<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 27, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
THE WILLIAMS COMPANIES, INC.
(Exact name of Company as Specified in Its Charter)
------------------------
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DELAWARE 4813 73-0569878
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
ONE WILLIAMS CENTER
TULSA, OKLAHOMA 74172
(918) 588-2000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
William G. von Glahn, Esq.
The Williams Companies, Inc.
One Williams Center
Tulsa, Oklahoma 74172
(918) 588-5942
(Name, Address, Including Zip Code and Telephone Number, Including Area Code, of
Agent For Service)
WITH COPIES TO:
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Jere R. Thomson, Esq. David Bowman, Esq. Franci J. Blassberg, Esq.
Jones, Day, Reavis & Pogue MAPCO Inc. Debevoise & Plimpton
599 Lexington Avenue, 30th Floor 1800 S. Baltimore Avenue 875 Third Avenue
New York, New York 10022 P.O. Box 645 New York, New York 10022
Tulsa, Oklahoma 74101-0645
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of the Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act"), check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
OFFERING PRICE PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PER SHARE OF AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED COMMON STOCK OFFERING PRICE REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------
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Common Stock, par value $1.00 per share, together
with Preferred Stock Purchase Rights(1)......... $97,389,699(2) N.A. $2,575,489,599(3) $759,769.43(4)
==============================================================================================================================
</TABLE>
(1) Preferred stock purchase rights are attached to and trade with the common
stock, par value $1.00 per share ("Williams Common Stock"), of The Williams
Companies, Inc. ("Williams"). The value attributable to such rights, if any,
is reflected in the market price of Williams Common Stock.
(2) Represents the maximum amount of Williams Common Stock estimated to be
issuable upon the consummation of the merger (the "Merger") of TML
Acquisition Corp., a wholly-owned subsidiary of Williams, with and into
MAPCO Inc. ("MAPCO").
(3) Pursuant to Rules 457(f)(1) and 457(c) under the Securities Act and solely
for the purpose of calculating the registration fee, the proposed maximum
aggregate offering price is equal to the market value of the common stock,
par value $1.00 per share ("MAPCO Common Stock"), of MAPCO and related
options to be cancelled upon consummation of the Merger and is based upon
$44.03125, the average of the high and low sale prices of MAPCO Common Stock
on the New York Stock Exchange Composite Tape on January 20, 1998.
(4) Computed in accordance with Rule 457(f) under the Securities Act to be
$759,769.43, which is .000295 multiplied by the proposed maximum aggregate
offering price of $2,575,489,599. In accordance with such Rule 457, the fee
of $478,924.36 paid by Williams pursuant to Section 14(g)(1)(A) of the
Securities Exchange Act of 1934 upon the filing of its preliminary proxy
materials on December 18, 1997 has been credited against the registration
fee payable in connection with this filing. The remaining amount of the fee
has been paid by Williams under the reference "The Williams Companies, Inc.
S-4."
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until this Registration Statement shall become effective
on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
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<PAGE> 2
[WILLIAMS LOGO] [MAPCO LOGO]
MERGER PROPOSED
The Board of Directors of MAPCO Inc. and the Board of Directors of The Williams
Companies, Inc. have approved a merger in which MAPCO will become a wholly-owned
subsidiary of Williams. The combined company will benefit from the complementary
strengths of Williams and MAPCO, and will have the financial strength and scope
to capitalize on the opportunities presented by a changing global economy.
In the merger, each share of MAPCO common stock and associated preferred stock
purchase rights will be exchanged for 1.665 shares of Williams common stock and
.555 associated preferred stock purchase rights.
It is estimated that former MAPCO stockholders will own approximately 23 percent
of the Williams common stock after the merger and current Williams stockholders
will own approximately 77 percent of the Williams common stock after the merger.
Stockholders of MAPCO are being asked, at MAPCO's special meeting of
stockholders, to approve the merger. THE BOARD OF DIRECTORS OF MAPCO HAS
DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF MAPCO STOCKHOLDERS AND
RECOMMENDS THAT THEY VOTE IN FAVOR OF THE MERGER.
Stockholders of Williams are being asked, at Williams' special meeting of
stockholders, to approve
- - a proposal to amend Williams' Restated Certificate of Incorporation, as
amended, to increase the number of authorized shares of Williams common stock,
and
- - a proposal to issue Williams common stock pursuant to the terms of the merger
agreement.
THE BOARD OF DIRECTORS OF WILLIAMS HAS DETERMINED THAT THESE PROPOSALS ARE IN
THE BEST INTERESTS OF WILLIAMS STOCKHOLDERS AND RECOMMENDS THAT THEY VOTE IN
FAVOR OF BOTH PROPOSALS. The merger will not occur unless both proposals are
approved.
YOUR VOTE IS VERY IMPORTANT.
Whether or not you plan to attend your meeting, please take the time to vote on
the proposal(s) submitted to stockholders at your meeting by completing and
mailing the enclosed proxy card to us. If you sign, date and mail your proxy
card without indicating how you wish to vote, your proxy will be counted as a
vote in favor of the proposal(s) submitted at your meeting. If you fail to
return your proxy card, the effect will be a vote against the merger for MAPCO
stockholders, and against the amendment of Williams' Certificate of
Incorporation for Williams stockholders.
The dates, times and places of the meetings are:
For MAPCO stockholders:
February 26, 1998 at 10 a.m.
MAPCO Inc.
1800 South Baltimore Ave.
Tulsa, Oklahoma
For Williams stockholders:
February 26, 1998 at 10 a.m.
The Adam's Mark Hotel
100 East 2nd Street
Tulsa, Oklahoma
This document provides you with detailed information about the proposed merger
and the proposals. In addition, you may obtain information about both companies
from documents filed with the Securities and Exchange Commission. We encourage
you to read this entire document carefully.
Keith E. Bailey
Chairman, President and Chief Executive Officer
The Williams Companies, Inc.
James E. Barnes
Chairman, President and Chief Executive Officer
MAPCO Inc.
Neither the SEC nor any state securities regulators have approved the Williams
common stock to be issued under this Joint Proxy Statement/Prospectus or
determined if this Joint Proxy Statement is accurate or adequate. Any
representation to the contrary is a criminal offense.
