on the new agreement is variable at the
London InterBank Offered Rate (LIBOR) plus .75 percent. At June 30, 2003,
letters of credit totaling $387 million have been issued by the participating
financial institutions under this facility and no revolving credit loans were
outstanding. At June 30, 2003, the amount of restricted investments securing
this facility was $461.1 million, which collateralized the facility at 119.25
percent.

ISSUANCES AND RETIREMENTS

     On May 28, 2003, Williams issued $300 million of 5.5 percent junior
subordinated convertible debentures due 2033. These notes, which are callable by
the Company after seven years, are convertible at the option of the holder into
Williams common stock at a conversion price of approximately $10.89 per share.
The proceeds were used to redeem all of the outstanding 9 7/8 percent
cumulative-convertible preferred shares (see Note 12).

     On May 30, 2003, Williams entered into a $500 million secured,
subsidiary-level note due May 30, 2007, at a floating interest rate of six-month
LIBOR plus 3.75 percent (totaling 4.9 percent at June 30, 2003). This loan
refinances a portion of the RMT note discussed above. Williams' Exploration &
Production interests in the U.S. Rocky Mountains had secured the RMT note
payable and will now serve as security on the new loan. Significant covenants on
the borrowers, RMT and Williams Production Holdings LLC (Holdings) (parent of
RMT), include: (i) an interest coverage ratio computed on a consolidated RMT
basis of greater than 3 to 1, (ii) a ratio of the present value of future cash
flows of proved reserves, discounted at ten percent, based on the most recent
engineering report to total senior secured debt, computed on a consolidated RMT
basis, of greater than 1.75 to 1, (iii) a limitation on restricted payments and
(iv) a limitation on intercompany indebtedness.

     On June 10, 2003, Williams issued $800 million of 8.625 percent senior
unsecured notes due 2010. The notes were issued under the company's $3 billion
shelf registration statement. Significant covenants include: i) limitation on
certain payments, including a limitation on the payment of quarterly dividends
to no greater than $.02 per common share, ii) limitation on additional
indebtedness and issuance of preferred stock unless the Fixed Charge Coverage
Ratio for the Company's most recently ended four full fiscal quarters is at
least 2.0 to 1, determined on a proforma basis; iii) limitation on asset sales,
unless the consideration is at least equal to fair market value and at least 75
percent of the consideration received is in the form of cash or cash
equivalents; iv) a limitation on the use of proceeds from permitted asset sales;
and v) a limitation on transactions with affiliates. These restrictions may be
lifted if certain conditions, including Williams attaining an investment grade
rating from both Moody's Investor's Services and Standard & Poor's, are met.

     A summary of significant long-term debt, including capital leases,
issuances and retirements, as well as the items listed above, for the six months
ended June 30, 2003, are as follows:

                                                                      Principal
Issue/Terms                                             Due Date       Amount
- -----------                                           ------------   ------------
                                                                      (Millions)
                                                               
Issuances of long-term debt in 2003:
    8.125% senior notes (Northwest Pipeline)             2010        $      175.0
    RMT Term B loan  (Exploration & Production)          2007        $      500.0
    5.5% junior subordinated convertible debentures      2033        $      300.0
    8.625% senior unsecured notes                        2010        $      800.0

Retirements/prepayments of long-term debt in 2003:
    Preferred interests                                  2003-2006   $      302.5
    Various capital leases                               2005        $      139.8
    Various notes, 6.65% - 9.45%                         2003        $       28.6
    Various notes, adjustable rate                       2003-2004   $      448.2

                                       17

Notes (Continued)

11. Contingent liabilities and commitments
- --------------------------------------------------------------------------------

RATE AND REGULATORY MATTERS AND RELATED LITIGATION

     Williams' interstate pipeline subsidiaries have various regulatory
proceedings pending. As a result of rulings in certain of these proceedings, a
portion of the revenues of these subsidiaries has been collected subject to
refund. The natural gas pipeline subsidiaries have accrued approximately $11
million for potential refund as of June 30, 2003.

     Williams Energy Marketing & Trading Company (Energy Marketing & Trading)
subsidiaries are engaged in power marketing in various geographic areas,
including California. Prices charged for power by Williams and other traders and
generators in California and other western states have been challenged in
various proceedings including those before the FERC. In December 2002, the FERC
issued an order which provided that, for the period between October 2, 2000 and
December 31, 2002, the FERC may order refunds from Williams and other similarly
situated companies if the FERC finds that the wholesale markets in California
were unable to produce competitive, just and reasonable prices or that market
power or other individual seller conduct was exercised to produce an unjust and
unreasonable rate. The judge issued his findings in the refund case on December
12, 2002. Under these findings, Williams' refund obligation to the California
Independent System Operator (ISO) is $192 million, excluding emissions costs and
interest. The judge found that Williams' refund obligation to the California
Power Exchange (PX) is $21.5 million, excluding interest. However, the judge
found that the ISO owes Williams $246.8 million, excluding interest, and that
the PX owes Williams $31.7 million, excluding interest, and $2.9 million in
charge backs. The judge's findings do not include the $18 million in emissions
costs that the judge found Williams is entitled to use as an offset to the
refund liability, and the judge's refund amounts are not based on final
mitigated market clearing prices. On March 26, 2003, the FERC acted to largely
adopt the judge's order with a change to the gas methodology used to set the
clearing price. As a result, Energy Marketing & Trading recorded, in the first
quarter of 2003, a charge for refund obligations of $37 million and recorded
interest income related to amounts due from the counterparties of $33 million.
Pursuant to an order from the 9th Circuit, FERC permitted the California parties
to conduct additional discovery into market manipulation by sellers in the
California markets. The California parties sought this discovery in order to
potentially expand the scope of the refunds. On March 3, 2003, the California
parties submitted evidence from this discovery on market manipulation. Williams
and other sellers submitted comments to the additional evidence on March 20,
2003. The FERC is considering this evidence and is expected to issue further
guidance later this year.

     In an order issued June 19, 2001, the FERC implemented a revised price
mitigation and market monitoring plan for wholesale power sales by all suppliers
of electricity, including Williams, in spot markets for a region that includes
California and ten other western states (the "Western Systems Coordinating
Council," or "WSCC"). In general, the plan, which was in effect from June 20,
2001 through September 30, 2002, established a market clearing price for spot
sales in all hours of the day that was based on the bid of the highest-cost
gas-fired California generating unit that was needed to serve the ISO's load.
When generation operating reserves fell below seven percent in California (a
"reserve deficiency period"), absent cost-based justification for a higher
price, the maximum price that Williams could charge for wholesale spot sales in
the WSCC was the market clearing price. When generation operating reserves rose
to seven percent or above in California, absent cost-based justification for a
higher price, Williams' maximum price was limited to 85 percent of the highest
hourly price that was in effect during the most recent reserve deficiency
period. This methodology initially resulted in a maximum price of $92 per
megawatt hour during non-emergency periods and $108 per megawatt hour during
emergency periods. These maximum prices remained unchanged throughout summer and
fall 2001. Revisions to the plan for the post-September 30, 2002, period were
provided on July 17, 2002, as discussed below.

     On December 19, 2001, the FERC reaffirmed its June 19 order with certain
clarifications and modifications. It also altered the price mitigation
methodology for spot market transactions for the WSCC market for the winter 2001
season and set the period maximum price at $108 per megawatt hour through April
30, 2002. Under the order, this price would be subject to being recalculated
when the average gas price rises by a minimum factor of ten percent effective
for the following trading day, but in no event would the maximum price drop
below $108 per megawatt hour. The FERC also upheld a ten percent addition to the
price applicable to sales into California to reflect credit risk. On July 9,
2002, the ISO's operating reserve levels dropped below seven percent for a full
operating hour, during which the ISO declared a Stage 1 System Emergency
resulting in a new Market Clearing Price cap of $57.14/MWh under the FERC's
rules. On July 11, 2002, the FERC issued an order that the existing price
mitigation formula be replaced with a hard price cap of $91.87/MWh for spot
markets operated in the West (which is the level of price mitigation that
existed prior to the July 9, 2002 events that reduced the cap), to be effective
July 12, 2002. The cap expired September 30, 2002, but the cap was later
extended by FERC to October 30, 2002.

                                       18

Notes (Continued)

   On July 17, 2002, the FERC issued its first order on the California ISO's
proposed market redesign. Key elements of the order include (1) maintaining
indefinitely the current must-offer obligation across the West; (2) the adoption
of Automatic Mitigation Procedures (AMP) to identify and limit excessive bids
and local market power within California, (bids less than $91.87/MWh will not be
subject to AMP); (3) a West-wide spot market bid cap of $250/MWh, beginning
October 1, 2002, and continuing indefinitely; (4) a requirement that the ISO
expedite the following market design elements and requiring them to be filed by
October 21, 2002: (a) creation of an integrated day-ahead market; (b) ancillary
services market reforms; and (c) hour-ahead and real-time market reforms; and
(5) the development of locational marginal pricing (LMP). The FERC reaffirmed
these elements in an order issued October 9, 2002, with the following
clarification: (a) generators may bid above the ISO cap, but their bids cannot
set the market clearing price and they will be subject to justification and
refund, (b) if the market clearing price is projected to be above $91.87 per MWh
in any zone, automatic mitigation will be triggered in all zones, (c) the 10
percent creditworthiness adder will be removed effective October 31, 2002. On
January 17, 2003, FERC clarified that bids below $91.87 per MWh are not entitled
to a safe harbor from mitigation, and where a seller is subject to the
must-offer obligation but fails to submit a bid, the ISO may impose a proxy bid.
On October 31, 2002, FERC found that the ISO has not explained how it will treat
generators that are running at minimum load and dispatched for instructed
energy. On December 2, 2002, the ISO proposed to pay for energy at minimum load
the uninstructed energy price even when a unit is dispatched for instructed
energy. Williams protested on January 2, 2003, arguing that the ISO's proposal
fails to keep sellers whole.

     In a separate but related proceeding, certain entities have also asked the
FERC to revoke Williams' authority to sell power from California-based
generating units at market-based rates, to limit Williams to cost-based rates
for future sales from such units and to order refunds of excessive rates, with
interest, retroactive to May 1, 2000, and possibly earlier.

     The California Public Utilities Commission (CPUC) filed a complaint with
the FERC on February 25, 2002, seeking to void or, alternatively, reform a
number of the long-term power purchase contracts entered into between the State
of California and several suppliers in 2001, including Energy Marketing &
Trading. The CPUC alleges that the contracts are tainted with the exercise of
market power and significantly exceed "just and reasonable" prices. The
California Electricity Oversight Board (CEOB) made a similar filing on February
27, 2002. The FERC set the complaint for hearing on April 25, 2002, but held the
hearing in abeyance pending settlement discussions before a FERC judge. The FERC
also ordered that the higher public interest test will apply to the contracts.
The FERC commented that the state has a very heavy burden to carry in proving
its case. On July 17, 2002, the FERC denied rehearing of the April 25, 2002,
order that set for hearing California's challenges to the long-term contracts
entered into between the state and several suppliers, including Energy Marketing
& Trading. The settlement discussions noted above resulted in Williams entering
into a settlement agreement with the State of California and other non-Federal
parties that includes renegotiated long-term energy contracts. These contracts
are made up of block energy sales, dispatchable products and a gas contract. The
original contract contained only block energy sales. The settlement does not
extend to criminal matters or matters of willful fraud, but will resolve civil
complaints brought by the California Attorney General against Williams that are
discussed below and the State of California's refund claims that are discussed
above. In addition, the settlement is intended to resolve ongoing investigations
by the States of California, Oregon and Washington. The settlement was reduced
to writing and executed on November 11, 2002. The settlement closed on December
31, 2002, after FERC issued an order granting Williams' motion for partial
dismissal from the refund proceedings. The dismissal affects Williams' refund
obligations to the settling parties, but not to other parties, such as
investor-owned utilities. Pursuant to the settlement, the CPUC and CEOB filed a
motion on January 13, 2003 to withdraw their complaints against Williams
regarding the original block energy sales contract. On June 26, 2003, the FERC
granted the CPUC and CEOB joint motion to withdraw their respective complaints
against Williams. Private class action and other civil plaintiffs also executed
the settlement. Various court filings and approvals are necessary to make the
settlement effective as to plaintiffs and to terminate the class actions as to
Williams. As of June 30, 2003, pursuant to the terms of the settlement, Williams
has transferred ownership of six LM6000 gas powered electric turbines, has made
one payment of $42 million to the California Attorney General, and has funded a
$15 million fee and expense fund associated with civil actions that are subject
to the settlement. An additional $105 million remains to be paid to the
California Attorney General (or his designee) over the next seven years, with
the final payment of $15 million due on January 1, 2010.

     On May 2, 2002, PacifiCorp filed a complaint against Energy Marketing &
Trading seeking relief from rates contained in three separate confirmation
agreements between PacifiCorp and Energy Marketing & Trading (known as the
Summer 2002 90-Day Contracts). PacifiCorp filed similar complaints against three
other suppliers. PacifiCorp alleges that the rates contained in the contracts
are unjust and unreasonable. Energy Marking & Trading filed its answer on May
22, 2002, requesting that the FERC reject the complaint and deny the relief
sought. On June 28, 2002, the FERC set PacifiCorp's complaints for hearing, but
held the hearing in abeyance pending the

                                       19

Notes (Continued)

outcome of settlement judge proceedings. The FERC set a refund effective date of
July 1, 2002. The hearing was conducted December 13 through December 20, 2002,
at FERC. The judge issued an initial decision on February 27, 2003 dismissing
the complaints. This decision was appealed to the FERC and FERC affirmed the
Administrative Law Judge (ALJ).

     On March 14, 2001, the FERC issued a Show Cause Order directing Energy
Marketing & Trading and AES Southland, Inc. to show cause why they should not be
found to have engaged in violations of the Federal Power Act and various
agreements, and they were directed to make refunds in the aggregate of
approximately $10.8 million and have certain conditions placed on Williams'
market-based rate authority for sales from specific generating facilities in
California for a limited period. On April 30, 2001, the FERC issued an Order
approving a settlement of this proceeding. The settlement terminated the
proceeding without making any findings of wrongdoing by Williams. Pursuant to
the settlement, Williams agreed to refund $8 million to the ISO by crediting
such amount against outstanding invoices. Williams also agreed to prospective
conditions on its authority to make bulk power sales at market-based rates for
certain limited facilities under which it has call rights for a one-year period.
Williams also has been informed that the facts underlying this proceeding have
been investigated by a California Grand Jury, and the investigation has been
closed without the Grand Jury taking any action. As a result of federal court
orders, FERC released the data it obtained from Williams that gave rise to the
show cause order.

     On December 11, 2002, the FERC staff informed Transcontinental Gas Pipe
Line Corporation (Transco) of a number of issues the FERC staff identified
during the course of a formal, nonpublic investigation into the relationship
between Transco and its marketing affiliate, Energy Marketing & Trading. The
FERC staff asserted that Energy Marketing & Trading personnel had access to
Transco data bases and other information, and that Transco had failed to
accurately post certain information on its electronic bulletin board. Williams,
Transco and Energy Marketing & Trading did not agree with all of the FERC
staff's allegations and furthermore believe that Energy Marketing & Trading did
not profit from the alleged activities. Nevertheless, in order to avoid
protracted litigation, on March 13, 2003, Williams, Transco and Energy Marketing
& Trading executed a settlement of this matter with the FERC staff. An Order
approving the settlement was issued by the FERC on March 17, 2003. No requests
for rehearing of the March 17, 2003 order were filed; therefore, the order
became final on April 16, 2003. Pursuant to the terms of the settlement
agreement, Transco will pay a civil penalty in the amount of $20 million,
beginning with a payment of $4 million within thirty (30) days of the date the
FERC Order approving the settlement becomes final. The first payment was made on
May 16, 2003, and the subsequent $4 million payments are due on or before the
first, second, third and fourth anniversaries of the first payment. Transco
recorded a charge to income and established a liability of $17 million in 2002
on a discounted basis to reflect the future payments to be made over the next
four years. In addition, Transco has provided notice to its merchant sales
service customers that it will be terminating such services when it is able to
do so under the terms of any applicable contracts and FERC certificates
authorizing such services. Most of these sales are made through a Firm Sales
(FS) program, and under this program Transco must provide two-year advance
notice of termination. Therefore, Transco notified the FS customers of its
intention to terminate the FS service effective April 1, 2005. As part of the
settlement, Energy Marketing & Trading has agreed, subject to certain
exceptions, that it will not enter into new transportation agreements that would
increase the transportation capacity it holds on certain affiliated interstate
gas pipelines, including Transco. Finally, Transco and certain affiliates have
agreed to the terms of a compliance plan designed to ensure future compliance
with the provisions of the settlement agreement and the FERC's rules governing
the relationship of Transco and Energy Marketing & Trading.

     On August 1, 2002, the FERC issued a Notice of Proposed Rulemaking (NOPR)
that proposed restrictions on various types of cash management programs employed
by companies in the energy industry, such as Williams and its subsidiaries. In
addition to stricter guidelines regarding the accounting for and documentation
of cash management or cash pooling programs, the FERC proposal, if made final,
would have precluded public utilities, natural gas companies and oil pipeline
companies from participating in such programs unless the parent company and its
FERC-regulated affiliate maintain investment-grade credit ratings and that the
FERC-regulated affiliate maintains stockholders equity of at least 30 percent of
total capitalization. Williams' and its regulated gas pipelines' current credit
ratings are not investment grade. Williams participated in comments in this
proceeding on August 28, 2002, by the Interstate Natural Gas Association of
America. On September 25, 2002, the FERC convened a technical conference to
discuss the issues raised in the comments filed by parties in this proceeding.
On June 26, 2003, the FERC issued an Interim Rule (Order No. 634), which
requires FERC-regulated entities to have their cash management programs in
writing and to have all such programs specify (i) the duties and
responsibilities of administrators and participants, (ii) the methods for
calculating interest and for allocating interest and expenses, and (iii)
restrictions on borrowing from the programs. The Interim Rule was effective on
August 7, 2003. The Interim Rule also seeks industry comment on new reporting
requirements that would require FERC-regulated entities to file their cash
management programs with the FERC and to notify the FERC when their proprietary
capital ratio drops below 30 percent of total capitalization and when it
subsequently returns to or exceeds 30 percent. This Interim Rule replaces the
earlier NOPR on cash management described above.

                                       20

Notes (Continued)

     On February 13, 2002, the FERC issued an Order Directing Staff
Investigation commencing a proceeding titled Fact-Finding Investigation of
Potential Manipulation of Electric and Natural Gas Prices. Through the
investigation, the FERC intends to determine whether "any entity, including
Enron Corporation (Enron) (through any of its affiliates or subsidiaries),
manipulated short-term prices for electric energy or natural gas in the West or
otherwise exercised undue influence over wholesale electric prices in the West
since January 1, 2000, resulting in potentially unjust and unreasonable rates in
long-term power sales contracts subsequently entered into by sellers in the
West." This investigation does not constitute a Federal Power Act complaint;
rather, the results of the investigation will be used by the FERC in any
existing or subsequent Federal Power Act or Natural Gas Act complaint. The FERC
Staff is directed to complete the investigation as soon as "is practicable."
Williams, through many of its subsidiaries, is a major supplier of natural gas
and power in the West and, as such, anticipates being the subject of certain
aspects of the investigation. Williams is cooperating with all data requests
received in this proceeding. On May 8, 2002, Williams received an additional set
of data requests from the FERC related to a disclosure by Enron of certain
trading practices in which it may have been engaged in the California market. On
May 21, and May 22, 2002, the FERC supplemented the request inquiring as to
"wash" or "round trip" transactions. Williams responded on May 22, 2002, May 31,
2002, and June 5, 2002, to the data requests. On June 4, 2002, the FERC issued
an order to Williams to show cause why its market-based rate authority should
not be revoked as the FERC found that certain of Williams' responses related to
the Enron trading practices constituted a failure to cooperate with the staff's
investigation. Williams subsequently supplemented its responses to address the
show cause order. On July 26, 2002, Williams received a letter from the FERC
informing Williams that it had reviewed all of Williams' supplemental responses
and concluded that Williams responded to the initial May 8, 2002 request.

     In response to an article appearing in the New York Times on June 2, 2002,
containing allegations by a former Williams employee that it had attempted to
"corner" the natural gas market in California, and at Williams' invitation, the
FERC is conducting an investigation into these allegations. Also, the Commodity
Futures Trading Commission (CFTC) and the U.S. Department of Justice (DOJ) are
conducting an investigation regarding gas and power trading and have requested
information from Williams in connection with this investigation.

     Williams disclosed on October 25, 2002, that certain of its gas traders had
reported inaccurate information to a trade publication that published gas price
indices. On November 8, 2002, Williams received a subpoena from a federal grand
jury in Northern California seeking documents related to Williams' involvement
in California markets, including its reporting to trade publications for both
gas and power transactions. Williams is in the process of completing its
response to the subpoena. The DOJ's investigation into this matter is
continuing. On July 29, 2003, Williams reached a settlement with the CFTC where
in exchange for $20 million, the CFTC closed its investigation and Williams did
not admit or deny allegations that it had engaged in false reporting or
attempted manipulation.

     On March 26, 2003, FERC issued an order addressing Enron trading practices,
the allegation of cornering the gas market, and the gas price index issue. The
March 26, 2003 order cleared Williams on the issue of cornering the market and
contemplated or established further proceedings on the other two as to Williams
and numerous other market participants. These proceedings resulted in a show
cause order to Williams and others regarding specific practices alleged by an
ISO report that various companies engaged in.

     On May 31, 2002, Williams received a request from the Securities and
Exchange Commission (SEC) to voluntarily produce documents and information
regarding "round-trip" trades for gas or power from January 1, 2000, to the
present in the United States. On June 24, 2002, the SEC made an additional
request for information including a request that Williams address the amount of
Williams' credit, prudency and/or other reserves associated with its energy
trading activities and the methods used to determine or calculate these
reserves. The June 24, 2002, request also requested Williams' volumes, revenues,
and earnings from its energy trading activities in the Western U.S. market.
Williams has responded to the SEC's requests.

     On July 3, 2002, the ISO announced fines against several energy producers
including Williams, for failure to deliver electricity in 2001 as required. The
ISO fined Williams $25.5 million, which will be offset against Williams' claims
for payment from the ISO. Williams believes the vast majority of fines are not
justified and has challenged the fines pursuant to the FERC approved process
contained in the ISO tariff.

     On December 3, 2002, an administrative law judge at the FERC issued an
initial decision in Transco's general rate case which, among other things,
rejects the recovery of the costs of Transco's Mobile Bay expansion project from
its shippers on a "rolled-in" basis and finds that incremental pricing for the
Mobile Bay expansion project is just and reasonable. The initial decision does
not address the issue of the effective date for the change to incremental
pricing, although Transco's rates reflecting recovery of the Mobile Bay
expansion project costs on a "rolled-in" basis have been in effect since
September 1, 2001. The administrative law judge's initial decision is subject to
review by the FERC. Energy Marketing & Trading holds long-term transportation
capacity on the Mobile Bay expansion project. If the FERC adopts the decision of
the administrative law judge on the pricing of the Mobile Bay expansion project
and also requires that the decision be implemented effective September 1, 2001,
Energy Marketing & Trading could be subject to surcharges of approximately $32
million, excluding interest, through June 30, 2003, in addition to increased
costs going forward.

                                       21

Notes (Continued)

ENVIRONMENTAL MATTERS

Continuing operations

     Since 1989, Transco has had studies under way to test certain of its
facilities for the presence of toxic and hazardous substances to determine to
what extent, if any, remediation may be necessary. Transco has responded to data
requests regarding such potential contamination of certain of its sites. The
costs of any such remediation will depend upon the scope of the remediation. At
June 30, 2003, Transco had accrued liabilities totaling approximately $30
million for these costs.

     Transco has identified polychlorinated biphenyl contamination (PCB) in air
compressor systems, soils and related properties at certain compressor station
sites. Transco has also been involved in negotiations with the U.S.
Environmental Protection Agency (EPA) and state agencies to develop screening,
sampling and cleanup programs. In addition, Transco commenced negotiations with
certain environmental authorities and other programs concerning investigative
and remedial actions relative to potential mercury contamination at certain gas
metering sites. Transco had accrued liabilities for these costs which are
included in the $30 million liability mentioned above.

     Williams and its subsidiaries also accrue environmental remediation costs
for its natural gas gathering and processing facilities primarily related to
soil and groundwater contamination. At June 30, 2003, Williams and its
subsidiaries had accrued liabilities totaling approximately $10 million for
these costs.

     Actual costs incurred for these matters will depend on the actual number of
contaminated sites identified, the actual amount and extent of contamination
discovered, the final cleanup standards mandated by the EPA and other
governmental authorities and other factors.

Former operations, including operations classified as discontinued

     In connection with the sale of certain assets and businesses, Williams has
retained responsibility through indemnification of the purchasers for
environmental liabilities existing at the time the sale was consummated,
including former fertilizer operations, propane marketing operations, retail
petroleum and refining operations, petroleum products pipelines and related
facilities, exploration and production operations and mining operations.

     In connection with the 1987 sale of the assets of Agrico Chemical Company,
Williams agreed to indemnify the purchaser for environmental cleanup costs
resulting from certain conditions at specified locations, to the extent such
costs exceed a specified amount. At June 30, 2003, Williams had approximately $9
million accrued for such excess costs.

     At June 30, 2003, Williams had accrued environmental liabilities totaling
approximately $15 million related to its (1) Alaska refining, retail and
pipeline operations currently classified as held for sale, (2) potential
indemnification obligations to purchasers of its former retail petroleum and
refining operations, and (3) former propane marketing operations, petroleum
products and natural gas pipelines, a discontinued petroleum refining facility
and exploration and production and mining operations. These costs include (1)
certain conditions at specified locations related primarily to soil and
groundwater contamination and (2) any penalty assessed on Williams Refining &
Marketing, LLC (Williams Refining) associated with noncompliance with EPA's
benzene waste "NESHAP" regulations. In 2002, Williams Refining submitted to the
EPA a self-disclosure letter indicating noncompliance with those regulations.
This unintentional noncompliance had occurred due to a regulatory interpretation
that resulted in under-counting the total annual benzene level at Williams
Refining's Memphis refinery. Also in 2002, the EPA conducted an all-media audit
of the Memphis refinery. The EPA anticipates releasing a report of its audit
findings in 2003. The EPA will likely assess a penalty on Williams Refining due
to the benzene waste NESHAP issue, but the amount of any such penalty is not
known. In connection with the sale of the Memphis refinery in March 2003,
Williams indemnified the purchaser for any such penalty.

     As part of its June 17, 2003 sale of Williams Energy Partners (see Note 6),
Williams indemnified the purchaser for (1) environmental cleanup costs resulting
from certain conditions, primarily soil and groundwater contamination, at
specified locations, to the extent such costs exceed a specified amount and (2)
currently unidentified environmental contamination relating to operations prior
to April of 2002 and identified prior to April of 2008. No amounts have been
accrued by Williams for such costs as of June 30, 2003; however, Williams
deferred approximately $113 million of the gain on the sale associated with
Williams' indemnifications, including environmental indemnifications, of the
purchaser under the sales agreement.

     On July 2, 2001, the EPA issued an information request asking for
information on oil releases and discharges in any amount from Williams'
pipelines, pipeline systems, and pipeline facilities used in the movement of oil
or petroleum products, during the period from July 1, 1998 through July 2, 2001.
In November 2001, Williams furnished its response.

                                       22

Notes (Continued)

     Certain Williams' subsidiaries have been identified as potentially
responsible parties (PRP) at various Superfund and state waste disposal sites.
In addition, these subsidiaries have incurred, or are alleged to have incurred,
various other hazardous materials removal or remediation obligations under
environmental laws. Although no assurances can be given, Williams does not
believe that these obligations or the PRP status of these subsidiaries will have
a material adverse effect on its financial position, results of operations or
net cash flows.

     Actual costs incurred for these matters will depend on the actual number of
contaminated sites identified, the actual amount and extent of contamination
discovered, the final cleanup standards mandated by the EPA and other
governmental authorities and other factors.

OTHER LEGAL MATTERS

     In connection with agreements to resolve take-or-pay and other contract
claims and to amend gas purchase contracts, Transco entered into certain
settlements with producers which may require the indemnification of certain
claims for additional royalties which the producers may be required to pay as a
result of such settlements. Transco, through its agent Energy Marketing &
Trading, continues to purchase gas under contracts which extend, in some cases,
through the life of the associated gas reserves. Certain of these contracts
contain royalty indemnification provisions which have no carrying value.
Producers have received and may receive other demands, which could result in
claims pursuant to royalty indemnification provisions. Indemnification for
royalties will depend on, among other things, the specific lease provisions
between the producer and the lessor and the terms of the agreement between the
producer and Transco. Consequently, the potential maximum future payments under
such indemnification provisions cannot be determined.

     As a result of these settlements, Transco has been sued by certain
producers seeking indemnification from Transco. Transco is currently defending
two lawsuits in which producers have asserted damages, including interest
calculated through June 30, 2003, of approximately $18 million. In one of these
cases, at the conclusion of a trial on July 11, 2003, the judge ruled from the
bench in Transco's favor. It is expected that the judge will enter a formal
judgment reflecting his bench ruling in the near future. This case accounts for
approximately $10 million of the $18 million claimed in the two cases.

     On June 8, 2001, fourteen Williams entities were named as defendants in a
nationwide class action lawsuit which had been pending against other defendants,
generally pipeline and gathering companies, for more than one year. The
plaintiffs allege that the defendants, including the Williams defendants, have
engaged in mismeasurement techniques that distort the heating content of natural
gas, resulting in an alleged underpayment of royalties to the class of producer
plaintiffs. In September 2001, the plaintiffs voluntarily dismissed two of the
fourteen Williams entities named as defendants in the lawsuit. In January 2002,
most of the Williams defendants, along with a group of Coordinating Defendants,
filed a motion to dismiss for lack of personal jurisdiction and other grounds.
On August 19, 2002, the defendants' motion to dismiss on nonjurisdictional
grounds was denied. On September 17, 2002, the plaintiffs filed a motion for
class certification. The Williams entities joined with other defendants in
contesting certification of the class. On April 10, 2003, the court denied the
plaintiffs' motion for class certification. The motion to dismiss for lack of
personal jurisdiction remains pending. On May 13, 2003, plaintiffs filed a
motion for leave to file a fourth amended petition and on July 29, 2003, the
court granted the motion. The amended petition deletes all but two of the
Williams defendants.

     In 1998, the DOJ informed Williams that Jack Grynberg, an individual, had
filed claims in the United States District Court for the District of Colorado
under the False Claims Act against Williams and certain of its wholly owned
subsidiaries. In connection with its sales of Kern River and Texas Gas, the
Company agreed to indemnify the purchasers for any liability relating to this
claim, including legal fees. The maximum amount of future payments that Williams
could potentially be required to pay under these indemnifications depends upon
the ultimate resolution of the claim and cannot currently be determined. No
amounts have been accrued for these indemnifications. Grynberg has also filed
claims against approximately 300 other energy companies and alleged that the
defendants violated the False Claims Act in connection with the measurement,
royalty valuation and purchase of hydrocarbons. The relief sought was an
unspecified amount of royalties allegedly not paid to the federal government,
treble damages, a civil penalty, attorneys' fees, and costs. On April 9, 1999,
the DOJ announced that it was declining to intervene in any of the Grynberg qui
tam cases, including the action filed against the Williams entities in the
United States District Court for the District of Colorado. On October 21, 1999,
the Panel on Multi-District Litigation transferred all of the Grynberg qui tam
cases, including those filed against Williams, to the United States District
Court for the District of Wyoming for pre-trial purposes. On October 9, 2002,
the court granted a motion to dismiss Grynberg's royalty valuation claims.
Grynberg's measurement claims remain pending against Williams and the other
defendants.

     On August 6, 2002, Jack J. Grynberg, and Celeste C. Grynberg, Trustee on
Behalf of the Rachel Susan Grynberg Trust, and the Stephen Mark Grynberg Trust,
served The Williams Companies and Williams Production RMT Company with a
complaint in the District Court in and for the City of Denver, State of
Colorado. The complaint alleges that the defendants have used mismeasurement
techniques that distort the BTU heating content of natural

                                       23

Notes (Continued)

gas, resulting in the alleged underpayment of royalties to Grynberg and other
independent natural gas producers. The complaint also alleges that defendants
inappropriately took deductions from the gross value of their natural gas and
made other royalty valuation errors. Theories for relief include breach of
contract, breach of implied covenant of good faith and fair dealing,
anticipatory repudiation, declaratory relief, equitable accounting, civil theft,
deceptive trade practices, negligent misrepresentation, deceit based on fraud,
conversion, breach of fiduciary duty, and violations of the state racketeering
statute. Plaintiff is seeking actual damages of between $2 million and $20
million based on interest rate variations, and punitive damages in the amount of
approximately $1.4 million dollars. On October 7, 2002, the Williams defendants
filed a motion to stay the proceedings in this case based on the pendency of the
False Claims Act litigation discussed in the preceding paragraph.

     Williams and certain of its subsidiaries are named as defendants in various
putative, nationwide class actions brought on behalf of all landowners on whose
property the plaintiffs have alleged WilTel Communications Group, Inc. (WilTel)
installed fiber-optic cable without the permission of the landowners. Williams
and its subsidiaries have been dismissed from all of the cases.

     In November 2000, class actions were filed in San Diego, California
Superior Court by Pamela Gordon and Ruth Hendricks on behalf of San Diego rate
payers against California power generators and traders including Williams Energy
Services Company and Energy Marketing & Trading, subsidiaries of Williams. Three
municipal water districts also filed a similar action on their own behalf. Other
class actions have been filed on behalf of the people of California and on
behalf of commercial restaurants in San Francisco Superior Court. These lawsuits
result from the increase in wholesale power prices in California that began in
the summer of 2000. Williams is also a defendant in other litigation arising out
of California energy issues. The suits claim that the defendants acted to
manipulate prices in violation of the California antitrust and unfair business
practices statutes and other state and federal laws. Plaintiffs are seeking
injunctive relief as well as restitution, disgorgement, appointment of a
receiver, and damages, including treble damages. These cases have all been
administratively consolidated in San Diego County Superior Court. As part of a
comprehensive settlement with the State of California and other parties,
Williams and the lead plaintiffs in these suits have resolved the claims. While
the settlement is final as to the State of California, the San Diego Superior
Court must still approve it as to the plaintiff ratepayers.

     On May 2, 2001, the Lieutenant Governor of the State of California and
Assemblywoman Barbara Matthews, acting in their individual capacities as members
of the general public, filed suit against five companies and fourteen executive
officers, including Energy Marketing & Trading and Williams' then current
officers Keith Bailey, Chairman and CEO of Williams, Steve Malcolm, President
and CEO of Williams Energy Services and an Executive Vice President of Williams,
and Bill Hobbs, Senior Vice President of Williams Energy Marketing & Trading, in
Los Angeles Superior State Court alleging State Antitrust and Fraudulent and
Unfair Business Act Violations and seeking injunctive and declaratory relief,
civil fines, treble damages and other relief, all in an unspecified amount. This
case is being administratively consolidated with the other class actions in San
Diego Superior Court. As part of a comprehensive settlement with the State of
California and other parties, Williams and the lead plaintiffs in these suits
have resolved the claims. While the settlement is final as to the State of
California, the San Diego Superior Court must still approve it as to the
plaintiffs in this suit.

     On October 5, 2001, a suit was filed on behalf of California taxpayers and
electric ratepayers in the Superior Court for the County of San Francisco
against the Governor of California and 22 other defendants consisting of other
state officials, utilities and generators, including Energy Marketing & Trading.
The suit alleges that the long-term power contracts entered into by the state
with generators are illegal and unenforceable on the basis of fraud, mistake,
breach of duty, conflict of interest, failure to comply with law, commercial
impossibility and change in circumstances. Remedies sought include rescission,
reformation, injunction, and recovery of funds. Private plaintiffs have also
brought five similar cases against Williams and others on similar grounds. These
suits have all been removed to federal court, and plaintiffs are seeking to
remand the cases to state court. In January 2003, the federal district court
granted the plaintiffs' motion to remand the case to San Diego Superior Court,
but on February 20, 2003, the United States Court of Appeals for the Ninth
Circuit, on its own motion, stayed the remand order pending its review of an
appeal of the remand order by certain defendants. As part of a comprehensive
settlement with the State of California and other parties, Williams and the lead
plaintiffs in these suits have resolved the claims. While the settlement is
final as to the State of California, once the jurisdictional issue is resolved,
either the San Diego Superior Court or the United States District Court for the
Southern District of California must still approve the settlement as to the
plaintiff ratepayers and taxpayers.

     Numerous shareholder class action suits have been filed against Williams in
the United States District Court for the Northern District of Oklahoma. The
majority of the suits allege that Williams and co-defendants, WilTel and certain
corporate officers, have acted jointly and separately to inflate the stock price
of both companies. Other suits allege similar causes of action related to a
public offering in early January 2002, known as the FELINE PACS offering. These
cases were filed against Williams, certain corporate officers, all members of
Williams' board of directors and all of the offerings' underwriters. These cases
have all been consolidated and an order has been issued requiring separate
amended consolidated complaints by Williams and WilTel equity holders. The
amended

                                       24

Notes (Continued)

complaint of the WilTel securities holders was filed on September 27, 2002, and
the amended complaint of the WMB securities holders was filed on October 7,
2002. This amendment added numerous claims related to Energy Marketing &
Trading. In addition, four class action complaints have been filed against
Williams, the members of its board of directors and members of Williams'
Benefits and Investment Committees under the Employee Retirement Income Security
Act (ERISA) by participants in Williams' 401(k) plan. A motion to consolidate
these suits has been approved. Williams and other defendants have filed motions
to dismiss each of these suits. Oral arguments on the motions were held in April
2003. On July 14, 2003, the Court dismissed Williams and its Board, but not the
members of the Benefits and Investment Committees. A decision in the shareholder
suits is pending. Derivative shareholder suits have been filed in state court in
Oklahoma, all based on similar allegations. On August 1, 2002, a motion to
consolidate and a motion to stay these suits pending action by the federal court
in the shareholder suits was approved.

     On April 26, 2002, the Oklahoma Department of Securities issued an order
initiating an investigation of Williams and WilTel regarding issues associated
with the spin-off of WilTel and regarding the WilTel bankruptcy. Williams has
committed to cooperate fully in the investigation.

     On November 30, 2001, Shell Offshore, Inc. filed a complaint at the FERC
against Williams Gas Processing -- Gulf Coast Company, L.P. (WGP), Williams Gulf
Coast Gathering Company (WGCGC), Williams Field Services Company (WFS) and
Transco, alleging concerted actions by the affiliates frustrating the FERC's
regulation of Transco. The alleged actions are related to offers of gathering
service by WFS and its subsidiaries on the recently spundown and deregulated
North Padre Island offshore gathering system. On September 5, 2002, the FERC
issued an order reasserting jurisdiction over that portion of the North Padre
Island facilities previously transferred to WFS. The FERC also determined an
unbundled gathering rate for service on these facilities which is to be
collected by Transco. Transco, WGP, WGCGC and WFS believe their actions were
reasonable and lawful and sought rehearing of the FERC's order which was denied
by the FERC on May 15, 2003. Transco, WGP, WGCGC and WFS have each filed
petitions for review of the FERC's orders with the U.S. Court of Appeals for the
District of Columbia. They also filed a joint motion to consolidate their
appeals.

     On October 23, 2002, Western Gas Resources, Inc. and its subsidiary, Lance
Oil and Gas Company, Inc., filed suit against Williams Production RMT Company in
District Court for Sheridan, Wyoming, claiming that the merger of Barrett
Resources Corporation and Williams triggered a preferential right to purchase a
portion of the coal bed methane development properties owned by Barrett in the
Powder River Basin of northeastern Wyoming. In addition, Western claims that the
merger triggered certain rights of Western to replace Barrett as operator of
those properties. Mediation efforts are continuing and a trial date has been set
for July 2004. The Company believes that the claims have no merit.

     Williams Alaska Petroleum, Inc. (WAPI) is actively engaged in
administrative litigation being conducted jointly by the FERC and the Regulatory
Commission of Alaska concerning the Trans-Alaska Pipeline System (TAPS) Quality
Bank. Primary issues being litigated include the appropriate valuation of the
naphtha, heavy distillate, vacuum gas oil and residual product cuts within the
TAPS Quality Bank as well as the appropriate retroactive effects of the
determinations. WAPI's interest in these proceedings is material as the matter
involves claims by crude producers and the State of Alaska for retroactive
payments plus interest from WAPI in the range of $150 million to $200 million
aggregate. Because of the complexity of the issues involved, however, the
outcome cannot be predicted with certainty nor can the likely result be
quantified.

     Energy Marketing & Trading has paid and received various settlement amounts
in conjunction with the liquidation of trading positions during 2002 and the
first six months of 2003. One counterparty, American Electric Power Company,
Inc. (AEP), disputed a settlement amount related to the liquidation of a trading
position with Energy Marketing & Trading that was initially calculated to be in
excess of $100 million payable to Energy Marketing & Trading. Arbitration was
initiated to resolve this dispute. On June 5, 2003, Energy Marketing & Trading
and AEP executed a settlement agreement resolving the dispute, pursuant to which
AEP paid Energy Marketing & Trading $90 million. AEP is a related party as a
result of a director who serves on both Williams' and AEP's board of directors.

     Pursuant to various purchase and sale agreements relating to divested
businesses and assets, Williams has indemnified certain purchasers against
liabilities that they may incur with respect to the businesses and assets
acquired from Williams. The indemnities provided to the purchasers are customary
in sale transactions and are contingent upon the purchasers incurring
liabilities that are not otherwise recoverable from third parties. The
indemnities generally relate to breach of warranties, tax, historic litigation,
personal injury, environmental matters, right of way and other representations
provided by Williams. At June 30, 2003, Williams does not expect any of the
indemnities provided pursuant to the sales agreements to have a material impact
on Williams' future financial position. However, if a claim for indemnity is
brought against Williams in the future, it may have a material adverse effect on
the net income of the period in which the claim is made.

     In addition to the foregoing, various other proceedings are pending against
Williams or its subsidiaries which are incidental to their operations.

                                       25

Notes (Continued)

SUMMARY

     Litigation, arbitration, regulatory matters and environmental matters are
subject to inherent uncertainties. Were an unfavorable ruling to occur, there
exists the possibility of a material adverse impact on the net income of the
period in which the ruling occurs. Management, including internal counsel,
currently believes that the ultimate resolution of the foregoing matters, taken
as a whole and after consideration of amounts accrued, insurance coverage,
recovery from customers or other indemnification arrangements, will not have a
materially adverse effect upon Williams' future financial position.

COMMITMENTS

     Energy Marketing & Trading has entered into certain contracts giving it the
right to receive fuel conversion services as well as certain other services
associated with electric generation facilities that are currently in operation
throughout the continental United States. At June 30, 2003, Energy Marketing &
Trading's estimated committed payments under these contracts are $206 million
for the remainder of 2003, range from approximately $391 million to $421 million
annually through 2017 and decline over the remaining five years to $57 million
in 2022. Total committed payments under these contracts over the next 20 years
are approximately $7 billion.

GUARANTEES

     In 2001, Williams sold its investment in Ferrellgas Partners L.P. senior
common units (Ferrellgas units). As part of the sale, Williams became party to a
put agreement whereby the purchaser's lenders can unilaterally require Williams
to repurchase the units upon nonpayment by the purchaser of its term loan due to
its lender or failure or default by Williams under any of its debt obligations
greater than $60 million. The maximum potential obligation under the put
agreement at June 30, 2003, was $51.5 million. Williams' contingent obligation
decreases as purchaser's payments are made to the lender. Collateral and other
recourse provisions include the outstanding Ferrellgas units and a guarantee
from Ferrellgas Partners L.P. to cover any shortfall from the sale of the
Ferrellgas units at less than face value. The proceeds from the liquidation of
the Ferrellgas units combined with the Ferrellgas Partners' guarantee should be
sufficient to cover any required payment by Williams. The put agreement expires
December 30, 2005. There have been no events of default and the purchaser has
performed as required under payment terms with the lender. No amounts have been
accrued for this contingent obligation as management believes it is not probable
that Williams would be required to perform under this obligation.

     In connection with the 1993 public offering of units in the Williams Coal
Seam Gas Royalty Trust (Royalty Trust), Exploration & Production entered a gas
purchase contract for the purchase of natural gas in which the Royalty Trust
holds a net profits interest. Under this agreement, Exploration & Production
guarantees a minimum purchase price that the Royalty Trust will realize in the
calculation of its net profits interest. Exploration & Production has an annual
option to discontinue this minimum purchase price guarantee and pay solely based
on an index price. The maximum potential future exposure associated with this
guarantee is not determinable because it is dependent upon natural gas prices
and production volumes. No amounts have been accrued for this contingent
obligation as the index price continues to exceed the minimum purchase price.

     In connection with the 1987 sale of certain real estate assets associated
with its Tulsa headquarters, Williams guaranteed 70 percent of the principal and
interest payments through 2007 on revenue bonds issued by the purchaser to
finance those assets. In the event that future operating results from these
assets are not sufficient to make the principal and interest payments, Williams
is required to fund that short-fall. The maximum potential future payments under
this guarantee are $6.8 million, all of which is accrued at June 30, 2003. On
July 14, 2003, Williams deposited its 70 percent share ($6.8 million) with the
trustee, satisfying its entire remaining obligation.

     In connection with the construction of a joint venture pipeline project,
Williams guaranteed, through a put agreement, certain portions of the joint
venture's project financing in the event of nonpayment by the joint venture.
Williams' maximum potential liability under this guarantee, based on the
outstanding project financing at June 30, 2003, is $29.3 million. As additional
borrowings are made under the project financing facility, Williams' maximum
potential exposure will increase. This guarantee expires in March 2005, and no
amounts have been accrued at June 30, 2003.

     Discovery Pipeline (Discovery) is a joint venture gas gathering and
processing system. Williams has provided a guarantee in the event of
nonperformance on 50 percent of Discovery's debt obligations, or approximately
$126.9 million at June 30, 2003. Performance under the guarantee generally would
occur upon a failure of payment by the financed entity or certain events of
default related to the guarantor. These events of default primarily relate to
bankruptcy and/or insolvency of the guarantor. The guarantee expires upon the
maturity of the debt obligation at the end of 2003, and no amounts have been
accrued as of June 30, 2003.

                                       26

Notes (Continued)

    Williams has provided performance guarantees in the event of nonpayment by
WilTel on certain lease performance obligations of WilTel that extend through
2042 and have a maximum potential exposure of approximately $52 million.
Williams' exposure declines systematically throughout the remaining term of
WilTel's obligations. At June 30, 2003, Williams has an accrued liability of
$46.9 million for this guarantee.

   Williams has provided guarantees on behalf of certain partnerships in which
Williams has an equity ownership interest. These generally guarantee operating
performance measures and the maximum potential future exposure cannot be
determined. These guarantees continue until Williams withdraws from the
partnerships. No amounts have been accrued at June 30, 2003.

   Williams remains guarantor under certain performance guarantees for an entity
sold earlier in 2003. These guarantees are expected to expire or be terminated
during 2003. The maximum potential future payments under these guarantees total
$144 million. No amounts have been accrued for these contingent obligations, as
management believes it is highly unlikely that Williams will be required to
perform under these agreements.

12. Stockholders' equity
- --------------------------------------------------------------------------------

     On June 10, 2003, Williams redeemed all of the outstanding 9 7/8 percent
cumulative-convertible preferred shares for approximately $289 million, plus
$5.3 million for accrued dividends. These shares were repurchased with proceeds
from a private placement of 5.5 percent junior subordinated convertible
debentures due 2033 (see Note 10).

                                       27

Notes (Continued)

13. Comprehensive income (loss)
- --------------------------------------------------------------------------------

     Comprehensive income (loss) is as follows:

                                                           Three months ended              Six months ended
                                                                June 30,                        June 30,
                                                      ----------------------------    ----------------------------
(Millions)                                                2003            2002            2003            2002
- ----------                                            ------------    ------------    ------------    ------------
                                                                                          
Net income (loss)                                     $      269.7    $     (349.1)   $     (544.8)   $     (241.4)

Other comprehensive loss:
Unrealized gains (losses)
  on securities                                                4.4             (.3)             .2              .8
Unrealized gains (losses) on derivative
  instruments                                               (266.1)           12.4          (450.2)         (188.9)
Net reclassification into
  earnings of derivative
  instrument (gains) losses                                    8.5           (46.5)           23.8          (200.8)
Foreign currency
  translation adjustments                                     28.9            21.1            53.6            19.7
Minimum pension liability adjustment                           1.6              --             1.6              --
                                                      ------------    ------------    ------------    ------------
Other comprehensive loss before
  taxes and minority interest                               (222.7)          (13.3)         (371.0)         (369.2)
Income tax benefit on other
  comprehensive loss                                          96.2            13.0           162.4           148.0
                                                      ------------    ------------    ------------    ------------
Other comprehensive loss                                    (126.5)            (.3)         (208.6)         (221.2)
                                                      ------------    ------------    ------------    ------------
Comprehensive income (loss)                           $      143.2    $     (349.4)   $     (753.4)   $     (462.6)
                                                      ============    ============    ============    ============

     Components of other comprehensive income (loss) before taxes related to
discontinued operations are as follows:

                                                           Three months ended              Six months ended
                                                                June 30,                        June 30,
                                                      ----------------------------    ----------------------------
(Millions)                                                2003            2002            2003            2002
- ----------                                            ------------    ------------    ------------    ------------
                                                                                         
Unrealized gains (losses) on derivative instruments   $         --   $        2.0    $        (.4)   $        (.7)
Net reclassification into earnings of
  derivative instruments (gains) losses                        1.1            (.2)            1.7            (1.8)
Minimum pension liability adjustment                           2.0             --             2.0              --
                                                      ------------   ------------    ------------    ------------
Other comprehensive income (loss)
 before taxes related to discontinued operations      $        3.1   $        1.8    $        3.3    $       (2.5)
                                                      ============   ============    ============    ============

                                       28

Notes (Continued)

14. Segment disclosures
- --------------------------------------------------------------------------------

Segments

     Williams' reportable segments are strategic business units that offer
different products and services. The segments are managed separately because
each segment requires different technology, marketing strategies and industry
knowledge. The Petroleum Services segment is now reported within Other as a
result of the Alaska refinery and related assets being reflected as discontinued
operations. Segment amounts have been restated to reflect this change. Other
primarily consists of corporate operations, and certain continuing operations
previously reported within the International and Petroleum Services segments.

Segments - Performance measurement

     Williams currently evaluates performance based upon segment profit (loss)
from operations which includes revenues from external and internal customers,
operating costs and expenses, depreciation, depletion and amortization, equity
earnings (losses) and income (loss) from investments including gains/losses on
impairments related to investments accounted for under the equity method.
Intersegment sales are generally accounted for as if the sales were to
unaffiliated third parties, that is, at current market prices.

     Energy Marketing & Trading has entered into intercompany interest rate
swaps with the corporate parent, the effect of which is included in Energy
Marketing & Trading's segment revenues and segment profit (loss) as shown in the
reconciliation within the following tables. The results of interest rate swaps
with external counterparties are shown as interest rate swap loss in the
Consolidated Statement of Operations below operating income (loss).

     The majority of energy commodity hedging by certain Williams' business
units is done through intercompany derivatives with Energy Marketing & Trading
which, in turn, enters into offsetting derivative contracts with unrelated third
parties. Energy Marketing & Trading bears the counterparty performance risks
associated with unrelated third parties.

     The following tables reflect the reconciliation of revenues and operating
income (loss) as reported in the Consolidated Statement of Operations to segment
revenues and segment profit (loss).

                                       29

Notes (Continued)

14. Segment disclosures (continued)
- --------------------------------------------------------------------------------

                                      Energy                    Exploration    Midstream
                                    Marketing         Gas            &           Gas &
                                    & Trading       Pipeline     Production      Liquids        Other     Eliminations      Total
                                    ----------     ----------   -----------    ----------    ----------   ------------   ----------
                                                                             (MILLIONS)
                                                                                                    
THREE MONTHS ENDED JUNE 30, 2003

Segment revenues:
   External                         $  2,732.5     $    301.8    $     (5.8)   $    723.8    $     11.5    $       --    $  3,763.8
   Internal                              191.0           10.2         206.0          14.0           8.6        (429.8)           --
                                    ----------     ----------    ----------    ----------    ----------    ----------    ----------
Total segment revenues                 2,923.5          312.0         200.2         737.8          20.1        (429.8)   $  3,763.8
                                    ----------     ----------    ----------    ----------    ----------    ----------    ----------
Less intercompany interest
   rate swap gain (loss)                 (16.7)            --            --            --            --          16.7            --
Total revenues                      $  2,940.2     $    312.0    $    200.2    $    737.8    $     20.1    $   (446.5)   $  3,763.8
                                    ==========     ==========    ==========    ==========    ==========    ==========    ==========
Segment profit (loss)               $    348.0     $    113.9    $    178.7    $     52.4    $    (51.7)   $       --    $    641.3
Less:
   Equity earnings (loss)                   --            2.0           2.5          (2.8)          (.8)           --            .9
   Income (loss) from investments           --             .1            --          (3.7)        (42.5)           --         (46.1)
   Intercompany interest
      rate swap gain (loss)              (16.7)            --            --            --            --            --         (16.7)
                                    ----------     ----------    ----------    ----------    ----------    ----------    ----------
Segment operating
   income (loss)                    $    364.7     $    111.8    $    176.2    $     58.9    $     (8.4)   $       --         703.2
                                    ----------     ----------    ----------    ----------    ----------    ----------    ----------
General corporate expenses                                                                                                    (21.8)
                                                                                                                         ----------
Consolidated operating
   income (loss)                                                                                                         $    681.4
                                                                                                                         ==========
THREE MONTHS ENDED JUNE 30, 2002

Segment revenues:
   External                         $     16.9     $    275.2    $     24.3    $    421.7    $      9.0    $       --    $    747.1
   Internal                             (295.5)*         15.3         196.7          16.3          17.0          50.2            --
                                    ----------     ----------    ----------    ----------    ----------    ----------    ----------
Total segment revenues                  (278.6)         290.5         221.0         438.0          26.0          50.2         747.1
                                    ----------     ----------    ----------    ----------    ----------    ----------    ----------
Less intercompany interest
   rate swap gain (loss)                 (83.0)            --            --            --            --          83.0            --
Total revenues                      $   (195.6)    $    290.5    $    221.0    $    438.0    $     26.0    $    (32.8)   $    747.1
                                    ==========     ==========    ==========    ==========    ==========    ==========    ==========
Segment profit (loss)               $   (497.5)    $    141.1    $     92.4    $     51.7    $     (3.7)   $       --    $   (216.0)
Less:
   Equity earnings (loss)                   --           51.7           1.0           3.6          (2.7)           --          53.6
   Income (loss) from investments           --          (12.3)           --            --            --            --         (12.3)
   Intercompany interest
      rate swap gain (loss)              (83.0)            --            --            --            --            --         (83.0)
                                    ----------     ----------    ----------    ----------    ----------    ----------    ----------
Segment operating
   income (loss)                    $   (414.5)    $    101.7    $     91.4    $     48.1    $     (1.0)   $       --        (174.3)
                                    ----------     ----------    ----------    ----------    ----------    ----------    ----------
General corporate expenses                                                                                                    (34.1)
                                                                                                                         ----------
Consolidated operating
   income (loss)                                                                                                         $   (208.4)
                                                                                                                         ==========

*  Prior to January 1, 2003, Energy Marketing & Trading intercompany cost of
   sales, which were netted in revenues consistent with fair-value accounting,
   exceeded intercompany revenue. Beginning January 1, 2003, Energy Marketing &
   Trading intercompany cost of sales are no longer netted in revenues due to
   adoption of EITF Issue No. 02-3 (see Note 3).

                                       30

Notes (Continued)

14. Segment disclosures (continued)

                                      Energy                    Exploration    Midstream
                                    Marketing         Gas            &           Gas &
                                    & Trading       Pipeline     Production      Liquids        Other     Eliminations      Total
                                    ----------     ----------   -----------    ----------    ----------   ------------   ----------
                                                                              (MILLIONS)

SIX MONTHS ENDED JUNE 30, 2003

Segment revenues:
   External                         $  6,245.0     $    618.3    $    (12.9)   $  1,837.0    $     26.1    $       --    $  8,713.5
   Internal                              454.1           17.0         457.0          31.5          22.0        (981.6)           --
                                    ----------     ----------    ----------    ----------    ----------    ----------    ----------
Total segment revenues                 6,699.1          635.3         444.1       1,868.5          48.1        (981.6)      8,713.5
                                    ----------     ----------    ----------    ----------    ----------    ----------    ----------
Less intercompany interest
   rate swap gain (loss)                 (22.6)            --            --            --            --          22.6            --
                                    ----------     ----------    ----------    ----------    ----------    ----------    ----------
Total revenues                      $  6,721.7     $    635.3    $    444.1    $  1,868.5    $     48.1    $ (1,004.2)   $  8,713.5
                                    ==========     ==========    ==========    ==========    ==========    ==========    ==========
Segment profit (loss)               $    211.6     $    265.1    $    292.5    $    169.7    $    (46.9)   $       --    $    892.0
Less:
   Equity earnings (loss)                   --            3.8           4.6          (6.0)          3.0            --           5.4
   Income (loss) from investments           --             .1            --          (3.7)        (42.5)           --         (46.1)
   Intercompany interest
      rate swap gain (loss)              (22.6)            --            --            --            --            --         (22.6)
                                    ----------     ----------    ----------    ----------    ----------    ----------    ----------
Segment operating
   income (loss)                    $    234.2     $    261.2    $    287.9    $    179.4    $     (7.4)   $       --    $    955.3
                                    ----------     ----------    ----------    ----------    ----------    ----------    ----------
General corporate expenses                                                                                                    (44.7)
                                                                                                                         ----------
Consolidated operating
   income (loss)                                                                                                         $    910.6
                                                                                                                         ==========
SIX MONTHS ENDED JUNE 30, 2002

Segment revenues:
   External                         $    581.8     $    565.2    $     41.9    $    808.0    $     22.1    $       --    $  2,019.0
   Internal                             (505.4)*         30.3         400.9          30.0          30.6          13.6            --
                                    ----------     ----------    ----------    ----------    ----------    ----------    ----------
Total segment revenues                    76.4          595.5         442.8         838.0          52.7          13.6       2,019.0
                                    ----------     ----------    ----------    ----------    ----------    ----------    ----------
Less intercompany interest
   rate swap gain (loss)                 (68.9)            --            --            --            --          68.9            --
                                    ----------     ----------    ----------    ----------    ----------    ----------    ----------
Total revenues                      $    145.3     $    595.5    $    442.8    $    838.0    $     52.7    $    (55.3)   $  2,019.0
                                    ==========     ==========    ==========    ==========    ==========    ==========    ==========
Segment profit (loss)               $   (214.4)    $    275.8    $    198.9    $    106.0    $    (12.4)   $       --    $    353.9
Less:
   Equity earnings (loss)                 (4.0)          71.2            .6           5.2         (12.1)           --          60.9
   Income (loss) from investments           --          (12.3)           --            --            --            --         (12.3)
   Intercompany interest
      rate swap gain (loss)              (68.9)            --            --            --            --            --         (68.9)
                                    ----------     ----------    ----------    ----------    ----------    ----------    ----------
Segment operating
   income (loss)                    $   (141.5)    $    216.9    $    198.3    $    100.8    $      (.3)   $       --         374.2
                                    ----------     ----------    ----------    ----------    ----------    ----------    ----------
General corporate expenses                                                                                                    (72.3)
                                                                                                                         ----------
Consolidated operating
   income (loss)                                                                                                         $    301.9
                                                                                                                         ==========

*    Prior to January 1, 2003, Energy Marketing & Trading intercompany cost of
     sales, which were netted in revenues consistent with fair-value accounting,
     exceeded intercompany revenue. Beginning January 1, 2003, Energy Marketing
     & Trading intercompany cost of sales are no longer netted in revenues due
     to adoption of EITF Issue No. 02-3 (see Note 3).

                                       31

Notes (Continued)

14. Segment disclosures (continued)

                                                       Total Assets
                                          ----------------------------------
(Millions)                                June 30, 2003    December 31, 2002
- ----------                                -------------    -----------------
                                                     
Energy Marketing & Trading                $    14,271.1    $        12,532.9
Gas Pipeline                                    7,177.2              6,892.1
Exploration & Production                        5,416.1              5,595.1
Midstream Gas & Liquids                         4,975.2              4,855.9
Other                                           8,688.7              7,664.3
Eliminations                                   (7,141.1)            (6,636.9)
                                          -------------    -----------------
                                               33,387.2             30,903.4
Discontinued operations                           465.8              4,085.1
                                          -------------    -----------------
Total                                     $    33,853.0    $        34,988.5
                                          =============    =================

15. Recent accounting standards
- --------------------------------------------------------------------------------

     Effective July 1, 2003, Williams adopted FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities." The Interpretation defines a
variable interest entity (VIE) as an entity in which equity investors do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. The investments or
other interests that will absorb portions of the VIE's expected losses if they
occur or receive portions of the VIE's expected residual returns if they occur
are called variable interests. Variable interests may include, but are not
limited to, equity interests, debt instruments, beneficial interests, derivative
instruments and guarantees. The Interpretation requires an entity to consolidate
a VIE if that entity will absorb a majority of the VIE's expected losses if they
occur, receive a majority of the VIE's expected residual returns if they occur,
or both. If no party will absorb a majority of the expected losses or expected
residual returns, no party will consolidate the VIE. The Interpretation also
requires disclosure of significant variable interests in unconsolidated VIE's.
The Interpretation is effective for all new variable interest entities created
or acquired after January 31, 2003. For variable interest entities created
or acquired prior to February 1, 2003, the provisions of the Interpretation
must be applied for the first interim or annual period beginning after
June 15, 2003. The effect of the adoption of the Interpretation is not
material to the consolidated financial statements.

16. Subsequent events
- --------------------------------------------------------------------------------

     In August 2003, Williams announced sales of assets completed subsequent to
June 30, 2003, and agreements to sell various assets for cash proceeds in excess
of $80 million. These assets include:

     o    The West Stoddart natural gas processing plant in Western Canada,
          which is part of Midstream Gas & Liquids,

     o    Williams' 20 percent ownership interest in the West Texas LPG Pipeline
          Limited Partnership which transports natural gas liquids in Texas and
          is part of Midstream Gas & Liquids,

     o    Distributed-generation units and an associated third-party contract,
          which is part of Energy Marketing & Trading, and

     o    Refined products management operations, which are part of the Other
          segment.

     In August 2003, Williams also announced it had agreed to terminate a
long-term power contract with Allegheny Energy Supply Company, LLC, a subsidiary
of Allegheny Energy, Inc., for cash consideration of $128 million payable to
Williams. The agreement is subject to certain conditions, including a provision
that Allegheny successfully complete the sale of its energy supply agreement
with the California Department of Water Resources. Allegheny has announced an
agreement for the sale of that contract.

                                       32

                                     ITEM 2
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATION

RECENT EVENTS AND COMPANY OUTLOOK

     On February 20, 2003, Williams outlined its planned business strategy for
the next few years. Williams believes it to be a comprehensive response to the
events that have impacted the energy sector and Williams during 2002. The plan
focuses on retaining a strong, but smaller, portfolio of natural gas businesses
and bolstering Williams' liquidity through additional asset sales, strategic
levels of financing at the Williams and subsidiary levels and additional
reductions in its operating costs. The plan is designed to provide Williams with
a clear strategy to address near-term and medium-term liquidity issues and
further de-leverage the company with the objective of returning to investment
grade status, while retaining businesses with favorable returns and
opportunities for growth in the future.

     Williams, at June 30, 2003, has maturing notes payable and long-term debt
totaling approximately $1.8 billion through the first quarter of 2004. The
maturing notes and long-term debt are expected to be repaid with cash on hand,
proceeds from asset sales and cash flows from operations. During second-quarter
2003, Williams repaid the RMT note payable of approximately $1.15 billion (which
included certain contractual fees and deferred interest) which was due in July
2003. A portion of the RMT note payable was refinanced by the issuance of $500
million secured, subsidiary-level financing at a floating rate of the six-month
London Interbank Offered Rate (LIBOR) plus 3.75 percent (totaling 4.9 percent at
June 30, 2003). Also during second-quarter 2003, Williams issued $800 million of
8.625 percent senior unsecured notes due 2010. Williams intends to use the net
proceeds from the $800 million offering to improve corporate liquidity, for
general corporate purposes, and for payment of maturing debt obligations,
including the partial repayment of the company's senior unsecured 9.25 percent
notes due March 2004. Additionally, Williams issued $300 million of 5.5 percent
junior subordinated convertible debentures due 2033 and utilized the proceeds to
redeem all of the outstanding 9 7/8 percent cumulative-convertible preferred
stock for approximately $289 million, plus $5.3 million for accrued dividends.
The new convertible debentures provide Williams with more favorable terms, which
on an annual basis result in approximately $17 million in lower after-tax
carrying costs compared with the preferred convertible shares. Williams also
obtained a new $800 million revolving credit facility that is collateralized by
purchased government securities and/or cash and will be utilized mainly for
issuance of letters of credit. This new facility enabled the release of the
midstream assets that served as security for the previous credit facilities.
Long-term debt, excluding the current portion, at June 30, 2003 was
approximately $11.2 billion. See the Liquidity section for a maturity schedule
of the long-term debt.

     As part of the asset sales portion of the plan, Williams expects to
generate proceeds, net of related debt, of nearly $4 billion from asset sales
during 2003 and 2004. For the six months ended June 30, 2003, Williams had
received approximately $2.4 billion in net proceeds from the sales of assets and
businesses, including the retail travel centers, the Midsouth refinery,
bio-energy operations, Texas Gas Transmission Corporation, Williams' general
partnership interest and limited partner investment in Williams Energy Partners,
and certain natural gas exploration and production properties in Kansas,
Colorado, and New Mexico. The additional assets and/or businesses expected to be
sold in 2003 and 2004 include the Alaska refinery and related assets, certain
assets within Midstream Gas & Liquids, the soda ash mining operations and
various other assets. The specific assets and the timing of such sales are
dependent on various factors, including negotiations with prospective buyers,
regulatory approvals, industry conditions, and the short- and long-term
liquidity requirements of Williams. While management believes it has considered
all relevant information in assessing for potential impairments, the ultimate
sales price for assets that may be sold and the final decisions in the future
may result in additional impairments or losses and/or gains.

     Williams continues its efforts to reduce its commitment to the Energy
Marketing & Trading business. As part of these efforts, Energy Marketing &
Trading has focused on managing its existing contractual commitments, while
pursuing potential dispositions and restructuring of certain of its long-term
contracts. For the six month period ended June 30, 2003, Energy Marketing &
Trading has sold contracts resulting in cash proceeds of approximately $206
million. Although management currently believes that the Company has the
financial resources and liquidity to meet the expected cash requirements of
Energy Marketing & Trading, the Company continues to pursue several specific
transactions with interested parties involving the sales of portions of Energy
Marketing & Trading's portfolio and would consider the sale or joint venture of
all of the portfolio.

     The Company's available liquidity to meet maturing debt requirements and
fund a reduced level of capital expenditures will be dependent on several
factors, including available cash on hand, the cash flows of retained
businesses, the amount of proceeds raised from the sale of assets previously
mentioned, the price of natural gas and capital spending. Future cash flows from
operations may also be affected by the timing and nature of the sale of

                                       33

Management's Discussion & Analysis (Continued)

assets. Because of recent and anticipated asset sales, cash on hand, potential
external financings, and available secured credit facilities, Williams currently
believes that it has, or has access to, the financial resources and liquidity to
meet future cash requirements.

GENERAL

     In accordance with the provisions related to discontinued operations within
Statement of Financial Accounting Standard (SFAS) No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," the consolidated financial
statements and notes in Item 1 reflect the results of operations, financial
position and cash flows, through the date of sale as applicable, of the
following components as discontinued operations (see Note 6):

          o    Kern River Gas Transmission (Kern River), previously one of Gas
               Pipeline's segments

          o    Central natural gas pipeline, previously one of Gas Pipeline's
               segments

          o    Texas Gas Transmission Corporation, previously one of Gas
               Pipeline's segments

          o    Natural gas properties in the Hugoton and Raton basins,
               previously part of the Exploration & Production segment

          o    Two natural gas liquids pipeline systems, Mid-American Pipeline
               and Seminole Pipeline, previously part of the Midstream Gas &
               Liquids segment

          o    Gulf Liquids New River Project LLC, previously part of the
               Midstream Gas & Liquids segment

          o    Refining and marketing operations in the Midsouth, including the
               Midsouth refinery, part of the previously reported Petroleum
               Services segment

          o    Retail travel centers concentrated in the Midsouth, part of the
               previously reported Petroleum Services segment

          o    Bio-energy operations, part of the previously reported Petroleum
               Services segment

          o    Refining, retail and pipeline operations in Alaska, part of the
               previously reported Petroleum Services segment

          o    Williams' general partnership interest and limited partner
               investment in Williams Energy Partners, previously the Williams
               Energy Partners segment

          o    Colorado soda ash mining operations, part of the previously
               reported International segment

     Unless indicated otherwise, the following discussion and analysis of
results of operations, financial condition and liquidity relates to the current
continuing operations of Williams and should be read in conjunction with the
consolidated financial statements and notes thereto included in Item 1 of this
document and Williams' Annual Report on Form 10-K.

CRITICAL ACCOUNTING POLICIES & ESTIMATES

     As noted in the 2002 Annual Report on Form 10-K, Williams' financial
statements reflect the selection and application of accounting policies that
require management to make significant estimates and assumptions. One of the
critical judgment areas in the application of our accounting policies noted in
the Form 10-K is the revenue recognition of energy risk management and trading
operations. As a result of the application of the conclusions reached by the
Emerging Issues Task Force in Issue No. 02-3, "Issues related to Accounting for
Contracts Involved in Energy Trading and Risk Management Activities," the
methodology for revenue recognition related to energy risk management and
trading activities changed January 1, 2003. Williams initially applied the
consensus effective January 1, 2003 and reported the initial application as a
cumulative effect of a change in accounting principle. See Note 3 for a
discussion of the impacts to Williams' financial statements as a result of
applying this consensus.

                                       34

Management's Discussion & Analysis (Continued)

RESULTS OF OPERATIONS

     Consolidated Overview

     The following table and discussion is a summary of Williams' consolidated
results of operations. The results of operations by segment are discussed in
further detail following this consolidated overview discussion.

                                                              THREE MONTHS                SIX MONTHS
                                                             ENDED JUNE 30,              ENDED JUNE 30,
                                                       ------------------------    ------------------------
                                                          2003          2002          2003          2002
                                                       ----------    ----------    ----------    ----------
                                                                            (MILLIONS)

Revenues                                               $  3,763.8    $    747.1    $  8,713.5    $  2,019.0

Costs and expenses:
  Costs and operating expenses                            3,169.0         612.1       7,750.6       1,203.3
  Selling, general and
     administrative expenses                                116.8         162.6         232.2         294.6
  Other (income) expense-net                               (225.2)        146.7        (224.6)        146.9
  General corporate expenses                                 21.8          34.1          44.7          72.3
                                                       ----------    ----------    ----------    ----------
  Total costs and expenses                                3,082.4         955.5       7,802.9       1,717.1

Operating income (loss)                                     681.4        (208.4)        910.6         301.9
Interest accrued-net                                       (394.8)       (247.4)       (735.6)       (446.6)
Interest rate swap loss                                      (6.1)        (83.2)         (8.9)        (73.0)
Investing income (loss)                                     (43.1)         38.5           3.2        (178.2)
Minority interest in income and preferred returns of
  consolidated subsidiaries                                  (6.0)        (11.5)         (9.5)        (23.5)
Other income- net                                            14.0          23.8          36.0          18.5
                                                       ----------    ----------    ----------    ----------
Income (loss) from continuing operations before
   income taxes and cumulative effect of change
   in accounting principles                                 245.4        (488.2)        195.8        (400.9)
(Provision) benefit for income taxes                       (127.4)        156.4        (116.6)        116.3
                                                       ----------    ----------    ----------    ----------
Income (loss) from continuing operations                    118.0        (331.8)         79.2        (284.6)
Income (loss) from discontinued operations                  151.7         (17.3)        137.3          43.2
                                                       ----------    ----------    ----------    ----------
Income (loss) before cumulative effect of change
   in accounting principles                                 269.7        (349.1)        216.5        (241.4)
Cumulative effect of change in accounting principles           --            --        (761.3)           --
                                                       ----------    ----------    ----------    ----------
Net income (loss)                                           269.7        (349.1)       (544.8)       (241.4)
Preferred stock dividends                                   (22.7)         (6.8)        (29.5)        (76.5)
                                                       ----------    ----------    ----------    ----------
Income (loss) applicable to common stock               $    247.0    $   (355.9)   $   (574.3)   $   (317.9)
                                                       ==========    ==========    ==========    ==========

Three Months Ended June 30, 2003 vs. Three Months Ended June 30, 2002

     Williams' revenue increased $3 billion due primarily to increased revenues
at Energy Marketing & Trading and Midstream Gas & Liquids as a result of the
adoption of Emerging Issues Task Force (EITF) Issue No. 02-3, "Issues Related to
Accounting for Contracts Involved in Energy Trading & Risk Management
Activities," which requires that revenues and cost of sales from non-derivative
contracts and certain physically settled derivative contracts be reported on a
gross basis. As permitted by EITF Issue No. 02-3, prior year amounts have not
been restated. Prior to the adoption of EITF Issue No. 02-3 on January 1, 2003,
revenues and costs of sales related to non-derivative contracts and certain
physically settled derivative contracts were reported in revenues on a net
basis. Revenues at Energy Marketing & Trading increased $3.1 billion and
Midstream Gas & Liquids' revenues increased $300 million. During the second
quarter of 2003, Energy Marketing & Trading corrected the accounting treatment
previously given to certain third party derivative contracts during 2002 and
2001, resulting in the recognition of $80.7 million in revenues in the second
quarter 2003 attributable to prior periods. Refer to Note 1 to the financial
statements for further information. These corrections relate to the fair value
of these derivative contracts and do not represent current period actual cash
flows.

     Costs and operating expenses increased $2.6 billion due primarily to the
impact of reporting certain costs gross at Energy Marketing & Trading and
Midstream Gas & Liquids, as discussed above.

     Selling, general and administrative expenses decreased $45.8 million due
primarily to the absence of $21 million of costs related to an enhanced benefit
early retirement option offered to certain employee groups in 2002 and reduced
staffing levels at Energy Marketing & Trading.

                                       35

Management's Discussion & Analysis (Continued)

     Other (income) expense - net in 2003 reflects a $175 million gain from the
sale of an Energy Marketing & Trading contract and $91.5 million in net gains
from the sale of Exploration & Production's interests in natural gas properties.
Partially offsetting these gains in 2003 was a $25.5 million charge at Northwest
Pipeline to write-off capitalized software development costs for a service
delivery system following a decision not to implement the system and a $20
million charge related to a settlement by Energy Marketing & Trading with the
Commodity Futures Trading Commission (CFTC) (see Note 11). Other (income)
expense - net in 2002 includes $141.2 million of impairment charges, loss
accruals, and write-offs within Energy Marketing & Trading, including a partial
impairment of goodwill.

     General corporate expenses decreased $12.3 million, or 36 percent, due
primarily to lower advertising expenses and charitable contributions.

     Operating income (loss) improved by $889.8 million from a $208.4 million
loss in 2002 to $681.4 million of income in 2003. The increase results primarily
from a $779.2 million improvement at Energy Marketing & Trading and $91.5
million in net gains on sales of certain properties at Exploration & Production.

     Interest accrued - net increased $147.4 million, or 60 percent, due
primarily to $120 million of interest expense, including amortization of fees,
on the RMT note payable (see Note 10), $21 million higher amortization expense
of deferred debt issuance costs, and $12 million of interest expense within
Energy Marketing & Trading related to a FERC ruling. A $22 million decrease in
interest expense reflecting lower average borrowing levels of long-term debt in
2003 was offset by a $19 million increase in interest expense reflecting higher
average interest rates on long-term debt in 2003. The $21 million of higher
amortization expense of deferred debt issuance costs reflects $14.5 million in
accelerated amortization of costs related to the termination of the revolving
credit agreement that was replaced in June 2003 (see Note 10).

     In 2002, Williams began entering into interest rate swaps with external
counter parties primarily in support of the energy-trading portfolio (see Note
14). The decline in market value of these swaps was $77.1 million lower in 2003
than 2002. The total notional amount of these swaps is approximately $300
million at June 30, 2003 as compared to a notional amount at June 30, 2002 of
approximately $1.5 billion.

     Investing income (loss) for the three months ended June 30, 2003 and 2002
consisted of the following components:

                                                                  THREE MONTHS
                                                                 ENDED JUNE 30,
                                                          ----------------------------
                                                              2003            2002
                                                          ------------    ------------
                                                                  (MILLIONS)
                                                                    
Equity earnings*                                          $         .9    $       53.6
Loss provision for WCG receivables                                  --           (15.0)
Income (loss) from investments*:
    Gain on sale of Rio Grand equity investment                    4.8              --
    Impairment of investments in Longhorn Partners
      Pipeline, L.P.                                             (42.4)             --
    Impairment of investment in Aux Sable                         (8.5)             --
    Impairment of investment in Independence Pipeline               --           (12.3)
Impairment of cost based investments                             (19.1)             --
Interest income and other                                         21.2            12.2
                                                          ------------    ------------
Investing income (loss)                                   $      (43.1)   $       38.5
                                                          ============    ============

* These items are also included in the measure of segment profit (loss).

     Equity earnings for the three months ended June 30, 2002 includes $27.4
million of income reflecting a contractual construction completion fee received
by an equity affiliate that served as the general contractor on the Gulfstream
Pipeline Natural Gas System (Gulfstream) project. Additionally, the decrease in
equity earnings for the three months ended June 30, 2003 as compared to 2002
reflects $16 million lower equity earnings from Gulfstream. Equity earnings for
2002 includes net equity income of $3.6 million related to equity method
investments that were sold during 2002. The $15 million loss provision in 2002
is related to the estimated recoverability of receivables from WilTel
Communications Group, Inc. (formerly Williams Communications Group, Inc.). The
$42.4 million impairment in 2003 relates to the investment in equity and debt
securities of Longhorn Partners Pipeline LP, and the $12.3 million impairment in
2002 relates to a write down of Gas Pipeline's investment in a pipeline project
which was cancelled in second-quarter 2002. Impairment of cost based investments
in 2003 includes a $13.5 million impairment of an investment in a company
holding phosphate reserves.

                                       36

Management's Discussion & Analysis (Continued)

     Minority interest in income and preferred returns of consolidated
subsidiaries in 2003 is lower than 2002 due to the absence of preferred returns
totaling $5.5 million on the preferred interests in Castle Associates L.P.,
Arctic Fox, L.L.C., Piceance Production Holdings L.L.C., and in Williams' Risk
Holdings L.L.C. which were reclassified as debt in the third-quarter of 2002
with the exception of Arctic Fox, L.L.C., which was reclassified as debt in
April 2002.

     Other income - net in 2003 includes a $38.2 million foreign currency
translation gain on a Canadian dollar denominated note receivable offset by a
$30.3 million derivative loss on a forward contract to fix the U.S. dollar
principal cash flows from this note. Other income - net in 2002 includes an $11
million gain at Gas Pipeline associated with the disposition of securities
received through a mutual insurance company reorganization.

     The provision (benefit) for income taxes was unfavorable by $283.8 million
due primarily to a pre-tax income in 2003 as compared to a pre-tax loss for
2002. The effective income tax rate for the three months ended June 30, 2003 is
greater than the federal statutory rate due primarily to the financial
impairment of certain investments and capital losses generated for which
valuation allowances were established and nondeductible expenses. The effective
income tax rate for the three months ended June 30, 2002 is less than the
federal statutory rate due primarily to the impairment of goodwill which is not
deductible for income tax purposes and reduces the tax benefit of the pretax
loss.

     Preferred stock dividends in 2003 includes $13.8 million associated with
accounting for the premium paid on the redemption in May 2003 of the 9 7/8
percent cumulative-convertible preferred shares (see Note 12).

     Six Months Ended June 30, 2003 vs. Six Months Ended June 30, 2002

     Williams' revenue increased $6.7 billion due primarily to increased
revenues at Energy Marketing & Trading and Midstream Gas & Liquids as a result
of the adoption of EITF Issue No. 02-3, which requires that revenues and cost of
sales from non-derivative contracts and certain physically settled derivative
contracts be reported on a gross basis. As permitted by EITF Issue No. 02-3,
prior year amounts have not been restated. Prior to the adoption of EITF Issue
No. 02-3 on January 1, 2003, revenues and costs of sales related to
non-derivative contracts and certain physically settled derivative contracts
were reported in revenues on a net basis. Energy Marketing & Trading's revenues
increased $6.6 billion and Midstream Gas & Liquids' revenues increased $1
billion. The increase in revenues at Midstream Gas & Liquids includes a $236
million higher Canadian revenues and $128 million higher domestic gathering and
processing revenues. Offsetting these revenue increases at the operating units
was $948.9 million higher intercompany eliminations primarily as a result of
intercompany costs that were previously netted in Energy Marketing & Trading's
revenues prior to EITF Issue No. 02-3. During the second quarter of 2003, Energy
Marketing & Trading corrected the accounting treatment previously given to
certain third party derivative contracts during 2002 and 2001, resulting in the
recognition of $80.7 million in revenues in the second quarter 2003 attributable
to prior periods. Refer to Note 1 to the financial statements for further
information. These corrections relate to the fair value of these derivative
contracts and do not represent current period actual cash flows.

     Costs and operating expenses increased $6.5 billion due primarily to the
impact of reporting certain costs gross at Energy Marketing & Trading and
Midstream Gas & Liquids, as discussed above. Costs and operating expenses at
Energy Marketing & Trading increased $6.5 billion. Costs and operating expenses
at Midstream Gas & Liquids also increased due to $210 million and $59 million
higher fuel and shrink costs at Canadian and domestic processing facilities,
respectively.

     Selling, general and administrative expenses decreased $62.4 million due
primarily to reduced staffing levels at Energy Marketing & Trading and the
absence of $21 million of costs related to an enhanced benefit early retirement
option offered to certain employee groups in 2002.

     Other (income) expense - net in 2003 reflects a $175 million gain from the
sale of an Energy Marketing & Trading contract and $91.5 million in net gains
from the sale of Exploration & Production's interests in natural gas properties.
Partially offsetting these gains was a $25.5 million charge at Northwest
Pipeline to write-off capitalized software development costs for a service
delivery system following a decision not to implement and a $20 million charge
related to a settlement by Energy Marketing & Trading with the CFTC (see Note
11). Other (income) expense - net in 2002 includes $141.2 million of impairment
charges, loss accruals, and write-offs within Energy Marketing & Trading,
including a partial impairment of goodwill.

     General corporate expenses decreased $27.6 million, or 38 percent, due
primarily to lower advertising costs and charitable contributions.

     Operating income (loss) increased $608.7 million due primarily to a $375.7
million improvement at Energy Marketing & Trading, $91.5 million in net gains on
sales of certain properties at Exploration & Production and a $78.6 million
increase at Midstream Gas & Liquids primarily from domestic gathering and
processing operations.

                                       37

Management's Discussion & Analysis (Continued)

     Interest accrued - net increased $289 million, or 65 percent, due primarily
to $209 million of interest expense, including amortization of fees, on the RMT
note payable (see Note 10), $34 million higher amortization expense of deferred
debt issuance costs, and $12 million of interest expense within Energy Marketing
& Trading related to a FERC ruling. The increase also reflects the $48 million
effect of higher average interest rates on long-term debt in 2003 offset
slightly by the $9 million effect of lower average borrowing levels of long-term
debt. The $34 million higher amortization expense of deferred debt issuance
costs reflects $14.5 million in accelerated amortization of costs related to the
termination of the revolving credit agreement that was replaced in June 2003
(see Note 10).

     In 2002, Williams began entering into interest rate swaps with external
counter parties primarily in support of the energy-trading portfolio (see Note
14). The decline in market value of these swaps was $64.1 million lower in 2003
that in 2002. The total notional amount of these swaps is approximately $300
million at June 30, 2003 as compared to a notional amount at June 30, 2002 of
approximately $1.5 billion.

    Investing income (loss) for the six months ended June 30, 2003 and 2002
consisted of the following components:

                                                           SIX MONTHS
                                                         ENDED JUNE 30,
                                                  ----------------------------
                                                      2003            2002
                                                  ------------    ------------
                                                          (MILLIONS)
                                                            
Equity earnings*                                  $        5.4    $       60.9
Loss provision for WCG receivables                          --          (247.0)
Income (loss) from investments*:
    Gain on sale of Rio Grand equity investment            4.8              --
    Impairment of investment in Longhorn
        Partners Pipeline L.P.                           (42.4)             --
    Impairment of investment in Aux Sable                 (8.5)             --
    Impairment of investment in Independence
        Pipeline                                            --           (12.3)
Impairment of cost based investments                     (31.1)           (3.1)
Interest income and other                                 75.0            23.3
                                                  ------------    ------------
Investing income (loss)                           $        3.2    $     (178.2)
                                                  ============    ============

* These items are also included in the measure of segment profit (loss).

     Equity earnings decreased $55.5 million due primarily to $27 million lower
equity earnings from Gulfstream and the absence of a $27.4 million benefit in
2002 related to the contractual construction completion fee received by an
equity affiliate, that served as the general construction on the Gulfstream
project. The $247 million loss provision in 2002 was related to the estimated
recoverability of receivables from WilTel Communications Group, Inc. The $42.4
million impairment in 2003 relates to the investment in equity and debt
securities of Longhorn Partners Pipeline LP, and the $12.3 million impairment in
2002 relates to a write down of Gas Pipeline's investment in a pipeline project
that was cancelled in second-quarter 2002. Impairment of cost based investments
in 2003 includes a $13.5 million impairment of an investment in a company
holding phosphate reserves, a $12 million impairment of Algar Telecom S.A. and a
$5.6 million impairment of various international investments. Each of these
impairments results from management's determination that there was an other than
temporary decline in the estimated fair value of each investment. Interest
income and other increased $51.7 million due primarily to a $37.2 million
increase at Energy Marketing & Trading comprised primarily of interest income as
a result of recent FERC proceedings, a $5 million increase in interest income
from advances to equity affiliates and a $3 million increase in interest from
margin deposits.

     Minority interest in income and preferred returns of consolidated
subsidiaries in 2003 is lower than 2002 due primarily to the absence of
preferred returns totaling $13 million on the preferred interests in Castle
Associates L.P., Arctic Fox, L.L.C., Piceance Production Holdings L.L.C., and in
Williams' Risk Holdings L.L.C. which were reclassified as debt in third-quarter
2002 with the exception of Arctic Fox, L.L.C., which was reclassified as debt in
April 2002.

     Other income - net in 2003 includes a $67.4 million foreign currency
transaction gain on a Canadian dollar denominated note receivable offset by a
$47 million derivative loss on a forward contract to fix the U.S. dollar
principal cash flows from this note. Other income-net in 2002 includes an $11
million gain at Gas Pipeline associated with the disposition of securities
received through a mutual insurance company reorganization offset by a $8
million loss related to early retirement of remarketable notes.

     The provision (benefit) for income taxes was $232.9 million unfavorable in
2003 due primarily to pre-tax income in 2003 as compared to a pre-tax loss for
2002. The effective income tax rate for the six months ended June 30, 2003, is
greater than the federal statutory rate due primarily to the financial
impairment of certain investments and capital losses generated for which
valuation allowances were established and nondeductible expenses.

                                       38

Management's Discussion & Analysis (Continued)

The effective income tax rate for the six months ended June 30, 2002 is less
than the federal statutory rate due primarily to the impairment of goodwill
which is not deductible for income tax purposes and reduces the tax benefit of
the pre-tax loss.

    Cumulative effect of change in accounting principles reduced net income for
2003 by $761.3 million due to a $762.5 million charge related to the adoption of
EITF Issue No. 02-3 (see Note 3), slightly offset by $1.2 million related to the
adoption of SFAS No. 143, "Accounting for Asset Retirement Obligations" (see
Note 3).

    Preferred stock dividends in 2002 reflects the impact of $69.4 million
associated with accounting for a preferred security that contains a conversion
option that was beneficial to the purchaser at the time the security was issued.

RESULTS OF OPERATIONS-SEGMENTS

     Williams is currently organized into the following segments: Energy
Marketing & Trading, Gas Pipeline, Exploration & Production, and Midstream Gas &
Liquids. Due to completed and anticipated asset sales, Williams Energy Partners
and Petroleum Services are no longer reportable segments as most of the
operations comprising these segments are now reported in discontinued
operations. Williams currently evaluates performance based upon several measures
including segment profit (loss) from operations (see Note 14). Segment profit of
the operating companies may vary by quarter. The following discussions relate to
the results of operations of Williams' segments.

ENERGY MARKETING & TRADING

                                   THREE MONTHS                   SIX MONTHS
                                  ENDED JUNE 30,                ENDED JUNE 30,
                           ---------------------------    ---------------------------
                               2003           2002            2003           2002
                           ------------   ------------    ------------   ------------
                                                   (MILLIONS)
                                                             
Segment revenues           $    2,923.5   $     (278.6)   $    6,699.1   $       76.4
                           ============   ============    ============   ============
Segment profit (loss)      $      348.0   $     (497.5)   $      211.6   $     (214.4)
                           ============   ============    ============   ============

Three Months Ended June 30, 2003 vs. Three Months Ended June 30, 2002

     ENERGY MARKETING & TRADING'S revenues and cost of sales increased by $3.2
billion and $2.7 billion, respectively, which equates to an increase in gross
margin of $512.9 million. This significant increase in revenues and cost of
sales is primarily a result of the adoption of EITF Issue No. 02-3, which
requires that revenues and cost of sales from non-derivative energy contracts
and certain physically settled derivative contracts be reported on a gross
basis. Prior to the adoption of EITF Issue No. 02-3 on January 1, 2003, revenues
related to non-derivative energy contracts were reported on a net basis in
trading revenues. As permitted by EITF Issue No. 02-3, prior year amounts have
not been restated.

     On October 25, 2002, the EITF concluded on Issue No. 02-3, which rescinded
Issue No. 98-10, "Accounting for Contracts Involved in Energy Trading and Risk
Management Activities," under which all energy trading contracts, derivative and
non-derivative energy, were required to be valued at fair value with the net
change in fair value of these contracts representing unrealized gains and losses
reported in income currently and recorded as revenues in the Consolidated
Statement of Operations. Energy contracts include forward contracts, futures
contracts, options contracts, swap agreements, commodity inventories, short-and
long-term purchase and sale commitments, which involve physical delivery of an
energy commodity and energy-related contracts, such as transportation, storage,
full requirements, load serving and power tolling contracts. Energy-related
contracts that are not considered to be derivatives under SFAS No. 133 are no
longer presented on the balance sheet at fair value. These contracts are now
reported under the accrual method of accounting. In addition, trading
inventories are no longer marked to market but are reported on a lower of cost
or market basis. Upon adoption of this new standard on January 1, 2003, Energy
Marketing & Trading recorded an adjustment as a cumulative effect of change in
accounting principle to remove the previously reported fair value of
non-derivative energy contracts from the balance sheet. Energy Marketing &
Trading's portion of this change in accounting principle was approximately $755
million on an after-tax basis (see Note 3) and was recognized in first-quarter
2003. Prior year amounts have not been restated as permitted by EITF Issue No.
02-3.

                                       39

Management's Discussion & Analysis (Continued)

     Energy Marketing & Trading's revenues increased by $3.2 billion primarily
as a result of the new gross reporting requirements as discussed above. Energy
Marketing & Trading's gross margin increased $512.9 million principally due to
$506.4 million higher power and natural gas gross margin, $53.4 million higher
petroleum products gross margin, and $6.2 million higher European gross margin,
slightly offset by $53.4 million lower emerging products gross margin.

     The power and natural gas gross margin increased from a margin loss of $213
million in 2002 to a $293.4 million gross margin in 2003, an increase of $506.4
million. The $293.4 million gross margin in 2003 is primarily comprised of a
$57.5 million accrual loss and a $302.9 million mark-to-market gain. The accrual
loss of $57.5 million is primarily related to reduced revenues resulting from
narrow spark spreads on the tolling portfolio that do not exceed
contractually-obligated capacity payments. Approximately $218.2 million of the
$302.9 million gain is related to mark to market gains on power and gas
positions that were entered into to economically hedge long-term structured
transactions that are now accounted for on an accrual basis. These
mark-to-market gains are primarily a result of increased gas prices on long
natural gas positions. In 2002, all energy-related trading contracts, including
tolling and full requirements contracts, were marked to market. In 2003, with
the implementation of EITF Issue No. 02-3 as discussed above, these
non-derivative energy-related trading contracts were accounted for on an accrual
basis. Therefore, while in 2002 the impact of narrower spark spreads in future
periods on the fair value of certain power tolling portfolios was reflected in
earnings, in 2003, the earnings for these types of non-derivative contracts are
reported on an accrual basis. Therefore, any forward gains or losses resulting
from changes in fair value are excluded from current earnings for non-derivative
contracts, whereas the changes in the forward value of certain derivatives
contracts continue to be included in earnings. Additionally, in second-quarter
2003, Energy Marketing & Trading began accounting for certain of its power and
gas derivatives contracts under the accrual method of accounting as a result of
an election to account for the contracts under the normal purchases and sales
exception available under SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities." These contracts were previously marked to market with
changes in fair value reported within earnings. During the second quarter of
2003, Energy Marketing & Trading corrected the accounting treatment previously
given to certain third party derivative contracts during 2002 and 2001,
resulting in the recognition of $80.7 million in revenues in the second quarter
2003 attributable to prior periods. Refer to Note 1 to the financial statements
for further information. These corrections relate to the fair value of these
derivative contracts and do not represent current period actual cash flows.

     The petroleum products portfolio gross margin improved from a gross margin
loss of $73.7 million in 2002 to a gross margin loss of $20.3 million in 2003.
This $53.4 million improvement was impacted by the implementation of EITF Issue
No. 02-3. The petroleum products portfolio was adversely affected in 2002 by a
decrease in the fair value of refined products storage and transportation
portfolios. In second-quarter 2003, however, these non-derivative contracts were
accounted for on an accrual basis and accordingly earnings do not reflect
changes in fair value.

     The $6.2 million increase in European gross margin is due to the absence of
trading activity in second-quarter 2003 as a result of the wind-down of the
European trading operations. These operations generated a $6.2 million loss in
second-quarter 2002.

     The $53.4 million decrease in emerging products gross margin is primarily
attributable to falling interest rates on forward interest rate positions that
are marked to market.

     Selling, general, and administrative expenses decreased by $19.3 million,
or 30 percent. This cost reduction is primarily due to the impact of staff
reductions in the Energy Marketing & Trading business segment. Energy Marketing
& Trading employed approximately 265 employees at June 30, 2003, compared with
approximately 900 employees at June 30, 2002.

     Other (income) expense -- net increased $312.2 million. This increase is
due primarily to $175 million gain from the sale of an energy trading contract
in 2003 and the effect in 2002 of $83.7 million of impairments and loss accruals
associated with certain terminated power projects and a $57.5 million partial
goodwill impairment. The increase was partially offset by a $20 million charge
in 2003 for the settlement reached with the Commodity Futures Trading Commission
subsequent to quarter end (see Note 11).

     Segment profit increased $845.5 million due primarily to increased power,
natural gas, petroleum products and European gross margins, decreased selling,
general and administrative expenses and improved other (income) expense - net,
partially offset by decreased emerging products gross margin as discussed above.

                                       40

Management's Discussion & Analysis (Continued)

     Energy Marketing & Trading's future results will continue to be affected by
the willingness of counterparties to enter into transactions with Energy
Marketing & Trading, the liquidity of markets in which Energy Marketing &
Trading transacts, and the creditworthiness of other counterparties in the
industry and their ability to perform under contractual obligations. Because
Williams is not currently rated investment grade by credit rating agencies,
Williams is required, in certain instances, to provide additional adequate
assurances in the form of cash or credit support to enter into and maintain
existing transactions. The financial and credit constraints of Williams will
likely continue to result in Energy Marketing & Trading having exposure to
market movements, which could result in future operating losses. In addition,
other companies in the energy trading and marketing sector are experiencing
financial difficulties which will affect Energy Marketing & Trading's credit and
default assessment related to the future value of its forward positions and the
ability of such counterparties to perform under contractual obligations. The
ultimate outcome of these items could result in future operating losses for
Energy Marketing & Trading or limit Energy Marketing & Trading's ability to
achieve profitable operations.

     In July 2003, Energy Marketing & Trading reached an agreement in principle
to terminate one of its long-term energy trading contracts in exchange for a
cash payment of $128 million from the counterparty to the contract. This
contract is accounted for on a fair value basis. The agreement is contingent
upon certain events, but if consummated in its present form, the transaction
could result in realization of an amount significantly in excess of fair value
as estimated at June 30, 2003.

     Six Months Ended June 30, 2003 vs. Six Months Ended June 30, 2002

     ENERGY MARKETING & TRADING'S revenues and cost of sales increased by $6.6
billion and $6.5 billion, respectively, which equates to an increase in gross
margin of $74.9 million. This significant increase in revenues and cost of sales
is primarily a result of the adoption of EITF Issue No. 02-3 and rescinding of
EITF Issue No. 98-10, as discussed previously.

     Energy Marketing & Trading's gross margin increased $74.9 million
principally due to $227.9 million higher power and natural gas gross margin,
offset by $82.1 million lower emerging products gross margin, $64.3 million
lower petroleum products gross margin, and $6.5 million lower European gross
margin.

         The power and natural gas gross margin increased from a margin loss of
$12.3 million in 2002 to a $215.6 million gross margin in 2003, an improvement
of $227.9 million. The $215.6 million gross margin in 2003 is primarily
comprised of a $80 million accrual loss and a $293.1 million mark to market
gain. The accrual loss of $80 million is primarily related to reduced revenues
resulting from narrow spark spreads on the tolling portfolio that do not exceed
contractually-obligated capacity payments. Approximately $232.5 million of the
$293.1 million gain is related to mark-to-market gains on power and gas
positions that were entered into to economically hedge long-term structured
transactions that are now accounted for on an accrual basis. These mark to
market gains are primarily a result of increased gas prices on long natural gas
positions. In 2002, all energy-related trading contracts, including tolling and
full requirements contracts, were marked to market. In 2003, with the
implementation of EITF Issue No. 02-3 as discussed previously, these
non-derivative energy-related trading contracts were accounted for on an accrual
basis. Therefore, while in 2002 the impact of narrower spark spreads on the fair
value of certain power tolling portfolios was reflected in earnings, in 2003,
the earnings for these types of contracts are reported on an accrual basis.
Therefore, any forward gains or losses resulting from changes in fair value are
excluded from current earnings for non-derivative contracts, whereas the changes
in forward value of certain derivatives contracts continue to be included in
earnings. Additionally, in second-quarter 2003, Energy Marketing & Trading
began accounting for certain of its power and gas derivatives contracts under
the accrual method of accounting as a result of an election to account for the
contracts under the normal purchases and sales exception available under SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities." These
contracts were previously marked to market with changes in fair value reported
within earnings. During the second quarter of 2003, Energy Marketing & Trading
corrected the accounting treatment previously given to certain third party
derivative contracts during 2002 and 2001, resulting in the recognition of $80.7
million in revenues in the second quarter 2003 attributable to prior periods.
Refer to Note 1 to the financial statements for further information. These
corrections relate to the fair value of these derivative contracts and do not
represent current period actual cash flows. The effect of these events is
partially offset by an $84 million decrease in power and gas revenues from the
origination of significant new long-term transactions in 2002 and a $37 million
adjustment in first quarter 2003 to increase the liability for rate refunds
associated with 2003 FERC rulings relative to California power and natural gas
markets.

                                       41

Management's Discussion & Analysis (Continued)

     The petroleum products portfolio gross margin decreased from $46.8 million
in 2002 to a margin loss of $17.5 million in 2003. This decrease of $64.3
million was primarily attributable to a $118.8 million decrease in revenues from
the origination of significant new long-term transactions in 2002 partially
offset by the impact of the implementation of EITF Issue No. 02-3 in 2003. The
petroleum products portfolio was adversely affected in 2002 by a decrease in the
forward value of refined products storage and transportation portfolios.
Pursuant to EITF Issue No. 02-3, these same non-derivative storage and
transportation contracts were required to be treated on an accrual basis in
2003, resulting in a comparatively higher gross margin attributable to these
contracts.

     The $6.5 million decrease in European gross margin is due to the absence of
trading activity in 2003 as a result of the wind-down of the European trading
operations as compared to a $6.5 million gross margin recognized in 2002. The
$82.1 million decrease in emerging products gross margin is primarily
attributable to falling interest rates on forward interest rate positions that
are marked to market.

         Selling, general, and administrative expenses decreased by $33.9
million, or 30 percent. This cost reduction is due primarily to the impact of
staff reductions in the Energy Marketing & Trading business segment.

     Other (income) expense -- net increased $312.7 million. This increase is
primarily due to $175.0 million gain from the sale of an energy trading contract
in 2003 and the effect in 2002 of $83.7 million of impairments and loss accruals
associated with certain terminated power projects and a $57.5 million partial
goodwill impairment. The increase was partially offset by a $20 million charge
in 2003 for the settlement reached with the CFTC subsequent to quarter end (see
Note 11).

     Segment profit increased $426 million due primarily to increased power and
natural gas gross margin, decreased selling, general and administrative expenses
and improved other (income) expense- net, partially offset by decreased
petroleum products, European and emerging products gross margins as discussed
above.

GAS PIPELINE

                             THREE MONTHS              SIX MONTHS
                            ENDED JUNE 30,           ENDED JUNE 30,
                       -----------------------   -----------------------
                          2003         2002         2003         2002
                       ----------   ----------   ----------   ----------
                                           (MILLIONS)
                                                  
Segment revenues       $    312.0   $    290.5   $    635.3   $    595.5
                       ==========   ==========   ==========   ==========
Segment profit         $    113.9   $    141.1   $    265.1   $    275.8
                       ==========   ==========   ==========   ==========

     On April 14, 2003, Williams announced that it had signed a definitive
agreement to sell Texas Gas Transmission Corporation (Texas Gas) to Loews
Pipeline Holding Corp., a unit of Loews Corporation. The sale closed on May 16,
2003. Williams received $793 million in cash and the buyer assumed $250 million
in debt. Pursuant to current accounting guidance, the operations of Texas Gas
have been classified as discontinued operations.

     For the purposes of second-quarter 2003 reporting, Gas Pipeline's
continuing operations include Northwest Pipeline Corporation, Transcontinental
Gas Pipe Line Corporation, a 50 percent interest in the Gulfstream Natural Gas
System, L.L.C. and other joint venture interstate and intrastate natural gas
pipeline systems. Certain assets sold during 2002 are included in the 2002
results. These assets include Cove Point, a general partner interest in Northern
Border, and our 14.6 percent interest in Alliance Pipeline. These assets
represented $2.2 million and $5.7 million of revenues for the three months and
six months ended June 30, 2002, respectively, and $4.9 million and $12.4 million
of segment profit for the three and six months ended June 30, 2002,
respectively. Financial results related to Kern River, Central, (both sold
during 2002), and Texas Gas are included in discontinued operations.

Three Months Ended June 30, 2003 vs. Three Months Ended June 30, 2002

     GAS PIPELINE'S revenues increased $21.5 million, or 7 percent, due
primarily to $17 million higher demand revenues on the Transco system resulting
from new expansion projects (MarketLink, Momentum and Sundance) and higher
transportation rates in connection with rate proceedings that became effective
in late 2002, and $8 million on the Northwest Pipeline system primarily from new
projects (Gray's Harbor, Centralia, and Chehalis). Partially offsetting these
increases were $4 million lower storage demand revenues due to lower demand
charges as a result

                                       42

Management's Discussion & Analysis (Continued)

of lower rates in connection with Transco's rate proceedings that became
effective in late 2002 and $3 million lower cash-out sales related to gas
imbalance settlements (offset in costs and operating expenses).

     Cost and operating expenses increased $4 million, or 2 percent, due
primarily to $7 million higher depreciation expense due to increased property,
plant and equipment placed into service, partially offset by $3 million lower
cash-out sales related to gas imbalance settlements (offset in revenues).

     General and administrative costs decreased $17 million, or 36 percent, due
primarily to $11 million of early retirement pension cost in 2002.

     Other (income) expense--net in 2003 includes a $25.5 million charge at
Northwest Pipeline to write-off capitalized software development costs for a
service delivery system following a decision not to implement. Subsequent to the
implementation of the same system at Transco in the second quarter of 2003 and a
determination of the unique and additional programming requirements that would
be needed to complete the system at Northwest Pipeline, management determined
that the system would not be implemented at Northwest Pipeline.

     Segment profit, which includes equity earnings and income (loss) from
investment (included in investing income), decreased $27.2 million reflecting
$49.6 million lower equity earnings and the $25.5 million charge discussed
previously. These items were partially offset by the higher revenues and lower
general and administrative expenses discussed above and the absence of the $12.3
million 2002 write-off of Gas Pipeline's investment in a cancelled pipeline
project (income (loss) from investments). The $49.6 million decrease in equity
earnings is due primarily to a $27.4 million benefit in 2002 related to the
contractual construction completion fee received by an equity affiliate and $16
million lower equity earnings from Gulfstream Natural Gas System primarily
related to the absence in 2003 of interest capitalized on internally generated
funds as allowed by FERC regulations during construction. The pipeline was
placed into service during second-quarter 2002. Also, the decrease in equity
earnings reflects the absence of $6 million of equity earnings following the
October 2002 sale of Gas Pipeline's 14.6 percent ownership in Alliance Pipeline.

Six Months Ended June 30, 2003 vs. Six Months Ended June 30, 2002

     GAS PIPELINE'S revenues increased $39.8 million, or 7 percent, due
primarily to $33 million higher demand revenues on the Transco system resulting
from new expansion projects (MarketLink, Momentum and Sundance) and higher rates
authorized under Transco's rate proceedings that became effective in late 2002
and $10 million on the Northwest Pipeline system resulting from new projects
(Gary's Harbor, Centralia, and Chehalis). In addition to these increases was a
$9 million higher recovery of tracked costs which are passed through to
customers (offset in costs and operating expenses). Partially offsetting these
increases were $11 million lower cash-out sales related to gas imbalance
settlements (offset in costs and operating expenses) and $8 million lower
storage demand revenues due to lower charges as a result of lower rates in
connection with Transco's rate proceedings that became effective in late 2002.

     Cost and operating expenses decreased $12 million, or 4 percent, due
primarily to $12 million lower fuel expense on Transco due primarily to pricing
differentials on the volumes of gas used in operation and $11 million lower
cash-out sales related to gas imbalance settlements (offset in revenues). These
decreases were partially offset by $8 million higher depreciation expense due to
increased property, plant and equipment placed into service and $7 million
higher tracked costs which are passed through to customers (offset in revenues).

     General and administrative costs decreased $20 million, or 24 percent, due
primarily to the absence of $11 million of 2002 early retirement pension costs
and reductions to employee-related benefits accruals.

     Other (income) expense--net in 2003 includes a $25.5 million charge at
Northwest Pipeline to write-off capitalized software development costs for a
service delivery system following a decision not to implement. Subsequent to the
implementation of the same system at Transco in the second quarter of 2003 and a
determination of the unique and additional programming requirements that would
be needed to complete the system at Northwest Pipeline, management determined
that the system would not be implemented at Northwest Pipeline.

     Segment profit, which includes equity earnings and income (loss) from
investments (included in investing income), decreased $10.7 million, or 4
percent, due to $67.4 million lower equity earnings and the $25.5 million charge
at Northwest Pipeline discussed previously. These decreases to segment profit
were partially offset by $39.8 million higher revenues, $12 million lower costs
and operating expenses and $20 million lower general and administrative costs
discussed above, as well as the absence of a $12.3 million 2002 write-off of
Gas Pipeline's investment in a cancelled pipeline project (income (loss) from
investment). The $67.4 million decrease to equity earnings reflects $27 million
lower equity earnings from the Gulfstream Natural Gas System, the absence of a
$27.4 million benefit in 2002 related to the contractual construction completion
fee received by an equity affiliate and the

                                       43

Management's Discussion & Analysis (Continued)

absence of $12 million of equity earnings following the October 2002 sale of Gas
Pipeline's 14.6 percent ownership in Alliance Pipeline. The lower earnings for
Gulfstream Natural Gas System were primarily due to the absence in 2003 of
interest capitalized on internally generated funds as allowed by the FERC during
construction. The pipeline was placed into service during second-quarter 2002.

EXPLORATION & PRODUCTION

                             THREE MONTHS              SIX MONTHS
                            ENDED JUNE 30,           ENDED JUNE 30,
                       -----------------------   -----------------------
                          2003         2002         2003         2002
                       ----------   ----------   ----------   ----------
                                          (MILLIONS)
                                                  
Segment revenues       $    200.2   $    221.0   $    444.1   $    442.8
                       ==========   ==========   ==========   ==========
Segment profit         $    178.7   $     92.4   $    292.5   $    198.9
                       ==========   ==========   ==========   ==========

     On February 20, 2003, Williams announced that it was evaluating the sale of
additional assets including selected Exploration & Production properties. During
second-quarter 2003, Williams completed a substantial portion of the targeted
asset sales from the Exploration & Production segment which included sales of
properties located primarily in Kansas, Colorado and New Mexico. The targeted
properties for sale, including the completed sales, represented approximately 16
percent of Williams' proved domestic reserves at December 31, 2002. Exploration
& Production has received net proceeds of approximately $417 million resulting
in net pre-tax gains of approximately $131.4 million, including $39.9 million of
pre-tax gains reported in discontinued operations related to the interests in
the Raton and Hugoton basins. The results of operations and gains on sales for
the Raton and Hugoton properties have been classified as discontinued
operations. The following discussion relates to the continuing operations of
Exploration & Production.

     Two regulatory decisions during second-quarter 2003 will allow for Williams
to increase its recoverable natural gas reserves in two key areas of the U.S.
Rocky Mountain region. Approval from the Colorado Oil & Gas Conservation
Commission on a proposed plan for 10-acre bottom hole spacing will allow for the
drilling of more than 550 natural gas wells over the next decade in Colorado's
Piceance Basin. These additional wells are expected to substantially increase
the company's proved undeveloped reserves for that basin. A decision by the
Bureau of Land Management provides guidelines for developing coalbed natural gas
on federal lands in the Powder River Basin in Wyoming. Williams plans to drill
or participate in approximately 750 new Powder River wells in 2003, consistent
with its current capital spending plan.

Three Months Ended June 30, 2003 vs. Three Months Ended June 30, 2002

     EXPLORATION & PRODUCTION'S revenues decreased $20.8 million, or 9 percent,
due primarily to $10 million lower domestic production revenues and $9 million
lower domestic gas management revenues (costs related to these revenues also
decreased by $9 million). The decrease in domestic production revenues reflects
$16 million lower revenues related to an 11 percent decrease in net domestic
production volumes, partially offset by $6 million higher revenues from
increased net realized average prices for production (including the effect of
hedge positions). The decrease in production volumes primarily results from the
sales of properties in 2002 and 2003, partially offset by increased production
volumes for properties retained. Approximately 84 percent of all domestic
production during second-quarter 2003 was hedged. Exploration & Production has
contracts that hedge approximately 95 percent of estimated production for the
remainder of 2003 at prices that average $3.72 per mcfe at the basin level.
These contracts are entered into with Energy Marketing & Trading which in turn
enters into offsetting derivative contracts with unrelated third parties.
Generally, Energy Marketing & Trading bears the counterparty performance risks
associated with unrelated third parties. Exploration & Production also has
derivative contracts with Energy Marketing & Trading that no longer qualify for
hedge accounting treatment (as a result of asset sales) or were never designated
in hedge relationships. The changes in fair value of these contracts are
recognized in revenues. The total impact, realized and unrealized, of these
instruments on 2003 revenues was a $15 million gain as compared to a $7 million
gain in 2002.

     Domestic gas management revenues consist primarily of marketing activities
within the Exploration & Production segment that are not a direct part of the
results of operations for producing activities. These non-producing activities
include acquisition and disposition of other working interest and royalty
interest gas and the movement of gas from the wellhead to the tailgate of the
respective plants for sale to Energy Marketing & Trading or third parties.

                                       44

Management's Discussion & Analysis (Continued)

     Costs and expenses, including selling, general and administrative expenses,
decreased $15 million, including $6 million lower depreciation, depletion and
amortization expense, $9 million lower domestic gas management expenses and $2
million lower lease operating expense. The decreased depreciation, depletion and
amortization expense is due to the previously discussed asset sales. These
decreases were partially offset by $4 million higher operating taxes.

     Other (income) expense - net includes approximately $91.5 million in net
gains on sales of assets during 2003, which are discussed above.

     Segment profit increased $86.3 million due to the net gains on the sales of
assets which are discussed above.

Six Months Ended June 30,2003 vs. Six Months Ended June 30, 2002

     EXPLORATION & PRODUCTION'S revenues increased $1.3 million, or less than
one percent. A favorable change in fair value of derivative contracts with
Energy Marketing & Trading that no longer qualify for hedge accounting treatment
(due to asset sales) or were never designated in hedge relationships was
substantially offset by $14 million lower domestic production revenues. The
total impact, realized and unrealized, of the non hedge derivative contracts on
2003 revenues was a $23 million gain as compared to $7 million of gains in 2002.
The $14 million lower domestic production revenues reflect $30 million lower
revenues due to a 9 percent decrease in net domestic production volumes,
partially offset by $16 million higher revenues from increased net realized
average prices for production (including the effect of hedge positions). The
decrease in production volumes primarily results from the sales of properties in
2002 and 2003, partially offset by increased production volumes for properties
retained. Approximately 86 percent of all domestic production during the first
six months of 2003 was hedged.

     Costs and expenses, including selling, general and administrative expenses,
increased $3 million including $11 million higher operating taxes and $2 million
higher lease operating expenses, largely offset by $6 million lower exploration
expenses. The lower exploration expenses reflect the current focus of the
company on developing proved properties while reducing exploratory activities.

     Other (income) expense - net includes approximately $91.5 million in net
gains on sales of assets during 2003, which were discussed previously.

     Segment profit increased $93.6 million due primarily to the $91.5 million
in net gains on the sales of assets, which are discussed above.

MIDSTREAM GAS & LIQUIDS

                              THREE MONTHS             SIX MONTHS
                             ENDED JUNE 30,           ENDED JUNE 30,
                       -----------------------   -----------------------
                          2003         2002         2003         2002
                       ----------   ----------   ----------   ----------
                                          (MILLIONS)

Segment revenues       $    737.8   $    438.0   $  1,868.5   $    838.0
                       ==========   ==========   ==========   ==========
Segment profit         $     52.4   $     51.7   $    169.7   $    106.0
                       ==========   ==========   ==========   ==========

     Williams has announced its intention to sell certain Midstream Gas &
Liquids assets, including certain operations in Canada. Future asset sales would
have the effect of lowering revenues in periods following their sale. Williams'
board of directors has approved a plan authorizing management to negotiate and
facilitate the sale of the assets of Gulf Liquids New River Project LLC (Gulf
Liquids). The operations of Gulf Liquids have been classified as discontinued
operations.

Three Months Ended June 30,2003 vs. Three Months Ended June 30, 2002

     MIDSTREAM GAS & LIQUIDS' revenues increased $300 million, or 68 percent,
due primarily to a $194 million effect of a change in the reporting of natural
gas liquids trading activities for which costs are no longer netted in revenues
as a result of the application of EITF Issue No. 02-3, combined with an $83
million increase in Canadian revenues and a $16 million increase in domestic
gathering and processing revenues. The increase in Canadian revenues is due
primarily to $80 million higher liquids sales resulting from an increase in
liquids sales prices at existing processing and fractionation facilities and
increased liquids sales volumes and prices at the olefins fractionation facility
that began operations at the end of the first quarter 2002. The increase in
domestic gathering and processing revenues is due primarily to a $24 million
increase in new deepwater fee-based and liquids sales

                                       45

Management's Discussion & Analysis (Continued)

operations that were entering service and increasing operations during
second-quarter 2002, $5 million higher revenues resulting from additional
gathering volumes within the Gulf Coast regulated gathering system due primarily
to higher volumes contributed from deepwater fields and a $6 million increase
from new fee-based contractual arrangements around an existing Gulf Coast
facility. Offsetting these increases in domestic gathering and processing were
$7 million lower liquids sales from western and Gulf Coast facilities and $9
million lower gathering revenues following the sale of the Kansas-Hugoton
gathering system in third-quarter 2002. The decline in liquid sales from western
and Gulf Coast facilities is due primarily to lower liquids sales volumes as a
result of lower processing economics partially offset by an increase in liquids
sales prices within both regions.

   Costs and operating expenses increased $294 million, or 84 percent, due
primarily to the $194 million effect of the change in reporting certain costs of
natural gas liquids trading activities discussed above. Costs and expenses were
also impacted by higher fuel and shrink costs at Canadian facilities of $84
million due primarily to higher gas prices. Also contributing to the increase in
costs was a $13 million increase in product feedstock costs at the ethylene
production facility within the Gulf Coast and $4 million in higher depreciation
expense due primarily to the new deepwater operations. Slightly offsetting these
increases were $16 million lower operating, maintenance and other costs within
western gathering and processing facilities due in part to the third-quarter
2002 sale of the Kansas Hugoton gathering system and an overall decrease in
maintenance spending and other operating costs. Domestic fuel and shrink costs
were $29 million higher at western processing facilities. This increase was
substantially offset by lower fuel and shrink costs at Gulf Coast facilities
primarily due to the decline in liquids production volumes.

     Included in other (income) expense - net within segment costs and expenses
in 2003 are $6 million in impairment charges primarily related to impairments
taken on two domestic processing facilities. Included in other (income) expense
- - net within segment costs and expenses in 2002, was a $4.8 million charge
representing the impairment of assets to fair value associated with the sale of
the Kansas Hugoton natural gas gathering system.

     Segment profit, which includes income (loss) from investments (included in
investment income (loss) on the Consolidated Statement of Operations), increased
$.7 million. Segment profit reflects a $12 million increase in domestic
gathering and processing operations, $4 million in lower general and
administrative costs within trading operations and a $4.8 million gain on the
sale of the equity investment in Rio Grande pipeline (income (loss) from
investments). These increases to segment profit were offset by a $14 million
decline in Gulf Coast olefins operating profit due primarily to higher feedstock
costs and lower production volumes at the ethylene production facility and a $9
million decline in operating profits from Canadian operations due primarily to
unfavorable liquids margins during the quarter. The $12 million increase in
domestic gathering and processing operations is due primarily to a $17 million
increase resulting from new deepwater fee-based and liquid sales operations
combined with the impact of additional gathering volumes within the Gulf Coast
regulated gathering system, new fee-based contractual arrangements at a Gulf
Coast facility, and lower maintenance spending and other operating costs.
Offsetting these increases is a $10 million decline in liquid sales margins from
western processing facilities resulting from lower sales volumes and rising fuel
and shrink costs, a $8.5 million impairment of an equity investment in Aux Sable
and a $7 million decrease in equity earnings. The rising fuel and shrink costs
in this region are attributable to the overall rising price of gas combined with
a reversal of the favorable basis differential for gas in Wyoming that was
experienced in first-quarter 2003 as additional transportation capacity out of
Wyoming has provided new markets for gas from this region. Liquids sales margins
from Gulf Coast facilities are relatively unchanged and remain at or near break
even levels as a result of poor processing economics due primarily to rising gas
prices. Poor processing economics in the Gulf Coast are being mitigated by new
contractual arrangements and other provisions that provide compensation for
processing gas in an uneconomic environment in order for customer's gas to
achieve pipeline quality standards. The decrease in equity earnings is due
primarily to operating losses generated from our investment in Aux Sable
combined with the impact of a $4 million charge associated with an accounting
adjustment recorded by Discovery.

     Segment profit within Venezuela has remained relatively unchanged during
the period. The economic and political situation within Venezuela remains fluid
and volatile but has not significantly impacted the operations or cash flow at
Midstream's owned facilities. Contracts with PDVSA at these facilities provide
for payment in U.S. dollars and contain provisions that provide for adjustments
for inflation and minimum volume guarantees if the plants are operational.

                                       46

Management's Discussion & Analysis (Continued)

     Six Months Ended June 30, 2003 vs. Six Months Ended June 30, 2002

     MIDSTREAM GAS & LIQUIDS' revenues increased $1,031 million, or 123 percent,
due primarily to a $664 million effect of a change in the reporting of natural
gas liquids trading activities for which costs are no longer netted in revenues
as a result of the application of EITF Issue No. 02-3, combined with a $236
million increase in Canadian revenues and a $128 million increase in domestic
gathering and processing revenues. The increase in Canadian revenues is due
primarily to $221 million higher liquids sales from processing and fractionation
facilities resulting from higher liquids sales prices at existing processing and
fractionation facilities and increased liquids sales volumes and prices at a new
olefin fractionation facility that began operations at the end of the first
quarter 2002. The increase in domestic gathering and processing revenues is due
primarily to $88 million higher liquids sales at western processing facilities
resulting from increased sales volumes and prices during the first quarter. Also
contributing to the increase is $65 million from new deepwater operations which
includes $24 million in liquids sales from a deepwater gas processing facility
that went into service in 2002. Partially, offsetting these increases is a $20
million decline in gathering revenues resulting from the sale of the Kansas
Hugoton gathering system in the third-quarter 2002.

     Costs and operating expenses increased $954 million, or 144 percent, due
primarily to the $664 million effect of the change in reporting certain costs of
natural gas liquids trading activities discussed above. Costs and expenses were
also impacted by higher fuel and shrink costs at domestic and Canadian
processing facilities of $59 million and $210 million, respectively. The
increase in domestic fuel and shrink prices is largely due to higher natural gas
prices and production volumes. The increase in Canadian fuel and shrink costs is
due primarily to higher natural gas prices and increased operations at the new
olefins fractionation facility (Canada). Also contributing to the increase is
$32 million in product feedstock costs at the ethylene production facility
within the Gulf Coast, $17 million in Canadian depreciation and operations and
maintenance costs due primarily to full operation in 2003 at the new olefins
fractionation facility and $9 million in depreciation expense from domestic
gathering and processing facilities due primarily to the new deepwater
operations. Offsetting these increases is a $35 million decline in operating,
maintenance and other costs within western gathering and processing facilities
due in part to the sale of the Kansas Hugoton gathering system in third-quarter
2002 and an overall decrease in maintenance spending and other operating costs.

     Segment profit, which includes income (loss) from investments (included in
investment income (loss) on the Consolidated Statement of Operations), increased
$63.7 million due primarily to an $81 million increase in operating profit from
domestic gathering and processing operations and the $4.8 million gain on the
sale of the equity investment in Rio Grande pipeline during second-quarter 2003
(income (loss) from investments). Partially offsetting these increases were a
$14 million decline in Canadian operating profit, an $8 million decline in
olefins operating profit and a $5 million decline in operating profit from
Venezuelan operations. The increase in domestic gathering and processing profits
is due primarily to a $22 million increase in liquids sales margins from
domestic processing plants within the western United States as a result of
higher natural gas liquids sales prices and a favorable basis differential for
natural gas within Wyoming which had the effect of lower fuel and shrink prices
at processing facilities in this region during the first quarter of 2003. This
favorable basis differential tightened during the second quarter of 2003 as new
transportation capacity for natural gas from this region had the effect of
increasing fuel and shrink costs and lowering margins in the region during
second-quarter 2003. Also contributing to the increase in domestic gathering and
processing profits was $35 million associated with new deepwater operations, as
well as the incremental profitability resulting from additional gathering
volumes, new fee-based contractual arrangements, and lower maintenance spending
and other operating costs. Offsetting the increases in domestic gathering and
processing operating profit is a $10 million decline in equity earnings from
Discovery pipeline and an $8.5 million impairment of the equity investment in
Aux Sable (income loss from investments). The decline in the equity earnings of
Discovery reflects a $12 million charge associated with adjustments recorded by
Discovery primarily to expense certain amounts previously capitalized during
periods prior to Williams becoming the operator. The decline in Canadian
operating results includes $8 million bad debt expense associated with a single
customer. The decline in Gulf Cost olefins profits is due primarily to higher
feedstock prices and lower production volumes at the ethylene fractionation
facility. The decline in Venezuelan segment profit is due primarily to curtailed
operations resulting from a fire at one of the high-pressure gas compression
facilities in February 2003, partially offset by an improvement in equity
earnings from Accroven and lower foreign currency exchange losses in the first
quarter of 2003 as a result of currency exchange controls in place within
Venezuela.

                                       47

Management's Discussion & Analysis (Continued)

OTHER

                              THREE MONTHS               SIX MONTHS
                             ENDED JUNE 30,             ENDED JUNE 30,
                       ------------------------    ------------------------
                          2003          2002          2003          2002
                       ----------    ----------    ----------    ----------
                                            (MILLIONS)
                                                     
Segment revenues       $     20.1    $     26.0    $     48.1    $     52.7
                       ==========    ==========    ==========    ==========
Segment loss           $    (51.7)   $     (3.7)   $    (46.9)   $    (12.4)
                       ==========    ==========    ==========    ==========

     Other segment loss for the three and six months ended June 2003 includes a
$42.4 million impairment related to the investment in equity and debt securities
of Longhorn Partners Pipeline, LP. The impairment results from management's
determination that there has been an other than temporary decline in estimated
fair value of the investments.

FAIR VALUE OF ENERGY RISK MANAGEMENT AND TRADING ACTIVITIES

     The chart below reflects the fair value of energy trading derivatives for
Energy Marketing & Trading and Midstream Gas & Liquids that have been assessed
to be trading contracts, separated by the year in which the recorded fair value
is expected to be realized. As of December 31, 2002, Energy Marketing & Trading
reported a net asset of approximately $1,632 million related to the fair value
of energy risk management and trading contracts. With the adoption of EITF Issue
No. 02-3 on January 1, 2003, approximately $1,193 million of that pre-tax fair
value pertained to non-derivative energy contracts, and this amount was reversed
through a cumulative adjustment from a change in accounting principle. Trading
contracts include those derivative contracts that have not been designated as or
do not qualify as SFAS No. 133 hedges and that are held to provide price risk
management services to third party customers. These contracts are accounted for
using the mark to market accounting method. As reported in the Form 10-Q for
March 31, 2003, all derivative contracts that had not been designated as or did
not qualify as SFAS No. 133 hedges were presented as trading contracts. However,
consistent with Williams' continued evaluation of its future involvement in the
merchant power and generation business, derivative contracts have been
reevaluated for trading versus non-trading classification at June 30, 2003 on a
contract by contract basis. The table of trading contracts presented below
includes only those contracts that do not hedge or mitigate Energy Marketing &
Trading's or Midstream Gas & Liquids' own long-term structured contract
positions and which were entered into to provide risk management services to
third parties. Also, the table below does not reflect the fair value of
non-derivative energy contracts which was reversed in the cumulative accounting
change adjustment recorded in the first quarter of 2003.

(In millions)

                                                                                            TOTAL FAIR
TO BE REALIZED     TO BE REALIZED    TO BE REALIZED   TO BE REALIZED    TO BE REALIZED       VALUE OF
IN 1-12 MONTHS    IN MONTHS 13-36   IN MONTHS 37-60  IN MONTHS 61-120   IN MONTHS 121+       TRADING
   (YEAR 1)          (YEARS 2-3)      (YEARS 4-5)      (YEARS 6-10)       (YEARS 11+)      DERIVATIVES
- --------------    ---------------   ---------------  ----------------   --------------   ---------------
                                                                          
$        (20.4)   $        (43.8)   $          2.6   $          11.6    $           --   $        (50.0)

     Energy Marketing & Trading holds a substantial portfolio of non-trading
derivative contracts. Certain of these have not been designated as or do not
qualify as SFAS No. 133 hedges, and are accounted for using the mark to market
method of accounting. As of June 30, 2003 the fair value of these non-trading
derivative contracts was a net asset of $803.1 million. Energy Marketing &
Trading also holds a number of SFAS No. 133 cash flow hedges on behalf of other
business units, hedges associated with owned generation assets, and other
miscellaneous hedges. As of June 30, 2003 the fair value of these hedges was a
net liability of approximately $281.9 million. Various other business units
within Williams also possess certain SFAS No. 133 hedge liabilities of
approximately $24.9 million.

                                       48

Management's Discussion & Analysis (Continued)

Estimates and assumptions regarding counterparty performance and credit risk
considerations

   Energy Marketing & Trading and Midstream Gas & Liquids include in their
estimate of fair value for all derivative contracts an assessment of the risk of
counterparty non-performance. Such assessment considers the credit rating of
each counterparty as represented by public rating agencies such as Standard &
Poor's and Moody's Investor's Service, the inherent default probabilities within
these ratings, the regulatory environment that the contract is subject to, as
well as the terms of each individual contract.

   Risks surrounding counterparty performance and credit could ultimately impact
the amount and timing of the cash flows expected to be realized. Energy
Marketing & Trading and Midstream Gas & Liquids continually assess this risk and
have credit protection within various agreements to call on additional
collateral support in the event of changes in the creditworthiness of the
counterparty. Additional collateral support could include letters of credit,
payment under margin agreements, guarantees of payment by creditworthy parties,
or in some instances, transfers of the ownership interest in natural gas
reserves or power generation assets. In addition, Energy Marketing & Trading and
Midstream Gas & Liquids enter into netting agreements to mitigate counterparty
performance and credit risk.

   The gross forward credit exposure from Energy Marketing & Trading's and
Midstream Gas & Liquids' derivative contracts as of June 30, 2003 is summarized
as below.

                                                    INVESTMENT GRADE
COUNTERPARTY TYPE                                         (a)            TOTAL
- -----------------                                   ----------------  ------------
                                                               (MILLIONS)

Gas and electric utilities                            $    1,344.6    $    1,403.7
Energy marketers and traders                               3,004.6         6,159.2
Financial Institutions                                     1,423.3         1,423.3
Other                                                      1,533.9         1,648.9
                                                      ------------    ------------
                                                      $    7,306.4        10,635.1
                                                      ============
Credit reserves                                                              (62.9)
                                                                      ------------
Gross Credit Exposure from Derivative Contracts (b)                   $   10,572.2
                                                                      ============

     In addition to the gross Energy Marketing & Trading and Midstream Gas &
Liquids derivative exposure discussed above, other business units within
Williams possess an additional $30 million in gross derivative asset exposure.

     Energy Marketing & Trading and Midstream Gas & Liquids assess their credit
exposure on a net basis when appropriate and contractually allowed. The net
forward credit exposure from Energy Marketing & Trading's and Midstream Gas &
Liquids' derivative contracts as of June 30, 2003 is summarized as below.

                                                  INVESTMENT GRADE
COUNTERPARTY TYPE                                       (a)             TOTAL
- -----------------                                 ----------------  ------------
                                                             (MILLIONS)
                                                              
Gas and electric utilities                          $      662.0    $      663.9
Energy marketers and traders                               127.6           406.7
Financial Institutions                                      45.6            45.6
Other                                                        7.6            14.1
                                                    ------------    ------------
                                                    $      842.8         1,130.3
                                                    ============
Credit reserves                                                            (62.9)
                                                                    ------------
Net Credit Exposure from Derivative Contracts (b)                   $    1,067.4
                                                                    ============

- ----------

     (a)  "Investment Grade" is primarily determined using publicly available
          credit ratings along with consideration of cash, standby letters of
          credit, parent company guarantees, and property interests, including
          oil and gas reserves. Included in "Investment Grade" are
          counterparties with a minimum Standard & Poor's and Moody's Investor's
          Service rating of BBB- or Baa3, respectively.

                                       49

Management's Discussion & Analysis (Continued)

          (b)  One counterparty within the California power market represents
               greater than ten percent of derivative assets and is included in
               "investment grade." Standard & Poor's and Moody's Investor's
               Service do not currently rate this counterparty. This
               counterparty has been included in the "investment grade" column
               based upon contractual credit requirements in the event of
               assignment or novation.

     The overall net credit exposure from derivative contracts of $1,067.4
million at June 30, 2003, represents an overall decrease in derivative credit
exposure of approximately 13 percent on a comparable basis from December 31,
2002. In 2002 and 2003 Energy Marketing & Trading closed out various trading
positions and as a result has not suffered significant losses due to recent
bankruptcy filings of certain counterparties in second-quarter 2003. In
addition, Energy Marketing and Trading settled a dispute with a counterparty in
second-quarter 2003 and received $90 million in cash while recognizing an
insignificant loss for the settlement in second-quarter 2003. Credit
constraints, declines in market liquidity, and financial instability of market
participants, are expected to continue and potentially worsen in 2003. Continued
liquidity and credit constraints of Williams may also significantly impact
Energy Marketing & Trading's ability to manage market risk and meet contractual
obligations.

     Electricity and natural gas markets, in California and elsewhere, continue
to be subject to numerous and wide-ranging federal and state regulatory
proceedings and investigations, as well as civil actions, regarding among other
things, market structure, behavior of market participants, market prices, and
reporting to trade publications. Energy Marketing & Trading may be liable for
refunds and other damages and penalties as a part of these actions. Each of
these matters as well as other regulatory and legal matters related to Energy
Marketing & Trading are discussed in more detail in Note 11 to the Consolidated
Financial Statements. The outcome of these matters could affect the
creditworthiness and ability to perform contractual obligations of Energy
Marketing & Trading as well as the creditworthiness and ability to perform
contractual obligations of other market participants.

     FINANCIAL CONDITION AND LIQUIDITY

LIQUIDITY

     Williams' liquidity is derived from both internal and external sources.
Certain of those sources are available to Williams (the parent) and others are
available to certain of its subsidiaries. Williams' sources of liquidity consist
of the following:

          o    Cash-equivalent investments at the corporate level of $2.8
               billion at June 30, 2003, as compared to $1.3 billion at December
               31, 2002.

          o    Cash and cash-equivalent investments of various international and
               domestic entities of $437 million at June 30, 2003 as compared to
               $352 million at December 31, 2002.

          o    Cash generated from sales of assets.

          o    Cash generated from operations.

          o    $413 million available under Williams' new revolving credit
               facility at June 30, 2003. This new facility is primarily for the
               purpose of issuing letters of credit and must be collateralized
               at 105 percent of the level utilized (see Note 10). At December
               31, 2002, Williams had a combined $480 million available under
               the previous revolving and letter of credit facilities.

     Williams has an effective shelf registration statement with the Securities
and Exchange Commission that enables it to issue up to $3 billion of a variety
of debt and equity securities. Subsequent to the $800 million issuance of senior
unsecured securities on June 10, 2003, the current availability under this shelf
registration is $2.2 billion.

     In addition, there are outstanding registration statements filed with the
Securities and Exchange Commission for Williams' wholly owned subsidiaries:
Northwest Pipeline and Transcontinental Gas Pipe Line. As of August 11, 2003,
approximately $350 million of shelf availability remains under these outstanding
registration statements and may be used to issue a variety of debt securities.
Interest rates, market conditions, and industry conditions will affect amounts
raised, if any, in the capital markets. On March 4, 2003, Northwest Pipeline
completed an offering of $175 million of 8.125 percent senior notes due 2010.
The $350 million of shelf availability mentioned above was not affected by this
offering.

                                       50

Management's Discussion & Analysis (Continued)

     Capital and investment expenditures for 2003 are estimated to total
approximately $1 billion. Williams expects to fund capital and investment
expenditures, debt payments and working-capital requirements through (1) cash on
hand, (2) cash generated from operations, (3) the sale of assets, and/or (4)
amounts available under Williams' revolving credit facility.

Outlook

     Williams expects to generate proceeds, net of related debt, of nearly $4
billion from asset sales during 2003 and 2004. Through June 30, 2003, Williams
has received $2.4 billion in net proceeds from asset sales and its board of
directors has approved resolutions that authorized management to negotiate and
facilitate the sales of the assets of Gulf Liquids New River Project LLC and
Williams' Alaska operations. Williams has also reached agreements to sell
certain additional natural gas exploration and production properties in Utah for
$49 million. In August 2003, Williams announced sales of assets completed
subsequent to June 30, 2003, and agreements to sell various assets for cash
proceeds in excess of $80 million. These assets include:

          o    The West Stoddart natural gas processing plant in Western Canada,
               which is part of Midstream Gas & Liquids,

          o    Williams' 20 percent ownership interest in West Texas LPG
               Pipeline Limited Partnership which transports natural gas liquids
               in Texas and is part of Midstream Gas & Liquids,

          o    Distributed-generation units and an associated third-party
               contract, which is part of Energy Marketing & Trading, and

          o    Refined products management operations, which are part of the
               Other segment.

     The nearly $4 billion targeted level of assets sales does not include any
proceeds from sales of contracts within Energy Marketing & Trading. Any proceeds
from sales of contracts would be additive to the assets sales. For the six month
period ended June 30, 2003, Energy Marketing & Trading has sold contracts for
proceeds totaling approximately $206 million. In August 2003, Williams also
announced that it had agreed to terminate a long-term power contract with
Allegheny Energy Supply Company, LLC, a subsidiary of Allegheny Energy, Inc.,
for cash consideration of $128 million payable to Williams. The agreement is
subject to certain conditions, including a provision that Allegheny successfully
complete the sale of its energy supply agreement with the California Department
of Water Resources.

     Based on the Company's forecast of cash flows and liquidity, Williams
believes that it has, or has access to, the financial resources and liquidity to
meet future cash requirements. For the remainder of 2003 and including periods
through first-quarter 2004, the Company has scheduled debt retirements of
approximately $1.8 billion.

OPERATING ACTIVITIES

     For the six months ended June 30, 2003, Williams recorded approximately
$121 million in provisions for losses on property and other assets consisting
primarily of the $42.4 million impairment of Williams' investment in Longhorn
Partners Pipeline L.P., $25.5 million charge related to write-off of software
development costs at Northwest Pipeline, $13.5 million impairment of an
investment in a company holding phosphate reserves and the $12 million
impairment of Algar Telecom S.A.

     The net gain on disposition of assets primarily consists of the gains on
the sales of natural gas properties during second-quarter 2003.

     The accrual for fixed rate interest included in the RMT note payable on the
Consolidated Statement of Cash Flows represents the quarterly noncash
reclassification of the deferred fixed rate interest from an accrued liability
to the RMT note payable. The amortization of deferred set-up fee and fixed rate
interest on the RMT note payable relates to amounts recognized in the income
statement as interest expense, which were not paid until maturity. The RMT note
payable was repaid in June 2003 (see Note 10).

FINANCING ACTIVITIES

     For a discussion of borrowings and repayments in 2003, see Note 10 of Notes
to Consolidated Financial Statements.

     Dividends paid on common stock are currently $.01 per common share on a
quarterly basis and total $10.3 million for the six months ended June 30, 2003.
Additionally, one of the covenants under the indenture

                                       51

Management's Discussion & Analysis (Continued)

for the new $800 million senior unsecured notes due 2010 currently limits the
quarterly common stock dividends paid by Williams to not more than $.02 per
common share. This restriction may be removed in the future as Williams'
financial condition improves and certain requirements in the covenants are met.
Williams also paid $32.6 million in dividends on the 9 7/8 percent cumulative-
convertible preferred shares that were redeemed in June 2003.

INVESTING ACTIVITIES

     For 2003, net cash proceeds from asset dispositions, sales of businesses
and disposition of investments include the following:

          o    $793 million related to the sale of Texas Gas Transmission
               Corporation

          o    $431 million (net of cash held by Williams Energy Partners)
               related to the sale of Williams' general partnership interest and
               limited partner investment in Williams Energy Partners

          o    $417 million related to certain natural gas exploration and
               production properties in Kansas, Colorado and New Mexico

          o    $452 million related to the sale of the Midsouth refinery

          o    $188 million related to the sale of the Williams travel centers

          o    $60 million related to the sale of Williams' equity interest in
               Williams Bio-Energy L.L.C.

          o    $40 million related to the sale of the Worthington facility

COMMITMENTS

     The table below summarizes the more significant contractual obligations and
commitments by period. These amounts do not reflect debt reductions contingent
upon asset sales (see Note 10).

                              JULY 1-
                             DEC. 31,
                                2003        2004         2005            2006         2007      THEREAFTER      TOTAL
                            ----------   ----------   ----------      ----------   ----------   ----------   ----------
                                                                    (MILLIONS)
                                                                                        
Notes payable               $       10   $       --   $       --      $       --   $       --   $       --   $       10
Long-term debt, including
     current portion               386        1,596        1,344(1)          959          905        7,826       13,016
Operating leases                    35           34           24              12           10           19          134
Fuel conversion and other
     service contracts(2)          206          391          395             399          404        5,063        6,858
                            ----------   ----------   ----------      ----------   ----------   ----------   ----------
Total                       $      637   $    2,021   $    1,763      $    1,370   $    1,319   $   12,908   $   20,018
                            ==========   ==========   ==========      ==========   ==========   ==========   ==========

     (1)  Includes $1.1 billion of 6.5 percent notes, payable 2007 subject to
          remarketing in 2004 (FELINE PACS). If the remarketing is unsuccessful
          in 2004 and a second remarketing in February 2005 is unsuccessful as
          defined in the offering document of the FELINE PACS, then Williams
          could exercise its right to foreclose on the notes in order to satisfy
          the obligation of the holders of the equity forward contracts
          requiring the holder to purchase Williams common stock.

     (2)  Energy Marketing & Trading has entered into certain contracts giving
          Williams the right to receive fuel conversion services as well as
          certain other services associated with electric generation facilities
          that are either currently in operation or are to be constructed at
          various locations throughout the continental United States.

                                       52

       ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK

     Williams' interest rate risk exposure associated with the debt portfolio
was impacted by debt issuances and debt payments in both the first and second
quarters of 2003. During 2003, Williams has repaid or retired the RMT note
payable (see Note 10), $224 million on the variable rate debt of Snow Goose LLC,
$448.2 million of variable rate debt due in 2003, $139.8 million of capitalized
lease obligations and $78.5 million of variable rate debt due in 2006. During
2003, Williams, or its subsidiaries, issued the following debt:

     o    March 2003-Northwest Pipeline Corporation, a subsidiary of Williams,
          through a private debt placement, issued $175 million of 8.125 percent
          notes payable in 2010

     o    May 2003-Williams issued $300 million of 5.5 percent junior
          subordinated convertible debentures, due 2033.

     o    May 2003-Williams RMT Production Company issued a $500 million
          secured, subsidiary-level loan, due in 2007, at a floating interest
          rate of 3.75 percent over the six-month London InterBank Offered Rate

     o    June 2003-Williams issued $800 million of 8.625 percent senior
          unsecured notes due in 2010 under the company's $3 billion shelf
          registration statement

COMMODITY PRICE RISK

     Energy Marketing & Trading and Midstream Gas & Liquids are exposed to the
impact of market fluctuations in the price of natural gas, electricity, crude
oil, refined products, and natural gas liquids as a result of managing risk
associated with the Company's owned energy related assets and long-term
energy-related contracts as well as its proprietary trading activities. Energy
Marketing & Trading and Midstream Gas & Liquids manage the risks associated with
these market fluctuations using various derivatives for both trading and
non-trading purposes. Certain of these derivative contracts are designated as
cash flow hedges under SFAS No. 133 and others are accounted for under the
mark-to-market method of accounting. Derivative contracts are subject to changes
in energy commodity market prices, volatility and correlation of those commodity
prices, the portfolio position of the contracts, the liquidity of the market in
which the contract is transacted and changes in interest rates. The risk in the
trading and non-trading portfolios are measured utilizing a value-at-risk
methodology to estimate the potential one-day loss from adverse changes in the
fair value of the portfolios. Value at risk requires a number of key assumptions
and is not necessarily representative of actual losses in fair value that could
be incurred from the portfolios. The value-at-risk model assumes that, as a
result of changes in commodity prices, there is a 95 percent probability that
the one-day loss in fair value of the portfolios will not exceed the value at
risk. The value-at-risk model uses historical simulations to estimate
hypothetical movements in future market prices assuming normal market conditions
based upon historical market prices. Value at risk does not consider that
changing the portfolio in response to market conditions could affect market
prices and could take longer to execute than the one-day holding period assumed
in the value-at-risk model. While a one-day holding period has historically been
the industry standard, a longer holding period could more accurately represent
the true market risk in an environment where market illiquidity and credit and
liquidity constraints of the company may result in further inability to mitigate
risk in a timely manner in response to changes in market conditions. Commodity
contracts designated as a normal purchase or sale pursuant to SFAS No. 133 and
non-derivative energy contracts have been excluded from the estimation of value
at risk.

     TRADING

     The trading portfolio consists of derivative contracts held to provide
price risk management services to third-party customers based on a contract by
contract assessment. These contracts are accounted for using the mark-to-market
accounting method. At June 30, 2003 and December 31, 2002, the value at risk for
the derivative contracts considered to be held for trading purposes was $6.5
million and $50.2 million, respectively. The adoption of EITF Issue No. 02-3
resulted in non-derivative energy contracts no longer being accounted for and
reported at fair value, therefore such contracts have not been included in the
June 30, 2003 trading value at risk. For the disclosure in the Form 10-Q for
March 31, 2003, Energy Marketing & Trading and Midstream Gas & Liquids
considered all derivatives other than those designated as cash flow hedges under
SFAS No. 133 to be trading. As previously noted, consistent with Williams'
continued evaluation of its future involvement in the merchant power and
generation business, in the second quarter of 2003 trading contracts were
reevaluated to include only those entered into to provide risk management
services to third party customers and not those contracts hedging or mitigating
the market risk of Energy Marketing & Trading and Midstream Gas & Liquid's own
long-term structured portfolios.

                                       53

Item 3. Quantitative and Qualitative Disclosures About Market Risk (concluded)

     NON-TRADING

     The non-trading portfolio consists of derivative contracts held to hedge
changes in energy commodity prices within Exploration & Production, the
non-trading operations of Midstream Gas & Liquids and the non-trading operations
of Energy Marketing & Trading. Exploration & Production is exposed to commodity
price risk associated with the sales price of the natural gas and crude oil it
produces. Midstream Gas & Liquids is exposed to commodity price risk related to
natural gas purchases, natural gas liquids purchases and sales, and electricity
costs. Energy Marketing & Trading is exposed to commodity price risk related to
electricity purchased and sold and natural gas purchased for the production of
electricity. At June 30, 2003, the non-trading portfolio consists of derivative
contracts designated as cash flow hedges under SFAS No. 133 and non-trading
derivative contracts accounted for under the mark-to-market method of
accounting. The value-at-risk model did not consider the underlying commodity
positions to which the cash flow hedges relate. Therefore, it is not
representative of economic losses that could occur on a total non-trading
portfolio basis that includes the underlying commodity positions. At June 30,
2003 and December 31, 2002, the value at risk for the non-trading derivative
commodity instruments was approximately $23.6 million and $45 million,
respectively.

                         ITEM 4. CONTROLS AND PROCEDURES

     An evaluation of the effectiveness of the design and operation of Williams'
disclosure controls and procedures (as defined in Rule 13a-15(e) and 15(d)-(e)
of the Securities Exchange Act)(Disclosure Controls) was performed as of the end
of the period covered by this report. This evaluation was performed under the
supervision and with the participation of Williams' management, including
Williams' Chief Executive Officer and Chief Financial Officer. Based upon that
evaluation, Williams' Chief Executive Officer and Chief Financial Officer
concluded that, subject to the limitations noted below, these Disclosure
Controls are effective.

     Williams' management, including its Chief Executive Officer and Chief
Financial Officer, does not expect that Williams' Disclosure Controls or its
internal controls over financial reporting (Internal Controls) will prevent all
error and all fraud. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the company have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the control. The design of any
system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions.
Over time, controls may become inadequate because of changes in conditions, or
the degree of compliance with the policies or procedures may deteriorate.
Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected. Williams
monitors its Disclosure Controls and Internal Controls and makes modifications
as necessary; Williams' intent in this regard is that the Disclosure Controls
and the Internal Controls will be maintained as systems change and conditions
warrant.

     There has been no change in Williams' Internal Controls that occurred
during the period covered by this report that has materially affected, or is
reasonably likely to materially affect, Williams' Internal Controls.

                                       54

                           PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The information called for by this item is provided in Note 11 Contingent
liabilities and commitments included in the Notes to Consolidated Financial
Statements included under Part I, Item 1. Financial Statements of this report,
which information is incorporated by reference into this item.

Item 2. Changes in Securities and Use of Proceeds

The terms of the $800 million 8.625 percent senior unsecured notes due 2010
issued on June 10, 2003 currently limits the payment of quarterly dividends to
no greater than $.02 per common share. This restriction may be lifted if certain
conditions, including Williams attaining an investment grade rating from both
Moody's Investor's Services and Standard & Poor's, are met.

On May 28, 2003, Williams issued $300 million of 5.5 percent junior subordinated
convertible debentures due 2033 in a private placement. These notes, which are
not callable by the company for seven years, are convertible at the option of
the holder into Williams common stock at a conversion price of $10.89 per share.
The proceeds were used to redeem all of the outstanding 9 7/8 percent
cumulative-convertible preferred shares.

Item 4. Submission of Matters to a Vote of Security Holders

The Annual Meeting of Stockholders of the Company was held on May 15, 2003. At
the Annual Meeting, three individuals were elected as directors of the Company
and seven individuals continue to serve as directors pursuant to their prior
elections. The appointment of Ernst & Young LLP as the independent auditor of
the Company for 2003 was ratified and an amendment to The Williams Companies,
Inc. 2002 Incentive Plan was approved. A shareholder proposal regarding an audit
services policy was not approved.

A tabulation of the voting at the Annual Meeting with respect to the matters
indicated is as follows:

Election of Directors

        Name                            For                      Withheld
- ----------------------           -------------------            ----------
                                                          
William E. Green                    431,452,485                 36,255,783
W.R. Howell                         432,029,952                 35,678,316
George A. Lorch                     441,520,713                 26,187,555

Ratification of Appointment of Independent Auditors

         For                            Against                   Abstain
- ----------------------           -------------------         ----------------
                                                       
441,880,331                           21,453,148                 4,374,789

Approval of  an Amendment to The Williams Companies, Inc. 2002 Incentive Plan

         For                            Against                   Abstain
- ----------------------           -------------------         ----------------
                                                       
374,155,662                            8,414,541                 5,138,065

Approval of  a Policy on Audit Services

         For                            Against
- ----------------------           -------------------
                              
64,757,334                          218,994,157

                                       55

Item 6. Exhibits and Reports on Form 8-K

     (a) The exhibits listed below are filed as part of this report:

          Exhibit 4.1 - Ninth Supplemental Indenture dated June 10, 2003 between
          The Williams Companies, Inc. as Issuer and JPMorgan Chase Bank as
          Trustee.

          Exhibit 4.2-- Indenture dated as of May 28, 2003, by and between The
          Williams Companies, Inc. and JPMorgan Chase Bank, as Trustee for the
          issuance of the 5.5% Junior Subordinated Convertible Debentures due
          2033.

          Exhibit 4.3 - Registration Rights Agreement between The Williams
          Companies, Inc., as Issuer, and Lehman Brothers Inc., as Initial
          Purchaser dated May 28, 2003.

          Exhibit 10.1 - U.S. $500,000,000 Term Loan Agreement among Williams
          Production Holdings LLC, Williams Production RMT Company, as Borrower,
          the Several Lenders from time to time parties thereto, Lehman Brothers
          Inc. and Banc of America Securities LLC as Joint Lead Arrangers,
          Citigroup USA, Inc. and JPMorgan Chase Bank, as Co-Syndication Agents,
          Bank of America, N.A., as Documentation Agent, and Lehman Commercial
          Paper Inc., as Administrative Agent dated as of May 30, 2003.

          Exhibit 10.2-- Guarantee and Collateral Agreement made by Williams
          Production Holdings LLC, Williams Production RMT Company and certain
          of its Subsidiaries in favor of Lehman Commercial Paper Inc. as
          Administrative Agent dated as of May 30, 2003.

          Exhibit 10.3 - U.S. $800,000,000 Credit Agreement dated as of June 6,
          2003, among The Williams Companies, Inc., Northwest Pipeline
          Corporation, Transcontinental Gas Pipe Line Corporation, as Borrowers,
          Citibank, N.A., as Administrative Agent and Collateral Agent, Bank of
          America, N.A., as Syndication Agent, JPMorgan Chase Bank, as
          Documentation Agreement, Citibank, N.A. and Bank of America, N.A as
          Issuing Banks, the banks named therein as Banks and Citigroup Global
          Markets Inc. and Banc of America Securities LLC as Joint Lead
          Arrangers and Joint Book Runners.

          Exhibit 10.4-- Security Agreement dated as of June 6, 2003, among The
          Williams Companies, Inc., as Grantor, Citibank, N.A., as Collateral
          Agent and Citibank, N.A. as Securities Intermediary.

          Exhibit 10.5-- Stock Purchase Agreement dated as of May 19, 2003,
          between MEHC Investment, Inc., MidAmerican Energy Holdings Company,
          and The Williams Companies, Inc.

          Exhibit 10.6 - Purchase Agreement by and among Williams Energy
          Services, LLC, Williams Natural Gas Liquids, Inc. and Williams GP LLC
          collectively, as Selling Parties, and WEG Acquisitions, L.P. as Buyer
          for the purchase and sale of all the membership interests of WEG GP
          LLC, all the Common Units and Subordinated Units of Williams Energy
          Partners, L.P. owned by Williams Energy Services, LLC and Williams
          Natural Gas Liquids, Inc. and all of the Class B Common Units of
          Williams Energy Partners, L.P. dated as of April 18, 2003.

          Exhibit 10.7 - Amendment No. 1 to the Purchase Agreement dated as of
          April 18, 2003 by and among Williams Energy Services, LLC, Williams
          Natural Gas Liquids, Inc. and Williams GP LLC collectively, as Selling
          Parties, and WEG Acquisitions, L.P. as Buyer for the purchase and sale
          of all the membership interests of WEG GP LLC, all the Common Units
          and Subordinated Units of Williams Energy Partners, L.P. owned by
          Williams Energy Services, LLC and Williams Natural Gas Liquids, Inc.
          and all of the Class B Common Units of Williams Energy Partners, L.P.
          dated as of May 5, 2003.

          Exhibit 10.8 -Transition Services Agreement by and between The
          Williams Companies, Inc. and WEG Acquisitions, L.P. dated June 17,
          2003.

          Exhibit 10.9 - New Omnibus Agreement among WEG Acquisitions, L.P.,
          Williams Energy Services, LLC, Williams Natural Gas Liquids, Inc. and
          The Williams Companies, Inc. dated as of June 17, 2003.

                                       56

          Exhibit 10.10 - Assumption Agreement dated June 17, 2003 by and
          between The Williams Companies, Inc. and WEG Acquisitions, L.P.

          Exhibit 12-- Computation of Ratio of Earnings to Combined Fixed
          Charges and Preferred Stock Dividend Requirements.

          Exhibit 31.1 - Certification of Chief Executive Officer pursuant to
          Rules 13a-14(a) and 15d-14(a) promulgated under the Securities
          Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation
          S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
          2002.

          Exhibit 31.2 - Certification of Chief Financial Officer pursuant to
          Rules 13a-14(a) and 15d-14(a) promulgated under the Securities
          Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation
          S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
          2002.

          Exhibit 32--Certification of Chief Executive Officer and Chief
          Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
          pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

          (b) During second-quarter 2003, Williams filed a Form 8-K on the
          following dates reporting events under the specified items: April 10,
          2003 Item 9; April 15, 2003 Item 9; April 16, 2003 Item 9; April 21,
          2003 Item 5 and Item 9; April 22, 2003 Item 5 and Item 7; April 25,
          2003 Item 9; May 13, 2003 Item 9 and Item 12; May 19, 2003 Item 9; May
          21, 2003 Item 9; May 23, 2003 Item 5 and Item 7; May 29, 2003 Item 9;
          May 30, 2003 Item 9; June 2, 2003 Item 9; June 5, 2003 Item 7; June 9,
          2003 Item 5 and Item 7; June 10, 2003 Item 5 and Item 7; June 13, 2003
          Item 7; June 19, 2003 Item 9; and June 27, 2003 Item 5 and Item 7.

                                       57

                                    SIGNATURE

           Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                        THE WILLIAMS COMPANIES, INC.
                                        ---------------------------------------
                                        (Registrant)

                                        /s/ Gary R. Belitz
                                        ---------------------------------------
                                        Gary R. Belitz
                                        Controller
                                        (Duly Authorized Officer and
                                          Principal Accounting Officer)

August 12, 2003

                               INDEX TO EXHIBITS
                               -----------------

EXHIBIT
NUMBER                            DESCRIPTION
- -------                           -----------

Exhibit 4.1--  Ninth Supplemental Indenture dated June 10, 2003
               between The Williams Companies, Inc. as Issuer and JPMorgan Chase
               Bank as Trustee.

Exhibit 4.2--  Indenture dated as of May 28, 2003, by and between The Williams
               Companies, Inc. and JPMorgan Chase Bank, as Trustee for the
               issuance of the 5.50% Junior Subordinated Convertible Debentures
               due 2033.

Exhibit 4.3--  Registration Rights Agreement between The Williams Companies,
               Inc., as Issuer, and Lehman Brothers Inc., as Initial Purchaser
               dated May 28, 2003.

Exhibit 10.1-- U.S. $500,000,000 Term Loan Agreement among Williams Production
               Holdings LLC, Williams Production RMT Company, as Borrower, the
               Several Lenders from time to time parties thereto, Lehman
               Brothers Inc. and Banc of America Securities LLC as Joint Lead
               Arrangers, Citigroup USA, Inc. and JPMorgan Chase Bank, as
               Co-Syndication Agents, Bank of America, N.A., as Documentation
               Agent, and Lehman Commercial Paper Inc., as Administrative Agent
               dated as of May 30, 2003.

Exhibit 10.2-- Guarantee and Collateral Agreement made by Williams Production
               Holdings LLC, Williams Production RMT Company and certain of its
               Subsidiaries in favor of Lehman Commercial Paper Inc. as
               Administrative Agent dated as of May 30, 2003.

Exhibit 10.3-- U.S. $800,000,000 Credit Agreement dated as of June 6, 2003,
               among The Williams Companies, Inc., Northwest Pipeline
               Corporation, Transcontinental Gas Pipe Line Corporation, as
               Borrowers, Citibank, N.A., as Administrative Agent and Collateral
               Agent, Bank of America, N.A., as Syndication Agent, JPMorgan
               Chase Bank, as Documentation Agreement, Citibank, N.A. and Bank
               of America, N.A as Issuing Banks, the banks named therein as
               Banks and Citigroup Global Markets Inc. and Banc of America
               Securities LLC as Joint Lead Arrangers and Joint Book Runners.

Exhibit 10.4-- Security Agreement dated as of June 6, 2003, among The Williams
               Companies, Inc., as Grantor, Citibank, N.A., as Collateral Agent
               and Citibank, N.A. as Securities Intermediary.

Exhibit 10.5-- Stock Purchase Agreement dated as of May 19, 2003, between MEHC
               Investment, Inc., MidAmerican Energy Holdings Company, and The
               Williams Companies, Inc.

Exhibit 10.6-- Purchase Agreement by and among Williams Energy Services, LLC,
               Williams Natural Gas Liquids, Inc. and Williams GP LLC
               collectively, as Selling Parties, and WEG Acquisitions, L.P. as
               Buyer for the purchase and sale of all the membership interests
               of WEG GP LLC, all the Common Units and Subordinated Units of
               Williams Energy Partners, L.P. owned by Williams Energy Services,
               LLC and Williams Natural Gas Liquids, Inc. and all of the Class B
               Common Units of Williams Energy Partners, L.P. dated as of April
               18, 2003.

Exhibit 10.7-- Amendment No. 1 to the Purchase Agreement dated as of April 18,
               2003 by and among Williams Energy Services, LLC, Williams Natural
               Gas Liquids, Inc. and Williams GP LLC collectively, as Selling
               Parties, and WEG Acquisitions, L.P. as Buyer for the purchase and
               sale of all the membership interests of WEG GP LLC, all the
               Common Units and Subordinated Units of Williams Energy Partners,
               L.P. owned by Williams Energy Services, LLC and Williams Natural
               Gas Liquids, Inc. and all of the Class B Common Units of Williams
               Energy Partners, L.P. dated as of May 5, 2003.

Exhibit 10.8-- Transition Services Agreement by and between The Williams
               Companies, Inc. and WEG Acquisitions, L.P. dated June 17, 2003.

Exhibit 10.9-- New Omnibus Agreement among WEG Acquisitions, L.P., Williams
               Energy Services, LLC, Williams Natural Gas Liquids, Inc. and The
               Williams Companies, Inc. dated as of June 17, 2003.

               
Exhibit 10.10--   Assumption Agreement dated June 17, 2003 by and between The
                  Williams Companies, Inc. and WEG Acquisitions, L.P.

Exhibit 12--      Computation of Ratio of Earnings to Combined Fixed Charges and
                  Preferred Stock Dividend Requirements.

Exhibit 31.1--    Certification of Chief Executive Officer pursuant to Rules
                  13a-14(a) and 15d-14(a) promulgated under the Securities
                  Exchange Act of 1934, as amended, and Item 601(b)(31) of
                  Regulation S-K, as adopted pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.

Exhibit 31.2--    Certification of Chief Financial Officer pursuant to Rules
                  13a-14(a) and 15d-14(a) promulgated under the Securities
                  Exchange Act of 1934, as amended, and Item 601(b)(31) of
                  Regulation S-K, as adopted pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.

Exhibit 32--      Certification of Chief Executive Officer and Chief Financial
                  Officer pursuant to 18 U.S.C. Section 1350, as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

                                                                     EXHIBIT 4.1

                          NINTH SUPPLEMENTAL INDENTURE

                            DATED AS OF JUNE 10, 2003

                                     BETWEEN

                          THE WILLIAMS COMPANIES, INC.,

                                    AS ISSUER

                                       AND

                              JPMORGAN CHASE BANK,

                                   AS TRUSTEE

                                                                                             
                                    ARTICLE 1
                                   DEFINITIONS

Section 1.01.  Definition of Terms...........................................................    1
Section 1.02.  Rules of Construction.........................................................   25

                                    ARTICLE 2
                               THE SERIES OF NOTES

Section 2.01.  Title of the Securities.......................................................   25
Section 2.02.  Form And Dating...............................................................   25
Section 2.03.  Aggregate Principal Amount....................................................   26
Section 2.04.  Principal Payment Date........................................................   26
Section 2.05.  Interest And Interest Dates...................................................   26
Section 2.06.  Optional Redemption...........................................................   26
Section 2.07.  Redemption with Proceeds of Public Equity Offering............................   27
Section 2.08.  Change Of Control Offer.......................................................   27
Section 2.09.  Defeasance....................................................................   30

                                    ARTICLE 3
                                    COVENANTS

Section 3.01.  Applicability Of Covenants....................................................   30
Section 3.02.  Commission Reports; Financial Statements......................................   30
Section 3.03.  Limitation On Restricted Payments.............................................   31
Section 3.04.  Limitation On Incurrence Of Indebtedness And Issuance Of Preferred Stock......   35
Section 3.05.  Limitation On Liens...........................................................   37
Section 3.06.  Limitation On Dividend And Other Payment Restrictions Affecting Subsidiaries..   38
Section 3.07.  Repurchase Of Notes Upon A Change Of Control..................................   39
Section 3.08.  Limit On Asset Sales..........................................................   40
Section 3.09.  Limitation On Transactions With Affiliates....................................   44
Section 3.10.  Designation Of Restricted And Unrestricted Subsidiaries.......................   46
Section 3.11.  Limitation On Sale And Leaseback Transactions.................................   46
Section 3.12.  Business Activities...........................................................   46
Section 3.13.  Payments For Consent..........................................................   46
Section 3.14.  Limitation On Mergers, Consolidations And Sales Of Assets.....................   47
Section 3.15.  Covenant Termination..........................................................   48

                                    ARTICLE 4
                                EVENTS OF DEFAULT

Section 4.01.  Applicability Of Events Of Default............................................   48
Section 4.02.  Events Of Default Defined.....................................................   48
Section 4.03.  Acceleration..................................................................   51

                                       i

                                                                                            
Section 4.04.  Waiver Of Existing Defaults...................................................   52
Section 4.05.  Conflict with Base Indenture..................................................   52

                                    ARTICLE 5
                               EXECUTION OF NOTES

Section 5.01.  Execution of Notes............................................................   52

                                    ARTICLE 6
                            MISCELLANEOUS PROVISIONS

Section 6.01.  Ratification..................................................................   53
Section 6.02.  Counterparts..................................................................   53
Section 6.03.  Governing Law.................................................................   53
Section 6.04.  No Recitals, etc..............................................................   53
Section 6.05.  Paying Agent..................................................................   53
Section 6.06.  Liability Of Incorporators, Stockholders, etc.................................   53

Exhibit A. Form of Note......................................................................  A-1

                                       ii

         NINTH SUPPLEMENTAL INDENTURE, dated as of June 10, 2003 (the "NINTH
SUPPLEMENTAL INDENTURE"), between The Williams Companies, Inc., a corporation
duly organized and existing under the laws of the State of Delaware (the
"COMPANY"), and JPMorgan Chase Bank, a New York banking corporation (as
successor trustee to Bank One Trust Company, National Association (successor in
interest to the First National Bank of Chicago)), as trustee (the "TRUSTEE").

         WHEREAS, the Company executed and delivered the Indenture dated as of
November 10, 1997 (the "BASE INDENTURE") to the Trustee to provide for the
issuance from time to time of the Company's senior, unsecured debentures, notes,
or other evidences of indebtedness (the "SECURITIES"), to be issued in one or
more series as might be determined by the Company under the Base Indenture; and

         WHEREAS, pursuant to the terms of the Base Indenture, the Company
desires to provide for the establishment of a new series of its Securities to be
known as its 8 5/8% Senior Notes due 2010 (the "NOTES"), the form and terms of
such Notes and the terms, provisions and conditions thereof to be set forth as
provided in the Base Indenture and this Ninth Supplemental Indenture (together,
the "INDENTURE"); and

         WHEREAS, the Company has requested that the Trustee execute and deliver
this Ninth Supplemental Indenture and all requirements necessary to make this
Ninth Supplemental Indenture a valid, binding and enforceable instrument in
accordance with its terms, and to make the Notes, when executed, authenticated
and delivered by the Company, the valid, binding and enforceable obligations of
the Company, have been done and performed, and the execution and delivery of
this Ninth Supplemental Indenture has been duly authorized in all respects.

         NOW THEREFORE, in consideration of the purchase and acceptance of the
Notes by the Holders thereof, and for the purpose of setting forth, as provided
in the Base Indenture, the form and terms of the Notes, the Company covenants
and agrees with the Trustee as follows:

                                    ARTICLE 1
                                   DEFINITIONS

         Section 1.01. Definition of Terms.Unless the context otherwise
requires:

                  (a)      except as provided in Section 1.01(c), a term defined
         in the Base Indenture has the same meaning when used in this Ninth
         Supplemental Indenture;

                  (b)      a term defined anywhere in this Ninth Supplemental
         Indenture has the same meaning throughout;

                  (c)      a term defined anywhere in this Ninth Supplemental
         Indenture that has a meaning inconsistent with the meaning given such
         term in the Base Indenture shall have the meaning given such term in
         this Ninth Supplemental Indenture;

                  (d)      the singular includes the plural and vice versa;

                  (e)      headings are for convenience of reference only and do
         not affect interpretation; and

                  (f)      the following terms have the meanings given to them
         in this Section 1.01(f):

         "ACQUIRED DEBT" means, with respect to any specified Person:

                  (1)      Indebtedness of any other Person existing at the time
         such other Person is merged with or into or became a Subsidiary of such
         specified Person, whether or not such Indebtedness is incurred in
         connection with, or in contemplation of, such other Person merging with
         or into, or becoming a Subsidiary of, such specified Person; and

                  (2)      Indebtedness secured by a Lien encumbering any asset
         acquired by such specified Person.

         "AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "CONTROL,"
as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person will be deemed to be control. For purposes of this
definition, the terms "CONTROLLING," "CONTROLLED BY" and "UNDER COMMON CONTROL
WITH" have correlative meanings.

         "ASSET SALE" means:

                  (1)      the sale, lease, conveyance or other disposition of
         any assets or rights; provided that the sale, conveyance or other
         disposition of all or substantially all of the assets of the Company
         and its Restricted Subsidiaries taken as a whole will be governed by
         the provisions of Section 3.07 or Section 3.14 hereof and not by the
         provisions of Section 3.08; and

                  (2)      the issuance of Equity Interests in any of the
         Company's Restricted Subsidiaries or the sale of Equity Interests in
         any of its Restricted Subsidiaries.

                                       2

         Notwithstanding the preceding, the following items will not be deemed
to be Asset Sales:

                  (1)      any single transaction or series of related
         transactions that involves assets having a fair market value of less
         than $10.0 million;

                  (2)      a transfer of assets between or among the Company and
         its Restricted Subsidiaries,

                  (3)      an issuance of Equity Interests by a Restricted
         Subsidiary to the Company or to another Restricted Subsidiary;

                  (4)      the sale or lease of equipment, inventory, accounts
         receivable or other assets in the ordinary course of business;

                  (5)      the sale or other disposition of cash or Cash
         Equivalents;

                  (6)      dispositions of accounts receivable and related
         assets to a Securitization Subsidiary in connection with a Permitted
         Receivables Financing;

                  (7)      Sale and Leaseback Transactions;

                  (8)      a Restricted Payment or Permitted Investment that is
         permitted by Section 3.03 hereof;

                  (9)      dispositions in the ordinary course of business on
         arm's-length terms consummated pursuant to Oil and Gas Agreements; and

                  (10)     (i) dispositions of property acquired after the date
         hereof required in connection with operating contracts, joint venture
         agreements and lease arrangements entered into after the date hereof in
         the ordinary course of business and on arm's-length terms (which
         disposition is with the other party to such agreement), the aggregate
         value of which shall not exceed $25,000,000 per fiscal year and (ii)
         dispositions required in connection with operating contracts, joint
         venture agreements and lease agreements existing on the date hereof.

         "ATTRIBUTABLE DEBT" in respect of a Sale and Leaseback Transaction
means, at the time of determination, the present value of the obligation of the
lessee for net rental payments during the remaining term of the lease included
in such Sale and Leaseback Transaction including any period for which such lease
has been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.

         "BENEFICIAL OWNER" has the meaning assigned to such term in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial

                                       3

ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" will be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"BENEFICIALLY OWNS" and "BENEFICIALLY OWNED" have a corresponding meaning.

         "BOARD OF DIRECTORS" means:

                  (1)      with respect to a corporation, the board of directors
         of the corporation or any committee of such board authorized to act on
         its behalf;

                  (2)      with respect to a partnership, the board of directors
         of the general partner of the partnership or any committee of such
         board authorized to act on its behalf; and

                  (3)      with respect to any other Person, the board or
         committee of such Person serving a similar function.

         "CAPITAL LEASE OBLIGATION" means, at the time any determination is to
be made, the amount of the liability in respect of a capital lease that would at
that time be required to be capitalized on a balance sheet in accordance with
GAAP.

         "CAPITAL STOCK" means:

                  (1)      in the case of a corporation, corporate stock;

                  (2)      in the case of an association or business entity, any
         and all shares, interests, participations, rights or other equivalents
         (however designated) of corporate stock;

                  (3)      in the case of a partnership or limited liability
         company, partnership or membership interests (whether general or
         limited); and

                  (4) any other interest or participation that confers on a
         Person the right to receive a share of the profits and losses of, or
         distributions of assets of, the issuing Person.

         "CASH EQUIVALENTS" means:

                  (1)      United States dollars;

                  (2)      securities issued or directly and fully guaranteed or
         insured by the United States government or any agency or
         instrumentality of the United States government (provided that the full
         faith and credit of the United States is pledged in support of those
         securities) having maturities of not more than two years from the date
         of acquisition;

                                       4

                  (3)      (i) demand deposits, (ii) certificates of deposit and
         eurodollar time deposits with maturities of one year or less from the
         date of acquisition, (iii) bankers' acceptances with maturities not
         exceeding 365 days and (iv) overnight bank deposits and other similar
         types of investments routinely offered by commercial banks, in each
         case, with any lender party to the Credit Agreement or with any
         domestic commercial bank or trust company having capital and surplus in
         excess of $100.0 million;

                  (4)      repurchase obligations with a term of not more than
         seven days for underlying securities of the types described in clauses
         (2) and (3) above entered into with any financial institution meeting
         the qualifications specified in clause (3) above;

                  (5)      commercial paper rated at least P-2 by Moody's or A-2
         by S&P and in each case maturing within 270 days after the date of
         acquisition;

                  (6)      short-term tax exempt securities, including municipal
         notes, commercial paper, auction rate floaters, and floating rate notes
         rated either P-1 by Moody's or A-1 by S&P and maturing within 270 days
         of acquisition;

                  (7)      securities with maturities of one year or less from
         the date of acquisition issued or fully guaranteed by any state,
         commonwealth or territory of the United States, by any political
         subdivision or taxing authority of any such state, commonwealth or
         territory or by any foreign government, the securities of which state,
         commonwealth, territory, political subdivision, taxing authority or
         foreign government (as the case may be) are rated at least A by Moody's
         or A by S&P;

                  (8)      money market funds the assets of which constitute
         primarily Cash Equivalents of the kinds described in clauses (1)
         through (7) of this definition; and

                  (9)      deposits available for withdrawal on demand with any
         commercial bank not meeting the qualifications specified in clause (3)
         above; provided that all such deposits are made in the ordinary course
         of business, do not remain on deposit for more than 30 consecutive days
         and do not exceed $10.0 million in the aggregate at any one time.

         "CHANGE OF CONTROL" means the occurrence of any of the following:

                  (1)      the direct or indirect sale, transfer, conveyance or
         other disposition (other than by way of merger or consolidation), in
         one or a series of related transactions, of all or substantially all of
         the properties or assets of the Company and its Restricted Subsidiaries
         taken as a whole to

                                       5

         any "person" (as that term is used in Section 13(d)(3) of the Exchange
         Act);

                  (2)      the adoption of a plan relating to the liquidation or
         dissolution of the Company;

                  (3)      the consummation of any transaction (including,
         without limitation, any merger or consolidation) the result of which is
         that, any "person" or "group" (as such terms are used for purposes of
         Sections 13(d) and 14(d) of the Exchange Act) (other than a trustee or
         other fiduciary holding securities under an employee benefit plan of
         the Company or any of its Subsidiaries) becomes the Beneficial Owner,
         directly or indirectly, of more than 50% of the Voting Stock of the
         Company, measured by voting power rather than number of shares;

                  (4)      the first day on which a majority of the members of
         the Board of Directors of the Company are not Continuing Directors; or

                  (5)      the Company consolidates with, or merges with or
         into, any Person, or any Person consolidates with, or merges with or
         into, the Company, in any such event pursuant to a transaction in which
         any of the outstanding Voting Stock of the Company or such other Person
         is converted into or exchanged for cash, securities or other property,
         other than any such transaction where the Voting Stock of the Company
         outstanding immediately prior to such transaction is converted into or
         exchanged for Voting Stock (other than Disqualified Stock) of the
         surviving or transferee Person constituting a majority of the
         outstanding shares of such Voting Stock of such surviving or transferee
         Person (immediately after giving effect to such issuance).

          "CONSOLIDATED CASH FLOW" means, with respect to any specified Person
for any period, the Consolidated Net Income of such Person for such period plus
(without duplication):

                  (1)      an amount equal to any extraordinary loss plus any
         net loss realized by such Person or any of its Subsidiaries in
         connection with an Asset Sale, to the extent such losses were deducted
         in computing such Consolidated Net Income; plus

                  (2)      provision for taxes based on income or profits of
         such Person and its Restricted Subsidiaries for such period, to the
         extent that such provision for taxes was deducted in computing such
         Consolidated Net Income; plus

                  (3)      consolidated interest expense of such Person and its
         Restricted Subsidiaries for such period, whether paid or accrued and
         whether or not capitalized (including, without limitation, amortization
         of

                                       6

         debt issuance costs and original issue discount, non-cash interest
         payments, the interest component of any deferred payment obligations,
         the interest component of all payments associated with Capital Lease
         Obligations, imputed interest with respect to Attributable Debt,
         commissions, discounts and other fees and charges incurred in respect
         of letter of credit or bankers' acceptance financings, and net of the
         effect of all payments made or received pursuant to Related Interest
         Rate or Currency Hedges), to the extent that any such expense was
         deducted in computing such Consolidated Net Income; plus

                  (4)      depreciation, amortization (including amortization of
         goodwill and other intangibles but excluding amortization of prepaid
         cash expenses that were paid in a prior period) and other non-cash
         items (excluding any such non-cash item to the extent that it
         represents an accrual of or reserve for cash expenses in any future
         period or amortization of a prepaid cash expense that was paid in a
         prior period) of such Person and its Subsidiaries for such period to
         the extent that such depreciation, amortization and other non-cash
         items were deducted in computing such Consolidated Net Income; plus

                  (5)      unrealized non-cash losses resulting from foreign
         currency balance sheet adjustments required by GAAP to the extent such
         losses were deducted in computing such Consolidated Net Income; plus

                  (6)      all losses incurred as a result of EM&T Portfolio
         Disposition Transactions, to the extent such losses were deducted in
         computing such Consolidated Net Income, minus

                  (7)      all gains as a result of EM&T Portfolio Disposition
         Transactions, to the extent such gains were included in computing such
         Consolidated Net Income; plus

                  (8)      all extraordinary, unusual or non-recurring items of
         gain or loss, or revenue or expense to the extent such gains or losses
         were added or deducted in computing such Consolidated Net Income; minus

                  (9)      non-cash items increasing such Consolidated Net
         Income for such period, other than the accrual of revenue in the
         ordinary course of business,

in each case, on a consolidated basis and determined (where applicable) in
accordance with GAAP.

         "CONSOLIDATED NET INCOME" means, with respect to any specified Person
for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that:

                                       7

                  (1)      the Net Income (but not loss) of any Person that is
         not a Restricted Subsidiary or that is accounted for by the equity
         method of accounting will be included only to the extent of the amount
         of dividends or distributions paid in cash to the specified Person or a
         Restricted Subsidiary of the Person;

                  (2)      the Net Income of any Restricted Subsidiary will be
         excluded to the extent that the declaration or payment of dividends or
         similar distributions by that Restricted Subsidiary of that Net Income
         is not at the date of determination permitted without any prior
         governmental approval (that has not been obtained) or, directly or
         indirectly, by operation of the terms of its charter or any agreement,
         instrument, judgment, decree, order, statute, rule or governmental
         regulation applicable to that Restricted Subsidiary or its
         stockholders;

                  (3)      the Net Income of any Person acquired in a pooling of
         interests transaction for any period prior to the date of such
         acquisition will be excluded; and

                  (4)      the cumulative effect of a change in accounting
         principles will be excluded.

         "CONSOLIDATED NET TANGIBLE ASSETS" means, with respect to any Person at
any date of determination, the aggregate amount of total assets included in such
Person's most recent quarterly or annual consolidated balance sheet prepared in
accordance with GAAP less applicable reserves reflected in such balance sheet,
after deducting the following amounts: (i) all current liabilities reflected in
such balance sheet, and (ii) all goodwill, trademarks, patents, unamortized debt
discounts and expenses and other like intangibles reflected in such balance
sheet.

         "CONTINUING DIRECTORS" means, as of any date of determination, any
member of the Board of Directors of the Company who:

                  (1)      was a member of such Board of Directors on the date
         hereof; or

                  (2)      was nominated for election or elected to such Board
         of Directors with the approval of a majority of the Continuing
         Directors who were members of such Board at the time of such nomination
         or election.

         "CREDIT AGREEMENT" means the Credit Agreement dated June 6, 2003 by and
among the Company, Northwest Pipeline Corporation and Transcontinental Gas Pipe
Line Corporation as Borrowers and the banks named therein as Banks, the "Issuing
Banks", "Co-Lead Arrangers" and other parties referred to therein, and Citicorp
USA, Inc., as Agent and Collateral Agent, including any related notes,
guarantees, collateral documents, instruments and agreements executed in

                                       8

connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time.

         "CREDIT FACILITIES" means, one or more debt facilities (including,
without limitation, (1) the Credit Agreement, (2) the New RMT Loan, and (3) one
or more Permitted Receivables Financings) or commercial paper facilities, in
each case with banks or other institutional lenders, or pursuant to intercompany
loan or advance arrangements between the Company as borrower, on the one hand,
and one or more of its Subsidiaries, on the other (provided that in the case of
such intercompany arrangements with the Company's Subsidiaries that such
arrangements are on terms consistent with practices in existence on the date
hereof) providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time.

         "DEFAULT" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.

         "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder of the Capital Stock), or
upon the happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or redeemable at the option of the
holder of the Capital Stock, in whole or in part, on or prior to the date that
is 91 days after the date on which the Notes mature. Notwithstanding the
preceding sentence, any Capital Stock that would constitute Disqualified Stock
solely because the holders of the Capital Stock have the right to require the
Company to repurchase such Capital Stock upon the occurrence of a Change of
Control or an Asset Sale will not constitute Disqualified Stock if the terms of
such Capital Stock provide that the Company may not repurchase or redeem any
such Capital Stock pursuant to such provisions unless such repurchase or
redemption complies with Section 3.03 hereof.

         "EM&T PORTFOLIO DISPOSITION TRANSACTION" means the sale, buyout,
liquidation or material restructuring, not in the ordinary course of business,
of a tolling or full requirements structured transaction in existence on the
date hereof, and associated Hedging Obligations; provided that in the good faith
belief of an executive officer of the Company, such sale, buyout, liquidation or
restructuring is consistent with the effort to reduce the risk profile and
overall financial commitment of the Company's Energy Marketing & Trading
business.

         "EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).

                                       9

         "EQUITY OFFERING" means a primary issuance, after the date hereof, of
Capital Stock (other than Disqualified Stock) of the Company either through an
offering pursuant to an effective registration statement under the Securities
Act (other than an issuance registered on Form S-4 or S-8 or any successor
thereto) or pursuant to a private placement (but excluding in any event any
issuance pursuant to an exemption from the registration requirements of the
Securities Act or any issuance pursuant to employee benefit plans or otherwise
in compensation to officers, directors or employees).

         "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

         "EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Restricted Subsidiaries (other than Indebtedness under the Credit Facilities) in
existence on the date hereof, until such amounts are repaid.

         "FIXED CHARGE COVERAGE RATIO" means with respect to any specified
Person for any period, the ratio of the Consolidated Cash Flow of such Person
for such period to the Fixed Charges of such Person for such period. In the
event that the specified Person or any of its Restricted Subsidiaries incurs,
assumes, Guarantees, repays, repurchases or redeems any Indebtedness (other than
ordinary working capital borrowings) or issues, repurchases or redeems preferred
stock subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated and on or prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"CALCULATION DATE"), then the Fixed Charge Coverage Ratio will be calculated
giving pro forma effect to such incurrence, assumption, Guarantee, repayment,
repurchase or redemption of Indebtedness, or such issuance, repurchase or
redemption of preferred stock, and the use of the proceeds therefrom as if the
same had occurred at the beginning of the applicable four-quarter reference
period.

         In addition, for purposes of calculating the Fixed Charge Coverage
Ratio:

                  (1)      acquisitions that have been made by the specified
         Person or any of its Restricted Subsidiaries, including through
         mergers, consolidations or otherwise (including acquisitions of assets
         used in a Permitted Business and Qualifying Expansion Projects) and
         including any related financing transactions (including any repayment
         of Indebtedness), during the four-quarter reference period or
         subsequent to such reference period and on or prior to the Calculation
         Date will be given pro forma effect as if they had occurred or (in the
         case of any Qualifying Expansion Projects) have been completed and in
         service on the first day of the four-quarter reference period,
         including any Consolidated Cash Flow (including interest income
         reasonably anticipated by such Person to be received from Cash or Cash
         Equivalents held by such Person or any of its Restricted Subsidiaries)
         and any pro forma expense and cost reductions

                                       10

         that have occurred or are reasonably expected to occur, in the
         reasonable judgment of the chief financial officer or chief accounting
         officer of the Company (regardless of whether those cost savings or
         operating improvements could then be reflected in pro forma financial
         statements in accordance with Regulation S-X promulgated under the
         Securities Act or any other regulation or policy of the Commission
         related thereto) but in the case of Qualifying Expansion Projects, only
         to the extent of Qualifying Expansion Project Amounts;

                  (2)      the Consolidated Cash Flow attributable to
         discontinued operations, as determined in accordance with GAAP, and
         operations or businesses disposed of prior to the Calculation Date,
         will be excluded; and

                  (3)      the Fixed Charges attributable to discontinued
         operations, as determined in accordance with GAAP, and operations or
         businesses disposed of prior to the Calculation Date, will be excluded,
         but only to the extent that the obligations giving rise to such Fixed
         Charges will not be obligations of the specified Person or any of its
         Restricted Subsidiaries following the Calculation Date.

         "FIXED CHARGES" means, with respect to any specified Person for any
period, the sum, without duplication, of:

                  (1)      the consolidated interest expense of such Person and
         its Restricted Subsidiaries for such period, whether paid or accrued,
         including, without limitation, amortization of debt issuance costs and
         original issue discount, non-cash interest payments, the interest
         component of any deferred payment obligations, the interest component
         of all payments associated with Capital Lease Obligations, imputed
         interest with respect to Attributable Debt, commissions, discounts and
         other fees and charges incurred in respect of letter of credit or
         bankers' acceptance financings, any premiums, fees, discounts,
         expenses and losses on the sale of accounts receivable (and any
         amortization thereof) in connection with a Permitted Receivables
         Financing, and net of the effect of all payments made or received
         pursuant to Related Interest Rate or Currency Hedges ; plus

                  (2)      the consolidated interest of such Person and its
         Restricted Subsidiaries that was capitalized during such period; plus

                  (3)      any interest expense on Indebtedness of another
         Person that is Guaranteed by such Person or one of its Restricted
         Subsidiaries or secured by a Lien on assets of such Person or one of
         its Restricted Subsidiaries, whether or not such Guarantee or Lien is
         called upon; plus

                  (4)      the product of (a) all dividends, whether paid or
         accrued and whether or not in cash, on any series of preferred stock of
         such Person

                                       11

         or any of its Restricted Subsidiaries, other than dividends on Equity
         Interests payable solely in Equity Interests of the Company (other than
         Disqualified Stock) or to the Company or a Restricted Subsidiary of the
         Company, times (b) a fraction, the numerator of which is one and the
         denominator of which is one minus the then current combined federal,
         state and local statutory tax rate of such Person, expressed as a
         decimal, in each case, on a consolidated basis and in accordance with
         GAAP.

         "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, all as in effect from time to time.

         "GUARANTEE" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.

         "HEDGING OBLIGATIONS" means, with respect to any specified Person, the
obligations of such Person incurred in the normal course of business and
consistent with past practices and not for speculative purposes under:

                  (1)      interest rate swap agreements, interest rate cap
         agreements and interest rate collar agreements;

                  (2)      foreign exchange contracts and currency protection
         agreements entered into with one or more financial institutions
         designed to protect the person or entity entering into the agreement
         against fluctuations in interest rates or currency exchanges rates with
         respect to Indebtedness incurred and not for purposes of speculation;

                  (3)      any commodity futures contract, commodity option or
         other similar agreement or arrangement designed to protect against
         fluctuations in the price of commodities used by that entity at the
         time; and

                  (4)      other agreements or arrangements designed to protect
         such person against fluctuations in interest rates or currency exchange
         rates.

         "INDEBTEDNESS" means, with respect to any specified Person, any
obligation of such Person, whether or not contingent:

                  (1)      in respect of borrowed money;

                                       12

                  (2)      evidenced by bonds (but not including performance or
         surety bonds), notes, debentures or similar instruments or letters of
         credit (or reimbursement agreements in respect thereof);

                  (3)      in respect of banker's acceptances;

                  (4)      representing Capital Lease Obligations;

                  (5)      representing the balance deferred and unpaid
         of the purchase price of any property, except any such balance that
         constitutes an accrued expense or trade payable;

                  (6)      representing any Related Interest Rate or Currency
         Hedges, or

                  (7)      under Permitted Receivables Financings;

         if and to the extent any of the preceding items (other than letters of
credit and Related Interest Rate or Currency Hedges and obligations in respect
of Permitted Receivables Financings) would appear as a liability upon a balance
sheet of the specified Person prepared in accordance with GAAP. In addition, the
term "Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by the specified Person of any indebtedness of any other Person.

         The amount of any Indebtedness outstanding as of any date will be:

                  (1)      the accreted value of the Indebtedness, in the case
         of any Indebtedness issued with original issue discount;

                  (2)      in the case of any Permitted Receivables Financing,
         the net unrecovered principal amount of the accounts receivable sold
         thereunder at such date, or other similar amount representing the
         principal financing amount thereof;

                  (3)      in the case of any Related Interest Rate or Currency
         Hedges, the net amount payable if such Related Interest Rate or
         Currency Hedges is terminated at that time due to default by such
         Person (after giving effect to any contractually permitted set-off);
         and

                  (4)      the principal amount of the Indebtedness in the case
         of any other Indebtedness.

         "INVESTMENT GRADE DATE" has the meaning set forth in Section 3.15
hereof.

                                       13

         "INVESTMENT GRADE RATING" means a rating equal to or higher than Baa3
by Moody's (or its equivalent under any successor rating categories of Moody's)
and BBB- by S&P (or its equivalent under any successor rating categories of
S&P).

         "INVESTMENTS" means, with respect to any Person, all direct or indirect
investments by such Person in other Persons (including Affiliates) in the forms
of loans (including Guarantees (other than Guarantees of Indebtedness of the
Company or any of its Restricted Subsidiaries to the extent permitted by Section
3.04 hereof)), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business and excluding trade payables of the Company and its Subsidiaries
arising in the ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP. If the Company or any Subsidiary of the
Company sells or otherwise disposes of any Equity Interests of any direct or
indirect Subsidiary of the Company such that, after giving effect to any such
sale or disposition, such Person is no longer a Subsidiary of the Company, the
Company will be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of in an amount determined as provided in
paragraph (c) of Section 3.03 hereof. The acquisition by the Company or any
Subsidiary of the Company of a Person that holds an Investment in a third Person
will be deemed to be an Investment by the Company or such Subsidiary in such
third Person in an amount equal to the fair market value of the Investment held
by the acquired Person in such third Person in an amount determined as provided
in paragraph (c) of Section 3.03 hereof.

         "LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

         "MAKE-WHOLE AMOUNT" with respect to a Note means an amount equal to the
excess, if any, of (1) the present value of the remaining interest, premium and
principal payments due on such Note (excluding any portion of such payments of
interest accrued as of the redemption date), computed using a discount rate
equal to the Treasury Rate plus 50 basis points, over (2) the outstanding
principal amount of such Note. "TREASURY RATE" is defined as the yield to
maturity (calculated on a semi-annual bond-equivalent basis) at the time of the
computation of United States Treasury securities with a constant maturity (as
compiled by and published in the most recent Federal Reserve Statistical Release
H.15 (519), which has become publicly available at least two Business

                                       14

Days prior to the date of the related redemption notice given pursuant to
Section 12.2 of the Base Indenture or, if such Statistical Release is no longer
published, any publicly available source of similar market data) most nearly
equal to the then remaining maturity of the Notes; provided that if the
Make-Whole Average Life of such Note is not equal to the constant maturity of
the United States Treasury security for which a weekly average yield is given,
the Treasury Rate shall be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from the weekly average yields of United States
Treasury securities for which such yields are given, except that if the
Make-Whole Average Life of such Note is less than one year, the weekly average
yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year shall be used. "MAKE-WHOLE AVERAGE LIFE" means the
number of years (calculated to the nearest one-twelfth) between the date of
redemption and the Stated Maturity of the Notes.

         "MAKE-WHOLE PRICE" means the sum of the Outstanding principal amount of
the Notes to be redeemed plus the Make-Whole Amount of those Notes.

         "MATURITY DATE" means, with respect to any Note, the date on which any
principal of such Note becomes due and payable, whether at the Stated Maturity
with respect to such principal or by declaration of acceleration, call for
redemption or purchase or otherwise.

         "MOODY'S" means Moody's Investors Service, Inc. and its successors.

         "NET INCOME" means, with respect to any specified Person, the net
income (loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:

                  (1)      any gain (but not loss), together with any related
         provision for taxes on such gain (but not loss), realized in connection
         with: (a) any Asset Sale; or (b) the disposition of any securities by
         such Person or any of its Subsidiaries or the extinguishment of any
         Indebtedness of such Person or any of its Subsidiaries; and

                  (2)      any extraordinary gain (but not loss), together with
         any related provision for taxes on such extraordinary gain (but not
         loss).

         "NET PROCEEDS" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale, including, without limitation,
legal, accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result of the Asset Sale, taxes paid or
payable as a result of the Asset Sale (as reasonably estimated by the Company),
in each case, after taking into

                                       15

account any available tax credits or deductions and any tax sharing
arrangements, and amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the asset or assets that were the subject of
such Asset Sale and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.

         "NEW RMT LOAN" means the Term Loan Agreement dated as of May 30, 2003
among Williams Production Holdings LLC, Williams Production RMT Company, as
borrower, the "Lenders", "Arrangers", "Co-Syndication Agents" and "Documentation
Agent" referred to therein, and Lehman Commercial Paper Inc., as Administrative
Agent, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and as the same may
further be amended, modified, renewed, refunded, replaced or refinanced from
time to time.

         "NON-RECOURSE DEBT" means Indebtedness:

                  (1)      as to which neither the Company nor any of its
         Restricted Subsidiaries (a) provides credit support of any kind
         (including any undertaking, agreement or instrument that would
         constitute Indebtedness), (b) is directly or indirectly liable as a
         guarantor or otherwise, or (c) constitutes the lender;

                  (2)      no default with respect to which (including any
         rights that the holders of the Indebtedness may have to take
         enforcement action against an Unrestricted Subsidiary) would permit
         upon notice, lapse of time or both any holder of any other Indebtedness
         (other than the Notes) of the Company or any of its Restricted
         Subsidiaries to declare a default on such other Indebtedness or cause
         the payment of the Indebtedness to be accelerated or payable prior to
         its Stated Maturity; and

                  (3)      as to which the lenders have been notified in writing
         that they will not have any recourse to the stock or assets of the
         Company or any of its Restricted Subsidiaries.

         "OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.

         "OIL AND GAS AGREEMENTS" means operating agreements, processing
agreements, farm-out and farm-in agreements, development agreements, area of
mutual interest agreements, contracts for the gathering and/or transportation of
oil and natural gas, unitization agreements, pooling arrangements, joint bidding
agreements, joint venture agreements, participation agreements, surface use
agreements, service contracts, tax credit agreements, leases and subleases of
oil and gas properties or other similar customary agreements; transactions,
properties, interests or arrangements, howsoever designated, in each case made
or entered

                                       16

into in the ordinary course of business as conducted by the Company and its
Restricted Subsidiaries.

         "PERMITTED BUSINESS" means the lines of business conducted by the
Company and its Restricted Subsidiaries on the date hereof and any business
incidental or reasonably related thereto or which is a reasonable extension
thereof as determined in good faith by the Board of Directors of the Company and
set forth in an Officers' Certificate delivered to the Trustee.

         "PERMITTED INVESTMENTS" means:

                  (1)      any Investment in the Company or in a Restricted
         Subsidiary of the Company;

                  (2)      any Investment in Cash Equivalents;

                  (3)      any Investment by the Company or any Subsidiary of
         the Company in a Person, if as a result of such Investment:

                           (a)      such Person becomes a Restricted Subsidiary
                  of the Company; or

                           (b)      such Person is merged, consolidated or
                  amalgamated with or into, or transfers or conveys
                  substantially all of its assets to, or is liquidated into, the
                  Company or a Restricted Subsidiary of the Company;

                  (4)      any Investment made as a result of the receipt of
         non-cash consideration from an Asset Sale that was made pursuant to and
         in compliance with Section 3.08 hereof, or any non-cash consideration
         that was excluded from the definition of Asset Sale pursuant to clause
         (1) or (4) (for the sale or lease of equipment) pursuant to the second
         paragraph of such definition;

                  (5)      any Investment in any Person solely in exchange for
         the issuance of Equity Interests (other than Disqualified Stock) of the
         Company;

                  (6)      any purchase or other acquisition of senior debt of
         the Company or any Restricted Subsidiary (other than Indebtedness that
         is subordinated to the Notes);

                  (7)      any Investments received in compromise of obligations
         of such persons incurred in the ordinary course of trade creditors or
         customers that were incurred in the ordinary course of business,
         including pursuant to any plan of reorganization or similar arrangement
         upon the bankruptcy or insolvency of any trade creditor or customer;

                                       17

                  (8)      Hedging Obligations incurred in the ordinary course
         of business;

                  (9)      Investments in a Securitization Subsidiary that are
         necessary or desirable to effect any Permitted Receivables Financing;

                  (10)     Investments by the Company or any Restricted
         Subsidiary in the Discovery, Gulfstream, Aux Sable and Accroven joint
         ventures existing on the date hereof in an aggregate amount for each
         such joint venture (exclusive of equity Investments therein existing on
         the date hereof) not in excess of the Company's direct or indirect
         equity percentage interest of the total Indebtedness of such joint
         venture on the date hereof, together with, in the case of Gulfstream,
         such percentage interest of additional Indebtedness incurred in
         accordance with expansions thereof that have been publicly announced
         prior to the date hereof;

                  (11)     Investments by the Company or any Restricted
         Subsidiary in joint ventures operating primarily in a Permitted
         Business in an amount which, together with the amount of all other
         Investments made after the date hereof in reliance on this clause (11),
         does not exceed 3% of Consolidated Net Tangible Assets;

                  (12)     reclassification of any Investment initially made in
         the form of equity as a loan or advance, and reclassification of any
         Investment initially made in the form of a loan or advance as equity;
         provided in each case that the amount of such Investment is not
         increased thereby; and

                  (13)     other Investments in any Person having an aggregate
         fair market value (measured on the date each such Investment was made
         and without giving effect to subsequent changes in value), when taken
         together with all other Investments made pursuant to this clause that
         are at the time outstanding not to exceed $50 million.

         "PERMITTED LIENS" means:

                  (1)      Liens of the Company and any Restricted Subsidiary
         securing any Credit Facility that was permitted by the terms of this
         Indenture to be incurred and all Obligations and Hedging Obligations
         relating to such Indebtedness (but excluding any Credit Facility with
         any Subsidiary or other Affiliate of the Company, as lender);

                  (2)      Liens (i) in favor of the Company, or (ii) on
         property of a Restricted Subsidiary in favor of another Restricted
         Subsidiary;

                  (3)      Liens on property of a Person existing at the time
         such Person is merged with or into or consolidated with or acquired by
         the Company or any Restricted Subsidiary of the Company or renewals or

                                       18

         replacement of such Liens in connection with the incurrence of
         Permitted Refinancing Indebtedness to refinance Indebtedness secured by
         such Liens; provided that such Liens were in existence prior to the
         contemplation of such merger, consolidation or acquisition and do not
         extend to any assets other than those of the Person merged into or
         consolidated with the Company or the Restricted Subsidiary;

                  (4)      Liens on property existing at the time of acquisition
         of the property by the Company or any Restricted Subsidiary of the
         Company or renewals or replacement of such Liens in connection with the
         incurrence of Permitted Refinancing Indebtedness to refinance
         Indebtedness secured by such Liens; provided that such Liens were in
         existence prior to the contemplation of such acquisition;

                  (5)      Liens to secure the performance of tenders, bids,
         statutory obligations, surety or appeal bonds, performance bonds or
         other obligations of a like nature incurred in the ordinary course of
         business;

                  (6)      Liens to secure Indebtedness (including Capital Lease
         Obligations) (x) permitted by clause (4) of the second paragraph of
         Section 3.04 hereof covering only the assets acquired with such
         Indebtedness or similar assets acquired in connection with the
         incurrence of such Permitted Refinancing Indebtedness or (y) permitted
         by clause (5) of such paragraph, to the extent that such Permitted
         Refinancing Indebtedness is in respect of Indebtedness initially
         incurred under clause (4) (whether or not subsequently incurred as
         Permitted Refinancing Indebtedness);

                  (7)      Liens existing on the date hereof;

                  (8)      Liens for taxes, assessments or governmental charges
         or claims that are not yet delinquent or that are being contested in
         good faith by appropriate proceedings promptly instituted and
         diligently concluded; provided that any reserve or other appropriate
         provision as is required in conformity with GAAP has been made
         therefor;

                  (9)      Liens on assets of Unrestricted Subsidiaries that
         secure Non-Recourse Debt of Unrestricted Subsidiaries;

                  (10)     Liens on accounts receivable and related assets and
         proceeds thereof arising in connection with a Permitted Receivables
         Financing;

                  (11)     Liens arising under Oil and Gas Agreements;

                  (12)     any mortgage which is payable, both with respect to
         principal and interest, solely out of the proceeds of oil, gas, coal or
         other

                                       19

         minerals or timber to be produced from the property subject thereto
         and to be sold or delivered by the Company or one of its Restricted
         Subsidiaries, including any interest of the character commonly
         referred to as a "production payment";

                  (13)     any mortgage created or assumed by a Restricted
         Subsidiary on oil, gas, coal or other mineral or timber property,
         owned or leased by a Restricted Subsidiary to secure loans to such
         Subsidiary for the purposes of developing such properties, including
         any interest of the character commonly referred to as a "production
         payment"; provided, however, that neither the Company nor any other
         Subsidiary shall assume or guarantee such loans or otherwise be liable
         in respect thereto;

                  (14)     Liens granted in cash collateral to support the
         issuance of letters of credit in an aggregate face amount not exceeding
         $30.0 million;

                  (15)     Liens pursuant to master netting agreements entered
         into in the ordinary course of business in connection with Hedging
         Obligations; and

                  (16)     Liens with respect to Indebtedness and other
         obligations that at the time of incurrence do not exceed in the
         aggregate for all such obligations under this clause (16) 15% of the
         Consolidated Net Tangible Assets of the Company.

         "PERMITTED RECEIVABLES FINANCING" means any receivables financing
facility or arrangement pursuant to which a Securitization Subsidiary purchases
or otherwise acquires accounts receivable of the Company or any Restricted
Subsidiaries and enters into a third party financing thereof on terms that the
Board of Directors has concluded are customary and market terms fair to the
Company and its Restricted Subsidiaries.

         "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that:

                  (1)      the principal amount (or accreted value, if
         applicable) of such Permitted Refinancing Indebtedness does not exceed
         the principal amount (or accreted value, if applicable) of the
         Indebtedness extended, refinanced, renewed, replaced, defeased or
         refunded (plus all accrued interest on the Indebtedness and the amount
         of all expenses and premiums incurred in connection therewith) and any
         premiums paid on the Indebtedness so extended, refinanced, renewed,
         replaced, defeased or refunded;

                                       20

                  (2)      if such Permitted Refinancing Indebtedness is issued
         on or after the first anniversary of the date hereof, such Permitted
         Refinancing Indebtedness has a final maturity date later than the final
         maturity date of, and has a Weighted Average Life to Maturity equal to
         or greater than the Weighted Average Life to Maturity of, the
         Indebtedness being extended, refinanced, renewed, replaced, defeased or
         refunded;

                  (3)      if such Permitted Refinancing Indebtedness is issued
         on or after the first anniversary of the date hereof, and the
         Indebtedness being extended, refinanced, renewed, replaced, defeased or
         refunded is subordinated in right of payment to the Notes, such
         Permitted Refinancing Indebtedness has a final maturity date later than
         the final maturity date of, and is subordinated in right of payment to,
         the Notes, as the case may be, on terms at least as favorable to the
         Holders of Notes as those contained in the documentation governing the
         Indebtedness being extended, refinanced, renewed, replaced, defeased or
         refunded; and

                  (4)      such Indebtedness is incurred either by the Company
         or by the Subsidiary who is the obligor on the Indebtedness being
         extended, refinanced, renewed, replaced, defeased or refunded.

         "PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.

         "QUALIFYING EXPANSION PROJECT" means any capital expansion project that
has increased or will increase the physical capacity of the pipeline system of
the Company and its Restricted Subsidiaries; provided that such project has been
completed and the assets are in service at, or the Company reasonably believes
that the in-service date of the project will be within twelve months after, the
Calculation Date.

         "QUALIFYING EXPANSION PROJECT AMOUNTS" means with respect to any
calculation of pro forma amounts under the Fixed Charge Coverage Ratio
additional revenues (if any) and related expenses for any Qualifying Expansion
Project for the portion of the four-quarter period prior to the in-service date
of such Qualifying Expansion Project (the "ESTIMATION PERIOD"); provided that
revenues and related expenses anticipated from any Qualifying Expansion Project
during any Estimation Period shall be included in such calculation only to the
extent (1) of the portion of the capacity of such Qualifying Expansion Project
that is committed under a long-term firm transportation contract on customary
terms (as determined in good faith by the Company) with a counterparty that has
an Investment Grade Rating of its long-term debt from at least one of S&P and
Moody's and (2) the aggregate amount of Qualifying Expansion Project Amounts for
all Qualifying Expansion Projects included in any such calculation does not
exceed 25% of the aggregate revenues of the Company and its Restricted

                                       21

Subsidiaries for such period, determined for this purpose on a pro forma basis
but before inclusion of any Qualifying Expansion Project Amounts.

         "RATING AGENCY" means each of S&P and Moody's, or if S&P or Moody's or
both shall not make a rating on the Notes publicly available, a nationally
recognized statistical rating agency or agencies, as the case may be, selected
by the Company (as evidenced by a resolution of the Company's Board of
Directors), which shall be substituted for S&P or Moody's, or both, as the case
may be.

         "RELATED INTEREST RATE OR CURRENCY HEDGE" means any Hedging Obligation
entered into by the Company and/or any of its Restricted Subsidiaries of the
type referred to in items (i) or (ii) of the definition thereof, and provided
that such Hedging Obligation was entered into with respect to other Indebtedness
of the Company and/or its Restricted Subsidiaries to protect against
fluctuations in interest rates or currency exchange rates with respect to such
other Indebtedness.

         "RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.

         "RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.

         "S&P" means Standard and Poor's, a division of The McGraw-Hill
Companies, Inc., and its successors.

         "SALE AND LEASEBACK TRANSACTION" means any arrangement with any Person
(other than the Company or a Subsidiary), or to which any such Person is a
party, providing for the leasing, pursuant to a capital lease that would at such
time be required to be capitalized on a balance sheet in accordance with GAAP,
to the Company or a Restricted Subsidiary of any property or asset which has
been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person or to any other Person (other than the Company or a
Subsidiary), to which funds have been or are to be advanced by such Person.

         "SECURITIES ACT" means the Securities Act of 1933, as amended.

         "SECURITIZATION SUBSIDIARY" means a Subsidiary of the Company

                  (1)      that is designated a "Securitization Subsidiary" by
         the Company's Board of Directors,

                  (2)      that does not engage in, and whose charter prohibits
         it from engaging in, any activities other than Permitted Receivables
         Financings and any activity necessary, incidental or related thereto,

                                       22

                  (3)      no portion of the Indebtedness or any other
         obligation, contingent or otherwise, of which

                           (A) is Guaranteed by the Company or any Restricted
                  Subsidiary of the Company,

                           (B) is recourse to or obligates the Company or any
                  Restricted Subsidiary of the Company in any way, or

                           (C) subjects any property or asset of the Company or
                  any Restricted Subsidiary of the Company, directly or
                  indirectly, contingently or otherwise, to the satisfaction
                  thereof, and

                  (4)      with respect to which neither the Company nor any
         Restricted Subsidiary of the Company (other than an Unrestricted
         Subsidiary) has any obligation to maintain or preserve such its
         financial condition or cause it to achieve certain levels of operating
         results

         other than, in respect of clauses (3) and (4), pursuant to customary
representations, warranties, covenants and indemnities entered into in
connection with a Permitted Receivables Financing.

         "SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.

         "STATED MATURITY" means, with respect to any installment of interest or
principal on any Indebtedness, the date on which the payment of interest or
principal was scheduled to be paid in the original documentation governing such
Indebtedness, and will not include any contingent obligations to repay, redeem
or repurchase any such interest or principal prior to the date originally
scheduled for the payment thereof.

         "SUBSIDIARY" means, with respect to any specified Person:

                  (1)      any corporation, association or other business entity
         of which more than 50% of the total voting power of shares of Capital
         Stock entitled (without regard to the occurrence of any contingency) to
         vote in the election of directors, managers or trustees of the
         corporation, association or other business entity is at the time owned
         or controlled, directly or indirectly, by that Person or one or more of
         the other Subsidiaries of that Person (or a combination thereof); and

                  (2)      any partnership (a) the sole general partner or the
         managing general partner of which is such Person or a Subsidiary of
         such Person or

                                       23

         (b) the only general partners of which are that Person or one or more
         Subsidiaries of that Person (or any combination thereof).

         "UNRESTRICTED SUBSIDIARY" means (1) any Securitization Subsidiary or
(2) any Subsidiary of the Company that is designated by the Board of Directors
of the Company as an Unrestricted Subsidiary pursuant to a Board Resolution, but
only to the extent that such Subsidiary:

                  (1)      has no Indebtedness other than Non-Recourse Debt;

                  (2)      is not party to any agreement, contract, arrangement
         or understanding with the Company or any Restricted Subsidiary of the
         Company unless the terms of any such agreement, contract, arrangement
         or understanding are no less favorable to the Company or such
         Restricted Subsidiary than those that might be obtained at the time
         from Persons who are not Affiliates of the Company;

                  (3)      is a Person with respect to which neither the Company
         nor any of its Restricted Subsidiaries has any direct or indirect
         obligation (a) to subscribe for additional Equity Interests or (b) to
         maintain or preserve such Person's financial condition or to cause such
         Person to achieve any specified levels of operating results; and

                  (4)      has not guaranteed or otherwise directly or
         indirectly provided credit support for any Indebtedness of the Company
         or any of its Restricted Subsidiaries.

Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary
will be evidenced to the Trustee by filing with the Trustee the Board Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the preceding conditions and was permitted by
Section 3.03 hereof. If, at any time, any Unrestricted Subsidiary would fail to
meet the preceding requirements as an Unrestricted Subsidiary, it will
thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture
and any Indebtedness of such Subsidiary will be deemed to be incurred by a
Restricted Subsidiary of the Company as of such date and, if such Indebtedness
is not permitted to be incurred as of such date under Section 3.04 hereof, the
Company will be in default thereunder. The Board of Directors of the Company may
at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation will be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation will only be
permitted if (1) such Indebtedness is permitted under Section 3.04 hereof,
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period; and (2) no Default or Event of
Default would be in existence following such designation.

                                       24

         "VOTING STOCK" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.

         "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:

                  (1)      the sum of the products obtained by multiplying (a)
         the amount of each then remaining installment, sinking fund, serial
         maturity or other required payments of principal, including payment at
         final maturity, in respect of the Indebtedness, by (b) the number of
         years (calculated to the nearest one-twelfth) that will elapse between
         such date and the making of such payment; by

                  (2)      the then outstanding principal amount of such
         Indebtedness.

         Section 1.02. Rules of Construction. For all purposes of this Ninth
Supplemental Indenture:

         (a)      all references herein to Articles and Sections, unless
otherwise specified, refer to the corresponding Articles and Sections of this
Ninth Supplemental Indenture;

         (b)      the terms "herein", "hereof', "hereunder" and other words of
similar import refer to this Ninth Supplemental Indenture; and

         (c)      the terms "this Indenture" and "the Indenture" and other words
of similar import refer to the Base Indenture as supplemented by this Ninth
Supplemental Indenture.

                                    ARTICLE 2
                               THE SERIES OF NOTES

         Section 2.01. Title of the Securities. There shall be established
hereby a series of Securities designated as the "85/8% Senior Notes due 2010."

         Section 2.02. Form And Dating. General. The Notes and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A
hereto. The Notes may have notations, legends or endorsements required by law,
stock exchange rule or usage. Each Note shall be dated the date of its
authentication. The Notes shall be in denominations of US$1,000 and integral
multiples thereof.

         (b)      The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Ninth Supplemental
Indenture, and the Company and the Trustee, by their execution and delivery of
this Ninth
                                       25

Supplemental Indenture, expressly agree to such terms and provisions and to be
bound thereby. However, to the extent any provision of any Note conflicts with
the express provisions of this Ninth Supplemental Indenture, the provisions of
this Ninth Supplemental Indenture shall govern and be controlling.

         (c)      The Notes shall be issuable as Registered Securities and
Registered Global Securities. The Company hereby designates The Depository Trust
Company as the initial Depositary for the Notes. References to the "Depositary"
herein shall refer to the Depositary designated in the foregoing sentence.

         Section 2.03. Aggregate Principal Amount. The aggregate principal
amount of the Notes shall not initially exceed $800,000,000. The aggregate
principal amount of Notes issuable hereunder may be increased and additional
Notes may be issued up to the maximum aggregate principal amount authorized from
time to time by the Board of Directors of the Company. Such additional Notes (i)
shall have the same terms as the Notes initially issued hereunder, except for
the issue date, issue price, initial Interest Payment Date and the initial
interest accrual date, (ii) shall, together with the Notes initially issued
hereunder, constitute a single series of Securities under the Indenture, (iii)
shall not be issued if at the time of issuance an Event of Default with respect
to the Notes shall have occurred and be continuing and (iv) may only be issued
if permitted by Section 3.04 hereof.

         Section 2.04. Principal Payment Date. The Notes will mature and
principal thereof will be due and payable, together with all accrued and unpaid
interest thereon, on June 1, 2010.

         Section 2.05. Interest And Interest Dates. Interest on the Notes shall
be payable semi-annually on June 1 and December 1 of each year, beginning (in
the case of Notes initially issued hereunder) on December 1, 2003 (each, an
"INTEREST PAYMENT DATE"); provided, however, that if an Interest Payment Date
would otherwise be a day that is not a Business Day, such Interest Payment Date
shall be the next succeeding Business Day, and no additional interest shall be
paid in respect of such intervening period. Interest will be paid to the Holders
of record on the May 15 or November 15 immediately preceding the applicable
Interest Payment Date. The interest rate borne by the Notes will be 85/8% per
annum, until the Notes are paid in full.

         The amount of interest payable on the Notes will be computed on the
basis of a 360-day year of twelve 30-day months.

         Section 2.06. Optional Redemption.

         (a)      At any time and from time to time prior to June 1, 2007, the
Company may, at its option, redeem all or a portion of the Notes at the
Make-Whole Price plus accrued and unpaid interest to the redemption date. The
Company shall determine the Make-Whole Price and deliver to the Trustee an

                                       26

Officers' Certificate setting forth such price promptly after the determination
thereof and prior to the time the redemption notice is to be given pursuant to
Section 12.2 of the Base Indenture. The Trustee shall have no responsibility for
determining the Make-Whole Price.

         (b)      At any time and from time to time on or after June 1, 2007,
the Company may, at its option, redeem the Notes, in whole or in part, at a
redemption price equal to the percentage of principal amount set forth below
plus accrued and unpaid interest to the redemption date:

TWELVE MONTH PERIOD COMMENCING JUNE 1 IN YEAR                     PERCENTAGE
- ---------------------------------------------                     ----------
                                                               
2007........................................                        104.313%
2008........................................                        102.156%
2009 and thereafter.........................                        100.000%

         Any redemption pursuant to this Section 2.06 shall be made, to the
extent applicable, pursuant to the provisions contained in Article Twelve of the
Base Indenture.

         Section 2.07. Redemption with Proceeds of Public Equity Offering. At
any time and from time to time prior to June 1, 2006, the Company may, at its
option, redeem up to 35% of the aggregate principal amount of the Notes with the
net cash proceeds received by Company from any Equity Offering at a redemption
price equal to 108.625% of the principal amount plus accrued and unpaid interest
to the redemption date; provided that

         (a)      in each case the redemption takes place not later than 120
days after the closing of the related Equity Offering, and

         (b)      at least 65% of the aggregate principal amount of Notes
remains outstanding immediately after the occurrence of such redemption
(excluding Notes held by the Company and its Subsidiaries).

         (c)      The Officers' Certificate required to be delivered to the
Trustee by the Company by the fourth paragraph of Section 12.2 of the Base
Indenture shall, in addition to the other matters required to be stated therein,
state that the Company is entitled under this Section 2.07 to redeem the Notes.

         (d)      Any redemption pursuant to this Section 2.07 shall be made, to
the extent applicable, pursuant to the provisions of Article Twelve of the Base
Indenture.

         Section 2.08. Change Of Control Offer. (a) A "CHANGE OF CONTROL OFFER"
means an offer by the Company to purchase Notes as required by Section 3.07
hereof. A Change of Control Offer must be made by written offer (the "OFFER")
sent to the Holders of the Notes. The Company shall notify the Trustee at least
three Business Days (or such shorter period as is acceptable to the

                                       27

Trustee) prior to sending the offer to such Holders of its obligation to make a
Change of Control Offer, and the offer will be sent by the Company or, at the
Company's request, by the Trustee in the name and at the expense of the Company.

         (b)      The offer must include or state the following as to the terms
 of the Change of Control Offer:

                  (i)      the provision of the Indenture pursuant to which the
         Change of Control Offer is being made;

                  (ii)     the purchase price, including the portion thereof
         representing accrued interest;

                  (iii)    a payment date (the "CHANGE OF CONTROL PAYMENT DATE")
         not less than 30 days or more than 60 days after the date the offer is
         mailed;

                  (iv)     a description of the transaction or transactions
         constituting the Change of Control;

                  (v)      a Holder may tender all or any portion of its Notes,
         subject to the requirement that any portion of a Note tendered must be
         in a multiple of $1,000 principal amount;

                  (vi)     the place or places where Notes are to be surrendered
         for tender pursuant to the Change of Control Offer;

                  (vii)    each Holder electing to tender a Note pursuant to the
         offer will be required to surrender such Note, with the form entitled
         "Option of Holder to Elect Purchase" attached to the Notes completed,
         at the place or places specified in the offer prior to the close of
         business on the Change of Control Payment Date (such Note being, if the
         Company or the Trustee so requires, duly endorsed or accompanied by a
         duly executed written instrument of transfer);

                  (viii)   interest on any Note not tendered will continue to
         accrue;

                  (ix)     on the Change of Control Payment Date the purchase
         price will become due and payable on each Note accepted for purchase,
         and interest on Notes purchased will cease to accrue on and after the
         Change of Control Payment Date;

                  (x)      Holders are entitled to withdraw Notes tendered by
         giving notice, which must be received by the Company or the Trustee not
         later than the close of business on the Change of Control Payment Date,
         setting forth the name of the Holder, the principal amount of the
         tendered Notes, the certificate number of the tendered Notes (unless
         the Notes are

                                       28

         represented by one or more Registered Global Securities) and a
         statement that the Holder is withdrawing all or a portion of the
         tender;

                  (xi)     the Company will purchase all Notes validly tendered
         pursuant to such Change of Control Offer on the Change of Control
         Payment Date;

                  (xii)    if any Note is purchased in part, new Notes equal in
         principal amount to the unpurchased portion of the Note will be issued;
         and

                  (xiii)   if any Note contains a CUSIP or CINS number, no
         representation is being made as to the correctness of the CUSIP or CINS
         number either as printed on the Notes or as contained in the offer and
         that the Holder should rely only on the other identification numbers
         printed on the Notes.

         (c)      Prior to the Change of Control Payment Date, the Company will
accept tendered Notes for purchase as required by the Change of Control Offer
and deliver to the Trustee all Notes so accepted together with an Officers'
Certificate specifying which Notes have been accepted for purchase. On the
Change of Control Payment Date the purchase price will become due and payable on
each Note accepted for purchase, and interest on Notes purchased will cease to
accrue on and after the Change of Control Payment Date. The Trustee or other
paying agent with respect to the Notes will promptly mail to each Holder of
Notes properly tendered the Change of Control Payment for such Notes, and the
Trustee will promptly return to Holders any Notes not accepted for purchase and
send to Holders new Notes equal in principal amount to any unpurchased portion
of any Notes accepted for purchase in part, provided that each new Note will be
in a principal amount of $1,000 or an integral multiple of $1,000.

         (d)      On the Change of Control Payment Date, the Company will, to
the extent lawful:

                  (i)      accept for payment all Notes or portions of Notes
         properly tendered pursuant to the Change of Control Offer;

                  (ii)     deposit with the Trustee or other paying agent an
         amount equal to the Change of Control Payment in respect of all Notes
         or portions of Notes properly tendered; and

                  (iii)    deliver or cause to be delivered to the Trustee the
         Notes properly accepted together with an Officers' Certificate stating
         the aggregate principal amount of Notes or portions of Notes being
         purchased by the Company.

                                       29

                  (e)      The Company will comply with Rule 14e-1 under the
Exchange Act and any other securities laws or regulations thereunder to the
extent such laws or regulations are applicable in connection with the repurchase
of the Notes as a result of a Change of Control, and the above procedures will
be deemed modified as necessary to permit such compliance.

         Section 2.09. Defeasance. Section 10.1 of the Base Indenture is hereby
amended with respect to the Notes by adding at the end of subsection (B)
thereof, the following new paragraphs "(f) the Company has delivered to the
Trustee an Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of the Notes over the other
creditors of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others." and "(g) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit (other
than a Default or Event of Default resulting from the borrowing of funds to be
applied to such deposit)."

         (b)      Section 10.1 of the Base Indenture is hereby amended with
respect to the Notes by (i) adding on the third line of paragraph (b) of
subsection (C) thereof, the following words after the word Securities: "(other
than a Default or Event of Default resulting from the borrowing of funds to be
applied to such deposit)" and (ii) adding at the end of subsection (C) thereof,
the following new paragraph "(i) the Company has delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders of the Notes over the other creditors of
the Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others."

         (c)      The following covenants and Events of Default shall be subject
to covenant defeasance under Section 10.1(C) of the Base Indenture in lieu of
Sections 3.6 and 9.1 thereof: 2.08, 3.02 through 3.13, 3.14(a)(4), 3.15 and
4.02(a)(iii), (v) and (vi). All references in Section 10.1(C) to Section 5.1 of
the Base Indenture shall be deemed a reference to Section 4.02(a) hereof and all
references in Section 10.1(C) to Section 5.1(d) or (e) of the Base Indenture
shall be deemed a reference to Section 4.02(a)(vii) or (viii) hereof.

                                    ARTICLE 3
                                    COVENANTS

         Section 3.01. Applicability Of Covenants. Section 3.6 and Section 9.1
of the Base Indenture will not be applicable to the Notes. Instead, the
provisions of Sections 3.02 through 3.15 will apply to the Notes to the extent
stated below.

         Section 3.02. Commission Reports; Financial Statements. (a) Whether or
not required by the Commission, so long as any Notes are outstanding, the

                                       30

Company will furnish to the Trustee, within 30 days after the time periods
specified in the Commission's rules and regulations:

         (1) all quarterly and annual financial information that would be
    required to be contained in a filing with the Commission on Forms 10-Q and
    10-K if the Company were required to file such reports, including a
    "Management's Discussion and Analysis of Financial Condition and Results of
    Operations", and, with respect to the annual information only, a report on
    the annual financial statements by the Company's certified independent
    accountants; and

        (2) all current reports that would be required to be filed with the
    Commission on Form 8-K if the Company were required to file such reports.

         (b) If the Company has designated any of its Subsidiaries as
    Unrestricted Subsidiaries, then the quarterly and annual financial
    information required by paragraph (a) will include a reasonably detailed
    presentation, either on the face of the financial statements or in the
    footnotes thereto, of the financial condition and results of operations of
    the Company and its Restricted Subsidiaries excluding in all respects the
    Unrestricted Subsidiaries of the Company.

         (c) On request from the Trustee, the Company shall provide the Trustee
   with a sufficient number of copies of all reports and other documents and
   information that the Trustee may be required to deliver to Holders pursuant
   to the Indenture, if any are so required.

         (d) Delivery of such reports, information and documents to the Trustee
    is for informational purposes only and the Trustee's receipt of such shall
    not constitute constructive notice of any information contained therein or
    determinable from information contained therein, including the Company's
    compliance with any of its covenants hereunder (as to which the Trustee is
    entitled to rely exclusively on Officers' Certificates).

         Section 3.03. Limitation On Restricted Payments. (a) The Company will
not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly:

        (1) declare or pay any dividend or make any other payment or
    distribution on account of the Company's or any of its Restricted
    Subsidiaries' Equity Interests (including, without limitation, any payment
    in connection with any merger or consolidation involving the Company or any
    of its Restricted Subsidiaries) or to the direct or indirect holders of the
    Company's or any of its Restricted Subsidiaries' Equity Interests in their
    capacity as such (other than dividends or distributions payable in Equity
    Interests (other than Disqualified Stock) of the Company or to the Company
    or a Restricted Subsidiary of the Company);

                                       31

        (2) purchase, redeem or otherwise acquire or retire for value
    (including, without limitation, in connection with any merger or
    consolidation involving the Company) any Equity Interests of the Company;

        (3) make any payment on or with respect to, or purchase, redeem, defease
    or otherwise acquire or retire for value any Indebtedness that is
    subordinated to the Notes, except a payment of interest or principal at the
    Stated Maturity thereof; or

        (4) make any Restricted Investment (all such payments and other actions
    set forth in these clauses (1) through (4) above being collectively referred
    to as "RESTRICTED PAYMENTS"),

unless, at the time of and after giving effect to such Restricted Payment, no
Default or Event of Default has occurred and is continuing or would occur as a
consequence of such Restricted Payment; and

        (1) The Company would, at the time of such Restricted Payment and after
    giving pro forma effect thereto as if such Restricted Payment had been made
    at the beginning of the applicable four-quarter period, have been permitted
    to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
    Charge Coverage Ratio test set forth in the first paragraph of Section 3.04
    hereof and

        (2) such Restricted Payment, together with the aggregate amount of all
    other Restricted Payments made by the Company and its Restricted
    Subsidiaries after the date hereof (excluding Restricted Payments permitted
    by clauses (2), (3), (4), (6) and (8) of the next succeeding paragraph), is
    less than the sum, without duplication, of:

             (A) 50% of the Consolidated Net Income of the Company for the
        period (taken as one accounting period) from the beginning of the first
        fiscal quarter commencing after the first anniversary of the date hereof
        to the end of the Company's most recently ended fiscal quarter for which
        internal financial statements are available at the time of such
        Restricted Payment (or, if such Consolidated Net Income for such period
        is a deficit, less 100% of such deficit), plus

             (B) 100% of the aggregate net cash proceeds received by the Company
        (including the fair market value of any Permitted Business or assets
        used or useful in a Permitted Business to the extent acquired in
        consideration of Equity Interests of the Company (other than
        Disqualified Stock)) since the date hereof as a contribution to its
        common equity capital or from the issue or sale of Equity Interests of
        the Company (other than Disqualified Stock) or from the issue or sale of
        convertible or exchangeable Disqualified Stock or convertible or
        exchangeable debt securities of the Company that have been converted
        into or exchanged for such Equity Interests (other than

                                       32

         Equity Interests (or Disqualified Stock or debt securities) sold to a
         Subsidiary of the Company), plus

             (C) to the extent that any Restricted Investment that was made
        after the date hereof is sold for cash or otherwise liquidated or repaid
        for cash, the lesser of (i) the cash return of capital with respect to
        such Restricted Investment, including, without limitation, repayment of
        principal of any Restricted Investment constituting a loan or advance
        (less the cost of disposition, if any) and (ii) the initial amount of
        such Restricted Investment, plus

             (D) to the extent that any Unrestricted Subsidiary of the Company
        is redesignated as a Restricted Subsidiary after the date hereof, the
        lesser of (i) the fair market value of the Company's Investment in such
        Subsidiary as of the date of such redesignation or (ii) such fair market
        value as of the date on which such Subsidiary was originally designated
        as an Unrestricted Subsidiary.

         (b)      Notwithstanding the foregoing, the preceding provisions of
this Section 3.03 shall not prohibit:

        (1) the payment of any dividend within 60 days after the date of
    declaration of the dividend, if at the date of declaration the dividend
    payment would have complied with the provisions of the Indenture;

        (2) the redemption, repurchase, retirement, defeasance or other
    acquisition of any subordinated Indebtedness of the Company or of any Equity
    Interests of the Company in exchange for, or out of the net cash proceeds
    of, the substantially concurrent sale (other than to a Subsidiary of the
    Company) of Equity Interests of the Company (other than Disqualified Stock);
    provided that the amount of any such net cash proceeds that are utilized for
    any such redemption, repurchase, retirement, defeasance or other acquisition
    will be excluded from clause (2)(B) of the preceding paragraph;

        (3) the redemption, repurchase, retirement, defeasance or other
    acquisition of the 9-7/8% Cumulative Convertible Preferred Stock of the
    Company out of the net cash proceeds of the 5.50% Junior Subordinated
    Convertible Debentures issued by the Company on May 28, 2003; provided that
    the amount of any such net cash proceeds that are utilized for any such
    redemption, repurchase, retirement, defeasance or other acquisition will be
    excluded from clause (2)(B) of the preceding paragraph;

        (4) the defeasance, redemption, repurchase or other acquisition of
    subordinated Indebtedness of the Company with the net cash proceeds from an
    incurrence of Permitted Refinancing Indebtedness;

                                       33

        (5) quarterly dividends paid pro rata on outstanding common stock of the
    Company in an amount of up to $0.02 per share, provided that (A) such per
    share amount shall be adjusted proportionally upon any reclassification,
    split, combination, special distribution of common stock to holders thereof
    or similar event such that (x) the per share amount multiplied by the number
    of such shares outstanding, in each case determined immediately before
    giving effect to such event is equal to (y) the per share amount multiplied
    by the number of such shares outstanding, in each case determined
    immediately after giving effect to such event and (B) in no event shall the
    aggregate quarterly amount payable pursuant to this clause exceed by 20% the
    aggregate quarterly amount that would be payable on all shares of common
    stock outstanding on the date hereof if a quarterly dividend payment of
    $0.02 per share were payable on the date hereof;

        (6) the payment of any distribution or dividend by a Restricted
    Subsidiary of the Company, on a pro rata basis to all holders or on a basis
    more favorable to the Company and its Restricted Subsidiary, to the holders
    of such Restricted Subsidiary's Equity Interests; and

        (7) so long as no Default or Event of Default has occurred and is
    continuing or would be caused thereby, the repurchase, redemption or
    acquisition or retirement for value of any Equity Interests of the Company
    held by any member of the Company's (or any of its Restricted Subsidiaries')
    management pursuant to any management equity subscription agreement, stock
    option agreement or similar agreement; provided that the aggregate price
    paid for all such repurchased, redeemed, acquired or retired Equity
    Interests may not exceed $5.0 million in any twelve-month period and
    provided further that if the amount so paid in any calendar year is less
    than $5.0 million, such shortfall may be used to so repurchase, redeem,
    acquire or retire Equity Interests in either of the next two calendar years
    in addition to the $5.0 million that may otherwise be paid in each such
    calendar year;

        (8) so long as no Default or Event of Default has occurred and is
    continuing or would be caused thereby, any Investment made in exchange for,
    or out of the net cash proceeds of, a substantially concurrent offering of
    Equity Interests of the Company; provided that the amount of any such net
    cash proceeds will be excluded from clause (2)(B) of the preceding
    paragraph; and

        (9) other Restricted Payments in an aggregate amount since the date
    hereof not to exceed $50.0 million.

         (c)      The amount of all Restricted Payments (other than cash) will
be the fair market value on the date of the Restricted Payment of the asset(s)
or securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be valued
by this

                                       34

Section 3.03 will be determined, in the case of amounts greater than $10.0
million but less than $75.0 million, by an officer of the Company and, in the
case of $75.0 million or more, by the Board of Directors of the Company.

         Section 3.04. Limitation On Incurrence Of Indebtedness And Issuance
Of Preferred Stock. (a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "INCUR") any
Indebtedness (including Acquired Debt), and the Company will not issue any
Disqualified Stock and will not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; provided, however, that the Company and its
Restricted Subsidiaries may incur Indebtedness (including Acquired Debt) or the
Company may issue Disqualified Stock, if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least 2.0 to 1, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred or Disqualified Stock had been issued, as the
case may be, at the beginning of such four-quarter period.

         (b)      Paragraph (a) of this Section 3.04 will not prohibit the
incurrence of any of the following items of Indebtedness (collectively,
"PERMITTED DEBT"):

        (1) the incurrence by the Company or any Restricted Subsidiary of
    Indebtedness and letters of credit under any Credit Facilities to which the
    Company or any Restricted Subsidiary is a party in an aggregate principal
    amount at any one time outstanding under this clause (1) (with letters of
    credit being deemed to have a principal amount equal to the undrawn face
    amount thereof) not to exceed $1.3 billion;

        (2) the incurrence by the Company and its Restricted Subsidiaries of the
    Existing Indebtedness;

        (3) the incurrence by the Company of Indebtedness represented by the
    Notes issued on the date hereof;

        (4) the incurrence by the Company and any of its Restricted Subsidiaries
    of Indebtedness represented by Capital Lease Obligations, mortgage
    financings or purchase money obligations, in each case, incurred for the
    purpose of financing all or any part of the purchase price or cost of
    construction or improvement of property, plant or equipment used in the
    business of the Company or such Restricted Subsidiary, in an aggregate
    principal amount not to exceed $50.0 million at any time outstanding;

                                       35

        (5) the incurrence by the Company or any of its Restricted Subsidiaries
    of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
    of which are used to refund, refinance or replace Indebtedness (other than
    intercompany Indebtedness), including Permitted Refinancing Indebtedness
    incurred to finance the purchase price of the replacement properties, that
    was permitted to be incurred under paragraph (a) of this Section 3.04 or
    clauses (2), (3), (4) or (5) of this paragraph (b);

        (6) the incurrence by the Company or any of its Restricted Subsidiaries
    of intercompany Indebtedness between or among the Company and any of its
    Restricted Subsidiaries; provided, however, that (a) any subsequent issuance
    or transfer of Equity Interests that results in any such Indebtedness being
    held by a Person other than the Company or a Restricted Subsidiary of the
    Company and (b) any sale or other transfer of any such Indebtedness to a
    Person that is not either the Company or a Restricted Subsidiary of the
    Company, will be deemed, in each case, to constitute an incurrence of such
    Indebtedness by the Company or such Restricted Subsidiary, as the case may
    be, that was not permitted by this clause (6);

        (7) the incurrence by the Company or any of its Subsidiaries of Hedging
    Obligations;

        (8) the Guarantee by the Company of Indebtedness of any of its
    Restricted Subsidiaries that was permitted to be incurred by another
    provision of this Section 3.04;

        (9) Indebtedness in respect of bankers acceptances, letters of credit
    and performance or surety bonds issued for the account of the Company or any
    of its Restricted Subsidiaries in the ordinary course of business in amounts
    and for the purposes customary in the Company's industry, in each case only
    to the extent that such incurrence does not result in the incurrence of any
    obligation to repay any borrowed money;

        (10) Indebtedness arising from any agreement providing for indemnities,
    Guarantees, purchase price adjustments, holdbacks, contingency payment
    obligations based on the performance of the acquired or disposed assets or
    similar obligations (other than Guarantees of Indebtedness) incurred by any
    Person in connection with the acquisition or disposition of assets;

        (11) the incurrence by the Company or any of its Restricted Subsidiaries
     of Acquired Debt if the Fixed Charge Coverage Ratio for the Company's most
     recently ended four full fiscal quarters for which internal financial
     statements are available immediately preceding the date of incurrence of
     Acquired Debt (the "RELEVANT FIXED CHARGE COVERAGE RATIO") determined
     immediately after giving effect to such incurrence and the related
     acquisition (including through a merger, consolidation or otherwise) is
     higher than the Relevant

                                       36

     Fixed Charge Coverage Ratio determined immediately before giving effect to
     such incurrence and the related acquisition; and

        (12) the incurrence by the Company or any of its Restricted Subsidiaries
    of additional Indebtedness in an aggregate principal amount (or accreted
    value, as applicable) at any time outstanding, including all Permitted
    Refinancing Indebtedness incurred to refund, refinance or replace any
    Indebtedness incurred pursuant to this clause (12), not to exceed $250.0
    million.

         (c)      If any Non-Recourse Debt of an Unrestricted Subsidiary shall
at any time cease to constitute Non-Recourse Debt or such Unrestricted
Subsidiary shall be redesignated a Restricted Subsidiary, such event will be
deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary.

         (d)      For purposes of determining compliance with this Section 3.04:

        (1) in the event that an item of proposed Indebtedness (including
    Acquired Debt) meets the criteria of more than one of the categories of
    Permitted Debt described in clauses (1) through (12) of paragraph (b) above,
    or is entitled to be incurred pursuant to paragraph (a) of this Section
    3.04, the Company will be permitted to classify (or later classify or
    reclassify in whole or in part in its sole discretion) such item of
    Indebtedness in any manner that complies with this Section 3.04;

        (2) the accrual of interest, the accretion or amortization of original
    issue discount, the payment of interest on any Indebtedness in the form of
    additional Indebtedness with the same terms, and the payment of dividends on
    Disqualified Stock in the form of additional shares of the same class of
    Disqualified Stock will not be deemed to be an incurrence of Indebtedness or
    an issuance of Disqualified Stock for purposes of this Section 3.04;
    provided, in each such case, that the amount thereof is included in the
    computation of Fixed Charges of the Company as accrued; and

        (3) for the purposes of determining compliance with any
     dollar-denominated restriction on the incurrence of Indebtedness
     denominated in a foreign currency, the dollar-equivalent principal amount
     of such Indebtedness incurred pursuant thereto shall be calculated based on
     the relevant currency exchange rate in effect on the date that such
     Indebtedness was incurred.

         Section 3.05. Limitation On Liens. The Company will not, and will not
permit any of its Restricted Subsidiaries to, create, incur, assume or otherwise
cause or suffer to exist or become effective any Lien of any kind securing
Indebtedness, Attributable Debt or trade payables (other than Permitted Liens)
upon any of their property or assets, now owned or hereafter acquired, unless
the Notes and all payments due under the Indenture with respect to the Notes are
secured on an equal and ratable basis with the obligations so secured until such

                                       37

time as such obligations are no longer secured by a Lien or, in the case of any
obligation so secured that is expressly subordinated to the Notes, by a Lien
prior to any Liens securing any and all obligations thereby secured for so long
as any such obligations shall be so secured.

         Section 3.06 . Limitation On Dividend And Other Payment Restrictions
Affecting Subsidiaries. (a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or permit to exist or
become effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:

        (1) pay dividends or make any other distributions on its Capital Stock
    to the Company or any of its Subsidiaries, or with respect to any other
    interest or participation in, or measured by, its profits, or pay any
    indebtedness owed to the Company or any of its Restricted Subsidiaries;

        (2) make loans or advances to the Company or any of its Restricted
    Subsidiaries; or

        (3) transfer any of its properties or assets to the Company or any of
    its Restricted Subsidiaries.

    (b) Notwithstanding the foregoing, the preceding restrictions will not apply
to encumbrances or restrictions existing under or by reason of:

        (1) agreements governing Existing Indebtedness and the Credit Facilities
    in effect on June 1, 2003 and other customary encumbrances and restrictions
    existing on or after the date hereof that are not more restrictive in any
    material respect, taken as a whole, with respect to such dividend and other
    payment restrictions than those contained in such agreements on June 1, 2003
    (provided that the application of such restrictions and encumbrances to
    additional Restricted Subsidiaries not subject thereto on June 1, 2003 shall
    not be deemed to make such restrictions and encumbrances more restrictive);

        (2) the Indenture and the Notes and other customary encumbrances and
    restrictions existing in indentures and notes after the date hereof that are
    not more restrictive, in any material respect, taken as a whole, with
    respect to such dividend and other payment restrictions than those contained
    in the Indenture;

        (3) applicable law (including without limitation, rules, regulations and
    agreements with regulatory authorities);

        (4) any instrument governing Indebtedness or Capital Stock of a Person
    acquired by the Company or any of its Restricted Subsidiaries as in effect
    at the time of such acquisition (except to the extent such Indebtedness or
    Capital Stock was incurred in connection with or in contemplation of such

                                       38

    acquisition), which encumbrance or restriction is not applicable to any
    Person, or the properties or assets of any Person, other than the Person, or
    the property or assets of the Person, so acquired; provided that, in the
    case of Indebtedness, such Indebtedness was permitted by the terms of the
    Indenture to be incurred;

        (5) customary non-assignment provisions in leases entered into in the
    ordinary course of business and consistent with past practices;

        (6) Capital Lease Obligations, mortgage financings or purchase money
    obligations for property acquired in the ordinary course of business that
    impose restrictions on that property of the nature described in clause (3)
    of paragraph (a) of this Section 3.06;

        (7) any agreement for the sale or other disposition of a Restricted
    Subsidiary that restricts distributions by that Restricted Subsidiary
    pending its sale or other disposition;

        (8) Permitted Refinancing Indebtedness; provided that the restrictions
    contained in the agreements governing such Permitted Refinancing
    Indebtedness are no more restrictive in any material respect, taken as a
    whole, than those contained in the agreements governing the Indebtedness
    being refinanced;

        (9) Liens securing Indebtedness otherwise permitted to be incurred under
    the provisions of Section 3.05 hereof that limit the right of the debtor to
    dispose of the assets subject to such Liens;

        (10) provisions with respect to the disposition or distribution of
    assets or property in joint venture agreements, asset sale agreements, stock
    sale agreements and other similar agreements; provided that such
    restrictions apply only to the assets or property subject to such joint
    venture or similar agreement or to the assets or property being sold, as the
    case may be; and

        (11) restrictions on cash or other deposits or net worth imposed by
    customers under contracts entered into in the ordinary course of business.

         Section 3.07.  Repurchase Of Notes Upon A Change Of Control. (a)
Subject to paragraph (b) of this Section, not later than 30 days following a
Change of Control, the Company will make a Change of Control Offer to purchase
all outstanding Notes at a purchase price (the "CHANGE OF CONTROL PAYMENT")
equal to 101% of the principal amount plus accrued and unpaid interest to the
date of purchase; provided that the Company will not be required to make a
Change of Control Offer upon a Change of Control if a third party makes the
Change of Control Offer in the manner, at the times and otherwise in compliance
with the requirements set forth herein applicable to a Change of Control Offer
made by the

                                       39

Company and purchases all Notes properly tendered and not withdrawn under the
Change of Control Offer.

         (b)      Prior to complying with any of the provisions of this Section,
but in any event within 30 days following a Change of Control, if the Company is
subject to any agreement evidencing Indebtedness (or commitments to extend
Indebtedness) that prohibits prepayment or repurchase of the Notes pursuant to a
Change of Control Offer, the Company will either repay all such outstanding
Indebtedness of the Company (and terminate all commitments to extend such
Indebtedness), or obtain the requisite consents, if any, under all agreements
governing such Indebtedness or commitments to permit the repurchase of Notes
required by paragraph (a) of this Section 3.07. The Company shall first comply
with this paragraph (b) before it shall be required to make a Change of Control
Offer or to repurchase Notes pursuant to paragraph (a). The Company's failure to
comply with paragraph (b) may (with notice and lapse of time) constitute an
Event of Default under Section 4.02 (a)(iv) but shall not constitute an Event of
Default under Section 4.02(a)(iii).

         (c)      The Company will publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Payment Date.

         Section 3.08.  Limit On Asset Sales. (a) The Company will not, and
will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale
unless:

        (1) the Company (or the Restricted Subsidiary, as the case may be)
    receives consideration at the time of the Asset Sale at least equal to the
    fair market value of the assets or Equity Interests issued or sold or
    otherwise disposed of;

        (2) for any agreement to make an Asset Sale that is entered into after
    the date hereof, the fair market value is determined by (a) an executive
    officer of the Company if the value is more than $10 million but less than
    $75 million or (b) the Company's Board of Directors if the value is $75
    million or more, as evidenced by a Board Resolution; and

        (3) at least 75% of the consideration received in the Asset Sale by the
    Company or such Restricted Subsidiary is in the form of cash or Cash
    Equivalents. For purposes of this provision, each of the following will be
    deemed to be cash:

             (a) any liabilities, as shown on the Company's or such Restricted
        Subsidiary's most recent balance sheet, of the Company or any Restricted
        Subsidiary (other than contingent liabilities and liabilities that are
        by their terms subordinated to the Notes) that are assumed by the
        transferee of any such assets pursuant to a customary novation agreement
        that releases the Company or such Subsidiary from further liability;

                                       40

             (b) any securities, notes or other obligations received by the
        Company or any such Restricted Subsidiary from such transferee that are
        contemporaneously, subject to ordinary settlement periods, converted by
        the Company or such Restricted Subsidiary into cash, to the extent of
        the cash received in that conversion; and

             (c) property or assets received as consideration for such Asset
        Sale that would otherwise constitute a permitted application of Net
        Proceeds (or other cash in such amount) under clauses (2), (3) or (4)
        under paragraph (b) of this Section 3.08.

    (b) Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, the Company or any of its Restricted Subsidiaries may apply an amount of
cash equal to the amount of such Net Proceeds at its option:

        (1) to repay or prepay senior Indebtedness of the Company or any
    Restricted Subsidiary;

        (2) to acquire all or substantially all of the assets of, or a majority
    of the Voting Stock of, another Permitted Business;

        (3) to make a capital expenditure; or

        (4) to acquire other long-term assets that are used or useful in a
    Permitted Business.

    (c)  Subject to paragraph (e) of this Section 3.08, to the extent that the
Company and its Restricted Subsidiaries do not apply an amount of cash equal to
the amount of such Net Proceeds of any Asset Sale during such period as provided
in paragraph (b) of this Section 3.08, the amount not so applied (excluding Net
Proceeds of any Asset Sale to the extent of the amount of acquisitions or
capital expenditures described under clauses (2), (3) or (4) paragraph (b) of
this Section 3.08 made during the 365 days preceding the receipt of such Net
Proceeds (other than any portion of such amount that was funded with Net
Proceeds of any other Asset Sale or that has been allocated to exclude Net
Proceeds of any other Asset Sales under this Section 3.08)) will constitute
"EXCESS PROCEEDS." When the aggregate amount of Excess Proceeds exceeds $20.0
million, the Company will make an Asset Sale Offer to all Holders of Notes and
all holders of other Indebtedness that is pari passu with the Notes containing
provisions similar to those set forth in this Section 3.08 with respect to
offers to purchase or redeem with the proceeds of sales of assets to purchase
the maximum principal amount of Notes and such other pari passu Indebtedness
that may be purchased out of the Excess Proceeds. The offer price in any Asset
Sale Offer will be equal to 100% of the principal amount plus accrued and unpaid
interest to the date of purchase, and will be payable in cash. If any Excess
Proceeds remain after consummation of an Asset Sale Offer, the Company may use
those Excess

                                       41

Proceeds for any purpose not otherwise prohibited by the Indenture. If the
aggregate principal amount of Notes and other pari passu Indebtedness tendered
into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Excess
Proceeds will be allocated by the Company to Notes and such other pari passu
Indebtedness on a pro rata basis (based upon the respective principal amounts of
the Notes and such other pari passu Indebtedness tendered into such Asset Sale
Offer) and the portion of each Note to be purchased will thereafter be
determined by the Trustee on a pro rata basis among the Holders of such Notes
with appropriate adjustments such that the Notes may only be purchased in
integral multiples of $1,000. Upon completion of each Asset Sale Offer, the
amount of Excess Proceeds will be reset at zero.

    (d)  The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent those laws and regulations are applicable in connection with each
repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
this Section 3.08, the Company will comply with the applicable securities laws
and regulations and will not be deemed to have breached its obligations
hereunder by virtue of such conflict.

    (e)  Prior to making any Asset Sale Offer, but in any event within 30 days
following the date on which such Asset Sale Offer would otherwise be required,
if the Company is subject to any agreement evidencing Indebtedness (or
commitments to extend Indebtedness) that prohibits prepayment or repurchase of
the Notes pursuant to an Asset Sale Offer, the Company will either repay all
such outstanding Indebtedness of the Company (and terminate all commitments to
extend such Indebtedness) or obtain the requisite consents, if any, under all
agreements governing such Indebtedness or commitments to permit the repurchase
of Notes required by this Section 3.08. The Company shall first comply with this
paragraph (e) before it shall be required to make an Asset Sale Offer or to
repurchase Notes pursuant to this Section 3.08. The Company's failure to comply
with this paragraph (e) may (with notice and lapse of time) constitute an Event
of Default under Section 4.02(a)(iv) but shall not constitute an Event of
Default under Section 4.02(a)(iii).

    (f)  In the event that, pursuant to this Section 3.08, the Company is
required to commence an Asset Sale Offer, it shall follow the procedures
specified below.

         The Asset Sale Offer shall be made to all Holders of Notes and to all
holders of other Indebtedness that is pari passu with the Notes to the extent
set forth above in this Section 3.08. The Asset Sale Offer will remain open for
a period of at least 20 Business Days following its commencement and not more
than 30 Business Days, except to the extent that a longer period is required by
applicable law (the "OFFER PERIOD"). No later than three Business Days after the
termination of the Offer Period (the "PURCHASE Date"), the Company shall apply

                                       42

all Excess Proceeds (the "OFFER AMOUNT") to the purchase of Notes and such other
pari passu Indebtedness (on a pro rata basis, if applicable, as set forth above
in this Section 3.08) or, if less than the Offer Amount has been tendered, all
Notes and other Indebtedness tendered in response to the Asset Sale Offer.

         Upon the commencement of an Asset Sale Offer, the Company will send, by
first class mail, a notice to the Trustee and each of the Holders of the Notes.
The notice will contain all instructions and materials necessary to enable such
Holders to tender Notes pursuant to the Asset Sale Offer. The notice, which will
govern the terms of the Asset Sale Offer, will state:

                  (1)      that the Asset Sale Offer is being made pursuant to
         this Section 3.08 and the length of time the Asset Sale Offer will
         remain open;

                  (2)      the Offer Amount, the purchase price and the Purchase
         Date;

                  (3)      that any Note not tendered or accepted for payment
         will continue to accrue interest;

                  (4)      that, unless the Company defaults in making such
         payment, any Note accepted for payment pursuant to the Asset Sale Offer
         will cease to accrue interest after the Purchase Date;

                  (5)      that Holders electing to have a Note purchased
         pursuant to an Asset Sale Offer may elect to have Notes purchased in
         integral multiples of $1,000 only;

                  (6)      that Holders electing to have a Note purchased
         pursuant to any Asset Sale Offer will be required to surrender the
         Note, with the form entitled "Option of Holder to Elect Purchase"
         attached to the Note completed, or transfer its interest in such Note
         by book-entry transfer, to the Company, a depositary, if appointed by
         the Company, or a paying agent at the address specified in the notice
         at least three Business Days before the Purchase Date;

                  (7)      that Holders will be entitled to withdraw their
         election if the Company, the depositary or the applicable paying agent,
         as the case may be, receives, not later than the expiration of the
         Offer Period, a telegram, telex, facsimile transmission or letter
         setting forth the name of the Holder, the principal amount of the Note
         the Holder delivered for purchase and a statement that such Holder is
         withdrawing his election to have such Note purchased;

                  (8)      that, if the aggregate principal amount of Notes and
         other pari passu Indebtedness surrendered by Holders exceeds the Offer
         Amount, the Company will select the Notes and other pari passu

                                       43

         Indebtedness to be purchased on a pro rata basis based on the principal
         amount of Notes and such other pari passu Indebtedness surrendered
         (with such adjustments as may be deemed appropriate so that only Notes
         in denominations of $1,000, or integral multiples thereof, will be
         purchased); and

                  (9)      that Holders whose Notes were purchased only in part
         will be issued new Notes equal in principal amount to the unpurchased
         portion of the Notes surrendered (or transferred by book-entry
         transfer).

On or before the Purchase Date, the Company shall, to the extent lawful, accept
for payment, on a pro rata basis to the extent necessary, the Offer Amount of
Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less
than the Offer Amount has been tendered, all Notes tendered, and shall deliver
to the Trustee an Officers' Certificate stating that such Notes or portions
thereof were accepted for payment by the Company in accordance with the terms of
this Section 3.08. The Company, the depositary or the applicable paying agent,
as the case may be, shall promptly (but in any case not later than five Business
Days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes tendered by such Holder and accepted by
the Company for purchase, and the Company shall promptly issue a new Note, and
the Trustee, upon written request from the Company will authenticate and mail or
deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
will publicly announce the results of the Asset Sale Offer on the Purchase Date.

         Section 3.09.  Limitation On Transactions With Affiliates. (a) The
Company will not, and will not permit any of its Restricted Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each, an
"AFFILIATE TRANSACTION"), unless:

        (1) the Affiliate Transaction is on terms that are no less favorable to
    the Company or the relevant Restricted Subsidiary than those that would have
    been obtained in a comparable transaction by the Company or such Restricted
    Subsidiary with an unrelated Person; and

        (2) the Company delivers to the Trustee:

             (a) with respect to any Affiliate Transaction or series of related
        Affiliate Transactions involving aggregate consideration in excess of
        $50 million, a resolution of the Company's Board of Directors set forth
        in an

                                       44

         Officers' Certificate certifying that such Affiliate Transaction
         complies with this Section 3.09 and that such Affiliate Transaction has
         been approved by a majority of the disinterested members of such Board
         of Directors; and

             (b) with respect to any Affiliate Transaction or series of related
        Affiliate Transactions involving aggregate consideration in excess of
        $75 million, an opinion as to the fairness to the Company of such
        Affiliate Transaction from a financial point of view issued by an
        accounting, appraisal or investment banking firm of national standing.

    (b) The following items will not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of paragraph (a):

        (1) any employment agreement on customary terms entered into by the
    Company or any of its Restricted Subsidiaries in the ordinary course of
    business of the Company or such Restricted Subsidiary;

        (2) transactions between or among the Company and/or its Restricted
    Subsidiaries;

        (3) transactions with a Person that is an Affiliate of the Company
    solely because the Company owns an Equity Interest in, or controls, such
    Person;

        (4) payment of reasonable directors fees and provision to directors,
    officers and employees of customary indemnities and customary benefits
    pursuant to employee benefit plans and similar arrangements;

        (5) sales of Equity Interests (other than Disqualified Stock) to
    Affiliates of the Company;

        (6) (A) corporate sharing agreements among the Company and its
    subsidiaries with respect to tax sharing and general overhead and other
    administrative matters and (B) any other intercompany arrangements disclosed
    or described in the Company's report on Form 10-K for the fiscal year ended
    December 31, 2002 (including the exhibits thereto) or the prospectus
    relating to the offering of the Notes, all as in effect on the date hereof,
    and any amendment or replacement of any of the foregoing so long as such
    amendment or replacement agreement is not less advantageous to the Company
    in any material respect than the agreement so amended or replaced, as such
    agreement was in effect on the date hereof;

        (7) transactions entered into as part of a Permitted Receivables
    Financing; and

        (8) Restricted Payments that are permitted by the provisions of Section
     3.03 hereof.

                                       45

         Section 3.10. Designation Of Restricted And Unrestricted Subsidiaries.
The Board of Directors of the Company may designate any Restricted Subsidiary to
be an Unrestricted Subsidiary if that designation would not cause a Default;
provided that in no event will the material businesses currently operated by
Williams Production Holdings LLC or Williams Gas Pipeline Company LLC be
transferred to or held by an Unrestricted Subsidiary. If a Restricted Subsidiary
is designated as an Unrestricted Subsidiary, the aggregate fair market value of
all outstanding Investments owned by the Company and its Restricted Subsidiaries
in the Subsidiary properly designated will be deemed to be an Investment made as
of the time of the designation and will reduce the amount available for
Restricted Payments under any applicable provision of Section 3.03 or Permitted
Investments, as determined by the Company. That designation will only be
permitted if the Investment would be permitted at that time and if the
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. The Board of Directors of the Company may redesignate any
Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would
not cause a Default.

         Section 3.11.  Limitation On Sale And Leaseback Transactions. The
Company will not, and will not permit any of its Restricted Subsidiaries to,
enter into any Sale and Leaseback Transaction; provided that the Company or any
of its Restricted Subsidiaries may enter into a Sale and Leaseback Transaction
if:

        (1) the Company could have incurred Indebtedness in an amount equal to
    the Attributable Debt relating to such Sale and Leaseback Transaction under
    the Fixed Charge Coverage Ratio test in Section 3.04(a) hereof;

        (2) immediately after giving effect to such Sale and Leaseback
    Transaction, the aggregate outstanding Attributable Debt with respect to all
    Sale and Leaseback Transactions by the Company and its Restricted
    Subsidiaries does not exceed 10% of the Consolidated Net Tangible Assets of
    the Company; and

        (3) the gross cash proceeds of such Sale and Leaseback Transaction are
    at least equal to the fair market value, as determined in good faith by the
    Board of Directors and set forth in an Officers' Certificate delivered to
    the Trustee, of the property that is the subject of that Sale and Leaseback
    Transaction;

provided, however, that the foregoing clauses (1) and (2) shall no longer be
applicable after any Investment Grade Date.

         Section 3.12.  Business Activities. The Company will not, and will not
permit any Restricted Subsidiary to, engage in any business other than Permitted
Businesses, except to such extent as would not be material to the Company and
its Subsidiaries taken as a whole.

         Section 3.13.  Payments For Consent. The Company will not, and will
not permit any of its Subsidiaries to, directly or indirectly, pay or cause to
be paid any

                                       46

consideration to or for the benefit of any Holder of Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid
and is paid to all Holders of the Notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.

         Section 3.14.  Limitation On Mergers, Consolidations And Sales Of
Assets. (a) The Company may not, directly or indirectly: (1) consolidate or
merge with or into another Person (whether or not the Company is the surviving
Person); or (2) sell, assign, transfer, convey or otherwise dispose of all or
substantially all of the properties or assets of the Company and its Restricted
Subsidiaries taken as a whole, in one or more related transactions, to another
Person unless:

        (1) either: (A) The Company is the surviving Person; or (B) the Person
    formed by or surviving any such consolidation or merger (if other than the
    Company) or to which such sale, assignment, transfer, conveyance or other
    disposition has been made is a Person organized or existing under the laws
    of the United States, any state of the United States or the District of
    Columbia;

        (2) the Person formed by or surviving any such consolidation or merger
    (if other than the Company) or the Person to which such sale, assignment,
    transfer, conveyance or other disposition has been made expressly assumes by
    supplemental indenture in form satisfactory to the Trustee all the
    obligations of the Company under the Notes and the Indenture and delivers to
    the Trustee an Opinion of Counsel to the effect that the supplemental
    indenture has been duly authorized, executed and delivered by such Person
    and constitutes a valid and binding obligation of such Person, enforceable
    against such Person in accordance with its terms (subject to customary
    exceptions);

        (3) immediately after such transaction no Default or Event of Default
    exists; and

        (4) the Company or the Person formed by or surviving any such
    consolidation or merger (if other than the Company), or to which such sale,
    assignment, transfer, conveyance or other disposition has been made will, on
    the date of such transaction after giving pro forma effect thereto and any
    related financing transactions as if the same had occurred at the beginning
    of the applicable four-quarter period, be permitted to incur at least $1.00
    of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
    set forth in paragraph (a) of Section 3.04 hereof, provided, however, that
    this clause (4) shall no longer be applicable from and after any Investment
    Grade Date.

                                       47

         (b) Notwithstanding the foregoing, the Company may not, directly or
indirectly, lease all or substantially all of its properties or assets, in one
or more related transactions, to any other Person.

         (c) Clause (4) of paragraph (a) above will not apply to a sale,
assignment, transfer, conveyance or other disposition of assets between or among
the Company and any of its Restricted Subsidiaries.

         Section 3.15.  Covenant Termination. From and after the first date
after the date hereof on which the Notes have an Investment Grade Rating from
both Rating Agencies and no Default or Event of Default has occurred and is
continuing with respect to the Notes (the "INVESTMENT GRADE DATE"), the Company
and its Restricted Subsidiaries will no longer be subject to Sections 3.03,
3.04, 3.06, 3.08, 3.09 and 3.12 hereof. The Company shall give the Trustee
prompt notice in an Officers' Certificate of the occurrence of the Investment
Grade Date.

                                   ARTICLE 4
                                EVENTS OF DEFAULT

         Section 4.01.  Applicability Of Events Of Default. Sections 5.1 and
5.10 of the Base Indenture will not be applicable to the Notes. Instead, the
provisions of Section 4.02 to 4.04 will apply to extent specified therein. Any
reference in the Base Indenture to Section 5.1 or 5.10 thereof shall be deemed
for purposes of the Notes to be a reference to Section 4.02, 4.03 or 4.04, as
applicable, of this Ninth Supplemental Indenture.

         Section 4.02.  Events Of Default Defined. (a) Each of the following
shall be an Event of Default with respect to the Notes.

                  (i)      default for 30 days in the payment when due of
    interest on the Notes;

                  (ii)     default in payment when due of the principal of, or
    premium, if any, on the Notes;

                  (iii)    failure by the Company to purchase Notes tendered
    pursuant to an offer described under Sections 3.07 or 3.08 hereof in
    accordance with the terms thereof, or failure of the Company to comply with
    the provisions of Section 3.14 hereof;

                  (iv)     failure by the Company or any of its Restricted
    Subsidiaries for 60 days after notice, from the Trustee or the Holders of at
    least 25% of the

                                       48

    outstanding principal amount of the Notes, to comply with any of the other
    agreements in the Indenture;

                  (v)      default under any mortgage, indenture or instrument
    under which there may be issued or by which there may be secured or
    evidenced any Indebtedness for money borrowed by the Company or any of its
    Restricted Subsidiaries (or the payment of which is Guaranteed by the
    Company or any of its Restricted Subsidiaries) whether such Indebtedness or
    Guarantee now exists, or is created after the date hereof, if that default:

                           (A)      is caused by a failure of the Company or
                  any Subsidiary of the Company to pay principal of, or interest
                  or premium, if any, on such Indebtedness prior to the
                  expiration of the grace period provided in such Indebtedness
                  on the date of such default (a "PAYMENT DEFAULT"); or

                           (B)      results in the acceleration of such
                  Indebtedness prior to its express maturity,

    and, in each case, the principal amount of any such Indebtedness, together
    with the principal amount of any other such Indebtedness under which there
    has been a Payment Default or the maturity of which has been so accelerated,
    aggregates $50 million or more;

                  (vi)  failure by the Company or any of its Subsidiaries to pay
    final judgments aggregating in excess of $50 million, which judgments are
    not paid, discharged or stayed for a period of 60 days;

                  (vii) the entry by a court having jurisdiction in the premises
    of (A) a decree or order for relief in respect of the Company or any of its
    Significant Subsidiaries (or any group of Subsidiaries that, taken together,
    would constitute a Significant Subsidiary) in an involuntary case or
    proceeding under any applicable Federal or State bankruptcy, insolvency,
    reorganization or other similar law or (B) a decree or order adjudging the
    Company or any of its Significant Subsidiaries (or any group of Subsidiaries
    that, taken together, would constitute a Significant Subsidiary) a bankrupt
    or insolvent, or approving as properly filed a petition seeking
    reorganization, arrangement, adjustment or composition of or in respect of
    the Company or any of its Significant Subsidiaries (or any group of
    Subsidiaries that, taken together, would constitute a Significant
    Subsidiary) under any applicable Federal or State law, or appointing a
    custodian, receiver, liquidator, assignee, trustee, sequestrator or other
    similar official of the Company or any of its Significant Subsidiaries (or
    any group of Subsidiaries that, taken together, would constitute a
    Significant Subsidiary) or of any substantial part of the property of the
    Company or any of its Significant Subsidiaries, or ordering the winding up
    or liquidation of the affairs of the Company or any of its Significant

                                       49

    Subsidiaries (or any group of Subsidiaries that, taken together, would
    constitute a Significant Subsidiary), and the continuance of any such decree
    or order for relief or any such other decree or order unstayed and in effect
    for a period of 90 consecutive days; or

                  (viii) the commencement by the Company or any of its
    Significant Subsidiaries (or any group of Subsidiaries that, taken together,
    would constitute a Significant Subsidiary) of a voluntary case or proceeding
    under any applicable Federal or State bankruptcy, insolvency, reorganization
    or other similar law or of any other case or proceeding to be adjudicated a
    bankrupt or insolvent, or the consent by it to the entry of a decree or
    order for relief in respect of the Company or any of its Significant
    Subsidiaries (or any group of Subsidiaries that, taken together, would
    constitute a Significant Subsidiary) in an involuntary case or proceeding
    under any applicable Federal or State bankruptcy, insolvency, reorganization
    or other similar law or to the commencement of any bankruptcy or insolvency
    case or proceeding against it, or the filing by it of a petition or answer
    or consent seeking reorganization or relief under any applicable Federal or
    State law, or the consent by it to the filing of such petition or to the
    appointment of or taking possession by a custodian, receiver, liquidator,
    assignee, trustee, sequestrator or similar official of the Company or any of
    its Significant Subsidiaries (or any group of Subsidiaries that, taken
    together, would constitute a Significant Subsidiary) or of any substantial
    part of the property of the Company or any of its Significant Subsidiaries
    (or any group of Subsidiaries that, taken together, would constitute a
    Significant Subsidiary), or the making by it of an assignment for the
    benefit of creditors, or the admission by it in writing of its inability to
    pay its debts generally as they become due, or the taking of corporate
    action by the Company or any of its Significant Subsidiaries (or any group
    of Subsidiaries that, taken together, would constitute a Significant
    Subsidiary) in furtherance of any such action.

                  (b) The Trustee shall not be deemed to have knowledge of a
    Default or Event of Default or of the identity of a Significant Subsidiary
    (or any group of Subsidiaries that, taken together, would constitute a
    Significant Subsidiary) unless a Responsible Officer assigned to the
    Corporate Trust Office of the Trustee has actual knowledge of such Default
    or Event of Default or of the identity of such Significant Subsidiary or the
    Trustee receives written notice at the Corporate Trust Office of the Trustee
    of such Default or Event of Default or of the identity of such Significant
    Subsidiary with specific reference to such Default or Event of Default or
    Significant Subsidiary and the Notes and this Indenture.

                  (c) When a Default is cured, or when an Event of Default is
    deemed cured pursuant to Section 4.04 hereof, such Default, or Event of
    Default, as the case may be, ceases.

                                       50

                  (d) A Default under clause (iv) of this Section 4.02 will not
    be an Event of Default until the Trustee or the Holders of at least 25% in
    aggregate principal amount of the Notes then Outstanding notify the Company
    of the Default and the Company does not cure such Default within the time
    specified after receipt of such notice. Such notice must specify the Default
    and state that it is a "Notice of Default". Any such notice given by Holders
    shall also be given to the Trustee.

         Section 4.03.  Acceleration. If an Event of Default (other than an
Event of Default specified in clause (vii) or (viii) of Section 4.02(a) hereof
with respect to the Company) occurs and is continuing, the Trustee by notice to
the Company, or the Holders of at least 25% in principal amount of the then
Outstanding Notes by notice to the Company and the Trustee, may declare the
principal of and premium, if any, and accrued and unpaid interest, if any, on
all then Outstanding Notes to be due and payable immediately. Upon any such
declaration, the principal of, premium, if any, and accrued and unpaid interest,
if any, on all then Outstanding Notes shall be due and payable immediately. If
an Event of Default specified in clause (vii) or (viii) of Section 4.02(a)
occurs with respect to the Company, the principal of and premium, if any, and
accrued and unpaid interest, if any, on all Notes then Outstanding shall ipso
facto become and be immediately due and payable without any declaration, notice
or other act on the part of the Trustee or any Holder.

    At any time after such a declaration of acceleration with respect to the
Notes has been made and before a judgment for payment of the money due has been
obtained by the Trustee as provided in Article Five of the Base Indenture, the
Holders of a majority in principal amount of the Outstanding Notes, by written
notice to the Company and the Trustee, may rescind and annul such declaration
and its consequences if:

                  (i)      all existing Events of Default, other than the
         nonpayment of the principal of, premium, if any, and interest on the
         Notes that have become due solely by the declaration of acceleration,
         have been cured or waived, and

                  (ii)     the rescission would not conflict with any judgment
         or decree of a court of competent jurisdiction.

    No such rescission shall affect any subsequent Default or impair any right
consequent thereon.

    If the maturity of the Notes is accelerated pursuant to this Section 4.03,
100% of the principal amount thereof shall become due and payable plus premium,
if any, and accrued interest, if any, to the date of payment.

    In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of the Company with the
intention of

                                       51

avoiding payment of the premium (including, in the case of any such Event of
Default prior to June 1, 2007, payment of the Make-Whole Price) that the Company
would have had to pay if the Company then had elected to redeem the Notes
pursuant to Section 2.06 hereof, an equivalent premium (or, in the case of any
such Event of Default prior to June 1, 2007, the relevant Make-Whole Amount that
would apply at such time if the Notes were optionally redeemed at the Make-Whole
Price) will also become and be immediately due and payable to the extent
permitted by law upon the acceleration of the Notes.

         Section 4.04.  Waiver Of Existing Defaults. Subject to Sections 5.7
and 8.2 of the Base Indenture, the Holders of a majority in aggregate principal
amount of the Outstanding Notes by notice to the Trustee may waive an existing
Default or Event of Default and its consequences (including waivers obtained in
connection with a purchase of, or tender offer or exchange offer for, the Notes
or a solicitation of consents in respect of the Notes), except (1) a continuing
Default or Event of Default in the payment of interest on, or the principal of,
the Notes or (2) a continuing default in respect of a provision that under
Section 8.2 of the Base Indenture cannot be amended without the consent of each
Holder affected. Upon any such waiver, such Default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.

         Section 4.05.  Conflict with Base Indenture. Notwithstanding the
foregoing, if any notice, direction, waiver, rescission or cancellation is given
with respect to a Default or Event of Default that, under the terms of the Base
Indenture, requires action by holders of a percentage of the outstanding
principal amount of the Notes and one or more other series of Securities issued
under the Base Indenture, voting together or otherwise as a single class, then
such notice, direction, waiver, rescission or cancellation shall be effective
only if effected with the requisite percentage of the outstanding principal
amount of the Notes and any other such Securities, voting together or otherwise
as a single class.

                                    ARTICLE 5
                               EXECUTION OF NOTES

         Section 5.01.  Execution of Notes. The Notes shall be executed as
follows:

         Notwithstanding Section 2.5 of the Base Indenture, the Notes shall be
signed on behalf of the Company by its Chairman of the Board, its President, one
of its Vice Presidents or its Treasurer, and its corporate seal may, but need
not, be impressed, affixed, imprinted or otherwise reproduced thereon, and may,
but need not, be attested. Such signatures may be the manual or facsimile
signatures of the present or any future such officers. If any Note is executed
under the Company's corporate seal, such seal may be in the form of a facsimile
thereof. Typographical

                                       52

and other minor errors or defects in any such reproduction of the seal or any
such signature shall not affect the validity or enforceability of any Note that
has been duly authenticated and delivered by the Trustee.

         In case any officer of the Company who shall have signed any of the
Notes shall cease to be such officer before the Note so signed shall be
authenticated and delivered by the Trustee or disposed of by the Company, such
Note nevertheless may be authenticated and delivered or disposed of as though
the person who signed such Note had not ceased to be such officer of the
Company; and any Note may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Note, shall be the proper officers
of the Company, although at the date of the execution and delivery of this Ninth
Supplemental Indenture any such person was not such an officer.

                                    ARTICLE 6
                            MISCELLANEOUS PROVISIONS

         Section 6.01.  Ratification. The Indenture, as supplemented and
amended by this Ninth Supplemental Indenture, is in all respects hereby adopted,
ratified and confirmed.

         Section 6.02.  Counterparts. This Ninth Supplemental Indenture may be
executed in any number of counterparts, each of which when so executed shall be
deemed an original; and all such counterparts shall together constitute but one
and the same instrument.

         Section 6.03.  Governing Law. THIS NINTH SUPPLEMENTAL INDENTURE AND
EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO THE CHOICE OF LAW PRINCIPLES THEREOF.

         Section 6.04.  No Recitals, etc. The recitals contained herein shall
be taken as the statements of the Company, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Ninth Supplemental Indenture.

         Section 6.05.  Paying Agent. The Trustee is hereby appointed paying
agent for the Notes.

         Section 6.06.  Liability Of Incorporators, Stockholders, etc. Section
11.1 of the Base Indenture will not be applicable to the Notes. Instead, the
following provisions will apply: No director, officer, employee, incorporator or
stockholder of the Company or any Subsidiary, as such, will have any liability
for any obligations of the Company under the Notes or the Indenture, or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each

                                       53

Holder of the Notes by accepting a Note will be deemed to have waived and
released all such liability. Such waiver and release are part of the
consideration for issuance of the Notes.

                                       54

         IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the day and year first written above.

                                                 THE WILLIAMS COMPANIES, INC.,

                                                 By:   /s/ James G. Ivey
                                                      --------------------------
                                                       Name:   James G. Ivey
                                                       Title:  Treasurer

                                                 JPMORGAN CHASE BANK, as Trustee

                                                 By:   /s/ J Adamis
                                                      --------------------------
                                                       Name:   J Adamis
                                                       Title:  Vice President

                                                                       EXHIBIT A

         [Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Company
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]

         [Unless and until it is exchanged in whole or in part for Securities in
definitive registered form, this Security may not be transferred except as a
whole by the Depositary to the nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary.]

No. __

                                                     CUSIP: 969457 BQ2
                                                     $_____________

                          THE WILLIAMS COMPANIES, INC.

                           8 5/8% Senior Note due 2010

         The Williams Companies, Inc., a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company"), for value
received, hereby promises to pay to _________ or registered assigns, the
principal sum of ___________ Dollars ($__________) on June 1, 2010, at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, in such coin or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and private debts, and
to pay interest, semiannually on June 1 and December 1 of each year, commencing
December 1, 2003, on said principal sum at said office or agency, in like coin
or currency, at the rate per annum specified in the title of this Note, from the
June 1 or December 1, as the case may be, next preceding the date of this Note
to which interest has been paid or duly provided for, unless the date hereof is
a date to which interest has been paid or duly provided for, in which case from
the date of this Note, or unless no interest has been paid on this Note or duly
provided for, in which case from June 10, 2003, until payment of said principal
sum has been made or duly provided for; provided, that payment of interest may
be made at the option of the Company by check mailed to the address of the
person entitled thereto as such address shall appear on the Security register.
Notwithstanding the foregoing, if the date hereof is after May 15 or November
15, as the case may be, and before the following June 1 or December 1, this Note
shall bear interest from such June 1 or December 1; provided, that if the
Company shall default in the payment of interest due on such June 1 or December
1, then this Note shall bear interest from the next preceding June 1 or December
1, to which interest has been paid or duly provided for or, if no interest has
been paid on this Note or duly provided for, from June 10, 2003. The interest so
payable on any June 1 or December 1, will, subject to certain exceptions
provided in the Indenture referred to on the reverse hereof, be paid to the
person in whose name this Note (or one or more predecessor Notes) is registered
at the close of business on May 15 or November 15 (whether or not a Business
Day), as the case may be, next preceding such June 1 or

                                      A-1

December 1. Reference is made to the further provisions of this Note set
forth on the reverse hereof. Such further provisions shall for all purposes have
the same effect as though fully set forth at this place. This Note shall not be
valid or become obligatory for any purpose until the certificate of
authentication hereon shall have been executed by the Trustee under the
Indenture referred to on the reverse hereof by manual signature.

                                      A-2

         IN WITNESS WHEREOF, The Williams Companies, Inc. has caused this
instrument to be duly executed.

                                           THE WILLIAMS COMPANIES, INC.,

                                           By:  ________________________________
                                                  Name:
                                                  Title:

                     TRUSTEE'S CERTIFICATE OF AUTHENTICATION

Dated:

         This is one of the Securities referred to in the within-mentioned
Indenture.

                                            JPMORGAN CHASE BANK,
                                            as Trustee

                                            By:
                                                 _______________________________
                                                 Authorized Officer

                                      A-3

                                [REVERSE OF NOTE]

                          THE WILLIAMS COMPANIES, INC.
                           8 5/8% Senior Note due 2010

         This Note is one of a duly authorized issue of debentures, notes, bonds
or other evidences of indebtedness of the Company (hereinafter called the
"Securities") of the series hereinafter specified, all issued or to be issued
under and pursuant to an indenture dated as of November 10, 1997, as
supplemented (as supplemented, herein called the "Indenture"), duly executed and
delivered by the Company to JPMorgan Chase Bank, as successor Trustee (herein
called the "Trustee"), to which Indenture reference is hereby made for a
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the Holders of the
Securities. The Securities may be issued in one or more series, which different
series may be issued in various aggregate principal amounts, may mature at
different times, may bear interest (if any) at different rates, may be subject
to different redemption provisions (if any), may be subject to different
sinking, purchase or analogous funds (if any) and may otherwise vary as provided
in the Indenture. This Note is one of a series designated as the 8 5/8% Senior
Notes due 2010 (the "Notes") of the Company, initially limited in aggregate
principal amount to $800,000,000. The Company may, from time to time, without
the consent of the existing holders of the Notes, issue additional notes under
the Indenture having the same terms as the Notes in all respects, except for
issue date, issue price, initial interest accrual date and the initial Interest
Payment Date. Any such additional notes will be consolidated with and form a
single series with the Notes under the Indenture.

         At any time and from time to time prior to June 1, 2007, the Company
may, at its option, redeem the Notes, in whole or in part, at the Make-Whole
Price plus accrued and unpaid interest to the redemption date.

         "Make-Whole Amount" with respect to a Note means an amount equal to the
excess, if any, of (1) the present value of the remaining interest, premium and
principal payments due on such Note (excluding any portion of such payments of
interest accrued as of the redemption date), computed using a discount rate
equal to the Treasury Rate plus 50 basis points, over (2) the outstanding
principal amount of such Note.

         "Make-Whole Average Life" means the number of years (calculated to the
nearest one-twelfth) between the redemption date and the Stated Maturity of the
Notes.

         "Make-Whole Price" means the sum of the Outstanding principal amount of
the Notes to be redeemed plus the Make-Whole Amount for such Notes.

                                      A-4

         "Treasury Rate" is defined as the yield to maturity (calculated on a
semi-annual bond-equivalent basis) at the time of the computation of United
States Treasury securities with a constant maturity (as compiled by and
published in the most recent Federal Reserve Statistical Release H.15 (519),
which has become publicly available at least two Business Days prior to the date
of the redemption notice or, if such Statistical Release is no longer published,
any publicly available source of similar market data) most nearly equal to the
then remaining maturity of the Notes; provided that if the Make-Whole Average
Life of such Note is not equal to the constant maturity of the United States
Treasury security for which a weekly average yield is given, the Treasury Rate
shall be obtained by linear interpolation (calculated to the nearest one-twelfth
of a year) from the weekly average yields of United States Treasury securities
for which such yields are given, except that if the Make-Whole Average Life of
such Note is less than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant maturity of one year
shall be used.

         At any time and from time to time on or after June 1, 2007, the Company
may, at its option, redeem the Notes, in whole or in part, at a redemption price
equal to the percentage of their principal amount set forth below plus accrued
and unpaid interest to the redemption date, if redeemed during the twelve-month
period beginning on June 1 of the years indicated below:

Commencing in Year                        Percentage
- ------------------                        ----------
                                       
2007                                        104.313%
2008                                        102.156%
2009 and thereafter                         100.000%

         At any time and from time to time prior to June 1, 2006, the Company
may, at its option, redeem up to 35% of the aggregate principal amount of the
Notes with the net cash proceeds received by the Company from any Equity
Offering (as defined in the Indenture) at a redemption price equal to 108.625%
of their principal amount plus accrued and unpaid interest to the redemption
date; provided that (1) in each case the redemption takes place not later than
120 days after the closing of the related Equity Offering, and (2) at least 65%
of the aggregate principal amount of Notes remains outstanding immediately after
the occurrence of such redemption (excluding Notes held by the Company and its
Subsidiaries).

         This Note may be the subject of a Change of Control Offer and/or an
Asset Sale Offer, each as further described in the Indenture.

                                      A-5

         If the Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then Outstanding principal of, premium, if
any, and accrued interest on the Notes to the redemption date or the Maturity
Date of the Notes, as the case may be, the Company may in certain circumstances
specified in the Indenture be discharged from the Indenture and the Notes or may
be discharged from certain of its obligations under the Indenture.

         Periodic interest installments with respect to which the Interest
Payment Date is on or prior to any Redemption Date will be payable to Holders of
record at the close of business on the relevant record dates referred to herein,
all as provided in the Indenture.

         Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each Holder of Notes to be redeemed at his
registered address. Notes in denominations larger than $1,000 may be redeemed in
part but only in whole multiples of $1,000. On or after the redemption date,
interest will cease to accrue on Notes or on the portions thereof called for
redemption, as the case may be.

         In case an Event of Default with respect to the Notes shall have
occurred and be continuing, the principal hereof may be declared, and upon such
declaration shall become, due and payable, in the manner, with the effect and
subject to the conditions provided in the Indenture.

         The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Securities of all series issued under the
Indenture then Outstanding and affected, voting as one class, to add any
provisions to, or change in any manner or eliminate any of the provisions of,
such Indenture or modify in any manner the rights of the Holders of the
Securities of each series so affected; provided that the Company and the Trustee
may not, without the consent of the Holder of each outstanding Security affected
thereby, (i) extend the final maturity of the principal of any Security, or
reduce the principal amount thereof or reduce the rate or extend the time of
payment of interest thereon, or reduce the amount payable on redemption thereof
or change the currency in which the principal thereof (including any amount in
respect of original issues discount) or interest thereon is payable or reduce
the amount of any original issue discount security payable upon acceleration or
provable in bankruptcy or impair the right to institute suit for the enforcement
of any payment on any Security when due or (ii) reduce the aforesaid percentage
in principal amount of Securities of any series issued under such Indenture, the
consent of the Holders of which is required for any such modification. It is
also provided in the Indenture that, with respect to certain defaults or Events
of Default regarding the Securities of any series, prior to any declaration
accelerating the maturity of such Securities, the Holders of a majority in
aggregate principal amount Outstanding of the Securities of such

                                      A-6

series (or, in the case of certain defaults or Events of Default, all or certain
series of the Securities) may on behalf of the Holders of all the Securities of
such series (or, in the case of certain defaults or Events of Default, all or
certain series of the Securities, as the case may be) waive any such past
default or Event of Default and its consequences. The preceding sentence shall
not, however, apply to a default in the payment of the principal of or interest
on any of the Securities. Any such consent or waiver by the Holder of this Note
(unless revoked as provided in the Indenture) shall be conclusive and binding
upon such Holder and upon all future Holders and owners of this Note and any
Notes which may be issued in exchange or substitution herefor or on registration
of transfer hereof, irrespective of whether or not any notation thereof is made
upon this Note or such other Notes.

         No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note in
the manner, at the respective times, at the rate and in the coin or currency
herein prescribed.

         The Notes are issuable in registered form without coupons in
denominations of $1,000 and any multiple of $1,000 at the office or agency of
the Company in the Borough of Manhattan, The City of New York, and in the manner
and subject to the limitations provided in the Indenture, but without the
payment of any service charge, Notes may be exchanged for a like aggregate
principal amount of Notes of other authorized denominations.

         Upon due presentment for registration of transfer of this Note at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, a new Note or Notes of authorized denominations for an equal aggregate
principal amount will be issued to the transferee in exchange therefor, subject
to the limitations provided in the Indenture, without charge except for any tax
or other governmental charge imposed in connection therewith.

         The Company, the Trustee and any authorized agent of the Company or the
Trustee may deem and treat the registered Holder hereof as the absolute owner of
this Note (whether or not this Note shall be overdue and notwithstanding any
notation of ownership or other writing hereon), for the purpose of receiving
payment of, or on account of, the principal hereof and subject to the provisions
on the face hereof, interest hereon, and for all other purposes, and none of the
Company, the Trustee or any authorized agent of the Company or the Trustee shall
be affected by any notice to the contrary.

         No director, officer, employee, incorporator or stockholder of the
Company or any Subsidiary, as such, will have any liability for any obligations
of the Company under the Notes or the Indenture, or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of
the

                                      A-7

Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes.

         This Note shall for all purposes be governed by, and construed in
accordance with, the laws of the State of New York.

         Terms used herein which are defined in the Indenture shall have the
respective meanings assigned thereto in the Indenture.

                                      A-8

                       Option of Holder to Elect Purchase

         If you want to elect to have this Note purchased by the Company
pursuant to Section 2.08 or 3.08 of the Ninth Supplemental Indenture to the
Indenture, check the appropriate box below:

            ___Section 2.08                 ___Section 3.08

         If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 2.08 or Section 3.08 of the Ninth Supplemental
Indenture to the Indenture, state the amount you elect to have purchased ($1,000
or an integral multiple thereof):

                                  $_______________

Date _______________

                                    Your Signature: ____________________________
                                      (Sign exactly as your name appears on the
                                                              face of this Note)

                                    Tax Identification No.:
                                                            ____________________

Signature Guarantee*:  _________________________

         *        Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor acceptable to the Trustee).

                                      A-9

                                                                     EXHIBIT 4.2

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

                          THE WILLIAMS COMPANIES, INC.

                                       AND

                              JPMORGAN CHASE BANK,
                                   as Trustee

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

                                    INDENTURE

                                   Dated as of

                                  May 28, 2003

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

            5.50% JUNIOR SUBORDINATED CONVERTIBLE DEBENTURES DUE 2033

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

                               TABLE OF CONTENTS

                                                                                              PAGE
                                                                                              -----
                                                                                           
                                    ARTICLE 1
                                   DEFINITIONS

Section 1.01.  Definitions...................................................................    1

                                    ARTICLE 2
           ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF DEBENTURES

Section 2.01.  Designation Amount and Issue of Debentures....................................   12
Section 2.02.  Form of Debentures............................................................   12
Section 2.03.  Date and Denomination of Debentures; Payments of Interest.....................   13
Section 2.04.  Execution of Debentures.......................................................   14
Section 2.05.  Exchange and Registration of Transfer of Debentures;
               Restrictions on Transfer......................................................   15
Section 2.06.  Mutilated, Destroyed, Lost or Stolen Debentures...............................   22
Section 2.07.  Temporary Debentures..........................................................   23
Section 2.08.  Cancellation of Debentures....................................................   24
Section 2.09.  CUSIP Numbers.................................................................   24

                                    ARTICLE 3
                     REDEMPTION AND REPURCHASE OF DEBENTURES

Section 3.01.  Company's Right to Redeem.....................................................   25
Section 3.02.  Notice of Optional Redemption; Selection of Debentures........................   25
Section 3.03.  Payment of Debentures Called for Redemption by the Company....................   27
Section 3.04.  Conversion Arrangement on Call for Redemption.................................   28
Section 3.05.  Repurchase of Debentures by the Company at Option of the Holder upon a Change
               of Control....................................................................   28

                                    ARTICLE 4
                           SUBORDINATION OF DEBENTURES

Section 4.01.  Agreement of Subordination....................................................   32
Section 4.02.  Payments to Debentureholders..................................................   33
Section 4.03.  Subrogation of Debentures.....................................................   36
Section 4.04.  Authorization to Effect Subordination.........................................   37
Section 4.05.  Notice to Trustee.............................................................   37
Section 4.06.  Trustee's Relation to Senior and Senior Subordinated Indebtedness.............   38
Section 4.07.  No Impairment of Subordination................................................   39
Section 4.08.  Certain Conversions Not Deemed Payment........................................   39

                                                                                           
Section 4.09.  Article Applicable to Paying Agents...........................................   40
Section 4.10.  Senior and Senior Subordinated Indebtedness Entitled to Rely..................   40
Section 4.11.  Reliance on Judicial Order or Certificate of Liquidating Agent................   40

                                    ARTICLE 5
                       DEFERRAL OF INTEREST PAYMENT PERIOD

Section 5.01.  Extended Interest Payment Period..............................................   40
Section 5.02.  Notification of Deferral of Interest Payment Periods..........................   41

                                    ARTICLE 6
                       PARTICULAR COVENANTS OF THE COMPANY

Section 6.01.  Payment of Principal, Premium and Interest....................................   41
Section 6.02.  Maintenance of Office or Agency...............................................   42
Section 6.03.  Appointments to Fill Vacancies in Trustee's Office............................   42
Section 6.04.  Provisions as to Paying Agent.................................................   42
Section 6.05.  Existence.....................................................................   44
Section 6.06.  Rule 144A Information Requirement.............................................   44
Section 6.07.  Stay, Extension and Usury Laws................................................   44
Section 6.08.  Compliance Certificate........................................................   44
Section 6.09.  Liquidated Damages Notice.....................................................   45
Section 6.10.  Tax Treatment.................................................................   45
Section 6.11.  Restrictions on Certain Payments..............................................   45
Section 6.12.  Termination of Designated Agreements..........................................   47

                                    ARTICLE 7
       DEBENTUREHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

Section 7.01.  Debentureholders' Lists.......................................................   47
Section 7.02.  Preservation and Disclosure of Lists..........................................   47
Section 7.03.  Reports by Trustee............................................................   48
Section 7.04.  Reports by Company............................................................   48

                                   ARTICLE 8
       REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS ON AN EVENT OF DEFAULT

Section 8.01.  Events of Default.............................................................   48
Section 8.02.  Payments of Debentures on Default; Suit Therefor..............................   51
Section 8.03.  Application of Monies.........................................................   53
Section 8.04.  Proceedings by Debentureholder................................................   53
Section 8.05.  Proceedings by Trustee........................................................   54
Section 8.06.  Remedies Cumulative and Continuing............................................   55
Section 8.07.  Direction of Proceedings and Waiver of Defaults by Majority of
               Debentureholders..............................................................   55
Section 8.08.  Notice of Defaults............................................................   56
Section 8.09.  Undertaking to Pay Costs......................................................   56

                                       ii

                                                                                           
                                    ARTICLE 9
                                   THE TRUSTEE

Section 9.01.  Duties and Responsibilities of Trustee........................................  56
Section 9.02.  Reliance on Documents, Opinions, Etc..........................................  58
Section 9.03.  No Responsibility For Recitals, Etc...........................................  59
Section 9.04.  Trustee, Paying Agents, Conversion Agents or Registrar May Own Debentures.....  60
Section 9.05.  Monies to Be Held in Trust....................................................  60
Section 9.06.  Compensation and Expenses of Trustee..........................................  60
Section 9.07.  Officer's Certificate as Evidence.............................................  61
Section 9.08.  Conflicting Interests of Trustee..............................................  61
Section 9.09.  Eligibility of Trustee........................................................  61
Section 9.10.  Resignation or Removal of Trustee.............................................  61
Section 9.11.  Acceptance by Successor Trustee...............................................  63
Section 9.12.  Succession by Merger..........................................................  63
Section 9.13.  Preferential Collection of Claims.............................................  64

                                   ARTICLE 10
                              THE DEBENTUREHOLDERS

Section 10.01.  Action by Debentureholders...................................................  64
Section 10.02.  Proof of Execution by Debentureholders.......................................  65
Section 10.03.  Who Are Deemed Absolute Owners...............................................  65
Section 10.04.  Company-owned Debentures Disregarded.........................................  65
Section 10.05.  Revocation of Consents, Future Holders Bound.................................  66

                                   ARTICLE 11
                          MEETINGS OF DEBENTUREHOLDERS

Section 11.01.  Purpose of Meetings..........................................................  66
Section 11.02.  Call of Meetings by Trustee..................................................  67
Section 11.03.  Call of Meetings by Company or Debentureholders..............................  67
Section 11.04.  Qualifications for Voting....................................................  67
Section 11.05.  Regulations..................................................................  67
Section 11.06.  Voting.......................................................................  68
Section 11.07.  No Delay of Rights by Meeting................................................  69

                                   ARTICLE 12
                             SUPPLEMENTAL INDENTURES

Section 12.01.  Supplemental Indentures Without Consent of Debentureholders..................  69
Section 12.02.  Supplemental Indenture with Consent of Debentureholders......................  70
Section 12.03.  Effect of Supplemental Indenture.............................................  71
Section 12.04.  Notation on Debentures.......................................................  72

                                      iii

                                                                                           
Section 12.05.  Evidence of Compliance of Supplemental Indenture to Be
                Furnished to Trustee.........................................................  72

                                   ARTICLE 13
                CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

Section 13.01.  Company May Consolidate on Certain Terms.....................................  72
Section 13.02.  Successor to Be Substituted..................................................  73
Section 13.03.  Opinion of Counsel to Be Given Trustee.......................................  74

                                   ARTICLE 14
                     SATISFACTION AND DISCHARGE OF INDENTURE

Section 14.01.  Discharge of Indenture.......................................................  74
Section 14.02.  Deposited Monies to Be Held in Trust by Trustee..............................  75
Section 14.03.  Paying Agent to Repay Monies Held............................................  75
Section 14.04.  Return of Unclaimed Monies...................................................  75

                                   ARTICLE 15
               IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

Section 15.01.  Indenture and Debentures Solely Corporate Obligations........................  75

                                   ARTICLE 16
                            CONVERSION OF DEBENTURES

Section 16.01.  Right to Convert.............................................................  76
Section 16.02.  Exercise of Conversion Privilege; Issuance of Common Stock
                on Conversion; No Adjustment for Interest or Dividends.......................  76
Section 16.03.  Cash Payments in Lieu of Fractional Shares...................................  78
Section 16.04.  Conversion Rate..............................................................  78
Section 16.05.  Adjustment of Conversion Rate................................................  78
Section 16.06.  Effect of Reclassification, Consolidation, Merger or Sale....................  88
Section 16.07.  Taxes on Shares Issued.......................................................  89
Section 16.08.  Reservation of Shares, Shares to Be Fully Paid; Compliance with Governmental
                Requirements; Listing of Common Stock........................................  90
Section 16.09.  Responsibility of Trustee....................................................  91
Section 16.10.  Notice to Holders Prior to Certain Actions...................................  91
Section 16.11.  Stockholder Rights Plans.....................................................  92

                                   ARTICLE 17
                            MISCELLANEOUS PROVISIONS

Section 17.01.  Provisions Binding on Company's Successors...................................  92
Section 17.02.  Official Acts by Successor Corporation.......................................  93
Section 17.03.  Addresses for Notices, Etc...................................................  93
Section 17.04.  Governing Law................................................................  93

                                       iv

                                                                                           
Section 17.05.  Evidence of Compliance with Conditions Precedent, Certificates to Trustee....  93
Section 17.06.  Legal Holidays...............................................................  94
Section 17.07.  Trust Indenture Act..........................................................  94
Section 17.08.  No Security Interest Created.................................................  94
Section 17.09.  Benefits of Indenture........................................................  95
Section 17.10.  Table of Contents, Headings, Etc.............................................  95
Section 17.11.  Authenticating Agent.........................................................  95
Section 17.12.  Execution in Counterparts....................................................  96
Section 17.13.  Severability.................................................................  96
Schedule A:  Designated Agreements
Exhibit A:  Form of Debenture

                                       v

                                    INDENTURE

         INDENTURE dated as of May 28, 2003 between The Williams Companies,
Inc., a Delaware corporation duly organized and existing under the laws of the
State of Delaware (hereinafter called the "COMPANY"), having its principal
office at One Williams Center, Tulsa, Oklahoma 74172, and JPMorgan Chase Bank, a
banking corporation duly organized and existing under the laws of the State of
New York, as trustee hereunder (hereinafter called the "TRUSTEE").

                                   WITNESSETH:

         WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issue of its 5.50% Junior Subordinated Convertible Debentures due
2033 (hereinafter called the "DEBENTURES"), in an aggregate principal amount not
to exceed $300,000,000, and, to provide the terms and conditions upon which the
Debentures are to be authenticated, issued and delivered, the Company has duly
authorized the execution and delivery of this Indenture; and

         WHEREAS, the Debentures, the certificate of authentication to be borne
by the Debentures, a form of assignment, a form of option to elect repurchase
upon a change of control and a form of conversion notice to be borne by the
Debentures are to be substantially in the forms hereinafter provided for; and

         WHEREAS, all acts and things necessary to make the Debentures, when
executed by the Company and authenticated and delivered by the Trustee or a duly
authorized authenticating agent, as in this Indenture provided, the valid,
binding and legal obligations of the Company, and to constitute this Indenture a
valid agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Debentures have in
all respects been duly authorized,

         NOW, THEREFORE, THIS INDENTURE WITNESSETH:

         That in order to declare the terms and conditions upon which the
Debentures are, and are to be, authenticated, issued and delivered, and in
consideration of the premises and of the purchase and acceptance of the
Debentures by the holders thereof, the Company covenants and agrees with the
Trustee for the equal and proportionate benefit of the respective holders from
time to time of the Debentures (except as otherwise provided below), as follows:

                                    ARTICLE 1
                                   DEFINITIONS

Section 1.01 . Definitions. The terms defined in this Section 1.01 (except as
herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall

have the respective meanings specified in this Section 1.01. All other terms
used in this Indenture that are defined in the Trust Indenture Act or which are
by reference therein defined in the Securities Act (except as herein otherwise
expressly provided or unless the context otherwise requires) shall have the
meanings assigned to such terms in the Trust Indenture Act and in the Securities
Act as in force at the date of the execution of this Indenture. The words
"HEREIN", "HEREOF", "HEREUNDER" and words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
Subdivision. The terms defined in this Article include the plural as well as the
singular.

         "ACCEPTED PURCHASED SHARES" has the meaning specified in Section
16.05(g).

         "ADJUSTMENT EVENT" has the meaning specified in Section 16.05(l).

         "AGENT MEMBERS" has the meaning specified in Section 2.05(a).

         "AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"CONTROL", when used with respect to any specified Person, means the power to
direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms "CONTROLLING" and "CONTROLLED" have
meanings correlative to the foregoing.

         "BOARD OF DIRECTORS" means the Board of Directors of the Company or a
committee of such Board duly authorized to act for it hereunder.

         "BUSINESS DAY" means any day, other than a Saturday or Sunday, that is
not a day on which banking institutions in The City of New York, New York are
authorized or obligated by law or executive order to remain closed or on which
the Corporate Trust Office of the Trustee is closed for business.

         "CHANGE OF CONTROL" means:

         (a)      the acquisition by any Person of beneficial ownership (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, through a
purchase, merger, other acquisition transaction or a series of such
transactions, of shares of the Company's capital stock entitling that Person to
exercise 50% or more of the total voting power of all shares of the Company's
capital stock entitled to vote generally in elections of directors, other than
any acquisition by the Company, any of the Company's Subsidiaries or future
Subsidiaries or any of the Company's employee benefit plans;

         (b)      the first day on which a majority of the members of the board
of directors of the Company are not Continuing Directors; or

                                       2

         (c)      the consolidation, combination or merger of the Company with
or into any other Person, any merger of another Person into the Company, or any
conveyance, transfer, sale, lease or other disposition of all or substantially
all of the Company's properties and assets to another Person, other than (i) any
transaction (x) that does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of the Company's capital stock,
and (y) pursuant to which holders of the Company's capital stock immediately
prior to such transaction are entitled to exercise, directly or indirectly, 50%
or more of the total voting power of all shares of the Company's capital stock
entitled to vote generally in elections of directors of the continuing or
surviving Person immediately after giving effect to such transaction, or (ii)
any merger solely for the purpose of changing the Company's jurisdiction of
incorporation and resulting in a reclassification, conversion or exchange of
outstanding shares of common stock solely into shares of common stock of the
surviving entity.

Notwithstanding the foregoing, a Change of Control will not be deemed to have
occurred if:

                  (i)      the Closing Sale Price per share of the Company's
         common stock for any five full Trading Days (not including extended
         hours trading) within the period of ten consecutive Trading Days ending
         immediately after the later of the Change of Control or the public
         announcement of the Change of Control, in the case of a Change of
         Control under (a) above, or the period of ten consecutive full Trading
         Days (not including extended hours trading) ending immediately before
         the Change of Control, in the case of a Change of Control under (c)
         above, equals or exceeds 110% of the Conversion Price in effect on each
         of those Trading Days (as adjusted in accordance with Article 16
         hereof); or

                  (ii)     at least 90% of the consideration in the transaction
         or transactions constituting a Change of Control consists of shares of
         common stock traded or to be traded immediately following such Change
         of Control on a national securities exchange or the Nasdaq National
         Market and, as a result of such transaction or transactions, the
         Debentures become convertible into such common stock (and any rights
         attached thereto).

         "CHANGE OF CONTROL NOTICE" has the meaning specified in Section
3.05(b).

         "CLOSING SALE PRICE" of the shares of Common Stock on any date means
the closing sale price per share (or, if no closing sale price is reported, the
average of the closing bid and ask prices or, if more than one in either case,
the average of the average closing bid and the average closing ask prices) on
such date as reported in composite transactions for the principal United States
securities exchange on which shares of Common Stock are traded or, if the shares
of Common Stock are not listed on a United States national or regional
securities

                                       3

exchange, as reported by the Nasdaq System or by the National Quotation Bureau
Incorporated. In the absence of such quotations, the Company shall be entitled
to determine the Closing Sale Price on the basis it considers appropriate. The
Closing Sale Price shall be determined without reference to extended or after
hours trading.

         "COMMISSION" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or, if at any time after
the execution of this Indenture such Commission is not existing and performing
the duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.

         "COMMON STOCK" means any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company. Subject to the provisions
of Section 16.06, however, shares issuable on conversion of Debentures shall
include only shares of the class designated as Common Stock of the Company at
the date of this Indenture (namely, the common stock, par value $1.00) or shares
of any class or classes resulting from any reclassification or reclassifications
thereof and which have no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and which are not subject to redemption by the
Company; provided that if at any time there shall be more than one such
resulting class, the shares of each such class then so issuable on conversion
shall be substantially in the proportion which the total number of shares of
such class resulting from all such reclassifications bears to the total number
of shares of all such classes resulting from all such reclassifications.

         "COMPANY" means the corporation named as the "COMPANY" in the first
paragraph of this Indenture, and, subject to the provisions of Article 13 and
Section 16.06, shall include its successors and assigns.

         "COMPOUNDED INTEREST" has the meaning specified in Section 5.01.

         "CONTINUING DIRECTORS" means, as of any date of determination, any
member of the board of directors of the Company who (i) was a member of the
board of directors throughout the twenty-four consecutive months preceding such
date of determination; or (ii) was nominated for election or elected to the
board of directors with the approval of a majority of the Continuing Directors
who were members of the board of directors at the time of such director's
nomination or election.

         "CONVERSION AGENT" means the office or agency designated by the Company
in accordance with Section 6.02 where the Debentures may be presented for
conversion.

                                       4

         "CONVERSION DATE" has the meaning specified in Section 16.02.

         "CONVERSION NOTICE" has the meaning specified in Section 16.02.

         "CONVERSION PRICE" as of any day will equal $50 divided by the
Conversion Rate as of such date.

         "CONVERSION RATE" has the meaning specified in Section 16.04.

         "CORPORATE TRUST OFFICE" or other similar term, means the designated
office of the Trustee at which at any particular time its corporate trust
business as it relates to this Indenture shall be principally administered,
which office is, at the date as of which this Indenture is dated, located at 4
New York Plaza, 15th Floor, New York, New York 10004, Attention: Institutional
Trust Services.

         "CURRENCY AGREEMENT" means, with respect to any Person, any foreign
exchange contract, currency swap agreement or other similar agreement or
arrangement designed to protect such Person or any of its Subsidiaries against
fluctuations in currency values to or under which such Person or any of its
Subsidiaries is a party or a beneficiary on the date hereof or becomes a party
or a beneficiary thereafter.

         "CURRENT MARKET PRICE" has the meaning specified in Section 16.05(h).

         "CUSTODIAN" means JPMorgan Chase Bank, as custodian with respect to the
Debentures in global form, or any successor entity thereto.

         "DEBENTURE" or "DEBENTURES" means any Debenture or Debentures (as
defined in the first "WHEREAS" clause hereof), as the case may be, authenticated
and delivered under this Indenture, including any Global Debenture.

         "DEBENTURE REGISTER" has the meaning specified in Section 2.05.

         "DEBENTURE REGISTRAR" has the meaning specified in Section 2.05.

         "DEBENTUREHOLDER" or "HOLDER" as applied to any Debenture, or other
similar terms (but excluding the term "beneficial holder"), means any Person in
whose name at the time a particular Debenture is registered on the Debenture
Registrar's books.

         "DEFAULT" means any event that is, or after notice or passage of time,
or both, would be, an Event of Default.

         "DEFAULTED INTEREST" has the meaning specified in Section 2.03.

         "DEPOSITARY" means, the clearing agency registered under the Exchange
Act that is designated to act as the Depositary for the Global Debentures. The
Depository Trust Company shall be the initial Depositary, until a successor
shall

                                       5

have been appointed and become such pursuant to the applicable provisions of
this Indenture, and thereafter, "DEPOSITARY" shall mean or include such
successor.

         "DESIGNATED AGREEMENTS" means the agreements specified on Schedule A.

         "DESIGNATED AGREEMENT TERMINATION DATE" has the meaning specified in
Section 6.12.

         "DESIGNATED SENIOR INDEBTEDNESS" means any Senior and Senior
Subordinated Indebtedness of the Company which, at the date of incurrence or
thereafter, has an aggregate principal amount outstanding of, or under which, at
the date of determination, the holders thereof are committed to lend up to, at
least $5,000,000 and which is specifically designated by the Company, at the
time of incurrence or thereafter, in the instrument evidencing or governing such
Senior and Senior Subordinated Indebtedness as "Designated Senior Indebtedness"
for purposes of this Indenture.

         "DETERMINATION DATE" has the meaning specified in Section 16.05(l).

         "EVENT OF DEFAULT" means any event specified in Section 8.01 as an
Event of Default.

         "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder, as in effect from time to
time.

         "EXPIRATION TIME" has the meaning specified in Section 16.05(f).

         "EXTENDED INTEREST PAYMENT PERIOD" has the meaning specified in Section
5.01.

         "FAIR MARKET VALUE" has the meaning specified in Section 16.05(h).

         "GLOBAL DEBENTURE" has the meaning specified in Section 2.02.

         "GUARANTEE" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising by virtue
of partnership arrangements, or by agreement to keep well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided that the term Guarantee shall not include
endorsements for

                                       6

collection or deposit in the ordinary course of business. The term Guarantee
used as a verb has a corresponding meaning.

         "INDEBTEDNESS" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit, bank guarantees, or bankers acceptance
or other similar instruments (or reimbursement obligations with respect
thereto), (iv) all obligations of such Person to pay the deferred purchase price
of property or services, except Trade Payables, (v) all obligations of such
Person as lessee under leases required or permitted to be treated as capitalized
leases under U.S. generally accepted accounting principles, (vi) all
Indebtedness of others secured by a Lien on any asset of such Person, whether or
not such Indebtedness is assumed by such Person; provided that, for purposes of
determining the amount of any Indebtedness of the type described in this clause,
if recourse with respect to such Indebtedness is limited to such asset, the
amount of such Indebtedness shall be limited to the lesser of the fair market
value of such asset or the amount of such Indebtedness; (vii) all Indebtedness
of others Guaranteed by such Person to the extent such Indebtedness is
Guaranteed by such Person and (viii) to the extent not otherwise included in
this definition, all obligations of such Person under Currency Agreements and
Interest Rate Agreements.

         "INDENTURE" means this instrument as originally executed or, if amended
or supplemented as herein provided, as so amended or supplemented.

         "INITIAL PURCHASER" means Lehman Brothers Inc.

         "INTEREST" means, when used with reference to the Debentures, any
interest payable under the terms of the Debentures, including Liquidated
Damages, if any, payable under the terms of the Registration Rights Agreement.

         "INTEREST PAYMENT DATE" means March 1, June 1, September 1 or December
1.

         "INTEREST RATE AGREEMENT" means, with respect to any Person, any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement designed to protect such Person or any of
its Subsidiaries against fluctuations in interest rates to or under which such
Person or any of its Subsidiaries is a party or a beneficiary on the date hereof
or becomes a party or a beneficiary thereafter.

         "JUNIOR SECURITIES" has the meaning specified in Section 4.08.

                                       7

         "JUNIOR SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company
ranking equally and ratably with, or junior to, the Debentures, other than
obligations owed by the Company to its Subsidiaries.

         "LIEN" means, with respect to any property, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
property. For purposes of this Indenture, the Company shall be deemed to own
subject to a Lien any property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such property.

         "LIQUIDATED DAMAGES" has the meaning specified for "LIQUIDATED DAMAGES
AMOUNT" in Section 2(e) of the Registration Rights Agreement.

         "LIQUIDATED DAMAGES NOTICE" has the meaning specified in Section 6.09.

         "MATURITY DATE" means June 1, 2033.

         "NON-ELECTING SHARE" has the meaning specified in Section 16.06.

         "OFFER EXPIRATION TIME" has the meaning specified in Section 16.05(g).

         "OFFICER'S CERTIFICATE", when used with respect to the Company, means a
certificate signed by the Chairman of the Board, the Chief Executive Officer,
the President or any Vice President (whether or not designated by a number or
numbers or word or words added before or after the title "VICE PRESIDENT"), the
Treasurer or any Assistant Treasurer, or the Secretary of the Company.

         "OPINION OF COUNSEL" means an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company, or other counsel
reasonably acceptable to the Trustee.

         "OUTSTANDING", when used with reference to Debentures and subject to
the provisions of Section 10.04, means, as of any particular time, all
Debentures authenticated and delivered by the Trustee under this Indenture,
except:

         (a)      Debentures theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;

         (b)      Debentures, or portions thereof, (i) for the redemption of
which monies in the necessary amount shall have been deposited in trust with the
Trustee or with any Paying Agent (other than the Company) or (ii) which shall
have been otherwise defeased in accordance with Article 14;

         (c)      Debentures in lieu of which, or in substitution for which,
other Debentures shall have been authenticated and delivered pursuant to the
terms of Section 2.06; and

                                       8

         (d)      Debentures converted into Common Stock pursuant to Article 16
and Debentures deemed not outstanding pursuant to Article 3.

         "PAYING AGENT" means the office or agency designated by the Company in
accordance with Section 6.02 where the Debentures may be presented for payment.

         "PERSON" means a corporation, an association, a partnership, a limited
liability company, an individual, a joint venture, a joint stock company, a
trust, an unincorporated organization or a government or an agency or a
political subdivision thereof.

         "PORTAL MARKET" means The Portal Market operated by the National
Association of Securities Dealers, Inc. or any successor thereto.

         "POTENTIAL EVENT OF DEFAULT" has the meaning specified in Section 6.11.

         "PREDECESSOR DEBENTURE" of any particular Debenture means every
previous Debenture evidencing all or a portion of the same debt as that
evidenced by such particular Debenture, and, for the purposes of this
definition, any Debenture authenticated and delivered under Section 2.06 in lieu
of a lost, destroyed or stolen Debenture shall be deemed to evidence the same
debt as the lost, destroyed or stolen Debenture that it replaces.

         "PREMIUM" means any premium payable under the terms of the Debentures.

         "PURCHASED SHARES" has the meaning specified in Section 16.05(f).

         "QIB" means a "QUALIFIED INSTITUTIONAL BUYER" as defined in Rule 144A.

         "RECORD DATE" has the meaning specified in Section 2.03.

         "REDEMPTION DATE" has the meaning specified in Section 3.02.

         "REDEMPTION NOTICE" has the meaning specified in Section 3.02.

         "REDEMPTION PRICE" has the meaning specified in Section 3.01.

         "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of May 28, 2003, between the Company and the Initial
Purchaser, as amended from time to time in accordance with its terms.

         "REPRESENTATIVE" means (a) the indenture trustee or other trustee,
agent or representative for holders of Senior and Senior Subordinated
Indebtedness or (b) with respect to any Senior and Senior Subordinated
Indebtedness that does not have any such trustee, agent or other representative,
(i) in the case of such Senior and Senior Subordinated Indebtedness issued
pursuant to an agreement providing

                                       9

for voting arrangements as among the holders or owners of such Senior and Senior
Subordinated Indebtedness, any holder or owner of such Senior and Senior
Subordinated Indebtedness acting with the consent of the required persons
necessary to bind such holders or owners of such Senior and Senior Subordinated
Indebtedness and (ii) in the case of all other such Senior and Senior
Subordinated Indebtedness, the holder or owner of such Senior and Senior
Subordinated Indebtedness.

         "REPURCHASE DATE" has the meaning specified in Section 3.05(a).

         "REPURCHASE ELECTION" has the meaning specified in Section 3.05(c).

         "REPURCHASE EXPIRATION TIME" has the meaning specified in Section
3.05(b).

         "REPURCHASE PRICE" has the meaning specified in Section 3.05(a).

         "RESPONSIBLE OFFICER" shall mean, any vice president, any assistant
vice president, the secretary, any assistant secretary, the treasurer, any
assistant treasurer, or any trust officer or any other officer of the Trustee
within the Institutional Trust Services--Conventional Debt Unit (or any
successor unit, department or division of the Trustee) located at the Corporate
Trust Office of the Trustee who has direct responsibility for the administration
of this Indenture, and, for the purposes of clause (b) of Section 9.01 and the
proviso of Section 8.08 (and only the proviso), shall also include any other
officer of the Trustee to whom any corporate trust matter is referred because of
such person's knowledge of and familiarity with the particular subject.

         "RESTRICTED PAYMENT" has the meaning specified in Section 6.11.

         "RESTRICTED SECURITIES" has the meaning specified in Section 2.05(b).

         "RULE 144A" means Rule 144A as promulgated under the Securities Act.

         "SECURITIES" has the meaning specified in Section 16.05(d).

         "SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, as in effect from time to time.

         "SENIOR AND SENIOR SUBORDINATED INDEBTEDNESS" means the principal of
(and premium, if any) and interest (including interest accruing subsequent to
the filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law) on, and all other amounts owing in respect of
(including, without limitation, obligations to pay principal and interest,
reimbursement obligations under letters of credit, fees, expenses and
indemnities thereunder) all Indebtedness of the Company whether created,
incurred or assumed before, on or after the date of this instrument; provided
that Senior and Senior Subordinated Indebtedness

                                       10

shall not include (i) Indebtedness of the Company that, when incurred and
without respect to any election under Section 1111(b) of Title 11, U.S. Code,
was without recourse to the Company, (ii) the Debentures and any other
Indebtedness of the Company which by the terms of the instrument creating or
evidencing the same is expressly made equal in rank and payment with or
subordinated to the Debentures, (iii) obligations by the Company owed to its
Subsidiaries and (iv) stock of the Company.

         "SIGNIFICANT SUBSIDIARY" means, as of any date of determination, a
Subsidiary of the Company that would constitute a "SIGNIFICANT SUBSIDIARY" as
such term is defined under Rule 1-02(w) of Regulation S-X of the Commission as
in effect on the date of this Indenture.

         "SPINOFF VALUATION PERIOD" has the meaning specified in Section
16.05(d).

         "STOCK RECORD DATE" has the meaning specified in Section 16.05(h).

         "SUBSIDIARY" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock or other equity interest entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other subsidiaries
of that Person (or a combination thereof).

         "TRADE PAYABLES" means, with respect to any Person, any accounts
payable or any other indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person or any of its Subsidiaries arising
in the ordinary course of business in connection with the acquisition of goods
or services.

         "TRADING DAY" has the meaning specified in Section 16.05(h).

         "TRIGGER EVENT" has the meaning specified in Section 16.05(d).

         "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as
amended, as it was in force at the date of this Indenture, except as provided in
Section 12.03 and Section 17.07; provided that if the Trust Indenture Act of
1939 is amended after the date hereof, the term "TRUST INDENTURE ACT" shall
mean, to the extent required by such amendment, the Trust Indenture Act of 1939
as so amended.

         "TRUSTEE" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.

                                       11

                                   ARTICLE 2
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF DEBENTURES

         Section 2.01. Designation Amount and Issue of Debentures. The
Debentures shall be designated as "5.50% JUNIOR SUBORDINATED CONVERTIBLE
DEBENTURES DUE 2033". Debentures not to exceed the aggregate principal amount of
$300,000,000 (except pursuant to Sections 2.05, 2.06, 3.03, 3.05 and 16.02
hereof) upon the execution of this Indenture, or from time to time thereafter,
may be executed by the Company and delivered to the Trustee for authentication,
and the Trustee shall thereupon authenticate and deliver said Debentures to or
upon the written order of the Company, signed by its Chairman of the Board,
Chief Executive Officer, President or any Vice President (whether or not
designated by a number or numbers or word or words added before or after the
title "VICE PRESIDENT"), the Treasurer or any Assistant Treasurer or the
Secretary, without any further action by the Company hereunder.

         Section 2.02. Form of Debentures. The Debentures and the Trustee's
certificate of authentication to be borne by such Debentures shall be
substantially in the form set forth in Exhibit A. The terms and provisions
contained in the form of Debenture attached as Exhibit A hereto shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.

         Any of the Debentures may have such letters, numbers or other marks of
identification and such notations, legends, endorsements or changes as the
officers executing the same may approve (execution thereof to be conclusive
evidence of such approval) and as are not inconsistent with the provisions of
this Indenture, or as may be required by the Custodian, the Depositary or by the
National Association of Securities Dealers, Inc. in order for the Debentures to
be tradable on The Portal Market or as may be required for the Debentures to be
tradable on any other market developed for trading of securities pursuant to
Rule 144A or as may be required to comply with any applicable law or with any
rule or regulation made pursuant thereto or with any rule or regulation of any
securities exchange or automated quotation system on which the Debentures may be
listed, or to conform to usage, or to indicate any special limitations or
restrictions to which any particular Debentures are subject.

         So long as the Debentures are eligible for book-entry settlement with
the Depositary, or unless otherwise required by law, or otherwise contemplated
by Section 2.05(a), all of the Debentures will be represented by one or more
Debentures in global form registered in the name of the Depositary or the
nominee of the Depositary (a "GLOBAL DEBENTURE"). The transfer and exchange of
beneficial interests in any such Global Debenture shall be effected through the
Depositary in accordance with this Indenture and the applicable procedures of
the Depositary. Except as provided in Section 2.05(a), beneficial owners of a
Global Debenture shall not be entitled to have certificates registered in their
names, will not receive or be

                                       12

entitled to receive physical delivery of certificates in definitive form and
will not be considered holders of such Global Debenture.

         Any Global Debenture shall represent such of the outstanding Debentures
as shall be specified therein and shall provide that it shall represent the
aggregate amount of outstanding Debentures from time to time endorsed thereon
and that the aggregate amount of outstanding Debentures represented thereby may
from time to time be increased or reduced to reflect redemptions, repurchases,
conversions, transfers or exchanges permitted hereby. Any endorsement of a
Global Debenture to reflect the amount of any increase or decrease in the amount
of outstanding Debentures represented thereby shall be made by the Trustee or
the Custodian, at the direction of the Trustee, in such manner and upon
instructions given by the holder of such Debentures in accordance with this
Indenture. Payment of principal of and Interest and premium, if any, on any
Global Debenture shall be made to the holder of such Debenture.

         Section 2.03. Date and Denomination of Debentures; Payments of
Interest. The Debentures shall be issuable in registered form without coupons in
denominations of $50 principal amount and integral multiples thereof. Each
Debenture shall be dated the date of its authentication and shall bear interest
from the date specified on the face of the form of Debenture attached as Exhibit
A hereto. Interest on the Debentures shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.

         Subject to Article 5, the Person in whose name any Debenture (or its
Predecessor Debenture) is registered on the Debenture Register at the close of
business on any Record Date with respect to any Interest Payment Date shall be
entitled to receive the Interest payable on such Interest Payment Date, except
that the Interest payable upon redemption or repurchase will be payable to the
Person to whom principal is payable pursuant to such redemption or repurchase.
Notwithstanding the foregoing, if any Debenture (or portion thereof) is
converted into Common Stock during the period after a Record Date for the
payment of Interest to, but excluding, the next succeeding Interest Payment
Date, the Company shall not be required to pay Interest on such Interest Payment
Date in respect of any such Debenture (or portion thereof), except as provided
in Section 16.02. Interest shall be payable at the office of the Company
maintained by the Company for such purposes in the Borough of Manhattan, City of
New York, which shall initially be an office or agency of the Trustee. The
Company shall pay Interest (i) on any Debentures in certificated form by check
mailed to the address of the Person entitled thereto as it appears in the
Debenture Register (or, upon written notice, by wire transfer in immediately
available funds, if such Person is entitled to interest on Debentures with an
aggregate principal amount in excess of $2,000,000) or (ii) on any Global
Debenture by wire transfer of immediately available funds to the account of the
Depositary or its nominee. The term "RECORD DATE" with respect to any Interest
Payment Date shall mean the February 15, May 15, August 15 or November 15
preceding the applicable March 1, June 1, September 1 or December 1 Interest
Payment Date, respectively.

                                       13

         Any Interest on any Debenture which is payable, but is not punctually
paid, deferred in accordance with Article 5 or duly provided for, on any March
1, June 1, September 1 or December 1 (herein called "DEFAULTED INTEREST") shall
forthwith cease to be payable to the Debentureholder on the relevant Record Date
by virtue of his having been such Debentureholder, and such Defaulted Interest
shall be paid by the Company, at its election in each case, as provided in
clause (1) or (2) below:

         (1)      The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Debentures (or their respective
Predecessor Debentures) are registered at the close of business on a special
Record Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Debenture and the date
of the proposed payment (which shall be not less than twenty-five (25) days
after the receipt by the Trustee of such notice, unless the Trustee shall
consent to an earlier date), and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit on or prior to the date of the proposed payment,
such money when deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Interest as in this clause provided. Thereupon the
Trustee shall fix a special record date for the payment of such Defaulted
Interest which shall be not more than fifteen (15) days and not less than ten
(10) days prior to the date of the proposed payment, and not less than ten (10)
days after the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such special record date and, in
the name and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the special record date therefor to be
mailed, first-class postage prepaid, to each holder at his address as it appears
in the Debenture Register, not less than ten (10) days prior to such special
record date. Notice of the proposed payment of such Defaulted Interest and the
special record date therefor having been so mailed, such Defaulted Interest
shall be paid to the Persons in whose names the Debentures (or their respective
Predecessor Debentures) are registered at the close of business on such special
record date and shall no longer be payable pursuant to the following clause (2)
of this Section 2.03.

         (2)      The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange or automated quotation system on which the Debentures may be listed or
designated for issuance, and upon such notice as may be required by such
exchange or automated quotation system, if, after notice given by the Company to
the Trustee of the proposed payment pursuant to this clause, such manner of
payment shall be deemed practicable by the Trustee.

         Section 2.04. Execution of Debentures. The Debentures shall be signed
in the name and on behalf of the Company by the manual or facsimile signature of

                                       14

its Chairman of the Board, Chief Executive Officer, President or any Vice
President (whether or not designated by a number or numbers or word or words
added before or after the title "VICE PRESIDENT") or its Treasurer (which may be
printed, engraved or otherwise reproduced thereon, by facsimile or otherwise).
Only such Debentures as shall bear thereon a certificate of authentication
substantially in the form set forth on the form of Debenture attached as Exhibit
A hereto, manually executed by the Trustee (or an authenticating agent appointed
by the Trustee as provided by Section 17.11), shall be entitled to the benefits
of this Indenture or be valid or obligatory for any purpose. Such certificate by
the Trustee (or such an authenticating agent) upon any Debenture executed by the
Company shall be conclusive evidence that the Debenture so authenticated has
been duly authenticated and delivered hereunder and that the holder is entitled
to the benefits of this Indenture.

         In case any officer of the Company who shall have signed any of the
Debentures shall cease to be such officer before the Debentures so signed shall
have been authenticated and delivered by the Trustee, or disposed of by the
Company, such Debentures nevertheless may be authenticated and delivered or
disposed of as though the person who signed such Debentures had not ceased to be
such officer of the Company, and any Debenture may be signed on behalf of the
Company by such persons as, at the actual date of the execution of such
Debenture, shall be the proper officers of the Company, although at the date of
the execution of this Indenture any such person was not such an officer.

         Section 2.05. Exchange and Registration of Transfer of Debentures;
Restrictions on Transfer. The Company shall cause to be kept at the Corporate
Trust Office a register (the register maintained in such office and in any other
office or agency of the Company designated pursuant to Section 6.02 being herein
sometimes collectively referred to as the "DEBENTURE REGISTER") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Debentures and of transfers of Debentures. The
Debenture Register shall be in written form or in any form capable of being
converted into written form within a reasonably prompt period of time. The
Trustee is hereby appointed "DEBENTURE REGISTRAR" for the purpose of registering
Debentures and transfers of Debentures as herein provided. The Company may
appoint one or more co-registrars in accordance with Section 6.02; provided,
however, that there shall be only one Debenture Register.

         Upon surrender for registration of transfer of any Debenture to the
Debenture Registrar or any co-registrar, and satisfaction of the requirements
for such transfer set forth in this Section 2.05, the Company shall execute, and
the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Debentures of any authorized
denominations and of a like aggregate principal amount and bearing such
restrictive legends as may be required by this Indenture.

                                       15

         Debentures may be exchanged for other Debentures of any authorized
denominations and of a like aggregate principal amount, upon surrender of the
Debentures to be exchanged at any such office or agency maintained by the
Company pursuant to Section 6.02. Whenever any Debentures are so surrendered for
exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Debentures which the Debentureholder making the exchange is
entitled to receive bearing registration numbers not contemporaneously
outstanding.

         All Debentures issued upon any registration of transfer or exchange of
Debentures shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Debentures
surrendered upon such registration of transfer or exchange.

         All Debentures presented or surrendered for registration of transfer or
for exchange, redemption, repurchase or conversion shall (if so required by the
Company or the Debenture Registrar) be duly endorsed, or be accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Company, and the Debentures shall be duly executed by the Debentureholder
thereof or his attorney duly authorized in writing.

         No service charge shall be made to any holder for any registration of,
transfer or exchange of Debentures, but the Company may require payment by the
holder of a sum sufficient to cover any tax, assessment or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Debentures.

         Neither the Company nor the Trustee nor any Debenture Registrar shall
be required to exchange or register a transfer of (a) any Debentures for a
period of fifteen (15) days next preceding any selection of Debentures to be
redeemed, (b) any Debentures or portions thereof called for redemption pursuant
to Section 3.02, (c) any Debentures or portions thereof surrendered for
conversion pursuant to Article 16 or (d) any Debentures or portions thereof
tendered for repurchase (and not withdrawn) pursuant to Section 3.05.

         (a)      The following provisions shall apply only to Global
Debentures:

                  (i)      Each Global Debenture authenticated under this
         Indenture shall be registered in the name of the Depositary or a
         nominee thereof and delivered to such Depositary or a nominee thereof
         or Custodian therefor, and each such Global Debenture shall constitute
         a single Debenture for all purposes of this Indenture.

                  (ii)     Notwithstanding any other provision in this
         Indenture, no Global Debenture may be exchanged in whole or in part for
         Debentures registered, and no transfer of a Global Debenture in whole
         or in part may be registered, in the name of any Person other than the
         Depositary or a

                                       16

         nominee thereof unless the Depositary (i) has notified the Company that
         it is unwilling or unable to continue as Depositary for such Global
         Debenture and a successor depositary has not been appointed by the
         Company within ninety days or (ii) has ceased to be a clearing agency
         registered under the Exchange Act, an Event of Default has occurred and
         is continuing or the Company, in its sole discretion, notifies the
         Trustee in writing that it no longer wishes to have all the Debentures
         represented by Global Debentures. Any Global Debenture exchanged
         pursuant to clause (A) or (B) above shall be so exchanged in whole and
         not in part and any Global Debenture exchanged pursuant to clause (C)
         above may be exchanged in whole or from time to time in part as
         directed by the Company. Any Debenture issued in exchange for a Global
         Debenture or any portion thereof shall be a Global Debenture; provided
         that any such Debenture so issued that is registered in the name of a
         Person other than the Depositary or a nominee thereof shall not be a
         Global Debenture.

                  (iii)    Securities issued in exchange for a Global Debenture
         or any portion thereof pursuant to clause (ii) above shall be issued in
         definitive, fully registered form, without interest coupons, shall have
         an aggregate principal amount equal to that of such Global Debenture or
         portion thereof to be so exchanged, shall be registered in such names
         and be in such authorized denominations as the Depositary shall
         designate and shall bear any legends required hereunder. Any Global
         Debenture to be exchanged in whole or in part shall be surrendered by
         the Depositary to the Trustee, as Debenture Registrar. Upon any such
         surrender, the Trustee shall authenticate and make available for
         delivery the Debenture issuable on such exchange to or upon the written
         order of the Depositary or an authorized representative thereof and the
         Global Debenture shall be cancelled or its principal amount reduced in
         accordance with Section 2.05(b)(vi).

                  (iv)     In the event of the occurrence of any of the events
         specified in clause (ii) above, the Company will promptly make
         available to the Trustee a reasonable supply of certificated Debentures
         in definitive, fully registered form, without interest coupons.

                  (v)      Neither any members of, or participants in, the
         Depositary ("AGENT MEMBERS") nor any other Persons on whose behalf
         Agent Members may act shall have any rights under this Indenture with
         respect to any Global Debenture registered in the name of the
         Depositary or any nominee thereof, and the Depositary or such nominee,
         as the case may be, may be treated by the Company, the Trustee and any
         agent of the Company or the Trustee as the absolute owner and holder of
         such Global Debenture for all purposes whatsoever. Notwithstanding the
         foregoing, nothing herein shall prevent the Company, the Trustee or any
         agent of the Company or the Trustee from giving effect to any written
         certification, proxy or other authorization furnished by the Depositary
         or such nominee,

                                       17

         as the case may be, or impair, as between the Depositary, its Agent
         Members and any other Person on whose behalf an Agent Member may act,
         the operation of customary practices of such Persons governing the
         exercise of the rights of a holder of any Debenture.

                  (vi)     At such time as all interests in a Global Debenture
         have been redeemed, repurchased, converted, canceled or exchanged for
         Debentures in certificated form, such Global Debenture shall, upon
         receipt thereof, be canceled by the Trustee in accordance with standing
         procedures and instructions existing between the Depositary and the
         Custodian. At any time prior to such cancellation, if any interest in a
         Global Debenture is redeemed, repurchased, converted, canceled or
         exchanged for Debentures in certificated form, the principal amount of
         such Global Debenture shall, in accordance with the standing procedures
         and instructions existing between the Depositary and the Custodian, be
         appropriately reduced, and an endorsement shall be made on such Global
         Debenture, by the Trustee or the Custodian, at the direction of the
         Trustee, to reflect such reduction.

         (b)      Every Debenture that bears or is required under this Section
2.05(b) to bear the legend set forth in this Section 2.05(b) (together with any
Common Stock issued upon conversion of the Debentures and required to bear the
legend set forth in Section 2.05(b), collectively, the "RESTRICTED SECURITIES")
shall be subject to the restrictions on transfer set forth in this Section
2.05(b (including those set forth in the legend below) unless such restrictions
on transfer shall be waived by written consent of the Company, and the holder of
each such Restricted Security, by such Debentureholder's acceptance thereof,
agrees to be bound by all such restrictions on transfer. As used in Section
2.05(b) and 2.05(d), the term "TRANSFER" encompasses any sale, pledge, loan,
transfer or other disposition whatsoever of any Restricted Security or any
interest therein.

         Until the expiration of the holding period applicable to sales thereof
under Rule 144(k) under the Securities Act (or any successor provision), any
certificate evidencing such Debenture (and all securities issued in exchange
therefor or substitution thereof, other than Common Stock, if any, issued upon
conversion thereof, which shall bear the legend set forth in Section 2.05(c), if
applicable) shall bear a legend in substantially the following form, unless such
Debenture has been sold pursuant to a registration statement that has been
declared effective under the Securities Act (and which continues to be effective
at the time of such transfer) or pursuant to Rule 144 under the Securities Act
or any similar provision then in force, or unless otherwise agreed by the
Company in writing, with written notice thereof to the Trustee:

         THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY AGREES FOR THE BENEFIT OF THE WILLIAMS COMPANIES, INC. THAT (a) THIS

                                       18

SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED OTHER THAN (1) TO
THE WILLIAMS COMPANIES, INC. OR ANY AFFILIATE, (2) IN A TRANSACTION ENTITLED TO
AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), (3) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
l44A UNDER THE SECURITIES ACT ("RULE l44A"), TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE l44A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED
BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY), (4) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT, SUBJECT, IN THE CASE OF CLAUSES (2) OR (4), TO THE RECEIPT
BY THE WILLIAMS COMPANIES, INC. OF AN OPINION OF COUNSEL OR SUCH OTHER EVIDENCE
ACCEPTABLE TO THE WILLIAMS COMPANIES, INC. THAT SUCH RESALE, PLEDGE OR TRANSFER
IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (5)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND THAT (b) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY
OF THE RESALE RESTRICTIONS REFERRED TO HEREIN AND DELIVER TO THE TRANSFEREE
(OTHER THAN A QUALIFIED INSTITUTIONAL BUYER) PRIOR TO THE SALE A COPY OF THE
TRANSFER RESTRICTIONS APPLICABLE HERETO. THIS LEGEND WILL BE REMOVED UPON THE
EARLIER OF THE TRANSFER OF THIS DEBENTURE PURSUANT TO CLAUSE (5) ABOVE OR UPON
ANY TRANSFER OF THIS DEBENTURE UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR
ANY SUCCESSOR PROVISION). THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS DEBENTURE IN VIOLATION OF THE
FOREGOING RESTRICTION.

         THIS DEBENTURE WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR U.S. FEDERAL
INCOME TAX PURPOSES. FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL
REVENUE CODE OF 1986 (AS AMENDED), THE ISSUE PRICE OF EACH DEBENTURE IS $50 PER
$50 OF PRINCIPAL AMOUNT, THE ISSUE DATE IS MAY 28, 2003, THE YIELD TO MATURITY
IS 5.50% COMPOUNDED QUARTERLY AND THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS
$82.52.

                                       19

         THE HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF A
REGISTRATION RIGHTS AGREEMENT DATED MAY 28, 2003 AND, BY ITS ACCEPTANCE HEREOF,
AGREES TO BE BOUND BY AND TO COMPLY WITH THE PROVISIONS OF SUCH REGISTRATION
RIGHTS AGREEMENT.

         BECAUSE OF THE FOREGOING RESTRICTIONS, PURCHASERS ARE ADVISED TO
CONSULT LEGAL COUNSEL PRIOR TO MAKING ANY RESALE, PLEDGE OR TRANSFER OF ANY OF
THE CONVERTIBLE DEBENTURES OR COMMON STOCK ISSUABLE UPON CONVERSION OF THE
CONVERTIBLE DEBENTURES. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO
BEAR THE FINANCIAL RISKS OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

         Any Debenture (or security issued in exchange or substitution therefor)
as to which such restrictions on transfer shall have expired in accordance with
their terms or as to conditions for removal of the foregoing legend set forth
therein have been satisfied may, upon surrender of such Debenture for exchange
to the Debenture Registrar in accordance with the provisions of this Section
2.05, be exchanged for a new Debenture or Debentures, of like tenor and
aggregate principal amount, which shall not bear the restrictive legend required
by this Section 2.05(c). If the Restricted Security surrendered for exchange is
represented by a Global Debenture bearing the legend set forth in this Section
2.05(c), the principal amount of the legended Global Debenture shall be reduced
by the appropriate principal amount and the principal amount of a Global
Debenture without the legend set forth in this Section 2.05(c) shall be
increased by an equal principal amount. If a Global Debenture without the legend
set forth in this Section 2.05(c) is not then outstanding, the Company shall
execute and the Trustee shall authenticate and deliver an unlegended Global
Debenture to the Depositary.

         (c)      Until the expiration of the holding period applicable to sales
thereof under Rule 144(k) under the Securities Act (or any successor provision),
any stock certificate representing Common Stock issued upon conversion of any
Debenture shall bear a legend in substantially the following form, unless such
Common Stock has been sold pursuant to a registration statement that has been
declared effective under the Securities Act (and which continues to be effective
at the time of such transfer) or pursuant to Rule 144 under the Securities Act
or any similar provision then in force, or such Common Stock has been issued
upon conversion of Debentures that have been transferred pursuant to a
registration statement that has been declared effective under the Securities Act
or pursuant to Rule 144 under the Securities Act or any similar provision then
in force, or unless otherwise agreed by the Company in writing with written
notice thereof to the transfer agent:

                                       20

         THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY AGREES FOR THE BENEFIT OF THE WILLIAMS COMPANIES, INC. THAT (a) THIS
SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED OTHER THAN (1) TO
THE WILLIAMS COMPANIES, INC. OR ANY AFFILIATE, (2) IN A TRANSACTION ENTITLED TO
AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), (3) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
l44A UNDER THE SECURITIES ACT ("RULE l44A"), TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE l44A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED
BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY), (4) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT, SUBJECT, IN THE CASE OF CLAUSES (2) OR (4), TO THE RECEIPT
BY THE WILLIAMS COMPANIES, INC. OF AN OPINION OF COUNSEL OR SUCH OTHER EVIDENCE
ACCEPTABLE TO THE WILLIAMS COMPANIES, INC. THAT SUCH RESALE, PLEDGE OR TRANSFER
IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (5)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND THAT (b) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY
OF THE RESALE RESTRICTIONS REFERRED TO HEREIN AND DELIVER TO THE TRANSFEREE
(OTHER THAN A QUALIFIED INSTITUTIONAL BUYER) PRIOR TO THE SALE A COPY OF THE
TRANSFER RESTRICTIONS APPLICABLE HERETO. THIS LEGEND WILL BE REMOVED UPON THE
EARLIER OF THE TRANSFER OF THIS DEBENTURE PURSUANT TO CLAUSE (5) ABOVE OR UPON
ANY TRANSFER OF THIS DEBENTURE UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR
ANY SUCCESSOR PROVISION). THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS DEBENTURE IN VIOLATION OF THE
FOREGOING RESTRICTION.

         THE HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF A
REGISTRATION RIGHTS AGREEMENT DATED MAY 28, 2003 AND, BY ITS ACCEPTANCE HEREOF,
AGREES TO BE BOUND BY AND TO COMPLY WITH THE PROVISIONS OF SUCH REGISTRATION
RIGHTS AGREEMENT.

                                       21

         BECAUSE OF THE FOREGOING RESTRICTIONS, PURCHASERS ARE ADVISED TO
CONSULT LEGAL COUNSEL PRIOR TO MAKING ANY RESALE, PLEDGE OR TRANSFER OF ANY OF
THE CONVERTIBLE DEBENTURES OR COMMON STOCK ISSUABLE UPON CONVERSION OF THE
CONVERTIBLE DEBENTURES. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO
BEAR THE FINANCIAL RISKS OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

         Any such Common Stock as to which such restrictions on transfer shall
have expired in accordance with their terms or as to which the conditions for
removal of the foregoing legend set forth therein have been satisfied may, upon
surrender of the certificates representing such shares of Common Stock for
exchange in accordance with the procedures of the transfer agent for the Common
Stock, be exchanged for a new certificate or certificates for a like number of
shares of Common Stock, which shall not bear the restrictive legend required by
this Section 2.05(c).

         (d)      Any Debenture or Common Stock issued upon the conversion of a
Debenture that, prior to the expiration of the holding period applicable to
sales thereof under Rule 144(k) under the Securities Act (or any successor
provision), is purchased or owned by the Company or any Affiliate thereof may
not be resold by the Company or such Affiliate unless registered under the
Securities Act or resold pursuant to an exemption from the registration
requirements of the Securities Act in a transaction which results in such
Debentures or Common Stock, as the case may be, no longer being "RESTRICTED
SECURITIES" (as defined under Rule 144).

         (e)      The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of any
interest in any Debenture (including any transfers between or among Depositary
participants or beneficial owners of interests in any Global Debenture) other
than to require delivery of such certificates and other documentation or
evidence as are expressly required by, and to do so if and when expressly
required by the terms of, this Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements hereof.

         Section 2.06. Mutilated, Destroyed, Lost or Stolen Debentures. In case
any Debenture shall become mutilated or be destroyed, lost or stolen, the
Company in its discretion may execute, and upon its written request the Trustee
or an authenticating agent appointed by the Trustee shall authenticate and make
available for delivery, a new Debenture, bearing a number not contemporaneously
outstanding, in exchange and substitution for the mutilated Debenture, or in
lieu of and in substitution for the Debenture so destroyed, lost or stolen. In
every case, the applicant for a substituted Debenture shall furnish to the
Company, to the Trustee and, if applicable, to such authenticating agent such
security or indemnity

                                       22

as may be required by them to save each of them harmless for any loss,
liability, cost or expense caused by or connected with such substitution, and,
in every case of destruction, loss or theft, the applicant shall also furnish to
the Company, to the Trustee and, if applicable, to such authenticating agent
evidence to their satisfaction of the destruction, loss or theft of such
Debenture and of the ownership thereof.

         Following receipt by the Trustee or such authenticating agent, as the
case may be, of satisfactory security or indemnity and evidence, as described in
the preceding paragraph, the Trustee or such authenticating agent may
authenticate any such substituted Debenture and make available for delivery such
Debenture. Upon the issuance of any substituted Debenture, the Company may
require the payment by the holder of a sum sufficient to cover any tax,
assessment or other governmental charge that may be imposed in relation thereto
and any other expenses connected therewith. In case any Debenture which has
matured or is about to mature or has been called for redemption or has been
tendered for repurchase upon a Change of Control (and not withdrawn) or is to be
converted into Common Stock shall become mutilated or be destroyed, lost or
stolen, the Company may, instead of issuing a substitute Debenture, pay or
authorize the payment of or convert or authorize the conversion of the same
(without surrender thereof except in the case of a mutilated Debenture), as the
case may be, if the applicant for such payment or conversion shall furnish to
the Company, to the Trustee and, if applicable, to such authenticating agent
such security or indemnity as may be required by them to save each of them
harmless from any loss, liability, cost or expense caused by or in connection
with such substitution, and, in every case of destruction, loss or theft, the
applicant shall also furnish to the Company, the Trustee and, if applicable, any
Paying Agent or Conversion Agent evidence to their satisfaction of the
destruction, loss or theft of such Debenture and of the ownership thereof.

         Every substitute Debenture issued pursuant to the provisions of this
Section 2.06 by virtue of the fact that any Debenture is destroyed, lost or
stolen shall constitute an additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Debenture shall be found at any
time, and shall be entitled to all the benefits of (but shall be subject to all
the limitations set forth in) this Indenture equally and proportionately with
any and all other Debentures duly issued hereunder. To the extent permitted by
law, all Debentures shall be held and owned upon the express condition that the
foregoing provisions are exclusive with respect to the replacement or payment or
conversion or redemption or repurchase of mutilated, destroyed, lost or stolen
Debentures and shall preclude any and all other rights or remedies
notwithstanding any law or statute existing or hereafter enacted to the contrary
with respect to the replacement or payment or conversion or redemption or
repurchase of negotiable instruments or other securities without their
surrender.

         Section 2.07. Temporary Debentures. Pending the preparation of
Debentures in certificated form, the Company may execute and the Trustee or an

                                       23

authenticating agent appointed by the Trustee shall, upon the written request of
the Company, authenticate and deliver temporary Debentures (printed or
lithographed). Temporary Debentures shall be issuable in any authorized
denomination, and substantially in the form of the Debentures in certificated
form, but with such omissions, insertions and variations as may be appropriate
for temporary Debentures, all as may be determined by the Company. Every such
temporary Debenture shall be executed by the Company and authenticated by the
Trustee or such authenticating agent upon the same conditions and in
substantially the same manner, and with the same effect, as the Debentures in
certificated form. Without unreasonable delay, the Company will execute and
deliver to the Trustee or such authenticating agent Debentures in certificated
form and thereupon any or all temporary Debentures may be surrendered in
exchange therefor, at each office or agency maintained by the Company pursuant
to Section 6.02 and the Trustee or such authenticating agent shall authenticate
and make available for delivery in exchange for such temporary Debentures an
equal aggregate principal amount of Debentures in certificated form. Such
exchange shall be made by the Company at its own expense and without any charge
therefor. Until so exchanged, the temporary Debentures shall in all respects be
entitled to the same benefits and subject to the same limitations under this
Indenture as Debentures in certificated form authenticated and delivered
hereunder.

         Section 2.08. Cancellation of Debentures. All Debentures surrendered
for the purpose of payment, redemption, repurchase, conversion, exchange or
registration of transfer shall, if surrendered to the Company or any Paying
Agent or any Debenture Registrar or any Conversion Agent, be surrendered to the
Trustee and promptly canceled by it, or, if surrendered to the Trustee, shall be
promptly canceled by it, and no Debentures shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this Indenture. The
Trustee shall dispose of such canceled Debentures in accordance with its
customary procedures. If the Company shall acquire any of the Debentures, such
acquisition shall not operate as a redemption, repurchase or satisfaction of the
indebtedness represented by such Debentures unless and until the same are
delivered to the Trustee for cancellation.

         Section 2.09. CUSIP Numbers. The Company in issuing the Debentures may
use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to
Debentureholders; provided that any such notice may state that no representation
is made as to the correctness of such numbers either as printed on the
Debentures or as contained in any notice of a redemption and that reliance may
be placed only on the other identification numbers printed on the Debentures,
and any such redemption shall not be affected by any defect in or omission of
such numbers. The Company will promptly notify the Trustee of any change in the
"CUSIP" numbers.

                                       24

                                   ARTICLE 3
                     REDEMPTION AND REPURCHASE OF DEBENTURES

         Section 3.01. Company's Right to Redeem. Prior to June 1, 2010, the
Securities will not be redeemable at the Company's option. Beginning on June 1,
2010, if, for at least 20 Trading Days in the period of 30 consecutive Trading
Days ending on the Trading Day immediately preceding the date of mailing of the
Redemption Notice pursuant to Section 3.02 (including on the last Trading Day in
such period), the Closing Sale Price of the Common Stock shall have exceeded
130% of the Conversion Price in effect on the last Trading Day of such period,
the Company, at its option, may redeem the Securities in accordance with the
provisions of Sections 3.02, 3.03 and 3.04 on the Redemption Date for cash, in
whole or in part, at a redemption price (the "REDEMPTION PRICE") equal to 100%
of the principal amount of the Securities to be redeemed together in each case
with accrued and unpaid Interest (including deferred interest) on the Securities
redeemed to (but excluding) the Redemption Date.

         Section 3.02. Notice of Optional Redemption; Selection of Debentures.
In case the Company shall desire to exercise the right to redeem all or, as the
case may be, any part of the Debentures pursuant to Section 3.01 it shall fix a
date for redemption (the "REDEMPTION DATE") and it or, at its written request
received by the Trustee not fewer than forty-five (45) days prior (or such
shorter period of time as may be acceptable to the Trustee) to the Redemption
Date, the Trustee in the name of and at the expense of the Company, shall mail
or cause to be mailed a notice of such redemption (a "REDEMPTION NOTICE") not
fewer than thirty (30) nor more than sixty (60) days prior to the Redemption
Date to each holder of Debentures so to be redeemed as a whole or in part at its
last address as the same appears on the Debenture Register; provided that if the
Company shall give such notice, it shall also give written notice of the
Redemption Date to the Trustee. Such mailing shall be by first class mail. The
notice, if mailed in the manner herein provided, shall be conclusively presumed
to have been duly given, whether or not the holder receives such notice. In any
case, failure to give such notice by mail or any defect in the notice to the
holder of any Debenture designated for redemption as a whole or in part shall
not affect the validity of the proceedings for the redemption of any other
Debenture. Concurrently with the mailing of any such Redemption Notice, the
Company shall issue a press release announcing such redemption, the form and
content of which press release shall be determined by the Company in its sole
discretion. The failure to issue any such press release or any defect therein
shall not affect the validity of the Redemption Notice or any of the proceedings
for the redemption of any Debenture called for redemption.

         Each such Redemption Notice shall specify the aggregate principal
amount of Debentures to be redeemed, the CUSIP number or numbers of the
Debentures being redeemed, the date fixed for redemption (which shall be a
Business Day), the Redemption Price at which Debentures are to be redeemed, the
place or places of payment, that payment will be made upon presentation and
surrender of such Debentures, that Interest accrued to the date fixed for

                                       25

redemption will be paid as specified in said notice, and that on and after said
date Interest thereon or on the portion thereof to be redeemed will cease to
accrue. Such notice shall also state the current Conversion Rate and the date on
which the right to convert such Debentures or portions thereof into Common Stock
will expire. If fewer than all the Debentures are to be redeemed, the Redemption
Notice shall identify the Debentures to be redeemed (including CUSIP numbers, if
any). In case any Debenture is to be redeemed in part only, the Redemption
Notice shall state the portion of the principal amount thereof to be redeemed
and shall state that, on and after the Redemption Date, upon surrender of such
Debenture, a new Debenture or Debentures in principal amount equal to the
unredeemed portion thereof will be issued.

         On or prior to the Redemption Date specified in the Redemption Notice
given as provided in this Section 3.02, the Company will deposit with the
Trustee or with one or more Paying Agents (or, if the Company is acting as its
own Paying Agent, set aside, segregate and hold in trust as provided in Section
6.04) an amount of money in immediately available funds sufficient to redeem on
the Redemption Date all the Debentures (or portions thereof) so called for
redemption (other than those theretofore surrendered for conversion into Common
Stock) at the appropriate Redemption Price; provided that if such payment is
made on the Redemption Date it must be received by the Trustee or Paying Agent,
as the case may be, by 11:00 a.m., New York City time, on such date. The Company
shall be entitled to retain any interest, yield or gain on amounts deposited
with the Trustee or any Paying Agent pursuant to this Section 3.02 in excess of
amounts required hereunder to pay the Redemption Price and accrued interest to,
but excluding, the Redemption Date. Subject to the last sentence of Section
9.05, if any Debenture called for redemption is converted pursuant hereto prior
to such Redemption Date, any money deposited with the Trustee or any Paying
Agent or so segregated and held in trust for the redemption of such Debenture
shall be paid to the Company upon its written request, or, if then held by the
Company, shall be discharged from such trust. Whenever any Debentures are to be
redeemed, the Company will give the Trustee written notice in the form of an
Officer's Certificate not fewer than forty-five (45) days (or such shorter
period of time as may be acceptable to the Trustee) prior to the Redemption Date
as to the aggregate principal amount of Debentures to be redeemed.

         If less than all of the outstanding Debentures are to be redeemed, the
Trustee shall select the Debentures or portions thereof of the Global Debenture
or the Debentures in certificated form to be redeemed (in principal amounts of
$50 or multiples thereof) by lot, on a pro rata basis or by another method the
Trustee deems fair and appropriate. If any Debenture selected for partial
redemption is submitted for conversion in part after such selection, the portion
of such Debenture submitted for conversion shall be deemed (so far as may be
possible) to be the portion to be selected for redemption. The Debentures (or
portions thereof) so selected shall be deemed duly selected for redemption for
all purposes

                                       26

hereof, notwithstanding that any such Debenture is submitted for conversion in
part before the mailing of the Redemption Notice.

         Upon any redemption of less than all of the outstanding Debentures, the
Company and the Trustee may (but need not), solely for purposes of determining
the pro rata allocation among such Debentures as are unconverted and outstanding
at the time of redemption, treat as outstanding any Debentures surrendered for
conversion during the period of fifteen (15) days next preceding the mailing of
a Redemption Notice and may (but need not) treat as outstanding any Debenture
authenticated and delivered during such period in exchange for the unconverted
portion of any Debenture converted in part during such period.

         Section 3.03. Payment of Debentures Called for Redemption by the
Company. If notice of redemption has been given as provided in Section 3.02, the
Debentures or portion of Debentures with respect to which such notice has been
given shall, unless converted into Common Stock pursuant to the terms hereof,
become due and payable on the date fixed for redemption and at the place or
places stated in such notice at the applicable Redemption Price, and on and
after said date (unless the Company shall default in the payment of such
Debentures at the Redemption Price) Interest on the Debentures or portion of
Debentures so called for redemption shall cease to accrue and, after the close
of business on the Business Day immediately preceding the Redemption Date
(unless the Company shall default in the payment of such Debentures at the
Redemption Price) such Debentures shall cease to be convertible into Common
Stock and, except as provided in Section 9.05 and 13.04, to be entitled to any
benefit or security under this Indenture, and the holders thereof shall have no
right in respect of such Debentures except the right to receive the Redemption
Price thereof. On presentation and surrender of such Debentures at a place of
payment in said notice specified, the said Debentures or the specified portions
thereof shall be paid and redeemed by the Company at the applicable Redemption
Price.

         Upon presentation of any Debenture redeemed in part only, the Company
shall execute and the Trustee shall authenticate and make available for delivery
to the holder thereof, at the expense of the Company, a new Debenture or
Debentures, of authorized denominations, in principal amount equal to the
unredeemed portion of the Debentures so presented.

         Notwithstanding the foregoing, the Trustee shall not redeem less than
all the outstanding Debentures or mail any Redemption Notice with respect to
less than all the outstanding Debentures during the continuance of a default in
payment of Interest or premium, if any, on the Debentures or during any Extended
Interest Payment Period. If any Debenture called for redemption shall not be so
paid upon surrender thereof for redemption, the principal and premium, if any,
shall, until paid or duly provided for, continue to bear interest at the rate
borne by the Debenture, compounded quarterly, and such Debenture shall remain
convertible into Common Stock until the principal and premium, if any, and
Interest shall have been paid or duly provided for.

                                       27

         Section 3.04. Conversion Arrangement on Call for Redemption. In
connection with any redemption of Debentures, the Company may arrange for the
purchase and conversion of any Debentures by an agreement with one or more
investment banks or other purchasers to purchase such Debentures by paying to
the Trustee in trust for the Debentureholders, on or before the date fixed for
redemption, an amount not less than the applicable Redemption Price of such
Debentures. Notwithstanding anything to the contrary contained in this Article
3, the obligation of the Company to pay the Redemption Price of such Debentures
shall be deemed to be satisfied and discharged to the extent such amount is so
paid by such purchasers. If such an agreement is entered into, a copy of which
will be filed with the Trustee prior to the date fixed for redemption, any
Debentures not duly surrendered for conversion by the holders thereof may, at
the option of the Company, be deemed, to the fullest extent permitted by law,
acquired by such purchasers from such holders and (notwithstanding anything to
the contrary contained in Article 16) surrendered by such purchasers for
conversion, all as of immediately prior to the close of business on the date
fixed for redemption (and the right to convert any such Debentures shall be
extended through such time), subject to payment of the above amount as
aforesaid. At the direction of the Company, the Trustee shall hold and dispose
of any such amount paid to it in the same manner as it would monies deposited
with it by the Company for the redemption of Debentures. Without the Trustee's
prior written consent, no arrangement between the Company and such purchasers
for the purchase and conversion of any Debentures shall increase or otherwise
affect any of the powers, duties, responsibilities or obligations of the Trustee
as set forth in this Indenture.

         Section 3.05. Repurchase of Debentures by the Company at Option of the
Holder upon a Change of Control.

         (a)      If a Change of Control shall occur at any time prior to the
Maturity Date, then each Debentureholder shall have the right, at such holder's
option, to require the Company to repurchase all of such holder's Debentures, or
any portion thereof that is a multiple of $50 principal amount, on the date (the
"REPURCHASE DATE") that is specified by the Company in accordance with Section
3.05(b) (or, if such day is not a Business Day, the next succeeding Business
Day) at a repurchase price (the "REPURCHASE PRICE") equal to 100% of the
principal amount thereof, together with accrued and unpaid Interest (including
deferred interest) to, but excluding, the Repurchase Date.

         (b)      On or before the thirtieth (30th) day after the occurrence of
a Change of Control, the Company, or at its written request the Trustee in the
name of and at the expense of the Company (which request must be received by the
Trustee at least five (5) Business Days prior to the date the Trustee is
requested to give notice as described below, unless the Trustee shall agree to a
shorter period), shall mail or cause to be mailed, by first class mail, to all
holders of record on such date a notice (the "CHANGE OF CONTROL NOTICE") of the
occurrence of such Change of Control and of the repurchase right at the option
of the holders arising as a result

                                       28

thereof to each holder of Debentures at its last address as the same appears on
the Debenture Register; provided that if the Company shall give such notice, it
shall also give written notice of the Change of Control to the Trustee at such
time as it is mailed to Debentureholders. Such notice, if mailed in the manner
herein provided, shall be conclusively presumed to have been duly given, whether
or not the holder receives such notice. Concurrently with the mailing of any
Change of Control Notice, the Company shall issue a press release announcing
such Change of Control referred to in the Change of Control Notice, the form and
content of which press release shall be determined by the Company in its sole
discretion. The failure to issue any such press release or any defect therein
shall not affect the validity of the Change of Control Notice or any proceedings
for the repurchase of any Debenture which any Debentureholder may elect to have
the Company repurchase as provided in this Section 3.05.

         Each Change of Control Notice shall specify the circumstances
constituting the Change of Control, the Repurchase Date (which must be no less
than 20 and no more than 45 days after the date of the Change of Control
Notice), the Repurchase Price, that the holder must exercise the repurchase
right on or prior to the close of business on the Repurchase Date (the
"REPURCHASE EXPIRATION TIME"), that the holder shall have the right to withdraw
any Debentures surrendered prior to the Repurchase Expiration Time, a
description of the procedure which a Debentureholder must follow to exercise
such repurchase right or to withdraw any surrendered Debentures, the place or
places where the holder is to surrender such holder's Debentures, the amount of
interest accrued on each Debenture to the Repurchase Date and the CUSIP number
or numbers of the Debentures (if then generally in use).

         No failure of the Company to give the foregoing notices and no defect
therein shall limit the Debentureholders' repurchase rights or affect the
validity of the proceedings for the repurchase of the Debentures pursuant to
this Section 3.05.

         (c)      Debentures shall be repurchased pursuant to this Section 3.05
at the option of the holder upon:

                  (i)      delivery to the Trustee (or other Paying Agent
         appointed by the Company) by a holder of a duly completed notice (the
         "REPURCHASE ELECTION") in the form set forth on the reverse of the
         Debenture at any time prior to the Repurchase Expiration Time; and

                  (ii)     delivery or book-entry transfer of the Debentures to
         the Trustee (or other Paying Agent appointed by the Company) at any
         time after delivery of the Repurchase Election (together with all
         necessary endorsements) at the Corporate Trust Office of the Trustee
         (or other Paying Agent appointed by the Company) in the Borough of
         Manhattan, such delivery being a condition to receipt by the holder of
         the purchase price therefor; provided that such purchase price shall be
         so paid pursuant

                                       29

         to this Section 3.05 only if the Debenture so delivered to the Trustee
         (or other Paying Agent appointed by the Company) shall conform in all
         respects to the description thereof in the related Repurchase Election.
         All questions as to the validity, eligibility (including time of
         receipt) and acceptance of any Debenture for repurchase shall be
         determined by the Company, whose determination shall be final and
         binding absent manifest error.

         (d)      The Company shall purchase from the holder thereof, pursuant
to this Section 3.05, a portion of a Debenture, if the principal amount of such
portion is $50 or a whole multiple of $50. Provisions of this Indenture that
apply to the purchase of all of a Debenture also apply to the purchase of such
portion of such Debenture. Upon presentation of any Debenture repurchased in
part only, the Company shall execute and the Trustee shall authenticate and make
available for delivery to the holder thereof, at the expense of the Company, a
new Debenture or Debentures, of any authorized denomination, in aggregate
principal amount equal to the portion of the Debentures presented not
repurchased.

         (e)      On or prior to the Repurchase Date, the Company will deposit
with the Trustee or with one or more Paying Agents (or, if the Company is acting
as its own Paying Agent, set aside, segregate and hold in trust as provided in
Section 6.04) an amount of cash sufficient to repurchase on the Repurchase Date
all the Debentures or portions thereof to be repurchased on such date at the
Repurchase Price; provided that if such payment is made on the Repurchase Date
it must be received by the Trustee or Paying Agent, as the case may be, by 11:00
a.m., New York City time, on such date.

         If the Trustee or other Paying Agent appointed by the Company, or the
Company or an Affiliate of the Company, if it or such Affiliate is acting as the
Paying Agent, holds cash sufficient to pay the aggregate Repurchase Price of all
the Debentures or portions thereof that are to be repurchased as of the
Repurchase Date, on or after the Repurchase Date (i) such Debentures will cease
to be outstanding, (ii) Interest on such Debentures will cease to accrue and
(iii) all other rights of the holders of such Debentures will terminate, whether
or not book-entry transfer of the Debentures has been made or the Debentures
have been delivered to the Trustee or Paying Agent, other than the right to
receive the Repurchase Price upon delivery of the Debentures.

         (f)      Upon receipt by the Trustee (or other Paying Agent appointed
by the Company) of the Repurchase Election specified in Section 3.05(c), the
holder of the Debenture in respect of which such Repurchase Election was given
shall (unless such Repurchase Election is validly withdrawn) thereafter be
entitled to receive solely the Repurchase Price with respect to such Debenture.
Such Repurchase Price shall be paid to such holder, subject to receipt of funds
and/or Debentures by the Trustee (or other Paying Agent appointed by the
Company), promptly (but in no event more than five (5) Business Days) following
the later of (x) the Repurchase Date with respect to such Debenture (provided
the holder has

                                       30

satisfied the conditions in Section 3.05(c)) and (y) the time of delivery of
such Debenture to the Trustee (or other Paying Agent appointed by the Company)
by the holder thereof in the manner required by Section 3.05(c). Debentures in
respect of which a Repurchase Election has been given by the holder thereof may
not be converted pursuant to Article 16 hereof on or after the date of the
delivery of such Repurchase Election unless such Repurchase Election has first
been validly withdrawn.