Joint Proxy Statement/Prospectus dated January 27, 1998, and first mailed to
stockholders on January 28, 1998.
<PAGE> 3
[THE WILLIAMS COMPANIES LOGO]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To the Stockholders of The Williams Companies, Inc.:
A special meeting of stockholders of The Williams Companies, Inc. will be
held at the Adam's Mark Hotel, 100 East 2nd Street, Tulsa, Oklahoma, on
Thursday, February 26, 1998 at 10:00 a.m., local time, for the following
purposes:
1. To consider and vote upon a proposal to amend Williams' Certificate
of Incorporation, as amended, to increase the authorized number of shares
of Williams common stock from 480,000,000 to 960,000,000 shares;
2. To consider and vote upon a proposal to approve the issuance of
Williams common stock in exchange for shares of common stock and options of
MAPCO Inc. pursuant to the merger in which MAPCO will become a wholly-owned
subsidiary of Williams and the other transactions contemplated by the
merger agreement; and
3. To transact such other business as may properly come before the
meeting.
After the merger, MAPCO will be a wholly-owned subsidiary of Williams and
each outstanding share of MAPCO common stock will be converted into the right to
receive 1.665 shares of Williams common stock. The accompanying document
describes the merger and the proposals listed above in detail.
To make sure that your vote will be counted, please complete, sign and date
the enclosed proxy card and return it promptly in the enclosed postage-paid
envelope whether or not you plan to attend the meeting. You may revoke your
proxy at any time before it is voted at the meeting by following the procedures
described in the accompanying document.
Only stockholders of record of Williams at the close of business on Monday,
January 26, 1998, the record date for the meeting, are entitled to notice of,
and to vote at, the meeting. The proposal to amend Williams' Certificate of
Incorporation must be approved by the holders of a majority of the outstanding
shares of Williams common stock. The proposal to issue shares of Williams common
stock in the merger must be approved by a majority of the votes cast on the
proposal. For this purpose, the holders of at least a majority of all
outstanding shares of Williams common stock must vote on the proposal.
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
HOWEVER, WHETHER OR NOT YOU EXPECT TO ATTEND, YOU ARE URGED TO READ THE
ACCOMPANYING DOCUMENT AND THEN COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD
AND MAIL IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED AT THE MEETING. IF YOU RECEIVE MORE THAN ONE PROXY
CARD BECAUSE YOU OWN SHARES REGISTERED IN DIFFERENT NAMES OR AT DIFFERENT
ADDRESSES, EACH CARD SHOULD BE SIGNED AND RETURNED.
By Order of the Board of Directors
DAVID M. HIGBEE
Secretary
January 27, 1998
Tulsa, Oklahoma
<PAGE> 4
[MAPCO LOGO]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To the Stockholders of Mapco Inc.:
A special meeting of stockholders of MAPCO Inc. will be held at MAPCO's
headquarters at 1800 South Baltimore Avenue, Tulsa, Oklahoma, on Thursday,
February 26, 1998 at 10:00 a.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt a merger
agreement that provides for a merger in which MAPCO will become a
wholly-owned subsidiary of The Williams Companies, Inc. and the
transactions contemplated by that agreement; and
2. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
After the merger, MAPCO will be a subsidiary of Williams and each
outstanding share of MAPCO common stock, other than shares held by MAPCO or its
wholly-owned subsidiaries, will be converted into the right to receive 1.665
shares of Williams common stock. The accompanying document describes the merger
in detail.
To make sure that your vote will be counted, please complete, sign and date
the enclosed proxy card and return it promptly in the enclosed postage-paid
envelope whether or not you plan to attend the meeting. You may revoke your
proxy at any time before it is voted at the meeting by following the procedures
described in the accompanying document.
Only stockholders of record of MAPCO at the close of business on Monday,
January 26, 1998, the record date for the meeting, are entitled to notice of,
and to vote at, the meeting. Approval of the merger requires the affirmative
vote of the holders of a majority of the outstanding shares of MAPCO common
stock.
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
HOWEVER, WHETHER OR NOT YOU EXPECT TO ATTEND, YOU ARE URGED TO READ THE
ACCOMPANYING DOCUMENT AND THEN COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD
AND MAIL IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED AT THE MEETING. IF YOU RECEIVE MORE THAN ONE PROXY
CARD BECAUSE YOU OWN SHARES REGISTERED IN DIFFERENT NAMES OR AT DIFFERENT
ADDRESSES, EACH CARD SHOULD BE SIGNED AND RETURNED.
By Order of the Board of Directors,
DAVID W. BOWMAN
Senior Vice President,
General Counsel and
Secretary
January 27, 1998
Tulsa, Oklahoma
<PAGE> 5
TABLE OF CONTENTS
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PAGE
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QUESTIONS AND ANSWERS ABOUT THE MERGER................................................ 1
SUMMARY............................................................................... 3
INTRODUCTION.......................................................................... 15
THE PROPOSED MERGER................................................................... 15
Background of the Merger............................................................ 16
MAPCO's Rationale for the Merger; Recommendation of the MAPCO Board................. 18
Williams' Rationale for the Merger; Recommendation of the Williams Board............ 19
Opinion of Financial Advisor to MAPCO............................................... 19
Opinion of Financial Advisor to Williams............................................ 24
Certain Federal Income Tax Consequences of the Merger on MAPCO Stockholders......... 29
Accounting Treatment................................................................ 30
Regulatory and Third-Party Approvals................................................ 31
No Appraisal Rights................................................................. 32
Interests of Certain Persons in the Merger.......................................... 32
Restrictions on Resales by Affiliates............................................... 33
Litigation.......................................................................... 34
Cautionary Statement Concerning Forward-Looking Statements.......................... 34
INFORMATION CONCERNING THE WILLIAMS SPECIAL MEETING................................... 35
Purpose, Time and Place............................................................. 35
Record Date; Quorum; Vote Required.................................................. 35
Proxies............................................................................. 36
INFORMATION CONCERNING THE MAPCO SPECIAL MEETING...................................... 38
Purpose, Time and Place............................................................. 38
Record Date; Quorum; Vote Required.................................................. 38
Proxies............................................................................. 39
THE MERGER AGREEMENT.................................................................. 40
General............................................................................. 40
Closing; Effective Time............................................................. 40
Surviving Corporation Certificate of Incorporation.................................. 40
Surviving Corporation By-Laws....................................................... 40
Directors and Officers.............................................................. 40
Consideration to be Received in the Merger.......................................... 40
Exchange of Certificates; Fractional Shares......................................... 41
Representations and Warranties...................................................... 41
Conduct of Business................................................................. 42
No Solicitation..................................................................... 45
Directors of Williams............................................................... 45
MAPCO Stock-Based Awards............................................................ 46
MAPCO Employee Benefit Plans........................................................ 46
Conditions to the Consummation of the Merger........................................ 47
Termination......................................................................... 48
Termination Fees.................................................................... 49
Expenses............................................................................ 50
Amendment and Waiver................................................................ 50
Governing Law....................................................................... 50
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COMPARISON OF RIGHTS OF STOCKHOLDERS OF WILLIAMS AND MAPCO............................ 50
Authorized Capital.................................................................. 51
Board of Directors.................................................................. 51
Committees of the Board of Directors................................................ 51
Newly Created Directorships and Vacancies........................................... 51
Removal of Directors................................................................ 52
Officers............................................................................ 52
Special Meetings of Stockholders.................................................... 52
Quorum at Stockholder Meetings...................................................... 52
Stockholder Action by Written Consent............................................... 52
Advance Notice of Stockholder-Proposed Business or Director Nominations at Annual
Meetings......................................................................... 53
Amendment of Governing Documents.................................................... 53
Rights Agreements................................................................... 54
DESCRIPTION OF CAPITAL STOCK OF WILLIAMS FOLLOWING THE MERGER......................... 55
Williams Common Stock............................................................... 55
Williams $3.50 Preferred Stock...................................................... 56
Williams Rights..................................................................... 57
Stock Exchange Matters.............................................................. 57
WILLIAMS PROPOSAL TO INCREASE AUTHORIZED NUMBER OF SHARES OF WILLIAMS COMMON STOCK.... 57
EXPERTS............................................................................... 59
LEGAL MATTERS......................................................................... 59
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS............................................ 59
WHERE YOU CAN FIND MORE INFORMATION................................................... 59
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS........................... 62
Appendix A: Agreement and Plan of Merger among The Williams Companies, Inc., TML
Acquisition Corp. and MAPCO Inc. dated as of November 23, 1997, as
amended.................................................................. A-1
Appendix B: Opinion of Morgan Stanley & Co. Incorporated............................. B-1
Appendix C: Opinion of Smith Barney Inc. ............................................ C-1
</TABLE>
<PAGE> 7
QUESTIONS AND ANSWERS
ABOUT THE MERGER
WHY SHOULD MAPCO MERGE WITH WILLIAMS?
For MAPCO, the merger presents an opportunity for its stockholders to
participate in a combined company with greater financial resources,
diversification and ability to compete in the energy industry, and also an
opportunity to realize a premium over historic market prices for their shares.
For Williams, the merger is consistent with its strategy of seeking growth
through strategic acquisitions and alliances. In particular, Williams believes
that MAPCO's businesses complement those of Williams and the merger will
increase Williams' earnings while strengthening its balance sheet and increasing
its capacity to generate capital for future growth.
WHAT WILL BE RECEIVED IN EXCHANGE FOR MAPCO COMMON STOCK?
Each share of MAPCO common stock and associated preferred stock purchase rights
will be exchanged for 1.665 shares of Williams common stock and .555 associated
preferred stock purchase rights. No fractional shares will be issued and cash
will be paid to MAPCO stockholders for the value of any fraction of a share of
Williams common stock otherwise issuable in the merger.
HOW WILL I BE TAXED ON THE MERGER?
We expect that for U.S. Federal income tax purposes:
- - MAPCO stockholders will not realize taxable gain or loss by the exchange of
MAPCO common stock for Williams common stock, except with respect to any cash
received instead of a fractional share of Williams common stock, and
- - the holding period for the Williams common stock received by MAPCO
stockholders in the merger, which determines how any gain or loss will be
treated for tax purposes upon future sales of Williams common stock, generally
will include the holding period for the MAPCO common stock given up in the
merger.
WILL I CONTINUE TO RECEIVE DIVIDENDS?
Williams currently intends to pay a quarterly dividend of $.15 per share of
Williams common stock. Because each share of MAPCO common stock will be
exchanged for 1.665 shares of Williams common stock in the merger, this $.15
quarterly dividend will equate to approximately $.25 per share for each share of
MAPCO common stock held immediately prior to the merger.
ARE THERE RISKS TO BE CONSIDERED?
The 1.665 exchange ratio for MAPCO common stock will not change even if the
market price of Williams common stock changes before the merger is completed.
Accordingly, the market value of Williams common stock to be received in the
merger may be lower or higher than its current market value. For other risks,
see page 34.
DO ANY MAPCO OR WILLIAMS STOCKHOLDERS HAVE APPRAISAL RIGHTS?
Under applicable state law, neither Williams stockholders nor MAPCO stockholders
are entitled to dissenters' appraisal rights.
WHEN WILL THE MERGER BE COMPLETED?
Work is under way to complete the merger by the end of February, 1998; however,
the failure to satisfy closing conditions, including the receipt of third-party
and governmental approvals, could postpone the merger.
WHEN AND WHERE ARE THE MAPCO AND WILLIAMS SPECIAL STOCKHOLDER MEETINGS?
The special meeting of MAPCO stockholders will be held at 10:00 a.m. on
Thursday, February 26, 1998, at MAPCO Inc., 1800 South Baltimore Ave., Tulsa,
Oklahoma.
The special meeting of Williams stockholders will be held at 10:00 a.m. on
Thursday, February 26, 1998 at the Adam's Mark Hotel, 100 East 2nd Street,
Tulsa, Oklahoma.
WHO CAN VOTE AT THE SPECIAL STOCKHOLDER MEETINGS?
Holders of MAPCO common stock at the close of business on January 26, 1998 may
vote at the MAPCO special meeting.
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<PAGE> 8
Holders of Williams common stock at the close of business on January 26, 1998
may vote at the Williams special meeting.