         (g)      Notwithstanding anything herein to the contrary, any holder
delivering to the office of the Trustee (or other Paying Agent appointed by the
Company) the Repurchase Election contemplated by Section 3.05(c) shall have the
right to withdraw such Repurchase Election at any time prior to the close of
business on the Business Day preceding the Repurchase Date by delivery of a
written notice of withdrawal to the Trustee (or other Paying Agent appointed by
the Company) specifying:

                  (i)      the certificate number, if any, of the Debenture in
         respect of which such notice of withdrawal is being submitted, or the
         appropriate Depositary information if the Debenture in respect of which
         such notice of withdrawal is being submitted is represented by a Global
         Debenture,

                  (ii)     the principal amount of the Debenture with respect to
         which such notice of withdrawal is being submitted, and

                  (iii)    the principal amount, if any, of such Debenture which
         remains subject to the original Repurchase Election and which has been
         or will be delivered for repurchase by the Company.

         The Trustee (or other Paying Agent appointed by the Company) shall
promptly notify the Company of the receipt by it of any Repurchase Election or
written notice of withdrawal thereof.

         (h)      In the case of a reclassification, change, consolidation,
merger, combination, sale or conveyance to which Section 16.06 applies, in which
the Common Stock of the Company is changed or exchanged as a result into the
right to receive stock, securities or other property or assets (including cash),
which includes shares of Common Stock of the Company or shares of common stock
of another Person that are, or upon issuance will be, traded on a United States
national securities exchange or approved for trading on an established automated
over-the-counter trading market in the United States and such shares constitute
at the time such change or exchange becomes effective in excess of 50% of the
aggregate fair market value of such stock, securities or other property or
assets (including cash) (as determined by the Company, which determination shall
be conclusive and binding), then the Person formed by such consolidation or
resulting from such merger or which acquires such assets, as the case may be,
shall execute and deliver to the Trustee a supplemental indenture (accompanied
by an Opinion of Counsel that such supplemental indenture complies with the

                                       31

Trust Indenture Act as in force at the date of execution of such supplemental
indenture) modifying the provisions of this Indenture relating to the right of
holders of the Debentures to cause the Company to repurchase the Debentures
following a Change of Control, including without limitation the applicable
provisions of this Section 3.05 and the definitions of Common Stock and Change
of Control, as appropriate, as determined in good faith by the Company (which
determination shall be conclusive and binding), to make such provisions apply to
such other Person if different from the Company and the common stock issued by
such Person (in lieu of the Company and the Common Stock of the Company).

         (i)      The Company will comply with the provisions of Rule 13e-4 and
any other tender offer rules under the Exchange Act to the extent then
applicable in connection with the repurchase rights of the holders of Debentures
in the event of a Change of Control.

         (j)      The Trustee (or other Paying Agent appointed by the Company)
shall return to the Company any cash that remains unclaimed as provided in
Section 14.04, together with interest, if any, thereon, held by them for the
payment of the Repurchase Price; provided that to the extent that the aggregate
amount of cash deposited by the Company pursuant to Section 3.05(e) exceeds the
aggregate Repurchase Price of the Debentures or portions thereof which the
Company is obligated to purchase as of the Repurchase Date then, unless
otherwise agreed in writing with the Company, promptly after the Business Day
following the Repurchase Date, the Trustee shall return any such excess to the
Company together with interest, if any, thereon.

                                   ARTICLE 4
                           SUBORDINATION OF DEBENTURES

         Section 4.01. Agreement of Subordination. The Company covenants and
agrees, and each holder of Debentures issued hereunder by its acceptance thereof
likewise covenants and agrees, that all Debentures shall be issued subject to
the provisions of this Article 4, and each Person holding any Debentures,
whether upon original issue or upon registration of transfer, assignment or
exchange thereof, accepts and agrees to be bound by such provisions.

         The payment of the principal of, premium, if any, and Interest on all
Debentures (including, but not limited to, the Redemption Price with respect to
Debentures called for redemption in accordance with Section 3.02 or Repurchase
Price with respect to Debentures submitted for repurchase in accordance with
Section 3.05) issued hereunder shall, to the extent and in the manner
hereinafter set forth, be subordinated and subject in right of payment to the
prior payment in full of all Senior and Senior Subordinated Indebtedness,
whether outstanding at the date of this Indenture or thereafter incurred.

                                       32

         No provision of this Article 4 shall prevent the occurrence of any
default or Event of Default hereunder or have any effect on the rights of the
holders of the Debentures or the Trustee to accelerate the maturity of the
Debentures.

         Section 4.02. Payments to Debentureholders. No payment shall be made
with respect to the principal of, premium, if any, or Interest on the Debentures
(including, but not limited to, the Redemption Price with respect to Debentures
called for redemption in accordance with Section 3.02 or Repurchase Price with
respect to Debentures submitted for repurchase in accordance with Section 3.05),
except payments and distributions made by the Trustee as permitted by the first
or second paragraph of Section 4.05, if:

                  (i)      a default in the payment of principal, premium, if
         any, interest, rent or other obligations in respect of Designated
         Senior Indebtedness occurs and is continuing (or, in the case of
         Designated Senior Indebtedness for which there is a period of grace, in
         the event of such a default that continues beyond the period of grace,
         if any, specified in the instrument or lease evidencing such Designated
         Senior Indebtedness) (a "PAYMENT DEFAULT"); or

                  (ii)     a default, other than a Payment Default, on any
         Designated Senior Indebtedness occurs and is continuing that then
         permits holders of such Designated Senior Indebtedness to accelerate
         its maturity (or in the case of any lease that is Designated Senior
         Indebtedness, a default occurs and is continuing that then permits the
         lessor to either terminate the lease or require the Company to make an
         irrevocable offer to terminate the lease following an event of default
         thereunder) and the Trustee receives a notice of the default (a
         "PAYMENT BLOCKAGE NOTICE") from a holder of Designated Senior
         Indebtedness or a Representative of Designated Senior Indebtedness (a
         "NON-PAYMENT DEFAULT").

         If the Trustee receives any Payment Blockage Notice pursuant to clause
(ii) above, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section 4.02 unless and until at least 360 days shall have
elapsed since the initial effectiveness of the immediately prior Payment
Blockage Notice. No Non-Payment Default that existed or was continuing on the
date of delivery of any Payment Blockage Notice (to the extent the holder or the
Representative of Designated Senior Indebtedness giving such notice had
knowledge of the same) to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice.

         The Company may and shall resume payments on and distributions in
respect of the Debentures (including, but not limited to, the Redemption Price
with respect to Debentures called for redemption in accordance with Section 3.02
or Repurchase Price with respect to Debentures submitted for repurchase in
accordance with Section 3.05) upon the earlier of:

                                       33

                           (1)      in the case of a Payment Default, the date
                  upon which any such Payment Default is cured or waived or
                  ceases to exist, or

                           (2)      in the case of a Non-Payment Default, the
                  earlier of (a) the date upon which such default is cured or
                  waived or ceases to exist or (b) 179 days after the applicable
                  Payment Blockage Notice is received by the Trustee if the
                  maturity of such Designated Senior Indebtedness has not been
                  accelerated (or in the case of any lease, 179 days after
                  notice is received if the Company has not received notice that
                  the lessor under such lease has exercised its right to
                  terminate the lease or require the Company to make an
                  irrevocable offer to terminate the lease following an event of
                  default thereunder), unless this Article 4 otherwise prohibits
                  the payment or distribution at the time of such payment or
                  distribution.

         Upon any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding up or liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due upon all
Senior and Senior Subordinated Indebtedness shall first be paid in full in cash
(including interest after the commencement of any such proceeding at the rate
specified in the applicable debt agreement or other document, whether or not
allowed as a claim in such proceeding) before any payment is made on account of
the principal of, premium, if any, or Interest on the Debentures (except
payments made pursuant to Article 14 from monies deposited with the Trustee
pursuant thereto prior to commencement of proceedings for such dissolution,
winding up, liquidation or reorganization), and upon any such dissolution or
winding up or liquidation or reorganization of the Company or bankruptcy,
insolvency, receivership or other similar proceeding, any payment by the
Company, or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the holders of the Debentures
or the Trustee would be entitled, except for the provisions of this Article 4,
shall (except as aforesaid) be paid by the Company or by any receiver, trustee
in bankruptcy, liquidating trustee, agent or other Person making such payment or
distribution, or by the holders of the Debentures or by the Trustee under this
Indenture if received by them or it, directly to the holders of Senior and
Senior Subordinated Indebtedness (pro rata to such holders on the basis of the
respective amounts of Senior and Senior Subordinated Indebtedness held by such
holders, or as otherwise required by law or a court order) or their
Representative or Representatives, as their respective interests may appear, to
the extent necessary to pay all Senior and Senior Subordinated Indebtedness in
full in cash, after giving effect to any concurrent payment or distribution to
or for the holders of Senior and Senior Subordinated Indebtedness, before any
payment or distribution is made to the holders of the Debentures or to the
Trustee.

                                       34

         For purposes of this Article 4, the words, "CASH, PROPERTY OR
SECURITIES" shall not be deemed to include shares of Common Stock of the Company
as reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated at least to the extent provided in this Article
4 with respect to the Debentures to the payment of all Senior and Senior
Subordinated Indebtedness which may at the time be outstanding; provided that
(i) the Senior and Senior Subordinated Indebtedness is assumed by the new
corporation, if any, resulting from any reorganization or readjustment, and (ii)
the rights of the holders of Senior and Senior Subordinated Indebtedness (other
than leases which are not assumed by the Company or the new corporation, as the
case may be) are not, without the consent of such holders, altered by such
reorganization or readjustment. The consolidation of the Company with, or the
merger of the Company into, another corporation or the liquidation or
dissolution of the Company following the conveyance or transfer of its property
as an entirety, or substantially as an entirety, to another Person upon the
terms and conditions provided for in Article 13 shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section 4.02 if such other Person shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article 13.

         In the event of the acceleration of the Debentures because of an Event
of Default, no payment or distribution shall be made to the Trustee or any
holder of Debentures in respect of the principal of, premium, if any, or
Interest on the Debentures (including, but not limited to, the Redemption Price
with respect to Debentures called for redemption in accordance with Section 3.02
or Repurchase Price with respect to Debentures submitted for repurchase in
accordance with Section 3.05), except payments and distributions made by the
Trustee as permitted by the first or second paragraph of Section 4.05, until all
Senior and Senior Subordinated Indebtedness has been paid in full in cash
(including interest after the commencement of any such proceeding at the rate
specified in the applicable debt agreement or other document, whether or not
allowed as a claim in such proceeding) or such acceleration is rescinded in
accordance with the terms of this Indenture. If payment of the Debentures is
accelerated because of an Event of Default, the Company or, at the Company's
request and expense, the Trustee shall promptly notify holders of Senior and
Senior Subordinated Indebtedness of the acceleration.

         In the event that, notwithstanding the foregoing provisions, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities (including, without limitation, by way
of setoff or otherwise), prohibited by the foregoing provisions in this Section
4.02, shall be received by the Trustee or the holders of the Debentures before
all Senior and Senior Subordinated Indebtedness is paid in full in cash
(including interest after the commencement of any such proceeding at the rate
specified in the applicable debt agreement or other document, whether or not
allowed as a claim in such proceeding) or provision is made for such payment
thereof in accordance with its terms in cash (including interest after the
commencement of any such proceeding at the rate specified in the applicable debt
agreement or other document, whether or not allowed as a claim in such

                                       35

proceeding), to the extent that the Trustee or any holder of the Debentures has
acquired written notice that all Senior and Senior Subordinated Indebtedness has
not been paid in full, such payment or distribution shall be held in trust for
the benefit of and shall be paid over or delivered to the holders of Senior and
Senior Subordinated Indebtedness or their Representative or Representatives, as
their respective interests may appear, as calculated by the Company, for
application to the payment of any Senior and Senior Subordinated Indebtedness
remaining unpaid to the extent necessary to pay all Senior and Senior
Subordinated Indebtedness in full in cash (including interest after the
commencement of any such proceeding at the rate specified in the applicable debt
agreement or other document, whether or not allowed as a claim in such
proceeding), after giving effect to any concurrent payment or distribution to or
for the holders of such Senior and Senior Subordinated Indebtedness.

         Nothing in this Article 4 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 8.03 or Section 9.06. This Section 4.02
shall be subject to the further provisions of Section 4.05.

         Section 4.03. Subrogation of Debentures. Subject to the payment in full
in cash (including interest after the commencement of any such proceeding at the
rate specified in the applicable debt agreement or other document, whether or
not allowed as a claim in such proceeding) of all Senior and Senior Subordinated
Indebtedness, the rights of the holders of the Debentures shall be subrogated to
the extent of the payments or distributions made to the holders of such Senior
and Senior Subordinated Indebtedness pursuant to the provisions of this Article
4 (equally and ratably with the holders of all Indebtedness of the Company which
by its express terms is subordinated to Senior and Senior Subordinated
Indebtedness to the same extent as the Debentures are subordinated and is
entitled to like rights of subrogation) to the rights of the holders of Senior
and Senior Subordinated Indebtedness to receive payments or distributions of
cash, property or securities of the Company applicable to the Senior and Senior
Subordinated Indebtedness until the principal, premium, if any, and Interest on
the Debentures shall be paid in full, and, for the purposes of such subrogation,
no payments or distributions to the holders of the Senior and Senior
Subordinated Indebtedness of any cash, property or securities to which the
holders of the Debentures or the Trustee would be entitled except for the
provisions of this Article 4, and no payment pursuant to the provisions of this
Article 4, to or for the benefit of the holders of Senior and Senior
Subordinated Indebtedness by holders of the Debentures or the Trustee, shall, as
among the Company, its creditors other than holders of Senior and Senior
Subordinated Indebtedness, and the holders of the Debentures, be deemed to be a
payment by the Company to or on account of the Senior and Senior Subordinated
Indebtedness, and no payments or distributions of cash, property or securities
to or for the benefit of the holders of the Debentures

                                       36

pursuant to the subrogation provisions of this Article 4, which would otherwise
have been paid to the holders of Senior and Senior Subordinated Indebtedness,
shall be deemed to be a payment by the Company to or for the account of the
Debentures. It is understood that the provisions of this Article 4 are intended
solely for the purposes of defining the relative rights of the holders of the
Debentures, on the one hand, and the holders of the Senior and Senior
Subordinated Indebtedness, on the other hand.

         Nothing contained in this Article 4 or elsewhere in this Indenture or
in the Debentures is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior and Senior Subordinated Indebtedness,
and the holders of the Debentures, the obligation of the Company, which is
absolute and unconditional, to pay to the holders of the Debentures the
principal of, premium, if any, and Interest on the Debentures as and when the
same shall become due and payable in accordance with their terms, or is intended
to or shall affect the relative rights of the holders of the Debentures and
creditors of the Company other than the holders of the Senior and Senior
Subordinated Indebtedness, nor shall anything herein or therein prevent the
Trustee or, subject to Section 8.04, the holder of any Debenture from exercising
all remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article 4 of the holders of
Senior and Senior Subordinated Indebtedness in respect of cash, property or
securities of the Company received upon the exercise of any such remedy.

         Section 4.04. Authorization to Effect Subordination. Each holder of a
Debenture by the holder's acceptance thereof authorizes and directs the Trustee
on the holder's behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in this Article 4 and appoints the
Trustee to act as the holder's attorney-in-fact for any and all such purposes.
If the Trustee does not file a proper proof of claim or proof of debt in the
form required in any proceeding referred to in the third paragraph of Section
8.02 hereof at least thirty (30) days before the expiration of the time to file
such claim, the holders of any Senior and Senior Subordinated Indebtedness or
their Representatives are hereby authorized to file an appropriate claim for and
on behalf of the holders of the Debentures.

         Section 4.05. Notice to Trustee. The Company shall give prompt written
notice in the form of an Officer's Certificate to a Responsible Officer of the
Trustee and to any Paying Agent of any fact known to the Company that would
prohibit the making of any payment of monies to or by the Trustee or any Paying
Agent in respect of the Debentures pursuant to the provisions of this Article 4.
Notwithstanding the provisions of this Article 4 or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts that would prohibit the making of any payment of monies to or by the
Trustee in respect of the Debentures pursuant to the provisions of this Article
4, unless and until a Responsible Officer of the Trustee shall have received
written notice thereof at the Corporate Trust Office from the Company (in the
form of an

                                       37

Officer's Certificate) or a Representative or a holder or holders of Senior and
Senior Subordinated Indebtedness, and before the receipt of any such written
notice, the Trustee, subject to the provisions of Section 9.01, shall be
entitled in all respects to assume that no such facts exist; provided, however,
that if on a date not less than two (2) Business Days prior to the date upon
which by the terms hereof any such monies may become payable for any purpose
(including, without limitation, the payment of the principal of, or premium, if
any, or Interest on any Debenture) the Trustee shall not have received, with
respect to such monies, the notice provided for in this Section 4.05, then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to apply monies received to the purpose for which
they were received, and shall not be affected by any notice to the contrary that
may be received by it on or after such prior date.

         Notwithstanding anything in this Article 4 to the contrary, nothing
shall prevent any payment by the Trustee to the Debentureholders of monies
deposited with it pursuant to Section 14.01, if a Responsible Officer of the
Trustee shall not have received written notice at the Corporate Trust Office on
or before two (2) Business Days prior to the date such payment is due that such
payment is not permitted under Section 4.01 or Section 4.02.

         The Trustee, subject to the provisions of Section 9.01, shall be
entitled to rely on the delivery to it of a written notice by a Representative
or a person representing himself to be a holder of Senior and Senior
Subordinated Indebtedness (or a trustee on behalf of such holder) to establish
that such notice has been given by a Representative or a holder of Senior and
Senior Subordinated Indebtedness or a trustee on behalf of any such holder or
holders. The Trustee shall not be required to make any payment or distribution
to or on behalf of a holder of Senior and Senior Subordinated Indebtedness
pursuant to this Article 4 unless it has received satisfactory evidence as to
the amount of Senior and Senior Subordinated Indebtedness held by such Person,
the extent to which such Person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such Person under
this Article 4.

         Section 4.06. Trustee's Relation to Senior and Senior Subordinated
Indebtedness. The Trustee, in its individual capacity, shall be entitled to all
the rights set forth in this Article 4 in respect of any Senior and Senior
Subordinated Indebtedness at any time held by it, to the same extent as any
other holder of Senior and Senior Subordinated Indebtedness, and nothing in
Section 9.13 or elsewhere in this Indenture shall deprive the Trustee of any of
its rights as such holder.

         With respect to the holders of Senior and Senior Subordinated
Indebtedness, the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this Article 4, and
no implied covenants or obligations with respect to the holders of Senior and
Senior Subordinated Indebtedness shall be read into this Indenture against the
Trustee.

                                       38

The Trustee shall not be deemed to owe any fiduciary duty to the holders of
Senior and Senior Subordinated Indebtedness and, subject to the provisions of
Section 9.01, the Trustee shall not be liable to any holder of Senior and Senior
Subordinated Indebtedness (i) for any failure to make any payments or
distributions to such holder or (ii) if it shall pay over or deliver money to
holders of Debentures, the Company or any other Person in compliance with this
Article 4.

         Section 4.07. No Impairment of Subordination. No right of any present
or future holder of any Senior and Senior Subordinated Indebtedness to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance by
the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof which any such holder may have or otherwise
be charged with. Senior and Senior Subordinated Indebtedness may be created,
renewed or extended and holders of Senior and Senior Subordinated Indebtedness
may exercise any rights under any instrument creating or evidencing such Senior
and Senior Subordinated Indebtedness, including, without limitation, any waiver
of default thereunder, without any notice to or consent from the holders of the
Debentures or the Trustee. No compromise, alteration, amendment, modification,
extension, renewal or other change of, or waiver, consent or other action in
respect of, any liability or obligation under or in respect of the Senior and
Senior Subordinated Indebtedness or any terms or conditions of any instrument
creating or evidencing such Senior and Senior Subordinated Indebtedness shall in
any way alter or affect any of the provisions of this Article 4 or the
subordination of the Debentures provided thereby.

         Section 4.08. Certain Conversions Not Deemed Payment. For the purposes
of this Article 4 only, (1) the issuance and delivery of Junior Securities upon
conversion of Debentures in accordance with Article 16 and (2) the payment,
issuance or delivery of cash, property or securities upon conversion of a
Debenture as a result of any transaction specified in Section 16.06 shall not be
deemed to constitute a payment or distribution on account of the principal of,
premium, if any, or Interest on Debentures or on account of the purchase or
other acquisition of Debentures. For the purposes of this Section 4.08, the term
"JUNIOR SECURITIES" means (a) Common Stock of the Company or (b) securities of
the Company that are subordinated in right of payment to all Senior and Senior
Subordinated Indebtedness that may be outstanding at the time of issuance or
delivery of such securities to the same extent as, or to a greater extent than,
the Debentures are so subordinated as provided in this Article 4. Nothing
contained in this Article 4 or elsewhere in this Indenture or in the Debentures
is intended to or shall impair, as among the Company, its creditors (other than
holders of Senior and Senior Subordinated Indebtedness) and the
Debentureholders, the right, which is absolute and unconditional, of the Holder
of any Debenture to convert such Debenture in accordance with Article 16.

                                       39

         Section 4.09. Article Applicable to Paying Agents. If at any time any
Paying Agent other than the Trustee shall have been appointed by the Company and
be then acting hereunder, the term "TRUSTEE" as used in this Article 4 shall
(unless the context otherwise requires) be construed as extending to and
including such Paying Agent within its meaning as fully for all intents and
purposes as if such Paying Agent were named in this Article 4 in addition to or
in place of the Trustee; provided, however, that the first paragraph of Section
4.05 shall not apply to the Company or any Affiliate of the Company if it or
such Affiliate acts as Paying Agent.

         The Trustee shall not be responsible for the actions or inactions of
any other Paying Agents (including the Company if acting as its own Paying
Agent) and shall have no control of any funds held by such other Paying Agents.

         Section 4.10. Senior and Senior Subordinated Indebtedness Entitled to
Rely. The holders of Senior and Senior Subordinated Indebtedness (including,
without limitation, Designated Senior Indebtedness) shall have the right to rely
upon this Article 4, and no amendment or modification of the provisions
contained herein shall diminish the rights of such holders unless such holders
shall have agreed in writing thereto.

         Section 4.11. Reliance on Judicial Order or Certificate of Liquidating
Agent. Upon any payment or distribution of assets of the Company referred to in
this Article 4, the Trustee and the Debentureholders shall be entitled to rely
upon any order or decree entered by any court of competent jurisdiction in which
such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, liquidating trustee, custodian,
receiver, assignee for the benefit of creditors, agent or other Person making
such payment or distribution, delivered to the Trustee or to the
Debentureholders, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of Senior and Senior
Subordinated Indebtedness and other indebtedness of the Company, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article 4.

                                   ARTICLE 5
                       DEFERRAL OF INTEREST PAYMENT PERIOD

         Section 5.01. Extended Interest Payment Period. So long as the Company
is not in default in the payment of Interest on the Debentures, and so long as
the Designated Agreement Termination Date has occurred, the Company shall have
the right, at any time during the term of the Debentures, from time to time to
extend any interest payment period with respect to such Debentures for up to 20
consecutive quarterly interest periods (an "EXTENDED INTEREST PAYMENT PERIOD"),
at the end of which period the Company shall pay all Interest accrued

                                       40

and unpaid thereon (together with interest thereon at the rate of 5.50% per
annum to the extent permitted by applicable law, compounded quarterly
("COMPOUNDED INTEREST")); provided that no Extended Interest Payment Period may
extend beyond the Maturity Date or Redemption Date of the Debentures or end on a
day other than an Interest Payment Date. Prior to the termination of any such
Extended Interest Payment Period, the Company may pay all or any portion of the
Interest accrued on the Debentures on any Interest Payment Date to holders of
record on the regular Record Date for such Interest Payment Date or from time to
time further extend such Period; provided that such Extended Interest Payment
Period, including such extension and all such further extensions thereof, shall
not exceed 20 consecutive quarterly interest periods. Upon the termination of
any Extended Interest Payment Period and upon the payment of all accrued and
unpaid Interest then due, together with Compounded Interest, the Company may
select a new Extended Interest Payment Period, subject to the foregoing
requirements. No Interest shall be due and payable during an Extended Interest
Payment Period, except at the end thereof. At the end of the Extended Interest
Payment Period, the Company shall pay all Interest accrued and unpaid on the
Debentures including any Compounded Interest which shall be payable to the
holders of the Debentures in whose names the Debentures are registered in the
Debenture Register on the first Record Date prior to the end of the Extended
Interest Payment Period.

         Section 5.02. Notification of Deferral of Interest Payment Periods. The
Company shall, or shall cause the Trustee to, give the holders of the Debentures
written notice of its selection of an Extended Interest Payment Period at least
5 Business Days prior to the earlier of the Record Date with respect to the next
succeeding Interest Payment Date or the date the Company is required to give
notice of the record or payment date of such interest payment to any national
stock exchange or other self-regulatory organization on which the Debentures are
listed or quoted or to holders of the Debentures. The quarter in which any
notice is given pursuant to this Section 5.02 shall be counted as one of the
quarters permitted in the maximum Extended Interest Payment Period permitted
under this Article 5. If the Company shall give such notice, the Company shall
also deliver a copy of such notice to the Trustee at such time as it is mailed
to Debentureholders.

                                   ARTICLE 6
                       PARTICULAR COVENANTS OF THE COMPANY

         Section 6.01. Payment of Principal, Premium and Interest. The Company
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and premium, if any (including, but not limited to, the
Redemption Price with respect to Debentures called for redemption in accordance
with Section 3.02 or Repurchase Price with respect to Debentures submitted for
repurchase in accordance with Section 3.05), and Interest, on each of the
Debentures at the

                                       41

places, at the respective times and in the manner provided herein and in the
Debentures.

         Section 6.02. Maintenance of Office or Agency. The Company will
maintain an office or agency in the Borough of Manhattan, the City of New York,
where the Debentures may be surrendered for registration of transfer or exchange
or for presentation for payment or for conversion, redemption or repurchase and
where notices and demands to or upon the Company in respect of the Debentures
and this Indenture may be served. The Company will give prompt written notice to
the Trustee of the location, and any change in the location, of such office or
agency not designated or appointed by the Trustee. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office.

         The Company may also from time to time designate co-registrars and one
or more offices or agencies where the Debentures may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations. The Company will give prompt written notice of any such
designation or rescission and of any change in the location of any such other
office or agency.

         The Company hereby initially designates the Trustee as Paying Agent,
Debenture Registrar, Custodian and Conversion Agent and each of the Corporate
Trust Office and the office of agency of the Trustee in The Borough of
Manhattan, shall be considered as one such office or agency of the Company for
each of the aforesaid purposes.

         So long as the Trustee is the Debenture Registrar, the Trustee agrees
to mail, or cause to be mailed, the notices set forth in Section 9.10(a) and the
third paragraph of Section 9.11. If co-registrars have been appointed in
accordance with this Section, the Trustee shall mail such notices only to the
Company and the holders of Debentures it can identify from its records.

         Section 6.03. Appointments to Fill Vacancies in Trustee's Office. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 9.10, a Trustee, so that there
shall at all times be a Trustee hereunder.

         Section 6.04. Provisions as to Paying Agent. If the Company shall
appoint a Paying Agent other than the Trustee, or if the Trustee shall appoint
such a Paying Agent, the Company will cause such Paying Agent to execute and
deliver to the Trustee an instrument in which such agent shall agree with the
Trustee, subject to the provisions of this Section 6.04:

                  (1)      that it will hold all sums held by it as such agent
         for the payment of the principal of and premium, if any, or Interest on
         the

                                       42

         Debentures (whether such sums have been paid to it by the Company or by
         any other obligor on the Debentures) in trust for the benefit of the
         holders of the Debentures;

                  (2)      that it will give the Trustee notice of any failure
         by the Company (or by any other obligor on the Debentures) to make any
         payment of the principal of and premium, if any, or Interest on the
         Debentures when the same shall be due and payable; and

                  (3)      that at any time during the continuance of an Event
         of Default, upon request of the Trustee, it will forthwith pay to the
         Trustee all sums so held in trust.

         The Company shall, on or before each due date of the principal of,
premium, if any, or Interest on the Debentures, deposit with the Paying Agent a
sum (in funds which are immediately available on the due date for such payment)
sufficient to pay such principal, premium, if any, or Interest, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of any
failure to take such action; provided that if such deposit is made on the due
date, such deposit shall be received by the Paying Agent by 11:00 a.m., New York
City time, on such date.

         (a)      If the Company shall act as its own Paying Agent, it will, on
or before each due date of the principal of, premium, if any, or Interest on the
Debentures, set aside, segregate and hold in trust for the benefit of the
holders of the Debentures a sum sufficient to pay such principal, premium, if
any, or Interest so becoming due and will promptly notify the Trustee of any
failure to take such action and of any failure by the Company (or any other
obligor under the Debentures) to make any payment of the principal of, premium,
if any, or Interest on the Debentures when the same shall become due and
payable.

         (b)      Anything in this Section 6.04 to the contrary notwithstanding,
the Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by the Company or any Paying Agent hereunder
as required by this Section 6.04, such sums to be held by the Trustee upon the
trusts herein contained and upon such payment by the Company or any Paying Agent
to the Trustee, the Company or such Paying Agent shall be released from all
further liability with respect to such sums.

         (c)      Anything in this Section 6.04 to the contrary notwithstanding,
the agreement to hold sums in trust as provided in this Section 6.04 is subject
to Sections 14.03 and 14.04.

         The Trustee shall not be responsible for the actions of any other
Paying Agent (including the Company if acting as its own Paying Agent) and shall
have no control of any funds held by such other Paying Agents.

                                       43

         Section 6.05. Existence. Subject to Article 13, the Company will do or
cause to be done all things necessary to preserve and keep in full force and
effect its existence and rights (charter and statutory); provided that the
Company shall not be required to preserve any such right if the Company shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and that the loss thereof is not disadvantageous in
any material respect to the Debentureholders.

         Section 6.06. Rule 144A Information Requirement. Within the period
prior to the expiration of the holding period applicable to sales thereof under
Rule 144(k) under the Securities Act (or any successor provision), the Company
covenants and agrees that it shall, during any period in which it is not subject
to Section 13 or 15(d) under the Exchange Act, make available to any holder or
beneficial holder of Debentures or any Common Stock issued upon conversion
thereof which continue to be Restricted Securities in connection with any sale
thereof and any prospective purchaser of Debentures or such Common Stock
designated by such holder or beneficial holder, the information required
pursuant to Rule 144A(d)(4) under the Securities Act upon the request of any
holder or beneficial holder of the Debentures or such Common Stock and it will
take such further action as any holder or beneficial holder of such Debentures
or such Common Stock may reasonably request, all to the extent required from
time to time to enable such holder or beneficial holder to sell its Debentures
or Common Stock without registration under the Securities Act within the
limitation of the exemption provided by Rule 144A, as such Rule may be amended
from time to time. Upon the request of any holder or any beneficial holder of
the Debentures or such Common Stock, the Company will deliver to such holder a
written statement as to whether it has complied with such requirements.

         Section 6.07. Stay, Extension and Usury Laws. The Company covenants (to
the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the principal of, premium,
if any, or Interest on the Debentures as contemplated herein, wherever enacted,
now or at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture and the Company (to the extent it may lawfully do
so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impede
the execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been enacted.

         Section 6.08. Compliance Certificate. The Company shall deliver to the
Trustee, within one hundred twenty (120) days after the end of each fiscal year
of the Company (which fiscal year of the Company is presently the twelve
calendar months ending December 31), a certificate signed by either the
principal executive officer, principal financial officer or principal accounting
officer of the Company, stating whether or not to the best knowledge of the
signer thereof the

                                       44

Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and the status thereof
of which the signer may have knowledge.

         The Company will deliver to the Trustee, promptly upon becoming aware
of (i) any default in the performance or observance of any covenant, agreement
or condition contained in this Indenture, or (ii) any Event of Default, an
Officer's Certificate specifying with particularity such default or Event of
Default and further stating what action the Company has taken, is taking or
proposes to take with respect thereto.

         Any notice required to be given under this Section 6.08 shall be
delivered to a Responsible Officer of the Trustee at its Corporate Trust Office.

         Section 6.09. Liquidated Damages Notice. In the event that the Company
is required to pay Liquidated Damages to holders of Debentures pursuant to the
Registration Rights Agreement, the Company will provide written notice
("LIQUIDATED DAMAGES NOTICE") to the Trustee of its obligation to pay Liquidated
Damages no later than fifteen (15) days prior to the proposed payment date for
the Liquidated Damages, and the Liquidated Damages Notice shall set forth the
amount of Liquidated Damages to be paid by the Company on such payment date. The
Trustee shall not at any time be under any duty or responsibility to any holder
of Debentures to determine the Liquidated Damages, or with respect to the
nature, extent or calculation of the amount of Liquidated Damages when made, or
with respect to the method employed in such calculation of the Liquidated
Damages.

         Section 6.10. Tax Treatment. The Company agrees and, by acceptance of a
Debenture, each beneficial holder of a Debenture will covenant to treat the
Debentures as indebtedness of the Company for U.S. federal income tax purposes.

         Section 6.11. Restrictions on Certain Payments. The Company agrees that
if (i) an event has occurred that with the giving of notice or the lapse of
time, or both, would constitute an Event of Default and the Company has not
taken commercially reasonable steps to cure the event (a "POTENTIAL EVENT OF
DEFAULT") or (ii) the Company has given notice of its intention to begin an
Extended Interest Payment Period pursuant to Section 5.02 and has not rescinded
the notice or any Extended Interest Payment Period is continuing, then the
Company will not and will not permit any of its Subsidiaries to do any of the
following (each, a "RESTRICTED PAYMENT"):

         (a)      declare or pay any dividends on, make distributions regarding,
or redeem, purchase, acquire or make any liquidation payment with respect to,
any of the capital stock of the Company, other than:

                                       45

                  (i)      purchases of the capital stock of the Company in
         connection with employee or agent benefit plans or under any dividend
         reinvestment plan;

                  (ii)     in connection with the reclassifications of any class
         or series of the Company's capital stock, or the exchange or conversion
         of one class or series of the Company's capital stock for or into
         another class or series of its capital stock;

                  (iii)    the purchase of fractional interests in shares of the
         Company's capital stock in connection with the conversion or exchange
         provisions of that capital stock or the security being converted or
         exchanged;

                  (iv)     dividends or distributions in the Company's capital
         stock, or options, warrants or rights to acquire capital stock, or
         repurchases or redemptions of capital stock solely from the issuance or
         exchange of capital stock;

                  (v)      any declaration of a dividend in connection with the
         implementation of a shareholders' rights plan, or issuances of stock
         under any such plan in the future, or redemptions or repurchases of any
         such rights pursuant to any such shareholders' rights plan; or

                  (vi)     repurchases of Common Stock in connection with
         acquisitions of businesses made by the Company or any of its
         Subsidiaries (which repurchases are made in connection with the
         satisfaction of indemnification obligations of the sellers of such
         businesses);

         (b)      make any payment of interest, principal or premium, if any, on
or repay, repurchase or redeem any debt securities (including other convertible
debentures) issued by the Company that rank equally with or junior to the
Debentures; or

         (c)      make any guarantee payments with respect to any Guarantee by
the Company of the debt securities (including other Guarantees) of any of its
Subsidiaries, if such Guarantee ranks equally with or junior in interest to the
Debentures;

provided that the limitation described in clause (a) above will not apply when a
Potential Event of Default is occurring until such time as each of the
Designated Agreements has been replaced, retired or otherwise terminated or has
been duly amended so that such Designated Agreement does not limit the Company's
ability to agree not to make the payments described in clause (a) above (the
first date on which all of the Designated Agreements has been so replaced,
retired, terminated or amended, the "DESIGNATED AGREEMENT TERMINATION DATE").

                                       46

         Notwithstanding the foregoing, Restricted Payments shall not include
payments or distributions of any kind made by the Company, directly or
indirectly, to Williams Gas Pipeline Company, LLC or any of its direct or
indirect Subsidiaries, or to any successor company established by the Company to
own or manage its natural gas pipelines and related assets, or any of such
successor company's direct or indirect Subsidiaries.

         Section 6.12. Termination of Designated Agreements. The Company agrees
to use its commercially reasonable efforts to cause each of the Designated
Agreements to be replaced, retired or otherwise terminated or to be amended so
that such Designated Agreement does not limit the Company's ability to agree not
to make the payments described in clause (a) of Section 6.11 within 90 days
after the date of this Indenture.

                                   ARTICLE 7
       DEBENTUREHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

         Section 7.01. Debentureholders' Lists. The Company covenants and agrees
that it will furnish or cause to be furnished to the Trustee, semiannually, not
more than fifteen (15) days after each June 1 and December 1 in each year
beginning with December 1, 2003, and at such other times as the Trustee may
request in writing, within thirty (30) days after receipt by the Company of any
such request (or such lesser time as the Trustee may reasonably request in order
to enable it to timely provide any notice to be provided by it hereunder), a
list in such form as the Trustee may reasonably require of the names and
addresses of the holders of Debentures as of a date not more than fifteen (15)
days (or such other date as the Trustee may reasonably request in order to so
provide any such notices) prior to the time such information is furnished,
except that no such list need be furnished by the Company to the Trustee so long
as the Trustee is acting as the sole Debenture Registrar.

         Section 7.02. Preservation and Disclosure of Lists. The Trustee shall
preserve, in as current a form as is reasonably practicable, all information as
to the names and addresses of the holders of Debentures contained in the most
recent list furnished to it as provided in Section 7.01 or maintained by the
Trustee in its capacity as Debenture Registrar or co-registrar in respect of the
Debentures, if so acting. The Trustee may destroy any list furnished to it as
provided in Section 7.01 upon receipt of a new list so furnished.

         (a)      The rights of Debentureholders to communicate with other
holders of Debentures with respect to their rights under this Indenture or under
the Debentures, and the corresponding rights and duties of the Trustee, shall be
as provided by the Trust Indenture Act.

         (b)      Every Debentureholder, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor

                                       47

any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of holders of Debentures
made pursuant to the Trust Indenture Act.

         Section 7.03. Reports by Trustee. Within sixty (60) days after December
15 of each year commencing with the year 2003, the Trustee shall transmit to
holders of Debentures such reports dated as of December 15 of the year in which
such reports are made concerning the Trustee and its actions under this
Indenture as may be required pursuant to the Trust Indenture Act at the times
and in the manner provided pursuant thereto.

         (a)      A copy of such report shall, at the time of such transmission
to holders of Debentures, be filed by the Trustee with each stock exchange and
automated quotation system upon which the Debentures are listed, with the
Securities and Exchange Commission and with the Company. The Company will
promptly notify the Trustee in writing when the Debentures are listed on any
stock exchange or automated quotation system or delisted therefrom.

         Section 7.04. Reports by Company. The Company shall file with the
Trustee (and the Commission if at any time after the Indenture becomes qualified
under the Trust Indenture Act), and transmit to holders of Debentures, such
information, documents and other reports and such summaries thereof, as may be
required pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant to such Act, whether or not the Debentures are governed by
such Act; provided that any such information, documents or reports required to
be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act
shall be filed with the Trustee within fifteen (15) days after the same is so
required to be filed with the Commission. Delivery of such reports, information
and documents to the Trustee is for informational purposes only and the
Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on an Officer's
Certificates).

                                    ARTICLE 8
       REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS ON AN EVENT OF DEFAULT

         Section 8.01. Events of Default. In case one or more of the following
events (each an "EVENT OF DEFAULT") (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body) shall
have occurred and be continuing:

         (a)      default in the payment of any installment of Interest upon any
of the Debentures as and when the same shall become due and payable, and
continuance

                                       48

of such default for a period of thirty (30) days, whether or not the payment is
prohibited by the provisions of Article 4 hereof, provided that a valid
extension of the interest payment period by the Company pursuant to Article 5
shall not constitute an Event of Default; or

         (b)      default in the payment of the principal of or premium, if any,
on any of the Debentures as and when the same shall become due and payable
either at maturity or in connection with any redemption, repurchase or
otherwise, in each case pursuant to Article 3, by acceleration or otherwise,
whether or not the payment is prohibited by the provisions of Article 4 hereof;
or

         (c)      default in the Company's obligation to convert the Debentures
into Common Stock upon the exercise of a holder's rights pursuant to Article 16;
or

         (d)      default in the Company's obligation to repurchase the
Debentures at the option of a holder upon a Change of Control pursuant to
Section 3.05, whether or not the payment is prohibited by the provisions of
Article 4 hereof; or

         (e)      failure to provide notice of the occurrence of a Change of
Control on a timely basis as required by Section 3.05; or

         (f)      default in Williams' obligation to redeem the convertible
debentures after it has exercised its option to redeem, whether or not the
payment is prohibited by the provisions of Article 4 hereof; or

         (g)      failure on the part of the Company duly to observe or perform
any other of the covenants or agreements on the part of the Company in the
Debentures or in this Indenture (other than a covenant or agreement a default in
whose performance or whose breach is elsewhere in this Section 8.01 specifically
dealt with) continued for a period of ninety (90) days after the date on which
written notice of such failure, requiring the Company to remedy the same, shall
have been given to the Company by the Trustee, or the Company and a Responsible
Officer of the Trustee by the holders of at least twenty-five percent (25%) in
aggregate principal amount of the Debentures at the time outstanding determined
in accordance with Section 10.04; or

         (h)      failure to pay at final stated maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount of any
Junior Subordinated Indebtedness of the Company or the acceleration of the final
stated maturity of any such Junior Subordinated Indebtedness (which acceleration
is not rescinded, annulled or otherwise cured within 90 days of receipt by the
Company of notice from the holders thereof of any such acceleration) if the
aggregate principal amount of such Junior Subordinated Indebtedness, together
with the principal amount of any other Junior Subordinated Indebtedness of the
Company that is in default for failure to pay principal at final stated maturity
or which has been accelerated (in each case with respect to which the 90-day
period described above has elapsed), aggregates $250 million or more at any
time; or

                                       49

         (i)      the Company shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
the Company or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of the Company or any
substantial part of the property of the Company, or shall consent to any such
relief or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against the Company, or shall
make a general assignment for the benefit of creditors, or shall fail generally
to pay its debts as they become due; or

         (j)      an involuntary case or other proceeding shall be commenced
against the Company seeking liquidation, reorganization or other relief with
respect to the Company or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of the Company or any
substantial part of the property of the Company, and such involuntary case or
other proceeding shall remain undismissed and unstayed for a period of sixty
(60) consecutive days;

then, and in each and every such case (other than an Event of Default specified
in Section 8.01(i) or 8.01(j)), unless the principal of all of the Debentures
shall have already become due and payable, either the Trustee or the holders of
not less than twenty-five percent (25%) in aggregate principal amount of the
Debentures then outstanding hereunder determined in accordance with Section
10.04, by notice in writing to the Company (and to the Trustee if given by
Debentureholders), may declare the principal of and premium, if any, on all the
Debentures and the Interest accrued thereon to be due and payable immediately,
and upon any such declaration the same shall become and shall be immediately due
and payable, anything in this Indenture or in the Debentures contained to the
contrary notwithstanding. If an Event of Default specified in Section 8.01(i) or
8.01(j) occurs, the principal of all the Debentures and the Interest accrued
thereon shall be immediately and automatically due and payable without necessity
of further action. This provision, however, is subject to the conditions that
if, at any time after the principal of the Debentures shall have been so
declared due and payable, and before any judgment or decree for the payment of
the monies due shall have been obtained or entered as hereinafter provided, the
Company shall pay or shall deposit with the Trustee a sum sufficient to pay all
matured installments of Interest upon all Debentures and the principal of and
premium, if any, on any and all Debentures which shall have become due otherwise
than by acceleration (with interest on overdue installments of Interest (to the
extent that payment of such interest is enforceable under applicable law) and on
such principal and premium, if any, at the rate borne by the Debentures, to the
date of such payment or deposit) and amounts due to the Trustee pursuant to
Section 9.06, and if any and all defaults under this Indenture, other than the
nonpayment of principal of and premium, if any, and accrued Interest on
Debentures which shall have become due by acceleration, shall have been cured or
waived pursuant to Section 8.07, then and in every such case the holders of a
majority in aggregate principal

                                       50

amount of the Debentures then outstanding, by written notice to the Company and
to the Trustee, may waive all defaults or Events of Default and rescind and
annul such declaration and its consequences; but no such waiver or rescission
and annulment shall extend to or shall affect any subsequent default or Event of
Default, or shall impair any right consequent thereon. The Company shall notify
in writing a Responsible Officer of the Trustee, promptly upon becoming aware
thereof, of any Event of Default.

         In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such waiver or rescission and annulment or for any other reason or
shall have been determined adversely to the Trustee, then and in every such case
the Company, the holders of Debentures, and the Trustee shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the holders of Debentures, and the Trustee
shall continue as though no such proceeding had been taken.

         Section 8.02. Payments of Debentures on Default; Suit Therefor. The
Company covenants that in case default shall be made in the payment of any
installment of Interest upon any of the Debentures as and when the same shall
become due and payable, and such default shall have continued for a period of
thirty (30) days, or in case default shall be made in the payment of the
principal of or premium, if any, on any of the Debentures as and when the same
shall have become due and payable, whether at maturity of the Debentures or in
connection with any redemption, repurchase, acceleration, declaration or
otherwise, then, upon demand of the Trustee, the Company will pay to the
Trustee, for the benefit of the holders of the Debentures, the whole amount that
then shall have become due and payable on all such Debentures for principal and
premium, if any, or Interest, as the case may be, with interest upon the overdue
principal and premium, if any, and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
all other amounts due the Trustee under Section 9.06. Until such demand by the
Trustee, the Company may pay the principal of and premium, if any, and Interest
on the Debentures to the registered holders, whether or not the Debentures are
overdue.

         In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the
Debentures and collect in the manner provided by law out of the property of the
Company or any other obligor on the Debentures wherever situated the monies
adjudged or decreed to be payable.

                                       51

         In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Debentures under
Title 11 of the United States Code, or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of the Company or
such other obligor, or in the case of any other judicial proceedings relative to
the Company or such other obligor upon the Debentures, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Debentures shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 8.02,
shall be entitled and empowered, by intervention in such proceedings or
otherwise, to file and prove a claim or claims for the whole amount of
principal, premium, if any, and Interest owing and unpaid in respect of the
Debentures, and, in case of any judicial proceedings, to file such proofs of
claim and other papers or documents as may be necessary or advisable in order to
have the claims of the Trustee and of the Debentureholders allowed in such
judicial proceedings relative to the Company or any other obligor on the
Debentures, its or their creditors, or its or their property, and to collect and
receive any monies or other property payable or deliverable on any such claims,
and to distribute the same after the deduction of any amounts due the Trustee
under Section 9.06, and any receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, custodian or similar official is hereby authorized
by each of the Debentureholders to make such payments to the Trustee, and, in
the event that the Trustee shall consent to the making of such payments directly
to the Debentureholders, to pay to the Trustee any amount due it for reasonable
compensation, expenses, advances and disbursements, including counsel fees and
expenses incurred by it up to the date of such distribution. To the extent that
such payment of reasonable compensation, expenses, advances and disbursements
out of the estate in any such proceedings shall be denied for any reason,
payment of the same shall be secured by a lien on, and shall be paid out of, any
and all distributions, dividends, monies, securities and other property which
the holders of the Debentures may be entitled to receive in such proceedings,
whether in liquidation or under any plan of reorganization or arrangement or
otherwise.

         All rights of action and of asserting claims under this Indenture, or
under any of the Debentures, may be enforced by the Trustee without the
possession of any of the Debentures, or the production thereof at any trial or
other proceeding relative thereto, and any such suit or proceeding instituted by
the Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, be for the ratable benefit of the holders of the
Debentures.

         In any proceedings brought by the Trustee (and in any proceedings
involving the interpretation of any provision of this Indenture to which the

                                       52

Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Debentures, and it shall not be necessary to make any holders of the
Debentures parties to any such proceedings.

         Section 8.03. Application of Monies. Any monies collected by the
Trustee pursuant to this Article 8 and, after an Event of Default, any other
money or other property distributable in respect of the Company's obligations
under this Indenture shall be applied in the order following, at the date or
dates fixed by the Trustee for the distribution of such monies, upon
presentation of the several Debentures, and stamping thereon the payment, if
only partially paid, and upon surrender thereof, if fully paid:

         FIRST: To the Trustee (including any predecessor Trustee) for the
payment of all amounts due under Section 9.06;

         SECOND: In case the principal of the outstanding Debentures shall not
have become due and be unpaid, subject to the provisions of Article 4, to the
payment of Interest on the Debentures in default in the order of the maturity of
the installments of such Interest, with interest (to the extent that such
interest has been collected by the Trustee) upon the overdue installments of
Interest at the rate borne by the Debentures, such payments to be made ratably
to the Persons entitled thereto;

         THIRD: In case the principal of the outstanding Debentures shall have
become due, by declaration or otherwise, and be unpaid, subject to the
provisions of Article 4, to the payment of the whole amount then owing and
unpaid upon the Debentures for principal and premium, if any, and Interest, with
interest on the overdue principal and premium, if any, and (to the extent that
such interest has been collected by the Trustee) upon overdue installments of
Interest at the rate borne by the Debentures, and in case such monies shall be
insufficient to pay in full the whole amounts so due and unpaid upon the
Debentures, then to the payment of such principal and premium, if any, and
Interest without preference or priority of principal and premium, if any, over
Interest, or of Interest over principal and premium, if any, or of any
installment of Interest over any other installment of Interest, or of any
Debenture over any other Debenture, ratably to the aggregate of such principal
and premium, if any, and accrued and unpaid Interest; and

         FOURTH: To the payment of the remainder, if any, to the Company or any
other Person lawfully entitled thereto.

         Section 8.04. Proceedings by Debentureholder. No holder of any
Debenture shall have any right by virtue of or by reference to any provision of
this Indenture to institute any suit, action or proceeding in equity or at law
upon or under or with respect to this Indenture, or for the appointment of a
receiver, trustee, liquidator, custodian or other similar official, or for any
other remedy hereunder, unless such holder previously shall have given to the
Trustee written

                                       53

notice of an Event of Default and of the continuance thereof, as hereinbefore
provided, and unless also the holders of not less than twenty-five percent (25%)
in aggregate principal amount of the Debentures then outstanding shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee hereunder and shall have offered to the Trustee such
reasonable security or indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee for sixty
(60) days after its receipt of such notice, request and offer of indemnity,
shall have neglected or refused to institute any such action, suit or proceeding
and no direction inconsistent with such written request shall have been given to
the Trustee pursuant to Section 8.07; it being understood and intended, and
being expressly covenanted by the taker and holder of every Debenture with every
other taker and holder and the Trustee, that no one or more holders of
Debentures shall have any right in any manner whatever by virtue of or by
reference to any provision of this Indenture to affect, disturb or prejudice the
rights of any other holder of Debentures, or to obtain or seek to obtain
priority over or preference to any other such holder, or to enforce any right
under this Indenture, except in the manner herein provided and for the equal,
ratable and common benefit of all holders of Debentures (except as otherwise
provided herein). For the protection and enforcement of this Section 8.04, each
and every Debentureholder and the Trustee shall be entitled to such relief as
can be given either at law or in equity.

         Notwithstanding any other provision of this Indenture and any provision
of any Debenture, the right of any holder of any Debenture to receive payment of
the principal of and premium, if any (including, but not limited to, the
Redemption Price with respect to Debentures called for redemption in accordance
with Section 3.02 or Repurchase Price with respect to Debentures submitted for
repurchase in accordance with Section 3.05), and accrued Interest on such
Debenture, on or after the respective due dates expressed in such Debenture or
in the event of redemption, or to institute suit for the enforcement of any such
payment on or after such respective dates against the Company shall not be
impaired or affected without the consent of such holder.

         Anything in this Indenture or the Debentures to the contrary
notwithstanding, the holder of any Debenture, without the consent of either the
Trustee or the holder of any other Debenture, in its own behalf and for its own
benefit, may enforce, and may institute and maintain any proceeding suitable to
enforce, its rights of conversion as provided herein.

         Section 8.05. Proceedings by Trustee. In case of an Event of Default,
the Trustee may, in its discretion, proceed to protect and enforce the rights
vested in it by this Indenture by such appropriate judicial proceedings as are
necessary to protect and enforce any of such rights, either by suit in equity or
by action at law or by proceeding in bankruptcy or otherwise, whether for the
specific enforcement of any covenant or agreement contained in this Indenture or
in aid of the exercise of any power granted in this Indenture, or to enforce any
other legal or equitable right vested in the Trustee by this Indenture or by
law.

                                       54

         Section 8.06. Remedies Cumulative and Continuing. Except as provided in
Section 2.06, all powers and remedies given by this Article 8 to the Trustee or
to the Debentureholders shall, to the extent permitted by law, be deemed
cumulative and not exclusive of any thereof or of any other powers and remedies
available to the Trustee or the holders of the Debentures, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in this Indenture, and no delay or omission
of the Trustee or of any holder of any of the Debentures to exercise any right
or power accruing upon any default or Event of Default occurring and continuing
as aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or any acquiescence therein, and, subject to the
provisions of Section 8.04, every power and remedy given by this Article 8 or by
law to the Trustee or to the Debentureholders may be exercised from time to
time, and as often as shall be deemed expedient, by the Trustee or by the
Debentureholders.

         Section 8.07. Direction of Proceedings and Waiver of Defaults by
Majority of Debentureholders. The holders of a majority in aggregate principal
amount of the Debentures at the time outstanding determined in accordance with
Section 10.04 shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee; provided that (a) such direction
shall not be in conflict with any rule of law or with this Indenture or would
involve the Trustee in personal liability or expense, (b) the Trustee may take
any other action which is not inconsistent with such direction and (c) the
Trustee may decline to take any action that would benefit some Debentureholder
to the detriment of other Debentureholders. The holders of a majority in
aggregate principal amount of the Debentures at the time outstanding determined
in accordance with Section 10.04 may, on behalf of the holders of all of the
Debentures, waive any past default or Event of Default hereunder and its
consequences except (i) a default in the payment of Interest or premium, if any,
on, or the principal of, the Debentures, (ii) a failure by the Company to
convert any Debentures into Common Stock, (iii) a default in the payment of the
Redemption Price pursuant to Article 3, (iv) a default in the payment of the
Repurchase Price pursuant to Article 3 or (v) a default in respect of a covenant
or provisions hereof which under Article 12 cannot be modified or amended
without the consent of the holders of each or all Debentures then outstanding or
affected thereby. Upon any such waiver, the Company, the Trustee and the holders
of the Debentures shall be restored to their former positions and rights
hereunder; but no such waiver shall extend to any subsequent or other default or
Event of Default or impair any right consequent thereon. Whenever any default or
Event of Default hereunder shall have been waived as permitted by this Section
8.07, said default or Event of Default shall for all purposes of the Debentures
and this Indenture be deemed to have been cured and to be not continuing; but no
such waiver shall extend to any subsequent or other default or Event of Default
or impair any right consequent thereon.

                                       55

         Section 8.08. Notice of Defaults. The Trustee shall, within ninety (90)
days after a Responsible Officer of the Trustee has knowledge of the occurrence
of a default, mail to all Debentureholders, as the names and addresses of such
holders appear upon the Debenture Register, notice of all defaults known to a
Responsible Officer, unless such defaults shall have been cured or waived before
the giving of such notice; provided that except in the case of default in the
payment of the principal of, or premium, if any, or Interest on any of the
Debentures, the Trustee shall be protected in withholding such notice if and so
long as a trust committee of directors and/or Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interests of the Debentureholders. For the purpose of this Section 8.08, the
term "default" means any event which is, or after notice or lapse of time or
both would become, an Event of Default.

         Section 8.09. Undertaking to Pay Costs. All parties to this Indenture
agree, and each holder of any Debenture by his acceptance thereof shall be
deemed to have agreed, that any court may, in its discretion, require, in any
suit for the enforcement of any right or remedy under this Indenture, or in any
suit against the Trustee for any action taken or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees and expenses, against any party litigant in
such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; provided that the provisions of this
Section 8.09 (to the extent permitted by law) shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Debentureholder, or
group of Debentureholders, holding in the aggregate more than ten percent in
principal amount of the Debentures at the time outstanding determined in
accordance with Section 10.04, or to any suit instituted by any Debentureholder
for the enforcement of the payment of the principal of or premium, if any, or
Interest on any Debenture on or after the due date expressed in such Debenture
or to any suit for the enforcement of the right to convert any Debenture in
accordance with the provisions of Article 16.

                                    ARTICLE 9
                                   THE TRUSTEE

         Section 9.01. Duties and Responsibilities of Trustee. The Trustee,
prior to the occurrence of an Event of Default and after the curing of all
Events of Default which may have occurred, undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the Trustee,
and in the absence of bad faith on the part of the Trustee, the Trustee may
conclusively rely as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture; but, in the case
of any such certificates or opinions

                                       56

which by any provisions hereof are specifically required to be furnished to the
Trustee, the Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this Indenture. In case an
Event of Default has occurred (which has not been cured or waived), the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of his own affairs.

         No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:

         (a)      prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default which may have occurred:

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

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

         (b)      the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer or Officers of the Trustee, unless the
Trustee was negligent in ascertaining the pertinent facts;

         (c)      the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the written
direction of the holders of not less than a majority in principal amount of the
Debentures at the time Outstanding determined as provided in Section 1.01 and
Section 10.04 relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Indenture;

         (d)      this paragraph shall not be construed to limit the effect of
the penultimate paragraph of this Section 9.01;

                                       57

         (e)      the Trustee shall not be liable in respect of any payment (as
to the correctness of amount, entitlement to receive or any other matters
relating to payment) or notice effected by the Company or any Paying Agent or
any records maintained by any co-registrar with respect to the Debentures; and

         (f)      if any party fails to deliver a notice relating to an event
the fact of which, pursuant to this Indenture, requires notice to be sent to the
Trustee, the Trustee may conclusively rely on its failure to receive such notice
as reason to act as if no such event occurred.

         The Trustee shall not be deemed to have knowledge or notice of any
default (as defined in Section 8.08) or Event of Default hereunder unless a
Responsible Officer of the Trustee shall have received at the Corporate Trust
Office written notice of such default or Event of Default from the Company or
the holders of at least 10% in aggregate principal amount of the Debentures and
such notice refers to such default or Event of Default, the Debentures and the
Indenture.

         None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.

         Whether or not therein provided, every provision of this Indenture
relating to the conduct or affecting the liability of, or affording protection
to, the Trustee shall be subject to the provisions of this Section 9.01.

         Section 9.02. Reliance on Documents, Opinions, Etc. Except as otherwise
provided in Section 9.01:

         (a)      the Trustee may conclusively rely and shall be protected in
acting upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, debenture, note, coupon or other paper or
document (whether in its original or facsimile form) believed by it in good
faith to be genuine and to have been signed or presented by the proper party or
parties;

         (b)      any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by an Officer's Certificate
(unless other evidence in respect thereof be herein specifically prescribed);
and any resolution of the Board of Directors may be evidenced to the Trustee by
a copy thereof certified by the Secretary or an Assistant Secretary of the
Company;

         (c)      the Trustee may consult with counsel of its own selection and
any advice or Opinion of Counsel shall be full and complete authorization and

                                       58

protection in respect of any action taken or omitted by it hereunder in good
faith and in accordance with such advice or Opinion of Counsel;

         (d)      the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request, order or
direction of any of the Debentureholders pursuant to the provisions of this
Indenture, unless such Debentureholders shall have offered to the Trustee
reasonable security or indemnity satisfactory to it against the costs, expenses
and liabilities which may be incurred therein or thereby;

         (e)      the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture or other paper or document, but the Trustee may make such further
inquiry or investigation into such facts or matters as it may see fit, and, if
the Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney; and

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

         (g)      the Trustee shall not be liable for any action taken, suffered
or omitted to be taken by it in good faith and reasonably believed by it to be
authorized or within the discretion or rights or powers conferred upon it by
this Indenture;

         (h)      the rights, privileges, protections, immunities and benefits
given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in each
of its capacities hereunder, and each agent, custodian and other Person employed
to act hereunder; and

         (i)      the Trustee may request that the Company deliver an Officer's
Certificate setting forth the names of individuals and/or titles of officers
authorized at such time to take specified actions pursuant to this Indenture,
which Officer's Certificate may be signed by any person authorized to sign an
Officer's Certificate, including any person specified as so authorized in any
such certificate previously delivered and not superseded.

         Section 9.03. No Responsibility For Recitals, Etc. The recitals
contained herein and in the Debentures (except in the Trustee's certificate of
authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Debentures. The Trustee shall not be accountable for the use or application by
the

                                       59

Company of any Debentures or the proceeds of any Debentures authenticated and
delivered by the Trustee in conformity with the provisions of this Indenture.

         Section 9.04. Trustee, Paying Agents, Conversion Agents or Registrar
May Own Debentures. The Trustee, any Paying Agent, any Conversion Agent or
Debenture Registrar, in its individual or any other capacity, may become the
owner or pledgee of Debentures with the same rights it would have if it were not
Trustee, Paying Agent, Conversion Agent or Debenture Registrar.

         Section 9.05. Monies to Be Held in Trust. Subject to the provisions of
Section 14.04, all monies received by the Trustee shall, until used or applied
as herein provided, be held in trust for the purposes for which they were
received. Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
may be agreed in writing from time to time by the Company and the Trustee.

         Section 9.06. Compensation and Expenses of Trustee. The Company
covenants and agrees to pay to the Trustee from time to time, and the Trustee
shall be entitled to, such compensation for all services rendered by it
hereunder in any capacity (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust) as mutually agreed
to in writing between the Company and the Trustee, and the Company will pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances reasonably incurred or made by the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all Persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or willful misconduct. The Company
also covenants to indemnify the Trustee and any predecessor Trustee (or any
officer, director or employee of the Trustee and such predecessor Trustee), in
any capacity under this Indenture and its agents and any authenticating agent
for, and to hold them harmless against, any and all loss, liability, damage,
claim or expense including taxes (other than taxes based on the income of the
Trustee) incurred without negligence or willful misconduct on the part of the
Trustee or such officers, directors, employees and agent or authenticating
agent, as the case may be, and arising out of or in connection with the
acceptance or administration of this trust or in any other capacity hereunder,
including the costs and expenses of defending themselves against any claim
(whether asserted by the Company, any holder or any other Person) of liability
in connection with the exercise or performance of any of its powers or duties
hereunder. The obligations of the Company under this Section 9.06 to compensate
or indemnify the Trustee (or any predecessor Trustee) and to pay or reimburse
the Trustee for expenses, disbursements and advances shall be secured by a lien
prior to that of the Debentures upon all property and funds held or collected by
the Trustee as such, except funds held in trust for the benefit of the holders
of particular Debentures. The obligation of the Company under this Section and
such lien shall survive the satisfaction and discharge of this

                                       60

Indenture, the resignation or removal of the Trustee and the termination of this
Indenture for any reason.

         When the Trustee and its agents and any authenticating agent incur
expenses or render services after an Event of Default specified in Section
8.01(i) or (j) with respect to the Company occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any bankruptcy, insolvency or similar laws.

         Section 9.07. Officer's Certificate as Evidence. Except as otherwise
provided in Section 9.01, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of bad faith or willful misconduct on the part
of the Trustee, be deemed to be conclusively proved and established by an
Officer's Certificate delivered to the Trustee.

         Section 9.08. Conflicting Interests of Trustee. If the Trustee has or
shall acquire a conflicting interest within the meaning of the Trust Indenture
Act, the Trustee shall either eliminate such interest or resign, to the extent
and in the manner provided by, and subject to the provisions of, the Trust
Indenture Act and this Indenture.

         Section 9.09. Eligibility of Trustee. There shall at all times be a
Trustee hereunder which shall be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of at least
$50,000,000 (or if such Person is a member of a bank holding company system, its
bank holding company shall have a combined capital and surplus of at least
$50,000,000). If such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of any supervising or examining
authority, then for the purposes of this Section the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the provisions of this
Section 9.09, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.

         Section 9.10. Resignation or Removal of Trustee.

         (a)      The Trustee may at any time resign by giving written notice of
such resignation to the Company and to the holders of Debentures. Upon receiving
such notice of resignation, the Company shall promptly appoint a successor
trustee by written instrument, in duplicate, executed by order of the Board of
Directors, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee. If no successor trustee shall
have been so appointed and have accepted appointment sixty (60) days after the

                                       61

mailing of such notice of resignation to the Debentureholders, the resigning
Trustee may, upon ten (10) Business Days' notice to the Company and the
Debentureholders, appoint a successor identified in such notice or may petition,
at the expense of the Company, any court of competent jurisdiction for the
appointment of a successor trustee, or, if any Debentureholder who has been a
bona fide holder of a Debenture or Debentures for at least six (6) months may,
subject to the provisions of Section 8.09, on behalf of himself and all others
similarly situated, petition any such court for the appointment of a successor
trustee. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, appoint a successor trustee.

         (b)      In case at any time any of the following shall occur:

                  (i)      the Trustee shall fail to comply with Section 9.08
         after written request therefor by the Company or by any Debentureholder
         who has been a bona fide holder of a Debenture or Debentures for at
         least six (6) months; or

                  (ii)     the Trustee shall cease to be eligible in accordance
         with the provisions of Section 9.09 and shall fail to resign after
         written request therefor by the Company or by any such Debentureholder;
         or

                  (iii)    the Trustee shall become incapable of acting, or
         shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee
         or of its property shall be appointed, or any public officer shall take
         charge or control of the Trustee or of its property or affairs for the
         purpose of rehabilitation, conservation or liquidation;

then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee, or, subject to the
provisions of Section 8.09, any Debentureholder who has been a bona fide holder
of a Debenture or Debentures for at least six (6) months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
trustee; provided that if no successor Trustee shall have been appointed and
have accepted appointment sixty (60) days after either the Company or the
Debentureholders has removed the Trustee, or the Trustee resigns, the Trustee so
removed may petition, at the expense of the Company, any court of competent
jurisdiction for an appointment of a successor trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor trustee.

         (c)      The holders of a majority in aggregate principal amount of the
Debentures at the time outstanding may at any time remove the Trustee and
nominate a successor trustee which shall be deemed appointed as successor

                                       62

trustee unless, within ten (10) days after notice to the Company of such
nomination, the Company objects thereto, in which case the Trustee so removed or
any Debentureholder, or if such Trustee so removed or any Debentureholder fails
to act, the Company, upon the terms and conditions and otherwise as in Section
9.10(a) provided, may petition any court of competent jurisdiction for an
appointment of a successor trustee.

         (d)      Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 9.10 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 9.11.

         Section 9.11. Acceptance by Successor Trustee. Any successor trustee
appointed as provided in Section 9.10 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but, nevertheless, on the written request
of the Company or of the successor trustee, the trustee ceasing to act shall,
upon payment of any amount then due it pursuant to the provisions of Section
9.06, execute and deliver an instrument transferring to such successor trustee
all the rights and powers of the trustee so ceasing to act. Upon request of any
such successor trustee, the Company shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such successor
trustee all such rights and powers. Any trustee ceasing to act shall,
nevertheless, retain a lien upon all property and funds held or collected by
such trustee as such, except for funds held in trust for the benefit of holders
of particular Debentures, to secure any amounts then due it pursuant to the
provisions of Section 9.06.

         No successor trustee shall accept appointment as provided in this
Section 9.11 unless, at the time of such acceptance, such successor trustee
shall be qualified under the provisions of Section 9.08 and be eligible under
the provisions of Section 9.09.

         Upon acceptance of appointment by a successor trustee as provided in
this Section 9.11, the Company (or the former trustee or successor trustee, at
the written direction of the Company) shall mail or cause to be mailed notice of
the succession of such trustee hereunder to the holders of Debentures at their
addresses as they shall appear on the Debenture Register. If the Company fails
to mail such notice within ten (10) days after acceptance of appointment by the
successor trustee, the successor trustee shall cause such notice to be mailed at
the expense of the Company.

         Section 9.12. Succession by Merger. Any Person into which the Trustee
may be merged or converted or with which it may be consolidated, or any Person

                                       63

resulting from any merger, conversion or consolidation to which the Trustee
shall be a party, or any Person succeeding to all or substantially all of the
corporate trust business of the Trustee (including any trust created by this
Indenture), shall be the successor to the Trustee hereunder without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that in the case of any Person succeeding to all or
substantially all of the corporate trust business of the Trustee, such Person
shall be qualified under the provisions of Section 9.08 and eligible under the
provisions of Section 9.09.

         In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture, any of the Debentures shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor trustee or authenticating agent
appointed by such predecessor trustee, and deliver such Debentures so
authenticated; and in case at that time any of the Debentures shall not have
been authenticated, any successor to the Trustee or any authenticating agent
appointed by such successor trustee may authenticate such Debentures in the name
of the successor trustee; and in all such cases such certificates shall have the
full force that is provided in the Debentures or in this Indenture; provided
that the right to adopt the certificate of authentication of any predecessor
Trustee or authenticate Debentures in the name of any predecessor Trustee shall
apply only to its successor or successors by merger, conversion or
consolidation.

         Section 9.13. Preferential Collection of Claims. If and when the
Trustee shall be or become a creditor of the Company (or any other obligor upon
the Debentures), the Trustee shall be subject to the provisions of the Trust
Indenture Act regarding the collection of the claims against the Company (or any
such other obligor).

                                   ARTICLE 10
                              THE DEBENTUREHOLDERS

         Section 10.01. Action by Debentureholders. Whenever in this Indenture
it is provided that the holders of a specified percentage in aggregate principal
amount of the Debentures may take any action (including the making of any demand
or request, the giving of any notice, consent or waiver or the taking of any
other action), the fact that at the time of taking any such action, the holders
of such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by
Debentureholders in person or by agent or proxy appointed in writing, or (b) by
the record of the holders of Debentures voting in favor thereof at any meeting
of Debentureholders duly called and held in accordance with the provisions of
Article 11, or (c) by a combination of such instrument or instruments and any
such record of such a meeting of Debentureholders. Whenever the Company or the
Trustee solicits the taking of any action by the holders of the Debentures, the

                                       64

Company or the Trustee may fix in advance of such solicitation, a date as the
record date for determining holders entitled to take such action. The record
date shall be not more than fifteen (15) days prior to the date of commencement
of solicitation of such action.

         Section 10.02. Proof of Execution by Debentureholders. Subject to the
provisions of Sections 9.01, 9.02 and 11.05, proof of the execution of any
instrument by a Debentureholder or its agent or proxy shall be sufficient if
made in accordance with such reasonable rules and regulations as may be
prescribed by the Trustee or in such manner as shall be satisfactory to the
Trustee. The holding of Debentures shall be proved by the registry of such
Debentures or by a certificate of the Debenture Registrar.

         The record of any Debentureholders' meeting shall be proved in the
manner provided in Section 11.06.

         Section 10.03. Who Are Deemed Absolute Owners. The Company, the
Trustee, any Paying Agent, any Conversion Agent and any Debenture Registrar may
deem the Person in whose name such Debenture shall be registered upon the
Debenture Register to be, and may treat it as, the absolute owner of such
Debenture (whether or not such Debenture shall be overdue and notwithstanding
any notation of ownership or other writing thereon made by any Person other than
the Company or any Debenture Registrar) for the purpose of receiving payment of
or on account of the principal of, premium, if any, and Interest on such
Debenture, for conversion of such Debenture and for all other purposes; and
neither the Company nor the Trustee nor any Paying Agent nor any Conversion
Agent nor any Debenture Registrar shall be affected by any notice to the
contrary. All such payments so made to any holder for the time being, or upon
his order, shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for monies payable upon any
such Debenture.

         Section 10.04. Company-owned Debentures Disregarded. In determining
whether the holders of the requisite aggregate principal amount of Debentures
have concurred in any direction, consent, waiver or other action under this
Indenture, Debentures which are owned by the Company or any other obligor on the
Debentures or any Affiliate of the Company or any other obligor on the
Debentures shall be disregarded and deemed not to be outstanding for the purpose
of any such determination; provided that for the purposes of determining whether
the Trustee shall be protected in relying on any such direction, consent, waiver
or other action, only Debentures which a Responsible Officer knows are so owned
shall be so disregarded. Debentures so owned which have been pledged in good
faith may be regarded as outstanding for the purposes of this Section 10.04 if
the pledgee shall establish to the satisfaction of the Trustee the pledgee's
right to vote such Debentures and that the pledgee is not the Company, any other
obligor on the Debentures or any Affiliate of the Company or any such other
obligor. In the case of a dispute as to such right, any decision by the Trustee
taken upon the advice of counsel shall be full protection to the Trustee. Upon
request of the

                                       65

Trustee, the Company shall furnish to the Trustee promptly an Officer's
Certificate listing and identifying all Debentures, if any, known by the Company
to be owned or held by or for the account of any of the above described Persons,
and, subject to Section 9.01, the Trustee shall be entitled to accept such
Officer's Certificate as conclusive evidence of the facts therein set forth and
of the fact that all Debentures not listed therein are outstanding for the
purpose of any such determination.

         Section 10.05. Revocation of Consents, Future Holders Bound. At any
time prior to (but not after) the evidencing to the Trustee, as provided in
Section 10.01, of the taking of any action by the holders of the percentage in
aggregate principal amount of the Debentures specified in this Indenture in
connection with such action, any holder of a Debenture which is shown by the
evidence to be included in the Debentures the holders of which have consented to
such action may, by filing written notice with the Trustee at its Corporate
Trust Office and upon proof of holding as provided in Section 10.02, revoke such
action so far as concerns such Debenture. Except as aforesaid, any such action
taken by the holder of any Debenture shall be conclusive and binding upon such
holder and upon all future holders and owners of such Debenture and of any
Debentures issued in exchange or substitution therefor, irrespective of whether
any notation in regard thereto is made upon such Debenture or any Debenture
issued in exchange or substitution therefor.

                                   ARTICLE 11
                          MEETINGS OF DEBENTUREHOLDERS

         Section 11.01. Purpose of Meetings. A meeting of Debentureholders may
be called at any time and from time to time pursuant to the provisions of this
Article 11 for any of the following purposes:

                  (1)      to give any notice to the Company or to the Trustee
         or to give any directions to the Trustee permitted under this
         Indenture, or to consent to the waiving of any default or Event of
         Default hereunder and its consequences, or to take any other action
         authorized to be taken by Debentureholders pursuant to any of the
         provisions of Article 8;

                  (2)      to remove the Trustee and nominate a successor
         trustee pursuant to the provisions of Article 9;

                  (3)      to consent to the execution of an indenture or
         indentures supplemental hereto pursuant to the provisions of Section
         12.02; or

                  (4)      to take any other action authorized to be taken by or
         on behalf of the holders of any specified aggregate principal amount of
         the Debentures under any other provision of this Indenture or under
         applicable law.

                                       66

         Section 11.02. Call of Meetings by Trustee. The Trustee may at any time
call a meeting of Debentureholders to take any action specified in Section
11.01, to be held at such time and at such place as the Trustee shall determine.
Notice of every meeting of the Debentureholders, setting forth the time and the
place of such meeting and in general terms the action proposed to be taken at
such meeting and the establishment of any record date pursuant to Section 10.01,
shall be mailed to holders of Debentures at their addresses as they shall appear
on the Debenture Register. Such notice shall also be mailed to the Company. Such
notices shall be mailed not less than twenty (20) nor more than ninety (90) days
prior to the date fixed for the meeting.

         Any meeting of Debentureholders shall be valid without notice if the
holders of all Debentures then outstanding are present in person or by proxy or
if notice is waived before or after the meeting by the holders of all Debentures
outstanding, and if the Company and the Trustee are either present by duly
authorized representatives or have, before or after the meeting, waived notice.

         Section 11.03. Call of Meetings by Company or Debentureholders. In case
at any time the Company, pursuant to a resolution of its Board of Directors, or
the holders of at least ten percent (10%) in aggregate principal amount of the
Debentures then outstanding, shall have requested the Trustee to call a meeting
of Debentureholders, by written request setting forth in reasonable detail the
action proposed to be taken at the meeting, and the Trustee shall not have
mailed the notice of such meeting within twenty (20) days after receipt of such
request, then the Company or such Debentureholders may determine the time and
the place for such meeting and may call such meeting to take any action
authorized in Section 11.01, by mailing notice thereof as provided in Section
11.02.

         Section 11.04. Qualifications for Voting. To be entitled to vote at any
meeting of Debentureholders a person shall (a) be a holder of one or more
Debentures on the record date pertaining to such meeting or (b) be a person
appointed by an instrument in writing as proxy by a holder of one or more
Debentures on the record date pertaining to such meeting. The only persons who
shall be entitled to be present or to speak at any meeting of Debentureholders
shall be the persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.

         Section 11.05. Regulations. Notwithstanding any other provisions of
this Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Debentureholders, in regard to proof of the holding
of Debentures and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall think fit.

                                       67

         The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Debentureholders as provided in Section 11.03, in which case the
Company or the Debentureholders calling the meeting, as the case may be, shall
in like manner appoint a temporary chairman. A permanent chairman and a
permanent secretary of the meeting shall be elected by vote of the holders of a
majority in principal amount of the Debentures represented at the meeting and
entitled to vote at the meeting.

         Subject to the provisions of Section 10.04, at any meeting each
Debentureholder or proxyholder shall be entitled to one vote for each $50
principal amount of Debentures held or represented by him; provided that no vote
shall be cast or counted at any meeting in respect of any Debenture challenged
as not outstanding and ruled by the chairman of the meeting to be not
outstanding. The chairman of the meeting shall have no right to vote other than
by virtue of Debentures held by him or instruments in writing as aforesaid duly
designating him as the proxy to vote on behalf of other Debentureholders. Any
meeting of Debentureholders duly called pursuant to the provisions of Section
11.02 or 11.03 may be adjourned from time to time by the holders of a majority
of the aggregate principal amount of Debentures represented at the meeting,
whether or not constituting a quorum, and the meeting may be held as so
adjourned without further notice.

         Section 11.06. Voting. The vote upon any resolution submitted to any
meeting of Debentureholders shall be by written ballot on which shall be
subscribed the signatures of the holders of Debentures or of their
representatives by proxy and the outstanding principal amount of the Debentures
held or represented by them. The permanent chairman of the meeting shall appoint
two inspectors of votes who shall count all votes cast at the meeting for or
against any resolution and who shall make and file with the secretary of the
meeting their verified written reports in duplicate of all votes cast at the
meeting. A record in duplicate of the proceedings of each meeting of
Debentureholders shall be prepared by the secretary of the meeting and there
shall be attached to said record the original reports of the inspectors of votes
on any vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was mailed as provided in Section 11.02. The record
shall show the principal amount of the Debentures voting in favor of or against
any resolution. The record shall be signed and verified by the affidavits of the
permanent chairman and secretary of the meeting and one of the duplicates shall
be delivered to the Company and the other to the Trustee to be preserved by the
Trustee, the latter to have attached thereto the ballots voted at the meeting.

         Any record so signed and verified shall be conclusive evidence of the
matters therein stated.

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         Section 11.07. No Delay of Rights by Meeting. Nothing contained in this
Article 11 shall be deemed or construed to authorize or permit, by reason of any
call of a meeting of Debentureholders or any rights expressly or impliedly
conferred hereunder to make such call, any hindrance or delay in the exercise of
any right or rights conferred upon or reserved to the Trustee or to the
Debentureholders under any of the provisions of this Indenture or of the
Debentures.

                                   ARTICLE 12
                             SUPPLEMENTAL INDENTURES

         Section 12.01. Supplemental Indentures Without Consent of
Debentureholders. The Company, when authorized by the resolutions of the Board
of Directors, and the Trustee may, from time to time, and at any time enter into
an indenture or indentures supplemental hereto for one or more of the following
purposes:

         (a)      make provision with respect to the conversion rights of the
holders of Debentures pursuant to the requirements of Section 16.06 and the
redemption obligations of the Company pursuant to the requirements of Section
3.05(h);

         (b)      to convey, transfer, assign, mortgage or pledge to the Trustee
as security for the Debentures, any property or assets;

         (c)      to evidence the succession of another Person to the Company,
or successive successions, and the assumption by the successor Person of the
covenants, agreements and obligations of the Company pursuant to Article 13;

         (d)      to add to the covenants of the Company such further covenants,
restrictions or conditions as the Board of Directors and the Trustee shall
consider to be for the benefit of the holders of Debentures, and to make the
occurrence, or the occurrence and continuance, of a default in any such
additional covenants, restrictions or conditions a default or an Event of
Default permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; provided that in respect of any
such additional covenant, restriction or condition, such supplemental indenture
may provide for a particular period of grace after default (which period may be
shorter or longer than that allowed in the case of other defaults) or may
provide for an immediate enforcement upon such default or may limit the remedies
available to the Trustee upon such default;

         (e)      to provide for the issuance under this Indenture of Debentures
in coupon form (including Debentures registrable as to principal only) and to
provide for exchangeability of such Debentures with the Debentures issued
hereunder in fully registered form and to make all appropriate changes for such
purpose;

                                       69

         (f)      to cure any ambiguity or to correct or supplement any
provision contained herein or in any supplemental indenture that may be
defective or inconsistent with any other provision contained herein or in any
supplemental indenture, or to make such other provisions in regard to matters or
questions arising under this Indenture that shall not materially adversely
affect the interests of the holders of the Debentures;

         (g)      to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Debentures;

         (h)      to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the qualifications of
this Indenture under the Trust Indenture Act, or under any similar federal
statute hereafter enacted; or

         (i)      make other changes to the indenture or forms or terms of the
Debentures, provided no such change individually or in the aggregate with all
other such changes has or will have a material adverse effect on the interests
of the Debentureholders.

         Upon the written request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any supplemental indenture, the Trustee
is hereby authorized to join with the Company in the execution of any such
supplemental indenture, to make any further appropriate agreements and
stipulations that may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, if any, but the Trustee
shall not be obligated to, but may in its discretion, enter into any
supplemental indenture that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.

         Any supplemental indenture authorized by the provisions of this Section
12.01 may be executed by the Company and the Trustee without the consent of the
holders of any of the Debentures at the time outstanding, notwithstanding any of
the provisions of Section 12.02.

         Notwithstanding any other provision of the Indenture or the Debentures,
the Registration Rights Agreement and the obligation to pay Liquidated Damages
thereunder may be amended, modified or waived in accordance with the provisions
of the Registration Rights Agreement.

         Section 12.02. Supplemental Indenture with Consent of Debentureholders.
With the consent (evidenced as provided in Article 10) of the holders of at
least a majority in aggregate principal amount of the Debentures at the time
outstanding, the Company, when authorized by the resolutions of the Board of
Directors, and the Trustee may, from time to time and at any time, enter into an
indenture or indentures supplemental hereto for the purpose of adding any

                                       70

provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or any supplemental indenture or of modifying in any manner the
rights of the holders of the Debentures; provided that no such supplemental
indenture shall (i) extend the fixed maturity of any Debenture, or reduce the
rate or extend the time of payment of Interest thereon, or reduce the principal
amount thereof or premium, if any, thereon, or reduce any amount payable on
redemption or repurchase thereof, or impair the right of any Debentureholder to
institute suit for the payment thereof, or make the principal thereof or
Interest or premium, if any, thereon payable in any coin or currency other than
that provided in the Debentures, or change the obligation of the Company to
redeem any Debenture on a Redemption Date in a manner adverse to the holders of
Debentures, or change the obligation of the Company to repurchase any Debenture
upon a Change of Control in a manner adverse to the holders of Debentures, or
impair the right to convert the Debentures into Common Stock subject to the
terms set forth herein, including Section 16.06, or reduce the number of shares
of Common Stock or other property receivable upon conversion, in each case,
without the consent of the holder of each Debenture so affected, or modify any
of the provisions of this Section 12.02 or Section 8.07, except to increase any
such percentage or to provide that certain other provisions of this Indenture
cannot be modified or waived without the consent of the holder of each Debenture
so affected, or reduce the quorum or voting requirements set forth in Article 11
or (ii) reduce the aforesaid percentage of Debentures, the holders of which are
required to consent to any such supplemental indenture, without the consent of
the holders of all Debentures then outstanding.

         Upon the written request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any such supplemental indenture, and upon
the filing with the Trustee of evidence of the consent of Debentureholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.

         It shall not be necessary for the consent of the Debentureholders under
this Section 12.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.

         Section 12.03. Effect of Supplemental Indenture. Any supplemental
indenture executed pursuant to the provisions of this Article 12 shall comply
with the Trust Indenture Act, as then in effect, provided that this Section
12.03 shall not require such supplemental indenture or the Trustee to be
qualified under the Trust Indenture Act prior to the time such qualification is
in fact required under the terms of the Trust Indenture Act or the Indenture has
been qualified under the Trust Indenture Act, nor shall it constitute any
admission or acknowledgment by

                                       71

any party to such supplemental indenture that any such qualification is required
prior to the time such qualification is in fact required under the terms of the
Trust Indenture Act or the Indenture has been qualified under the Trust
Indenture Act. Upon the execution of any supplemental indenture pursuant to the
provisions of this Article 12, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective rights,
limitation of rights, obligations, duties and immunities under this Indenture of
the Trustee, the Company and the holders of Debentures shall thereafter be
determined, exercised and enforced hereunder, subject in all respects to such
modifications and amendments and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.

         Section 12.04. Notation on Debentures. Debentures authenticated and
delivered after the execution of any supplemental indenture pursuant to the
provisions of this Article 12 may bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If the
Company or the Trustee shall so determine, new Debentures so modified as to
conform, in the opinion of the Trustee and the Board of Directors, to any
modification of this Indenture contained in any such supplemental indenture may,
at the Company's expense, be prepared and executed by the Company, authenticated
by the Trustee (or an authenticating agent duly appointed by the Trustee
pursuant to Section 17.10) and delivered in exchange for the Debentures then
outstanding, upon surrender of such Debentures then outstanding.

         Section 12.05. Evidence of Compliance of Supplemental Indenture to Be
Furnished to Trustee. Prior to entering into any supplemental indenture, the
Trustee shall be provided with an Officer's Certificate and an Opinion of
Counsel as conclusive evidence that any supplemental indenture executed pursuant
hereto complies with the requirements of, and that the Trustee's execution of
such supplemental indenture is permitted under, this Article 12.

                                   ARTICLE 13
                CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

         Section 13.01. Company May Consolidate on Certain Terms. Subject to the
provisions of Section 13.02, the Company shall not consolidate or merge with or
into any other Person or Persons (whether or not affiliated with the Company),
nor shall the Company or its successor or successors be a party or parties to
successive consolidations or mergers, nor shall the Company sell, convey,
transfer or lease the property and assets of the Company substantially as an
entirety, to any other Person (whether or not affiliated with the Company),
unless: (i) the Company is the surviving Person, or the resulting, surviving or
transferee Person is a corporation organized and existing under the laws of the
United States of America, any state thereof or the District of Columbia; (ii)
upon any such

                                       72

consolidation, merger, sale, conveyance, transfer or lease, the due and punctual
payment of the principal of and premium, if any, and Interest on all of the
Debentures, according to their tenor and the due and punctual performance and
observance of all of the covenants and conditions of this Indenture to be
performed by the Company, shall be expressly assumed, by supplemental indenture
satisfactory in form to the Trustee, executed and delivered to the Trustee by
the Person (if other than the Company) formed by such consolidation, or into
which the Company shall have been merged, or by the Person that shall have
acquired or leased such property, and such supplemental indenture shall provide
for the applicable conversion rights set forth in Section 16.06; and (iii)
immediately after giving effect to the transaction described above, no Event of
Default, and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have happened and be continuing.

         Section 13.02. Successor to Be Substituted. In case of any such
consolidation, merger, sale, conveyance, transfer or lease and upon the
assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the due and
punctual payment of the principal of and premium, if any, and Interest on all of
the Debentures and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, such successor
Person shall succeed to and be substituted for the Company, with the same effect
as if it had been named herein as the party of this first part. Such successor
Person thereupon may cause to be signed, and may issue either in its own name or
in the name of The Williams Companies, Inc. any or all of the Debentures,
issuable hereunder that theretofore shall not have been signed by the Company
and delivered to the Trustee; and, upon the order of such successor Person
instead of the Company and subject to all the terms, conditions and limitations
in this Indenture prescribed, the Trustee shall authenticate and shall deliver,
or cause to be authenticated and delivered, any Debentures that previously shall
have been signed and delivered by the officers of the Company to the Trustee for
authentication, and any Debentures that such successor Person thereafter shall
cause to be signed and delivered to the Trustee for that purpose. All the
Debentures so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Debentures theretofore or thereafter issued in
accordance with the terms of this Indenture as though all of such Debentures had
been issued at the date of the execution hereof. In the event of any such
consolidation, merger, sale, conveyance, transfer or lease, the Person named as
the "COMPANY" in the first paragraph of this Indenture or any successor that
shall thereafter have become such in the manner prescribed in this Article 13
may be dissolved, wound up and liquidated at any time thereafter and such Person
shall be released from its liabilities as obligor and maker of the Debentures
and from its obligations under this Indenture.

                                       73

         In case of any such consolidation, merger, sale, conveyance, transfer
or lease, such changes in phraseology and form (but not in substance) may be
made in the Debentures thereafter to be issued as may be appropriate.

         Section 13.03. Opinion of Counsel to Be Given Trustee. The Trustee
shall receive an Officer's Certificate and an Opinion of Counsel as conclusive
evidence that any such consolidation, merger, sale, conveyance, transfer or
lease and any such assumption complies with the provisions of this Article 13.

                                   ARTICLE 14
                     SATISFACTION AND DISCHARGE OF INDENTURE

         Section 14.01. Discharge of Indenture. When the Company shall deliver
to the Trustee for cancellation all Debentures theretofore authenticated (other
than any Debentures that have been destroyed, lost or stolen and in lieu of or
in substitution for which other Debentures shall have been authenticated and
delivered) and not theretofore canceled, or all the Debentures not theretofore
canceled or delivered to the Trustee for cancellation shall have become due and
payable and the Company shall deposit with the Trustee, in trust, funds
sufficient to pay at maturity or upon redemption of all of the Debentures (other
than any Debentures that shall have been mutilated, destroyed, lost or stolen
and in lieu of or in substitution for which other Debentures shall have been
authenticated and delivered) not theretofore canceled or delivered to the
Trustee for cancellation, including principal and premium, if any, and Interest
due or to become due to such date of maturity or Redemption Date, as the case
may be, accompanied by a verification report, as to the sufficiency of the
deposited amount, from an independent certified accountant or other financial
professional satisfactory to the Trustee, and if the Company shall also pay or
cause to be paid all other sums payable hereunder by the Company, then this
Indenture shall cease to be of further effect (except as to remaining rights of
registration of transfer, substitution and exchange and conversion of
Debentures, rights hereunder of Debentureholders to receive payments of
principal of and premium, if any, and Interest on, the Debentures and the other
rights, duties and obligations of Debentureholders, as beneficiaries hereof with
respect to the amounts, if any, so deposited with the Trustee and the rights,
obligations and immunities of the Trustee hereunder, including, but not limited
to, Section 9.06 hereof), and the Trustee, on written demand of the Company
accompanied by an Officer's Certificate and an Opinion of Counsel as required by
Section 17.04 and at the cost and expense of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture; the
Company, however, hereby agrees to reimburse the Trustee for any costs or
expenses thereafter reasonably and properly incurred by the Trustee and to
compensate the Trustee for any services thereafter reasonably and properly
rendered by the Trustee in connection with this Indenture or the Debentures.

                                       74

         Section 14.02. Deposited Monies to Be Held in Trust by Trustee. Subject
to Section 14.04, all monies deposited with the Trustee pursuant to Section
14.01, shall be held in trust for the sole benefit of the Debentureholders, and
such monies shall be applied by the Trustee to the payment, either directly or
through any Paying Agent (including the Company if acting as its own Paying
Agent), to the holders of the particular Debentures for the payment or
redemption of which such monies have been deposited with the Trustee, of all
sums due and to become due thereon for principal and Interest and premium, if
any.

         Section 14.03. Paying Agent to Repay Monies Held. Upon the satisfaction
and discharge of this Indenture, all monies then held by any Paying Agent of the
Debentures (other than the Trustee) shall, upon written request of the Company,
be repaid to it or paid to the Trustee, and thereupon such Paying Agent shall be
released from all further liability with respect to such monies.

         Section 14.04. Return of Unclaimed Monies. Subject to the requirements
of applicable law, any monies deposited with or paid to the Trustee for payment
of the principal of, premium, if any, or Interest on Debentures and not applied
but remaining unclaimed by the holders of Debentures for two years after the
date upon which the principal of, premium, if any, or Interest on such
Debentures, as the case may be, shall have become due and payable, shall be
repaid to the Company by the Trustee on demand and all liability of the Trustee
shall thereupon cease with respect to such monies; and the holder of any of the
Debentures shall thereafter look only to the Company for any payment that such
holder may be entitled to collect unless an applicable abandoned property law
designates another Person.

                                   ARTICLE 15
         IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

         Section 15.01. Indenture and Debentures Solely Corporate Obligations.
No recourse for the payment of the principal of or premium, if any, or Interest
on any Debenture, or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in this Indenture or in any supplemental indenture or in any
Debenture, or because of the creation of any indebtedness represented thereby,
shall be had against any incorporator, stockholder, employee, agent, officer,
director or subsidiary, as such, past, present or future, of the Company or of
any successor corporation, either directly or through the Company or any
successor corporation, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise; it being
expressly understood that all such liability is hereby expressly waived and
released as a condition of, and as a consideration for, the execution of this
Indenture and the issue of the Debentures.

                                       75

                                   ARTICLE 16
                            CONVERSION OF DEBENTURES

         Section 16.01. Right to Convert. Subject to and upon compliance with
the provisions of this Indenture, prior to the close of business on June 1,2033
(or in the case of Debentures called for redemption pursuant to Section 3.01,
prior to the close of business on the Business Day prior to the Redemption
Date), the holder of any Debenture shall have the right, at such holder's
option, to convert the principal amount of the Debenture, or any portion of such
principal amount which is a multiple of $50, into fully paid and non-assessable
shares of Common Stock (as such shares shall then be constituted) at the
Conversion Rate in effect at such time, by surrender of the Debenture so to be
converted in whole or in part, together with any required funds, under the
circumstances described in this Section 16.01 and in the manner provided in
Section 16.02.

         (a)      A Debenture in respect of which a holder is electing to
exercise its option to require repurchase upon a Change of Control pursuant to
Section 3.05, may be converted only if such holder withdraws its election in
accordance with Section 3.05(g). A holder of Debentures is not entitled to any
rights of a holder of Common Stock until such holder has converted its
Debentures to Common Stock, and only to the extent such Debentures are deemed to
have been converted to Common Stock under this Article 16.

         Section 16.02. Exercise of Conversion Privilege; Issuance of Common
Stock on Conversion; No Adjustment for Interest or Dividends. In order to
exercise the conversion privilege with respect to any Debenture in certificated
form, the Company must receive at the office or agency of the Company maintained
for that purpose or, at the option of such holder, the Corporate Trust Office,
such Debenture with the original or facsimile of the form entitled "CONVERSION
NOTICE" on the reverse thereof, duly completed and manually signed, together
with such Debentures duly endorsed for transfer, accompanied by the funds, if
any, required by the fifth paragraph of this Section 16.02. Such notice shall
also state the name or names (with address or addresses) in which the
certificate or certificates for shares of Common Stock which shall be issuable
on such conversion shall be issued, and shall be accompanied by transfer or
similar taxes, if required pursuant to Section 16.07.

         In order to exercise the conversion privilege with respect to any
interest in a Global Debenture, the beneficial holder must complete, or cause to
be completed, the appropriate instruction form for conversion pursuant to the
Depositary's book-entry conversion program, deliver, or cause to be delivered,
by book-entry delivery an interest in such Global Debenture, furnish appropriate
endorsements and transfer documents if required by the Company or the Trustee or
Conversion Agent, and pay the funds, if any, required by this Section 16.02 and
any transfer taxes if required pursuant to Section 16.07.

                                       76

         As promptly as reasonably practicable after satisfaction of the
requirements for conversion set forth above, subject to compliance with any
restrictions on transfer if shares issuable on conversion are to be issued in a
name other than that of the Debentureholder (as if such transfer were a transfer
of the Debenture or Debentures (or portion thereof) so converted), the Company
shall issue and shall deliver to such Debentureholder at the office or agency
maintained by the Company for such purpose pursuant to Section 6.02, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such Debenture or portion thereof as determined
by the Company in accordance with the provisions of this Article 16 and a check
or cash in respect of any fractional interest in respect of a share of Common
Stock arising upon such conversion, calculated by the Company as provided in
Section 16.03. In case any Debenture of a denomination greater than $50 shall be
surrendered for partial conversion, and subject to Section 2.03, the Company
shall execute and the Trustee shall authenticate and deliver to the holder of
the Debenture so surrendered, without charge to him, a new Debenture or
Debentures in authorized denominations in an aggregate principal amount equal to
the unconverted portion of the surrendered Debenture.

         Each conversion shall be deemed to have been effected as to any such
Debenture (or portion thereof) on the date on which the requirements set forth
above in this Section 16.02 have been satisfied as to such Debenture (or portion
thereof) (such date, the "CONVERSION DATE"), and the Person in whose name any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become on said date the holder of record
of the shares represented thereby; provided that any such surrender on any date
when the stock transfer books of the Company shall be closed shall constitute
the Person in whose name the certificates are to be issued as the record holder
thereof for all purposes on the next succeeding day on which such stock transfer
books are open, but such conversion shall be at the Conversion Rate in effect on
the date upon which such Debenture shall be surrendered.

         Any Debenture or portion thereof surrendered for conversion during the
period from 5:00 p.m., New York City time, on the Record Date for any Interest
Payment Date to the close of business on the following Interest Payment Date
that has not been called for redemption during such period shall be accompanied
by payment, in immediately available funds or other funds acceptable to the
Company, of an amount equal to the Interest otherwise payable on such Interest
Payment Date on the principal amount being converted; provided that no such
payment need be made (1) if the Company has specified a Redemption Date that is
after a Record Date and on or prior to the next Interest Payment Date, (2) if
the Company has specified a Repurchase Date following a Change of Control that
is during such period or (3) to the extent of any overdue Interest, if any
overdue Interest exists at the time of conversion with respect to such
Debenture. Except as provided above in this Section 16.02, no payment or other
adjustment shall be made for Interest accrued on any Debenture converted or for
dividends on any

                                       77

shares issued upon the conversion of such Debenture as provided in this Article
16.

         Upon the conversion of an interest in a Global Debenture, the Trustee
(or other Conversion Agent appointed by the Company), or the Custodian at the
direction of the Trustee (or other Conversion Agent appointed by the Company),
shall make a notation on such Global Debenture as to the reduction in the
principal amount represented thereby. The Company shall notify the Trustee in
writing of any conversions of Debentures effected through any Conversion Agent
other than the Trustee.

         Section 16.03. Cash Payments in Lieu of Fractional Shares. No
fractional shares of Common Stock or scrip certificates representing fractional
shares shall be issued upon conversion of Debentures. If more than one Debenture
shall be surrendered for conversion at one time by the same holder, the number
of full shares that shall be issuable upon conversion shall be computed on the
basis of the aggregate principal amount of the Debentures (or specified portions
thereof to the extent permitted hereby) so surrendered. If any fractional share
of stock would be issuable upon the conversion of any Debenture or Debentures,
the Company shall make an adjustment and payment therefor in cash at the Closing
Sale Price on the Conversion Date to the holder of Debentures.

         Section 16.04. Conversion Rate. Each $50 principal amount of the
Debentures shall be convertible into the number of shares of Common Stock
specified in the form of Debenture (herein called the "CONVERSION RATE")
attached as Exhibit A hereto, subject to adjustment as provided in this Article
16.

         Section 16.05. Adjustment of Conversion Rate. The Conversion Rate shall
be adjusted from time to time by the Company as follows:

         (a)      In case the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of Common
Stock, the Conversion Rate shall be increased so that the same shall equal the
rate determined by multiplying the Conversion Rate in effect at the opening of
business on the date following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution by a
fraction,

                  (i)      the numerator of which shall be the sum of the number
         of shares of Common Stock outstanding at the close of business on the
         date fixed for the determination of stockholders entitled to receive
         such dividend or other distribution plus the total number of shares of
         Common Stock constituting such dividend or other distribution; and

                  (ii)     the denominator of which shall be the number of
         shares of Common Stock outstanding at the close of business on the date
         fixed for such determination,

                                       78

such increase to become effective immediately after the opening of business on
the Business Day following the date fixed for such determination. For the
purpose of this paragraph (a), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the Company. The
Company will not pay any dividend or make any distribution on shares of Common
Stock held in the treasury of the Company. If any dividend or distribution of
the type described in this Section 16.05(a) is declared but not so paid or made,
the Conversion Rate shall again be adjusted to the Conversion Rate that would
then be in effect if such dividend or distribution had not been declared.

         (b)      In case the Company shall issue rights or warrants to all
holders of its outstanding shares of Common Stock entitling them (for a period
expiring within forty-five (45) days after the date fixed for determination of
stockholders entitled to receive such rights or warrants) to subscribe for or
purchase shares of Common Stock at a price per share less than the Current
Market Price on the date fixed for determination of stockholders entitled to
receive such rights or warrants, the Conversion Rate shall be increased so that
the same shall equal the rate determined by multiplying the Conversion Rate in
effect immediately prior to the date fixed for determination of stockholders
entitled to receive such rights or warrants by a fraction,

                  (i)      the numerator of which shall be the number of shares
         of Common Stock outstanding on the date fixed for determination of
         stockholders entitled to receive such rights or warrants plus the total
         number of additional shares of Common Stock offered for subscription or
         purchase, and

                  (ii)     the denominator of which shall be the sum of the
         number of shares of Common Stock outstanding at the close of business
         on the date fixed for determination of stockholders entitled to receive
         such rights or warrants plus the number of shares that the aggregate
         offering price of the total number of shares so offered would purchase
         at such Current Market Price.

         Such adjustment shall be successively made whenever any such rights or
warrants are issued, and shall become effective immediately after the opening of
business on the Business Day following the date fixed for determination of
stockholders entitled to receive such rights or warrants. To the extent that
shares of Common Stock are not delivered after the expiration of such rights or
warrants, the Conversion Rate shall be readjusted to the Conversion Rate that
would then be in effect had the adjustments made upon the issuance of such
rights or warrants been made on the basis of delivery of only the number of
shares of Common Stock actually delivered. If such rights or warrants are not so
issued, the Conversion Rate shall again be adjusted to be the Conversion Rate
that would then be in effect if such date fixed for the determination of
stockholders entitled to receive such rights or warrants had not been fixed. In
determining whether any rights or warrants entitle the holders to subscribe for
or purchase shares of

                                       79

Common Stock at less than such Current Market Price, and in determining the
aggregate offering price of such shares of Common Stock, there shall be taken
into account any consideration received by the Company for such rights or
warrants and any amount payable on exercise or conversion thereof, the value of
such consideration, if other than cash, to be determined by the Board of
Directors.

         (c)      In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Rate in effect
at the opening of business on the Business Day following the day upon which such
subdivision becomes effective shall be proportionately increased, and
conversely, in case outstanding shares of Common Stock shall be combined into a
smaller number of shares of Common Stock, the Conversion Rate in effect at the
opening of business on the Business Day following the day upon which such
combination becomes effective shall be proportionately reduced, such increase or
reduction, as the case may be, to become effective immediately after the opening
of business on the day following the day upon which such subdivision or
combination becomes effective.

         (d)      In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock shares of any class of capital
stock of the Company or evidences of its indebtedness or assets (including
securities, but excluding any rights or warrants referred to in Section
16.05(b), excluding any dividends or distributions in connection with the
liquidation or winding up of the Company, and excluding any dividend or
distribution (x) paid exclusively in cash or (y) referred to in Section 16.05(a)
(any of the foregoing hereinafter in this Section 16.05(d)) called the
"SECURITIES")), then, in each such case (unless the Company elects to reserve
such Securities for distribution to the Debentureholders upon the conversion of
the Debentures so that any such holder converting Debentures will receive upon
such conversion, in addition to the shares of Common Stock to which such holder
is entitled, the amount and kind of such Securities which such holder would have
received if such holder had converted its Debentures into Common Stock
immediately prior to the Stock Record Date), the Conversion Rate shall be
increased so that the same shall be equal to the rate determined by multiplying
the Conversion Rate in effect on the Stock Record Date with respect to such
distribution by a fraction,

                  (i)      the numerator of which shall be the Current Market
         Price on such Stock Record Date; and

                  (ii)     the denominator of which shall be the Current Market
         Price on such Stock Record Date less the Fair Market Value (as
         determined by the Board of Directors, whose determination shall be
         conclusive, and described in a resolution of the Board of Directors) on
         the Stock Record Date of the portion of the Securities so distributed
         applicable to one share of Common Stock,

                                       80

such adjustment to become effective immediately prior to the opening of business
on the Business Day following such Stock Record Date; provided that if the then
Fair Market Value (as so determined) of the portion of the Securities so
distributed applicable to one share of Common Stock is equal to or greater than
the Current Market Price on the Stock Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Debentureholder shall
have the right to receive upon conversion the amount of Securities such holder
would have received had such holder converted each Debenture on the Stock Record
Date. If such dividend or distribution is not so paid or made, the Conversion
Rate shall again be adjusted to be the Conversion Rate that would then be in
effect if such dividend or distribution had not been declared. If the Board of
Directors determines the Fair Market Value of any distribution for purposes of
this Section 16.05(d) by reference to the actual or when issued trading market
for any securities, it must in doing so consider the prices in such market over
the same period used in computing the Current Market Price on the applicable
Stock Record Date. Notwithstanding the foregoing, if the Securities distributed
by the Company to all holders of its Common Stock consist of capital stock of,
or similar equity interests in, a Subsidiary or other business unit, the
Conversion Rate shall be increased so that the same shall be equal to the rate
determined by multiplying the Conversion Rate in effect on the Stock Record Date
with respect to such distribution by a fraction,

                  (i)      the numerator of which shall be the sum of (x) the
         average Closing Sale Price of one share of Common Stock over the ten
         consecutive Trading Day period (the "SPINOFF VALUATION PERIOD")
         commencing on and including the fifth Trading Day after the date on
         which "ex-dividend trading" commences on the Common Stock on the New
         York Stock Exchange or such other national or regional exchange or
         market on which the Common Stock is then listed or quoted and (y) the
         average Closing Sale Price over the Spinoff Valuation Period of the
         portion of the Securities so distributed applicable to one share of
         Common Stock; and

                  (ii)     the denominator of which shall be the average Closing
         Sale Price of one share of Common Stock over the Spinoff Valuation
         Period,

such adjustment to become effective immediately prior to the opening of business
on the Business Day following such Stock Record Date; provided that the Company
may in lieu of the foregoing adjustment make adequate provision so that each
Debentureholder shall have the right to receive upon conversion the amount of
Securities such holder would have received had such holder converted each
Debenture on the Stock Record Date with respect to such distribution.

         Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of the
Company's capital stock (either initially or under certain circumstances), which
rights or warrants, until the occurrence of a specified event or events
("TRIGGER

                                       81

EVENT"): (i) are deemed to be transferred with such shares of Common Stock; (ii)
are not exercisable; and (iii) are also issued in respect of future issuances of
Common Stock, shall be deemed not to have been distributed for purposes of this
Section 16.06 (and no adjustment to the Conversion Rate under this Section 16.06
will be required) until the occurrence of the earliest Trigger Event, whereupon
such rights and warrants shall be deemed to have been distributed and an
appropriate adjustment (if any is required) to the Conversion Rate shall be made
under this Section 16.05(d). If any such right or warrant, including any such
existing rights or warrants distributed prior to the date of this Indenture, are
subject to events, upon the occurrence of which such rights or warrants become
exercisable to purchase different securities, evidences of indebtedness or other
assets, then the date of the occurrence of any and each such event shall be
deemed to be the date of distribution and Stock Record Date with respect to new
rights or warrants with such rights (and a termination or expiration of the
existing rights or warrants without exercise by any of the holders thereof). In
addition, in the event of any distribution (or deemed distribution) of rights or
warrants, or any Trigger Event or other event (of the type described in the
preceding sentence) with respect thereto that was counted for purposes of
calculating a distribution amount for which an adjustment to the Conversion Rate
under this Section 16.06 was made, (1) in the case of any such rights or
warrants that shall all have been redeemed or repurchased without exercise by
any holders thereof, the Conversion Rate shall be readjusted upon such final
redemption or repurchase to give effect to such distribution or Trigger Event,
as the case may be, as though it were a cash distribution, equal to the per
share redemption or repurchase price received by a holder or holders of Common
Stock with respect to such rights or warrants (assuming such holder had retained
such rights or warrants), made to all holders of Common Stock as of the date of
such redemption or repurchase, and (2) in the case of such rights or warrants
that shall have expired or been terminated without exercise by any holders
thereof, the Conversion Rate shall be readjusted as if such rights and warrants
had not been issued.

         No adjustment of the Conversion Rate shall be made pursuant to this
Section 16.05(d) in respect of rights or warrants distributed or deemed
distributed on any Trigger Event to the extent that such rights or warrants are
actually distributed, or reserved by the Company for distribution to holders of
Debentures upon conversion by such holders of Debentures to Common Stock.

         For purposes of this Section 16.05(d) and Section 16.05(a) and (b), any
dividend or distribution to which this Section 16.05(d) is applicable that also
includes shares of Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, assets or shares of
capital stock other than such shares of Common Stock or rights or warrants (and
any Conversion Rate adjustment required by this Section 16.05(d) with respect to
such dividend or distribution shall then be made) immediately followed by (2) a
dividend or distribution of such shares of Common Stock or such rights or

                                       82

warrants (and any further Conversion Rate adjustment required by Sections
16.05(a) and 16.05(b) with respect to such dividend or distribution shall then
be made), except (A) the Stock Record Date of such dividend or distribution
shall be substituted as "the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution", "the date fixed for
the determination of stockholders entitled to receive such rights or warrants"
and "the date fixed for such determination" within the meaning of Section
16.05(a) and 16.05(b) and (B) any shares of Common Stock included in such
dividend or distribution shall not be deemed "outstanding at the close of
business on the date fixed for such determination" within the meaning of Section
16.05(a).

         (e)      In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding (x) any quarterly
cash dividend on the Common Stock to the extent the aggregate cash dividend per
share of Common Stock in any fiscal quarter does not exceed the greater of (A)
the amount per share of Common Stock of the next preceding quarterly cash
dividend on the Common Stock to the extent that such preceding quarterly
dividend did not require any adjustment of the Conversion Rate pursuant to this
Section 16.05(e) (as adjusted to reflect subdivisions, or combinations of the
Common Stock), and (B) 10% of the arithmetic average of the Closing Sale Price
during the ten Trading Days immediately prior to the date of declaration of such
dividend, and (y) any dividend or distribution in connection with the
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary), then, in such case, the Conversion Rate shall be increased so that
the same shall equal the rate determined by multiplying the Conversion Rate in
effect immediately prior to the close of business on such Stock Record Date by a
fraction,

                  (i)      the numerator of which shall be the Current Market
         Price on such Stock Record Date; and

                  (ii)     the denominator of which shall be the Current Market
         Price on such Stock Record Date less the amount of cash so distributed
         (and not excluded as provided above) applicable to one share of Common
         Stock,

such adjustment to be effective immediately prior to the opening of business on
the day following the Stock Record Date; provided that if the portion of the
cash so distributed applicable to one share of Common Stock is equal to or
greater than the Current Market Price on the Stock Record Date, in lieu of the
foregoing adjustment, adequate provision shall be made so that each
Debentureholder shall have the right to receive upon conversion the amount of
cash such holder would have received had such holder converted each Debenture on
the Stock Record Date. If such dividend or distribution is not so paid or made,
the Conversion Rate shall again be adjusted to be the Conversion Rate that would
then be in effect if such dividend or distribution had not been declared. If any
adjustment is required to be made as set forth in this Section 16.05(e) as a
result of a distribution that is a quarterly dividend, such adjustment shall be
based upon the amount by which such distribution exceeds the amount of the
quarterly cash dividend permitted to

                                       83

be excluded pursuant hereto. If an adjustment is required to be made as set
forth in this Section 16.05(e) above as a result of a distribution that is not a
quarterly dividend, such adjustment shall be based upon the full amount of the
distribution.

         (f)      In case a tender or exchange offer made by the Company or any
Subsidiary for all or any portion of the Common Stock shall expire and such
tender or exchange offer (as amended upon the expiration thereof) shall require
the payment to stockholders of consideration per share of Common Stock having a
Fair Market Value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a resolution of the Board of Directors)
that as of the last time (the "EXPIRATION TIME") tenders or exchanges may be
made pursuant to such tender or exchange offer (as it may be amended) exceeds
the Closing Sale Price of a share of Common Stock on the Trading Day next
succeeding the Expiration Time, the Conversion Rate shall be increased so that
the same shall equal the rate determined by multiplying the Conversion Rate in
effect immediately prior to the Expiration Time by a fraction,

                  (i)      the numerator of which shall be the sum of (x) the
         Fair Market Value (determined as aforesaid) of the aggregate
         consideration payable to stockholders based on the acceptance (up to
         any maximum specified in the terms of the tender or exchange offer) of
         all shares validly tendered or exchanged and not withdrawn as of the
         Expiration Time (the shares deemed so accepted up to any such maximum,
         being referred to as the "PURCHASED SHARES") and (y) the product of the
         number of shares of Common Stock outstanding (less any Purchased
         Shares) at the Expiration Time and the Closing Sale Price of a share of
         Common Stock on the Trading Day next succeeding the Expiration Time,
         and

                  (ii)     the denominator of which shall be the number of
         shares of Common Stock outstanding (including any tendered or exchanged
         shares) at the Expiration Time multiplied by the Closing Sale Price of
         a share of Common Stock on the Trading Day next succeeding the
         Expiration Time

such adjustment to become effective immediately prior to the opening of business
on the Business Day following the Expiration Time. If the Company is obligated
to purchase shares pursuant to any such tender or exchange offer, but the
Company is permanently prevented by applicable law from effecting any such
purchases or all such purchases are rescinded, the Conversion Rate shall again
be adjusted to be the Conversion Rate that would then be in effect if such
tender or exchange offer had not been made.

         (g)      In case of a tender or exchange offer made by a Person other
than the Company or any Subsidiary for an amount that increases the offeror's
ownership of Common Stock to more than twenty-five percent (25%) of the Common
Stock outstanding and shall involve the payment by such Person of consideration
per share of Common Stock having a Fair Market Value (as determined by the Board
of Directors, whose determination shall be conclusive,

                                       84

and described in a resolution of the Board of Directors) that as of the last
time (the "OFFER EXPIRATION TIME") tenders or exchanges may be made pursuant to
such tender or exchange offer (as it shall have been amended) exceeds the
Closing Sale Price of a share of Common Stock on the Trading Day next succeeding
the Offer Expiration Time, and in which, as of the Offer Expiration Time the
Board of Directors is not recommending rejection of the offer, the Conversion
Rate shall be increased so that the same shall equal the rate determined by
multiplying the Conversion Rate in effect immediately prior to the Offer
Expiration Time by a fraction

                  (i)      the numerator of which shall be the sum of (x) the
         Fair Market Value (determined as aforesaid) of the aggregate
         consideration payable to stockholders based on the acceptance (up to
         any maximum specified in the terms of the tender or exchange offer) of
         all shares validly tendered or exchanged and not withdrawn as of the
         Offer Expiration Time (the shares deemed so accepted, up to any such
         maximum, being referred to as the "ACCEPTED PURCHASED SHARES") and (y)
         the product of the number of shares of Common Stock outstanding (less
         any Accepted Purchased Shares) at the Offer Expiration Time and the
         Closing Sale Price of a share of Common Stock on the Trading Day next
         succeeding the Offer Expiration Time, and

                  (ii)     the denominator of which shall be the number of
         shares of Common Stock outstanding (including any tendered or exchanged
         shares) at the Offer Expiration Time multiplied by the Closing Sale
         Price of a share of Common Stock on the Trading Day next succeeding the
         Offer Expiration Time,

such adjustment to become effective immediately prior to the opening of business
on the day following the Offer Expiration Time. If such Person is obligated to
purchase shares pursuant to any such tender or exchange offer, but such Person
is permanently prevented by applicable law from effecting any such purchases or
all such purchases are rescinded, the Conversion Rate shall again be adjusted to
be the Conversion Rate that would then be in effect if such tender or exchange
offer had not been made. Notwithstanding the foregoing, the adjustment described
in this Section 16.05(g) shall not be made if, as of the Offer Expiration Time,
the offering documents with respect to such offer disclose a plan or intention
to cause the Company to engage in any transaction described in Article 13.

         (h)      For purposes of this Section 16.05, the following terms shall
have the meaning indicated:

                  (i)      "CURRENT MARKET PRICE" shall mean the average of the
         daily Closing Sale Prices per share of Common Stock for the ten
         consecutive Trading Days selected by the Company commencing no more
         than 30 Trading Days before and ending not later than the earlier of
         such date of determination and the day before the "EX" date with
         respect to the

                                       85

         issuance, distribution, subdivision or combination requiring such
         computation immediately prior to the date in question. For purpose of
         this paragraph, the term "EX" date, (1) when used with respect to any
         issuance or distribution, means the first date on which the Common
         Stock trades, regular way, on the relevant exchange or in the relevant
         market from which the Closing Sale Price was obtained without the right
         to receive such issuance or distribution, and (2) when used with
         respect to any subdivision or combination of shares of Common Stock,
         means the first date on which the Common Stock trades, regular way, on
         such exchange or in such market after the time at which such
         subdivision or combination becomes effective.

         If another issuance, distribution, subdivision or combination to which
Section 16.05 applies occurs during the period applicable for calculating
"CURRENT MARKET PRICE" pursuant to the definition in the preceding paragraph,
"CURRENT MARKET PRICE" shall be calculated for such period in a manner
determined by the Board of Directors to reflect the impact of such issuance,
distribution, subdivision or combination on the Closing Sale Price of the Common
Stock during such period.

                  (ii)     "FAIR MARKET VALUE" shall mean the amount which a
         willing buyer would pay a willing seller in an arm's-length
         transaction.

                  (iii)    "STOCK RECORD DATE" shall mean, with respect to any
         dividend, distribution or other transaction or event in which the
         holders of Common Stock have the right to receive any cash, securities
         or other property or in which the Common Stock (or other applicable
         security) is exchanged for or converted into any combination of cash,
         securities or other property, the date fixed for determination of
         stockholders entitled to receive such cash, securities or other
         property (whether such date is fixed by the Board of Directors or by
         statute, contract or otherwise).

                  (iv)     "TRADING DAY" shall mean (x) if the applicable
         security is quoted on the Nasdaq National Market, a day on which trades
         may be made thereon or (y) if the applicable security is listed or
         admitted for trading on the New York Stock Exchange or another national
         securities exchange, a day on which the New York Stock Exchange or such
         other national securities exchange is open for business or (z) if the
         applicable security is not so listed, admitted for trading or quoted,
         any day other than a Saturday or Sunday or a day on which banking
         institutions in the State of New York are authorized or obligated by
         law or executive order to close.

         (i)      The Company may make such increases in the Conversion Rate, in
addition to those required by Section 16.05(a), (b), (c), (d), (e), (f) or (g),
as the Board of Directors considers to be advisable to avoid or diminish any
income tax to holders of Common Stock or rights to purchase Common Stock
resulting from

                                       86

any dividend or distribution of stock (or rights to acquire stock) or from any
event treated as such for income tax purposes.

         To the extent permitted by applicable law, the Company from time to
time may increase the Conversion Rate by any amount for any period of time if
the period is at least twenty (20) days, the increase is irrevocable during the
period and the Board of Directors shall have made a determination that such
increase would be in the best interests of the Company, which determination
shall be conclusive. Whenever the Conversion Rate is increased pursuant to the
preceding sentence, the Company shall mail to holders of record of the
Debentures a notice of the increase at least fifteen (15) days prior to the date
the increased Conversion Rate takes effect, and such notice shall state the
increased Conversion Rate and the period during which it will be in effect.

         (j)      No adjustment in the Conversion Rate shall be required unless
such adjustment would require an increase or decrease of at least one percent
(1%) in such rate; provided that any adjustments that by reason of this Section
16.05(j) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Article 16
shall be made by the Company and shall be made to the nearest cent or to the
nearest one-ten thousandth (1/10,000) of a share, as the case may be. No
adjustment need be made for rights to purchase Common Stock pursuant to a
Company plan for reinvestment of dividends or interest or for any issuance of
Common Stock or convertible or exchangeable securities or rights to purchase
Common Stock or convertible or exchangeable securities. To the extent the
Debentures become convertible into cash, assets, property or securities (other
than capital stock of the Company), no adjustment need be made thereafter as to
the cash, assets, property or such securities. Interest will not accrue on any
cash into which the Debentures are convertible.

         (k)      Whenever the Conversion Rate is adjusted as herein provided,
the Company shall promptly file with the Trustee and any Conversion Agent other
than the Trustee an Officer's Certificate setting forth the Conversion Rate
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment. Unless and until a Responsible Officer of the Trustee shall
have received such Officer's Certificate, the Trustee shall not be deemed to
have knowledge of any adjustment of the Conversion Rate and may assume that the
last Conversion Rate of which it has knowledge is still in effect. Promptly
after delivery of such certificate, the Company shall prepare a notice of such
adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and
the date on which each adjustment becomes effective and shall mail such notice
of such adjustment of the Conversion Rate to the holder of each Debenture at his
last address appearing on the Debenture Register provided for in Section 2.05 of
this Indenture, within twenty (20) days after execution thereof. Failure to
deliver such notice shall not affect the legality or validity of any such
adjustment.

                                       87

         (l)      In any case in which this Section 16.05 provides that an
adjustment shall become effective immediately after (1) a Record Date or Stock
Record Date for an event, (2) the date fixed for the determination of
stockholders entitled to receive a dividend or distribution pursuant to Section
16.05(a), (3) a date fixed for the determination of stockholders entitled to
receive rights or warrants pursuant to Section 16.05(b), (4) the Expiration Time
for any tender or exchange offer pursuant to Section 16.05(f), or (5) the Offer
Expiration Time for a tender or exchange offer pursuant to Section 16.05(g)(i)
(each a "DETERMINATION DATE"), the Company may elect to defer until the
occurrence of the applicable Adjustment Event (as hereinafter defined) (x)
issuing to the holder of any Debenture converted after such Determination Date
and before the occurrence of such Adjustment Event, the additional shares of
Common Stock or other securities issuable upon such conversion by reason of the
adjustment required by such Adjustment Event over and above the Common Stock
issuable upon such conversion before giving effect to such adjustment and (y)
paying to such holder any amount in cash in lieu of any fraction pursuant to
Section 16.03. For purposes of this Section 16.05(l), the term "ADJUSTMENT
EVENT" shall mean:

                  (i)      in any case referred to in clause (1) hereof, the
         occurrence of such event,

                  (ii)     in any case referred to in clause (2) hereof, the
         date any such dividend or distribution is paid or made,

                  (iii)    in any case referred to in clause (3) hereof, the
         date of expiration of such rights or warrants, and

                  (iv)     in any case referred to in clause (4) or clause (5)
         hereof, the date a sale or exchange of Common Stock pursuant to such
         tender or exchange offer is consummated and becomes irrevocable.

         (m)      For purposes of this Section 16.05, the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The Company
will not pay any dividend or make any distribution on shares of Common Stock
held in the treasury of the Company.

         Section 16.06. Effect of Reclassification, Consolidation, Merger or
Sale. If any of the following events occur, namely (i) any reclassification or
change of the outstanding shares of Common Stock (other than a subdivision or
combination to which Section 16.05(c) applies), (ii) any consolidation, merger
or combination of the Company with another Person as a result of which holders
of Common Stock shall be entitled to receive stock, other securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, or (iii) any sale or conveyance of all or substantially all of the
properties and assets of the Company to any other Person as a result of which
holders of Common Stock shall

                                       88

be entitled to receive stock, other securities or other property or assets
(including cash) with respect to or in exchange for such Common Stock, then the
Company or the successor or purchasing Person, as the case may be, shall execute
with the Trustee a supplemental indenture (which shall comply with the Trust
Indenture Act as in force at the date of execution of such supplemental
indenture) providing that each Debenture shall be convertible into the kind and
amount of shares of stock, other securities or other property or assets
(including cash) receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance by a holder of a number of shares of
Common Stock issuable upon conversion of such Debentures (assuming, for such
purposes, a sufficient number of authorized shares of Common Stock are available
to convert all such Debentures) immediately prior to such reclassification,
change, consolidation, merger, combination, sale or conveyance assuming such
holder of Common Stock did not exercise his rights of election, if any, as to
the kind or amount of stock, other securities or other property or assets
(including cash) receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance (provided that, if the kind or amount of
stock, other securities or other property or assets (including cash) receivable
upon such reclassification, change, consolidation, merger, combination, sale or
conveyance is not the same for each share of Common Stock in respect of which
such rights of election shall not have been exercised ("NON-ELECTING SHARE"),
then for the purposes of this Section 16.06 the kind and amount of stock, other
securities or other property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, sale or conveyance
for each non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares). Such
supplemental indenture shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
16.

         The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Debentures, at its address appearing on
the Debenture Register provided for in Section 2.05 of this Indenture, within
twenty (20) days after execution thereof. Failure to deliver such notice shall
not affect the legality or validity of such supplemental indenture.

         The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.

         If this Section 16.06 applies to any event or occurrence, Section 16.05
shall not apply.

         Section 16.07. Taxes on Shares Issued. The issue of stock certificates
on conversions of Debentures shall be made without charge to the converting
Debentureholder for any documentary, stamp or similar issue or transfer tax in
respect of the issue thereof. The Company shall not, however, be required to pay
any such tax which may be payable in respect of any transfer involved in the
issue

                                       89

and delivery of stock in any name other than that of the holder of any Debenture
converted, and the Company shall not be required to issue or deliver any such
stock certificate unless and until the Person or Persons requesting the issue
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.

         Section 16.08. Reservation of Shares, Shares to Be Fully Paid;
Compliance with Governmental Requirements; Listing of Common Stock. The Company
shall provide, free from preemptive rights, out of its authorized but unissued
shares or shares held in treasury, sufficient shares of Common Stock to provide
for the conversion of the Debentures from time to time as such Debentures are
presented for conversion.

         Before taking any action which would cause an adjustment increasing the
Conversion Rate to an amount that would cause the Conversion Price to be reduced
below the then par value, if any, of the shares of Common Stock issuable upon
conversion of the Debentures, the Company will take all corporate action which
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue shares of such Common Stock at such adjusted
Conversion Rate.

         The Company covenants that all shares of Common Stock which may be
issued upon conversion of Debentures will upon issue be fully paid and
non-assessable by the Company and free from all taxes, liens and charges with
respect to the issue thereof.

         The Company covenants that, if any shares of Common Stock to be
provided for the purpose of conversion of Debentures hereunder require
registration with or approval of any governmental authority under any federal or
state law before such shares may be validly issued upon conversion, the Company
will in good faith and as expeditiously as reasonably possible, to the extent
then permitted by the rules and interpretations of the Commission (or any
successor thereto), endeavor to secure such registration or approval, as the
case may be.

         The Company further covenants that, if at any time the Common Stock
shall be listed on the New York Stock Exchange or any other national securities
exchange or automated quotation system, the Company will, if permitted by the
rules of such exchange or automated quotation system, list and keep listed, so
long as the Common Stock shall be so listed on such exchange or automated
quotation system, all Common Stock issuable upon conversion of the Debenture;
provided that if the rules of such exchange or automated quotation system permit
the Company to defer the listing of such Common Stock until the first conversion
of the Debentures into Common Stock in accordance with the provisions of this
Indenture, the Company covenants to list such Common Stock issuable upon
conversion of the Debentures in accordance with the requirements of such
exchange or automated quotation system at such time.

                                       90

         Section 16.09. Responsibility of Trustee. The Trustee and any other
Conversion Agent shall not at any time be under any duty or responsibility to
any holder of Debentures to determine the Conversion Rate or whether any facts
exist which may require any adjustment of the Conversion Rate, or with respect
to the nature or extent or calculation of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same. The Trustee and any other
Conversion Agent shall not be accountable with respect to the validity or value
(or the kind or amount) of any shares of Common Stock, or of any securities or
property, which may at any time be issued or delivered upon the conversion of
any Debenture; and the Trustee and any other Conversion Agent make no
representations with respect thereto. Neither the Trustee nor any Conversion
Agent shall be responsible for any failure of the Company to issue, transfer or
deliver any shares of Common Stock or stock certificates or other securities or
property or cash upon the surrender of any Debenture for the purpose of
conversion or to comply with any of the duties, responsibilities or covenants of
the Company contained in this Article 16. Without limiting the generality of the
foregoing, neither the Trustee nor any other Conversion Agent shall be under any
responsibility to determine the correctness of any provisions contained in any
supplemental indenture entered into pursuant to Section 16.06 relating either to
the kind or amount of shares of stock or securities or property (including cash)
receivable by Debentureholders upon the conversion of their Debentures after any
event referred to in such Section 16.06 or to any adjustment to be made with
respect thereto, but, subject to the provisions of Section 9.01, may accept as
conclusive evidence of the correctness of any such provisions, and shall be
protected in relying upon, the Officer's Certificate (which the Company shall be
obligated to file with the Trustee prior to the execution of any such
supplemental indenture) with respect thereto.

         Section 16.10. Notice to Holders Prior to Certain Actions. In case:

         (a)      the Company shall declare a dividend (or any other
distribution) on its Common Stock that would require an adjustment in the
Conversion Rate pursuant to Section 16.05; or

         (b)      the Company shall authorize the granting to the holders of all
or substantially all of its Common Stock of rights or warrants to subscribe for
or purchase any share of any class or any other rights or warrants; or

         (c)      of any reclassification or reorganization of the Common Stock
of the Company (other than a subdivision or combination of its outstanding
Common Stock, or a change in par value, or from par value to no par value, or
from no par value to par value), or of any consolidation or merger to which the
Company is a party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company; or

                                       91

         (d)      of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;

the Company shall cause to be filed with the Trustee and to be mailed to each
holder of Debentures at his address appearing on the Debenture Register provided
for in Section 2.05 of this Indenture, as promptly as possible but in any event
at least ten (10) days prior to the applicable date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined, or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective or occur,
and the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of such
dividend, distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up.

         Section 16.11. Stockholder Rights Plans. If the rights provided for in
the Company's rights agreement dated February 6, 1996 or in any future
stockholder rights plan adopted by the Company have separated from the shares of
Common Stock in accordance with the provisions of the applicable stockholder
rights agreement so that the holders of the Debentures would not be entitled to
receive any rights in respect of Common Stock issuable upon conversion of the
Debentures, the Conversion Rate will be adjusted as if the Company had
distributed to all holders of Common Stock shares of the Company's capital
stock, evidences of indebtedness or assets in accordance with Section 16.05(d),
subject to readjustment in the event of the expiration, termination or
redemption of the rights. In lieu of any such adjustment, the Company may amend
such applicable stockholder rights agreement to provide that upon conversion of
the Debentures the holders will receive, in addition to the Common Stock
Issuable upon such conversion, the rights which would have attached to such
Common Stock if the rights had not become separated from the Common Stock under
such applicable stockholder rights agreement.

                                   ARTICLE 17
                            MISCELLANEOUS PROVISIONS

         Section 17.01. Provisions Binding on Company's Successors. All the
covenants, stipulations, promises and agreements by the Company contained in
this Indenture shall bind its successors and assigns whether so expressed or
not.

                                       92

         Section 17.02. Official Acts by Successor Corporation. Any act or
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any Person that shall at the time be the lawful sole successor of the
Company.

         Section 17.03. Addresses for Notices, Etc. Any notice or demand which
by any provision of this Indenture is required or permitted to be given or
served by the Trustee or by the holders of Debentures on the Company shall be
deemed to have been sufficiently given or made, for all purposes, if given or
served by being deposited postage prepaid by registered or certified mail in a
post office letter box or sent by telecopier transmission addressed as follows:
to The Williams Companies, Inc., One Williams Center, Tulsa, Oklahoma, 74172,
Telecopier No.: (918) 573-2065, Attention: Treasurer. Any notice, direction,
request or demand hereunder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or served in writing by
telecopier transmission addressed as follows: JPMorgan Chase Bank, 4 New York
Plaza, 15th Floor, New York, New York 10004, Telecopier No.: (212) 623-6167,
Attention: Institutional Trust Services. No such notice, direction, request or
demand shall be deemed given to the Trustee unless actually received by a
Responsible Officer of the Trustee at the Corporate Trust Office of the Trustee.

         The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.

         Any notice or communication mailed to a Debentureholder shall be mailed
to him by first class mail, postage prepaid, at his address as it appears on the
Debenture Register and shall be sufficiently given to him if so mailed within
the time prescribed.

         Failure to mail a notice or communication to a Debentureholder or any
defect in it shall not affect its sufficiency with respect to other
Debentureholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.

         Section 17.04. Governing Law. This Indenture and each Debenture shall
be deemed to be a contract made under the laws of the State of New York, and for
all purposes shall be construed in accordance with the laws of the State of New
York (including Section 5-1401 of the New York General Obligations Law or any
successor to such statute).

         Section 17.05. Evidence of Compliance with Conditions Precedent,
Certificates to Trustee. Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions of this Indenture, the
Company shall furnish to the Trustee an Officer's Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the

                                       93

proposed action have been complied with, and an Opinion of Counsel stating that,
in the opinion of such counsel, all such conditions precedent have been complied
with.

         Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include: (1) a statement that the person
making such certificate or opinion has read such covenant or condition; (2) a
brief statement as to the nature and scope of the examination or investigation
upon which the statement or opinion contained in such certificate or opinion is
based (such brief statement may indicate the extent to which such person relied
upon an opinion of counsel or other officer of the Company in conducting such
examination or investigation); (3) a statement that, in the opinion of such
person, he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and (4) a statement as to whether or not, in
the opinion of such person, such condition or covenant has been complied with.

         Section 17.06. Legal Holidays. In any case in which the date of
maturity of Interest on or principal of the Debentures or the redemption date of
any Debenture will not be a Business Day, then payment of such Interest on or
principal of the Debentures need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the date of maturity or the redemption date, and no Interest shall accrue for
the period from and after such date, except that if such next succeeding
Business Day would fall in the next calendar year, then payment of such Interest
on or principal of the Debentures shall be made on the immediately preceding
Business Day.

         Section 17.07. Trust Indenture Act. This Indenture is hereby made
subject to, and shall be governed by, the provisions of the Trust Indenture Act
required to be part of and to govern indentures qualified under the Trust
Indenture Act; provided that unless otherwise required by law, notwithstanding
the foregoing, this Indenture and the Debentures issued hereunder shall not be
subject to the provisions of subsections (a)(1), (a)(2), and (a)(3) of Section
314 of the Trust Indenture Act as now in effect or as hereafter amended or
modified; provided further that this Section 17.07 shall not require this
Indenture or the Trustee to be qualified under the Trust Indenture Act prior to
the time such qualification is in fact required under the terms of the Trust
Indenture Act, nor shall it constitute any admission or acknowledgment by any
party to the Indenture that any such qualification is required prior to the time
such qualification is in fact required under the terms of the Trust Indenture
Act. If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in an indenture qualified
under the Trust Indenture Act, such required provision shall control.

         Section 17.08. No Security Interest Created. Except as otherwise
provided in Section 9.06 hereof, nothing in this Indenture or in the Debentures,

                                       94

expressed or implied, shall be construed to constitute a security interest under
the Uniform Commercial Code or similar legislation, as now or hereafter enacted
and in effect, in any jurisdiction in which property of the Company or its
subsidiaries is located.

         Section 17.09. Benefits of Indenture. Nothing in this Indenture or in
the Debentures, express or implied, shall give to any Person, other than the
parties hereto, any Paying Agent, any authenticating agent, any Conversion
Agent, any Debenture Registrar and their successors hereunder and the holders of
Debentures any benefit or any legal or equitable right, remedy or claim under
this Indenture.

         Section 17.10. Table of Contents, Headings, Etc. The table of contents
and the titles and headings of the Articles and Sections of this Indenture have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.

         Section 17.11. Authenticating Agent. The Trustee may appoint an
authenticating agent that shall be authorized to act on its behalf, and subject
to its direction, in the authentication and delivery of Debentures in connection
with the original issuance thereof and transfers and exchanges of Debentures
hereunder, including under Sections 2.04, 2.05, 2.06, 2.07, 3.03 and 3.05, as
fully to all intents and purposes as though the authenticating agent had been
expressly authorized by this Indenture and those Sections to authenticate and
deliver Debentures. For all purposes of this Indenture, the authentication and
delivery of Debentures by the authenticating agent shall be deemed to be
authentication and delivery of such Debentures "by the Trustee" and a
certificate of authentication executed on behalf of the Trustee by an
authenticating agent shall be deemed to satisfy any requirement hereunder or in
the Debentures for the Trustee's certificate of authentication. Such
authenticating agent shall at all times be a Person eligible to serve as trustee
hereunder pursuant to Section 9.09.

         Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is otherwise eligible under this
Section 17.11, without the execution or filing of any paper or any further act
on the part of the parties hereto or the authenticating agent or such successor
corporation.

         Any authenticating agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any authenticating agent by giving written notice
of termination to such authenticating agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
any authenticating agent shall cease to be eligible under this Section, the
Trustee shall

                                       95

either promptly appoint a successor authenticating agent or itself assume the
duties and obligations of the former authenticating agent under this Indenture
and, upon such appointment of a successor authenticating agent, if made, shall
give written notice of such appointment of a successor authenticating agent to
the Company and shall mail notice of such appointment of a successor
authenticating agent to all holders of Debentures as the names and addresses of
such holders appear on the Debenture Register.

         The Company agrees to pay to the authenticating agent from time to time
such reasonable compensation for its services as shall be agreed upon in writing
between the Company and the authenticating agent.

         The provisions of Sections 9.02, 9.03, 9.04 and 10.03 and this Section
17.11 shall be applicable to any authenticating agent.

         Section 17.12. Execution in Counterparts. This Indenture may be
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.

         Section 17.13. Severability. In case any provision in this Indenture or
in the Debentures shall be invalid, illegal or unenforceable, then (to the
extent permitted by law) the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.

         JPMorgan Chase Bank hereby accepts the trusts in this Indenture
declared and provided, upon the terms and conditions herein above set forth.

                                       96

         IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed.

                                    THE WILLIAMS COMPANIES, INC.

                                    By:  /s/ James G. Ivey
                                        ---------------------------------------
                                         Name:   James G. Ivey
                                         Title:  Treasurer

                                    JPMORGAN CHASE BANK, as Trustee

                                    By:  /s/ Joanne Adamis
                                        ---------------------------------------
                                         Name:   Joanne Adamis
                                         Title:  Vice President

                                                                       EXHIBIT A

         [Include only for Global Debentures:]

[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE
"DEPOSITARY", WHICH TERM INCLUDES ANY SUCCESSOR DEPOSITARY FOR THE CERTIFICATES)
TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND
ANY PAYMENT HEREIN IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]

[Include only for Debentures that are Restricted Securities]

         THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY AGREES FOR THE BENEFIT OF THE WILLIAMS COMPANIES, INC. THAT (a) THIS
SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED OTHER THAN (1) TO
THE WILLIAMS COMPANIES, INC. OR ANY AFFILIATE, (2) IN A TRANSACTION ENTITLED TO
AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), (3) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
l44A UNDER THE SECURITIES ACT ("RULE l44A"), TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE l44A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED
BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY), (4) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT, SUBJECT, IN THE CASE OF CLAUSES (2) OR (4), TO THE RECEIPT
BY THE WILLIAMS COMPANIES, INC. OF AN OPINION OF COUNSEL OR SUCH OTHER EVIDENCE
ACCEPTABLE TO THE WILLIAMS COMPANIES, INC. THAT SUCH RESALE, PLEDGE OR TRANSFER
IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (5)
PURSUANT TO AN EFFECTIVE REGISTRATION

STATEMENT AND THAT (b) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED
TO, NOTIFY ANY PURCHASER OF THIS SECURITY OF THE RESALE RESTRICTIONS REFERRED TO
HEREIN AND DELIVER TO THE TRANSFEREE (OTHER THAN A QUALIFIED INSTITUTIONAL
BUYER) PRIOR TO THE SALE A COPY OF THE TRANSFER RESTRICTIONS APPLICABLE HERETO.
THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THIS DEBENTURE
PURSUANT TO CLAUSE (5) ABOVE OR UPON ANY TRANSFER OF THIS DEBENTURE UNDER RULE
144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). THE INDENTURE
CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF
THIS DEBENTURE IN VIOLATION OF THE FOREGOING RESTRICTION.

         THIS DEBENTURE WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR U.S. FEDERAL
INCOME TAX PURPOSES. FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL
REVENUE CODE OF 1986 (AS AMENDED), THE ISSUE PRICE OF EACH DEBENTURE IS $50 PER
$50 OF PRINCIPAL AMOUNT, THE ISSUE DATE IS MAY 28, 2003, THE YIELD TO MATURITY
IS 5.50% COMPOUNDED QUARTERLY AND THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS
$82.52.

         THE HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF A
REGISTRATION RIGHTS AGREEMENT DATED MAY 28, 2003 AND, BY ITS ACCEPTANCE HEREOF,
AGREES TO BE BOUND BY AND TO COMPLY WITH THE PROVISIONS OF SUCH REGISTRATION
RIGHTS AGREEMENT.

         BECAUSE OF THE FOREGOING RESTRICTIONS, PURCHASERS ARE ADVISED TO
CONSULT LEGAL COUNSEL PRIOR TO MAKING ANY RESALE, PLEDGE OR TRANSFER OF ANY OF
THE CONVERTIBLE DEBENTURES OR COMMON STOCK ISSUABLE UPON CONVERSION OF THE
CONVERTIBLE DEBENTURES. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO
BEAR THE FINANCIAL RISKS OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

                                      A-2

                          THE WILLIAMS COMPANIES, INC.
                 5.50% JUNIOR SUBORDINATED CONVERTIBLE DEBENTURE
                                    DUE 2033

                                                                CUSIP: 969457852

No.                                                               $_____________

         The Williams Companies, Inc., a corporation duly organized and validly
existing under the laws of the State of Delaware (herein called the "COMPANY",
which term includes any successor corporation under the Indenture referred to on
the reverse hereof), for value received hereby promises to pay to ____________
or its registered assigns, the principal sum of [_____________ DOLLARS] [the
principal sum set forth on Schedule I hereto](1) on June 1, 2033 at the office
or agency of the Company maintained for that purpose in accordance with the
terms of the Indenture, in such coin or currency of the United States of America
as at the time of payment shall be legal tender for the payment of public and
private debts, and to pay interest (subject to deferral as provided herein),
quarterly on March 1, June 1, September 1 and December 1 of each year,
commencing September 1, 2003, on said principal sum at said office or agency, in
like coin or currency, at the rate per annum of 5.50%, from the March 1, June 1,
September 1 or December 1, as the case may be, next preceding the date of this
Debenture to which interest has been paid or duly provided for, unless the date
hereof is a date to which interest has been paid or duly provided for, in which
case from the date of this Debenture, or unless no interest has been paid or
duly provided for on the Debentures, in which case from May 28, 2003 until
payment of said principal sum has been made or duly provided for.
Notwithstanding the foregoing, if the date hereof is after any February 15, May
15, August 15 or November 15, as the case may be, and before the following March
1, June 1, September 1, or December 1, this Debenture shall bear interest from
such March 1, June 1, September 1 or December 1; provided that if the Company
shall default in the payment of interest due on such March 1, June 1, September
1, or December 1, then this Debenture shall bear interest from the next
preceding March 1, June 1, September 1, or December 1 to which interest has been
paid or duly provided for or, if no interest has been paid or duly provided for
on such Debenture, from May 28, 2003. Except as otherwise provided in the
Indenture, the interest payable on the Debenture pursuant to the Indenture on
any March 1, June 1, September 1 or December 1 will be paid to the Person
entitled thereto as it appears in the Debenture Register at the close of
business on the Record Date, which shall be the February 15, May 15, August 15
or November 15 (whether or not a Business Day) next preceding such March 1, June
1, September 1 or December 1, as provided in the Indenture; provided that any
such interest not punctually paid or duly provided for shall be payable as
provided in the Indenture. The Company

- -------------
(1)   For Global Debentures only.

                                      A-3

shall pay interest (i) on any Debentures in certificated form by check mailed to
the address of the Person entitled thereto as it appears in the Debenture
Register (or, upon written notice, by wire transfer in immediately available
funds, if such Person is entitled to interest on Debentures with an aggregate
principal amount in excess of $2,000,000) or (ii) on any Global Debenture by
wire transfer of immediately available funds to the account of the Depositary or
its nominee.

         The Company promises to pay interest on overdue principal, premium, if
any, and (to the extent that payment of such interest is enforceable under
applicable law) interest at the rate of 5.50%, per annum, compounded quarterly.

         Reference is made to the further provisions of this Debenture set forth
on the reverse hereof, including, without limitation, provisions giving the
holder of this Debenture the right to convert this Debenture into Common Stock
of the Company on the terms and subject to the limitations referred to on the
reverse hereof and as more fully specified in the Indenture. Such further
provisions shall for all purposes have the same effect as though fully set forth
at this place.

         This Debenture shall be deemed to be a contract made under the laws of
the State of New York, and for all purposes shall be construed in accordance
with and governed by the laws of the State of New York (including Section 5-1401
of the New York General Obligations Law or any successor to such statute).

         This Debenture shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been manually signed
by the Trustee or a duly authorized authenticating agent under the Indenture.

                                      A-4

         IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed.

                                    THE WILLIAMS COMPANIES, INC.

                                    By: _______________________________________

Dated: May 28, 2003

      TRUSTEE'S CERTIFICATE OF AUTHENTICATION

This is one of the Debentures described in the within-named Indenture.

JPMORGAN CHASE BANK,
     as Trustee

By: ____________________________________________
        Authorized Signatory

                                      A-5

                          FORM OF REVERSE OF DEBENTURE
                          THE WILLIAMS COMPANIES, INC.

            5.50% JUNIOR SUBORDINATED CONVERTIBLE DEBENTURE DUE 2033

         This Debenture is one of a duly authorized issue of Debentures of the
Company, designated as its 5.50% Junior Subordinated Convertible Debentures due
2033 (herein called the "DEBENTURES"), limited in aggregate principal amount to
$300,000,000, issued and to be issued under and pursuant to an Indenture dated
as of May 28, 2003 (herein called the "INDENTURE"), between the Company and
JPMorgan Chase Bank, as trustee (herein called the "TRUSTEE"), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the holders of the
Debentures.

         In case an Event of Default shall have occurred and be continuing, the
principal of, premium, if any, and accrued interest on all Debentures may be
declared by either the Trustee or the holders of not less than 25% in aggregate
principal amount of the Debentures then outstanding, and upon said declaration
shall become, due and payable, in the manner, with the effect and subject to the
conditions provided in the Indenture.

         The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of at least a majority in aggregate
principal amount of the Debentures at the time outstanding, to execute
supplemental indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of any supplemental
indenture or modifying in any manner the rights of the holders of the
Debentures; provided that no such supplemental indenture shall (i) extend the
fixed maturity of any Debenture, or reduce the rate or extend the time of
payment of Interest, or reduce the principal amount thereof or premium, if any,
thereon, or reduce any amount payable upon redemption or repurchase thereof, or
impair the right of any Debentureholder to institute suit for the payment
thereof, or make the principal thereof or Interest or premium, if any, thereon
payable in any coin or currency other than that provided in the Debentures, or
change the obligation of the Company to redeem any Debenture on a Redemption
Date in a manner adverse to the holders of Debentures, or change the obligation
of the Company to repurchase any Debenture upon a Change of Control in a manner
adverse to the holders of the Debentures, or impair the right to convert the
Debentures into Common Stock subject to the terms set forth in the Indenture,
including Section 16.06 thereof, or reduce the number of shares of Common Stock
or other property receivable upon conversion, in each case without the consent
of the holder of each Debenture so affected, or modify any of the provisions of
Section 12.02 or Section 8.07 thereof, except to increase any such percentage or
to provide that certain other provisions of the Indenture cannot be modified or
waived without the consent of the holder of each Debenture so affected, or
reduce the quorum or voting requirements set

                                      A-6

forth in Article 11 or (ii) reduce the aforesaid percentage of Debentures, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of all Debentures then outstanding. Subject
to the provisions of the Indenture, the holders of a majority in aggregate
principal amount of the Debentures at the time outstanding may on behalf of the
holders of all of the Debentures waive any past default or Event of Default
under the Indenture and its consequences except (A) a default in the payment of
Interest, or any premium on, or the principal of, any of the Debentures, (B) a
failure by the Company to convert any Debentures into Common Stock of the
Company, (C) a default in the payment of the Redemption Price pursuant to
Article 3 of the Indenture, (D) a default in the payment of the Repurchase Price
pursuant to Article 3 of the Indenture, or (E) a default in respect of a
covenant or provisions of the Indenture which under Article 12 of the Indenture
cannot be modified or amended without the consent of the holders of each or all
Debentures then outstanding or affected thereby. Any such consent or waiver by
the holder of this Debenture (unless revoked as provided in the Indenture) shall
be conclusive and binding upon such holder and upon all future holders and
owners of this Debenture and any Debentures which may be issued in exchange or
substitution hereof, irrespective of whether or not any notation thereof is made
upon this Debenture or such other Debentures.

         The indebtedness evidenced by the Debentures is, to the extent and in
the manner provided in the Indenture, expressly subordinated and subject in
right of payment to the prior payment in full of all Senior and Senior
Subordinated Indebtedness of the Company, whether outstanding at the date of the
Indenture or thereafter incurred, and this Debenture is issued subject to the
provisions of the Indenture with respect to such subordination. Each holder of
this Debenture, by accepting the same, agrees to and shall be bound by such
provisions and authorizes the Trustee on its behalf to take such action as may
be necessary or appropriate to effectuate the subordination so provided and
appoints the Trustee his attorney-in-fact for such purpose.

         No reference herein to the Indenture and no provision of this Debenture
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium and
Interest on this Debenture at the place, at the respective times, at the rate
and in the coin or currency herein prescribed.

         Interest on the Debentures shall be computed on the basis of a 360-day
year of twelve 30-day months.

         So long as the Company is not in default in the payment of Interest on
the Debentures and so long as the Designated Agreement Termination Date has
occurred, the Company shall have the right, at any time during the term of the
Debentures, from time to time to extend an interest payment period with respect
to such Debentures for up to 20 consecutive quarterly interest periods (an
"EXTENDED INTEREST PAYMENT PERIOD"), at the end of which period the Company

                                      A-7

shall pay all Interest then accrued and unpaid (together with interest thereon
at the rate of 5.50% per annum to the extent permitted by applicable law,
compounded quarterly ("COMPOUNDED INTEREST")); provided that no Extended
Interest Payment Period may extend beyond the Maturity Date or any Redemption
Date of the Debentures or end on a day other than an Interest Payment Date.
During such Extended Interest Payment Period, the Company shall not make any
Restricted Payment as provided in the Indenture. Prior to the termination of any
such Extended Interest Payment Period, the Company may pay all or any portion of
the interest accrued on the Debentures on any Interest Payment Date to holders
of record on the regular Record Date for such Interest Payment Date or from time
to time further extend such Extended Interest Payment Period; provided that such
Extended Interest Payment Period, including such extension and all further
extensions thereof, shall not exceed 20 consecutive quarterly interest periods.
Upon the termination of any such Extended Interest Payment Period and upon the
payment of all accrued and unpaid interest then due, together with Compounded
Interest, the Company may select a new Extended Interest Payment Period, subject
to the foregoing requirements. No interest on this Debenture shall be due and
payable during an Extended Interest Payment Period, except at the end thereof.
At the end of the Extended Interest Payment Period the Company shall pay all
interest accrued and unpaid on the Debentures including any Compounded Interest
which shall be payable to the holders of the Debentures in whose names the
Debentures are registered in the Debenture Register on the first Record Date
prior to the end of the Extended Interest Payment Period.

         The Debentures are issuable in fully registered form, without coupons,
in denominations of $50 principal amount and any multiple of $50. At the office
or agency of the Company referred to on the face hereof, and in the manner and
subject to the limitations provided in the Indenture, without payment of any
service charge but with payment of a sum sufficient to cover any tax, assessment
or other governmental charge that may be imposed in connection with any
registration or exchange of Debentures, Debentures may be exchanged for a like
aggregate principal amount of Debentures of any other authorized denominations.

         Beginning on June 1, 2010, if, for at least 20 Trading Days in the
period of 30 consecutive Trading Days ending on the Trading Day before the date
of mailing of the Redemption Notice pursuant to Section 3.02 of the Indenture
(including on the last day in such period), the Closing Sale Price of the Common
Stock shall have exceeded 130% of the Conversion Price in effect on the last
Trading Day of such period, the Company, at its option, may redeem the
Securities on a Redemption Date specified by the Company in accordance with
Article 3 of the Indenture for cash in whole or in part, at a redemption price
(the "REDEMPTION PRICE") equal to the principal amount of the Securities to be
redeemed together in each case with accrued and unpaid Interest (including
deferred interest) on the Securities redeemed to (but excluding) the Redemption
Date.

                                      A-8

         In no event will any Security be redeemable at the option of the
Company before June 1, 2010.

         The Company may redeem Debentures only in whole and not in part if a
default in the payment of interest, or premium, if any, on the Debentures has
occurred and is continuing or during an Extended Interest Payment Period.

         The Debentures are not subject to redemption through the operation of
any sinking fund.

         If a Change of Control occurs at any time prior to maturity of the
Debentures, this Debenture will be repurchased at the option of the holder on
the Repurchase Date specified by the Company in accordance with the Indenture at
a Repurchase Price equal to 100% of the principal amount thereof, together with
accrued and unpaid Interest (including deferred interest) to but excluding the
Repurchase Date. The Debentures will be repurchased in multiples of $50
principal amount. The Company shall mail to all holders of record of the
Debentures a notice of the occurrence of a Change of Control and of the
repurchase right arising as a result thereof on or before the 30th day after the
occurrence of such Change of Control. For a Debenture to be so repurchased at
the option of the holder, the Company must receive at the office or agency of
the Company maintained for that purpose in accordance with the terms of the
Indenture, such Debenture with the form entitled "OPTION TO ELECT REPURCHASE
UPON A CHANGE OF CONTROL" on the reverse thereof duly completed, together with
such Debenture, duly endorsed for transfer, on or before the Repurchase Date

         Holders have the right to withdraw any such repurchase election by
delivering to the Trustee (or other Paying Agent appointed by the Company) a
written notice of withdrawal up to the close of business on the Business Day
preceding the Repurchase Date, all as provided in the Indenture.

         If cash sufficient to pay the Repurchase Price with respect to all
Debentures or portions thereof to be repurchased as of the Repurchase Date is
deposited with the Trustee (or other Paying Agent appointed by the Company) on
the Business Day following the Repurchase Date, interest will cease to accrue on
such Debentures (or portions thereof) on and after the Repurchase Date and the
holder thereof shall have no other rights as such other than the right to
receive the Repurchase Price upon surrender of such Debenture.

         In compliance with the provisions of the Indenture, prior to the final
Maturity Date of the Debentures, the holder hereof has the right, at its option,
to convert each $50 principal amount of the Debentures into 4.5907 shares of the
Company's Common Stock, as such shares shall be constituted at the date of
conversion and subject to adjustment from time to time as provided in the
Indenture, upon surrender of this Debenture with the form entitled "CONVERSION
NOTICE" on the reverse hereof duly completed, to the Company at the office or
agency of the Company maintained for that purpose in accordance with the terms

                                      A-9

of the Indenture, or at the option of such holder, the Corporate Trust Office,
and, unless the shares issuable on conversion are to be issued in the same name
as this Debenture, duly endorsed by, or accompanied by instruments of transfer
in form satisfactory to the Company duly executed by, the holder or by his duly
authorized attorney.

         If the Company (i) is a party to a consolidation, merger, statutory
share exchange or combination, (ii) reclassifies the Common Stock, or (iii)
sells or conveys its properties and assets substantially as an entirety to any
Person, the right to convert a Security into shares of Common Stock may be
changed into a right to convert it into securities, cash or other assets of the
Company or such other Person, in each case in accordance with the Indenture.

         No adjustment in respect of interest on any Debenture converted or
dividends on any shares issued upon conversion of such Debenture will be made
upon any conversion except as set forth in the next sentence. If this Debenture
(or portion hereof) is surrendered for conversion during the period from the
close of business on any Record Date for the payment of Interest to the close of
business on the following Interest Payment Date, this Debenture (or portion
hereof being converted) must be accompanied by payment, in immediately available
funds or other funds acceptable to the Company, of an amount equal to the
Interest otherwise payable on such Interest Payment Date on the principal amount
being converted; provided that no such payment shall be required (1) if the
Company has specified a Redemption Date that is after a Record Date and prior to
the next Interest Payment Date, (2) if the Company has specified a Repurchase
Date following a Change of Control that is during such period or (3) to the
extent of any overdue interest, if any overdue interest exists at the time of
conversion with respect to such debenture.

         No fractional shares will be issued upon any conversion, but an
adjustment and payment in cash will be made, as provided in the Indenture, in
respect of any fraction of a share which would otherwise be issuable upon the
surrender of any Debenture or Debentures for conversion.

         A Debenture in respect of which a holder is exercising its right to
require repurchase upon a Change of Control may be converted only if such holder
withdraws its election to exercise such right in accordance with the terms of
the Indenture.

         Any Debentures called for redemption, unless surrendered for conversion
by the holders thereof on or before the close of business on the Business Day
preceding the Redemption Date, may be deemed to be redeemed from the holders of
such Debentures for an amount equal to the applicable Redemption Price, together
with accrued but unpaid Interest to, but excluding, the date fixed for
redemption, by one or more investment banks or other purchasers who may agree
with the Company (i) to purchase such Debentures from the holders thereof and

                                      A-10

convert them into shares of the Company's Common Stock and (ii) to make payment
for such Debentures as aforesaid to the Trustee in trust for the holders.

         Upon due presentment for registration of transfer of this Debenture at
the office or agency of the Company maintained for that purpose in accordance
with the terms of the Indenture, a new Debenture or Debentures of authorized
denominations for an equal aggregate principal amount will be issued to the
transferee in exchange thereof, subject to the limitations provided in the
Indenture, without charge except for any tax, assessment or other governmental
charge imposed in connection therewith.

         The Company, the Trustee, any authenticating agent, any Paying Agent,
any Conversion Agent and any Debenture Registrar may deem and treat the
registered holder hereof as the absolute owner of this Debenture (whether or not
this Debenture shall be overdue and notwithstanding any notation of ownership or
other writing hereon made by anyone other than the Company or any Debenture
Registrar) for the purpose of receiving payment hereof, or on account hereof,
for the conversion hereof and for all other purposes, and neither the Company
nor the Trustee nor any other authenticating agent nor any Paying Agent nor
other Conversion Agent nor any Debenture Registrar shall be affected by any
notice to the contrary. All payments made to or upon the order of such
registered holder shall, to the extent of the sum or sums paid, satisfy and
discharge liability for monies payable on this Debenture.

         No recourse for the payment of the principal of or any premium or
Interest on this Debenture, or for any claim based hereon or otherwise in
respect hereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture or any supplemental indenture or in
any Debenture, or because of the creation of any indebtedness represented
thereby, shall be had against any incorporator, stockholder, employee, agent,
officer or director or subsidiary, as such, past, present or future, of the
Company or of any successor corporation, either directly or through the Company
or any successor corporation, whether by virtue of any constitution, statute or
rule of law or by the enforcement of any assessment or penalty or otherwise, all
such liability being, by acceptance hereof and as part of the consideration for
the issue hereof, expressly waived and released.

         This Debenture shall be deemed to be a contract made under the laws of
New York, and for all purposes shall be construed in accordance with the laws of
New York (including Section 5-1401 of the New York General Obligations Law or
any successor to such statute).

         Terms used in this Debenture and defined in the Indenture are used
herein as therein defined.

                                      A-11

                                  ABBREVIATIONS

         The following abbreviations, when used in the inscription of the face
of this Debenture, shall be construed as though they were written out in full
according to applicable laws or regulations.

                                                        
TEN COM -     as tenants in common                            UNIF GIFT MIN ACT -___ Custodian ___
TEN ENT -     as tenant by the entireties                     (Cust)   (Minor)
JT TEN -      as joint tenants with right of survivorship     under Uniform Gifts to Minors Act
              and not as tenants in common                    ____________________________
                                                                       (State)

         Additional abbreviations may also be used though not in the above list.

                                CONVERSION NOTICE

TO:      THE WILLIAMS COMPANIES, INC.

         The undersigned registered owner of this Debenture hereby irrevocably
exercises the option to convert this Debenture, or the portion thereof (which is
$50 or a multiple thereof) below designated, into shares of Common Stock of The
Williams Companies, Inc. in accordance with the terms of the Indenture referred
to in this Debenture, and directs that the shares issuable and deliverable upon
such conversion, together with any check in payment for fractional shares and
any Debentures representing any unconverted principal amount hereof, be issued
and delivered to the registered holder hereof unless a different name has been
indicated below. Capitalized terms used herein but not defined shall have the
meanings ascribed to such terms in the Indenture. If shares or any portion of
this Debenture not converted are to be issued in the name of a person other than
the undersigned, the undersigned will provide the appropriate information below
and pay all transfer taxes payable with respect thereto. Any amount required to
be paid by the undersigned on account of interest accompanies this Debenture.

Dated: ______________________

                                              __________________________________

                                              __________________________________
                                              Signature(s)

                                              Signature(s) must be guaranteed by
                                              an "ELIGIBLE GUARANTOR
                                              INSTITUTION" meeting the
                                              requirements of the Debenture
                                              Registrar, which requirements
                                              include membership or
                                              participation in the Security
                                              Transfer Agent Medallion Program
                                              ("STAMP") or such other "SIGNATURE
                                              GUARANTEE PROGRAM" as may be
                                              determined by the Debenture
                                              Registrar in addition to, or in
                                              substitution for, STAMP, all in
                                              accordance with the Securities
                                              Exchange Act of 1934, as amended.

                                              __________________________________
                                              Signature Guarantee

         Fill in the registration of shares of Common Stock if to be issued, and
Debentures if to be delivered, other than to and in the name of the registered
holder:

____________________________
(Name)

_______________________________
(Street Address)

_______________________________
(City, State and Zip Code)

_______________________________
Please print name and address

Principal amount to be converted
(if less than all):

$_______________________________

Social Security or Other Taxpayer
Identification Number:

_______________________________

                           OPTION TO ELECT REPURCHASE
                            UPON A CHANGE OF CONTROL

TO:      THE WILLIAMS COMPANIES, INC.

         The undersigned registered owner of this Debenture hereby irrevocably
acknowledges receipt of a notice from The Williams Companies, Inc. (the
"COMPANY") as to the occurrence of a Change of Control with respect to the
Company and requests and instructs the Company to repurchase the entire
principal amount of this Debenture, or the portion thereof (which is $50 or a
multiple thereof) below designated, in accordance with the terms of the
Indenture referred to in this Debenture at the price of 100% of such entire
principal amount or portion thereof, together with accrued interest (including
deferred interest) to, but excluding, the Repurchase Date, to the registered
holder hereof. Capitalized terms used herein but not defined shall have the
meanings ascribed to such terms in the Indenture.

Dated: ______________________

                                              __________________________________

                                              __________________________________
                                              Signature(s)

                                              NOTICE: The above signatures of
                                              the holder(s) hereof must
                                              correspond with the name as
                                              written upon the face of the
                                              Debenture in every particular
                                              without alteration or enlargement
                                              or any change whatever.

                                              Principal amount to be repaid
                                              (if less than all):

                                              __________________________________

                                              __________________________________
                                              Social Security or Other Taxpayer
                                              Identification Number

                                   ASSIGNMENT

         For value received ______________________________hereby sell(s)
assign(s) and transfer(s) unto ___________________________________ (Please
insert social security or other Taxpayer Identification Number of assignee) the
within Debenture, and hereby irrevocably constitutes and appoints
______________________________________ attorney to transfer said Debenture on
the books of the Company, with full power of substitution in the premises.

         In connection with any transfer of the Debenture prior to the
expiration of the holding period applicable to sales thereof under Rule 144(k)
under the Securities Act (or any successor provision) (other than any transfer
pursuant to a registration statement that has been declared effective under the
Securities Act), the undersigned confirms that such Debenture is being
transferred:

         [ ]      To The Williams Companies, Inc. or a subsidiary thereof; or

         [ ]      To a "QUALIFIED INSTITUTIONAL BUYER" in compliance with Rule
                  144A under the Securities Act of 1933, as amended; or

         [ ]      Pursuant to and in compliance with Rule 144 under the
                  Securities Act of 1933, as amended; or

         [ ]      Pursuant to a Registration Statement which has been declared
                  effective under the Securities Act of 1933, as amended, and
                  which continues to be effective at the time of transfer;

and unless the Debenture has been transferred to The Williams Companies, Inc. or
a subsidiary thereof, the undersigned confirms that such Debenture is not being
transferred to an "AFFILIATE" of the Company as defined in Rule 144 under the
Securities Act of 1933, as amended.

         Unless one of the boxes is checked, the Trustee will refuse to register
any of the Debentures evidenced by this certificate in the name of any person
other than the registered holder thereof.

Dated: ______________________

                                              __________________________________

                                              __________________________________
                                              Signature(s)

                                              Signature(s) must be guaranteed by
                                              an "ELIGIBLE GUARANTOR
                                              INSTITUTION"

                                              meeting the requirements of the
                                              Debenture Registrar, which
                                              requirements include membership or
                                              participation in the Security
                                              Transfer Agent Medallion Program
                                              ("STAMP") or such other "SIGNATURE
                                              GUARANTEE PROGRAM" as may be
                                              determined by the Debenture
                                              Registrar in addition to, or in
                                              substitution for, STAMP, al in
                                              accordance with the Securities
                                              Exchange Act of 1934, as amended.

                                              __________________________________
                                              Signature Guarantee

NOTICE: The signature on the Conversion Notice, the Option to Elect Repurchase
Upon a Change of Control or the Assignment must correspond with the name as
written upon the face of the Debenture in every particular without alteration or
enlargement or any change whatever.

                                                                      Schedule I

                [Include Schedule I only for a Global Debenture]

            5.50% Junior Subordinated Convertible Debenture due 2033

No.  _______

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                                                                                             Authorized Signature
                                                         Notation Explaining Principal          of Trustee or
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                                                                     EXHIBIT 4.3

                         REGISTRATION RIGHTS AGREEMENT

                                     between

                          THE WILLIAMS COMPANIES, INC.,

                                   as Issuer,

                                       and

                              LEHMAN BROTHERS INC.,

                              as Initial Purchaser

                            Dated as of May 28, 2003

         REGISTRATION RIGHTS AGREEMENT dated as of May 28, 2003 between The
Williams Companies, Inc., a Delaware corporation (the "COMPANY"), and Lehman
Brothers Inc. (the "INITIAL PURCHASER") pursuant to the Purchase Agreement dated
May 20, 2003 (the "PURCHASE AGREEMENT"), between the Company and the Initial
Purchaser. In order to induce the Initial Purchaser to enter into the Purchase
Agreement, the Company has agreed to provide the registration rights set forth
in this Agreement.

         The Company agrees with the Initial Purchaser, (i) for its benefit as
Initial Purchaser and (ii) for the benefit of the beneficial owners (including
the Initial Purchaser) from time to time of the Debentures (as defined herein)
and the beneficial owners from time to time of the Underlying Common Stock (as
defined herein) issued upon conversion of the Debentures (each of the foregoing
a "HOLDER" and together the "HOLDERS"), as follows:

         Section 1. Definitions. Capitalized terms used herein without
definition shall have their respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:

         "AFFILIATE" means with respect to any specified person, an "affiliate,"
as defined in Rule 144, of such person.

         "AMENDMENT EFFECTIVENESS DEADLINE DATE" has the meaning set forth in
Section 2(d) hereof.

         "BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in The City of New York
are authorized or obligated by law or executive order to close.

         "CLOSING DATE" has the meaning assigned such term in the Purchase
Agreement.

         "COMMON STOCK" means the shares of common stock, $1.00 par value per
share, of the Company.

         "CONVERSION PRICE" has the meaning assigned such term in the Indenture.

         "DAMAGES ACCRUAL PERIOD" has the meaning set forth in Section 2(e)
hereof.

         "DAMAGES PAYMENT DATE" means each March 1, June 1, September 1 and
December 1, beginning September 1, 2003.

         "DEBENTURES" means the 5.50% Junior Subordinated Convertible Debentures
due 2033 of the Company to be purchased pursuant to the Purchase Agreement.

         "DEFERRAL NOTICE" has the meaning set forth in Section 3(h) hereof.

         "DEFERRAL PERIOD" has the meaning set forth in Section 3(h) hereof.

         "EFFECTIVENESS DEADLINE DATE" has the meaning set forth in Section
2(a) hereof.

         "EFFECTIVENESS PERIOD" means the period commencing on the date hereof
and ending on the date that all Registrable Securities have ceased to be
Registrable Securities.

         "EVENT" has the meaning set forth in Section 2(e) hereof.

         "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.

         "FILING DEADLINE DATE" has the meaning set forth in Section 2(a)
hereof.

         "HOLDER" has the meaning set forth in the second paragraph of this
Agreement.

         "INDENTURE" means the Indenture, dated as of May 28, 2003, between the
Company and JPMorgan Chase Bank, as trustee, pursuant to which the Debentures
are being issued.

         "INITIAL PURCHASER" means Lehman Brothers Inc.

         "INITIAL SHELF REGISTRATION STATEMENT" has the meaning set forth in
Section 2(a) hereof.

         "ISSUE DATE" means the Closing Date.

         "LIQUIDATED DAMAGES AMOUNT" has the meaning set forth in Section 2(e)
hereof.

         "MATERIAL EVENT" has the meaning set forth in Section 3(h) hereof.

         "NOTICE AND QUESTIONNAIRE" means a written notice delivered to the
Company containing substantially the information called for by the Selling
Securityholder Notice and Questionnaire attached as Annex A to the Offering
Memorandum of the Company dated May 20, 2003 relating to the Debentures.

         "NOTICE HOLDER" means, on any date, any Holder that has delivered a
Notice and Questionnaire to the Company on or prior to such date.

         "PURCHASE AGREEMENT" has the meaning set forth in the preamble hereof.

         "PROSPECTUS" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as

                                       2

amended or supplemented by any amendment or prospectus supplement, including
post-effective amendments, and all materials incorporated by reference or
explicitly deemed to be incorporated by reference in such Prospectus.

         "RECORD HOLDER" means with respect to any Damages Payment Date relating
to any Debentures or Underlying Common Stock as to which any Liquidated Damages
Amount has accrued, the registered holder of such Debenture or Underlying Common
Stock on the February 15, May 15, August 15 and November 15, as the case may be,
immediately preceding a Damages Payment Date.

         "REGISTRABLE SECURITIES" means the Debentures until such Debentures
have been converted into or exchanged for the Underlying Common Stock and, at
all times subsequent to any such conversion, the Underlying Common Stock and any
securities into or for which such Underlying Common Stock has been converted or
exchanged, and any security issued with respect thereto upon any stock dividend,
split or similar event until, in the case of any such security, (A) the earliest
of (i) its effective registration under the Securities Act and resale in
accordance with the Registration Statement covering it, (ii) expiration of the
holding period that would be applicable thereto under Rule 144(k) or (iii) its
sale to the public pursuant to Rule 144 (or any similar provision then in force,
but not Rule 144A) under the Securities Act, and (B) as a result of the event or
circumstance described in any of the foregoing clauses (i) through (iii), the
legend with respect to transfer restrictions required under the Indenture is
removed or removable in accordance with the terms of the Indenture or such
legend, as the case may be.

         "REGISTRATION STATEMENT" means any registration statement of the
Company that covers any of the Registrable Securities pursuant to the provisions
of this Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits and
all materials incorporated by reference or explicitly deemed to be incorporated
by reference in such registration statement.

         "RESTRICTED SECURITIES" means "Restricted Securities" as defined in
Rule 144.

         "RULE 144" means Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.

         "RULE 144A" means Rule 144A under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.

         "SEC" means the Securities and Exchange Commission.

                                       3

         "SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.

         "SHELF REGISTRATION STATEMENT" has the meaning set forth in Section
2(a) hereof.

         "SPECIAL COUNSEL" means Davis Polk & Wardwell or one such other
successor counsel as shall be specified by the Holders of a majority of the
Registrable Securities, but which may, with the written consent of the Initial
Purchaser (which shall not be unreasonably withheld), be another nationally
recognized law firm experienced in securities law matters designated by the
Company, the reasonable fees and expenses of which will be paid by the Company
pursuant to Section 5 hereof. For purposes of determining the holders of a
majority of the Registrable Securities in this definition, Holders of Debentures
shall be deemed to be the Holders of the number of shares of Underlying Common
Stock into which such Debentures are or would be convertible as of the date the
consent is requested.

         "SUBSEQUENT SHELF REGISTRATION STATEMENT" has the meaning set forth in
Section 2(b) hereof.

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

         "TRUSTEE" means JPMorgan Chase Bank, the Trustee under the Indenture.

         "UNDERLYING COMMON STOCK" means the Common Stock into which the
Debentures are convertible or issued upon any such conversion.

         Section 1. Shelf Registration. The Company shall prepare and file or
cause to be prepared and filed with the SEC, not later than the date (the
"FILING DEADLINE DATE") ninety (90) days after the Issue Date, a Registration
Statement for an offering to be made on a delayed or continuous basis pursuant
to Rule 415 of the Securities Act (a "SHELF REGISTRATION STATEMENT") registering
the resale from time to time by Holders thereof of all of the Registrable
Securities (the "INITIAL SHELF REGISTRATION STATEMENT"). The Initial Shelf
Registration Statement shall be on Form S-3 or another appropriate form
permitting registration of such Registrable Securities for resale by such
Holders in accordance with the methods of distribution elected by the Holders
and set forth in the Initial Shelf Registration Statement. The Company shall use
its reasonable best efforts to cause the Initial Shelf Registration Statement to
be declared effective under the Securities Act by the date (the "EFFECTIVENESS
DEADLINE DATE") that is one hundred eighty (180) days after the Issue Date, and
to keep the Initial Shelf Registration Statement (or any Subsequent Shelf
Registration Statement) continuously effective under the Securities Act until
the expiration of the Effectiveness Period. At the time the Initial Shelf
Registration Statement is declared effective, each Holder that became a Notice
Holder on or prior to the date ten (10) Business Days prior to such time of
effectiveness shall be named as

                                       4

a selling securityholder in the Initial Shelf Registration Statement and the
related Prospectus in such a manner as to permit such Holder to deliver such
Prospectus to purchasers of Registrable Securities in accordance with applicable
law. None of the Company's security holders (other than the Holders of
Registrable Securities) shall have the right to include any of the Company's
securities in the Shelf Registration Statement.

         (a)      If the Initial Shelf Registration Statement or any Subsequent
Shelf Registration Statement ceases to be effective for any reason at any time
during the Effectiveness Period (other than because all Registrable Securities
registered thereunder shall have been resold pursuant thereto or shall have
otherwise ceased to be Registrable Securities), the Company shall use its
reasonable best efforts to obtain the prompt withdrawal of any order suspending
the effectiveness thereof, and in any event shall within thirty (30) days of
such cessation of effectiveness amend the Shelf Registration Statement in a
manner reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional Shelf Registration Statement
covering all of the securities that as of the date of such filing are
Registrable Securities (a "SUBSEQUENT SHELF REGISTRATION STATEMENT"). If a
Subsequent Shelf Registration Statement is filed, the Company shall use its
reasonable best efforts to cause the Subsequent Shelf Registration Statement to
become effective as promptly as is reasonably practicable after such filing and
to keep such Registration Statement (or Subsequent Shelf Registration Statement)
continuously effective until the end of the Effectiveness Period.

         (b)      The Company shall supplement and amend the Shelf Registration
Statement if required by the rules, regulations or instructions applicable to
the registration form used by the Company for such Shelf Registration Statement,
if required by the Securities Act or as necessary to name a Notice Holder as a
selling securityholder pursuant to Section (d) below.

         (c)      Each Holder agrees that if such Holder wishes to sell
Registrable Securities pursuant to a Shelf Registration Statement and related
Prospectus, it will do so only in accordance with this Section 2(d) and
Section 3(h) and Section 4 of this Agreement. Following the date that the
Initial Shelf Registration Statement is declared effective, each Holder wishing
to sell Registrable Securities pursuant to a Shelf Registration Statement and
related Prospectus agrees to deliver a Notice and Questionnaire to the Company
at least ten (10) Business Days prior to any intended distribution of
Registrable Securities under the Shelf Registration Statement. From and after
the date the Initial Shelf Registration Statement is declared effective, the
Company shall, as promptly as practicable after the date a Notice and
Questionnaire is delivered pursuant to Section 8(c) and in any event upon the
later of (x) fifteen (15) Business Days after such date or (y) fifteen (15)
Business Days after the expiration of any Deferral Period in effect when the
Notice and Questionnaire is delivered or put into effect within fifteen (15)
Business Days of such delivery date:

                                       5

                  (i)      if required by applicable law, file with the SEC a
         post-effective amendment to the Shelf Registration Statement or prepare
         and, if required by applicable law, file a supplement to the related
         Prospectus or a supplement or amendment to any document incorporated
         therein by reference or file any other required document so that the
         Holder delivering such Notice and Questionnaire is named as a selling
         securityholder in the Shelf Registration Statement and the related
         Prospectus in such a manner as to permit such Holder to deliver such
         Prospectus to purchasers of the Registrable Securities in accordance
         with applicable law and, if the Company shall file a post-effective
         amendment to the Shelf Registration Statement, use its reasonable best
         efforts to cause such post-effective amendment to be declared effective
         under the Securities Act as promptly as is reasonably practicable, but
         in any event by the date (the "AMENDMENT EFFECTIVENESS DEADLINE DATE")
         that is forty-five (45) days after the date such post-effective
         amendment is required by this clause to be filed;

                  (ii)     provide such Holder copies of any documents filed
         pursuant to Section 2(d)(i); and

                  (iii)    notify such Holder as promptly as practicable after
         the effectiveness under the Securities Act of any post-effective
         amendment filed pursuant to Section 2(d)(i);

provided, that if such Notice and Questionnaire is delivered during a Deferral
Period, the Company shall so inform the Holder delivering such Notice and
Questionnaire and shall, to the extent required, take the actions set forth in
clauses (i), (ii) and (iii) above upon expiration of the Deferral Period in
accordance with Section 3(h). Notwithstanding anything contained herein to the
contrary, (i) the Company shall be under no obligation to name any Holder that
is not a Notice Holder as a selling securityholder in any Registration Statement
or related Prospectus and (ii) the Amendment Effectiveness Deadline Date shall
be extended by up to ten (10) Business Days from the expiration of a Deferral
Period (and the Company shall incur no obligation to pay Liquidated Damages
during such extension) if such Deferral Period shall be in effect on the
Amendment Effectiveness Deadline Date.

         (d)      The parties hereto agree that the Holders of Registrable
Securities will suffer damages, and that it would not be feasible to ascertain
the extent of such damages with precision, if, other than as permitted
hereunder,

                  (i)      the Initial Shelf Registration Statement has not been
         declared effective under the Securities Act on or prior to the
         Effectiveness Deadline Date,

                  (ii)     the Company has failed to perform its obligations set
         forth in Section 2(d)(i) within the time period required therein,

                                       6

                  (iii)    any post-effective amendment to a Shelf Registration
         Statement filed pursuant to Section 2(d)(i) has not become effective
         under the Securities Act on or prior to the Amendment Effectiveness
         Deadline Date,

                  (iv)     the aggregate duration of Deferral Periods in any
         period exceeds the number of days permitted in respect of such period
         pursuant to Section 3(h) hereof, or

                  (v)      the number of Deferral Periods in any period exceeds
         the number permitted in respect of such period pursuant to Section
         3(h) hereof.

Each event described in any of the foregoing clauses (i) through (v) is
individually referred to herein as an "EVENT". For purposes of this Agreement,
each Event set forth above shall begin and end on the dates set forth in the
table below:

           Type of Event                          Beginning                           Ending
             by Clause                              Date                               Date
- ----------------------------------    --------------------------------   ---------------------------------
                                                                   
                (i)                   Effectiveness Deadline Date        the date the Initial Shelf
                                                                         Registration Statement becomes
                                                                         effective under the Securities
                                                                         Act

                (ii)                  the date by which the Company is   the date the Company performs
                                      required to perform its            its obligations set forth in
                                      obligations under Section          Section 2(c)(i)
                                      2(c)(i)

                (iii)                 the Amendment Effectiveness        the date the applicable
                                      Deadline Date                      post-effective amendment to a
                                                                         Shelf Registration Statement
                                                                         becomes effective under the
                                                                         Securities Act

                (iv)                  the date on which the aggregate    termination of the Deferral
                                      duration of Deferral Periods in    Period that caused the limit on
                                      any period exceeds the number of   the aggregate duration of
                                      days permitted by Section 3(h)     Deferral Periods to be exceeded

                (v)                   the date of commencement of a      termination of the Deferral
                                      Deferral Period that causes the    Period that caused the number of
                                      number of Deferral Periods to      Deferral Periods to exceed the
                                      exceed                             number

                                       7

           Type of Event                          Beginning                           Ending
             by Clause                              Date                               Date
- ----------------------------------    --------------------------------   ---------------------------------
                                                                   
                                      the number permitted by            permitted by Section 3(h)
                                      Section 3(h)

For purposes of this Agreement, Events shall begin on the dates set forth in the
table above and shall continue until the ending dates set forth in the table
above.