WHAT VOTE IS REQUIRED?
The merger must be approved by holders of a majority of the shares of MAPCO
common stock outstanding on the record date.
The charter amendment proposal must be approved by the holders of a majority of
the outstanding shares of Williams common stock. The share issuance proposal
must be approved by a majority of the votes cast on the proposal. For this
purpose, the holders of at least a majority of all outstanding shares of
Williams common stock must vote on the proposal.
IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
Your broker may not vote your shares without your instructions. You should
instruct your broker to vote your shares, following the directions your broker
provides. For MAPCO stockholders, shares that are not voted because you do not
instruct your broker, so called "broker non-votes," will have the effect of a
vote against the merger. For Williams stockholders, broker non-votes will have
the effect of a vote against the proposal to amend Williams' Certificate of
Incorporation, but will not be counted for determining whether the share
issuance proposal has been approved. Broker non-votes, however, can negatively
affect the vote on the share issuance proposal if their failure to be counted
results in less than a majority in interest of all outstanding shares of
Williams common stock being voted.
WHAT SHOULD I DO NOW TO VOTE AT THE SPECIAL STOCKHOLDER MEETINGS?
Just mail your signed proxy card in the enclosed return envelope as soon as
possible, so that your shares can be voted at your stockholder meeting. It is
important that Williams stockholders who favor the merger vote for both the
charter amendment proposal and the share issuance proposal.
MAY I CHANGE MY VOTE AFTER I MAIL MY PROXY CARD?
Yes, you may change your vote at any time before your proxy is voted at your
company's stockholder meeting. You can do this in three ways: First, you can
send your company a written statement that you would like to revoke your proxy.
Second, you can send your company a new proxy card. You should send your
revocation or new proxy card to your company's Secretary at the address stated
in the section of this document entitled "The Companies" on page 3. Third, you
can attend your company's stockholder meeting and vote in person. However, your
attendance alone will not revoke your proxy. If you instructed a broker to vote
your shares, you must follow your broker's directions for changing those
instructions.
IF I AM A MAPCO STOCKHOLDER, SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
No. After the merger is completed you will receive written instructions for
exchanging your MAPCO common stock certificates for Williams common stock
certificates.
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SUMMARY
This summary may not contain all the information that is important to you. For a
more complete understanding of the merger and the other information contained in
this document, you should read this entire document carefully, as well as the
additional documents to which it refers. For instructions on obtaining more
information, see page 60.
In November 1997, the Board of Directors of Williams declared a two-for-one
stock split, distributed on December 29, 1997, in the form of a stock dividend.
This split resulted in the exchange ratio being increased from 0.8325 to the
current 1.665. All figures with respect to shares of Williams common stock
contained in this document have been adjusted to give effect to such stock
dividend, unless otherwise stated.
THE COMPANIES
WILLIAMS
Williams, through subsidiaries, engages in the energy and communications
businesses. Its energy operations include the transportation and sale of natural
gas and related activities; natural gas gathering, processing, and treating
activities; the transportation and terminaling of petroleum products;
hydrocarbon exploration and production activities; the production and marketing
of ethanol; and energy commodity trading and marketing; and provides a variety
of other products and services, including price risk management services, to the
energy industry. Williams' communications subsidiaries offer data-, voice- and
video-related products and services; advertising distribution services; video
services and other multimedia services for the broadcast industry; broadcast
facsimile and audio-and video conferencing services for businesses;
customer-premise voice and data equipment, including installation and
maintenance; and network integration and management services nationwide.
Williams also has investments in the equity of certain other companies. As of
September 30, 1997, Williams had total assets of $13.3 billion and total
stockholders' equity of $3.6 billion. For additional information regarding
Williams, see pages 8 and 60.
Williams' headquarters are at One Williams Center, Tulsa, Oklahoma 74172,
telephone (918) 588-2000.
MAPCO
MAPCO is a diversified energy company which, through separate business units, is
engaged in the transportation by pipeline of natural gas liquids, or NGLs,
anhydrous ammonia, crude oil and refined petroleum products; the transportation
by truck and rail of NGLs and refined petroleum products; the refining of crude
oil; the marketing of NGLs, refined petroleum products and crude oil; the
trading of crude oil, refined petroleum products and NGLs; NGL processing; NGL
storage; and the marketing of motor fuel and merchandise through convenience
store operations. As of September 30, 1997, MAPCO had total assets of $2.3
billion and total stockholders' equity of $657 million. For additional
information regarding MAPCO, see pages 10 and 60.
MAPCO's headquarters are at 1800 South Baltimore Avenue, Tulsa, Oklahoma 74119,
telephone (918) 581-1800.
RECOMMENDATIONS TO STOCKHOLDERS
MAPCO's Board has unanimously approved (with one director absent) the merger and
recommends that MAPCO stockholders vote FOR the proposal to approve the merger.
Williams' Board has unanimously approved the merger and recommends that Williams
stockholders vote FOR both proposals on the Williams proxy.
WHY APPROVAL OF THE WILLIAMS STOCKHOLDERS IS NECESSARY
Approval of the charter amendment proposal is necessary to provide sufficient
shares of Williams common stock to complete the merger. Approval of the share
issuance proposal is necessary to meet a listing requirement of the New York
Stock Exchange applicable to issuances of common stock in excess of 20 percent
of a listed company's outstanding common stock. Unless these proposals are
approved, the merger cannot be completed.
3
<PAGE> 10
TOTAL VALUE OF WILLIAMS COMMON STOCK TO BE EXCHANGED FOR MAPCO COMMON STOCK
Based on the number of shares of MAPCO common stock outstanding on December 31,
1997 and the closing price of Williams common stock on January 26, 1998, the
aggregate dollar value of Williams common stock to be exchanged for MAPCO common
stock in the merger will be approximately $2.6 billion. Also, based upon the
number of options to purchase MAPCO common stock outstanding on December 31,
1997 and the same closing price, an additional $133.7 million of Williams common
stock will be issued to holders of MAPCO options when the merger is completed.
See page 47. These values do not reflect changes in the market price of Williams
common stock since such date. After the merger, we estimate that former MAPCO
stockholders will own approximately 23 percent of the Williams common stock and
current Williams stockholders will own approximately 77 percent of the Williams
common stock.
INTERESTS OF MAPCO OFFICERS AND DIRECTORS IN THE MERGER
Certain of MAPCO's directors and officers have interests in the merger in
addition to their interests as MAPCO stockholders. For example, if the merger is
completed, all options to purchase MAPCO common stock held by MAPCO officers and
employees will be automatically converted into Williams common stock in an
amount reflecting the approximate fair value of such options immediately prior
to the MAPCO stockholders meeting plus a 2 percent premium, regardless of
whether such options will otherwise have vested prior to the merger. Also,
certain payments have been and will be made to MAPCO officers pursuant to
employment continuation and non-competition agreements and existing
indemnification arrangements for MAPCO directors and officers will be continued
after the merger. See page 32.
NO APPRAISAL RIGHTS
Under applicable state law, neither Williams' stockholders nor MAPCO's
stockholders are entitled to dissenters' appraisal rights.
CONDITIONS TO THE MERGER
The merger will be completed only if a number of conditions are met or waived,
including the following:
- - the approval of the stockholders of Williams and MAPCO is obtained,
- - all necessary governmental approvals are obtained,
- - the relevant waiting period imposed by the Federal Trade Commission and the
Department of Justice expires,
- - no law, injunction or order prohibiting the transaction exists,
- - the shares of Williams common stock to be issued in the merger are approved
for listing on the New York Stock Exchange,
- - opinions from legal advisors to Williams and MAPCO confirming that the merger
will be treated as a tax-free reorganization are obtained, and
- - letters from independent accountants to Williams and MAPCO stating their
opinions that there are no conditions which would preclude the merger from
being accounted for as a pooling of interests transaction are obtained.
The legal opinions will not bind the Internal Revenue Service, and the
accountants' letters will not bind the Securities and Exchange Commission, each
of which could take a contrary position.
TERMINATION OF THE MERGER AGREEMENT
MAPCO and Williams may agree to terminate the merger agreement at any time. In
addition, either party may terminate the merger agreement if:
- - the other party suffers a material adverse change in its business, financial
position or results of operations,
- - the other party materially breaches the merger agreement, or
- - the merger is not completed by June 30, 1998 (other than because the
terminating party
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<PAGE> 11
breached the merger agreement), but either party may extend this date to as
late as August 29, 1998, if the merger has not been completed because a
regulatory approval has not been obtained but such party expects the approval
will be obtained within the extended period.
MAPCO may terminate the merger agreement under the circumstances described under
"What happens if MAPCO receives a better offer" below.
Termination of the merger agreement by either party may be before or after
stockholder approval, except as described below. Upon withdrawal under certain
circumstances, either MAPCO or Williams will be required to pay fees and
expenses to the other, as described below.
WHAT HAPPENS IF MAPCO RECEIVES A BETTER OFFER
MAPCO must pay Williams $25 million if:
- - someone other than Williams proposes to acquire MAPCO; and
- - the merger agreement is terminated because:
- MAPCO's stockholders do not approve the merger,
- the merger is not completed by June 30, 1998,
- MAPCO's directors withdraw or modify their approval of the merger,
- MAPCO's directors approve another proposal to acquire MAPCO, or
- MAPCO breaches the merger agreement by soliciting or negotiating another
acquisition proposal and the breach has a material effect on Williams;
and
- MAPCO agrees to be or is acquired within 12 months after such
termination.
If MAPCO has to pay the $25 million termination fee, MAPCO must also pay
Williams an additional $50 million upon completion of such acquisition of MAPCO
(or any other acquisition agreed to prior to November 24, 1998).
Alternatively, MAPCO may terminate the merger agreement, prior to MAPCO
stockholder approval, if MAPCO wishes to enter into an agreement for another
transaction which is better than the transaction with Williams, so long as MAPCO
pays Williams $75 million.
PAYMENT OF FEES UPON TERMINATION
In addition to the fees described above, if the merger agreement is terminated
because MAPCO stockholders do not approve the merger following public
announcement of an acquisition proposal by someone other than Williams, MAPCO
must reimburse Williams for up to $7.5 million of expenses, which will be
credited against any termination fee payable by MAPCO.
If the share issuance proposal is not approved by Williams stockholders,
Williams must reimburse MAPCO for up to $7.5 million of expenses. If the share
issuance proposal is approved by Williams stockholders but the charter amendment
proposal is not approved by Williams stockholders, Williams must pay MAPCO a
termination fee of $75 million. The different treatment accorded the proposals
is intended to put Williams rather than MAPCO at risk if the charter amendment
proposal fails and such failure prevents completion of the merger. The rationale
is that it was Williams' use of its authorized but unissued shares in its
two-for-one stock split that resulted in approval of the charter amendment
proposal being necessary for the merger to occur.
AMENDING OR WAIVING TERMS OF THE MERGER AGREEMENT
MAPCO and Williams may amend the merger agreement by mutual consent before or
after stockholder approval. Once MAPCO's or Williams' stockholders approve the
merger, however, applicable law may require that subsequent amendments or
waivers be approved by such stockholders. Also, either Williams or MAPCO may
waive (i.e., ignore) circumstances that, under the merger agreement, would allow
it to withdraw from the merger.
5
<PAGE> 12
ACCOUNTING TREATMENT
It is expected that the merger will qualify as a pooling of interests, which
means that, for accounting and financial reporting purposes, Williams and MAPCO
will be treated as if they had always been combined. This means, among other
things, that Williams will record MAPCO's assets and liabilities as having the
same cost basis as currently reported by MAPCO. The receipt of letters from each
of MAPCO's and Williams' accountants stating that there are no conditions which
would preclude the merger from being accounted for as a pooling of interests
transaction is a condition to the closing of the merger.
REGULATORY AND THIRD-PARTY APPROVALS
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 does not allow Williams
and MAPCO to complete the merger until certain information has been given to the
Antitrust Division of the United States Department of Justice and the United
States Federal Trade Commission, and a required waiting period has expired or
been terminated. On December 5, 1997, Williams and MAPCO made the required
filings with the Department of Justice and the Federal Trade Commission. On
January 2, 1998, the FTC requested additional information. Williams and MAPCO
are in the process of preparing a response to this second request. The waiting
period will expire 20 days after Williams and MAPCO have substantially complied
with this second request, unless early termination is granted by the FTC.