         Commencing on (and including) any date that an Event has begun and
ending on (but excluding) the next date on which there are no Events that have
occurred and are continuing (a "DAMAGES ACCRUAL PERIOD"), the Company shall pay,
as liquidated damages and not as a penalty, to Record Holders of Registrable
Securities an amount (the "LIQUIDATED DAMAGES AMOUNT") accruing, for each day in
the Damages Accrual Period, (i) in respect of any Debenture, at a rate per annum
equal to 0.5% of the aggregate principal amount of such Debenture and (ii) in
respect of each share of Underlying Common Stock at a rate per annum equal to
0.5% of the Conversion Price on such date, as the case may be; provided that in
the case of a Damages Accrual Period that is in effect solely as a result of an
Event of the type described in clause (ii) or (iii) of the preceding paragraph,
such Liquidated Damages Amount shall be paid only to the Holders (as set forth
in the succeeding paragraph) that have delivered Notices and Questionnaires that
caused the Company to incur the obligations set forth in Section 2(d) the
non-performance of which is the basis of such Event. In calculating the
Liquidated Damages Amount on any date on which no Debentures are outstanding,
the Conversion Price and the Liquidated Damages Amount payable with respect to
shares of Common Stock which are Registrable Securities shall be calculated as
if the Debentures were still outstanding. Notwithstanding the foregoing, no
Liquidated Damages Amount shall accrue as to any Registrable Security from and
after the earlier of (x) the date such security is no longer a Registrable
Security and (y) expiration of the Effectiveness Period. The rate of accrual of
the Liquidated Damages Amount with respect to any period shall not exceed the
rate provided for in this paragraph notwithstanding the occurrence of multiple
concurrent Events.

         The Liquidated Damages Amount shall accrue from the first day of the
applicable Damages Accrual Period, and shall be payable on each Damages Payment
Date during the Damages Accrual Period (and on the Damages Payment Date next
succeeding the end of the Damages Accrual Period if the Damage Accrual Period
does not end on a Damages Payment Date) to the Record Holders of the Registrable
Securities entitled thereto; provided that any Liquidated Damages Amount accrued
with respect to any Debenture or portion thereof redeemed by the Company on a
redemption date or converted into Underlying Common Stock on a conversion date
prior to the Damages Payment Date, shall, in any such event, be paid instead to
the Holder who submitted such Debenture or portion thereof for redemption or
conversion on the applicable redemption date or

                                       8

conversion date, as the case may be, on such date (or promptly following the
conversion date, in the case of conversion); provided, further, that, in the
case of an Event of the type described in clause (ii) or (iii) of the first
paragraph of this Section 2(e), such Liquidated Damages Amount shall be paid
only to the Holders entitled thereto pursuant to such first paragraph by check
mailed to the address set forth in the Notice and Questionnaire delivered by
such Holder. The Trustee shall be entitled, on behalf of registered holders of
Debentures or Underlying Common Stock, to seek any available remedy for the
enforcement of this Agreement, including for the payment of such Liquidated
Damages Amount. Notwithstanding the foregoing, the parties agree that the sole
damages payable for a violation of the terms of this Agreement with respect to
which liquidated damages are expressly provided shall be such liquidated
damages. Nothing shall preclude any Holder from pursuing or obtaining specific
performance or other equitable relief with respect to this Agreement.

         All of the Company's obligations set forth in this Section 2(e) that
are outstanding with respect to any Registrable Security at the time such
security ceases to be a Registrable Security shall survive until such time as
all such obligations with respect to such security have been satisfied in full
(notwithstanding termination of this Agreement pursuant to Section 8(k)).

         The parties hereto agree that the liquidated damages provided for in
this Section 2(e) constitute a reasonable estimate of the damages that may be
incurred by Holders of Registrable Securities by reason of the failure of the
Shelf Registration Statement to be filed or declared effective or available for
effecting resales of Registrable Securities in accordance with the provisions
hereof.

         Section 3. Registration Procedures. In connection with the registration
obligations of the Company under Section 2 hereof, during the Effectiveness
Period, the Company shall:

         (a)      Prepare and file with the SEC a Registration Statement or
Registration Statements on Form S-3 or another appropriate form under the
Securities Act available for the sale of the Registrable Securities by the
Holders thereof in accordance with the intended method or methods of
distribution thereof, and use its reasonable best efforts to cause each such
Registration Statement to become effective and remain effective as provided
herein; provided that before filing any Registration Statement or Prospectus or
any amendments or supplements thereto with the SEC, furnish to the Initial
Purchaser and the Special Counsel of such offering, if any, copies of all such
documents proposed to be filed at least three (3) Business Days prior to the
filing of such Registration Statement or amendment thereto or Prospectus or
supplement thereto.

         (b)      Subject to Section 3(h), prepare and file with the SEC such
amendments and post-effective amendments to each Registration Statement as may
be necessary to keep such Registration Statement continuously effective for the
applicable period specified in Section 2(a); cause the related Prospectus to be

                                       9

supplemented by any required prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and use its reasonable best efforts to comply with the
provisions of the Securities Act applicable to it with respect to the
disposition of all securities covered by such Registration Statement during the
Effectiveness Period in accordance with the intended methods of disposition by
the sellers thereof set forth in such Registration Statement as so amended or
such Prospectus as so supplemented.

         (c)      As promptly as practicable give notice to the Notice Holders,
the Initial Purchaser and the Special Counsel, (i) when any Prospectus,
prospectus supplement, Registration Statement or post-effective amendment to a
Registration Statement has been filed with the SEC and, with respect to a
Registration Statement or any post-effective amendment, when the same has been
declared effective, (ii) of any request, following the effectiveness of the
Initial Shelf Registration Statement under the Securities Act, by the SEC or any
other federal or state governmental authority for amendments or supplements to
any Registration Statement or related Prospectus or for additional information,
(iii) of the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of any Registration
Statement or the initiation or threatening of any proceedings for that purpose,
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (v) of the occurrence of, but
not the nature of or details concerning, a Material Event and (vi) of the
determination by the Company that a post-effective amendment to a Registration
Statement will be filed with the SEC, which notice may, at the discretion of the
Company (or as required pursuant to Section 3(h)), state that it constitutes a
Deferral Notice, in which event the provisions of Section 3(h) shall apply.

         (d)      Use its reasonable best efforts to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement or the
lifting of any suspension of the qualification (or exemption from qualification)
of any of the Registrable Securities for sale in any jurisdiction in which they
have been qualified for sale, in either case at the earliest possible moment,
and provide immediate notice to each Notice Holder and the Initial Purchaser of
the withdrawal of any such order.

         (e)      As promptly as practicable furnish to each Notice Holder, the
Special Counsel and the Initial Purchaser, upon request and without charge, at
least one (1) conformed copy of the Registration Statement and any amendment
thereto, including exhibits and all documents incorporated or deemed to be
incorporated therein by reference.

         (f)      During the Effectiveness Period, deliver to each Notice
Holder, the Special Counsel, if any, and the Initial Purchaser, in connection
with any sale of

                                       10

Registrable Securities pursuant to a Registration Statement, without charge, as
many copies of the Prospectus or Prospectuses relating to such Registrable
Securities (including each preliminary prospectus) and any amendment or
supplement thereto as such Notice Holder may reasonably request; and the Company
hereby consents (except during such periods that a Deferral Notice is
outstanding and has not been revoked) to the use of such Prospectus or each
amendment or supplement thereto by each Notice Holder in connection with any
offering and sale of the Registrable Securities covered by such Prospectus or
any amendment or supplement thereto in the manner set forth therein.

         (g)      Prior to any public offering of the Registrable Securities
pursuant to a Registration Statement, use its reasonable best efforts to
register or qualify or cooperate with the Notice Holders and the Special Counsel
in connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions within the United
States as any Notice Holder reasonably requests in writing (which request may be
included in the Notice and Questionnaire); prior to any public offering of the
Registrable Securities pursuant to the Shelf Registration Statement, use its
reasonable best efforts to keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period in connection
with such Notice Holder's offer and sale of Registrable Securities pursuant to
such registration or qualification (or exemption therefrom) and do any and all
other acts or things reasonably necessary or advisable to enable the disposition
in such jurisdictions of such Registrable Securities in the manner set forth in
the relevant Registration Statement and the related Prospectus; provided that
the Company will not be required to (i) qualify as a foreign corporation or as a
dealer in securities in any jurisdiction where it would not otherwise be
required to qualify but for this Agreement or (ii) take any action that would
subject it to general service of process in suits or to taxation in any such
jurisdiction where it is not then so subject.

         (h)      Upon (A) the issuance by the SEC of a stop order suspending
the effectiveness of the Shelf Registration Statement or the initiation of
proceedings with respect to the Shelf Registration Statement under Section 8(d)
or 8(e) of the Securities Act, (B) the occurrence of any event or the existence
of any fact (a "MATERIAL EVENT") as a result of which any Registration Statement
shall contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any Prospectus shall contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or (C) the occurrence or existence
of any pending corporate development that, in the sole judgment of the Company,
makes it appropriate to suspend the availability of the Shelf Registration
Statement and the related Prospectus:

                                       11

                  (i)      in the case of clause (B) above, subject to the next
         sentence, as promptly as reasonably practicable prepare and file, if
         necessary pursuant to applicable law, a post-effective amendment to
         such Registration Statement or a supplement to the related Prospectus
         or any document incorporated therein by reference or file any other
         required document that would be incorporated by reference into such
         Registration Statement and Prospectus so that such Registration
         Statement does not contain any untrue statement of a material fact or
         omit to state any material fact required to be stated therein or
         necessary to make the statements therein not misleading, and such
         Prospectus does not contain any untrue statement of a material fact or
         omit to state any material fact required to be stated therein or
         necessary to make the statements therein, in the light of the
         circumstances under which they were made, not misleading, as thereafter
         delivered to the purchasers of the Registrable Securities being sold
         thereunder, and, in the case of a post-effective amendment to a
         Registration Statement, subject to the next sentence, use its
         reasonable best efforts to cause it to be declared effective as
         promptly as is practicable, and

                  (ii)     give notice to the Notice Holders, and the Special
         Counsel, if any, that the availability of the Shelf Registration
         Statement is suspended (a "DEFERRAL NOTICE") and, upon receipt of any
         Deferral Notice, each Notice Holder agrees not to sell any Registrable
         Securities pursuant to the Registration Statement until such Notice
         Holder's receipt of copies of the supplemented or amended Prospectus
         provided for in clause (i) above, or until it is advised in writing by
         the Company that the Prospectus may be used, and has received copies of
         any additional or supplemental filings that are incorporated or deemed
         incorporated by reference in such Prospectus.

The Company will use its reasonable best efforts to ensure that the use of the
Prospectus may be resumed (x) in the case of clause (A) above, as promptly as is
reasonably practicable, (y) in the case of clause (B) above, as soon as, in the
sole judgment of the Company, public disclosure of such Material Event would not
be prejudicial to or contrary to the interests of the Company or, if necessary
to avoid unreasonable burden or expense, as soon as reasonably practicable
thereafter and (z) in the case of clause (C) above, as soon as in the sole
judgment of the Company, such suspension is no longer appropriate. The Company
shall be entitled to exercise its right under this Section 3(h) to suspend the
availability of the Shelf Registration Statement or any Prospectus, without
incurring or accruing any obligation to pay liquidated damages pursuant to
Section 2(e), and any such period during which the availability of the
Registration Statement and any Prospectus is suspended (the "DEFERRAL PERIOD")
shall, without incurring any obligation to pay liquidated damages pursuant to
Section 2(e), not exceed 45 days; provided that the aggregate duration of any
Deferral Periods shall not exceed 45 days in any 90-day period (or 75 days in
any 90-day period in the event of a Material Event pursuant to which the Company
has delivered a second notice

                                       12

as permitted below) or 90 days in any 360-day period; provided that in the case
of a Material Event relating to an acquisition or a probable acquisition or
financing, recapitalization, business combination or other similar transaction,
the Company may, without incurring any obligation to pay liquidated damages
pursuant to Section 2(e), deliver to Notice Holders a second notice to the
effect set forth above, which shall have the effect of extending the Deferral
Period by up to an additional 30 days, or such shorter period of time as is
specified in such second notice. Each Notice Holder agrees to hold any notice by
the Company in respect of any Deferral Period or Material Event described in the
last clause of the preceding sentence in confidence.

         (i)      If requested in writing in connection with an underwritten
disposition of Registrable Securities pursuant to a Registration Statement, make
reasonably available for inspection during normal business hours by a
representative for the underwriters of such Registrable Securities, any
attorneys and accountants retained by such underwriters all relevant financial
and other records and pertinent corporate documents and properties of the
Company and its subsidiaries, and cause the appropriate officers, directors and
employees of the Company and its subsidiaries to make reasonably available for
inspection during normal business hours on reasonable notice all relevant
information reasonably requested by such representative for such underwriters,
or any attorneys or accountants in connection with such disposition, in each
case as is customary for similar "due diligence" examinations; provided that
such persons shall first agree in writing with the Company that any non-public
information shall be kept confidential by such persons and shall be used solely
for the purposes of exercising rights under this Agreement, unless (i)
disclosure of such information is required by court or administrative order or
is necessary to respond to inquiries of regulatory authorities, (ii) disclosure
of such information is required by law (including any disclosure requirements
pursuant to federal securities laws in connection with the filing of any
Registration Statement or the use of any prospectus referred to in this
Agreement), (iii) such information becomes generally available to the public
other than as a result of a disclosure or failure to safeguard by any such
person or (iv) such information becomes available to any such person from a
source other than the Company and such source is not bound by a confidentiality
agreement, and provided further that the foregoing inspection and information
gathering shall, to the greatest extent possible, be coordinated on behalf of
all underwriters and the other parties entitled thereto by Special Counsel. Any
person legally compelled to disclose any such confidential information made
available for inspection shall provide the Company with prompt prior written
notice of such requirement so that the Company may seek a protective order or
other appropriate remedy.

         (j)      Comply with all applicable rules and regulations of the SEC
and make generally available to its securityholders earning statements (which
need not be audited) satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder (or any similar rule promulgated under
the Securities Act) for a 12-month period commencing on the first day of the
first fiscal quarter of the

                                       13

Company commencing after the effective date of a Registration Statement, which
statements shall be made available no later than 45 days after the end of the
12-month period or 90 days if the 12-month period coincides with the fiscal year
of the Company.

         (k)      Cooperate with each Notice Holder to facilitate the timely
preparation and delivery of certificates representing Registrable Securities
sold or to be sold pursuant to a Registration Statement, which certificates
shall not bear any restrictive legends, and cause such Registrable Securities to
be in such denominations as are permitted by the Indenture and registered in
such names as such Notice Holder may request in writing at least one (1)
Business Day prior to any sale of such Registrable Securities.

         (l)      Provide a CUSIP number for all Registrable Securities covered
by each Registration Statement not later than the effective date of such
Registration Statement and provide the Trustee and the transfer agent for the
Common Stock with printed certificates for the Registrable Securities that are
in a form eligible for deposit with The Depository Trust Company.

         (m)      Cooperate and assist in any filings required to be made with
the National Association of Securities Dealers, Inc.

         (n)      Upon (i) the filing of the Initial Shelf Registration
Statement and (ii) the effectiveness of the Initial Shelf Registration
Statement, announce the same, in each case by release to Reuters Economic
Services and Bloomberg Business News.

         Section 4. Holder's Obligations. Each Holder agrees, by acquisition of
the Registrable Securities, that no Holder shall be entitled to sell any of such
Registrable Securities pursuant to a Registration Statement or to receive a
Prospectus relating thereto, unless such Holder has furnished the Company with a
Notice and Questionnaire as required pursuant to Section 2(d) hereof (including
the information required to be included in such Notice and Questionnaire and the
information set forth in the next sentence and a sales notice (a "SALES NOTICE")
setting forth the amount of Registrable Securities to be sold and the proposed
sales date not later than three Business Days prior to the proposed sales date).

         Each Notice Holder agrees promptly to furnish to the Company all
information required to be disclosed in order to make the information previously
furnished to the Company by such Notice Holder not misleading and any other
information regarding such Notice Holder and the distribution of such
Registrable Securities as the Company may from time to time reasonably request.
Any sale of any Registrable Securities by any Holder shall constitute a
representation and warranty by such Holder that the information relating to such
Holder and its plan of distribution is as set forth in the Prospectus delivered
by such Holder in connection with such disposition, that such Prospectus does
not as of the time of such sale contain any untrue statement of a material fact
relating to or provided by

                                       14

such Holder or its plan of distribution and that such Prospectus does not as of
the time of such sale omit to state any material fact relating to or provided by
such Holder or its plan of distribution necessary to make the statements in such
Prospectus, in the light of the circumstances under which they were made, not
misleading.

         Each Holder acknowledges and agrees that a Sales Notice will only be
valid for a period of five Business Days commencing with the proposed sales date
and that if any of the Registrable Securities to which such Sales Notice relates
are not sold during such period, a new Sales Notice will need to be submitted to
the Company not later than three Business Days prior to the new proposed sales
date. Notwithstanding the foregoing, no Sales Notice may be submitted, or if
submitted will be of no force and effect, and no Registrable Securities may be
sold pursuant to the Shelf Registration Statement if a Deferral Period is then
in effect.

         Section 5. Registration Expenses. The Company shall bear all fees and
expenses incurred in connection with the performance by the Company of its
obligations under Sections y2 and y3 of this Agreement whether or not any
Registration Statement is declared effective. Such fees and expenses shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (x) with respect to filings required to be
made with the National Association of Securities Dealers, Inc. and (y) of
compliance with federal and state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of the Special Counsel in
connection with Blue Sky qualifications of the Registrable Securities under the
laws of such jurisdictions as Notice Holders may designate pursuant to Section
3(g) of this Agreement and any filings required to be made with the National
Association of Securities Dealers, Inc.), (ii) printing expenses (including,
without limitation, expenses of printing certificates for Registrable Securities
in a form eligible for deposit with The Depository Trust Company), (iii)
duplication expenses relating to copies of any Registration Statement or
Prospectus delivered to any Holders hereunder, (iv) reasonable fees and
disbursements of counsel for the Company and of Special Counsel in connection
with the Shelf Registration Statement, (v) reasonable fees and disbursements of
the Trustee and its counsel and of the registrar and transfer agent for the
Common Stock and (vi) any Securities Act liability insurance obtained by the
Company in its sole discretion. In addition, the Company shall pay the internal
expenses of the Company (including, without limitation, all salaries and
expenses of officers and employees performing legal or accounting duties), the
expense of any annual audit, the fees and expenses incurred in connection with
the listing by the Company of the Registrable Securities on any securities
exchange on which similar securities of the Company are then listed and the fees
and expenses of any person, including special experts, retained by the Company.
Notwithstanding the provisions of this Section 5, each seller of Registrable
Securities shall pay selling expenses, including any underwriting discount and
commissions, and all registration expenses to the extent required by applicable
law.

                                       15

         Section 6. Indemnification and Contribution.

         (a)      Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Holder, each person, if any, who controls any
Holder within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act, and each affiliate of any Holder within the meaning of
Rule 405 under the Securities Act from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), caused by any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such losses, claims, damages or liabilities
are caused by any such untrue statement or omission or alleged untrue statement
or omission based upon information relating to any Holder furnished to the
Company in writing by such Holder expressly for use therein; provided that the
indemnification contained in this paragraph shall not inure to the benefit of
any Holder (or to the benefit of any person controlling such Holder) on account
of any such losses, claims, damages or liabilities caused by any untrue
statement or alleged untrue statement or omission or alleged omission made in
any preliminary prospectus; provided in each case the Company has performed its
obligations under Section 3(f) hereof if either (A) (x) such Holder failed to
send or deliver a copy of the Prospectus with or prior to the delivery of
written confirmation of the sale by such Holder to the person asserting the
claim from which such losses, claims, damages or liabilities arise and (y) the
Prospectus would have corrected such untrue statement or alleged untrue
statement or such omission or alleged omission, or (B) (x) such untrue statement
or alleged untrue statement, omission or alleged omission is corrected in an
amendment or supplement to the Prospectus and (y) having previously been
furnished by or on behalf of the Company with copies of the Prospectus as so
amended or supplemented, such Holder thereafter fails to deliver such Prospectus
as so amended or supplemented, with or prior to the delivery of written
confirmation of the sale of a Registrable Security to the person asserting the
claim from which such losses, claims, damages or liabilities arise.

         (b)      Indemnification by Holders. Each Holder agrees severally and
not jointly to indemnify and hold harmless the Company and its directors, its
officers and each person, if any, who controls the Company (within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act)
and each affiliate of the Company within the meaning of Rule 405 under the
Securities Act or any other Holder, to the same extent as the foregoing
indemnity from the Company to such Holder, but only with reference to
information relating to such Holder furnished to the Company in writing by such
Holder expressly for use in such Registration Statement or Prospectus or
amendment or supplement thereto. In no event shall the liability of any Holder
hereunder be greater in amount than

                                       16

the dollar amount of the proceeds received by such Holder upon the sale of the
Registrable Securities pursuant to the Registration Statement giving rise to
such indemnification obligation.

         (c)      Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to Section 6(a) or
y6(b) hereof, such person (the "INDEMNIFIED PARTY") shall promptly notify the
person against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in
writing and the indemnifying party, upon request of the indemnified party, shall
retain counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the reasonable fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified party shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by, in the case of
parties indemnified pursuant to Section 6(a), the Holders of a majority (with
Holders of Debentures deemed to be the Holders, for purposes of determining such
majority, of the number of shares of Underlying Common Stock into which such
Debentures are or would be convertible as of the date on which such designation
is made) of the Registrable Securities covered by the Registration Statement
held by Holders that are indemnified parties pursuant to Section 6(a) and, in
the case of parties indemnified pursuant to Section 6(b), the Company. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment.

         Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior

                                       17

to the date of such settlement. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.

         (d)      Contribution. To the extent that the indemnification provided
for in Section 6(a) or y6(b) is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party or parties on the one hand
and the indemnified party or parties on the other hand or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the indemnifying party or
parties on the one hand and of the indemnified party or parties on the other
hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company shall be deemed to
be equal to the total net proceeds from the initial placement pursuant to the
Purchase Agreement (before deducting expenses) of the Registrable Securities to
which such losses, claims, damages or liabilities relate. The relative benefits
received by any Holder shall be deemed to be equal to the value of receiving
Registrable Securities that are registered under the Securities Act. The
relative fault of the Holders on the one hand and the Company on the other hand
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Holders or by
the Company, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Holders'
respective obligations to contribute pursuant to this Section 6 are several in
proportion to the respective number of Registrable Securities they have sold
pursuant to a Registration Statement, and not joint.

         The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding this Section 6, no

                                       18

indemnifying party that is a selling Holder shall be required to contribute any
amount in excess of the amount by which the total price at which the Registrable
Securities sold by it and distributed to the public were offered to the public
exceeds the amount of any damages that such indemnifying party has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.

         (e)      The remedies provided for in this Section 6 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
an indemnified party at law or in equity, hereunder, under the Purchase
Agreement or otherwise.

         (f)      The indemnity and contribution provisions contained in this
Section 6 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Holder, any person controlling any Holder or any affiliate of any Holder
or by or on behalf of the Company, its officers or directors or any person
controlling the Company and (iii) the sale of any Registrable Securities by any
Holder.

         Section 7. Information Requirements. The Company covenants that, if at
any time before the end of the Effectiveness Period the Company is not subject
to the reporting requirements of the Exchange Act, it will cooperate with any
Holder and take such further commercially reasonable action as any Holder may
reasonably request in writing (including, without limitation, making such
reasonable representations as any such Holder may reasonably request), all to
the extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144 and Rule 144A under the Securities Act
and customarily taken in connection with sales pursuant to such exemptions. Upon
the written request of any Holder, the Company shall deliver to such Holder a
written statement as to whether it has complied with such filing requirements,
unless such a statement has been included in the Company's most recent report
filed pursuant to Section 13 or Section 15(d) of Exchange Act. Notwithstanding
the foregoing, nothing in this Section 7 shall be deemed to require the Company
to register any of its securities (other than the Common Stock) under any
section of the Exchange Act.

         Section 8. Miscellaneous.

         (a)      No Conflicting Agreements. The Company is not, as of the date
hereof, a party to, nor shall it, on or after the date of this Agreement, enter
into, any agreement with respect to its securities that conflicts with the
rights granted to the Holders in this Agreement. The Company represents and
warrants that the

                                       19

rights granted to the Holders hereunder do not in any way conflict with the
rights granted to the holders of the Company's securities under any other
agreements.

         (b)      Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of a majority of the then outstanding Underlying Common Stock constituting
Registrable Securities (with Holders of Debentures deemed to be the Holders, for
purposes of this Section, of the number of outstanding shares of Underlying
Common Stock into which such Debentures are or would be convertible as of the
date on which such consent is requested). Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders whose securities are being
sold pursuant to a Registration Statement and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of at
least a majority of the Registrable Securities being sold by such Holders
pursuant to such Registration Statement; provided that the provisions of this
sentence may not be amended, modified or supplemented except in accordance with
the provisions of the immediately preceding sentence. Notwithstanding the
foregoing sentence, (i) this Agreement may be amended by written agreement
signed by the Company and the Initial Purchaser, without the consent of the
Holders of Registrable Securities, to cure any ambiguity or to correct or
supplement any provision contained herein that may be defective or inconsistent
with any other provision contained herein, or to make such other provisions in
regard to matters or questions arising under this Agreement that shall not
adversely affect the interests of the Holders of Registrable Securities. Each
Holder of Registrable Securities outstanding at the time of any such amendment,
modification, supplement, waiver or consent or thereafter shall be bound by any
such amendment, modification, supplement, waiver or consent effected pursuant to
this Section 8(b), whether or not any notice, writing or marking indicating
such amendment, modification, supplement, waiver or consent appears on the
Registrable Securities or is delivered to such Holder.

         (c)      Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, by telecopier, by
courier guaranteeing overnight delivery or by first-class mail, return receipt
requested, and shall be deemed given (i) when made, if made by hand delivery,
(ii) upon confirmation, if made by telecopier, (iii) one (1) Business Day after
being deposited with such courier, if made by overnight courier or (iv) on the
date indicated on the notice of receipt, if made by first-class mail, to the
parties as follows:

                  (i)      if to a Holder, at the most current address given by
         such Holder to the Company in a Notice and Questionnaire or any
         amendment thereto;

                                       20

                  (ii)     if to the Company, to:

                           The Williams Companies, Inc.
                           One Williams Center
                           Tulsa, Oklahoma 74172
                           Attention: Treasurer
                           Telecopy No.: (918) 573-2065

                  (iii)    if to the Initial Purchaser, to:

                           Lehman Brothers Inc.
                           399 Park Avenue, 11th Floor
                           New York, New York 10022
                           Attention: Syndicate Department
                           Fax No.: (212) 526-0943

         with a copy, in the case of any notice pursuant to Section 6, to the:

                           Director of Litigation,
                           Office of the General Counsel,
                           Lehman Brothers Inc.
                           399 Park Avenue, 15th Floor
                           New York, NY 10022

or to such other address as such person may have furnished to the other persons
identified in this Section 8(c) in writing in accordance herewith.

         (d)      Approval of Holders. Whenever the consent or approval of
Holders of a specified percentage of Registrable Securities is required
hereunder, Registrable Securities held by the Company or its affiliates (as such
term is defined in Rule 405 under the Securities Act) (other than the Initial
Purchaser or subsequent Holders if such subsequent Holders are deemed to be such
affiliates solely by reason of their holdings of such Registrable Securities)
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.

         (e)      Successors and Assigns. Any person who purchases any
Registrable Securities from the Initial Purchaser shall be deemed, for purposes
of this Agreement, to be an assignee of the Initial Purchaser. This Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties and shall inure to the benefit of and be binding upon each
Holder of any Registrable Securities, provided that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Indenture. If any transferee of any
Holder shall acquire Registrable Securities, in any manner, whether by operation
of law or otherwise, such Registrable Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding such Registrable
Securities, such person shall be conclusively deemed to have agreed to be bound
by and to perform all of

                                       21

the terms and provisions of this Agreement and such person shall be entitled to
receive the benefits hereof.

         (f)      Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be original and all of which taken together
shall constitute one and the same agreement.

         (g)      Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.

         (h)      Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.

         (i)      Severability. If any term provision, covenant or restriction
of this Agreement is held to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated thereby, and the parties hereto shall use their best efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction, it being intended that all of the rights and privileges of the
parties shall be enforceable to the fullest extent permitted by law.

         (j)      Entire Agreement. This Agreement is intended by the parties as
a final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and the registration rights
granted by the Company with respect to the Registrable Securities. Except as
provided in the Purchase Agreement, there are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Company with respect to
the Registrable Securities. This Agreement supersedes all prior agreements and
undertakings among the parties with respect to such registration rights. No
party hereto shall have any rights, duties or obligations other than those
specifically set forth in this Agreement. In no event will such methods of
distribution take the form of an underwritten offering of the Registrable
Securities without the prior agreement of the Company.

         (k)      Termination. This Agreement and the obligations of the parties
hereunder shall terminate upon the end of the Effectiveness Period, except for
any

                                       22

liabilities or obligations under Section 4, 5 or 6 hereof and the obligations
to make payments of and provide for liquidated damages under Section 2(e) hereof
to the extent such damages accrue prior to the end of the Effectiveness Period,
each of which shall remain in effect in accordance with its terms.

                                       23

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

                                              THE WILLIAMS COMPANIES, INC.

                                              By:  /s/ James G. Ivey
                                                  -----------------------------
                                                  Name:
                                                  Title:

Confirmed and accepted as of
the date first above written:

By:  LEHMAN BROTHERS INC.

By:  /s/ Robert Pierce
    -----------------------------------------
    Name:
    Title:

                                                                  EXECUTION COPY

================================================================================
                                                                    EXHIBIT 10.1

                                  $500,000,000

                               TERM LOAN AGREEMENT

                                      AMONG

                        WILLIAMS PRODUCTION HOLDINGS LLC,

                        WILLIAMS PRODUCTION RMT COMPANY,
                                  AS BORROWER,

                               THE SEVERAL LENDERS
                        FROM TIME TO TIME PARTIES HERETO,

                            LEHMAN BROTHERS INC. AND
                         BANC OF AMERICA SECURITIES LLC,
                            AS JOINT LEAD ARRANGERS,

                             CITICORP USA, INC. AND
                              JPMORGAN CHASE BANK,
                            AS CO-SYNDICATION AGENTS,

                             BANK OF AMERICA, N.A.,
                             AS DOCUMENTATION AGENT,

                                       AND

                          LEHMAN COMMERCIAL PAPER INC.,
                             AS ADMINISTRATIVE AGENT

                            DATED AS OF MAY 30, 2003

================================================================================

                                TABLE OF CONTENTS

                                                                                                                    PAGE
                                                                                                                 
SECTION 1.            DEFINITIONS...............................................................................      1

         1.1      Defined Terms.................................................................................      1

         1.2      Other Definitional Provisions.................................................................     20

SECTION 2.            AMOUNT AND TERMS OF TERM LOAN COMMITMENTS.................................................     21

         2.1      Term Loan Commitments.........................................................................     21

         2.2      Procedure for Term Loan Borrowing.............................................................     21

         2.3      Repayment of Term Loans.......................................................................     21

         2.4      Repayment of Term Loans; Evidence of Debt.....................................................     22

         2.5      Fees, etc.....................................................................................     23

         2.6      Optional Prepayments..........................................................................     23

         2.7      Mandatory Prepayments.........................................................................     23

         2.8      Conversion and Continuation Options...........................................................     24

         2.9      Minimum Amounts and Maximum Number of Eurodollar Tranches.....................................     24

         2.10     Interest Rates and Payment Dates..............................................................     25

         2.11     Computation of Interest and Fees..............................................................     25

         2.12     Inability to Determine Interest Rate..........................................................     25

         2.13     Pro Rata Treatment and Payments...............................................................     26

         2.14     Requirements of Law...........................................................................     27

         2.15     Taxes.........................................................................................     28

         2.17     Illegality....................................................................................     31

         2.18     Change of Lending Office......................................................................     31

         2.19     Replacement of Lenders under Certain Circumstances............................................     31

SECTION 3.            REPRESENTATIONS AND WARRANTIES............................................................     32

         3.1      Financial Condition...........................................................................     32

         3.2      No Change.....................................................................................     32

         3.3      Corporate Existence; Compliance with Law......................................................     33

         3.4      Corporate Power; Authorization; Enforceable Obligations.......................................     33

         3.5      No Legal Bar..................................................................................     33

         3.6      No Material Litigation........................................................................     33

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                                TABLE OF CONTENTS
                                   (CONTINUED)

                                                                                                                    PAGE
                                                                                                                 
         3.7      No Default....................................................................................     34

         3.8      Ownership of Property; Liens..................................................................     34

         3.9      Intellectual Property.........................................................................     34

         3.10     Taxes.........................................................................................     34

         3.11     Federal Regulations...........................................................................     34

         3.12     Labor Matters.................................................................................     34

         3.13     ERISA.........................................................................................     35

         3.14     Investment Company Act; Other Regulations.....................................................     35

         3.15     Subsidiaries..................................................................................     35

         3.16     Use of Proceeds...............................................................................     35

         3.17     Environmental Matters.........................................................................     35

         3.18     Accuracy of Information, etc..................................................................     37

         3.19     Security Documents............................................................................     37

         3.20     Solvency......................................................................................     38

         3.21     Hydrocarbon Interests.........................................................................     38

         3.22     Permits.......................................................................................     38

         3.23     Lease Payments................................................................................     38

         3.24     Public Utility Holding Company Act............................................................     39

SECTION 4.            CONDITIONS PRECEDENT......................................................................     39

         4.1      Conditions to the Term Loan...................................................................     39

SECTION 5.            AFFIRMATIVE COVENANTS.....................................................................     42

         5.1      Financial Statements..........................................................................     42

         5.2      Certificates; Other Information...............................................................     43

         5.3      Payment of Obligations........................................................................     44

         5.4      Conduct of Business and Maintenance of Existence, etc.........................................     44

         5.5      Maintenance of Property; Insurance............................................................     45

         5.6      Inspection of Property; Books and Records; Discussions........................................     45

         5.7      Notices.......................................................................................     46

         5.8      Environmental Laws............................................................................     46

                                       ii

                                TABLE OF CONTENTS
                                   (CONTINUED)

                                                                                                                    PAGE
                                                                                                                 
         5.9      Additional Collateral, etc....................................................................     46

         5.10     Further Assurances............................................................................     47

         5.11     Capital Expenditure...........................................................................     48

SECTION 6.            NEGATIVE COVENANTS........................................................................     48

         6.1      Financial Condition Covenants.................................................................     48

         6.2      Limitation on Indebtedness....................................................................     48

         6.3      Limitation on Liens...........................................................................     49

         6.4      Limitation on Fundamental Changes.............................................................     52

         6.5      Limitation on Disposition of Property.........................................................     52

         6.6      Limitation on Restricted Payments.............................................................     54

         6.7      Limitation on Investments.....................................................................     55

         6.8      Limitation on Optional Payments and Modifications of Indebtedness.............................     56

         6.9      Limitation on Transactions with Affiliates....................................................     56

         6.10     Limitation on Sales and Leasebacks............................................................     56

         6.11     Limitation on Changes in Fiscal Periods.......................................................     56

         6.12     Limitation on Negative Pledge Clauses.........................................................     56

         6.13     Limitation on Restrictions on Subsidiary Distributions, etc...................................     57

         6.14     Business Activities...........................................................................     57

         6.15     Holdings Negative Pledge; Limitation on Assets................................................     57

         6.16     Minimum Borrower Liquidity....................................................................     58

SECTION 7.            EVENTS OF DEFAULT.........................................................................     58

         7.2      Certain Cure Rights...........................................................................     61

SECTION 8.            THE AGENTS................................................................................     62

         8.1      Appointment...................................................................................     62

         8.2      Delegation of Duties..........................................................................     62

         8.3      Exculpatory Provisions........................................................................     62

         8.4      Reliance by Agents............................................................................     63

         8.5      Notice of Default.............................................................................     63

         8.6      Non-Reliance on Agents and Other Lenders......................................................     63

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                                TABLE OF CONTENTS
                                   (CONTINUED)

                                                                                                                    PAGE
                                                                                                                 
         8.7      Indemnification...............................................................................     64

         8.8      Agent in Its Individual Capacity..............................................................     64

         8.9      Successor Administrative Agent................................................................     65

         8.10     Authorization to Release Liens and Guarantees.................................................     65

         8.11     The Arrangers; the Co-Syndication Agents; the Documentation Agent.............................     65

SECTION 9.            MISCELLANEOUS.............................................................................     65

         9.1      Amendments and Waivers........................................................................     65

         9.2      Notices.......................................................................................     67

         9.3      No Waiver; Cumulative Remedies................................................................     68

         9.4      Survival of Representations and Warranties....................................................     68

         9.5      Payment of Expenses...........................................................................     69

         9.6      Successors and Assigns; Participations and Assignments........................................     70

         9.7      Adjustments; Set off..........................................................................     73

         9.8      Counterparts..................................................................................     74

         9.9      Severability..................................................................................     74

         9.10     Integration...................................................................................     74

         9.11     GOVERNING LAW.................................................................................     74

         9.12     Submission to Jurisdiction; Waivers...........................................................     74

         9.13     Acknowledgments...............................................................................     75

         9.14     Confidentiality...............................................................................     75

         9.15     Release of Collateral and Guarantee Obligations...............................................     76

         9.16     Delivery of Lender Addenda....................................................................     76

         9.17     WAIVERS OF JURY TRIAL.........................................................................     76

                                       iv

                  TERM LOAN AGREEMENT, dated as of May 30, 2003, among WILLIAMS
PRODUCTION HOLDINGS LLC, a Delaware limited liability company ("Holdings"),
WILLIAMS PRODUCTION RMT COMPANY, a Delaware corporation (the "Borrower"), the
several banks and other financial institutions or entities from time to time
parties to this Agreement as lenders (the "Lenders"), LEHMAN BROTHERS INC.
("LBI") and BANC OF AMERICA SECURITIES LLC, as joint advisors, joint lead
arrangers and joint book runners (together in such capacities, the "Arrangers"),
CITICORP USA, INC. and JPMORGAN CHASE BANK, as co-syndication agents (together
in such capacities, the "Co-Syndication Agents"), BANK OF AMERICA, N.A., as
documentation agent (in such capacity, the "Documentation Agent"), and LEHMAN
COMMERCIAL PAPER INC. ("LCPI"), as administrative agent (in such capacity, the
"Administrative Agent").

                              W I T N E S S E T H:

                  WHEREAS, the Lenders are willing to make a term loan available
to the Borrower upon and subject to the terms and conditions hereinafter set
forth; and

                  WHEREAS, the Borrower intends to refinance the Existing Credit
Agreement (as defined below) with proceeds from the term loan hereunder;

                  NOW, THEREFORE, in consideration of the premises and the
agreements hereinafter set forth, the parties hereto hereby agree as follows:

                             SECTION 1. DEFINITIONS

                  1.1      Defined Terms. As used in this Agreement, the terms
listed in this Section 1.1 shall have the respective meanings set forth in this
Section 1.1.

                  "Administrative Agent": as defined in the preamble hereto.

                  "Affiliate": as to any Person, any other Person that, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" of a Person means
the power, directly or indirectly, either to (a) vote 10% or more of the
securities having ordinary voting power for the election of directors (or
persons performing similar functions) of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise.

                  "Agents": the collective reference to the Co-Syndication
Agents, the Documentation Agent and the Administrative Agent.

                  "Agreement": this Term Loan Agreement, as amended,
supplemented or otherwise modified from time to time.

                  "Applicable Margin": (a) with respect to Base Rate Loans, a
rate per annum equal to 2.75%, and (b) with respect to Eurodollar Loans, a rate
per annum equal to 3.75%.

                  "Approved Engineer": any independent engineer recognized in
the U.S. oil and gas loan syndication market and reasonably satisfactory to the
Administrative Agent.

                  "Arrangers": as defined in the preamble hereto.

                  "Asset Sale": any Disposition of Property or series of related
Dispositions of Property (excluding any such Disposition permitted by clause
(a), (b), (c), (d), (e), (f), (i), (j), (k), (l) or (m) of Section 6.5) which
yields gross proceeds to Holdings, the Borrower or any of the Borrower's
Subsidiaries in excess of $500,000.

                  "Assignee": as defined in Section 9.6(c).

                  "Assignor": as defined in Section 9.6(c).

                  "Barrett Trust": the trust created pursuant to the Trust
Agreement dated as of November 1, 1997 by and among Barrett Resources
Corporation, a Delaware corporation, in its capacity as the initial Manager,
Delaware Trust Capital Management, Inc., a Delaware banking corporation in its
capacity as Special Trustee and the Holders signatory thereto (as amended,
supplemented or otherwise modified from time to time).

                  "Base Rate": for any day, a rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime
Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the prime
lending rate as set forth on the British Banking Association Telerate Page 5 (or
such other comparable page as may, in the opinion of the Administrative Agent,
replace such page for the purpose of displaying such rate), as in effect from
time to time. Any change in the Base Rate due to a change in the Prime Rate
actually available or the Federal Funds Effective Rate shall be effective as of
the opening of business on the effective day of such change in the Prime Rate or
the Federal Funds Effective Rate, respectively. The Prime Rate is a reference
rate and does not necessarily represent the lowest or best rate actually
available.

                  "Base Rate Loans": Term Loans for which the applicable rate of
interest is based upon the Base Rate.

                  "Benefited Lender": as defined in Section 9.7.

                  "Bison Entities": means, collectively, Bison Royalty LLC, PPH
and Rulison Production Company LLC.

                  "Board": the Board of Governors of the Federal Reserve System
of the United States (or any successor).

                  "Borrower": as defined in the preamble hereto.

                  "Borrowing Notice": with respect to any request for borrowing
of Term Loans hereunder, a notice from the Borrower, substantially in the form
of, and containing the information prescribed by, Exhibit I, delivered to the
Administrative Agent.

                                       2

                  "Business Day": (a) for all purposes other than as covered by
clause (b) below, a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to close and
(b) with respect to all notices and determinations in connection with, and
payments of principal and interest on, Eurodollar Loans, any day which is a
Business Day described in clause (a) and which is also a day for trading by and
between banks in Dollar deposits in the interbank eurodollar market.

                  "Capital Expenditures": for any period, with respect to any
Person, the aggregate of all expenditures by such Person for the acquisition or
leasing (pursuant to a capital lease) of fixed or capital assets, the drilling
of wells or additions to equipment (including replacements, capitalized repairs
and improvements during such period) which are required to be capitalized under
GAAP on a balance sheet of such Person.

                  "Capital Lease Obligations": with respect to any Person, the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP;
and, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.

                  "Capital Stock": any and all shares, interests, participations
or other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase any of the foregoing.

                  "Cash Equivalents": (a) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States government or issued by
any agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition; (b)
certificates of deposit, time deposits, eurodollar time deposits or overnight
bank deposits having maturities of one year or less from the date of acquisition
issued by any Lender or by any commercial bank organized under the laws of the
United States of America or any state thereof having combined capital and
surplus of not less than $100,000,000; (c) commercial paper of an issuer rated
at least A-2 by S&P or P-2 by Moody's, or carrying an equivalent rating by a
nationally recognized rating agency, if both of the two named rating agencies
cease publishing ratings of commercial paper issuers generally, and maturing
within 270 days from the date of acquisition; (d) short-term tax exempt
securities including municipal notes, commercial paper, auction rate floaters,
and floating rate notes rated either "P-1" by Moody's or "A-1" by S&P and
maturing within 270 days from the date of acquisition; (e) repurchase
obligations of any Lender or of any commercial bank satisfying the requirements
of clause (b) of this definition, having a term of not more than 30 days with
respect to securities issued or fully guaranteed or insured by the United States
government; (f) securities with maturities of one year or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States, by any political subdivision or taxing authority of any
such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are rated at least A
by S&P or A by Moody's; (g) securities with maturities of one year or less from
the date of acquisition backed by standby

                                       3

letters of credit issued by any Lender or any commercial bank satisfying the
requirements of clause (b) of this definition; and (h) shares of money market
mutual or similar funds which invest primarily in assets satisfying the
requirements of clauses (a) through (g) of this definition.

                  "Change of Control": the occurrence of any of the following
events: (i) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), shall become, or obtain rights (whether by means or warrants, options or
otherwise) to become, the "beneficial owner" (as defined in Rules 13(d)-3 and
13(d)-5 under the Exchange Act), directly or indirectly, of more than 50% of the
outstanding common stock of Parent; (ii) the board of directors of Parent shall
cease to consist of a majority of Continuing Directors; (iii) Parent shall cease
to own and control, of record and beneficially, directly, 100% of each class of
outstanding Capital Stock of Holdings free and clear of all Liens; or (iv)
Holdings shall cease to own and control, of record and beneficially, directly,
100% of each class of outstanding Capital Stock of the Borrower (other than the
Class B Common Stock of the Borrower issued to the Administrative Agent) free
and clear of all Liens (except Liens created by the Guarantee and Collateral
Agreement).

                  "Closing Date": the date on which the conditions precedent set
forth in Section 4.1 shall have been satisfied, which date shall be not later
than June 15, 2003.

                  "Code": the United States Internal Revenue Code of 1986, as
amended from time to time.

                  "Collateral": all Property of the Loan Parties, now owned or
hereafter acquired, upon which a Lien is purported to be created by any Security
Document; provided that the Collateral shall not include in any event (i) the
Properties set forth on Schedules 6.5(f)(i) and 6.5(i), (ii) the Capital Stock
of the Bison Entities, (iii) any Property of a Bison Entity other than an Oil
and Gas Property of such Bison Entity, and (iv) any Oil and Gas Property with a
fair market value of less than $2,000,000 (so long as the aggregate fair market
value of the Properties excluded by the Borrower and any other Grantor from
inclusion in the Collateral as a result of such threshold at any time does not
exceed $10,000,000 in the aggregate) and (v) any other Property excluded from
the Collateral pursuant to the terms of the Guarantee and Collateral Agreement.

                  "Collateral Account": as defined in the Guarantee and the
Collateral Agreement.

                  "Commonly Controlled Entity": an entity, whether or not
incorporated, that is under common control with the Borrower within the meaning
of Section 4001 of ERISA or is part of a group that includes the Borrower and
that is treated as a single employer under Section 414 of the Code.

                  "Compliance Certificate": a certificate duly executed by a
Responsible Officer, substantially in the form of Exhibit B.

                  "Confidential Information Memorandum": the Confidential
Information Memorandum dated May 2003 and furnished to the initial Lenders in
connection with the syndication of the Facility.

                                       4

                  "Consolidated EBITDA": of any Person for any period,
Consolidated Net Income of such Person and its Subsidiaries for such period
plus, without duplication and to the extent reflected as a charge in the
statement of such Consolidated Net Income for such period, the sum of (a) income
tax expense, (b) consolidated interest expense calculated in accordance with
GAAP of such Person and its Subsidiaries, amortization or write-off of debt
discount and debt issuance costs and commissions, discounts and other fees and
charges associated with Indebtedness (including, in the case of the Borrower,
the Term Loans), (c) depreciation, depletion and amortization expense, (d)
amortization of intangibles (including, but not limited to, goodwill) and
organization costs, (e) any extraordinary, unusual or non-recurring expenses or
losses, (f) regardless of whether such amount is reflected as a charge in the
statement of such Consolidated Net Income but only to the extent that such
amount is not reflected in Consolidated Net Income, cash received by such Person
in respect of hedge agreements entered into by Parent or its Affiliates hedging
the oil or gas production of the Borrower, (g) non-cash corporate overhead
allocated to the Borrower in amounts consistent with past practice which are not
reimbursed by the Borrower pursuant to Section 6.6, (h) any other non-cash
charges and (i) any impairment of goodwill or property asset carrying value, and
minus, to the extent included in the statement of such Consolidated Net Income
for such period, the sum of (w) interest income (except (I) to the extent
deducted in determining Consolidated Interest Expense and (II) interest accrued
in respect of investments made with the proceeds of the cash collateral
contemplated by Section 6.17), (x) any extraordinary, unusual or non-recurring
income or gains, (y) to the extent that such amount is not reflected in
Consolidated Net Income, cash payments by such Person in respect of hedge
agreements entered into by Parent or its Affiliates hedging the oil or gas
production of the Borrower and (z) any other non-cash income, all as determined
on a consolidated basis; provided that for such relevant fiscal quarter period
prior to the fiscal quarter ended September 30, 2003, the applicable
"Consolidated EBITDA" shall be as set forth on Schedule 1.1(d).

                  "Consolidated Interest Coverage Ratio": for any period, the
ratio of (a) Consolidated EBITDA of the Borrower and its Subsidiaries for such
period to (b) Consolidated Interest Expense of the Borrower and its Subsidiaries
for such period.

                  "Consolidated Interest Expense": of any Person for any period,
total cash interest expense (including that attributable to Capital Lease
Obligations) of such Person and its Subsidiaries for such period with respect to
all outstanding Indebtedness of such Person and its Subsidiaries (including,
without limitation, all commissions, discounts and other fees and charges owed
by such Person with respect to letters of credit and bankers' acceptance
financing and net costs of such Person under Hedge Agreements in respect of
interest rates to the extent such net costs are allocable to such period in
accordance with GAAP, and excluding all fees and expenses incurred in connection
with this Agreement); provided that for the fiscal quarters ending September 30,
2003, December 31, 2003 and March 31, 2004, "Consolidated Interest Expense" for
the relevant period shall be deemed to equal Consolidated Interest Expense for
such fiscal quarter (and each fiscal quarter commencing on or after July 1,
2003) multiplied by 4, 2 and 4/3, respectively.

                  "Consolidated Net Income": of any Person for any period, the
consolidated net income (or loss) of such Person and its Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP; provided
that in calculating Consolidated Net

                                       5

Income of the Borrower and its consolidated Subsidiaries for any period, there
shall be excluded (a) the income (or deficit) of any Person accrued prior to the
date it becomes a Subsidiary of the Borrower or is merged into or consolidated
with the Borrower or any of its Subsidiaries (excluding, however, any merger or
consolidation of a Subsidiary with and into the Borrower or another Subsidiary),
and (b) the income (or deficit) of any Person (other than a Subsidiary of the
Borrower) in which the Borrower or any of its Subsidiaries has an ownership
interest, except to the extent that any such income is actually received by the
Borrower or such Subsidiary in the form of dividends or similar distributions
and (c) the undistributed earnings of any Subsidiary of the Borrower to the
extent that the declaration or payment of dividends or similar distributions by
such Subsidiary is not at the time permitted by the terms of any Contractual
Obligation (other than under any Loan Document) or Requirement of Law applicable
to such Subsidiary.

                  "Continuing Directors": as to any Person, the directors of
such Person on the Closing Date, after giving effect to the transactions
contemplated hereby, and each other director, if, in each case, such other
director's nomination for election to the board of directors of such Person is
recommended by at least 66-2/3% of the then Continuing Directors or such other
director receives the vote of each of the shareholders of such Person on the
Closing Date in his or her election by the shareholders of such Person.

                  "Contractual Obligation": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
Property is bound.

                  "Default": any of the events specified in Section 7.1, whether
or not any requirement for the giving of notice, the lapse of time, or both, has
been satisfied.

                  "Derivatives Counterparty": as defined in Section 6.6.

                  "Disposition": with respect to any Property, any sale, lease,
sale and leaseback, assignment, conveyance, transfer or other disposition
thereof; and the terms "Dispose" and "Disposed of" shall have correlative
meanings.

                  "Disqualified Stock": any Capital Stock or other ownership or
profit interest of any Loan Party that any Loan Party is or, upon the passage of
time or the occurrence of any event, may become obligated to redeem, purchase,
retire, defease or otherwise make any payment in respect of in consideration
other than Capital Stock (other than Disqualified Stock) prior to the date one
year and one day after the Maturity Date.

                  "Dollars" and "$": lawful currency of the United States of
America.

                  "Domestic Subsidiary": any Subsidiary of the Borrower
organized under the laws of any jurisdiction within the United States of
America.

                  "Eligible Assignee": (i) a Lender; (ii) an Affiliate of a
Lender; (iii) a Related Fund (iv) a commercial bank organized under the laws of
the United States, or any State thereof; (v) a savings and loan association or
savings bank organized under the laws of the United States, or any State
thereof; (vi) a commercial bank organized under the laws of any other country
that is a member of the Organization for Economic Cooperation and Development or
has concluded

                                       6

special lending arrangements with the International Monetary Fund associated
with its General Arrangements to Borrow, or a political subdivision of any such
country, so long as such bank is acting through a branch or agency located in
the country in which it is organized or another country that is described in
this clause (vi); (vii) a finance company, insurance company or other financial
institution or fund (whether a corporation, partnership, trust or other entity)
that is engaged in making, purchasing or otherwise investing in commercial loans
in the ordinary course of its business and (viii) the central bank of any
country that is a member of the Organization for Economic Cooperation and
Development; provided that neither the Borrower nor an Affiliate of the Borrower
shall qualify as an Eligible Assignee.

                  "Engineering Report": a report prepared by the Borrower (in
which case, such report shall be reviewed or audited by an Approved Engineer in
a manner consistent with past practices) or an Approved Engineer as of December
31 of each year for purposes of compliance with Section 5.2(d) and, if the
Borrower has so elected, as of any other date and, in each case, subject to
reasonable review by the Administrative Agent showing the net present value
(using a 10.0% discount rate and with prices adjusted to reflect a ten year
future market price strip (and, assuming for all periods subsequent to year ten,
the price determined for year ten) reasonably determined by the Borrower and
reasonably satisfactory to the Administrative Agent) of the projected future net
revenues attributable to the Proved Reserves.

                  "Environmental Laws": any and all laws, rules, orders,
regulations, statutes, ordinances, guidelines, codes, decrees, or other legally
enforceable requirements (including, without limitation, common law) of the
United States, or any state, local, municipal or other governmental authority,
regulating, relating to or imposing liability or standards of conduct concerning
protection of the environment or of human health, as has been, is now, or may at
any time hereafter be, in effect.

                  "Environmental Permits": any and all permits, licenses,
approvals, registrations, and other authorizations required under any
Environmental Law.

                  "ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.

                  "Eurocurrency Reserve Requirements": for any day, the
aggregate (without duplication) of the maximum rates (expressed as a decimal
fraction) of reserve requirements in effect on such day (including, without
limitation, basic, supplemental, marginal and emergency reserves) under any
regulations of the Board or other Governmental Authority having jurisdiction
with respect thereto dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board) maintained by a member bank of the Federal Reserve
System.

                  "Eurodollar Base Rate": with respect to each day during each
Interest Period, the rate per annum determined on the basis of the rate for
deposits in Dollars for a period equal to such Interest Period commencing on the
first day of such Interest Period appearing on Page 3750 of the Telerate screen
as of 11:00 A.M., London time, two Business Days prior to the beginning of such
Interest Period. In the event that such rate does not appear on Page 3750 of the
Telerate screen (or otherwise on such screen), the "Eurodollar Base Rate" for
purposes of this definition

                                       7

shall be determined by reference to such other comparable publicly available
service for displaying eurodollar rates as may be selected by the Administrative
Agent.

                  "Eurodollar Loans": Term Loans for which the applicable rate
of interest is based upon the Eurodollar Rate.

                  "Eurodollar Rate": with respect to each day during each
Interest Period, a rate per annum determined for such day in accordance with the
following formula (rounded upward to the nearest 1/100th of 1%):

                              Eurodollar Base Rate
            ---------------------------------------------------------
                    1.00 - Eurocurrency Reserve Requirements

                  "Eurodollar Tranche": the collective reference to Eurodollar
Loans the then current Interest Periods with respect to all of which begin on
the same date and end on the same later date.

                  "Event of Default": any of the events specified in Section
7.1, provided that any requirement for the giving of notice, the lapse of time,
or both, has been satisfied.

                  "Excluded Foreign Subsidiaries": any Foreign Subsidiary in
respect of which either (a) the pledge of greater than 65% of the Capital Stock
of such Subsidiary as Collateral or (b) the guaranteeing by such Subsidiary of
the Obligations, would, in the good faith judgment of the Borrower, result in
adverse tax consequences to the Borrower.

                  "Existing Credit Agreement": the Credit Agreement, dated as of
July 31, 2002, among Parent, Holdings, the Borrower, the several lenders from
time to time party thereto, LBI, as Lead Arranger and Book Manager, LCPI, as
Syndication Agent, and LCPI, as Administrative Agent, as the same may be
amended, supplemented or otherwise modified from time to time.

                  "Facility": the Term Loan Commitments and the Term Loans made
thereunder.

                  "Federal Funds Effective Rate": for any day, the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the average
of the quotations for the day of such transactions received by the
Administrative Agent from three federal funds brokers of recognized standing
selected by it.

                  "Foreign Subsidiary": any Subsidiary of the Borrower that is
not a Domestic Subsidiary.

                  "Funding Office": the office specified from time to time by
the Administrative Agent as its funding office by notice to the Borrower and the
Lenders.

                  "GAAP": generally accepted accounting principles in the United
States of America in effect on the date hereof, with respect to determinations
under Section 6.1, and otherwise in effect from time to time.

                                       8

                  "Gas Gathering Systems": the gas plant and those certain gas
gathering systems consisting of all equipment, assets, rights-of-way, surface
leases, contracts and related assets more particularly described on schedule
1.1(b) attached hereto.

                  "GE Equipment": the Equipment (as defined in the UCC)
purchased or constructed with the proceeds of the GE Loan.

                  "GE Loan": the loan made to the Borrower by General Electric
Capital Corporation pursuant to the Interim Loan and Security Agreement, dated
as of June 16, 2002, in an aggregate principal amount not to exceed $17,000,000.

                  "Governing Documents": collectively, as to any Person, the
articles or certificate of incorporation and bylaws, any shareholders agreement,
certificate of formation, limited liability company agreement, partnership
agreement or other formation or constituent documents of such Person.

                  "Governmental Authority": any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of government.

                  "Grantor": as defined in the Guarantee and Collateral
Agreement.

                  "Guarantee and Collateral Agreement": the Guarantee and
Collateral Agreement to be executed and delivered by Holdings, the Borrower and
each Subsidiary Guarantor, substantially in the form of Exhibit A, as the same
may be amended, supplemented or otherwise modified from time to time.

                  "Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit), if to
induce the creation of such obligation of such other Person the guaranteeing
person has issued a reimbursement, counterindemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness, leases,
dividends or other obligations (the "primary obligations") of any other third
Person (the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or any
Property constituting direct or indirect security therefor, (ii) to advance or
supply funds (1) for the purchase or payment of any such primary obligation or
(2) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) to
purchase Property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in respect
thereof; provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (x) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (y) the maximum amount for which such guaranteeing person
may be liable pursuant

                                       9

to the terms of the instrument embodying such Guarantee Obligation, unless such
primary obligation and the maximum amount for which such guaranteeing person may
be liable are not stated or determinable, in which case the amount of such
Guarantee Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Borrower in good
faith.

                  "Guarantors": the collective reference to Holdings and the
Subsidiary Guarantors.

                  "Hedge Agreements": (a) all interest rate swaps, caps or
collar agreements or similar arrangements entered into by the Borrower or any of
its Subsidiaries providing for protection against fluctuations in interest rates
or currency exchange rates or the exchange of nominal interest obligations,
either generally or under specific contingencies and (b) all hedging agreements
entered into by the Borrower or any of its Subsidiaries in connection with the
hedging of commodity prices, including basis (transportation) hedges.

                  "Holdings": as defined in the preamble hereto.

                  "Holdings Subordinated Guaranty": the Amended and Restated
Subordinated Guaranty, dated as of October 31, 2002, by Holdings in favor of the
Financial Institutions (as defined therein).

                  "Hydrocarbons": oil, gas, casing head gas, condensate,
distillate, liquid hydrocarbons, gaseous hydrocarbons, all products refined,
separated, settled and dehydrated therefrom and all products refined therefrom,
including, without limitation, kerosene, liquefied petroleum gas, refined
lubricating oils, diesel fuel, drip gasoline, natural gasoline, helium, sulfur
and all other minerals.

                  "Hydrocarbon Interests": all rights, titles, interests and
estates now owned or hereafter acquired by the Borrower or any of its
Subsidiaries in any and all oil, gas and other liquid or gaseous hydrocarbon
properties and interests, including without limitation, mineral fee or lease
interests, production sharing agreements, concession agreements, license
agreements, service agreements, risk service agreements or similar Hydrocarbon
interests granted by an appropriate Governmental Authority, farmout, overriding
royalty and royalty interests, net profit interests, oil payments, production
payment interests and similar interests in Hydrocarbons, including any reserved
or residual interests of whatever nature.

                  "Indebtedness": of any Person at any date, without
duplication, (a) all indebtedness of such Person for borrowed money, (b) all
obligations of such Person for the deferred purchase price of Property or
services (other than (I) trade payables and (II) customary obligations under Oil
and Gas Agreements, in each case, incurred in the ordinary course of such
Person's business), (c) all obligations of such Person evidenced by notes, bonds
(other than obligations in respect of surety, performance and guarantee bonds
issued for the account of such Person in the ordinary course of business),
debentures or other similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
Property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such

                                       10

Property), (e) all Capital Lease Obligations of such Person, (f) all obligations
of such Person, contingent or otherwise, as an account party or applicant under
acceptance, letter of credit or similar facilities, (g) all Guarantee
Obligations of such Person in respect of obligations of the kind referred to in
clauses (a) through (f) above, (h) all obligations of the kind referred to in
clauses (a) through (g) above secured by (or for which the holder of such
obligation has an existing right, contingent or otherwise, to be secured by) any
Lien on Property (including, without limitation, accounts and contract rights)
owned by such Person, whether or not such Person has assumed or become liable
for the payment of such obligation and (i) for the purposes of Section 7.1(e)
only, all obligations of such Person in respect of Hedge Agreements.

                  "Indemnified Liabilities": as defined in Section 9.5.

                  "Indemnitee": as defined in Section 9.5.

                  "Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245 of
ERISA.

                  "Insolvent": pertaining to a condition of Insolvency.

                  "Intellectual Property": the collective reference to all
rights, priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign laws or otherwise,
including, without limitation, copyrights, copyright licenses, patents, patent
licenses, trademarks, trademark licenses, technology, know-how and processes,
and all rights to sue at law or in equity for any infringement or other
impairment thereof, including the right to receive all proceeds and damages
therefrom.

                  "Interest Payment Date": (a) as to any Base Rate Loan, the
last day of each March, June, September and December to occur while such Term
Loan is outstanding and the final maturity date of such Term Loan, (b) as to any
Eurodollar Loan having an Interest Period of three months or shorter, the last
day of such Interest Period, (c) as to any Eurodollar Loan having an Interest
Period longer than three months, each day that is three months, or a whole
multiple thereof, after the first day of such Interest Period and the last day
of such Interest Period and (d) as to any Term Loan, the date of any repayment
or prepayment made in respect thereof.

                  "Interest Period": as to any Eurodollar Loan, (a) initially,
the period commencing on the borrowing or conversion date, as the case may be,
with respect to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower in its notice of borrowing or notice of
conversion, as the case may be, given with respect thereto; and (b) thereafter,
each period commencing on the last day of the next preceding Interest Period
applicable to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower by irrevocable notice to the
Administrative Agent not less than three Business Days prior to the last day of
the then current Interest Period with respect thereto; provided that, all of the
foregoing provisions relating to Interest Periods are subject to the following:

                  (1)      if any Interest Period would otherwise end on a day
                  that is not a Business Day, such Interest Period shall be
                  extended to the next succeeding Business Day unless the result
                  of such extension would be to carry such Interest Period into

                                       11

                  another calendar month in which event such Interest Period
                  shall end on the immediately preceding Business Day;

                  (2)      any Interest Period that would otherwise extend
                  beyond the date final payment is due on the Term Loans, shall
                  end on the such due date, as applicable; and

                  (3)      any Interest Period that begins on the last Business
                  Day of a calendar month (or on a day for which there is no
                  numerically corresponding day in the calendar month at the end
                  of such Interest Period) shall end on the last Business Day of
                  the calendar month at the end of such Interest Period.

                  "Investments": as defined in Section 6.7.

                  "Lehman Entity": any of LCPI or any of its affiliates
(including Syndicated Loan Funding Trust).

                  "Lender Addendum": with respect to any initial Lender, a
Lender Addendum, substantially in the form of Exhibit H, to be executed and
delivered by such Lender on the Closing Date as provided in Section 9.17.

                  "Lenders": as defined in the preamble hereto.

                  "Lien": any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement and any
capital lease having substantially the same economic effect as any of the
foregoing).

                  "Loan Documents": this Agreement, the Security Documents, the
Term Notes, and all documents, instruments, agreements, certificates and notices
at any time executed and/or delivered to the Administrative Agent, any of the
other Agents, the Arrangers or any Lender in connection herewith or therewith.

                  "Loan Parties": Holdings, the Borrower and each Subsidiary of
the Borrower that is a party to a Loan Document.

                  "Loans": the collective reference to the Term Loans and any
other loan made by any Lender pursuant to this Agreement.

                  "Material Adverse Effect": a material adverse effect on or
affecting in a material and adverse manner (a) the business, assets, property,
condition (financial or otherwise) or prospects of Holdings, the Borrower and
the Borrower's Subsidiaries taken as a whole, or (b) the validity or
enforceability of this Agreement, the Guarantee and Collateral Agreement, the
Mortgages or the other Security Documents, or the Term Notes or the rights or
remedies of the Agents or the Lenders hereunder or thereunder.

                                       12

                  "Material Environmental Amount": an amount or amounts payable
by the Borrower and/or any of its Subsidiaries, in the aggregate in excess of
$10,000,000 in any one year for: costs to (i) comply with any requirement or
interpretation of Environmental Law imposed after the Closing Date that
constitutes a material change; or (ii) respond to, remove or remediate a release
to the environment of Materials of Environmental Concern; provided, however,
such amount excludes ordinary and customary costs for obtaining, complying with
and maintaining Environmental Permits, and for plugging and abandonment and site
restoration upon cessation of production. Such amount includes compensatory
damages, (including, without limitation, damages to natural resources), punitive
damages, fines, and penalties pursuant to any Environmental Law.

                  "Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum products,
polychlorinated biphenyls, urea-formaldehyde insulation, asbestos, pollutants,
contaminants, radioactivity, and any other substances of any kind, whether or
not any such substance is defined as hazardous or toxic under any Environmental
Law, that is regulated pursuant to or reasonably could give rise to liability
under any Environmental Law.

                  "Maturity Date: May 30, 2007.

                  "Moody's": Moody's Investors Service, Inc. and its successors.

                  "Mortgaged Properties": the real properties and leasehold
estates listed on Schedule 1.1(a), as to which the Administrative Agent for the
benefit of the Secured Parties shall be granted a Lien pursuant to the
Mortgages.

                  "Mortgages": each of the mortgages and deeds of trust made by
any Loan Party in favor of, or for the benefit of, the Administrative Agent for
the benefit of the Secured Parties, substantially in the form of Exhibit D (with
such changes thereto as shall be advisable under the law of the jurisdiction in
which such mortgage or deed of trust is to be recorded), as the same may be
amended, supplemented or otherwise modified from time to time.

                  "Multiemployer Plan": a Plan that is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.

                  "Net Cash Proceeds": (a) in connection with any Asset Sale or
any Recovery Event, the proceeds thereof in the form of cash and cash
equivalents (including any such proceeds received by way of deferred payment of
principal pursuant to a note or installment receivable or purchase price
adjustment receivable or otherwise, but only as and when received) of such Asset
Sale or Recovery Event, net of attorneys' fees, accountants' fees, investment
banking fees, amounts required to be applied to the repayment of Indebtedness
secured by a Lien expressly permitted hereunder on any asset which is the
subject of such Asset Sale or Recovery Event (other than any Lien pursuant to a
Security Document) and other customary fees and expenses actually incurred in
connection therewith and net of taxes paid or reasonably estimated to be payable
as a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), and (b) in connection with any
issuance or sale of equity securities or debt securities or instruments or the
incurrence of loans, the cash proceeds received

                                       13

from such issuance or incurrence, net of attorneys' fees, investment banking
fees, accountants' fees, underwriting discounts and commissions and other
customary fees and expenses actually incurred in connection therewith.

                  "New Notes": as defined in Section 6.2(i).

                  "Non-Excluded Taxes": as defined in Section 2.15(a).

                  "Non-U.S. Lender": as defined in Section 2.15(d).

                  "Obligations": the unpaid principal of and interest on
(including, without limitation, interest accruing after the maturity of the
Loans and interest accruing after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding, relating
to the Borrower, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) the Loans, and all other obligations and
liabilities of the Borrower to the Administrative Agent or to any Lender or any
Qualified Counterparty, whether direct or indirect, absolute or contingent, due
or to become due, or now existing or hereafter incurred, which may arise under,
out of, or in connection with, this Agreement, any other Loan Document, any
Specified Hedge Agreement or any other document made, delivered or given in
connection herewith or therewith, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses (including,
without limitation, all fees, charges and disbursements of counsel to the
Administrative Agent or to any Lender that are required to be paid by the
Borrower pursuant hereto) or otherwise; provided, that (i) obligations of the
Borrower or any Subsidiary under any Specified Hedge Agreement shall be secured
and guaranteed pursuant to the Security Documents only to the extent that, and
for so long as, the other Obligations are so secured and guaranteed and (ii) any
release of Collateral or Guarantors effected in the manner permitted by this
Agreement shall not require the consent of holders of obligations under
Specified Hedge Agreements.

                  "Oil and Gas Agreements": operating agreements, processing
agreements, farm-out and farm-in agreements, development agreements, area of
mutual interest agreements, contracts for the gathering and/or transportation of
oil and natural gas, unitization agreements, pooling arrangements, joint bidding
agreements, joint venture agreements, participation agreements, surface use
agreements, service contracts, tax credit agreements, leases and subleases of
Oil and Gas Properties or other similar customary agreements, transactions,
properties, interests or arrangements, howsoever designated, in each case made
or entered into in the ordinary course of business as conducted by the Borrower
and its Subsidiaries.

                  "Oil and Gas Business": (a) the acquisition, exploration,
exploitation, development, operation, management and disposition of interests in
Hydrocarbon Interests and Hydrocarbons; (b) gathering, marketing, treating,
processing, storage, selling and transporting of any production from such
interests or Hydrocarbon Interests, including, without limitation, the marketing
of Hydrocarbons obtained from unrelated Persons; (c) any business relating to or
arising from exploration for or development, production, treatment, processing,
storage, transportation or marketing of oil, gas and other minerals and products
produced in association therewith; and (d) any activity that is ancillary or
necessary or desirable to facilitate the activities described in clauses (a)
through (c) of this definition.

                                       14

                  "Oil and Gas Properties": (a) Hydrocarbon Interests; (b) the
Property now or hereafter pooled or unitized with Hydrocarbon Interests; (c) all
presently existing or future unitization, pooling agreements and declarations of
pooled units and the units created thereby (including, without limitation, all
units created under orders, regulations and rules of any Governmental Authority)
which may affect all or any portion of the Hydrocarbon Interests; (d) all
operating agreements, contracts and other agreements which relate to any of the
Hydrocarbon Interests or the production, sale, purchase, exchange or processing
of Hydrocarbons from or attributable to such Hydrocarbon Interest; (e) all
Hydrocarbons in and under and which may be produced and saved or attributable to
the Hydrocarbon Interests, the lands covered thereby and all oil in tanks and
all rents, issues, profits, proceeds, products, revenues and other income from
or attributable to the Hydrocarbon Interests; (f) all tenements, hereditaments,
appurtenances and Property in any manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests, Property, Gas Gathering System, rights,
titles, interests and estates described or referred to above, including, without
limitation, any and all Property, now owned or hereinafter acquired and situated
upon, used, held for use or useful in connection with the operating, working or
development of any of such Hydrocarbon Interests or Property (excluding drilling
rigs, automotive equipment or other personal property which may be on such
premises for the purpose of drilling a well or for other similar temporary uses)
and including any and all oil wells, gas wells, injection wells or other wells,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing and (g) to the extent not
included in the foregoing, any and all other oil or gas property described in
Section 4.09(y) of the RMT Senior Notes Indenture.

                  "Other Taxes": any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement or any other
Loan Document.

                  "Parent": The Williams Companies, Inc., a Delaware
corporation.

                  "Parent Event of Default": the occurrence of any of the
following: (i) Parent shall commence any case, proceeding or other action (A)
under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking
to have an order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or any
substantial part of its assets, or Parent shall make a general assignment for
the benefit of its creditors; or (ii) there shall be commenced against Parent
any case, proceeding or other action of a nature referred to in clause (i) above
that (A) results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a period of
60 days; or (iii) there shall be commenced against Parent any case, proceeding
or other action seeking issuance of a warrant of attachment, execution,
distraint or similar process against

                                       15

all or any substantial part of its assets that results in the entry of an order
for any such relief that shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; or (iv) Parent
shall take any action in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii)
above; or (v) Parent shall generally not, or shall be unable to, or shall admit
in writing its inability to, pay its debts as they become due; or (vi) Parent
shall default in making any payment of any principal of or interest on any
Indebtedness of Parent the outstanding principal amount of which exceeds
$150,000,000 on the scheduled or original due date with respect thereto.

                  "Participant": as defined in Section 9.6(b).

                  "Payment Office": the office specified from time to time by
the Administrative Agent as its payment office by notice to the Borrower and the
Lenders.

                  "PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA (or any successor).

                  "Permitted Cure Security": an equity security of Holdings that
is not Disqualified Stock and upon which all dividends or distributions are
payable and paid in additional shares of such equity security.

                  "Permitted Liens": the collective reference to (i) in the case
of Collateral other than Pledged Stock, Liens permitted by Section 6.3 and (ii)
in the case of Collateral consisting of Pledged Stock, non-consensual Liens
permitted by Section 6.3 to the extent arising by operation of law.

                  "Permits": the collective reference to (i) Environmental
Permits, and (ii) any and all other franchises, licenses, leases, permits,
approvals, notifications, certifications, registrations, authorizations,
exemptions, qualifications, easements, rights of way, Liens and other rights,
privileges and approvals required under any Requirement of Law.

                  "Person": an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.

                  "Plan": at a particular time, any employee benefit plan that
is covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.

                  "Pledged Notes": as defined in the Guarantee and Collateral
Agreement

                  "Pledged Stock": as defined in the Guarantee and Collateral
Agreement.

                  "PPH": Piceance Production Holdings LLC, a Delaware limited
liability company.

                  "Pro Forma Balance Sheet": as defined in Section 3.1(a).

                                       16

                  "Projections": as defined in Section 5.2(e).

                  "Property": any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible, including, without limitation, Capital Stock and Hydrocarbon
Interests.

                  "Proved Reserves" those recoverable Hydrocarbons which have
been estimated with reasonable certainty, as demonstrated by geological and
engineering data, to be economically recoverable from the Borrower's Oil and Gas
Properties by existing operating methods under existing economic conditions.

                  "PV-10 Value": at the particular time in question, the net
present value (determined in accordance with the definition of Engineering
Report) of the projected future net revenues attributable to the Proved Reserves
included in the Borrower's Oil and Gas Properties, as set forth in the
Engineering Report most recently provided by the Borrower pursuant to Section
5.2(d).

                  "Qualified Counterparty": with respect to any Specified Hedge
Agreement, any counterparty thereto that, at the time such Specified Hedge
Agreement was entered into, was a Lender or an affiliate of a Lender.

                  "Real Estate": all real property held or used by the Borrower
or its Subsidiaries, which the Borrower or the relevant Subsidiary owns in fee
or in which it holds a leasehold interest as a tenant.

                  "Recovery Event": any settlement of or payment in respect of
any property or casualty insurance claim or any condemnation proceeding relating
to any asset of Holdings, the Borrower or any of the Borrower's Subsidiaries.

                  "Register": as defined in Section 9.6(d).

                  "Regulation U": Regulation U of the Board as in effect from
time to time.

                  "Reinvestment Deferred Amount": with respect to any
Reinvestment Event, the aggregate Net Cash Proceeds received by Holdings, the
Borrower or any of Borrower's Subsidiaries in connection therewith that are not
applied to prepay the Term Loans pursuant to Section 2.7(b) as a result of the
delivery of a Reinvestment Notice.

                  "Reinvestment Event": any Asset Sale or Recovery Event in
respect of which the Borrower has delivered a Reinvestment Notice.

                  "Reinvestment Notice": a written notice executed by a
Responsible Officer stating that no Default or Event of Default has occurred and
is continuing and that the Borrower (directly or indirectly through a
Subsidiary) intends and expects to use all or a specified portion of the Net
Cash Proceeds of an Asset Sale or Recovery Event to make capital expenditures
useful in its business or otherwise acquire assets useful in its business.

                                       17

                  "Reinvestment Prepayment Amount": with respect to any
Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any
amount expended prior to the relevant Reinvestment Prepayment Date to make
capital expenditures useful in its business or otherwise acquire assets useful
in the Borrower's business.

                  "Reinvestment Prepayment Date": with respect to any
Reinvestment Event, the earlier of (a) the date occurring twelve months after
such Reinvestment Event and (b) the date on which the Borrower shall have
determined not to, or shall have otherwise ceased to undertake to, make capital
expenditures useful in the Borrower's business or otherwise acquire assets
useful in the Borrower's business with all or any portion of the relevant
Reinvestment Deferred Amount.

                  "Related Fund": with respect to any Lender, any fund that (x)
invests as a regular part of its business in commercial loans and (y) is managed
or advised by the same investment advisor as such Lender, by such Lender or an
Affiliate of such Lender.

                  "Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.

                  "Reportable Event": any of the events set forth in Section
4043(c) of ERISA, other than those events described in Section 4043(c)(3) of
ERISA and other than those events as to which the thirty day notice period is
waived under subsections .22, .24 (solely with respect to partial termination of
a Plan), .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. Section 4043.

                  "Required Lenders": at any time, the holders of more than 50%
of (a) until the Closing Date, the Term Loan Commitments and (b) thereafter, the
sum of the aggregate unpaid principal amount of the Term Loans then outstanding.

                  "Requirement of Law": as to any Person, the Certificate of
Incorporation and By Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.

                  "Reserve Report": means a report setting forth the Proved
Reserves by reserve category attributable to the Hydrocarbon Interests
constituting Proved Reserves owned directly by the Borrower or any Subsidiary
thereof, a projection of the rate of production and net operating income with
respect thereto, as of a specified date, and such other information as is
customarily obtained from and provided in such reports, satisfactory in form and
substance to the Administrative Agent. All Reserve Reports prepared after the
Closing Date and required by this Agreement or any of the other Loan documents
shall be prepared, reviewed or audited in a manner consistent with the past
practices of the Borrower by an Approved Engineer.

                  "Responsible Officer": the chief executive officer, president,
senior vice president, chief financial officer, treasurer or controller of the
Borrower, but in any event, with respect to financial matters, the chief
financial officer, treasurer or controller of the Borrower.

                  "Restricted Payments": as defined in Section 6.6.

                                       18

                  "RMT Senior Notes": the $150,000,000 7.55% Senior Notes due
2007 of the Borrower issued pursuant to the Indenture, dated as of February 1,
1997 (as amended, supplemented or otherwise modified from time to time, the
"Senior Note Indenture"), between the Borrower and Bankers Trust Company, as
Trustee.

                  "SEC": the Securities and Exchange Commission (or successors
thereto or an analogous Governmental Authority).

                  "Secured Parties": as defined in the Guarantee and Collateral
Agreement.

                  "Security Documents": the collective reference to the
Guarantee and Collateral Agreement, the Mortgages and all other security
documents hereafter delivered to the Administrative Agent granting a Lien on any
Property of any Person to secure the obligations and liabilities of any Loan
Party under any Loan Document.

                  "Single Employer Plan": any Plan that is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.

                  "Solvent": with respect to any Person, as of any date of
determination, (a) the amount of the "present fair saleable value" of the assets
of such Person will, as of such date, exceed the amount of all "liabilities of
such Person, contingent or otherwise", as of such date, as such quoted terms are
determined in accordance with applicable federal and state laws governing
determinations of the insolvency of debtors, (b) the present fair saleable value
of the assets of such Person will, as of such date, be greater than the amount
that will be required to pay the liability of such Person on its debts as such
debts become absolute and matured, (c) such Person will not have, as of such
date, an unreasonably small amount of capital with which to conduct its
business, and (d) such Person will be able to pay its debts as they mature. For
purposes of this definition, (i) "debt" means liability on a "claim", and (ii)
"claim" means any (x) right to payment, whether or not such a right is reduced
to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an
equitable remedy for breach of performance if such breach gives rise to a right
to payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured
or unsecured.

                  "Specified Hedge Agreement": any Hedge Agreement described in
clause (a) of such definition entered into by the Borrower or any Subsidiary and
any Qualified Counterparty.

                  "S&P": Standard & Poor's Rating Services and its successors.

                  "Subsidiary": as to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of
such corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Borrower.

                                       19

                  "Subsidiary Guarantor": each Subsidiary of the Borrower.

                  "Term Loan": as defined in Section 2.1.

                  "Term Loan Commitment": as to any Lender, the obligation of
such Lender, if any, to make a Term Loan to the Borrower hereunder in a
principal amount not to exceed the amount set forth under the heading "Term Loan
Commitment" opposite such Lender's name on Schedule 1 to the Lender Addendum
delivered by such Lender, or, as the case may be, in the Assignment and
Acceptance pursuant to which such Lender became a party hereto, as the same may
be changed from time to time pursuant to the terms hereof. The original
aggregate amount of the Term Loan Commitments is $500,000,000.

                  "Term Loan Percentage": as to any Lender at any time, the
percentage which such Lender's Term Loan Commitment then constitutes of the
aggregate Term Loan Commitments (or, at any time after the Closing Date, the
percentage which the aggregate principal amount of such Lender's Term Loans then
outstanding constitutes of the aggregate principal amount of the Term Loans then
outstanding).

                  "Term Note": as defined in Section 2.4(e).

                  "Total Senior Secured Debt": at any time, an amount equal to
the sum of the aggregate principal amount of Indebtedness outstanding at such
time under this Agreement.

                  "Transferee": as defined in Section 9.14.

                  "Type": as to any Term Loan, its nature as a Base Rate Loan or
a Eurodollar Loan.

                  "UCC": the Uniform Commercial Code as in effect from time to
time in the State of New York.

                  "U.S. Lender": each Lender (or Transferee), each Issuing
Lender and each Agent that is a United States person as defined in section
7701(a)(30) of the Code.

                  "Wholly Owned Subsidiary": as to any Person, any other Person
all of the Capital Stock of which (other than directors' qualifying shares
required by law) is owned by such Person directly and/or through other Wholly
Owned Subsidiaries.

                  "Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor
that is a Wholly Owned Subsidiary of the Borrower.

                  1.2      Other Definitional Provisions. Unless otherwise
specified therein, all terms defined in this Agreement shall have the defined
meanings when used in the other Loan Documents or any certificate or other
document made or delivered pursuant hereto or thereto.

                  (a)      As used herein and in the other Loan Documents, and
any certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to Holdings, the Borrower and its Subsidiaries not
defined in Section 1.1 and accounting terms

                                       20

partly defined in Section 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.

                  (b)      The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
Section, Schedule and Exhibit references are to this Agreement unless otherwise
specified.

                  (c)      The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.

                  (d)      All calculations of financial ratios set forth in
Section 6.1 shall be calculated to the same number of decimal places as the
relevant ratios are expressed in and shall be rounded upward if the number in
the decimal place immediately following the last calculated decimal place is
five or greater. For example, if the relevant ratio is to be calculated to the
hundredth decimal place and the calculation of the ratio is 5.126, the ratio
will be rounded up to 5.13.

              SECTION 2. AMOUNT AND TERMS OF TERM LOAN COMMITMENTS

                  2.1      Term Loan Commitments. Subject to the terms and
conditions hereof, the Lenders severally agree to make term loans (each, a "Term
Loan") to the Borrower on the Closing Date in an amount for each Lender not to
exceed the amount of the Term Loan Commitment of such Lender. The Term Loans may
from time to time be Eurodollar Loans or Base Rate Loans, as determined by the
Borrower and notified to the Administrative Agent in accordance with Sections
2.2 and 2.8.

                  2.2      Procedure for Term Loan Borrowing. The Borrower shall
deliver to the Administrative Agent a Borrowing Notice (which Borrowing Notice
must be received by the Administrative Agent prior to 10:00 A.M., New York City
time, one Business Day prior to the anticipated Closing Date) requesting that
the Lenders make the Term Loans on the Closing Date. The Term Loans made on the
Closing Date shall initially be Base Rate Loans, and no Term Loan may be
converted into or continued as a Eurodollar Loan prior to the date which is 5
Business Days after the Closing Date or such shorter period as may be reasonably
acceptable to the Administrative Agent. Upon receipt of such Borrowing Notice
the Administrative Agent shall promptly notify each Lender thereof. Not later
than 12:00 Noon, New York City time, on the Closing Date each Lender shall make
available to the Administrative Agent at the Funding Office an amount in
immediately available funds equal to the Term Loan or Term Loans to be made by
such Lender. The Administrative Agent shall make available to the Borrower the
aggregate of the amounts made available to the Administrative Agent by the
Lenders, in like funds as received by the Administrative Agent.

                  2.3      Repayment of Term Loans. The Term Loan of each Lender
shall mature in 16 consecutive quarterly installments, commencing on September
30, 2003, each of which shall be in an amount equal to such Lender's Term Loan
Percentage multiplied by the percentage set forth below opposite such
installment of the aggregate principal amount of Term Loans made on the Closing
Date:

                                       21

    Installment                          Percentage
    -----------                          ----------
                                      
September 30, 2003                         0.25%
December 31, 2003                          0.25%
March 31, 2004                             0.25%
June 30, 2004                              0.25%
September 30, 2004                         0.25%
December 31, 2004                          0.25%
March 31, 2005                             0.25%
June 30, 2005                              0.25%
September 30, 2005                         0.25%
December 31, 2005                          0.25%
March 31, 2006                             0.25%
June 30, 2006                              0.25%
September 30, 2006                         0.25%
December 31, 2006                          0.25%
March 31, 2007                             0.25%
May 30, 2007                              96.25%

                  2.4      Repayment of Term Loans; Evidence of Debt. The
Borrower hereby unconditionally promises to pay to the Administrative Agent for
the account of the appropriate Lender the principal amount of each Term Loan of
such Lender in installments according to the schedule set forth in Section 2.3
(or on such earlier date on which the Term Loans become due and payable pursuant
to Section 7.1); provided that the Borrower shall repay the unpaid principal
amount of the Term Loans on the Maturity Date. The Borrower hereby further
agrees to pay interest on the unpaid principal amount of the Term Loans from
time to time outstanding from the date hereof until payment in full thereof at
the rates per annum, and on the dates, set forth in Section 2.10.

                  (a)      Each Lender shall maintain in accordance with its
usual practice an account or accounts evidencing indebtedness of the Borrower to
such Lender resulting from each Term Loan of such Lender from time to time,
including the amounts of principal and interest payable and paid to such Lender
from time to time under this Agreement.

                  (b)      The Administrative Agent, on behalf of the Borrower,
shall maintain the Register pursuant to Section 9.6(d), and a subaccount therein
for each Lender, in which shall be recorded (i) the amount of each Term Loan
made hereunder and any Term Note evidencing such Term Loan, the Type of such
Term Loan and each Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) both the amount of any sum received
by the Administrative Agent hereunder from the Borrower and each Lender's share
thereof.

                  (c)      The entries made in the Register and the accounts of
each Lender maintained pursuant to Section 2.4(b) shall, to the extent permitted
by applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation

                                       22

of the Borrower to repay (with applicable interest) the Term Loans made to the
Borrower by such Lender in accordance with the terms of this Agreement.

                  (d)      The Borrower agrees that, upon the request to the
Administrative Agent by any Lender, the Borrower will promptly execute and
deliver to such Lender a promissory note of the Borrower evidencing any Term
Loans of such Lender, substantially in the forms of Exhibit G (a "Term Note"),
with appropriate insertions as to date and principal amount; provided, that
delivery of Term Notes shall not be a condition precedent to the occurrence of
the Closing Date or the making of the Term Loans on the Closing Date.

                  2.5      Fees, etc. The Borrower agrees to pay to the
Arrangers and the Agents the fees in the amounts and on the dates previously
agreed to in writing by the Borrower, the Arrangers and the Agents.

                  2.6      Optional Prepayments. The Borrower may at any time
and from time to time prepay the Term Loans, in whole or in part, without
premium or penalty (except as otherwise provided herein), upon irrevocable
notice delivered to the Administrative Agent at least three Business Days prior
thereto in the case of Eurodollar Loans and at least one Business Day prior
thereto in the case of Base Rate Loans, which notice shall specify the date and
amount of such prepayment, and whether such prepayment is of Eurodollar Loans or
Base Rate Loans; provided, that if a Eurodollar Loan is prepaid on any day other
than the last day of the Interest Period applicable thereto, the Borrower shall
also pay any amounts owing pursuant to Section 2.16. Upon receipt of any such
notice the Administrative Agent shall promptly notify each Lender thereof. If
any such notice is given, the amount specified in such notice shall be due and
payable on the date specified therein, together with accrued interest to such
date on the amount prepaid. Partial prepayments of Term Loans shall be in an
aggregate principal amount of $1,000,000 or a whole multiple thereof.

                  2.7      Mandatory Prepayments. If any Capital Stock shall
be issued (excluding any Capital Stock issued to Parent or any of its
Affiliates), or Indebtedness incurred, by Holdings, the Borrower or any of
Borrower's Subsidiaries (excluding any Indebtedness incurred in accordance with
Section 6.2(a) to (h), (i) (to the extent set forth therein), and (j) and (k)),
then on the date of such issuance or incurrence, the Term Loans shall be
prepaid, by an amount equal to the amount of the Net Cash Proceeds of such
issuance or incurrence. The provisions of this Section do not constitute a
consent to the issuance of any equity securities by any entity whose equity
securities are pledged pursuant to the Guarantee and Collateral Agreement, or a
consent to the incurrence of any Indebtedness by Holdings, the Borrower or any
of the Borrower's Subsidiaries.

                  (a)      If on any date Holdings, the Borrower or any of
Borrower's Subsidiaries shall receive Net Cash Proceeds from any Asset Sale or
Recovery Event then, unless a Reinvestment Notice shall be delivered in respect
thereof, on the date of receipt by Holdings, the Borrower or any of the
Borrower's Subsidiaries of such Net Cash Proceeds, the Term Loans shall be
prepaid by an amount equal to the amount of such Net Cash Proceeds; provided
that such prepayment of the Term Loans need not be made pursuant to this Section
2.7(b) until the Borrower or any of its Subsidiaries shall have received at
least $10,000,000 in Net Cash Proceeds in the aggregate from Asset Sales or
Recovery Events, at which time, such $10,000,000

                                       23

in Net Cash Proceeds from any Asset Sales or Recovery Events and all further Net
Cash Proceeds from any Asset Sales or Recovery Events received prior to
application, shall be promptly applied to the prepayment of the Term Loans as
set forth in this Section 2.7(b) and after giving effect to such prepayment the
foregoing $10,000,000 basket shall be reinstated; and provided, further, that,
notwithstanding the foregoing, (i) the aggregate Net Cash Proceeds of Asset
Sales and Recovery Events that may be excluded from the foregoing requirement
pursuant to a Reinvestment Notice shall not exceed $50,000,000 in any fiscal
year of the Borrower and (ii) on each Reinvestment Prepayment Date the Term
Loans shall be prepaid by an amount equal to the Reinvestment Prepayment Amount
with respect to the relevant Reinvestment Event. The provisions of this Section
do not constitute a consent to the consummation of any Disposition not permitted
by Section 6.5.

                  2.8      Conversion and Continuation Options. The Borrower
may elect from time to time to convert Eurodollar Loans to Base Rate Loans by
giving the Administrative Agent at least two Business Days' prior irrevocable
notice of such election, provided that any such conversion of Eurodollar Loans
may be made only on the last day of an Interest Period with respect thereto. The
Borrower may elect from time to time to convert Base Rate Loans to Eurodollar
Loans by giving the Administrative Agent at least three Business Days' prior
irrevocable notice of such election (which notice shall specify the length of
the initial Interest Period therefor), provided that no Base Rate Loan may be
converted into a Eurodollar Loan (i) when any Event of Default has occurred and
is continuing and the Administrative Agent has, or the Required Lenders have,
determined in its or their sole discretion not to permit such conversions or
(ii) after the date that is one month prior to the final scheduled termination
or maturity date of the Facility. Upon receipt of any such notice the
Administrative Agent shall promptly notify each Lender thereof.

                  (a)      The Borrower may elect to continue any Eurodollar
Loan as such upon the expiration of the then current Interest Period with
respect thereto by giving irrevocable notice to the Administrative Agent, in
accordance with the applicable provisions of the term "Interest Period" set
forth in Section 1.1, of the length of the next Interest Period to be applicable
to such Term Loans, provided that no Eurodollar Loan may be continued as such
(i) when any Event of Default has occurred and is continuing and the
Administrative Agent has, or the Required Lenders have, determined in its or
their sole discretion not to permit such continuations or (ii) after the date
that is one month prior to the final scheduled termination or maturity date of
the Facility, and provided, further, that if the Borrower shall fail to give any
required notice as described above in this paragraph or if such continuation is
not permitted pursuant to the preceding proviso, such Term Loans shall be
converted automatically to Base Rate Loans on the last day of such then expiring
Interest Period. Upon receipt of any such notice the Administrative Agent shall
promptly notify each relevant Lender thereof.

                  2.9      Minimum Amounts and Maximum Number of Eurodollar
Tranches. Notwithstanding anything to the contrary in this Agreement, all
borrowings, conversions, continuations and optional prepayments of Eurodollar
Loans and all selections of Interest Periods shall be in such amounts and be
made pursuant to such elections so that, (a) after giving effect thereto, the
aggregate principal amount of the Eurodollar Loans comprising each Eurodollar
Tranche shall be equal to $5,000,000 or a whole multiple of $1,000,000 in excess
thereof and (b) no more than ten Eurodollar Tranches shall be outstanding at any
one time.

                                       24

                  2.10     Interest Rates and Payment Dates. Each Eurodollar
Loan shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin.

                  (a)      Each Base Rate Loan shall bear interest for each day
on which it is outstanding at a rate per annum equal to the Base Rate in effect
for such day plus the Applicable Margin.

                  (b)      (i) If all or a portion of the principal amount of
any Term Loan shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), all Obligations (whether or not overdue) (to the
extent legally permitted) shall bear interest at a rate per annum that is equal
to the rate that would otherwise be applicable thereto pursuant to the foregoing
provisions of this Section plus 2% and (ii) if all or a portion of any interest
payable on any Term Loan or any fee or other amount payable hereunder shall not
be paid when due (whether at the stated maturity, by acceleration or otherwise),
such overdue amount shall bear interest at a rate per annum equal to the rate
then applicable to Base Rate Loans plus 2%, in each case, with respect to
clauses (i) and (ii) above, from the date of such non payment until such amount
is paid in full (after as well as before judgment).

                  (c)      Interest shall be payable in arrears on each Interest
Payment Date, provided that interest accruing pursuant to paragraph (c) of this
Section shall be payable from time to time on demand.

                  2.11     Computation of Interest and Fees. Interest, fees,
commissions payable pursuant hereto shall be calculated on the basis of a
360-day year for the actual days elapsed, except that, with respect to Base Rate
Loans on which interest is calculated on the basis of the Prime Rate, the
interest thereon shall be calculated on the basis of a 365- (or 366-, as the
case may be) day year for the actual days elapsed. The Administrative Agent
shall as soon as practicable notify the Borrower and the Lenders of each
determination of a Eurodollar Rate. Any change in the interest rate on a Term
Loan resulting from a change in the Base Rate or the Eurocurrency Reserve
Requirements shall become effective as of the opening of business on the day on
which such change becomes effective. The Administrative Agent shall as soon as
practicable notify the Borrower and the Lenders of the effective date and the
amount of each such change in interest rate.

                  (a)      Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrower and the Lenders in the absence of
manifest error. The Administrative Agent shall, at the request of the Borrower,
deliver to the Borrower a statement showing the quotations used by the
Administrative Agent in determining any interest rate pursuant to Section
2.10(a).

                  2.12     Inability to Determine Interest Rate. If prior to the
first day of any Interest Period:

                  (a)      the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by reason
of circumstances affecting

                                       25

the relevant market, adequate and reasonable means do not exist for ascertaining
the Eurodollar Rate for such Interest Period, or

                  (b)      the Administrative Agent shall have received notice
from the Required Lenders that the Eurodollar Rate determined or to be
determined for such Interest Period will not adequately and fairly reflect the
cost to such Lenders (as conclusively certified by such Lenders) of making or
maintaining their affected Term Loans during such Interest Period, the
Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the Lenders as soon as practicable thereafter. If such notice is
given (x) any Eurodollar Loans requested to be made on the first day of such
Interest Period shall be made as Base Rate Loans, (y) any Term Loans that were
to have been converted on the first day of such Interest Period to Eurodollar
Loans shall be continued as Base Rate Loans and (z) any outstanding Eurodollar
Loans shall be converted, on the last day of the then current Interest Period
with respect thereto, to Base Rate Loans. Until such notice has been withdrawn
by the Administrative Agent, no further Eurodollar Loans shall be made or
continued as such, nor shall the Borrower have the right to convert Term Loans
to Eurodollar Loans.

                  2.13     Pro Rata Treatment and Payments. Each borrowing
by the Borrower from the Lenders hereunder shall be made pro rata according to
the respective Term Loan Percentages of the Lenders. Each payment (other than
prepayments) in respect of principal or interest in respect of the Term Loans
and each payment in respect of fees payable hereunder shall be applied to the
amounts of such obligations owing to the Lenders pro rata according to the
respective amounts then due and owing to the Lenders.

                  (a)      Each payment (including each prepayment) of the Term
Loans shall be allocated among the Lenders holding such Term Loans pro rata
based on the principal amount of such Term Loans held by such Lenders, and shall
be applied to the installments of such Term Loans pro rata based on the
remaining outstanding principal amount of such installments. Amounts prepaid on
account of the Term Loans may not be reborrowed.

                  (b)      The application of any payment of Term Loans
(including optional and mandatory prepayments) shall be made, first, to Base
Rate Loans and, second, to Eurodollar Loans. Each payment of the Term Loans
shall be accompanied by accrued interest to the date of such payment on the
amount paid.

                  (c)      All payments (including prepayments) to be made by
the Borrower hereunder, whether on account of principal, interest, fees or
otherwise, shall be made without setoff or counterclaim and shall be made prior
to 12:00 Noon, New York City time, on the due date thereof to the Administrative
Agent, for the account of the Lenders, at the Payment Office, in Dollars and in
immediately available funds. Any payment made by the Borrower after 12:00 Noon,
New York City time, on any Business Day shall be deemed to have been on the next
following Business Day. The Administrative Agent shall distribute such payments
to the Lenders promptly upon receipt in like funds as received. If any payment
hereunder (other than payments on the Eurodollar Loans) becomes due and payable
on a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day. If any payment on a Eurodollar Loan becomes due and
payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day unless the result of such extension
would be to

                                       26

extend such payment into another calendar month, in which event such payment
shall be made on the immediately preceding Business Day. In the case of any
extension of any payment of principal pursuant to the preceding two sentences,
interest thereon shall be payable at the then applicable rate during such
extension.

                  (d)      Unless the Administrative Agent shall have been
notified in writing by any Lender prior to the Closing Date that such Lender
will not make the amount that would constitute its share of such borrowing
available to the Administrative Agent, the Administrative Agent may assume that
such Lender is making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the Closing Date, such Lender shall
pay to the Administrative Agent, on demand, such amount with interest thereon at
a rate equal to the daily average Federal Funds Effective Rate for the period
until such Lender makes such amount immediately available to the Administrative
Agent. A certificate of the Administrative Agent submitted to any Lender with
respect to any amounts owing under this paragraph shall be conclusive in the
absence of manifest error. If such Lender's share of such borrowing is not made
available to the Administrative Agent by such Lender within three Business Days
after such Closing Date, the Administrative Agent shall also be entitled to
recover such amount with interest thereon at the rate per annum applicable to
Base Rate Loans, on demand, from the Borrower.

                  (e)      Unless the Administrative Agent shall have been
notified in writing by the Borrower prior to the date of any payment due to be
made by the Borrower hereunder that the Borrower will not make such payment to
the Administrative Agent, the Administrative Agent may assume that the Borrower
is making such payment, and the Administrative Agent may, but shall not be
required to, in reliance upon such assumption, make available to the Lenders
their respective pro rata shares of a corresponding amount. If such payment is
not made to the Administrative Agent by the Borrower within three Business Days
after such due date, the Administrative Agent shall be entitled to recover, on
demand, from each Lender to which any amount which was made available pursuant
to the preceding sentence, such amount with interest thereon at the rate per
annum equal to the daily average Federal Funds Effective Rate. Nothing herein
shall be deemed to limit the rights of the Administrative Agent or any Lender
against the Borrower.

                  2.14     Requirements of Law. If the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
or compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:

                           (i)      shall subject any Lender to any tax of any
                                    kind whatsoever with respect to this
                                    Agreement or any Eurodollar Loan made by it,
                                    or change the basis of taxation of payments
                                    to such Lender in respect thereof (except
                                    for Non-Excluded Taxes covered by Section
                                    2.15 and changes in the rate of tax on the
                                    overall net income of such Lender);

                                       27

                           (ii)     shall impose, modify or hold applicable any
                                    reserve, special deposit, compulsory loan or
                                    similar requirement against assets held by,
                                    deposits or other liabilities in or for the
                                    account of, advances, loans or other
                                    extensions of credit by, or any other
                                    acquisition of funds by, any office of such
                                    Lender that is not otherwise included in the
                                    determination of the Eurodollar Rate
                                    hereunder; or

                           (iii)    shall impose on such Lender any other
                                    condition;

and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans, or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, the Borrower shall
promptly pay such Lender, within 30 days of written demand therefor, any
additional amounts necessary to compensate such Lender for such increased cost
or reduced amount receivable. If any Lender becomes entitled to claim any
additional amounts pursuant to this Section, it shall promptly notify the
Borrower (with a copy to the Administrative Agent) of the event by reason of
which it has become so entitled.

                  (b)      If any Lender shall have determined that the adoption
of or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under to a level below that which
such Lender or such corporation could have achieved but for such adoption,
change or compliance (taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy) by an amount deemed by
such Lender to be material, then from time to time, after submission by such
Lender to the Borrower (with a copy to the Administrative Agent) of a written
request therefor, the Borrower shall pay to such Lender within 30 days of such
written demand therefor, such additional amount or amounts as will compensate
such Lender or such corporation for such reduction.

                  (c)      A certificate describing in reasonable detail the
basis for any additional amounts payable pursuant to this Section submitted by
any Lender to the Borrower (with a copy to the Administrative Agent) shall be
conclusive in the absence of manifest error. The Borrower shall not be obligated
to make any payment to any Lender under this Section which is attributable to
any period of time occurring more than 180 days prior to the date of any
certificate delivered pursuant to the preceding sentence. The obligations of the
Borrower pursuant to this Section shall survive the termination of this
Agreement and the payment of the Term Loans and all other amounts payable
hereunder.

                  2.15     Taxes. All payments made by the Borrower or any
other Loan Party under this Agreement and the other Loan Documents shall be made
free and clear of, and without deduction or withholding for or on account of,
any present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority, excluding net
income taxes and franchise taxes (imposed in lieu of net income taxes) imposed
on any Agent or

                                       28

any Lender as a result of a present or former connection between such Agent or
such Lender and the jurisdiction of the Governmental Authority imposing such tax
or any political subdivision or taxing authority thereof or therein (other than
any such connection arising solely from such Agent's or such Lender's having
executed, delivered or performed its obligations or received a payment under, or
enforced, this Agreement or any other Loan Document). If any such non-excluded
taxes, levies, imposts, duties, charges, fees, deductions or withholdings
("Non-Excluded Taxes") or any Other Taxes are required to be withheld from any
amounts payable to any Agent or any Lender hereunder, the amounts so payable to
such Agent or such Lender shall be increased to the extent necessary to yield to
such Agent or such Lender (after payment of all Non-Excluded Taxes and Other
Taxes) interest or any such other amounts payable hereunder at the rates or in
the amounts specified in this Agreement; provided, however, that the Borrower or
any other Loan Party shall not be required to increase any such amounts payable
to any Lender with respect to any Non-Excluded Taxes (i) that are attributable
to such Lender's failure to comply with the requirements of paragraph (d) or (e)
of this Section or (ii) that are United States withholding taxes imposed on
amounts payable to such Lender at the time such Lender becomes a party to this
Agreement, except to the extent that such Lender's assignor (if any) was
entitled, at the time of assignment, to receive additional amounts from the
Borrower with respect to such Non-Excluded Taxes pursuant to this paragraph (a).

                  (a)      In addition, the Borrower and each other Loan Party
shall pay any Other Taxes to the relevant Governmental Authority in accordance
with applicable law.

                  (b)      Whenever any Non-Excluded Taxes or Other Taxes are
payable by the Borrower or any other Loan Party, as promptly as possible
thereafter the Borrower or such other Loan Party shall send to the
Administrative Agent for the account of the relevant Agent or Lender, as the
case may be, a certified copy of an original official receipt received by the
Borrower or any other Loan Party showing payment thereof. If the Borrower or
such other Loan Party fails to pay any Non-Excluded Taxes or Other Taxes when
due to the appropriate taxing authority or fails to remit to the Administrative
Agent the required receipts or other required documentary evidence, the Borrower
and each other Loan Party shall indemnify the Agents and the Lenders for the
full amount of Non-Excluded Taxes or Other Taxes and any incremental taxes,
interest or penalties that may become payable by any Agent or any Lender as a
result of any such failure. The agreements in this Section 2.15 shall survive
the termination of this Agreement and the payment of the Term Loans and all
other amounts payable hereunder.

                  (c)      (i) Each Lender (or Transferee) and each
administrative agent that is not a person (as defined in section 7701(a)(30) of
the Code (a "Non-U.S. Lender") shall deliver to the Borrower and the
Administrative Agent (or, in the case of a Participant, to the Lender from which
the related participation shall have been purchased) two copies of either U.S.
Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a
Non-U.S. Lender entitled to exemption from U.S. federal withholding tax under
Section 871(h) or 881(c) of the Code with respect to payments of "portfolio
interest" a Form W-8BEN, or any subsequent versions thereof or successors
thereto properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from, or a reduced rate of, U.S. federal withholding tax on
all payments by the Borrower under this Agreement and the other Loan Documents.
Such forms shall be delivered by each Non-U.S. Lender on or before the date it
becomes a party to this Agreement (or, in the case of any Participant, on or
before the date such Participant purchases the related

                                       29

participation). In addition, each Non-U.S. Lender shall deliver such forms
promptly upon the obsolescence or invalidity of any form previously delivered by
such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at
any time it determines that it is no longer in a position to provide any
previously delivered certificate to the Borrower (or any other form of
certification adopted by the U.S. taxing authorities for such purpose).
Notwithstanding any other provision of this paragraph, a Non-U.S. Lender shall
not be required to deliver any form pursuant to this paragraph that such
Non-U.S. Lender is not legally able to deliver.

                           (ii) Each U.S. Lender shall deliver to the Borrower
and the Administrative Agent (or, in the case of a Participant, to the Lender
from which the related participation shall have been purchased) two copies of
U.S. Internal Revenue Service Form W-9, or any subsequent versions thereof or
successors thereto, properly completed and duly executed by such U.S. Lender
certifying that such Lender is entitled to an exemption from United States
backup withholding tax on all payments by the Borrower under this Agreement and
the other Loan Documents. Such forms shall be delivered by each U.S. Lender on
or before the date it becomes a party to this Agreement (or, in the case of any
Participant, on or before the date such Participant purchases the related
participation). In addition, each U.S. Lender shall deliver such forms promptly
upon the obsolescence or invalidity of any form previously delivered by such
U.S. Lender. Each U.S. Lender shall promptly notify the Borrower at any time it
determines that it is no longer in a position to provide any previously
delivered certificate to the Borrower (or any other form of certification
adopted by the U.S. taxing authorities for such purpose). Solely for purposes of
this Section 2.15(d), a U.S. Lender shall not include a Lender (or Transferee),
or Issuing Lender or Agent, as the case may be, that is treated as an exempt
recipient based on the indicators described in Treasury Regulation section
1.6049-4(c)(1)(ii).

                  (d)      A Lender that is entitled to an exemption from or
reduction of non-U.S. withholding tax under the law of the jurisdiction in which
the Borrower is located, or any treaty to which such jurisdiction is a party,
with respect to payments under this Agreement shall deliver to the Borrower
(with a copy to the Administrative Agent), at the time or times prescribed by
applicable law or reasonably requested by the Borrower, such properly completed
and executed documentation prescribed by applicable law as will permit such
payments to be made without withholding or at a reduced rate, provided that such
Lender is legally entitled to complete, execute and deliver such documentation
and in such Lender's reasonable judgment such completion, execution or
submission would not materially prejudice the legal position of such Lender.

                  2.16     If any payment of principal, or conversion, of any
Eurodollar Loan made to the Borrower is made other than on the last day of an
Interest Period relating to such Eurodollar Loan, as a result of a payment made
pursuant to Section 2.6 or 2.7 or acceleration of the maturity of such
Eurodollar Loan pursuant to Section 7.1 or for any other reason or any
conversion pursuant to Section 2.8, the Borrower shall, upon demand of any
Lender (with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender any amounts required to
compensate such Lender for any additional losses, costs or expenses which it may
reasonably incur as a result of any such payment, purchase or conversion,
including, without limitation, any loss, cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Lender to fund or maintain such Eurodollar Loan.

                                       30

                  2.17     Illegality. Notwithstanding any other provision
herein, if the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Lender to
make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the
commitment of such Lender hereunder to make Eurodollar Loans, continue
Eurodollar Loans as such and convert Base Rate Loans to Eurodollar Loans shall
forthwith be suspended until such Lender notifies the Administrative Agent and
the Borrower that the circumstances giving rise to such suspension no longer
exist and (b) such Lender's Term Loans then outstanding as Eurodollar Loans, if
any, shall be converted automatically to Base Rate Loans on the respective last
days of the then current Interest Periods with respect to such Term Loans or
within such earlier period as required by law. If any such conversion of a
Eurodollar Loan occurs on a day which is not the last day of the then current
Interest Period with respect thereto, the Borrower shall pay to such Lender such
amounts, if any, as may be required pursuant to Section 2.16.

                  2.18     Change of Lending Office. Each Lender agrees that,
upon the occurrence of any event giving rise to the operation of Section 2.14,
2.15(a) or 2.17 with respect to such Lender, it will, if requested by the
Borrower, use reasonable efforts (subject to overall policy considerations of
such Lender) to designate another lending office for any Term Loans affected by
such event with the object of avoiding the consequences of such event; provided,
that such designation is made on terms that, in the sole judgment of such
Lender, cause such Lender and its lending office(s) to suffer no economic, legal
or regulatory disadvantage, and provided, further, that nothing in this Section
shall affect or postpone any of the obligations of any Borrower or the rights of
any Lender pursuant to Section 2.14, 2.15(a) or 2.17.

                  2.19     Replacement of Lenders under Certain Circumstances.
The Borrower shall be permitted to replace any Lender that (a) requests
reimbursement for amounts owing pursuant to Section 2.14 or 2.15 or gives a
notice of illegality pursuant to Section 2.17 or (b) defaults in its obligation
to make Term Loans hereunder, with a replacement financial institution; provided
that (i) such replacement does not conflict with any Requirement of Law, (ii) no
Event of Default shall have occurred and be continuing at the time of such
replacement, (iii) prior to any such replacement, such Lender shall have taken
no action under Section 2.18 so as to eliminate the continued need for payment
of amounts owing pursuant to Section 2.14 or 2.15 or to eliminate the illegality
referred to in such notice of illegality given pursuant to Section 2.17, (iv)
the replacement financial institution shall purchase, at par, all Term Loans and
other amounts owing to such replaced Lender on or prior to the date of
replacement, (v) the Borrower shall be liable to such replaced Lender under
Section 2.16 (as though Section 2.16 were applicable) if any Eurodollar Loan
owing to such replaced Lender shall be purchased other than on the last day of
the Interest Period relating thereto, (vi) the replacement financial
institution, if not already a Lender, shall be reasonably satisfactory to the
Administrative Agent, (vii) the replaced Lender shall be obligated to make such
replacement in accordance with the provisions of Section 9.6 (provided that the
Borrower shall be obligated to pay the registration and processing fee referred
to therein), (viii) the Borrower shall pay all additional amounts (if any)
required pursuant to Section 2.14 or 2.15, as the case may be, in respect of any
period prior to the date on which such replacement shall be consummated, and
(ix) any such replacement shall not be deemed to be a waiver of any rights that
the Borrower, the Administrative Agent or any other Lender shall have against
the replaced Lender.

                                       31

                   SECTION 3. REPRESENTATIONS AND WARRANTIES

                  To induce the Arrangers, the Agents and the Lenders to enter
into this Agreement and to make the Term Loans, Holdings and the Borrower hereby
jointly and severally represent and warrant to each Arranger, each Agent and
each Lender that:

                  3.1      Financial Condition. The unaudited pro forma
consolidated balance sheet of the Borrower and its consolidated Subsidiaries as
at March 31, 2003 (the "Pro Forma Balance Sheet"), copies of which have
heretofore been furnished to each Lender, has been prepared giving effect (as if
such events had occurred on such date) to (i) the Term Loans to be made on the
Closing Date and the use of proceeds thereof and (ii) the payment of fees and
expenses in connection with the foregoing. The Pro Forma Balance Sheet has been
prepared based on the best information available to the Borrower as of the date
of delivery thereof, and presents fairly on a pro forma basis the estimated
financial position of Borrower and its consolidated Subsidiaries as at March 31,
2003, assuming that the events specified in the preceding sentence had actually
occurred at such date.

                  (a)      The audited consolidated balance sheet of the
Borrower and its Subsidiaries as at December 31, 2002, and the related
consolidated statements of income and of cash flows for the fiscal year ended on
such date, and the audited consolidated balance sheet of the Borrower and its
Subsidiaries as at December 31, 2001, and the related consolidated statements of
income and of cash flows for the period from May 4, 2001 to December 31, 2001,
each reported on by and accompanied by an unqualified report from Ernst & Young
LLP, present fairly the consolidated financial condition of the Borrower and its
Subsidiaries as at such date, and the consolidated results of its operations and
its consolidated cash flows for the respective periods then ended. The unaudited
consolidated balance sheet of the Borrower and its Subsidiaries as at March 31,
2003, and the related unaudited consolidated statements of income and cash flows
for the 3-month period ended on such date, present fairly the consolidated
financial condition of the Borrower and its Subsidiaries as at such date, and
the consolidated results of its operations and its consolidated cash flows for
the respective period then ended (subject to normal year-end audit adjustments).
All such financial statements, including the related schedules and notes
thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by the aforementioned firm
of accountants and disclosed therein and the absence of footnotes in unaudited
statements). Except for the Holdings Subordinated Guaranty and intercompany
Indebtedness eliminated in a consolidation of Holdings and its Subsidiaries,
Holdings, the Borrower and Borrower's Subsidiaries do not have any material
Guarantee Obligations, contingent liabilities and liabilities for taxes, or any
long term leases or unusual forward or long term commitments, including, without
limitation, any interest rate or foreign currency swap or exchange transaction
or other obligation in respect of derivatives, that are not reflected in the
most recent financial statements referred to in this paragraph or the footnotes
thereto. Except as disclosed on Schedule 3.1, during the period from December
31, 2002 to and including the date hereof there has been no Disposition by the
Borrower and its Subsidiaries of any material part of its business or Property.

                  3.2      No Change. Since December 31, 2002, there has been no
development or event that has had or could reasonably be expected to have a
Material Adverse Effect.

                                       32

                  3.3      Corporate Existence; Compliance with Law. Each of
Holdings, the Borrower and the Borrower's Subsidiaries (a) is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the corporate or equivalent power and authority to own and
operate its Property, to lease the Property it operates as lessee and to conduct
the business in which it is currently engaged, (c) is duly qualified as a
foreign corporation and in good standing under the laws of each jurisdiction
where its ownership, lease or operation of Property or the conduct of its
business requires such qualification and (d) is in compliance with all
Requirements of Law, except in the case of clauses (c) and (d), to the extent
that the failure to comply therewith could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.

                  3.4      Corporate Power; Authorization; Enforceable
Obligations. Each Loan Party has the corporate or equivalent power and authority
to make, deliver and perform the Loan Documents to which it is a party and, in
the case of the Borrower, to borrow hereunder. Each Loan Party has taken all
necessary corporate or other action to authorize the execution, delivery and
performance of the Loan Documents to which it is a party and, in the case of the
Borrower, to authorize the borrowings on the terms and conditions of this
Agreement. No consent or authorization of, filing with, notice to or other act
by or in respect of, any Governmental Authority or any other Person is required
in connection with the borrowings hereunder or the execution, delivery,
performance, validity or enforceability of this Agreement or any of the other
Loan Documents, except (i) consents, authorizations, filings and notices
described in Schedule 3.4, which consents, authorizations, filings and notices
have been obtained or made and are in full force and effect and (ii) the filings
referred to in Section 3.19. This Agreement has been, and each other Loan
Document to which any Loan Party is a party will be, duly executed and delivered
on behalf of each Loan Party that is a party thereto. This Agreement
constitutes, and each other Loan Document upon execution will constitute, a
legal, valid and binding obligation of each Loan Party that is a party thereto,
enforceable against each such Loan Party in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).

                  3.5      No Legal Bar. The execution, delivery and performance
of this Agreement and the other Loan Documents, the borrowings hereunder and the
use of the proceeds thereof will not violate any Requirement of Law or any
Contractual Obligation of Holdings, the Borrower or any of their respective
Subsidiaries and will not result in, or require, the creation or imposition of
any Lien on any of their respective properties or revenues pursuant to any
Requirement of Law or any such Contractual Obligation (other than the Liens
created by the Security Documents). No Requirement of Law or Contractual
Obligation applicable to Holdings, the Borrower or any of the Borrower's
Subsidiaries could reasonably be expected to have a Material Adverse Effect.

                  3.6      No Material Litigation. Except as set forth on
Schedule 3.6 (any such litigation set forth therein could not, in the judgment
of the Borrower, reasonably be expected to have a Material Adverse Effect), no
litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of Holdings or the
Borrower, threatened by or against Holdings, the Borrower or any of the
Borrower's Subsidiaries

                                       33

or against any of their respective properties or revenues (a) with respect to
any of the Loan Documents or any of the transactions contemplated hereby or
thereby, or (b) that could reasonably be expected to have a Material Adverse
Effect.

                  3.7      No Default. Neither Holdings, the Borrower nor any of
the Borrower's Subsidiaries is in default under or with respect to any of its
Contractual Obligations in any respect that could reasonably be expected to have
a Material Adverse Effect. No Default or Event of Default has occurred and is
continuing.

                  3.8      Ownership of Property; Liens. Each of Holdings, the
Borrower and the Borrower's Subsidiaries has a valid interest in all its
Property, and none of such Property is subject to any Lien other than Permitted
Liens and imperfections in title that do not in the aggregate materially detract
from the value or use of such Property in the business of Borrower and its
Subsidiaries.

                  3.9      Intellectual Property. Each of Holdings, the Borrower
and the Borrower's Subsidiaries owns, or is licensed to use, all Intellectual
Property necessary for the conduct of its business as currently conducted. No
material claim has been asserted and is pending by any Person challenging or
questioning the use of any Intellectual Property or the validity or
effectiveness of any Intellectual Property, nor does Holdings or the Borrower
know of any valid basis for any such claim. The use of Intellectual Property by
Holdings, the Borrower and the Borrower's Subsidiaries does not infringe on the
rights of any Person in any material respect.

                  3.10     Taxes. Each of Holdings, the Borrower and each of
their respective Subsidiaries has filed or caused to be filed all Federal, state
and other material tax returns that are required to be filed and has paid all
taxes shown to be due and payable on said returns or on any assessments made
against it or any of its Property and all other material taxes, fees or other
charges imposed on it or any of its Property by any Governmental Authority
(other than any the amount or validity of which are currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of Holdings, the Borrower
or their respective Subsidiaries, as the case may be); and no tax Lien has been
filed that is not a Permitted Lien, and, to the knowledge of Holdings and the
Borrower, no claim is being asserted, with respect to any such tax, fee or other
charge.

                  3.11     Federal Regulations. No part of the proceeds of any
Term Loans will be used for "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under Regulation U as now
and from time to time hereafter in effect or for any purpose that violates the
provisions of the Regulations of the Board. If requested by any Lender or the
Administrative Agent, the Borrower will furnish to the Administrative Agent and
each Lender a statement to the foregoing effect in conformity with the
requirements of FR Form G-3 or FR Form U 1 referred to in Regulation U.

                  3.12     Labor Matters. There are no strikes or other labor
disputes against Holdings, the Borrower or any of the Borrower's Subsidiaries
pending or, to the knowledge of Holdings or the Borrower, threatened that
(individually or in the aggregate) could reasonably be expected to have a
Material Adverse Effect. Hours worked by and payment made to employees of
Holdings, the Borrower and the Borrower's Subsidiaries have not been in
violation of the Fair

                                       34

Labor Standards Act or any other applicable Requirement of Law dealing with such
matters that (individually or in the aggregate) could reasonably be expected to
have a Material Adverse Effect. All payments due from Holdings, the Borrower or
any of the Borrower's Subsidiaries on account of employee health and welfare
insurance that (individually or in the aggregate) could reasonably be expected
to have a Material Adverse Effect if not paid have been paid or accrued as a
liability on the books of Holdings, the Borrower or the relevant Subsidiary.

                  3.13     ERISA. Except as set forth on Schedule 3.13, neither
a Reportable Event nor an "accumulated funding deficiency" (within the meaning
of Section 412 of the Code or Section 302 of ERISA) has occurred during the five
year period prior to the date on which this representation is made with respect
to any Plan. Each Plan has complied in all material respects with the applicable
provisions of ERISA and the Code. No termination of a Single Employer Plan has
occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such
five-year period. Except as set forth on Section 3.13, the present value of all
accrued benefits under each Single Employer Plan (based on those assumptions
used to fund such Plans) did not, as of the last annual valuation date prior to
the date on which this representation is made, exceed the value of the assets of
such Plan allocable to such accrued benefits by a material amount. Neither the
Borrower nor any Commonly Controlled Entity has had a complete or partial
withdrawal from any Multiemployer Plan that has resulted or could reasonably be
expected to result in a material liability under ERISA, and neither the Borrower
nor any Commonly Controlled Entity would become subject to any material
liability under ERISA if the Borrower or any such Commonly Controlled Entity
were to withdraw completely from all Multiemployer Plans as of the valuation
date most closely preceding the date on which this representation is made or
deemed made. No such Multiemployer Plan is in Reorganization or Insolvent.

                  3.14     Investment Company Act; Other Regulations. No Loan
Party is an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
No Loan Party is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) which limits its ability to incur Indebtedness.

                  3.15     Subsidiaries. The Subsidiaries listed on Schedule
3.15 constitute all the Subsidiaries of Holdings at the date hereof. Schedule
3.15 sets forth as of the Closing Date the name and jurisdiction of
incorporation of each Subsidiary of Holdings and, as to each Subsidiary, the
percentage of each class of Capital Stock owned by each Loan Party.

                  (a)      There are no outstanding subscriptions, options,
warrants, calls, rights or other agreements or commitments (other than stock
options granted to employees or directors and directors' qualifying shares) of
any nature relating to any Capital Stock of Holdings, the Borrower or any of the
Borrower's Subsidiaries.

                  3.16     Use of Proceeds. The proceeds of the Term Loans shall
be used (i) to repay in part loans outstanding under, and other amounts due in
respect of, the Existing Credit Agreement, and to pay related fees and expenses,
and (ii) for general corporate purposes.

                  3.17     Environmental Matters. Except as set forth on
Schedule 3.17 (provided, however, that any such matters set forth therein could
not, in the judgment of the Borrower,

                                       35

reasonably be expected to have a Material Adverse Effect) and other than
exceptions to any of the following that could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect:

                  (a)      Holdings, the Borrower and the Borrower's
Subsidiaries: (i) are, and within the period of all applicable statutes of
limitation have been, in compliance with all applicable Environmental Laws; (ii)
hold all Environmental Permits (each of which is in full force and effect)
required for any of their current operations or for any property owned, leased,
or otherwise operated by any of them; (iii) are, and within the period of all
applicable statutes of limitation have been, in compliance with all of their
Environmental Permits; and (iv) reasonably believe that: each of their
Environmental Permits will be timely renewed and complied with; any additional
Environmental Permits that may be required of any of them will be timely
obtained and complied with; and compliance with any Environmental Law that is or
is expected to become applicable to any of them will be timely attained and
maintained.

                  (b)      Materials of Environmental Concern are not present
at, on, under, in, or about any real property now or formerly owned, leased or
operated by Holdings, the Borrower or any of the Borrower's Subsidiaries, or at
any other location (including, without limitation, any location to which
Materials of Environmental Concern have been sent for re-use or recycling or for
treatment, storage, or disposal) which could reasonably be expected to (i) give
rise to liability of Holdings, the Borrower or any of the Borrower's
Subsidiaries under any applicable Environmental Law or otherwise result in costs
to Holdings, the Borrower or any of the Borrower's Subsidiaries, or (ii)
interfere with Holdings', the Borrower's or any of the Borrower's Subsidiaries'
continued operations, or (iii) impair the fair saleable value of any real
property owned or leased by Holdings, the Borrower or any of the Borrower's
Subsidiaries.

                  (c)      There is no judicial, administrative, or arbitral
proceeding (including any notice of violation or alleged violation) under or
relating to any Environmental Law to which Holdings, the Borrower or any of the
Borrower's Subsidiaries is, or to the knowledge of Holdings or the Borrower will
be, named as a party that is pending or, to the knowledge of Holdings or the
Borrower, threatened.

                  (d)      None of Holdings, the Borrower or any of the
Borrower's Subsidiaries has received any written request for information, or
been notified that it is a potentially responsible party under or relating to
the federal Comprehensive Environmental Response, Compensation, and Liability
Act or any similar Environmental Law.

                  (e)      None of Holdings, the Borrower or any of the
Borrower's Subsidiaries has entered into or agreed to any consent decree, order,
or settlement or other agreement, or is subject to any judgment, decree, or
order or other agreement, in any judicial, administrative, arbitral, or other
forum for dispute resolution, relating to compliance with or liability under any
Environmental Law.

                  (f)      None of Holdings, the Borrower or any of the
Borrower's Subsidiaries has assumed or retained, by contract or operation of
law, any liabilities of any kind, fixed or contingent, known or unknown, under
any Environmental Law.

                                       36

                  3.18     Accuracy of Information, etc. No statement or
information contained in this Agreement, any other Loan Document, the
Confidential Information Memorandum or any other document, certificate or
statement (other than projections and the financial statements of the Borrower
for fiscal years 1998, 1999 and 2000 and the first 7 months of fiscal year 2001)
furnished to the Arrangers, the Administrative Agent, any other Agent or the
Lenders or any of them, by or on behalf of any Loan Party for use in connection
with the transactions contemplated by this Agreement or the other Loan
Documents, contained as of the date such statement, information, document or
certificate was so furnished (or, in the case of the Confidential Information
Memorandum, as of the date of this Agreement) and taken as a whole, any untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements contained herein or therein not misleading. The
projections and pro forma financial information contained in the materials
referenced above are based upon good faith estimates and assumptions believed by
management of Holdings and the Borrower to be reasonable at the time made, it
being recognized by the Lenders that such financial information as it relates to
future events is not to be viewed as fact and that actual results during the
period or periods covered by such financial information may differ from the
projected results set forth therein by a material amount. There is no fact known
to any Loan Party that could reasonably be expected to have a Material Adverse
Effect that has not been expressly disclosed herein, in the other Loan
Documents, in the Confidential Information Memorandum or in any other documents,
certificates and statements furnished to the Arrangers, the Administrative
Agent, any other Agent and the Lenders for use in connection with the
transactions contemplated hereby and by the other Loan Documents.

                  3.19     Security Documents. The Guarantee and Collateral
Agreement is effective to create in favor of the Administrative Agent, for the
benefit of the Secured Parties, a legal, valid and enforceable security interest
in the Collateral described therein and proceeds thereof. In the case of the
Pledged Stock described in the Guarantee and Collateral Agreement, when any
stock certificates representing such Pledged Stock are delivered to the
Administrative Agent, and in the case of the other Collateral described in the
Guarantee and Collateral Agreement, when financing statements in appropriate
form are filed in the offices specified on Schedule 3.19(a)-1 (which financing
statements have been duly completed and executed, delivered to and authorized to
be filed by the Administrative Agent) and such other filings as are specified on
Schedule 3 to the Guarantee and Collateral Agreement have been completed, the
Guarantee and Collateral Agreement shall constitute (to the extent perfection
can be accomplished by filings of UCC financing statements or the delivery and
possession of Pledged Stock or Pledged Notes) a fully perfected Lien on, and
security interest in, all right, title and interest of the Loan Parties in such
Collateral and the proceeds thereof, as security for the Obligations (as defined
in the Guarantee and Collateral Agreement), in each case prior and superior in
right to any other Person (except, in the case of Collateral other than Pledged
Stock, Permitted Liens). Schedule 3.19(a)-2 lists each UCC Financing Statement
that (i) names any Loan Party as debtor and (ii) will remain on file after the
Closing Date. Schedule 3.19(a)-3 lists each UCC Financing Statement that (i)
names any Loan Party as debtor and (ii) will be terminated on or prior to the
Closing Date; and on or prior to the Closing Date, the Borrower will have
delivered to the Administrative Agent, or caused to be filed, duly completed UCC
termination statements, authorized or authenticated by the relevant secured
party, in respect of each UCC Financing Statement listed in Schedule 3.19(a)-3.

                                       37

                  (a)      Upon the due execution and recordation thereof, each
of the Mortgages will be effective to create in favor of the Administrative
Agent, for the benefit of the Secured Parties, a legal, valid, binding and
enforceable Lien on, and security interest in, the Mortgaged Properties
described, and as defined, therein and proceeds and products thereof, and when
the Mortgages are filed in the offices specified on Schedule 3.19(b), each such
Mortgage shall constitute a fully perfected first-priority Lien on, and security
interest in, all of the Mortgaged Properties and the proceeds and products
thereof, as security for the Obligations, in each case prior and superior in
right to any Liens of any other Person other than Permitted Liens.

                  3.20     Solvency. The Loan Parties are, taken as a whole, and
after giving effect to the incurrence of all Indebtedness and obligations being
incurred in connection herewith will be, and will continue to be, Solvent.

                  3.21     Hydrocarbon Interests. As of the Closing Date,
Schedule 3.21 sets forth a list of all of the Hydrocarbon Interests consisting
of oil and gas leaseholds, mineral interests, royalty and overriding royalty
interests in which the Borrower or any of its Subsidiaries has an interest.

                  3.22     Permits. Except as set forth in Section 3.17
(provided, however, that any such matters set forth therein could not, in the
judgment of the Borrower, reasonably be expected to have a Material Adverse
Effect) and other than exceptions to any of the following that could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect: (i) each of Holdings, the Borrower and the Borrower's
Subsidiaries has obtained and holds all Permits required in respect of all Real
Estate and for any other property otherwise operated by or on behalf of, or for
the benefit of, such Person and for the operation of each of its businesses as
presently conducted, (ii) all such Permits are in full force and effect, and
each of Holdings, the Borrower and the Borrower's Subsidiaries has performed and
observed all requirements of such Permits, (iii) no event has occurred which
allows or results in, or after notice or lapse of time would allow or result in,
revocation or termination by the issuer thereof or in any other impairment of
the rights of the holder of any such Permit, (iv) no such Permits contain any
restrictions, either individually or in the aggregate, that are materially
burdensome to Holdings, the Borrower or any of the Borrower's Subsidiaries, or
to the operation of any of its businesses or any property owned, leased or
otherwise operated by such Person, (v) each of Holdings, the Borrower and the
Borrower's Subsidiaries reasonably believes that the Permits necessary for the
operation of its Oil and Gas Business, taken as a whole, will be renewed and
complied with and that any additional permits necessary for the operation of its
Oil and Gas Business, taken as a whole, will be obtained and complied with.

                  (a)      Except as set forth on Schedule 3.22(b) and except
for filings and recordings required for the perfection of Liens, no consent or
authorization of, filing with, Permit from, or other act by or in respect of,
any Governmental Authority is required in connection with the execution,
delivery, performance, validity or enforceability of, or enforcement of remedies
(including, without limitation, foreclosure on the Collateral) pursuant to, this
Agreement and the other Loan Documents.

                  3.23     Lease Payments. Each of Holdings, the Borrower and
the Borrower's Subsidiaries has paid all royalties and payments required to be
made by it under leases of Oil and

                                       38

Gas Properties (except for properties abandoned in the ordinary course of
business or with respect to which the failure to pay such royalties and other
payments could not reasonably be expected to have a Material Adverse Effect)
where any of the Collateral is or may be located from time to time (other than
any the amount or validity of which are currently being contested in good faith
by appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of Holdings, the Borrower or such
Subsidiary, as the case may be); to the knowledge of Holdings or the Borrower,
no claim is being asserted with respect to any such payments that, individually
or in the aggregate, could be reasonably expected to have a Material Adverse
Effect.

                  3.24     Public Utility Holding Company Act. Neither the
Borrower nor any of its Subsidiaries is a "holding company," or a "Subsidiary
company" of a "holding company," or an "affiliate" of a "holding company" or of
a "Subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.

                  SECTION 4. CONDITIONS PRECEDENT

                  4.1      Conditions to the Term Loan. The agreement of each
Lender to make the Term Loan requested to be made by it hereunder is subject to
the satisfaction, prior to or concurrently with the making of such Term Loan on
the Closing Date, of the following conditions precedent:

                  (a)      Loan Documents. The Administrative Agent shall have
received (i) this Agreement, executed and delivered by a duly authorized officer
of Holdings and the Borrower, (ii) the Guarantee and Collateral Agreement,
executed and delivered by a duly authorized officer of Holdings, the Borrower
and each Subsidiary Guarantor, and (iii) a Lender Addendum executed and
delivered by each Lender and accepted by the Borrower.

                  (b)      Pro Forma Balance Sheet; Financial Statements. The
Lenders shall have received (i) the Pro Forma Balance Sheet, (ii) audited
consolidated financial statements of the Borrower and its Subsidiaries for the
1998, 1999, 2000 and 2002 fiscal years, (iii) audited consolidated financial
statements of the Borrower and its Subsidiaries for the period from August 1,
2001 to December 31, 2001, (iv) unaudited consolidated financial statements of
the Borrower and its Subsidiaries for the period from January 1, 2001 to July
31, 2001 (without footnotes) and (v) unaudited interim consolidated financial
statements of the Borrower and its Subsidiaries for the fiscal quarter of the
Borrower ended March 31, 2003; and such financial statements shall not, in the
reasonable judgment of the Lenders, reflect any material adverse change in the
consolidated financial condition of the Borrower and its Subsidiaries, as
reflected in the financial statements or projections contained in the
Confidential Information Memorandum.

                  (c)      Approvals. All governmental and third party approvals
(including landlords' and other consents) necessary or, in the reasonable
judgment of the Administrative Agent, advisable in connection with the
continuing operations of Holdings, the Borrower and the Borrower's Subsidiaries
and the transactions contemplated hereby shall have been obtained and be in full
force and effect.

                                       39

                  (d)      Related Agreements. The Administrative Agent shall
have received (in a form reasonably satisfactory to the Administrative Agent),
true and correct copies, certified as to authenticity by the Borrower, of such
documents or instruments as may be reasonably requested by the Administrative
Agent, including, without limitation, a copy of any debt instrument, security
agreement or other material contract to which Parent or any Loan Party may be a
party that is requested by the Administrative Agent.

                  (e)      Termination of Existing Credit Agreement. The
Administrative Agent shall have received evidence reasonably satisfactory to the
Administrative Agent that the Existing Credit Agreement shall be simultaneously
terminated, all amounts thereunder shall be simultaneously paid in full and
arrangements reasonably satisfactory to the Administrative Agent shall have been
made for the termination of Liens and security interests granted in connection
therewith.

                  (f)      Fees. The Administrative Agent and the other Agents
shall have received all fees required to be paid, and all expenses for which
invoices have been presented (including reasonable fees, disbursements and other
charges of Weil, Gotshal & Manges LLP and LeBoeuf Lamb, Greene & MacRae, L.L.P.,
counsel to the Administrative Agent), on or before the Closing Date. All such
amounts will be paid with proceeds of Term Loans made on the Closing Date and
will be reflected in the funding instructions given by the Borrower to the
Administrative Agent on or before the Closing Date.

                  (g)      Business Plan. The Lenders shall have received
satisfactory business projections for fiscal years 2003 - 2007.

                  (h)      Solvency Certification. The Lenders shall have
received a Solvency Certificate, substantially in the form of Exhibit J, from
the treasurer or controller of Holdings and the Borrower, which shall document
the solvency of Holdings, the Borrower and the Borrower's Subsidiaries
considered as a whole after giving effect to the transactions contemplated
hereby.

                  (i)      Lien Searches. The Administrative Agent shall have
received the results of a recent lien search in each of the jurisdictions in
which Uniform Commercial Code financing statements or other filings or
recordations have been or should be made to evidence or perfect security
interests in all assets of the Loan Parties, and such search shall reveal no
liens on any of the assets of the Loan Party, except for Liens permitted by
Section 6.3.

                  (j)      Reserve Reports. The Administrative Agent shall have
received a Reserve Report dated as of December 31, 2002, covering the
Hydrocarbon Interests of the Borrower and its Subsidiaries, in form and
substance satisfactory to the Administrative Agent.

                  (k)      Closing Certificate. The Administrative Agent shall
have received a certificate of each Loan Party, dated the Closing Date,
substantially in the form of Exhibit C, with appropriate insertions and
attachments.

                  (l)      Legal Opinions. The Administrative Agent shall have
received the following executed legal opinions:

                                       40

                           (i)      the legal opinion of Gibson, Dunn & Crutcher
                                    LLP, counsel to Holdings, the Borrower and
                                    the Borrower's Subsidiaries, substantially
                                    in the form of Exhibit F-1;

                           (ii)     the legal opinion of Davis Graham & Stubbs
                                    LLP, counsel to the Borrower, substantially
                                    in the form of Exhibit F-2; and

                           (iii)    such other legal opinions of local counsel
                                    as are requested by the Administrative Agent
                                    in form and substance reasonably
                                    satisfactory to the Administrative Agent.

Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent may
reasonably require.

                  (m)      Pledged Stock; Stock Powers; Acknowledgment and
Consent; Pledged Notes. The Administrative Agent shall have received (i) the
certificates representing the shares of Capital Stock pledged pursuant to the
Guarantee and Collateral Agreement, together with an undated stock power for
each such certificate executed in blank by a duly authorized officer of the
pledgor thereof, (ii) an Acknowledgment and Consent, substantially in the form
of Annex II to the Guarantee and Collateral Agreement, duly executed by any
issuer of Capital Stock pledged pursuant to the Guarantee and Collateral
Agreement that is not itself a party to the Guarantee and Collateral Agreement
and (iii) each promissory note pledged pursuant to the Guarantee and Collateral
Agreement endorsed (without recourse) in blank (or accompanied by an executed
transfer form in blank satisfactory to the Administrative Agent) by the pledgor
thereof.

                  (n)      Filings, Registrations and Recordings. Each document
(including, without limitation, any Uniform Commercial Code financing statement)
required by the Security Documents or under law or reasonably requested by the
Administrative Agent to be filed, registered or recorded in order to create in
favor of the Administrative Agent, for the benefit of the Secured Parties, a
perfected Lien on the Collateral described therein, prior and superior in right
to any other Person (other than with respect to Liens expressly permitted by
Section 6.3 and Liens subject to releases delivered at Closing), shall have been
filed, registered or recorded or shall have been delivered to the Administrative
Agent be in proper form for filing, registration or recordation.

                  (o)      Oil and Gas Mortgages. The Lenders shall have
received, in form satisfactory for filing, Mortgages on each of the Borrower's
Oil and Gas Properties, other than those set forth on Schedules 6.5(f)(i) or
6.5(i) or any Oil and Gas Property with a fair market value as of the Closing
Date of less than $2,000,000 (so long as the aggregate fair market value of the
Properties excluded by the Borrower from inclusion in the Collateral as a result
of such threshold at any time does not exceed $10,000,000 in the aggregate).

                  (p)      Insurance. The Administrative Agent shall have
received insurance certificates satisfying the requirements of Section 5.3 of
the Guarantee and Collateral Agreement.

                                       41

                  (q)      Minimum Rating. The Facility shall have been assigned
a senior secured credit rating of not less than B3 from Moody's and B+ from S&P,
which ratings shall remain in effect on the Closing Date.

                  (r)      Environmental. The Lenders shall be reasonably
satisfied with the environmental affairs of the Borrower and its Subsidiaries.

                  (s)      Representations and Warranties. Each of the
representations and warranties made by any Loan Party in or pursuant to the Loan
Documents shall be true and correct on and as of the Closing Date.

                  (t)      No Default. No Default or Event of Default shall have
occurred and be continuing on the Closing Date or after giving effect to the
Term Loans requested to be made on the Closing Date.

                        SECTION 5. AFFIRMATIVE COVENANTS

                  Holdings and the Borrower hereby jointly and severally agree
that, so long as any Term Loan or other amount is owing to any Lender, any
Arranger or any Agent hereunder, each of Holdings and the Borrower shall and
shall cause each of the Borrower's Subsidiaries to:

                  5.1      Financial Statements. Furnish to the Administrative
Agent for the benefit of each Lender:

                  (a)      as soon as available, but in any event within 105
days after the end of each fiscal year of the Borrower, a copy of the audited
consolidated balance sheet of the Borrower and its consolidated Subsidiaries as
at the end of such year and the related audited consolidated statements of
income and of cash flows for such year, setting forth in each case in
comparative form the figures as of the end of and for the previous year,
reported on without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, by Ernst & Young LLP or
other independent certified public accountants of nationally recognized
standing;

                  (b)      as soon as available, but in any event not later than
60 days after the end of each of the first three quarterly periods of each
fiscal year of the Borrower, the unaudited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at the end of such quarter and the
related unaudited consolidated statements of income and of cash flows for such
quarter and the portion of the fiscal year through the end of such quarter,
setting forth in each case in comparative form the figures as of the end of and
for the corresponding period in the previous year, certified by a Responsible
Officer as being fairly stated in all material respects (subject to normal year
end audit adjustments and the absence of footnotes); and

all such financial statements to be prepared in accordance with GAAP applied
consistently throughout the periods reflected therein and with prior periods
(except as approved by such accountants or officer, as the case may be, and
disclosed therein) and to present fairly the financial condition of the Borrower
and its Subsidiaries as of the dates thereof and the results of operations for
the periods covered thereby.

                                       42

                  5.2      Certificates; Other Information. Furnish to the
Administrative Agent:

                  (a)      concurrently with the delivery of the financial
statements referred to in Section 5.1(a), a certificate of the independent
certified public accountants reporting on such financial statements stating that
in making the examination necessary therefor no knowledge was obtained of any
Default or Event of Default, except as specified in such certificate;

                  (b)      concurrently with the delivery of any financial
statements pursuant to Section 5.1, (i) a certificate of a Responsible Officer
stating that such Responsible Officer has obtained no knowledge of any Default
or Event of Default except as specified in such certificate and (ii) in the case
of quarterly or annual financial statements, (x) a Compliance Certificate
containing all information and calculations necessary for determining compliance
by the Borrower with Section 6.1 as of the last day of the fiscal quarter or
fiscal year of the Borrower, as the case may be, and (y) to the extent not
previously disclosed to the Administrative Agent in writing, a listing of any
county and state, where any Loan Party has an Oil and Gas Property required to
be pledged to the Lenders pursuant to Section 5.9;

                  (c)      concurrently with any Compliance Certificate
delivered pursuant to paragraph (b) above, (i) a production statement that
identifies the most recent information available relating to net revenue
interests of Hydrocarbons sold by the Borrower and its Subsidiaries and (ii) a
statement of revenues and expenses attributable to the Hydrocarbon Interests of
the Borrower and its Subsidiaries for such fiscal quarter ended;

                  (d)      concurrently with the delivery of any financial
statements pursuant to Section 5.1(a), and such other time as the Borrower may,
in its sole discretion elect, an Engineering Report;

                  (e)      as soon as available, and in any event no later than
45 days after the end of each fiscal year of the Borrower, a detailed
consolidated budget for the following fiscal year (including a projected
consolidated balance sheet of the Borrower and the Borrower's Subsidiaries as of
the end of the following fiscal year, and the related consolidated statements of
projected cash flow, projected changes in financial position and projected
income), and, as soon as available, significant revisions, if any, by the
Borrower for any material changes to such budget and projections with respect to
such fiscal year (collectively, the "Projections"), which Projections shall in
each case be accompanied by a certificate of a Responsible Officer stating that
such Projections are based on reasonable estimates, information and assumptions
and that such Responsible Officer has no reason to believe that such Projections
are incorrect or misleading in any material respect;

                  (f)      within 60 days after the end of each fiscal quarter
of the Borrower (or in the case of the fourth fiscal quarter of each year,
within 105 days after the end of such fiscal quarter), a narrative discussion
and analysis of the financial condition and results of operations of the
Borrower and the Borrower's Subsidiaries for such fiscal quarter and for the
period from the beginning of the then current fiscal year to the end of such
fiscal quarter, as compared to the portion of the Projections covering such
periods and to the comparable periods of the previous year;

                                       43

                  (g)      no later than 10 Business Days prior to the
effectiveness thereof, copies of substantially final drafts of any proposed
amendment, supplement, waiver or other modification with respect the Governing
Documents of Holdings, the Borrower or any of the Borrower's Subsidiaries that
could reasonably be expected to have a Material Adverse Effect;

                  (h)      to the extent not previously provided, within five
days after the same are sent, copies of all financial statements and reports
that Holdings, the Borrower or any of the Borrower's Subsidiaries sends to the
holders of any class of its public debt securities or public equity securities
and, within five days after the same are filed, copies of all financial
statements and reports that Holdings, the Borrower or any of the Borrower's
Subsidiaries may make to, or file with, the SEC;

                  (i)      promptly and in any event within 10 days of a
Responsible Officer obtaining knowledge thereof: (i) notice of any development,
event, or condition that, individually or in the aggregate with other
developments, events or conditions, could reasonably be expected to result in
the payment by Holdings, the Borrower or any of the Borrower's Subsidiaries, in
the aggregate, of a Material Environmental Amount; and (ii) any notice that any
Governmental Authority may condition approval of, or any application for, an
Environmental Permit or any other Permit held by Holdings, the Borrower or any
of the Borrower's Subsidiaries on terms and conditions that could reasonably be
expected to have a Material Adverse Effect;

                  (j)      promptly upon receipt thereof, copies of all title
opinions produced in the ordinary course of business or delivered to or received
by the Borrower or its Subsidiaries covering any Oil and Gas Properties acquired
by the Borrower or its Subsidiaries after the Closing Date; and

                  (k)      promptly, such additional financial and other
information as the Administrative Agent may from time to time reasonably
request.

                  5.3      Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all its material obligations of whatever nature, except (i) where the
failure to pay, discharge or otherwise satisfy such obligations, individually or
in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect, or (ii) where the amount or validity thereof is currently being
contested in good faith by appropriate proceedings and reserves in conformity
with GAAP with respect thereto have been provided on the books of Holdings, the
Borrower or Borrower's Subsidiaries, as the case may be.

                  5.4      Conduct of Business and Maintenance of Existence,
etc. (a) (i) Preserve, renew and keep in full force and effect its corporate or
other existence and (ii) take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of its
business, except, in each case, as otherwise permitted by Section 6.4 and
except, in the case of clause (ii) above, to the extent that failure to do so
could not reasonably be expected to have a Material Adverse Effect; and (b)
comply with all Contractual Obligations and Requirements of Law, except to the
extent that failure to comply therewith could not, in the aggregate, reasonably
be expected to have a Material Adverse Effect.

                                       44

                  5.5      Maintenance of Property; Insurance. Keep all of
its Property and systems useful and necessary in its business in good working
order and condition, ordinary wear and tear and casualty and condemnation
excepted, subject to Dispositions permitted under Section 6.5 and maintain with
financially sound and reputable insurance companies insurance on all its
Property in at least such amounts and against at least such risks (but including
in any event public liability, product liability and business interruption) as
are usually insured against in the same general area by companies engaged in the
same or a similar business.

                  (a)      Maintain all rights of way, easements, grants,
privileges, licenses, certificates, and permits necessary for the use of any
Real Estate the failure of which to maintain could reasonably be expected to
result in a Material Adverse Effect and will not, without the prior written
consent of the Administrative Agent, consent to any public or private
restriction as to the use of any Real Estate that could reasonably be expected
to interfere materially with the use or operation of a material portion of the
Real Estate by the Borrower or any of its Subsidiaries.

                  (b)      (i) Comply with the terms of each lease in respect of
Oil and Gas Properties so as to not permit any material uncured default on its
part to exist in respect of such lease and renew the terms of such leases on
commercially reasonable terms, except such defaults and expiration of leases
that could not be reasonably expected to have a Material Adverse Effect and (ii)
in accordance with prudent industry practices, perform or cause to be performed
each and every material act required by each and all of the leases in respect of
its material Oil and Gas Properties and all other material agreements and
material contracts constituting or affecting its material Oil and Gas
Properties, do all things necessary to keep unimpaired its rights thereunder and
prevent any forfeiture thereof or default thereunder, and operate or cause to be
operated such Oil and Gas Properties in a diligent, careful and efficient manner
in material compliance with all applicable Requirements of Law, in each case,
except to the extent the failure to so act could not reasonably be expected to
have a Material Adverse Effect.

                  (c)      Preserve and protect the Lien status of each
respective Mortgage and, if any Lien (other than unrecorded Liens permitted
under Section 6.3 that arise by operation of law and other Liens permitted under
Section 6.3(b)(i), (ii), (v), (vi), (x), (xi), (xii), (xiii), (xiv), (xv) and
(xvi)) is asserted against any material Mortgaged Property, promptly and at its
expense, give the Administrative Agent a detailed written notice of such Lien
and pay the underlying claim in full or take such other action so as to cause it
to be released or bonded over in a manner satisfactory to the Administrative
Agent.

                  5.6      Inspection of Property; Books and Records;
Discussions. (a) Keep proper books of records and account in which full, true
and correct entries in conformity with GAAP and all Requirements of Law shall be
made of all dealings and transactions in relation to its business and activities
and (b) permit representatives of any Lender to visit and inspect any of its
properties and examine and make abstracts from any of its books and records upon
reasonably prior written notice, at any reasonable time, at such Lender's
expense (so long as no Event of Default shall have occurred and be continuing)
and as often as may reasonably be desired and to discuss the business,
operations, properties and financial and other condition of Holdings, the
Borrower and Borrower's Subsidiaries with officers and employees of Holdings,
the Borrower and Borrower's Subsidiaries and, so long as (i) accompanied by a
Responsible Officer and (ii) no

                                       45

more often than annually unless an Event of Default shall have occurred and be
continuing, with its independent certified public accountants.

                  5.7      Notices. Promptly after a Responsible Officer has
knowledge, give notice to the Administrative Agent for the benefit of each
Lender:

                  (a)      the occurrence of any Default or Event of Default;

                  (b)      any (i) default or event of default under any
Contractual Obligation of Holdings, the Borrower or any of Borrower's
Subsidiaries or (ii) litigation, investigation or proceeding which may exist at
any time between Holdings, the Borrower or any of Borrower's Subsidiaries and
any Governmental Authority, that in either case, if not cured or if adversely
determined, as the case may be, could reasonably be expected to have a Material
Adverse Effect;

                  (c)      any litigation or proceeding affecting Holdings, the
Borrower or any of Borrower's Subsidiaries in which the amount involved is
$10,000,000 or more and not covered by insurance or in which injunctive or
similar relief is sought which, if granted, could reasonably be expected to
cause a Material Adverse Effect;

                  (d)      the following events, as soon as possible and in any
event within 30 days after a Responsible Officer knows thereof: (i) the
occurrence of any Reportable Event with respect to any Plan, a failure to make
any required contribution to a Plan, the creation of any Lien in favor of the
PBGC or a Plan or any withdrawal from, or the termination, Reorganization or
Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or
the taking of any other action by the PBGC or the Borrower or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the withdrawal from,
or the termination, Reorganization or Insolvency of, any Plan; and

                  (e)      any development or event that has had or could
reasonably be expected to have a Material Adverse Effect.

Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action Holdings, the Borrower or the relevant Subsidiary
proposes to take with respect thereto.

                  5.8      Environmental Laws. Comply in all material
respects with, and use commercially reasonable best efforts to cause compliance
in all material respects by all tenants and subtenants, if any, with, all
applicable Environmental Laws, and obtain, comply with and maintain, in each
case in all material respects, and use commercially reasonable best efforts to
cause all tenants and subtenants, if any, to obtain, comply with and maintain,
in each case in all material respects, the Environmental Permits that are
material and necessary for the continued operation of its Oil and Gas Business.

                (a)      Conduct and complete all investigations, studies,
sampling and testing associated with response, removal or remediation actions
required under Environmental Laws.

                  5.9      Additional Collateral, etc. With respect to any
Property having a value of at least $2,000,000 individually (so long as the
aggregate fair market value of the Properties

                                       46

excluded by the Borrower from inclusion in the Collateral as a result of such
threshold at any time does not exceed $10,000,000 in the aggregate) acquired
after the Closing Date by any Grantor (other than (x) Property acquired by an
Excluded Foreign Subsidiary, (y) Property (other than any Oil and Gas Property)
acquired by any Bison Entities, and (z) any other Property excluded from the
Collateral pursuant to the terms of the Guarantee and Collateral Agreement) as
to which the Administrative Agent, for the benefit of the Secured Parties, does
not have a perfected Lien, promptly (i) execute and deliver to the
Administrative Agent Mortgages, such amendments to the Guarantee and Collateral
Agreement or such other documents as the Administrative Agent deems necessary or
advisable to grant to the Administrative Agent, for the benefit of the Secured
Parties, a security interest (subject to Permitted Liens) in such Property and
(ii) take all actions necessary or advisable to grant to the Administrative
Agent, for the benefit of the Secured Parties, a perfected first priority
security interest in such Property, including without limitation, the filing of
Mortgages or Uniform Commercial Code financing statements in such jurisdictions
as may be required by the Guarantee and Collateral Agreement or by law or as may
be requested by the Administrative Agent.

                  (a)      With respect to any new Subsidiary (other than an
Excluded Foreign Subsidiary) created or acquired after the Closing Date (which,
for the purposes of this paragraph, shall include any existing Subsidiary that
ceases to be an Excluded Foreign Subsidiary), by Holdings, the Borrower or any
of Borrower's Subsidiaries, cause such new Subsidiary (A) to become a party to
the Guarantee and Collateral Agreement and (B) to take such actions necessary or
advisable to grant to the Administrative Agent for the benefit of the Secured
Parties a security interest (subject to Permitted Liens) in the Collateral
described in the Guarantee and Collateral Agreement with respect to such new
Subsidiary, including, without limitation, the filing of Uniform Commercial Code
financing statements in such jurisdictions as may be required by the Guarantee
and Collateral Agreement or by law or as may be requested by the Administrative
Agent.

                  (b)      Use commercially reasonable efforts to deliver to the
Administrative Agent, for the benefit of the Lenders, as soon as commercially
practicable, the certificates representing the shares of Class B Common Stock of
the Borrower (or substitute certificates with the same rights) issued to the
Original Lenders (as defined in the Existing Credit Agreement), together with a
stock power for each such certificate executed by a duly authorized officer of
such Original Lender.

                  5.10     Further Assurances. From time to time execute and
deliver, or cause to be executed and delivered, such additional instruments,
certificates or documents, and take such actions, as the Administrative Agent
may reasonably request for the purposes of implementing or effectuating the
provisions of this Agreement and the other Loan Documents, or of more fully
perfecting or renewing the rights of the Administrative Agent and the Lenders
with respect to the Collateral (or with respect to any additions thereto or
replacements or proceeds thereof or with respect to any other property or assets
hereafter acquired by Holdings, the Borrower or any Subsidiary which may be
deemed to be part of the Collateral) pursuant hereto or thereto. Upon the
exercise by the Administrative Agent or any Lender of any power, right,
privilege or remedy pursuant to this Agreement or the other Loan Documents which
requires any consent, approval, recording, qualification or authorization of any
Governmental Authority, Holdings and the Borrower will execute and deliver, or
will cause the execution and delivery of, all applications,

                                       47

certifications, instruments and other documents and papers that the
Administrative Agent or such Lender may be required to obtain from Holdings, the
Borrower or any of the Borrower's Subsidiaries for such governmental consent,
approval, recording, qualification or authorization.

                  5.11     Capital Expenditure. The Capital Expenditures of the
Borrower and its Subsidiaries shall be at least $40,000,000 in each fiscal year
beginning on or after January 1, 2004, (excluding any Capital Expenditures made
with the proceeds of any Reinvestment Deferred Amount).

                         SECTION 6. NEGATIVE COVENANTS

                  Holdings and the Borrower hereby jointly and severally agree
that, so long as any Term Loan or other amount is owing to any Lender, any
Arranger or any Agent hereunder, each of Holdings and the Borrower shall not,
and shall not permit any of the Borrower's Subsidiaries to, directly or
indirectly:

                  6.1      Financial Condition Covenants.

                  (a)      Consolidated Interest Coverage Ratio. Permit the
Consolidated Interest Coverage Ratio for any period of four consecutive fiscal
quarters of the Borrower ending September 30, 2003 and each fiscal quarter
thereafter to be less than 3.00 to 1.00.

                  (b)      PV-10 Value to Total Senior Secured Debt Ratio.
Permit the ratio of PV-10 Value to Total Senior Secured Debt as of September 30,
2003 and as of each March 31 and September 30 thereafter to be less than 1.75 to
1.00.

                  6.2      Limitation on Indebtedness. Create, incur, assume or
suffer to exist any Indebtedness, except:

                  (a)      Indebtedness of any Loan Party pursuant to any Loan
Document;

                  (b)      Indebtedness of the Borrower to any Subsidiary and of
any Wholly Owned Subsidiary Guarantor to the Borrower or any other Subsidiary;

                  (c)      Indebtedness outstanding on the date hereof and
listed on Schedule 6.2(c) and any refinancings, refundings, renewals or
extensions thereof (without any increase in the principal amount thereof or any
shortening of the maturity of any principal amount thereof);

                  (d)      Guarantee Obligations made in the ordinary course of
business by the Borrower or any of its Subsidiaries of obligations of the
Borrower or any Subsidiary Guarantor;

                  (e)      Guarantee Obligations of the Borrower or any
Subsidiary Guarantor in respect of any other Indebtedness permitted under this
Section 6.2;

                  (f)      Indebtedness of Holdings pursuant to the Holdings
Subordinated Guaranty;

                                       48

                  (g)      Indebtedness in respect of acceptances, letters of
credit or similar instruments in the ordinary course of the Borrower's
exploration and production activities in an aggregate face or principal amount
not to exceed $30,000,000;

                  (h)      Indebtedness of any Loan Party to Parent or its
Affiliates (other than the Loan Parties) that has been subordinated to such Loan
Party's Obligations on terms reasonably satisfactory to the Administrative
Agent;

                  (i)      senior unsecured notes and senior unsecured
subordinated notes (collectively, the "New Notes") issued by the Borrower or
Holdings containing covenants, events of default and other terms customary for
such transactions or otherwise less restrictive to Holdings and its Subsidiaries
than those set forth in this Agreement or otherwise reasonably satisfactory to
the Administrative Agent; provided that (x) the interest rate applicable thereto
does not exceed the then applicable market interest rate and the maturity date
therefor is no earlier than the date one year and one day after the Maturity
Date, (y) no Default or Event of Default exists at the time of the issuance of
such notes or would result therefrom and (z) the requirements of Section 2.7(a)
are complied with in connection therewith for the Net Cash Proceeds of any
Indebtedness permitted by this Section 6.2(i) in excess of $150,000,000;

                  (j)      Indebtedness in respect of any standby letters of
credit that may be delivered in connection with Section 6.17; and

                  (k)      additional Indebtedness of the Borrower or any of its
Subsidiaries in an aggregate principal amount (for the Borrower and all
Subsidiaries) not to exceed $50,000,000 at any one time outstanding.

                  6.3      Limitation on Liens. Create, incur, assume or suffer
to exist any Lien upon any of its Property, whether now owned or hereafter
acquired, except for (a) with respect to Holdings, Liens granted pursuant to the
Loan Documents and (b) with respect to the Borrower and its Subsidiaries only,
the following Liens:

                           (i)      Lessors' royalties, overriding royalties,
                                    reversionary interests and similar burdens;

                           (ii)     Any required third-party consents to
                                    assignment of leases and contracts and
                                    preferential purchase rights;

                           (iii)    Liens for taxes or assessments not yet due
                                    or not yet delinquent or, if delinquent,
                                    that are being contested in good faith in
                                    the normal course of business and for which
                                    adequate reserves are maintained in
                                    accordance with GAAP;

                           (iv)     all rights to consent by, required notices
                                    to, filings with, or other actions by
                                    Governmental Authorities in connection with
                                    the sale or conveyance of the assets if the
                                    same is customarily obtained subsequent to
                                    such sale or conveyance;

                                       49

                           (v)      Rights of reassignment upon the surrender or
                                    expiration of any lease;

                           (vi)     easements, rights-of-way, servitudes,
                                    permits, surface leases and other rights
                                    with respect to surface operations on, over
                                    or in respect of any of the Oil and Gas
                                    Properties or any restriction on access
                                    thereto and that do not materially interfere
                                    with the operation of the affected Oil and
                                    Gas Property;

                           (vii)    Materialman's, mechanics', repairman's,
                                    employees', contractors', operators or other
                                    similar Liens or charges arising in the
                                    ordinary course of business incidental to
                                    construction, maintenance or operation of
                                    the assets of the Borrower or the Borrower's
                                    Subsidiaries, (i) if they have not been
                                    filed pursuant to law and the time for
                                    filing has expired, (ii) if filed, they have
                                    not yet become due and payable or payment is
                                    being withheld as provided by law or (iii)
                                    if their validity is being contested in good
                                    faith by appropriate action;

                           (viii)   pledges or deposits in connection with
                                    workers' compensation, unemployment
                                    insurance and other social security
                                    legislation;

                           (ix)     Liens, pledges or deposits by or on behalf
                                    of the Borrower or any of the Borrower's
                                    Subsidiaries to secure the performance of
                                    bids, trade contracts (other than for
                                    borrowed money), leases, statutory
                                    obligations, surety and appeal bonds,
                                    performance bonds and other obligations of a
                                    like nature incurred in the ordinary course
                                    of business;

                           (x)      Liens in existence on the date hereof listed
                                    on Schedule 6.3(b)(x), securing Indebtedness
                                    permitted by Section 6.2(c), including
                                    extensions, renewals and replacements of
                                    such Liens granted in connection with any
                                    refinancing, refunding, renewal or extension
                                    of any such Indebtedness, provided that no
                                    such Lien is spread to cover any additional
                                    Property after the Closing Date and that the
                                    amount of Indebtedness secured thereby is
                                    not increased;

                           (xi)     any interest or title of a lessor under any
                                    lease entered into by the Borrower or any of
                                    the Borrower's Subsidiaries in the ordinary
                                    course of its business and covering only the
                                    assets so leased;

                           (xii)    Liens arising out of all presently existing
                                    and future division and transfer orders,
                                    advance payment agreements, processing
                                    contracts, gas processing plant agreements,
                                    operating agreements, gas balancing or
                                    deferred production agreements, pooling,
                                    unitization or communitization agreements,
                                    pipeline, gathering or transportation
                                    agreements, platform agreements, drilling
                                    contracts,

                                       50

                                    injection or repressuring agreements,
                                    cycling agreements, construction agreements,
                                    salt water or other disposal agreements,
                                    leases or rental agreements, farm-out and
                                    farm-in agreements, exploration and
                                    development agreements, and any and all
                                    other contracts or agreements covering,
                                    arising out, used or useful in connection
                                    with or pertaining to the exploration,
                                    development, operation, production, sale,
                                    use, purchase, exchange, storage,
                                    separation, dehydration, treatment,
                                    compression, gathering, transportation,
                                    processing, improvement, marketing,
                                    disposal, or handling of any Hydrocarbon
                                    Interest of the Borrower or any Subsidiary
                                    thereof; provided that such agreements are
                                    entered into in the ordinary course of
                                    business and contain terms customary for
                                    such agreements in the industry; and
                                    provided further that no Liens described in
                                    this paragraph (xii) shall be granted or
                                    created in connection with the incurrence of
                                    Indebtedness;

                           (xiii)   Rights reserved to or vested in any
                                    Governmental Authority to control or
                                    regulate any of the Oil and Gas Properties
                                    in any manner and all Requirements of Law of
                                    general applicability in that area;

                           (xiv)    Liens arising out of operating agreements,
                                    unitization and pooling agreements and
                                    production sales contracts securing amounts
                                    not yet due or, if due, being contested in
                                    good faith in the ordinary course of
                                    business;

                           (xv)     Gas imbalances that obligate the Borrower to
                                    provide and make up free of charge, and that
                                    other third parties are entitled to take
                                    without paying for, under applicable
                                    contracts, as a result of any imbalances in
                                    production or sales from the assets at any
                                    wells, in any pipelines, at any gas plant or
                                    in storage;

                           (xvi)    defects, irregularities and deficiencies in
                                    the title to any rights of way or any
                                    Hydrocarbon Interest of the Borrower or any
                                    Subsidiary thereof which in the aggregate do
                                    not materially impair the use of such rights
                                    of way or any Hydrocarbon Interest for the
                                    purposes for which such rights of way and
                                    any other Hydrocarbon Interest are held by
                                    such Person, and defects, irregularities and
                                    deficiencies in title to any Hydrocarbon
                                    Interest of the Borrower or any of its
                                    Subsidiaries, which defects, irregularities
                                    or deficiencies have been cured by
                                    possession under applicable statutes of
                                    limitations;

                           (xvii)   Liens on the GE Equipment to secure the GE
                                    Loan;

                           (xviii)  Liens granted pursuant to the Loan Documents
                                    to secure the Obligations (including
                                    Specified Hedge Agreements);

                                       51

                           (xix)    purchase money security interests and Liens
                                    in respect of Capital Lease Obligations
                                    permitted by Section 6.2(c) or Section
                                    6.2(k);

                           (xx)     Liens granted in cash collateral to support
                                    the issuance of letters of credit permitted
                                    pursuant to Section 6.2;

                           (xxi)    normal and customary depositary Liens in
                                    favor of banks or other depositary
                                    institutions incurred in the ordinary course
                                    of business; and

                           (xxii)   Liens securing other Indebtedness of the
                                    Borrower and its Subsidiaries; provided, the
                                    aggregate amount of the Indebtedness,
                                    secured by Liens permitted pursuant to this
                                    clause (xxiii) shall not exceed $50,000,000
                                    at any one time outstanding less the amount
                                    of Indebtedness secured pursuant to clause
                                    (xix) of this Section 6.3.

                  6.4      Limitation on Fundamental Changes. Enter into any
merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself
(or suffer any liquidation or dissolution), or Dispose of all or substantially
all of its Property or business, except that:

                  (a)      any Subsidiary of the Borrower may be merged or
consolidated with or into the Borrower (provided that the Borrower shall be the
continuing or surviving corporation) or with or into any Subsidiary Guarantor
(provided that (i) the Subsidiary Guarantor shall be the continuing or surviving
corporation or (ii) simultaneously with such transaction, the continuing or
surviving corporation shall become a Subsidiary Guarantor and the Borrower shall
comply with Section 5.10 in connection therewith);

                  (b)      any Subsidiary of the Borrower may Dispose of any or
all of its assets (upon voluntary liquidation or otherwise) to the Borrower or
any Subsidiary Guarantor; and

                  (c)      the Borrower or any Subsidiary may Dispose of the
Capital Stock or other Property or business of a Subsidiary of Borrower in a
transaction permitted under Section 6.5.

                  6.5      Limitation on Disposition of Property. Dispose of any
of its Property (including, without limitation, receivables and leasehold
interests), whether now owned or hereafter acquired, or, in the case of any
Subsidiary of Holdings, issue or sell any shares of such Subsidiary's Capital
Stock to any Person, except:

                  (a)      the Disposition of obsolete, surplus or worn out
property in the ordinary course of business;

                  (b)      the Disposition of Hydrocarbons or other inventory in
the ordinary course of business;

                  (c)      Dispositions permitted by Section 6.4(b);

                                       52

                  (d)      the sale or issuance of (i) any Capital Stock of a
Subsidiary of the Borrower (other than Disqualified Stock) to the Borrower or
any Subsidiary Guarantor or (ii) the Borrower's Capital Stock (other than
Disqualified Stock) to Holdings;

                  (e)      any trade or exchange of Oil and Gas Properties or
Capital Stock in any corporation or royalty trust in the Oil and Gas Business
owned by the Borrower or any of its Subsidiaries for Oil and Gas Properties
owned or held by another Person if the fair market value of such Oil and Gas
Properties or Capital Stock traded or exchanged by the Borrower or any such
Subsidiary (including any cash or Cash Equivalents (excluding cash exchanged
with respect to the reimbursement of drilling costs or revenues received by the
parties thereto), not to exceed 15% of the such fair market value, to be
delivered to the Borrower or such Subsidiary) is reasonably equivalent to the
fair market value of the Oil and Gas Properties (together with any cash or Cash
Equivalents (excluding cash exchanged with respect to the reimbursement of
drilling costs or revenues received by the parties thereto), not to exceed 15%
of such fair market value) to be received by the Borrower or such Subsidiary;
provided that, such fair market value shall, if at such time the ratio of PV-10
Value to Total Senior Secured Debt is less than 2.25 to 1.00 and such fair
market value is equal to or greater than $25,000,000 be as determined in good
faith by the Board of Directors of the Borrower as evidenced by a Board
resolution delivered to the Administrative Agent; provided further that the
Borrower and its Subsidiaries shall execute and deliver Mortgages to the
Administrative Agent on any Oil and Gas Properties received by the Borrower or
its Subsidiaries to the extent required by Section 5.9 (provided, however, that
notwithstanding anything in this Section 6.5(e) to the contrary, Holdings, the
Borrower and the Borrower's Subsidiaries may not trade or exchange Oil and Gas
Properties or Capital Stock in any corporation or royalty trust in the Oil and
Gas Business owned by the Borrower or any of its Subsidiaries for Oil and Gas
Properties owned or held by another Person in an amount exceeding $50,000,000
per fiscal year;

                  (f)      (i) Dispositions described in detail on Schedule
6.5(f)(i) required in connection with operating contracts, joint venture
agreements and lease agreements existing on the date hereof and (ii)
Dispositions of Property acquired after the Closing Date required in connection
with operating contracts, joint venture agreements and lease arrangements
entered into after the date hereof in the ordinary course of business and on
arm's-length terms (which Disposition is with the other party to such
agreement), the aggregate value of which shall not exceed $25,000,000 per fiscal
year;

                  (g)      the Disposition of assets having a fair market value
not to exceed $50,000,000 per fiscal year; provided that not less than 85% of
the proceeds of any such Disposition are solely in the form of cash and the Loan
Parties party to such Disposition comply with the provisions of Section 2.7(b);

                  (h)      any Recovery Event, provided, that the requirements
of Section 2.7(b) are complied with in connection therewith;

                  (i)      the Dispositions described on Schedule 6.5(i);

                  (j)      (i) Dispositions by a Loan Party to a Grantor and
(ii) Dispositions by a Loan Party that is not a Grantor to another Loan Party;

                                       53

                  (k)      so long as no Default or Event of Default shall have
occurred and be continuing prior to or after giving effect to such Disposition
(without giving effect in any fiscal quarter of the Borrower or at any time to
any Cure Amount provided for in Section 7.2 and the Borrower is in compliance
with Section 6.1 without giving effect to Section 7.2), the Disposition of Hedge
Agreements or other contracts by a Loan Party to the Parent or one of its
Affiliates to the extent permitted by Section 6.9;

                  (l)      Dispositions consummated in the ordinary course of
business on an arm's-length basis pursuant to Oil and Gas Agreements; and

                  (m)      Dispositions described on Schedule 6.5(m).

                  6.6      Limitation on Restricted Payments. Declare or pay any
dividend (other than in common stock of the Borrower) on, or make any payment on
account of, or set apart assets for a sinking or other analogous fund for, the
purchase, redemption, defeasance, retirement or other acquisition of, any
Capital Stock of Holdings, the Borrower or any of the Borrower's Subsidiaries,
whether now or hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of Holdings, the Borrower or any of the Borrower's Subsidiaries, or
enter into any derivatives or other transaction with any financial institution,
commodities or stock exchange or clearinghouse (a "Derivatives Counterparty")
obligating Holdings, the Borrower or any of the Borrower's Subsidiaries to make
payments to such Derivatives Counterparty as a result of any change in market
value of any such Capital Stock (collectively, "Restricted Payments"), except
that:

                  (a)      any Subsidiary may make Restricted Payments to the
Borrower or any Subsidiary Guarantor;

                  (b)      the Borrower may pay dividends to Holdings to permit
Holdings to (i) pay corporate overhead expenses incurred in the ordinary course
of business not to exceed $2,000,000 in any fiscal year; (ii) pay dividends to
the Parent to pay the corporate overhead and administration expenses allocated
(in a manner consistent with past practices) to the Borrower and its
Subsidiaries, and (iii) pay any taxes which are due and payable by Holdings and
the Borrower as part of a consolidated group;

                  (c)      any Loan Party may make Dispositions permitted in
Section 6.5(l); and

                  (d)      so long as (i) no Default or Event of Default shall
have occurred and be continuing prior to or after giving effect to such dividend
(without giving effect in any fiscal quarter of the Borrower or at any time to
any Cure Amount provided for in Section 7.2 and the Borrower is in compliance
with Section 6.1 without giving effect to Section 7.2), including compliance on
a pro forma basis with Section 6.16, and (ii) five Business Days prior to making
such dividend, the Borrower delivers to the Administrative Agent a Compliance
Certificate containing all information and calculations necessary for
determining compliance by the Borrower with Section 6.1(b) as of the date of
such Compliance Certificate, based on the PV-10 Value and the Total Senior
Secured Debt as of the date of such Compliance Certificate and the Engineering
Report most recently delivered to the Administrative Agent, then the Borrower
may pay dividends to Holdings and the Parent.

                                       54

                  6.7      Limitation on Investments. Make any advance, loan,
extension of credit (by way of guaranty or otherwise) or capital contribution
to, or purchase any Capital Stock, bonds, notes, debentures or other debt
securities of, or all or substantially all of the assets of an unrelated Person
or a division of an unrelated Person, or make any other investment in, any other
Person (all of the foregoing, "Investments"), except:

                  (a)      extensions of trade credit in the ordinary course of
business;

                  (b)      Investments in Cash Equivalents;

                  (c)      Investments arising in connection with the incurrence
of Indebtedness permitted by Section 6.2(b) and (c);

                  (d)      loans and advances to employees of Holdings, the
Borrower or any Subsidiaries of the Borrower in the ordinary course of business
(including, without limitation, for travel, entertainment and relocation
expenses) in an aggregate amount for Holdings, the Borrower and Subsidiaries of
the Borrower not to exceed $1,000,000 at any one time outstanding;

                  (e)      Investments (other than those relating to the
incurrence of Indebtedness permitted by Section 6.7(c)) by Holdings, the
Borrower or any of Borrower's Subsidiaries in the Borrower or any Person that,
prior to such Investment, is a Subsidiary Guarantor;

                  (f)      Investments arising in connection with the Holdings
Subordinated Guaranty;

                  (g)      Investments pursuant to Oil and Gas Agreements;

                  (h)      the acquisition of the beneficial interests in the
Barrett Trust not already held by the Borrower, so long as after giving effect
to such acquisition all beneficial interests of the Barrett Trust are held by
the Borrower for aggregate consideration not to exceed $3,000,000;

                  (i)      loans by a Grantor to the Parent or any of its
Subsidiaries so long as (i) no Parent Event of Default has occurred and is
continuing; (ii) no Default or Event of Default shall have occurred and be
continuing prior and after giving effect thereto without giving effect in any
fiscal quarter of the Borrower or at any time to any Cure Amount provided for in
Section 7.2 and the Borrower is in compliance with Section 6.1 without giving
effect to Section 7.2; and (iii) any such loans are represented by a note, which
shall be pledged to the Administrative Agent for the benefit of the Lenders
pursuant to Section 5.9;

                  (j)      Investments made in connection with the acquisition
of (i) the Capital Stock of any Person, so long as (x) after giving effect to
such acquisition, such Person becomes a Subsidiary Guarantor, (y) the Borrower
complies with Section 5.9 and (z) such Person is engaged in the Oil and Gas
Business; and (ii) all or substantially all of the assets of an unrelated Person
or a division of an unrelated Person, in each case engaged in the Oil and Gas
Business; provided the aggregate amount of such Investments pursuant to this
Section 6.7(j) shall not exceed $100,000,000 during the term of this Agreement;
and

                                       55

                  (k)      other Investments in any fiscal year not to exceed
$25,000,000.

                  6.8      Limitation on Optional Payments and Modifications of
Indebtedness. (i) Make or offer to make any optional or voluntary payment,
prepayment, repurchase or redemption of, or otherwise voluntarily or optionally
defease, any New Notes, or segregate funds for any such payment, prepayment,
repurchase, redemption or defeasance, or enter into any derivative or other
transaction with any Derivatives Counterparty obligating Holdings, the Borrower
or any of the Borrower's Subsidiaries to make payments to such Derivatives
Counterparty as a result of any change in market value of such New Notes, (ii)
amend or permit the amendment of its Governing Documents in any manner
determined by the Administrative Agent to be materially adverse to the Lenders
or (iii) amend, modify or otherwise change, or consent or agree to any
amendment, modification, waiver or other change to, any of the terms (including,
without limitation, the subordination terms) of any RMT Senior Notes or New
Notes (other than any such amendment, modification, waiver or other change that
would not adversely affect the interests of the Lenders in any material
respect).

                  6.9      Limitation on Transactions with Affiliates. Except
for the Holdings Subordinated Guaranty, enter into any transaction, relating to
any purchase, sale, lease or exchange of Property, the rendering of any service
or the payment of any management, advisory or similar fees, with any Affiliate
(other than the Borrower or any other Grantor) unless such transaction is (a)
not prohibited by this Agreement and (b) in the ordinary course of business of
Holdings, Borrower or such Subsidiary, as the case may be, upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary, as the
case may be, than it would obtain in a comparable arm's-length transaction with
a Person that is not an Affiliate; provided that if (i) such transaction (or
series of transactions) is a Disposition of Property the fair market value of
which is greater than $25,000,000 and (ii) at the time of such transaction, the
ratio of the PV-10 Value to Total Senior Secured Debt is less than 2.25 to 1.00,
then Holdings, the Borrower or any of the Borrower's Subsidiaries shall not
enter into such transaction unless the Board of Directors of the Borrower has
approved such transaction, as evidenced by a resolution of such Board of
Directors delivered to the Administrative Agent.

                  6.10     Limitation on Sales and Leasebacks. Enter into any
arrangement with any Person providing for the leasing by Holdings, the Borrower
or any of the Borrower's Subsidiaries of Property which has been or is to be
sold or transferred by Holdings, the Borrower or such Subsidiary to such Person
or to any other Person to whom funds have been or are to be advanced by such
Person on the security of such Property or rental obligations of Holdings, the
Borrower or such Subsidiary.

                  6.11     Limitation on Changes in Fiscal Periods. Permit the
fiscal year of Holdings, the Borrower or any of the Borrower's Subsidiaries to
end on a day other than December 31 or change Holdings', the Borrower's or any
of the Borrower's Subsidiaries' method of determining fiscal quarters, in each
case, without the prior written consent of the Administrative Agent. The Lenders
hereby authorize the Agents to enter into such amendments to effect such
modifications, if any, in accordance with the provisions of this Section.