Failure to obtain a non-material governmental consent or any non-governmental
consent will not prevent completion of the merger.
COMPARATIVE PER SHARE INFORMATION
MAPCO common stock is listed on the New York Stock Exchange, the Pacific Stock
Exchange and the Chicago Stock Exchange.
Williams common stock is, and the Williams common stock issued in the merger
will be, listed on the New York Stock Exchange and the Pacific Stock Exchange.
The table below shows the closing prices for MAPCO and Williams common stock on
November 21, 1997, the last trading day before the public announcement of the
merger, and January 23, 1998, the latest trading day for which closing prices
were available when this document was mailed. The value of the Williams common
stock to be received by MAPCO stockholders was $46.15 per MAPCO share as of
November 21, 1997, representing a premium of approximately 21 percent over the
value of the MAPCO common stock on such date.
<TABLE>
<CAPTION>
PER SHARE
-----------------------------------
VALUE OF 1.665
WILLIAMS MAPCO WILLIAMS
PRICE PRICE SHARES
-------- ------- --------------
<S> <C> <C> <C>
November 21,
1997............. $ 27.72 * $38.12 $46.15*
January 26, 1998... $ 28.56 $46.50 $47.56
</TABLE>
- ---------------
* Adjusted to reflect the two-for-one stock split effective December 29, 1997.
RECENT EARNINGS-WILLIAMS
On January 22, 1998, Williams reported 1997 unaudited net income of $271.4
million, or 80 cents per share, as compared to $362.3 million, or $1.07 per
share, in 1996. For the fourth quarter of 1997, Williams reported unaudited net
income of $66.1 million, or 19 cents per share, compared with net income of $106
million, or 31 cents per share, during the same period of 1996. Williams' 1997
results were reduced primarily due to the $79.1 million after-tax cost of a debt
restructuring program and fourth quarter charges totaling $49.8 million related
to the previously announced decision to sell the computer-based training
business, and the write-down of assets and the development expense associated
with certain advanced applications. Partially offsetting was a $44.5 million
gain recognized from a second-quarter transaction involving the combination of
Williams' and Nortel's communications solutions businesses.
6
<PAGE> 13
OPINIONS OF FINANCIAL ADVISORS
Morgan Stanley & Co. Incorporated, financial advisor to MAPCO, has provided an
opinion to the effect that, as of November 23, 1997 and subject to certain
factors stated in the opinion, the exchange ratio provided for in the merger
agreement was fair, from a financial point of view, to holders of MAPCO common
stock. The full text of Morgan Stanley's written opinion, which sets forth
assumptions made, matters considered and limitations on the review undertaken by
Morgan Stanley, is included at the back of this document as Appendix B. Morgan
Stanley's opinion was provided for the information and assistance of the MAPCO
Board and is not a recommendation as to how MAPCO stockholders should vote at
the MAPCO special meeting of stockholders. STOCKHOLDERS OF MAPCO ARE URGED TO,
AND SHOULD, READ MORGAN STANLEY'S OPINION CAREFULLY IN ITS ENTIRETY. See page
19.
Similarly, in deciding to approve the merger agreement, one of the factors that
the Williams Board considered was the opinion of Williams' financial advisor,
Smith Barney Inc., to the effect that, as of November 23, 1997 and subject to
certain factors stated in the opinion, the exchange ratio provided for in the
merger agreement was fair from a financial point of view to Williams. The full
text of Smith Barney's written opinion, which sets forth assumptions made,
matters considered and limitations on the review undertaken by Smith Barney, is
included at the back of this document as Appendix C. Smith Barney's opinion was
provided for the information and assistance of the Williams Board and is not a
recommendation as to how Williams stockholders should vote at the Williams
special meeting of stockholders. STOCKHOLDERS OF WILLIAMS ARE URGED TO, AND
SHOULD, READ SMITH BARNEY'S OPINION CAREFULLY IN ITS ENTIRETY. See page 24.
7
<PAGE> 14
SELECTED CONSOLIDATED FINANCIAL DATA OF
WILLIAMS AND SUBSIDIARIES -- HISTORICAL
The following selected income statement data for the nine months ended
September 30, 1997 and 1996, and balance sheet data for September 30, 1997, have
been derived from Williams' unaudited consolidated financial statements included
in Williams' quarterly report on Form 10-Q for the quarter ended September 30,
1997, incorporated herein by reference. The following selected income statement
data for the years ended December 31, 1996, 1995 and 1994 and balance sheet for
December 31, 1996 and 1995 have been derived from Williams' audited consolidated
financial statements appearing in the Form 10-K for the year ended December 31,
1996 and incorporated herein by reference. The income statement data for the
years 1993 and 1992 and balance sheet data for 1994, 1993 and 1992 have been
derived from Williams' audited consolidated financial statements previously
filed with the Securities and Exchange Commission (the "SEC"), but are not
incorporated herein by reference. The balance sheet data for September 30, 1996
have been derived from Williams' unaudited consolidated financial statements
previously filed with the SEC, but are not incorporated herein by reference. All
share and per share data have been restated to reflect the two-for-one stock
split effective December 29, 1997. The selected historical consolidated
financial data shown below is not necessarily indicative of results to be
expected after the Merger is consummated and should be read in conjunction with
such financial statements of Williams and related notes.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- ------------------------------------------------------
1997(1) 1996 1996 1995(2) 1994 1993 1992
--------- --------- --------- --------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues.................. $ 3,143.0 $ 2,573.4 $ 3,531.2 $ 2,855.7 $1,751.1 $1,793.4 $1,983.5
Income from continuing
operations.................... 279.0(4) 256.3 362.3(5) 99.4(6) 164.9(7) 185.4(8) 103.1(9)
Income from discontinued
operations(3)................. -- -- -- 1,018.8 94.0 46.4 25.2
Net income...................... 205.3(10) 256.3 362.3 1,318.2 246.7 231.8 138.2
PER SHARE DATA:
Income from continuing
operations:
Primary....................... $ .83 $ .77 $ 1.09 $ .93 $ .51 $ .58 $ .33
Fully diluted................. .82 .76 1.07 .92 .51 .57 .33
Net income:
Primary....................... .61 .77 1.09 4.26 .77 .73 .45
Fully diluted................. .61 .76 1.07 4.16 .77 .72 .45
Cash dividends.................. .39 .34 .47 .36 .28 .26 .255
BALANCE SHEET DATA:
Property, plant and
equipment -- net.............. $ 9,860.6 $ 9,210.8 $ 9,386.3 $ 8,014.7 $3,124.0 $3,678.6 $3,527.1
Total assets.................... 13,253.7 11,793.9 12,418.8 10,561.2 5,226.1 5,020.4 4,982.3
Long-term debt.................. 4,043.6 4,173.3 4,376.9 2,874.0 1,307.8 1,604.8 1,683.2
Stockholders' equity............ 3,528.5 3,344.1 3,421.0 3,187.1 1,505.5 1,724.0 1,518.3
Ratio of Earnings to Combined
Fixed Charges and Preferred
Stock Dividend
Requirements(11).............. 2.20 2.22 2.30 2.06 2.15 2.30 1.59
</TABLE>
8
<PAGE> 15
- ---------------
(1) On April 30, 1997, Williams and Northern Telecom combined their customer
premise operations into a limited liability company, WilTel Communications,
LLC (the "LLC"). Williams owns a 70 percent interest in the LLC. Operating
results of the LLC are included in Williams' operating results beginning
May 1, 1997.