                                       56

                  6.12     Limitation on Negative Pledge Clauses. Enter into or
suffer to exist or become effective any agreement that prohibits or limits the
ability of Holdings, the Borrower or any of the Borrower's Subsidiaries to
create, incur, assume or suffer to exist any Lien upon any of its Property or
revenues, whether now owned or hereafter acquired, to secure the Obligations or,
in the case of any guarantor, its obligations under the Guarantee and Collateral
Agreement, other than (a) this Agreement and the other Loan Documents, (b) any
agreements governing any purchase money Liens or Capital Lease Obligations
otherwise permitted hereby (in which case, any prohibition or limitation shall
only be effective against the assets financed thereby), (c) any agreements in
effect on the date of this Agreement, (d) customary provisions in Oil and Gas
Agreements in respect of Collateral the fair market value of which does not
exceed $10,000,000 in the aggregate, and (e) customary anti-assignment
provisions in any contract entered into from and after the date of this
Agreement.

                  6.13     Limitation on Restrictions on Subsidiary
Distributions, etc. Enter into or suffer to exist or become effective any
consensual encumbrance or restriction on the ability of the Borrower or any of
the Borrower's Subsidiaries to (a) make Restricted Payments in respect of any
Capital Stock of such Subsidiary held by, or pay any Indebtedness or other
obligation owed to Holdings, the Borrower or any other Subsidiary or (b) make
loans or advances to Holdings, the Borrower or any other Subsidiary except for
such encumbrances or restrictions existing under or by reason of (i) any
restrictions existing under the Loan Documents, (ii) any restrictions with
respect to a Subsidiary imposed pursuant to an agreement that has been entered
into in connection with the Disposition of all or substantially all of the
Capital Stock or assets of such Subsidiary, (iii) encumbrances and restrictions
on any Subsidiary that is not a material Subsidiary, (iv) those encumbrances and
restrictions existing on the Closing Date, and (v) other customary encumbrances
and restrictions now or hereafter existing of a Borrower or any Subsidiary
thereof entered into in the ordinary course of business that are not more
restrictive in any material respect than the encumbrances and restrictions with
respect to a Borrower or its Subsidiaries existing on the Closing Date.

                  6.14     Business Activities. In the case of the Borrower and
its Subsidiaries, engage in any business activity other than the Oil and Gas
Business. In the case of Holdings, notwithstanding anything to the contrary in
this Agreement or any other Loan Document, (a) conduct, transact or otherwise
engage in, or commit to conduct, transact or otherwise engage in, any business
or operations other than those incidental to its ownership of the Capital Stock
of the Borrower, (b) incur, create, assume or suffer to exist any Indebtedness
or other liabilities or financial obligations, except (i) nonconsensual
obligations imposed by operation of law, (ii) pursuant to the Loan Documents to
which it is a party and (iii) obligations with respect to its Capital Stock,
(iv) the Holdings Subordinated Guaranty, (v) intercompany Indebtedness permitted
hereunder, (vi) liabilities in respect of Hedge Agreements temporarily held by
Holdings prior to transfer to an Affiliate, or (c) own, lease, manage or
otherwise operate any properties or assets (including cash (other than cash
received in connection with dividends made by the Borrower in accordance with
Section 6.6 and intercompany loans permitted under Section 6.2 and cash received
from Parent or any Affiliate for transmittal to the Borrower and its
Subsidiaries) and Cash Equivalents) other than the ownership of shares of
Capital Stock of the Borrower and Hedge Agreements temporarily held prior to
transfer to an Affiliate.

                                       57

                  6.15     Holdings Negative Pledge; Limitation on Assets.
Solely with respect to Holdings, (a) create, incur, assume or suffer to exist
any Lien upon any of its Property or revenues, whether now owned or hereafter
acquired, to secure any Indebtedness of Holdings, except for (X) Liens granted
pursuant to the Loan Documents, (Y) non-consensual Liens imposed by operation of
law and (Z) Liens permitted by Section 6.3(b)(iii) or (b) hold any Property
other than (i) all of the Capital Stock of the Borrower, and (ii) temporary
ownership of assets being conveyed by the Borrower to the Parent, or the Parent
to the Borrower, in accordance with the terms of this Agreement.

                  6.16     Minimum Borrower Liquidity. Permit the sum of (a)
cash and Cash Equivalents held by the Borrower in the Collateral Account plus
(b) an irrevocable standby letter of credit naming the Administrative Agent as
beneficiary issued by a financial institution reasonably acceptable to the
Administrative Agent, to be less than $20,000,000, multiplied by a fraction, the
numerator of which is the aggregate unpaid principal amount of Term Loans at the
time of determination, and the denominator of which is $500,000,000.

                          SECTION 7. EVENTS OF DEFAULT

                  7.1      If any of the following events shall occur and be
continuing:

                  (a)      The Borrower shall fail to pay any principal of any
Loan when due in accordance with the terms hereof; or the Borrower shall fail to
pay any interest on any Loan; or any Loan Party shall fail to pay any other
amount payable hereunder or under any other Loan Document, within five days
after any such interest or other amount becomes due in accordance with the terms
hereof;

                  (b)      Any representation or warranty made or deemed made by
any Loan Party herein or in any other Loan Document or that is contained in any
certificate, document or financial or other statement furnished by it at any
time under or in connection with this Agreement or any such other Loan Document
shall prove to have been inaccurate in any material respect on or as of the date
made or deemed made;

                  (c)      (i) Any Loan Party shall default in the observance or
performance of any agreement contained in Section 5.2(k), clause (i) of Section
5.4(a) (with respect to Holdings and the Borrower only), Section 5.7(a), Section
6 or Section 5 of the Guarantee and Collateral Agreement, or (ii) an "Event of
Default" under and as defined in any material Mortgage shall have occurred and
be continuing;

                  (d)      Any Loan Party shall default in the observance or
performance of any other covenant or agreement contained in this Agreement or
any other Loan Document (other than as provided in paragraphs (a) through (c) of
this Section), and such default shall continue unremedied for a period of 30
days following the first to occur of (i) a Responsible Officer obtaining
knowledge of such default and (ii) the Administrative Agent delivering written
notice of such default to the Borrower;

                  (e)      Holdings, the Borrower or any of the Borrower's
Subsidiaries shall (i) default in making any payment of any principal of any
Indebtedness (including, without limitation, any Guarantee Obligation, but
excluding the Term Loans) on the scheduled or

                                       58

original due date with respect thereto; or (ii) default in making any payment of
any interest on any such Indebtedness beyond the period of grace, if any,
provided in the instrument or agreement under which such Indebtedness was
created; or (iii) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or beneficiary of such
Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to
cause, with the giving of notice if required, such Indebtedness to become due
prior to its stated maturity or (in the case of any such Indebtedness
constituting a Guarantee Obligation) to become payable; provided that a default,
event or condition described in clause (i), (ii) or (iii) of this paragraph (e)
shall not at any time constitute an Event of Default unless, at such time, one
or more defaults, events or conditions of the type described in clauses (i),
(ii) and (iii) of this paragraph (e) shall have occurred and be continuing with
respect to Indebtedness the outstanding principal amount of which exceeds in the
aggregate $25,000,000;

                  (f)      (i) Holdings, the Borrower or any of the Borrower's
Subsidiaries shall commence any case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or any
substantial part of its assets, or Holdings, the Borrower or any of the
Borrower's Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against Holdings, the Borrower or
any of the Borrower's Subsidiaries any case, proceeding or other action of a
nature referred to in clause (i) above that (A) results in the entry of an order
for relief or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii) there shall be
commenced against Holdings, the Borrower or any of the Borrower's Subsidiaries
any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets that results in the entry of an order for any
such relief that shall not have been vacated, discharged, or stayed or bonded
pending appeal within 60 days from the entry thereof; or (iv) Holdings, the
Borrower or any of the Borrower's Subsidiaries shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clause (i), (ii), or (iii) above; or (v) Holdings,
the Borrower or any of the Borrower's Subsidiaries shall generally not, or shall
be unable to, or shall admit in writing its inability to, pay its debts as they
become due;

                  (g)      (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (ii) any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall exist with respect to any
Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur
with respect to, or proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Required Lenders, likely to result
in the termination of such Plan for purposes of Title IV of

                                       59

ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of
ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the
reasonable opinion of the Required Lenders is likely to, incur any liability in
connection with a withdrawal from, or the Insolvency or Reorganization of, a
Multiemployer Plan, (vi) the Borrower, any of the Borrower's Subsidiaries or any
Commonly Controlled Entity shall be required to make during any fiscal year of
the Borrower payments pursuant to any employee welfare benefit plan (as defined
in Section 3(1) of ERISA) that provides benefits to retired employees (or their
dependents) that, in the aggregate, exceed the amount set forth on Schedule
7(g)(i) with respect to such fiscal year, (vii) the Borrower, any of the
Borrower's Subsidiaries or any Commonly Controlled Entity shall be required to
make during any fiscal year of the Borrower contributions to any defined benefit
pension plan subject to Title IV of ERISA (including any Multiemployer Plan)
that, in the aggregate, exceed the amount set forth on Schedule 7(g)(ii) with
respect to such fiscal year or; and in each case in clauses (i) through (vii)
above, such event or condition, together with all other such events or
conditions, if any, could, in the sole judgment of the Required Lenders,
reasonably be expected to have a Material Adverse Effect;

                  (h)      One or more judgments or decrees shall be entered
against Holdings, the Borrower or any of the Borrower's Subsidiaries involving
for Holdings, the Borrower and the Borrower's Subsidiaries taken as a whole a
liability (not paid or fully covered by insurance as to which the relevant
insurance company has acknowledged coverage) of $25,000,000 or more, and all
such judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 30 days from the entry thereof;

                  (i)      Any of the Security Documents shall cease, for any
reason (other than pursuant to the terms thereof), to be in full force and
effect, or any Loan Party or any Affiliate of any Loan Party shall so assert, or
any Lien created by any of the Security Documents shall cease to be enforceable
and of the same effect and priority purported to be created thereby;

                  (j)      The guarantees contained in (i) Section 2 of the
Guarantee and Collateral Agreement shall cease, for any reason (other than
pursuant to the terms thereof), to be in full force and effect, any Loan Party
shall so assert;

                  (k)      Any Loan Party or any Affiliate of any Loan Party
shall assert that any provision of any Loan Document is not in full force and
effect; or

                  (l)      Any Change of Control shall occur;

then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to any Loan Party,
automatically the Term Loans hereunder (with accrued interest thereon) and all
other amounts owing under this Agreement and the other Loan Documents shall
immediately become due and payable, and (B) if such event is any other Event of
Default, with the consent of the Required Lenders, the Administrative Agent may,
or upon the request of the Required Lenders, the Administrative Agent shall, by
notice to the Borrower, declare the Term Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement and the other Loan
Documents to be due and payable forthwith, whereupon the same shall immediately
become due and payable. Upon the occurrence and during the continuation of an
Event of Default, the Administrative Agent and the

                                       60

Lenders shall be entitled to exercise any and all remedies available under the
Security Documents, including, without limitation, the Guarantee and Collateral
Agreement and the Mortgages, or otherwise available under applicable law or
otherwise.

                  7.2      Certain Cure Rights.

                  (a)      Financial Condition Covenants. Notwithstanding
anything to the contrary contained in Section 7.1, in the event that the
Borrower fails to comply with the requirements of Sections 6.1(a) or (b) (each,
a "Financial Condition Covenant"), (i) with respect to Section 6.1(a), until the
expiration of the 10th Business Day (the "Section 6.1(a) Cure Period Date")
subsequent to the date the certificate calculating such Financial Condition
Covenant is required to be delivered pursuant to Section 5.2(b), Holdings shall
have the right to issue to the Parent or an Affiliate Permitted Cure Securities
for cash or otherwise receive cash contributions to the capital of Holdings, and
to contribute such cash to the capital of the Borrower or (ii) with respect to
Section 6.1(b), the Borrower shall have the right to prepay the Term Loans in an
amount necessary to comply with Section 6.1(b), which prepayment shall be in no
more than three substantially equal monthly installments, the first such payment
to be due within 30 days after the date the certificate calculating such
Financial Condition Covenant is required to be delivered pursuant to Section
5.2(b) and the remaining payments due on the numerically corresponding day of
each of the subsequent two months (or, if a subsequent month does not contain a
numerically corresponding day or such corresponding day is not a Business Day,
such payment will be due on the immediately preceding Business Day) or such
earlier dates as are reasonably satisfactory to the Administrative Agent (each
such three monthly dates or earlier dates approved by the Administrative Agent,
the "Section 6.1(b) Cure Period Dates")(clauses (i) and (ii) collectively, the
"Cure Right"). Upon the receipt by the Borrower of such cash for purposes of
Section 6.1(a) (the "Cure Amount") or upon such prepayment of the Term Loans for
purposes of Section 6.1(b) (the amount of such payment or prepayment being the
"Prepayment Amount"), pursuant to the exercise by the Borrower of such Cure
Right, such Financial Condition Covenant shall be recalculated giving effect to
the following pro forma adjustments:

                           (A)      with respect to Section 6.1(a), Consolidated
                                    EBITDA shall be increased, solely for the
                                    purpose of measuring the Financial Condition
                                    Covenant in Section 6.1(a) and not for any
                                    other purpose under this Agreement, by an
                                    amount equal to the Cure Amount;

                           (B)      with respect to Section 6.1(b), Total Senior
                                    Secured Debt shall be decreased by an amount
                                    equal to the Prepayment Amount; and

                           (C)      if, after giving effect to the foregoing
                                    recalculations, the Borrower shall then be
                                    in compliance with the requirements of all
                                    Financial Condition Covenants, the Borrower
                                    shall be deemed to have satisfied the
                                    requirements of the Financial Condition
                                    Covenants as of the relevant date of
                                    determination with the same effect as though
                                    there had been no failure to comply
                                    therewith at such date, and the applicable
                                    breach or default of the Financial Condition
                                    Covenants which had occurred shall be deemed
                                    cured for all

                                       61

                                    purposes of this Agreement. Prior to the
                                    Section 6.1(a) Cure Period Date in the case
                                    of Section 6.1(a), and prior to any of the
                                    Section 6.1(b) Cure Period Dates in the case
                                    of Section 6.1(b), notwithstanding anything
                                    to the contrary contained in Section 7.1, no
                                    Default or Event of Default shall be deemed
                                    to have occurred as a result of any failure
                                    of the Borrower to comply with such
                                    respective Sections. If, after giving effect
                                    to the foregoing calculations or otherwise,
                                    the Borrower is not in compliance with
                                    Section 6.1(a) on the Section 6.1(a) Cure
                                    Period Date or with Section 6.1(b) on the
                                    third Section 6.1(b) Cure Period Date or
                                    there is a failure to make any of the three
                                    required prepayments on the dates specified
                                    above or other dates approved by the
                                    Administrative Agent, an Event of Default
                                    shall be in existence as of such date.

                  (b)      Limitations on Exercise of Cure Right, etc.
Notwithstanding anything herein to the contrary, (i) in no event shall the
Borrower be entitled to exercise the Cure Right with respect to Section 6.1(a)
in more than two consecutive fiscal quarters and (ii) in any six fiscal quarter
period, there must be a period of at least two consecutive fiscal quarters
during which the Borrower has not exercised its Cure Right with respect to
Section 6.1(a). To the extent a fiscal quarter ended for which the Financial
Condition Covenants are initially recalculated as a result of a Cure Right is
included in the calculation of a Financial Condition Covenant in a subsequent
fiscal period, the Cure Amount shall be included in the amount of Consolidated
EBITDA for such initial fiscal period.

                             SECTION 8. THE AGENTS

                  8.1      Appointment. Each Lender hereby irrevocably
designates and appoints the Agents as the agents of such Lender under this
Agreement and the other Loan Documents, and each Lender irrevocably authorizes
each Agent, in such capacity, to take such action on its behalf under the
provisions of this Agreement and the other Loan Documents and to exercise such
powers and perform such duties as are expressly delegated to such Agent by the
terms of this Agreement and the other Loan Documents, together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere in this Agreement, no Agent shall have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against any Agent.

                  8.2      Delegation of Duties. Each Agent may execute any of
its duties under this Agreement and the other Loan Documents by or through
agents or attorneys in fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. No Agent shall be responsible
for the negligence or misconduct of any agents or attorneys-in fact selected by
it with reasonable care.

                  8.3      Exculpatory Provisions. Neither any Agent nor any of
its officers, directors, employees, agents, attorneys in fact or affiliates
shall be (i) liable for any action

                                       62

lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement or any other Loan Document (except to the extent
that any of the foregoing are found by a final and nonappealable decision of a
court of competent jurisdiction to have resulted from its or such Person's own
gross negligence or willful misconduct) or (ii) responsible in any manner to any
of the Lenders for any recitals, statements, representations or warranties made
by Parent or any Loan Party or any officer thereof contained in this Agreement
or any other Loan Document or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agents under or in
connection with, this Agreement or any other Loan Document or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document or for any failure of any Loan Party to
perform its obligations hereunder or thereunder. The Agents shall not be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of any Loan Party.

                  8.4      Reliance by Agents. Each Agent shall be entitled to
rely, and shall be fully protected in relying, upon any instrument, writing,
resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Loan Parties), independent accountants and
other experts selected by such Agent. The Agents may deem and treat the payee of
any Term Note as the owner thereof for all purposes unless such Term Note shall
have been transferred in accordance with Section 9.6 and all actions required by
such Section in connection with such transfer shall have been taken. Each Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such advice
or concurrence of the Required Lenders (or, if so specified by this Agreement,
all Lenders or any other instructing group of Lenders specified by this
Agreement) as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense that may
be incurred by it by reason of taking or continuing to take any such action.
Each Agent shall in all cases be fully protected in acting, or in refraining
from acting, under this Agreement and the other Loan Documents in accordance
with a request of the Required Lenders (or, if so specified by this Agreement,
all Lenders or any other instructing group of Lenders specified by this
Agreement), and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and all future holders of the Term
Loans.

                  8.5      Notice of Default. No Agent shall be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless such Agent shall have received notice from a Lender, Holdings
or the Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event that
the Administrative Agent shall receive such a notice, the Administrative Agent
shall give notice thereof to the Lenders. The Administrative Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders (or, if so specified by this
Agreement, all Lenders or any other instructing group of Lenders specified by
this Agreement); provided that unless and until the Administrative Agent shall
have received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or

                                       63

refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders.

                  8.6      Non-Reliance on Agents and Other Lenders. Each Lender
expressly acknowledges that neither any of the Agents nor any of their
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates have made any representations or warranties to it and that no act by
any Agent hereafter taken, including any review of the affairs of a Loan Party
or any affiliate of a Loan Party, shall be deemed to constitute any
representation or warranty by any Agent to any Lender. Each Lender represents to
the Agents that it has, independently and without reliance upon any Agent or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Loan Parties and their affiliates and made its own decision to make its Term
Loans hereunder and enter into this Agreement. Each Lender also represents that
it will, independently and without reliance upon any Agent or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Loan Parties and their affiliates. Except for notices,
reports and other documents expressly required to be furnished to the Lenders by
the Administrative Agent hereunder, no Agent shall have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of any Loan Party or any affiliate of
a Loan Party that may come into the possession of such Agent or any of its
officers, directors, employees, agents, attorneys in fact or affiliates.

                  8.7      Indemnification. The Lenders agree to indemnify each
Agent in its capacity as such (to the extent not reimbursed by Holdings or the
Borrower and without limiting the obligation of Holdings or the Borrower to do
so), ratably according to their respective Term Loan Percentages in effect on
the date on which indemnification is sought under this Section (or, if
indemnification is sought after the date upon which the Term Loan Commitments
shall have terminated and the Term Loans shall have been paid in full, ratably
in accordance with such Term Loan Percentages immediately prior to such date),
for, and to save each Agent harmless from and against, any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever that may at any time
(including, without limitation, at any time following the payment of the Term
Loans) be imposed on, incurred by or asserted against such Agent in any way
relating to or arising out of, the Term Loan Commitments, this Agreement, any of
the other Loan Documents or any documents contemplated by or referred to herein
or therein or the transactions contemplated hereby or thereby or any action
taken or omitted by such Agent under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements that are found by a final and nonappealable
decision of a court of competent jurisdiction to have resulted from such Agent's
gross negligence or willful misconduct. The agreements in this Section shall
survive the payment of the Term Loans and all other amounts payable hereunder.

                                       64

                  8.8      Agent in Its Individual Capacity. Each Agent and its
affiliates may make loans to, accept deposits from and generally engage in any
kind of business with any Loan Party as though such Agent were not an Agent.
With respect to its Term Loans made or renewed by it, each Agent shall have the
same rights and powers under this Agreement and the other Loan Documents as any
Lender and may exercise the same as though it were not an Agent, and the terms
"Lender" and "Lenders" shall include each Agent in its individual capacity.

                  8.9      Successor Administrative Agent. The Administrative
Agent may resign as Administrative Agent upon 30 days' notice to the Lenders and
the Borrower. If the Administrative Agent shall resign as Administrative Agent
under this Agreement and the other Loan Documents, then the Required Lenders
shall appoint from among the Lenders a successor agent for the Lenders, which
successor agent shall (unless an Event of Default under Section 7.1(a) or
Section 7.1(f) with respect to the Borrower shall have occurred and be
continuing) be subject to approval by the Borrower (which approval shall not be
unreasonably withheld or delayed), whereupon such successor agent shall succeed
to the rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Term Loans. If no successor
agent has accepted appointment as Administrative Agent by the date that is 30
days following a retiring Administrative Agent's notice of resignation, the
retiring Administrative Agent's resignation shall nevertheless thereupon become
effective, and the Lenders shall assume and perform all of the duties of the
Administrative Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above. Any of the Co-Syndication
Agents may, at any time, by notice to the Lenders and the Administrative Agent,
resign as Co-Syndication Agent hereunder, whereupon the duties, rights,
obligations and responsibilities of such Co-Syndication Agent hereunder shall
automatically be assumed by, and inure to the benefit of, the remaining
Co-Syndication Agent, or if none, the Administrative Agent, without any further
act by any Co-Syndication Agent, the Administrative Agent or any Lender. After
any retiring Agent's resignation as Agent, the provisions of this Section 8
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement and the other Loan Documents.

                  8.10     Authorization to Release Liens and Guarantees. The
Administrative Agent is hereby irrevocably authorized by each of the Lenders to
effect any release of Liens or guarantee obligations contemplated by Section
9.15.

                  8.11     The Arrangers; the Co-Syndication Agents; the
Documentation Agent. Neither the Arrangers, the Co-Syndication Agents nor the
Documentation Agent, in their respective capacities as such, shall have any
duties or responsibilities, and shall incur no liability, under this Agreement
and the other Loan Documents.

                            SECTION 9. MISCELLANEOUS

                  9.1      Amendments and Waivers. Neither this Agreement or any
other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except

                                       65

in accordance with the provisions of this Section 9.1. The Required Lenders and
each Loan Party party to the relevant Loan Document may, or (with the written
consent of the Required Lenders) the Administrative Agent and each Loan Party
party to the relevant Loan Document may, from time to time, (a) enter into
written amendments, supplements or modifications hereto and to the other Loan
Documents (including amendments and restatements hereof or thereof) for the
purpose of adding any provisions to this Agreement or the other Loan Documents
or changing in any manner the rights of the Lenders or of the Loan Parties
hereunder or thereunder or (b) waive, on such terms and conditions as may be
specified in the instrument of waiver, any of the requirements of this Agreement
or the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
supplement or modification shall:

                           (i)      forgive the principal amount or extend the
                                    final scheduled date of maturity of any Term
                                    Loan, extend the scheduled date of any
                                    amortization payment in respect of any Term
                                    Loan, reduce the stated rate of any interest
                                    or fee payable hereunder or extend the
                                    scheduled date of any payment thereof,
                                    increase the amount or extend the expiration
                                    date of any Term Loan Commitment of any
                                    Lender, or require additional consents to be
                                    obtained with respect to the sale or any
                                    assignment or participations of any
                                    interests of the Lenders hereunder, in each
                                    case without the consent of each Lender
                                    directly affected thereby;

                           (ii)     amend, modify or waive any provision of this
                                    Section or reduce any percentage specified
                                    in the definition of Required Lenders, or
                                    consent to the assignment or transfer by the
                                    Borrower of any of its rights and
                                    obligations under this Agreement and the
                                    other Loan Documents, release all or
                                    substantially all of the Collateral or
                                    release all or substantially all of the
                                    Subsidiary Guarantors from their guarantee
                                    obligations under the Guarantee and
                                    Collateral Agreement, or amend the
                                    definition of Interest Period so as to allow
                                    intervals of greater than six months, in
                                    each case without the consent of all
                                    Lenders;

                           (iii)    amend, modify or waive any provision of
                                    Section 8, or any other provision of this
                                    Agreement affecting the rights and
                                    obligations of any Agent, without the
                                    consent of any Agent directly affected
                                    thereby; or

                           (iv)     amend, modify or waive any provision of
                                    Section 2.18 without the consent of each
                                    Lender directly affected thereby.

Any such waiver and any such amendment, supplement or modification shall apply
equally to each of the Lenders and shall be binding upon the Loan Parties, the
Lenders, the Agents and all future holders of the Term Loans. In the case of any
waiver, the Loan Parties, the Lenders and the Agents shall be restored to their
former position and rights hereunder and under the other Loan Documents, and any
Default or Event of Default waived shall be deemed to be cured and

                                       66

not continuing; but no such waiver shall extend to any subsequent or other
Default or Event of Default, or impair any right consequent thereon. Any such
waiver, amendment, supplement or modification shall be effected by a written
instrument signed by the parties required to sign pursuant to the foregoing
provisions of this Section; provided, that delivery of an executed signature
page of any such instrument by facsimile transmission shall be effective as
delivery of a manually executed counterpart thereof.

                  For the avoidance of doubt, this Agreement and any other Loan
Document may be amended (or amended and restated) with the written consent of
the Required Lenders, the Administrative Agent and each Loan Party to each
relevant Loan Document (x) to add one or more additional credit facilities to
this Agreement and to permit the extensions of credit from time to time
outstanding thereunder and the accrued interest and fees in respect thereof
(collectively, the "Additional Extensions of Credit") to share ratably in the
benefits of this Agreement and the other Loan Documents with the Term Loans and
the accrued interest and fees in respect thereof and (y) to include
appropriately the Lenders holding such credit facilities in any determination of
the Required Lenders; provided, however, that no such amendment shall permit the
Additional Extensions of Credit to share ratably with or with preference to the
Term Loans in the application of mandatory prepayments without the consent of
the Required Lenders.

                  9.2      Notices. All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or three Business Days after being
deposited in the mail (registered or certified), postage prepaid, or, in the
case of telecopy notice, when received, addressed (a) in the case of Holdings,
the Borrower and the Agents, as follows and (b) in the case of the Lenders, as
set forth in an administrative questionnaire delivered to the Administrative
Agent or on Schedule I to the Lender Addendum to which such Lender is a party
or, in the case of a Lender which becomes a party to this Agreement pursuant to
an Assignment and Acceptance, in such Assignment and Acceptance or (c) in the
case of any party, to such other address as such party may hereafter notify to
the other parties hereto:

Holdings or the Borrower:                Williams Production Holdings LLC
                                         One Williams Center
                                         Suite 4100
                                         Tulsa, Oklahoma 74172
                                         Attention: Jim Kimble;
                                         Treasury Compliance Group
                                         Telecopy: (918) 573-2065
                                         Telephone: (918) 573-7159

                                         with a copy to:

                                       67

                                         Williams Production RMT Company
                                         One Williams Center
                                         Suite 4100
                                         Tulsa, Oklahoma 74172
                                         Attention: Assistant General Counsel -
                                         Corporate
                                         Telecopy: (918) 573-4503
                                         Telephone: (918) 573-2613

The Administrative Agent:                Lehman Commercial Paper Inc.
                                         745 Seventh Avenue
                                         New York, New York 10019
                                         Attention: Francis Chang
                                         Telecopy: (212) 526-0242
                                         Telephone: (212) 526-5390

                                         with a copy to:

                                         Attention: Michelle Rosolinsky
                                         Telecopy: (212) 526-6590
                                         Telephone: (212) 526-4979

The Arrangers:                           Lehman Brothers Inc.
                                         745 Seventh Avenue
                                         New York, New York 10019
                                         Attention:  Francis Chang
                                         Telecopy:  (212) 526-0242
                                         Telephone:  (212) 526-5390

                                         Banc of America Securities LLC
                                         100 North Tryon Street
                                         NC1-007-06-07
                                         Charlotte, North Carolina  28255
                                         Attention: Kelly Warnement/Anabel
                                         Morris/Diana Himes
                                         Telecopy: (704) 388-0648
                                         Telephone: (704) 388-8943/(704) 387-
                                         1939/(704) 387-9951

provided that any notice, request or demand to or upon the Agent or any Lender
shall not be effective until received.

                  9.3      No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of any Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
shall operate as a waiver thereof; nor shall any

                                       68

single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.

                  9.4      Survival of Representations and Warranties. All
representations and warranties made herein, in the other Loan Documents and in
any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the Term Loans and other extensions of credit hereunder.

                  9.5      Payment of Expenses. The Borrower agrees (a) to pay
or reimburse the Agents and the Arrangers for all their reasonable out of pocket
costs and expenses incurred in connection with the syndication of the Facilities
(other than fees payable to syndicate members) and the development, preparation
and execution of, or preservation of any rights under, and any amendment,
supplement or modification to, this Agreement and the other Loan Documents and
any other documents prepared in connection herewith or therewith, and the
consummation and administration of the transactions contemplated hereby and
thereby, including, without limitation, the reasonable fees and disbursements
and other charges of Weil, Gotshal & Manges LLP and LeBoeuf, Lamb, Greene &
MacRae, LLP and the charges of Intralinks, (b) to pay or reimburse each Lender,
the Arrangers, and the Agents for all their costs and expenses incurred in
connection with the enforcement of any rights under this Agreement, the other
Loan Documents and any other documents prepared in connection herewith or
therewith, including, without limitation, the fees and disbursements of outside
counsel to each Lender and of counsel to each of the Arrangers and the
Administrative Agent, (c) to pay, indemnify, or reimburse each Lender Arranger,
and the Agents for, and hold each Lender, Arranger, and the Agents harmless
from, any and all recording and filing fees and any and all liabilities with
respect to, or resulting from any delay in paying, stamp, excise and other
taxes, if any, which may be payable or determined to be payable in connection
with the execution and delivery of, or consummation or administration of any of
the transactions contemplated by, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, this Agreement, the other
Loan Documents and any such other documents, and (d) to pay, indemnify or
reimburse each Lender, each Arranger, each Agent, their respective affiliates,
and their respective officers, directors, trustees, employees, advisors, agents
and controlling persons (each, an "Indemnitee") for, and hold each Indemnitee
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement, the other Loan
Documents and any such other documents, including, without limitation, any of
the foregoing relating to the use of proceeds of the Term Loans or the violation
of, noncompliance with or liability under, any Environmental Law applicable to
the operations of any Loan Party any of the Properties and the fees and
disbursements and other charges of legal counsel in connection with claims,
actions or proceedings by any Indemnitee against the Borrower hereunder (all the
foregoing in this clause (d), collectively, the "Indemnified Liabilities"),
provided, that the Borrower shall have no obligation hereunder to any Indemnitee
with respect to Indemnified Liabilities to the extent such Indemnified
Liabilities are found by a final and nonappealable decision of a court of
competent jurisdiction to have resulted from the gross negligence or willful
misconduct of such Indemnitee.

                                       69

No Indemnitee shall be liable for any damages arising from the use by
unauthorized persons of Information or other materials sent through electronic,
telecommunications or other information transmission systems that are
intercepted by such persons or for any special, indirect, consequential or
punitive damages in connection with the Facilities. Without limiting the
foregoing, and to the extent permitted by applicable law, the Borrower agrees
not to assert and to cause its Subsidiaries not to assert, and hereby waives and
agrees to cause its Subsidiaries so to waive, all rights for contribution or any
other rights of recovery with respect to all claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or
nature, under or related to Environmental Laws, that any of them might have by
statute or otherwise against any Indemnitee. All amounts due under this Section
shall be payable not later than 30 days after written demand therefor.
Statements payable by the Borrower pursuant to this Section shall be submitted
to the Borrower in accordance with Section 9.2, or to such other Person or
address as may be hereafter designated by the Borrower in a notice to the
Administrative Agent. The agreements in this Section shall survive repayment of
the Term Loans and all other amounts payable hereunder.

                  9.6      Successors and Assigns; Participations and
Assignments. This Agreement shall be binding upon and inure to the benefit
of Holdings, the Borrower, the Lenders, the Agents, all future holders of the
Term Loans and their respective successors and assigns, except that the Borrower
may not assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of the Agents and each Lender.

                  (a)      Any Lender may, without the consent of the Borrower,
in accordance with applicable law, at any time sell to one or more banks,
financial institutions or other entities (each, a "Participant") participating
interests in any Term Loan owing to such Lender, any Term Loan Commitment of
such Lender or any other interest of such Lender hereunder and under the other
Loan Documents. In the event of any such sale by a Lender of a participating
interest to a Participant, such Lender's obligations under this Agreement to the
other parties to this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall remain the
holder of any such Term Loan for all purposes under this Agreement and the other
Loan Documents, and the Borrower and the Agents shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. In no event shall
any Participant under any such participation have any right to approve any
amendment or waiver of any provision of any Loan Document, or any consent to any
departure by any Loan Party therefrom, except to the extent that such amendment,
waiver or consent would require the consent of all Lenders pursuant to Section
9.1. The Borrower agrees that if amounts outstanding under this Agreement and
the Term Loans are due or unpaid, or shall have been declared or shall have
become due and payable upon the occurrence of an Event of Default, each
Participant shall, to the maximum extent permitted by applicable law, be deemed
to have the right of setoff in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement, provided that, in purchasing such participating interest, such
Participant shall be deemed to have agreed to share with the Lenders the
proceeds thereof as provided in Section 9.7(a) as fully as if such Participant
were a Lender hereunder. The Borrower also agrees that each Participant shall be
entitled to the benefits of Sections 2.14, 2.15 and 2.16 with respect to its
participation in the Term Loan Commitments and the Term Loans outstanding from
time to

                                       70

time as if such Participant were a Lender; provided that, in the case of Section
2.15, such Participant shall have complied with the requirements of said
Section, and provided, further, that no Participant shall be entitled to receive
any greater amount pursuant to any such Section than the transferor Lender would
have been entitled to receive in respect of the amount of the participation
transferred by such transferor Lender to such Participant had no such transfer
occurred. In addition, each transferor Lender selling a participation to a
Participant under this Section 9.6(b): (i) shall keep a register, meeting the
requirements of Treasury Regulation section 5f.103-1(c), of each such
Participant, specifying such Participant's entitlement to payments of principal
and interest with respect to such participation, and (ii) shall collect from
each such Participant the appropriate forms, certificates and statements
described in Section 2.15 (and updated as required by Section 2.15) as if such
Participant were a Lender under Section 2.15.

                  (b)      Any Lender (an "Assignor") may, in accordance with
applicable law and upon written notice to the Administrative Agent, at any time
and from time to time assign to any Lender or any affiliate or Related Fund
thereof or, with the consent of the Administrative Agent and the Borrower
(which, in each case, shall not be unreasonably withheld or delayed) (provided
that (x) no such consent need be obtained by a Lehman Entity for assignments to
Eligible Assignees and (y) the consent of the Borrower need not be obtained if
any Default or Event of Default shall have occurred and be continuing), to an
additional bank, financial institution or other entity (an "Assignee") all or
any part of its rights and obligations under this Agreement pursuant to an
Assignment and Acceptance, substantially in the form of Exhibit E, executed by
such Assignee and such Assignor (and, where the consent of the Administrative
Agent is required pursuant to the foregoing provisions, by the Administrative
Agent) and delivered to the Administrative Agent for its acceptance and
recording in the Register; provided that no such assignment to an Assignee
(other than any Lender or any affiliate or Related Fund thereof) shall be in an
aggregate principal amount of less than $1,000,000 (other than in the case of an
assignment of all of a Lender's interests under this Agreement), unless
otherwise agreed by the Borrower and the Administrative Agent. Upon such
execution, delivery, acceptance and recording, from and after the effective date
determined pursuant to such Assignment and Acceptance in the Register, (x) the
Assignee thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
with Term Commitments and Term Loans as set forth therein, and (y) the Assignor
thereunder shall, to the extent provided in such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all of an Assignor's rights and obligations
under this Agreement, such Assignor shall cease to be a party hereto, except as
to Section 2.14, 2.15 and 9.5 in respect of the period prior to such effective
date). For purposes of the minimum assignment amounts set forth in this
paragraph, multiple assignments by two or more Related Funds shall be
aggregated.

                  (c)      The Administrative Agent shall, on behalf of the
Borrower, maintain at its address referred to in Section 9.2 a copy of each
Assignment and Acceptance delivered to it and a register (the "Register") for
the recordation of the names and addresses of the Lenders and the Term Loan
Commitment of, and principal amount of the Term Loans owing to, each Lender from
time to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, each Agent and the Lenders shall treat each
Person whose name is recorded in the Register as the owner of the Term Loans and
any Term Notes evidencing such Term Loans recorded therein for all purposes of
this Agreement. Any assignment of any Term

                                       71

Loan, whether or not evidenced by a Term Note, shall be effective only upon
appropriate entries with respect thereto being made in the Register (and each
Term Note shall expressly so provide). Any assignment or transfer of all or part
of a Term Loan evidenced by a Term Note shall be registered on the Register only
upon surrender for registration of assignment or transfer of the Term Note
evidencing such Term Loan, accompanied by a duly executed Assignment and
Acceptance; thereupon one or more new Term Notes in the same aggregate principal
amount shall be issued to the designated Assignee, and the old Term Notes shall
be returned by the Administrative Agent to the Borrower marked "canceled". The
Register shall be available for inspection by the Borrower or any Lender (with
respect to any entry relating to such Lender's Term Loans) at any reasonable
time and from time to time upon reasonable prior notice.

                  (d)      Upon its receipt of an Assignment and Acceptance
executed by an Assignor and an Assignee (and, in any case where the consent of
any other Person is required by Section 9.6(c), by each such other Person)
together with payment to the Administrative Agent of a registration and
processing fee of $3,500 (treating multiple, simultaneous assignments by or to
two or more Related Funds as a single assignment) (except that no such
registration and processing fee shall be payable (y) in connection with an
assignment by or to a Lehman Entity or (z) in the case of an Assignee which is
already a Lender or is an affiliate or Related Fund of a Lender or a Person
under common management with a Lender), the Administrative Agent shall (i)
promptly accept such Assignment and Acceptance and (ii) on the effective date
determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation to the Borrower. On
or prior to such effective date, the Borrower, at its own expense, upon request,
shall execute and deliver to the Administrative Agent (in exchange for Term
Notes, of the assigning Lender) a new applicable Term Note to the order of such
Assignee and its registered assigns in an amount equal to the applicable Term
Loans, as the case may be, assumed or acquired by it pursuant to such Assignment
and Acceptance and, if the Assignor has retained Term Loans, as the case may be,
upon request, a new Term Note, as the case may be, to the order of the Assignor
and its registered assigns in an amount equal to the applicable Term Loans
retained by it hereunder. Such new Term Note or Term Notes shall be dated the
Closing Date and shall otherwise be in the form of the Term Note or Term Notes
replaced thereby.

                  (e)      For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this Section concerning assignments of Term
Loans and Term Notes relate only to absolute assignments and that such
provisions do not prohibit assignments creating security interests in Term Loans
and Term Notes, including, without limitation, any pledge or assignment by a
Lender of any Term Loan or Term Note to any Federal Reserve Bank in accordance
with applicable law.

                  (f)      Notwithstanding anything to the contrary contained
herein, any Lender (a "Granting Lender") may grant to a special purpose funding
vehicle (an "SPC"), identified as such in writing from time to time by the
Granting Lender to the Administrative Agent and the Borrower, the option to
provide to the Borrower all or any part of any Term Loan that such Granting
Lender would otherwise be obligated to make to the Borrower pursuant to this
Agreement; provided that (i) nothing herein shall constitute a commitment by any
SPC to make any Term Loan and (ii) if an SPC elects not to exercise such option
or otherwise fails to provide all or any part of such Term Loan, the Granting
Lender shall be obligated to make such Term

                                       72

Loan pursuant to the terms hereof. The making of a Term Loan by an SPC hereunder
shall utilize the Term Loan Commitment of the Granting Lender to the same
extent, and as if, such Term Loan were made by such Granting Lender. Each party
hereto hereby agrees that no SPC shall be liable for any indemnity or similar
payment obligation under this Agreement (all liability for which shall remain
with the Granting Lender). In furtherance of the foregoing, each party hereto
hereby agrees (which agreement shall survive the termination of this Agreement)
that, prior to the date that is one year and one day after the payment in full
of all outstanding commercial paper or other indebtedness of any SPC, it will
not institute against, or join any other person in instituting against, such SPC
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under the laws of the United States or any state thereof. In
addition, notwithstanding anything to the contrary in this Section 9.6(g), any
SPC may (A) with notice to, but without the prior written consent of, the
Borrower and the Administrative Agent and without paying any processing fee
therefor, assign all or a portion of its interests in any Term Loans to the
Granting Lender, or with the prior written consent of the Borrower and the
Administrative Agent (which consent shall not be unreasonably withheld) to any
financial institutions providing liquidity and/or credit support to or for the
account of such SPC to support the funding or maintenance of Term Loans, and (B)
disclose on a confidential basis any non-public information relating to its Term
Loans to any rating agency, commercial paper dealer or provider of any surety,
guarantee or credit or liquidity enhancement to such SPC; provided that
non-public information with respect to the Parent, the Borrower or any of their
respective Subsidiaries may be disclosed only with the Borrower's prior written
consent which will not be unreasonably withheld. This paragraph (g) may not be
amended without the written consent of any SPC with Term Loans outstanding at
the time of such proposed amendment.

                  9.7      Adjustments; Set off. Except to the extent that
this Agreement provides for payments to be allocated to a particular Lender or
to the Lenders under a particular Facility, if any Lender (a "Benefited Lender")
shall at any time receive any payment of all or part of the Obligations owing to
it, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set off, pursuant to events or proceedings of the nature
referred to in Section 7.1(f), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender's Obligations, such Benefited Lender shall purchase for
cash from the other Lenders a participating interest in such portion of each
such other Lender's Obligations, or shall provide such other Lenders with the
benefits of any such collateral, as shall be necessary to cause such Benefited
Lender to share the excess payment or benefits of such collateral ratably with
each of the Lenders; provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such Benefited Lender,
such purchase shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest.

                  (a)      In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right upon the election of the
Required Lenders following the occurrence and during the continuance of an Event
of Default, without prior notice to Holdings or the Borrower, any such notice
being expressly waived by Holdings and the Borrower to the extent permitted by
applicable law, upon any amount becoming due and payable by the Borrower
hereunder (whether at the stated maturity, by acceleration or otherwise), to set
off and appropriate and apply against such amount any and all deposits (general
or special, time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in

                                       73

any currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Lender or any branch or
agency thereof to or for the credit or the account of the Borrower. Each Lender
agrees promptly to notify the Borrower and the Administrative Agent after any
such setoff and application made by such Lender, provided that the failure to
give such notice shall not affect the validity of such setoff and application.

                  9.8      Counterparts. This Agreement may be executed by one
or more of the parties to this Agreement on any number of separate counterparts,
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument. Delivery of an executed signature page of this
Agreement or of a Lender Addendum by facsimile transmission shall be effective
as delivery of a manually executed counterpart hereof. A set of the copies of
this Agreement signed by all the parties shall be lodged with the Borrower and
the Administrative Agent.

                  9.9      Severability. Any provision of this Agreement 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.

                  9.10     Integration. This Agreement and the other Loan
Documents represent the entire agreement of Holdings, the Borrower, the Agents,
the Arranger and the Lenders with respect to the subject matter hereof and
thereof, and there are no promises, undertakings, representations or warranties
by the Arranger, any Agent or any Lender relative to subject matter hereof not
expressly set forth or referred to herein or in the other Loan Documents.

                  9.11     GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

                  9.12     Submission to Jurisdiction; Waivers. Each of Holdings
and the Borrower hereby irrevocably and unconditionally:

                  (a)      submits for itself and its Property in any legal
action or proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non exclusive general jurisdiction of the courts of the
State of New York, the courts of the United States of America for the Southern
District of New York, and appellate courts from any thereof;

                  (b)      consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;

                  (c)      agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar

                                       74

form of mail), postage prepaid, to Holdings or the Borrower, as the case may be
at its address set forth in Section 9.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto;

                  (d)      agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction; and

                  (e)      waives, to the maximum extent not prohibited by law,
any right it may have to claim or recover in any legal action or proceeding
referred to in this Section any special, exemplary, punitive or consequential
damages.

                  9.13     Acknowledgments. Each of Holdings and the Borrower
hereby acknowledges that:

                  (a)      it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;

                  (b)      neither the Arranger, any Agent nor any Lender has
any fiduciary relationship with or duty to Holdings or the Borrower arising out
of or in connection with this Agreement or any of the other Loan Documents, and
the relationship between the Arranger, the Agents and the Lenders, on one hand,
and Holdings and the Borrower, 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
Loan Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Arranger, the Agents and the Lenders or among Holdings, the
Borrower and the Lenders.

                  9.14     Confidentiality. Each of the Agents and the Lenders
agrees to keep confidential all non-public information provided to it by any
Loan Party pursuant to this Agreement that is designated by such Loan Party as
confidential; provided that nothing herein shall prevent any Agent or any Lender
from disclosing any such information (a) to the Arranger, any Agent, any other
Lender or any affiliate of any thereof, (b) to any Participant or Assignee
(each, a "Transferee") or prospective Transferee that agrees to comply with the
provisions of this Section or substantially equivalent provisions, (c) to any of
its employees, directors, agents, attorneys, accountants and other professional
advisors, (d) to any financial institution or any Eligible Assignee that is a
direct or indirect contractual counterparty in swap agreements or such
contractual counterparty's professional advisor (so long as such contractual
counterparty or professional advisor to such contractual counterparty agrees to
be bound by the provisions of this Section), (e) upon the request or demand of
any Governmental Authority having jurisdiction over it, (f) in response to any
order of any court or other Governmental Authority or as may otherwise be
required pursuant to any Requirement of Law, (g) in connection with any
litigation or similar proceeding, (h) that has been publicly disclosed other
than in breach of this Section, (i) to the National Association of Insurance
Commissioners or any similar organization or any nationally recognized rating
agency that requires access to information about a Lender's investment portfolio
in connection with ratings issued with respect to such Lender or (j) in
connection with the exercise of any remedy hereunder or under any other Loan
Document. Notwithstanding anything herein to the contrary, any party subject to
confidentiality obligation hereunder or under

                                       75

any other related document (and any employee, representative or other agent of
such party) may disclose to any and all persons, without limitation of any kind,
such party's U.S. federal income tax treatment and tax structure of the
transactions contemplated by this Agreement relating to such party and all
materials of any kind (including opinions or other tax analyses) that are
provided to it relating to such tax treatment and tax structure. However, no
such party shall disclose any information relating to such tax treatment or tax
structure to the extent nondisclosure is reasonably necessary in order to comply
with applicable securities laws. Subject to the foregoing, nothing herein shall
release any Lender from any other confidentiality agreement previously executed
with any Borrower.

                  9.15     Release of Collateral and Guarantee Obligations.
Notwithstanding anything to the contrary contained herein or in any other Loan
Document, upon request of the Borrower in connection with any Disposition of
Property permitted by the Loan Documents, the Administrative Agent shall
(without notice to, or vote or consent of, any Lender, or any affiliate of any
Lender that is a party to any Specified Hedge Agreement) take such actions as
shall be required to release its security interest in any Collateral being
Disposed of in such Disposition, and to release any guarantee obligations under
any Loan Document of any Person being Disposed of in such Disposition, to the
extent necessary to permit consummation of such Disposition in accordance with
the Loan Documents.

                  (a)      Notwithstanding anything to the contrary contained
herein or any other Loan Document, when all Obligations (other than obligations
in respect of any Specified Hedge Agreement) have been paid in full, all Term
Loan Commitments have terminated or expired, upon request of the Borrower, the
Administrative Agent shall (without notice to, or vote or consent of, any
Lender, or any affiliate of any Lender that is a party to any Specified Hedge
Agreement) take such actions as shall be required to release its security
interest in all Collateral, and to release all guarantee obligations under any
Loan Document, whether or not on the date of such release there may be
outstanding Obligations in respect of Specified Hedge Agreements. Any such
release of guarantee obligations shall be deemed subject to the provision that
such guarantee obligations shall be reinstated if after such release any portion
of any payment in respect of the Obligations guaranteed thereby shall be
rescinded or must otherwise be restored or returned upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Borrower or any
Guarantor, or upon or as a result of the appointment of a receiver, intervenor
or conservator of, or trustee or similar officer for, the Borrower or any
Guarantor or any substantial part of its property, or otherwise, all as though
such payment had not been made.

                  (b)      Notwithstanding anything in this Agreement or the
other Loan Documents to the contrary, the Administrative Agent shall be
authorized to release the Mortgages and Liens on the Oil and Gas Properties
permitted to be sold, exchanged or traded under Section 6.5 of this Agreement
without any further action by the Lenders.

                  9.16     Delivery of Lender Addenda. Each initial Lender shall
become a party to this Agreement by delivering to the Administrative Agent a
Lender Addendum duly executed by such Lender, the Borrower and the
Administrative Agent.

                                       76

                  9.17     WAIVERS OF JURY TRIAL. HOLDINGS, THE BORROWER, THE
AGENTS AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

                                       77

                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.

                                               William Production Holdings LLC

                                               By: /s/ James G. Ivey
                                                   ----------------------------
                                                   Name: James G. Ivey
                                                   Title: Treasurer

                                               WILLIAMS PRODUCTION RMT COMPANY

                                               By: /s/ James G. Ivey
                                                   ----------------------------
                                                   Name: James G. Ivey
                                                   Title: Treasurer

                                               LEHMAN COMMERCIAL PAPER INC.,
                                               as Administrative Agent

                                               By: /s/ Francis Chang
                                                   ----------------------------
                                                   Name: Francis Chang
                                                   Title: Authorized Signatory

                     [Signature Page to Term Loan Agreement]

SCHEDULES:

1.1(a)         Mortgaged Property
1.1(b)         Gas Gathering Systems
1.1(c)         Historical Hedging Addbacks
1.1(d)         Consolidated EBITDA
3.1            Pre-Closing Dispositions
3.4            Consents, Authorizations, Filings and Notices
3.6            Material Litigation
3.13           Reportable Events
3.15           Subsidiaries
3.17           Environmental
3.19(a)-1      UCC Filing Jurisdictions
3.19(a)-2      UCC Financing Statements to Remain on File
3.19(a)-3      UCC Financing Statements to be Terminated
3.19(b)        Mortgage Filing Jurisdictions
3.21           Hydrocarbon Interests
3.22(b)        Consents
6.2(c)         Existing Indebtedness
6.3(b)(x)      Existing Liens
6.5(f)(i)      Dispositions
6.5(i)         Certain Dispositions
6.5(m)         Specified Dispositions
7(g)(i)        Required Payments to Employee Welfare Benefit Plans
7(g)(ii)       Required Payments to Multiemployer Plans

EXHIBITS:

A        Form of Guarantee and Collateral Agreement
B        Form of Compliance Certificate
C        Form of Closing Certificate
D        Form of Mortgage
E        Form of Assignment and Acceptance
F-1      Form of Legal Opinion of Gibson, Dunn & Crutcher LLP
F-2      Form of Legal Opinion of Davis, Graham & Stubbs LLP
G        Form of Term Note
H        Form of Lender Addendum
I        Form of Borrowing Notice
J        Form of Solvency Certificate

                                                                  EXECUTION COPY

                                                                    EXHIBIT 10.2
================================================================================

                       GUARANTEE AND COLLATERAL AGREEMENT

                                     made by

                        WILLIAMS PRODUCTION HOLDINGS LLC,

                         WILLIAMS PRODUCTION RMT COMPANY

                         and certain of its Subsidiaries

                                   in favor of

                          LEHMAN COMMERCIAL PAPER INC.,

                             as Administrative Agent

                            Dated as of May 30, 2003

================================================================================

                                TABLE OF CONTENTS

                                                                                                                    Page
                                                                                                                    ----
                                                                                                                 
Section 1.        DEFINED TERMS.................................................................................      1

         1.1      Definitions...................................................................................      1

         1.2      Other Definitional Provisions.................................................................      6

Section 2.        GUARANTEE.....................................................................................      6

         2.1      Guarantee.....................................................................................      6

         2.2      Right of Contribution.........................................................................      7

         2.3      No Subrogation................................................................................      7

         2.4      Amendments, Etc. With Respect to the Borrower Obligations.....................................      8

         2.5      Guarantee Absolute and Unconditional..........................................................      8

         2.6      Reinstatement.................................................................................     10

         2.7      Payments......................................................................................     10

Section 3.        GRANT OF SECURITY INTEREST....................................................................     10

Section 4.        REPRESENTATIONS AND WARRANTIES................................................................     12

         4.1      Representations in Term Loan Agreement........................................................     12

         4.2      Title; No Other Liens.........................................................................     12

         4.3      Perfected First-Priority Liens................................................................     12

         4.4      Chief Executive Office........................................................................     13

         4.5      Inventory and Equipment.......................................................................     13

         4.6      Farm Products.................................................................................     13

         4.7      Pledged Securities............................................................................     13

         4.8      Receivables...................................................................................     13

         4.9      Vehicles......................................................................................     13

         4.10     Intellectual Property.........................................................................     13

         4.11     Contracts.....................................................................................     14

         4.12     Commercial Tort Claims........................................................................     15

Section 5.        COVENANTS.....................................................................................     15

         5.1      Covenants in Term Loan Agreement..............................................................     15

         5.2      Delivery of Instruments and Chattel Paper.....................................................     15

         5.3      Maintenance of Insurance......................................................................     15

         5.4      Payment of Obligations........................................................................     16

                                       i

                                                                                                                    Page
                                                                                                                    ----
                                                                                                                 
         5.5      Maintenance of Perfected Security Interest; Further Documentation.............................     16

         5.6      Changes in Name, Etc..........................................................................     16

         5.7      Notices.......................................................................................     17

         5.8      Investment Property...........................................................................     17

         5.9      Receivables...................................................................................     18

         5.10     Contracts.....................................................................................     18

         5.11     Intellectual Property.........................................................................     19

         5.12     Vehicles......................................................................................     20

         5.13     Notice of Commercial Tort Claims..............................................................     20

         5.14     Subordination.................................................................................     21

Section 6.        REMEDIAL PROVISIONS...........................................................................     21

         6.1      Certain Matters Relating to Receivables.......................................................     21

         6.2      Communications with Obligors; Grantors Remain Liable..........................................     22

         6.3      Pledged Stock.................................................................................     22

         6.4      Proceeds to be Turned Over To Administrative Agent............................................     23

         6.5      Application of Proceeds.......................................................................     23

         6.6      Code and Other Remedies.......................................................................     24

         6.7      Registration Rights...........................................................................     24

         6.8      Waiver; Deficiency............................................................................     25

Section 7.        THE ADMINISTRATIVE AGENT......................................................................     26

         7.1      Administrative Agent's Appointment as Attorney-in-Fact, etc...................................     26

         7.2      Duty of Administrative Agent..................................................................     27

         7.3      Execution of Financing Statements.............................................................     28

         7.4      Authority of Administrative Agent.............................................................     28

Section 8.        MISCELLANEOUS.................................................................................     28

         8.1      Amendments in Writing.........................................................................     28

         8.2      Notices.......................................................................................     28

         8.3      No Waiver by Course of Conduct; Cumulative Remedies...........................................     28

         8.4      Enforcement Expenses; Indemnification.........................................................     29

         8.5      Successors and Assigns........................................................................     29

         8.6      Set-Off.......................................................................................     29

         8.7      Counterparts..................................................................................     30

         8.8      Severability..................................................................................     30

                                       ii

                                                                                                                    Page
                                                                                                                    ----
                                                                                                                 
         8.9      Section Headings..............................................................................     30

         8.10     Integration...................................................................................     30

         8.11     GOVERNING LAW.................................................................................     30

         8.12     Submission To Jurisdiction; Waivers...........................................................     30

         8.13     Acknowledgements..............................................................................     31

         8.14     Additional Guarantors.........................................................................     31

         8.15     Releases......................................................................................     31

         8.16     WAIVER OF JURY TRIAL..........................................................................     32

SCHEDULES:

Schedule 1        Notice Addresses of Guarantors

Schedule 2        Description of Pledged Securities

Schedule 3        Filings and Other Actions Required to Perfect
                  Security Interest

Schedule 4        Jurisdiction of Organization, Identification Number
                  and Location of Chief Executive Office

Schedule 5        Locations of Inventory and Equipment

Schedule 6        Intellectual Property

Schedule 7        Existing Prior Liens

Schedule 8        Commercial Tort Claims

ANNEXES:

Annex I           Assumption Agreement

Annex II          Acknowledgment and Consent

                                      iii

                  GUARANTEE AND COLLATERAL AGREEMENT, dated as of May 30, 2003,
made by Williams Production RMT Company, a Delaware corporation (the
"Borrower"), and each of the other signatories hereto (together with any other
entity that may become a party hereto as provided herein, the "Guarantors" and,
together with the Borrower, the "Grantors" ) in favor of LEHMAN COMMERCIAL PAPER
INC., as Administrative Agent (in such capacity, the "Administrative Agent") for
the banks and other financial institutions (the "Lenders") from time to time
parties to the Term Loan Agreement, dated as of May 30, 2003 (as amended,
supplemented or otherwise modified from time to time, the "Term Loan
Agreement"), among WILLIAMS PRODUCTION HOLDINGS LLC, a Delaware limited
liability company ("Holdings"), the Borrower, the Lenders, LEHMAN BROTHERS INC.
and Banc of America Securities LLC, as joint advisors, joint lead arrangers and
joint book runners, CITICORP USA, INC. and JPMORGAN CHASE BANK, as
co-syndication agents, BANK OF AMERICA, N.A., as documentation agent, and the
Administrative Agent.

                              W I T N E S S E T H:

                  WHEREAS, pursuant to the Term Loan Agreement, the Lenders have
severally agreed to make extensions of credit to the Borrower upon the terms and
subject to the conditions set forth therein;

                  WHEREAS, the Borrower is a member of an affiliated group of
companies that includes each Guarantor;

                  WHEREAS, certain of the Qualified Counterparties may enter
into Specified Hedge Agreements with one or more of the Borrower and the
Guarantors;

                  WHEREAS, the Borrower and the Guarantors are engaged in
related businesses, and each Guarantor will derive substantial direct and
indirect benefit from the making of the term loans under the Term Loan Agreement
and from the Specified Hedge Agreements; and

                  WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective term loans to the Borrower under the Term Loan
Agreement that the Borrower and the Guarantors shall have executed and delivered
this Agreement to the Administrative Agent for the benefit of the Secured
Parties;

                  NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Term Loan Agreement
and to induce the Lenders to make their respective term loans to the Borrower
thereunder, the Borrower and each Guarantor hereby agrees with the
Administrative Agent, for the benefit of the Secured Parties, as follows:

                            SECTION 1. DEFINED TERMS

                  1.1      Definitions. Unless otherwise defined herein,
terms defined in the Term Loan Agreement and used herein shall have the meanings
given to them in the Term Loan Agreement and the following terms are used herein
as defined in the New York UCC: Accounts, Certificated Security, Chattel Paper,
Commercial Tort Claims, Documents, Equipment, Farm

Products, General Intangibles, Goods, Instruments, Inventory, Letter of Credit
Rights and Supporting Obligations.

                  (a)      The following terms shall have the following
         meanings:

                  "Agreement": this Guarantee and Collateral Agreement, as the
         same may be amended, supplemented or otherwise modified from time to
         time.

                  "Borrower Term Loan Agreement Obligations": the collective
         reference to the unpaid principal of and interest on the Term Loans and
         all other obligations and liabilities of the Borrower (including,
         without limitation, interest accruing at the then applicable rate
         provided in the Term Loan Agreement after the maturity of the Term
         Loans and interest accruing at the then applicable rate provided in the
         Term Loan Agreement after the filing of any petition in bankruptcy, or
         the commencement of any insolvency, reorganization or like proceeding,
         relating to the Borrower, whether or not a claim for post-filing or
         post-petition interest is allowed in such proceeding) to the
         Administrative Agent or any Lender, whether direct or indirect,
         absolute or contingent, due or to become due, or now existing or
         hereafter incurred, which may arise under, out of, or in connection
         with, the Term Loan Agreement, this Agreement, or the other Loan
         Documents, or any other document made, delivered or given in connection
         therewith, in each case whether on account of principal, interest,
         reimbursement obligations, fees, indemnities, costs, expenses or
         otherwise (including, without limitation, all fees and disbursements of
         counsel to the Administrative Agent or to the Lenders that are required
         to be paid by the Borrower pursuant to the terms of any of the
         foregoing agreements).

                  "Borrower Hedge Agreement Obligations": the collective
         reference to all obligations and liabilities of the Borrower
         (including, without limitation, interest accruing at the then
         applicable rate provided in any Specified Hedge Agreement after the
         filing of any petition in bankruptcy, or the commencement of any
         insolvency, reorganization or like proceeding, relating to the
         Borrower, whether or not a claim for post-filing or post petition
         interest is allowed in such proceeding) to any Qualified Counterparty,
         whether direct or indirect, absolute or contingent, due or to become
         due, or now existing or hereafter incurred, which may arise under, out
         of, or in connection with, any Specified Hedge Agreement or any other
         document made, delivered or given in connection therewith, in each case
         whether on account of principal, interest, reimbursement obligations,
         fees, indemnities, costs, expenses or otherwise (including, without
         limitation, all fees and disbursements of counsel to the relevant
         Qualified Counterparty that are required to be paid by the Borrower
         pursuant to the terms of any Specified Hedge Agreement).

                  "Borrower Obligations": the collective reference to (i) the
         Borrower Term Loan Agreement Obligations, (ii) the Borrower Hedge
         Agreement Obligations, but only to the extent that, and only so long
         as, the Borrower Term Loan Agreement Obligations are secured and
         guaranteed pursuant hereto and (iii) all other obligations and
         liabilities of the Borrower, whether direct or indirect, absolute or
         contingent, due or to become due, or now existing or hereafter
         incurred, which may arise under, out of, or in connection with, this
         Agreement (including, without limitation, all fees and disbursements of
         counsel to

                                       2

         the Administrative Agent or to the Secured Parties that are required to
         be paid by the Borrower pursuant to the terms of this Agreement).

                  "Collateral": as defined in Section 3.

                  "Collateral Account": any collateral account established by
         the Administrative Agent as provided in Section 5.12, 6.1 or 6.4.

                  "Contracts": contracts and agreements, as the same may be
         amended, supplemented or otherwise modified from time to time,
         including, without limitation, (i) all rights of any Grantor to receive
         moneys due and to become due to it thereunder or in connection
         therewith, (ii) all rights of any Grantor to damages arising thereunder
         and (iii) all rights of any Grantor to perform and to exercise all
         remedies thereunder.

                  "Copyrights": (i) all copyrights arising under the laws of the
         United States, any other country or any political subdivision thereof,
         whether registered or unregistered and whether published or unpublished
         (including, without limitation, those listed in Schedule 6), all
         registrations and recordings thereof, and all applications in
         connection therewith, including, without limitation, all registrations,
         recordings and applications in the United States Copyright Office, and
         (ii) the right to obtain all renewals thereof.

                  "Copyright Licenses": any written agreement naming any Grantor
         as licensor or licensee (including, without limitation, those listed in
         Schedule 6), granting any right under any Copyright, including, without
         limitation, the grant of rights to manufacture, distribute, exploit and
         sell materials derived from any Copyright.

                  "Deposit Account": as defined in the Uniform Commercial Code
         of any applicable jurisdiction and, in any event, including, without
         limitation, any demand, time, savings, passbook or like account
         maintained with a depositary institution.

                  "Excluded Assets": the collective reference to (i) with
         respect to the Borrower, the Capital Stock owned by the Borrower in (a)
         Bison Royalty LLC, (b) Piceance Production Holdings LLC, (c) Rulison
         Production Company LLC or (d) any Subsidiary created or acquired after
         the Closing Date, in each case to the extent the grant by the Borrower
         of a security interest pursuant to this Agreement in the Borrower's
         right, title and interest in such Capital Stock is prohibited, would
         require the grant of security interest securing obligations or would
         constitute a breach, event of default or event which with notice or
         lapse of time would become an event of default under any contract,
         agreement, instrument or indenture binding on Parent or any of its
         Subsidiaries and in effect on the date hereof, (ii) with respect to the
         (a) Bison Royalty LLC, (b) Piceance Production Holdings LLC, and (c)
         Rulison Production Company LLC, any property other than Oil and Gas
         Property, (iii) with respect to the Borrower, the GE Equipment securing
         the obligations of the Borrower under the GE Loan, to the extent the
         grant by the Borrower of a security interest pursuant to this Agreement
         in the Borrower's right, title and interest in such GE Equipment is
         prohibited, would require the grant of security interest securing
         obligations or would constitute a breach, event of default or event
         which with notice or lapse of time would become an event of default
         under the GE Loan, (iv) with respect to the grant of a security
         interest pursuant to this Agreement in any other

                                       3

         Contract, General Intangible, Pledged Securities (other than those
         issued by the Borrower or a Subsidiary), Copyright, License, Patent
         License or Trademark License ("Intangible Assets") which (A) is
         prohibited by legally enforceable provisions of any contract,
         agreement, instrument or indenture governing such Intangible Assets,
         (B) would give any other party to such contract, agreement, instrument
         or indenture a legally enforceable right to terminate its obligations
         thereunder or (C) is permitted only with the consent of another party,
         if the requirement to obtain such consent is legally enforceable and
         such consent has not been obtained; provided, that in any event any
         Receivable or any money or other amounts due or to become due under any
         such contract, agreement, instrument, indenture or other Collateral
         shall not be Excluded Assets to the extent that any of the foregoing is
         (or if it contained a provision limiting the transferability or pledge
         thereof would be) subject to Section 9-406 of the New York UCC, (v) any
         Property that does not constitute (A) Collateral of any Grantor under
         the Existing Guarantee and Collateral Agreement or (B) an Oil and Gas
         Property, in each case, to the extent that the grant of a security
         interest pursuant to this Agreement in such Property is prohibited,
         would require the grant of security interest securing obligations to
         another or would constitute a breach, event of default or event which
         with notice or lapse of time would become an event of default under any
         contract, agreement, instrument or indenture binding on Parent or any
         of its Subsidiaries and in effect on the date hereof or would reduce
         the right of Parent or any of its Subsidiaries to grant a security
         interest securing obligations to another Person under any contract,
         agreement, instrument or indenture binding on Parent or any of its
         Subsidiaries, (vi) any office building or related fixtures, (vii) any
         property set forth on Schedules 6.5(f)(i) or 6.5(i) of the Term Loan
         Agreement and (viii) Foreign Subsidiary Voting Stock excluded from the
         definition of "Pledged Stock" set forth in this Section 1.1.

                  "Existing Guarantee and Collateral Agreement": the Guarantee
         and Collateral Agreement dated as of July 31, 2002 made by the Parent,
         the Borrower and certain of its Subsidiaries in favor of Lehman
         Commercial Paper Inc., as Administrative Agent.

                  "Foreign Subsidiary": any Subsidiary organized under the laws
         of any jurisdiction outside the United States of America.

                  "Foreign Subsidiary Voting Stock": the voting Capital Stock of
         any Foreign Subsidiary.

                  "Grantor Obligations": with respect to the Borrower, the
         Borrower Obligations, and with respect to any other Grantor, its
         Guarantor Obligations.

                   "Guarantor Hedge Agreement Obligations": the collective
         reference to all obligations and liabilities of a Guarantor (including,
         without limitation, interest accruing at the then applicable rate
         provided in any Specified Hedge Agreement after the filing of any
         petition in bankruptcy, or the commencement of any insolvency,
         reorganization or like proceeding, relating to such Guarantor, whether
         or not a claim for post-filing or post petition interest is allowed in
         such proceeding) to any Qualified Counterparty, whether direct or
         indirect, absolute or contingent, due or to become due, or now existing
         or hereafter incurred, which may arise under, out of, or in connection
         with, any Specified Hedge Agreement or any other document made,
         delivered or given in connection

                                       4

         therewith, in each case whether on account of principal, interest,
         reimbursement obligations, fees, indemnities, costs, expenses or
         otherwise (including, without limitation, all fees and disbursements of
         counsel to the relevant Qualified Counterparty that are required to be
         paid by such Guarantor pursuant to the terms of any Specified Hedge
         Agreement).

                  "Guarantor Obligations": with respect to any Guarantor, the
         collective reference to (i) any Guarantor Hedge Agreement Obligations
         of such Guarantor, but only to the extent that, and only so long as,
         the other Obligations of such Guarantor are secured and guaranteed
         pursuant hereto, and (ii) all obligations and liabilities of such
         Guarantor which may arise under or in connection with this Agreement
         (including, without limitation, Section 2) or any other Loan Document
         to which such Guarantor is a party, in each case whether on account of
         guarantee obligations, reimbursement obligations, fees, indemnities,
         costs, expenses or otherwise (including, without limitation, all fees
         and disbursements of counsel to the Administrative Agent or to any
         Secured Party that are required to be paid by such Guarantor pursuant
         to the terms of this Agreement or any other Loan Document).

                  "Intellectual Property": the collective reference to all
         rights, priorities and privileges relating to intellectual property,
         whether arising under United States, multinational or foreign laws or
         otherwise, including, without limitation, the Copyrights, the Copyright
         Licenses, the Patents, the Patent Licenses, the Trademarks and the
         Trademark Licenses, and all rights to sue at law or in equity for any
         infringement or other impairment thereof, including the right to
         receive all proceeds and damages therefrom.

                  "Intercompany Note": any promissory note evidencing loans made
         by any Grantor to Parent or any of its Subsidiaries.

                  "Investment Property": the collective reference to (i) all
         "investment property" as such term is defined in Section 9-102(a)(49)
         of the New York UCC (other than any Foreign Subsidiary Voting Stock
         excluded from the definition of "Pledged Stock" in this Section 1.1)
         and (ii) whether or not constituting "investment property" as so
         defined, all Pledged Notes and all Pledged Stock.

                  "Issuers": the collective reference to each issuer of any
         Investment Property.

                  "New York UCC": the Uniform Commercial Code as from time to
         time in effect in the State of New York.

                  "Obligations": (i) in the case of the Borrower, the Borrower
         Obligations, (ii) in the case of each Guarantor, its Guarantor
         Obligations, and (iii) in the case of each Grantor, its Grantor
         Obligations.

                  "Patents": (i) all letters patent of the United States, any
         other country or any political subdivision thereof, all reissues and
         extensions thereof and all goodwill associated therewith, including,
         without limitation, any of the foregoing referred to in Schedule 6,
         (ii) all applications for letters patent of the United States or any
         other country and all divisions, continuations and
         continuations-in-part thereof, including, without

                                       5

         limitation, any of the foregoing referred to in Schedule 6, and (iii)
         all rights to obtain any reissues or extensions of the foregoing.

                  "Patent License": all agreements, whether written or oral,
         providing for the grant by or to any Grantor of any right to
         manufacture, use or sell any invention covered in whole or in part by a
         Patent, including, without limitation, any of the foregoing referred to
         in Schedule 6.

                  "Pledged Notes": all promissory notes listed on Schedule 2,
         all Intercompany Notes at any time issued to any Grantor and all other
         promissory notes issued to or held by any Grantor (other than
         promissory notes issued in connection with extensions of trade credit
         by any Grantor in the ordinary course of business).

                  "Pledged Securities": the collective reference to the Pledged
         Notes and the Pledged Stock.

                  "Pledged Stock": the shares of Capital Stock listed on
         Schedule 2, together with any other shares, stock certificates, options
         or rights of any nature whatsoever in respect of the Capital Stock of
         any Person that may be issued or granted to, or held by, any Grantor
         while this Agreement is in effect; provided that in no event shall more
         than 65% of the total outstanding Foreign Subsidiary Voting Stock of
         any Foreign Subsidiary be required to be pledged hereunder.

                  "Proceeds": all "proceeds" as such term is defined in Section
         9-102(a)(64) of the Uniform Commercial Code in effect in the State of
         New York on the date hereof and, in any event, including, without
         limitation, all dividends or other income from the Investment Property,
         collections thereon or distributions or payments with respect thereto.

                  "Receivable": any right to payment for goods sold, leased,
         licensed, assigned or otherwise disposed of, or for services rendered
         (except for any right to payment of any Grantor from Parent or any of
         its Subsidiaries), whether or not such right is evidenced by an
         Instrument or Chattel Paper and whether or not it has been earned by
         performance (including, without limitation, any Account).

                  "Secured Parties": the collective reference to the
         Administrative Agent, the Lenders and any Qualified Counterparties.

                  "Securities Act": the Securities Act of 1933, as amended.

                  "Trademarks": (i) all trademarks, trade names, corporate
         names, company names, business names, fictitious business names, trade
         styles, service marks, logos and other source or business identifiers,
         and all goodwill associated therewith, now existing or hereafter
         adopted or acquired, all registrations and recordings thereof, and all
         applications in connection therewith, whether in the United States
         Patent and Trademark Office or in any similar office or agency of the
         United States, any State thereof or any other country or any political
         subdivision thereof, or otherwise, and all common-law rights related

                                       6

         thereto, including, without limitation, any of the foregoing referred
         to in Schedule 6, and (ii) the right to obtain all renewals thereof.

                  "Trademark License": any agreement, whether written or oral,
         providing for the grant by or to any Grantor of any right to use any
         Trademark, including, without limitation, any of the foregoing referred
         to in Schedule 6.

                  "Vehicles": all cars, trucks, trailers, construction and earth
         moving equipment and other vehicles covered by a certificate of title
         law of any state and all tires and other appurtenances to any of the
         foregoing.

                  1.2      Other Definitional Provisions. The words
"hereof," "herein", "hereto" and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section and Schedule references are
to this Agreement unless otherwise specified.

                  (a)      The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.

                  (b)      Where the context requires, terms relating to the
Collateral or any part thereof, when used in relation to a Grantor, shall refer
to such Grantor's Collateral or the relevant part thereof.

                              SECTION 2. GUARANTEE

                  2.1      Guarantee. (a) (i) The Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantee to the Administrative
Agent and the Secured Parties, for the ratable benefit of the Secured Parties
and their respective successors, indorsees, transferees and assigns, the prompt
and complete payment and performance by the Borrower when due (whether at stated
maturity, by acceleration or otherwise) of the Borrower Obligations (other than,
in the case of each Guarantor, Borrower Obligations arising pursuant to clause
(ii) of this Section 2.1(a) in respect of Guarantor Hedge Agreement Obligations
in respect of which such Guarantor is a primary obligor).

                  (ii)     The Borrower hereby unconditionally and irrevocably
guarantees to the Administrative Agent and the Secured Parties, for the ratable
benefit of the Secured Parties and their respective successors, endorsees,
transferees and assigns, the prompt and complete payment and performance by each
Guarantor when due (whether at stated maturity, by acceleration or otherwise) of
the Guarantor Hedge Agreement Obligations of such Guarantor.

                  (a)      Anything herein or in any other Loan Document to the
contrary notwithstanding, (i) the maximum liability of each Guarantor hereunder
and under the other Loan Documents shall in no event exceed the amount which can
be guaranteed by such Guarantor under applicable federal and state laws relating
to fraudulent conveyances or transfers or the insolvency of debtors (after
giving effect to the right of contribution established in Section 2.2) and (ii)
the maximum liability of the Borrower under this Section 2 shall in no event
exceed the amount which can be guaranteed by the Borrower under applicable
federal and state laws

                                       7

relating to fraudulent conveyances or transfers or the insolvency of debtors
(after giving effect to the right of contribution established in Section 2.2).

                  (b)      Each Guarantor agrees that the Borrower Obligations
may at any time and from time to time exceed the amount of the liability of such
Guarantor hereunder without impairing the guarantee of such Guarantor contained
in this Section 2 or affecting the rights and remedies of the Administrative
Agent or any Secured Party hereunder. The Borrower agrees that the Guarantor
Hedge Agreement Obligations may at any time and from time to time exceed the
amount of the liability of the Borrower under this Section 2 without impairing
the guarantee of the Borrower contained in this Section 2 or affecting the
rights and remedies of the Administrative Agent or any Secured Party hereunder.

                  (c)      Subject to Section 8.15 hereof, the guarantee
contained in this Section 2 shall remain in full force and effect until all the
Borrower Obligations (other than Borrower Obligations arising under Section
2.1(a)(ii) hereof) and the obligations of each Guarantor under the guarantee
contained in this Section 2 (other than Guarantor Obligations in respect of
Borrower Obligations arising under Section 2.1(a)(ii) hereof) shall have been
satisfied by full and final payment in cash, notwithstanding that from time to
time during the term of the Term Loan Agreement the Borrower may be free from
any Borrower Obligations and any or all of the Guarantors may be free from their
respective Guarantor Hedge Agreement Obligations.

                  (d)      No payment made by the Borrower, any of the
Guarantors, any other guarantor or any other Person or received or collected by
the Administrative Agent or any Secured Party from the Borrower, any of the
Guarantors, 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 the Borrower Obligations or the
Guarantor Hedge Agreement Obligations shall be deemed to modify, reduce, release
or otherwise affect the liability of the Borrower or any Guarantor under this
Section 2 which shall, notwithstanding any such payment (other than any payment
made by the Borrower or such Guarantor in respect of the Borrower Obligations or
the Guarantor Hedge Agreement Obligations or any payment received or collected
from the Borrower or such Guarantor in respect of the Borrower Obligations or
the Guarantor Hedge Agreement Obligations), remain liable for the Borrower
Obligations and the Guarantor Hedge Agreement Obligations up to the maximum
liability of the Borrower or such Guarantor hereunder until the Borrower
Obligations and the Guarantor Hedge Agreement Obligations are fully and finally
paid in cash.

                  2.2      Right of Contribution. Each Guarantor hereby agrees
that to the extent that a Guarantor shall have paid more than its proportionate
share of any payment made hereunder or the Guarantor Hedge Agreement
Obligations, such Guarantor shall be entitled to seek and receive contribution
from and against any other Guarantor hereunder which has not paid its
proportionate share of such payment. The Borrower and each Guarantor agrees that
to the extent that the Borrower or any Guarantor shall have paid more than its
proportionate share of any payment made hereunder in respect of any Guarantor
Hedge Agreement Obligation of any other Guarantor, the Borrower or such
Guarantor, as the case may be, shall be entitled to seek and receive
contribution from and against the Borrower and any other Guarantor which has not
paid its proportionate share of such payment. The Borrower's and each
Guarantor's right of contribution under this Section 2.2 shall be subject to the
terms and conditions of Section 2.3. The provisions of this Section 2.2 shall in
no respect limit the obligations and liabilities of the

                                       8

Borrower or any Guarantor to the Administrative Agent and the Secured Parties,
and the Borrower and each Guarantor shall remain liable to the Administrative
Agent and the Secured Parties for the full amount guaranteed by the Borrower or
such Guarantor hereunder.

                  2.3      No Subrogation. Notwithstanding any payment made by
the Borrower or any Guarantor hereunder or any set-off or application of funds
of the Borrower or any Guarantor by the Administrative Agent or any Secured
Party, neither the Borrower nor any Guarantor shall be entitled to be subrogated
to any of the rights of the Administrative Agent or any Secured Party against
the Borrower or any other Guarantor or any collateral security or guarantee or
right of offset held by the Administrative Agent or any Secured Party for the
payment of the Borrower Obligations or the Guarantor Hedge Agreement
Obligations, nor shall the Borrower or any Guarantor seek or be entitled to seek
any contribution or reimbursement from the Borrower or any other Guarantor in
respect of payments made by the Borrower or such Guarantor hereunder, until all
amounts owing to the Administrative Agent and the Secured Parties by the
Borrower on account of the Borrower Obligations are fully and finally paid in
cash. If any amount shall be paid to the Borrower or any Guarantor on account of
such subrogation rights at any time when all of the Borrower Obligations shall
not have been fully and finally paid in cash, such amount shall be held by the
Borrower or such Guarantor in trust for the Administrative Agent and the Secured
Parties, segregated from other funds of the Borrower or such Guarantor, and
shall, forthwith upon receipt by the Borrower or such Guarantor, be turned over
to the Administrative Agent in the exact form received by the Borrower or such
Guarantor (duly indorsed by the Borrower or such Guarantor to the Administrative
Agent, if required), to be applied against the Borrower Obligations or the
Guarantor Hedge Agreement Obligations, whether matured or unmatured, in such
order as the Administrative Agent may determine.

                  2.4      Amendments, Etc. With Respect to the Borrower
Obligations. The Borrower and each Guarantor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against the Borrower or
any Guarantor and without notice to or further assent by the Borrower or any
Guarantor, any demand for payment of any of the Borrower Obligations or
Guarantor Hedge Agreement Obligations made by the Administrative Agent or any
Secured Party may be rescinded by the Administrative Agent or such Secured Party
and any of the Borrower Obligations or Guarantor Hedge Agreement Obligations
continued, and the Borrower Obligations or Guarantor Hedge Agreement
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
the Administrative Agent or any Secured Party (with the consent of such of the
Borrower and the Guarantor as shall be required thereunder), and the Specified
Hedge Agreements, the Term Loan Agreement and the other Loan Documents and any
other documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Administrative
Agent (or the Required Lenders or all Lenders, as the case may be) may (with the
consent of such of the Borrower and the Guarantor as shall be required
thereunder) deem advisable from time to time, and any collateral security,
guarantee or right of offset at any time held by the Administrative Agent or any
Secured Party for the payment of the Borrower Obligations or Guarantor Hedge
Agreement Obligations may (with the consent of such of the Borrower and the
Guarantor as shall be required thereunder) be sold, exchanged, waived,
surrendered or released. Neither the Administrative Agent nor any Secured Party
shall, except to

                                       9

the extent set forth in, and for the benefit of the parties to, the agreements
and instruments governing such Lien or guarantee, have any obligation to
protect, secure, perfect or insure any Lien at any time held by it as security
for the Borrower Obligations or Guarantor Hedge Agreement Obligations or for the
guarantees contained in this Section 2 or any property subject thereto.

                  2.5      Guarantee Absolute and Unconditional. (a) Each
Guarantor waives any and all notice of the creation, renewal, extension or
accrual of any of the Borrower Obligations (other than any notice with respect
to any Guarantor Hedge Agreement Obligation with respect to which such Guarantor
is a primary obligor and to which it is entitled pursuant to the applicable
Specified Hedge Agreement) and notice of or proof of reliance by the
Administrative Agent or any Secured Party upon the guarantee contained in this
Section 2 or acceptance of the guarantee contained in this Section 2; the
Borrower Obligations, and any of them, shall conclusively be deemed to have been
created, contracted or incurred, or renewed, extended, amended or waived, in
reliance upon the guarantee contained in this Section 2; and all dealings
between the Borrower and any of the Guarantors, on the one hand, and the
Administrative Agent and the Secured Parties, on the other hand, likewise shall
be conclusively presumed to have been had or consummated in reliance upon the
guarantee contained in this Section 2. Each Guarantor waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon the Borrower or any of the Guarantors with respect to the Borrower
Obligations (other than any diligence, presentment, protest, demand or notice
with respect to any Guarantor Hedge Agreement Obligation with respect to which
such Guarantor is a primary obligor and to which it is entitled pursuant to the
applicable Specified Hedge Agreement). Each Guarantor understands and agrees
that the guarantee of such Guarantor contained in this Section 2 shall be
construed as a continuing, absolute and unconditional guarantee of payment
without regard to (1) the validity or enforceability of the Term Loan Agreement
or any other Loan Document, any of the Borrower Obligations or any collateral
security therefor or guarantee or right of offset with respect thereto at any
time or from time to time held by the Administrative Agent or any Secured Party,
(2) any defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by the
Borrower or any other Person against the Administrative Agent or any Secured
Party, or (3) any other circumstance whatsoever (with or without notice to or
knowledge of the Borrower or such Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the Borrower for the
Borrower Obligations, or of such Guarantor under the guarantee of such Guarantor
contained in this Section 2, in bankruptcy or in any other instance. When making
any demand hereunder or otherwise pursuing its rights and remedies hereunder
against any Guarantor, the Administrative Agent or any Secured Party 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 the Borrower, any other
Guarantor or any other Person or against any collateral security or guarantee
for the Borrower Obligations or any right of offset with respect thereto, and
any failure by the Administrative Agent or any Secured Party to make any such
demand, to pursue such other rights or remedies or to collect any payments from
the Borrower, any other Guarantor 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 the Borrower, any other Guarantor or any other Person or any
such collateral security, guarantee or right of offset, shall not relieve any
Guarantor of any obligation or liability under this Section 2, and shall not
impair or affect the rights and remedies, whether express, implied or available
as a matter of law, of the Administrative Agent or any Secured Party against any

                                       10

Guarantor. For the purposes hereof "demand" shall include the commencement and
continuance of any legal proceedings.

                  (a)      The Borrower waives any and all notice of the
creation, renewal, extension or accrual of any of the Guarantor Hedge Agreement
Obligations and notice of or proof of reliance by the Administrative Agent or
any Secured Party upon the guarantee by the Borrower contained in this Section 2
or acceptance of the guarantee by the Borrower contained in this Section 2; the
Guarantor Hedge Agreement Obligations, and any of them, shall conclusively be
deemed to have been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon the guarantee by the Borrower contained in
this Section 2; and all dealings between the Borrower and any of the Guarantors,
on the one hand, and the Administrative Agent and the Secured Parties, on the
other hand, with respect to any Guarantor Hedge Agreement Obligation likewise
shall be conclusively presumed to have been had or consummated in reliance upon
the guarantee by the Borrower contained in this Section 2. The Borrower waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon the Borrower with respect to the Guarantor Hedge Agreement
Obligations. The Borrower understands and agrees that the guarantee by the
Borrower contained in this Section 2 shall be construed as a continuing,
absolute and unconditional guarantee of payment without regard to (1) the
validity or enforceability of the Guarantor Hedge Agreement 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 the Administrative Agent or any
Secured Party, (2) any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or be asserted by
any Person against the Administrative Agent or any Secured Party, or (3) any
other circumstance whatsoever (with or without notice to or knowledge of the
Borrower or any Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the applicable Guarantor for the
applicable Guarantor Hedge Agreement Obligations, or of the Borrower under its
guarantee contained in this Section 2, in bankruptcy or in any other instance.
When making any demand under this Section 2 or otherwise pursuing its rights and
remedies under this Section 2 against the Borrower, the Administrative Agent or
any Secured Party 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
any Guarantor or any other Person or against any collateral security or
guarantee for the Guarantor Hedge Agreement Obligations or any right of offset
with respect thereto, and any failure by the Administrative Agent or any Secured
Party to make any such demand, to pursue such other rights or remedies or to
collect any payments from any Guarantor 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 any Guarantor or any other Person or any such
collateral security, guarantee or right of offset, shall not relieve the
Borrower of any obligation or liability under this Section 2, and shall not
impair or affect the rights and remedies, whether express, implied or available
as a matter of law, of the Administrative Agent or any Secured Party against the
Borrower under this Section 2. For the purposes hereof "demand" shall include
the commencement and continuance of any legal proceedings.

                  2.6      Reinstatement. The guarantee contained in this
Section 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 Borrower Obligations
or Guarantor Hedge Agreement Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any Secured Party upon

                                       11

the insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Borrower or any Guarantor or any substantial part of its property, or otherwise,
all as though such payments had not been made.

                  2.7      Payments. The Borrower and each Guarantor hereby
guarantees that payments by it hereunder will be paid to the Administrative
Agent without set-off or counterclaim (i) in the case of obligations in respect
of Borrower Obligations arising under the Term Loan Agreement or any other Loan
Document, in Dollars at the Payment Office specified in the Term Loan Agreement,
and (ii) in the case of obligations in respect of any Borrower Hedge Agreement
Obligations or any Guarantor Hedge Agreement Obligations, in the currency and at
the place specified in the applicable Specified Hedge Agreement.

                     SECTION 3. GRANT OF SECURITY INTEREST

                  Each Grantor hereby assigns and transfers to the
Administrative Agent, and hereby grants to the Administrative Agent and the
Secured Parties, for the ratable benefit of the Secured Parties, a security
interest in, all of the following property now owned or at any time hereafter
acquired by such Grantor or in which such Grantor now has or at any time in the
future may acquire any right, title or interest (collectively, the
"Collateral"), as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of such Grantor's Obligations:

         (a)      all Accounts;

         (b)      all Chattel Paper;

         (c)      all Contracts;

         (d)      all Deposit Accounts;

         (e)      all Documents;

         (f)      all Equipment;

         (g)      all General Intangibles;

         (h)      all Instruments;

         (i)      all Intellectual Property;

         (j)      all Inventory;

         (k)      all Investment Property;

         (l)      all Letter of Credit Rights;

         (m)      all Vehicles;

                                       12

         (n)      all Commercial Tort Claims described on Schedule 8 and on any
                  supplement thereto received by the Administrative Agent
                  pursuant to Section 5.10;

         (o)      all Goods and other property, whether tangible or intangible
                  and wherever located, not otherwise described above;

         (p)      all books and records pertaining to the Collateral; and

         (q)      to the extent not otherwise included, all Proceeds and
                  products of any and all of the foregoing, all Supporting
                  Obligations in respect of any of the foregoing and all
                  collateral security and guarantees given by any Person with
                  respect to any of the foregoing;

provided, that the Collateral shall not include the Excluded Assets; provided,
further, that if and when the prohibition which prevents the granting by such
Grantor to the Administrative Agent of a security interest in such Excluded
Asset is removed or otherwise terminated, the Administrative Agent will be
deemed to have, and at all times from and after the date hereof to have had, a
security interest in such Excluded Asset, as the case may be.

                   SECTION 4. REPRESENTATIONS AND WARRANTIES

                  To induce the Administrative Agent and the Lenders to enter
into the Term Loan Agreement and to induce the Lenders to make their respective
term loans to the Borrower thereunder, each Grantor, and with respect to Section
4.1, each Guarantor, hereby represents and warrants to the Administrative Agent
and each Lender that:

                  4.1      Representations in Term Loan Agreement. In the case
of each Guarantor, the representations and warranties set forth in Section 3 of
the Term Loan Agreement as they relate to such Guarantor or to the Loan
Documents to which such Guarantor is a party, each of which is hereby
incorporated herein by reference, are true and correct, and the Administrative
Agent and each Lender shall be entitled to rely on each of them as if they were
fully set forth herein, provided that each reference in each such representation
and warranty to the Borrower's knowledge shall, for the purposes of this Section
4.1, be deemed to be a reference to such Guarantor's knowledge.

                  4.2      Title; No Other Liens. Except for the security
interest granted to the Administrative Agent and the Secured Parties for the
ratable benefit of the Secured Parties pursuant to this Agreement and the other
Liens permitted to exist on the Collateral by the Term Loan Agreement, such
Grantor owns each item of the Collateral free and clear of any and all Liens or
claims of others. No financing statement or other public notice with respect to
all or any part of the Collateral is on file or of record in any public office,
except such as have been filed in favor of the Administrative Agent and the
Secured Parties, for the ratable benefit of the Secured Parties, pursuant to
this Agreement or as are permitted by the Term Loan Agreement.

                  4.3      Perfected First-Priority Liens. The security
interests granted pursuant to this Agreement (a) upon completion of the filings
and other actions specified on Schedule 3 (which, in the case of all UCC
financing statements and Mortgages referred to on said Schedule, have been
delivered to the Administrative Agent in completed and duly executed form) will

                                       13

constitute valid perfected security interests in all of the Collateral in favor
of the Administrative Agent and the Secured Parties, for the ratable benefit of
the Secured Parties, as collateral security for such Grantor's Obligations,
enforceable in accordance with the terms hereof against all creditors of such
Grantor and any Persons purporting to purchase any Collateral from such Grantor
and (b) in respect of Collateral consisting of Capital Stock are prior to all
other Liens in existence on the date hereof, and (c) in respect of all other
Collateral are prior to all other Liens in existence on the date hereof except
for Permitted Liens.

                  4.4      Jurisdiction of Organization; Chief Executive Office.
On the date hereof, such Grantor's jurisdiction of organization, identification
number from the jurisdiction of organization (if any), and the location of such
Grantor's chief executive office or sole place of business or principal
residence, as the case may be, are specified on Schedule 4. Such Grantor has
furnished to the Administrative Agent a certified charter, certificate of
incorporation or other organization document and long-form good standing
certificate as of a date which is recent to the date hereof.

                  4.5      Inventory and Equipment. On the date hereof, the
Inventory and the Equipment (other than mobile goods) are kept in the counties
listed on Schedule 5.

                  4.6      Farm Products. None of the Collateral constitutes, or
is the Proceeds of, Farm Products.

                  4.7      Investment Property. The shares of Pledged Stock
pledged by such Grantor hereunder constitute all the issued and outstanding
shares of all classes of the Capital Stock of each Issuer owned by such Grantor
or, in the case of Foreign Subsidiary Voting Stock, if less, 65% of the
outstanding Foreign Subsidiary Voting Stock of each relevant Issuer.

                  (a)      All the shares of the Pledged Stock have been duly
and validly issued and are fully paid and nonassessable.

                  (b)      Each of the Pledged Notes constitutes the legal,
valid and binding obligation of the obligor with respect thereto, enforceable in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.

                  (c)      Such Grantor is the record and beneficial owner of
the Investment Property pledged by it hereunder, free of any and all Liens or
options in favor of, or claims of, any other Person, except the security
interest created by this Agreement and Permitted Liens.

                  4.8      Receivables. No amount payable to such Grantor
under or in connection with any Receivable is evidenced by any Instrument or
Chattel Paper which has not been delivered to the Administrative Agent to the
extent required by Section 5.2.

                  (a)      None of the obligors on any Receivable is a
Governmental Authority, except for Receivables constituting not more than 5% of
the face amount of all Receivables.

                                       14

                  (b)      The amounts represented by such Grantor to the
Secured Parties from time to time as owing to such Grantor in respect of the
Receivables will at such times be accurate.

                  4.9      Vehicles. The aggregate book value of all Vehicles
owned by all Grantors is less than $5,000,000.

                  4.10     Intellectual Property. Schedule 6 lists all
registered Intellectual Property owned by such Grantor in its own name on the
date hereof.

                  (a)      On the date hereof, all material Intellectual
Property of such Grantor described on Schedule 6 is valid, subsisting, unexpired
and enforceable, has not been abandoned and does not infringe the intellectual
property rights of any other Person.

                  (b)      Except as set forth in Schedule 6, on the date
hereof, none of the Intellectual Property is the subject of any licensing or
franchise agreement pursuant to which such Grantor is the licensor or
franchisor.

                  (c)      No holding, decision or judgment has been rendered by
any Governmental Authority which would limit, cancel or question the validity
of, or such Grantor's rights in, any Intellectual Property in any respect that
could reasonably be expected to have a Material Adverse Effect.

                  (d)      No action or proceeding is pending, or, to the
knowledge of such Grantor, threatened, on the date hereof (i) seeking to limit,
cancel or question the validity of any material Intellectual Property or such
Grantor's ownership interest therein, or (ii) which, could reasonably be
expected to have a material adverse effect on the value of any Intellectual
Property.

                  4.11     Contracts. Subject to 9407(b), 9408(b), 9409(b)
of the New York UCC, no consent of any party (other than such Grantor) to any
Contract is required, or purports to be required, in connection with the
execution, delivery and performance of this Agreement.

                  (a)      No amount payable to such Grantor under or in
connection with any Contract is evidenced by any Instrument or Chattel Paper
which, to the extent required to be delivered pursuant to Section 5.2 has not
been delivered to the Administrative Agent.

                              SECTION 5. COVENANTS

                  Each Grantor, and with respect to Sections 5.1, 5.7 and 5.11,
each Guarantor, covenants and agrees with the Administrative Agent and the
Secured Parties that, from and after the date of this Agreement until the
Obligations shall have been paid in full:

                  5.1      Covenants in Term Loan Agreement. In the case of each
Guarantor, such Guarantor shall take, or shall refrain from taking, as the case
may be, each action that is necessary to be taken or not taken, as the case may
be, so that no Default or Event of Default is caused by the failure to take such
action or to refrain from taking such action by such Guarantor or any of its
Subsidiaries.

                  5.2      Delivery of Instruments and Chattel Paper. If any
amount payable under or in connection with any of the Collateral shall be or
become evidenced by any Instrument,

                                       15

Certificated Security or Chattel Paper, such Instrument, Certificated Security
or Chattel Paper shall be promptly delivered to the Administrative Agent, duly
indorsed in a manner satisfactory to the Administrative Agent, to be held as
Collateral pursuant to this Agreement; provided that the Grantors shall not be
obligated to deliver to the Administrative Agent any Instruments or Chattel
Paper held by any Grantor at any time to the extent that the aggregate face
amount of all such Instruments and Chattel Paper held by all Grantors at such
time does not exceed $10,000,000.

                  5.3      Maintenance of Insurance. Such Grantor will
maintain, with financially sound and reputable companies, insurance on all its
Property (including, without limitation, all Inventory, Equipment and Vehicles)
in at least such amounts and against at least such risks as are usually insured
against by businesses of similar size and character of such Grantor, including,
without limitation, (i) property insurance against loss by fire, explosion,
theft and such other casualties as may be reasonably satisfactory to the
Administrative Agent and (ii) insurance covering such Grantor, the
Administrative Agent and the Secured Parties against liability for personal
injury and property damage relating to such Property.

                  (a)      All such insurance shall (i) provide that no
cancellation, material reduction in amount or material change in coverage
thereof shall be effective until at least 30 days after receipt by the
Administrative Agent of written notice thereof, (ii) name the Administrative
Agent as an additional insured party under such liability insurance and loss
payee under such property insurance, (iii) if reasonably requested by the
Administrative Agent and to the extent obtainable on commercially reasonable
terms, include a breach of warranty clause and (iv) be reasonably satisfactory
in all other respects to the Administrative Agent.

                  (b)      The Borrower shall deliver to the Administrative
Agent and the Lenders a report of a reputable insurance broker with respect to
such insurance substantially concurrently with the delivery by the Borrower to
the Administrative Agent of its audited financial statements for each fiscal
year and such supplemental reports with respect thereto as the Administrative
Agent may from time to time reasonably request.

                  5.4      Maintenance of Perfected Security Interest; Further
Documentation. (a) Such Grantor shall maintain the security interest created by
this Agreement as a perfected security interest having at least the priority
described in Section 4.3 and shall defend such security interest against the
claims and demands of all Persons whomsoever.

                  (a)      Such Grantor will furnish to the Administrative Agent
and the Lenders from time to time statements and schedules further identifying
and describing the assets and property of such Grantor and such other reports in
connection with the Collateral as the Administrative Agent may reasonably
request, all in reasonable detail.

                  (b)      At any time and from time to time, upon the written
request of the Administrative Agent, and at the sole expense of such Grantor,
such Grantor will promptly and duly execute and deliver, and have recorded, such
further instruments and documents and take such further actions as the
Administrative Agent may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, (i) the filing of any financing
or continuation statements under the Uniform Commercial Code (or other similar
laws) in effect in any jurisdiction with

                                       16

respect to the security interests created hereby and (ii) in the case of
Investment Property, Deposit Accounts and Letter of Credit Rights, taking any
actions necessary to enable the Administrative Agent to obtain "control" (within
the meaning of the applicable Uniform Commercial Code) with respect thereto.

                  5.5      Changes in Name, Etc. Such Grantor will not, except
upon 15 days' prior written notice to the Administrative Agent and delivery to
the Administrative Agent of all additional executed financing statements and
other documents reasonably requested by the Administrative Agent to maintain the
validity, perfection and priority of the security interests provided for herein:

                  (i)      change its jurisdiction of organization or the
         location of its chief executive office or sole place of business or
         principal residence from that referred to in Section 4.4; or

                  (ii)     change its name.

                  5.6      Notices. Such Grantor will advise the Administrative
Agent promptly, in reasonable detail, of any Lien (other than security interests
created hereby or Liens permitted under the Term Loan Agreement) on any of the
Collateral which would adversely affect the ability of the Administrative Agent
to exercise any of its remedies hereunder.

                  5.7      Investment Property. (a) If such Grantor shall become
entitled to receive or shall receive any certificate (including, without
limitation, any certificate representing a dividend or a distribution in
connection with any reclassification, increase or reduction of capital or any
certificate issued in connection with any reorganization), option or rights in
respect of the Capital Stock of any Issuer, whether in addition to, in
substitution of, as a conversion of, or in exchange for, any shares of the
Pledged Stock, or otherwise in respect thereof, such Grantor shall accept the
same as the agent of the Administrative Agent and the Secured Parties, hold the
same in trust for the Administrative Agent and the Secured Parties and deliver
the same forthwith to the Administrative Agent in the exact form received, duly
indorsed by such Grantor to the Administrative Agent, if required, together with
an undated stock power covering such certificate duly executed in blank by such
Grantor and with, if the Administrative Agent so requests, signature guaranteed,
to be held by the Administrative Agent, subject to the terms hereof, as
additional collateral security for the Obligations; provided, however, that any
such certificate that does not evidence securities issued by a Subsidiary of
Holdings may be held in a Securities Account included in the Collateral. Any
sums paid upon or in respect of the Investment Property upon the liquidation or
dissolution of any Issuer shall (i) unless such Issuer is a Subsidiary of
Holdings, be held or deposited in a Securities Account or a Deposit Account
included in the Collateral (until used or reinvested in the ordinary course of
business) or (ii) be paid over to the Administrative Agent to be held by it
hereunder as additional collateral security for the Obligations, and in case any
distribution of capital shall be made on or in respect of the Investment
Property, or any property shall be distributed upon or with respect to the
Investment Property pursuant to the recapitalization or reclassification of the
capital of any Issuer or pursuant to the reorganization thereof, the property so
distributed shall, unless otherwise subject to a perfected security interest in
favor of the Administrative Agent, be delivered to the Administrative Agent to
be held by it hereunder as additional collateral security for the Obligations.
If any sums of money or property so paid or distributed in respect of the
Investment

                                       17

Property shall be received by such Grantor, such Grantor shall, until such money
or property is held or deposited in a Securities Account or Deposit Account (as
permitted under clause (i) above) or paid or delivered to the Administrative
Agent, hold such money or property in trust for the Secured Parties, segregated
from other funds of such Grantor, as additional collateral security for the
Obligations. Notwithstanding the foregoing, the Grantors shall not be required
to pay over to the Administrative Agent or deliver to the Administrative Agent
as Collateral any proceeds of any liquidation or dissolution of any Issuer, or
any distribution of capital or property in respect of any Investment Property,
to the extent that (i) such liquidation, dissolution or distribution, if treated
as a Disposition of the relevant Issuer, would be permitted by the Term Loan
Agreement and (ii) the proceeds thereof are applied toward prepayment of Term
Loans to the extent required by the Term Loan Agreement.

                  (a)      Without the prior written consent of the
Administrative Agent, such Grantor will not (i) vote to enable, or take any
other action to permit, any Issuer that is a Subsidiary of Holdings to issue any
stock or other equity securities of any nature or to issue any other securities
convertible into or granting the right to purchase or exchange for any stock or
other equity securities of any nature of any Issuer, unless such securities are
delivered to the Administrative Agent, concurrently with the issuance thereof,
to be held by the Administrative Agent as Collateral, (ii) sell, assign,
transfer, exchange, or otherwise dispose of, or grant any option with respect
to, the Investment Property or Proceeds thereof (except pursuant to a
transaction not prohibited by the Term Loan Agreement), or (iii) create, incur
or permit to exist any Lien or option in favor of, or any claim of any Person
with respect to, any of the Investment Property or Proceeds thereof, or any
interest therein, except for the security interests created by this Agreement
and except for Permitted Liens.

                  (b)      In the case of each Grantor and each Guarantor which
is an Issuer, such Issuer agrees that (i) it will be bound by the terms of this
Agreement relating to the Pledged Securities issued by it and will comply with
such terms insofar as such terms are applicable to it, (ii) it will notify the
Administrative Agent promptly in writing of the occurrence of any of the events
described in Section 5.7(a) with respect to the Pledged Securities issued by it
and (iii) the terms of Sections 6.3(c) and 6.7 shall apply to it, mutatis
mutandis, with respect to all actions that may be required of it pursuant to
Section 6.3(c) or 6.7 with respect to the Pledged Securities issued by it.

                  (c)      Each Subsidiary of Holdings that is a partnership or
a limited liability company and each Grantor (i) confirms that none of the terms
of any equity interest issued by such Issuer provides that such equity interest
is a "security" within the meaning of Sections 8-102 and 8-103 of the New York
UCC (a "Security"), (ii) agrees that it will, and cause such Issuer to, take no
action to cause or permit any such equity interest to become a Security, (iii)
agrees that it will not, and cause such Issuer to not, issue any certificate
representing any such equity interest and (iv) agrees that if, notwithstanding
the foregoing, any such equity interest shall be or become a Security, it will,
or cause such Issuer to, (and the Grantor that holds such equity interest hereby
instructs such Issuer to) comply with instructions originated by the
Administrative Agent without further consent by such Grantor.

                                       18

                  5.8      Receivables. Other than in the ordinary course of
business consistent with its past practice, such Grantor will not (i) grant any
extension of the time of payment of any Receivable, (ii) compromise or settle
any Receivable for less than the full amount thereof, (iii) release, wholly or
partially, any Person liable for the payment of any Receivable, (iv) allow any
credit or discount whatsoever on any Receivable or (v) amend, supplement or
modify any Receivable in any manner that could adversely affect the value
thereof except to the extent that failure to comply with any or all of the
provisions of clauses (i) to (iv) (inclusive) of this Section 5.8 could not
reasonably be expected to have a Material Adverse Effect.

                  (a)      Such Grantor will deliver to the Administrative Agent
a copy of each material demand, notice or document received by it that questions
or calls into doubt the validity or enforceability of more than 5% of the
aggregate amount of the then outstanding Receivables.

                  5.9      Intellectual Property. Whenever such Grantor, either
by itself or through any agent, employee, licensee or designee, shall file an
application for the registration of any Intellectual Property with the United
States Patent and Trademark Office, the United States Copyright Office or any
similar office or agency in any other country or any political subdivision
thereof, such Grantor shall report such filing to the Administrative Agent
within five Business Days after the last day of the fiscal quarter in which such
filing occurs. Upon request of the Administrative Agent, such Grantor shall
execute and deliver, and have recorded, any and all agreements, instruments,
documents, and papers as the Administrative Agent may request to evidence the
Administrative Agent's and the Secured Parties' security interest in any
Copyright, Patent or Trademark and the goodwill and general intangibles of such
Grantor relating thereto or represented thereby.

                  5.10     Notice of Commercial Tort Claims. Such Grantor agrees
that, if it shall acquire any interest in any Commercial Tort Claim in excess of
$25,000,000 (whether from another Person or because such Commercial Tort Claim
shall have come into existence) and, if requested by the Administrative Agent,
(i) such Grantor shall, promptly upon such acquisition, deliver to the
Administrative Agent, in each case in form and substance reasonably satisfactory
to the Administrative Agent, a notice of the existence and nature of such
Commercial Tort Claim and deliver a supplement to Schedule 8 containing a
specific description of such Commercial Tort Claim, certified by such Grantor as
true, correct and complete, (ii) the provision of Section 3 shall apply to such
Commercial Tort Claim (and the Grantor authorizes the Administrative Agent to
supplement such schedule with a description of such Commercial Tort Claim if
such Grantor fails to deliver the supplement described in clause (i)) and (iii)
such Grantor shall execute and deliver to the Administrative Agent, in each case
in form and substance reasonably satisfactory to the Administrative Agent, any
certificate, agreement and other document, and take all other action, deemed by
the Administrative Agent to be reasonably necessary or appropriate for the
Administrative Agent to obtain, on behalf of the Secured Parties, a
first-priority, perfected security interest in all such Commercial Tort Claims.
Any supplement to Schedule 8 delivered pursuant to this Section 5.10 shall
become part of Schedule 8 for all purposes hereunder other than, absent a
written consent of the Administrative Agent, for purpose of the representations
and warranties set forth in Section 4.12.

                  5.11     Subordination. Any Indebtedness of the Borrower or
any of its Subsidiaries to Parent, Holdings or any of Parent's Subsidiaries
(other than Holdings, the

                                       19

Borrower or any of the Borrower's Subsidiaries) shall be subordinated in right
of payment to the Obligations under the Loan Documents.

                  5.12     Collateral Account. The Borrower will maintain a
Collateral Account under the sole dominion and control of the Administrative
Agent for any cash or Cash Equivalents deposited therein pursuant to Section
6.16 of the Term Loan Agreement.

                         SECTION 6. REMEDIAL PROVISIONS

                  6.1      Certain Matters Relating to Receivables. The
Administrative Agent shall have the right, at any time after the occurrence and
during the continuance of an Event of Default, to make test verifications of the
Receivables in any manner and through any medium that it reasonably considers
advisable, and each Grantor shall furnish all such assistance and information as
the Administrative Agent may require in connection with such test verifications.
At any time and from time to time after the occurrence and during the
continuance of an Event of Default, upon the Administrative Agent's request and
at the expense of the relevant Grantor, such Grantor shall cause independent
public accountants or others satisfactory to the Administrative Agent to furnish
to the Administrative Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Receivables.

                  (a)      The Administrative Agent hereby authorizes each
Grantor to collect such Grantor's Receivables, subject to the Administrative
Agent's direction and control after the occurrence and during the continuance of
an Event of Default, and the Administrative Agent may curtail or terminate said
authority at any time after the occurrence and during the continuance of an
Event of Default. If required by the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default, any payments of
Receivables, when collected by any Grantor, (i) shall be forthwith (and, in any
event, within two Business Days) deposited by such Grantor in the exact form
received, duly indorsed by such Grantor to the Administrative Agent if required,
in a Collateral Account maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent for the
account of the Secured Parties only as provided in Section 6.5, and (ii) until
so turned over, shall be held by such Grantor in trust for the Administrative
Agent and the Secured Parties, segregated from other funds of such Grantor.

                  (b)      At the Administrative Agent's request, after the
occurrence of and during the continuance of an Event of Default, each Grantor
shall make available to the Administrative Agent all original and other
documents evidencing, and relating to, the agreements and transactions which
gave rise to the Receivables, including, without limitation, all original
orders, invoices and shipping receipts.

                  (c)      At any time after the occurrence and during the
continuance of an Event of Default, at the Administrative Agent's request each
Grantor will cooperate with the Administrative Agent to establish a system of
lockbox accounts, under the sole dominion and control of the Administrative
Agent, into which all Receivables shall be paid and from which all collected
funds will be transferred to a Collateral Account.

                  6.2      Communications with Obligors; Grantors Remain Liable.
The Administrative Agent in its own name or in the name of others may at any
time after the

                                       20

occurrence and during the continuance of an Event of Default communicate with
obligors under the Receivables and parties to the Contracts to verify with them
to the Administrative Agent's satisfaction the existence, amount and terms of
any Receivables or Contracts.

                  (a)      Upon the request of the Administrative Agent at any
time after the occurrence and during the continuance of an Event of Default,
each Grantor shall notify obligors on the Receivables and parties to the
Contracts that the Receivables and the Contracts have been assigned to the
Administrative Agent and the Secured Parties for the ratable benefit of the
Lenders and that payments in respect thereof shall be made directly to the
Administrative Agent.

                  (b)      Anything herein to the contrary notwithstanding, each
Grantor shall remain liable under each of the Receivables (or any agreement
giving rise thereto) and Contracts to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in accordance
with the terms of any agreement giving rise thereto. Neither the Administrative
Agent nor any Secured Party shall have any obligation or liability under any
Receivable (or any agreement giving rise thereto) or Contract by reason of or
arising out of this Agreement or the receipt by the Administrative Agent or any
Secured Party of any payment relating thereto, nor shall the Administrative
Agent or any Secured Party be obligated in any manner to perform any of the
obligations of any Grantor under or pursuant to any Receivable (or any agreement
giving rise thereto) or Contract, to make any payment, to make any inquiry as to
the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party thereunder, to present or file any
claim, to take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to it or to which it may be entitled
at any time or times.

                  6.3      Pledged Stock. Unless an Event of Default shall
have occurred and be continuing and the Administrative Agent shall have given
notice to the relevant Grantor of the Administrative Agent's intent to exercise
its corresponding rights pursuant to Section 6.3(b), each Grantor shall be
permitted to receive all cash dividends paid in respect of the Pledged Stock and
all payments made in respect of the Pledged Notes, in each case to the extent
permitted in the Term Loan Agreement, and to exercise all voting and corporate
rights with respect to the Pledged Securities; provided, however, that no vote
shall be cast or corporate right exercised or other action taken which, would
materially impair the Collateral (except Dispositions permitted under the Term
Loan Agreement) or which would result in any violation of any provision of the
Term Loan Agreement, this Agreement or any other Loan Document.

                  (a)      If an Event of Default shall occur and be continuing
and the Administrative Agent shall give notice of its intent to exercise such
rights to the relevant Grantor or Grantors, (i) the Administrative Agent shall
have the right to receive any and all cash dividends, payments or other Proceeds
paid in respect of the Pledged Securities and make application thereof to the
Obligations in the order set forth in Section 6.5, and (ii) any or all of the
Pledged Securities shall be registered in the name of the Administrative Agent
or its nominee, and the Administrative Agent or its nominee may thereafter
exercise (x) all voting, corporate and other rights pertaining to such Pledged
Securities at any meeting of shareholders of the relevant Issuer or Issuers or
otherwise and (y) any and all rights of conversion, exchange and subscription
and any other rights, privileges or options pertaining to such Pledged
Securities as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged
Securities upon the merger, consolidation, reorganization, recapitalization

                                       21

or other fundamental change in the corporate structure of any Issuer, or upon
the exercise by any Grantor or the Administrative Agent of any right, privilege
or option pertaining to such Pledged Securities, and in connection therewith,
the right to deposit and deliver any and all of the Pledged Securities with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as the Administrative Agent may determine), all
without liability except to account for property actually received by it, but
the Administrative Agent shall have no duty to any Grantor to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.

                  (b)      Each Grantor hereby authorizes and instructs each
Issuer of any Pledged Securities pledged by such Grantor hereunder to (i) comply
with any instruction received by it from the Administrative Agent in writing
that (x) states that an Event of Default has occurred and is continuing and (y)
is otherwise in accordance with the terms of this Agreement, without any other
or further instructions from such Grantor, and each Grantor agrees that each
Issuer shall be fully protected in so complying, and (ii) unless otherwise
expressly permitted hereby, pay any dividends or other payments with respect to
the Pledged Securities directly to the Administrative Agent.

                  6.4      Proceeds to be Turned Over To Administrative Agent.
In addition to the rights of the Administrative Agent and the Secured Parties
specified in Section 6.1 with respect to payments of Receivables, if an Event of
Default shall occur and be continuing and, if required by the Administrative
Agent, all Proceeds received by any Grantor consisting of cash, checks and
Instruments shall be held by such Grantor in trust for the Administrative Agent
and the Secured Parties, segregated from other funds of such Grantor, and shall,
forthwith upon receipt by such Grantor, be turned over to the Administrative
Agent in the exact form received by such Grantor (duly indorsed by such Grantor
to the Administrative Agent, if required). All Proceeds received by the
Administrative Agent hereunder shall be held by the Administrative Agent in a
Collateral Account maintained under its sole dominion and control. All Proceeds
while held by the Administrative Agent in a Collateral Account (or by such
Grantor in trust for the Administrative Agent and the Secured Parties) shall
continue to be held as collateral security for all the Obligations and shall not
constitute payment thereof until applied as provided in Section 6.5.

                  6.5      Application of Proceeds. If an Event of Default shall
have occurred and be continuing and the Lenders have elected to exercise
remedies in accordance with the terms of the Term Loan Agreement, at any time at
the Administrative Agent's election, the Administrative Agent may apply all or
any part of Proceeds constituting Collateral, whether or not held in any
Collateral Account, and any proceeds of the guarantee set forth in Section 2, in
payment of the Obligations in the following order:

                  First, to pay incurred and unpaid fees and expenses of the
         Administrative Agent under the Loan Documents;

                  Second, to the Administrative Agent, for application by it
         towards payment of amounts then due and owing and remaining unpaid in
         respect of the Obligations, pro rata among the Secured Parties
         according to the amounts of the Obligations then due and owing and
         remaining unpaid to the Secured Parties;

                                       22

                  Third, to the Administrative Agent, for application by it
         towards prepayment of the Obligations, pro rata among the Secured
         Parties according to the amounts of the Obligations then held by the
         Secured Parties; and

                  Fourth, any balance of such Proceeds remaining after the
         Obligations shall have been paid in full shall be paid over to the
         Borrower or to whomsoever may be lawfully entitled to receive the same.

                  6.6      Code and Other Remedies. If an Event of Default shall
occur and be continuing, the Administrative Agent, on behalf of the Secured
Parties, may exercise, in addition to all other rights and remedies granted to
them in this Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations, all rights and remedies of a secured
party under the New York UCC or any other applicable law. Without limiting the
generality of the foregoing, the Administrative Agent, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon any
Grantor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give option or options
to purchase, or otherwise dispose of and deliver the Collateral or any part
thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, at any exchange, broker's board or office of
the Administrative Agent or any Secured Party or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Administrative Agent or any Secured Party shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold, free
of any right or equity of redemption in any Grantor, which right or equity is
hereby waived and released. Each Grantor further agrees, at the Administrative
Agent's request, to assemble the Collateral and make it available to the
Administrative Agent at places which the Administrative Agent shall reasonably
select, whether at such Grantor's premises or elsewhere. The Administrative
Agent shall apply the net proceeds of any action taken by it pursuant to this
Section 6.6 with respect to any Grantor's Collateral, after deducting all
reasonable costs and expenses of every kind incurred in connection therewith or
incidental to the care or safekeeping of any of the Collateral of such Grantor
or in any way relating to the Collateral of such Grantor or the rights of the
Administrative Agent and the Secured Parties hereunder with respect thereto,
including, without limitation, reasonable attorneys' fees and disbursements, to
the payment in whole or in part of the Obligations of such Grantor, in the order
specified in Section 6.5, and only after such application and after the payment
by the Administrative Agent of any other amount required by any provision of
law, including, without limitation, Section 9-615(a)(3) of the New York UCC,
need the Administrative Agent account for the surplus, if any, to any Grantor.
To the extent permitted by applicable law, each Grantor waives all claims,
damages and demands it may acquire against the Administrative Agent or any
Secured Party arising out of the exercise by them of any rights hereunder,
(except to the extent that such claims, damages and demands resulted from the
gross negligence or willful misconduct of the Administrative Agent or any
Secured Party). If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed reasonable and
proper if given at least 10 days before such sale or other disposition.

                                       23

                  6.7      Registration Rights. If the Administrative Agent
shall determine to exercise its right to sell any or all of the Pledged Stock
pursuant to Section 6.6, and if in the opinion of the Administrative Agent it is
necessary or advisable to have the Pledged Stock, or that portion thereof to be
sold, registered under the provisions of the Securities Act, with respect to any
Issuer that is a Subsidiary of Holdings, the relevant Grantor will cause the
Issuer thereof to (i) execute and deliver, and cause the directors and officers
of such Issuer to execute and deliver, all such instruments and documents, and
do or cause to be done all such other acts as may be, in the opinion of the
Administrative Agent, necessary or advisable to register the Pledged Stock, or
that portion thereof to be sold, under the provisions of the Securities Act,
(ii) use its best efforts to cause the registration statement relating thereto
to become effective and to remain effective for a period of one year from the
date of the first public offering of the Pledged Stock, or that portion thereof
to be sold, and (iii) make all amendments thereto and/or to the related
prospectus which, in the opinion of the Administrative Agent, are necessary or
advisable, all in conformity with the requirements of the Securities Act and the
rules and regulations of the Securities and Exchange Commission applicable
thereto. Each Grantor agrees to cause such Issuer to comply with the provisions
of the securities or "Blue Sky" laws of any and all jurisdictions which the
Administrative Agent shall designate and to make available to its security
holders, as soon as practicable, an earnings statement (which need not be
audited) which will satisfy the provisions of Section 11(a) of the Securities
Act.

                  (a)      Each Grantor recognizes that the Administrative Agent
may be unable to effect a public sale of any or all the Pledged Stock, by reason
of certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Administrative
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.

                  (b)      Each Grantor agrees to use its best efforts to do or
cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Pledged Stock pursuant to this Section 6.7
valid and binding and in compliance with any and all other applicable
Requirements of Law. Each Grantor further agrees that a breach of any of the
covenants contained in this Section 6.7 will cause irreparable injury to the
Administrative Agent and the Secured Parties, that the Administrative Agent and
the Secured Parties have no adequate remedy at law in respect of such breach
and, as a consequence, that each and every covenant contained in this Section
6.7 shall be specifically enforceable against such Grantor, and such Grantor
hereby waives and agrees not to assert any defenses against an action for
specific performance of such covenants except for a defense that no Event of
Default has occurred under the Term Loan Agreement.

                                       24

                  6.8      Deficiency. Each Grantor shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the Collateral
are insufficient to pay its Obligations and the fees and disbursements of any
attorneys employed by the Administrative Agent or any Secured Party to collect
such deficiency.

                      SECTION 7. THE ADMINISTRATIVE AGENT

                  7.1      Administrative Agent's Appointment as
Attorney-in-Fact, etc. Each Grantor hereby irrevocably constitutes and appoints
the Administrative Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Grantor and in the name of
such Grantor or in its own name, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to carry out
any obligation imposed on such Grantor under this Agreement or to enable the
Administrative Agent or any Lender and any officer or agent thereof, to exercise
any of the rights, remedies, powers and authorities conferred on them under or
by this Agreement, and, without limiting the generality of the foregoing, each
Grantor hereby gives the Administrative Agent the power and right, on behalf of
such Grantor, without notice to or assent by such Grantor, to do any or all of
the following:

                  (i)      in the name of such Grantor or its own name, or
         otherwise, take possession of and indorse and collect any checks,
         drafts, notes, acceptances or other instruments for the payment of
         moneys due under any Receivable or Contract or with respect to any
         other Collateral and file any claim or take any other action or
         proceeding in any court of law or equity or otherwise deemed
         appropriate by the Administrative Agent for the purpose of collecting
         any and all such moneys due under any Receivable or Contract or with
         respect to any other Collateral whenever payable;

                  (ii)     in the case of any Intellectual Property, execute and
         deliver, and have recorded, any and all agreements, instruments,
         documents and papers as the Administrative Agent may request to
         evidence the Administrative Agent's and the Secured Parties' security
         interest in such Intellectual Property and the goodwill and general
         intangibles of such Grantor relating thereto or represented thereby;

                  (iii)    pay or discharge taxes and Liens levied or placed on
         or threatened against the Collateral, effect any repairs or any
         insurance called for by the terms of this Agreement and pay all or any
         part of the premiums therefor and the costs thereof;

                  (iv)     execute, in connection with any sale provided for in
         Section 6.6 or 6.7, any indorsements, assignments or other instruments
         of conveyance or transfer with respect to the Collateral; and

                  (v)      direct any party liable for any payment under any of
         the Collateral to make payment of any and all moneys due or to become
         due thereunder directly to the Administrative Agent or as the
         Administrative Agent shall direct; ask or demand for, collect, and
         receive payment of and receipt for, any and all moneys, claims and
         other amounts due or to become due at any time in respect of or arising
         out of any Collateral; sign and indorse any invoices, freight or
         express bills, bills of lading, storage or

                                       25

         warehouse receipts, drafts against debtors, assignments, verifications,
         notices and other documents in connection with any of the Collateral;
         commence and prosecute any suits, actions or proceedings at law or in
         equity in any court of competent jurisdiction to collect the Collateral
         or any portion thereof and to enforce any other right in respect of any
         Collateral; defend any suit, action or proceeding brought against such
         Grantor with respect to any Collateral; settle, compromise or adjust
         any such suit, action or proceeding and, in connection therewith, give
         such discharges or releases as the Administrative Agent may deem
         appropriate; assign any Copyright, Patent or Trademark (along with the
         goodwill of the business to which any such Copyright, Patent or
         Trademark pertains), throughout the world for such term or terms, on
         such conditions, and in such manner, as the Administrative Agent shall
         in its sole discretion determine; and generally, sell, transfer,
         pledge and make any agreement with respect to or otherwise deal with
         any of the Collateral as fully and completely as though the
         Administrative Agent were the absolute owner thereof for all purposes,
         and do, at the Administrative Agent's option and such Grantor's
         expense, at any time, or from time to time, all acts and things which
         the Administrative Agent deems necessary to protect, preserve or
         realize upon the Collateral and the Administrative Agent's and the
         Secured Parties' security interests therein and to effect the intent
         of this Agreement, all as fully and effectively as such Grantor might
         do; and license or sublicense whether on an exclusive or non-exclusive
         basis, any Intellectual Property for such term and on such conditions
         and in such manner as the Administrative Agent shall in its sole
         judgment determine and, in connection therewith, such Grantor hereby
         grants to the Administrative Agent for the benefit of the Secured
         Parties a royalty-free, world-wide irrevocable license of its
         Intellectual Property.

                  Anything in this Section 7.1(a) to the contrary
notwithstanding, the Administrative Agent agrees that it will not exercise any
rights under the power of attorney provided for in this Section 7.1(a) unless an
Event of Default shall have occurred and be continuing.

                  (b)      If any Grantor fails to perform or comply with any of
its agreements contained herein, the Administrative Agent, at its option, but
without any obligation so to do, may perform or comply, or otherwise cause
performance or compliance, with such agreement.

                  (c)      The expenses of the Administrative Agent incurred in
connection with actions undertaken as provided in this Section 7.1, together
with interest thereon at a rate per annum equal to the rate per annum at which
interest would then be payable on past due Base Rate Loans under the Term Loan
Agreement, from the date of payment by the Administrative Agent to the date
reimbursed by the relevant Grantor, shall be payable by such Grantor to the
Administrative Agent on demand.

                  (d)      Each Grantor hereby ratifies all that said attorneys
shall lawfully do or cause to be done by virtue hereof. All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable until this Agreement is terminated and the security
interests created hereby are released.

                  7.2      Duty of Administrative Agent. The Administrative
Agent's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession,

                                       26

under Section 9-207 of the New York UCC or otherwise, shall be to deal with it
in the same manner as the Administrative Agent deals with similar property for
its own account. Neither the Administrative Agent, any Secured Party nor any of
their respective officers, directors, employees or agents shall be liable for
failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of any Grantor or any other Person or to take
any other action whatsoever with regard to the Collateral or any part thereof.
The powers conferred on the Administrative Agent and the Secured Parties
hereunder are solely to protect the Administrative Agent's and the Secured
Parties' interests in the Collateral and shall not impose any duty upon the
Administrative Agent or any Secured Party to exercise any such powers. The
Administrative Agent and the Secured Parties shall be accountable only for
amounts that they actually receive as a result of the exercise of such powers,
and neither they nor any of their officers, directors, employees or agents shall
be responsible to any Grantor for any act or failure to act hereunder, except
for their own gross negligence or willful misconduct.

                  7.3      Execution of Financing Statements. Pursuant to any
applicable law, each Grantor authorizes the Administrative Agent to file or
record financing statements and other filing or recording documents or
instruments with respect to the Collateral without the signature of such Grantor
in such form and in such offices as the Administrative Agent determines
appropriate to perfect the security interests of the Administrative Agent under
this Agreement. Each Grantor (other than the Bison Entities and each Grantor
that becomes a party hereto after the date hereof) authorizes the Administrative
Agent to use the collateral description "all assets" in any such financing
statements. Each of the Bison Entities and each Grantor that becomes a party
hereto after the date hereof authorizes the Administrative Agent to use the
collateral description "Oil and Gas Properties" in any such financing statements
(as well as a description of any other Collateral provided to the Lenders by
such Grantor pursuant to the terms hereof). Each Grantor hereby ratifies and
authorizes the filing by the Administrative Agent of any financing statement
with respect to the Collateral made prior to the date hereof.

                  7.4      Authority of Administrative Agent. Each Grantor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Agreement with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any option,
voting right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Administrative
Agent and the Secured Parties, be governed by the Term Loan Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Administrative Agent and the Grantors, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Secured Parties with full and valid authority so to act or refrain from
acting, and no Grantor shall be under any obligation, or entitlement, to make
any inquiry respecting such authority. Notwithstanding any other provision
herein or in any Loan Document, the only duty or responsibility of the
Administrative Agent to any Qualified Counterparty under this Agreement is the
duty to remit to such Qualified Counterparty any amounts to which it is entitled
pursuant to Section 6.5.

                            SECTION 8. MISCELLANEOUS

                  8.1      Amendments in Writing. None of the terms or
provisions of this Agreement may be waived, amended, supplemented or otherwise
modified except in accordance

                                       27

with Section 9.1 of the Term Loan Agreement. No consent of any Qualified
Counterparty shall be required for any waiver, amendment, supplement or other
modification to this Agreement.

                  8.2      Notices. All notices, requests and demands to or upon
the Administrative Agent, the Borrower or any Guarantor hereunder shall be
effected in the manner provided for in Section 9.2 of the Term Loan Agreement;
provided that any such notice, request or demand to or upon any Guarantor shall
be addressed to such Guarantor at its notice address set forth on Schedule 1.

                  8.3      No Waiver by Course of Conduct; Cumulative Remedies.
Neither the Administrative Agent nor any Secured Party shall by any act (except
by a written instrument pursuant to Section 8.1), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default. No failure to exercise, nor any
delay in exercising, on the part of the Administrative Agent or any Secured
Party, 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 the Administrative Agent or
any Secured Party of any right or remedy hereunder on any one occasion shall not
be construed as a bar to any right or remedy which the Administrative Agent or
such Secured Party 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.

                  8.4      Enforcement Expenses; Indemnification. The
Borrower and each Guarantor agree to pay, or reimburse each Secured Party and
the Administrative Agent for, all its costs and expenses incurred in collecting
against the Borrower or such Guarantor under the guarantee contained in Section
2 or otherwise enforcing any rights under this Agreement and the other Loan
Documents to which the Borrower or such Guarantor is a party, including, without
limitation, the fees and disbursements of outside counsel to each Secured Party
and of counsel to the Administrative Agent.

                  (a)      The Borrower and each Guarantor agree to pay, and to
save the Administrative Agent and the Secured Parties harmless from, any and all
liabilities with respect to, or resulting from any delay in paying, any and all
stamp, excise, sales or other taxes which may be payable or determined to be
payable with respect to any of the Collateral or in connection with any of the
transactions contemplated by this Agreement.

                  (b)      The Borrower and each Guarantor agree to pay, and to
save the Administrative Agent and the Secured Parties harmless from, any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Agreement to the extent the Borrower would be required to do so pursuant to
Section 9.5 of the Term Loan Agreement.

                  (c)      The agreements in this Section shall survive
repayment of the Obligations and all other amounts payable under the Term Loan
Agreement and the other Loan Documents.

                                       28

                  8.5      Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of the Borrower and each Guarantor and
shall inure to the benefit of the Administrative Agent and the Secured Parties
and their successors and assigns; provided that except pursuant to mergers and
consolidations permitted under the Term Loan Agreement, neither the Borrower nor
any Guarantor may assign, transfer or delegate any of its rights or obligations
under this Agreement without the prior written consent of the Administrative
Agent.

                  8.6      Set-Off. The Borrower and each Guarantor hereby
irrevocably authorize the Administrative Agent and each Secured Party at any
time and from time to time upon the election of the Required Lenders following
the occurrence and during the continuance of an Event of Default, without notice
to the Borrower or such Guarantor or any other Guarantor, any such notice being
expressly waived by the Borrower and each Guarantor, 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 the Administrative Agent or
such Secured Party to or for the credit or the account of the Borrower or such
Guarantor, or any part thereof in such amounts as the Administrative Agent or
such Secured Party may elect, against and on account of the obligations and
liabilities of the Borrower or such Guarantor to the Administrative Agent or
such Secured Party hereunder and claims of every nature and description of the
Administrative Agent or such Secured Party against the Borrower or such
Guarantor, in any currency, whether arising hereunder, under the Term Loan
Agreement, any other Loan Document or otherwise, as the Administrative Agent or
such Secured Party may elect, whether or not the Administrative Agent or any
Secured Party has made any demand for payment and although such obligations,
liabilities and claims may be contingent or unmatured. The Administrative Agent
and each Secured Party shall notify the Borrower or such Guarantor promptly of
any such set-off and the application made by the Administrative Agent or such
Secured Party 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 the Administrative Agent and each Secured Party under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Administrative Agent or such Secured Party may
have.

                  8.7      Counterparts. This Agreement may be executed by one
or more of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.

                  8.8      Severability. Any provision of this Agreement which
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.

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

                  8.10     Integration. This Agreement and the other Loan
Documents represent the agreement of the Borrower, the Guarantors, the
Administrative Agent and the Secured Parties

                                       29

with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Secured Party relative to subject matter hereof and thereof not
expressly set forth or referred to herein or in the other Loan Documents.

                  8.11     GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.

                  8.12     Submission To Jurisdiction; Waivers. The Borrower and
each Guarantor hereby irrevocably and unconditionally:

                  (a)      submits for itself and its property in any legal
action or proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts of the
State of New York, the courts of the United States of America for the Southern
District of New York, and appellate courts from any thereof;

                  (b)      consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;

                  (c)      agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to the
Borrower or such Guarantor at its address referred to in Section 8.2 or at such
other address of which the Administrative Agent shall have been notified
pursuant thereto;

                  (d)      agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction; and

                  (e)      waives, to the maximum extent not prohibited by law,
any right it may have to claim or recover in any legal action or proceeding
referred to in this Section any special, exemplary, punitive or consequential
damages.

                  8.13     Acknowledgements. The Borrower and each Guarantor
hereby acknowledges that:

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

                  (b)      neither the Administrative Agent nor any Secured
Party has any fiduciary relationship with or duty to the Borrower or any
Guarantor arising out of or in connection with this Agreement or any of the
other Loan Documents, and the relationship between the Borrower and the
Guarantors, on the one hand, and the Administrative Agent and Secured Parties,
on the other hand, in connection herewith or therewith is solely that of debtor
and creditor; and

                                       30

                  (c)      no joint venture is created hereby or by the other
Loan Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Secured Parties or among the Borrower, the Guarantors and the
Secured Parties.

                  8.14     Additional Guarantors and/or Grantors. Each
Subsidiary of the Borrower (other than an Excluded Foreign Subsidiary) created
or acquired after the Closing Date (which, for purposes of this paragraph, shall
include any Subsidiary that ceases to be an Excluded Foreign Subsidiary), by
Holdings, the Borrower or any of its Subsidiaries, shall become a Guarantor and
Grantor under this Agreement, by execution and delivery by such Subsidiary of an
Assumption Agreement in the form of Annex I hereto.

                  8.15     Releases. At such time as the Term Loans and the
other Obligations (other than Borrower Hedge Agreement Obligations and Guarantor
Hedge Agreement Obligations and contingent obligations under general
indemnification provisions as to which no claim is pending or reasonably
forseeable) shall have been paid in full, the Collateral shall be released from
the Liens created hereby, and this Agreement and all obligations (other than
those expressly stated to survive such termination) of the Administrative Agent
and each Grantor hereunder shall terminate, all without delivery of any
instrument or performance of any act by any party, and all rights to the
Collateral shall revert to the Grantors. At the request and sole expense of any
Grantor following any such termination, the Administrative Agent shall deliver
to such Grantor any Collateral held by the Administrative Agent hereunder, and
execute and deliver to such Grantor such documents as such Grantor shall
reasonably request to evidence such termination.

                  (a)      If any of the Collateral shall be sold, transferred
or otherwise disposed of by any Grantor in a transaction permitted by the Term
Loan Agreement, then the Administrative Agent, at the request and sole expense
of such Grantor, shall execute and deliver to such Grantor all releases or other
documents reasonably necessary or desirable for the release of the Liens created
hereby on such Collateral. At the request and sole expense of the Borrower, a
Subsidiary Guarantor shall be released from its obligations hereunder in the
event that all the Capital Stock of such Subsidiary Guarantor shall be sold,
transferred or otherwise disposed of in a transaction permitted by the Term Loan
Agreement; provided that the Borrower shall have delivered to the Administrative
Agent, at least ten Business Days (or such shorter period agreed to by the
Administrative Agent) prior to the date of the proposed release, a written
request for release identifying the relevant Subsidiary Guarantor and the terms
of the sale or other disposition in reasonable detail, including the price
thereof and any expenses in connection therewith, together with a certification
by the Borrower stating that such transaction is in compliance with the Term
Loan Agreement and the other Loan Documents.

                  No consent of any Qualified Counterparty shall be required for
any release of Collateral or Guarantors pursuant to this Section.

                  8.16     WAIVER OF JURY TRIAL. THE BORROWER AND EACH GUARANTOR
AND, BY ACCEPTANCE OF THE BENEFITS HEREOF, EACH AGENT AND EACH SECURED PARTY,
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.

                                       31

                            [SIGNATURE PAGES FOLLOW]

                                       32

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

                                     WILLIAMS PRODUCTION HOLDINGS LLC

                                     By: /s/ James G. Ivey
                                         -----------------
                                     Name: James G. Ivey
                                     Title: Treasurer

                                     WILLIAMS PRODUCTION RMT COMPANY

                                     By: /s/ James G. Ivey
                                         -----------------
                                     Name: James G. Ivey
                                     Title: Treasurer

                                     BARRETT RESOURCES INTERNATIONAL
                                     CORPORATION

                                     By: /s/ James G. Ivey
                                         -----------------
                                     Name: James G. Ivey
                                     Title: Treasurer

                                     BARGATH INC.

                                     By: /s/ James G. Ivey
                                         -----------------
                                     Name: James G. Ivey
                                     Title: Treasurer

                                     BARRETT FUELS CORPORATION

                                     By: /s/ James G. Ivey
                                         -----------------
                                     Name: James G. Ivey
                                     Title: Treasurer

                                     RULISON GAS COMPANY, LLC

                                     By: /s/ James G. Ivey
                                         -----------------
                                     Name: James G. Ivey
                                     Title: Treasurer

                                     BISON ROYALTY LLC

                                     By: /s/ James G. Ivey
                                         -----------------
                                     Name: James G. Ivey
                                     Title: Treasurer

                                     PICEANCE PRODUCTION HOLDINGS, LLC

                                     By: /s/ James G. Ivey
                                         -----------------
                                     Name: James G. Ivey
                                     Title: Treasurer

                                     RULISON PRODUCTION COMPANY LLC

                                     By: /s/ James G. Ivey
                                         -----------------
                                     Name: James G. Ivey
                                     Title: Treasurer

                                                                      Annex I to
                                              Guarantee and Collateral Agreement

                  ASSUMPTION AGREEMENT, dated as of ________________, 200__,
made by ______________________________, a ______________ corporation (the
"Additional Guarantor"), in favor of LEHMAN COMMERCIAL PAPER INC. ("LCPI"), as
administrative agent (in such capacity, the "Administrative Agent") for the
financial institutions (the "Lenders") party to the Term Loan Agreement referred
to below. All capitalized terms not defined herein shall have the meaning
ascribed to them in such Term Loan Agreement.

                              W I T N E S S E T H :

                  WHEREAS, Williams Production Holdings LLC ("Holdings"),
Williams Production RMT Company (the "Borrower"), the Lenders, Lehman Brothers
Inc. and Banc of America Securities LLC, as joint advisors, joint lead arrangers
and joint book runners, Citicorp USA, Inc. and JPMorgan Chase Bank, as
co-syndication agents, Bank of America, N.A., as documentation agent, and the
Administrative Agent, have entered into a Term Loan Agreement, dated as of May
30, 2003 (as amended, supplemented or otherwise modified from time to time, the
"Term Loan Agreement");

                  WHEREAS, in connection with the Term Loan Agreement, Holdings,
the Borrower and certain of its Subsidiaries (other than the Additional
Guarantor) have entered into a Guarantee and Collateral Agreement, dated as of
May 30, 2003 (as amended, supplemented or otherwise modified from time to time,
the "Guarantee and Collateral Agreement") in favor of the Administrative Agent
for the benefit of the Secured Parties;

                  WHEREAS, the Term Loan Agreement requires the Additional
Guarantor to become a party to the Guarantee and Collateral Agreement; and

                  WHEREAS, the Additional Guarantor has agreed to execute and
deliver this Assumption Agreement in order to become a party to the Guarantee
and Collateral Agreement;

                  NOW, THEREFORE, IT IS AGREED:

                  1.       Guarantee and Collateral Agreement. By executing and
delivering this Assumption Agreement, the Additional Guarantor, as provided in
Section 8.14 of the Guarantee and Collateral Agreement, hereby becomes a party
to the Guarantee and Collateral Agreement as a Guarantor and a Grantor
thereunder with the same force and effect as if originally named therein as a
Guarantor and a Grantor and, without limiting the generality of the foregoing,
hereby expressly assumes all obligations and liabilities of a Guarantor and a
Grantor thereunder. The information set forth in Annex 1-A hereto is hereby
added to the information set forth in Schedules _______* to the Guarantee and
Collateral Agreement. The Additional Guarantor hereby represents and warrants
that each of the representations and warranties contained in

- --------------------
* Refer to each Schedule which needs to be supplemented.

Section 4 of the Guarantee and Collateral Agreement is true and correct on and
as the date hereof (after giving effect to this Assumption Agreement) as if made
on and as of such date.

                  2.       GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.

                  IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.

                                                [ADDITIONAL GUARANTOR/GRANTOR]

                                                By: ____________________________
                                                     Name:
                                                     Title:

                                      I-2

                                                                        Annex II
                                                                              to
                                              Guarantee and Collateral Agreement

                           ACKNOWLEDGEMENT AND CONSENT

         The undersigned hereby acknowledges receipt of a copy of the Guarantee
and Collateral Agreement, dated as of May 30, 2003 (the "Agreement"), made by
the Borrower and the Guarantors parties thereto for the benefit of LEHMAN
COMMERCIAL PAPER INC., as Administrative Agent (in such capacity, the
"Administrative Agent"). The undersigned agrees for the benefit of the
Administrative Agent and the Lenders as follows:

         1.       The undersigned will be bound by the terms of the Agreement
and will comply with such terms insofar as such terms are applicable to the
undersigned.

         2.       The undersigned will notify the Administrative Agent promptly
in writing of the occurrence of any of the events described in Section 5.7(a) of
the Agreement.

         3.       The terms of Sections 5.7, 6.3(c) and 6.7 of the Agreement
shall apply to it, mutatis mutandis, with respect to all actions that may be
required of it, or prohibited, pursuant to Section 5.7, 6.3(c) or 6.7 of the
Agreement.

                                            [NAME OF ISSUER]

                                            By: ________________________________
                                                 Name:
                                                 Title:

                                            Address for Notices:
                                            ____________________________________

                                            ____________________________________

                                            ____________________________________

                                            Fax: _______________________________

                                                                    EXHIBIT 10.3

                                                                  EXECUTION COPY

                                U.S. $800,000,000

                                CREDIT AGREEMENT

                            Dated as of June 6, 2003

                                      among

                          THE WILLIAMS COMPANIES, INC.
                         NORTHWEST PIPELINE CORPORATION
                   TRANSCONTINENTAL GAS PIPE LINE CORPORATION
                                  as Borrowers

                                 CITIBANK, N.A.

                  as Administrative Agent and Collateral Agent

                              BANK OF AMERICA, N.A.

                              as Syndication Agent

                               JPMORGAN CHASE BANK

                             as Documentation Agent

                                 CITIBANK, N.A.
                              BANK OF AMERICA, N.A.

                                as Issuing Banks

                             THE BANKS NAMED HEREIN

                                    as Banks

                                       and

                          CITIGROUP GLOBAL MARKETS INC.
                         BANC OF AMERICA SECURITIES LLC

                  as Joint Lead Arrangers & Joint Book Runners

                                TABLE OF CONTENTS

                                                                                                          Page
                                                                                                          ----
                                                                                                       
                                                ARTICLE I
                                    DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.1. Certain Defined Terms.....................................................................     2

SECTION 1.2. Computation of Time Periods...............................................................    12

SECTION 1.3. Accounting Terms..........................................................................    12

SECTION 1.4. Miscellaneous.............................................................................    12

                                               ARTICLE II

                AMOUNTS AND TERMS OF THE REVOLVING CREDIT ADVANCES AND LETTERS OF CREDIT

SECTION 2.1. Revolving Credit Advances and Letters of Credit...........................................    13

SECTION 2.2. Issuance of and Drawings and Reimbursement Under Letters of Credit........................    13

SECTION 2.3. Making the Revolving Credit Advances......................................................    17

SECTION 2.4. Voluntary Reduction of the Commitments....................................................    18

SECTION 2.5. Prepayments...............................................................................    19

SECTION 2.6. Increased Costs...........................................................................    19

SECTION 2.7. Payments and Computations.................................................................    20

SECTION 2.8. Taxes.....................................................................................    21

SECTION 2.9. Sharing of Payments, Etc..................................................................    24

SECTION 2.10. Evidence of Debt.........................................................................    24

SECTION 2.11. Fees.....................................................................................    25

SECTION 2.12. Repayment of Revolving Credit Advances...................................................    26

SECTION 2.13. Interest.................................................................................    26

SECTION 2.14. Interest Rate Determination..............................................................    27

SECTION 2.15. Optional Conversion of Revolving Credit Advances.........................................    27

                                                                                                        
SECTION 2.16. Illegality...............................................................................    28

SECTION 2.17. Additional Interest on Eurodollar Rate Advances..........................................    28

SECTION 2.18. Existing Letters of Credit...............................................................    28

                                               ARTICLE III
                                               CONDITIONS

SECTION 3.1. Conditions Precedent to Effectiveness of Agreement........................................    29

SECTION 3.2. Conditions Precedent to a Revolving Credit Advance and an Issuance of a Letter of Credit..    30

                                               ARTICLE IV
                                     REPRESENTATIONS AND WARRANTIES

SECTION 4.1. Representations and Warranties of the Borrowers...........................................    32

                                                ARTICLE V
                                       COVENANTS OF THE BORROWERS

SECTION 5.1. Affirmative Covenants.....................................................................    34

SECTION 5.2. Negative Covenants........................................................................    36

                                               ARTICLE VI
                                            EVENTS OF DEFAULT

SECTION 6.1. Events of Default.........................................................................    37

                                               ARTICLE VII
                           THE AGENT; THE COLLATERAL AGENT; AND ISSUING BANKS

SECTION 7.1. Agent's and Collateral Agent's Authorization and Action...................................    39

SECTION 7.2. Agent's and Collateral Agent's Reliance, Etc..............................................    39

SECTION 7.3. Issuing Banks' Reliance, Etc..............................................................    40

SECTION 7.4. Rights....................................................................................    40

SECTION 7.5. Indemnification...........................................................................    41

SECTION 7.6. Successor Agent and Collateral Agent......................................................    42

SECTION 7.7. Bank Credit Decision......................................................................    42

SECTION 7.8. Certain Rights of the Collateral Agent....................................................    43

                                     - ii -

                                                                                                        
SECTION 7.9. Other Agents..............................................................................    43

                                              ARTICLE VIII
                                              MISCELLANEOUS

SECTION 8.1. Amendments, Etc...........................................................................    43

SECTION 8.2. Notices, Etc..............................................................................    44

SECTION 8.3. No Waiver; Remedies.......................................................................    45

SECTION 8.4. Costs and Expenses........................................................................    46

SECTION 8.5. Binding Effect; Transfers.................................................................    47

SECTION 8.6. Governing Law.............................................................................    50

SECTION 8.7. Interest..................................................................................    51

SECTION 8.8. Execution in Counterparts.................................................................    51

SECTION 8.9. Survival of Agreements, Representations and Warranties, Etc...............................    51

SECTION 8.10. Confidentiality..........................................................................    51

SECTION 8.11. Waiver of Jury Trial.....................................................................    53

SECTION 8.12. Severability.............................................................................    53

SECTION 8.13. Forum Selection and Consent to Jurisdiction..............................................    53

SECTION 8.14. Nature of Obligations....................................................................    53

                                    - iii -

                             Schedules and Exhibits

                   
Schedule I      -     Bank Information
Schedule II     -     Notice Information for the Borrowers
Schedule III    -     Commitments

Exhibit A       -     Opinion of James J. Bender, Esq., General Counsel of TWC
Exhibit B       -     Opinion of White & Case LLP, New York Counsel
Exhibit C       -     Form of Transfer Agreement
Exhibit D-1     -     Notice of Letter of Credit
Exhibit D-2     -     Notice of Revolving Credit Borrowing
Exhibit E       -     Form of Security Agreement
Exhibit F       -     Form of Note

                                     - iv -

                                CREDIT AGREEMENT

                  This Credit Agreement dated as of June 6, 2003 (as may be
further amended, modified, supplemented, renewed, extended or restated from time
to time, this "Agreement"), is by and among THE WILLIAMS COMPANIES, INC., a
Delaware corporation ("TWC"), NORTHWEST PIPELINE CORPORATION, a Delaware
corporation ("NWP"), TRANSCONTINENTAL GAS PIPE LINE CORPORATION, a Delaware
corporation ("TGPL", and together with TWC and NWP, the "Borrowers" and each, a
"Borrower"), the banks, financial institutions and other institutional lenders
listed on the signature pages hereof as banks (the "Banks"), CITIBANK, N.A.
("Citibank") and BANK OF AMERICA, N.A. ("BofA") (the "Issuing Banks" and each,
an "Issuing Bank"), CITIBANK, as agent (together with any successor agent
appointment pursuant to Article VII, the "Agent") and collateral agent (together
with any successor agent appointment pursuant to Article VII, the "Collateral
Agent"), BofA, as syndication agent, JPMORGAN CHASE BANK ("JPMorgan") as
documentation agent (the "Documentation Agent"), and CITIGROUP GLOBAL MARKETS
INC. ("CGMI") and BANC OF AMERICA SECURITIES LLC ("BAS", together with CGMI, the
"Co-Lead Arrangers"), as joint lead arrangers and joint book runners. In
consideration of the mutual covenants and agreements contained herein, the
Borrowers, the Banks, the Issuing Banks, the Agent, and the Co-Lead Arrangers
hereby agree as set forth herein.

                             PRELIMINARY STATEMENTS

                  WHEREAS, each of the Borrowers is a borrower under that
certain First Amended and Restated Credit Agreement dated as of October 31, 2002
(as amended, restated, supplemented or otherwise modified, the "Multiyear
Agreement") with the banks party thereto, JPMorgan and Commerzbank AG, as
co-syndication agents, Credit Lyonnais New York Branch, as documentation agent,
Citicorp USA, Inc. ("CUSA"), as agent, and CGMI (formerly known as Salmon Smith
Barney Inc. ("SSBI")), as arranger;

                  WHEREAS, TWC is the borrower under that certain Amended and
Restated Credit Agreement dated as of October 31, 2002 (as amended, restated,
supplemented or otherwise modified, the "LC Agreement"; and together with the
Multiyear Agreement, the "Existing Credit Documentation") with the banks party
thereto, CUSA, as agent and collateral agent, BofA, as syndication agent, and
CGMI (formally known as SSBI), as arranger;

                  WHEREAS, the Borrowers have requested that the Banks lend to
the Borrowers and the Issuing Banks issue Letters of Credit for the account of
the Borrowers to (a) refinance in full outstanding indebtedness under the
Existing Credit Documentation (it being understood that such letters of credit
shall be fully cash-collateralized) and (b) provide for the working capital
needs and general corporate purposes of the Borrowers, including, without
limitation, acquisition of the Borrowers' equity securities and debt; and

                  WHEREAS, the Issuing Banks and Banks are willing to lend such
amounts and to issue such Letters of Credit on the terms and subject to the
conditions hereinafter set forth (including Article III);

                  NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained herein, the parties hereto hereby
agree as follows:

                                   ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

                  SECTION 1.1.Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):

                  "Agent" means Citibank, in its capacity as administrative
         agent pursuant to Article VII hereof and any successor Agent pursuant
         to Section 7.6.

                  "Agreement" has the meaning specified in the first paragraph
         of this Agreement.

                  "Applicable Margin" means, for any Eurodollar Rate Advance,
         0.75% per annum.

                  "Authorized Financial Officer" means the Chief Financial
         Officer, Chief Accounting Officer, and the Treasurer of any Person.

                  "Authorized Officer" means the President, Chief Executive
         Officer, Chief Financial Officer, the General Counsel, any Vice
         President, the Secretary, the Assistant Secretary, the Treasurer,
         Assistant Treasurer, or the Controller of a Person or any other officer
         designated as an "Authorized Officer" by the Board of Directors (or
         equivalent governing body) of such Person.

                  "Available Amount" of any Letter of Credit means, at any time,
         the maximum amount available to be drawn under such Letter of Credit at
         such time as set forth in Section 2.1(b) (assuming compliance at such
         time with all conditions to drawing).

                  "Banks" means the lenders listed on the signature pages hereof
         and each other Person that becomes a Bank pursuant to Section 8.5(a).

                  "Base Rate" means a fluctuating interest rate per annum in
         effect from time to time, which rate per annum shall at all times be
         equal to the higher of:

                  (a)      the rate of interest announced publicly by Citibank
         in New York, New York, from time to time, as Citibank's base rate; and

                  (b)      1/2 of 1% per annum above the Federal Funds Rate.

                  "Base Rate Advance" means a Revolving Credit Advance that
         bears interest as provided in Section 2.13(a)(i).

                  "BofA" has the meaning specified in the recitals hereto.

                  "Borrowers" has the meaning specified in the recitals hereto.

                                       2

                  "Business Day" means a day of the year on which banks are not
         required or authorized to close in New York City.

                  "Business Entity" means a partnership, limited partnership,
         limited liability partnership, corporation (including a business
         trust), limited liability company, unlimited liability company, joint
         stock company, trust, unincorporated association, joint venture or
         other entity.

                  "CGMI" has the meaning specified in the recitals hereto.

                  "Change of Control Event" means the occurrence of any of the
         following: (i) any Person (other than a trustee or other fiduciary
         holding securities under an employee benefit plan of TWC or of any
         Subsidiary of TWC) or two or more Persons acting in concert (other than
         any group of employees of TWC or of any of its Subsidiaries) shall have
         acquired beneficial ownership (within the meaning of Rule l3d-3 of the
         Securities and Exchange Commission under the Securities Exchange Act of
         1934), directly or indirectly, of securities of TWC (or other
         securities convertible into such securities) representing 50% or more
         of the combined voting power of all securities of TWC entitled to vote
         in the election of directors, other than securities having such power
         only by reason of the happening of a contingency, or (ii) during any
         period of up to 24 consecutive months, commencing on or after the date
         of this Agreement, individuals who at the beginning of such period were
         directors of TWC or who were elected or nominated by individuals who at
         the beginning of such period were such directors or by individuals
         elected in accordance with this clause (ii) shall cease for any reason
         (other than as a result of death, incapacity or normal retirement) to
         constitute a majority of the board of directors of TWC.

                  "Citibank" has the meaning specified in the recitals hereto.

                  "Code" means, as appropriate, the Internal Revenue Code of
         1986, as amended, or any successor federal tax code, and any reference
         to any statutory provision shall be deemed to be a reference to any
         successor provision or provisions.

                  "Co-Lead Arrangers" has the meaning specified in the recitals
         hereto.

                  "Collateral" has the meaning specified in the Security
         Agreement.

                  "Collateral Account" has the meaning specified in the Security
         Agreement.

                  "Collateral Agent" means Citibank in its capacity as
         Collateral Agent pursuant to Article VII and any successor in such
         capacity pursuant to Section 7.6.

                  "Collateral Coverage Requirement" means any time that the
         aggregate mark-to-market value of all Collateral is equal to or greater
         than 105% of the Total Credit Exposure.

                  "Commitment" means a Revolving Credit Commitment or a Letter
         of Credit Commitment.

                                       3

                  "Commitment Fee" has the meaning specified in Section 2.11(c).

                  "Consolidated" refers to the consolidation of the accounts of
         any Person and its consolidated subsidiaries in accordance with
         generally accepted accounting principles.

                  "Consolidated Subsidiaries" of any Person means all other
         Persons the financial statements of which are consolidated with those
         of such Person in accordance with generally accepted accounting
         principles.

                  "Convert", "Conversion" and "Converted" each refers to a
         conversion of Revolving Credit Advances of one Type into Revolving
         Credit Advances of the other Type pursuant to Sections 2.15, 2.16 and
         2.17.

                  "Credit Documents" means this Agreement, the Security
         Agreement, the Letter of Credit Documents, each Letter of Credit, each
         Note, each Notice of Letter of Credit, each Notice of Revolving Credit
         Borrowing, and each certificate pursuant to Sections 3.2(ii),
         5.1(b)(ii), and 5.1(b)(iii) at any time executed and/or delivered to
         the Agent, the Collateral Agent, any Issuing Bank, or any Bank in
         connection therewith.

                  "Cross-Acceleration Event" means the occurrence or existence
         of any event or condition under any agreement or instrument relating to
         any Debt which is outstanding in a principal amount of at least
         $250,000,000 in the aggregate (excluding Debt incurred pursuant to any
         Letter of Credit or Revolving Credit Advance) of any Borrower the
         result of which is the acceleration of the final stated maturity of
         such Debt or any such Debt shall not be paid at its final stated
         maturity (giving effect to any applicable grace periods and any
         extensions thereof).

                  "CUSA" has the meaning specified in the recitals hereto.

                  "Debt" means, in the case of any Person, the principal or
         equivalent amount (without duplication) of (i) indebtedness of such
         Person for borrowed money, (ii) obligations of such Person evidenced by
         bonds, debentures or notes, (iii) obligations of such Person to pay the
         deferred purchase price of property or services (other than trade
         payables), (iv) obligations of such Person as lessee under leases that
         are, in accordance with generally accepted accounting principles,
         recorded as capital leases, and (v) obligations of such Person under
         guaranties in respect of, and obligations (contingent or otherwise) to
         purchase or otherwise acquire, or otherwise to assure a creditor
         against loss in respect of indebtedness or obligations of others of the
         kinds referred to in clauses (i) through (iv) of this definition.

                  "Default" means any event or condition that, upon the giving
         of notice or passage of time or both, if required by Section 6.1, would
         constitute an Event of Default.

                  "Designating Bank" has the meaning specified in Section
         8.5(g).

                  "Documentation Agent" has the meaning specified in the
         recitals hereto.

                  "Dollars" and "$" means lawful money of the United States of
         America.

                                       4

                  "Domestic Lending Office" means, with respect to any Bank, the
         office of such Bank specified as its "Domestic Lending Office" opposite
         its name on Schedule I hereto or in the Transfer Agreement pursuant to
         which it became a Bank, or such other office of such Bank as such Bank
         may from time to time specify to the Borrowers and the Agent.

                  "EDGAR" means "Electronic Data Gathering, Analysis and
         Retrieval" system (or any successor system thereof), a database
         maintained by the Securities and Exchange Commission containing
         electronic filings of issuers of certain securities.

                  "Effective Date" has the meaning specified in Section 3.1.

                  "Eligible Assignee" means (i) any Bank, (ii) any affiliate of
         any Bank, and (iii) any other Person not covered by clause (i) or (ii)
         of this definition that is consented to by the Borrowers, the Agent and
         the Issuing Banks (which consents shall not be unreasonably withheld);
         provided that if any Event of Default has occurred and is continuing,
         no consent of the Borrowers shall be required; provided further that
         neither the Borrowers nor any affiliate of the Borrowers shall be an
         Eligible Assignee.

                  "Equity Interests" means any capital stock, partnership, joint
         venture, member or limited liability or unlimited liability company
         interest, beneficial interest in a trust or similar entity or other
         equity interest or investment of whatever nature.

                  "ERISA" means the Employee Retirement Income Security Act of
         1974, as amended from time to time, and the regulations promulgated and
         rulings issued thereunder from time to time.

                  "ERISA Affiliate" means any trade or business (whether or not
         incorporated) which is a member of a group of which the Borrowers are
         members and which is under common control within the meaning of Section
         414 of the Code and the regulations promulgated thereunder.

                  "Eurocurrency Liabilities" has the meaning assigned to that
         term in Regulation D of the Federal Reserve Board, as in effect from
         time to time.

                  "Eurodollar Lending Office" means, with respect to any Bank,
         the office of such Bank specified as its "Eurodollar Lending Office"
         opposite its name on Schedule I hereto or in the Transfer Agreement
         pursuant to which it became a Bank (or, if no such office is specified,
         its Domestic Lending Office), or such other office of such Bank as such
         Bank may from time to time specify to the Borrowers and the Agent.

                  "Eurodollar Rate" means, for any Eurodollar Rate Advance
         comprising part of the same Revolving Credit Borrowing for any Interest
         Period therefor, the rate per annum (rounded upwards, if necessary, to
         the nearest 1/100 of 1%) appearing on Dow Jones Markets Page 3750 (or
         any successor page) as the London interbank offered rate for deposits
         in Dollars at approximately 11:00 a.m. (London time) two Business Days
         prior to the first day of such Interest Period for a term comparable to
         such Interest Period. If for any reason such rate is not available, the
         term "Eurodollar Rate" shall mean, for any Eurodollar Rate Advance
         comprising part of the same Revolving Credit Borrowing for

                                       5

         any Interest Period therefor, the rate per annum (rounded upwards, if
         necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO
         Page as the London interbank offered rate for deposits in Dollars at
         approximately 11:00 a.m. (London time) two Business Days prior to the
         first day of such Interest Period for a term comparable to such
         Interest Period; provided, however, if more than one rate is specified
         on Reuters Screen LIBO Page, the applicable rate shall be the
         arithmetic mean of all such rates (rounded upwards, if necessary, to
         the nearest 1/100 of 1%).

                  "Eurodollar Rate Advance" means a Revolving Credit Advance
         that bears interest as provided in Section 2.13(a)(ii).

                  "Eurodollar Rate Reserve Percentage" of any Bank for any
         Interest Period for any Eurodollar Rate Advance means the reserve
         percentage applicable during such Interest Period (or if more than one
         such percentage shall be so applicable, the daily average of such
         percentages for those days in such Interest Period during which any
         such percentage shall be so applicable) under regulations issued from
         time to time by the Board of Governors of the Federal Reserve System
         (or any successor) for determining the maximum reserve requirement
         (including, without limitation, any emergency, supplemental or other
         marginal reserve requirement) for such Bank with respect to liabilities
         or assets consisting of or including Eurocurrency Liabilities having a
         term equal to such Interest Period.

                  "Events of Default" has the meaning specified in Section 6.1.

                  "Existing Credit Documentation" has the meaning specified in
         the preliminary statements hereto.

                  "Federal Funds Rate" means, for any day, a fluctuating
         interest rate per annum equal for such day to the weighted average of
         the rates on overnight federal funds transactions with members of the
         Federal Reserve System arranged by federal funds brokers, as published
         for such day (or, if such day is not a Business Day, for the next
         preceding Business Day) by the Federal Reserve Bank of New York, or, if
         such rate is not so published for any day which is a Business Day, the
         average of the quotations for such day on such transactions received by
         the Agent from three federal funds brokers of recognized standing
         selected by it.

                  "Federal Reserve Board" means the Board of Governors of the
         Federal Reserve System, or any federal agency or authority of the
         United States from time to time succeeding to its function.

                  "Financial Letter of Credit" means any Letter of Credit
         supporting only indebtedness for borrowed money.

                  "Fiscal Quarter" means any quarter of a Fiscal Year.

                  "Fiscal Year" means any period of twelve consecutive calendar
         months ending on December 31; references to a Fiscal Year with a number
         corresponding to any calendar

                                       6

         year (e.g., the "2002 Fiscal Year") refer to the Fiscal Year ending on
         December 31 of such calendar year.

                  "Fronting Fee" shall have the meaning specified in Section
         2.11(b)(i).

                  "Governmental Authority" means the government of the United
         States, any other nation or any political subdivision thereof, whether
         state or local, and any agency, authority, instrumentality, regulatory
         body, court, central bank or other Person exercising executive,
         legislative, judicial, taxing, regulatory or administrative powers or
         functions of or pertaining to government.

                  "Governmental Requirements" means all judgments, orders,
         writs, injunctions, decrees, awards, laws, ordinances, statutes,
         regulations, rules, franchises, permits, certificates, licenses,
         authorizations and the like and any other requirements of any
         government or any commission, board, court, agency, instrumentality or
         political subdivision thereof.

                  "Indemnified Parties" has the meaning assigned to such term in
         Section 8.4(b).

                  "Interest Period" means, for each Eurodollar Rate Advance
         comprising part of the same Revolving Credit Borrowing, the period
         commencing on the date of such Eurodollar Rate Advance or the date of
         the Conversion of any Base Rate Advance into such Eurodollar Rate
         Advance and ending on the last day of the period selected by a Borrower
         pursuant to the provisions below and, thereafter, with respect to
         Eurodollar Rate Advances, each subsequent period commencing on the last
         day of the immediately preceding Interest Period and ending on the last
         day of the period selected by a Borrower pursuant to the provisions
         below. The duration of each such Interest Period shall be one, two,
         three or six months, as a Borrower may, upon notice received by the
         Agent not later than 11:00 A.M. (New York City time) on the third
         Business Day prior to the first day of such Interest Period, select;
         provided, however, that:

                           (i)      a Borrower may not select any Interest
                  Period that ends after the Termination Date;

                           (ii)     Interest Periods commencing on the same date
                  for Eurodollar Rate Advances comprising part of the same
                  Revolving Credit Borrowing shall be of the same duration;

                           (iii)    whenever the last day of any Interest Period
                  would otherwise occur on a day other than a Business Day, the
                  last day of such Interest Period shall be extended to occur on
                  the next succeeding Business Day; provided, however, that, if
                  such extension would cause the last day of such Interest
                  Period to occur in the next following calendar month, the last
                  day of such Interest Period shall occur on the next preceding
                  Business Day; and

                           (iv)     whenever the first day of any Interest
                  Period occurs on a day of an initial calendar month for which
                  there is no numerically corresponding day in the calendar
                  month that succeeds such initial calendar month by the number
                  of

                                       7

                  months equal to the number of months in such Interest Period,
                  such Interest Period shall end on the last Business Day of
                  such succeeding calendar month.

                  "Issuing Banks" has the meaning specified in the recitals
         hereto.

                  "JPMorgan" has the meaning specified in the recitals hereto.

                  "Judgment Event" means any judgment or order rendered against
         any Borrower for the payment of money in excess of $250,000,000 (and
         not adequately covered by insurance as to which a solvent and
         unaffiliated insurance company has provided coverage and has
         acknowledged liability) shall remain undischarged, unvacated, unbonded
         or unstayed for a period of 60 days.

                  "LC Agreement" has the meaning specified in the recitals
         hereto.

                  "LC Participation Percentage" of any Bank means, at any time,
         the percentage set opposite such Bank's name on Schedule III or as
         reflected for such Bank in the relevant Transfer Agreement to which it
         is a party, as such amount may be terminated, reduced or increased
         pursuant to Section 8.5(a).

                  "Lending Office" means, with respect to any Bank, the office
         of such Bank specified as its "Lending Office" opposite its name on
         Schedule I hereto or in the relevant Transfer Agreement delivered
         pursuant to Section 8.5(a), or such other office of such Bank as such
         Bank may from time to time specify to the Borrowers and the Agent.

                  "Letter of Credit Commitment" of any Issuing Bank means, at
         any time, the amount set opposite such Bank's name on Schedule III
         under the heading "Letter of Credit Commitments" or as reflected for
         such Bank in the relevant Transfer Agreement to which it is a party, as
         such amount may be terminated, reduced or increased pursuant to Section
         2.4, Section 6.1 or Section 8.5(a).

                  "Letter of Credit Documents" means, with respect to any Letter
         of Credit, collectively, any application therefor and any other
         agreements, instruments, guarantees or other documents (whether general
         in application or applicable only to such Letter of Credit) governing
         or providing for (i) the rights and obligations of the parties
         concerned or at risk with respect to such Letter of Credit or (ii) any
         collateral security for any of such obligations, each as the same may
         be modified and supplemented and in effect from time to time.

                  "Letter of Credit Fee" shall have the meaning specified in
         Section 2.11(b)(ii).

                  "Letter of Credit Interest" means, for each Bank, (i) such
         Bank's participation interest in Letters of Credit (and, in the case of
         an Issuing Bank, such Issuing Bank's retained interest in Letters of
         Credit issued by it), and (ii) such Bank's rights and interests in
         Reimbursement Obligations and fees, interest and other amounts payable
         in connection with Letters of Credit and Reimbursement Obligations.

                                       8

                  "Letter of Credit Liability" means at any time and in respect
         of any Letter of Credit, the sum (without duplication) of (a) the
         Available Amount of such Letter of Credit at such time (after giving
         effect to any step up provision or other mechanism for increase, if
         any, and assuming that all conditions to drawing have been satisfied)
         plus (b) the aggregate unpaid amount of all drawings under such Letter
         of Credit that are unpaid at such time. For purposes of this Agreement,
         a Bank shall be deemed to hold a Letter of Credit Liability in an
         amount equal to its LC Participation Percentage in the related Letter
         of Credit.

                  "Letters of Credit" has the meaning assigned to such term in
         Section 2.1(b).

                  "Majority Banks" means, at any time, Banks owed or holding
         more than 50% of the sum of (i) the aggregate unpaid principal amount
         of Revolving Credit Advances outstanding at such time, or if no such
         principal amount is then outstanding, the aggregate Revolving Credit
         Commitments and (ii) the aggregate Available Amount of all Letters of
         Credit outstanding at such time, or if no such Available Amount of
         Letters of Credit are then outstanding, then (x) the LC Participation
         Percentages, or (y) if the Letter of Credit Commitments have terminated
         and any Letter of Credit or any Letter of Credit Interest is
         outstanding, then the aggregate unpaid principal amount of the
         outstanding Letter of Credit Interests; provided that for purposes of
         this definition no Borrower shall be considered a "Bank".

                  "Mandatory Prepayment Event" means any of the following:
         Change of Control Event; Cross-Acceleration Event; or Judgment Event.

                  "Multiemployer Plan" means any multiemployer plan, as defined
         in Section 4001 (a)(3) of ERISA, which is maintained by (or to which
         there is an obligation to contribute of) the Borrowers or an ERISA
         Affiliate of the Borrowers.

                  "Note" means a promissory note of a Borrower payable to the
         order of any Bank, in substantially the form of Exhibit F hereto (as
         such note may be amended, endorsed or otherwise modified from time to
         time), delivered at the request of such Bank pursuant to Section 2.10
         or 8.6, together with any other note accepted from time to time in
         substitution or replacement therefore.

                  "Notice of Letter of Credit" has the meaning specified in
         Section 2.2(a).

                  "Notice of Revolving Credit Borrowing" has the meaning
         specified in Section 2.3(a).

                  "NWP" has the meaning specified in the recitals hereto.

                  "Obligations" means all Reimbursement Obligations and all
         other Debt, advances, debts, liabilities, obligations, indemnities,
         covenants and duties owing by any Borrower to any Bank, the Agent, the
         Collateral Agent, any Issuing Bank, or any other Person required to be
         indemnified under any Credit Document, of any kind or nature, present
         or future, whether or not evidenced by any Note, guaranty or other
         instrument, arising under or in connection with this Agreement or any
         other Credit Document or any of the

                                       9

         transactions evidenced by this Agreement or any other Credit Document,
         whether or not for the payment of money, whether arising by reason of
         an extension of credit, loan, guaranty, indemnification or in any other
         manner, whether direct or indirect (including those acquired by
         assignment), absolute or contingent, due or to become due, now existing
         or hereafter arising and however acquired. The term "Obligations"
         includes all interest, charges, expenses, fees, attorneys' fees and
         disbursements and any other sum chargeable to any Borrower under this
         Agreement or any other Credit Document.

                  "PBGC" means the Pension Benefit Guaranty Corporation.

                  "Person" means an individual, partnership, corporation,
         limited liability company, business trust, joint stock company, trust,
         unincorporated association, joint venture or other Business Entity, or
         a government or any political subdivision or agency thereof.

                  "Plan" means an employee pension benefit plan (other than a
         Multiemployer Plan) as defined in Section 3(2) of ERISA currently
         maintained by, or in the event such plan has terminated, to which
         contributions have been made or an obligation to make such
         contributions has accrued during any of the five plan years preceding
         the date of the termination of such plan by, the Borrowers or any ERISA
         Affiliate of the Borrowers for employees of the Borrowers or any such
         ERISA Affiliate and covered by Title IV of ERISA or subject to the
         minimum funding standards under Section 412 of the Code.

                  "Public Filings" means the Borrowers' (i) annual report on
         Form 10-K/A for the year ended December 31, 2002, (ii) quarterly report
         on Form 10-Q for the quarter ended March 31, 2003, and (iii) each other
         quarterly and annual and other reports filed with the SEC from time to
         time.

                  "Register" has the meaning specified in Section 8.5(c).

                  "Regulation U" means Regulation U of the Board of Governors of
         the Federal Reserve System, as in effect from time to time.

                  "Reimbursement Obligations" means, at any time, the
         obligations of any of the Borrowers then outstanding, or that may
         thereafter arise, in respect of all Letters of Credit then outstanding
         to reimburse amounts paid by any Issuing Bank in respect of any
         drawings under a Letter of Credit.

                  "Revolving Credit Advance" means an advance by a Bank to a
         Borrower as part of a Revolving Credit Borrowing and refers to a Base
         Rate Advance or a Eurodollar Rate Advance (each of which shall be a
         "Type" of Revolving Credit Advance).

                  "Revolving Credit Borrowing" means a borrowing consisting of
         simultaneous Revolving Credit Advances of the same Type made by each of
         the Banks, pursuant to Section 2.1(a).

                  "Revolving Credit Commitment" means, with respect to any Bank
         at any time, the amount set forth opposite such Banks' name on Schedule
         III hereto under the caption "Revolving Credit Commitment" or, if such
         Bank has entered into one or more Transfer

                                       10

         Agreements, set forth for such Bank in the Register maintained by the
         Agent pursuant to Section 8.5(c) as such Lender's "Revolving Credit
         Commitment", as such amount may be reduced at or prior to such time
         pursuant to Section 2.4.

                  "Security Agreement" means a Security Agreement executed by
         TWC in substantially the form of Exhibit E.

                  "SPC" has the meaning specified in Section 8.5(g).

                  "Subsidiary" of any Person means any corporation, partnership,
         joint venture or other entity of which more than 50% of the outstanding
         Equity Interests having ordinary voting power to elect a majority of
         the board of directors of such corporation, partnership, joint venture
         or other entity or others performing similar functions (irrespective of
         whether or not at the time Equity Interests of any other class or
         classes of such corporation, partnership, joint venture or other entity
         shall or might have voting power upon the occurrence of any
         contingency) is at the time directly or indirectly owned by such
         Person.

                  "Termination Date" means the earlier of (i) June 6, 2005 or
         (ii) the date of termination in whole of the Commitments pursuant to
         Section 2.4 or 6.1.

                  "Termination Event" means (i) a "reportable event", as such
         term is described in Section 4043(c) of ERISA (other than a "reportable
         event" not subject to the provision for 30-day notice to the PBGC or a
         "reportable event" as such term is described in Section 4043(c)(3) of
         ERISA) which might reasonably be expected to result in a termination
         of, or the appointment of a trustee to administer, a Plan, or which
         causes TWC, due to actions of the PBGC, to be required to contribute at
         least $75,000,000 in excess of the contributions which otherwise would
         have been made to fund a Plan based upon the contributions recommended
         by such Plan's actuary, or (ii) the withdrawal of a Borrower or any
         ERISA Affiliate of such Borrower from a Multiple Employer Plan during a
         plan year in which it was a "substantial employer," as such term is
         defined in Section 4001(a)(2) of ERISA, or the incurrence of liability
         by a Borrower or any ERISA Affiliate of such Borrower under Section
         4064 of ERISA upon the termination of a Plan or Multiple Employer Plan,
         or (iii) the distribution of a notice of intent to terminate a Plan
         pursuant to Section 4041(a)(2) of ERISA or the treatment of a Plan
         amendment as a termination under Section 4041 of ERISA, or (iv) the
         institution of proceedings to terminate a Plan by the PBGC under
         Section 4042 of ERISA, or (v) any other event or condition which might
         reasonably be expected to result in the termination of, or the
         appointment of, a trustee to administer, any Plan under Section 4042 of
         ERISA.

                  "TGPL" has the meaning specified in the recitals hereto.

                  "Total Credit Exposure" means the sum of the Total L/C
         Exposure plus the Total Loan Exposure plus the amount of any other
         Obligations that are not paid when due and remain outstanding.

                  "Total L/C Exposure" means at any time, the aggregate amount
         of all Letter of Credit Liabilities with respect to all issued Letters
         of Credit.

                                       11

                  "Total Loan Exposure" means at any time, the aggregate
         principal amount of all outstanding Revolving Credit Advances.

                  "Transfer Agreement" means an agreement executed pursuant to
         Section 8.5 by an assignor Bank and assignee Bank substantially in the
         form of Exhibit C, which agreement shall be executed by the Borrowers
         and the Agent to evidence the consent of each if such consent is
         required pursuant to the definition herein of "Eligible Assignee" or
         the terms of Section 8.5.

                  "TWC" has the meaning specified in the recitals hereto.

                  "Unused Revolving Credit Commitment" with respect to each Bank
         at any time, (a) such Bank's Revolving Credit Commitment at such time
         minus (b) the sum of (i) the aggregate principal amount of all
         Revolving Credit Advances made by such Bank and outstanding at such
         time and (ii) such Bank's Letter of Credit Liability.

                  "Wholly-Owned Subsidiary" of any Person means any Subsidiary
         of such Person all of the Equity Interests in which are owned by such
         Person and/or one or more other Wholly-Owned Subsidiaries of such
         Person.

                  "Withdrawal Liability" shall have the meaning given such term
         under Part I of Subtitle E of Title IV of ERISA.

                  SECTION 1.2. Computation of Time Periods. In this Agreement in
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each means "to but excluding".

                  SECTION 1.3. Accounting Terms. All accounting terms not
specifically defined shall be construed in accordance with general accounting
principles, and each reference herein to "generally accepted accounting
principles" shall mean U.S. generally accepted accounting principles in effect,
consistently applied.

                  SECTION 1.4. Miscellaneous. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and Article, Section, Schedule and Exhibit references are to Articles
and Sections of and Schedules and Exhibits to this Agreement, unless otherwise
specified. The term "including" shall mean "including, without limitation".
References to any document, instrument or agreement (a) shall include all
exhibits, schedules and other attachments thereto, (b) shall include all
documents, instruments or agreements issued or executed in replacement thereof
and (c) shall mean such document, instrument or agreement, or replacement or
predecessor thereto, as amended, modified and supplemented from time to time and
in effect at any given time so long as such amended, modified or supplemented
document, instrument or agreement does not violate the terms of this Agreement.

                                       12

                                   ARTICLE II

                    AMOUNTS AND TERMS OF THE REVOLVING CREDIT
                         ADVANCES AND LETTERS OF CREDIT

                  SECTION 2.1. Revolving Credit Advances and Letters of Credit.

                  (a)      Revolving Credit Advances. Each Bank severally
agrees, on the terms and conditions hereinafter set forth, to make Revolving
Credit Advances to each Borrower from time to time on any Business Day during
the period from the Effective Date until the Termination Date in an aggregate
amount to all Borrowers not to exceed at any time such Bank's Unused Revolving
Credit Commitment at such time. Each Revolving Credit Borrowing shall be in an
aggregate amount of not less than $10,000,000 or an integral multiple of
$1,000,000 in excess thereof and shall consist of Revolving Credit Advances made
on the same day by the Banks ratably according to their respective Revolving
Credit Commitments. Within the limits of this Section 2.1(a), a Borrower may
borrow under this Section 2.1(a), prepay pursuant to Section 2.5 and reborrow
under this Section 2.1(a).

                  (b)      Letters of Credit. Each Issuing Bank agrees, on the
terms and conditions hereinafter set forth, to issue standby or trade letters of
credit (collectively, the "Letters of Credit", and each a "Letter of Credit")
for the account of any Borrower (such issuance, and any funding of a draw
thereunder, to be made by the Issuing Banks in reliance on the agreements of the
other Banks pursuant to Section 2.2) from time to time on any Business Day
during the period from the Effective Date until 30 days prior to the Termination
Date in an aggregate Available Amount (i) for all Letters of Credit issued by
the Issuing Banks not to exceed at any time the lesser of (A) the aggregate of
all Letter of Credit Commitments at such time and (B) the Letter of Credit
Commitment of such Issuing Bank at such time and (ii) for each such Letter of
Credit not to exceed an amount equal to the Unused Revolving Credit Commitments
of the Banks at such time; provided that at no time shall all Letter of Credit
Liabilities exceed the aggregate amount of the Letter of Credit Commitments. No
Letter of Credit shall have an expiration date (including all rights of a
Borrower or the beneficiary to require renewals) later then 10 Business Days
prior to the Termination Date. Within the limits referred to above, a Borrower
may request the issuance of Letters of Credit under this Section 2.1(b), repay
any Letter of Credit Liability resulting from drawings thereunder pursuant to
Section 2.2(a) and request the issuance of additional Letters of Credit under
this Section 2.1(b).

                  SECTION 2.2. Issuance of and Drawings and Reimbursement Under
Letters of Credit.

                  (a)      Notice of Issuance. A Borrower shall give the Agent
and the Issuing Bank from which it is requesting a Letter of Credit at least
three Business Days' (or such shorter period as agreed to by the Agent and such
Issuing Bank) prior notice, in the form of Exhibit D-1 (a "Notice of Letter of
Credit"), specifying the Business Day such Letter of Credit is to be issued and
the account party or parties therefor and describing in reasonable detail the
proposed terms of such Letter of Credit (including the beneficiary thereof) and
the nature of the transactions or obligations proposed to be supported thereby.

                                       13

                  (b)      Participations in Letters of Credit. On each day
during the period commencing with the issuance by any Issuing Bank of any Letter
of Credit and until such Letter of Credit shall have expired or been terminated,
the Letter of Credit Commitment of each Issuing Bank shall be deemed to be
utilized for all purposes of this Agreement in an amount equal to the Available
Amount of such Letter of Credit. Each Bank agrees that, upon the issuance of any
Letter of Credit hereunder by any Issuing Bank, it shall automatically acquire a
participation in such Issuing Bank's liability under such Letter of Credit in an
amount equal to such Bank's LC Participation Percentage of such liability, and
each Bank thereby shall absolutely, unconditionally and irrevocably assume, as
primary obligor and not as surety, and shall be unconditionally obligated to
such Issuing Bank to the extent provided in this Section 2.2(b).

                  (c)      Reimbursement Obligations; Notice of Drawings. Upon
receipt from the beneficiary of any Letter of Credit of any demand for payment
under such Letter of Credit, the Issuing Bank that issued such Letter of Credit
shall promptly notify the applicable Borrower (through the Agent) of the amount
to be paid by such Issuing Bank as a result of such demand and the date on which
payment is to be made by such Issuing Bank to such beneficiary in respect of
such demand, which shall be (unless same day payment is required by the terms of
such Letter of Credit pursuant to a request of such Borrower) at least one
Business Day after the date on which the Agent shall deliver such notice to the
applicable Borrower pursuant to this sentence. Notwithstanding the identity of
the account party of any Letter of Credit, the Borrowers hereby unconditionally
agree to pay and reimburse the Agent for the account of the Issuing Bank that
issued a Letter of Credit for the amount of each demand for payment under such
Letter of Credit that is in substantial compliance with the provisions of such
Letter of Credit at or prior to the date on which payment is to be made by such
Issuing Bank to the beneficiary thereunder, without presentment, demand, protest
or other formalities of any kind, together with interest thereon at a rate per
annum equal to the Base Rate for the period from the date of such demand until
the date of such reimbursement; provided that, to the extent that any
Reimbursement Obligation has not been reimbursed by any Borrower to the
applicable Issuing Bank hereunder, the Collateral Agent shall withdraw funds
from the Collateral Account upon the request (such request to be delivered to
the Collateral Agent by TWC on the same day of the receipt of notice from the
Agent to the Borrowers pursuant to this Section 2.2(c)) of TWC (in accordance
with the Security Agreement), in an amount of such outstanding Reimbursement
Obligation and apply such funds for the satisfaction and reimbursement of such
Issuing Bank. The Borrowers' obligations to reimburse each Issuing Bank as
provided herein shall be absolute, unconditional and irrevocable under all
circumstances whatsoever, including the following circumstances: (i) any lack of
validity of this Agreement, the other Credit Documents or the other documents to
be delivered under this Agreement; (ii) the existence of any claim, set-off,
defense or other right that a Borrower may have at any time against the Agent,
any Bank, any Issuing Bank or any other Person, whether in connection with the
transactions contemplated by this Agreement or any unrelated transaction; (iii)
any action or inaction taken or suffered by any Issuing Bank under a Letter of
Credit if taken in good faith and in conformity with applicable law; (iv) the
payment by any Issuing Bank under a Letter of Credit against presentation of a
demand, statement or other document which in the sole discretion of such Issuing
Bank substantially complies with the terms of such Letter of Credit, including
any demand, statement or other document which is forged, fraudulent, invalid or
inaccurate in any respect; (v) any exchange, release or non-perfection of any
collateral for, or any release or amendment or waiver of or consent to departure
from any guarantee of, all or any of the Obligations of the applicable Borrower
in respect of any Letter of

                                       14

Credit; and (vi) any determination of invalidity or unenforceability with
respect to any Letter of Credit after payment by an Issuing Bank thereunder.

                  (d)      Payments by Banks to Issuing Banks. To the extent
that a Borrower fails to make any payment to an Issuing Bank that such Borrower
is required to make pursuant to Section 2.2(c), each Bank (other than such
Issuing Bank) shall pay to the Agent, for the account of such Issuing Bank in
Dollars and in immediately available funds, the amount of such Bank's LC
Participation Percentage of any payment under a Letter of Credit upon notice by
such Issuing Bank (through the Agent) to such Bank requesting such payment and
specifying such amount. Each such Bank's obligation to make such payment to the
Agent for the account of such Issuing Bank under this Section 2.2(d), and such
Issuing Bank's right to receive the same, shall be absolute and unconditional
and shall not be affected by any circumstance whatsoever other than the gross
negligence or willful misconduct of such Issuing Bank in making payment under
such Letter of Credit, including the failure of any other Bank to make its
payment under this Section 2.2(d), the financial condition of a Borrower (or any
account party in respect of such Letter of Credit), the existence of any Event
of Default or the termination of the Letter of Credit Commitments. If any Bank
shall default in its obligation to make any such payment to the Agent for the
account of an Issuing Bank, for so long as such default shall continue the Agent
may, at the request of such Issuing Bank withhold from any payments received by
the Agent under this Agreement for the account of such Bank the amount so in
default and, to the extent so withheld and pay the same to such Issuing Bank for
application to such defaulted obligation.

                  (e)      Participations in Reimbursement Obligations. Upon the
making of each payment by a Bank to an Issuing Bank pursuant to Section 2.2(d)
in respect of any Letter of Credit, such Bank shall, automatically and without
any further action on the part of the Agent, any Issuing Bank or such Bank,
acquire (i) a funded participation in an amount equal to such payment in the
Reimbursement Obligation owing to such Issuing Bank by the applicable Borrower
hereunder and under the Letter of Credit Documents relating to such Letter of
Credit and (ii) a participation in a percentage equal to such Bank's LC
Participation Percentage in any interest or other amounts payable by the
Borrowers hereunder and under such Letter of Credit Documents in respect of such
Reimbursement Obligation (other than the Fronting Fee contemplated by Section
2.11(b)(i)). Upon receipt by any Issuing Bank from or for the account of a
Borrower of any payment in respect of any Reimbursement Obligation or any such
interest or other amount (including by way of setoff or application of proceeds
of any collateral security or the withdrawal and application of funds from the
Collateral Account as required by Section 2.2(c)), such Issuing Bank shall
promptly pay to the Agent, for the account of each Bank entitled thereto, such
Bank's Participation Percentage of such payment, each such payment by such
Issuing Bank to be made in the same currency and funds in which received by any
Issuing Bank. In the event any payment received by such Issuing Bank and so paid
to the Banks hereunder is rescinded or must otherwise be returned by any Issuing
Bank, each Bank shall, upon the request of such Issuing Bank (through the
Agent), repay to such Issuing Bank (through the Agent) the portion of such
payment paid to such Bank.

                  (f)      Information Provided by Issuing Banks to Banks.
Promptly after the issuance of or amendment to any Letter of Credit, the Issuing
Bank that issued such Letter of Credit will notify the Agent and the applicable
Borrower in writing of such issuance or amendment and such notice shall be
accompanied by a copy of such issued or amended Letter of

                                       15

Credit. Upon receipt of such notice, the Agent shall notify each Bank of such
issuance or amendment and, if requested by a Bank, the Agent shall provide such
Bank with copies of such issued or amended Letter of Credit and any related
Letter of Credit Documents thereto.

                  (g)      Conditions Precedent to Issuance, Extension and
Modification. The issuance by any Issuing Bank of a Letter of Credit, or any
extension of any outstanding Letter of Credit, shall be subject to satisfaction
of each of the conditions precedent set forth in Article III, and shall further
be subject to the conditions precedent that (i) such Letter of Credit shall be
in such form and contain such terms as shall be reasonably satisfactory to such
Issuing Bank consistent with its then current practices and procedures of
general applicability with respect to letters of credit of the same type and
(ii) the applicable Borrower shall have executed and delivered such agreements
and other instruments relating to such Letter of Credit as such Issuing Bank
shall have reasonably requested consistent with its then current practices and
procedures of general applicability with respect to letters of credit of the
same type; provided that in the event of any conflict between any such
application, agreement or other instrument and the provisions of this Agreement,
the provisions of this Agreement shall control. The issuance by any Issuing Bank
of any amendment, modification or supplement to any Letter of Credit hereunder
which increases the stated amount thereof or extends the termination date
thereof shall be subject to the same conditions applicable under this Section
2.2 to the issuance of new Letters of Credit, and no such modification or
supplement shall be issued hereunder unless the Letter of Credit affected
thereby would have complied with such conditions had it originally been issued
hereunder in such modified or supplemented form.

                  (h)      Interest Payable to Issuing Banks by Banks. To the
extent that any Bank shall fail to pay any amount required to be paid pursuant
to Sections 2.2(d) or (e) on the due date therefor, such Bank shall pay interest
to the Issuing Bank owed such amount (through the Agent) on such amount from and
including such due date to but excluding the date such payment is made at a rate
per annum equal to the Federal Funds Rate.

                  (i)      Indemnification of the Banks, Issuing Banks and
Agent. The Borrowers hereby indemnify and hold harmless each Bank, each Issuing
Bank and the Agent from and against any and all claims, damages, losses,
liabilities, costs and expenses that such Bank, such Issuing Bank or the Agent
may incur (or that may be claimed against such Bank, such Issuing Bank or the
Agent by any Person whatsoever) by reason of or in connection with the execution
and delivery or transfer of or payment or refusal to pay by each Issuing Bank
under any Letter of Credit (EXPRESSLY INCLUDING ANY SUCH CLAIM, DAMAGE, LOSS,
LIABILITY OR EXPENSE ATTRIBUTABLE TO THE ORDINARY, SOLE OR CONTRIBUTORY
NEGLIGENCE OF SUCH BANK, SUCH ISSUING BANK OR THE AGENT, AS THE CASE MAY BE, BUT
EXCLUDING ANY SUCH CLAIM, DAMAGE, LOSS, LIABILITY OR EXPENSE ATTRIBUTABLE TO THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH BANK, SUCH ISSUING BANK AND THE
AGENT). IT IS THE INTENT OF THE PARTIES HERETO THAT EACH BANK, EACH ISSUING BANK
OR THE AGENT, AS THE CASE MAY BE, SHALL, TO THE EXTENT PROVIDED IN THIS SECTION
2.2(i), BE INDEMNIFIED FOR ITS OWN ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE;
provided that the Borrowers shall not be required to indemnify any Bank, any
Issuing Bank or the Agent for any claims, damages, losses, liabilities, costs or
expenses to the extent, but only to the extent, caused by (A) in the case of

                                       16

each Issuing Bank, the willful misconduct or gross negligence of such Issuing
Bank in determining whether a request presented under any Letter of Credit
complied with the terms of such Letter of Credit or (B) in the case of any Bank,
such Bank's failure to pay its Letter of Credit Liabilities pursuant to Sections
2.2(d), (e) and (h).

                  SECTION 2.3. Making the Revolving Credit Advances.

                  (a)      Each Revolving Credit Borrowing shall be made on
notice, given not later than 11:00 a.m. (New York City time) on the third
Business Day prior to the date of the proposed Revolving Credit Borrowing in the
case of a Revolving Credit Borrowing consisting of Eurodollar Rate Advances, or
10:00 a.m. (New York City Time) the Business Day of the proposed Revolving
Credit Borrowing in the case of a Revolving Credit Borrowing consisting of Base
Rate Advances, by the Borrower to the Agent, which shall give to each Bank
prompt notice thereof by telecopier or telex. Each such notice of a Revolving
Credit Borrowing (a "Notice of Revolving Credit Borrowing") shall be by
telephone, confirmed immediately in writing, or telecopier or telex in
substantially the form of Exhibit D-2 hereto, specifying therein the requested
(i) date of such Revolving Credit Borrowing, (ii) Type of Revolving Credit
Advance, (iii) aggregate amount of such Revolving Credit Borrowing, and (iv) in
the case of a Revolving Credit Borrowing consisting of Eurodollar Rate Advances,
initial Interest Period for each such Revolving Credit Advance. Each Bank shall,
before 12:00 p.m. (New York City time) on the date of such Revolving Credit
Borrowing, make available for the account of its Applicable Lending Office to
the Agent at the Agent's Account, in same day funds, such Bank's ratable portion
of such Revolving Credit Borrowing. After the Agent's receipt of such funds and
upon fulfillment of the applicable conditions set forth in Article III, the
Agent will make such funds available to the Borrower at the Agent's address
referred to in Section 8.2.

                  (b)      Anything in Section 2.3(a) to the contrary
notwithstanding, a Borrower may not select Eurodollar Rate Advances for any
Revolving Credit Borrowing if the aggregate obligation of the Banks to make
Eurodollar Rate Advances shall then be suspended pursuant to Sections 2.3(e),
2.14 or 2.16.

                  (c)      No Borrower may select Eurodollar Rate Advances for
any Revolving Credit Borrowing if the aggregate amount of such Revolving Credit
Borrowings is less than $10,000,000.

                  (d)      Each Notice of Revolving Credit Borrowing shall be
irrevocable and binding on such Borrower. In the case of any Revolving Credit
Borrowing that the related Notice of Revolving Credit Borrowing specifies is to
be comprised of Eurodollar Rate Advances, the Borrowers shall indemnify each
Bank against any loss, cost or expense incurred by such Bank as a result of any
failure by the Borrowers to fulfill on or before the date specified in such
Notice of Revolving Credit Borrowing for such Revolving Credit Borrowing the
applicable conditions set forth in Article III, including, without limitation,
any loss (excluding loss of anticipated profits), cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such Bank to fund the Revolving Credit Advance to be made by such Bank as part
of such Revolving Credit Borrowing when such Revolving Credit Advance, as a
result of such failure, is not made on such date.

                                       17

                  (e)      If the Agent is unable to determine the Eurodollar
Rate for Eurodollar Rate Advances, the obligation of the Banks to make, or to
Convert Revolving Credit Advances into, Eurodollar Rate Advances shall be
suspended until the Agent shall notify the Borrowers and the Banks that the
circumstances causing such suspension no longer exist, and, except as provided
in Section 2.3(f), each Revolving Credit Advance comprising any requested
Revolving Credit Borrowing shall be a Base Rate Advance.

                  (f)      If a Borrower has requested a proposed Revolving
Credit Borrowing consisting of Eurodollar Rate Advances and as a result of
circumstances referred to in Section 2.3(e) or Section 2.14(b) such Revolving
Credit Borrowing would not consist of Eurodollar Rate Advances, such Borrower
may, by notice given not later than 3:00 p.m. (New York City time) at least one
Business Day prior to the date such proposed Revolving Credit Borrowing would
otherwise be made, cancel such Revolving Credit Borrowing, in which case such
Revolving Credit Borrowing shall be cancelled and no Revolving Credit Advances
shall be made as a result of such requested Revolving Credit Borrowing, but such
Borrower shall indemnify the Banks in connection with such cancellation as
contemplated by Section 2.3(d).

                  (g)      Unless the Agent shall have received notice from a
Bank prior to the date of any Revolving Credit Borrowing that such Bank will not
make available to the Agent such Bank's ratable portion of such Revolving Credit
Borrowing, the Agent may assume that such Bank has made such portion available
to the Agent on the date of such Revolving Credit Borrowing in accordance with
Section 2.3(a) and the Agent may, in reliance upon such assumption, make
available to a Borrower on such date a corresponding amount. If and to the
extent that such Bank shall not have so made such ratable portion available to
the Agent, such Bank and Borrower severally agree to repay to the Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available to such Borrower until
the date such amount is repaid to the Agent, at (i) in the case of such
Borrower, the interest rate applicable at the time to Revolving Credit Advances
comprising such Revolving Credit Borrowing and (ii) in the case of such Bank,
the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding
amount, such amount so repaid shall constitute such Bank's Revolving Credit
Advance as part of such Revolving Credit Borrowing for purposes of this
Agreement and such Borrower shall be relieved of its obligations to repay such
amount under this Section 2.3(g).

                  (h)      The failure of any Bank to make the Revolving Credit
Advance to be made by it as part of any Revolving Credit Borrowing shall not
relieve any other Bank of its obligation, if any, hereunder to make its
Revolving Credit Advance on the date of such Revolving Credit Borrowing, but no
Bank shall be responsible for the failure of any other Bank to make the
Revolving Credit Advance to be made by such other Bank on the date of any
Revolving Credit Borrowing.

                  SECTION 2.4. Voluntary Reduction of the Commitments. Each
Borrower shall have the right, upon at least three Business Days notice to the
Agent, to terminate in whole or reduce ratably in part (i) the Unused Revolving
Credit Commitments and (ii) the unused portions of the Letter of Credit
Commitments; provided that each partial reduction shall be in the aggregate
amount of at least $10,000,000 or an integral multiple of $1,000,000 in excess
thereof and shall be made ratably among the Banks or Issuing Banks, as the case
may be, in accordance

                                       18

with their respective Commitments hereunder; and provided further that the
aggregate amount of the Letter of Credit Commitments shall not be reduced to an
amount which is less than the aggregate amount of all Letter of Credit
Liabilities.

                  SECTION 2.5. Prepayments.

                  (a)      Optional. Each Borrower may, upon notice to the Agent
(i) before 10:00 a.m. (New York City time) for Base Rate Advances on the date of
prepayment and (ii) upon at least three Business Days' notice to the Agent for
Eurodollar Rate Advances stating the proposed date and aggregate principal
amount of the prepayment, and if such notice is given by such Borrower shall,
prepay the outstanding principal amount of the Revolving Credit Advances
comprising part of the same Revolving Credit Borrowing in whole or ratably in
part, together with accrued interest and fees to the date of such prepayment on
the principal amount prepaid and amounts, if any, required to be paid pursuant
Section 8.4(c) as a result of such prepayment; provided, however, that each
prepayment pursuant to this Section 2.5(a) shall be in an aggregate principal
amount not less than $5,000,000.

                  (b)      Mandatory. Upon the date of receipt of written notice
by the Borrowers from the Agent or the Majority Banks of the occurrence of any
Mandatory Prepayment Event (such written notice to be delivered by the Agent or
the Majority Banks to the Borrowers not later than ten Business Days from the
date of an occurrence of any Mandatory Prepayment Event), all then outstanding
Revolving Credit Advances, including any amounts required to be paid pursuant to
Section 8.4(c) as a result of such prepayment, shall be repaid by the Borrowers
(which the Borrowers may elect to repay using amounts on deposit in the
Collateral Account (in accordance with the Security Agreement) if and to the
extent funds are available in such Collateral Account) by no later than 10
Business Days from the date of receipt of such written notice of such Mandatory
Prepayment Event.

                  SECTION 2.6. Increased Costs.

                  (a)      If any Bank or Issuing Bank determines that
compliance with any law or regulation or any guideline or request from any
central bank or other governmental or monetary authority (whether or not having
the force of law) affects or would affect the amount of capital required or
expected to be maintained by such Bank or Issuing Bank, as the case may be, or
any corporation controlling such Bank or Issuing Bank, as the case may be, and
that the amount of such capital is increased by or based upon the existence of
such Bank's or such Issuing Bank's, as the case may be, commitment to lend
hereunder, issue Letters of Credit or purchase participations in Letters of
Credit and other commitments of this type, then, upon demand by such Bank or
Issuing Bank, as the case may be (with a copy of such demand and related
certificate (which certificate shall specify in reasonable detail the nature of
such change in capital requirements, the proposed (or actual) compliance change
to be adopted by the applicable Bank or Issuing Bank and the calculations upon
which any compensation is claimed hereunder) to the Agent), the Borrowers shall
immediately pay to the Agent within five Business Days of receipt of such demand
for the account of such Bank or Issuing Bank, as the case may be, from time to
time as specified by such Bank or Issuing Bank, as the case may be, additional
amounts sufficient to compensate such Bank or Issuing Bank, as the case may be,
or such corporation in the light of such circumstances, to the extent that such
Bank or Issuing Bank, as the case may be,

                                       19

reasonably determines such increase in capital to be allocable to the existence
of such Bank's or such Issuing Bank's, as the case may be, commitment to lend,
issue Letters of Credit or purchase participations in Letters of Credit
hereunder. A certificate as to the amount of such additional amounts, submitted
to the Borrowers and the Agent by such Bank or Issuing Bank, as the case may be,
shall be prima facie evidence of the amount of such additional amounts. No Bank
or Issuing Bank shall have any right to recover any additional amounts under
this Section 2.6(a) for any period more than 90 days prior to the date such Bank
or Issuing Bank, as the case may be, notifies the Borrowers of any such
compliance.

                  (b)      In the event that any Bank (i) makes a demand for
payment under Section 2.2, 2.8, 2.17 or this Section 2.6, or (ii) does not agree
to provide its consent or agree to any amendment or waiver pursuant to Section
8.1 where such consent or agreement to provide an amendment or waiver is
required of all the Banks hereto, TWC may within ninety (90) days of such demand
or non-consent, if no Default or Event of Default then exists, replace such Bank
with another commercial bank in accordance with all of the provisions of the
second and third sentences of Section 8.5(a), and clauses (b) and (d) of Section
8.5 (including execution of an appropriate Transfer Agreement); provided that
(w) all obligations of such Bank to lend hereunder or purchase participations in
Letters of Credit shall be terminated and the Letter of Credit Interests held by
such Bank and Notes payable to such Bank and all other obligations owed to such
Bank hereunder shall be purchased in full without recourse at par plus accrued
interest and fees at or prior to such replacement, (x) such replacement bank
shall be an Eligible Assignee, (y) such replacement bank shall, from and after
such replacement, be deemed for all purposes to be a "Bank" hereunder with a
Revolving Credit Commitment and Letter of Credit Liabilities in the amount of
the Revolving Credit Commitment and Letter of Credit Liabilities of such Bank to
such Borrower immediately prior to such replacement (plus, if such replacement
bank is already a Bank prior to such replacement the respective Revolving Credit
Commitment and Letter of Credit Liabilities of such Bank to such Borrower prior
to such replacement), as such amount may be changed from time to time pursuant
hereto, and shall have all of the rights, duties and obligations hereunder of
the Bank being replaced, including obligations under Section 2.1(b), and (z)
such other actions shall be taken by the Borrowers, such Bank and such
replacement bank as may be appropriate to effect the replacement of such Bank
with such replacement bank on terms such that such replacement bank has all of
the rights, duties and obligations hereunder as such Bank (including
specification of the information contemplated by Schedule I as to such
replacement bank).

                  (c)      Before making any demand under this Section 2.6, each
Bank agrees to use reasonable efforts (consistent with its internal policy and
legal and regulatory restrictions) to designate a different Lending Office if
the making of such a designation would avoid the need for, or reduce the amount
of, such increased cost and would not, in the reasonable judgment of such Bank,
be otherwise disadvantageous to such Bank.

                  SECTION 2.7. Payments and Computations.

                  (a)      Each Borrower shall make each payment hereunder to be
made by it not later than 11:00 a.m. (New York City time) on the day when due in
Dollars to the Agent at its New York address referred to in Section 8.2, in each
case in same day funds, without deduction, counterclaim or offset of any kind.
The Agent will promptly thereafter cause to be distributed

                                       20

like funds relating to the payment of principal, interest or any fees to the
Banks for the account of their respective Lending Offices, and like funds
relating to the payment of any other amount payable to any Bank to such Bank for
the account of its Lending Office, in each case to be applied in accordance with
the terms of this Agreement. The Agent will promptly pay to the Collateral Agent
like funds relating to the payment of any amount payable to the Collateral
Agent. In no event shall any Bank be entitled to share any fee paid to the Agent
pursuant to Section 2.11(a), any other fee paid to the Agent, as such, or any
Fronting Fee paid to an Issuing Bank pursuant to Section 2.11(b)(i).

                  (b)      (i) All computations of interest based on clause (a)
of the definition herein of "Base Rate" and all computations of all Commitment
Fees, Letter of Credit Fees, Fronting Fees and all other fees shall be made by
the Agent on the basis of a year of 365 or 366 days, as the case may be, and
(ii) all computations of interest based on the Eurodollar Rate, the Federal
Funds Rate and interest pursuant to Section 2.17 shall be made by the Agent on
the basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest, letter of credit fees or other fees are payable. Each
determination by the Agent of an interest rate or fee hereunder shall be
conclusive and binding for all purposes, absent manifest error.

                  (c)      Whenever any payment hereunder shall be stated to be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest, commitment fee, letter of
credit fee or any other fee hereunder, as the case may be; provided, however,
that, if such extension would cause payment of interest on or principal of
Eurodollar Rate Revolving Credit Advances to be made in the next following
calendar month, such payment shall be made on the next preceding Business Day.

                  (d)      Unless the Agent shall have received notice from a
Borrower prior to the date on which any payment is due by such Borrower to any
Bank hereunder that such Borrower will not make such payment in full, the Agent
may assume that such Borrower has made such payment in full to the Agent on such
date and the Agent may, in reliance upon such assumption, cause to be
distributed to each Bank on such due date an amount equal to the amount then due
such Bank hereunder. If and to the extent such Borrower shall not have so made
such payment in full to the Agent, each Bank shall repay to the Agent forthwith
on demand such amount distributed to such Bank together with interest thereon,
for each day from the date such amount is distributed to such Bank until the
date such Bank repays such amount to the Agent, at the Federal Funds Rate.

                  SECTION 2.8. Taxes.

                  (a)      Any and all payments by any Borrower hereunder shall
be made, in accordance with Section 2.7, free and clear of and without deduction
for any and all present or future taxes, levies, imposts, deductions, charges or
withholdings with respect thereto, and all liabilities with respect thereto,
excluding in the case of each Bank and the Agent, (i) taxes imposed on its net
income or net profits, and franchise taxes imposed on it, by the jurisdiction
under the laws of which such Bank or the Agent (as the case may be) is organized
or any political subdivision thereof and (ii) taxes imposed as a result of a
present or former connection

                                       21

between such Bank or the Agent, as the case may be, and the jurisdiction
imposing such tax or any political subdivision thereof and, in the case of each
Bank, taxes imposed on its net income or net profits, and franchise taxes
imposed on it, by the jurisdiction of such Bank's Lending Office or any
political subdivision thereof, other than any such connection arising solely
from the Bank or Agent having executed or delivered, or performed its
obligations or received a payment under, or taken any other action related to
this Agreement (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If any Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or under any Note to any Bank or the Agent, (i) the
sum payable shall be increased as may be necessary so that after making all
required deductions for Taxes (including deductions for Taxes applicable to
additional sums payable under this Section 2.8) such Bank or the Agent, as the
case may be, receives an amount equal to the sum it would have received had no
such deductions for Taxes been made, (ii) such Borrower shall make such
deductions and (iii) such Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law.

                  (b)      In addition, each Borrower 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 such Borrower
hereunder or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement (hereinafter referred to as "Other Taxes").

                  (c)      Each Borrower will indemnify each Bank, each Issuing
Bank and the Agent for the full amount of Taxes or Other Taxes (including any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.8) owed and paid by such Bank, such Issuing Bank or the Agent, as the
case may be, and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto. This indemnification shall be made
within 30 days from the date such Bank, such Issuing Bank or the Agent, as the
case may be, makes written demand therefor; provided that such Borrower shall
have no liability pursuant to this clause (c) of this Section 2.8 to indemnify a
Bank, an Issuing Bank or the Agent for Taxes or Other Taxes which were paid by
such Bank, such Issuing Bank or the Agent, as the case may be, more than ninety
days prior to such written demand for indemnification.

                  (d)      In the event that a Bank, an Issuing Bank or the
Agent receives a written communication from any governmental authority with
respect to an assessment or proposed assessment of any Taxes, such Bank, such
Issuing Bank or Agent, as the case may be, shall promptly notify TWC in writing
and provide TWC with a copy of such communication. The Agent's, an Issuing
Bank's or a Bank's failure to provide a copy of such communication to TWC shall
not relieve TWC of any of its obligations hereunder.

                  (e)      Promptly following payment of Taxes by or at the
direction of any Borrower, such Borrower will furnish to the Agent, at its
address referred to in Section 8.2, the original or a certified copy of a
receipt evidencing payment thereof (or, if no such receipt is reasonably
available, other evidence of payment reasonably acceptable to the Agent). Should
any Bank, any Issuing Bank or the Agent ever receive any refund, credit or
deduction from any taxing authority to which such Bank, such Issuing Bank or the
Agent, as the case may be, would not be entitled but for the payment by such
Borrower of Taxes as required by this Section 2.8 (it

                                       22

being understood that the decision as to whether or not to claim, and if
claimed, as to the amount of any such refund, credit or deduction shall be made
by such Bank, such Issuing Bank or the Agent, as the case may be, in its
reasonable judgment), such Bank, such Issuing Bank or the Agent, as the case may
be, thereupon shall repay to such Borrower an amount with respect to such
refund, credit or deduction equal to any net reduction in taxes actually
obtained by such Bank, such Issuing Bank or the Agent, as the case may be, and
determined by such Bank, such Issuing Bank or the Agent, as the case may be, to
be attributable to such refund, credit or deduction.

                  (f)      Each Bank organized under the laws of a jurisdiction
outside the United States shall on or prior to the date of its execution and
delivery of this Agreement in the case of each Bank which is a party to this
Agreement on the date this Agreement becomes effective and on the date the
Transfer Agreement pursuant to which it becomes a Bank is first effective in the
case of each other Bank, and from time to time thereafter as necessary or
appropriate (but only so long thereafter as such Bank remains lawfully able to
do so), provide each of the Agent and each Borrower with two original Internal
Revenue Service Forms W-8BEN or W-8ECI (or, in the case of a Bank that has
provided a certificate to the Agent that it is not (i) a "bank" as defined in
Section 881(c)(3)(A) of the Code, (ii) a ten-percent shareholder (within the
meaning of Section 871(h)(3)(B) of the Code) of such Borrower or (iii) a
controlled foreign corporation related to such Borrower (within the meaning of
Section 864(d)(4) of the Code), Internal Revenue Service Form W-8BEN), or any
successor or other form prescribed by the Internal Revenue Service, certifying
that such Bank is exempt from or entitled to a reduced rate of United States
withholding tax on payments pursuant to this Agreement or any other Credit
Document or, in the case of a Bank that has certified that it is not a "bank" as
described above, certifying that such Bank is a foreign corporation. If the
forms provided by a Bank at the time such Bank first becomes a party to this
Agreement indicate a United States interest withholding tax rate in excess of
zero, withholding tax at such rate shall be considered excluded from Taxes
unless and until such Bank provides the appropriate forms certifying that a
lesser rate applies, whereupon withholding tax at such lesser rate only shall be
considered excluded from Taxes for periods governed by such forms.

                  (g)      For any period with respect to which a Bank has
failed to provide any Borrower with the appropriate form, certificate or other
document described in subsection (f) of this Section 2.8 (other than if such
failure is due to a change in the applicable law, or in the interpretation or
application thereof, occurring after the date on which a form, certificate or
other document originally was required to be provided) such Bank shall not be
entitled to indemnification under subsection (a) or (c) of this Section 2.8 with
respect to Taxes imposed by the United States by reason of such failure;
provided, however, that should a Bank become subject to Taxes because of its
failure to deliver a form, certificate or other document required hereunder, the
Borrowers shall take such steps as such Bank shall reasonably request (at such
Bank's expense) to assist such Bank in recovering such Taxes.

                  (h)      Any Bank claiming any additional amounts payable
pursuant to this Section 2.8 agrees to use reasonable efforts to change the
jurisdiction of its Lending Office if the making of such a change would avoid
the need for, or reduce the amount of, any such additional amounts that may
thereafter accrue and would not, in the reasonable judgment of such Bank, be
otherwise materially disadvantageous to such Bank.

                                       23

                  (i)      If a Borrower determines in good faith that a
reasonable basis exists for contesting a Tax, the relevant Bank, or the Agent,
as applicable, shall provide reasonable cooperation to such Borrower in
challenging such Tax at such Borrower's expense and if requested by such
Borrower in writing; provided, however, that no Bank shall be required to take
any action hereunder which, in the reasonable discretion of such Bank, would
cause such Bank or its applicable lending office to suffer a legal, regulatory
or material economic disadvantage.

                  (j)      Without prejudice to the survival of any other
agreement of the Borrowers hereunder, the agreements and obligations of the
Borrowers contained in this Section 2.8 shall survive the payment in full of
principal and interest hereunder and the Termination Date.

                  (k)      Notwithstanding any provision of this Agreement or
the Notes to the contrary, this Section 2.8 shall be the sole provision
governing indemnities and claims for taxes under this Agreement.

                  SECTION 2.9. Sharing of Payments, Etc. If any Bank shall
obtain any payment (whether voluntary or involuntary, or through the exercise of
any right of set-off or otherwise) on account of the Revolving Credit Advances
made by it or its Letter of Credit Interest (other than pursuant to Section 2.6,
2.8, 2.17, 8.4(b) or 8.4(c)) in excess of its ratable share of payments on
account of all Revolving Credit Advances and Letter of Credit Interests obtained
by all the Banks, such Bank shall forthwith purchase from the other Banks such
participations in the Revolving Credit Advances and Letter of Credit Interests
of such other Banks as shall be necessary to cause such purchasing Bank to share
the excess payment ratably with each of them; provided, however, that if all or
any portion of such excess payment is thereafter recovered from such purchasing
Bank, such purchase from each Bank shall be rescinded and such Bank shall repay
to the purchasing Bank the purchase price to the extent of such Bank's ratable
share (according to the proportion of (i) the amount of the participation
purchased from such Bank as a result of such excess payment to (ii) the total
amount of such excess payment) of such recovery together with an amount equal to
such Bank's ratable share (according to the proportion of (i) the amount of such
Bank's required repayment to (ii) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. Each Borrower
agrees that any Bank so purchasing a participation from another Bank pursuant to
this Section 2.9 may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off) with respect to such
participation as fully as if such Bank were the direct creditor of such Borrower
in the amount of such participation; provided, that in no event shall the
Borrowers be liable for duplicative payments under this Section 2.9 in respect
to any Obligation or other liability under the Credit Documents.

                  SECTION 2.10. Evidence of Debt. Each Bank and Issuing Bank
shall maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness of each Borrower to such Bank or Issuing Bank
resulting from each Revolving Credit Advance or Letter of Credit Interest owing
to such Bank or Issuing Bank, as the case may be, from time to time, including
the amounts of principal and interest payable and paid to such Bank or Issuing
Bank from time to time hereunder. Each Borrower agrees that upon notice by any
Bank to such Borrower (with a copy of such notice to the Agent) to the effect
that a promissory note or other evidence of indebtedness is required or
appropriate in order for such Bank to evidence (whether

                                       24

for purposes of pledge, enforcement or otherwise) such Revolving Credit Advance
owing to, or to be made by, such Bank, such Borrower shall promptly execute and
deliver to such Bank, with a copy to the Agent, a Note in substantially the form
of Exhibit F hereto payable to the order of such Bank. All references to Notes
in the Credit Documents shall mean Notes, if any, to the extent issued
hereunder.

                  (a)      The Register maintained by the Agent pursuant to
Section 8.5(c) shall set forth (i) the date and amount of each Letter of Credit
and Revolving Credit Borrowing made hereunder, the Type of Revolving Credit
Advances comprising such Revolving Credit Borrowing and, if appropriate, the
Interest Period applicable thereto, (ii) the terms of each Transfer Agreement
delivered to and accepted by it, (iii) the amount of any principal or interest
due and payable or to become due and payable from each Borrower to each Bank
hereunder, and (iv) the amount of any sum received by the Agent from any
Borrower hereunder and each Bank's share thereof.

                  (b)      Entries made in good faith by the Agent in the
Register pursuant to subsection (b) above, and by each Bank or Issuing Bank in
its account or accounts pursuant to subsection (a) above, shall be prima facie
evidence of the amount of principal and interest due and payable or to become
due and payable from any Borrower to, in the case of the Register, the Agent
and, in the case of such account or accounts, such Bank, Issuing Bank or the
Agent, under this Agreement, absent manifest error; provided, however, that the
failure of the Agent or such Bank or Issuing Bank to make an entry, or any
finding that an entry is incorrect, in the Register or such account or accounts
shall not limit or otherwise affect the obligations of the Borrowers under this
Agreement.

                  SECTION 2.11. Fees.

                  (a)      Agent's and Collateral Agent's Fees. TWC agrees to
pay to the Agent and the Collateral Agent, for their respective sole account,
such fees as may be separately agreed to in writing by TWC and the Agent and the
Collateral Agent.

                  (b)      Letter of Credit Fees.

                  (i)      Fronting Fee. The Borrowers agree to pay to the Agent
         for the account of each Issuing Bank a fronting fee (a "Fronting Fee")
         based on the Available Amount of each Letter of Credit (for the stated
         duration thereof, and giving effect to any step up provision or other
         mechanism for increase that (x) occurs automatically and is not subject
         to the occurrence or satisfaction or any condition or contingency or
         (y) that is unilaterally exercisable by such Borrower) issued by such
         Issuing Banks in an amount equal to 0.125% per annum. All Fronting Fees
         payable pursuant to this Section 2.11(b)(i) shall be payable in arrears
         on the last Business Day of each Fiscal Quarter and on the Termination
         Date. In addition, the Borrowers shall pay directly to each Issuing
         Bank for its own account the customary issuance, presentation,
         amendment and other processing fees, and other standard costs and
         charges, of such Issuing Bank relating to Letters of Credit as from
         time to time in effect. Such customary fees and standard costs and
         charges are due and payable on demand and are nonrefundable.

                                       25

                  (ii)     Participating Banks. The Borrowers agree to pay to
         the Agent for the account of each Bank a letter of credit fee (a
         "Letter of Credit Fee") based on such Bank's LC Participation
         Percentage of the average daily aggregate Available Amount of all
         Letters of Credit outstanding from time to time at a rate of 0.75% per
         annum (for the stated duration thereof, and giving effect to any step
         up provision or other mechanism for increase that (x) occurs
         automatically and is not subject to the occurrence or satisfaction or
         any condition or contingency or (y) is unilaterally exercisable by the
         Borrowers). All amounts payable pursuant to this Section 2.11(b)(ii)
         shall be paid in arrears on the last Business Day of each Fiscal
         Quarter and on the Termination Date.

                  (c)      Commitment Fees. The Borrowers agree to pay to the
Agent for the account of each Bank a commitment fee (a "Commitment Fee"), in an
amount equal to 0.10% per annum on such Bank's Unused Revolving Credit
Commitment. All amounts payable pursuant to this Section 2.11(c) shall be paid
in arrears on the last Business Day of each Fiscal Quarter and on the
Termination Date.

                  SECTION 2.12. Repayment of Revolving Credit Advances. Each
Borrower shall repay to the Agent for the ratable account of the Banks on the
Termination Date, or such earlier date as the Notes may become due and payable
pursuant to Article VI, the aggregate principal amount of the Revolving Credit
Advances then outstanding.

                  SECTION 2.13. Interest.

                  (a)      Scheduled Interest. Each Borrower shall pay interest
on the unpaid principal amount of each Revolving Credit Advance owing to each
Bank from the date of such Revolving Credit Advance until such principal amount
shall be paid in full, at the following rates per annum:

                  (i)      Base Rate Advances. During such periods as such
         Revolving Credit Advance is a Base Rate Advance, a rate per annum equal
         at all times the Base Rate in effect from time to time, payable in
         arrears quarterly on the last Business Day of each Fiscal Quarter
         during such periods and on the date such Base Rate Advance shall be
         Converted or paid in full.

                  (ii)     Eurodollar Rate Advances. During such periods as such
         Revolving Credit Advance is a Eurodollar Rate Advance, a rate per annum
         equal at all times during each Interest Period for such Revolving
         Credit Advance to the sum of (x) the Eurodollar Rate for such Interest
         Period for such Revolving Credit Advance plus (y) the Applicable Margin
         in effect from time to time, payable in arrears on the last day of such
         Interest Period and, if such Interest Period has a duration of more
         than three months, on each day that occurs during such Interest Period
         every three months from the first day of such Interest Period and on
         the date such Eurodollar Rate Advance shall be Converted or paid in
         full.

                  (b)      Default Interest. Upon the occurrence and during the
continuance of an Event of Default under Section 6.1(a), the Borrowers shall pay
interest on (i) the unpaid principal amount of each (x) Revolving Credit Advance
owing to each Bank, payable in arrears in the

                                       26

amounts and on the dates referred to in Section 2.13(a) or (y) Reimbursement
Obligation owing to each Bank, payable in arrears in the amounts and from the
date referred to in Section 2.2(c), plus 2% per annum above the rate per annum
required to be paid on such Revolving Credit Advance pursuant to Section 2.13(a)
or such rate per annum required to be paid on such Reimbursement Obligation
pursuant to Section 2.2(c) and (ii) to the fullest extent permitted by law, the
amount of any interest, Fronting Fee, Commitment Fee, Letter of Credit Fee or
any other fee or other amount payable hereunder that is not paid when due, from
the date such amount shall be due until such amount shall be paid in full,
payable in arrears on the date such amount shall be paid in full and on demand,
at a rate per annum equal at all times to 2% per annum above the rate per annum
required to be paid on Base Rate Advances pursuant to Section 2.13(a)(i).

                  SECTION 2.14. Interest Rate Determination.

                  (a)      The Agent shall give prompt notice to the Borrowers
and the Banks of the applicable interest rate determined by the Agent for
purposes of Section 2.13(a)(i) or 2.13(a)(ii).

                  (b)      If, with respect to any Eurodollar Rate Revolving
Credit Advances, the Majority Banks notify the Agent that the Eurodollar Rate
for any Interest Period for such Revolving Credit Advances will not adequately
reflect the cost to such Majority Banks of making, funding or maintaining their
respective Eurodollar Rate Advances for such Interest Period, the Agent shall
forthwith so notify the Borrowers and the Banks, whereupon (i) each Eurodollar
Rate Advance will automatically, on the last day of the then existing Interest
Period therefor, Convert into a Base Rate Advance, and (ii) the obligation of
the Banks to make, or to Convert Revolving Credit Advances into, Eurodollar Rate
Advances shall be suspended until the Agent shall notify the Borrowers and the
Banks that the circumstances causing such suspension no longer exist.

                  (c)      If a Borrower shall fail to select the duration of
any Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Agent will forthwith so notify such Borrower and the Banks and such Revolving
Credit Advances will automatically, on the last day of the then existing
Interest Period therefor, Convert into Base Rate Advances.

                  (d)      On the date on which the aggregate unpaid principal
amount of Eurodollar Rate Advances comprising any Revolving Credit Borrowing
shall be reduced, by payment or prepayment or otherwise, to less than
$10,000,000, such Revolving Credit Advances shall automatically Convert into
Base Rate Advances and the applicable Borrower shall pay any amounts required to
be paid pursuant Section 8.4(c) as a result of such Conversion.

                  (e)      Upon the occurrence and during the continuance of any
Event of Default under Section 6.1(a), (i) each Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance and (ii) the obligation of the Banks to make,
or to Convert Advances into, Eurodollar Rate Advances shall be suspended.

                  SECTION 2.15. Optional Conversion of Revolving Credit
Advances. Any Borrower may on any Business Day, upon notice given to the Agent
not later than 11:00 a.m.

                                       27

(New York City time) on the third Business Day prior to the date of the proposed
Conversion and subject to the provisions of Sections 2.14 and 2.16, Convert all
Revolving Credit Advances of one Type comprising the same Revolving Credit
Borrowing into Revolving Credit Advances of the other Type; provided, however,
that any Conversion of Eurodollar Rate Advances into Base Rate Advances shall be
made only on the last day of an Interest Period for such Eurodollar Rate
Advances and any Conversion of Base Rate Advances into Eurodollar Rate Advances
shall be in an amount not less than $10,000,000. Each such notice of a
Conversion shall, within the restrictions specified above, specify (a) the date
of such Conversion, (b) the Revolving Credit Advances to be Converted and (c) if
such Conversion is into Eurodollar Rate Advances, the duration of the initial
Interest Period for each such Advance. Each notice of Conversion shall be
irrevocable and binding on such Borrower.

                  SECTION 2.16. Illegality. Notwithstanding any other provision
of this Agreement, if any Bank shall notify the Agent that the introduction of
or any change in or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental authority having relevant
jurisdiction asserts that it is unlawful, for any Bank or its Eurodollar Lending
Office to perform its obligations hereunder to make Eurodollar Rate Advances or
to fund or maintain Eurodollar Rate Advances hereunder, (a) each Eurodollar Rate
Advance will automatically, upon such demand, Convert into a Base Rate Advance
and (b) the obligation of the Banks to make Eurodollar Rate Advances or to
Convert Revolving Credit Advances into Eurodollar Rate Advances shall be
suspended until the Agent shall notify the Borrowers and the Banks that the
circumstances causing such suspension no longer exist.

                  SECTION 2.17. Additional Interest on Eurodollar Rate Advances.
Each Borrower shall pay to each Bank, so long as such Bank shall be required
under regulations of the Board of Governors of the Federal Reserve System to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities, additional interest on the unpaid principal
amount of each Eurodollar Rate Advance of such Bank to such Borrower, from the
date of such Revolving Credit Advance until such principal amount is paid in
full, at an interest rate per annum equal at all times to the remainder obtained
by subtracting (a) the Eurodollar Rate for the Interest Period for such
Revolving Credit Advance from (b) the rate obtained by dividing such Eurodollar
Rate by a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage
of such Bank for such Interest Period, payable on each date on which interest is
payable on such Revolving Credit Advance. Such additional interest shall be
determined by such Bank and notified to such Borrower through the Agent. A
certificate as to the amount of such additional interest submitted to such
Borrower and the Agent by such Bank shall be conclusive and binding for all
purposes, absent manifest error. No Bank shall have the right to recover any
additional interest pursuant to this Section 2.17 for any period more than 90
days prior to the date such Bank notifies the Borrowers that additional interest
may be charged pursuant to this Section 2.17.

                  SECTION 2.18. Existing Letters of Credit. Effective as of the
Effective Date, all "Letters of Credit" issued and outstanding under the LC
Agreement for the account of TWC shall be deemed to be Letters of Credit
hereunder.

                                       28

                                   ARTICLE III

                                   CONDITIONS

                  SECTION 3.1. Conditions Precedent to Effectiveness of
Agreement. Article II hereof shall become effective on and as of the first date
(the "Effective Date") on which the Agent shall have received counterparts of
this Agreement duly executed by the Borrowers and all of the Banks and the
following additional conditions precedent have been satisfied or the following
additional documents have been received (except as provided otherwise in Section
3.1(i) below, all in form and substance satisfactory to the Agent):

                  (a)      Except as otherwise disclosed publicly (including
         disclosure in Public Filings prior to the date hereof) or to the
         Co-Lead Arrangers and the Banks prior to the date hereof, there shall
         not have occurred a material adverse change in the business, financial
         condition, operations or properties of the Borrowers and their
         Subsidiaries, taken as a whole, since December 31, 2002.

                  (b)      The Agent shall have received (in addition to a fully
         executed counterpart of this Agreement) the Notes, to the extent
         requested by a Bank and an executed copy of each other Credit Document.

                  (c)      The Agent shall have received certified copies of the
         resolutions of the Board of Directors, or the Executive Committee
         thereof, of each Borrower authorizing the execution of this Agreement,
         the Notes and each Notice of Letter of Credit and Notice of Revolving
         Credit Borrowing, and any other Credit Documents to which such Borrower
         is a party, and all other documents, in each case evidencing any
         necessary company action and governmental and other third party
         approvals and consents, if any, with respect to each such Credit
         Document and the transactions thereunder and hereunder.

                  (d)      The Agent shall have received a certificate of the
         Secretary or an Assistant Secretary of each Borrower certifying the
         names and true signatures of the officers of such Borrower authorized
         to sign each Credit Document to which it is or is to be a party and the
         other documents to be delivered hereunder and thereunder.

                  (e)      The Agent shall have received a copy of a certificate
         of the Secretary of State of the jurisdiction of incorporation of each
         Borrower, dated reasonably near the Effective Date, certifying (i) as
         to a true and correct copy of the charter of such Borrower, and each
         amendment thereto on file in such Secretary's office and (ii) that (x)
         such amendments are the only amendments to such Borrower's charter or
         other organizational documents on file in such Secretary's office, (y)
         such Borrower has paid all franchise taxes to the date of such
         certificate and (z) such Borrower is duly incorporated and in good
         standing or presently subsisting under the laws of the State of the
         jurisdiction of its incorporation.

                  (f)      The Agent shall have received opinions of each of (i)
         James J. Bender, Esq., General Counsel of TWC, substantially in the
         forms of Exhibit A hereto and (ii) White & Case LLP, New York counsel
         to the Borrowers, substantially in the form of

                                       29

         Exhibit B, and, in each case, as to such other matters as any Bank
         through the Agent may reasonably request.

                  (g)      The Agent shall have received a certificate of each
         Borrower, signed on behalf of such Borrower by an Authorized Officer
         thereof, dated as of the Effective Date (the statements made in which
         certificate shall be true on and as of the Effective Date), certifying
         as to (i) the absence of any amendments to the charter of such Borrower
         since the date of the Secretary of State's certificate referred to in
         clause (e) above, (ii) a true and correct copy of the bylaws of such
         Borrower as in effect on the date on which the resolutions referred to
         in clause (c) were adopted and on the Effective Date, (iii) the due
         incorporation and good standing or valid existence of such Borrower as
         a corporation organized under the laws of the jurisdiction of its
         incorporation or organization, (iv) the truth, in all material
         respects, of the representations and warranties contained in this
         Agreement and the Credit Documents as though made on and as of the
         Effective Date other than any such representations or warranties that,
         by their terms, refer to a specific date other than the Effective Date,
         in which case as of such specific date and (v) the absence of any event
         occurring and continuing, or resulting from the consummation of the
         transactions hereunder or pursuant to the Credit Documents, that
         constitutes an Event of Default (other than any Event of Default which
         may arise as a result of a draw or probability of a draw under a Letter
         of Credit).

                  (h)      TWC shall have paid in full all accrued fees and
         expenses of the Agent, the Co-Lead Arrangers and the Banks (including
         the accrued reasonable fees and expenses of counsel to the Agent and
         the Co-Lead Arrangers for which an invoice has been received by the
         Borrowers).

                  (i)      Evidence that the Existing Credit Documentation shall
         have been terminated including (unless TWC otherwise agrees) release of
         substantially all liens thereunder and TWC shall have paid or agreed to
         pay all fees and expenses reasonably incurred pursuant therewith.

                  SECTION 3.2. Conditions Precedent to a Revolving Credit
Advance and an Issuance of a Letter of Credit. The obligation of each Bank to
make a Revolving Credit Advance on the occasion of any Revolving Credit
Borrowing and each Issuing Bank to issue or renew a Letter of Credit shall be
subject to the further conditions precedent that (i) the Agent shall have
received a Notice of Revolving Credit Borrowing in the form of Exhibit D-2
hereto or a Notice of Letter of Credit in the form of Exhibit D-1 hereto, as the
case may be, (ii) in the case of each Revolving Credit Advance and issuance or
renewal of a Financial Letter of Credit only, the Agent shall have received a
certificate of an Authorized Officer of TWC certifying that the delivery and
deposit of Collateral to the Collateral Account in connection with such
Revolving Credit Borrowing or issuance or renewal of a Financial Letter of
Credit does not give rise to default or an event of default pursuant to the
terms and conditions of any material indenture, agreement or other instrument of
the Borrowers which restricts the amount of Collateral which the Borrowers are
permitted to provide hereunder in such detail as the Agent may reasonably
require and (iii) on the date of such Revolving Credit Borrowing or issuance of
such Letter of Credit, the following statements shall be true (and each of the
giving of the applicable Notice of Borrowing or Notice of Letter of Credit and
the acceptance by such Borrower of the proceeds of

                                       30

such Revolving Credit Borrowing or issuance of such Letter of Credit shall
constitute a representation and warranty by such Borrower that on the date of
such Revolving Credit Borrowing or such Letter of Credit is issued such
statements are true):

                  (a)      there has been no Change of Control Event;

                  (b)      each of the representations and warranties contained
         in Section 4.1(a) through (d), (h) and (l) are correct in all material
         respects on and as of the date of such Revolving Credit Borrowing or
         issuance or renewal of such Letter of Credit, before and after giving
         effect to such Revolving Credit Borrowing or issuance or renewal of
         such Letter of Credit, as though made on and as of such date (unless
         such representation and warranty speaks solely as of a particular date
         or a particular period, in which case, as of such date or for such
         period);

                  (c)      solely in connection with any Revolving Credit
         Borrowing or issuance or renewal of a Financial Letter of Credit, there
         has been no, nor will there be, any Cross-Acceleration Event or
         Judgment Event before or after giving effect to such Revolving Credit
         Borrowing or issuance or renewal of such Financial Letter of Credit;

                  (d)      no event has occurred and is continuing, or would
         result from such Revolving Credit Borrowing or issuance or renewal of
         such Letter of Credit, which constitutes a Default or Event of Default;

                  (e)      after giving effect to such Revolving Credit
         Borrowing or issuance of such Letter of Credit and Letters of Credit
         which have been requested by such Borrower on or prior to such date but
         which have not been made or issued prior to such date, the sum of the
         aggregate amount of all Revolving Credit Advances and Letter of Credit
         Liabilities will not exceed the aggregate of the Commitments of the
         Banks; and

                  (f)      the aggregate mark-to-market value of all Collateral
         in the Collateral Account for which the Collateral Agent has a
         first-priority perfected security interest shall be equal to or greater
         than the Collateral Coverage Requirement before and after giving effect
         to such Revolving Credit Borrowing or issuance or renewal of such
         Letter of Credit.

provided that, notwithstanding anything in this Section 3.2 to the contrary,
with respect to any Letters of Credit which shall automatically renew by their
own terms unless a notice of non-renewal is given by the applicable Issuing
Bank, such Issuing Bank may give such notice of non-renewal (after notice to
such Borrower and in no event earlier than the date 10 days prior to the latest
date on which it is entitled to do so) if applicable conditions precedent
pursuant to this Section 3.2 are not satisfied at the date of issuance of the
notice of non-renewal.

                                       31

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

                  SECTION 4.1. Representations and Warranties of the Borrowers.
The Borrowers represent and warrant as follows:

                  (a)      Each Borrower is duly organized, validly existing and
         in good standing under the laws of the State of Delaware and has all
         corporate powers and all governmental licenses, authorizations,
         certificates, consents and approvals required to carry on its business
         as now conducted in all material respects.

                  (b)      After giving effect to this Agreement and assuming
         the consummation of the transactions contemplated hereby, the
         execution, delivery and performance by each of the Borrowers of the
         Credit Documents to which it is a party and the consummation of the
         transactions contemplated thereby are within such Borrower's corporate
         power, have been duly authorized by all necessary corporate action, and
         do not contravene (i) such Borrower's charter or by-laws, or (ii) law
         or any restriction under any material agreement binding on or affecting
         any Borrower (other than any default which may arise as a result of a
         draw or the probability of a draw under a Letter of Credit).

                  (c)      No authorization or approval or other action by, and
         no notice to or filing with, any Governmental Authority or regulatory
         body is required for the due execution, delivery and performance by any
         Borrower of any Credit Document to which any of them is a party, or the
         consummation of the transactions contemplated thereby.

                  (d)      Each Credit Document to which any Borrower is a party
         has been duly executed and delivered by such Person and is the legal,
         valid and binding obligation of such Person enforceable against such
         Person in accordance with its terms, except as such enforceability may
         be limited by any applicable bankruptcy, insolvency, reorganization,
         moratorium or similar law affecting creditors' rights generally and by
         general principles of equity.

                  (e)      The Consolidated balance sheets of TWC and its
         Subsidiaries as at December 31, 2002, and the related Consolidated
         statements of income and cash flows of TWC and its Subsidiaries for the
         fiscal year then ended, copies of which have been furnished to each
         Bank, and the Consolidated balance sheet of TWC and its Subsidiaries as
         at March 31, 2003, and the related Consolidated statements of income
         and cash flows of TWC and its Subsidiaries for the three months then
         ended, duly certified by an authorized financial officer of TWC, copies
         of which have been furnished to each Bank, fairly present in all
         material respects (in the case of such balance sheets as at March 31,
         2003, and such statements of income and cash flows for the three months
         then ended, subject to normal recurring and other adjustments) the
         Consolidated financial condition of TWC and its Subsidiaries as at such
         dates and the Consolidated results of operations of TWC and its
         Subsidiaries for the year and three-month period, respectively, ended
         on such dates, all in accordance with generally accepted accounting
         principles consistently applied. Except as has been disclosed to each
         Bank prior to the date of this Agreement,

                                       32

         from December 31, 2002 to the date of this Agreement, there has been no
         material adverse change in the Consolidated financial condition or
         Consolidated results of operations of TWC and its Consolidated
         Subsidiaries.

                  (i)      The Consolidated balance sheet of NWP and its
         Subsidiaries as at December 31, 2002, and the related Consolidated
         statement of income and cash flows of NWP and its Subsidiaries for the
         fiscal year then ended, copies of which have been furnished to each
         Bank, and the Consolidated balance sheet of NWP and its Subsidiaries as
         at March 31, 2003, and the related Consolidated statement of income and
         cash flows of NWP and its Subsidiaries for the three months then ended,
         duly certified by an authorized financial officer of NWP, copies of
         which have been furnished to each Bank, fairly present in all material
         respects, subject, in the case of such balance sheet as at March 31,
         2003, and such statements of income and cash flows for the three months
         then ended, to normal recurring and other adjustments, the Consolidated
         financial condition of NWP and its Subsidiaries as at such dates and
         the Consolidated results of operations of NWP and its Subsidiaries for
         the year and three-month period, respectively, ended on such dates, all
         in accordance with generally accepted accounting principles
         consistently applied.

                  (ii)     The Consolidated balance sheet of TGPL and its
         Subsidiaries as at December 31, 2002, and the related Consolidated
         statement of income and cash flows of TGPL and its Subsidiaries for the
         fiscal year then ended, copies of which have been furnished to each
         Bank, and the Consolidated balance sheet of TGPL and its Subsidiaries
         as at March 31, 2003, and the related Consolidated statement of income
         and cash flows of TGPL and its Subsidiaries for the three months then
         ended, duly certified by an authorized financial officer of TGPL,
         copies of which have been furnished to each Bank, fairly present in all
         material respects, subject, in the case of such balance sheet as at
         March 31, 2003, and such statements of income and cash flows for the
         three months then ended, to year-end audit adjustments, the
         Consolidated financial condition of TGPL and its Subsidiaries as at
         such dates and the Consolidated results of operations of TGPL and its
         Subsidiaries for the year and three-month period, respectively, ended
         on such dates, all in accordance with generally accepted accounting
         principles consistently applied.

                  (f)      Except as set forth in the Public Filings, there is
         no pending or, to the knowledge of each Borrower, threatened action or
         proceeding affecting any Borrower or any of their Subsidiaries or
         against any of its or their respective properties or revenues before
         any Governmental Authority or arbitrator (other than such threatened
         actions or proceedings which are being contested in good faith and by
         appropriate proceedings and with respect to which liabilities in
         conformity with generally accepted accounting principles, if required
         by such principles, have been established by the applicable Borrower or
         such Subsidiary, as the case may be) which could reasonably be expected
         to materially and adversely affect the value of the Collateral or on
         the ability of the Banks to exercise their rights and remedies in
         respect of the Collateral.

                  (g)      No Letter of Credit or Revolving Credit Advance has
         been or will be used for any purpose or in any manner contrary to the
         provisions of Section 5.2(b).

                                       33

                  (h)      No Borrower is engaged in the business of extending
         credit for the purpose of purchasing or carrying margin stock (within
         the meaning of Regulation U issued by the Federal Reserve Board), and
         no proceeds of any issuance of a Letter of Credit or Revolving Credit
         Advance will be used to purchase or carry any such margin stock (other
         than purchases of common stock expressly permitted by Section 5.2(b))
         or to extend credit to others for the purpose of purchasing or carrying
         any such margin stock.

                  (i)      No Borrower is an "investment company" or a company
         "controlled" by an "investment company" within the meaning of the
         Investment Company Act of 1940, as amended.

                  (j)      No Termination Event has occurred or is reasonably
         expected to occur with respect to any Plan that could reasonably be
         expected to have a material adverse effect on the value of the
         Collateral, the perfection or priority of the liens of the Collateral
         Agent (for the benefit of the Secured Parties) on any material portion
         of such Collateral, or the ability of the Banks to exercise their
         rights and remedies in respect of the Collateral. No Borrower has nor
         has any ERISA Affiliate of any Borrower received any notification that
         any Multiemployer Plan is in reorganization or has been terminated,
         within the meaning of Title IV of ERISA, and no Borrower is aware of
         any reason to expect that any Multiemployer Plan is to be in
         reorganization or to be terminated within the meaning of Title IV of
         ERISA that would have any material adverse effect on the value of the
         Collateral or the ability of the Banks to exercise their rights and
         remedies in respect of the Collateral.

                  (k)      No Borrower is a "holding company," or a "subsidiary
         company" of a "holding company," or an "affiliate" of a "holding
         company" or of a "subsidiary company" of a "holding company," or a
         "public utility" within the meaning of the Public Utility Holding
         Company Act of 1935, as amended.

                  (l)      After taking all actions required to be made by TWC
         which are necessary to perfect the security interest in the Collateral
         created under the Security Agreement, the Security Agreement will
         create in favor of the Collateral Agent for the benefit of the Secured
         Parties (as defined in the Security Agreement) a valid, and together
         with any applicable actions, perfected first priority security interest
         in the Collateral, securing payment of the Secured Obligations (as
         defined in the Security Agreement). TWC is the legal and beneficial
         owner of the Collateral free and clear of any lien other than those in
         favor of the Collateral Agent for the benefit of the Secured Parties.

                                   ARTICLE V

                           COVENANTS OF THE BORROWERS

                  SECTION 5.1. Affirmative Covenants. So long as any Revolving
Credit Advance shall remain unpaid, any Letter of Credit or Reimbursement
Obligation shall remain outstanding, any Letter of Credit Liability shall exist,
any Issuing Bank shall have any Letter of Credit Commitment or any Bank shall
have any Commitment hereunder, each Borrower will, unless the Majority Banks
shall otherwise consent in writing:

                                       34

                  (a)      Compliance with Laws, Etc. Comply in all material
         respects with all applicable laws, rules, regulations and orders (other
         than such non-compliance matters which are being contested in good
         faith and by proper proceedings and with respect to which reserves in
         conformity with generally accepted accounting principles, if required
         by such principles, have been established by the applicable Borrower
         books of such Borrower) and where such failure to comply could not
         reasonably be expected to have a material adverse effect on the value
         of the Collateral, the perfection or priority of the liens of the
         Collateral Agent (for the benefit of the Secured Parties) on any
         material portion of such Collateral, or on the ability of the Banks to
         exercise their rights and remedies in respect of the Collateral.

                  (b)      Reporting Requirements. Furnish to each of the Banks:

                           (i)      as soon as possible and in any event within
                  five Business Days after the occurrence of each Default, Event
                  of Default or Mandatory Prepayment Event, continuing on the
                  date of such statement, a statement of an Authorized Financial
                  Officer of such Borrower setting forth the details of such
                  Default or Event of Default and the actions, if any, which
                  such Borrower has taken and proposes to take with respect
                  thereto;

                           (ii)     as soon as available and in any event not
                  later than 60 days after the end of each of the first three
                  quarters of each Fiscal Year of such Borrower, (1) the
                  unaudited Consolidated balance sheet of such Borrower and its
                  Consolidated Subsidiaries as of the end of such quarter and
                  the unaudited Consolidated statements of income and cash flows
                  of such Borrower and its Consolidated Subsidiaries for the
                  period commencing at the end of the previous year and ending
                  with the end of such quarter, all in reasonable detail and
                  duly certified (subject to normal recurring and other
                  adjustments and the lack of footnotes) by an Authorized
                  Financial Officer of such Borrower as having been prepared in
                  accordance with generally accepted accounting principles;
                  provided that, if any financial statement referred to in this
                  clause (ii) of Section 5.1(b) is readily available on-line
                  through EDGAR as of the date on which such financial statement
                  is required to be delivered hereunder, such Borrower shall not
                  be obligated to furnish copies of such financial statement;
                  and (2) a certificate of an Authorized Financial Officer of
                  such Borrower stating that he or she has no knowledge that a
                  Default or Event of Default has occurred and is continuing or,
                  if a Default or Event of Default has occurred and is
                  continuing, a statement as to the nature thereof and the
                  action, if any, which such Borrower proposes to take with
                  respect thereto;

                           (iii)    as soon as available and in any event not
                  later than (1) 105 days after the end of each Fiscal Year of
                  such Borrower, a copy of the annual audited report for such
                  year for such Borrower and its Consolidated Subsidiaries,
                  including therein the Consolidated balance sheet of such
                  Borrower and its Consolidated Subsidiaries as of the end of
                  such fiscal year and Consolidated statements of income and
                  cash flows of such Borrower and its Consolidated Subsidiaries
                  for such fiscal year, in each case prepared in accordance with

                                       35

                  generally accepted accounting principles and reported on by
                  Ernst & Young, LLP or other independent certified public
                  accountants of recognized standing acceptable to the Majority
                  Banks; provided that if any financial statement referred to in
                  this clause (iii) of Section 5.1(b) is readily available
                  on-line through EDGAR as of the date on which such financial
                  statement is required to be delivered hereunder, the Borrowers
                  shall not be obligated to furnish copies of such financial
                  statement; and (2) 120 days after the end of each Fiscal Year
                  of such Borrower, a certificate of an Authorized Financial
                  Officer of such Borrower stating that he or she has no
                  knowledge that a Default or Event of Default has occurred and
                  is continuing or, if a Default or Event of Default has
                  occurred and is continuing, a statement as to the nature
                  thereof and the action, if any, which such Borrower proposes
                  to take with respect thereto.

                           (iv)     promptly after the sending or filing
                  thereof, copies of all proxy material, reports and other
                  information which any Borrower sends to any of its security
                  holders, and copies of all final reports and final
                  registration statements which any Borrower files with the
                  Securities and Exchange Commission or any national securities
                  exchange; provided that if such proxy materials and reports,
                  registration statements and other information are readily
                  available on-line through EDGAR, such Borrower shall not be
                  obligated to furnish copies thereof.

                  (c)      Preservation of Corporate Existence, Etc. Preserve
         and maintain its existence, legal structure, legal name, and rights
         (charter and statutory), in the jurisdiction of its incorporation or
         formation, and qualify and remain qualified as a foreign corporation
         and maintain and preserve its franchise and privileges in each
         jurisdiction in which such qualification, franchise or privilege is
         necessary or desirable in view of its business and operations in the
         reasonable judgment of the applicable Borrower, except any Borrowers
         may consummate any merger, consolidation or sale, lease or transfer all
         or substantially of its assets as permitted pursuant to Section 5.2(a).

                  (d)      Security Interest in Collateral. Cause, and take all
         action reasonably requested by the Collateral Agent to maintain, a
         first priority perfected security interest to exist at all times in the
         Collateral held on deposit in the Collateral Account in favor of the
         Collateral Agent for the benefit of itself and the Secured Parties (as
         defined in the Security Agreement) pursuant to the Security Agreement.

                  SECTION 5.2. Negative Covenants. So long as any Revolving
Credit Advance shall remain unpaid, any Letter of Credit or Reimbursement
Obligation shall remain outstanding, any Letter of Credit Liability shall exist,
any Issuing Bank shall have any Letter of Credit Commitment or any Bank shall
have any Commitment hereunder, each Borrower will not, without the written
consent of the Majority Banks:

                  (a)      Mergers, Etc. Merge or consolidate with or into any
         other Person, or sell, lease or otherwise transfer all or substantially
         all of its assets, except that any Borrower may merge into, consolidate
         with or into or sell, lease or otherwise transfer all or substantially
         all of its assets to any successor or purchaser Business Entity so long
         as such successor or purchaser Business Entity shall be organized in
         the United States of

                                       36

         America and shall have expressly assumed this Agreement and the
         obligations of such Borrower hereunder and under the other Credit
         Documents.

                  (b)      Use of Proceeds. Use any Letter of Credit or proceeds
         of any Revolving Credit Advance for any purpose other than general
         corporate purposes relating to the business of a Borrower (including
         without limitation, working capital, capital expenditures, and the
         acquisition, purchase or redemption of any Equity Interests or of any
         Debt of any Borrower or its Subsidiary), or use any Letter of Credit or
         proceeds of any Revolving Credit Advance in any manner which violates
         or results in a violation of law.

                                   ARTICLE VI

                                EVENTS OF DEFAULT

                  SECTION 6.1. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:

                  (a)      Any Borrower (i) shall fail to pay any Reimbursement
         Obligation when the same becomes due and payable, (ii) shall fail to
         pay any principal of any Revolving Credit Advance or any Note executed
         by it when the same becomes due and payable, (iii) shall fail to pay
         any interest on any Reimbursement Obligation, Revolving Credit Advance
         or Note within five Business Days after the same becomes due and
         payable or (iv) shall fail to pay any fee or other amount to be paid by
         it hereunder or under any Credit Document to which it is a party within
         ten days after the same becomes due and payable; or

                  (b)      Any certification, representation or warranty made by
         any Borrower herein or in any other Credit Document or by any Borrower
         (or any officer of any Borrower) in writing under or in connection with
         this Agreement or in any other Credit Document or any instrument
         executed in connection herewith (including representations and
         warranties deemed made pursuant to Section 3.2) shall prove to have
         been materially incorrect in any material respect when made or deemed
         made; or

                  (c)      Any Borrower shall fail to perform or observe (i) any
         term, covenant or agreement contained in Section 5.1(b)(i) on its part
         to be performed or observed and such failure shall continue for five
         Business Days after the earlier of the date notice thereof shall have
         been given to such Borrower by the Agent or any Bank or the date any
         Authorized Financial Officer of such Borrower shall have actual
         knowledge of such failure, or (ii) any term, covenant or agreement
         contained in Section 5.1(b) (other than a term, covenant or agreement
         contained in Section 5.1(b)(i)) on its part to be performed or observed
         and such failure shall continue for ten Business Days after the earlier
         of the date notice thereof shall have been given to such Borrower by
         the Agent or any Bank or the date any Authorized Financial Officer of
         such Borrower shall have actual knowledge of such failure, or (iii) any
         term, covenant or agreement contained in this Agreement (other than a
         term, covenant or agreement contained in Section 5.1(b), Section 5.1(d)
         or Section 5.2) or any other Credit Document on its part to be
         performed or observed and such

                                       37

         failure shall continue for thirty days after the earlier of the date
         notice thereof shall have been given to such Borrower by the Agent or
         any Bank or the date any Authorized Financial Officer of such Borrower
         shall have actual knowledge of such failure, or (iv) any term, covenant
         or agreement contained in Section 5.1(d) on its part to be performed or
         observed and such failure shall continue for one Business Day after the
         earlier of the date notice thereof shall have been given to such
         Borrower by the Agent or any Bank or the date any Authorized Financial
         Officer of such Borrower shall have actual knowledge of such failure,
         or (v) any term, covenant or agreement contained in Section 5.2; or

                  (d)      Any Borrower (i) shall generally not pay its debts as
         such debts become due, or (ii) shall admit in writing its inability to
         pay its debts generally, or shall make a general assignment for the
         benefit of creditors or any proceeding shall be instituted by or
         against the Borrower seeking to adjudicate it a bankrupt or insolvent,
         or seeking liquidation, winding up, reorganization, arrangement,
         adjustment, protection, relief, or composition of it or its debts under
         any law relating to bankruptcy, insolvency or reorganization or relief
         of debtors, or seeking the entry of an order for relief or the
         appointment of a receiver, trustee, or other similar official for it or
         for any substantial part of its property and, in the case of any such
         proceeding instituted against it (but not instituted by it), shall
         remain undismissed or unstayed for a period of 60 days; or any Borrower
         shall take any action to authorize any of the actions set forth above
         in this subsection (d); or

                  (e)      Any material provision in the Security Agreement for
         any reason is not a legal, valid, binding and enforceable obligation of
         any Borrower party thereto or any Borrower party thereto shall so state
         in writing; or

                  (f)      the aggregate mark-to-market value of the Collateral
         shall be less than the Collateral Coverage Requirement for a period of
         five consecutive Business Days after the date of receipt by the
         Borrowers of written notice (which notice shall specify in reasonable
         detail the calculation and amount of such shortfall amount) from the
         Collateral Agent;

then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Majority Banks, by notice to the Borrowers, declare the
Commitments of each Bank, the obligations of each Issuing Bank to issue any
Letter of Credit and each Bank to make Revolving Credit Advances to be
terminated, whereupon each such obligation shall forthwith terminate, and (ii)
shall at the request, or may with the consent, of the Majority Banks, by notice
to the Borrowers, declare the principal of the Reimbursement Obligations and
Revolving Credit Advances, all interest thereon and all other amounts payable by
the Borrowers under this Agreement and any other Credit Document to be forthwith
due and payable, whereupon all such amounts shall become and be forthwith due
and payable, without requirement of any presentment, demand, protest, notice of
intent to accelerate, further notice of acceleration or other further notice of
any kind (other than the notice expressly provided for above), all of which are
hereby expressly waived by the Borrowers; provided, however, that in the event
of any Event of Default described in Section 6.1(d)(ii), (A) the Commitments of
each Bank, the obligation of each Issuing Bank to issue a Letter of Credit and
each Bank to make Revolving Credit Advances shall automatically be terminated
and (B) the principal of the Reimbursement Obligations and

                                       38

Revolving Credit Advances, all such interest and all such other amounts shall
automatically become and be due and payable, without presentment, demand,
protest, notice of intent to accelerate, notice of acceleration or any other
notice of any kind, all of which are hereby expressly waived by the Borrowers.
For purposes of this Section 6.1, any Reimbursement Obligation or Revolving
Credit Advances owed to an SPC shall be deemed to be owed to its Designating
Bank.

                                  ARTICLE VII

               THE AGENT; THE COLLATERAL AGENT; AND ISSUING BANKS

                  SECTION 7.1. Agent's and Collateral Agent's Authorization and
Action. Each Bank hereby appoints and authorizes the Agent and the Collateral
Agent to take such action respectively as agent and collateral agent on its
behalf and to exercise such powers under this Agreement and the other Credit
Documents as are delegated respectively to the Agent and to the Collateral Agent
by the terms hereof and thereof, together with such powers as are reasonably
incidental thereto. As to any matters not expressly provided for by the Credit
Documents (including enforcement of the terms of this Agreement or collection of
the Reimbursement Obligations or Notes, fees and any other amounts due and
payable pursuant to this Agreement), neither the Agent nor the Collateral Agent
shall be required to exercise any discretion or take any action, but shall be
required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Majority Banks,
and such instructions shall be binding upon all Banks and all holders of Notes;
provided, however, that the neither the Agent nor the Collateral Agent shall be
required to take any action which exposes the Agent or the Collateral Agent to
personal liability or which is contrary to the Credit Documents or applicable
law. The Agent and the Collateral Agent agree to give to each Bank prompt notice
of each notice given to it by any Borrower pursuant to the terms of this
Agreement or any other Credit Document.

                  SECTION 7.2. Agent's and Collateral Agent's Reliance, Etc.
Neither the Agent nor the Collateral Agent nor any of their respective
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by them or under or in connection with this Agreement,
except for its or their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, the Agent and the Collateral
Agent: (i) may consult with their respective legal counsel (including counsel
for any Borrower), independent public accountants and other experts selected by
them and shall not be liable for any action taken or omitted to be taken in good
faith by them in accordance with the advice of such counsel, accountants or
experts; (ii) make no warranty or representation to any Bank and shall not be
responsible to any Bank for any statements, warranties or representations
(whether written or oral) made in or in connection with this Agreement or any
other Credit Document; (iii) shall not have any duty to ascertain or to inquire
as to the performance or observance of any of the terms, covenants or conditions
of this Agreement or any other Credit Document on the part of any Borrower or to
inspect the property (including the books and records) of any Borrower; (iv)
shall not be responsible to any Bank for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement, any other
Credit Document or any other instrument or document furnished pursuant hereto or
thereto; (v) shall incur no liability under or

                                       39

in respect of any Letter of Credit, Note or this Agreement by acting upon any
notice, consent, certificate or other instrument or writing (which may be by
telecopier, telegram, cable or telex) believed by them in their reasonable
judgement to be genuine and signed or sent by the proper party or parties; (vi)
may treat any Issuing Bank that issues or has issued a Letter of Credit as being
the issuer of such Letter of Credit for all purposes and (vii) may treat a Bank
as the obligee of any Revolving Credit Advance or, if applicable, the payee of
any Note as the holder thereof, until the Agent receives and accepts a Transfer
Agreement executed by a Borrower (if required pursuant to Section 8.5), the
assignor Bank and the assigning Bank pursuant to Section 8.5.

                  SECTION 7.3. Issuing Banks' Reliance, Etc. Neither the Issuing
Banks nor any directors, officers, agents or employees of the Issuing Banks
shall be liable for any action taken or omitted to be taken by any of them under
or in connection with this Agreement, except for its or their own gross
negligence or willful misconduct. The Issuing Banks shall not have, by reason of
this Agreement a fiduciary relationship in respect of any Bank; and nothing in
this Agreement, expressed or implied, is intended or shall be so construed as to
impose upon the Issuing Banks any obligations in respect of this Agreement
except as expressly set forth herein. Without limitation of the generality of
the foregoing, the Issuing Banks: (i) may consult with legal counsel (including
counsel for any Borrower), independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (ii) make no warranty or representation to any Bank and
shall not be responsible to any Bank for any statements, warranties or
representations (whether written or oral) made in or in connection with this
Agreement or any other Credit Document; (iii) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement or any other Credit Document on the
part of any Borrower or to inspect the property (including the books and
records) of any Borrower; (iv) shall not be responsible to any Bank for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or any other Credit Document or any other instrument or
document furnished pursuant hereto or thereto; and (v) shall incur no liability
under or in respect of any Letter of Credit or this Agreement by acting upon any
notice, consent, certificate or other instrument or writing (which may be by
telecopier, telegram, cable or telex) believed by it in its reasonable judgment
to be genuine and signed or sent by the proper party or parties.

                  SECTION 7.4. Rights. With respect to its Commitments, the
Revolving Credit Advances made by it and the Notes, if any, issued to it, or any
Letter of Credit Interest held by it, Citibank shall have the same rights and
powers under any such Note and this Agreement as any other Bank and may exercise
the same as though it was not the Agent and Collateral Agent; with respect to
its Letter of Credit Commitments, the Reimbursement Obligations owed to it, any
Letter of Credit Interest held by it, the Issuing Banks shall have the right and
power under this Agreement as any other Bank and may exercise the same as though
it was not an Issuing Bank, as the case may be. The term "Bank" or "Banks"
shall, unless otherwise expressly indicated, include each of the Issuing Banks
in their individual capacity. Citibank, each Issuing Bank and the respective
affiliates of each may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with, any Borrower,
any Person who may do business with or own, directly or indirectly, securities
of any Borrower and any other Person, all as if Citibank were not the Agent and
Collateral Agent and each Issuing Bank was not an Issuing Bank, in each case
without any duty to account therefor to the Banks.

                                       40

                  SECTION 7.5. Indemnification. The Banks agree to indemnify the
Agent and the Collateral Agent (to the extent not reimbursed by the Borrowers),
ratably according to the respective Letter of Credit Interests then held by each
of them plus the respective principal amounts of the Revolving Credit Advances
owed to each of them (or if no Letter of Credit Interests or Revolving Credit
Advances are at the time outstanding, ratably according to their respective LC
Participation Percentage plus their Revolving Credit Commitments), from and
against any and all claims, damages, losses, liabilities and expenses (including
reasonable fees and disbursements of counsel) of any kind or nature whatsoever
which may be imposed on, incurred by, or asserted against either the Agent or
the Collateral Agent in any way relating to or arising out of this Agreement or
any other Credit Document or any action taken or omitted by the Agent or the
Collateral Agent under this Agreement or any other Credit Document (EXPRESSLY
INCLUDING ANY SUCH CLAIM, DAMAGE, LOSS, LIABILITY OR EXPENSE ATTRIBUTABLE TO THE
ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE OF THE AGENT, BUT EXCLUDING ANY SUCH
CLAIM, DAMAGE, LOSS, LIABILITY OR EXPENSE ATTRIBUTABLE TO THE GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT OF THE AGENT AND THE COLLATERAL AGENT). IT IS THE INTENT
OF THE PARTIES HERETO THAT THE AGENT AND THE COLLATERAL AGENT SHALL, TO THE
EXTENT PROVIDED IN THIS SECTION 7.5, BE INDEMNIFIED FOR RESPECTIVELY FOR THEIR
OWN ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE. Without limitation of the
foregoing, each Bank agrees to reimburse the Agent and the Collateral Agent
promptly upon demand for their respective ratable shares of any out-of-pocket
expenses (including counsel fees) incurred respectively by the Agent and the
Collateral Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under this Agreement or any other Credit Document to
the extent that the Agent and the Collateral Agent are not reimbursed for such
expenses by the Borrowers.

                  (a)      The Banks agree to indemnify each Issuing Bank (to
the extent not reimbursed by the Borrowers), ratably according to the respective
Letter of Credit Interests then held by each of them plus the respective
principal amounts so the Revolving Credit Advances owed to each of them (or if
no Letter of Credit Interests or Revolving Credit Advances are at the time
outstanding, ratably according to their respective LC Participation Percentage
plus their Revolving Credit Commitments), from and against any and all claims,
damages, losses, liabilities and expenses (including reasonable fees and
disbursements of counsel) of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against any Issuing Bank in any way relating to or
arising out of this Agreement or any other Credit Document or any action taken
or omitted by any Issuing Bank under this Agreement or any other Credit Document
(EXPRESSLY INCLUDING ANY SUCH CLAIM, DAMAGE, LOSS, LIABILITY OR EXPENSE
ATTRIBUTABLE TO THE ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE OF ANY ISSUING
BANK, BUT EXCLUDING ANY SUCH CLAIM, DAMAGE, LOSS, LIABILITY OR EXPENSE
ATTRIBUTABLE TO THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH ISSUING
BANK). IT IS THE INTENT OF THE PARTIES HERETO THAT AN ISSUING BANK SHALL, TO THE
EXTENT PROVIDED IN THIS SECTION 7.5, BE INDEMNIFIED FOR ITS OWN ORDINARY, SOLE
OR CONTRIBUTORY NEGLIGENCE. Without limitation of the foregoing, each Bank
agrees to reimburse each Issuing Bank promptly upon demand for its

                                       41

ratable share of ay out-of-pocket expenses (including counsel fees) incurred by
such Issuing Bank in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
renegotiations, legal proceedings or otherwise) of, or legal advice in respect
of rights or responsibilities under this Agreement or any other Credit Documents
to the extent that such Issuing Bank is not reimbursed for such expenses by the
Borrowers.

                  SECTION 7.6. Successor Agent and Collateral Agent. The Agent
and Collateral Agent may resign at any time respectively as Agent and Collateral
Agent under this Agreement by giving written notice thereof to the Banks and the
Borrowers and may be removed at any time with or without cause by the Majority
Banks; provided, however, that any removal of the Agent will not be effective
until it has also been replaced as Collateral Agent. Upon any such resignation
or removal, the Majority Banks shall have the right to appoint, with the consent
of the Borrowers (which consent shall not be unreasonably withheld and shall not
be required if an Event of Default exists), a successor Agent and Collateral
Agent from among the Banks. If no successor Agent and Collateral Agent shall
have been so appointed by the Majority Banks with such consent, and shall have
accepted such appointment, within 30 days after the respective retiring Agent's
or Collateral Agent's giving of notice of resignation or the Majority Banks'
removal of the retiring Agent or Collateral Agent, then the retiring Agent or
Collateral Agent may, on behalf of the Banks, appoint respectively a successor
Agent or Collateral Agent, which shall be a Bank which is a commercial bank
organized under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Agent or Collateral Agent under this Agreement
by respectively a successor Agent or Collateral Agent, such successor Agent or
Collateral Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent or Collateral Agent
and shall function as the Agent or Collateral Agent under this Agreement, and
the retiring Agent or Collateral Agent shall be discharged from its duties and
obligations as Agent or Collateral Agent under this Agreement. After any
retiring Agent's or Collateral Agent's resignation or removal hereunder
respectively as Agent or Collateral Agent, the provisions of this Article VII
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent or Collateral Agent under this Agreement.

                  SECTION 7.7. Bank Credit Decision. Each of the Banks
acknowledges that it has, independently and without reliance upon the Collateral
Agent, the Agent, the Documentation Agent, the Co-Lead Arrangers, the Issuing
Banks or any other Bank and based on the financial statements referred to in
Section 4.1(e) and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each of the Banks and the other beneficiaries of any Security
Agreement parties hereto (both on its own behalf and on behalf of any of its
Affiliates that is a beneficiary of any Security Agreement) also acknowledges
that it will, independently and without reliance upon the Collateral Agent, the
Agent, the Documentation Agent, the Co-Lead Arrangers, the Issuing Banks or any
other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement and the other Credit Documents. The
Collateral Agent shall not have any duty or responsibility, either initially or
on a continuing basis, to provide any Person with any

                                       42

credit or other information with respect thereto, whether coming into its
possession before the issuance of any Letter of Credit or at any time or times
thereafter.

                  SECTION 7.8. Certain Rights of the Collateral Agent. If the
Collateral Agent shall request instructions from the Majority Banks with respect
to any act or action (including failure to act) in connection with this
Agreement or any other Credit Document, the Collateral Agent shall be entitled
to refrain from such act or taking such action unless and until the Collateral
Agent shall have received instructions from the Majority Banks; and it shall not
incur liability to any Person by reason of so refraining. Without limiting the
foregoing, no Bank nor any beneficiary of any Security Agreement shall have any
right of action whatsoever against the Collateral Agent as a result of its
acting or refraining from acting hereunder or under any other Credit Document in
accordance with the instructions of the Majority Banks or all of the Banks, as
the case may be. Furthermore, except for action expressly required of the
Collateral Agent hereunder, the Collateral Agent shall in all cases be fully
justified in failing or refusing to act hereunder unless it shall be
specifically indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action.

                  SECTION 7.9. Other Agents. The other agents, Documentation
Agent and the Co-Lead Arrangers have no duties or obligations under this
Agreement. None of the other agents, the Documentation Agent or the Co-Lead
Arrangers shall have, by reason of this Agreement or the other Credit Documents,
a fiduciary relationship in respect of any Bank, and nothing in this Agreement
or other Credit Documents, express or implied, is intended or shall be so
construed to impose on any of the other agents, the Documentation or the Co-Lead
Arrangers any obligation in respect of this Agreement or other Credit Documents.

                                  ARTICLE VIII

                                  MISCELLANEOUS

                  SECTION 8.1. Amendments, Etc. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by any Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Majority Banks, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent shall, unless in
writing and signed by all the Banks, do any of the following: (a) except as
provided in Section 3.1(i), waive any of the conditions specified in Article
III, (b) increase the Commitments of the Banks or the Letter of Credit
Commitments of the Issuing Banks or subject any Bank to any additional
obligation, (c) reduce the Reimbursement Obligations, (d) reduce the principal
of, or interest on (other than any interest pursuant to Section 2.13(b)), the
Revolving Credit Advances or any fees or other amounts payable hereunder, (e)
postpone any date fixed for any payment of the Reimbursement Obligations,
Revolving Credit Advances or any fees or other amounts payable hereunder, (f)
change the definition of Majority Banks or otherwise change the LC Participation
Percentages, the percentage of the Commitments or of the aggregate unpaid
principal amount of the Revolving Credit Advances, Letter of Credit Liabilities
or the Reimbursement Obligations, or the number of Banks, which shall be
required for the Banks or any of them to take any action under this Agreement,
(g) release any of the Collateral, except as set forth in the Security

                                       43

Agreement or Section 2.2(c), (h) amend, waive any provision of, or consent to
any departure by any Borrower from Section 2.5(b), Section 2.9 or this Section
8.1, (i) decrease the percentage set forth in the definition of "Collateral
Coverage Requirement" or (j) amend or modify the definition of "Collateral" as
defined herein or as defined in the Security Agreement; and provided further
that no amendment, waiver or consent shall, unless in writing and signed by the
Agent in addition to the Banks required above to take such action, affect the
rights or duties of the Agent under any Credit Document; and provided further
that no amendment, waiver or consent shall, unless in writing and signed by each
Issuing Bank in addition to the Banks required above to take such action, affect
the rights or duties of any Issuing Bank under any Credit Document; and provided
further that no amendment, waiver or consent shall, unless in writing and signed
by the Collateral Agent in addition to the Banks required above to take such
action, affect the rights or duties of the Collateral Agent under any Credit
Document.

                  SECTION 8.2. Notices, Etc. All notices and other
communications provided for hereunder shall be either (x) in writing (including
telecopy communication) and mailed, telecopied or delivered or (y) as and to the
extent set forth in Section 8.2(b) and in the provisos to this Section 8.2(a),
in an electronic medium and delivered, as set forth in Section 8.2(b), if to any
Bank, as specified opposite its name on Schedule I hereto or specified in a
Transfer Agreement for any assignee Bank delivered pursuant to Section 8.5(a);
if to a Borrower, as specified opposite its name on Schedule II hereto; if to an
Issuing Bank to its address as specified opposite its name on Schedule I; and if
to Citibank, as Agent or Collateral Agent, to its address at 2 Penns Way, Suite
200, New Castle, Delaware 19720 (telecopier number: (302) 894-6120), Attention:
Williams Account Officer, with a copy to Citicorp North America, Inc., 1200
Smith Street, Suite 2000, Houston, Texas 77002 (telecopier number: (713)
654-2849), Attention: The Williams Companies, Inc. Account Officer, or, as to
any Borrower, any Issuing Bank, the Collateral Agent, or the Agent, at such
other address as shall be designated by such party in a written notice to the
other parties and, as to each other party, at such other address as shall be
designated by such party in a written notice to any Borrower, each Issuing Bank,
the Collateral Agent and the Agent; provided that materials required to be
delivered pursuant to Section 5.1(b)(ii), (iii) and (iv) shall be delivered to
the Agent as specified in Section 8.2(b) or as otherwise specified to any
Borrower by the Agent; provided, further, that any communication that (A)
relates to a request for a new, or a conversion of an existing, borrowing or
other extension of credit (including any election of an interest rate or
interest period relating thereto), (B) relates to the payment of any principal
or other amount due under the Credit Agreement prior to the scheduled date
therefor, (C) provides notice of any Default or Event of Default under the
Credit Agreement or (D) is required to be delivered to satisfy any condition
precedent to the effectiveness of the Credit Agreement and/or any borrowing or
other extension of credit thereunder, shall be in writing (including telecopy
communication) and mailed, telecopied or delivered pursuant to this Section
8.2(a). All such notices and communications shall, when mailed, telecopied or
e-mailed, be effective when received in the mail, sent by telecopier to any
party to the telecopier number as set forth herein or on Schedule I or Schedule
II or specified in a Transfer Agreement for any assignee Bank delivered pursuant
to Section 8.5(a) (or other telecopy number specified by such party in a written
notice to the other parties hereto) or confirmed by e-mail, respectively, except
that notices and communications to the Agent shall not be effective until
received by the Agent. Any notice or communication to a Bank shall be deemed to
be a notice or communication to any SPC designated by such Bank and no further
notice to an SPC shall be required. Delivery by telecopier of an executed
counterpart of this Agreement or of any amendment or waiver of any

                                       44

provision of this Agreement or any other Credit Document (other than a Letter of
Credit) shall be effective as delivery of a manually executed counterpart
thereof.

                  (a)      So long as Citibank is the Agent, materials required
to be delivered pursuant to Section 5.1(b)(ii), (iii) and (iv) may be delivered
to the Agent (x) in an electronic medium in a format acceptable to the Agent and
the Lenders by e-mail at oploanswebadmin@citigroup.com or (y) in accordance with
Section 8.2(a)(x). The Borrowers agree that the Agent may make such materials,
as well as any other written information, documents, instruments and other
material relating to any Borrower, any Subsidiaries or any other materials or
matters relating to this Agreement, the Notes or any of the transactions
contemplated hereby (collectively, the "Communications") available to the Banks
by posting such notices on "e-Disclosure" (the "Platform"), the Agent's internet
delivery system that is part of Fixed Income Direct, Global Fixed Income's
primary web portal. Although the primary web portal is secured with a dual
firewall and a User ID/Password Authorization System and the Platform is secured
through a single user per deal authorization method whereby each user may access
the Platform only on a deal-by-deal basis, the Borrowers acknowledge that (i)
the distribution of material through an electronic medium is not necessarily
secure and that there are confidentiality and other risks associated with such
distribution, (ii) the Platform is provided "as is" and "as available" and (iii)
neither the Agent nor any of its Affiliates warrants the accuracy, adequacy or
completeness of the Communications or the Platform and each expressly disclaims
liability for errors or omissions in the Communications or the Platform. No
warranty of any kind, express, implied or statutory, including, without
limitation, any warranty of merchantability, fitness for a particular purpose,
non-infringement of third party rights or freedom from viruses or other code
defects, is made by the Agent or any of its Affiliates in connection with the
Platform.

                  (b)      Each Bank agrees that notice to it (as provided in
the next sentence) (a "Notice") specifying that any Communications have been
posted to the Platform shall constitute effective delivery of such information,
documents or other materials to such Bank for purposes of this Agreement;
provided that, if requested by any Bank, the Agent shall deliver a copy of the
Communications to such Bank by e-mail or telecopier. Each Bank agrees (i) to
notify the Agent in writing of such Bank's e-mail address to which a Notice may
be sent by electronic transmission (including by electronic communication) on or
before the date such Bank becomes a party to this Agreement (and from time to
time thereafter to ensure that the Agent has on record an effective e-mail
address for such Bank) and (ii) that any Notice may be sent to such e-mail
address.

                  SECTION 8.3. No Waiver; Remedies. No failure on the part of
any Bank, the Collateral Agent, any Issuing Bank, any Issuing Bank or the Agent
to exercise, and no delay in exercising, any right under this Agreement or any
other Credit Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies provided in this
Agreement are cumulative and not exclusive of any remedies provided by law.

                                       45

                  SECTION 8.4. Costs and Expenses.

                  (a)      (i) TWC agrees to pay on demand all reasonable
out-of-pocket costs and expenses of the Co-Lead Arrangers, the Documentation
Agent, the Collateral Agent, the Agent and the Issuing Banks in connection with
the preparation, execution, delivery, administration, modification and amendment
of this Agreement, the Letters of Credit, the Notes, or any other Credit
Document and the other documents to be delivered under this Agreement, including
the reasonable fees and out-of-pocket expenses of counsel for the Agent with
respect thereto and with respect to advising the Agent as to its rights and
responsibilities under this Agreement, the Notes and any other Credit Document,
the reasonable costs and expenses of the Issuing Banks in connection with any
Letter of Credit, the reasonable costs and expenses of the Collateral Agent and
all amounts paid by the Collateral Agent pursuant to the Security Agreement, and
(ii) TWC agrees to pay on demand all costs and expenses, if any (including
reasonable counsel fees and expenses, which may include allocated costs of
in-house counsel), of the Agent, the Collateral Agent, the Documentation Agent,
the Issuing Banks and each Bank in connection with the enforcement (whether
before or after the occurrence of an Event of Default and whether through
negotiations (including formal workouts or restructurings), legal proceedings or
otherwise) against any Borrower.

                  (b)      Each Borrower agrees, to the fullest extent permitted
by law, to indemnify and hold harmless the Agent, the Collateral Agent, the
Documentation Agent, the Issuing Banks, other agents, the Co-Lead Arrangers and
each Bank and each of their respective directors, officers, employees and agents
(the "Indemnified Parties") from and against any and all claims, damages,
losses, liabilities and expenses (including, without limitation, reasonable fees
and disbursements of counsel) of any kind or nature whatsoever for which any of
them may become liable or which may be incurred by or asserted against any of
the Indemnified Parties (other than by another Bank or any successor or assign
of another Bank), in each case in connection with or arising out of or by reason
of any investigation, litigation, or proceeding, whether or not any of the
Indemnified Parties is a party thereto, arising out of, related to or in
connection with the Notes, any Letter of Credit, this Agreement, any Credit
Document or any transaction in which any proceeds of all or any part of Letters
of Credit or Revolving Credit Advances are applied (EXPRESSLY INCLUDING ANY SUCH
CLAIM, DAMAGE, LOSS, LIABILITY OR EXPENSE ATTRIBUTABLE TO THE ORDINARY, SOLE OR
CONTRIBUTORY NEGLIGENCE OF SUCH INDEMNIFIED PARTY, BUT EXCLUDING ANY SUCH CLAIM,
DAMAGE, LOSS, LIABILITY OR EXPENSE ATTRIBUTABLE TO THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY OR THE GROSS NEGLIGENCE OR WILFUL
MISCONDUCT OF THE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS OF SUCH
INDEMNIFIED PARTY). IT IS THE INTENT OF THE PARTIES HERETO THAT EACH INDEMNIFIED
PARTY SHALL, TO THE EXTENT PROVIDED IN THIS SECTION 8.4(b), BE INDEMNIFIED FOR
ITS OWN ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE.

                  (c)      If any payment of principal of, or Conversion of, any
Eurodollar Rate Advance is made by any Borrower to or for the account of a Bank
other than on the last day of the Interest Period for such Eurodollar Rate
Advance, as a result of a payment, prepayment or Conversion pursuant to this
Agreement or acceleration of the maturity of the Notes pursuant to

                                       46

Section 6.1, such Borrower shall, upon demand by such Bank (with a copy of such
demand to the Agent), pay to the Agent for the account of such Bank any amounts
required to compensate such Bank for any additional losses, costs or expenses
that it may reasonably incur as a result of such payment or Conversion,
including, without limitation, any loss (excluding loss of anticipated profits),
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by any Bank to fund or maintain such Eurodollar
Rate Advance.

                  (d)      Without prejudice to the survival of any other
agreement of the Borrowers hereunder, the agreements and obligations of the
Borrowers contained in Sections 2.2, 2.6 and 2.8 and this Section 8.4 shall
survive the payment in full of principal, interest and all other amounts payable
hereunder and under the Notes.

                  SECTION 8.5. Binding Effect; Transfers.

                  (a)      This Agreement shall become effective (other than
Article II, which shall become effective upon satisfaction of the conditions
precedent set forth in Section 3.1) when it shall have been executed by the
Borrowers, the Agent, the Collateral Agent and the Issuing Banks, and when each
Bank listed on the signature pages hereof has delivered an executed counterpart
hereof to the Agent, has sent to the Agent a facsimile copy of its signature
hereon or has notified the Agent that such Bank has executed this Agreement and
thereafter shall be binding upon and inure to the benefit of the Borrowers, the
Agent, the Collateral Agent, the Issuing Banks and each Bank and their
respective successors and assigns; provided that the Borrowers shall not have
the right to assign any of their rights hereunder or any interest herein without
the prior written consent of the Agent. Each Bank may assign to one or more
banks, financial institutions or other entities all or a portion of its rights
and obligations under this Agreement (including all or a portion of its
Revolving Credit Advances owing to such Bank, any Note or Notes held by such
Bank, its Letter of Credit Commitments, its Letter of Credit Interest and any or
all of its Commitments); provided, however, that (i) each such assignment shall
be of a constant, and not a varying, percentage of all rights and obligations
under this Agreement and the Notes, (ii) except in the case of an assignment of
all of a Bank's rights and obligations under this Agreement or an assignment to
another Bank, the amount of the Commitment, Letter of Credit Commitment and/or
LC Participation Percentage of the assigning Bank being assigned pursuant to
each such assignment (determined as of the date of the Transfer Agreement with
respect to such assignment) shall in no event be less than $10,000,000 in the
aggregate or such lesser amount as may be consented to by the Agent and the
respective Borrowers, (iii) each such assignment shall be to an Eligible
Assignee, and (iv) the parties to each such assignment shall execute and deliver
to the Agent, for its acceptance and recording in the Register maintained by the
Agent, a Transfer Agreement and, unless the assignment is to an affiliate of
such Bank, a processing and recordation fee of $3,500. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Transfer Agreement, (x) the assignee thereunder shall be a party hereto
as a "Bank" and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Transfer Agreement, have the rights and
obligations of a Bank hereunder (including obligations to the Agent and the
Collateral Agent pursuant to Section 7.6) and (y) the Bank assignor thereunder
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such Transfer Agreement, relinquish its rights and be released
from its obligations under this Agreement, except for rights and obligations
which continue after repayment of the Reimbursement Obligations and

                                       47

Revolving Credit Advances or termination of this Agreement pursuant to the
express terms of this Agreement (and, in the case of a Transfer Agreement
covering all of an assigning Bank's rights and obligations under this Agreement,
such Bank shall cease to be a party hereto).

                  (b)      By executing and delivering a Transfer Agreement, the
Bank assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Transfer Agreement, such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations (whether written or oral) made in or in connection
with this Agreement, any other Credit Document or any other instrument or
document furnished pursuant hereto or in connection herewith, the perfection,
existence, sufficiency or value of any Collateral or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of any Credit
Document or any other instrument or document furnished pursuant hereto or in
connection herewith; (ii) such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of any Borrower or any other Person or the performance or observance by any
Borrower or any other Person of any of its respective obligations under the
Credit Documents or any other instrument or document furnished pursuant hereto
or in connection herewith; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of such financial statements and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Transfer Agreement; (iv)
such assignee will, independently and without reliance upon the Agent, the
Collateral Agent, any Issuing Bank, such assigning Bank or any other Bank and
based on such financial statements and such other documents and information as
it shall deem appropriate at the time, continue to make its own credit analysis
and decisions in taking or not taking action under this Agreement, any of the
other Credit Documents or any other instrument or document; (v) such assignee
confirms that it is an Eligible Assignee; (vi) such assignee appoints and
authorizes the Agent and the Collateral Agent, respectively, to act as Agent and
the Collateral Agent, respectively, on its behalf and to exercise such powers
and discretion under this Agreement, any other Credit Document or any other
document executed in connection herewith or therewith as are delegated to the
Agent and the Collateral Agent, respectively, by the terms hereof or thereof,
together with such powers and discretion as are reasonably incidental thereto;
and (vii) such assignee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of this Agreement are required
to be performed by it as a Bank.

                  (c)      The Agent shall maintain a copy of each Transfer
Agreement, delivered to and accepted by it and a register for the recordation of
the names and addresses of each Bank together with its respective Commitment,
Letter of Credit Commitment, LC Participation Percentage, Letter of Credit
Interest and the principal amount of the Revolving Credit Advances owing to such
Bank from time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the
Borrowers, the Agent, the Issuing Banks and the Banks may treat each Person
whose name is recorded in the Register as a Bank hereunder for all purposes of
this Agreement. The Register shall be available for inspection by any Borrower
or any Bank at any reasonable time and from time to time upon reasonable prior
notice.

                  (d)      Upon its receipt of a Transfer Agreement executed and
completed by an assigning Bank and an assignee representing that it is an
Eligible Assignee (and consented to by

                                       48

the Agent and, if required, by the applicable Borrower), the Agent shall (i)
accept such Transfer Agreement, (ii) record the information contained therein in
the Register and (iii) give prompt notice thereof to such Borrower. If requested
by the assigning or assignee Bank, each Borrower after its receipt of such
notice, shall, at its own expense, execute and deliver to the Agent in exchange
for the surrendered Notes, new Notes to the order of such assignee Bank in an
amount equal to the Commitment assumed by it pursuant to such Transfer Agreement
and, if the assigning Bank has retained a Commitment hereunder new Notes to the
order of the assigning Bank in an amount equal to the Commitment retained by it
hereunder. Such new Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Notes, shall be dated the
effective date of such Transfer Agreement and shall otherwise be in
substantially the form of Exhibit F hereto

                  (e)      Each Bank may sell participations to one or more
banks or other entities (other than the Borrowers or any of their Affiliates) in
or to all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment, the Revolving Credit Advances
owing to it, the Notes held by it and its Letter of Credit Interest); provided,
however, that (i) such Bank's obligations under this Agreement shall remain
unchanged, (ii) such Bank shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) such Bank shall remain the
holder of any such Note for all purposes of this Agreement, (iv) the Borrowers,
the Agent, the Collateral Agent, each Issuing Bank and the other Banks shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement, (v) all amounts payable
under this Agreement shall be calculated as if such Bank had not sold such
participation, and (vi) the terms of any such participation shall not restrict
such Bank's ability to consent to any departure by any Borrower herefrom without
the approval of the participant, except that the approval of the participant may
be required to the extent that such amendment, waiver or consent would reduce
the principal of, or interest on, the Reimbursement Obligations or Revolving
Credit Advances or any fees or other amounts payable hereunder, in each case to
the extent subject to such participation, or postpone any date fixed for any
payment of principal of, or interest on, the Reimbursement Obligations or
Revolving Credit Advances or any fees or other amounts payable hereunder, in
each case to the extent subject to such participation.

                  (f)      Notwithstanding any other provisions set forth in
this Agreement, any Bank may at any time create a security interest in all or
any portion of its rights under this Agreement (including its Letter of Credit
Interest) or any of its Notes in favor of any Federal Reserve Bank in accordance
with Regulation A of the Federal Reserve Board without notice to or consent of
the Borrowers or the Agent. Furthermore, any Bank may assign, as collateral or
otherwise, any of its rights (including rights to payments of principal of
and/or interest on its Letter of Credit Interest or Revolving Credit Advances
made by such Bank) under this Agreement, its Notes or any of its Letter of
Credit Interest to any Federal Reserve Bank without notice to or consent of any
Borrowers or the Agent.

                  (g)      Notwithstanding anything to the contrary contained
herein, any Bank (a "Designating Bank") with the consent of the Agent (and, if
no Event of Default has occurred and is continuing, the Borrowers) may grant to
a special purpose funding vehicle (an "SPC"), identified as such in writing from
time to time by the Designating Bank to the Agent and the Borrowers, the option
to fund all or any part of any payment to any Issuing Bank or Revolving

                                       49

Credit Advance which the Designating Bank has agreed to make; provided that no
Designating Bank shall have granted at any one time such option to more than one
SPC; and provided further that (i) such Designating Bank's obligations under
this Agreement shall remain unchanged, (ii) such Designating Bank shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) the Borrowers, the Issuing Banks, the Collateral Agent, the
Agent and the other Banks shall continue to deal solely and directly with such
Designating Bank in connection with such Designating Bank's rights and
obligations under this Agreement, (iv) any such option granted to an SPC shall
not constitute a commitment by such SPC to fund any drawing under a Letter of
Credit or to fund any Revolving Credit Advance, and (v) neither the grant nor
the exercise of such option to an SPC shall increase the costs or expenses or
otherwise increase or change the obligations of a Borrower under this Agreement
(including its obligations under Section 2.7). The issuance of a Letter of
Credit or the making of a Revolving Credit Advance by an SPC hereunder shall
utilize the Commitment of the Designating Bank to the same extent, and as if,
such Revolving Credit Advance were made by or such Letter of Credit were issued
by such Designating Bank. Each party hereto hereby agrees that no SPC shall be
liable for any indemnity or similar payment obligation under this Agreement to
the extent that any such indemnity or similar payment obligations shall have
been paid by its Designating Bank. In furtherance of the foregoing, each party
hereto hereby agrees (which agreement shall survive the termination of this
Agreement) that, prior to the date that is one year and one day after the
payment in full of all outstanding commercial paper or other senior indebtedness
of any SPC, it will not institute against, or join any other person in
instituting against such SPC any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings under the laws of the United States. In
addition, notwithstanding anything to the contrary contained in this Section
8.5, an SPC may not assign its interest in any Letter of Credit Interests or
Revolving Credit Advance except that, with notice to, but without the prior
written consent of, the Borrowers and the Agent and without paying any
processing fee therefor, such SPC may assign all or a portion of its interests
in any Letter of Credit Interests or Revolving Credit Advance to the Designating
Bank or to any financial institutions (consented to by the Borrowers and Agent),
providing liquidity and/or credit support to or for the account of such SPC to
support the funding or maintenance of Letter of Credit Interests or Revolving
Credit Advance. Each Designating Bank shall serve as the agent of its SPC and
shall on behalf of its SPC: (i) receive any and all payments made for the
benefit of such SPC and (ii) give and receive all communications and notices,
and vote, approve or consent hereunder, and take all actions hereunder,
including votes, approvals, waivers, consents and amendments under or relating
to this Agreement, the Notes and the other Credit Documents. Any such notice,
communication, vote, approval, waiver, consent or amendment shall be signed by
the Designating Bank for the SPC and need not be signed by such SPC on its own
behalf. The Borrowers, the Issuing Banks, the Collateral Agent, the Agent and
the Banks may rely thereon without any requirement that the SPC sign or
acknowledge the same or that notice be delivered to the Borrowers or the SPC.
This Section 8.5(g) may not be amended without the written consent of any SPC,
which shall have been identified to the Agent and the Borrowers.

                  SECTION 8.6. Governing Law. This Agreement, the Notes and the
other Credit Documents shall be governed by, and construed in accordance with,
the laws of the State of New York.

                                       50

                  SECTION 8.7. Interest. It is the intention of the parties
hereto that the Agent, each Issuing Bank, the Collateral Agent and each Bank
shall conform strictly to usury laws applicable to it, if any. Accordingly, if
the transactions with the Agent, any Issuing Bank, the Collateral Agent or any
Bank contemplated hereby would be usurious under applicable law, then, in that
event, notwithstanding anything to the contrary in this Agreement or any other
agreement entered into in connection with or as security for this Agreement, it
is agreed as follows: (i) the aggregate of all consideration which constitutes
interest under applicable law that is contracted for, taken, reserved, charged
or received by the Agent, such Issuing Bank, the Collateral Agent or such Bank,
as the case may be, under this Agreement, the Notes and any other Credit
Document or under any other agreement entered into in connection with or as
security for this Agreement, the Notes or the other Credit Documents shall under
no circumstances exceed the maximum amount allowed by such applicable law and
any excess shall be canceled automatically and, if theretofore paid, shall at
the option of the Agent, such Issuing Bank, the Collateral Agent or such Bank,
as the case may be, be credited by the Agent, such Issuing Bank, the Collateral
Agent or such Bank, as the case may be, on the principal amount of the
obligations owed to the Agent, such Issuing Bank, the Collateral Agent or such
Bank, as the case may be, by the applicable Borrower or refunded by the Agent,
such Issuing Bank, the Collateral Agent or such Bank, as the case may be, to the
applicable Borrower, and (ii) in the event that the maturity of any obligation
payable to the Agent, such Issuing Bank, the Collateral Agent or such Bank, as
the case may be, is accelerated or in the event of any required or permitted
prepayment, then such consideration that constitutes interest under law
applicable to the Agent, such Issuing Bank, the Collateral Agent or such Bank,
as the case may be, may never include more than the maximum amount allowed by
such applicable law and excess interest, if any, to the Agent, such Issuing
Bank, the Collateral Agent or such Bank, as the case may be, provided for in
this Agreement or otherwise shall be canceled automatically as of the date of
such acceleration or prepayment and, if theretofore paid, shall, at the option
of the Agent, such Issuing Bank, the Collateral Agent or such Bank, as the case
may be, be credited by the Agent, such Issuing Bank, the Collateral Agent or
such Bank, as the case may be, on the principal amount of the obligations owed
to the Agent, such Issuing Bank, the Collateral Agent or such Bank, as the case
may be, by the Borrowers or refunded by the Agent, such Issuing Bank, the
Collateral Agent or such Bank, as the case may be, to the applicable Borrower.

                  SECTION 8.8. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.

                  SECTION 8.9. Survival of Agreements, Representations and
Warranties, Etc. All warranties, representations and covenants made by any
Borrower or any officer of any Borrower herein or in any certificate or other
document delivered in connection with this Agreement shall be considered to have
been relied upon by the Banks and shall survive the issuance of any Letters of
Credit and the issuance and delivery of the Notes (if any) and the making of
Revolving Credit Advances regardless of any investigation.

                  SECTION 8.10. Confidentiality.

                                       51

                  (a)      Subject to paragraph (b) below, each Bank agrees that
it will not disclose without the prior consent of TWC (other than to employees,
auditors, accountants, counsel or other professional advisors of the Agent or
any Bank) any information with respect to the Borrowers, which is furnished
pursuant to this Agreement and which (i) the Borrowers in good faith considers
to be confidential and (ii) is either clearly marked confidential or is
designated by the Borrowers to the Agent and the Banks in writing as
confidential; provided that any Bank may disclose any such information (1) as
has become generally available to the public, (2) as may be required or
appropriate in any report, statement or testimony submitted to or required by
any municipal, state or Federal regulatory body having or claiming to have
jurisdiction over such Bank or submitted to or required by the Federal Reserve
Board or the Federal Deposit Insurance Corporation or similar organizations
(whether in the United States or elsewhere) or their successors, (3) as may be
required or appropriate in response to any summons or subpoena in connection
with any litigation, (4) in order to comply with any law, order, regulation or
ruling applicable to such Bank, (5) to the prospective transferee or grantee in
connection with any contemplated transfer of any of the Commitments, Letter of
Credit Commitments, Letter of Credit Interests or Revolving Credit Advances or
any interest therein by such Bank or the grant of an option to an SPC to fund
any drawing under a Letter of Credit or Revolving Credit Advance; provided that
such prospective transferee executes an agreement with or for the benefit of the
Borrowers containing provisions substantially identical to those contained in
this Section 8.10; and provided further that if the contemplated transfer is a
grant of an option to fund a drawing under a Letter of Credit or Revolving
Credit Advance to an SPC pursuant to Section 8.5(g), such SPC may disclose (x)
on a confidential basis, any non-public information relating to such drawings
funded by it to any rating agency, commercial paper dealer or provider of any
surety, guaranty or credit or liquidity enhancement to such SPC, and (y) if
prior notice of the delivery thereof is given to the Borrowers, such information
as may be required by law or regulation to be delivered, (6) in connection with
the exercise of any remedy by such Bank following an Event of Default pertaining
to this Agreement, any of the Notes or any of the other Credit Documents or any
other document delivered in connection herewith, (7) in connection with any
litigation involving such Bank pertaining to this Agreement, any of the Notes or
any of the other Credit Documents or any other document delivered in connection
herewith, (8) to any Bank, any Issuing Bank, the Collateral Agent or the Agent,
or (9) to any affiliate of any Bank; provided that such affiliate executes an
agreement with or for the benefit of the Borrowers containing provisions
substantially identical to those contained in this Section 8.10.

                  (b)      Notwithstanding anything herein or in any of the
other Credit Documents to the contrary, the Borrowers, the Agent and each Bank
(and each employee, representative or other agent of any such Person) may
disclose to any and all Persons, without limitation of any kind, the tax
treatment and tax structure of the transactions contemplated hereby and all
materials of any kind (including opinions or other tax analyses) that are
provided to such Person relating to such tax treatment and tax structure. For
purposes of this Section 8.11(b), "tax treatment" means the purported or claimed
U.S. federal income tax treatment of the transaction, and "tax structure" means
any fact that may be relevant to understanding the purported or claimed U.S.
federal income tax treatment of the transaction. The authorization to disclose
the tax treatment and tax structure of the transactions contemplated hereby
contained in the first sentence was applicable immediately upon commencement of
discussions between the Borrowers, the Agent and the Banks with respect to the
transactions contemplated hereby.

                                       52

                  SECTION 8.11. Waiver of Jury Trial. THE BORROWERS, THE AGENT,
THE COLLATERAL AGENT, THE ISSUING BANK AND THE BANKS HEREBY IRREVOCABLY WAIVE
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OF THE NOTES, ANY LETTER OF CREDITS, ANY OTHER
CREDIT DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

                  SECTION 8.12. Severability. In the event any one or more of
the provisions contained in this Agreement or in any other Credit Document
should be held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein and
therein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

                  SECTION 8.13. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, ANY
CREDIT DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE BANKS, ANY ISSUING BANK,
THE COLLATERAL AGENT OR THE BORROWERS IN CONNECTION HEREWITH OR THEREWITH MAY BE
BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE
COUNTY OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY COLLATERAL MAY BE BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF
ANY JURISDICTION WHERE SUCH COLLATERAL MAY BE FOUND. THE BORROWERS IRREVOCABLY
CONSENT TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK AT THE ADDRESS FOR
NOTICES SPECIFIED IN ACCORDANCE WITH SECTION 8.2. THE BORROWERS HEREBY EXPRESSLY
AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH THEY MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH
LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY
SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT
ANY BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, SUCH BORROWER HEREBY IRREVOCABLY WAIVES TO THE FULLEST
EXTENT PERMITTED BY LAW SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THE
CREDIT DOCUMENTS.

                  SECTION 8.14. Nature of Obligations. Notwithstanding anything
in this Agreement to the contrary, (a) NWP and TGPL shall be obligated only with
respect in each case

                                       53

for the Revolving Credit Advances made to such Borrower (and all interest and
fees thereto) under Section 2.1(a) and the Reimbursement Obligations and fees
with respect to the Letters of Credit issued for the account of such Borrower
pursuant to Section 2.1(b) and (b) TWC shall be obligated for all obligations of
each Borrower hereunder.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       54

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.

                                       BORROWERS:

                                       THE WILLIAMS COMPANIES, INC.

                                       By:    /s/ Steven J. Malcolm
                                       Name:  Steven J. Malcolm
                                       Title: Chief Executive Officer, Chairman
                                              of the Board, and President

                                       NORTHWEST PIPELINE CORPORATION

                                       By:    /s/ J. Douglas Whisenant
                                       Name:  J. Douglas Whisenant
                                       Title: Senior Vice President

                                       TRANSCONTINENTAL GAS PIPE LINE
                                       CORPORATION

                                       By:    /s/ J. Douglas Whisenant
                                       Name:  J. Douglas Whisenant
                                       Title: Senior Vice President

                                       CITIBANK, N.A., as Administrative Agent
                                       and Collateral Agent

                                       By:    /s/ J. Chris Lyons
                                       Name:  J. Chris Lyons
                                       Title: Vice President

                                       CITIBANK, N.A. as Issuing Bank and Bank

                                       By:    /s/ J. Chris Lyons
                                       Name:  J. Chris Lyons
                                       Title: Vice President

                                       BANK OF AMERICA, N.A., as Syndication
                                       Agent

                                       By:    /s/ Claire Liu
                                       Name:  Claire M. Liu
                                       Title: Managing Director

                                       55

                                       BANK OF AMERICA, N.A., as Issuing Bank
                                       and Bank

                                       By:    /s/ Claire Liu
                                       Name:  Claire M. Liu
                                       Title: Managing Director

                                       JPMORGAN CHASE BANK, as Documentation
                                       Agent and Bank

                                       By:    /s/ Robert Traband
                                       Name:  Robert W. Traband
                                       Title: Vice President

                                       THE BANK OF NOVA SCOTIA, as Bank

                                       By:    /s/ N. Bell
                                       Name:  N. Bell
                                       Title: Senior Manager

                                       BARCLAYS BANK PLC, as Bank

                                       By:    /s/ Nicholas A. Bell
                                       Name:  Nicholas A. Bell
                                       Title: Director, Loan Transaction
                                              Management

                                       THE ROYAL BANK OF SCOTLAND PLC, as Bank

                                       By:    /s/ P. J. Dundee
                                       Name:  Patricia J. Dundee
                                       Title: Senior Vice President

                                       CREDIT LYONNAIS NEW YORK BRANCH, as Bank

                                       By:    /s/ O. Audemard
                                       Name:  Olivier Audemard
                                       Title: Senior Vice President

                                       56

                                       LEHMAN COMMERICAL PAPER, INC., as Bank

                                       By:    /s/ G. Andrew Keith
                                       Name:  G. Andrew Keith
                                       Title: Authorized Signatory

                                       TORONTO DOMINION (TEXAS), INC., as Bank

                                       By:    /s/ Jill Hall
                                       Name:  Jill Hall
                                       Title: Vice President

                                       WESTLB AG, NEW YORK BRANCH, as Bank

                                       By:    /s/ S. Battinelli
                                       Name:  Sal Battinelli
                                       Title: Managing Director

                                       By:    /s/ Duncan Robertson
                                       Name:  Duncan Robertson
                                       Title: Executive Director

                                       BANK ONE, N.A. (MAIN OFFICE - CHICAGO),
                                       as Bank

                                       By:    /s/ Jeanie Gonzalez
                                       Name:  Jeanie Gonzalez
                                       Title: Director

                                       MERRILL LYNCH BANK USA, as Bank

                                       By:    /s/ Louis Alder
                                       Name:  Louis Alder
                                       Title: Vice President

                                       MORGAN STANLEY SENIOR FUNDING, INC., as
                                       bank

                                       By:    /s/ Jaap Tonckens
                                       Name:  Jaap L. Tonckens
                                       Title: Vice President

                                       57

                                       BANK OF OKLAHOMA, N.A., as Bank

                                       By:    /s/ Robert Mattax
                                       Name:  Robert D. Mattax
                                       Title: Senior Vice President

                                       BMO NESBITT BURNS FINANCING, INC., as
                                       Bank

                                       By:    /s/ Thomas E. McGraw
                                       Name:  Thomas E. McGraw
                                       Title: Vice President

                                       THE BANK OF TOKYO-MITSUBISHI, LTD.,
                                       HOUSTON AGENCY, as Bank

                                       By:    /s/ K. Glasscock
                                       Name:  K. Glasscock
                                       Title: Vice President and Manager

                                       By:    /s/ J. Fort
                                       Name:  J. Fort
                                       Title: Vice President

                                       58

                                   SCHEDULE I

                           APPLICABLE LENDING OFFICES

Name of Bank                  Lending Office
- ------------                  --------------
                           
Citibank, N.A.                Citibank, N.A.
                              399 Park Avenue
                              New York, New York 10043

                              Notices:
                              Citibank, N.A.
                              2 Penns Way, Suite 200
                              New Castle, Delaware 19720
                              Telecopier: (302) 894-6120
                              Attn: The Williams Companies, Inc.
                              Account Officer

                              with copies to:
                              Citicorp North America, Inc.
                              1200 Smith Street, Suite 2000
                              Houston, Texas 77002
                              Telecopier: (713) 654-2849
                              Attn: The Williams Companies, Inc.
                              Account Officer

Bank of America, N.A.         Bank of America, N.A.
                              901 Main Street, 14th Floor
                              Dallas, Texas 75202
                              Telecopier: (214) 290-9415
                              Telephone: (214) 209-1228
                              Attn: Marija Salic

                              with copies to:
                              Bank of America, N.A.
                              Bank of America Center
                              700 Louisiana, 8th Floor
                              Houston, Texas 77002
                              Telecopier: (713) 247-7286
                              Telephone: (713) 247-7235
                              Attn: Claire Liu

The Bank of Nova Scotia       The Bank of Nova Scotia
                              600 Peachtree Street, N.E., Suite 2700
                              Atlanta, Georgia 30308
                              Telecopier: (404) 888-8998
                              Telex: 00542319
                              Attn: Robert L. Ahern

                              with copies to:
                              1100 Louisiana, Suite 3000

                                       59

Name of Bank                  Lending Office
- ------------                  --------------
                           
                              Houston, Texas 77002
                              Telecopier: (713) 752-2425
                              Telephone: (713) 759-3440
                              Attn:

Bank One, NA                  Bank One, NA
(Chicago)                     1 Bank One Plaza
                              0634, 1 FNP, 10
                              Chicago, Illinois 60670
                              Telephone: (312) 732-5219
                              Telecopier: (312) 732-4840
                              Attn:

JPMorgan Chase Bank           JPMorgan Chase Bank
                              1111 Fannin - 10th Floor
                              Houston, TX 77002
                              Telecopier: (713) 427-6307
                              Telephone: (713) 750-2377
                              Attn: Jamie Kurtz

Credit Lyonnais               Credit Lyonnais New York Branch
New York Branch               1301 Avenue of the Americas
                              New York, New York 10019
                              Telecopier: (713) 759-9766
                              Telephone: (713) 753-8723
                              Attn: Bernadette Archie

Bank of Montreal              Bank of Montreal
                              115 S. LaSalle Street, 11th Floor
                              Chicago, Illinois 60603
                              Telecopier: (312) 750-6061
                              Telephone: (312) 750-4359
                              Attn: Anita Blake

                              BMO Nesbitt Burns Financing, Inc.
                              700 Louisiana, Suite 4400
                              Houston, TX 77002
                              Telecopier: (713) 223-4007
                              Telephone: (713) 546-9750
                              Attn: Cahal Carmody

Morgan Stanley Senior         Morgan Stanley Senior Funding, Inc.
Funding, Inc.                 1585 Broadway
                              New York, New York 10036
                              Telecopier: (212) 507-3663
                              Telephone: (212) 762-2787
                              Attn: Michael O'Hare

                                       60

Name of Bank                  Lending Office
- ------------                  --------------
                           
Merrill Lynch Bank USA        Merrill Lynch Bank USA
                              15 West South Temple, Suite 300
                              Salt Lake City, UT 84101
                              Telecopier: (801) 531-7470
                              Telephone: (801) 526-8316
                              Attn: Frank K. Stepan

Barclays Bank PLC             Barclays Bank PLC
                              200 Park Avenue
                              New York, New York 10166
                              Telecopier: (212) 412-7600
                              Telephone: (212) 412-4029
                              Attn: Nicholas Bell

The Bank of Tokyo-            The Bank of Tokyo-Mitsubishi, Ltd.,
Mitsubishi, Ltd.,             Houston Agency
Houston Agency                1100 Louisiana Street, Suite 2800
                              Houston, Texas 77002-5216
                              Telecopier: (713) 655-3855
                              Telephone: (713) 655-3845
                              Attn: J.M. McIntyre

Toronto Dominion (Texas),     Toronto Dominion (Texas), Inc.
Inc.                          909 Fannin Street, 17th Floor
                              Houston, Texas 77010
                              Swift Address: TDOMU S4H
                              Telecopier: (713) 951-9921
                              Attn: Jill Hall

Lehman Commercial Paper,      Lehman Commercial Paper, Inc.
Inc.                          745 7th Avenue, 16th Floor
                              New York, New York 10019
                              Telecopier: (212) 520-0450
                              Telephone: (212) 526-6560
                              Attn: Marie Cowell

Westdeutsche Landesbank       Westdeutsche Landesbank Girozentrale,
Girozentrale, New York        New York Branch
Branch                        1211 Avenue of the Americas
                              New York, New York 10036
                              Telecopier: (212) 852-6307
                              Telephone: (212) 852-6096
                              Attn: Jeffrey S. Davidson

The Royal Bank of Scotland    The Royal Bank of Scotland
                              New York Branch
                              101 Park Avenue, 12th Floor

                                       61

Name of Bank                  Lending Office
- ------------                  --------------
                           
                              New York, New York 10178
                              Telecopier: (212) 401-1494
                              Telephone: (212) 401-1406
                              Attn: Sheila Shaw

                              Notices:
                              The Royal Bank of Scotland
                              600 Travis Street, Suite 6070
                              Houston, TX 77002
                              Telecopier: (713) 221-2430
                              Telephone: (713) 221-2423
                              Attn: Patricia Dundee

Bank of Oklahoma, N.A.        Bank of Oklahoma, N.A.
                              BOK Tower 8 SE
                              One Williams Center
                              Tulsa, OK 74172
                              Telecopier: (918) 280-3318
                              Telephone: (918) 588-6675
                              Attn: Laurie Brumbaugh

                                       62

                                   SCHEDULE II

                             BORROWERS' INFORMATION

Name of Borrowers                               Information for Notices
- -----------------                               -----------------------
                                             
The Williams Companies, Inc.                    The Williams Companies, Inc.
                                                One Williams Center, Suite 5000
                                                Tulsa, Oklahoma 74172
                                                Attention: Patti J. Kastl
                                                Telecopier: (918) 573-2065
                                                Telephone: (918) 573-2172

Northwest Pipeline Corporation                  Northwest Pipeline Corporation
                                                2800 Post Oak Blvd.
                                                Houston, TX 77056
                                                Attention: Jeff P. Heinrichs
                                                Telecopier: (713) 215-2435
                                                Telephone: (713) 215-2356

Transcontinental Gas Pipe Line Corporation      Transcontinental Gas Pipe Line Corporation
                                                2800 Post Oak Blvd.
                                                Houston, TX 77056
                                                Attention: Jeff P. Heinrichs
                                                Telecopier: (713) 215-2435
                                                Telephone: (713) 215-2356

                                  SCHEDULE III

                                   COMMITMENTS

                               as of June 6, 2003

- ------------------------------------------------------------------------------------------------------------------------
                                                      Revolving Credit    Letter of Credit   LC Participation Percentage
Banks                                                  Commitment ($)      Commitment ($)                (%)
- ------------------------------------------------------------------------------------------------------------------------
                                                                                    
Citibank, N.A                                            90,000,000         400,000,000                 11.250
- ------------------------------------------------------------------------------------------------------------------------
Bank of America, N.A                                     90,000,000         400,000,000                 11.250
- ------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank                                      90,000,000                   0                 11.250
- ------------------------------------------------------------------------------------------------------------------------
The Bank of Nova Scotia                                  60,000,000                   0                  7.500
- ------------------------------------------------------------------------------------------------------------------------
Barclays Bank plc                                        60,000,000                   0                  7.500
- ------------------------------------------------------------------------------------------------------------------------
The Royal Bank of Scotland plc                           60,000,000                   0                  7.500
- ------------------------------------------------------------------------------------------------------------------------
Credit Lyonnais New York Branch                          60,000,000                   0                  7.500
- ------------------------------------------------------------------------------------------------------------------------
Lehman Commercial Paper, Inc.                            60,000,000                   0                  7.500
- ------------------------------------------------------------------------------------------------------------------------
Toronto Dominion (Texas), Inc.                           60,000,000                   0                  7.500
- ------------------------------------------------------------------------------------------------------------------------
WESTLB AG, New York Branch                               35,000,000                   0                  4.375
- ------------------------------------------------------------------------------------------------------------------------
Bank One, N.A. (Main Office - Chicago)                   35,000,000                   0                  4.375
- ------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Bank USA                                   20,000,000                   0                  2.500
- ------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Senior Funding, Inc.                      20,000,000                   0                  2.500
- ------------------------------------------------------------------------------------------------------------------------
Bank of Oklahoma, N.A                                    20,000,000                   0                  2.500
- ------------------------------------------------------------------------------------------------------------------------
BMO Nesbitt Burns Financing, Inc.                        20,000,000                   0                  2.500
- ------------------------------------------------------------------------------------------------------------------------
The Bank of Tokyo-Mitsubishi, Ltd., Houston Agency       20,000,000                   0                  2.500
- ------------------------------------------------------------------------------------------------------------------------
TOTAL                                                  $800,000,000*                                   100.000
- ------------------------------------------------------------------------------------------------------------------------

- --------------------------
* The aggregate outstanding amount of all (i) Revolving Credit Advances and (ii)
Letters of Credit shall not exceed $800,000,000.

                                                                       EXHIBIT A
                                                                              TO
                                                                CREDIT AGREEMENT

                        OPINION OF JAMES J. BENDER, ESQ.
                             GENERAL COUNSEL OF TWC

                                                                       EXHIBIT B
                                                                              TO
                                                                CREDIT AGREEMENT

                         OPINION OF WHITE & CASE, L.L.P.
                                NEW YORK COUNSEL

                                                                       EXHIBIT C
                                                                              TO
                                                                CREDIT AGREEMENT

                           FORM OF TRANSFER AGREEMENT

                             Dated __________, 20__

                  Reference is made to the Credit Agreement, dated as of June 6,
2003 (such Credit Agreement, as amended or otherwise modified from time to time,
being herein referred to as the "Credit Agreement"), among The Williams
Companies, Inc., Northwest Pipeline Corporation, and Transcontinental Gas Pipe
Line Corporation, as Borrowers, Citibank, N.A., as Agent for the Banks, Bank of
America N.A., as Syndication Agent, the Banks and Issuing Banks parties thereto.
Terms defined in the Credit Agreement are used herein with the same meaning.

                  ___________________ (the "Assignor") and ________________ (the
"Assignee") agree as follows:

                  1.       The Assignor hereby sells and assigns to the
         Assignee, without recourse, and the Assignee hereby purchases and
         assumes from the Assignor, an interest in and to all of the Assignor's
         rights and obligations under the Credit Agreement and the other Credit
         Documents executed in connection therewith as of the date hereof equal
         to the percentage interest specified on Schedule 1 hereto of all
         outstanding rights and obligations under the Credit Agreement. After
         giving effect to such sale and assignment, the Assignee's and
         Assignor's respective Letter of Credit Commitments and LC Participation
         Percentage will be as set forth in Schedule 1.

                  2.       The Assignor (i) represents and warrants that it is
         the legal and beneficial owner of the interest being assigned by it
         hereunder and that such interest is free and clear of any adverse
         claim; (ii) makes no representation or warranty and assumes no
         responsibility with respect to any statements, warranties or
         representations made in or in connection with the Credit Agreement, the
         other Credit Documents or other instrument or document furnished
         pursuant thereto or in connection therewith, the perfection, existence,
         sufficiency or value of any Collateral, guaranty or insurance or the
         execution, legality, validity, enforceability, genuineness, sufficiency
         or value of the Credit Agreement, any of the other Credit Documents or
         any other instrument or document furnished pursuant thereto or in
         connection therewith; and (iii) makes no representation or warranty and
         assumes no responsibility with respect to the financial condition of
         the Borrowers or any other Person or the performance or observance by
         the Borrowers or any other Person of any of their respective
         obligations under the Credit Agreement, the other Credit Documents or
         any other instrument or document furnished pursuant thereto or in
         connection therewith.

                  3.       The Assignee (i) confirms that it has received a copy
         of the Credit Agreement, together with copies of the financial
         statements referred to in Section 4.1(e) of the Credit Agreement and
         such other documents and information as it has deemed appropriate to
         make its own credit analysis and decision to enter into this Transfer

         Agreement; (ii) agrees that it will, independently and without reliance
         upon the Agent, any Issuing Bank, the Assignor, any other Bank and
         based on such documents and information as it shall deem appropriate at
         the time, continue to make its own credit decisions in taking or not
         taking action under the Credit Agreement, any other Credit Document, or
         any other instrument or document; (iii) confirms that it is an Eligible
         Assignee; (iv) appoints and authorizes each of the Agent and the
         Collateral Agent, respectively, to take such action as agent on its
         behalf and to exercise such powers and discretion under the Credit
         Agreement as are delegated to the Agent, respectively, by the terms
         thereof, together with such powers and discretion as are reasonably
         incidental thereto; (v) agrees that it will perform in accordance with
         their terms all of the obligations which by the terms of the Credit
         Agreement are required to be performed by it as a Bank; and (vi)
         specifies as its Lending Office (and address for notices) the office
         set forth beneath its name on the signature pages hereof.

                  4.       Following the execution of this Transfer Agreement by
         the Assignor and the Assignee, this Transfer Agreement will be
         delivered to the Agent for acceptance and recording by the Agent. The
         effective date of this Transfer Agreement (the "Effective Date") shall
         be the date of acceptance thereof by the Agent, unless otherwise
         specified on Schedule 1 hereto.

                  5.       Upon such acceptance and recording by the Agent, as
         of the Effective Date, (i) the Assignee shall be a party to the Credit
         Agreement and, to the extent provided in this Transfer Agreement, have
         the rights and obligations of a Bank thereunder and under the other
         Credit Documents and (ii) the Assignor shall, to the extent provided in
         this Transfer Agreement, relinquish its rights and be released from its
         obligations under the Credit Agreement and under the other Credit
         Documents.

                  6.       Upon such acceptance and recording by the Agent, from
         and after the Effective Date, the Agent shall make all payments under
         the Credit Agreement and the other instruments or documents furnished
         pursuant thereto or in connection therewith in respect of the interest
         assigned hereby (including all payments of principal, interest and fees
         with respect thereto) to the Assignee. The Assignor and Assignee shall
         make all appropriate adjustments in payments under the Credit Agreement
         and the other instruments or documents furnished pursuant thereto or in
         connection therewith for periods prior to the Effective Date directly
         between themselves.

                  7.       This Transfer Agreement shall be governed by, and
         construed in accordance with, the laws of the State of New York.

                  8.       This Transfer Agreement may be executed in any number
         of counterparts and by different parties hereto in separate
         counterparts, each of which when so executed shall be deemed to be an
         original and all of which taken together shall constitute one and the
         same agreement. Delivery of an executed counterpart of Schedule 1 to
         this Transfer Agreement by telecopier shall be as effective as delivery
         of a manually executed counterpart of this Transfer Agreement.

                                       2

                  IN WITNESS WHEREOF, the parties hereto have caused this
Transfer Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written, such execution being made on
Schedule 1 hereto.

                                       3

                                   Schedule 1
                                       to
                               Transfer Agreement

                                                               
Section 1.

LC Participation Percentage interest assigned:                    ____________%

Assignee's LC Participation Percentage interest before giving
effect to this Transfer Agreement:                                ____________%

Assignee's LC Participation Percentage interest after giving
effect to this Transfer Agreement:                                ____________%

Assignor's remaining LC Participation Percentage interest after
giving effect to this Transfer Agreement:                         ______ _____%

Section 2.

Letter of Credit Commitment interest assigned:                    $___________

Assignee's Letter of Credit Commitment before giving effect
to this Transfer Agreement:                                       $___________

Assignee's Letter of Credit Commitment after giving effect to
this Transfer Agreement:                                          $___________

Assignor's remaining Letter of Credit Commitment after
giving effect to this Transfer Agreement:                         $___________

Section 3.

Effective Date: _____________________, 20____

                                          [NAME OF ASSIGNOR], as Assignor

                                                By:_________________________
                                                Name:
                                                Title:
                                                Dated:

                                          [NAME OF ASSIGNEE], as Assignee

                                                By:_________________________
                                                Name:
                                                Title:
                                                Dated:

                                    Lending Office (and address for notices):
                                    [Address]

Approved this ___ day of ______, _______

THE WILLIAMS COMPANIES, INC.

By:________________________
Name:
Title:

Approved this ___ day of ______, _______

[NAME OF [ISSUING BANK][BANK]], as [Issuing Bank][Bank]

By:________________________
Name:
Title:

Approved this ___ day of ______, _______

CITIBANK, N.A., as Agent

By:________________________
Name:
Title:

                                                                     EXHIBIT D-1
                                                                              TO
                                                                CREDIT AGREEMENT

                       FORM OF NOTICE OF LETTER OF CREDIT

                                                                          [Date]

Citibank, N.A., as Agent
for the Banks parties to the Credit
Agreement referred to below
399 Park Avenue
New York, New York 10043

         Attention: Williams Account Officer

Ladies and Gentlemen:

The undersigned, The Williams Companies, Inc. Northwest Pipeline Corporation,
and Transcontinental Gas Pipeline Corporation (the "Borrowers"), (a) refer to
that certain Credit Agreement, dated as of June 6, 2003 (as amended or otherwise
modified from time to time, the "Credit Agreement"; the terms defined therein
and not defined herein being used herein as therein defined), among The Williams
Companies, Inc., Northwest Pipeline Corporation, Transcontinental Gas Pipe Line
Corporation, as Borrowers, Citibank, N.A., as Agent and Collateral Agent for the
Banks, Bank of America N.A., as Syndication Agent, the Banks and Issuing Banks
parties thereto and Citigroup Global Markets Inc., as Co-Lead Arrangers; (b)
hereby gives you notice, irrevocably, pursuant to Section 2.1 of the Credit
Agreement that the undersigned hereby requests _____________ (the "Issuing
Bank") to issue an irrevocable Letter of Credit as set forth below in such
language as the Issuing Bank may deem appropriate and (c) in that connection
sets forth below the information relating to such Letter of Credit (the "Letter
of Credit") as required by Section 2.1 of the Credit Agreement:

         (i)      The Business Day upon which the Letter of Credit will be
                  issued is ______________, 20____ (the "Issuance Date").

         (ii)     The account party for the Letter of Credit is the ___________.

         (iii)    Attached hereto as Exhibit A are the proposed terms of the
                  Letter of Credit (including the beneficiary thereof and the
                  nature of the transactions or obligations proposed to be
                  supported thereby).

                  The undersigned hereby certifies that each of the
representations and warranties pursuant to Section 3.2 of the Credit Agreement
are true on the date hereof, and will be true on the date of the Issuance Date.

                                                Very truly yours,

                                                [THE WILLIAMS COMPANIES, INC. /
                                                NORTHWEST PIPELINE CORPORATION /
                                                TRANSCONTINENTAL GAS PIPELINE
                                                CORPORATION]

                                                By:_____________________________
                                                Name:___________________________
                                                Title:__________________________

cc:      Citicorp North America, Inc.
         1200 Smith Street, Suite 2000
         Houston, Texas 77002
         Attn: The Williams Companies, Inc.
               Account Officer

         [Issuing Bank]

                                                                     EXHIBIT D-2
                                                                              TO
                                                                CREDIT AGREEMENT

                  FORM OF NOTICE OF REVOLVING CREDIT BORROWING

                                                                          [Date]

Citibank, N.A., as Agent
for the Banks parties to the Credit
Agreement referred to below
399 Park Avenue
New York, New York 10043

         ATTENTION: The Williams Companies, Inc. Account Officer

Ladies and Gentlemen:

         The undersigned, ____________________ (the "Borrower"), (a) refers to
the Credit Agreement, dated as of June 6, 2003 (as may be further amended,
modified, supplemented, renewed, extended or restated from time to time, the
"Credit Agreement"; the terms defined therein and not defined herein being used
herein as therein defined), by and among the undersigned, [The Williams
Companies, Inc.,][Northwest Pipeline Corporation,][Transcontinental Gas Pipe
Line Corporation,] certain Banks parties thereto, Citibank, N.A., as
Administrative Agent and Collateral Agent, Bank of America N.A., as Syndication
Agent, Citibank, N.A. and Bank of America N.A., as Issuing Banks, Citigroup
Global Markets Inc. and Banc of America Securities LLC, as Co-Lead Arrangers;
(b) hereby gives you notice, irrevocably, pursuant to Section 2.3(a) of the
Agreement that the undersigned hereby requests a Revolving Credit Borrowing
under the Agreement and (c) in that connection sets forth below the information
relating to such Revolving Credit Borrowing (the "Proposed Revolving Credit
Borrowing") as required by Section 2.3 (a) of the Credit Agreement:

         (i)      The Business Day of the Proposed Revolving Credit Borrowing is
                  __________, 20____.

         (ii)     The type of Revolving Credit Advance comprising the Proposed
                  Revolving Credit Borrowing is a [Base Rate Advance]
                  [Eurodollar Rate Advance].

         (iii)    The aggregate amount of the Proposed Revolving Credit
                  Borrowing is $__________________.

         (iv)     [The Interest Period for each Revolving Credit Advance made as
                  part of the Proposed Revolving Credit Borrowing is __________
                  months.]

         The undersigned hereby certifies that each of the representations and
warranties pursuant to Section 3.2 are true on the date hereof, and will be true
on the date of the Proposed Revolving Credit Borrowing.

                                          Very truly yours,

                                          [BORROWER]

                                          By:_______________________________
                                          Name:_____________________________
                                          Title:____________________________

cc:      Citicorp North America, Inc.
         1200 Smith Street, Suite 2000
         Houston, Texas 77002
         Attn: The Williams Companies, Inc.
               Account Officer

                                                                       EXHIBIT E
                                                                              TO
                                                                CREDIT AGREEMENT

                           FORM OF SECURITY AGREEMENT

                                                                       EXHIBIT F
                                                                              TO
                                                                CREDIT AGREEMENT

                                  FORM OF NOTE

U.S.$_______________                                  Dated: _____________, 200_

                  FOR VALUE RECEIVED, the undersigned, ____________, a Delaware
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
_________________________ (the "Bank") for the account of its Applicable Lending
Office (as defined in the Credit Agreement referred to below) on the Termination
Date (as defined in the Credit Agreement referred to below) the principal sum of
U.S.$___________ or, if less, the aggregate principal amount of the Revolving
Credit Advances made by the Bank to the Borrower pursuant to the Credit
Agreement, dated as of June 6, 2003 (as amended or otherwise modified from time
to time, the "Credit Agreement"; the terms defined therein and not defined
herein being used herein as therein defined), among The Williams Companies,
Inc., Northwest Pipeline Corporation, Transcontinental Gas Pipe Line
Corporation, as Borrowers, Citibank, N.A., as Agent and Collateral Agent for the
Banks, Bank of America N.A., as Syndication Agent, the Banks and Issuing Banks
parties thereto and Citigroup Global Markets Inc. and Banc of America Securities
LLC, as Co-Lead Arrangers) outstanding on the Termination Date.

                  The Borrower promises to pay interest on the unpaid principal
amount of each Revolving Credit Advance from the date of such Revolving Credit
Advance until such principal amount is paid in full, at such interest rates, and
payable at such times, as are specified in the Credit Agreement. Both principal
and interest in respect of each Revolving Credit Advance are payable in lawful
money of the United States of America to the Agent at its account maintained at
388 Greenwich Street, New York, New York 10013, in same day funds.

                  Each Revolving Credit Advance owing to the Bank by the
Borrower pursuant to the Credit Agreement, and all payments made on account of
principal thereof, shall be recorded by the Bank and, prior to any transfer
hereof, endorsed on the grid attached hereto which is part of this Promissory
Note.

                  This Promissory Note is one of the Notes referred to in, and
is entitled to the benefits of, the Credit Agreement. The Credit Agreement,
among other things, (i) provides for the making of Revolving Credit Advances by
the Bank to the Borrower from time to time in an aggregate amount not to exceed
at any time outstanding the U.S. dollar amount first above mentioned, the
indebtedness of the Borrower resulting from each such Revolving Credit Advance
being evidenced by this Promissory Note and (ii) contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events
and also for prepayments on account of principal hereof prior to the maturity
hereof upon the terms and conditions therein specified. Capitalized terms used
herein which are not defined herein and are defined in the Credit Agreement are
used herein as therein defined.

                  The Borrower hereby waives presentment, demand, protest,
notice of intent to accelerate, notice of acceleration and any other notice of
any kind, except as provided in the

Credit Agreement. No failure to exercise, and no delay in exercising, any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.

                  This Promissory Note shall be governed by, and construed in
accordance with, the laws of the State of New York.

                                                [BORROWER'S NAME]

                                                By________________
                                                Name:_____________
                                                Title:____________

              REVOLVING CREDIT ADVANCES AND PAYMENTS OF PRINCIPAL

- ------------------------------------------------------------------------------
                  AMOUNT OF         AMOUNT OF
               REVOLVING CREDIT   PRINCIPAL PAID   UNPAID PRINCIPAL   NOTATION
    DATE           ADVANCE          OR PREPAID          BALANCE        MADE BY
                                                          
- ------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                                                    EXHIBIT 10.4

                                                                  EXECUTION COPY

                               SECURITY AGREEMENT

                            Dated as of June 6, 2003

                                      Among

                          THE WILLIAMS COMPANIES, INC.

                                   as Grantor

                                 CITIBANK, N.A.

                               as Collateral Agent

                                       and

                                 CITIBANK, N.A.

                           as Securities Intermediary

                        T A B L E  O F  C O N T E N T S

SECTION                                                                                                PAGE
                                                                                                    
Section 1.   Grant of Security.................................................................          2

Section 2.   Security for Obligations..........................................................          2

Section 3.   The Collateral Account............................................................          3

Section 4.   Maintaining the Collateral........................................................          4

Section 5.   Investing of Amounts in the Collateral Account....................................          4

Section 6.   Release of Amounts................................................................          5

Section 7.   Representations and Warranties....................................................          5

Section 8.   Further Assurances................................................................          6

Section 9.   Post-Closing Changes..............................................................          7

Section 10.  Other Liens.......................................................................          7

Section 11.  Collateral Agent Appointed Attorney-in-Fact.......................................          7

Section 12.  The Collateral Agent's Duties.....................................................          7

Section 13.  Remedies..........................................................................          8

Section 14.  Indemnity and Expenses............................................................          8

Section 15.  Amendments; Waivers...............................................................          9

Section 16.  Notices, Etc......................................................................          9

Section 17.  Continuing Security Interest; Assignments under the Credit Agreement..............          9

Section 18.  Termination.......................................................................         10

Section 19.  Execution in Counterparts.........................................................         10

Section 20.  Governing Law.....................................................................         10

Schedules I      -   Chief Executive Office, Type Of Organization, Jurisdiction
                     Of Organization And Organizational Identification Number

                               SECURITY AGREEMENT

                  SECURITY AGREEMENT dated as of June 6, 2003 (as may be
amended, modified, supplemented, renewed, extended or restated from time to
time, this "AGREEMENT") among THE WILLIAMS COMPANIES, INC., a Delaware
corporation (the "GRANTOR"), CITIBANK, N.A., as collateral agent (in such
capacity, together with any successor collateral agent appointed pursuant to
Article VII of the Credit Agreement (as hereinafter defined), the "COLLATERAL
AGENT") for the Banks, the Issuing Banks, the Agent (each as defined in the
Credit Agreement) and the Collateral Agent (the "SECURED PARTIES") and CITIBANK,
N.A., as securities intermediary of Grantor (in such capacity, the "SECURITIES
INTERMEDIARY").

PRELIMINARY STATEMENTS.

                  (1)      The Grantor, Transcontinental Gas Pipe Line
Corporation and Northwest Pipeline Corporation have entered into a Credit
Agreement dated as of June 6, 2003 (said Agreement, as it may hereafter be
amended, amended and restated, supplemented or otherwise modified from time to
time, being the "CREDIT AGREEMENT") with the Secured Parties.

                  (2)      Pursuant to the Credit Agreement, the Grantor is
entering into this Agreement in order to grant to the Collateral Agent for the
ratable benefit of the Secured Parties a security interest (the "SECURITY
INTEREST") in the Collateral (as hereinafter defined) to secure the Secured
Obligations (as hereinafter defined).

                  (3)      The Grantor has opened Account No. 795241 (the
"COLLATERAL ACCOUNT"), with the Securities Intermediary at its office at 111
Wall Street, 14th Floor, New York, NY 10005, in the name of the Grantor but
under the control (within the meaning of Section 8-106 of the UCC (as defined
below)) of the Collateral Agent and subject to the terms of this Agreement.

                  (4)      The Securities Intermediary has agreed to calculate,
on a daily basis, the mark-to-market value of the securities held in the
Collateral Account and to provide such calculations to any Secured Party, as
such Secured Party may reasonably request from time to time.

                  (5)      It is a condition precedent to the making of
Revolving Credit Advances by the Banks and the issuance of Letters of Credit by
the Issuing Banks under the Credit Agreement that the Grantor shall have granted
the assignment and security interest and made the pledge and assignment
contemplated by this Agreement.

                  (6)      The Grantor will derive substantial direct and
indirect benefit from the transactions contemplated herein and by the other
Credit Documents.

                  (7)      Terms defined in the Credit Agreement and not
otherwise defined in this Agreement are used in this Agreement as defined in the
Credit Agreement. Further, unless otherwise defined in this Agreement or in the
Credit Agreement, terms defined in Article 8 or 9 of the UCC (as defined below)
and/or in the Federal Book Entry Regulations (as defined below) are used in this
Agreement as such terms are defined in such Article 8 or 9 and/or the Federal
Book Entry Regulations. "UCC" means the Uniform Commercial Code as in effect,
from time

to time, in the State of New York; provided that, if perfection or the effect of
perfection or non-perfection or the priority of any security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of New York, "UCC" means the Uniform
Commercial Code as in effect from time to time in such other jurisdiction for
purposes of the provisions hereof relating to such perfection, effect of
perfection or non-perfection or priority. The term "FEDERAL BOOK ENTRY
REGULATIONS" means (a) the federal regulations contained in Subpart B
("Treasury/Reserve Automated Debt Entry System (TRADES)") governing book-entry
securities consisting of U.S. Treasury bonds, notes and bills and Subpart D
("ADDITIONAL PROVISIONS") of 31 C.F.R. Part 357, 31 C.F.R. Section 357.2,
Section 357.10 through Section 357.14 and Section 357.41 through Section 357.44
and (b) to the extent substantially identical to the federal regulations
referred to in clause (a) above (as in effect from time to time), the federal
regulations governing other book-entry securities.

                  NOW, THEREFORE, in consideration of the premises and in order
to induce the Banks to make Revolving Advances and the Issuing Banks to issue
Letters of Credit under the Credit Agreement, the Grantor hereby agrees with the
Collateral Agent for the ratable benefit of the Secured Parties as follows:

                  Section 1. Grant of Security. The Grantor hereby grants to the
Collateral Agent, for the ratable benefit of the Secured Parties, a security
interest in the Grantor's right, title and interest in and to the following
(collectively, the "COLLATERAL"):

                  (a) the Collateral Account and all funds and financial assets
         from time to time credited thereto (including, without limitation,
         Government Securities (as hereinafter defined)), all interest,
         dividends, distributions, cash, instruments and other property from
         time to time received, receivable or otherwise distributed in respect
         of or in exchange for any or all of such funds and financial assets,
         and all certificates and instruments, if any, from time to time
         representing or evidencing the Collateral Account;

                  (b) all interest, dividends, distributions, cash, instruments
         and other property from time to time received, receivable or otherwise
         distributed in respect of or in exchange for any or all of the then
         existing Collateral.

                  "GOVERNMENT SECURITIES" means any of the following and each
having a maturity of not greater than 2 years from the date of acquisition
thereof: (i) United States treasury securities, including bills, notes and
bonds; and (ii) securities of any agency of the Government of the United States
that are explicitly guaranteed by the full faith and credit of the Government of
the United States.

                  Section 2. Security for Obligations. This Agreement secures
the payment of all obligations of the Grantor and the Borrowers, now or
hereafter existing under the Credit Documents, whether direct or indirect,
absolute or contingent, and whether for principal, reimbursement obligations,
interest, fees, premiums, penalties, indemnifications, contract causes of
action, costs, expenses or otherwise (all such obligations being the "SECURED
OBLIGATIONS"). Without limiting the generality of the foregoing, this Agreement
secures, as to each Borrower, the payment of all amounts that constitute part of
the Secured Obligations and would be owed by such Borrower to any Secured Party
under the Credit Documents but for the fact that they are

unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving a Borrower.

                  Section 3. The Collateral Account. The Securities Intermediary
represents to and agrees with the Grantor and the Collateral Agent that:

                  (a) The Securities Intermediary maintains the Collateral
         Account in the name of, and for the benefit of, the Grantor, and all
         property held by the Securities Intermediary for the account of the
         Grantor is, and will continue to be, credited to the Collateral Account
         and maintained therein from time to time.

                  (b) The Collateral Account is a "securities account" as such
         term is used in Section 8-501(a) of the UCC and, in accordance
         therewith, (i) the Securities Intermediary is the securities
         intermediary with respect to the property credited from time to time to
         the Collateral Account, (ii) the Grantor is the entitlement holder with
         respect to the property credited from time to time to the Collateral
         Account and (iii) the Securities Intermediary agrees to treat the
         Grantor as entitled to exercise the rights that comprise the financial
         assets credited to the Collateral Account.

                  (c) The Securities Intermediary will comply with all
         notifications it receives directing it to invest, withdraw, transfer or
         redeem any property in the Collateral Account (each, an "ENTITLEMENT
         ORDER") originated by the Collateral Agent without further consent by
         the Grantor or any other person; provided that, without limiting the
         absolute obligation of the Securities Intermediary to comply with any
         Entitlement Order originated by the Collateral Agent, the Collateral
         Agent agrees with the Grantor that the Collateral Agent will not
         originate any Entitlement Order except in accordance with the terms of
         this Agreement; provided, further, that promptly thereafter, the
         Securities Intermediary shall give the Grantor written notice of the
         same at its address specified in the Credit Agreement.

                  (d) The Securities Intermediary shall comply with Entitlement
         Orders originated by the Grantor (subject to the terms of this
         Agreement); provided, however, if the Securities Intermediary receives
         a notice from the Collateral Agent that it will exercise exclusive
         control over the Collateral Account upon a Specified Event of Default
         (as hereinafter defined), the Securities Intermediary shall cease
         complying with Entitlement Orders or other directions concerning the
         Collateral Account, originated by the Grantor; provided, further, that
         in the event of any conflict between any Entitlement Order originated
         by the Grantor and any Entitlement Order originated by the Collateral
         Agent, the Entitlement Order originated by the Collateral Agent will
         prevail.

                  (e) The Securities Intermediary will treat all cash,
         securities and other property credited to the Collateral Account as
         "financial assets" as such term is defined in Section 8-102(a)(9) of
         the UCC.

                  (f) The State of New York is, and will continue to be, the
         Securities Intermediary's jurisdiction for purposes of Section
         8-110(e)(2) of the UCC so long as the Security Interest shall remain in
         effect.

                  Section 4. Maintaining the Collateral. So long as any
Revolving Credit Advance or any other obligation of the Grantor or any Borrower
under any Credit Document shall remain unpaid, any Letter of Credit or Letter of
Credit Liability shall be outstanding or any Bank shall have any Commitment:

                  (a) The Grantor will maintain all Collateral only with the
         Collateral Agent or the Securities Intermediary (or such other Person
         acceptable to the Collateral Agent and the Grantor that complies with
         the provisions herein which has agreed, in a record authenticated by
         the Grantor, the Collateral Agent and such Person, to (i) comply with
         instructions originated by the Collateral Agent directing the
         disposition of funds in the Collateral Account without the further
         consent of the Grantor and (ii) waive or subordinate in favor of the
         Collateral Agent all claims of such Person (including, without
         limitation, claims by way of a security interest, lien or right of
         setoff or right of recoupment) to the Collateral, which authenticated
         record shall be in form and substance satisfactory to the Collateral
         Agent and the Grantor).

                  (b) The Collateral Agent shall, at the direction of the
         Grantor, at any time and without notice to, or consent from, any Bank,
         and notwithstanding the occurrence or continuance of any Event of
         Default, transfer, or direct the transfer of, funds from the Collateral
         Account to the Agent to satisfy any Borrower's Obligations under the
         Credit Agreement whether or not such Obligations are then due and
         payable.

                  (c) The Collateral Agent shall, at the request of the Agent,
         at any time and without consent from the Grantor or any Borrower,
         transfer, or direct the transfer of, funds from the Collateral Account
         to satisfy any Borrower's obligations under the Credit Documents which
         are then due and payable (provided that promptly thereafter the
         Collateral Agent shall give the Grantor written notice of the same) if
         an Event of Default shall have occurred and be continuing.

                  (d) Subject to Sections 4(b) and 6(d) hereof, upon the
         occurrence and continuance of an Event of Default under Section 6.1(d)
         or (f) of the Credit Agreement (each a "SPECIFIED EVENT OF DEFAULT"),
         the Collateral Agent shall have sole right to direct the investment and
         disposition of funds with respect to the Collateral Account and it
         shall be a term and condition of the Collateral Account,
         notwithstanding any term or condition to the contrary in any other
         agreement relating to the Collateral Account that no amount (including,
         without limitation, interest credited thereto) will be paid or released
         to or for the account of, or withdrawn by or for the account of, the
         Grantor, any Borrower or any other Person from the Collateral Account.

                  (e) Contemporaneously herewith, the Grantor shall cause a
         certificate of incumbency to be executed in the form of Exhibit A
         hereto (such certificate may be amended or modified by the Grantor from
         time to time by adding or deleting the names of persons authorized to
         act on behalf of the Grantor with respect to the Collateral Account).

                  Section 5. Investing of Amounts in the Collateral Account. So
long as no Specified Event of Default shall have occurred and be continuing and
subject to the provisions of

Sections 4, 6 and 18 hereof, the Grantor will be permitted to (a) invest, or
direct the Securities Intermediary to invest, amounts received with respect to
the Collateral Account in Government Securities, and only Government Securities,
and credited to the Collateral Account, as the Grantor may select and (b) invest
interest paid on the Government Securities referred to in clause (a) above, and
reinvest other proceeds of any such Government Securities that may mature or be
sold, in each case in such Government Securities credited in the same manner.
Interest and proceeds that are not invested or reinvested in Government
Securities as provided above shall be deposited and held in the Collateral
Account (such uninvested amounts shall not earn or accrue interest thereon). In
addition, so long as no Specified Event of Default shall have occurred and be
continuing, the Grantor shall have the right at any time to exchange, or direct
the Securities Intermediary to exchange, such Government Securities for similar
Government Securities of smaller or larger determinations, or for other
Government Securities, credited to the Collateral Account.

                  Section 6. Release of Amounts. So long as (x) no Specified
Event of Default shall have occurred and be continuing, and (y) the
mark-to-market value of the Collateral shall exceed the Collateral Coverage
Requirement (i) by not less than $1,000,000 at any time, and upon two Business
Days prior written notice by the Grantor to the Collateral Agent, or (ii) on the
last Business Day of each month, if requested by the Grantor, then the
Collateral Agent shall immediately transfer, or direct the Securities
Intermediary to transfer, such excess amount, or a portion thereof as may be
requested by the Grantor, to the Grantor or at its order.

                  (a) So long as (x) no Specified Event of Default shall have
occurred and be continuing, and (y) upon two Business Days prior written notice
by the Grantor to the Collateral Agent that (i) any outstanding Revolving Credit
Advance has been repaid or (ii) any outstanding Letter of Credit has expired and
is undrawn, then the Collateral Agent shall immediately transfer, or direct the
Securities Intermediary to transfer, such amount in excess of the Collateral
Coverage Requirement, or a portion thereof as may be requested by the Grantor,
as is then on deposit in the Collateral Account to the Grantor or at its order.

                  (b) Upon the occurrence of a Mandatory Prepayment Event and
unless the Grantor has otherwise paid all then outstanding obligations of the
Grantor with respect to the Revolving Credit Advances, the Collateral Agent
shall, at the direction of the Agent, pay and release, or direct the Securities
Intermediary to pay and release, to the Agent to be applied to all then
outstanding obligations of the Grantor or any Borrower with respect to the
Revolving Credit Advances, such amount as is then on deposit in the Collateral
Account.

                  (c) Notwithstanding Sections 6(a) and 6(b), and whether or not
an Event of Default has occurred and is continuing, upon two Business Days prior
written notice by the Grantor to the Collateral Agent, the Collateral Agent
shall immediately transfer, or direct the Securities Intermediary to transfer,
such amount in excess of 107.5% of the Total Credit Exposure, or a portion
thereof as may be requested by the Grantor, as is then on deposit in the
Collateral Account to the Grantor or at its order.

                  Section 7. Representations and Warranties. The Grantor
represents and warrants as follows:

                  (a) The Grantor's exact legal name, as defined in Section
         9-503(a) of the UCC, is correctly set forth in Schedule 1 hereto. The
         Grantor is located (within the meaning of Section 9-307 of the UCC) and
         has its chief executive office in the state or jurisdiction set forth
         in Schedule I hereto. The information set forth in Schedule I hereto
         with respect to the Grantor is true and accurate in all respects. The
         Grantor has not previously changed its name, location, chief executive
         office, type of organization, jurisdiction of organization or
         organizational identification number from those set forth in Schedule I
         within the previous five years of the date hereof.

                  (b) The Grantor is the legal and beneficial owner of the
         Collateral free and clear of any lien, claim, option or right of
         others, except for the security interest created under this Agreement.
         No effective financing statement or other instrument similar in effect
         covering all or any part of such Collateral or listing the Grantor or
         any trade name of the Grantor as debtor is on file in any recording
         office, except such as may have been filed in favor of the Collateral
         Agent relating to the Credit Documents.

                  (c) All filings and other actions necessary to perfect the
         security interest in the Collateral of the Grantor created under this
         Agreement have been duly made or taken and are in full force and
         effect, and this Agreement creates in favor of the Collateral Agent for
         the benefit of the Secured Parties a valid and, together with such
         filings and other actions, perfected first priority security interest
         in the Collateral of the Grantor, securing the payment of the Secured
         Obligations.

                  (d) No authorization or approval or other action by, and no
         notice to or filing with, any governmental authority or regulatory body
         or any other third party is required for (i) the grant by the Grantor
         of the security interest granted hereunder or for the execution,
         delivery or performance of this Agreement by the Grantor, or (ii) the
         perfection or maintenance of the security interest created hereunder
         (including the first priority nature of such security interest), except
         for the filing of financing and continuation statements under the UCC,
         which financing statements have been duly filed and are in full force
         and effect.

                  (e) The aggregate mark-to-market value of all Collateral in
         the Collateral Account for which the Collateral Agent has a
         first-priority perfected security interest is equal to or greater than
         the Collateral Coverage Requirement as of the date hereof.

                  Section 8. Further Assurances. The Grantor agrees that from
time to time, at the expense of the Grantor, it will promptly execute and
deliver, or otherwise authenticate, all further instruments and documents, and
take all further action that may be necessary or desirable, or that the
Collateral Agent may reasonably request, in order to perfect and protect the
security interest granted or purported to be granted by the Grantor hereunder or
to enable the Collateral Agent to exercise and enforce its rights and remedies
hereunder with respect to the Collateral. Without limiting the generality of the
foregoing, the Grantor will promptly with respect to Collateral: (i) execute or
authenticate and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as the Collateral Agent may reasonably request, in order to
perfect and preserve the security interest granted or purported to be granted by
the Grantor hereunder; and (ii) deliver to the Collateral

Agent evidence that all other action that the Collateral Agent may deem
reasonably necessary or desirable in order to perfect and protect the security
interest created by the Grantor under this Agreement has been taken.

                  (a) The Grantor hereby authorizes the Collateral Agent to file
one or more financing or continuation statements, and amendments thereto,
including, without limitation, one or more financing statements indicating that
such financing statements cover the Collateral (or words of similar effect) of
the Grantor, in each case without the signature of the Grantor. A photocopy or
other reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law. The Grantor ratifies its authorization for the
Collateral Agent to have filed such financing statements, continuation
statements or amendments filed prior to the date hereof.

                  (b) The Grantor will furnish to the Collateral Agent from time
to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with such Collateral as the
Collateral Agent may reasonably request in writing, all in reasonable detail.

                  Section 9. Post-Closing Changes. The Grantor will not change
its name, type of organization, jurisdiction of organization, organizational
identification number or location from those set forth in Section 7(a) of this
Agreement without first giving at least 15 Business Days' prior written notice
to the Collateral Agent and taking all action required by the Collateral Agent
for the purpose of perfecting or protecting the security interest granted by
this Agreement. If the Grantor does not have an organizational identification
number and later obtains one, it will forthwith notify the Collateral Agent of
such organizational identification number.

                  Section 10. Other Liens. The Grantor agrees that it will not
create or permit to suffer to exist any lien upon or with respect to any of the
Collateral except for the pledge, assignment and security interest created under
this Agreement.

                  Section 11. Collateral Agent Appointed Attorney-in-Fact. The
Grantor hereby irrevocably appoints the Collateral Agent the Grantor's
attorney-in-fact, with full authority in the place and stead of the Grantor and
in the name of the Grantor or otherwise, from time to time upon the occurrence
and during the continuance of an Event of Default, in the Collateral Agent's
discretion, to take any action and to execute any instrument that the Collateral
Agent may deem necessary to accomplish the purposes of this Agreement.

                  Section 12. The Collateral Agent's Duties. The powers
conferred on the Collateral Agent hereunder are solely to protect the Secured
Parties' interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the safe custody of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Collateral Agent shall have no duty as to any Collateral, as to ascertaining or
taking action with respect to exchanges, maturities, tenders or other matters
relative to any Collateral, whether or not any Secured Party has or is deemed to
have knowledge of such matters. The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any Collateral in
its possession if such Collateral is accorded treatment substantially equal to
that which it accords its own property.

                  Section 13. Remedies. If any Event of Default shall have
occurred and be continuing:

                  (a) The Collateral Agent may exercise in respect of the
         Collateral, in addition to other rights and remedies provided for
         herein or otherwise available to it, all the rights and remedies of a
         secured party upon default under the UCC (whether or not the UCC
         applies to the affected Collateral) and also may: (i) subject to
         Section 13(b), exercise any and all rights and remedies of the Grantor
         under or in connection with the Collateral, or otherwise in respect of
         the Collateral, including, without limitation, withdraw, or cause or
         direct the withdrawal, of all funds with respect to the Collateral and
         (ii) exercise all other rights and remedies with respect to the other
         Collateral, including, without limitation, those set forth in Section
         9-607 of the UCC.

                  (b) Any cash held by or on behalf of the Collateral Agent and
         all cash proceeds received by or on behalf of the Collateral Agent in
         respect of any collection from, or other realization upon all or any
         part of the Collateral shall be held by the Collateral Agent as
         collateral for, and/or then or at any time thereafter applied (after
         payment of any amounts payable to the Collateral Agent pursuant to
         Section 3 hereof) in whole or in part by the Collateral Agent for the
         ratable benefit of the Secured Parties against, all or any part of the
         Secured Obligations, in the following manner:

                           (i)      first, paid to the Collateral Agent, the
                  Securities Intermediary and the Agent for any amounts then
                  owing to the Collateral Agent, the Securities Intermediary and
                  the Agent pursuant to Section 8.4 of the Credit Agreement or
                  otherwise under the Credit Documents, ratably in accordance
                  with such respective amounts then owing to the Collateral
                  Agent, the Securities Intermediary and the Agent; and

                           (ii)     second, ratably paid to the Banks and the
                  Issuing Banks or any amounts then owing to them under the
                  Credit Documents ratably in accordance with such respective
                  amounts then owing to such Banks and Issuing Banks.

         Any surplus of such cash or cash proceeds held by or on the behalf of
         the Collateral Agent and remaining after payment in full of all the
         Secured Obligations shall be paid over to the Grantor or to whomsoever
         may be lawfully entitled to receive such surplus.

                  (c) The Collateral Agent may, without notice to the Grantor
         except as required by law and at any time or from time to time, charge,
         set-off and otherwise apply all or any part of the Secured Obligations
         against any funds held with respect to the Collateral.

                  Section 14. Indemnity and Expenses. The Grantor agrees to
indemnify, defend and save and hold harmless each Secured Party and the
Securities Intermediary and each of their affiliates and their respective
officers, directors, employees, agents and advisors (each, an "INDEMNIFIED
PARTY") from and against, and shall pay on demand, any and all claims, damages,
losses, liabilities and expenses (including, without limitation, reasonable fees
and expenses of counsel) that may be incurred by or asserted or awarded against
any Indemnified Party, in each case arising out of or in connection with or
resulting from this Agreement (including, without

limitation, enforcement of this Agreement), except to the extent such claim,
damage, loss, liability or expense is found in a final, non-appealable judgment
by a court of competent jurisdiction to have resulted from such Indemnified
Party's gross negligence or willful misconduct or the gross negligence or
willful misconduct of such Indemnified Party's affiliates, officers, directors,
employees, agents or advisors.

                  (a) The Grantor will upon demand pay to the Collateral Agent
and the Securities Intermediary the amount of any and all reasonable expenses,
including, without limitation, the reasonable fees and expenses of its counsel,
that the Collateral Agent and the Securities Intermediary may incur in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of the Collateral Agent or the other Secured Parties hereunder
or (iv) the failure by the Grantor to perform or observe any of the provisions
hereof.

                  Section 15. Amendments; Waivers. No amendment or waiver of any
provision of this Agreement, and no consent to any departure by the Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Collateral Agent and the Securities Intermediary, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. No failure on the part of the Collateral
Agent or any other Secured Party or the Securities Intermediary to exercise, and
no delay in exercising any right hereunder, shall operate as a waiver thereof;
nor shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right.

                  Section 16. Notices, Etc. All notices and other communications
provided for hereunder shall be either (i) in writing (including telegraphic,
telecopier or telex communication) and mailed, telegraphed, telecopied, telexed
or otherwise delivered or (ii) by electronic mail (if electronic mail addresses
are designated as provided below) confirmed immediately in writing, in the case
of the Borrowers or the Collateral Agent, addressed to it at its address
specified in the Credit Agreement, if to the Securities Intermediary, at its
address specified on its signature page hereto or, as to any party, at such
other address as shall be designated by such party in a written notice to the
other parties. All such notices and other communications shall, when mailed,
telegraphed, telecopied, telexed, sent by electronic mail or otherwise, be
effective when deposited in the mails, delivered to the telegraph company,
telecopied, confirmed by telex answerback, sent by electronic mail and confirmed
in writing, or otherwise delivered (or confirmed by a signed receipt),
respectively, addressed as aforesaid; except that notices and other
communications to the Collateral Agent or the Securities Intermediary shall not
be effective until received by the Collateral Agent or the Securities
Intermediary, as the case may be. Delivery by telecopier of an executed
counterpart of any amendment or waiver of any provision of this Agreement or
Schedule hereto shall be effective as delivery of an original executed
counterpart thereof.

                  Section 17. Continuing Security Interest; Assignments under
the Credit Agreement. This Agreement shall create a continuing security interest
in the Collateral and shall (a) remain in full force and effect until the latest
of (i) the payment in full in cash of the Secured Obligations, (ii) the
Termination Date and (iii) the termination or expiration of all Letters of

Credit, (b) be binding upon the Grantor, its successors and assigns and (c)
inure, together with the rights and remedies of the Collateral Agent hereunder,
to the benefit of the Secured Parties and their respective successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(c), any Bank may assign or otherwise transfer all or any portion of its rights
and obligations under the Credit Agreement in accordance therewith (including,
without limitation, all or any portion of its Commitments, the Revolving Credit
Advances owing to it and the Note or Notes, if any, held by it) to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Bank herein or otherwise, in each
case as provided in Section 8.6 of the Credit Agreement.

                  Section 18. Termination. Upon the latest of (i) the payment in
full in cash of the Secured Obligations, (ii) the Termination Date and (iii) the
termination or expiration of all Letters of Credit, the security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
the applicable Grantor. Upon any such termination, the Collateral Agent will, at
the Grantor's expense, execute and deliver to the Grantor such documents as the
Grantor shall reasonably request to evidence such termination.

                  Section 19. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement. Delivery of an executed counterpart of a signature page
to this Agreement by telecopier shall be effective as delivery of an original
executed counterpart of this Agreement.

                  Section 20. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York.

                              [Signatures follow.]

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
     executed by their respective officers thereunto duly authorized, as of the
     date first above written.

                                THE WILLIAMS COMPANIES, INC., as Grantor

                                By: /s/  Steven J. Malcolm
                                Name:  Steven J. Malcolm
                                Title: Chairman of the Board

                                CITIBANK, N.A., as Collateral Agent and Secured
                                Party

                                By: /s/  Gordon H. DeKuyper
                                Name:  Gordon H. DeKuyper
                                Title: Vice President

                                CITIBANK, N.A., as Securities Intermediary
                                By: /s/ Camille Tomao
                                Name: Camille Tomao
                                Title: Vice President

                                Address:
                                       111 Wall Street, 14th Floor
                                       New York, New York  10055

                                                               SCHEDULE I TO THE
                                                              SECURITY AGREEMENT

          CHIEF EXECUTIVE OFFICE, TYPE OF ORGANIZATION, JURISDICTION OF
              ORGANIZATION AND ORGANIZATIONAL IDENTIFICATION NUMBER

                    CHIEF EXECUTIVE           TYPE OF         JURISDICTION OF   ORGANIZATIONAL
   GRANTOR              OFFICE              ORGANIZATION        ORGANIZATION       I.D. NO.
- ---------------   -------------------       ------------      ---------------   --------------
                                                                    
The Williams      One Williams Center
Companies, Inc.   Tulsa, OK  74172          Corporation           Delaware          2116534

                                                                EXHIBIT A TO THE
                                                              SECURITY AGREEMENT

                            CERTIFICATE OF INCUMBENCY

                  Reference is made to (i) the credit agreement, dated as of
June 6, 2003 (as may be further amended, modified, supplemented, renewed,
extended or restated from time to time, the "CREDIT AGREEMENT"), by and among
The Williams Companies, Inc. (the "COMPANY"), Northwest Pipeline Corporation,
Transcontinental Gas Pipe Line Corporation, each a Delaware corporation, as
borrowers, the banks, issuing banks, financial institutions and other
institutional lenders party thereto, and Citibank, N.A., as agent and collateral
agent ("CITIBANK"), and (ii) the security agreement, dated as of June 6, 2003
(the "SECURITY AGREEMENT"), made by the Company to Citibank.

                  The undersigned certifies that s/he is the [INSERT TITLE] of
the Company, and as such s/he is authorized to execute this certificate and
further certifies that the following persons have been elected or appointed, are
qualified, and are now acting in the capacity or capacities indicated below, and
that the signatures set forth opposite their respective names are their true and
genuine signatures. S/he further certifies that any of the persons listed below
is authorized [CHOOSE ONE: INDIVIDUALLY OR JOINTLY WITH ONE OTHER PERSON] to
execute agreements and give written instructions with regard to any matters
pertaining to the Collateral Account (as defined in the Security Agreement);
provided, that, in all respects, such execution of agreements and giving of
written instructions shall be subject to the provisions of the Credit Agreement
and the Security Agreement:

             Name                                Title / Phone                                Signature
             ----                                -------------                                ----------
                                                                            
                                                        /
_______________________________      _______________________________________      ___________________________________
                                                       /
_______________________________      _______________________________________      ___________________________________
                                                       /
_______________________________      _______________________________________      ___________________________________

                  IN WITNESS WHEREOF, I have caused this certificate to be duly
executed and delivered as of the ___ day of ______, 200__.

                                                THE WILLIAMS COMPANIES, INC.

                                                [TO BE SIGNED BY AN OFFICER
                                                OTHER THAN ONE LISTED ABOVE]

                                                By __________________________
                                                   Name:
                                                   Title:

                                                                    EXHIBIT 10.5

                            STOCK PURCHASE AGREEMENT

                  STOCK PURCHASE AGREEMENT, dated as of May 19, 2003 (this
"Agreement"), between MEHC Investment, Inc., a South Dakota corporation (the
"Seller"), MidAmerican Energy Holdings Company, an Iowa corporation
("MidAmerican"), and The Williams Companies, Inc., a Delaware corporation (the
"Purchaser").

                              W I T N E S S E T H:

                  WHEREAS, the Seller is the owner of 1,466,667 shares (the
"Shares") of 9-7/8% Cumulative Convertible Preferred Stock, par value $1.00 per
share, of the Purchaser (the "Preferred Stock"), purchased pursuant to the Stock
Purchase Agreement, dated as of March 7, 2002 (the "Purchase Agreement"), by and
among the Purchaser, the Seller and MidAmerican;

                  WHEREAS, the Purchaser desires to repurchase the Shares from
the Seller and the Seller desires to sell the Shares to the Purchaser; and

                  WHEREAS, the Seller is a wholly owned subsidiary of
MidAmerican.

                  NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and subject to the terms and conditions set forth herein,
the parties hereto hereby agree as follows:

SECTION 1.        PURCHASE AND SALE

                  (a)      Subject to the terms and conditions set forth in this
Agreement and in reliance upon the Purchaser's and Seller's respective
representations and warranties set forth below, on the Closing Date, the Seller
shall sell to the Purchaser, and the Purchaser shall purchase from the Seller,
the Shares for an aggregate purchase price of $288,750,000 (the "Purchase
Price"). Such sale and purchase shall be effected on the Closing Date by the
Seller delivering to the Purchaser the stock certificate evidencing the Shares
together with a duly executed stock power, against delivery by the Purchaser to
the Seller of the Purchase Price by wire transfer of immediately available
United States dollars to such account as the Seller shall designate prior to the
Closing Date.

                  (b)      The closing of such sale and purchase (the "Closing")
shall take place at 10:00 a.m. on the first business day after the satisfaction
or waiver of the conditions set forth in Sections 5(c) and 6(c) (provided that
if, on the first date that such conditions are satisfied, all necessary
consents, waivers, authorizations and approvals are by their express terms
irrevocable, then the Closing shall be on such business day thereafter as may be
specified by Purchaser to Seller in a notice delivered at least two business
days prior to such closing date but in no event

shall such closing date be later than July 15, 2003), or at such other time as
the Purchaser and the Seller shall agree in writing (the "Closing Date"), at the
offices of Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York
10019, or such other location as the Purchaser and the Seller shall mutually
select.