(2) On January 18, 1995, Williams acquired 60 percent of the outstanding common
stock of Transco Energy Company ("Transco") in a cash tender offer. On May
1, 1995, the remaining 40 percent of Transco's outstanding common stock was
acquired through a merger, which involved the exchange of the remaining
Transco common stock for approximately 31.2 million shares of Williams
common stock. For additional information, see Note 2 of the Notes to
Consolidated Financial Statements of Williams appearing in the Form 10-K
and incorporated herein by reference.
(3) In the third quarter of 1994, Williams signed a definitive agreement to
enter into the sale of its network services operations (the "WNS Sale"). On
January 5, 1995, Williams consummated the WNS Sale, and the gain from the
sale was reported as discontinued operations in the 1995 first quarter
consolidated financial statements. The selected historical consolidated
financial data have been prepared to present operating results of the
operations sold in the WNS Sale as discontinued operations. Prior period
balance sheets have not been restated. For additional information see Note
3 of the Notes to Consolidated Financial Statements of Williams appearing
in the Form 10-K and incorporated herein by reference.
(4) Includes a gain on the sale of Williams' interest in a subsidiary of $44.5
million. See Note 4 of the Notes to Unaudited Consolidated Financial
Statements appearing in the Form 10-Q for the quarter ended September 30,
1997 and incorporated herein by reference.
(5) Includes a pretax gain on sales of assets of $15.7 million. See Note 6 of
the Notes to Consolidated Financial Statements of Williams appearing in the
Form 10-K and incorporated herein by reference. Also includes a pretax gain
of $20 million from the property insurance coverage associated with
construction of replacement gathering facilities.
(6) Includes a pretax loss on the sale of an investment of $12.6 million and a
pretax write-off of $41.4 million in project costs. See Note 6 of the Notes
to Consolidated Financial Statements of Williams in the Form 10-K and
incorporated herein by reference.
(7) Includes a pretax gain on sales of assets of $22.7 million. See Note 6 of
the Notes to Consolidated Financial Statements of Williams appearing in the
Form 10-K and incorporated herein by reference.
(8) Includes a pretax gain of $51.6 million from the sale of 6.1 million units
in the William Coal Seam Gas Royalty Trust and a pretax gain of $45.9
million from the sale of the intrastate natural gas pipeline system and
other related assets in Louisiana.
(9) Includes a pretax gain of $14.6 million from the sale of a tract of land in
Florida that had been retained from the previous sale of Agrico Chemical
Company.
(10) Includes an extraordinary loss of $73.7 million relating to the early
extinguishment of debt. See Note 6 of the Notes to Unaudited Consolidated
Financial Statements appearing in the Form 10-Q for the quarter ended
September 30, 1997, and incorporated herein by reference.
(11) For the purpose of this ratio (i) earnings consist of income from
continuing operations before fixed charges, minority interest expense and
income taxes for Williams, its majority-owned subsidiaries and its
proportionate share of 50 percent-owned companies, less undistributed
earnings of less than 50 percent-owned companies; and (ii) fixed charges
consist of interest and debt expense on all indebtedness (without reduction
of interest capitalized) and that portion of rental payments on operating
leases estimated to represent an interest factor, plus the pretax effect of
preferred dividends of Williams and its subsidiaries.