SECTION 2.        REPRESENTATIONS AND WARRANTIES OF THE SELLER AND MIDAMERICAN

                  The Seller and MidAmerican represent and warrant to the
Purchaser that:

                  2.1.     Organization, Good Standing, Qualification, Etc.

                  (a)      The Seller is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of South
Dakota, and it has the requisite corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby, and has taken all necessary action to
authorize the execution, delivery and performance of this Agreement. MidAmerican
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Iowa, and it has the requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby, and has taken
all necessary action to authorize the execution, delivery and performance of
this Agreement. No other action on the part of the Seller or MidAmerican is
necessary to authorize the execution, delivery and performance of this Agreement
by the Seller or MidAmerican and each of the transactions contemplated hereby.

                  (b)      This Agreement constitutes a valid and binding
obligation of the Seller and MidAmerican, enforceable against the Seller and
MidAmerican in accordance with its terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.

                  (c)      The execution and delivery by the Seller and
MidAmerican of this Agreement do not, and the fulfillment of the terms hereof by
the Seller and MidAmerican will not:

                  (i)      require the Seller or MidAmerican or any of their
                           Affiliates to obtain any consent, approval or action
                           of, or make any filing with or give any notice to,
                           any Person the failure of which to obtain, make or
                           give would, individually or in the aggregate,
                           reasonably be expected to delay or prevent the
                           fulfillment of the terms of this Agreement or have a
                           material adverse effect on the assets, properties,
                           business, net income or financial condition of the
                           Seller and its subsidiaries, taken as a whole; or

                  (ii)     result in a breach of any of the terms, conditions or
                           provisions of, or constitute a default under, or
                           permit the acceleration of rights under or
                           termination of, the Seller's or MidAmerican's
                           organizational documents, any agreement, lease,
                           contract, note, mortgage, indenture, arrangement or
                           other obligations to which the Seller or MidAmerican
                           or any of their

                                       2

                           Affiliates is a party, or any order, judgment, rule
                           or regulation of any Governmental Entity having
                           jurisdiction over the Seller or MidAmerican or any of
                           their Affiliates or over their respective assets,
                           properties or businesses, except for such breaches,
                           defaults, accelerations and terminations that would
                           not, individually or in the aggregate, reasonably be
                           expected to delay or prevent the fulfillment of terms
                           of this Agreement or have a material adverse effect
                           on the assets, properties, business, net income or
                           financial condition of MidAmerican and its
                           subsidiaries, taken as a whole.

                  2.2.     Shares

                  The Seller is the sole beneficial owner of the Shares and owns
the Shares free and clear of adverse claims, liens or restrictions on transfer,
except as set forth in Section 5.3 of the Purchase Agreement, and, upon delivery
of the Shares and payment therefore pursuant hereto, the Purchaser will have
acquired all legal and beneficial ownership of the Shares, free and clear of
such adverse claims, liens or restrictions on transfer (except as set forth in
Section 5.3 of the Purchase Agreement).

SECTION 3.        REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

                  The Purchaser represent and warrant to the Seller as follows:

                  (a)      The Purchaser is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware,
and it has the requisite corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby, and has taken all necessary action to
authorize the execution, delivery and performance of this Agreement. No other
action on the part of the Purchaser is necessary to authorize the execution,
delivery and performance of this Agreement by the Purchaser and each of the
transactions contemplated hereby.

                  (b)      This Agreement constitutes a valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies.

                  (c)      Except as set forth on Schedule 3(c), the execution
and delivery by the Purchaser of this Agreement do not, and the fulfillment of
the terms hereof by the Purchaser will not:

                  (i)      require the Purchaser or any of its Affiliates to
                           obtain any consent, approval or action of, or make
                           any filing with or give any notice to, any Person the
                           failure of which to obtain, make or give would,
                           individually or in the aggregate, reasonably be
                           expected to delay or prevent the fulfillment of the
                           terms of this Agreement or have a material adverse
                           effect on the assets, properties, business, net
                           income or financial condition of the Purchaser and
                           its subsidiaries, taken as a whole; or

                                       3

                  (ii)     result in a breach of any of the terms, conditions or
                           provisions of, or constitute a default under, or
                           permit the acceleration of rights under or
                           termination of, the Purchaser's organizational
                           documents, any agreement, lease, contract, note,
                           mortgage, indenture, arrangement or other obligation
                           to which the Purchaser or any of its Affiliates, is a
                           party, or any order, judgment, rule or regulation of
                           any Governmental Entity having jurisdiction over the
                           Purchaser or any of its Affiliates or over their
                           respective assets, properties or businesses, except
                           for such breaches, defaults, accelerations and
                           terminations that would not, individually or in the
                           aggregate, reasonably be expected to delay or prevent
                           the fulfillment of the terms of this Agreement or
                           have a material adverse effect on the assets,
                           properties, business, net income or financial
                           condition of the Purchaser and its subsidiaries,
                           taken as a whole.

                  (d)      The Purchaser has accumulated "earning and profits"
as of the taxable year ended December 31, 2002 which, when added to the current
"earnings and profits" for the taxable year ended December 31, 2003, will be
sufficient in the aggregate to qualify any dividends declared on the Shares
through the Closing Date as a "dividend" within the meaning of Section 316(a) of
the Internal Revenue Code of 1986, as amended.

                  (e)      The Purchaser is and, after giving effect to the
purchase of the Shares and the other obligations being incurred in connection
with this Agreement, will be "Solvent". As used herein, the term "Solvent"
means, as of any date of determination, that (a) the amount of the "present fair
saleable value" of the assets of the Purchaser will, as of such date, exceed the
amount of all "liabilities" of the Purchaser, "contingent or otherwise", as of
such date, as such quoted terms are determined in accordance with applicable
federal and state laws governing determinations of the insolvency of debtors of
debtors, (b) the Purchaser will not have, as of such date, an unreasonably small
amount of capital with which to conduct its business, (c) the Purchaser will be
able to pay its debts as they mature, and (d) the Purchaser is not insolvent
within the meaning of any applicable requirements of law in the jurisdictions
where Purchaser is located or where the transactions contemplated by this
Agreement are occurring. For purposes of this definition, (i) "debt" means
liability on a "claim", and (ii) "claim" means any (x) right to payment, whether
or not such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured
or unsecured or (y) right to an equitable remedy for breach of performance if
such breach gives rise to a right to payment, whether or not such right to an
equitable remedy is reduced to judgment, fixed, contingent, matured or
unmatured, disputed, undisputed, secured or unsecured.

                  (f)      The Purchaser currently has sufficient immediately
available funds in cash or cash equivalents and will on the Closing Date have
sufficient immediately available funds, in cash, to pay the Purchase Price and
to pay any other amounts payable pursuant to this Agreement and to effect the
transactions contemplated hereby.

                                       4

SECTION 4.        COVENANTS

                  4.1.     Covenants of the Seller and the Purchaser

                  Subject to the terms and conditions of this Agreement, each of
the parties shall use reasonable best efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary or desirable under
applicable legal requirements, to consummate and make effective the transactions
contemplated by this Agreement. If at any time after the Closing Date, any
further action is necessary or desirable to carry out the purposes of this
Agreement, the parties hereto shall use their reasonable best efforts to take or
cause to be taken all such necessary or desirable action and execute, deliver
and file, or cause to be executed, delivered and filed, all necessary or
desirable documentation.

                  4.2.     Covenants of the Seller

                  After the date hereof and prior to the Closing Date, except as
(i) expressly provided for in this Agreement, or (ii) consented to in writing by
the Purchaser, the Seller will not:

                  (i)      take any action, or knowingly omit to take any
                           action, that would, or that would reasonably be
                           expected to, result in (A) any of the representations
                           and warranties of the Seller set forth in Section 2
                           becoming untrue, or (B) any of the conditions to the
                           obligations of the Purchaser set forth in Section 5
                           not being satisfied; or

                  (ii)     enter into any agreement or commitment to do any of
                           the foregoing.

                  4.3.     Covenants of the Purchaser

                  (a)      After the date hereof and prior to the Closing Date,
except as (i) expressly provided for in this Agreement, or (ii) consented to in
writing by the Seller, the Purchaser will not:

                  (i)      take any action, or knowingly omit to take any
                           action, that would, or that would reasonably be
                           expected to, result in (A) any of the representations
                           and warranties of the Purchaser set forth in Section
                           3 becoming untrue, or (B) any of the conditions to
                           the obligations of the Seller set forth in Section 6
                           not being satisfied; or

                  (ii)     enter into any agreement or commitment to do any of
                           the foregoing.

                  (b)      The Purchaser shall use its commercially reasonable
efforts to validly obtain all consents, authorizations, waivers and approvals
required to be obtained by the Purchaser or its Affiliates to perform its
obligations under this Agreement. The Purchaser shall provide the Seller with
such current and full updates with respect to the status of such consents,
authorizations, waivers and approvals as the Seller may reasonably request from
time to time.

                                       5

SECTION 5.        CLOSING CONDITIONS OF THE PURCHASER

                  The obligations of the Purchaser to effect the transactions
contemplated by this Agreement shall be subject to the satisfaction on or prior
to the Closing Date of the following conditions, any one or more of which may be
waived by the Purchaser in accordance with Section 7.4:

                  (a)      All representations and warranties made by the Seller
in this Agreement shall be true and correct in all material respects (except
that the representations and warranties made in Section 2.1(c) and Section 2.2
shall be true and correct in all respects) on and as of the Closing Date as if
again made by the Seller on and as of such date.

                  (b)      The Seller shall have performed in all material
respects all obligations required under this Agreement to be performed by it on
or before the Closing Date.

                  (c)      The Purchaser shall have received a certificate,
dated the Closing Date, signed by the Chief Executive Officer or the Chief
Financial Officer of the Seller, certifying that the conditions specified in the
foregoing paragraphs (a) and (b) of this Section 5 have been satisfied.

                  (d)      The consents, waivers, authorizations and approvals
set forth on Schedule 3(c) shall have been obtained and shall be in full force
and effect on the Closing Date.

                  (e)      No preliminary or permanent injunction or other order
issued by any Governmental Entity, nor any statute, rule, regulation, decree or
executive order promulgated or enacted by any Governmental Entity, which
declares this Agreement or the Preferred Stock invalid or unenforceable in any
respect or which prevents the consummation of the transactions contemplated
hereby or thereby, shall be in effect; and no action or proceeding before any
Governmental Entity shall have been instituted by a Governmental Entity or
threatened by any Governmental Entity which seeks to prevent or delay the
consummation of the transactions contemplated by this Agreement or which
challenges the validity or enforceability of this Agreement or the Preferred
Stock.

SECTION 6.        CLOSING CONDITIONS OF THE SELLER

                  The obligations of the Seller to effect the transactions
contemplated by this Agreement shall be subject to the satisfaction on or prior
to the Closing Date of the following conditions, any one or more of which may be
waived by the Seller in accordance with Section 7.4:

                  (a)      All representations and warranties made by the
Purchaser in this Agreement shall be true and correct in all material respects
(except that the representations and warranties made in Sections 3(c), 3(d) and
3(e) shall be true and correct in all respects and the representations and
warranties made in Section 3(f) shall be true and correct in all respects as of
the Closing Date) on and as of the Closing Date as if again made by the
Purchaser on and as of such date.

                                       6

                  (b)      The Purchaser shall have performed in all material
respects all obligations required under this Agreement to be performed by it on
or before the Closing Date.

                  (c)      To the extent that the agreements set forth on
Schedule 3(c) have not been terminated and have no further force and effect as
of the Closing Date (as demonstrated by evidence reasonably satisfactory to
Seller and MidAmerican), the consents, waivers, authorizations and approvals set
forth on Schedule 3(c), except for the consent required under the transaction
described in paragraph 6 of such Schedule, shall have been validly obtained and
shall be in full force and effect on the Closing Date.

                  (d)      The Seller shall have received a certificate, dated
the Closing Date, signed by the Chief Executive Officer or the Chief Financial
Officer of the Purchaser, certifying that the conditions specified in the
foregoing paragraphs (a), (b) and (c) of this Section 6 have been satisfied.

                  (e)      The Seller shall have received the opinion of White &
Case, LLP, dated the Closing Date and addressed to the Seller, in form and
substance reasonably satisfactory to the Seller, that, to the extent that the
agreements set forth in Schedule 3(c) have not been terminated and have no
further force and effect as of the Closing Date, the execution, delivery and
performance by the Purchaser of this Agreement does not violate the agreements
set forth on Schedule 3(c), with the exception of the agreement listed in
paragraph 6 of Schedule 3(c).

                  (f)      (A) If the Closing Date occurs on or prior to July 1,
2003, then (i) at least ten days prior to the dividend payment date and before
seeking any of the third party consents required to consummate the transactions
contemplated hereby, the Purchaser shall have declared the regular quarterly
dividend on the Preferred Stock for the period ending June 30, 2003 and it shall
be payable on the earlier of the Closing Date or July 1, 2003 to holders of
record of the Shares on May 19, 2003 and (ii) such dividend shall have been paid
to such record holder on or prior to the Closing Date; provided that, if the
Closing Date occurs before July 1, 2003, then the Purchaser shall only be
required to have paid a dividend on the Shares in an aggregate amount equal to
the product of the regular quarterly dividend amount of $6,789,062.50 multiplied
by a fraction the numerator of which is the number of days elapsed in the second
quarter of 2003 from and including April 1, 2003 through the day preceding the
Closing Date and the denominator of which is 90; or (B) if the Closing Date
occurs after July 1, 2003, then (i) the Purchaser shall have declared and paid
the regular quarterly dividend on the Preferred Stock for the period ended June
30, 2003, (ii) at least ten days prior to the Closing Date the Purchaser shall
have declared the regular quarterly dividend on the Preferred Stock for the
period ending September 30, 2003 and it shall be payable on the Closing Date to
holders of record of the Shares on May 19, 2003 and (iii) such dividend shall
have been paid to such record holder on or prior to the Closing Date; provided
that the Purchaser shall only be required to have paid a dividend on the Shares
in an amount equal to the product of the regular quarterly dividend amount of
$6,789,062.50 multiplied by a fraction the numerator of which is the number of
days elapsed in the third quarter of 2003 from and including July 1, 2003
through the day preceding the Closing Date and the denominator of which is 90.

                  (g)      No preliminary or permanent injunction or other order
issued by any Governmental Entity, nor any statute, rule, regulation, decree or
executive order promulgated or

                                       7

enacted by any Governmental Entity, which declares this Agreement or the
Preferred Stock invalid or unenforceable in any respect or which prevents the
consummation of the transactions contemplated hereby or thereby, shall be in
effect; and no action or proceeding before any Governmental Entity shall have
been instituted by a Governmental Entity or threatened by any Governmental
Entity which seeks to prevent or delay the consummation of the transactions
contemplated by this Agreement or which challenges the validity or
enforceability of the Transaction Documents or the Preferred Stock.

SECTION 7.        TERMINATION, AMENDMENT AND WAIVER

                  7.1.     Termination

                  (a)      This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing:

                  (i)      by mutual written consent of the Seller and the
                           Purchaser;

                  (ii)     by the Seller, in the event that the Purchaser fails
                           to comply with any of its covenants or agreements
                           contained herein, or breaches its representations and
                           warranties contained herein, such failure to comply
                           or breach, if curable, is not cured within five
                           business days after receipt by the Purchaser of
                           notice specifying particularly such failure to comply
                           or breach, and such failure to comply or breach would
                           result in the failure to satisfy the conditions set
                           forth in Sections 6(a), 6(b), 6(c) and/or 6(f) on or
                           before July 15, 2003;

                  (iii)    by the Purchaser, in the event that the Seller fails
                           to comply with any of its covenants or agreements
                           contained herein, or breaches its representations and
                           warranties contained herein, such failure to comply
                           or breach, if curable, is not cured within five
                           business days after receipt by the Seller of notice
                           specifying particularly such failure to comply or
                           breach, and such failure to comply or breach would
                           result in a failure to satisfy the conditions set
                           forth in Section 5(a) and/or 5(b) on or before July
                           15, 2003;

                  (iv)     by the Seller or the Purchaser, in the event that a
                           Governmental Entity shall have issued an order,
                           decree or ruling or taken any other action (which
                           order, decree or ruling the parties hereto shall use
                           their reasonable best efforts to lift), which
                           permanently restrains, enjoins or otherwise prohibits
                           the transactions contemplated by this Agreement and
                           which is not subject to appeal;

                  (b)      This Agreement shall terminate automatically if the
Closing Date has not occurred by July 15, 2003.

                  7.2.     Effect of Termination

                  In the event of termination and abandonment of this Agreement
pursuant to Section 7.1(a), written notice thereof shall forthwith be given to
the other party hereto and this

                                       8

Agreement shall terminate and the transactions contemplated hereby shall be
abandoned, without further action by the Seller or the Purchaser. If (x) this
Agreement is terminated as provided herein by the Seller pursuant to Section
7.1(a)(ii) or (y) this Agreement is terminated pursuant to Section 7.1(b) and,
on July 15, 2003, all consents, waivers, authorizations and approvals set forth
on Schedule 3(c) have not been obtained or are not in full force and effect or
the failure to consummate the transaction on or prior to July 15, 2003 was
otherwise not due solely to a failure of the conditions set forth in Section
5(a), Section 5(b) or Section 5(c) to be satisfied, then the Purchaser shall pay
the Seller a cash termination fee (the "Termination Fee") of $13,750,000,
payable within three business days of the date of the termination of this
Agreement. If (x) this Agreement is terminated as provided herein by the
Purchaser pursuant to Section 7.1(a)(iii) or (y) this Agreement is terminated
pursuant to Section 7.1(b) and, on July 15, 2003, all consents, waivers,
authorizations and approvals set forth on Schedule 3(c) have been validly
obtained and are in full force and effect and the failure to consummate the
closing on or prior to July 15, 2003 was due solely to a failure of the
conditions set forth in Section 5(a), 5(b) or 5(c), then the Seller shall pay
the Purchaser a cash termination fee (the "Seller Fee") of $13,750,000, payable
within three business days of the date of such termination of this Agreement. If
this Agreement is otherwise terminated as provided herein, no party to this
Agreement shall have any liability or further obligation to any other party to
this Agreement. Notwithstanding the foregoing, no termination of this Agreement
pursuant to this Section 7 shall relieve any party of liability for
misrepresentation or breach of any provision of this Agreement occurring before
such termination, provided that (x) the sole liability of the Purchaser for any
breach or misrepresentation by it hereunder upon termination of this Agreement
shall be the payment of the Termination Fee and (y) the sole liability of the
Seller or the Guarantor for any breach or misrepresentation hereunder upon
termination of this Agreement shall be the payment of the Seller Fee.

                  7.3.     Amendment

                  This Agreement may be amended, modified or supplemented only
by a written instrument executed by the parties hereto.

                                       9

                  7.4.     Waiver

                  The Purchaser or the Seller may, by written notice to the
other party (i) extend the time for the performance of any of the obligations or
other actions of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties of the other party contained in this Agreement or
in any documents delivered pursuant to this Agreement by the other party, (iii)
waive compliance with any of the covenants of the other party contained in this
Agreement, (iv) waive performance of any of the obligations of the other party
or (v) waive fulfillment of any of the conditions to its own obligations under
this Agreement or in any documents delivered pursuant to this Agreement by the
other party. The waiver by either party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach, whether or not similar, unless such waiver specifically states that it
is to be construed as a continuing waiver.

SECTION 8.        INTERPRETATION OF THIS AGREEMENT

                  8.1.     Certain Terms Defined

                  As used in this Agreement, the following terms have the
respective meanings set forth below:

                  Affiliate: shall mean a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned Person.

                  Governmental Entity: shall mean any U.S. or non-U.S. (a)
federal, state, county, local or municipal governmental, administrative or
regulatory authority, agency, commission, tribunal, body or political
subdivision thereof, (b) other governmental, quasi-governmental, regulatory or
self-regulatory entity, (c) court or administrative tribunal, or (d) arbitration
tribunal or other non-Governmental Entity with applicable jurisdiction.

                  Person: shall mean an individual, corporation, association,
trust, limited liability company, limited partnership, limited liability
partnership, partnership, incorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934), and a
Governmental Entity.

                  8.2.     Governing Law

                  This Agreement shall be governed by and construed in
accordance with the internal and substantive laws of New York and without regard
to any conflicts of laws concepts, which would apply the substantive law of some
other jurisdiction.

                  8.3.     Paragraph and Section Headings

                  The headings of the sections and subsections and any table of
contents of this Agreement are solely for convenience of reference and shall not
affect the meaning or interpretation of this Agreement or any term or provision
hereof.

                                       10

SECTION 9.        SURVIVAL

                  The respective representations and warranties of the parties
hereto contained herein or in any certificates or other documents delivered
pursuant to this Agreement on the Closing shall survive the Closing.

SECTION 10.       MISCELLANEOUS

                  10.1. Notices

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

                  (1)    if to the Seller:

                         MEHC Investment, Inc.
                         C/o MidAmerican Capital
                         335 Sioux Point Road
                         Suite 100
                         Dakota Dunes, SD 57049

                         Attention:  Dennis Melstad
                         Facsimile:  (605) 232-5925

                         With a copy to:

                         MidAmerican Energy Holdings Company
                         320 South 36th St.
                         Suite 400
                         Omaha, NE  68131

                         Attention:  Douglas L. Anderson, Esq.
                         Facsimile: (402) 231-1658

                         With a copy to:

                         Willkie Farr & Gallagher
                         787 Seventh Avenue
                         New York, New York 10019-6009

                         Attention: Peter J. Hanlon, Esq. / William N. Dye, Esq.
                         Facsimile: (212) 728-8111

                                       11

                  (2)    if to the Purchaser:

                         The Williams Companies, Inc.
                         One Williams Center
                         Tulsa, Oklahoma 74172

                         Attention: Debbie Fleming
                         Facsimile: (918) 573-2065

                         With a copy to:

                         The Williams Companies, Inc.
                         One Williams Center
                         Tulsa, Oklahoma 74172

                         Attention: James J. Bender, Esq.
                         Facsimile: (918) 573-5942

                         With a copy to:

                         White & Case LLP
                         1155 Avenue of the Americas
                         New York, New York 10036

                         Attention:  David E. Joyce
                         Facsimile:  (212) 354-8113

or such other persons or at such other addresses as shall be furnished by either
party by like notice to the other, and such notice or communication shall be
deemed to have been given or made as of the date so delivered or mailed. No
change in any of such addresses shall be effective insofar as notices under this
Section 10.1 are concerned unless such changed address is located in the United
States of America and notice of such change shall have been given to such other
party hereto as provided in this Section 10.1.

                  10.2.    Expenses

                  All legal, accounting, financial advisory and other fees,
costs and expenses of a party hereto incurred in connection with this Agreement
and the performance of the transactions contemplated hereby shall be paid by the
party incurring such fees, costs and expenses.

                  10.3.    Publicity

                  On or prior to the Closing Date, neither party shall, nor
shall it permit its Affiliates to, issue or cause the publication of any press
release or other announcement with respect to this Agreement or the transactions
contemplated hereby without the consent of the other party hereto.
Notwithstanding the foregoing, in the event any such press release or
announcement is required (in the reasonable judgment of either party after
consulting with outside counsel experienced in such matters) by law or stock
exchange rule to be made by the

                                       12

party proposing to issue the same, such party shall use its reasonable best
efforts to consult in good faith with the other party prior to the issuance of
any such press release or announcement.

                  10.4.    Confidentiality

                  The Seller and MidAmerican agree to keep the material
non-public information with respect to the Purchaser and its subsidiaries
provided to Seller or MidAmerican in connection with the transactions
contemplated by this Agreement (the "Confidential Information") strictly
confidential and not to disclose any of it to anyone without the prior written
consent of the Purchaser, provided that the Seller and MidAmerican may disclose
such information to (a) the Seller's or MidAmerican's auditors, accountants,
attorneys and other professional advisors in connection with such auditors',
accountants', attorneys' and advisors' performance of professional services for
the Seller, if the Seller or MidAmerican (i) advises such auditors, accountants,
attorneys and advisors, as the case may be, of the confidential nature of such
Confidential Information and (ii) imposes on such auditors, accountants,
attorneys and advisors (or they are otherwise subject to) confidentiality
obligations in respect of the Confidential Information comparable to those which
MidAmerican ordinarily imposes with respect to its own confidential information,
and (b) to any regulatory authorities or examiners or any rating agencies in
connection with their supervision, examination or ratings of the Seller or
MidAmerican or any affiliate thereof or as required in any reports filed by the
Seller or such affiliate with such regulatory authorities or as may otherwise be
required by applicable laws. The confidentiality obligations imposed by the
foregoing sentence shall not apply, or shall cease to apply, to any such
information (a) which was or becomes generally available to the public other
than as a result of a disclosure by the Seller or MidAmerican (or any of their
respective employees, officers, directors, representatives, agents or advisors)
in violation of the terms of this Agreement, (b) which was available, or becomes
available, to the Seller or MidAmerican on a non-confidential basis prior to its
disclosure by the Purchaser or (c) becomes known to the Seller or MidAmerican
from a source other than the Purchaser under circumstances not involving a
breach known to the Seller or MidAmerican of a confidentiality obligation of
such source to the Purchaser. The obligations of Seller and MidAmerican under
this Section 10.4 shall terminate on, and be of no further effect from and
after, the first anniversary of the date of this Agreement.

                  10.5.    Submission to Jurisdiction

                  With respect to any suit, action or proceeding initiated by a
party to this Agreement arising out of, under or in connection with this
Agreement or the transactions contemplated hereby, the Seller and the Purchaser
each hereby submit to the exclusive jurisdiction of any state or federal court
sitting in the State of New York and irrevocably waive, to the fullest extent
permitted by law, any objection that they may now have or hereafter obtain to
the laying of venue in any such court in any such suit, action or proceeding.

                  10.6.    Successors and Assigns

                  The rights and obligations of the parties hereto shall inure
to the benefit of and shall be binding upon the authorized successors and
permitted assigns of each party. Neither party hereto may assign its rights or
obligations under this Agreement or designate another

                                       13

person (i) to perform all or part of its obligations under this Agreement or
(ii) to have all or part of its rights and benefits under this Agreement, in
each case without the prior written consent of the other party.

                  10.7. Entire Agreement

                  This Agreement represents the entire agreement and
understanding of the parties with reference to the transactions set forth herein
and therein and no representations or warranties have been made in connection
with this Agreement other than those expressly set forth herein or in the
certificates and other documents delivered in accordance herewith. This
Agreement supersedes all prior negotiations, discussions, correspondence,
communications, understandings and agreements between the parties relating to
the subject matter of this Agreement and all prior drafts of this Agreement, all
of which are merged into the final executed versions of this Agreement.

                  10.8. Severability

                  This Agreement shall be deemed severable, and the invalidity
or unenforceability of any term or provision hereof shall not affect the
validity or enforceability of this Agreement or of any other term or provision
hereof. Furthermore, in lieu of any such invalid or unenforceable term or
provision, the parties hereto intend that there shall be added as a part of this
Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.

                  10.9. Counterparts

                  Facsimile transmission of any signed original document and/or
retransmission of any signed facsimile transmission shall be the same as
delivery of an original. At the request of the Seller or the Purchaser, the
parties will confirm facsimile transmission by signing a duplicate original
document. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall be considered
one and the same agreement.

                  10.10. Guarantee

                  MidAmerican guarantees performance by the Seller of the
Seller's obligations under this Agreement.

                  10.11. Indemnity.

                                       14

                  From and after the Closing Date, notwithstanding the Closing
or the delivery of the Shares and regardless of any investigation at any time
made by or on behalf of the Seller or MidAmerican or of any knowledge or
information that the Seller or MidAmerican may have, the Purchaser shall
indemnify and agree to defend, save and hold the Seller and MidAmerican and
their officers, directors, employees, agents and affiliates (collectively, the
"INDEMNIFIED PARTIES") harmless if any such Indemnified Party shall at any time
or from time to time suffer any damage, judgment, fine, penalty, demand,
settlement, liability, loss, cost, Tax, expense (including reasonable
attorneys', consultants' and experts' fees), claim or cause of action (each, a
"LOSS") arising out of, relating to, or resulting from any failure by Purchaser
to obtain or maintain in full force and effect any consent, waiver,
authorization or approval relating to the agreements described in paragraph 6 of
Schedule 3(c) and/or any related cross-defaults. Without limiting the foregoing,
the Indemnified Parties shall have the right, but not the obligation, to
participate at Purchaser's expense in the defense of any claim or action by
counsel of the Indemnified Party's choice and to have their reasonable expenses
in connection therewith promptly reimbursed by Purchaser and shall in any event
use their reasonable best efforts to cooperate with and assist the Purchaser. If
the Purchaser fails timely to defend, contest or otherwise protect against such
suit, action, investigation, claim or proceeding, the Indemnified Parties shall
have the right to do so, including, without limitation, the right to make any
compromise or settlement thereof, and the Indemnified Parties shall be entitled
to recover the entire cost thereof from the Purchaser, including, without
limitation, reasonable attorneys' fees, disbursements and amounts paid as the
result of such suit, action, investigation, claim or proceeding.

                                       15

                  IN WITNESS WHEREOF, the Seller, the Purchaser and MidAmerican
have caused this Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.

                                     THE WILLIAMS COMPANIES, INC.

                                     By: /s/ Donald R. Chappell
                                         ------------------------------------
                                         Name: Donald R. Chappell
                                         Title: Senior Vice President and CFO

                                     MEHC INVESTMENT, INC.

                                     By: /s/Douglas L. Anderson
                                         ------------------------------------
                                         Name: Douglas L. Anderson
                                         Title: Vice President

                                     MIDAMERICAN ENERGY HOLDINGS COMPANY.

                                     By: /s/ Douglas L. Anderson
                                         ------------------------------------
                                         Name: Douglas L. Anderson
                                         Title: Senior Vice President

                                       16

                                                                  EXECUTION COPY

                                                                    EXHIBIT 10.6

                               PURCHASE AGREEMENT

                                  BY AND AMONG

                         WILLIAMS ENERGY SERVICES, LLC,

                     WILLIAMS NATURAL GAS LIQUIDS, INC. AND

                                 WILLIAMS GP LLC

                        COLLECTIVELY, AS SELLING PARTIES,

                                       AND

                             WEG ACQUISITIONS, L.P.
                         A DELAWARE LIMITED PARTNERSHIP,
                                    AS BUYER,

                          FOR THE PURCHASE AND SALE OF

                       (i) ALL THE MEMBERSHIP INTERESTS OF

                                   WEG GP LLC
                      A DELAWARE LIMITED LIABILITY COMPANY,

             (ii) ALL OF THE COMMON UNITS AND SUBORDINATED UNITS OF

                         WILLIAMS ENERGY PARTNERS, L.P.
                         A DELAWARE LIMITED PARTNERSHIP

  OWNED BY WILLIAMS ENERGY SERVICES, LLC AND WILLIAMS NATURAL GAS LIQUIDS, INC.

                                       AND

                      (iii) ALL THE CLASS B COMMON UNITS OF

                         WILLIAMS ENERGY PARTNERS, L.P.
                         A DELAWARE LIMITED PARTNERSHIP

                           DATED AS OF APRIL 18, 2003

                                TABLE OF CONTENTS

                                                                                                           PAGE
                                                                                                           ----
                                                                                                        
ARTICLE I. SALE AND PURCHASE...........................................................................      2

    SECTION 1.1. Agreement to Sell and to Purchase.....................................................      2
    SECTION 1.2. Deliveries at Closing.................................................................      3
    SECTION 1.3. Purchase Price........................................................................      5

ARTICLE II. REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES..........................................      7

    SECTION 2.1. Organization..........................................................................      7
    SECTION 2.2. Capitalization of the New Company; Title..............................................      8
    SECTION 2.3. Partnership Capitalization; Title.....................................................      8
    SECTION 2.4. Subsidiaries; Equity Interests; Business of GP Companies..............................     10
    SECTION 2.5. Validity of Agreement; Authorization..................................................     10
    SECTION 2.6. No Conflict or Violation..............................................................     11
    SECTION 2.7. Consents and Approvals................................................................     11
    SECTION 2.8. New Company Financial Statements; SEC Reports; Operating Surplus......................     12
    SECTION 2.9. Absence of Certain Changes or Events..................................................     12
    SECTION 2.10. Tax Matters..........................................................................     13
    SECTION 2.11. Absence of Undisclosed Liabilities...................................................     14
    SECTION 2.12. Real and Personal Property...........................................................     14
    SECTION 2.13. Intellectual Property and Computer Hardware..........................................     15
    SECTION 2.14. Licenses, Permits and Governmental Approvals.........................................     16
    SECTION 2.15. Compliance with Law..................................................................     16
    SECTION 2.16. Litigation...........................................................................     17
    SECTION 2.17. Contracts............................................................................     17
    SECTION 2.18. Brokers..............................................................................     18
    SECTION 2.19. Employees; Employee Plans............................................................     18
    SECTION 2.20. Insurance............................................................................     19
    SECTION 2.21. Environmental; Health and Safety Matters.............................................     20
    SECTION 2.22. Regulatory Matters...................................................................     22
    SECTION 2.23. Books and Records; Other Information.................................................     22
    SECTION 2.24. WPL Contribution Agreement...........................................................     22
    SECTION 2.25. Customers and Suppliers..............................................................     22
    SECTION 2.26. Adequacy of Assets...................................................................     22
    SECTION 2.27. Excluded Assets......................................................................     22
    SECTION 2.28. Solvency.............................................................................     23
    SECTION 2.29. Auction Process......................................................................     23

ARTICLE III. REPRESENTATIONS AND WARRANTIES OF BUYER...................................................     23

    SECTION 3.1. Limited Partnership Organization......................................................     23
    SECTION 3.2. Validity of Agreement; Authorization..................................................     23
    SECTION 3.3. No Conflict or Violation..............................................................     24
    SECTION 3.4. Consents and Approvals................................................................     24
    SECTION 3.5. Financial Ability.....................................................................     24
    SECTION 3.6. Buyer Status..........................................................................     24

                                        i

                                                                                                        
    SECTION 3.7. Brokers...............................................................................     25
    SECTION 3.8. Independent Investigation.............................................................     25
    SECTION 3.9. Investment Intent; Investment Experience; Restricted Securities.......................     25

ARTICLE IV. COVENANTS..................................................................................     25

    SECTION 4.1. Certain Changes and Conduct of Business...............................................     25
    SECTION 4.2. Access to Properties and Records......................................................     27
    SECTION 4.3. Employee Matters......................................................................     29
    SECTION 4.4. Consents and Approvals................................................................     34
    SECTION 4.5. Further Assurances....................................................................     35
    SECTION 4.6. Commercially Reasonable Efforts.......................................................     36
    SECTION 4.7. Notice of Breach......................................................................     36
    SECTION 4.8. Confidential Information..............................................................     36
    SECTION 4.9. Tax Covenants.........................................................................     37
    SECTION 4.10. Insurance, Bonds and Collateral......................................................     38
    SECTION 4.11. Information Technology...............................................................     39
    SECTION 4.12. Software License.....................................................................     41
    SECTION 4.13. Non-software Copyright License.......................................................     42
    SECTION 4.14. Transitional Trademark License; Legal Names..........................................     42
    SECTION 4.15. Maximum Amount of Certain of Buyer's Costs and Expenses..............................     43
    SECTION 4.16. Office Lease; Office Furniture and Equipment; Office Supplies........................     44
    SECTION 4.17. No Solicitation; Termination of Discussions..........................................     44
    SECTION 4.18. Confirmation of Termination of Old Omnibus Agreement.................................     45
    SECTION 4.19. New Company Intercompany Accounts....................................................     45
    SECTION 4.20. Certain Costs and Expenses of Board of Directors of New Company......................     46
    SECTION 4.21. New Company Audited Financial Statements.............................................     46

ARTICLE V. CONDITIONS TO OBLIGATIONS OF BUYER..........................................................     46

    SECTION 5.1. Receipt of Documents..................................................................     46
    SECTION 5.2. Representations and Warranties of the Selling Parties.................................     46
    SECTION 5.3. Performance of Selling Parties' Obligations...........................................     47
    SECTION 5.4. Consents and Approvals................................................................     47
    SECTION 5.5. No Violation of Orders................................................................     47
    SECTION 5.6. Director Resignations.................................................................     48
    SECTION 5.7. Employment............................................................................     48
    SECTION 5.8. Legal Opinion.........................................................................     48
    SECTION 5.9. Debt Financing........................................................................     48
    SECTION 5.10. Absence of Specified Events..........................................................     48
    SECTION 5.11. Material Adverse Effect..............................................................     48
    SECTION 5.12. Financial Advisor's Opinion..........................................................     48
    SECTION 5.13. Waivers of Existing Debt Agreements..................................................     49

ARTICLE VI. CONDITIONS TO OBLIGATIONS OF SELLING PARTIES...............................................     49

    SECTION 6.1. Receipt of Documents..................................................................     49
    SECTION 6.2. Representations and Warranties of Buyer...............................................     49
    SECTION 6.3. Performance of Buyer's Obligations....................................................     49
    SECTION 6.4. Consents and Approvals................................................................     49

                                       ii

                                                                                                        
    SECTION 6.5. No Violation of Orders................................................................     50
    SECTION 6.6. Legal Opinion.........................................................................     50
    SECTION 6.7. Assumption of Consent Decree..........................................................     50

ARTICLE VII. TERMINATION AND ABANDONMENT...............................................................     50

    SECTION 7.1. Methods of Termination; Upset Date....................................................     50
    SECTION 7.2. Effect of Termination.................................................................     51

ARTICLE VIII. SURVIVAL; INDEMNIFICATION................................................................     51

    SECTION 8.1. Survival..............................................................................     51
    SECTION 8.2. Indemnification Coverage..............................................................     52
    SECTION 8.3. Procedures............................................................................     56
    SECTION 8.4. Waiver of Consequential, Etc. Damages.................................................     57
    SECTION 8.5. Compliance with Express Negligence Rule...............................................     57
    SECTION 8.6. Liquidated Damages....................................................................     57
    SECTION 8.7. Remedy................................................................................     58
    SECTION 8.8. Tax Treatment of Indemnity Payments...................................................     58

ARTICLE IX. MISCELLANEOUS PROVISIONS...................................................................     58

    SECTION 9.1. Publicity.............................................................................     58
    SECTION 9.2. Successors and Assigns; Third-Party Beneficiaries.....................................     59
    SECTION 9.3. Investment Bankers, Financial Advisors, Brokers and Finders...........................     59
    SECTION 9.4. Fees and Expenses.....................................................................     60
    SECTION 9.5. Off-Set Right.........................................................................     60
    SECTION 9.6. Notices...............................................................................     60
    SECTION 9.7. Entire Agreement......................................................................     61
    SECTION 9.8. Waivers and Amendments................................................................     62
    SECTION 9.9. Severability..........................................................................     62
    SECTION 9.10. Titles and Headings..................................................................     62
    SECTION 9.11. Signatures and Counterparts..........................................................     62
    SECTION 9.12. Enforcement of the Agreement; Damages................................................     63
    SECTION 9.13. Governing Law........................................................................     63
    SECTION 9.14. Disclosure...........................................................................     63
    SECTION 9.15. Consent to Jurisdiction..............................................................     63
    SECTION 9.16. Certain Definitions..................................................................     64

                                       iii

Exhibits

Exhibit 1.2(a)(i)       WES Bill of Sale
Exhibit 1.2(a)(ii)      WNGL Bill of Sale
Exhibit 1.2(a)(iv)(1)   New Omnibus Agreement
Exhibit 1.2(a)(iv)(2)   Transition Services Agreement
Exhibit 1.2(a)(iv)(3)   ATLAS Assignment, Contribution and License Agreement
Exhibit 1.2(a)(iv)(4)   Services Agreement
Exhibit 5.8             Opinion of Counsel(s) for the Selling Parties
Exhibit 6.6             Opinion of Counsel for the Buyer

Disclosure Schedules

Schedule 1.3            Purchase Price Allocation
Schedule 2.1            Qualification Jurisdictions
Schedule 2.3(d)(i)      Preemptive Purchase Rights
Schedule 2.3(d)(ii)     Outstanding Options
Schedule 2.4            Subsidiaries; Equity Interests; Encumbrances
Schedule 2.6            Conflict or Violation; Encumbrances
Schedule 2.7            Seller Parties' Consents and Approvals
Schedule 2.8            New Company Financial Statements
Schedule 2.9            Certain Changes or Events
Schedule 2.10(b)(i)     Tax Matters
Schedule 2.10(b)(ii)    Contested Taxes Exceeding $100,000
Schedule 2.11           Absence of Undisclosed Liabilities
Schedule 2.12(a)        Real and Personal Property
Schedule 2.12(b)        Permitted Encumbrances
Schedule 2.13(a)        Intellectual Property
Schedule 2.13(b)        Licensed Software
Schedule 2.14           Licenses, Permits and Governmental Approvals
Schedule 2.15           Compliance with Laws
Schedule 2.16           Litigation
Schedule 2.17           Material Contracts
Schedule 2.18           Seller Parties' Brokers
Schedule 2.19(b)(i)     Employee Plans
Schedule 2.19(b)(ii)    Seller Plans
Schedule 2.19(f)(i)     Business Employees
Schedule 2.19(f)(ii)    Change of Control Agreements
Schedule 2.19(g)(i)     Represented Employees
Schedule 2.19(g)(ii)    Union Organizing Activities
Schedule 2.20(a)(i)     Parent Policies
Schedule 2.20(a)(ii)    Partnership Policies
Schedule 2.20(b)        Additional Policies
Schedule 2.21           Environmental; Health and Safety Matters
Schedule 2.25           Termination Notices
Schedule 2.26           Adequacy of Assets
Schedule 3.4            Buyer's Consents and Approvals

                                       iv

Schedule 3.7            Buyer's Brokers
Schedule 4.1            Certain Changes and Conduct of Business
Schedule 4.10(a)        Bonds, Letters of Credit and Cash Collateral
Schedule 4.14           Legal Names
Schedule 5.13           Forms of Waivers Under Existing Debt Agreements
Schedule 8.2(c)         Environmental Matters Subject to Special Indemnification
Schedule 8.3(b)         Environmental Remediation Procedures

                                        v

                               PURCHASE AGREEMENT

                  THIS PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into as of this 18th day of April, 2003, by and among WILLIAMS ENERGY SERVICES,
LLC, a Delaware limited liability company ("WES"), WILLIAMS NATURAL GAS LIQUIDS,
INC., a Delaware corporation ("WNGL"), and Williams GP LLC, a Delaware limited
liability company (the "OLD COMPANY," and collectively with WES and WNGL, the
"SELLING PARTIES") and WEG Acquisitions, L.P., a Delaware limited partnership
("BUYER").

                              W I T N E S S E T H:

                  WHEREAS, WES and WNGL are the sole members of both (i) WEG GP
LLC, a Delaware limited liability company (the "NEW COMPANY," and with the Old
Company, the "GP COMPANIES") and (ii) the Old Company;

                  WHEREAS, (i) WES owns a 99.81% membership interest in the New
Company (the "WES NEW LLC INTERESTS"), and WNGL owns a 0.19% membership interest
in the New Company (the "WNGL NEW LLC INTERESTS," and with the WES New LLC
Interest, the "NEW LLC INTERESTS"); and (ii) WES owns a 99.80% membership
interest in the Old Company and WNGL owns a 0.20% membership interest in the Old
Company;

                  WHEREAS, the New Company is the sole general partner of
Williams Energy Partners, L.P., a Delaware limited partnership (the
"PARTNERSHIP"), and the New Company owns (i) a 2.0% general partner interest in
the Partnership (the "GP INTEREST") and (ii) all of the incentive distribution
rights with respect to the Partnership (the "IDRs");

                  WHEREAS, other than the GP Interest and the IDRs, the
Partnership also has outstanding common units representing limited partner
interests in the Partnership (the "COMMON UNITS"), Class B common units
representing limited partner interests in the Partnership (the "CLASS B COMMON
UNITS") and subordinated units representing limited partner interests in the
Partnership (the "SUBORDINATED UNITS");

                  WHEREAS, WES owns 757,193 Common Units (the "WES COMMON
UNITS") and 4,589,193 subordinated units (the "WES SUBORDINATED UNITS," and with
the WES Common Units, the "WES UNITS"), which, in the aggregate, represent a
19.3% limited partner interest in the Partnership;

                  WHEREAS, WNGL owns 322,501 Common Units (the "WNGL COMMON
UNITS") and 1,090,501 Subordinated Units (the "WNGL SUBORDINATED UNITS," and
with the WNGL Common Units, the "WNGL UNITS"), which, in the aggregate,
represent a 5.1% limited partner interest in the Partnership;

                  WHEREAS, the Old Company owns 7,830,924 Class B Common Units,
which, in the aggregate, represent a 28.2% limited partner interest in the
Partnership;

                  WHEREAS, the general public holds 12,600,000 Common Units,
which, in the aggregate, represent a 45.4% limited partner interest in the
Partnership;

                  WHEREAS, Buyer desires to purchase the New LLC Interests, the
WES Units, the WNGL Units and the Class B Common Units (collectively, the
"SECURITIES") from the respective Selling Parties, and each Selling Party
desires to sell the Securities owned by it to the Buyer, in each case upon the
terms and subject to the conditions set forth in this Agreement;

                  WHEREAS, as of the date hereof, The Williams Companies, Inc.
("PARENT") has entered into a Guaranty and Covenant Agreement ("PARENT
GUARANTY") in favor of Buyer and the other Buyer Indemnified Parties, pursuant
to which, among other things, Parent has guaranteed the payment and performance
by the Selling Parties of all of their liabilities and obligations under this
Agreement and the Transaction Documents (as defined herein);

                  WHEREAS, the Board of Directors of Parent has received an
opinion from Lehman Brothers, Inc., dated as of the date hereof, to the effect
that the consideration (as defined therein) to be received by Parent pursuant to
this Agreement is fair, from a financial point of view, to Parent; and

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

                                   ARTICLE I.
                                SALE AND PURCHASE

                  SECTION 1.1. AGREEMENT TO SELL AND TO PURCHASE.

                  (a)      On the Closing Date (as hereinafter defined) and upon
the terms and subject to the conditions set forth in this Agreement:

                  (i)      WES shall sell, assign, transfer, convey and deliver
         to Buyer, and Buyer shall purchase and accept from WES, the WES New LLC
         Interests and the WES Units, in each case, free and clear of any
         pledges, restrictions on transfer, proxies and voting or other
         agreements, liens, claims, charges, mortgages, security interests or
         other legal or equitable encumbrances, limitations or restrictions of
         any nature whatsoever ("ENCUMBRANCES"), except, in the case of the WES
         New LLC Interests, as may be set forth in the New LLC Agreement (as
         defined in Section 2.2) or, in the case of the WES Units, as may be set
         forth in the Partnership Agreement (as defined in Section 2.3);

                  (ii)     WNGL shall sell, assign, transfer, convey and deliver
         to Buyer, and Buyer shall purchase and accept from WNGL, the WNGL New
         LLC Interests and the WNGL Units, in each case, free and clear of any
         Encumbrances, except, in the case of the WNGL New LLC Interests, as may
         be set forth in the New LLC Agreement or, in the case of the WNGL
         Units, as may be set forth in the Partnership Agreement; and

                  (iii)    The Old Company shall sell, assign, transfer, convey
         and deliver to Buyer, and Buyer shall purchase and accept from the Old
         Company, the Class B Common Units, free and clear of any Encumbrances,
         except as may be set forth in the Partnership Agreement.

                                       -2-

                  (b)      The closing of such sale and purchase (the "CLOSING")
shall take place at 10:00 a.m. (New York time), on the third business day after
the satisfaction of the conditions contained in Articles V and VI (other than
those conditions that by their nature are to be fulfilled at Closing), or at
such other time and date as the parties hereto shall agree in writing (the
"CLOSING DATE"), at the offices of Vinson & Elkins L.L.P. in New York, New York
or at such other place as the parties hereto shall agree in writing.

                  SECTION 1.2. DELIVERIES AT CLOSING.

                  (a) At the Closing, the Selling Parties shall make the
following deliveries to Buyer:

                  (i)      WES shall deliver to Buyer:

                           (1)      a duly executed bill of sale, in
                                    substantially the form attached hereto as
                                    Exhibit 1.2(a)(i), transferring the WES New
                                    LLC Interests (the "WES BILL OF SALE");

                           (2)      (i) a duly executed certificate,
                                    countersigned by the Transfer Agent (as
                                    defined below), representing 757,193 Common
                                    Units in the name of the Buyer (or an
                                    Affiliate designated in writing), (ii) a
                                    copy of a letter from WES, addressed to and
                                    acknowledged by the Bank of New York, as the
                                    transfer agent and registrar with respect to
                                    the Common Units (the "TRANSFER AGENT"),
                                    instructing such Transfer Agent to cancel
                                    the certificate(s) representing the WES
                                    Common Units and to reissue a new
                                    certificate representing 757,193 Common
                                    Units in the name of the Buyer (or an
                                    Affiliate designated in writing) and (iii) a
                                    copy of the cancelled certificate(s)
                                    representing the WES Common Units;

                           (3)      (i) a duly executed certificate,
                                    countersigned by the transfer agent
                                    therefor, representing 4,589,193
                                    Subordinated Units in the name of the Buyer
                                    (or an Affiliate designated in writing),
                                    (ii) a copy of a letter from WES, addressed
                                    to and acknowledged by the New Company, as
                                    the general partner of the Partnership and
                                    the transfer agent and registrar with
                                    respect to the Subordinated Units,
                                    instructing the New Company to cancel the
                                    certificate(s) representing the WES
                                    Subordinated Units and to reissue a new
                                    certificate representing 4,589,193
                                    Subordinated Units in the name of the Buyer
                                    (or an Affiliate designated in writing) and
                                    (iii) a copy of the cancelled certificate(s)
                                    representing the WES Subordinated Units;

                  (ii)     WNGL shall deliver to Buyer:

                           (1)      a duly executed bill of sale, in
                                    substantially the form attached hereto as
                                    Exhibit 1.2(a)(ii), transferring the WNGL
                                    New LLC

                                       -3-

                                    Interests (the "WNGL BILL OF SALE," and with
                                    the WES Bill of Sale, the "BILLS OF SALE");

                           (2)      (i) a duly executed certificate,
                                    countersigned by the Transfer Agent,
                                    representing 322,501 Common Units in the
                                    name of the Buyer (or an Affiliate
                                    designated in writing), (ii) a copy of a
                                    letter from WNGL, addressed to and
                                    acknowledged by the Transfer Agent,
                                    instructing the Transfer Agent to cancel the
                                    certificate(s) representing the WNGL Common
                                    Units and to reissue a new certificate
                                    representing 322,501 Common Units in the
                                    name of the Buyer (or an Affiliate
                                    designated in writing) and (iii) a copy of
                                    the cancelled certificate(s) representing
                                    the WNGL Common Units;

                           (3)      (i) a duly executed certificate,
                                    countersigned by the transfer agent
                                    therefor, representing 1,090,501
                                    Subordinated Units in the name of the Buyer
                                    (or an Affiliate designated in writing),
                                    (ii) a copy of a letter from WNGL, addressed
                                    to and acknowledged by the New Company, as
                                    the general partner of the Partnership and
                                    the transfer agent and registrar with
                                    respect to the Subordinated Units,
                                    instructing the New Company to cancel the
                                    certificate(s) representing the WNGL
                                    Subordinated Units and to reissue a new
                                    certificate representing 1,090,501
                                    Subordinated Units in the name of the Buyer
                                    (or an Affiliate designated in writing) and
                                    (iii) a copy of the cancelled certificate(s)
                                    representing the WNGL Subordinated Units;

                  (iii)    the Old Company shall deliver to Buyer: (1) a duly
         executed certificate, countersigned by the transfer agent therefor,
         representing 7,830,924 Class B Common Units in the name of the Buyer
         (or an Affiliate designated in writing), (2) a copy of a letter from
         the Old Company, addressed to and acknowledged by the New Company, as
         the general partner of the Partnership and the transfer agent and
         registrar with respect to the Class B Common Units, instructing the New
         Company to cancel the certificate(s) representing 7,830,924 Class B
         Common Units in the name of the Old Company and to reissue a new
         certificate representing 7,830,924 Class B Common Units in the name of
         the Buyer (or an Affiliate designated in writing) and (3) a copy of the
         cancelled certificate(s) in the name of the Old Company;

                  (iv)     WES and WNGL shall together deliver to
         Buyer:

                           (1)      a duly executed copy of the New Omnibus
                                    Agreement, in substantially the form
                                    attached hereto as Exhibit 1.2(a)(iv)(1);

                           (2)      a duly executed copy of the Transition
                                    Services Agreement, in substantially the
                                    form attached hereto as Exhibit
                                    1.2(a)(iv)(2);

                                       -4-

                           (3)      a duly executed copy of the ATLAS
                                    Assignment, Contribution and License
                                    Agreement, in substantially the form
                                    attached hereto as Exhibit 1.2(a)(iv)(3);
                                    and

                           (4)      a duly executed copy of a Services Agreement
                                    between Buyer and the Selling Parties, in
                                    form and substance to be mutually agreed on
                                    by the parties, reflecting the terms on the
                                    term sheet attached as Exhibit
                                    1.2(a)(iv)(4).

                  (b)      At the Closing, Buyer shall make the following
deliveries to the Selling Parties (or the New Company as specified in clause
(ii) below):

                  (i)      payment of the First Payment of the Purchase Price,
         as provided in Section 1.3 below;

                  (ii)     one or more transfer applications in respect of the
         Common Units, Class B Common Units and Subordinated Units to be
         acquired by it, in the form specified in the Partnership Agreement,
         seeking admission to the Partnership as a substitute limited partner
         (the "UNIT TRANSFER APPLICATION(S)");

                  (iii)    a duly executed copy of the New Omnibus Agreement, in
         substantially the form attached hereto as Exhibit 1.2(a)(iv)(1);

                  (iv)     a duly executed copy of the Transition Services
         Agreement, in substantially the form attached hereto as Exhibit
         1.2(a)(iv)(2);

                  (v)      a duly executed copy of the ATLAS Assignment,
         Contribution and License Agreement, in substantially the form attached
         hereto as Exhibit 1.2(a)(iv)(3); and

                  (vi)     a duly executed copy of a Services Agreement between
         Buyer and the Selling Parties, in form and substance to be mutually
         agreed on by the parties, reflecting the terms on the term sheet
         attached as Exhibit 1.2(a)(iv)(4).

                  SECTION 1.3. PURCHASE PRICE

                  (a)      The aggregate purchase price for the Securities (the
"PURCHASE PRICE"), subject to adjustment, if applicable, only pursuant to
Section 1.3(f) and Section 8.8, shall be paid to the Selling Parties in up to
four payments, of which:

                           (i)      the first payment of the Purchase Price
         shall be $509,868,000.00 (the "FIRST PAYMENT") and shall be paid as
         provided in Section 1.3(b);

                           (ii)     the Second Payment (defined below) shall be
         calculated and paid as specified in Sections 1.3(b) and (c) below;

                           (iii)    the Third Payment (defined below) shall be
         calculated and paid as specified in Sections 1.3(b) and (d) below; and

                                       -5-

                           (iv)     the Fourth Payment (defined below) shall be
         paid as specified in Sections 1.3(b) and (e) below.

                  (b)      Each of the First Payment, the Second Payment and the
Third Payment shall be paid by wire transfer to the Selling Parties of
immediately available funds made to not more than three bank accounts in the
United States of America, as designated in writing by the Selling Parties not
less than three business days in advance of the applicable payment, (i) on the
Closing Date (in the case of the First Payment), (ii) on the date specified in
Section 1.3(c) (in the case of the Second Payment) and (iii) from time to time
as provided in Section 1.3(d) hereof (in the case of the Third Payment). The
Buyer shall pay the Fourth Payment from time to time in accordance with Section
8.2(c) hereof. The Purchase Price shall be allocated between the Selling Parties
and among the Securities in accordance with Schedule 1.3, which schedule shall
be completed prior to Closing.

                  (c)      If the Closing occurs at any time on or after May 1,
2003 (or if the Closing shall occur during the quarterly period ending September
30, 2003, August 1, 2003), the Buyer will pay to the Selling Parties an amount
equal to the product of the Per Day Rate (as defined below) times the number of
calendar days in the period that commences on May 1, 2003 (or if the Closing
shall occur during the quarterly period ending September 30, 2003, August 1,
2003) and ends on the Closing Date; provided, however, in no event shall the
amount payable pursuant to this Section 1.3(c) exceed the product of the Per Day
Rate times fifteen (15) (the amount, if any, calculated pursuant to this Section
1.3(c), the "SECOND PAYMENT"). As used herein, the term "PER DAY RATE" means a
fraction, of which (i) the numerator is equal to the product of (A) the
quarterly cash distribution per Common Unit for the quarterly period ending June
30, 2003 (or, in the event that the Closing occurs subsequent to the record date
for the cash distribution for the quarterly period ending June 30, 2003 and
prior to the record date for the cash distribution for the quarterly period
ending September 30, 2003, the quarterly cash distribution per Common Unit for
the quarterly period ending September 30, 2003) times (B) 14,590,312, and (ii)
of which the denominator is 91. Buyer shall pay the Second Payment to the
Selling Parties within one business day following the date of receipt from the
Partnership by Buyer of the cash distribution to the holders of Common Units for
the quarterly period ending June 30, 2003 (or, in the event that the Closing
occurs subsequent to the record date for the cash distribution for the quarterly
period ending June 30, 2003 and prior to the record date for the cash
distribution for the quarterly period ending September 30, 2003, within one
business day following the date of receipt from the Partnership by Buyer of the
cash distribution to the holders of Common Units for the quarterly period ending
September 30, 2003), or as soon thereafter as Buyer is permitted to make payment
of the Second Payment under the definitive debt financing documents pursuant to
the debt financing commitment letter described in Section 3.5.

                  (d)      From and after the Closing Date, upon any sale by
Buyer or any of its Affiliates (excluding the Partnership Group) of any Common
Units (including, without limitation, Common Units issued to Buyer or its
Affiliates upon conversion of the Class B Common Units or the Subordinated
Units) or of any Class B Common Units or upon the redemption by any of the
Partnership Entities of any of the Common Units or Class B Common Units held by
Buyer or its Affiliates (excluding the Partnership Group), Buyer shall pay to
the Selling Parties an amount for each such Common Unit or Class B Common Unit
sold or redeemed equal to 85% of the amount, if any, by which the proceeds
received by the Buyer or its

                                       -6-

Affiliates (net of any underwriting commissions, placement fees or other
offering expenses payable by the Buyer or its Affiliates) exceeds $37.50 per
Common Unit or Class B Common Unit (the aggregate amounts, if any, payable to
the Selling Parties pursuant to this Section 1.3(d), the "THIRD PAYMENT");
provided, however, that this Section 1.3(d) shall apply only with respect to the
first 5,000,000 units (whether Common Units or Class B Common Units or any
combination thereof) held by Buyer or its Affiliates (excluding the Partnership
Group) which are sold or redeemed; provided, further, that the maximum amount
payable to the Selling Parties pursuant to this Section 1.3(d) shall in no event
exceed $20 million. Buyer undertakes and agrees to notify the Selling Parties in
writing promptly after each such sale or redemption of Common Units or Class B
Common Units (which notice shall include the price(s) at which such Common Units
or Class B Common Units were sold or redeemed). Buyer shall pay any amounts due
to the Selling Parties pursuant to this Section 1.3(d) no later than the third
business day following the closing date of any such sale or redemption. For so
long as the Selling Parties are entitled to receive payments pursuant to this
Section 1.3(d), Buyer agrees that it shall not, and shall not permit its
Affiliates (excluding the Partnership Group) to, sell, convey, assign or
otherwise dispose of any Common Units or Class B Common Units for consideration
other than cash. Notwithstanding the foregoing, this Section 1.3(d) shall not in
any way obligate Buyer or any of its Affiliates (i) to sell any Common Units or
Class B Common Units or give rise to any optional or mandatory redemption rights
or obligations with respect to the Common Units or the Class B Common Units or
(ii) to make any payments to the Selling Parties to the extent not permitted
under any definitive debt financing documents entered into pursuant to the debt
financing commitment letter described in Section 3.5.

                  (e)      Buyer shall assume at the Closing the obligations,
and make the applicable payments from time to time, as specified in accordance
with Section 8.2(c) hereof (the "FOURTH PAYMENT").

                  (f)      If the Closing Price (as defined in Section 9.16) of
the Common Units as of three business days prior to Closing is less than $32.00
per unit, then the First Payment shall be reduced by an amount equal to the
difference between $32.00 and such Closing Price multiplied by 14,590,312.

                                  ARTICLE II.
                REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES

                  As of the date hereof, each of the Selling Parties hereby
represents and warrants, jointly and severally, to Buyer as follows:

                  SECTION 2.1. ORGANIZATION.

                  (a)      WES is a limited liability company duly formed,
validly existing and in good standing under the laws of Delaware, and WNGL is a
corporation duly formed, validly existing and in good standing under the laws of
Delaware.

                  (b)      Each of the GP Companies is a limited liability
company, duly formed, validly existing and in good standing under the laws of
Delaware, and the Partnership is a limited partnership duly formed, validly
existing and in good standing under the laws of Delaware. Each

                                       -7-

of the Partnership Entities (as defined in Section 2.4) is a corporation,
limited partnership or limited liability company, as the case may be, duly
formed, validly existing and in good standing under the laws of Delaware and has
all requisite corporate, limited partnership or limited liability company power
and authority, as the case may be, and all governmental licenses,
authorizations, permits, consents and approvals to own its respective properties
and assets and to conduct its business as now conducted, except where the
failure to have such governmental licenses, authorizations, permits, consents
and approvals would not have a Material Adverse Effect (as defined in Section
9.16). Each of the Partnership Entities is duly qualified to do business as a
foreign entity and is in good standing in each jurisdiction where the character
of the properties owned or leased by it or the nature of the business conducted
by it makes such qualification necessary, except where the failure to be so
qualified or in good standing would not individually or in the aggregate have a
Material Adverse Effect. Schedule 2.1 sets forth for each Partnership Entity all
of the jurisdictions in which such Partnership Entity is qualified to do
business.

                  SECTION 2.2. CAPITALIZATION OF THE NEW COMPANY; TITLE.

                  WES and WNGL are the sole members of the New Company in the
proportions set forth in the Recitals to this Agreement. The WES New LLC
Interests are owned of record and beneficially solely by WES, and the WNGL New
LLC Interests are owned of record and beneficially solely by WNGL. All of such
New LLC Interests have been duly authorized and validly issued in accordance
with the Limited Liability Company Agreement of the New Company, dated as of
November 15, 2002 (the "NEW LLC AGREEMENT"), are fully paid (to the extent
required by the New LLC Agreement) and nonassessable (except as such
nonassessability may be affected by Section 18-607 of the Delaware Limited
Liability Company Act). Except for the New LLC Interests, there are no
outstanding securities of the New Company. There are no preemptive or other
rights to subscribe for or to purchase, nor any restriction upon the voting or
transfer of, any interest in the New Company pursuant to any agreement to which
any of the New Company or the Selling Parties is a party or to which any of them
may be bound. There are no outstanding options, warrants or similar rights to
purchase or acquire any equity interests in the New Company. Each of the Selling
Parties has valid and marketable title to the New LLC Interest owned by it, free
and clear of any Encumbrances (other than the Parent Credit Facility Liens (as
defined in Section 9.16), which shall be released at or prior to Closing). A
true and correct copy of the New LLC Agreement, with any and all amendments
thereto to the date hereof, has been made available by the Selling Parties to
the Buyer or its representatives.

                  SECTION 2.3. PARTNERSHIP CAPITALIZATION; TITLE.

                  (a)      The New Company is the sole general partner of the
Partnership. The New Company is the sole record and beneficial owner of the GP
Interest, which represents a 2.0% general partner interest in the Partnership,
and the GP Interest has been duly authorized and validly issued in accordance
with the Partnership Agreement. Except for any Encumbrances provided in the
Partnership Agreement, the New Company owns such GP Interest, free and clear of
any Encumbrances.

                  (b)      As of the date hereof, the Partnership has no limited
partner interests issued and outstanding other than the following:

                                       -8-

                  (i)      12,600,000 Common Units issued to the general public;

                  (ii)     the WES Common Units and the WNGL Common Units issued
         to WES and WNGL, respectively, and with respect to which WES and WNGL,
         as applicable, are the sole record and beneficial owners and have valid
         and marketable title (subject to restrictions on transfer that may be
         imposed thereon under the Securities Act and state "blue sky"
         securities laws);

                  (iii)    the WES Subordinated Units and the WNGL Subordinated
         Units issued to WES and WNGL, respectively, and with respect to which
         WES and WNGL, as applicable, are the sole record and beneficial owners
         and have valid and marketable title (subject to restrictions on
         transfer that may be imposed thereon under the Securities Act and state
         "blue sky" securities laws);

                  (iv)     the Class B Common Units issued to the Old Company
         and with respect to which the Old Company is the sole record and
         beneficial owner and has valid and marketable title (subject to
         restrictions on transfer that may be imposed thereon under the
         Securities Act and state "blue sky" securities laws); and

                  (v)      the IDRs held by the New Company and with respect to
         which the New Company is the sole record and beneficial owner and has
         valid and marketable title (subject to restrictions on transfer that
         may be imposed thereon under the Securities Act and state "blue sky"
         securities laws).

                  Each of such Common Units, Subordinated Units, Class B Common
Units and IDRs and the limited partner interests represented thereby have been
duly authorized and validly issued in accordance with the Second Amended and
Restated Agreement of Limited Partnership of the Partnership, dated as of
September 27, 2002, as amended by Amendments Nos. 1 and 2 thereto, each dated as
of November 15, 2002 (as amended, the "PARTNERSHIP AGREEMENT"); and are fully
paid (to the extent required under the Partnership Agreement) and nonassessable
(except to the extent such nonassessability may be affected by Section 17-607 of
the Delaware Revised Uniform Limited Partnership Act (the "DELAWARE LP ACT")).

                  (c)      Except for any Encumbrances provided in the
Partnership Agreement, (i) the New Company owns all of the IDRs, free and clear
of any Encumbrances, (ii) the Old Company owns all of the Class B Common Units,
free and clear of any Encumbrances (other than the Parent Credit Facility Liens,
which shall be released at or prior to Closing), (iii) WES owns all of the WES
Units, free and clear of any Encumbrances (other than the Parent Credit Facility
Liens, which shall be released at or prior to Closing), and (iv) WNGL owns all
of the WNGL Units, free and clear of any Encumbrances (other than the Parent
Credit Facility Liens, which shall be released at or prior to Closing).

                  (d)      Except as described in the Partnership Agreement or
in Schedule 2.3(d)(i) hereto, there are no preemptive or other rights to
subscribe for or to purchase, nor any restriction upon the voting or transfer of
any interest in the Partnership (provided that the foregoing shall not apply to
any such restriction on voting or transfer that any holder of Common Units
(other than the Selling Parties) may have imposed upon such Common Units).
Except as described in

                                       -9-

the Partnership Agreement and for "phantom" units ("PHANTOM UNITS") granted
under the Williams Energy Partners Long-Term Incentive Plan as described in
Schedule 2.3(d)(ii), there are no outstanding options, warrants or similar
rights to purchase or acquire from any of the Partnership Entities, Parent or
the Selling Parties any equity interests in the Partnership.

                  SECTION 2.4. SUBSIDIARIES; EQUITY INTERESTS; BUSINESS OF GP
COMPANIES.

                  (a)      Except as set forth on Schedule 2.4, neither of the
GP Companies nor the Partnership has any subsidiaries, and does not own,
directly or indirectly, any shares of capital stock, voting rights or other
equity interests or investments in any other Person. Except as set forth in the
Partnership Agreement or on Schedule 2.4, neither of the GP Companies nor the
Partnership has any obligation or rights to acquire by any means, directly or
indirectly, any capital stock, voting rights, equity interests or investments in
another Person. Except for Encumbrances set forth on Schedule 2.4, the
Partnership owns, directly or indirectly, all of the issued and outstanding
partnership, membership or other equity interests of each of the subsidiaries
set forth on Schedule 2.4 free and clear of any Encumbrances. The New Company,
the Partnership and each of the subsidiaries of the Partnership set forth on
Schedule 2.4 are collectively referred to herein as the "PARTNERSHIP ENTITIES."

                  (b)      Old Company was formed as a limited liability company
under the laws of Delaware on August 30, 2000 and, from its date of formation
until November 15, 2002, did not (i) engage in or conduct, directly or
indirectly, any business or other activities other than serving as the general
partner of the Partnership, owning the GP Interest, IDRs and Class B Common
Units and owning all of the outstanding membership interests of Williams Energy
Management LLC, a Delaware limited liability company ("OLD COMPANY SUBSIDIARY"),
(ii) have any employees, (iii) incur any indebtedness, liability or obligations,
absolute or contingent, other than any joint and several liability under
Delaware law for indebtedness, liabilities and obligations of the Partnership
Group that are reflected in the consolidated financial statements of the
Partnership included in the SEC Reports (other than Affiliate intercompany
obligations incurred in the ordinary course of business), or (iv) own or hold
any ownership or other interests in any real or personal property other than as
provided in clause (i) above. Old Company Subsidiary was formed as a limited
liability company under the laws of Delaware on April 10, 2002 and, from its
date of formation until November 15, 2002, did not (1) engage in or conduct,
directly or indirectly, any business or other activities, (2) have any
employees, (3) incur any indebtedness, liability or obligation, absolute or
contingent (other than Affiliate intercompany obligations incurred in the
ordinary course of business), or (4) own or hold any ownership or other
interests in any real or personal property. New Company was formed as a limited
liability company under the laws of Delaware on November 12, 2002 and, since its
date of formation, has not engaged in or conducted, directly or indirectly, any
business or other activities other than serving as the general partner of the
Partnership and owning the GP Interest and the IDRs.

                  SECTION 2.5. VALIDITY OF AGREEMENT; AUTHORIZATION.

         Each of the Selling Parties and Parent has the power and authority to
enter into this Agreement and the Transaction Documents to which it is party and
to carry out its obligations hereunder and thereunder. The execution and
delivery of this Agreement and such Transaction Documents and the performance of
the Selling Parties' and Parent's obligations hereunder and

                                      -10-

thereunder have been duly authorized by the Board of Directors of WES, the Board
of Directors of WNGL, the members of the Old Company and the Board of Directors
of Parent, as applicable, and no other proceedings on the part of any of the
Selling Parties or Parent are necessary to authorize such execution, delivery
and performance. This Agreement and the Transaction Documents to which any of
the Selling Parties or Parent is party have been (in the case of this Agreement
and the Parent Guaranty), or will be at the Closing (in the case of such other
Transaction Documents), duly executed and delivered by each of the Selling
Parties or Parent, as applicable, and constitute, or will constitute at the
Closing, as applicable, each such party's valid and binding obligation
enforceable against each such party in accordance with its terms (except to the
extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other similar law affecting the enforcement of
creditors' rights generally or by general equitable principles).

                  SECTION 2.6. NO CONFLICT OR VIOLATION.

         The execution, delivery and performance of this Agreement and the
Transaction Documents by any of the Selling Parties or Parent does not and will
not: (a) violate or conflict with any provision of the Organizational Documents
(as defined in Section 9.16) of Parent, any Selling Party or any of the
Partnership Entities; (b) violate any applicable provision of law, statute,
judgment, order, writ, injunction, decree, award, rule, or regulation of any
foreign, federal, tribal, state or local government, court, arbitrator, agency
or commission or other governmental or regulatory body or authority
("GOVERNMENTAL AUTHORITY"); (c) violate, result in a breach of, constitute (with
due notice or lapse of time or both) a default or cause any obligation, penalty
or premium to arise or accrue under any material contract, lease, loan
agreement, mortgage, security agreement, trust indenture or other agreement or
instrument to which Parent or any of the Selling Parties or Partnership Entities
is a party or by which any of them is bound or to which any of their respective
properties or assets is subject; (d) result in the creation or imposition of any
Encumbrance upon any of the properties or assets of any of the Partnership
Entities; or (e) result in the cancellation, modification, revocation or
suspension of any License (as defined in Section 2.14) of any of the Partnership
Entities, except in the cases of clauses (b), (d) and (e) above, as would not
have a Material Adverse Effect and, in the case of clauses (c) and (d) above, as
set forth on Schedule 2.6.

                  SECTION 2.7. CONSENTS AND APPROVALS.

         Except as disclosed on Schedule 2.7, no material consent, approval,
waiver or authorization of, or filing, registration or qualification with, any
Governmental Authority or any other Person (on the part of Parent or any of the
Selling Parties or Partnership Entities) is required for any such party to
execute and deliver this Agreement or the Transaction Documents to which Parent
or any of the Selling Parties is party or to perform its respective obligations
hereunder or thereunder (except under (i) the Parent Credit Facility and (ii)
the Parent Credit Facility Security Documents (as defined in Section 9.16),
which consents or approvals will be obtained prior to or at Closing).

                                      -11-

                  SECTION 2.8. NEW COMPANY FINANCIAL STATEMENTS; SEC REPORTS;
OPERATING SURPLUS.

                  (a)      Attached as Schedule 2.8 are copies of the unaudited
balance sheet, as of December 31, 2002, and the unaudited income statements and
statements of cash flows for the 12-month period, or portion thereof, ended
December 31, 2002, of the New Company and the unaudited balance sheet, income
statement and statements of cash flows for the three-month period ended March
31, 2003, of the New Company (collectively, the "NEW COMPANY FINANCIAL
STATEMENTS"). The New Company Financial Statements were prepared in accordance
with U.S. generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved and fairly present in all
material respects the financial condition of the New Company as of their
respective dates and the results of its operations for the periods covered
thereby.

                  (b)      Since October 30, 2000, (i) the Partnership has
timely made all filings (the "SEC REPORTS") required to be made under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), and the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), (ii) all SEC Reports
filed by the Partnership, at the time filed (in the case of documents filed
pursuant to the Exchange Act) or when declared effective by the Securities and
Exchange Commission (the "SEC") (in the case of registration statements filed
under the Securities Act) complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the SEC thereunder, (iii) no such SEC Report, at the time
described above, contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein in order to make the
statements contained therein, in the light of the circumstances under which they
were made, not misleading, (iv) all financial statements contained or
incorporated by reference in such SEC Reports complied as to form when filed in
all material respects with the rules and regulations of the SEC with respect
thereto, were prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the financial condition of
the Partnership and its consolidated subsidiaries at and as of the respective
dates thereof and the consolidated results of operations and changes in cash
flows for the periods indicated (subject, in the case of unaudited financial
statements, to normal year-end audit adjustments consistent with prior periods).

                  (c)      The Operating Surplus (as defined in the Partnership
Agreement) of the Partnership as of March 31, 2003 was not less than $150
million.

                  SECTION  2.9. ABSENCE OF CERTAIN CHANGES OR EVENTS.

         Except as set forth on Schedule 2.9, since December 31, 2002, the
business of each of the Partnership Entities has been conducted in the ordinary
course of business consistent with past practices and none of the Partnership
Entities has taken any of the actions described in Section 4.1(a) through (n),
except in connection with entering into this Agreement. Since December 31, 2002,
there has not been any event or condition that has had, or is reasonably
expected to have, a Material Adverse Effect.

                                      -12-

                  SECTION  2.10. TAX MATTERS.

                  (a) For purposes of this Agreement, "TAX RETURNS" shall mean
returns, reports, exhibits, schedules, information statements and other
documentation (including any additional or supporting material) filed or
maintained, or required to be filed or maintained, in connection with the
calculation, determination, assessment or collection of any Tax and shall
include any amended returns required as a result of examination adjustments made
by the Internal Revenue Service or other Tax authority. For purposes of this
Agreement, "TAX" or "TAXES" shall mean any and all federal, state, local,
foreign and other taxes, levies, fees, imposts and duties of whatever kind
(including any interest, penalties or additions to the tax imposed in connection
therewith or with respect thereto), including, without limitation, taxes imposed
on, or measured by, income, franchise, profits or gross receipts, and also ad
valorem, value added, sales, use, service, real or personal property, capital
stock, license, payroll, withholding, employment, social security, workers'
compensation, unemployment compensation, utility, severance, production, excise,
stamp, occupation, premium, windfall profits, transfer and gains taxes and
customs duties.

                  (b) Except as disclosed on Schedule 2.10(b)(i), (i) each of
the Partnership Entities has filed (or joined in the filing of) when due all Tax
Returns required by applicable law to be filed with respect to each of the
Partnership Entities other than those Tax Returns the failure of which to file
would not have a Material Adverse Effect; (ii) all such Tax Returns were true,
correct and complete in all material respects as of the time of such filing;
(iii) all Taxes relating to periods ending on or before the Closing Date owed by
the any of the Partnership Entities (whether or not shown on any Tax Return) at
any time on or prior to the Closing Date, if required to have been paid, have
been or will be timely paid (except for Taxes that are being contested in good
faith in appropriate proceedings and, to the extent the amount being contested
exceeds $100,000, that are set forth on Schedule 2.10(b)(ii)); (iv) any material
liability of any of the Partnership Entities for Taxes not yet due and payable,
or that is being contested in good faith in appropriate proceedings, has been
provided for on the financial statements of the applicable Partnership Entity or
Entities, as the case may be, in accordance with GAAP; (v) there is no action,
suit, proceeding, investigation, audit or claim now pending against, or with
respect to, any of the Partnership Entities in respect of any material Tax or
Tax assessment, nor has any claim for additional material Tax or Tax assessment
been asserted in writing or, to the Knowledge of the Selling Parties (as defined
in Section 9.16), been proposed by any Tax authority; (vi) since August 13,
2000, no written claim has been made by any Tax authority in a jurisdiction
where any of the Partnership Entities does not currently file a Tax Return that
it is or may be subject to Tax by such jurisdiction, nor to the Knowledge of the
Selling Parties has any such assertion been threatened or proposed in writing;
(vii) none of the Partnership Entities has any outstanding request for any
extension of time within which to pay its Taxes or file its Tax Returns; (viii)
there has been no waiver or extension of any applicable statute of limitations
for the assessment or collection of any Taxes of any of the Partnership
Entities; (ix) none of the Partnership Entities has entered into any agreement
or arrangement with any Tax authority that requires any of the Partnership
Entities to take any action or to refrain from taking any action; (x) none of
the Selling Parties is a "foreign person" within the meaning of Section 1445 of
the United States Internal Revenue Code of 1986, as amended (the "CODE"); (xi)
none of the Partnership Entities is a party to any agreement, whether written or
unwritten, providing for the payment of Taxes, payment for Tax losses,
entitlements to refunds or similar Tax matters; (xii) the New Company

                                      -13-

has made, or shall be eligible to make, an election pursuant to Section 754 of
the Code; and (xiii) each of the Partnership Entities has withheld and paid all
material Taxes required to be withheld by such Partnership Entity in connection
with any amounts paid or owing to any employee, creditor, independent contractor
or other third party.

                  (c) In each tax year since the formation of the Partnership up
to and including the current tax year, at least 90% of the Partnership's gross
income has been income which is "qualifying income" within the meaning of
Section 7704(d) of the Code.

                  (d) Except for Williams GP, Inc., none of the Partnership
Entities has elected to be treated as a corporation.

                  (e) The only representations and warranties given in respect
of Tax matters are those contained in this Section 2.10 and none of the other
representations and warranties shall be deemed to constitute, directly or
indirectly, a representation and warranty in respect of Tax matters.

                  SECTION 2.11. ABSENCE OF UNDISCLOSED LIABILITIES.

                  (a) Except as disclosed on Schedule 2.11, none of the
Partnership Entities has any indebtedness or liability, absolute or contingent,
which is not shown or provided for in the New Company Financial Statements or in
the consolidated financial statements of the Partnership included in the SEC
Reports, other than (i) liabilities incurred or accrued in the ordinary course
of business consistent with past practice, including liens for current taxes and
assessments not in default, since December 31, 2002, (ii) liabilities of the New
Company that individually or in the aggregate are not material to the New
Company and that are not required by GAAP to be included in the New Company
Financial Statements or (iii) liabilities of the Partnership or any of its
subsidiaries that individually or in the aggregate are not material to the
Partnership and its subsidiaries, taken as a whole, and that are not required by
GAAP to be included in the consolidated financial statements of the Partnership.

                  (b) As of the Closing Date, New Company will not have any
indebtedness, liabilities or obligations, absolute or contingent, other than
indebtedness, liabilities and obligations (i) that have been incurred on behalf
of the Partnership in the ordinary course of business that are properly
reimbursable by the Partnership or (ii) the responsibility for which is
specifically allocated under this Agreement.

                  SECTION 2.12. REAL AND PERSONAL PROPERTY.

         Except as disclosed on Schedule 2.12(a), each of the Partnership
Entities owns valid and defensible fee title to, or holds a valid leasehold
interest in, or a right-of-way or easement (collectively, the "RIGHTS-OF-WAY")
through, all real property used or necessary for the conduct of the business of
each such Partnership Entity as it is presently conducted ("REAL PROPERTY"), and
each of the Partnership Entities has good and valid title to all of the material
tangible personal property and assets which it owns and which are reflected in
the New Company Financial Statements or in the consolidated financial statements
of the Partnership included in the SEC Reports or which are thereafter acquired
to the date hereof (except for assets and properties sold, consumed or otherwise
disposed of in the ordinary course of business consistent

                                      -14-

with past practices since December 31, 2002), and all such Real Property, assets
and properties are owned or leased free and clear of all Encumbrances, except
for (i) Encumbrances set forth on Schedule 2.12(b), (ii) liens for current Taxes
not yet due and payable or for Taxes the validity of which is being contested in
good faith (and to the extent the amount being contested exceeds $100,000, that
are set forth on Schedule 2.10(b)(ii)), (iii) Encumbrances to secure
indebtedness reflected in the consolidated financial statements of the
Partnership included in the SEC Reports, (iv) Encumbrances that will be
discharged on or prior to the Closing Date, (v) laws, ordinances and regulations
affecting building use and occupancy or reservations of interest in title
(collectively, "PROPERTY RESTRICTIONS") imposed or promulgated by law or any
Governmental Authority with respect to Real Property, including zoning
regulations, provided they do not materially interfere with the present use of
the applicable Real Property, (vi) Encumbrances, Property Restrictions,
Rights-of-Way and written agreements of record or copies of which have been
furnished to Buyer, provided they do not materially interfere with the present
use of the applicable Real Property, (vii) mechanics', carriers', workmen's,
repairmen's or similar types of liens, if any, which do not materially detract
from the value of or materially interfere with the present use of any Real
Property subject thereto or affected thereby and which have arisen or been
incurred in the ordinary course of business, (viii) Parent Credit Facility Liens
(which shall be released prior to or at Closing) and (ix) Encumbrances and minor
title defects that do not materially detract from the value or materially
interfere with the present use of the asset subject thereto (clauses (i) through
(ix) above referred to collectively as "PERMITTED ENCUMBRANCES").
Notwithstanding the foregoing, with respect to Rights-of-Way, the Selling
Parties represent only that each of the Partnership Entities has sufficient
title thereto to enable it to conduct its business as presently conducted.

                  SECTION 2.13. INTELLECTUAL PROPERTY AND COMPUTER HARDWARE.

                  (a)      (x) Except as set forth on Schedule 2.13(a) and for
the Automated Transportation Logistics Activity System (the "ATLAS 2000 SYSTEM")
and (y) except as may be identified during development of the IT Migration Plan
(as defined in Section 4.11 below), contemplated under the Transition Services
Agreement and for such other matters that also would not have a Material Adverse
Effect, (i) one or more of the Partnership Entities owns all right, title and
interest in and to, or has a valid and enforceable license or other right to use
lawfully, all the Intellectual Property (as defined in Section 9.16) used by any
Partnership Entity in connection with its business free and clear of all liens
(other than the Parent Credit Facility Liens, which shall be released at or
prior to Closing, and the terms of any such license), and Schedule 2.13(a) sets
forth a list of such Intellectual Property so used by the Partnership Entities;
(ii) none of the Partnership Entities has infringed or otherwise violated the
Intellectual Property of any Person, (iii) to the Knowledge of the Selling
Parties, no Person has infringed or otherwise violated the Intellectual Property
of any of the Partnership Entities or any Intellectual Property associated with
software indicated as owned on Schedule 2.13(b), (iv) the consummation of the
transactions contemplated in this Agreement and the Transaction Documents will
not alter, impair or extinguish any Intellectual Property of any of the
Partnership Entities or any Intellectual Property associated with software
indicated as owned on Schedule 2.13(b)) and (v) to the Knowledge of the Selling
Parties, there are no agreements, judicial orders or settlement agreements which
limit or restrict any of the Partnership Entities' rights to use any
Intellectual Property or any Intellectual Property associated with software
indicated as owned on Schedule 2.13(b).

                                      -15-

                  (b)      Other than the ATLAS 2000 System, a listing of all
material computer software owned by or licensed to the Selling Parties and/or
its Affiliates which is used in connection with the business of the Partnership
Entities as presently conducted is identified in Schedule 2.13(b). None of such
owned or licensed software infringes or otherwise violates the Intellectual
Property of any Person. Such licensed software is referred to herein as the
"LICENSED SOFTWARE."

                  (c)      The Selling Parties or their Affiliates own all
right, title and interest to the ATLAS 2000 System and own all right, title and
interest to or have a valid and enforceable lease, license or other right to use
lawfully any software listed on Schedule 2.13(b) or computer hardware associated
with the ATLAS 2000 System that will be transferred to the Partnership Entities
in accordance with Section 4.11 or the ATLAS Assignment, Contribution and
License Agreement.

                  (d)      The only representations and warranties given in
respect of Intellectual Property and matters and agreements relating thereto are
those contained in this Section 2.13, and none of the other representations and
warranties shall be deemed to constitute, directly or indirectly, a
representation and warranty in respect of Intellectual Property and matters or
agreements relating thereto.

                  SECTION  2.14. LICENSES, PERMITS AND GOVERNMENTAL APPROVALS.

         Except as set forth on Schedule 2.14, (a) each of the Partnership
Entities has all material consents, licenses, permits, certificates, franchises,
authorizations and approvals issued or granted to any such Partnership Entity
by, and has made all material registrations and filings with, any Governmental
Authority as are necessary for the conduct of its business as currently
conducted (each a "LICENSE" and, collectively, the "LICENSES"); (b) each License
has been issued to, and duly obtained and fully paid for by, the holder thereof
and is valid, in full force and effect, except where such invalidity or failure
to be in full force and effect would not have a Material Adverse Effect, and (c)
none of such Licenses will terminate or become terminable as a result of the
transactions contemplated by this Agreement or the Transaction Documents.
Notwithstanding anything to the contrary in this Section 2.14, the
representations and warranties in this Section 2.14 shall not apply to (x) any
right to Intellectual Property (which shall be subject to the representations in
Section 2.13) or (y) any License required under applicable Environmental Law
(which shall be subject to the representations in Section 2.21(a)(v)).

                  SECTION  2.15. COMPLIANCE WITH LAW.

         Except with respect to Tax matters (which are provided for in Section
2.10), Intellectual Property matters (which are provided for in Section 2.13) or
environmental, health and safety matters (which are provided for in Section
2.21) and except as set forth on Schedule 2.15 or in the SEC Reports, since
February 9, 2001, the operations of each of the Partnership Entities have been
conducted in material compliance with all applicable laws, regulations, orders
and other requirements of all Governmental Authorities having jurisdiction over
each such Partnership Entity and its respective assets, properties and
operations. Without limiting the generality of the foregoing, Parent, the
Selling Parties and the Partnership Entities have been at all times, and are, in
compliance with the Consent Decree (as defined in Section 4.4).

                                      -16-

                  SECTION  2.16. LITIGATION.

         Except as set forth on Schedule 2.16, there are no Legal Proceedings
pending or, to the Knowledge of the Selling Parties, threatened against or
involving Parent or any Affiliate thereof, including the Selling Parties and the
Partnership Entities that, individually or in the aggregate, are reasonably
likely to (a) have a Material Adverse Effect or (b) materially impair or delay
the ability of any of the Parent or Selling Parties to perform its obligations
under this Agreement or the Transaction Documents or consummate the transactions
contemplated hereby or thereby. Except as set forth on Schedule 2.16 or as set
forth in the Partnership's Annual Report on Form 10-K for the year ended
December 31, 2002 (the "2002 10-K") under the caption "Item 3: Legal
Proceedings" or in Note 16 "Commitments and Contingencies" of the Notes to
Consolidated Financial Statements included under the caption "Item 8: Financial
Statements and Supplementary Data," there is no order, judgment, injunction or
decree of any Governmental Authority outstanding against Parent or any of the
Selling Parties or Partnership Entities that, individually or in the aggregate,
would have any effect referred to in the foregoing clauses (a) and (b). "LEGAL
PROCEEDING" shall mean any judicial, administrative or arbitral actions, suits,
proceedings (public or private), investigations or governmental proceedings
before any Governmental Authority. Notwithstanding the foregoing, the
representations and warranties in this Section 2.16 shall not include Legal
Proceedings in respect of any Environmental Law (which shall instead be subject
to the representations in Section 2.21(a)(iv)).

                  SECTION  2.17. CONTRACTS.

         Schedule 2.17 sets forth (other than those contracts filed as exhibits
to the 2002 10-K and subject to the dollar amount limitations of clauses (i) or
(ii) below) a true and complete list of the following contracts, agreements,
instruments and commitments to which any of the Partnership Entities is a party
or otherwise relating to or affecting any of its assets, properties or
operations, whether written or oral: (i) contracts calling for, or that the
Selling Parties expect to result in, payments by or to any of the Partnership
Entities of amounts greater than $1,000,000 per year; (ii) contracts, loan
agreements, letters of credit, repurchase agreements, mortgages, security
agreements, guarantees, pledge agreements, trust indentures and promissory notes
and similar documents relating to the borrowing of money or for lines of credit
in any case for amounts in excess of $1,000,000; (iii) partnership or joint
venture agreements; and (iv) contracts limiting or purporting to limit the
ability of any of the Partnership Entities to compete in any line of business or
with any Person or in any geographic area (collectively with those contracts
filed as exhibits to the 2002 10-K, "MATERIAL CONTRACTS"). Each Material
Contract is valid, binding and enforceable against such Partnership Entity or
Partnership Entities party thereto and, to the Knowledge of the Selling Parties,
each of the other parties thereto in accordance with its terms, and in full
force and effect on the date hereof (and each such Material Contract will be in
full force and effect on the Closing Date, except for any Material Contract that
terminates in accordance with its terms) except where a failure to be so valid,
binding or enforceable or in full force and effect would not have a Material
Adverse Effect. With respect to each Material Contract, no Partnership Entity
party thereto and, to the Knowledge of the Selling Parties, no other party
thereto is in breach or default, and to the Knowledge of the Selling Parties, no
event has occurred which with notice or lapse of time or both would constitute a
breach or default, or permit termination, modification or acceleration,
thereunder.

                                      -17-

                  SECTION  2.18. BROKERS.

         Except as disclosed on Schedule 2.18, neither the Parent nor any of the
Selling Parties has employed the services of an investment banker, financial
advisor, broker or finder in connection with this Agreement or any of the
transactions contemplated hereby.

                  SECTION  2.19. EMPLOYEES; EMPLOYEE PLANS.

                  (a)      None of the Partnership Entities has, nor since
February 9, 2001 has had, any employees.

                  (b)      Except as disclosed on Schedule 2.19(b)(i), none of
the Partnership Entities sponsors, maintains or contributes to or has an
obligation (secondary, contingent or otherwise) to contribute to and at any time
during the past five years has sponsored, maintained or contributed to or has
had an obligation to contribute to, any "employee benefit plan," as defined
under Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or any other bonus, pension, stock option, stock purchase,
benefit, welfare, profit-sharing, retirement, disability, vacation, severance,
hospitalization, insurance, incentive, deferred compensation and other similar
fringe or employee benefit plans, funds, programs or arrangements, whether
written or oral ("EMPLOYEE PLANS") (such Employee Plans listed on Schedule
2.19(b)(i) being the "PARTNERSHIP PLANS"). Each of the Partnership Plans is
maintained or sponsored solely by one or more of the Partnership Entities.
Schedule 2.19(b)(ii) sets forth a true and complete list of all Employee Plans,
other than Partnership Plans, which cover, are maintained for the benefit of, or
relate to any or all Business Employees (as defined below) (the "SELLER PLANS").

                  (c)      Each Partnership Plan and Seller Plan has been
maintained and operated in material compliance with its terms, the requirements
of applicable law, including the Code and ERISA, and each Seller Plan intended
to be "qualified" within the meaning of Section 401(a) of the Code is qualified
and has received a favorable determination letter from the IRS that covers all
amendments required by applicable law to have been made to such plan as of the
Closing Date or has timely filed an application to receive a favorable
determination letter as to such qualified status.

                  (d)      No Partnership Plan is subject to ERISA and no Seller
Plan covering Business Employees is a multiemployer plan, as defined in Section
3(37) of ERISA.

                  (e)      As of the date hereof, the Partnership Entities do
not have any liability, including secondary liability, under Title IV of ERISA
with respect to any plan, including, without limitation, any Seller Plan nor any
liability under Section 302 of ERISA or Section 412 of the Code.

                  (f)      Schedule 2.19(f)(i) sets forth a list showing the
names of the active employees of the Selling Parties or their Affiliates who
spend fifty percent (50%) or more of their business time engaged in, or in
activities related to, the business and/or affairs of any of the Partnership
Entities (the "BUSINESS EMPLOYEES") and showing which of such employees
regularly devote substantially all of their business time to the business and/or
affairs of the Partnership Entities. Except as set forth on Schedule
2.19(f)(ii), there are no contracts,

                                      -18-

agreements, plans or arrangements covering any Business Employee with "change of
control" or similar provisions that would be triggered as a result of the
consummation of any of the transactions contemplated by this Agreement. None of
the Business Employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement with any Selling
Party, any Partnership Entity, Parent or any other subsidiary of Parent, or to
the Knowledge of the Selling Parties, subject to any judgment, decree or order
of any court or administrative agency, that would interfere with the use of such
employee's efforts to promote the interests of the Partnership Entities or Buyer
or that would conflict with the business of any of the Partnership Entities as
presently conducted. None of Parent, the Selling Parties nor any of the
Partnership Entities has received notice from any officer or key Business
Employee or group of Business Employees, that such person(s) intends to
terminate their employment.

                  (g)      An Affiliate of the Selling Parties is a party to an
amended collective bargaining agreement with the Paper, Allied-Industrial,
Chemical, and Energy Workers International Union ("PACE") and with PACE Local
5-348 with respect to certain Business Employees as set forth on Schedule
2.19(g)(i), including all existing memorandums of agreement related thereto
(collectively, the "PACE COLLECTIVE BARGAINING AGREEMENT"), a copy of which has
been furnished to the Buyer. Except as disclosed on Schedule 2.19(g)(i), none of
the Business Employees is covered by any collective bargaining agreement with
respect to services performed in connection with the business or operations of
any of the Partnership Entities and, except as disclosed in Schedule
2.19(g)(ii), to the Knowledge of the Selling Parties, there are not any union
organizing efforts underway with respect to any such employees.

                  (h)      Each Partnership Plan may be unilaterally terminated
by a Partnership Entity at any time without liability to any Person, except as
provided under the terms of the affected plan.

                  SECTION  2.20. INSURANCE.

                  (a)      Schedule 2.20(a)(i) sets forth a summary listing of
all current liability and property insurance policies covering the properties,
assets, employees, directors and/or operations of the Partnership Entities that
are provided by the Parent or its Affiliates (other than the Partnership
Entities) (collectively, the "PARENT POLICIES"). Schedule 2.20(a)(ii) sets forth
a summary listing of all current liability and property insurance policies
covering the properties, assets, employees, directors and/or operations of all
of the Partnership Entities that are provided by the Partnership Entities
(collectively, the "PARTNERSHIP POLICIES" and together with the Parent Policies,
the "POLICIES"). All premiums payable under the Policies have been paid in a
timely manner and Parent (and each of its Affiliates and the Partnership
Entities covered thereunder) has complied fully with the terms and conditions of
all such Policies.

                  (b)      Except as set forth in Schedule 2.20(b) hereto, all
Policies are in full force and effect. None of Parent or the Selling Parties
will cancel any of the Partnership Policies or cause any of the Partnership
Policies to be canceled, and each of the Partnership Policies will continue to
be in full force and effect in accordance with their terms upon the consummation
of the transactions contemplated hereby. Subject to Section 4.10(b), coverage
for the each of the Partnership Entities under the Parent Policies shall
terminate on the Closing Date, except that

                                      -19-

coverage for the Partnership Entities under the excess liability policies of the
Parent Policies shall terminate on May 1, 2003 at 12:01 a.m. Central Time, and
the additional insurance policies to be provided by the Partnership Entities in
Schedule 2.20(b) shall be procured by the Selling Parties or Parent, as of May
1, 2003, at the cost of the Partnership. Parent is not (nor is any Affiliate or
Partnership Entity covered under any Policy) in default under any provisions of
the Policies, and there is no claim by any of the Partnership Entities or any
other Person pending under any of the Policies as to which coverage with respect
to any of the Partnership Entities has been questioned, denied or disputed by
the underwriters or issuers of such Policies.

                  SECTION  2.21. ENVIRONMENTAL; HEALTH AND SAFETY MATTERS.

                  (a)      Except as set forth on Schedule 2.21:

                  (i)      Each of the Partnership Entities and its operations,
         activities, Real Property and assets are in material compliance with
         all applicable Environmental Laws (as defined in paragraph (b) below);

                  (ii)     There are no Hazardous Materials present in, or being
         released to, the air, surface or sub-surface soils or in the
         groundwater at, on, in, under, beneath, or in the vicinity of the
         activities, operations, Real Property or assets of the Partnership
         Entities in amounts or concentrations that are reasonably likely to
         result in a material liability under any Environmental Laws;

                  (iii)    None of Parent, the Selling Parties nor any of the
         Partnership Entities has received any written request for information,
         or has received written notification that it has any liability, or is a
         potentially responsible party, under any Environmental Law that is
         material in nature with respect to any on-site or off-site location for
         which liability is currently being asserted against them with respect
         to the activities, operations, Real Property or assets of any of the
         Partnership Entities;

                  (iv)     There are no material writs, injunctions, decrees,
         orders or judgments outstanding, or any Legal Proceedings pending or,
         to the Knowledge of the Selling Parties, threatened involving any of
         the Partnership Entities or the activities, operations, Real Property
         or assets of the Partnership Entities relating to (A) its compliance
         with any Environmental Law, or (B) the release, disposal, discharge,
         spill, treatment, storage or recycling of Hazardous Materials (as
         defined in paragraph (b) below) into the environment at any on-site or
         off-site location;

                  (v)      Each of the Partnership Entities has obtained,
         currently maintains and is in material compliance with all Licenses
         which are required under Environmental Laws for its operations,
         activities, Real Property and assets (collectively, "ENVIRONMENTAL
         PERMITS"), and all such Environmental Permits are in effect. No appeal
         nor any other Legal Proceeding is pending to revoke any such
         Environmental Permit, nor, to the Knowledge of the Selling Parties,
         threatened, and to the Knowledge of the Selling Parties, no facts or
         circumstances exist that if unabated would be reasonably expected to
         result in any Environmental Permit being revoked, rescinded or
         withdrawn, or not being renewed or reissued on substantially the same
         terms;

                                      -20-

                  (vi)     The Selling Parties and Parent have made available to
         Buyer all internal and external audits, studies and reports on
         environmental matters relevant to the Partnership Entities that (A)
         have been retained in the files of any Selling Party or their
         Affiliates or the Partnership Entities and (B) were prepared or
         received at any time after January 1, 1998 (including such documents
         that may relate to the Excluded Assets, as defined in the WPL
         Contribution Agreement, and any real property of the type described in
         Section 2.21(a)(vii) below); and

                  (vii)    The representations in Sections 2.21(a)(ii), (a)(iii)
         and (a)(iv) above, also apply to with respect to real property or
         assets that were owned, leased or operated by the Partnership Entities
         subsequent to January 1, 1998 but that are no longer owned, leased or
         operated by the Partnership Entities on the date hereof, but only with
         respect to the periods such real property or assets were owned, leased
         or operated by the Partnership Entities; provided, however, that such
         representation with respect to Section 2.21(a)(iv) is made only to the
         Knowledge of the Selling Parties.

                  (b)      The following terms shall have the following
meanings:

                  "ENVIRONMENTAL LAW" shall mean current local, county, state,
federal, and/or foreign law (including common law), statute, code, ordinance,
rule, order, judgment, decree, regulation or other legal obligation relating to
the protection of health, safety or the environment or natural resources and in
effect on the date hereof, including, without limitation, the Comprehensive
Environmental Response Compensation and Liability Act (42 U.S.C. section 9601 et
seq.), as amended ("CERCLA"), the Resource Conservation and Recovery Act (42
U.S.C. section 6901 et seq.), as amended ("RCRA"), the Federal Water Pollution
Control Act (33 U.S.C. section 1251 et seq.), as amended, the Clean Air Act (42
U.S.C. section 7401 et seq.), as amended, the Toxic Substances Control Act (15
U.S.C. section 2601 et seq.), as amended, the Occupational Safety and Health Act
(29 U.S.C. section 651 et seq.), as amended, the Safe Drinking Water Act (42
U.S.C. section 300(f) et seq.), as amended, analogous state, tribal or local
laws, and any similar, implementing or successor law, and any amendment, rule,
regulation, or directive issued thereunder, including any determination by, or
interpretation of any of the foregoing by any Governmental Authority that has
the force of law.

                  "HAZARDOUS MATERIAL" shall mean any substance, material or
waste which is regulated by any Environmental Law as hazardous, toxic, a
pollutant, contaminant or words of similar meaning including, without
limitation, petroleum, petroleum products, petroleum hydrocarbons, petroleum
by-products, crude oil, and any components, fractions or derivatives thereof,
methyl tertiary butyl ether ("MTBE"), ammonia, asbestos, urea, formaldehyde and
polychlorinated biphenyls.

                  (c)      The only representations and warranties given in
respect of environmental, health and safety matters and compliance with and
liability under Environmental Laws are those contained in this Section 2.21 and
none of the other representations and warranties shall be deemed to constitute,
directly or indirectly, a representation and warranty in respect of
environmental, health and safety matters or compliance with and liability under
Environmental Laws.

                                      -21-

                  SECTION 2.22. REGULATORY MATTERS.

                  (a)      None of the Partnership Entities is a "public utility
company," "holding company" or "subsidiary" or "affiliate" of a holding company
as such terms are defined in the Public Utility Holding Company Act of 1935, as
amended.

                  (b)      None of the Partnership Entities is an "investment
company" or a company "controlled by" an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.

                  SECTION 2.23. BOOKS AND RECORDS; OTHER INFORMATION.

         The minute books and other similar records of the Partnership Entities
contain true and correct copies of all actions taken at all meetings of the
Partnership's limited partners, the Boards of Directors of the Old Company and
the New Company or any committee thereof and all written consents executed in
lieu of any such meetings. Complete copies of all such minute books and other
similar records have been made available to Buyer.

                  SECTION 2.24. WPL CONTRIBUTION AGREEMENT.

         None of the rights, benefits or privileges of any of the Partnership
Entities under the (i) WPL Contribution Agreement or (ii) the Corporate
Guarantee, dated as of March 14, 2003, of Parent in favor of the New Company
will be impaired by the consummation of the transactions contemplated by this
Agreement or the Transaction Documents.

                  SECTION 2.25. CUSTOMERS AND SUPPLIERS.

         Except as set forth on Schedule 2.25, since January 1, 2003, none of
the Partnership Entities, the Selling Parties or Parent has received any written
notice that any shipper or customer will discontinue its business relationship
with any of the Partnership Entities, and to the Knowledge of the Selling
Parties, no such action has been threatened by any material shipper or customer.

                  SECTION 2.26. ADEQUACY OF ASSETS.

         Except as set forth on Schedule 2.26 or as contemplated in the
Transition Services Agreement, the tangible assets to be owned by the
Partnership Entities immediately after the Closing will be adequate to permit
such Partnership Entities to conduct their respective business in substantially
the same manner as conducted immediately prior to the Closing.

                  SECTION 2.27. EXCLUDED ASSETS.

         All properties that are part of the Excluded Assets (as defined in
Section 1.1 of the WPL Contribution Agreement) ("EXCLUDED ASSETS") have been
transferred from the applicable Partnership Entity to another entity that is not
a Partnership Entity.

                                      -22-

                  SECTION 2.28. SOLVENCY.

         Each of the Selling Parties and Parent is, and immediately after giving
effect to the transactions contemplated by this Agreement and the Transaction
Documents will be Solvent. For purposes of this Section 2.28, "SOLVENT" means,
with respect to the applicable party on any date of determination, that on such
date (a) the fair value of the property of such party is greater than the total
amount of liabilities, including, without limitation, contingent liabilities of
such party that would constitute liabilities under GAAP, (b) the present fair
saleable value of the assets of such party is not less than the amount that will
be required to pay its debts as they become absolute and matured, taking into
account the possibility of refinancing such obligations and selling assets, (c)
such party does not intend to, and does not believe that it will, incur debts or
liabilities beyond such party's ability to pay such debts as they mature taking
into account the possibility of refinancing such obligations and selling assets
and (d) such party is not engaged in business or a transaction, and does not
intend to engage in business or a transaction, for which such party's property
remaining after such transaction would constitute unreasonably small capital.

                  SECTION 2.29. AUCTION PROCESS.

         The Selling Parties and Parent acknowledge that (i) this Agreement and
the other Transaction Documents are the culmination of an extensive auction
process, fair in substance and procedure, undertaken by the Selling Parties and
Parent to identify and negotiate a transaction with a bidder who was prepared to
give the best offer for the Securities, (ii) they have selected Buyer as the
successful bidder in accordance with the bidding procedures established for such
auction and (iii) this Agreement constitutes the best offer for the Securities.

                                  ARTICLE III.
                     REPRESENTATIONS AND WARRANTIES OF BUYER

                  As of the date hereof, Buyer hereby represents and warrants to
each of the Selling Parties as follows:

                  SECTION 3.1. LIMITED PARTNERSHIP ORGANIZATION.

         Buyer is a limited partnership duly organized, validly existing and in
good standing under the laws of the state of Delaware and has all requisite
limited partnership power and authority to own its properties and assets and to
conduct its business as now conducted. Buyer is duly qualified to do business as
a foreign entity in every jurisdiction where the character of the properties
owned or leased by it or the nature of the business conducted by it makes such
qualifications necessary.

                  SECTION 3.2. VALIDITY OF AGREEMENT; AUTHORIZATION.

         Buyer has the power and authority to enter into this Agreement and the
Transaction Documents to which Buyer is a party and to carry out its obligations
hereunder and thereunder. The execution and delivery of this Agreement and such
Transaction Documents and the performance of Buyer's obligations hereunder and
thereunder have been duly authorized by the Board of Directors of the general
partner of Buyer and no other proceedings on the part of Buyer,

                                      -23-

its general partner or its owners are necessary to authorize such execution,
delivery and performance. This Agreement and the Transaction Documents to which
Buyer is a party each have been (in the case of this Agreement) or will be at
the Closing (in the case of such Transaction Documents) duly executed and
delivered by Buyer and constitute or will constitute at the Closing, as
applicable, the valid and binding obligation of Buyer enforceable against Buyer
in accordance with its terms (except to the extent that its enforceability may
be limited by applicable bankruptcy, insolvency, reorganization or other similar
law affecting the enforcement of creditors' rights generally or by general
equitable principles).

                  SECTION 3.3. NO CONFLICT OR VIOLATION.

         The execution, delivery and performance by Buyer of this Agreement and
the Transaction Documents to which Buyer is a party does not and will not: (a)
violate or conflict with any provision of its or its general partner's
Organizational Documents, (b) violate any applicable provision of law, or any
order, judgment or decree of any Governmental Authority, (c) violate or result
in a breach of or constitute (with due notice or lapse of time or both) a
default under any contract, lease, loan agreement, mortgage, security agreement,
trust indenture or other agreement or instrument to which Buyer is a party or by
which it is bound or to which any of its properties or assets is subject or (d)
result in the creation or imposition of any Encumbrance upon any of its
properties or assets where such violations, breaches, defaults or Encumbrances
in the aggregate would have a material adverse effect on the transactions
contemplated hereby or on the assets, properties, business, operations, net
income or financial condition of Buyer.

                  SECTION 3.4. CONSENTS AND APPROVALS.

         Except as disclosed on Schedule 3.4, no material consent, approval or
authorization of, or filing, registration or qualification with, any
Governmental Authority or any other Person (on the part of Buyer), is required
for Buyer to execute and deliver this Agreement or the Transaction Documents to
which Buyer is a party or to perform its obligations hereunder or thereunder.

                  SECTION 3.5. FINANCIAL ABILITY.

         Buyer has (a) obtained commitments for debt financing, subject to the
satisfaction of the terms and conditions set forth in such commitment letter and
(b) obtained equity financing commitments, subject to the satisfaction of terms
and conditions set forth in this Agreement and in such commitment letter, copies
of which debt and equity financing commitment letters have been provided to the
Selling Parties, and which collectively will, if and when such debt and equity
financing is provided to Buyer pursuant to such commitment letters, provide
Buyer with sufficient immediately available funds at the Closing to pay the
First Payment of the Purchase Price and to effect the transactions contemplated
hereby.

                  SECTION 3.6. BUYER STATUS.

         Buyer is not an employee benefit plan or other organization exempt from
taxation pursuant to Section 501(a) of the Code, a non-resident alien, a foreign
corporation or other foreign Person, or a regulated investment company within
the meaning of Section 851 of the Code.

                                      -24-

                  SECTION 3.7. BROKERS.

         Except as disclosed on Schedule 3.7, Buyer has not employed the
services of an investment banker, financial advisor, broker or finder in
connection with this Agreement or any of the transactions contemplated hereby.

                  SECTION 3.8. INDEPENDENT INVESTIGATION.

         Buyer has conducted its own independent investigation, review and
analysis of the business, operations, assets, liabilities, results of
operations, financial condition and prospects of each of the Partnership
Entities, both individually and on a consolidated basis, which investigation,
review and analysis was done by Buyer and its Affiliates and, to the extent
Buyer deemed necessary or appropriate, by Buyer's representatives. Buyer
acknowledges that it and its representatives have been provided adequate access
to the personnel, properties, premises and records of each of the Partnership
Entities for such purpose.

                  SECTION 3.9. INVESTMENT INTENT; INVESTMENT EXPERIENCE;
RESTRICTED SECURITIES.

         In acquiring the Securities, Buyer is not offering or selling, and will
not offer or sell the Securities, for the Selling Parties in connection with any
distribution of any of such Securities, and Buyer does not have a participation
and will not participate in any such undertaking or in any underwriting of such
an undertaking except in compliance with applicable federal and state securities
laws. Buyer acknowledges that it is able to fend for itself, can bear the
economic risk of its investment in the Securities, and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in all of such Securities. Buyer is an
"accredited investor" as such term is defined in Regulation D under the
Securities Act. Buyer understands that none of the Securities will have been
registered pursuant to the Securities Act or any applicable state securities
laws, that all of such Securities will be characterized as "restricted
securities" under federal securities laws and that under such laws and
applicable regulations none of such Securities can be sold or otherwise disposed
of without registration under the Securities Act or an exemption therefrom.

                                   ARTICLE IV.
                                    COVENANTS

                  SECTION 4.1. CERTAIN CHANGES AND CONDUCT OF BUSINESS.

         From and after the date of this Agreement and until the Closing Date,
Selling Parties will use their commercially reasonable efforts to cause each of
the Partnership Entities to (except as required or permitted pursuant to the
terms hereof or as set forth on Schedule 4.1) conduct its business in the
ordinary course of business consistent with past practices and to use its
commercially reasonable efforts to preserve intact their business organization
and relationships of any Partnership Entity with third parties. Without limiting
the generality of the foregoing, without the prior written consent of Buyer
(which consent will not be unreasonably withheld or delayed), except as required
or permitted pursuant to the terms of this Agreement or as set forth on Schedule
4.1, the Selling Parties will use their commercially reasonable efforts to cause
each of the Partnership Entities not to:

                                      -25-

                  (a)      make any material change in the conduct of its
businesses and operations;

                  (b)      make any change in its Organizational Documents or
issue any additional equity securities or grant any option, warrant or right to
acquire any equity securities or issue any security convertible into or
exchangeable for its equity securities;

                  (c)      other than Williams G.P., Inc., elect to be treated
as a corporation for tax purposes;

                  (d)      (i) incur, assume or guarantee any indebtedness for
borrowed money, issue any notes, bonds, debentures (other than Affiliate
intercompany obligations incurred in the ordinary course of business or actions
taken to comply with the representation in Section 2.11(b) or the covenant in
Section 4.19) or other corporate securities or grant any option, warrant or
right to purchase any thereof or (ii) issue any securities convertible or
exchangeable for debt securities of any of the Partnership Entities;

                  (e)      make any sale, assignment, transfer, abandonment or
other conveyance of any of its assets or any part thereof except for
dispositions of inventory or of worn-out or obsolete equipment for fair or
reasonable value in the ordinary course of business consistent with past
practices;

                  (f)      subject any of its assets, or any part thereof, to
any Encumbrance except Permitted Encumbrances as may arise in the ordinary
course of business consistent with past practices by operation of law;

                  (g)      redeem, retire, purchase or otherwise acquire,
directly or indirectly, any of its equity interests or declare, set aside or pay
any dividends or other distribution in respect of such Partnership Entity's
equity interests, other than (i) regular quarterly cash distributions by the
Partnership from Available Cash (as defined in the Partnership Agreement) at a
rate of no greater than $0.80 per unit (with a proportionate distribution to the
New Company in respect of the GP Interest and any distribution on the IDRs
provided for in the Partnership Agreement), (ii) dividends or other
distributions by the New Company to the Selling Parties of all or any portion of
any cash distributions that the New Company may have received pursuant to clause
(i), (iii) any dividends or other distributions made by any subsidiaries of the
Partnership to other direct or indirect wholly owned subsidiaries of the
Partnership, or to the Partnership itself, in the ordinary course of business
consistent with past practices and (iv) actions taken to comply with the
representation in Section 2.11(b) or the covenant in Section 4.19;

                  (h)      (i) except as may be required by applicable law,
enter into, adopt or make any material amendments to or terminate any bonus,
profit sharing, compensation, severance, termination, stock option, stock
appreciation right, Phantom Units, restricted stock, performance unit, stock
equivalent, stock purchase, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreement, trust, plan, fund or
other arrangement for the benefit or welfare of any officer or director of any
of the Partnership Entities or any Business Employee, except to the extent (1)
such adoptions, terminations, amendments or modifications similarly affect
employees of the Selling Parties or their Affiliates who are similarly situated
to the Business Employees and (2) do not in the aggregate result in a material
increase in benefits

                                      -26-

or compensation expense to the Partnership Entities, taken as a whole; (ii)
except for normal increases in the ordinary course of business consistent with
past practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to the Partnership Entities, taken as a whole,
increase the benefits or compensation to any officer or director of any of the
Partnership Entities or any Business Employee; or (iii) pay to any officer or
director of any of the Partnership Entities or any Business Employee any benefit
not permitted by any employee benefit agreement, trust, plan, fund, or other
arrangement as in effect on the date hereof;

                  (i)      acquire any material assets or properties, except for
inventory in the ordinary course of business consistent with past practices;

                  (j)      loan or advance any amount to, or sell, transfer or
lease any properties or assets to, or enter into any agreement or arrangement
with, any of its Affiliates (other than intercompany receivables in the ordinary
course of business or actions taken to comply with the representation in Section
2.11(b) or the covenant in Section 4.19);

                  (k)      fail to duly and timely file or cause to be filed all
reports and returns required to be filed with any Governmental Authority and
promptly pay or cause to be paid when due all Taxes, assessments and
governmental charges, unless contested in good faith in appropriate proceedings;

                  (l)      permit any insurance policy naming any of the
Partnership Entities as a beneficiary to expire or be cancelled or terminated,
unless a comparable insurance policy is obtained and in effect in replacement
thereof;

                  (m)      (i) take or permit any action to be taken that would
make any representation or warranty of the Selling Parties under this Agreement
inaccurate in any material respect prior to the Closing Date or (ii) omit or
cause to omit to take any action necessary to prevent any such representation or
warranty from being inaccurate in any material respect at any such time;

                  (n)      issue any units except for (i) issuances of Common
Units to directors of the New Company in the ordinary course of business and
consistent with past practices or (ii) issuances pursuant to commitments or
obligations in respect of Phantom Units outstanding on the date hereof pursuant
to the Williams Energy Partners Long-Term Incentive Plan, as described on
Schedule 2.3(d)(ii); or

                  (o)      commit itself to do any of the foregoing.

                  SECTION 4.2. ACCESS TO PROPERTIES AND RECORDS.

                  (a)      Each of the Selling Parties shall afford, and shall
cause each of the Partnership Entities (and to the extent reasonably necessary,
Parent) to afford, to Buyer and Buyer's accountants, counsel and representatives
(collectively "BUYER REPRESENTATIVES"), upon reasonable advance notice to the
Selling Parties or their financial adviser, reasonable access during normal
business hours throughout the period commencing on the date hereof and ending on
the Closing Date (or the earlier termination of this Agreement pursuant to
Article VII hereof) to all personnel, properties, books, contracts, and records
of each of the Partnership Entities and

                                      -27-

their agents, including legal representatives, accountants and environmental and
engineering consultants (provided that the Selling Parties or their designee(s)
may, in the sole discretion of the Selling Parties, accompany the person(s) to
whom such access is provided as contemplated herein) and, during such period,
shall furnish promptly to Buyer all information concerning the business,
properties, liabilities and personnel of any of the Partnership Entities as
Buyer may request, provided that no investigation or receipt of information
pursuant to this Section 4.2 shall affect any representation or warranty of the
Selling Parties or Buyer's reliance thereon. Additionally, Buyer shall hold in
confidence all such information on the terms and subject to the conditions
contained in the Confidentiality Agreement (as defined in Section 9.16). Buyer
shall have no right of access to, and the Selling Parties shall have no
obligation to provide to Buyer, (1) bids received from other Persons in
connection with the transactions contemplated by this Agreement and information
and analysis (including financial analysis) relating to such bids or (2) any
information the disclosure of which the Selling Parties have concluded may
jeopardize any privilege available to the Selling Parties or any of the
Partnership Entities relating to such information or would cause any of such
entities to breach a confidentiality obligation. Buyer agrees that if Buyer or
its authorized representatives receive, or if the information (whether in
electronic mail format, on computer hard drives or otherwise) held by any of the
Partnership Entities as of the Closing includes information that relates to the
business operations or other strategic matters of the Parent or any of the
Selling Parties or any of their Affiliates (other than the Partnership Entities)
such information shall be held in confidence on the terms and subject to the
conditions contained in the Confidentiality Agreement, but the term of the
restriction on the disclosure and use of such information shall continue in
effect as to such information for a period of two years from the Closing. Buyer
further agrees that if any of the Selling Parties or Partnership Entities
inadvertently furnishes to Buyer copies of or access to information that is
subject to clause (2) of the second preceding sentence, Buyer will, upon the
Selling Parties' request, promptly return the same to the Selling Parties
together with any and all extracts therefrom or notes pertaining thereto
(whether in electronic or other format). Buyer shall indemnify, defend, and hold
harmless the Selling Parties and their Affiliates from and against any "LOSSES"
(as defined in Section 8.2) asserted against or suffered by the Seller
Indemnified Parties (as defined in Section 8.2) relating to, resulting from, or
arising out of any personal injury to, or property damage directly caused by,
any Buyer Representative during any site visit, examination or investigation
conducted in accordance with this Section 4.2(a), except where such personal
injury or property damage results from the gross negligence or willful
misconduct of the Selling Parties, Parent, the Partnership Entities or any
employee or agent thereof.

                  (b)      Buyer agrees that it shall preserve and keep all
books and records relating to the business or operations of the Partnership
Entities on or before the Closing Date in Buyer's possession for a period of at
least six years from the Closing Date. Notwithstanding the foregoing, Buyer
agrees that it shall preserve and keep all books and records of the Partnership
Entities relating to any audit or investigation instituted by a Governmental
Authority or any litigation (whether or not existing on the Closing Date) if it
is reasonably likely that such investigation or litigation may relate to matters
occurring prior to the Closing, without regard to the six-year period set forth
in this Section 4.2(b).

                                      -28-

                  SECTION 4.3. EMPLOYEE MATTERS.

                  (a)      Buyer intends to offer, or cause an Affiliate to
offer, employment to substantially all Business Employees who are identified on
Schedule 2.19(f)(i) as full-time Business Employees and may offer employment to
such Business Employees who are identified as less than full-time as it may
choose, based on the recommendation of the key management of the Partnership
Entities, in either case, on terms and conditions for each Business Employee as
are substantially comparable, in the aggregate, to industry standards for
similarly situated employees located in the same geographic region, as
determined in good faith by Buyer, such employment to commence as contemplated
in accordance with the Transition Services Agreement. In addition, within
fifteen (15) days after the execution of this Agreement, representatives of
Buyer and the Selling Parties shall meet to identify employees of the Selling
Parties or any of their Affiliates who are not Business Employees and to whom
Buyer and the Selling Parties agree that Buyer may make offers of employment
(collectively, the "ADDITIONAL EMPLOYEES"). The Selling Parties agree that if
any of the Additional Employees are covered by employee benefit plans or
programs of Parent or any of its Affiliates other than Seller Plans, the Selling
Parties shall provide Buyer with copies of such plans or programs as promptly as
practicable after such Additional Employees are identified. Any such offers of
employment made by the Buyer to an Additional Employee shall be on at least the
same basis as the offers Buyer makes to Business Employees. Promptly following
such agreement regarding the Additional Employees, the Selling Parties shall
prepare and submit to Buyer a list of the Additional Employees. Buyer or one or
more of its Affiliates shall use commercially reasonable efforts to notify
Selling Parties of the names of those Business Employees and Additional
Employees that accept such employment offers from Buyer or any other Affiliate
of Buyer prior to the Closing Date and in no event more than fifteen (15) days
after the Closing Date. The Selling Parties and their Affiliates shall not
discourage any Business Employee or Additional Employee to whom an offer of
employment is made by Buyer or an Affiliate of Buyer from accepting such offer.
Business Employees and Additional Employees who accept employment from Buyer and
become employees of Buyer or an Affiliate thereof in accordance with the
Transition Services Agreement are referred to herein as "TRANSFERRED EMPLOYEES."

                  (b)      Business Employees who are covered by the PACE
Collective Bargaining Agreement are identified on Schedule 2.19(g)(i) (the
"REPRESENTED EMPLOYEES"). At the time the first Represented Employee becomes a
Transferred Employee (the "REPRESENTED EMPLOYEE TRANSFER DATE"), Buyer agrees to
(i) comply with all legal requirements that may be applicable as a result of the
Transferred Employees who are Represented Employees being represented by any
labor organization, (ii) recognize PACE as the exclusive bargaining unit for the
Transferred Employees who are Represented Employees and (iii) assume (and
otherwise adopt) all rights and obligations of the Selling Parties under the
PACE Collective Bargaining Agreement with respect to Transferred Employees who
are Represented Employees. Notwithstanding anything herein to the contrary,
Buyer shall offer employment, commencing in accordance with the Transition
Services Agreement, to all Represented Employees.

                  (c)      Effective as of the Represented Employee Transfer
Date, Buyer shall assume the Williams Pipe Line Company Pension Plan for Hourly
Employees (the "PENSION PLAN"). On or as soon as practicable thereafter, the
Selling Parties or their applicable Affiliate shall cause the assets of the
Pension Plan held under the current master trust to be transferred to a

                                      -29-

trust established or maintained by the Buyer or one of its Affiliates. Such
transfer shall be made within one business day after any valuation date of the
current master trust and shall be made in cash, marketable securities or other
property acceptable to Buyer. Prior to such transfer of assets, the Selling
Parties shall make a contribution to the Pension Plan in an amount necessary to
cause the accrued benefit obligations under FASB 87 with respect to the Pension
Plan to be fully funded as of the last day of the month immediately preceding
the month that includes the Represented Employee Transfer Date using actuarial
assumptions and factors used for FASB 87 reporting purposes in the year that
includes the Represented Employee Transfer Date, which contribution shall also
include the amount necessary to satisfy in full the minimum funding contribution
liability for the 2002 plan year and the estimated minimum funding contribution
liability for the 2003 plan year, as prorated for the partial 2003 plan year
through Represented Employee Transfer Date, whether or not such 2002 and 2003
plan year funding contributions are then due.

                  (d)      The Selling Parties' shall retain the obligation for
providing retiree medical and retiree life benefits to all employees and former
employees (including their eligible dependents and beneficiaries) of the Selling
Parties and their Affiliates other than Transferred Employees. On or as soon as
practicable after the Represented Employee Transfer Date, the Selling Parties
shall transfer to Buyer sponsorship of the Voluntary Employee Beneficiary
Association ("VEBA") trust established or maintained for the Represented
Employees' retiree medical, including all assets of such trust.

                  (e)      The Selling Parties' shall retain the obligation for
providing long-term disability benefits to (i) those Represented Employees who,
immediately prior to the Represented Employee Transfer Date, are receiving
benefits under The Williams Companies, Inc. Long-Term Disability Plan (but the
parties hereto agree that such retained obligation shall not include the
obligation under the Pension Plan in respect of such totally disabled persons to
continue to accrue benefits, which obligation is to be assumed by Buyer as of
the Represented Employee Transfer Date under Section 4.3(c) above) and (ii)
those Represented Employees who become totally disabled on or after the
Represented Employee Transfer Date as a result of an injury or illness occurring
prior to the Represented Employee Transfer Date.

                  (f)      Transferred Employees shall participate in employee
benefit plans and programs of the Buyer, which shall provide benefits that are
substantially comparable, in the aggregate, to industry standards for similarly
situated employees located in the same geographic region, as determined in good
faith by Buyer, and that, subject to the terms of the PACE Collective Bargaining
Agreement and Section 4.3(r), shall cover each Transferred Employee effective as
of the date each such employee becomes a Transferred Employee (each such date,
an "EMPLOYEE TRANSFER DATE").

                  (g)      Each Transferred Employee shall, without duplication
of benefits, be given credit for all service with Selling Parties or their
Affiliates prior to the Employee Transfer Date, using the same methodology used
by such parties as of immediately prior to such date for crediting service and
determining levels of benefits under the Seller Plans, (i) under all employee
benefit plans, programs and arrangements maintained by or contributed to by the
Buyer in which a Transferred Employee becomes a participant for purposes of
eligibility to participate, vesting and determination of level of benefits
(excluding, however, benefit accrual under any defined

                                      -30-

benefit plans), and (ii) for purposes of calculating the amount of each
Transferred Employee's severance benefits, if any.

                  (h)      With respect to the plan year during which an
Employee Transfer Date occurs, Buyer will (i) waive all limitations as to
preexisting conditions exclusions and waiting periods with respect to
participation and coverage requirements applicable to the Transferred Employees
under any medical, dental and life insurance benefit plans that such employees
may be eligible to participate in after his or her Employee Transfer Date, other
than limitations or waiting periods that are already in effect with respect to
such employee and that have not been satisfied as of his or her Employee
Transfer Date under any welfare plan maintained for the Transferred Employee
immediately prior to his or her Employee Transfer Date, and (ii) provide each
Transferred Employee with credit for any co-payments and deductibles paid prior
to his or her Employee Transfer Date in satisfying any applicable deductible or
out-of-pocket requirements under any welfare plans that such employee is
eligible to participate in after his or her Employee Transfer Date.

                  (i)      Effective as of each Employee Transfer Date, each
Transferred Employee shall become fully vested in his or her account balances in
any defined contribution or 401(k) Plan maintained by the Selling Parties or
their Affiliates on behalf of such Transferred Employee (the "SELLER SAVINGS
PLAN") and distributions of such account balances shall be made available to
each such Transferred Employee as soon as practicable following his or her
Employee Transfer Date, in accordance with the provisions of the Seller Savings
Plan and applicable law. Participants shall be permitted to elect rollovers of
such accounts (excluding after-tax amounts) in cash to a defined contribution or
401(k) Plan maintained by Buyer (the "BUYER SAVINGS PLAN"). Pending such
distribution or rollover, the Seller Savings Plan shall permit each Transferred
Employee with a loan outstanding under the Seller Savings Plan to continue to be
able to repay such loan. Notwithstanding the foregoing, if requested by Buyer
and at Buyer's sole cost, the Selling Parties shall cause a spinoff of the
accounts of the Transferred Employees to a Buyer 401(k) plan on such terms as
reasonably requested by Buyer.

                  (j)      As of the occurrence of the first Employee Transfer
Date, Buyer shall have in effect flexible spending reimbursement accounts under
a cafeteria plan qualifying under Section 125 of the Code (the "BUYER 125 PLAN")
that provides benefits to the Transferred Employees that are substantially
identical in all material respects to those provided by the flexible spending
reimbursement accounts under the cafeteria plan in which the Transferred
Employees are eligible to participate immediately prior to such date (the
"SELLER 125 PLAN"). Buyer agrees to cause the Buyer 125 Plan to accept a
spin-off of the flexible spending reimbursement accounts from the Seller 125
Plan and to honor and continue through the end of the calendar year in which an
Employee Transfer Date occurs the elections made by each Transferred Employee
under the Seller 125 Plan in respect of the flexible spending reimbursement
accounts that are in effect immediately prior to the Employee Transfer Date. As
soon as practicable following an Employee Transfer Date, the Selling Parties
shall cause to be transferred to Buyer an amount in cash equal to the excess of
the aggregate accumulated contributions to the flexible spending reimbursement
accounts made during

                                      -31-

the year in which an Employee Transfer Date occurs by the applicable Transferred
Employee over the aggregate reimbursement payouts made for such year from such
accounts to such Transferred Employee. If the aggregate reimbursement payouts
from the flexible reimbursement accounts made during the year in which an
Employee Transfer Date occurs made to the applicable Transferred Employee exceed
the aggregate accumulated contributions to such accounts for such year by the
applicable Transferred Employee, Buyer shall cause such excess to be transferred
to the Selling Parties as soon as practicable following the applicable Employee
Transfer Date. On and after an Employee Transfer Date, Buyer shall assume and be
solely responsible for all claims by the applicable Transferred Employee under
the Seller 125 Plan, whether incurred prior to, on or after the applicable
Employee Transfer Date, that have not been paid in full as of the applicable
Employee Transfer Date.

                  (k)      Buyer and the Selling Parties agree to cooperate as
necessary to effectuate the provisions of this Section 4.3 and to ensure an
orderly transition of benefits coverage with respect to the Transferred
Employees from the Seller Plans to Buyer's plans.

                  (l)      Buyer shall assume all paid-time-off obligations of
the Selling Parties and their Affiliates with respect to each Transferred
Employee, and each Transferred Employee shall, without duplication of benefits,
be given credit for all accrued but unused paid-time-off under Selling Parties
or their Affiliate's paid-time-off program as of such Transferred Employee's
Employee Transfer Date, using the same methodology used by the Selling Parties
or their Affiliates immediately prior to such Employee Transfer Date for
crediting service and determining the amount of such paid-time-off benefits.
Buyer shall also assume the full obligation to pay all or any portion of any
bonus or incentive plan benefit for the years 2002 and 2003, to the extent
unpaid as of an Employee Transfer Date, with respect to any Transferred
Employee; provided, however, the Selling Parties will promptly reimburse Buyer
for (i) any portion of any bonus paid after the applicable Employee Transfer
Date for the year 2002, to the extent that the bonus so paid does not exceed the
unpaid portion of the bonus declared for such period in respect of such
Transferred Employee and (ii) for the allocable portion of any bonus paid after
the applicable Employee Transfer Date for the year 2003 to the extent such bonus
is included in general and administrative expenses of the Partnership and not in
operating and maintenance expenses, such allocable portion to be equal to the
product of (A) a fraction, of which (I) the numerator is the number of days in
the period from and including January 1, 2003 to but excluding the Closing Date,
and (II) the denominator is 365, times (B) the amount of such bonus included in
general and administrative expenses of the Partnership that is so paid for the
year 2003 to such Transferred Employee, provided, that in no event shall the
amount used in this subclause (B) exceed the 2003 target bonus amount
established by Parent for such Transferred Employee.

                  (m)      If Buyer terminates the employment of a Transferred
Employee at any time between his or her Employee Transfer Date and the first
anniversary of such date for a reason other than cause, but excluding any
termination in which such employee is offered substantially comparable continued
employment by another Person, Buyer shall provide such Transferred Employee who
is not a Represented Employee with a severance benefit equal to the greater of
(i) the benefit provided under Buyer's severance plan or program and (ii) a sum
equal to two weeks of pay for every year of service with a minimum of six weeks
and a maximum of fifty-two weeks total severance benefit.

                                      -32-

                  (n)      For a period of one year after the Closing Date:

                           (i)      except as contemplated by the Transition
         Services Agreement, neither Buyer nor any of its Affiliates shall,
         directly or indirectly, (A) induce any employee of any of the Selling
         Parties or their Affiliates (other than the Transferred Employees) to
         leave the employ of any such Selling Party or Affiliate thereof or (B)
         employ or otherwise engage as an employee, independent contractor or
         otherwise any such employee, except that Buyer and its Affiliates shall
         not be precluded from hiring any such employee who (y) initiates
         discussions regarding such employment without any direct or indirect
         solicitation by Buyer or its Affiliates or (z) responds to any public
         advertisement placed by Buyer or its Affiliates; and

                           (ii)     neither the Selling Parties nor any of their
         Affiliates shall, directly or indirectly, (A) induce any of the
         Transferred Employees to leave the employ of any Partnership Entity or
         Buyer or any of its Affiliates or (B) employ or otherwise engage as an
         employee, independent contractor or otherwise any such Transferred
         Employee, except that the Selling Parties and their Affiliates shall
         not be precluded from hiring any such employee who (y) initiates
         discussions regarding such employment without any direct or indirect
         solicitation by the Selling Parties or their Affiliates or (z) responds
         to any public advertisement placed by the Selling Parties or their
         Affiliates.

                  (o)      Effective as of each Employee Transfer Date, the
applicable Transferred Employee who is not a Represented Employee shall become
fully vested in his or her accrued benefits under The Williams Companies, Inc.
Pension Plan maintained by the Selling Parties or their Affiliates.

                  (p)      The Selling Parties shall bear the full and sole
responsibility and liability for providing any notice to the Selling Parties' or
Parent's employees which may be required pursuant to the Federal Working
Adjustment and Retraining Notification Act of 1988 ("WARN") or any similar
applicable law for any employment loss which occurs in connection with this
transaction and shall hold Buyer and its Affiliates (including the Partnership
Entities) harmless from and against any and all losses associated with or
related to the Selling Parties failure to comply with WARN or any similar law
with respect to such employees. Notwithstanding the foregoing, to the extent
that WARN liability on the part of the Selling Parties or Parent is triggered
with respect to a Business Employee due to Buyer or one or more of its
Affiliates terminating the employment of one or more Transferred Employees after
the applicable Employee Transfer Date, then any WARN liability that otherwise
would be attributed to the Selling Parties or Parent with respect to a Business
Employee shall instead be the sole responsibility of the Buyer.

                  (q)      Notwithstanding anything in this Agreement to the
contrary, Buyer and its Affiliates (including the Partnership Entities) are not
assuming any obligation or liability of the Selling Parties or any of their
Affiliates, including any Seller Plan, or any liability thereunder, to any
Transferred Employee or other Person except to the extent such liability or
obligation is specifically assumed pursuant to this Section 4.3.

                                      -33-

                  (r)      Nothing in this Section 4.3 shall prevent Buyer or an
Affiliate thereof from amending or terminating, in its sole discretion, any
employee benefit plan of Buyer or an Affiliate thereof at any time following the
Closing, subject to the provisions of the PACE Collective Bargaining Agreement
and Section 4.3(m) above; provided, however, that Buyer agrees to indemnify and
protect the Seller Indemnified Parties for any liability they may have as a
result of amending or terminating any employee benefit plan of Buyer or an
Affiliate thereof following the Closing.

                  SECTION 4.4. CONSENTS AND APPROVALS.

                  (a)      On or as promptly as practicable after the date
hereof, the Selling Parties shall cause Parent to deliver notice (a copy of
which will be furnished to Buyer) to the Federal Trade Commission, as required
under that certain order, dated June 17, 1998, to which Parent is subject (the
"CONSENT DECREE"). The Selling Parties and Buyer shall each use all commercially
reasonable efforts to obtain, and in the case of the Selling Parties, cause
Parent and the Partnership Entities to obtain, all necessary consents, waivers,
authorizations and approvals of all Governmental Authorities and of all other
Persons required in connection with the execution, delivery and performance by
such party of this Agreement and will cooperate fully with the other party in
promptly seeking to obtain all such authorizations, consents, orders, and
approvals, giving such notices, and making such filings. If the parties agree
that a filing is required, each party shall (i) file or cause to be filed, as
promptly as practicable (and in any event within five (5) business days after
the execution and delivery of this Agreement), with the Federal Trade Commission
and the United States Department of Justice, all reports and other documents
required to be filed by such party under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR ACT") concerning the transactions
contemplated hereby and (ii) promptly comply with or cause to be complied with
any requests by the Federal Trade Commission or the United States Department of
Justice for additional information concerning such transactions, in each case so
that the waiting period applicable to this Agreement and the transactions
contemplated hereby under the HSR Act shall expire as soon as practicable after
the execution and delivery of this Agreement. Each party agrees to request, and
to cooperate with the other party in requesting, early termination of any
applicable waiting period under the HSR Act. The costs of any filing fees
required in connection with any HSR filing shall be borne equally between Buyer,
on the on hand, and the Selling Parties, on the other hand; provided, however,
that any and all costs and expenses otherwise incurred by any of the parties in
connection with obtaining any necessary consents, waivers, authorizations and
approvals hereunder shall be borne solely by the party required to obtain or
deliver such consents, waivers, authorizations and approvals; provided, further,
any and all costs and expenses incurred by any of the parties in connection with
obtaining the waivers, consents and amendments referred to in Section 5.13
hereunder shall be borne by the Selling Parties.

                  (b)      Without limiting the generality of the parties'
undertakings pursuant to Section 4.6, the parties shall:

                  (i)      use commercially reasonable efforts to prevent the
         entry in a judicial or administrative proceeding brought under any
         antitrust law by the Federal Trade Commission, the United States
         Department of Justice or any other party of a permanent or preliminary
         injunction or other order that would make consummation of the

                                      -34-

         transactions contemplated by this Agreement unlawful or that would
         prevent or delay such consummation;

                  (ii)     take promptly, in the event that such an injunction
                           or order has been issued in such a proceeding, any
         and all reasonable steps, including the appeal thereof and the posting
         of a bond necessary to vacate, modify, or suspend such injunction or
         order, so as to permit such consummation on a schedule as close as
         possible to that contemplated by this Agreement; and

                  (iii)    not take a position or agree to a settlement that
         will or would reasonably be expected to have a material adverse effect
         on the Buyer or a material adverse effect on the Selling Parties or
         otherwise prejudice the Buyer's or the Selling Parties' intent with
         respect to the transactions contemplated hereby.

                  (c)      If the transfer of any instrument, contract, license,
lease, permit, or other document to Buyer hereunder shall require the consent of
any party thereto other than the Selling Parties, Parent or the Old Company,
then this Agreement shall not constitute an agreement to assign the same, and
such item shall not be assigned to or assumed by Buyer, if an actual or
attempted assignment thereof would constitute a breach thereof or default
thereunder. In such case, the parties shall cooperate and each shall use
commercially reasonable efforts to obtain such consents of such other parties to
the extent required and, if and when any such consents are obtained, to transfer
the applicable instrument, contract, license, lease, permit, or other document.
If any such consent cannot be obtained, the Selling Parties shall cooperate in
any reasonable arrangement designed to obtain for Buyer all benefits, privileges
and obligations of the applicable instrument, contract, license, lease, permit,
or document, including, without limitation, possession, use, risk of loss,
potential for gain and dominion, control and demand.

                  (d)      During the term of this Agreement and prior to the
Closing, Buyer will negotiate in good faith and use its commercially reasonable
efforts to finalize the terms and conditions of the debt financing described in
Section 3.5, including without limitation, the execution and delivery of
definitive agreements for same containing terms and conditions to funding that
are consistent in all material respects with the commitment therefor referenced
in Section 3.5, so that Buyer will have the immediately available funds to pay
the First Payment of the Purchase Price at Closing; provided, however, Buyer (or
its Affiliates) shall not be required to make any representation in such
definitive agreements relating to the Partnership Entities that it is not true.
Buyer will notify the Selling Parties, upon request, of the status of the
negotiations for the debt financing described in Section 3.5.

                  SECTION 4.5. FURTHER ASSURANCES.

         Upon the request of Buyer at any time on or after the Closing Date,
each of the Selling Parties will promptly execute and deliver, or cause Parent
to execute and deliver, such further instruments of assignment, transfer,
conveyance, endorsement, direction or authorization and other documents as Buyer
or its counsel may reasonably request in order to perfect title of Buyer and its
successors and assigns to the Securities or otherwise to effectuate the purposes
of this Agreement.

                                      -35-

                  SECTION 4.6. COMMERCIALLY REASONABLE EFFORTS.

         Upon the terms and subject to the conditions of this Agreement, each of
the parties hereto will use all commercially reasonable efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable consistent with applicable law to consummate and
make effective in the most expeditious manner practicable the transactions
contemplated hereby. Without limiting the generality of the foregoing, upon the
reasonable request of Buyer from time to time, the Selling Parties shall use
their commercially reasonable efforts to assist Buyer in meeting the condition
referred to in Section 5.9.

                  SECTION 4.7. NOTICE OF BREACH.

         Each party shall promptly give to the other parties written notice with
particularity upon having knowledge of any matter that would constitute a breach
by such party of any representation, warranty, agreement or covenant of such
party contained in this Agreement, including, without limitation, the Selling
Parties' representations in Article II. The Selling Parties shall have the
obligation prior to the Closing to supplement the Disclosure Schedule in a
prompt manner with respect to any matter that would have been required to be set
forth on or described in such Disclosure Schedule (a "DISCLOSURE SCHEDULE
UPDATE"). Any such supplemental disclosure (i) will not be deemed to have been
disclosed as of the date of this Agreement for purposes of determining whether
the conditions set forth in Article V have been satisfied (unless such
supplemental disclosure relates to an update made in response to Section
2.21(a)(vii)), and (ii) shall not be deemed to have cured any breach of
representation, warranty, covenant or agreement relating to the matters set
forth in such update for purposes of indemnification pursuant to Article VIII,
unless such supplemental disclosure relates to an update to Schedule 2.25 hereto
by reason of an action taken by a customer or shipper after the date hereof, in
which case a breach of the representation in Section 2.25 shall not be deemed to
have occurred for purposes of indemnification pursuant to Article VIII.

                  SECTION 4.8. CONFIDENTIAL INFORMATION.

                  (a)      For two (2) years after the Closing, the Selling
Parties and their Affiliates shall not, directly or indirectly, disclose to any
Person any information not in the public domain or generally known in the
industry, in any form, whether acquired prior to or after the Closing Date,
relating to the business and operations of the Partnership Entities; provided,
however, that any such confidential information received, obtained or created in
the course of defending any claim or action under Article VIII hereof shall not
be disclosed for a period of two (2) years following the resolution of such
claim or action. Notwithstanding the foregoing, the Selling Parties may disclose
any information relating to the business and operations of the Partnership
Entities (i) if required by law or applicable stock exchange rule, and (ii) to
such other Persons if, at the time such information is provided, such Person is
already in the possession of such information.

                  (b)      Except as consented to by Buyer in writing, none of
the Selling Parties and their Affiliates shall release any Person from any
Bidder Confidentiality Agreement (as defined below) now existing with respect to
the Securities or Partnership Entities or waive or amend any provision thereof.
After the Closing Date, the Selling Parties shall use commercially reasonable

                                      -36-

efforts to have all confidential information either returned to the Selling
Parties or destroyed. Furthermore, if any parties to the Bidder Confidentiality
Agreements breach the terms of their respective agreement, upon the request of
Buyer, the Selling Parties and Parent shall cooperate with Buyer to enforce the
terms of such Bidder Confidentiality Agreements at Buyer's cost and expense. The
term "BIDDER CONFIDENTIALITY AGREEMENTS" shall mean the confidentiality
agreements between any of Parent, the Selling Parties or any of their Affiliates
or advisors and prospective purchasers (other than Buyer or its Affiliates) of
the Securities.

                  SECTION 4.9. TAX COVENANTS.

                  (a)      The Selling Parties shall cause the Partnership
Entities to prepare and file all Tax Returns relating to any of the Partnership
Entities with the appropriate federal, state, local and foreign governmental
agencies and cause the Partnership Entities to pay the Taxes shown to be due
thereon, for which Tax Returns are due and Taxes are payable prior to the
Closing Date. For periods ending on or prior to the Closing Date, but for which
Tax Returns are not due and Taxes are not payable as of the Closing Date, (i)
the Selling Parties shall prepare and submit to Buyer for review, signature, and
filing all such Tax Returns required to be filed by the New Company, and, at
such time, the Selling Parties shall pay to the Buyer the Taxes shown to be due
thereon, and (ii) the Buyer shall cause the Partnership Entities (other than the
New Company) to prepare and file all Tax Returns and cause the Partnership
Entities to pay the Taxes shown to be due thereon.

                  (b)      Buyer shall cause the Partnership Entities to prepare
all Tax Returns relating to the Partnership Entities for periods beginning on or
before the Closing Date and ending after the Closing Date. With respect to any
such Tax Return relating to the New Company, Buyer shall determine (by an
interim closing of the books as of the Closing Date except for ad valorem and
property taxes owed or owing by the New Company, which shall be prorated on a
daily basis) the Tax that would have been due with respect to the period covered
by such Tax Return if such taxable period ended on and included the Closing Date
(the "PRE-CLOSING TAX"). Not later than 30 days prior to the due date of each
such Tax Return, Buyer shall deliver a copy of such Tax Return to the Selling
Parties together with a statement of the excess, if any, of the Pre-Closing Tax
over the amount set up as a liability for such Tax on the financial statements
of the New Company. Buyer shall make or cause to be made such changes in such
Tax Returns or the statement of excess, if any, as the Selling Parties may
reasonably request, which changes shall be subject to Buyer's approval, which
shall not be unreasonably withheld. Not later than five days prior to the due
date of such Tax Return, the Selling Parties shall pay to Buyer the amount of
such excess. Upon receipt thereof, Buyer shall file or cause to be filed such
Tax Return and shall pay all Taxes shown to be due thereon.

                  (c)      The Selling Parties will cause any tax sharing
agreement or similar arrangement with respect to Taxes involving any of the
Partnership Entities to be terminated effective as of the Closing Date, to the
extent any such agreement or arrangement relates to any such entity, and after
the Closing Date none of the Partnership Entities shall have any obligation
under any such agreement or arrangement for any past, present or future period.

                  (d)      All excise, sales, use, transfer (including real
property transfer or gains), stamp, documentary, filing, recordation and other
similar taxes, together with any interest,

                                      -37-

additions or penalties with respect thereto and any interest in respect of such
additions or penalties, resulting directly from the transactions contemplated by
this Agreement (the "TRANSFER TAXES"), shall be borne by the Selling Parties.
Notwithstanding anything to the contrary in this Section 4.9, any Tax Returns
that must be filed in connection with Transfer Taxes shall be prepared and filed
when due by the party primarily or customarily responsible under the applicable
local law for filing such Tax Returns, and such party will use commercially
reasonable efforts to provide such Tax Returns to the other party at least ten
days prior to the due date for such Tax Returns.

                  (e)      Notwithstanding anything to the contrary contained
herein, any franchise Tax paid or payable with respect to any of the Partnership
Entities shall be allocated to the taxable period during which the right to do
business is obtained by the payment of the franchise Tax.

                  SECTION 4.10. INSURANCE, BONDS AND COLLATERAL.

                  (a)      Buyer shall use its commercially reasonable efforts
to take, or cause the Partnership Entities to take, such actions as may be
necessary or appropriate so that all surety bonds, letters of credit, and cash
collateral issued in respect of any of the Partnership Entities and listed on
Schedule 4.10(a) (collectively, the "BONDS") are replaced as soon as practicable
and in no event later than 60 days after the Closing Date. Buyer shall
indemnify, defend and hold harmless the Selling Parties and their Affiliates for
any and all Losses (in each case without deduction or set off) incurred on
account of such Bonds after the Closing Date.

                  (b)      Notwithstanding the termination of coverage on the
Closing Date (or May 1, 2003, in the case of excess liability policies of the
Parent Policies) for each of the Partnership Entities under the Parent Policies
described in Section 2.20(b), the Selling Parties shall take or cause the Parent
to take appropriate action to ensure that upon and after the Closing (i) each of
the Partnership Entities shall continue to be covered by such Parent Policies
for claims relating to or arising from events or occurrences happening prior to
such termination of coverage and, with respect to "claims made" policies, which
are reported prior to such termination of coverage, to the same extent as each
such entity was covered prior to Closing under each of such Parent Policies, and
(ii) each of the Partnership Entities is named as an insured or additional
insured party under such Parent Policies in respect of such claims. After the
Closing Date, the Selling Parties or Parent shall continue to manage the claims
described in the immediately preceding sentence and shall be responsible for all
costs on account of such claims, including but not limited to deductibles and
retention and third-party administration charges. For a period of five years
after the Closing Date, the Selling Parties shall provide or cause Parent to
provide the Buyer, as reasonably requested by the Buyer, historical insurance
carrier loss-runs and internally administered loss-runs in respect of the
Partnership Entities.

                  (c)      Without limiting the generality of Section 4.10(b),
after the Closing Date, Parent or its Affiliates (other than the Partnership
Entities) shall continue to manage all workers' compensation claims of all
Transferred Employees that are known and reported on or prior to the Closing
Date, or that are covered under the workers compensation policy provided by the
Parent. The Selling Parties shall be responsible for all costs on account of
such claims, including but not limited to deductibles and third party
administrator charges.

                                      -38-

                  SECTION 4.11. INFORMATION TECHNOLOGY.

                  (a)      ATLAS Contribution and License Back Agreement. The
Selling Parties shall, or shall cause one or more of their Affiliates to, assign
and transfer, at or immediately prior to Closing, all right, title and interest
to the ATLAS 2000 System, any additional software related thereto and any
computer hardware associated therewith to the Partnership Entity or Partnership
Entities, as the case may be, designated by the Buyer pursuant to an Assignment,
Contribution and License Agreement, in substantially the form attached hereto as
Exhibit 1.2(a)(iv)(3) (the "ATLAS ASSIGNMENT, CONTRIBUTION AND LICENSE
AGREEMENT"). The ATLAS Assignment, Contribution and License Agreement shall
provide for, among other things, Buyer to cause the applicable Partnership
Entity or Entities to grant WES a license, which WES may sublicense to Williams
Bio-Energy LLC, to use, copy, modify, enhance and upgrade the ATLAS 2000 System
to support any business owned or operated by Williams Bio-Energy LLC for so long
as Williams Bio-Energy LLC continues to use the ATLAS 2000 System.

                  (b)      IT Migration Team and Migration Assets. The parties
shall each designate up to three (3) representatives to a migration team ("IT
MIGRATION TEAM") that shall be responsible for determining the software and
computer hardware ("IT ASSETS") that will be necessary for Buyer to continue
operations of the Partnership Entities in substantially as efficient a manner in
which such operations are conducted by the Partnership Entities as of the
Closing Date, taking into account, as appropriate, the impact on such items as
may be necessary in light of the reduced size and scale of Buyer and the
Partnership Entities immediately after the Closing as compared to the size and
scale (and corresponding needs) of Parent and its Affiliates (including the
Partnership Entities) immediately before the Closing. The IT Migration Team
shall identify (i) those certain IT Assets to be transferred or assigned to the
Partnership Entities by the Selling Parties or their Affiliates (which IT Assets
shall include, subject to the approval of the Partnership Entities, all computer
hardware that is not wholly owned by any of the Partnership Entities, but that
is owned by Parent or any of its Affiliates, and that is (A) not required for
the on-going business of Parent and its subsidiaries (other than the Partnership
Entities) and (B) is used more than 50% of the time or for the benefit of
Transferred Employees) (the "TRANSFERRED ASSETS") and (ii) those certain IT
Assets to be purchased, leased or licensed by or for the benefit of the
Partnership Entities as a substitute for IT Assets retained by the Selling
Parties or their Affiliates, subject to the parameters set forth in the
immediately preceding sentence (the "SUBSTITUTED ASSETS," and collectively with
Transferred Assets, the "MIGRATION ASSETS"); provided, however, the Selling
Parties shall retain the sole discretion as to whether any IT Asset owned,
licensed or leased by the Selling Parties or their Affiliates is transferred or
assigned to the Partnership Entities as a Transferred Asset, including without
limitation the IT Assets listed on Schedule 2.13(b).

                  (c)      Dispute Resolution. If the Selling Parties and Buyer
are unable to agree as to whether one or more IT Assets are to be included among
the Substituted Assets (or the terms of the purchase, lease or license of such
assets), the parties will compile a list of such disputed IT Assets (the
"Dispute List"). The Dispute List will, in the case of each category of disputed
IT Asset, set forth the Selling Parties' choice and Buyer's choice of IT Asset
to be deemed a Substituted Asset and the terms of the purchase, lease or license
of such assets. The parties will refer the dispute to a technology consultant of
nationally recognized standing (the "TECHNOLOGY CONSULTANT") to be selected in
the following manner: the Selling Parties will select three (3)

                                      -39-

candidates and deliver a written notice containing the names of such candidates
to Buyer, and within five (5) days of receiving such notice, Buyer will select
one of such three candidates to serve as the Technology Consultant. The
Technology Consultant may not be otherwise engaged by the Selling Parties or
Buyer, or their respective Affiliates, in connection with the transactions
contemplated under this Agreement and the Transaction Documents and shall not
have performed any material services on behalf of the Selling Parties or Buyer,
or their respective Affiliates, during the five (5) years immediately preceding
the date of this Agreement. Upon selection, the Technology Consultant shall
immediately be engaged by the parties, with costs and expenses of the Technology
Consultant to be borne equally be the Selling Parties, on the one hand, and
Buyer, on the other hand. For a period of ten (10) days following the engagement
of the Technology Consultant, the Selling Parties and Buyer shall be entitled to
furnish the Technology Consultant with such supporting documentation as they
deem reasonable to support their respective positions with respect any or all of
the IT Assets on the Dispute List. The Technology Consultant shall resolve the
dispute, with respect to each category of disputed IT Asset on the Dispute List,
by choosing either the Selling Parties' or Buyer's choice of IT Asset (and
either Selling Parties' or Buyers' terms of the purchase, lease or license of
such assets), and the decision of the Technology Consultant shall be final and
binding on the Selling Parties and Buyer. The Technology Consultant shall
resolve the dispute with respect to each category of IT Asset on the Dispute
List within thirty (30) days after the engagement of the Technology Consultant.

                  (d)      IT Migration Plan. The IT Migration Team shall also
be responsible for developing a detailed plan that will include timetables for
and estimated costs of the transfer, assignment, purchase, lease or license, as
the case may be, of the Migration Assets (the "IT MIGRATION PLAN"). The IT
Migration Plan shall provide, among other things, that if requested by Buyer,
the Selling Parties or their Affiliates will use commercially reasonable efforts
to obtain for Buyer, on commercially reasonable terms, such Substituted Assets
as requested, subject to Section 4.11(c) above. The Migration Team shall use
commercially reasonable efforts to complete the development of the IT Migration
Plan prior to the Closing Date and, in any event, shall complete the IT
Migration Plan by no later than fifteen (15) days after the Closing Date. The
time from such date through completion of the implementation of the IT Migration
Plan shall be stated therein and shall be referred to as the "IT MIGRATION
PERIOD." It is understood by the parties hereto that the IT Migration Plan will
be subject to mutual revision, agreement for which shall not be unreasonably
withheld by either party, during the IT Migration Period. Upon completion of the
IT Migration Plan, the Selling Parties shall promptly thereafter transfer the
Transferred Assets to Buyer, or the Partnership Entities designated by Buyer.

                  (e) Costs.

                  (i)      Costs Relating to Preparation of IT Migration Plan.
         All costs related to the Selling Parties' and their Affiliates'
         employees and contractors involved in the preparation of the IT
         Migration Plan shall be borne by the Selling Parties, and all costs
         related to Buyer's employees and contractors involved in the
         preparation of the IT Migration Plan shall be borne by Buyer. Costs
         incurred by Buyer pursuant to this Section 4.11(e)(i) shall not be
         subject to the Expense Limit (as defined in Section 4.15).

                                      -40-

                  (ii)     Costs Relating to Implementation of IT Migration
         Plan. All costs related to the implementation of the IT Migration Plan,
         including without limitation the transfer and assignment of Transferred
         Assets and purchase, lease or license of Substituted Assets, as the
         case may be (and including the cost of time, labor and expenses of
         employees of the Selling Parties and their Affiliates in connection
         therewith) (collectively, "IMPLEMENTATION COSTS"), shall be borne by
         the Buyer, subject in the case of this Section 4.11(e)(ii) to the
         Expense Limit. The Implementation Costs also shall include, without
         limitation, the following costs and expenses: (i) all cost associated
         with the transfer of leases or licenses relating to Transferred Assets,
         (ii) any excess costs or fees associated with any of the Selling
         Parties or their Affiliates being deemed to be a service bureau by a
         vendor of such Migration Assets, (iii) costs relating to the conversion
         and loading of data, and (iv) costs relating to the integration of the
         Migration Assets into the Partnership Entities' information technology
         systems.

                  (iii)    Costs Relating to Transition Services. All costs and
         expenses associated with ongoing maintenance and support services
         provided by the Selling Parties or their Affiliates with respect to the
         Migration Assets, whether provided under the Transition Services
         Agreement (other than Implementation Costs) or otherwise, shall not be
         subject to the Expense Limit.

                  (f)      Miscellaneous. In the case of Transferred Assets
(including software and computer hardware associated with the ATLAS 2000 System)
that are (i) leased by the Selling Parties or their Affiliates, such leases
shall be transferred to Buyer, and upon such transfer, Buyer shall assume full
responsibility for such leases, and (ii) assigned to any of the Partnership
Entities, including license and contract rights, the Selling Parties shall
secure any consents necessary for such assignments. If Buyer elects to obtain
its own leases or licenses for Substituted Assets without the assistance of the
Selling Parties, Buyer shall upon the request of the Selling Parties submit to
them documentation showing proper licensing prior to the end of the IT Migration
Period

                  SECTION 4.12. SOFTWARE LICENSE.

         With respect to any Licensed Software that is included in the
Transferred Assets (the "TRANSFERRED LICENSED SOFTWARE"), the Selling Parties,
for themselves and on behalf of their Affiliates, shall, in accordance with
Section 4.11(d), grant to the Partnership Entities and the Buyer and its
Affiliates, a worldwide nonexclusive royalty-free, perpetual license, with the
right to assign and sublicense only to such Affiliates, to use, copy, modify,
enhance, and upgrade, solely for their internal business purposes and not as a
service bureau, the Transferred Licensed Software, except as not permitted
pursuant to any license relating thereto. Any copies of the Transferred Licensed
Software and any documentation related thereto must contain all copyright and
other intellectual property rights notices included thereon at the time of
Closing. The Partnership Entities and Buyer shall not be entitled to receive and
Selling Parties and their Affiliates shall have no obligation to provide any
modifications, enhancements, or upgrades made to the Transferred Licensed
Software developed subsequent to the date of transfer of such Licensed
Transferred Software to the Buyer or the Partnership Entities. To the extent
that they possess such, the Selling Parties and their Affiliates shall provide
copies to Buyer and the Partnership Entities of the source code for all
Transferred Licensed Software. Ownership of all

                                      -41-

intellectual property rights in the Transferred Licensed Software remains with
Selling Parties and their Affiliates; provided, following the date of transfer
to Buyer and the Partnership Entities, the intellectual property rights to any
modifications, enhancements and upgrades to the Transferred Licensed Software
will be owned by the party making such modifications, enhancements and upgrades
and there shall be no right for any party to disclose such to any other party.
The Partnership Entities and Buyer shall not take any action that is materially
inconsistent with the Selling Parties' and their Affiliates' rights in the
Transferred Licensed Software. Except as otherwise expressly provided in this
section, the Transferred Licensed Software and any related documentation are
provided on an "as is" basis, and the Selling Parties and their Affiliates
hereby expressly disclaim any implied warranty of merchantability or fitness for
a particular purpose. The Selling Parties and their Affiliates do not warrant
that the Transferred Licensed Software or documentation are error-free or that
the Partnership Entities' or Buyer's use thereof will be uninterrupted. Buyer
shall have the right to transfer its rights as granted herein to a third party
only upon the sale or transfer of all or substantially all of the Securities or
the assets of the Partnership Entities or a majority of the New LLC Interests to
such third party, except to the extent any such transfer is not permitted
pursuant to any license relating thereto. All rights with respect to Transferred
Licensed Software not expressly granted to Buyer in this Section 4.12 are
retained by the Selling Parties and their Affiliates.

                  SECTION 4.13. NON-SOFTWARE COPYRIGHT LICENSE.

         Effective upon the Closing Date, the Selling Parties, for themselves
and on behalf of their Affiliates, hereby grant to the Partnership Entities,
Buyer and its Affiliates, a nonexclusive royalty-free, perpetual license,
without right to sublicense, to use, copy, modify, enhance, and upgrade, solely
for their internal business purposes and not as a service bureau, all manuals,
user guides, standards and operation procedures and similar documents owned by
the Selling Parties and/or their Affiliates and used by the Partnership
Entities. All copies of the foregoing must reproduce and include all copyright
and other intellectual property rights notices as such appear on such items at
the time of Closing or as specifically provided with respect to any such item by
the Selling Parties. All rights with respect to such items not expressly granted
to Buyer in this Section 4.13 are retained by the Selling Parties and their
Affiliates.

                  SECTION 4.14. TRANSITIONAL TRADEMARK LICENSE; LEGAL NAMES.

                  (a)      Effective upon the Closing Date, the Selling Parties
and their Affiliates, hereby grant to the Partnership Entities, Buyer and its
Affiliates a nonexclusive, nontransferable, royalty-free license, without right
to sublicense, to use, solely in the Partnership Entities' businesses as they
have been conducted since February 9, 2001 and as they are presently conducted,
any and all trademarks, service marks, trade names, trade dress and domain names
owned by the Selling Parties and their Affiliates solely to the extent appearing
on existing inventory, advertising materials and property of the Partnership
Entities (such as signage, vehicles, and equipment) (collectively "SELLERS'
MARKS") for a period of nine (9) months from the Closing Date ("LICENSE
PERIOD"). The Buyer and the Partnership Entities may use such existing
inventory, advertising materials and property during the License Period, but
shall not create new inventory, advertising materials or property using Sellers'
Marks. Buyer and the Partnership Entities shall promptly replace or remove
Sellers' Marks on inventory, advertising materials and other property, provided
that all such use shall cease no later than the end of the

                                      -42-

License Period. The nature and quality of all uses of Sellers' Marks by Buyer
and the Partnership Entities shall conform to the nature and quality of the uses
of Sellers' Marks by the Selling Parties, Parent and the Partnership Entities as
of the date hereof. Immediately upon expiration of the License Period, the Buyer
and the Partnership Entities shall cease all further use of Sellers' Marks and
shall adopt new trademarks, service marks, and trade names that are not
confusingly similar to Sellers' Marks. All rights not expressly granted in this
Section 4.14 with respect to Sellers' Marks are hereby reserved. In the event
Buyer or any of the Partnership Entities breaches the provisions of this Section
4.14 and such breach is not cured (or reasonable steps taken to prevent its
reoccurrence for such breaches that cannot be cured) within fifteen (15)
business days after receipt by Buyer or such Partnership Entity of written
notice of such breach, the Selling Parties may immediately terminate the License
Period upon fifteen (15) days written notice.

                  (b)      No later than ninety (90) days following the Closing
Date, Buyer shall have caused each of the Partnership Entities listed on
Schedule 4.14 hereof to change its legal name so that there is no longer any
reference therein to the name "Williams" or any variation, derivation or
abbreviation thereof, and in connection therewith, Buyer shall cause each such
Partnership Entity to make all necessary filings of certificates with the
Secretary of State of the State of Delaware and to otherwise amend its
Organizational Documents by such date.

                  SECTION 4.15. MAXIMUM AMOUNT OF CERTAIN OF BUYER'S COSTS AND
EXPENSES.

         Notwithstanding any other provision of this Agreement, all (i)
Implementation Costs and (ii) one-time costs and capital expenditures related to
(A) the transition, transfer or conveyance of assets, operations or employees
from the Selling Parties or Parent to the Buyer or the Partnership Entities or
(B) the changing of the names of the Partnership Entities (up to a maximum
amount of $650,000 plus reasonable legal expenses and filing fees in the case of
this clause (B)), in excess in the aggregate of $5,000,000 (the "EXPENSE LIMIT")
incurred by Buyer or the Partnership Entities that would otherwise be borne by
Buyer or the Partnership Entities (without reimbursement) shall instead be borne
by the Selling Parties or promptly reimbursed by the Selling Parties to Buyer or
the Partnership Entities; provided, however, that the Expense Limit shall only
apply to costs, expenses and capital expenditures incurred by Buyer or the
Partnership Entities within twelve (12) months of the Closing Date. Other than
the costs, expenses and capital expenditures referred to in the immediately
preceding sentence, all costs, expenses and capital expenditures incurred by
Buyer or the Partnership Entities in connection with consummation of the
transactions contemplated in this Agreement and the Transaction Documents shall
not be included in the Expense Limit nor be subject of any obligation of the
Selling Parties or any of their Affiliates to pay or reimburse such costs,
expenses and capital expenditures, including if applicable the cost and expense
of relocating Transferred Employees, property or assets from the One Williams
Center building in Tulsa, Oklahoma, except pursuant to the Transition Services
Agreement or as otherwise agreed to by the parties.

                                      -43-

                  SECTION 4.16. OFFICE LEASE; OFFICE FURNITURE AND EQUIPMENT;
OFFICE SUPPLIES.

         Buyer and the Selling Parties shall negotiate in good faith to enter
into a lease, as soon as reasonably practicable following the Closing Date,
between the Selling Parties or an Affiliate, as lessor, and Buyer or a
Partnership Entity, as lessee, for a term of not less than five (5) years and at
a rate comparable to that for similar unfurnished commercial space in Tulsa,
Oklahoma, subject to the immediately succeeding sentence, to provide the office
space at One Williams Center in Tulsa, Oklahoma, currently occupied by the
Transferred Employees and the IT Assets transferred to Buyer or the Partnership
Entities under the IT Migration Plan or such other or additional space in One
Williams Center as may be mutually agreed upon. The lease will also provide for
Williams to provide PBX services to Buyer and the Partnership Entities for the
term of such lease, at a cost that is agreed upon by the parties and will be
incorporated into such lease. At such time as Buyer and the Partnership Entities
relocate from the One Williams Center building in Tulsa, Oklahoma, Williams
agrees to purchase on behalf of Buyer and the Partnership Entities a system
sufficient to provide PBX services to Buyer and the Partnership Entities in
their new location. Upon the execution and delivery of such lease, the Selling
Parties will transfer, without additional consideration, to the Partnership
Entities (i) the material office furniture and equipment owned by the Selling
Parties or their Affiliates and currently used by the Transferred Employees (at
One Williams Center in Tulsa, Oklahoma) and (ii) office supplies of the type
currently used by such Transferred Employees in a quantity sufficient to last
for approximately ninety (90) days assuming customary usage in accordance with
past practices. Effective as of the Closing, regardless of the execution of such
lease, the Selling Parties hereby transfer, without additional consideration, to
the Partnership Entities all office furniture owned by the Selling Parties or
their Affiliates that is currently used by the Transferred Employees or the
Partnership Entities at locations other than One Williams Center in Tulsa,
Oklahoma.

                  SECTION 4.17. NO SOLICITATION; TERMINATION OF DISCUSSIONS.

                  (a)      From and after the date hereof, none of the Selling
Parties nor their Affiliates (other than the Partnership Entities), officers,
directors, employees, affiliates, stockholders, representatives, agents, nor
anyone acting on behalf of them shall (and, subject to Section 4.17(b) hereof,
the Selling Parties shall use their reasonable best efforts to cause the
Partnership Entities not to), directly or indirectly, encourage, solicit, engage
in discussions or negotiations with, or provide any information to, any Person
(other than Buyer or its representatives) concerning any merger, sale of assets,
purchase or sale of Securities or similar transaction involving the Partnership
Entities unless this Agreement has been terminated pursuant to and in accordance
with Article VII hereof.

                  (b)      Notwithstanding the provision of Section 4.17(a)
above, the board of directors of the New Company shall be entitled to take (and
to cause any of the other Partnership Entities to take) any action otherwise
prohibited by such Section 4.17(a) in response to any inquiry, contact or
proposal received by New Company, its board of directors or any of the other
Partnership Entities from a Person that is not an Affiliate of the Selling
Parties or the Partnership Entities, if: (i) any discussions and exchanges of
information between New Company (or the other Partnership Entities) and such
third party are subject to a customary confidentiality agreement that will allow
for the disclosure to Buyer provided in Section 4.17(c) below, (ii) such

                                      -44-

inquiry, contact or proposal includes a proposal to acquire at least a majority
of the outstanding Common Units held by Persons that are not Affiliates of the
Selling Parties or a majority in value of the consolidated assets of the
Partnership Entities, (iii) such inquiry, contact or proposal from any such
non-Affiliated Person was not received in violation of Section 4.17(a) and (iv)
the board of directors of the New Company shall have determined in its good
faith judgment, after consultation with legal counsel, that any failure to take
such action would be inconsistent with the fiduciary duties of the New Company,
as the general partner of the Partnership, to the holders of Common Units under
the Delaware LP Act. The Selling Parties agree that they will notify Buyer
immediately if any such inquiry, contact or proposal is received by New Company,
its board of directors or any of the other Partnership Entities or their
respective representatives, and, to the extent known by the Selling Parties,
thereafter shall keep Buyer informed, on a reasonably current basis, on the
status of any such inquiry, contact or proposal and a resulting negotiations or
discussions.

                  (c)      In the event that the New Company enters into a
definitive agreement for a transaction ("DEFINITIVE TRANSACTION AGREEMENT")
referred to in clause (ii) of Section 4.17(b) above, Buyer will have a period of
thirty (30) days from the date the Selling Parties notify Buyer of same (which
notice (x) may be given orally, provided it is promptly confirmed in writing and
(y) shall include a description of the transaction and consideration to be paid
by the acquiring Person) to evaluate such proposed transaction (and the dates
set forth in Sections 7.1(f) and 7.1(g) hereof shall be extended as necessary to
accommodate such 30-day period), and after the expiration of such 30-day period,
Buyer may terminate this Agreement at any time while such Definitive Transaction
Agreement remains in effect; provided, however, that if Buyer terminates this
Agreement while such a Definitive Transaction Agreement is in effect, then the
Selling Parties shall reimburse the Buyer and its Affiliates for their
reasonable out-of-pocket expenses (supported by appropriate documentation
therefore) incurred in connection with the transactions contemplated hereby, but
in no event shall the amount payable by the Selling Parties pursuant to this
proviso exceed $5,000,000.

                  (d)      In the event that the Partnership calls a meeting of
unitholders with a record date prior to the Closing Date (including a special
meeting to consider the approval of a Definitive Transaction Agreement) and the
Closing occurs prior to such meeting, the Selling Parties agree to grant to
Buyer, effective at Closing, an irrevocable proxy to vote the WES Units, WNGL
Units and the Class B Common Units with respect to any matter to be considered
at such meeting.

                  SECTION 4.18. CONFIRMATION OF TERMINATION OF OLD OMNIBUS
AGREEMENT.

         Upon the receipt by Buyer from the Selling Parties or Parent of a
written request after the Closing, Buyer shall use its best efforts to cause the
applicable Partnership Entities to confirm the termination of the Old Omnibus
Agreement as promptly as practicable following receipt of such request.

                  SECTION 4.19. NEW COMPANY INTERCOMPANY ACCOUNTS.

         At Closing, all cash on hand at the New Company will be distributed to
Williams. All intercompany accounts between the New Company, on the one hand,
and Parent, Selling Parties

                                      -45-

and their Affiliates (other than the Partnership Entities), on the other hand,
shall be zeroed at Closing (irrespective of the terms of payment or balances of
such intercompany accounts), with no obligation on the part of any party to make
any payment with respect to any such intercompany accounts.

                  SECTION 4.20. CERTAIN COSTS AND EXPENSES OF BOARD OF
DIRECTORS OF NEW COMPANY.

         The Selling Parties and Parent shall promptly reimburse the Partnership
for costs and expenses of third parties borne by the Board of Directors of New
Company in consideration of the transactions contemplated by this Agreement and
the Transaction Documents that exceed $200,000.

                  SECTION 4.21. NEW COMPANY AUDITED FINANCIAL STATEMENTS.

         As soon as practicable after the date of this Agreement, the Selling
Parties shall provide Buyer with audited balance sheets, as of December 31, 2002
and December 31, 2001, and audited income statements and statements of cash
flows for the 12-month period ended December 31, 2002 and the period from
February 10, 2001 through December 31, 2001, in each case of the New Company and
its predecessor in interest.

                                   ARTICLE V.
                       CONDITIONS TO OBLIGATIONS OF BUYER

          The obligations of Buyer to consummate the transactions contemplated
by this Agreement are subject to the fulfillment, at or before the Closing Date,
of the following conditions, any one or more of which may be waived by Buyer in
its sole discretion; provided, that Buyer cannot waive, without the consent of
the Selling Parties, the conditions specified in Section 5.4 relating to the
receipt of consents required under the Parent Credit Facility and the Parent
Credit Facility Security Documents and the receipt of a release under the Parent
Credit Facility Liens:

                  SECTION 5.1. RECEIPT OF DOCUMENTS.

         The Selling Parties shall have delivered, or be standing ready to
deliver, to Buyer the items specified in Sections 1.2(a)(i), 1.2(a)(ii),
1.2(a)(iii) and 1.2(a)(iv), in each case duly executed and dated the Closing
Date.

                  SECTION 5.2. REPRESENTATIONS AND WARRANTIES OF THE SELLING
PARTIES.

         All representations and warranties made by the Selling Parties in this
Agreement that are not qualified by materiality or Material Adverse Effect shall
be true and correct in all material respects on and as of the Closing Date as if
again made by the Selling Parties on and as of such date, and all
representations and warranties that are qualified by materiality or Material
Adverse Effect shall be true and correct on the Closing Date as if made by the
Selling Parties on and as of such date; and Buyer shall have received a
certificate dated the Closing Date and signed by a senior executive officer of
each of the Selling Parties to that effect. Any entitlement of the Partnership
Entities to indemnity under the Additional Partnership Indemnity Agreements or
any

                                      -46-

other agreement shall in no way influence the determination as to whether all
such representations and warranties are true and correct in all material
respects (or true and correct) on and as of the Closing Date. Notwithstanding
the foregoing, the representations and warranties made by the Selling Parties in
Section 2.25 shall be deemed to be true and correct in all material respects
unless written notices from customers or shippers that they will discontinue
their business relationship with any of the Partnership Entities (or, to the
Knowledge of the Selling Parties, threats of any such action from material
shippers or customers) have been received by the Parent, the Selling Parties or
the Partnership Entities which represent, in the aggregate, more than $22.0
million in the Partnership's consolidated annual earnings before interest
expenses, taxes, depreciation and amortization; provided, however, that Buyer
shall be entitled to consider any such discontinued business, together with
other adverse effects on the Partnership Entities, for purposes of Section 5.11.

                  SECTION 5.3. PERFORMANCE OF SELLING PARTIES' OBLIGATIONS.

         The Selling Parties shall have performed in all material respects all
obligations required under this Agreement to be performed by them on or before
the Closing Date, and Buyer shall have received a certificate dated the Closing
Date and signed by a senior executive officer of each of the Selling Parties to
that effect.

                  SECTION 5.4. CONSENTS AND APPROVALS.

         The Selling Parties and Parent shall have received all consents
required under the Parent Credit Facility and the Parent Credit Facility
Security Documents. The Selling Parties shall have received a full release of
all Parent Credit Facility Liens and of each of the Partnership Entities that is
party to any Parent Credit Facility Security Document from all liabilities,
obligations and commitments of any Partnership Entity thereunder, in form and
substance reasonably satisfactory to Buyer, and the Selling Parties and Parent
shall have delivered all documents in connection therewith as the Buyer may
reasonably request. All consents, waivers, authorizations and approvals set
forth on Schedule 2.7 shall have been duly obtained and shall be in full force
and effect on the Closing Date. The Selling Parties or Parent shall have
received all consents required in connection with the last matter listed on
Schedule 2.7 as of the date of this Agreement, or alternatively, Buyer shall
have received an opinion of counsel dated as of the Closing Date, in form and
substance reasonably satisfactory to Buyer, that no such consent is necessary.

                  SECTION 5.5. NO VIOLATION OF ORDERS.

         No preliminary or permanent injunction or other order issued by any
Governmental Authority that declares this Agreement or any of the Transaction
Documents invalid or unenforceable in any respect or that prevents the
consummation of the transactions contemplated hereby or thereby shall be in
effect; and no action or proceeding before any Governmental Authority shall have
been instituted by a Governmental Authority or threatened by any Government
Authority that seeks to prevent or delay the consummation of the transactions
contemplated by this Agreement or any of the Transaction Documents or that
challenges the validity or enforceability of this Agreement or any of the
Transaction Documents.

                                      -47-

                  SECTION 5.6. DIRECTOR RESIGNATIONS.

         The Buyer shall have received the effective resignations of each of the
directors of the New Company, other than those directors who are not a director,
officer, employee or agent of Parent or its Affiliates, or as otherwise agreed
to in writing by the Buyer, and all actions shall have been taken so that
immediately upon the Closing designees or nominees of the Buyer shall constitute
a majority of the members of the Board of Directors of the New Company
(including designees or nominees that are independent directors within the
meaning of the Partnership Agreement).

                  SECTION 5.7. EMPLOYMENT

         Buyer shall have arranged acceptable employment arrangements with each
of the Key Executives; provided, that no condition to Closing shall exist under
this Section 5.7 unless Buyer has made an offer of employment to each such Key
Executive on terms that in the aggregate are not materially less favorable than
the employment terms that each such Key Executive currently enjoys with the
Selling Parties or an Affiliate thereof.

                  SECTION 5.8. LEGAL OPINION.

         Buyer shall have received an opinion(s) of Andrews & Kurth L.L.P.,
counsel to Parent and Selling Parties, and/or such other counsel reasonably
acceptable to Buyer, dated the Closing Date, substantially in the form of
Exhibit 5.8.

                  SECTION 5.9. DEBT FINANCING.

         Buyer shall have obtained the funds necessary to pay the First Payment
of the Purchase Price.

                  SECTION 5.10. ABSENCE OF SPECIFIED EVENTS.

         None of the actions referred to in Section 4.1(a) through Section
4.1(o) shall have occurred and be continuing, except to the extent permitted
under Section 4.1 hereof; provided, that if any such actions have occurred at
any time after August 31, 2003, the date specified in Section 7.1(g) hereof
shall, in Buyer's sole discretion, be extended to a date 30 days after the date
the Buyer first receives notice of such occurrence.

                  SECTION 5.11. MATERIAL ADVERSE EFFECT.

         No Material Adverse Effect shall have occurred since the date of this
Agreement.

                  SECTION 5.12. FINANCIAL ADVISOR'S OPINION.

         The Boards of Directors of the Selling Parties and Parent shall have
received an opinion (a copy of which shall have been furnished to the Buyer)
from a nationally recognized investment bank, dated as of the date of this
Agreement, to the effect that the consideration (as defined therein) to be paid
by Buyer to each of the Selling Parties pursuant to this Agreement constitutes
reasonably equivalent value for the Securities sold by each such Selling Party.

                                      -48-

                  SECTION 5.13. WAIVERS OF EXISTING DEBT AGREEMENTS.

         The Selling Parties shall have received a written waiver from each of
(a) the noteholders under the Note Purchase Agreement, dated as of October 1,
2002, among Williams Pipe Line Company, LLC and the noteholders party thereto
and (b) the lenders under the Credit Agreement, dated as of February 6, 2001,
among Williams OLP, L.P., Bank of America, N.A., as administrative agent, Lehman
Commercial Paper, Inc., as syndication agent, Suntrust Bank, as documentation
agent, and the lenders party thereto, in each case in substantially the form set
forth on Schedule 5.13 (or such other form as may reasonably be agreed to by
Buyer) for the purpose, or in the manner, described on such schedule.

                                  ARTICLE VI.
                  CONDITIONS TO OBLIGATIONS OF SELLING PARTIES

          The obligations of the Selling Parties to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, at or before the
Closing Date, of the following conditions, any one or more of which may be
waived by the Selling Parties in their sole discretion:

                  SECTION 6.1. RECEIPT OF DOCUMENTS.

         Buyer shall have delivered, or be standing ready to deliver, to the
Selling Parties the items specified in Section 1.2(b), in each case duly
executed and dated the Closing Date.

                  SECTION 6.2. REPRESENTATIONS AND WARRANTIES OF BUYER.

         All representations and warranties made by Buyer in this Agreement that
are not qualified by materiality or material adverse effect shall be true and
correct in all material respects on and as of the Closing Date as if again made
by Buyer on and as of such date, and all representations and warranties that are
qualified by materiality or material adverse effect shall be true and correct on
the Closing Date as if made by the Buyer on and as of such date; and the Selling
Parties shall have received a certificate dated the Closing Date and signed by a
senior executive officer of Buyer to that effect.

                  SECTION 6.3. PERFORMANCE OF BUYER'S OBLIGATIONS.

         Buyer shall have performed in all material respects all obligations
required under this Agreement to be performed by it on or before the Closing
Date, and the Selling Parties shall have received a certificate dated the
Closing Date and signed by a senior executive officer of Buyer to that effect.

                  SECTION 6.4. CONSENTS AND APPROVALS.

         All consents, waivers, authorizations and approvals set forth on
Schedule 3.4 shall have been duly obtained and shall be in full force and effect
on the Closing Date.

                                      -49-

                  SECTION 6.5. NO VIOLATION OF ORDERS.

         No preliminary or permanent injunction or other order issued by any
Governmental Authority that declares this Agreement or any of the Transaction
Documents invalid or unenforceable in any respect or that prevents the
consummation of the transactions contemplated hereby or thereby shall be in
effect; and no action or proceeding before any Governmental Authority shall have
been instituted by a Governmental Authority or threatened by any Governmental
Authority that seeks to prevent or delay the consummation of the transactions
contemplated by this Agreement or any of the Transaction Documents or that
challenges the validity or enforceability of this Agreement or any of the
Transaction Documents.

                  SECTION 6.6. LEGAL OPINION.

         The Selling Parties shall have received an opinion of Vinson & Elkins
L.L.P., counsel to Buyer, dated the Closing Date substantially in the form of
Exhibit 6.6.

                  SECTION 6.7. ASSUMPTION OF CONSENT DECREE

         Buyer shall have agreed to be bound by the Consent Decree, only to the
extent (i) the Consent Decree is applicable to the properties, assets or
operations of the Partnership Entities and (ii) required by the Federal Trade
Commission after consultation therewith. Nothing herein shall prevent Buyer from
exercising any rights under the Consent Decree, including the right to petition
to the Federal Trade Commission to modify or terminate the Consent Decree as it
applies to Buyer or the Partnership Entities.

                                  ARTICLE VII.
                           TERMINATION AND ABANDONMENT

                  SECTION 7.1. METHODS OF TERMINATION; UPSET DATE.

         This Agreement may, or in the case of Section 7.1(g) will, be
terminated and the transactions contemplated hereby may be abandoned at any time
before the Closing:

                  (a)      by the mutual written consent of the Selling Parties
and Buyer;

                  (b)      by the Selling Parties, if Buyer fails to comply with
any of its covenants or agreements contained herein, or breaches their
representations and warranties contained herein, which failure to comply or
breach is not cured within 30 days after receipt by Buyer from the Selling
Parties of written notice specifying particularly such failure to comply or
breach, and such failure to comply or breach would result in a failure to
satisfy the conditions to Closing set forth in Sections 6.2 and/or 6.3;

                  (c)      by Buyer, if the Selling Parties fail to comply with
any of their covenants or agreements contained herein, or breaches its
representations and warranties contained herein, which failure to comply or
breach is not cured within 30 days after receipt by the Selling Parties from
Buyer of written notice specifying particularly such failure to comply or
breach, and such failure to comply or breach would result in the failure to
satisfy the conditions to Closing set forth in Sections 5.2 and/or 5.3;

                                      -50-

                  (d)      by Buyer in accordance with Section 4.17(c) hereof;

                  (e)      by the Selling Parties or Buyer, if a Governmental
Authority shall have issued an order, decree or ruling or taken any other action
(which order, decree or ruling the parties hereto shall use their commercially
reasonable efforts to lift), which permanently restrains, enjoins or otherwise
prohibits the transactions contemplated by this Agreement and which order,
decree, ruling or other action is not subject to appeal;

                  (f)      by written notice of the Selling Parties by not later
than 5:00 p.m. New York time on July 3, 2003 if (i) the Closing has not occurred
on or before 11:59 p.m. New York time on June 30, 2003, (ii) the Selling Parties
have satisfied, or are standing ready and able to satisfy, as of June 30, 2003,
all of the conditions precedent under Article V (other than the condition set
forth in Section 5.9, as to which the Selling Parties shall not be in breach of
their covenant contained in the second sentence of Section 4.6), and (iii) none
of the Selling Parties is in breach of any provision of this Agreement; or

                  (g)      without any action required by the Selling Parties or
Buyer, if the Closing has not occurred by 11:59 p.m. New York time on September
30, 2003.

                  SECTION 7.2. EFFECT OF TERMINATION.

         In the event of termination of this Agreement pursuant to Section
7.1(a), (d), (e), (f) or (g) hereof, this Agreement shall forthwith become void
and there shall be no liability on the part of Buyer or the Selling Parties (or
their respective officers or directors), except based upon obligations set forth
in Sections 4.17(c), 9.3 and 9.4 hereof, and except that Buyer shall thereupon
promptly return or destroy (and cause its agents and representatives to return
or destroy) to the Selling Parties all documents (and copies thereof) furnished
to Buyer and the parties shall continue to adhere to the Confidentiality
Agreement. Notwithstanding the foregoing or any other provision of this
Agreement, termination of this Agreement pursuant to Section 7.1(b) or Section
7.1(c) shall not in any way limit or restrict the rights and remedies of any
party hereto against any other party hereto that has violated or breached any of
the representations, warranties, agreements or other provisions of this
Agreement prior to termination hereof.

                                  ARTICLE VIII.
                            SURVIVAL; INDEMNIFICATION

                  SECTION 8.1. SURVIVAL.

                  (a)      The representations and warranties of the Selling
Parties contained herein or in any certificates or other documents delivered
pursuant to this Agreement on the Closing Date shall survive the Closing for a
period of eighteen (18) months following the Closing Date; provided however,
that (i) the representations and warranties set forth in Section 2.21
(Environmental; Health and Safety Matters) shall survive for a period of five
(5) years following the Closing Date, (ii) the representations and warranties
set forth in Sections 2.2 and 2.3 (Capitalization; Title), Section 2.5 (Validity
of Agreement; Authorization), Section 2.18 (Brokers) and Section 2.27 (Excluded
Assets) shall survive indefinitely and (iii) the representations and warranties
set forth in Section 2.10 (Taxes) shall survive for a period equal to thirty
(30) days after the expiration of the applicable statute of limitations
(including extensions)

                                      -51-

for each Tax and taxable year. The covenants and agreements in this Article VIII
shall survive the Closing and shall remain in full force and effect for such
period as is necessary to resolve any claim made with respect to any
representation, warranty, covenant or agreement contained herein during the
survival period thereof, and the covenants and agreements of the Parties
contained in Articles IV and IX of this Agreement shall survive the Closing for
(x) the time period(s) set forth in the respective Sections contained in such
Articles, or (y) if no time period is so specified, without any contractual
limitation on the period of survival.

                  (b)      The representations and warranties of Buyer contained
herein or in any certificates or documents delivered pursuant to this Agreement
or the Closing shall survive the Closing for a period of eighteen (18) months
following the Closing Date; provided, however, that the representations and
warranties set forth in Section 3.2 (Validity of Agreement) and Section 3.7
(Brokers) shall survive indefinitely.

                  SECTION 8.2. INDEMNIFICATION COVERAGE.

                  (a)      From and after the Closing, the Selling Parties shall
indemnify and defend, save and hold Buyer, the Partnership Entities and their
Affiliates and each of their officers, directors, employees and agents
(collectively, the "BUYER INDEMNIFIED PARTIES") harmless if any such Buyer
Indemnified Party shall suffer any damage, judgment, fine, penalty, demand,
settlement, liability, loss, cost, Tax, expense (including reasonable
attorneys', consultants' and experts' fees), claim or cause of action (each, a
"LOSS," and collectively, "LOSSES") arising out of, relating to or resulting
from:

                           (i)      any breach or inaccuracy in any
         representation by the Selling Parties or the breach of any warranty by
         the Selling Parties contained in this Agreement or any certificates or
         other documents delivered pursuant to this Agreement at the Closing;
         provided, that in determining whether any such representation or
         warranty has been breached or is inaccurate, such representation or
         warranty shall be construed as if Material Adverse Effect or
         materiality is not a qualification thereto;

                           (ii)     any failure by the Selling Parties to
         perform or observe any term, provision, covenant, or agreement on the
         part of the Selling Parties to be performed or observed under this
         Agreement;

                           (iii)    the failure by the Selling Parties to comply
         with any applicable statutory provisions relating to bulk sales and
         transfers;

                           (iv)     subject to Section 8.2(c) hereof, any of the
         matters listed on Schedule 2.21 hereto; and

                           (v)      any fines, penalties, or amounts paid to
         settle or resolve the last matter listed on Schedule 2.7 as of the date
         of this Agreement.

provided, however, that if any Loss for which Buyer would otherwise be entitled
to seek indemnity from the Selling Parties under this Section 8.2(a) is included
within the matters for which the Partnership Entities or any other Buyer
Indemnified Party would be entitled to indemnity under any of Section 3.1 of the
Old Omnibus Agreement, Article IV of the New

                                      -52-

Omnibus Agreement or Section 10.1(b) of the WPL Contribution Agreement (such
provisions are collectively referred to herein as the "ADDITIONAL PARTNERSHIP
INDEMNITY AGREEMENTS"), even if recovery under the Additional Partnership
Indemnity Agreements is not available due to the expiration of any applicable
survival period or any applicable deductible, threshold, maximum or "cap"
thereon, then none of the Buyer Indemnified Parties shall be entitled to
indemnification with respect to such matter or matters under this Section
8.2(a). The foregoing proviso shall not be deemed to amend, supplement or modify
in any way the Additional Partnership Indemnity Agreements.

                  (b)      From and after the Closing, Buyer shall indemnify and
defend, save and hold the Selling Parties and their Affiliates and their
officers, directors, employees and agents (collectively, the "SELLER INDEMNIFIED
PARTIES") harmless if any such Seller Indemnified Party shall suffer any Loss
arising out of, relating to or resulting from:

                           (i)      any breach or inaccuracy in any
         representation by Buyer or the breach of any warranty by Buyer
         contained in this Agreement or any certificates or other documents
         delivered pursuant to this Agreement at the Closing;

                           (ii)      any failure by Buyer to perform or observe
         any term, provision, covenant, or agreement on the part of Buyer to be
         performed or observed under this Agreement;

                           (iii)    with respect to any of the Partnership
         Entities, whether occurring before or after Closing to the extent such
         Losses are not covered by Section 8.2(a), except in the case, and only
         to the extent, of Losses that arise out of, or relate to or result from
         matters covered under the Additional Partnership Indemnity Agreements
         or otherwise covered under the Transaction Documents, the WPL
         Contribution Agreement or the Old Omnibus Agreement; and

                           (iv)     any Losses arising under the second
         paragraph of Section 3.1 and Section 3.2, in each case, of the
         Assignment and Assumption Agreement (as defined in Section 9.16), other
         than Affiliate intercompany obligations.

                  (c)      Buyer and the Selling Parties hereby acknowledge and
agree as follows:

                           (i)      Buyer agrees, on the terms and subject to
         the conditions specified in this Section 8.2(c), to assume at the
         Closing the obligations of WES under the Additional Partnership
         Indemnity Agreements to indemnify the Partnership Entities for the
         environmental remedial obligations specified in Schedule 8.2(c) hereto.

                           (ii)     The Partnership and WES have (A) identified
         environmental remedial obligations in Schedule 8.2(c) hereto for which
         WES is, subject only to Section 8.2(c)(iii), required to indemnify the
         Partnership pursuant to the Additional Partnership Indemnity Agreements
         and (B) prepared estimates of the costs expected to be incurred by the
         Partnership in connection with remediation activities to be undertaken
         in connection with such matters, and the Partnership, in accordance
         with GAAP, has recognized as a liability for such estimated costs and
         expenses to be incurred a total of $21,870,000 (as of March 31, 2003),
         consisting of both the current and long-term portions of such
         liability.

                                      -53-

         Included in Schedule 8.2(c) hereto is a schedule setting forth in
         reasonable detail the projected schedule for the incurrence of such
         costs and expenses.

                           (iii)    Buyer hereby covenants and agrees that it
         will pay on behalf of WES when due to the Partnership Entities under
         the Additional Partnership Indemnity Agreements all amounts that
         otherwise would be required to be paid by WES thereunder in respect of
         the matters listed under the column entitled "Site Name" in Schedule
         8.2(c) hereto, such payments to be made by Buyer from time to time as
         and when such amounts otherwise would become due and payable by WES and
         whether or not such amounts become due and payable before or after the
         time(s) projected in Schedule 8.2(c) (and WES agrees to notify Buyer
         promptly upon the request of any Partnership Entity or other Person for
         any payment subject to this clause (iii) of Section 8.2(c)).

                           (iv)     If (A) the matters specified under the
         column entitled "Site Name" in Schedule 8.2(c) hereto are determined to
         have reached closure by the appropriate Governmental Authority or have
         otherwise been finally resolved and all payments required to be made
         under the Additional Partnership Indemnity Agreements with respect
         thereto have been made by Buyer as provided in clause (iii) of this
         Section 8.2(c), (B) the Maximum Obligation (as defined below) has not
         been reached and (C) WES or the other Selling Parties have continuing
         indemnity obligations under the Additional Partnership Indemnity
         Agreements, Section 8.2(a)(i) hereof (in respect of a breach of a
         representation in Section 2.21 hereof) or Section 8.2(a)(iv) hereof,
         then Buyer covenants and agrees that, only to the extent of the Maximum
         Obligation, it shall pay any amounts that become payable by WES or the
         other Selling Parties under any of the continuing indemnity obligations
         referred to in clause (C) of this Section 8.2(c)(iv) from time to time
         as and when amounts would otherwise be payable by WES or the other
         Selling Parties.

                           (v)      If (A) the conditions referenced in clauses
         (iv)(A) and (iv)(B) of this Section 8.2(c) exist and the obligations of
         WES and the other Selling Parties under the provisions referenced in
         clause (iv)(C) of this Section 8.2(c) have expired and no amounts
         remain payable by WES or the other Selling Parties thereunder and (B)
         WES and the other Selling Parties (or their respective successors) and
         the Partnership furnish to Buyer a certificate from their respective
         chief financial officers or chief legal officers to such effect, then
         promptly upon receipt of such certificates in proper form Buyer shall
         pay to the Selling Parties the remaining unpaid amount, if any, of the
         Maximum Obligation.

                           (vi)     Buyer agrees that it shall use commercially
         reasonable efforts to cause the Partnership Entities to treat any
         payments made by Buyer under clauses (iii) or (iv) of this Section
         8.2(c) as a payment by WES or the other Selling Parties under the
         applicable Additional Partnership Indemnity Agreement in respect of
         which such payment is made, and Buyer shall indemnify and hold harmless
         WES and the other Selling Parties from any and all Losses caused by the
         failure or refusal of the Partnership Entities or any other Person to
         treat any payment so made by Buyer in accordance with clause (iii) or
         (iv) of this Section 8.2(c) as a payment made by or on behalf of WES or
         the other Selling Parties, as case may be, pursuant to the referenced
         indemnity obligation of such Person(s).

                                      -54-

                           (vii)    For purposes of this Section 8.2(c), Buyer
         shall pay to the Partnership all amounts due under this Section 8.2(c)
         following receipt of such amounts due from the General Partner on
         behalf of the Partnership. The determination of amounts and when they
         are due shall be made in good faith solely by the General Partner;
         provided, however, that Buyer shall not be required to make any such
         payments within less than twenty (20) days after receipt of the General
         Partner's determination; provided, further, Buyer shall indemnify and
         hold harmless the Selling Parties from any and all Losses caused by any
         delay by Buyer in making any such payment to the Partnership under this
         Section 8.2(c)(vii).

                           (viii)   Notwithstanding the foregoing provisions of
         this Section 8.2(c), in no event shall the aggregate amounts payable by
         or on behalf of Buyer under this Section 8.2(c) exceed $21,870,000 (the
         "MAXIMUM OBLIGATION").

                  (d)      The foregoing indemnification obligations shall be
subject to the following limitations:

                           (i)      the Selling Parties' aggregate liability
         under Section 8.2(a) shall not exceed $175,000,000 (the "CAP");
         provided, however, that the Cap shall not be applicable with respect to
         Losses otherwise indemnifiable under Section 8.2(a)(i) with respect to
         breaches or inaccuracies of Section 2.27 or under 8.2(a)(v);

                           (ii)     no indemnification for any Losses asserted
         against the Selling Parties under Section 8.2(a)(i) shall be required
         unless and until the cumulative aggregate amount of such Losses exceeds
         $4,000,000 (the "DEDUCTIBLE"), at which point the Selling Parties shall
         be obligated to indemnify the Buyer Indemnified Parties the amount of
         such Losses in excess of the Deductible, subject to the Cap; provided
         however, that the Deductible shall not be applicable to breaches under
         Sections 2.2, 2.3, 2.5, 2.11(b), 2.18, 2.21 or 2.27 hereof or recovery
         under Sections 8.2(a)(ii), 8.2(a)(iii), 8.2(a)(iv) or 8.2(a)(v) hereof;

                           (iii)    the amount of any Losses suffered by a
         Seller Indemnified Party or a Buyer Indemnified Party, as the case may
         be (such party seeking indemnification pursuant to this Article VIII,
         the "INDEMNIFIED PARTY," and the other party, the "INDEMNIFYING
         Party"), shall be reduced by any third-party insurance or other
         indemnification benefits which such party receives in respect of or as
         a result of such Losses, less the reasonable costs incurred to recover
         those insurance or indemnification benefits to the extent such costs
         are not otherwise recovered. If any Losses for which indemnification is
         provided hereunder is subsequently reduced by any third-party insurance
         or other indemnification benefit or recovery, the amount of the
         reduction shall be remitted to the Indemnifying Party. In the case of
         any purchase agreement between a Partnership Entity and a third-party
         relating to the acquisition of assets, businesses or securities by such
         Partnership Entity that contains unexpired and otherwise applicable
         indemnification provisions, if any Loss for which Buyer is entitled to
         seek indemnity from the Selling Parties under Section 8.2(a) is also
         included within the matters for which the Partnership Entities are
         entitled to indemnity under any such third-party agreement, Buyer
         agrees to use commercially reasonable efforts to cause any such
         Partnership Entity

                                      -55-

         first to pursue indemnification under such third-party agreement in
         good faith for a reasonable period of time prior to enforcing any claim
         against the Selling Parties for indemnification hereunder. Nothing in
         the foregoing sentence shall (i) prejudice the rights of the Buyer
         Indemnified Parties to make a claim for indemnification hereunder
         within the applicable survival period, if any, or (ii) require any
         Buyer Indemnified Party to file or institute any judicial proceeding or
         action. In addition, to the extent the Selling Parties make any
         payments to any Buyer Indemnified Party with respect to any claims
         covered under the unexpired and otherwise applicable indemnification
         provisions of such third-party agreements, Buyer agrees to use
         commercially reasonable efforts to cause the applicable Partnership
         Entity or Entities, at the sole cost and expense of the Selling
         Parties, (A) to assign any rights to the Selling Parties under such
         third-party agreement as may be necessary to allow the Selling Parties
         to independently pursue a claim for indemnification against the
         counterparty or counterparties to such third-party agreement and (B) to
         be subrogated to the rights of the applicable Partnership Entity or
         Entities in respect of such indemnification claims;

                           (iv)     no claim may be asserted nor may any action
         be commenced against any party for breach or inaccuracy of any
         representation or breach of a warranty, unless written notice of such
         claim or action is received by the other party describing in reasonable
         detail the facts and circumstances with respect to the subject matter
         of such claim or action on or prior to the date on which the
         representation or warranty on which such claim or action is based
         ceases to survive as set forth in Section 8.1;

                           (v)      no Indemnified Party shall be entitled under
         this Agreement to multiple recovery for the same Losses; and

                           (vi)     the limitations on indemnification set forth
         in clauses (i) and (ii) of this Section 8.2(d) shall not apply to any
         Losses arising from the failure by the Selling Parties or Buyer to pay
         any Taxes in accordance with Section 4.9 or for any amounts payable in
         accordance with Section 9.3 hereof.

                  SECTION 8.3. PROCEDURES.

                  (a)      Any Indemnified Party shall notify the Indemnifying
Party (with reasonable detail) promptly after it becomes aware of facts
supporting a claim or action for indemnification under this Article VIII, and
shall provide to the Indemnifying Party as soon as practicable thereafter all
reasonable available information and documentation necessary to support and
verify any Losses associated with such claim or action. Subject to Section
8.2(d)(iv), the failure to so notify or provide information to the Indemnifying
Party shall not relieve the Indemnifying Party of any liability that it may have
to any Indemnified Party, except to the extent that the Indemnifying Party
demonstrates that it has been materially prejudiced by the Indemnified Party's
failure to give such notice, in which case the Indemnifying Party shall be
relieved from its obligations hereunder to the extent of such material
prejudice. The Indemnifying Party shall participate in and defend, contest or
otherwise protect the Indemnified Party against any such claim or action by
counsel of the Indemnifying Party's choice at its sole cost and expense;
provided, however, that the Indemnifying Party shall not make any settlement or
compromise without the prior written consent of the Indemnified Party (which
consent shall

                                      -56-

not be unreasonably withheld or delayed) unless the sole relief provided is
monetary damages that are paid in full by the Indemnifying Party, there is no
admission or statement of fault or culpability on the part of the Indemnified
Party and there is an unconditional release of the Indemnified Party from all
liability on any claims that are the subject of such claim or action. The
Indemnified Party shall have the right, but not the obligation, to participate
at its own expense in the defense thereof by counsel of the Indemnified Party's
choice and shall in any event use its commercially reasonable efforts to
cooperate with and assist the Indemnifying Party; provided, however, that the
Indemnifying Party shall pay the fees and expenses of separate counsel for the
Indemnified Party if (i) the Indemnifying Party has agreed to pay such fees and
expenses or (ii) counsel for the Indemnifying Party reasonably determines that
representation of both the Indemnifying Party and the Indemnified Party by the
same counsel would create a conflict of interest. If the Indemnifying Party
fails timely to defend, contest or otherwise protect against such suit, action,
investigation, claim or proceeding, the Indemnified Party shall have the right
to do so, including, without limitation, the right to make any compromise or
settlement thereof, and the Indemnified Party shall be entitled to recover the
entire cost thereof from the Indemnifying Party, including, without limitation,
reasonable attorneys' fees, disbursements and amounts paid as the result of such
suit, action, investigation, claim or proceeding.

                  Any claim or action for indemnification under Section 8.2(a)
(i) (for Losses arising from, or relating to a breach of a representation
or warranty set forth in Section 2.21) or Section 8.2(a)(iv), that requires
remediation shall be administered in accordance with the procedures set forth on
Schedule 8.3(b) hereto.

                  SECTION 8.4. WAIVER OF CONSEQUENTIAL, ETC. DAMAGES.

         NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, BUYER SHALL
NOT BE LIABLE TO ANY OF THE SELLER INDEMNIFIED PARTIES, NOR SHALL ANY OF THE
SELLING PARTIES BE LIABLE TO ANY OF THE BUYER INDEMNIFIED PARTIES, FOR ANY
EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL, REMOTE, OR SPECULATIVE
DAMAGES (INCLUDING, WITHOUT LIMITATION, ANY DAMAGES ON ACCOUNT OF LOST PROFITS
OR OPPORTUNITIES) RESULTING FROM OR ARISING OUT OF THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.

                  SECTION 8.5. COMPLIANCE WITH EXPRESS NEGLIGENCE RULE.

         ALL RELEASES, DISCLAIMERS, LIMITATIONS ON LIABILITY, AND INDEMNITIES IN
THIS AGREEMENT, INCLUDING THOSE IN THIS ARTICLE VIII, SHALL APPLY EVEN IN THE
EVENT OF THE SOLE, JOINT, AND/OR CONCURRENT NEGLIGENCE, STRICT LIABILITY, OR
OTHER FAULT OF THE PARTY WHOSE LIABILITY IS RELEASED, DISCLAIMED, LIMITED, OR
INDEMNIFIED.

                  SECTION 8.6. LIQUIDATED DAMAGES.

         If Buyer breaches its obligations to close as contemplated by Article
V, then Buyer shall pay to the Selling Parties $25,000,000 by wire transfer of
immediately available funds to a bank

                                      -57-

account in the United States of America designated in writing by the Selling
Parties not later than three days following receipt of such designation. BUYER
AND THE SELLING PARTIES HEREBY ACKNOWLEDGE THAT (I) THE EXTENT OF DAMAGES TO THE
SELLING PARTIES CAUSED BY THE FAILURE OF THIS TRANSACTION TO BE CONSUMMATED DUE
TO THE CIRCUMSTANCES SPECIFIED IN THE IMMEDIATELY PRECEDING SENTENCE WOULD BE
IMPOSSIBLE OR EXTREMELY DIFFICULT TO ASCERTAIN, (II) THE AMOUNT OF THE
LIQUIDATED DAMAGES PROVIDED FOR IN THIS SECTION 8.6 IS A FAIR AND REASONABLE
ESTIMATE OF SUCH DAMAGES UNDER SUCH CIRCUMSTANCES AND (III) RECEIPT OF SUCH
AMOUNT BY THE SELLING PARTIES DOES NOT CONSTITUTE A PENALTY AND WILL BE THE
SELLING PARTIES' SOLE AND EXCLUSIVE REMEDY WITH RESPECT TO THE CIRCUMSTANCES
SPECIFIED IN THE IMMEDIATELY PRECEDING SENTENCE.

                  SECTION 8.7. REMEDY.

         Except for seeking equitable relief under Section 9.12 or otherwise or
actions involving fraud or as set forth in Section 9.5, from and after the
Closing the sole remedy of a party in connection with (i) a breach or inaccuracy
of the representations, or breach of warranties, in this Agreement or any
certificates or other documents delivered pursuant to this Agreement on Closing,
or (ii) any failure by a party to perform or observe any term, provision,
covenant, or agreement on the part of such party to be performed or observed
under this Agreement, shall, in each case, be as set forth in this Article VIII.

                  SECTION 8.8. TAX TREATMENT OF INDEMNITY PAYMENTS.

         Each party, to the extent permitted by applicable law, agrees to treat
any payments made pursuant to this Article VIII as adjustments to the Purchase
Price for all federal and state income and franchise Tax purposes. To the extent
that any such payment is not permitted to be treated as an adjustment to the
Purchase Price, the amount of such payment shall be increased so that after
reduction for the amount of any actual additional Tax cost incurred as a result
of the receipt of such payment, the amount remaining will be equal to the amount
of the payment that is owed under this Article VIII.

                                   ARTICLE IX.
                            MISCELLANEOUS PROVISIONS

                  SECTION 9.1. PUBLICITY.

         On or prior to the Closing Date, no party shall, nor shall it permit
its Affiliates to, issue or cause the publication of any press release or other
announcement with respect to this Agreement or the transactions contemplated
hereby without the consent of the other party hereto. Notwithstanding the
foregoing, in the event any such press release or announcement is required by
law or stock exchange rule to be made by the party proposing to issue the same,
such party shall use its commercially reasonable efforts to consult in good
faith with the other party prior to the issuance of any such press release or
announcement.

                                      -58-

                  SECTION 9.2. SUCCESSORS AND ASSIGNS; THIRD-PARTY
BENEFICIARIES.

         This Agreement shall inure to the benefit of, and be binding upon, the
parties hereto and their respective successors and permitted assigns. Except as
contemplated by Article VIII, nothing in this Agreement shall confer upon any
Person not a party to this Agreement, or the legal representatives of such
Person, any rights or remedies of any nature or kind whatsoever under or by
reason of this Agreement. No party shall sell, assign or otherwise transfer all
or any of its rights, benefits or obligations hereunder without the prior
written consent of the other party, such consent not to be unreasonably withheld
or delayed, provided, however, that (a) Buyer may, without the Selling Parties'
prior written consent, assign or transfer its rights and duties hereunder to the
Partnership (or an Affiliate of Buyer other than a Partnership Entity) and, if
so assigned or transferred, the Partnership (or such Affiliate of Buyer other
than a Partnership Entity) shall be entitled to enforce the rights, and shall
comply with the duties, hereunder so transferred or assigned as if it were a
named party hereto, but no such transfer or assignment shall relieve Buyer of
its obligations hereunder and no such assignee or transferee may further assign
any such rights, (b) for the purposes of any financing or refinancing
arrangement entered into by the Buyer in connection with the purchase of the
Securities the Buyer may, without the Selling Parties' prior written consent,
assign to or create a security interest in favor of any party providing any such
financing or refinancing to the Buyer, all of its rights, benefits, obligations
and interests hereunder, and the Selling Parties hereby consent to the exercise
by any such party of any rights, benefits, obligations or interests assigned to
or created in favor of such party pursuant to the foregoing and any remedies
arising in connection therewith and (c) each of the Selling Parties may, without
Buyer's prior written consent, assign or transfer its rights under Section
8.2(c) hereof to one or more of the Partnership Entities and, if so assigned or
transferred, any such Partnership Entity shall be entitled to enforce the rights
hereunder so transferred or assigned as if it were a named party hereto, but no
such transfer or assignment shall relieve the Selling Parties of their
obligations under Section 8.2(c) and no such assignee or transferee may further
assign any such rights.

                  SECTION 9.3. INVESTMENT BANKERS, FINANCIAL ADVISORS, BROKERS
AND FINDERS.

                  (a)      The Selling Parties shall indemnify and agree to
defend and hold Buyer and the Partnership Entities harmless against and in
respect of all claims, losses, liabilities and expenses which may be asserted
against Buyer (or any Affiliate of Buyer) and the Partnership Entities by any
broker or other person who claims to be entitled to an investment banker's,
financial advisor's, broker's, finder's or similar fee or commission in respect
of the execution of this Agreement or the consummation of the transactions
contemplated hereby, by reason of his acting at the request of Parent, the
Selling Parties or the Partnership Entities.

                  (b)      Buyer shall indemnify and agree to save and hold the
Selling Parties (and their Affiliates) harmless against and in respect of all
claims, losses, liabilities, fees, costs and expenses which may be asserted
against any of the Selling Parties (or any of their Affiliates) by any broker or
other person who claims to be entitled to an investment banker's, financial
advisor's, broker's, finder's or similar fee or commission in respect of the
execution of this Agreement or the consummation of the transactions contemplated
hereby, by reason of his acting at the request of Buyer.

                                      -59-

                  SECTION 9.4. FEES AND EXPENSES.

         Except as otherwise expressly provided in this Agreement, all legal,
accounting and other fees, costs and expenses of a party hereto incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such fees, costs or expenses.

                  SECTION 9.5. OFF-SET RIGHT.

         From and after the Closing, the Selling Parties agree and acknowledge
that Buyer and the Partnership Entities shall have a right to off-set any
payments to be made by Buyer or any of the Partnership Entities pursuant to this
Agreement or the Transition Services Agreement against any payments owed by the
Selling Parties, Parent or any direct or indirect wholly owned subsidiary of
Parent to Buyer or any of the Partnership Entities in respect of (i) the proviso
set forth in the final sentence of Section 4.3(l) hereof, (ii) undisputed trade
receivables, (iii) services provided by the Partnership Entities to the Selling
Parties or Parent (or any direct or indirect wholly owned subsidiary of Parent)
under the Services Agreement referred to in Section 1.2(a)(iv)(4) or (iv) any
other amounts determined by a final and non-appealable judgment to be owed by
any such parties; provided, however, that without the express prior written
consent of the Selling Parties or Parent, neither the Buyer nor any of the
Partnership Entities shall have a right hereunder to set-off against any other
amount that may become payable to the Buyer under this Agreement, any other
agreement or otherwise. The right of off-set provided for in this paragraph is
in addition to, and not in limitation of, any other right or remedy available to
Buyer or to the Partnership Entities under this Agreement, the Transaction
Documents, or any other agreement, under applicable law, in equity, or
otherwise.

                  SECTION 9.6. NOTICES.

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

                  (a)     If to Buyer, to:

                          Madison Dearborn Partners, LLC
                          Three First National Plaza
                          Suite 3800
                          Chicago, Illinois 60602
                          Facsimile: (312) 895-1206
                          Attention: Justin S. Huscher

                                     -60-

                          and to:

                          Carlyle/Riverstone Global Energy and Power Fund II, LP
                          712 Fifth Avenue
                          19th Floor
                          New York, New York 10019
                          Facsimile: (212) 993-0077
                          Attention: Pierre Lapeyre

                          with a copy to:

                          Vinson & Elkins L.L.P.
                          666 Fifth Avenue
                          26th Floor
                          New York, New York 10103
                          Facsimile: (917) 206-8100
                          Attention: Mike Rosenwasser

                  (b)     If to the Selling Parties, to:

                          Williams Energy Services, LLC and
                          Williams Natural Gas Liquids, Inc.
                          One Williams Center
                          Tulsa, Oklahoma 74172
                          Facsimile: (918) 573-6928
                          Attention: Lonny Townsend

                          with a copy to:

                          Andrews & Kurth L.L.P.
                          600 Travis, Suite 4200
                          Houston, Texas 77002
                          Facsimile: (713) 220-4285
                          Attention: G. Michael O'Leary

or to such other Persons or at such other addresses as shall be furnished by any
party by like notice to the other, and such notice or communication shall be
deemed to have been given or made as of the date so delivered or mailed. No
change in any of such addresses shall be effective insofar as notices under this
Section 9.6 are concerned unless such changed address is located in the United
States of America and notice of such change shall have been given to such other
party hereto as provided in this Section 9.6.

                  SECTION 9.7. ENTIRE AGREEMENT.

         This Agreement, together with the Disclosure Schedules and the Exhibits
hereto, the Confidentiality Agreement and the Transaction Documents represent
the entire agreement and understanding of the parties with reference to the
transactions set forth herein and therein and no

                                      -61-

representations or warranties have been made in connection herewith and
therewith other than those expressly set forth herein or therein. This
Agreement, together with the Disclosure Schedules and the Exhibits hereto, the
Confidentiality Agreement and the Transaction Documents supersede all prior
negotiations, discussions, correspondence, communications, understandings and
agreements between the parties relating to the subject matter hereof or thereof
and all prior drafts of such documents, all of which are merged into such
documents. No prior drafts of such documents and no words or phrases from any
such prior drafts shall be admissible into evidence in any action or suit
involving such documents.

                  SECTION  9.8. WAIVERS AND AMENDMENTS.

         The Selling Parties or Buyer may, by written notice to the other party:
(a) extend the time for the performance of any of the obligations or other
actions of the other party; (b) waive any inaccuracies in the representations or
warranties of the other party contained in this Agreement or in any document
delivered pursuant to this Agreement by the other party; (c) waive compliance
with any of the covenants of the other party contained in this Agreement; (d)
waive performance of any of the obligations of the other party created under
this Agreement; or (e) waive fulfillment of any of the conditions to its own
obligations under this Agreement or in any documents delivered pursuant to this
Agreement by the other party. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach, whether or not similar, unless such waiver specifically
states that it is to be construed as a continuing waiver. This Agreement may be
amended, modified or supplemented only by a written instrument executed by the
parties hereto.

                  SECTION  9.9. SEVERABILITY.

         This Agreement shall be deemed severable, and the invalidity or
unenforceability of any term or provision hereof shall not affect the validity
or enforceability of this Agreement or of any other term or provision hereof.
Furthermore, in lieu of any such invalid or unenforceable term or provision, the
parties hereto intend that there shall be added as a part of this Agreement a
provision as similar in terms to such invalid or unenforceable provision as may
be possible and be valid and enforceable.

                  SECTION  9.10. TITLES AND HEADINGS.

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

                  SECTION  9.11. SIGNATURES AND COUNTERPARTS.

         Facsimile transmission of any signed original document and/or
retransmission of any signed facsimile transmission shall be the same as
delivery of an original. At the request of Buyer or the Selling Parties, the
parties will confirm facsimile transmission by signing a duplicate original
document. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall be considered
one and the same agreement.

                                      -62-

                  SECTION  9.12. ENFORCEMENT OF THE AGREEMENT; DAMAGES.

         The parties hereto agree that irreparable damage would occur if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereto, this
being in addition to any other remedy to which they are entitled at law or in
equity.

                  SECTION  9.13. GOVERNING LAW.

         This Agreement shall be governed by and construed in accordance with
the internal and substantive laws of New York and without regard to any
conflicts of laws concepts that would apply the substantive law of some other
jurisdiction.

                  SECTION  9.14. DISCLOSURE.

         Certain information set forth in the Disclosure Schedules is included
solely for informational purposes, is not an admission of liability with respect
to the matters covered by the information, and may not be required to be
disclosed pursuant to this Agreement. Disclosure of any item in any section of
the Disclosure Schedules only qualifies (i) the correspondingly numbered
representation and warranty or covenant in this Agreement to the extent
specified therein and (ii) such other representations and warranties or
covenants in this Agreement that are qualified by another Disclosure Schedule
(or section of a Disclosure Schedule), but only to the extent (a) there is an
explicit cross-reference in such other Disclosure Schedule (or section of a
Disclosure Schedule, as applicable) or (b) such item is disclosed in such a way
as to make its relevance to the information called for by such other Disclosure
Schedule (or section of a Disclosure Schedule, as applicable) readily apparent
on its face. The specification of any dollar amount in the representations and
warranties contained in this Agreement or the inclusion of any specific item in
the Disclosure Schedules is not intended to imply that such amounts (or higher
or lower amounts) are or are not material, and no party shall use the fact of
the setting of such amounts or the fact of the inclusion of any such item in the
Disclosure Schedules in any dispute or controversy between the parties as to
whether any obligation, item, or matter not described herein or included in a
Disclosure Schedule is or is not material for purposes of this Agreement.

                  SECTION  9.15. CONSENT TO JURISDICTION.

         The parties hereby irrevocably submit to the jurisdiction of the courts
of the State of New York and the federal courts of the United States of America
located in New York, New York over any dispute arising out of or relating to
this Agreement or any of the transactions contemplated hereby, and each party
irrevocably agrees that all claims in respect of such dispute or proceeding
shall be heard and determined in such courts. The parties hereby irrevocably
waive, to the fullest extent permitted by applicable law, any objection which
they may now or hereafter have to the venue of any dispute arising out of or
relating to this Agreement or any of the transactions contemplated hereby
brought in such court or any defense of inconvenient forum for the maintenance
of such dispute. Each party agrees that a judgment in any dispute heard in the
venue specified by this section may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by applicable law.

                                      -63-

                  SECTION  9.16. CERTAIN DEFINITIONS.

         For purposes of this Agreement, the term:

                  (a)      "AFFILIATE" of a Person means a Person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, the first- mentioned Person.

                  (b)      "ASSIGNMENT AND ASSUMPTION AGREEMENT" means the
Assignment, Assumption and Amendment Agreement, dated November 15, 2002, among
the Selling Parties, the New Company and the Partnership.

                  (c)      "CLOSING PRICE" means the average of the daily
closing prices of the Common Units for the ten (10) consecutive days the Common
Units were trading on the New York Stock Exchange immediately prior to the
applicable date.

                  (d)      "CONFIDENTIALITY AGREEMENT" means, collectively, the
Nondisclosure Agreement among WES, WNGL and Madison Dearborn Partners, LLC,
dated September 3, 2002, and the Nondisclosure Agreement among WES, WNGL and
Riverstone Holdings, LLC, dated October 29, 2002.

                  (e)      "INTELLECTUAL PROPERTY" shall mean and include all
intellectual property of any kind, both foreign and domestic, including, without
limitation, all patents, trademarks, service marks, trade names, trade dress,
(and the goodwill associated with each), copyrights, confidential and
proprietary information (including trade secrets and know-how), and
registrations and applications for registration of any of the foregoing.
Intellectual Property does not include any software, whether owned or licensed,
or any copyrights associated with Licensed Software.

                  (f)      "KEY EXECUTIVES" means those individuals as
previously provided in writing to Buyer from the Selling Parties.

                  (g)      "KNOWLEDGE OF THE SELLING PARTIES" shall mean the
actual knowledge, after reasonable inquiry, of J. Chandler, B. Hagy, B. Hayes,
M. Little, T. McCoy, M. Mears, R. Olsen, C. Rich, J. Strief, A Sheridan, J.
Walkup, D. Wellendorf, J. Wiese, J. Willis and P. Wright.

                  (h)      "MATERIAL ADVERSE EFFECT" shall mean an adverse
effect on the assets, properties, business, operations, financial condition or
ability to maintain current levels of Operating Surplus (as defined in the
Partnership Agreement) of the Partnership Entities, taken as a whole, that would
have a material adverse effect on the value of the Securities, it being
understood that none of the following shall be deemed to constitute a Material
Adverse Effect: (i) any effect resulting from entering into this Agreement or
the announcement of the transactions contemplated by this Agreement, (ii) any
effect resulting from changes in general economic conditions in the industry in
which any of the Partnership Entities operates, and (iii) any effect resulting
from changes in the United States or global economy as a whole, unless in the
case of clause (ii) or (iii) above such change has a disproportionately adverse
effect on the Partnership Entities, taken as a whole.

                                      -64-

                  (i)      "OLD OMNIBUS AGREEMENT" means the Omnibus Agreement,
dated February 9, 2001, by and among Parent, the Selling Parties, the
Partnership and the other parties named therein, as amended by Amendment I,
dated as of January 28, 2002, and the Second and Third Amendments thereto, dated
as of April 11, 2002 and September 30, 2002, respectively.

                  (j)      "ORGANIZATIONAL DOCUMENTS" shall mean certificates of
incorporation, by-laws, certificates of formation, limited liability company
operating agreements, partnership or limited partnership agreements or other
formation or governing documents of a particular entity.

                  (k)      "PARENT CREDIT FACILITY" means (i) the First Amended
and Restated Credit Agreement, dated as of October 31, 2002, among the Parent,
Northwest Pipeline Corporation, Transcontinental Gas Pipe Line Corporation and
Texas Gas Transmission Corporation, as Borrowers, the Banks named therein,
JPMorgan Chase Bank and Commerzbank AG, as Co-Syndication Agents, Credit
Lyonnais New York Branch, as Documentation Agent, Citicorp USA, Inc., as Agent
and Salomon Smith Barney, Inc., as Arranger, and (ii) the Amended and Restated
Credit Agreement, dated as of October 31, 2002, among the Parent, as Borrower,
Citicorp USA, Inc., as Agent and Collateral Agent, Bank of America, N.A., as
Syndication Agent, Citibank, N.A., Bank of America N.A., and Bank of Nova
Scotia, as Issuing Banks and Solomon Smith Barney, Inc., as Arranger, each as
amended from time to time.

                  (l)      "PARENT CREDIT FACILITY LIENS" means any lien on the
Securities or any other security or interest in any of the Partnership Entities,
or on any asset or property of any of the Partnership Entities pursuant to, or
created in connection with, the Parent Credit Facility or any Parent Credit
Facility Security Document.

                  (m)      "PARENT CREDIT FACILITY SECURITY DOCUMENTS" means (i)
the Security Agreement, dated as of July 31, 2002, among the Parent and certain
subsidiaries of the Parent party thereto, in favor of Citibank, N.A., as
Collateral Trustee, as amended from time to time, (ii) the Pledge Agreement,
dated as of July 31, 2002, among the Parent and certain subsidiaries of the
Parent party thereto, in favor of Citibank, N.A., as Collateral Trustee, as
amended from time to time, (iii) the Collateral Trust Agreement, dated as of
July 31, 2002, among the Parent and certain subsidiaries of the Parent party
thereto, and Citibank, N.A., as Collateral Trustee, as amended from time to
time, (iv) the Guaranty, dated as of July 31, 2002, made by each of the
subsidiaries of the Parent that is a signatory thereto, in favor of Citibank,
N.A., as Surety Administrative Agent and (v) any other contract, agreement or
other instrument relating to or entered into in connection with the Parent
Credit Facility and binding upon the any of the Partnership Entities or any of
their respective securities, interests (including the Securities), properties or
assets.

                  (n)      "PARTNERSHIP GROUP" means the Partnership Entities,
with the exception of the New Company.

                  (o)      "PERSON" shall mean an individual, corporation,
association, trust, limited liability company, limited partnership, limited
liability partnership, partnership, incorporated organization, other entity or
group (as defined in Section 13(d)(3) of the Exchange Act).

                                      -65-

                  (p)      "TRANSACTION DOCUMENTS" shall mean the agreements,
contracts, documents, instruments and certificates provided for in this
Agreement to be entered into by one or more of the parties hereto or any of
their Affiliates in connection with the transactions contemplated by this
Agreement, including without limitation the Transition Services Agreement, the
Services Agreement referred to in Sections 1.2(a)(iv)(4) and 1.2(b)(vi), the
ATLAS Assignment, Contribution and License Agreement, the New Omnibus Agreement,
the Bills of Sale, the Parent Guaranty and the written document referred to in
Section 9.16(f).

                  (q)      "WPL CONTRIBUTION AGREEMENT" means the Contribution
Agreement, dated April 11, 2002, by and among WES, the Old Company and the
Partnership.

                                      -66-

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

         SELLING PARTIES:           WILLIAMS ENERGY SERVICES, LLC

                                    By: /s/ Phillip D. Wright
                                       -------------------------------
                                    Name: Phillip D. Wright
                                    Title: Authorized Signatory

                                    WILLIAMS NATURAL GAS LIQUIDS, INC.

                                    By: /s/ Phillip D. Wright
                                       --------------------------------
                                    Name: Phillip D. Wright
                                    Title: Authorized Signatory

                                    WILLIAMS GP LLC

                                    By:  WILLIAMS ENERGY SERVICES, LLC and
                                         WILLIAMS NATURAL GAS LIQUIDS, INC.,
                                         its Members

                                    By: /s/ Phillip D. Wright
                                       --------------------------------
                                    Name: Phillip D. Wright
                                    Title:  Authorized Signatory

         BUYER:                     WEG ACQUISITIONS, L.P.

                                    By: WEG Acquisition Management, LLC
                                    Its General Partner

                                    By: /s/ Pierre F. Lapeyre, Jr.
                                       ----------------------------------
                                    Name:  Pierre F. Lapeyre, Jr.
                                    Title:  Authorized Signatory

                                    By: /s/ Justin S. Huscher
                                       -------------------------------
                                    Name: Justin S. Huscher
                                    Title:  Authorized Signatory

                                      -67-

                              DISCLOSURE SCHEDULES

                           DATED AS OF APRIL 18, 2003

                                       FOR

                               PURCHASE AGREEMENT

                                  BY AND AMONG

                          WILLIAMS ENERGY SERVICES, LLC

                     WILLIAMS NATURAL GAS LIQUIDS, INC., AND

                                 WILLIAMS GP LLC

                        COLLECTIVELY, AS SELLING PARTIES,

                                       AND

                             WEG ACQUISITIONS, L.P.

                  Dated as of April 18, 2003 (the "AGREEMENT")

         Unless otherwise defined in these Disclosure Schedules, all capitalized
terms used herein shall have the meanings ascribed to them in the Agreement.
These Disclosure Schedules shall be deemed to be part of the Agreement.

         The inclusion of information in these Schedules shall not be construed
as an admission of liability to any third party with respect to the matters
covered by the information. Any matter or item disclosed on any Disclosure
Schedule shall not be deemed to be material (whether singularly or in the
aggregate) or deemed to give rise to circumstances which may result in a
Material Adverse Effect solely by reason of it being so disclosed herein.
Disclosure of any item in any section of these Schedules only qualifies (i) the
correspondingly numbered representation and warranty or covenant in the
Agreement to the extent specified therein and (ii) such other representations
and warranties or covenants in the Agreement that are qualified by another
Schedule (or section of a Schedule), but only to the extent (a) there is an
explicit cross-reference in such other Schedule (or section of a Schedule, as
applicable) or (b) such item is disclosed in such a way as to make its relevance
to the information called for by such other Schedule (or section of a Schedule,
as applicable) readily apparent on its face.

         These Disclosure Schedules supersede and replace any other Disclosure
Schedules previously provided to Buyer prior to the date of this Agreement. Any
such earlier Disclosure Schedules have no force or effect.

                             INDEX OF DEFINED TERMS

                                                                                                                     Page
                                                                                                                     ----
                                                                                                                  
2002 10-K........................................................................................................     16
Additional Employees.............................................................................................     28
Additional Partnership Indemnity Agreements......................................................................     51
Affiliate........................................................................................................     63
Agreement........................................................................................................      1
Assignment and Assumption Agreement..............................................................................     63
ATLAS 2000 System................................................................................................     15
ATLAS Assignment, Contribution and License Agreement.............................................................     38
Bidder Confidentiality Agreements................................................................................     36
Bills of Sale....................................................................................................      4
Bonds............................................................................................................     37
Business Employees...............................................................................................     18
Buyer............................................................................................................      1
Buyer 125 Plan...................................................................................................     31
Buyer Indemnified Parties........................................................................................     51
Buyer Representatives............................................................................................     27
Buyer Savings Plan...............................................................................................     31
Cap..............................................................................................................     54
CERCLA...........................................................................................................     21
Class B Common Units.............................................................................................      1
Closing..........................................................................................................      3
Closing Date.....................................................................................................      3
Closing Price....................................................................................................     63
Code.............................................................................................................     13
Common Units.....................................................................................................      1
Confidentiality Agreement........................................................................................     63
Consent Decree...................................................................................................     33
Deductible.......................................................................................................     54
Definitive Transaction Agreement.................................................................................     44
Delaware LP Act..................................................................................................      9
Disclosure Schedule Update.......................................................................................     35
Dispute List.....................................................................................................     39
Employee Plans...................................................................................................     18
Employee Transfer Date...........................................................................................     30
Encumbrances.....................................................................................................      2
Environmental Law................................................................................................     21
Environmental Permits............................................................................................     20
ERISA............................................................................................................     17
Exchange Act.....................................................................................................     12
Excluded Assets..................................................................................................     22
Expense Limit....................................................................................................     43
First Payment....................................................................................................      5
Fourth Payment...................................................................................................      7
GAAP.............................................................................................................     11

                                       i

                                                                                                                  
GP Companies.....................................................................................................      1
GP Interest......................................................................................................      1
Governmental Authority...........................................................................................     11
Hazardous Material...............................................................................................     21
HSR Act..........................................................................................................     33
IDRs.............................................................................................................      1
Implementation Costs.............................................................................................     40
Indemnified Party................................................................................................     54
Indemnifying Party...............................................................................................     54
Intellectual Property............................................................................................     63
IT Assets........................................................................................................     38
IT Migration Period..............................................................................................     40
IT Migration Plan................................................................................................     40
IT Migration Team................................................................................................     38
Key Executives...................................................................................................     63
Knowledge of the Selling Parties.................................................................................     63
Legal Proceeding.................................................................................................     16
License..........................................................................................................     16
License Period...................................................................................................     42
Licensed Software................................................................................................     15
Licenses.........................................................................................................     16
Loss.............................................................................................................     51
Losses...........................................................................................................     51
Material Adverse Effect..........................................................................................     63
Material Contracts...............................................................................................     17
Maximum Obligation...............................................................................................     54
Migration Assets.................................................................................................     39
MTBE.............................................................................................................     21
New Company......................................................................................................      1
New Company Financial Statements.................................................................................     11
New LLC Interests................................................................................................      1
New LLC Agreement................................................................................................      8
Old Company......................................................................................................      1
Old Company Subsidiary...........................................................................................     10
Old Omnibus Agreement............................................................................................     64
Organizational Documents.........................................................................................     64
PACE.............................................................................................................     18
PACE Collective Bargaining Agreement.............................................................................     19
Parent...........................................................................................................      2
Parent Credit Facility...........................................................................................     64
Parent Credit Facility Liens.....................................................................................     64
Parent Credit Facility Security Documents........................................................................     60
Parent Guaranty..................................................................................................      2
Parent Policies..................................................................................................     19
Partnership......................................................................................................      1
Partnership Agreement............................................................................................      9
Partnership Entities.............................................................................................     10

                                       ii

                                                                                                                  
Partnership Group................................................................................................     64
Partnership Plans................................................................................................     18
Partnership Policies.............................................................................................     19
Pension Plan.....................................................................................................     29
Per Day Rate.....................................................................................................      6
Permitted Encumbrances...........................................................................................     15
Person...........................................................................................................     64
Phantom Units....................................................................................................      9
Policies.........................................................................................................     19
Pre-Closing Tax..................................................................................................     36
Property Restrictions............................................................................................     14
Purchase Price...................................................................................................      5
RCRA.............................................................................................................     21
Real Property....................................................................................................     14
Represented Employee Transfer Date...............................................................................     29
Represented Employees............................................................................................     29
Rights-of-Way....................................................................................................     14
SEC..............................................................................................................     12
SEC Reports......................................................................................................     12
Second Payment...................................................................................................      6
Securities.......................................................................................................      2
Securities Act...................................................................................................     12
Seller 125 Plan..................................................................................................     31
Seller Indemnified Parties.......................................................................................     52
Seller Plans.....................................................................................................     18
Seller Savings Plan..............................................................................................     31
Sellers' Marks...................................................................................................     42
Selling Parties..................................................................................................      1
Solvent..........................................................................................................     22
Subordinated Units...............................................................................................      1
Substituted Assets...............................................................................................     39
Tax..............................................................................................................     12
Tax Returns......................................................................................................     12
Taxes............................................................................................................     12
Technology Consultant............................................................................................     39
Third Payment....................................................................................................      6
Transaction Documents............................................................................................     65
Transfer Agent...................................................................................................      3
Transfer Taxes...................................................................................................     37
Transferred Assets...............................................................................................     39
Transferred Employees............................................................................................     29
Transferred Licensed Software....................................................................................     41
Transition Services Agreement....................................................................................     35
Unit Transfer Application(s).....................................................................................      5
VEBA.............................................................................................................     30
WARN.............................................................................................................     33
WES..............................................................................................................      1

                                      iii

                                                                                                                  
WES Bill of Sale.................................................................................................      3
WES Common Units.................................................................................................      1
WES New LLC Interests............................................................................................      1
WES Subordinated Units...........................................................................................      1
WES Units........................................................................................................      1
WNGL.............................................................................................................      1
WNGL Bill of Sale................................................................................................      4
WNGL Common Units................................................................................................      1
WNGL New LLC Interests...........................................................................................      1
WNGL Subordinated Units..........................................................................................      1
WNGL Units.......................................................................................................      1
WPL Contribution Agreement.......................................................................................     65

                                       iv

                                                                    EXHIBIT 10.7
                                                                  Execution Copy

                                 AMENDMENT NO. 1

                                       TO

                               PURCHASE AGREEMENT,

                           DATED AS OF APRIL 18, 2003,

                                  BY AND AMONG

                         WILLIAMS ENERGY SERVICES, LLC,

                     WILLIAMS NATURAL GAS LIQUIDS, INC. AND

                                 WILLIAMS GP LLC

                        COLLECTIVELY, AS SELLING PARTIES,

                                       AND

                             WEG ACQUISITIONS, L.P.
                         A DELAWARE LIMITED PARTNERSHIP,
                                    AS BUYER,

                          FOR THE PURCHASE AND SALE OF

                       (i) ALL THE MEMBERSHIP INTERESTS OF

                                   WEG GP LLC
                      A DELAWARE LIMITED LIABILITY COMPANY,

             (ii) ALL OF THE COMMON UNITS AND SUBORDINATED UNITS OF

                          WILLIAMS ENERGY PARTNERS L.P.
                         A DELAWARE LIMITED PARTNERSHIP

  OWNED BY WILLIAMS ENERGY SERVICES, LLC AND WILLIAMS NATURAL GAS LIQUIDS, INC.

                                       AND

                      (iii) ALL THE CLASS B COMMON UNITS OF

                          WILLIAMS ENERGY PARTNERS L.P.
                         A DELAWARE LIMITED PARTNERSHIP

                             DATED AS OF MAY 5, 2003

                                 AMENDMENT NO. 1

                                       TO

                               PURCHASE AGREEMENT

         THIS AMENDMENT NO. 1 TO PURCHASE AGREEMENT (this "AMENDMENT NO. 1") is
made and entered into as of this 5th day of May 2003, by and among WILLIAMS
ENERGY SERVICES, LLC, a Delaware limited liability company ("WES"), WILLIAMS
NATURAL GAS LIQUIDS, INC., a Delaware corporation ("WNGL"), and WILLIAMS GP LLC,
a Delaware limited liability company (the "OLD COMPANY," and collectively with
WES and WNGL, the "SELLING PARTIES"), and WEG ACQUISITIONS, L.P., a Delaware
limited partnership ("BUYER").

                              W I T N E S S E T H:

         WHEREAS, the Selling Parties and Buyer have entered into the Purchase
Agreement, dated as of April 18, 2003 (the "PURCHASE AGREEMENT"), pursuant to
which, on the terms and subject to the conditions set forth therein, the Selling
Parties have agreed to sell, and Buyer has agreed to purchase, at the Closing
the Securities (as such terms are defined in the Purchase Agreement); and

         WHEREAS, in accordance with Section 9.8 of the Purchase Agreement, the
Selling Parties and Buyer have agreed to enter into this Amendment No. 1 to
amend the Purchase Agreement to the extent, and only to the extent, specified
below;

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

                                   ARTICLE I
                                   AMENDMENTS

         Section 1.1 Capitalized terms used herein but not defined shall have
the meanings assigned to such terms in the Purchase Agreement.

         Section 1.2 The Purchase Agreement is hereby amended by adding the
following provisions to Article IV of the Purchase Agreement, as new Sections
4.22, 4.23, 4.24 and 4.25 of the Purchase Agreement:

         "SECTION 4.22. COMMITMENT REGARDING INDEMNIFICATION PROVISIONS.

         (a)      The Selling Parties covenant and agree that prior to Closing
the Selling Parties (i) shall not propose to vote, or vote, the Securities in
favor of, or cause New Company to propose or to adopt, an amendment,
modification, waiver or termination of Section 7.7 or Section 7.8 of the
Partnership Agreement, and (ii) shall not amend, modify, waive or terminate
Section 9.01 or Section 9.02 of the New LLC Agreement, to the extent that such
amendment, modification, waiver or termination under clauses (i) and (ii) above
would affect adversely the rights thereunder of any person serving as a member
of the Board of Directors of New Company

existing as of the date of this Agreement; provided, however, that the foregoing
covenants and agreements shall not apply to any such amendment, modification,
waiver or termination to the extent required to cause such provisions (or any
portion thereof) to comply with applicable law.

         (b)      Buyer covenants and agrees that, during the period that
commences on the Closing Date and ends at 12:01 a.m. New York time on the sixth
(6th) anniversary of the Closing Date (the "STIPULATED PERIOD"), Buyer (i) shall
not propose to vote, or vote, the Securities (or any of the Securities that
Buyer then owns) in favor of, or cause New Company to propose or adopt, any
amendment, modification, waiver or termination of Section 7.7 or Section 7.8 of
the Partnership Agreement and (ii) shall not amend, modify, waive or terminate
Section 9.01 or Section 9.02 of the New LLC Agreement, to the extent that such
amendment, modification, waiver or termination under clauses (i) and (ii) above
would affect adversely the rights thereunder of any person serving as a member
of the Board of Directors of New Company existing as of the date of this
Agreement; provided, however, that the foregoing covenants and agreements shall
not apply to any such amendment, modification, waiver or termination to the
extent required to cause such provisions (or any portion thereof) to comply with
applicable law.

         SECTION 4.23. WEG INSURANCE CONTINUATION.

         (a)      The Selling Parties covenant and agree that during the
Stipulated Period, with respect to any person serving as a member of the Board
of Directors of New Company as of the date of this Agreement and who resigns
effective at or before the Closing, the Selling Parties shall make the payments
contemplated to be made by the Selling Parties referred to in clause (b) below
on the terms and conditions specified in this Section 4.23.

         (b)      Buyer covenants and agrees that, during the Stipulated Period,
with respect to any person serving as a member of the Board of Directors of New
Company as of the date of this Agreement and who resigns effective at or before
the Closing, Buyer shall use its commercially reasonable efforts to cause the
New Company: (i) to continue in effect the current director and officer
liability insurance policy or policies that New Company has as of the date of
this Agreement, as reflected on Schedule 2.20(a)(ii) hereto, or (ii) upon the
termination or cancellation of any such policy or policies, (A) to provide
director and officer liability insurance in substitution for, or in replacement
of, such cancelled or terminated policy or policies or (B) to provide a "tail"
or "run-off" policy, in each case, so that any person serving as a member of the
Board of Directors of New Company as of the date of this Agreement and who
resigns effective at or before the Closing has coverage thereunder for acts,
events, occurrences or omissions occurring or arising at or prior to the Closing
to the same extent (including, without limitation, policy limits, exclusions and
scope) as such person has coverage for such acts, events, occurrences or
omissions under the director and officer liability insurance policy maintained
by New Company as of the date of this Agreement, as reflected on Schedule
2.20(a)(ii) hereto; provided, however, that in no event shall Buyer or any of
the Partnership Entities be required to spend in excess of 200% of the annual
premium paid as of the date of this Agreement by or on behalf of the Partnership
Entities for such coverage (which amount as of the date of this Agreement is
$2,055,160.46) (the "CURRENT PREMIUM"). Without limiting the immediately
preceding proviso, if the premium required to obtain the amount of coverage
contemplated by clauses (i) or (ii) above would at any time exceed 200% of the
Current Premium Buyer or the Partnership Entities shall make a written request
to the Selling Parties to pay the amount of such

premium in excess of 200% of the Current Premium, up to 300% of the Current
Premium, and the Selling Parties will make payment to such requesting party of
such amount promptly, and in any event within thirty (30) calendar days of the
date of such request, in immediately available funds to an account previously
designated in writing by the requesting party; provided, however, that the
Selling Parties shall not have any obligation to make any payments with respect
to any amounts of such premium other than the amount between 200% of the Current
Premium and 300% of the Current Premium.

         SECTION 4.24. THIRD-PARTY BENEFICIARY RIGHTS.

         The parties agree that any person serving as a member of the Board of
Directors of New Company as of the date of this Agreement and who resigns
effective at or before the Closing is an intended third-party beneficiary of the
provisions of Section 4.22 and Section 4.23. In the event that the Selling
Parties do not make the payment to the requesting party in the amount that is in
excess of 200% of the Current Premium and up to 300% of the Current Premium, as
provided in Section 4.23(b), within the time period specified in Section
4.23(b), each person serving as a member of the Board of Directors of New
Company as of the date of this Agreement and who resigns effective at or before
the Closing shall have the right, as a third-party beneficiary of Section 4.22
and Section 4.23, to pursue all remedies available to it under this Agreement or
otherwise at law or in equity against any party to this Agreement in order to
enforce its third-party beneficiary rights under this Section 4.24. If a person
serving as a member of the Board of Directors of New Company as of the date of
this Agreement and who resigns effective at or before the Closing enforces its
third-party beneficiary rights under this Section 4.24 against any party to this
Agreement and prevails in a litigation or otherwise in such enforcement of such
third-party rights, the losing party shall reimburse such person in full for all
of such person's costs and expenses (including reasonable attorney's fees)
resulting from, arising out of or related to the enforcement of such third-party
beneficiary rights.

         SECTION 4.25 MODIFICATION OF OMNIBUS AGREEMENT. The Selling Parties and
Buyer agree that the New Omnibus Agreement to be entered into at the Closing
shall provide that no provision of the New Omnibus Agreement with respect to
which any entity comprising the Partnership Entities or the Partnership Group,
as applicable, is a third-party beneficiary can be amended, modified, waived or
terminated without the express prior written approval of the Partnership and if
New Company, in its capacity as the general partner of the Partnership,
determines in its reasonable discretion that such an amendment, modification,
waiver or termination is reasonably likely to adversely affect the holders of
Common Units, such amendment, modification, waiver or termination must also be
approved by Special Approval of the Conflicts Committee (as such terms are
defined in the Partnership Agreement).

         Section 1.3 The second sentence of Section 9.2 of the Purchase
Agreement is hereby amended and restated in its entirety as follows:

         "Except as contemplated by Section 4.24 and Article VIII, nothing in
this Agreement shall confer upon any Person not a party to this Agreement, or
the legal representatives of such Person, any rights or remedies of any nature
or kind whatsoever under or by reason of this Agreement."

         Section 1.4 Section 9.7 of the Purchase Agreement is hereby amended and
restated in its entirety as follows:

         "Section 9.7 Entire Agreement.

         This Agreement, together with the Disclosure Schedules and the Exhibits
hereto, the Confidentiality Agreement, the Transaction Documents and the
Amendment No. 1 to the Purchase Agreement, dated May 5, 2003, represent the
entire agreement and understanding of the parties with reference to the
transactions set forth herein and therein and no representations or warranties
have been made in connection herewith and therewith other than those expressly
set forth herein or therein. This Agreement, together with the Disclosure
Schedules and the Exhibits hereto, the Confidentiality Agreement, the
Transaction Documents and the Amendment No. 1 to the Purchase Agreement, dated
May 5, 2003, supersede all prior negotiations, discussions, correspondence,
communications, understandings and agreements between the parties relating to
the subject matter hereof or thereof and all prior drafts of such documents, all
of which are merged into such documents. No prior drafts of such documents and
no words or phrases from any such prior drafts shall be admissible into evidence
in any action or suit involving such documents."

         Section 1.5. Section 9.8 of the Purchase Agreement is hereby amended by
inserting the following provision immediately after the final sentence of such
section:

         "Notwithstanding anything to the contrary in this Agreement, Section
4.22 (Commitment Regarding Indemnification Provisions), Section 4.23 (WEG
Insurance Continuation) and Section 4.24 (Third-Party Beneficiary Rights) shall
not be amended, modified, waived or terminated by the parties hereto without the
prior written consent of all persons who are third-party beneficiaries under
Section 4.24 if such amendment, modification, waiver or termination would
adversely affect such third-party beneficiaries' rights under such provisions."

                                   ARTICLE II
                                  MISCELLANEOUS

         SECTION 2.1. SIGNATURES AND COUNTERPARTS. Facsimile transmissions of
any signed original document and/or retransmission of any signed facsimile
transmission shall be the same as delivery of an original. At the request of
Buyer or the Selling Parties, the parties will confirm facsimile transmission by
signing a duplicate original document. This Amendment No. 1 may be executed in
two or more counterparts, each of which shall be deemed an original and all of
which together shall be considered one and the same document.

         SECTION 2.2. GOVERNING LAW. This Amendment No. 1 shall be governed by
and construed in accordance with the internal and substantive laws of New York
and without regard to any conflicts of laws concepts that would apply the
substantive law of some other jurisdiction.

         SECTION 2.3. CONTINUATION OF PURCHASE AGREEMENT. To the extent not
amended hereby, the Purchase Agreement shall remain in full force and effect.

         IN WITNESS WHEREOF, the parties hereto have executed this Amendment No.
1 as of the date first above written.

         SELLING PARTIES:             WILLIAMS ENERGY SERVICES, LLC

                                      By: /s/ Phillip D. Wright
                                          --------------------------
                                      Name: Phillip D. Wright
                                      Title: Authorized Signatory

                                      WILLIAMS NATURAL GAS LIQUIDS, INC.

                                      By: /s/ Phillip D. Wright
                                          --------------------------
                                      Name: Phillip D. Wright
                                      Title: Authorized Signatory

                                      WILLIAMS GP LLC

                                      By: WILLIAMS ENERGY SERVICES, LLC and
                                          WILLIAMS NATURAL GAS LIQUIDS, INC.,
                                          Its Members

                                      By: /s/ Phillip D. Wright
                                          -------------------------
                                      Name: Phillip D. Wright
                                      Title: Authorized Signatory

         BUYER:                       WEG ACQUISITIONS, L.P.

                                      By: WEG Acquisition Management, LLC
                                      Its General Partner

                                      By: /s/ Pierre F. LaPeyre, Jr.
                                          ----------------------------
                                      Name: Pierre F. LaPeyre, Jr.
                                      Title: Authorized Signatory

                                      By: /s/ Justin S. Huscher
                                          ---------------------------
                                      Name: Justin S. Huscher
                                      Title: Authorized Signatory

                                                                  Execution Copy

                                                                    EXHIBIT 10.8

                               TRANSITION SERVICES

                                    AGREEMENT

                                 BY AND BETWEEN

                          THE WILLIAMS COMPANIES, INC.,
                             A DELAWARE CORPORATION

                                       AND

                             WEG ACQUISITIONS, L.P.,
                         A DELAWARE LIMITED PARTNERSHIP

                          TRANSITION SERVICES AGREEMENT

                  This TRANSITION SERVICES AGREEMENT (this "Agreement") is
entered into as of June 17, 2003, by and between THE WILLIAMS COMPANIES, INC., a
Delaware corporation ("Williams"), and WEG ACQUISITIONS, L.P., a Delaware
limited partnership ("Buyer").

                                    Recitals

                  WHEREAS, Buyer, Williams Energy Services, LLC ("WES"),
Williams Natural Gas Liquids, Inc. ("WNGL") and Williams GP LLC (the "Old GP,"
and together with WES and WNGL, the "Selling Parties") have entered into that
certain Purchase Agreement, dated April 18, 2003, as amended by Amendment No. 1
thereto dated as of May 5, 2003 (as amended, the "Purchase Agreement"), for the
purchase and sale of all of the membership interests of WEG GP LLC (the "General
Partner"), the general partner of the Williams Energy Partners L.P. (the "MLP"),
all of the common units and subordinated units representing limited partner
interests in the MLP owned by WES and WNGL, and all of the class B common units
representing limited partner interests in the MLP owned by the Old GP (as
contemplated in the Purchase Agreement, the "Transaction");

                  WHEREAS, the Partnership Entities (as defined herein) are
engaged in the business of the storage, transportation and distribution of
refined petroleum products and ammonia (the "Business"); and

                  WHEREAS, Williams and certain of its affiliates and
subsidiaries currently provide certain services to the Partnership Entities with
respect to the operation of its Business pursuant to the Services Agreement,
dated September 30, 2002 (the "Services Agreement"), among WES, Williams
Petroleum Services, L.L.C. ("WPS"), the General Partner and the MLP; and it is a
closing condition for the parties to the Purchase Agreement that Williams and
Buyer enter into this Agreement pursuant to which Williams shall provide, or
cause the Williams Service Providers (as defined herein) to provide, and make
available to the Buyer Entities (as defined herein) for their benefit, the
Transition Services (as defined herein) during the term of this Agreement.

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:

         1. Definitions. Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to them in the Purchase Agreement.

         "Accounting Referee" has the meaning set forth in Section 5(b).

         "Additional Services" has the meaning set forth in Section 2(j).

         "Business" shall have the meaning set forth in the recitals.

         "Buyer Entities" shall mean, collectively, Buyer and its subsidiaries,
including the Partnership Entities.

         "Buyer Indemnified Parties" shall have the meaning set forth in Section
9(a).

         "Claim" shall have the meaning set forth in Section 9(a).

         "Closing" shall have the meanings set forth in Section 1.1 of the
Purchase Agreement.

         "Closing Date" shall have the meaning set forth in Section 1.1 of the
Purchase Agreement.

         "Determination Amount" shall have the meaning set forth in Section
5(b).

         "Employee Lease Payment" shall have the meaning set forth in Section
2(f).

         "Force Majeure Event" shall mean an act of God; unusual fire, flood,
earthquake, storm, lightning; an act of Governmental Authority, or necessity for
compliance with any court order, law, statute, ordinance or regulation
promulgated by a Governmental Authority having jurisdiction with respect to the
applicable subject matter; a strike, lockout or other industrial disturbance; an
act of the public enemy, sabotage, war, act of terrorism, insurrection or
blockade; riot or other civil disturbance; epidemic; explosions; and any other
similar event that, in each such case, prevents, in whole or in part, the
performance of a party's obligations under this Agreement, is not reasonably
within the control of the affected party and which by the exercise of
commercially reasonable efforts the affected party is unable to overcome or
prevent.

         "G&A Employees" shall have the meaning set forth in Section 1A.

         "G&A Services" shall mean all general and administrative services of
the same or similar nature which the Williams Service Providers furnished to the
Partnership Entities pursuant to the Services Agreement during the one-month
period ending on the Closing Date, the categories with respect to which are set
forth on Schedule "A" attached hereto.

         "G&A Service Fee" shall have the meaning set forth in Section 5(a)(ii).

         "Governmental Approval" shall mean any material consent, authorization,
certificate, permit, right of way grant or approval of any Governmental
Authority that is necessary for the construction, ownership and operation of the
Business in accordance with applicable Laws.

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

         "Interest Rate" shall have the meaning set forth in Section 5(b).

                                       2

         "Laws" shall mean any applicable statute, Environmental Law (as defined
in the Purchase Agreement), common law, rule, regulation, judgment, order,
ordinance, writ, injunction or decree issued or promulgated by any Governmental
Authority.

         "Leased Employee" shall have the meaning set forth in Section 2(f).

         "Leasing Period" shall have the meaning set forth in Section 2(f).

         "MLP" shall have the meaning set forth in the recitals.

         "Monthly Invoice" shall have the meaning set forth in Section
5(a)(iii).

         "New Omnibus Agreement" shall mean the New Omnibus Agreement, dated the
date hereof, among the Buyer, Williams and the Williams Service Providers named
therein.

         "O&M Employees" shall have the meaning set forth in Section 1A.

         "O&M Services" shall mean all operating and maintenance services of the
same or similar nature which the Williams Service Providers furnished, during
the one-month period ending on the Closing Date, to the Partnership Entities
pursuant to the Services Agreement.

         "Organizational Documents" shall mean certificates of incorporation,
by-laws, certificates of formation, limited liability company operating
agreements, partnership or limited partnership agreements or other formation or
governing documents of a particular entity.

         "Partnership Assets" shall mean the assets and properties of the
Partnership Entities.

         "Partnership Entities" shall mean the General Partner, the MLP and all
of the subsidiaries of the MLP.

         "Partnership Group" shall mean the Partnership Entities, with the
exclusion of the General Partner.

         "Person" shall mean an individual, corporation, partnership, joint
venture, trust, limited liability company, unincorporated organization or any
other entity.

         "Section 4.3(a) Notice" shall mean the notice provided by Buyer to the
Selling Parties pursuant to Section 4.3(a) of the Purchase Agreement which lists
the Business Employees and Additional Employees that have accepted employment
offers with Buyer.

         "Services Agreement" shall have the meaning set forth in the recitals
to this Agreement.

         "Transition Services" shall mean the G&A Services and the O&M Services.

         "Williams Indemnified Parties" shall have the meaning set forth in
Section 9(b).

         "Williams Service Providers" shall mean any subsidiary or affiliate of
Williams that, during the one-month period ending on the Closing Date, was
providing to the Partnership Entities any services pursuant to the Services
Agreement.

                                       3

         1A. Covered Employees.

         Promptly upon delivery of the Section 4.3(a) Notice to the Selling
Parties by Buyer as required under the Purchase Agreement, and no more than five
(5) days after such delivery, Williams and Buyer shall determine (i) which of
such Business Employees and Additional Employees, as of the Closing Date,
provided O&M Services to the Partnership Entities under the Services Agreement
(the "O&M Employees") and (ii) which of such Business Employees and Additional
Employees, as of the Closing Date, provided G&A Services to the Partnership
Entities under the Services Agreement (the "G&A Employees"), and among the G&A
Employees, which single category of G&A Services (of those categories listed on
Schedule A hereto) they are responsible for providing. Immediately, upon such
determination, Williams and Buyer shall attach such information to this
Agreement as Schedule "C" hereto.

         2. Services.

                  (a) Existing Services Agreement. Williams and the Williams
         Service Providers currently provide certain services to the Partnership
         Entities pursuant to the Services Agreement. Williams shall continue,
         and shall cause the Williams Service Providers to continue, to provide
         such services to the Partnership Entities pursuant to the Services
         Agreement, as further provided in this Agreement; provided, however, in
         the event of the termination of the Services Agreement during the term
         of this Agreement, Williams shall continue, and shall cause the
         Williams Service Providers to continue, to provide, or cause to be
         provided, such services under this Agreement. At any time during the
         term of this Agreement, upon the written request of Williams, Buyer
         shall use its reasonable best efforts to cause the Partnership Entities
         to terminate the Services Agreement as promptly as possible.

                  (b) O&M Services. Until the date that all of the O&M Employees
         are transferred to one or more of the Buyer Entities as provided in
         Section 2(e) below, the Williams Service Providers shall continue to
         provide the O&M Services to the Partnership Entities at a cost
         consistent with the historical cost of providing such services under
         the Services Agreement.

                  (c) G&A Services. The Williams Service Providers shall
         provide, or subject to Section 2(h) below shall cause a third-party to
         provide, to the Buyer (or the Partnership Entity designated by Buyer)
         each category of G&A Services pursuant to the terms of the Services
         Agreement; provided, the obligation to provide any category of G&A
         Services hereunder shall terminate when the group of G&A Employees who
         provides such category of G&A Services is transferred to Buyer or a
         Partnership Entity designated by Buyer as provided in Section 2(e)
         below.

                  (d) Standard for Provision of Transition Services. Williams
         hereby covenants and agrees that the Transition Services will be
         performed (i) in accordance with applicable material Governmental
         Approvals and Laws, (ii) with at least the same level, standard of care
         and timeliness that services were provided to the Partnership Entities
         under the Service Agreement prior to the Closing and (iii) with at
         least the same level, standard of care and timeliness that the Williams
         Service Providers operate assets similar to the

                                       4

         Partnership Assets. EXCEPT AS SET FORTH IN THIS SECTION AND SECTION
         8(b) HEREOF, WILLIAMS AND THE WILLIAMS SERVICE PROVIDERS MAKE NO
         REPRESENTATION, WARRANTY OR GUARANTY, EXPRESS OR IMPLIED, OF ANY KIND
         CONCERNING THE TRANSITION SERVICES AND ANY RESULTS OR WORK PRODUCT AND
         SPECIFICALLY MAKE NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
         PARTICULAR PURPOSE, AND NONE SHALL BE IMPLIED. ALL OTHER
         REPRESENTATIONS, WARRANTIES OR GUARANTEES, WRITTEN OR ORAL, EXPRESS OR
         IMPLIED IN FACT OR IN LAW, AND WHETHER OR NOT BASED ON STATUTE ARE
         EXCLUDED.

                  (e) Transfer of Employees.

                           (i)      To effect the transfer of the O&M Employees,
                  Buyer shall deliver written notice to Williams requesting that
                  all (and not less than all) of the O&M Employees be
                  transferred to Buyer, or one or more of the Partnership
                  Entities designated by Buyer. The O&M Employees shall be
                  transferred within twenty (20) days of the receipt by Williams
                  of such notice, or as soon as practicable thereafter, in
                  either case, as of a date mutually agreed upon by the parties
                  (which shall be the last day of the any month during the term
                  of this Agreement). Upon the transfer of the O&M Employees,
                  the obligation of the Williams Service Providers to continue
                  providing the O&M Services hereunder shall terminate;

                           (ii)     To effect the transfer of one or more groups
                  of G&A Employees that provide a category of G&A Services,
                  Buyer shall deliver written notice to Williams requesting that
                  all (and not less than all) of the G&A Employees comprising
                  each such group be transferred to Buyer, or one or more of the
                  Partnership Entities designated by Buyer. Each such group of
                  G&A Employees shall be transferred within twenty (20) days of
                  the receipt by Williams of such notice, or as soon as
                  practicable thereafter, in either case, as of a date mutually
                  agreed upon by the parties (which shall be the last day of the
                  any month during the term of this Agreement). Upon the
                  transfer of any such group of G&A Employees, the obligation of
                  the Williams Service Providers to continue providing the
                  corresponding category of G&A Services hereunder shall
                  terminate; and

                           (iii)    The transfer of O&M Employees and G&A
                  Employees under this Section 2(e) is subject to Section 2(f)
                  below.

                  (f) Leased Employees. Notwithstanding the provisions of
         Section 2(e) above, Buyer shall lease from Williams the services of
         each of the employees listed on Schedule "B" hereto (each, a "Leased
         Employee") for the period beginning on the date that such employee
         would otherwise be transferred to Buyer (or a Partnership Entity
         designated by Buyer) and ending, with respect to each such employee, on
         the date such employee reaches the age of fifty-five (55) years (the
         "Leasing Period"), for the amount per month previously provided by
         Williams to Buyer in writing, which amount shall include salary and an
         allocation equal to 34% of salary which represents the cost of payroll,
         taxes, benefits and target bonus accruals for such employee (in
         aggregate the "Employee Lease

                                       5

         Payment"). Buyer shall, or shall cause the Partnership Entities to,
         reimburse Williams for any amounts paid in respect of a Leased Employee
         that are in excess of the target bonus amount with respect to such
         employee. During the Leasing Period, Williams shall have the sole
         responsibility for the payment of salary and providing benefits to the
         Leased Employees. The provisions of this Section 2(f) shall not apply
         in the case of any employee listed on Schedule "B" who reaches the age
         of fifty-five (55) years prior to the date such employee would
         otherwise be transferred to Buyer (or a Partnership Entity designated
         by Buyer) pursuant to Section 2(e) above.

                  (g) Service Changes. Williams and/or the Williams Service
         Providers may at any time, in their sole discretion, change or replace
         any of its (or their) internal or external services, functions or
         features that may affect such Transition Services; provided, that such
         change or replacement does not materially change Williams or the
         Williams Services Providers' performance of the Transition Services.

                  (h) Subcontractors. Williams and the Williams Service
         Providers shall have the right, in their sole discretion, to
         subcontract the performance of services under this Agreement to one or
         more third-parties; provided, that such subcontracting arrangement does
         not materially change Williams or the Williams Services Providers'
         performance of the Transition Services.

                  (i) Transfer upon Termination. Notwithstanding anything else
         in this Agreement, except as provided in Section 2(f), upon the
         termination of this Agreement, any O&M Employees or G&A Employees that
         have not been transferred to Buyer, or a Partnership Entity designated
         by Buyer, shall immediately be transferred to Buyer.

                  (j) Additional Services. Buyer may from time to time during
         the term of this Agreement request that Williams or a Williams Service
         Provider to provide additional services in accordance with the
         provisions of this Agreement that are not included in the definition of
         Transition Services. Upon receipt of any such request, Williams shall
         consider in good faith as to whether to provide such additional
         services and notify Buyer as to whether Williams is willing to provide
         or perform such service, and if so, shall submit to Buyer an estimate
         of the cost of such services; provided, Williams shall not unreasonably
         refuse to provide such additional services to Buyer. Buyer shall then
         promptly review such estimate and notify Williams in writing as to
         Buyer's concurrence or non-concurrence with such estimated costs. If
         Buyer concurs with such estimated costs, Buyer may notify Williams to
         proceed to provide or cause such services to be provided to Buyer, or
         the Partnership Entity designated by Buyer. Williams shall not be
         obligated to provide any such services to Buyer or the Partnership
         Entities other than pursuant to this Section 2(j). Any such services
         provided pursuant to this Section 2(j) shall be referred to as
         "Additional Services."

                                       6

         3. [Reserved].

         4. Term and Termination.

                  (a) Term. The term of this Agreement shall commence on the
         Closing Date and shall continue until the earlier of (i) the date on
         which all of the O&M Employees and G&A Employees have been transferred
         to Buyer, or one or more of the Partnership Entities designated by
         Buyer, or (ii) the last day of the ninth (9th) full calendar month
         following the calendar month in which the Closing Date occurs;
         provided, however, Buyer may, upon written notice delivered to and
         received by Williams not less than ten (10 days) prior to the date
         referred to in clause (ii) above, extend the term of this agreement
         until the last day of the twelfth (12th) full calendar month following
         the calendar month in which the Closing Date occurs; provided, further,
         that upon any such extension by Buyer, the aggregate amount payable by
         Buyer set forth on each Monthly Invoice following such extension shall
         be increased by five percent (5%).

                  (b) Termination of Transition Services. Except as provided in
         Section 4(c) or as otherwise provided in this Section 4(b), the
         provision of Transition Services by Williams and/or the Williams
         Service Providers will terminate upon the transfer of the employees
         associated with such service as provided under Section 2(e) above. With
         respect to any category of G&A Services, with respect to which there
         are no G&A Employees associated with such category, Buyer may elect, by
         giving not less ten (10) days advance written notice to Williams to
         terminate the provision by Williams or any Williams Service Provider of
         such category(ies) of Transition Services; provided, such categories of
         G&A Services shall only be terminated as of the last day of the month.
         The Buyer Entities shall have the right to immediately commence,
         whether directly or indirectly through third parties, the performance
         of any of the Transition Services, without advance notice to Williams,
         in the event of any event or occurrence of an emergency nature, in the
         event that Williams or any Williams Service Provider is unable to
         perform any such service because of the occurrence of a Force Majeure
         Event or in the event of any bankruptcy, insolvency or similar
         proceeding affecting Williams or any Williams Service Provider, without
         any obligation to Williams other than for Transition Services
         previously performed.

                  (c) Williams' Right to Suspend Performance or Terminate the
         Agreement. Williams shall have the right to suspend the performance of
         its obligations under this Agreement in the event of the Buyer
         Entities' failure to make payments due, owing and not disputed in good
         faith pursuant to Section 5(b) hereof or properly set off pursuant to
         Section 9.5 of the Purchase Agreement, to Williams under this
         Agreement, and such failure has not been cured within thirty (30) days
         after written notice of such failure to Buyer. In the event a Buyer
         Entity cures such payment default within sixty (60) days, Williams
         shall resume the performance of its obligations hereunder. Williams
         shall have the right to terminate this Agreement in the event such
         failure to make payment has not been cured within sixty (60) days after
         written notice of such failure to the Buyer.

                                       7

                  (d) Effect of Termination. Upon termination of this Agreement
         or any category of Transition Services, Williams and Williams Service
         Providers shall have no further obligation to provide such Transition
         Services to any of the Buyer Entities hereunder.

         5. Billing and Payment.

                  (a) Fees. Subject to Buyer's off-set rights contained in
         Section 9.5 of the Purchase Agreement, Buyer shall, or shall cause a
         Partnership Entity to, reimburse Williams for the Transition Services
         in accordance with this Section 5.

                           (i)      O&M Services Fee. Buyer shall, or shall
                  cause a Partnership Entity to, reimburse the Williams Service
                  Providers each month an amount equal to the cost of providing
                  the O&M Services, as set forth in the Monthly Invoice, except
                  that payment shall be made as provided in Section 5(a)(iii)
                  below.

                           (ii)     G&A Services Fee. Beginning on the Closing
                  Date, the Buyer Entities shall, or shall cause a Partnership
                  Entity to, pay Williams each month for G&A Services (the "G&A
                  Service Fee") an amount equal to $2,898,913 (which amount
                  represents the sum of the monthly service fees for each of the
                  separate categories of G&A Services set forth on Schedule "A"
                  hereto), subject to Article VII of the New Omnibus Agreement.
                  Upon receipt of notice from Buyer pursuant to Section 4(b)
                  requesting the termination of one or more categories of G&A
                  Services, the G&A Service fee shall be reduced by the amount
                  of the monthly service fee set forth on Schedule "A" for each
                  such category of G&A Services to be terminated, effective as
                  of the beginning of the month immediately following the month
                  in which each such category of G&A Services has been
                  terminated pursuant to Section 4 hereof.

                           (iii)    Billing. On or before the twentieth (20th)
                  day of each month, Williams shall provide to the Buyer one or
                  more written invoices (collectively, the "Monthly Invoice"),
                  setting out the total amount due Williams for (A) G&A Service
                  Fee, (B) the cost of O&M Expenses provided in the immediately
                  preceding month, (C) the Employee Lease Payment and (D) the
                  cost of any Additional Services provided in the immediately
                  preceding month, subject, if applicable, to the final proviso
                  of Section 4(a) above. Items properly invoiced and not
                  disputed in good faith by the Buyer are due and payable within
                  fifteen (15) days following the date of such invoice;
                  provided, that the Buyer shall give written notice on or
                  before the due date of any Williams invoice of any good faith
                  dispute of all or any portion of such Monthly Invoice, with
                  the particulars of such dispute, which dispute shall be
                  resolved in the manner provided in Section 5(b) below.

                  (b) Disputes. If there is a dispute between a Buyer Entity, on
         the one hand, and Williams or a Williams Service Provider, on the other
         hand, regarding the amounts shown as billed to the Buyer on any Monthly
         Invoice, (i) Williams shall, where applicable and practicable, furnish
         or cause to be furnished to the Buyer additional supporting
         documentation to reasonably substantiate the amounts billed including
         listings

                                       8

         of the dates, times and amounts of the Transition Services in question,
         and (ii) the Buyer Entities may withhold payment with respect to all or
         any portion of such invoiced amounts that such Buyer Entity believes in
         good faith are inaccurate or are otherwise not in accordance with the
         terms of this Agreement until resolution in accordance with the
         procedures set forth below in this Section 5(b); provided that the
         Buyer Entities shall pay any undisputed portion of such amount in
         accordance with Section 5(a).

                  Upon delivery of such additional documentation, Williams and
         the Buyer Entities shall cooperate and use their reasonable efforts to
         resolve such dispute. If they are unable to resolve their dispute
         within twenty (20) business days of the delivery of such additional
         supporting documentation by Williams, then the dispute shall be
         referred for resolution by a firm of independent accountants of
         nationally recognized standing (the "Accounting Referee") to be
         selected in the following manner: Williams will select three (3)
         candidates and deliver a written notice containing the names of such
         candidates to Buyer, and within five (5) days of receiving such notice,
         Buyer will select one of such three candidates to serve as the
         Accounting Referee. The Accounting Referee may not be otherwise engaged
         by Williams or Buyer, or their respective Affiliates, in connection
         with the transactions contemplated under this Agreement or the
         Transaction Documents and may not have performed any material services
         on behalf of Williams or Buyer, or their respective Affiliates, during
         the five (5) years immediately preceding the date of this Agreement.
         The Accounting Referee shall determine the validity of the disputed
         amounts within thirty (30) days of the referral of such dispute to such
         Accounting Referee. The determination of the Accounting Referee shall
         not require the Buyer Entities to pay more than the amount in dispute
         nor require any Williams Service Provider to return any amount
         previously paid by the Buyer Entities. The determination of the
         Accounting Referee shall be finally binding. The fees and expenses of
         the Accounting Referee shall be borne (i) by the Buyer if the
         difference between the amount set forth in such determination by the
         Accounting Referee (the "Determination Amount") and the Buyer's
         estimation of what the invoice amount should have been (which the Buyer
         shall provide to the Accounting Referee at such time the dispute is
         referred to such Accounting Referee) is greater than the difference
         between the Determination Amount and the amount set forth on the
         Monthly Invoice, (ii) by Williams if the first such difference is less
         than the second such difference and (iii) otherwise equally by Williams
         and the Buyer; provided, if any invoice dispute is resolved in favor of
         the Buyer Entities and Buyer has paid such amount, Williams shall
         offset the amount of any overpayment against future invoices to Buyer;
         or, if there are no additional invoices to be paid, Williams shall
         refund any amount owed within fifteen (15) days of resolution of the
         dispute. Such offset or refund shall be credited or paid to Buyer
         together with interest at the Interest Rate from the date of
         overpayment to Williams until the date of such offset or refund. If a
         dispute is resolved in favor of Williams, Buyer shall, or shall cause
         the Buyer Entities to, pay interest on the undisputed amount of an
         invoice from the due date thereof up to and including the date when
         such amount and interest thereon are paid in full, at the rate per
         annum equal to the rate published as the "prime rate" in The Wall
         Street Journal for the first business day of the month in which such
         invoice is paid, plus 2%, but in no event at any rate that is greater
         than the maximum interest rate allowed by applicable Laws (such rate,
         the "Interest Rate").

                                       9

                  (c) Buyer's Audit Rights. Buyer shall have the right, at any
         time within three (3) months after the date of any Williams invoice for
         reimbursement of costs of Transition Services to audit those books and
         records of Williams and any Williams Service Provider that provided
         Transition Services or which books and records relate to the Transition
         Services covered by such invoice, to verify the items reflected on such
         invoice. Any such audit shall be conducted during normal business hours
         by Buyer or its designated auditor after ten (10) days prior written
         notice to Williams, at Buyer's sole cost and expense, in the offices of
         Williams and the relevant Williams Service Provider or such other
         location as may be mutually agreed. Williams shall cooperate and shall
         cause any relevant Williams Service Provider to cooperate with and
         provide reasonable assistance to Buyer and/or its auditor in connection
         with the performance of any such audit. Buyer shall assert any claim
         for refund of costs of Transition Services reimbursed to Williams under
         the audited invoice within thirty (30) days after the completion of the
         audit. Williams shall have thirty (30) days from receipt of Buyer's
         claim for refund to respond. If Williams does not dispute Buyer's
         refund claim, Williams shall offset the overpayment against future
         invoices; or, if there are no additional invoices to be paid, Williams
         shall pay such refund within such 30-day period; such offset or refund
         shall be credited or paid together with interest at the Interest Rate
         from the date of Buyer's overpayment to Williams until the date of such
         offset or refund of such overpayment is credited or paid. Should
         Williams dispute the claim and refuse to pay any refund claim by Buyer
         resulting from the exercise of Buyer's audit rights, the parties will
         refer the dispute to an Accounting Referee in the manner described in
         Section 5(b) above.

         6. Confidentiality of Information.

                  (a) General. During the term of this Agreement and for a
         period of one (1) year following the termination of this Agreement,
         neither Party (as defined below in this Section 6(a)) shall, directly
         or indirectly, disclose to any Person any information received,
         obtained or created that is not in the public domain or generally known
         in the industry, in any form, whether acquired prior to or after the
         Closing Date, relating to the business and operations of the other
         Party. Notwithstanding the foregoing, either Party may disclose any
         information relating to the business and operations of the other Party
         (i) if required by Law or applicable stock exchange rule, and (ii) to
         such other Persons if, at the time such information is provided, such
         Person is already in the possession of such information. For purposes
         of this Section 6, each of Buyer and its affiliates, on the one hand,
         and Williams and its affiliates, on the other hand, shall be a "Party."

                  (b) Obligations upon Termination. Upon termination of this
         Agreement, except as otherwise provided in this Agreement or in the
         Purchase Agreement, each Party agrees to turn over to the other Party
         or destroy such confidential information in its possession, but only in
         accordance with the instructions of the other Party; provided, however,
         that each Party may maintain one archive copy of all of such
         confidential information that was generated during the term of this
         Agreement in a secure data storage facility.

         7. Relationships Among the Parties. It is the intent of the parties
that with respect to the provision of Transition Services pursuant to this
Agreement, Williams and the Williams Service Providers are independent
contractors, with authority to control, direct and oversee their

                                       10

performance of the Transition Services, subject to the overall direction and
control of the representatives of the Buyer Entities. Nothing in this Agreement
shall cause the relationship between Williams and the Williams Service Providers
on the one hand, and Buyer and the Partnership Entities on the other hand, to be
deemed to constitute an agency, partnership or joint venture. The terms of this
Agreement are not intended to constitute a joint employer for any purpose
between any of the parties and their affiliates. Neither Williams nor the
Williams Service Providers shall have or hold itself out as having, any
authority to enter into any contract or create any obligation or liability on
behalf of, in the name of, or binding upon the Buyer Entities except as
specifically provided in this Agreement.

         8. Representations and Warranties.

                  (a) Representations and Warranties of Buyer. As of the date of
         this Agreement, Buyer represents and warrants as follows:

                           (i)      Organization. Buyer is a limited partnership
                  duly organized, validly existing and in good standing under
                  the laws of the state of Delaware and has all requisite power
                  and authority to own its properties and assets and to conduct
                  its business as now conducted.

                           (ii)     Validity of Agreement. Buyer has the power
                  to enter into this Agreement and to carry out its obligations
                  hereunder. The execution and delivery of this Agreement and
                  the performance of the Buyer's obligations hereunder have been
                  duly authorized by its general partner, and no other
                  proceedings on the part of Buyer are necessary to authorize
                  such execution, delivery and performance. This Agreement has
                  been duly executed by Buyer and constitutes the valid and
                  binding obligation of Buyer enforceable against Buyer in
                  accordance with its terms (except to the extent that its
                  enforceability may be limited by applicable bankruptcy,
                  insolvency, reorganization or other similar law affecting the
                  enforcement of creditors' rights generally or by general
                  equitable principles).

                           (iii)    No Conflict or Violation; No Defaults. The
                  execution, delivery and performance by Buyer of this Agreement
                  does not and will not violate or conflict with any provision
                  of its organizational documents and does not and will not
                  violate any applicable provision of law, or any order,
                  judgment or decree of any Governmental Authority, nor violate
                  or result in a breach of or constitute (with due notice or
                  lapse of time or both) a default under any contract, lease,
                  loan agreement, mortgage, security agreement, trust indenture
                  or other agreement or instrument to which Buyer is a party or
                  by which it is bound or to which its properties or assets is
                  subject, nor result in the creation or imposition of any
                  encumbrance upon any of its properties or assets where such
                  violations, breaches or defaults in the aggregate would have a
                  material adverse effect on the transactions contemplated
                  hereby or on the assets, properties, business, operations, net
                  income or financial condition of Buyer.

                  (b) Representations and Warranties of Williams. As of the date
         of this Agreement, Williams represents and warrants as follows:

                                       11

                           (i)      Corporate Organization. Williams is a
                  corporation duly organized, validly existing and in good
                  standing under the laws of the state of Delaware and has all
                  requisite power and authority to own its properties and assets
                  and to conduct its business as now conducted.

                           (ii)     Validity of Agreement. Williams has the
                  power to enter into this Agreement and to carry out its
                  obligations hereunder. The execution and delivery of this
                  Agreement and the performance of Williams' obligations
                  hereunder have been duly authorized by its Boards of Directors
                  and no other proceedings on the part of Williams are necessary
                  to authorize such execution, delivery and performance. This
                  Agreement has been duly executed by Williams and constitutes
                  the valid and binding obligation of Williams enforceable in
                  accordance with its terms against Williams (except to the
                  extent that its enforceability may be limited by applicable
                  bankruptcy, insolvency, reorganization or other similar law
                  affecting the enforcement of creditors' rights generally or by
                  general equitable principles).

                           (iii)    No Conflict or Violation; No Defaults. The
                  execution, delivery and performance by Williams of this
                  Agreement does not and will not violate or conflict with any
                  provision of its organizational documents and does not and
                  will not violate any applicable provision of law, or any
                  order, judgment or decree of any Governmental Authority, nor
                  violate or result in a breach of or constitute (with due
                  notice or lapse of time or both) a default under any contract,
                  lease, loan agreement, mortgage, security agreement, trust
                  indenture or other agreement or instrument to which Williams
                  is a party or by which it is bound or to which any of its
                  properties or assets is subject, nor result in the creation or
                  imposition of any encumbrance upon any of its properties or
                  assets where such violations, breaches or defaults in the
                  aggregate would have a material adverse effect on the
                  transactions contemplated hereby or on the assets, properties,
                  business, operations, net income or financial condition of
                  Williams.

         9. Indemnification; Release; Limit on Liability.

                  (a) Williams and the Williams Service Providers shall, jointly
         and severally, indemnify and hold harmless the Buyer Entities and each
         of their respective officers, directors, employees, agents and
         affiliates (and the officers, directors, employees and agents of such
         affiliates) (the "Buyer Indemnified Parties") from and against any and
         all losses, claims, demands, damages, fines, penalties, injuries,
         liabilities, suits, obligations to indemnify others, judgments,
         expenses or costs (including reasonable attorneys', consultants' and
         experts' fees and other expenses incurred in the defense of any claim
         or lawsuit in the enforcement of this indemnity obligation) (each, a
         "Claim") arising out of, relating to or resulting from the Williams
         Service Providers' performance of the services specified under this
         Agreement to the extent such Claim results from Williams or the
         Williams Service Providers' negligence or willful failure to perform
         their obligations hereunder.

                                       12

                  (b) The Buyer Entities shall, jointly and severally, indemnify
         and hold harmless Williams and the Williams Service Providers, and each
         of their respective officers, directors, employees, agents and
         affiliates (and the officers, directors, employees and agents of such
         affiliates) ("Williams Indemnified Parties") if any of the Williams
         Indemnified Parties shall at any time or from time to time be subject
         to any Claims arising out of, relating to or resulting from the
         performance of the services specified under this Agreement by either
         party except to the extent such Claim results from the Williams
         Indemnified Parties' negligence or willful failure to perform their
         obligations hereunder.

                  (c) Notwithstanding anything to the contrary in this
         Agreement, the Buyer Entities shall not be liable to any of the
         Williams Indemnified Parties, nor shall Williams or the Williams
         Service Providers be liable to any of the Buyer Indemnified Parties,
         for any exemplary, punitive, special, indirect, consequential, remote,
         or speculative damages (including, without limitation, any damages on
         account of lost profits or opportunities) resulting from or arising out
         of this Agreement or the transactions contemplated hereby.

                  (d) The obligations of the Parties in this Section 9 shall not
         limit their respective indemnification obligations, or those of their
         affiliates, under the Purchase Agreement.

         10. Schedules. The Schedules to this Agreement that are specifically
referred to herein are a part of this Agreement as if fully set forth herein.
All references herein to Articles, Sections, subsections, paragraphs,
subparagraphs, clauses and Schedules shall be deemed references to such parts of
this Agreement, unless the context shall otherwise require.

         11. Force Majeure. If by reason of a Force Majeure Event either party
is rendered unable, in whole or in part, to perform its obligations under this
Agreement, other than the obligation to make payments of money then due, such
party shall be excused from such performance to the extent it is prevented by,
and during the continuance of, such Force Majeure Event. The party whose
performance is affected by an Force Majeure Event shall (i) give the other party
notice of the occurrence of such Force Majeure Event as soon as practicable and
(ii) use all commercially reasonable efforts to remedy the cause(s) and
effect(s) of such Force Majeure Event with all reasonable dispatch; provided,
however, that the affected party shall not be obligated to undertake
commercially unreasonable costs or burdens in order to overcome the effects of
the Force Majeure Event and reinstate full performance of its obligations under
this Agreement.

         12. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed given if delivered personally,
by facsimile (which is confirmed) or sent by overnight courier (providing proof
of delivery), to the parties at the following address:

         (a)      If to Williams:

         The Williams Companies, Inc.
         One Williams Center
         Tulsa, Oklahoma 74172

                                       13

         Facsimile: (918) 573-4503
         Attention: Mr. Tony Gehres

         (b)      If to the Buyer Entities:

         WEG Acquisitions, L.P.
         c/o WEG GP LLC
         One Williams Center
         Tulsa, Oklahoma 74172
         Facsimile: (918) 573-6928
         Attention:  Mr. Lonny Townsend

         with a copy to:

         Vinson & Elkins L.L.P.
         666 Fifth Avenue
         26th Floor
         New York, New York 10103
         Facsimile: (917) 206-8100
         Attention: Mr. Mike Rosenwasser

Any party may, by notice given in accordance with this Section 12 to the other
parties, designate another address or person for receipt of notices hereunder
provided that notice of such a change shall be effective upon receipt.

         13. Successors and Assigns. This Agreement shall inure to the benefit
of, and be binding upon, Williams and Buyer and their respective successors and
permitted assigns. No party may assign or otherwise transfer all or any of its
rights, benefits or obligations hereunder without the prior written consent of
the other party, and any assignment without such consent shall be void; provided
however, that, upon written notice to the other party but without the prior
written consent of such other party, a party may assign or otherwise transfer
its rights, benefits and obligations hereunder to another person or entity in
connection with an acquisition, merger, consolidation, sale of assets or other
transaction involving such other person or entity and constituting a change of
control of such party hereto.

         14. Headings. The headings in this Agreement are for reference only,
and shall not affect the interpretation of this Agreement.

         15. Signatures Counterparts. Facsimile transmission of any signed
original document and/or retransmission of any signed facsimile transmission
shall be the same as delivery of an original. At the request of Buyer or
Williams, the parties will confirm facsimile transmission by signing a duplicate
original document. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original and all of which together shall be
considered one and the same agreement.

                                       14

         16. Amendments. This Agreement may be amended, modified or supplemented
only by a written instrument executed by Williams and Buyer. The execution of
such instrument by any Partnership Entity shall not be required.

         17. Governing Law. This Agreement shall be governed and construed in
accordance with the internal and substantive laws of New York and without regard
to any conflicts of laws concepts that would apply the substantive law of some
other jurisdiction.

         18. Entire Agreement. This Agreement, together with the Schedules
attached hereto, and the provisions of the Purchase Agreement relating hereto,
represent the entire agreement and understanding of the parties hereto and
thereto with reference to the transactions set forth herein. This Agreement,
together with the Schedules attached hereto, and the provisions of the Purchase
Agreement relating hereto, supercede all prior negotiations, discussions,
correspondence, communications, understandings and agreements between the
parties relating to the transactions set forth herein and all prior drafts
hereof (including Exhibit 1.2(a)(iv)(2) to the Purchase Agreement). No prior
drafts hereof and no words or phrases from any such prior drafts shall be
admissible into evidence in any action or suit involving this Agreement.

         19. Negotiated Agreement. This Agreement has been negotiated by the
parties and the fact that the initial and final draft will have been prepared by
either party will not give rise to any presumption for or against any party to
this Agreement or be used in any respect or forum in the construction or
interpretation of this Agreement or any of its provisions.

         20. Waiver. No consent or waiver, express or implied, by any party to
or of any breach or default by any other party in the performance by such other
party of its obligations hereunder shall be deemed or construed to be a consent
or waiver to or of any other breach or default in the performance of obligations
hereunder by such other party hereunder. Failure on the part of any party to
complain of any act or failure to act of any other party or to declare any other
party in default, irrespective of how long such failure continues, shall not
constitute a waiver by such first party of any of its rights hereunder.

         21. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, each of Williams and Buyer directs that such court interpret
and apply the remainder of this Agreement in the manner that it determines most
closely effectuates their intent in entering into this Agreement, and in doing
so particularly take into account the relative importance of the term,
provision, covenant or restriction being held invalid, void or unenforceable.

         22. Interpretation. Whenever the words "include," "includes," or
"including," are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."

         23. Third Party Beneficiaries. Except for the Buyer Entities other than
the Buyer (including the Partnership Entities) and Williams Service Providers,
which are intended third party beneficiaries, and except as set forth in
Sections 9 and 13, nothing in this Agreement is intended or shall be construed
to give any person, other than the parties hereto, their successors and
permitted assigns, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.

                                       15

         24. Agreement Binding on Entities Other Than Parties. Buyer shall use
commercially reasonable efforts to cause the Partnership Entities to be bound by
the terms and conditions of this Agreement, and Buyer shall be responsible for
any breaches thereof by any such Partnership Entity. The Buyer Entities are
jointly and severally liable hereunder.

         25. Press Release. Except as required by Laws or applicable stock
exchange rules, neither party shall issue any press releases relating to or
arising out of the performance of this Agreement without the prior written
consent and approval of the content of such statement by the other party (which
consent shall not be unreasonably withheld).

         26. Reasonable Cooperation. During the term of this Agreement, each of
the parties shall reasonably cooperate with each other to perform its
obligations under this Agreement, including without limitation, agreeing to
negotiate in good faith to enter into an amendment to this Agreement upon the
written request of either party.

                                       16

         IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.

                                      THE WILLIAMS COMPANIES, INC.
                                      A DELAWARE CORPORATION

                                      By: /s/ Phillip D. Wright
                                          -------------------------------
                                      Name: Phillip D. Wright
                                      Title: Authorized Signatory

                                      WEG ACQUISITIONS, L.P.
                                      A DELAWARE LIMITED PARTNERSHIP

                                      By: WEG Acquisition Management, LLC
                                          its General Partner

                                      By: /s/ Justin S. Huscher
                                          --------------------------------
                                      Name: Justin S. Huscher
                                      Title: Authorized Signatory

                                      By: /s/ Pierre F. Lapeyre, Jr.
                                          ---------------------------------
                                      Name: Pierre F. Lapeyre, Jr.
                                      Title: Authorized Signatory

                                       17

                                  SCHEDULE "A"

                                  G&A SERVICES

                                                                                                  Monthly
                        Category of G&A Services                                              G&A Services Fee
                        ------------------------                                              ----------------
                                                                                           
1.  Technical services, including engineering, project management,
    corrosion control, environmental, health and safety services (excludes
    $30,583 estimated monthly bonus accrual and $22,702 benefits)                                 $746,715

2.  Pipeline commercial services, including commercial, business
    development, tariffs, and operations management for the Pipeline
    Group (excludes $31,417 in estimated monthly bonus accrual and
    $12,231 benefits)                                                                             $423,019

3.  Terminals commercial services, including commercial, business
    development and operations management for the Terminals Group
    (excludes $22,833 in estimated monthly bonus accrual and $7,508
    benefits)                                                                                     $286,325

4.  Services of CEO, CFO and their staffs, including investor relations
    and planning (excludes $16,750 in estimated monthly bonus accrual
    and $2,976 benefits)                                                                          $113,607

5.  Information technology services, including business, financial and
    HR applications and network, hardware and website support
    (excludes $12,500 in estimated monthly bonus accrual and $10,518
    benefits),* subdivided as follows:                                                            $710,000
    a.  ATLAS                                                                                     $193,000
    b.  Terminals Application (TAS)                                                               $ 49,000
    c.  Pipeline Applications (SCADA, Magic, Squire)                                              $ 54,000
    d.  Environmental Management                                                                  $  9,000
    e.  GIS                                                                                       $  1,000
    f.  Livelink                                                                                  $  6,000
    g.  Financial applications, including accounts payable/receivable,
           general ledger, financial reporting, purchasing)                                       $ 13,000
    h.  HR/Payroll applications                                                                   $ 46,000
    i.  Personal computing infrastructure (PC procurement, helpdesk,
           email, security)                                                                       $174,000
    j.  Hardware Leases                                                                           $ 27,000
    k.  Network support, including LAN and WAN routers                                            $138,000

6.  Accounting services, including business, general, accounts payable,
    property and management accounting and accounting services for                                $192,673

                                      A-1

                                                                                             
    SEC reporting (excludes $9,083 in estimated monthly bonus accrual and $6,577 benefits),
    subdivided as follows:
    a.  Financial Reporting                                                                     $   27,365
    b.  General Accounting                                                                      $   33,522
    c.  Accounts Payable                                                                        $   24,068
    d.  Revenue Accounting                                                                      $   82,049
    e.  Property Accounting                                                                     $   25,669

7.  Human resources and benefits administration, including HR
    generalists, compensation benefits analysts and benefits
    administration and employee communications (excludes $5,250 in
    estimated monthly bonus accrual and $2,710 benefits)                                        $  167,040

8.  Legal services of internal and external attorneys for legal services
    including contract negotiation, business advice, corporate secretary,
    general business advice, and services of general counsel (excludes
    $10,583 in estimated monthly bonus accrual and $2,102 benefits)                             $  120,648

9.  Governmental Affairs and regulatory representation (excludes $3,250
    in estimated monthly bonus accrual and $446 benefits)                                       $   37,971

10. Tax services, including state and local taxes, ad valorem tax,
    transactional taxes, and federal K-1 reporting assistance (excludes
    $2,167 in estimated monthly bonus accrual and $1,209 benefits)                              $   38,291

11. Internal audit and compliance services (excludes $2,167 in estimated
    monthly bonus accrual and $676 benefits)                                                    $   22,157

12. Risk management and insurance services                                                      $    8,333

13. Treasury services, including cash management and wire/ACH
    processing (excludes  $167 in estimated monthly bonus accrual and
    $143 benefits)                                                                              $    8,024

14. Administrative services, including mail services, fax and copier
    leases, records management, office services, and parking subsidy
    (excludes $500 in estimated monthly bonus accrual and $390
    benefits)                                                                                   $   24,110
                                                                                                ----------
        TOTAL                                                                                   $2,898,913

*    Notes to Item 5 above:

     -    Individual PC leases will be reduced following transfer of payment
          responsibilities.

     -    Network circuit charges (Williams' billed amount) will be reduced
          following circuit transfers.

     -    Computing (subcategory "i .") shall remain for the duration of the
          Agreement.

     -    Subcategories "a." through "j." shall not be subdivided; Buyer shall
          assume cost until the entire service represented by any such
          subcategory is removed.

                                      A-2

                                  SCHEDULE "B"

                           POTENTIAL LEASED EMPLOYEES*

- ----------------------------------------------------------------------------
  Employee Name                    Date of Birth              Lease End Date
- ----------------------------------------------------------------------------
                                                        
Kent Pribil                           7/4/1948                   7/11/2003
- --------------------------------------------------------------------------
Elsie Harmon                         8/14/1948                   8/22/2003
- --------------------------------------------------------------------------
Shirley Maxon                        8/18/1948                   8/22/2003
- --------------------------------------------------------------------------
Patricia L. Jones                    9/21/1948                   10/3/2003
- --------------------------------------------------------------------------
Jimmie D. Hamilton                  10/28/1948                  10/31/2003
- --------------------------------------------------------------------------
Karl A. Erickson                     11/8/1948                  11/14/2003
- --------------------------------------------------------------------------

* Each potential Leased Employees listed above shall become a Leased Employee in
accordance with Section 2(f) of this Agreement.

                                      B-1

                                  SCHEDULE "C"

                   POTENTIAL O&M EMPLOYEES AND G&A EMPLOYEES*

                               [See Attached List]

* This Schedule shall be finalized no more than five (5) days after delivery of
the Section 4.3(a) Notice to the Selling Parties.

                                       C-1

                                                                  EXECUTION COPY

                                                                    EXHIBIT 10.9

================================================================================

                              NEW OMNIBUS AGREEMENT

                                      among

                             WEG Acquisitions, L.P.,

                         Williams Energy Services, LLC,

                       Williams Natural Gas Liquids, Inc.

                                       and

                          The Williams Companies, Inc.

================================================================================

                              NEW OMNIBUS AGREEMENT

         THIS NEW OMNIBUS AGREEMENT (the "Agreement") is entered into on, and
effective as of, June 17, 2003 among WEG Acquisitions, L.P., a Delaware limited
partnership ("Buyer"), Williams Energy Services, LLC, a Delaware limited
liability company ("WES"), Williams Natural Gas Liquids, Inc., a Delaware
corporation ("WNGL"), and The Williams Companies, Inc., a Delaware corporation
("Williams", and together with WES and WNGL, the "Williams Parties").

                                R E C I T A L S:

         WHEREAS, Williams, WES, WNGL, Williams Pipe Line Company, LLC, a
Delaware limited liability company ("WPL"), Williams Energy Partners, L.P., a
Delaware limited partnership (the "MLP"), Williams OLP, L.P., a Delaware limited
partnership (the "OLP"), Williams GP LLC, a Delaware limited liability company
(the "Old GP"), and Williams Information Technology, Inc. (f/k/a Williams
Information Services Corporation), a Delaware corporation, entered into that
certain Omnibus Agreement, effective as of February 9, 2001, as amended by the
Amendment I thereto, dated January 28, 2002, the Second Amendment thereto, dated
April 11, 2002, and the Third Amendment thereto, dated September 30, 2002 (as
amended, the "Old Omnibus Agreement");

         WHEREAS, Buyer, WES, WNGL and the Old GP have entered into that certain
Purchase Agreement, dated as of April 18, 2003, as amended by Amendment No. 1
thereto dated as of May 5, 2003 (as amended, the "Purchase Agreement"), for the
purchase and sale of all of the membership interests of WEG GP LLC, a Delaware
limited liability company ("WEG GP LLC"), all of the common units and
subordinated units representing limited partner interests in the MLP owned by
WES and WNGL, and all of the class B common units representing limited partner
interests in the MLP owned by the Old GP (as contemplated in the Purchase
Agreement, the "Transaction");

         WHEREAS, the Old Omnibus Agreement will terminate upon closing of the
Transaction (the "Closing" and the date on which the Closing occurs, the
"Closing Date"); and

         WHEREAS, the parties hereto specifically intend for each of the
entities comprising the Partnership Entities and the Partnership Group, as
applicable, to be third-party beneficiaries with respect to certain of the
rights and benefits herein of the parties hereto.

         NOW, THEREFORE, in consideration of the premises and the covenants,
conditions, and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

         1.1      DEFINITIONS.

                  (a)      Capitalized terms used herein but not defined shall
have the meanings given to them in the MLP Agreement.

Page                                                                           1

                  (b)      As used in this Agreement, the following terms shall
have the respective meanings set forth below:

                  "Accounting Referee" is defined in Section 9.1(a).

                  "Acquisition Date" means April 11, 2002, the date WES
         contributed and the MLP acquired all of the membership interests in
         WPL.

                  "Affiliate" of a Person means a Person that directly or
         indirectly, through one or more intermediaries, controls, is controlled
         by, or is under common control with, the first-mentioned Person.

                  "Applicable Period" means the period commencing on the Closing
         Date and terminating on the second (2nd) anniversary of the Closing
         Date.

                  "Assignee" is defined in the MLP Agreement.

                  "Buyer" is defined in the introduction to this Agreement.

                  "Buyer Entities" means the Buyer and any entity that directly,
         or indirectly through one or more intermediaries, is controlled by the
         Buyer, including WEG GP LLC (but excluding each entity comprising the
         Partnership Group).

                  "Buyer Offer" is defined in Section 3.3(a).

                  "Change of Control" means, with respect to any Person (the
         "Applicable Person"), any of the following events:

                           (i)      any sale, lease, exchange or other transfer
         (in one transaction or a series of related transactions) of all or
         substantially all of the Applicable Person's assets to any other
         Person, unless immediately following such sale, lease, exchange or
         other transfer such assets are owned, directly or indirectly, by the
         Applicable Person;

                           (ii)     the consolidation or merger of the
         Applicable Person with or into another Person pursuant to a transaction
         in which the outstanding Voting Securities of the Applicable Person are
         changed into or exchanged for cash, securities or other property, other
         than any such transaction where (a) the outstanding Voting Securities
         of the Applicable Person are changed into or exchanged for Voting
         Securities of the surviving corporation or its parent and (b) the
         holders of the Voting Securities of the Applicable Person immediately
         prior to such transaction own, directly or indirectly, not less than a
         majority of the Voting Securities of the surviving corporation or its
         parent immediately after such transaction;

                           (iii)    a "person" or "group" (within the meaning of
         Sections 13(d) or 14(d)(2) of the Exchange Act) being or becoming the
         "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
         Exchange Act, except that a person or group shall be deemed to have
         "beneficial ownership" of all Voting Securities that such person or
         group has the right to acquire, whether such right is exercisable
         immediately or only after the

Page                                                                           2

         passage of time) of more than 50% of all of the then outstanding Voting
         Securities of the Applicable Person, except in a merger or
         consolidation that would not constitute a Change of Control under
         clause (ii) above; or

                           (iv)     solely with respect to WEG GP LLC, the
         Continuing Directors of WEG GP LLC cease for any reason to constitute
         all of the board of directors of WEG GP LLC then in office;

         notwithstanding the foregoing, the events described in clauses (i)
         through (iii) of this definition shall not constitute a Change of
         Control of WEG GP LLC if the other Person (or "person" or "group," in
         the case of clause (iii)) referred to in such clauses, immediately
         prior to such transaction, is an Affiliate of Buyer or WEG GP LLC.

                  "Closing" is defined in the recitals to this Agreement.

                  "Closing Date" is defined in the recitals to this Agreement.

                  "Conflicts Committee" is defined in the MLP Agreement.

                  "Continuing Directors" means (1) all individuals constituting
         the board of directors of WEG GP LLC immediately after the Closing and
         (2) any new directors whose nomination for election to the board of
         directors of WEG GP LLC was approved by WEG GP LLC or the board of
         directors of WEG GP LLC, or the nominating committee of such board, at
         a time that Continuing Directors comprised all of such board of
         directors.

                  "control" means the possession, direct or indirect, of the
         power to direct or cause the direction of the management and policies
         of a Person, whether through ownership of voting securities, by
         contract or otherwise.

                  "Covered Environmental Losses" is defined in Section 4.1.

                  "Environmental Laws" means all federal, state, and local laws,
         statutes, rules, regulations, orders, and ordinances relating to
         protection of health and the environment including, without limitation,
         the federal Comprehensive Environmental Response, Compensation, and
         Liability Act, the Superfund Amendments Reauthorization Act, the
         Resource Conservation and Recovery Act, the Clean Air Act, the Federal
         Water Pollution Control Act, the Toxic Substances Control Act, the Oil
         Pollution Act, the Safe Drinking Water Act, the Hazardous Materials
         Transportation Act, and other environmental conservation and protection
         laws, each as amended through the IPO Date.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
         amended.

                  "G&A Cap Amount" is defined in Section 7.1(a).

                  "General Partner" means WEG GP LLC and its successors as
         general partner of the MLP, unless the context otherwise requires.

Page                                                                           3

                  "IPO Assets" is defined in Section 4.1.

                  "IPO Date" means February 9, 2001, the date of the closing of
         the initial public offering of common units representing limited
         partner interests in the MLP.

                  "Limited Partner" is defined in the MLP Agreement.

                  "MLP" is defined in the introduction to this Agreement.

                  "MLP Agreement" means the Second Amended and Restated
         Agreement of Limited Partnership of the MLP, dated as of September 27,
         2002, as amended by Amendments Nos. 1 and 2 thereto, each dated as of
         November 15, 2002, as such agreement may be further amended or
         supplemented through the Closing Date, to which reference is hereby
         made for all purposes of this Agreement. No amendment or modification
         to the MLP Agreement subsequent to the Closing Date shall be given
         effect for the purposes of this Agreement unless consented to by each
         of the parties to this Agreement.

                  "OLP" is defined in the introduction to this Agreement.

                  "Old Omnibus Agreement" is defined in the recitals to this
         Agreement.

                  "Partnership Entities" means the General Partner, the MLP, the
         OLP, WPL and any entity controlled by any of the foregoing.

                  "Partnership Group" means the Partnership Entities, with the
         exclusion of the General Partner.

                  "Payment Request" is defined in Section 9.1(a).

                  "Person" means an individual, corporation, partnership, joint
         venture, trust, limited liability company, unincorporated organization
         or any other entity.

                  "Prospectus" means the MLP's final prospectus, dated February
         5, 2001, relating to the initial public offering of common units
         representing limited partner interests in the MLP, as filed with
         Securities and Exchange Commission pursuant to Rule 424(b) under the
         Securities Act of 1933.

                  "Purchase Agreement" is defined in the recitals to this
         Agreement.

                  "Refined Products" means all grades of motor gasoline,
         distillate and aviation fuel.

                  "Restricted Assets" means, (i) with respect to the Williams
         Entities, for purposes of Article II, any assets or any business having
         assets engaged in the activities prohibited by Section 2.1 and (ii)
         with respect to the Buyer Entities, for purposes of Article III, any
         assets or any business having assets engaged in the activities
         prohibited by Section 3.1.

Page                                                                           4

                  "Services Agreement" means the Services Agreement, dated the
         date hereof, among Williams Petroleum Services, LLC, Williams Alaska
         Pipeline Company, LLC, and WPL.

                  "Transaction" is defined in the recitals to this Agreement.

                  "Transition Services Agreement" means the Transition Services
         Agreement, dated the date hereof, between Buyer and Williams.

                  "Upper Cap Amount" is defined in Section 7.2(c)(i).

                  "Voting Securities" means securities of any class of a Person
         entitling the holders thereof to vote on a regular basis in the
         election of members of the board of directors or other similar
         governing body of such Person; provided, however, that in the case of
         WEG GP LLC, "Voting Securities" shall refer solely to the membership
         interests in WEG GP LLC.

                  "WAP LP" is defined in Section 5.1.

                  "WEG GP LLC" is defined in the recitals to this Agreement.

                  "WES" is defined in the introduction to this Agreement.

                  "Williams" is defined in the introduction to this Agreement.

                  "Williams Entities" means Williams and any entity that
         directly, or indirectly through one or more intermediaries, controls,
         is controlled by or is under common control with Williams, including
         without limitation, WNGL, WES and the Old GP.

                  "Williams Offer" is defined in Section 2.3(a).

                  "Williams Parties" is defined in the recitals to this
         Agreement.

                  "WNGL" is defined in the introduction to this Agreement.

                  "WPL" is defined in the recitals to this Agreement.

                  "WTH LP" is defined in Section 5.2.

                  "2003 Pre-Closing Stub Period" is defined in Section
         7.1(b)(i)(A).

                  "2003 Pre-Closing Cap" is defined in Section 7.1(b)(i)(A).

                  "2003 Post-Closing Stub Period" is defined in Section
         7.1(b)(i)(B).

                  "2003 Post-Closing Cap" is defined in Section 7.1(b)(i)(B).

                  "2003 Post-Closing Upper Cap Amount" is defined in Section
         7.2(c)(ii)(A).

Page                                                                           5

                  "2004 Stub Period" is defined in Section 7.2(c)(iii)(B).

                  "2004 Stub Period Upper Cap Amount" is defined in Section
         7.2(c)(iii)(B).

                                   ARTICLE II
                    WILLIAMS ENTITIES' BUSINESS OPPORTUNITIES

         2.1      WILLIAMS ENTITIES RESTRICTED ASSETS. During the Applicable
Period, the Williams Entities shall be prohibited from engaging in or acquiring
any business having assets engaged in the following activities:

                  (a)      the transportation, storage or distribution of
ammonia or related products in the United States;

                  (b)      the ownership and operation of facilities for the
terminalling and storage of refined petroleum products in any state in the
United States, except Alaska and Hawaii;

                  (c)      Refined Product transportation (including, without
limitation, through joint tariff arrangements or capacity leases or otherwise)
to a delivery point within a 50-mile radius of a Refined Products delivery point
owned or supplied by a Partnership Entity on the Acquisition Date; and

                  (d)      Refinery grade butane transportation from the Koch
Pine Bend, MN, refinery, Marathon St. Paul, MN refinery, ExxonMobil Joilet
refinery, BP Whiting, IN refinery and CITGO Lemont, IL refinery.

         2.2      PERMITTED EXCEPTIONS. Notwithstanding any provision of Section
2.1 to the contrary, any Williams Entity may own and operate Restricted Assets
under the following circumstances:

                  (a)      The Restricted Asset was owned, leased or operated by
the Williams Entities on the Closing Date;

                  (b)      The value of the Restricted Assets acquired after the
Closing Date in a transaction does not exceed $20 million at the time of the
acquisition, as determined by Williams, in its reasonable sole discretion;

                  (c)      (i) The value of the Restricted Assets acquired after
the Closing Date in a transaction exceeds $20 million at the time of
acquisition, as determined by Williams, in its reasonable sole discretion, and
(ii) the General Partner has elected not to cause a member of the Partnership
Group to pursue such opportunity in accordance with the procedures set forth in
Section 2.3; or

                  (d)      The value of the Restricted Assets acquired after the
Closing Date in a transaction represents less than 30% of the consideration paid
by Williams or another Williams Entity in connection with such transaction, as
determined by Williams, in its reasonable sole discretion.

Page                                                                           6

         2.3      PROCEDURES. In the event that, pursuant to Section 2.2(c), a
Williams Entity acquires Restricted Assets valued or having an original cost in
excess of $20 million at the time of the acquisition, as determined by Williams,
in its reasonable sole discretion, then not later than six (6) months after the
consummation of the acquisition by such Williams Entity of the Restricted
Assets, such Williams Entity shall notify the General Partner of such purchase
and offer the Partnership Group the opportunity to purchase such Restricted
Assets. As soon as practicable, but in any event, within sixty (60) days after
receipt of such notification, the General Partner shall notify the Williams
Entity that either (i) the General Partner has elected not to cause a member of
the Partnership Group to purchase such Restricted Assets, in which event such
Williams Entity shall be forever free to continue to own or operate such
Restricted Assets, or (ii) the General Partner has elected to cause a member of
the Partnership Group to purchase such Restricted Assets, in which event the
following procedures shall be followed:

                  (a)      Within thirty (30) days of receipt of the notice from
the General Partner that the General Partner has elected to cause a member of
the Partnership Group to purchase the Restricted Assets, Williams shall submit
an offer to the General Partner to sell the Restricted Assets (the "Williams
Offer") to any member of the Partnership Group selected by the General Partner
on the terms and for the consideration stated in the Williams Offer;

                  (b)      Williams and the General Partner shall negotiate
after receipt of such Williams Offer by the General Partner, the terms on which
the Restricted Assets will be sold to a member of the Partnership Group.
Williams shall provide all information concerning the business, operations and
finances of such Restricted Assets as may be reasonably requested by the General
Partner.

                           (i)      If Williams and the General Partner agree on
         such terms within sixty (60) days after receipt by the General Partner
         of the Williams Offer, the General Partner shall cause a member of the
         Partnership Group to purchase the Restricted Assets on such terms as
         soon as commercially practicable after such agreement has been reached;

                           (ii)     If Williams and the General Partner are
         unable to agree on the terms of a sale during the 60-day period after
         receipt by the General Partner of the Williams Offer, Williams and the
         General Partner will engage an independent investment banking firm with
         a national reputation to determine the fair market value of the
         Restricted Assets. In determining the fair market value of the
         Restricted Assets, the investment banking firm will have access to the
         proposed sale and purchase values for the Restricted Assets submitted
         by Williams and the General Partner, respectively. Such investment
         banking firm will determine the value of the Restricted Assets within
         thirty (30) days and furnish Williams and the General Partner its
         opinion of such value. The fees of the investment banking firm's
         appraisal will be split equally between Williams and the MLP. Upon
         receipt of such opinion, the General Partner will have the option, but
         not the obligation to:

                           (iii)

Page                                                                           7

                                    (A) cause a member of the Partnership Group
                           to purchase the Restricted Assets in accordance with
                           the following process:

                                         (1) if the valuation of the investment
                                    banking firm is in the range between the
                                    proposed sale/purchase values of Williams
                                    and the General Partner, the General Partner
                                    will have the right to cause a member of the
                                    Partnership Group to purchase the Restricted
                                    Assets at the valuation submitted by the
                                    investment banking firm;

                                         (2) if the valuation of the investment
                                    banking firm is less than the proposed
                                    purchase value submitted by the General
                                    Partner, the General Partner will have the
                                    right to cause a member of the Partnership
                                    Group to purchase the Restricted Assets for
                                    the amount submitted by the General Partner;
                                    and

                                         (3) if the valuation of the investment
                                    banking firm is greater than the proposed
                                    sale value submitted by Williams, the
                                    General Partner will have the right to cause
                                    a member of the Partnership Group to
                                    purchase the Restricted Assets for the
                                    amount submitted by Williams; or

                                    (B) decline to purchase such Restricted
                           Assets, in which event the Williams Entity forever
                           will be free to continue to own and operate such
                           Restricted Assets.

         2.4      SCOPE OF PROHIBITION. Williams and any other Williams Entity
shall only be required to offer Restricted Assets to the General Partner for
purchase by a member of the Partnership Group upon the terms and conditions,
including the price to be paid, contained in this Article II. Except as provided
in this Article II, each Williams Entity shall be free to engage in any business
activity whatsoever, including those that may be in direct competition with
Buyer or any Partnership Entity.

                                  ARTICLE III
                     BUYER ENTITIES' BUSINESS OPPORTUNITIES

         3.1      BUYER ENTITIES RESTRICTED ASSETS. During the Applicable
Period, the Buyer Entities shall be prohibited from engaging in or acquiring any
business having assets engaged in the following activities:

                  (a)      the transportation, storage or distribution of
ammonia or related products in the United States;

                  (b)      the ownership and operation of facilities for the
terminalling and storage of refined petroleum products in any state in the
United States, except Alaska and Hawaii; and

                  (c)      Refined Product transportation (including, without
limitation, through joint tariff arrangements or capacity leases or otherwise)
to a delivery point within a 50-mile

Page                                                                           8

radius of a Refined Products delivery point owned or supplied by a Partnership
Entity on the Acquisition Date.

         3.2      PERMITTED EXCEPTIONS. Notwithstanding any provision of Section
3.1 to the contrary, any Buyer Entity may own and operate Restricted Assets
under the following circumstances:

                  (a)      The Restricted Asset was owned, leased or operated by
the Buyer Entities on the Closing Date;

                  (b)      The Restricted Asset is owned, leased or operated by
the Buyer Entities on behalf of the Partnership Group;

                  (c)      The value of the Restricted Assets acquired after the
Closing Date in a transaction does not exceed $20 million at the time of the
acquisition, as determined by Buyer, in its reasonable sole discretion;

                  (d)      (i) The value of the Restricted Assets acquired after
the Closing Date in a transaction exceeds $20 million at the time of
acquisition, as determined by Buyer, in its reasonable sole discretion, and (ii)
the General Partner (with the approval of the Conflicts Committee) has elected
not to cause a member of the Partnership Group to pursue such opportunity in
accordance with the procedures set forth in Section 3.3; or

                  (e)      The value of the Restricted Assets acquired after the
Closing Date in a transaction represents less than 30% of the consideration paid
by Buyer or another Buyer Entity in connection with such transaction, as
determined by Buyer, in its reasonable sole discretion.

         3.3      PROCEDURE. In the event that, pursuant to Section 3.2(d), a
Buyer Entity acquires Restricted Assets valued or having an original cost in
excess of $20 million at the time of the acquisition, as determined by Buyer, in
its reasonable sole discretion, then not later than six (6) months after the
consummation of the acquisition by such Buyer Entity of the Restricted Assets,
such Buyer Entity shall notify the General Partner of such purchase and offer
the Partnership Group the opportunity to purchase such Restricted Assets. As
soon as practicable, but in any event, within sixty (60) days after receipt of
such notification, the General Partner shall notify the Buyer Entity that either
(i) the General Partner has elected (with the approval of the Conflicts
Committee) not to cause a member of the Partnership Group to purchase such
Restricted Assets, in which event such Buyer Entity shall be forever free to
continue to own or operate such Restricted Assets, or (ii) the General Partner
(with the approval of the Conflicts Committee) has elected to cause a member of
the Partnership Group to purchase such Restricted Assets, in which event the
following procedures shall be followed:

                  (a)      Within thirty (30) days of receipt of the notice from
the General Partner that General Partner has elected to cause a member of the
Partnership Group to purchase the Restricted Assets, the Buyer Entity shall
submit an offer to the General Partner to sell the Restricted Assets (the "Buyer
Offer") to any member of the Partnership Group selected by the General Partner
on the terms and for the consideration stated in the Buyer Offer;

Page                                                                           9

                  (b)      The Buyer Entity and the General Partner shall
negotiate after receipt of such Buyer Offer by the General Partner, the terms on
which the Restricted Assets will be sold to a member of the Partnership Group.
The Buyer Entity shall provide all information concerning the business,
operations and finances of such Restricted Assets as may be reasonably requested
by the General Partner.

                           (i)      If the Buyer Entity and the General Partner
         agree on such terms within sixty (60) days after receipt by the General
         Partner of the Buyer Offer, a member of the Partnership Group shall
         purchase the Restricted Assets on such terms as soon as commercially
         practicable after such agreement has been reached;

                           (ii)     If the Buyer Entity and the General Partner
         are unable to agree on the terms of a sale during the 60-day period
         after receipt by the General Partner of the Buyer Offer, the Buyer
         Entity and the General Partner will engage an independent investment
         banking firm with a national reputation to determine the fair market
         value of the Restricted Assets. In determining the fair market value of
         the Restricted Assets, the investment banking firm will have access to
         the proposed sale and purchase values for the Restricted Assets
         submitted by the Buyer Entity and the General Partner, respectively.
         Such investment banking firm will determine the value of the Restricted
         Assets within thirty (30) days and furnish the Buyer Entity and the
         General Partner its opinion of such value. The fees of the investment
         banking firm's appraisal will be split equally between the Buyer Entity
         and the MLP. Upon receipt of such opinion, the General Partner will
         have the option, but not the obligation to:

                           (iii)

                                    (A) cause a member of the Partnership Group
                           to purchase the Restricted Assets in accordance with
                           the following process:

                                         (1) if the valuation of the investment
                                    banking firm is in the range between the
                                    proposed sale/purchase values of the Buyer
                                    Entity and the General Partner, a member of
                                    the Partnership Group will have the right to
                                    purchase the Restricted Assets at the
                                    valuation submitted by the investment
                                    banking firm;

                                         (2) if the valuation of the investment
                                    banking firm is less than the proposed
                                    purchase value submitted by the General
                                    Partner, a member of the Partnership Group
                                    will have the right to purchase the
                                    Restricted Assets for the amount submitted
                                    by the General Partner; and

                                         (3) if the valuation of the investment
                                    banking firm is greater than the proposed
                                    sale value submitted by the Buyer Entity, a
                                    member of the Partnership Group will have
                                    the right to purchase the Restricted Assets
                                    for the amount submitted by the Buyer
                                    Entity; or

Page                                                                          10

                                    (B) decline to purchase such Restricted
                           Assets, in which event the Buyer Entity forever will
                           be free to continue to own and operate such
                           Restricted Assets.

         3.4      SCOPE OF PROHIBITION. Except as provided in this Article III,
each Buyer Entity shall be free to engage in any business activity whatsoever,
including those that may be in direct competition with any member of the
Partnership Group.

                                   ARTICLE IV
                          ENVIRONMENTAL INDEMNIFICATION

         4.1      WES INDEMNIFICATION FOR COVERED ENVIRONMENTAL LOSSES. Williams
and WES, jointly and severally, shall indemnify, defend and hold harmless the
Partnership Entities from and against any Covered Environmental Losses relating
to the assets of the Partnership Entities described in the Prospectus that arose
prior to the IPO Date (the "IPO Assets") that become known by February 9, 2004
and that exceed all amounts recovered or recoverable by any Partnership Entity
under contractual indemnities from third Persons or under any applicable
insurance policies. "Covered Environmental Losses" mean those non-contingent
environmental losses, costs, damages and expenses suffered or incurred by the
Partnership Entities arising from correction of violations of, or performance of
remediation required by, Environmental Laws in effect at the IPO Date due to
events and conditions associated with the operation of the IPO Assets and
occurring before the IPO Date.

         4.2      LIMITATIONS. Williams and WES shall have no indemnification
obligation under Section 4.1 for claims made after February 9, 2004. The
aggregate liability of Williams and WES in respect of all Covered Environmental
Losses under Section 4.1 shall not exceed $13.3 million, representing $15
million less amounts previously paid by Williams or WES to the Partnership
Entities pursuant to Section 3.1 of the Old Omnibus Agreement.

                                   ARTICLE V
                          RIGHT-OF-WAY INDEMNIFICATION

         5.1      WNGL RIGHT-OF-WAY INDEMNIFICATION. Williams and WNGL, jointly
and severally, shall indemnify, defend and hold harmless the Partnership
Entities and their successors or assigns until February 9, 2016 from and against
any losses, costs, damages, expenses and fees suffered or incurred by any of the
Partnership Entities or their successors or assigns as a result of (a) the
failure of Williams Ammonia Pipeline, L.P., a Delaware limited partnership ("WAP
LP"), or its successors or assigns to be the owner of such valid and
indefeasible easement rights in and to the easements and rights of way in which
the ammonia pipeline was located as of the IPO Date and as are necessary to
enable WAP LP and its successors and assigns to continue to own and operate the
ammonia pipeline in the manner that it was owned and operated as of the IPO
Date; and (b) the failure of WAP LP or its successors and assigns to have the
consents and permits necessary to allow such pipeline to cross the roads,
waterways, railroads and other areas upon which the ammonia pipeline was located
as of the IPO Date.

         5.2      WES RIGHT-OF-WAY INDEMNIFICATION. Williams and WES, jointly
and severally, shall indemnify, defend and hold harmless, the Partnership
Entities and their successors and

Page                                                                          11

assigns, until February 9, 2016, from and against any losses, costs, damages,
expenses and fees suffered or incurred by any of the Partnership Entities or
their successors or assigns as a result of (a) the failure of Williams Terminals
Holdings, L.P. , a Delaware limited partnership ("WTH LP"), or its successors
and assigns to be the owner of valid and indefeasible easement rights in and to
the easements and rights of way in which the pipelines that are associated with
the marine terminal facilities at Galena Park, Texas, Corpus Christi, Texas and
Marrero, Louisiana were located as of the IPO Date and that are necessary to
enable WTH LP and its successors and assigns to continue to own and operate the
pipelines in all material respects in the manner that such pipelines were owned
and operated prior to the IPO Date; and (b) the failure of WTH LP or its
successors and assigns to have the consents and permits necessary to allow such
pipelines to cross roads, waterways, railroads and other areas upon which such
pipelines were located as of the IPO Date.

                                   ARTICLE VI
            ENVIRONMENTAL AND RIGHT-OF-WAY INDEMNIFICATION PROCEDURES

         6.1      Buyer agrees that within a reasonable period of time after
any Partnership Entity becomes aware of facts giving rise to a claim for
indemnification pursuant to Sections 4.1, 5.1 or 5.2, Buyer will use its
reasonable best efforts to cause such Partnership Entity to provide notice
thereof in writing to Williams, specifying the nature of and specific basis for
such claim.

                  (a)      Except as provided in this Section 6.1(b), Williams
shall have the right to control all aspects of the defense of (and any
counterclaims with respect to) any claims brought against the Partnership
Entities that are covered by the indemnification set forth in Sections 4.1, 5.1
or 5.2, including, without limitation, the selection of counsel, determination
of whether to appeal any decision of any court and the settling of any such
matter or any issues relating thereto; provided, however, that no such
settlement shall be entered into without the consent of the Partnership Entities
unless it includes a full and unconditional release of the Partnership Entities
from all liability with respect to such matter or issues, as the case may be,
the sole relief provided is monetary damages that are paid in full by the
Williams Parties, and there is no admission or statement of fault or culpability
on the part of any Partnership Entity.

                  (b)      Buyer agrees to use its reasonable best efforts to
cause the Partnership Entities, at their own cost and expense, to cooperate
fully with Williams with respect to all aspects of the defense of any claims
covered by the indemnification set forth in Sections 4.1, 5.1 or 5.2, including,
without limitation, the prompt furnishing to Williams of any correspondence or
other notice relating thereto that the Partnership Entities may receive,
permitting the names of the Partnership Entities to be utilized in connection
with such defense, the making available to Williams of any files, records or
other information of the Partnership Entities that Williams reasonably considers
relevant to such defense and the making reasonably available to Williams, during
normal business hours, of any employees of the Partnership Entities; provided,
however, that in connection therewith Williams agrees to use reasonable best
efforts to minimize the impact thereof on the operations of such Partnership
Entities. In no event shall the obligation of Buyer to use its reasonable best
efforts to cause the Partnership Entities to cooperate with Williams as set
forth in the immediately preceding sentence be construed as imposing upon the
Buyer or the Partnership Entities an obligation to hire and pay for counsel in
connection with the defense of any claims covered by the indemnification set
forth in this Article VI, it being agreed

Page                                                                          12

that the Williams Parties, jointly and severally, shall pay the fees and
expenses of such counsel; provided, further, that Buyer or the Partnership
Entities may hire and pay for separate counsel in connection with any such
defense, at the Buyers or the MLP's own option, cost and expense, as the case
may be; provided, further, that the Williams Parties, jointly and severally,
shall pay the fees and expenses of separate counsel for the Buyer or the
Partnership Entities if (i) the Williams Parties have agreed to pay such fees
and expenses or (ii) counsel for the Williams Parties reasonably determines that
representation of both the Williams Parties, on the one hand, and the
Partnership Entities, on the other hand, by the same counsel would create a
conflict of interest. Williams agrees to keep any counsel hired by the
Partnership Entities reasonably informed as to the status of any such defense,
but Williams shall have the right to retain sole control over such defense
except as provided above.

                  (c)      In determining the amount of any loss, cost, damage
or expense for which any of the Partnership Entities are to be indemnified under
Sections 4.1, 5.1 or 5.2, the gross amount of the indemnification will be
reduced by (i) any insurance proceeds realized or to be realized by the
Partnership Entities, and such correlative insurance benefit shall be net of any
incremental insurance premium that becomes due and payable by the Partnership
Entities as a result of such claim and (ii) all amounts recovered or recoverable
by any Partnership Entity under contractual indemnities from third Persons as
described in Section 4.1.

                                  ARTICLE VII
                       GENERAL AND ADMINISTRATIVE EXPENSES

         7.1      G&A CAP AMOUNT.

                  (a)      Subject to Section 7.2, the amount of general and
administrative expenses reimbursed by the Partnership Group to the Buyer
Entities (or, in the case of Section 7.1(b)(i)(A) below, to the Williams
Entities) for any MLP fiscal year shall not exceed the amounts calculated
pursuant to Section 7.1(b) (for any MLP fiscal year, the "G&A Cap Amount").

                  (b)      2003 Fiscal Year. For the MLP fiscal year ending on
December 31, 2003, the G&A Cap Amount shall be calculated as follows:

                                    (A) For the period beginning on January 1,
                           2003 and ending on the day immediately preceding the
                           Closing Date (the "2003 Pre-Closing Stub Period"),
                           the amount of general and administrative expenses
                           reimbursed by the Partnership Group to the Williams
                           Entities shall not exceed $37.9 million times a
                           fraction, (X) the numerator of which is the number of
                           successive whole months beginning with January 2003
                           and ending with the month in which the Closing occurs
                           and (Y) the denominator of which is twelve (12) (the
                           "2003 Pre-Closing Cap"). To the extent that the
                           Partnership Group reimbursed the Williams Entities
                           for general and administrative expenses incurred in
                           2003 in excess of the 2003 Pre-Closing Cap, the
                           Williams Parties shall reimburse the MLP for any such
                           excess amounts and shall make such payment no later
                           than thirty (30) days following the Closing Date. To
                           the extent that the Williams Entities paid
                           unreimbursed general and administrative expenses up
                           to the 2003 Pre-

Page                                                                          13

                           Closing Cap, Buyer shall use commercially reasonable
                           efforts to cause the MLP to, make payment to the
                           appropriate Williams Entity of such unreimbursed
                           amount no later than thirty (30) days following the
                           Closing Date.

                                    (B) For the period beginning with the
                           Closing Date and ending on December 31, 2003 (the
                           "2003 Post-Closing Stub Period"), the amount of
                           general and administrative expenses reimbursed by the
                           Partnership Group to the Buyer Entities shall not
                           exceed the sum of (1) the product of $37.9 million
                           (as may be adjusted pursuant to Section 7.1(b)(iii))
                           times a fraction, (X) the numerator of which is the
                           number of successive whole months beginning with the
                           month following the month in which the Closing occurs
                           and ending with December 2003 and (Y) the denominator
                           of which is twelve (12) (the "2003 Post-Closing
                           Cap"), plus (2) the amount of general and
                           administrative expenses incurred by or on behalf of
                           the Partnership Group in excess of the 2003
                           Post-Closing Upper Cap Amount less any amounts duly
                           reimbursed by the Williams Parties to the Buyer
                           Entities pursuant to Section 7.2(c)(iii)(A).

                           (ii)     Succeeding Fiscal Years. For each succeeding
         MLP fiscal year beginning with the MLP fiscal year ending December 31,
         2004, the G&A Cap Amount shall be calculated as follows:

                                    (A) The G&A Cap Amount from the preceding
                           fiscal year (as may be adjusted pursuant to Section
                           7.1(b)(iii)) shall be increased by the greater of (A)
                           7% per year and (B) the percentage increase in the
                           Consumer Price Index -- All Urban Consumers, U.S.
                           City Average, Not Seasonally Adjusted.

                                    (B) For purposes of calculating the initial
                           increase in the G&A Cap Amount for the MLP fiscal
                           year ending on December 31, 2004, the G&A Cap Amount
                           for the 2003 fiscal year shall be $37.9 million (as
                           may be adjusted pursuant to Section 7.1(b)(iii) for
                           acquisitions, construction, capital improvements,
                           replacements or expansions occurring in 2003).

                           (iii)    Adjustment for Acquisitions and Other
         Events. If, after the Closing Date, the Partnership Group (A) makes an
         acquisition, (B) constructs or causes to be constructed any assets to
         be owned, leased or operated by any member of the Partnership Group or
         (C) makes or causes to be made any capital improvements, replacements
         or expansions of any assets owned, leased or operated by any member of
         the Partnership Group, the amount of general and administrative
         expenses reimbursed by the Partnership Group to the Buyer Entities will
         be increased by the Buyer's good faith reasonable estimate of the
         additional amount of annual general and administrative expenses to be
         incurred by or on behalf of the Partnership Group with respect to such
         acquisition, construction, capital improvement, replacement or
         expansion. The pro rata portion of the additional general and
         administrative expenses shall be added to the G&A Cap Amount and the
         Upper Cap Amount in the year in which such acquisition, construction,
         capital

Page                                                                          14

         improvement, replacement or expansion occurs for the portion of the
         year occurring thereafter and the full amount of such general and
         administrative expenses shall be added to the G&A Cap Amount and the
         Upper Cap Amount thereafter.

         7.2      CERTAIN LIMITATIONS. The provisions of Section 7.1 shall be
subject to the following limitations:

                  (a)      Expiration of G&A Cap. The amount of general and
administrative expenses reimbursed by the Partnership Group to the Buyer
Entities shall not be limited under this Agreement with respect to any fiscal
year ending after December 31, 2010.

                  (b)      Certain Expenses Not Included. General and
administrative expenses with respect to the following matters shall be excluded
in determining limitations herein on the amount of general and administrative
expenses that are required to be reimbursed by the Partnership Group or the
Williams Parties to the Buyer Entities:

                           (i)      expenses associated with equity-based
         incentive compensation plans;

                           (ii)     general and administrative expenses incurred
         by Buyer that are covered under Section 4.15 to the Purchase Agreement,
         regardless of whether in excess of the Expense Limit (as defined in
         Section 4.15 to the Purchase Agreement), it being understood that to
         the extent the Williams Parties reimburse Buyer for general and
         administrative expenses in excess of the Expense Limit, Buyer shall
         promptly pay any such reimbursements to the MLP by wire transfer of
         immediately available funds to an account or accounts designated in
         writing by the MLP; or

                           (iii)    general and administrative expenses incurred
         in connection with providing Services (as defined by the Services
         Agreement) under the Services Agreement.

                  (c)      Upper Cap Amount.

                           (i)      Notwithstanding the limitations in Section
         7.1 on the Partnership Group's reimbursement obligations for general
         and administrative expenses in excess of the G&A Cap Amount, the
         Partnership Group (or in the case of Section 7.2(c)(iii), the Williams
         Parties) shall be required to reimburse the Buyer Entities for general
         and administrative expenses incurred on behalf of the Partnership Group
         in any MLP fiscal year in excess of the Upper Cap Amount as calculated
         below (the "Upper Cap Amount").

                           (ii)     The Upper Cap Amount shall be calculated as
         follows:

                                    (A) For the 2003 Post-Closing Stub Period,
                           the Upper Cap Amount shall be equal to the product of
                           $49.3 million (as may be adjusted pursuant to Section
                           7.1(b)(iii)) times a fraction, (X) the numerator of
                           which is the number of successive whole months
                           beginning with the month following the month in which
                           the Closing occurs and ending with month of

Page                                                                          15

                           December 2003 and (Y) the denominator of which is
                           twelve (12) (the "2003 Post-Closing Upper Cap
                           Amount").

                                    (B) For each succeeding MLP fiscal year
                           beginning with the MLP fiscal year ending December
                           31, 2004, the Upper Cap Amount shall be calculated as
                           follows:

                                         (1) The Upper Cap Amount from the
                                    preceding fiscal year (as may be adjusted
                                    pursuant to Section 7.1(b)(iii)) shall be
                                    increased annually by the lesser of (A) 2.5%
                                    per year and (B) the percentage increase in
                                    the Consumer Price Index -- All Urban
                                    Consumers, U.S. City Average, Not Seasonally
                                    Adjusted.

                                         (2) For purposes of calculating the
                                    initial increase in the Upper Cap Amount for
                                    the MLP fiscal year ending on December 31,
                                    2004, the Upper Cap Amount for the 2003
                                    fiscal year shall be $49.3 million (as may
                                    be adjusted pursuant to Section 7.1(b)(iii)
                                    for acquisitions, construction, capital
                                    improvements, replacements and expansions
                                    occurring in 2003).

                           (iii)    For the twelve months immediately following
         the Closing Date, the Williams Parties shall be required to reimburse
         the Buyer Entities for any and all general and administrative expenses
         incurred by or on behalf of the Partnership Group in excess of the
         Upper Cap Amount, as follows:

                                    (A) If, for the 2003 Post-Closing Stub
                           Period, the general and administrative expenses
                           incurred by or on behalf of the Partnership Group are
                           in an amount in excess of 2003 Post-Closing Upper Cap
                           Amount, the Williams Parties, jointly and severally,
                           shall be required to reimburse the Buyer Entities in
                           full for the amount of such excess and shall make
                           such payment no later than thirty (30) days after the
                           last day of the 2003 Post-Closing Stub Period by wire
                           transfer of immediately available funds to an account
                           or accounts designated in writing by the Buyer
                           Entities.

                                    (B) If, for the period beginning on January
                           1, 2004 and ending on the last day of the month in
                           which the first anniversary of the Closing Date
                           occurs (the "2004 Stub Period"), the general and
                           administrative expenses incurred by or on behalf of
                           the Partnership Group exceed the Upper Cap Amount for
                           the MLP fiscal year ended December 31, 2004
                           multiplied by a fraction, (X) the numerator of which
                           is the number of successive months beginning with
                           January 2004 and ending with the month in which the
                           2004 Stub Period ends and (Y) the denominator of
                           which is twelve (12) (the "2004 Stub Period Upper Cap
                           Amount"), the Williams Parties, jointly and
                           severally, shall be required to reimburse the Buyer
                           Entities in full for the amount of such excess and
                           shall make such payment no later than thirty (30)
                           days after the last day of the 2004 Stub Period by
                           wire transfer of immediately available funds to an
                           account or accounts designated in

Page                                                                          16

                           writing by the Buyer Entities. If Buyer becomes
                           obligated to pay the 5% premium for transition
                           services pursuant to the final proviso in Section
                           4(a) of the Transition Services Agreement, then for
                           purposes of the immediately preceding sentence, the
                           2004 Stub Period Upper Cap Amount shall be increased
                           by the portion of such premium constituting general
                           and administrative expenses of the Partnership Group
                           attributable to the 2004 Stub Period.

                                    (C) Buyer shall, and shall cause each of the
                           other Buyer Entities to, use good faith efforts to
                           minimize the amount of general and administrative
                           expenses incurred by any of the Buyer Entities and
                           for which the Williams Parties would be required to
                           reimburse the Buyer Entities under this Section
                           7.2(c)(iii).

                                    (D) Notwithstanding any other provision of
                           this Article VII, the Williams Entities will not have
                           any obligations to reimburse the Buyer Entities for
                           general and administrative expenses incurred on
                           behalf of the Partnership Group or otherwise, except
                           as specifically provided in this Section 7.2(c)(iii).

                           (iv)     Except as provided in Section 7.2(c)(iii),
         the Partnership Group shall be required to reimburse the Buyer Entities
         for any and all general and administrative expenses in excess of the
         Upper Cap Amount incurred by or on behalf of the Partnership Group in
         any MLP fiscal year.

         7.3      NO AFFECT ON SECTION 7.4 OF THE MLP AGREEMENT. Nothing in this
Article VII is intended or shall be construed to affect or modify the terms and
conditions of Section 7.4 of the MLP Agreement.

                                  ARTICLE VIII
                              CAPITAL EXPENDITURES

         8.1      WILLIAMS REIMBURSEMENT OF PARTNERSHIP GROUP MAINTENANCE
CAPITAL EXPENDITURES. The Williams Entities will reimburse the Partnership Group
in each of the MLP's 2003 and 2004 fiscal years for any reasonable and customary
maintenance capital expenditures made by the Partnership Group, in accordance
with past practices, to maintain the assets of WPL, in either year, in excess of
$19 million; provided, that the Williams Entities shall not be required to
reimburse the Partnership Group in excess of an aggregate amount of $15 million
under this Section 8.1.

                                   ARTICLE IX
                                  MISCELLANEOUS

         9.1      PAYMENTS; DISPUTED AMOUNTS; AUDIT RIGHTS.

                  (a)      Except as otherwise provided herein, any payments to
be made by the Williams Entities to Buyer or the Partnership Entities under this
Agreement shall be made by the Williams Entities within sixty (60) days of
receipt of a written request for such payment from

Page                                                                          17

Buyer (which request shall contain a description in reasonable detail of the
individual costs and expenses that comprise the aggregate amount of the payment
requested) (a "Payment Request"). In the event of a good faith dispute as to the
amount of such payment, the applicable Williams Entity shall give written notice
of such dispute on or before the due date with respect to all or any portion of
the Payment Request, with the particulars of such dispute. Upon receipt of such
notice, Buyer shall, or shall use its reasonable best efforts to cause the
Partnership Entities to, furnish to the applicable Williams Entity additional
supporting documentation to reasonably substantiate the amount of the Payment
Request. Upon delivery of such additional documentation, the applicable Williams
Entity and the Buyer Entities shall cooperate and use their reasonable best
efforts to resolve such dispute. If they are unable to resolve their dispute
within twenty (20) business days of the delivery of such additional supporting
documentation to the applicable Williams Entity, then the dispute shall be
referred for resolution by a firm of independent accountants of nationally
recognized standing reasonably satisfactory to each of Buyer and the applicable
Williams Entity (the "Accounting Referee"), which shall determine the disputed
amounts within thirty (30) days of the referral of such dispute to such
Accounting Referee. The determination of the Accounting Referee shall not
require the applicable Williams Entity to pay more than the amount in dispute
nor require Buyer or any Partnership Entity to return any amount previously paid
by the applicable Williams Entity. The fees and expenses of the Accounting
Referee shall be borne equally by the applicable Williams Entity, on the one
hand, and Buyer or a member of the Partnership Entities, on the other hand. The
determination of the Accounting Referee shall be finally binding. If any dispute
is resolved in favor of Buyer or any Partnership Entity, the applicable Williams
Entity shall make payment to Buyer or the applicable Partnership Entity within
thirty (30) days of resolution of the dispute. Notwithstanding the foregoing, in
no event shall the Williams Entities be entitled to withhold any amounts other
than those portions of the applicable payment that are in dispute.

                  (b)      Williams shall have the right, at any time within six
(6) months after the date of any payment by Williams to Buyer or the Partnership
Entities pursuant to a Payment Request to audit those books and records of Buyer
and/or any Partnership Entity that incurred costs or expenses attributable to
such Payment Request or which books and records relate thereto, to verify the
amount reflected on such Payment Request. Any such audit shall be conducted
during normal business hours by Williams or its designated auditor after ten
(10) days prior written notice to Buyer, at Williams' sole cost and expense, in
the offices of Buyer and the relevant Partnership Entities or such other
location as may be mutually agreed. Buyer shall cooperate and shall use its
reasonable best efforts to cause any relevant Partnership Entity to cooperate
with and provide reasonable assistance to Williams and/or its auditor in
connection with the performance of any such audit. Williams shall assert any
claim for refund of amounts reimbursed to Buyer or the Partnership Entities
under the audited Payment Request within sixty (60) days after the completion of
the audit. Buyer shall have sixty (60) days from receipt of Williams' claim for
refund to respond. If Buyer does not dispute Williams' refund claim, Buyer or
the applicable Partnership Entity shall pay such refund within such 60-day
period. Should Buyer dispute the claim and refuse to pay any refund claim by
Williams resulting from the exercise of Williams' audit rights, the parties will
refer the dispute to an Accounting Referee in the manner described in Section
9.1(a) above.

         9.2      THIRD-PARTY BENEFICIARY; ASSIGNMENT; ENFORCEMENT.

Page                                                                          18

                  (a)      Each of Buyer and the Williams Parties specifically
intends that each entity comprising the Partnership Entities or the Partnership
Group, as applicable, shall be entitled to assert rights and remedies hereunder
as third-party beneficiaries hereto with respect to those provisions of this
Agreement affording a right, benefit or privilege to any such entity.
Notwithstanding anything else in this Agreement, pursuant to Section 4.25 of the
Purchase Agreement, no provision of this Agreement with respect to which any of
the entities comprising the Partnership Entities or the Partnership Group, as
applicable, is a third-party beneficiary shall be amended, modified, waived or
terminated by a party hereto without the express prior written approval of the
MLP, and if the General Partner, in its capacity as general partner of the MLP,
determines in its reasonable discretion that such an amendment, modification,
waiver or termination is reasonably likely to adversely affect the holders of
common units representing limited partner interests in the MLP, such amendment,
modification, waiver of termination must also be approved by Special Approval
(as such term is defined in the MLP Agreement).

                  (b)      No party shall have the right to assign its rights or
obligations under this Agreement without the consent of the other parties
hereto.

                  (c)      The parties hereto agree that irreparable damage
would occur if any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof, this being in addition to any other remedy to
which they are entitled at law or in equity. The third-party beneficiaries to
whom certain rights and remedies under this Agreement extend as contemplated
under Section 9.2(a) above shall also be entitled to enforce this Agreement in
the manner provided in this Section 9.2(c). Notwithstanding anything else in
this Agreement, the provisions of this Agreement are enforceable solely by the
parties to this Agreement and the third-party beneficiaries identified in
Section 9.2(a) above, and no Limited Partner (other than Buyer), Assignee or
other Person (other than a permitted assignee under Section 9.2(b)) may enforce
any provision of this Agreement or compel any party to this Agreement to comply
with the terms of this Agreement.

         9.3      CHOICE OF LAW; SUBMISSION TO JURISDICTION. This Agreement
shall be governed and construed in accordance with the internal and substantive
laws of New York, and without regard to any conflicts of laws concepts that
would apply the substantive law of some other jurisdiction. Each party hereby
submits to the jurisdiction of the state and federal courts in the State of New
York and to venue in the Borough of Manhattan in the City of New York, New York.

         9.4      NOTICE. All notices or requests or consents provided for or
permitted to be given pursuant to this Agreement must be in writing and must be
given by depositing same in the United States mail, addressed to the Person to
be notified, postpaid, and registered or certified with return receipt requested
or by delivering such notice in person or by telecopier or telegram to such
party. Notice given by personal delivery or mail shall be effective upon actual
receipt. Notice given by telegram or telecopier shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. All notices to be sent to a party
pursuant to this Agreement shall be sent to or made at the address set forth
below such

Page                                                                          19

party's signature to this Agreement, or at such other address as such party may
stipulate to the other parties in the manner provided in this Section 9.4.

         9.5      ENTIRE AGREEMENT. This Agreement, together with the provisions
of the Purchase Agreement relating hereto, represent the entire agreement and
understanding of the parties hereto and thereto with reference to the
transactions set forth herein. This Agreement, together with the provisions of
the Purchase Agreement relating hereto, supercede all prior negotiations,
discussions, correspondence, communications, understandings and agreements
between the parties relating to the transactions set forth herein and all prior
drafts hereof (including Exhibit 1.2(a)(iv)(1) to the Purchase Agreement). No
prior drafts hereof and no words or phrases from any such prior drafts shall be
admissible into evidence in any action or suit involving this Agreement.

         9.6      TERMINATION OF CERTAIN OBLIGATIONS UPON CHANGE OF CONTROL

                  (a)      Upon a Change of Control of Williams, the obligations
of the Williams Entities under Article II shall terminate.

                  (b)      Upon a Change of Control of Buyer or WEG GP LLC, the
obligations of the Buyer Entities under Article III shall terminate.

                  (c)      Upon a Change of Control of Buyer or WEG GP LLC, the
obligations of the Williams Parties under Article V shall terminate as of the
later to occur of (A) the date of such Change of Control and (B) the expiration
of all of the obligations of WES pursuant to Sections 10.1(a) (with respect to
breaches of environmental representations, warranties, agreements or covenants),
10.1(b) and 10.1(c) of that certain Contribution Agreement dated as of April 11,
2002 by and among WES, the Old GP and the MLP and the expiration of all of the
corresponding obligations of Williams pursuant to that certain Corporate
Guarantee in favor of the General Partner, dated as of March 14, 2003, of
Williams.

                  (d)      Upon a Change of Control of Buyer or WEG GP LLC,
Article VII and the limitations therein on the amount of general and
administrative expenses for which the Partnership Group is required to reimburse
the Buyer Entities shall terminate (including the provisions therein relating to
the reimbursement obligations of the Williams Parties in favor of the Buyer
Entities).

         9.7      EFFECT OF WAIVER OR CONSENT. No waiver of any provision of
this Agreement shall be effective unless set forth in writing by the party to be
bound thereby. Except as otherwise expressly provided therein, no waiver or
consent, express or implied, by any party to or of any breach or default by any
Person in the performance by such Person of its obligations hereunder shall be
deemed or construed to be a consent or waiver to or of any other breach or
default in the performance by such Person of the same or any other obligations
of such Person hereunder. Failure on the part of a party to complain of any act
of any Person or to declare any Person in default, irrespective of how long such
failure continues, shall not constitute a waiver by such party of its rights
hereunder until the applicable statute of limitations period has run.

         9.8      AMENDMENT OR MODIFICATION. Subject to the second sentence of
Section 9.2(a), this Agreement may be amended or modified from time to time only
by the written agreement of

Page                                                                          20

all the parties hereto. Each such instrument shall be reduced to writing and
shall be designated on its face an "Amendment" or an "Addendum" to this
Agreement.

         9.9      COUNTERPARTS. This Agreement may be executed in any number of
counterparts with the same effect as if all signatory parties had signed the
same document. All counterparts shall be construed together and shall constitute
one and the same instrument.

         9.10     SEVERABILITY. If any provision of this Agreement or the
application thereof to any Person or circumstance shall be held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provision to other Persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.

         9.11     GENDER, PARTS, ARTICLES AND SECTIONS. Whenever the context
requires, the gender of all words used in this Agreement shall include the
masculine, feminine and neuter, and the number of all words shall include the
singular and plural. Unless otherwise provided, all references to Article
numbers and Section numbers refer to Articles and Sections of this Agreement.

         9.12     FURTHER ASSURANCES. In connection with this Agreement and all
transactions contemplated by this Agreement, each signatory party hereto agrees
to execute and deliver such additional documents and instruments and to perform
such additional acts as may be necessary or appropriate to effectuate, carry out
and perform all of the terms, provisions and conditions of this Agreement and
all such transactions.

         9.13     WITHHOLDING OR GRANTING OF CONSENT. Except as otherwise
expressly provided herein, each party may, with respect to any consent or
approval that it is entitled to grant pursuant to this Agreement, grant or
withhold such consent or approval in its sole and uncontrolled discretion, with
or without cause, and subject to such conditions as it shall deem appropriate.

         9.14     U.S. CURRENCY. All sums and amounts payable to or to be
payable pursuant to the provisions of this Agreement shall be payable in coin or
currency of the United States of America that, at the time of payment, is legal
tender for the payment of public and private debts in the United States of
America.

         9.15     LAWS AND REGULATION. Notwithstanding any provision of this
Agreement to the contrary, no party to this Agreement shall be required to take
any act, or fail to take any act, under this Agreement if the effect thereof
would be to cause such party to be in violation of any applicable law, statute,
rule or regulation.

         9.16     WAIVER OF RIGHT OF FIRST REFUSAL. The Williams Parties hereby
agree that, effective as of the date hereof, any and all rights, benefits and
privileges of WES and any other Williams Entity under Section 11.10 of that
certain Contribution Agreement dated as of April 11, 2002 by and among WES, the
Old GP and the MLP are hereby forever terminated in all respects, and WES, WNGL
and Williams hereby waive any and all rights, benefits and privileges of WES and
any other Williams Entity under such section of such agreement.

Page                                                                          21

         IN WITNESS WHEREOF, the parties have executed this Agreement on, and
effective as of, the date first written above.

                             THE BUYER

                             WEG ACQUISITIONS, L.P.

                             By: WEG Acquisition Management, LLC
                             its General Partner

                             By: /s/ Justin S. Huscher
                                 ---------------------------
                                 Name:  Justin S. Huscher
                                 Title: Authorized Signatory

                             By: /s/ Pierre F. Lapeyre, Jr.
                                 ------------------------------
                                 Name:  Pierre F. Lapeyre, Jr.
                                 Title: Authorized Signatory

                             Address for Notice:

                             One Williams Center
                             Tulsa, Oklahoma 74172
                             Facsimile: 918-573-6928
                             Attention: Mr. Lonny Townsend

                             THE WILLIAMS PARTIES

                             WILLIAMS ENERGY SERVICES, LLC

                             By: /s/ Phillip D Wright
                                 ---------------------------
                                 Name:  Phillip D. Wright
                                 Title: Authorized Signatory

                             WILLIAMS NATURAL GAS LIQUIDS, INC.

                             By: /s/ Phillip D Wright
                                 ---------------------------
                                 Name:  Phillip D. Wright
                                 Title: Authorized Signatory

                             THE WILLIAMS COMPANIES, INC.

                             By: /s/ Phillip D Wright
                                 ---------------------------
                                 Name: Phillip D. Wright

Page                                                                          22

                                 Title: Authorized Signatory

                             Address for Notice to Each of the Williams Parties:

                             One Williams Center
                             Tulsa, Oklahoma 74172
                             Facsimile: 918-573-4503
                             Attention: Mr. Tony Gehres

Page                                                                          23

                                                                   EXHIBIT 10.10

                                                                  Execution Copy

                              ASSUMPTION AGREEMENT

         This ASSUMPTION AGREEMENT (this "Agreement"), dated June 17, 2003, is
entered into by and between The Williams Companies, Inc., a Delaware corporation
("Williams"), and WEG Acquisitions, L.P., a Delaware limited partnership
("Buyer"). Unless otherwise defined herein, the capitalized terms not defined in
this Agreement shall have the meanings assigned to such terms in the Purchase
Agreement, dated April 18, 2003, as amended by Amendment No.1 thereto, dated May
5, 2003, by and among the Selling Parties (as defined therein) and Buyer (as so
amended, the "Purchase Agreement").

                                    RECITALS

         WHEREAS, Williams is subject to a decision and order, dated June 27,
1998, promulgated by the Federal Trade Commission (the "FTC"), and which is
attached hereto as Exhibit A (the "Consent Decree"), in connection with
Williams' acquisition of MAPCO Inc., which among other things, relates to the
operation of the Williams Pipe Line (which was contributed by a subsidiary of
Williams to Williams Energy Partners L.P. (the "Partnership") in April 2002);

         WHEREAS, under the Consent Decree, Williams is required to give at
least thirty (30) days notice to the FTC prior to consummation of the
transactions contemplated under the Purchase Agreement; such notice was
delivered by Williams to the FTC on April 21, 2003, and such notice is attached
hereto as Exhibit B;

         WHEREAS, since the delivery of such notice, neither Williams nor Buyer
has received a notification from the FTC in connection with the Consent Decree;
and

         WHEREAS, pursuant to Section 6.7 of the Purchase Agreement, it is a
condition to the obligations of the Selling Parties to consummate the
transactions contemplated under the Purchase Agreement that Buyer has agreed to
be bound by the Consent Decree to the extent provided herein; and the parties
desire to enter into this Agreement in satisfaction of such condition.

         NOW THEREFORE, in consideration of their mutual undertakings and
agreements hereunder, the parties to this Agreement undertake and agree as
follows:

         1.       Partial Assumption.

                  (a)      From and after the Closing, Buyer hereby assumes and
         agrees to be bound by and to duly and timely pay, perform and
         discharge, or cause to be paid, performed and discharged, the
         obligations of Williams arising after the Closing under Paragraphs II,
         IV, V, VI, VII.B, VIII and IX of the Consent Decree to the extent that
         such obligations relate to assets or facilities that are owned by Buyer
         or the Partnership Entities after the Closing;

                  (b)      From and after the Closing, Williams shall continue
         to be bound by and to duly and timely pay, perform and discharge, or
         cause to be paid, performed and discharged, its obligations arising
         after the Closing under Paragraphs III, IV, VII.B, VIII and IX of the
         Consent Decree to the extent that such obligations relate to assets or
         facilities that are owned by Williams or its Affiliates after the
         Closing;

                  (c)      Notwithstanding the foregoing provisions of this
         Section 1, nothing herein shall prevent either party, in its sole
         discretion, from exercising any rights under the Consent Decree or any
         applicable law, rule or regulation, including petitioning the FTC to
         modify or terminate the Consent Decree as it applies to such party or
         its affiliates; and

                  (d)      It is understood and agreed that compliance by each
         party with its obligations under the applicable provisions of the
         Consent Decree as provided in this Section 1 shall be independent of
         compliance by the other party with its obligations under the applicable
         provisions of the Consent Decree as provided in this Section 1.

         2.       Indemnification.

                  (a)      From and after the date hereof, Buyer agrees to
         indemnify and hold harmless Williams and each of its officers,
         directors, employees, agents and affiliates (and the officers,
         directors, employees and agents of such affiliates) from and against
         any and all claims, demands, costs, liabilities and expenses (including
         court costs and reasonable attorney's fees) resulting from Buyer's
         failure to comply with Section 1(a) hereof; and

                  (b)      From and after the date hereof, Williams agrees to
         indemnify and hold harmless Buyer and each of its officers, directors,
         employees, agents and affiliates (and the officers, directors,
         employees and agents of such affiliates) from and against any and all
         claims, demands, costs, liabilities and expenses (including court costs
         and reasonable attorney's fees) resulting from Williams' failure to
         comply with (i) the Consent Decree prior to the Closing or (ii) Section
         1(b) hereof.

         3.       Satisfaction of Closing Condition. Williams hereby
acknowledges and agrees, on behalf of the Selling Parties, that the execution
and delivery by Buyer of this Agreement shall be deemed to constitute
satisfaction in full of the provisions of Section 6.7 of the Purchase Agreement.

         4.       Successors and Assigns. This Agreement shall inure to the
benefit of, and be binding upon, the parties hereto and their respective
successors and permitted assigns. No party may assign its rights, benefits or
obligations hereunder without the prior written consent of the other party (such
consent not to be unreasonably withheld or delayed) and in accordance with the
terms of the Consent Decree; provided, however, that upon written notice to the
other party as provided in the Purchase Agreement, but without the prior written
consent of the other party, and upon written notice to the FTC in accordance
with the terms of the Consent Decree, unless otherwise prohibited by the FTC:
(a) Buyer may assign its rights or obligations hereunder to the Partnership or
the New Company; (b) Buyer may assign its rights or obligations hereunder to any
person or entity in connection with an acquisition, merger, consolidation, sale
of assets or other

similar transaction involving the assets (or any entity that directly or
indirectly owns such assets) with respect to which Buyer is subject to the
obligations under Section 1(a) hereof; and (c) Williams may assign its rights or
obligations hereunder to any person or entity in connection with an acquisition,
merger, consolidation, sale of assets or other similar transaction involving the
assets (or any entity that directly or indirectly owns such assets) with respect
to which Williams is subject to the obligations under Section 1(b) hereof.

         5.       Further Assurances. At the request of either party, the other
party shall take all commercially reasonable steps, including participating in
discussions with the FTC and providing appropriate documents and information to
the FTC, to effect the provisions of Section 1 hereof or to effect any
assignment pursuant to Section 4 hereof; provided, however, that any reasonable
expenses incurred in connection therewith by the non-requesting party shall be
promptly reimbursed in full by the requesting party upon receipt of an invoice
describing such expenses in reasonable detail.

         6.       Signatures / Counterparts.Facsimile transmission of any signed
original of this Agreement and/or retransmission of any signed facsimile
transmission shall be the same as delivery of an original. At the request of
either party, the other party will confirm facsimile transmission by signing a
duplicate original document. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.

         7.       Severability. This Agreement shall be deemed severable, and
the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.

         8.       Entire Agreement. This Agreement, together with the provisions
of the Purchase Agreement relating hereto, represents the entire agreement and
understanding between the parties hereto and thereto with reference to the
transactions set forth herein and supercedes all prior negotiations,
discussions, correspondence, communications, understandings and agreements
between the parties relating to the subject matter hereof and all prior drafts
hereof. No prior drafts of this Agreement and no words or phrases from any such
prior drafts shall be admissible into evidence in any action or suit involving
this Agreement.

         9.       Governing Law. This Agreement shall be governed by and
construed in accordance with the internal and substantive laws of New York and
without regard to any conflicts of laws concepts that would apply the
substantive law of some other jurisdiction.

                            [SIGNATURE PAGE FOLLOWS]

         IN WITNESS WHEREOF, the parties have executed this Agreement on, and
effective as of, the date first written above.

                                    WEG ACQUISITIONS, L.P.

                                    By: WEG Acquisition Management, LLC
                                        its General Partner

                                    By: /s/ Pierre F. Lapeyre, Jr.
                                        ------------------------------
                                        Name:  Pierre F. Lapeyre, Jr.
                                        Title: Authorized Signatory

                                    By: /s/ Justin S. Huscher
                                        -----------------------------
                                        Name:  Justin S. Huscher
                                        Title: Authorized Signatory

                                    THE WILLIAMS COMPANIES, INC.

                                    By: /s/ Phillip D. Wright
                                        -----------------------------
                                        Name:  Phillip D. Wright
                                        Title: Authorized Signatory

                                    EXHIBIT A

                    [FTC Consent Decree, dated June 27, 1998]

                                    EXHIBIT B

               [Notice to FTC, pursuant to Paragraph VIII.A of the
                      Consent Decree, dated April 21, 2003]

                                                                      EXHIBIT 12

                          The Williams Companies, Inc.
           Computation of Ratio of Earnings to Combined Fixed Charges
                    and Preferred Stock Dividend Requirements
                              (Dollars in millions)

                                                                 Six months ended
                                                                  June 30, 2003
                                                                 ----------------

Earnings:
   Income from continuing operations before income taxes
      and cumulative effect of change in accounting principles     $      195.8
   Add:
      Interest expense - net                                              735.6
      Rental expense representative of interest factor                     13.6
      Minority interest in income of consolidated subsidiaries              9.5
      Interest expense - net - 50% owned companies                          2.1
      Equity losses in less than 50% owned companies                        4.3
      Other                                                                (6.1)
                                                                   ------------

         Total earnings as adjusted plus fixed charges             $      954.8
                                                                   ============

Fixed charges and preferred stock dividend requirements:
   Interest expense - net                                          $      735.6
   Capitalized interest                                                    23.2
   Rental expense representative of interest factor                        13.6
   Pre-tax effect of preferred stock dividend requirements
     of the Company                                                        47.8
   Interest accrued - 50% owned companies                                   2.1
                                                                   ------------

         Combined fixed charges and preferred stock
           dividend requirements                                   $      822.3
                                                                   ============

Ratio of earnings to combined fixed charges and preferred
   stock dividend requirements                                             1.16
                                                                   ============

                                                                    EXHIBIT 31.1

                            SECTION 302 CERTIFICATION

I, Steven J. Malcolm, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of The Williams
     Companies, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)), for the registrant and
     have:

     a)   Designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the
          registrant, including its consolidated subsidiaries, is made known to
          us by others within those entities, particularly during the period in
          which this report is being prepared;

     b)   Evaluated the effectiveness of the registrant's disclosure controls
          and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     c)   Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the period
          covered by the report that has materially affected, or is reasonably
          likely to materially affect, the registrant's internal control over
          financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent functions):

     a)   All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the registrant's ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          control over financial reporting.

Date:  August 12, 2003

By: /s/ Steven J. Malcolm
    -------------------------------
    President and Chief Executive Officer
    (Principal Executive Officer)

                                                                    EXHIBIT 31.2

                            SECTION 302 CERTIFICATION

I, Donald R. Chappel, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of The Williams
     Companies, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)), for the registrant and
     have:

     a)   Designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the
          registrant, including its consolidated subsidiaries, is made known to
          us by others within those entities, particularly during the period in
          which this report is being prepared;

     b)   Evaluated the effectiveness of the registrant's disclosure controls
          and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     c)   Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the period
          covered by the report that has materially affected, or is reasonably
          likely to materially affect, the registrant's internal control over
          financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent functions):

     a)   All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the registrant's ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          control over financial reporting.

Date:  August 12, 2003

By: /s/ Donald R. Chappel
    -----------------------------
    Chief Financial Officer
    (Principal Financial Officer)

                                                                      EXHIBIT 32

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

         In connection with the Quarterly Report of The Williams Companies, Inc.
(the "Company") on Form 10-Q for the period ending June 30, 2003 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), each
of the undersigned hereby certifies, in his capacity as an officer of the
Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:

         (1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

         (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.

/s/ Steven J. Malcolm
- ------------------------------------
Steven J. Malcolm
Chief Executive Officer
August 12, 2003

/s/ Donald R. Chappel
- ------------------------------------
Donald R. Chappel
Chief Financial Officer
August 12, 2003

A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished to the Securities and Exchange
Commission as an exhibit to the Report and shall not be considered filed as part
of the Report.