9
<PAGE> 16
SELECTED CONSOLIDATED FINANCIAL DATA OF
MAPCO AND SUBSIDIARIES -- HISTORICAL
The following selected income statement data for the nine months ended
September 30, 1997 and 1996, and balance sheet data for September 30, 1997, have
been derived from MAPCO's unaudited condensed consolidated financial statements
included in MAPCO's quarterly report on Form 10-Q for the quarter ended
September 30, 1997, incorporated herein by reference. The following selected
income statement data for the years ended December 31, 1996, 1995 and 1994 and
balance sheet data for December 31, 1996 and 1995 have been derived from MAPCO's
audited consolidated financial statements appearing in the Form 10-K for the
year ended December 31, 1996 and incorporated herein by reference. The income
statement data for the years 1993 and 1992 and balance sheet data for 1994, 1993
and 1992 have been derived from MAPCO's audited consolidated financial
statements previously filed with the SEC, but are not incorporated herein by
reference. The balance sheet data for September 30, 1996 have been derived from
MAPCO's unaudited condensed consolidated financial statements previously filed
with the SEC, but are not incorporated herein by reference. Where necessary, the
data have been restated to reflect discontinued operations and a two-for-one
stock split effected in the form of a stock dividend from shares held as
treasury stock, both occurring in 1996. The nine months' figures for 1997 and
1996 are unaudited, but MAPCO believes that the nine months' figures reflect all
normal recurring adjustments necessary for a fair presentation of the financial
position and results of operations for the periods. The selected historical
consolidated financial data shown below is not necessarily indicative of results
to be expected after the Merger is consummated and should be read in conjunction
with such financial statements of MAPCO and related notes.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- --------------------------------------------------------
1997 1996 1996 1995 1994(5) 1993 1992
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues................... $2,767.6 $2,321.7 $3,353.1 $2,856.6 $2,663.8 $2,300.9 $2,357.3
Income from continuing
operations..................... 105.5(2) 87.9(3) 130.2(3) 64.2(4) 50.2(6) 91.8 73.2
Income (loss) from discontinued
operations(1).................. -- (32.7) (32.7) 10.5 28.9 35.2 27.5
Net income....................... 105.5 55.2 97.5 74.7 79.1 127.0 100.7
PER SHARE DATA:
Income from continuing
operations:(7)
Primary........................ $ 1.91 $ 1.52 $ 2.26 $ 1.08 $ .83 $ 1.52 $ 1.21
Fully-diluted.................. 1.91 1.52 2.26 1.08 .83 1.52 1.21
Net income:(7)
Primary........................ 1.91 .95 1.69 1.25 1.31 2.10 1.66
Fully-diluted.................. 1.91 .95 1.69 1.25 1.31 2.10 1.66
Cash dividends................... .45 .38 .525 .50 .50 .50 .50
BALANCE SHEET DATA:
Property, plant and
equipment -- net............... $1,446.9 $1,341.1 $1,356.9 $1,312.0 $1,200.6 $1,092.6 $1,044.3
Total assets..................... 2,348.6 2,114.4 2,170.7 2,282.7 2,115.6 1,912.8 1,856.2
Long-term debt................... 763.0 618.1 608.4 801.0 720.9 585.5 662.9
Stockholders' equity............. 657.4 615.5 603.6 642.3 622.6 574.3 477.5
RATIO OF EARNINGS TO FIXED
CHARGES(8)..................... 4.7 4.0 4.4 2.6 2.4 3.8 2.9
</TABLE>
- ---------------
(1) In June 1996, MAPCO concluded that it would sell substantially all of its
coal business to Alliance Coal Corporation ("Alliance"), a corporation
formed by Beacon Group Energy Investment Fund L.P. and related entities. The
transaction was completed on September 10, 1996, with an effective date of
July 31, 1996. The selected historical consolidated financial data have been
prepared to present operating results of the operations sold to Alliance as
discontinued operations. For additional information, see Note 2 of the Notes
to Consolidated Financial Statements of MAPCO appearing in the Form 10-K and
incorporated herein by reference.
10
<PAGE> 17
(2) Includes a pretax gain on sale of assets of $66 million. See Note 3 of Notes
to Condensed Consolidated Financial Statements appearing in the Form 10-Q
for the quarter ended September 30, 1997, and incorporated herein by
reference.
(3) Includes a pretax gain of $20.8 million on a sale of assets. See Note 3 of
the Notes to Consolidated Financial Statements of MAPCO appearing in the
Form 10-K and incorporated herein by reference.
(4) Includes a pretax charge of $10.3 million for severance and early
retirements associated with reorganizations. See Note 11 of the Notes to
Consolidated Financial Statements of MAPCO appearing in the Form 10-K and
incorporated herein by reference.
(5) On September 1, 1994, MAPCO completed the acquisition of certain assets of
Emro Propane Company. The purchase price included a $186 million cash
payment and the transfer to Emro Marketing Company of the retail convenience
store assets of MAPCO Florida Inc.
(6) Includes a pretax charge of $68.7 million related to the settlement of a
long-standing dispute with the State of Alaska relative to its royalty oil
purchase agreements. See Note 14 of the Notes to Consolidated Financial
Statements of MAPCO appearing in the Form 10-K and incorporated herein by
reference.
(7) Calculated by using common and common-equivalent shares.
(8) For the purpose of this ratio (i) earnings consist of income from continuing
operations before fixed charges, minority interest expense and income taxes
for MAPCO and its majority-owned subsidiaries; and (ii) fixed charges
consist of interest and debt expense on all indebtedness (without reduction
of interest capitalized) and that portion of rental payments on operating
leases estimated to represent an interest factor.
11
<PAGE> 18
SELECTED PRO FORMA COMBINED FINANCIAL DATA
OF WILLIAMS AND MAPCO
(UNAUDITED)
The following table sets forth certain unaudited pro forma combined
financial information for Williams and MAPCO on a pooling of interests basis.
The pooling of interests method of accounting assumes that the combining
companies were merged from inception and the historical financial statements for
periods prior to consummation of the Merger are restated as though the companies
had been combined from inception. This pro forma information is derived from the
unaudited pro forma condensed combined financial statements appearing elsewhere
herein and should be read in conjunction with those statements and the notes
thereto. All per share data reflect the Williams two-for-one common stock split
effected December 29, 1997. The unaudited pro forma financial data are not
necessarily indicative of the operating results or financial position that would
have been achieved had the Merger been effective at the date or during the
periods presented or the operating results that may be obtained in the future.
See "Unaudited Pro Forma Condensed Combined Financial Statements" on page 62.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- --------------------------------
1997 1996 1996 1995 1994
--------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues........................... $ 5,898.5 $4,860.9 $6,842.9 $5,655.0 $4,357.9
Income from continuing operations........ $ 384.5 $ 344.2 $ 492.5 $ 363.6 $ 215.1
Average shares outstanding:
Primary................................ 417.2 420.7 420.1 405.4 407.6
Fully-diluted.......................... 429.6 432.9 432.5 413.8 407.7
PER SHARE DATA:
Income from continuing operations:
Primary................................ $ .90 $ .80 $ 1.15 $ .86 $ .51
Fully diluted.......................... .89 .79 1.14 .86 .51
Cash dividends........................... .36 .32 .43 .35 .29
Book value............................... 9.74 9.35
BALANCE SHEET DATA:
Property, plant and equipment -- net..... $11,307.5
Total assets............................. 15,632.8
Long-term debt........................... 4,806.6
Stockholders' equity..................... 4,178.4
</TABLE>
12
<PAGE> 19
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth certain historical per share data of
Williams and MAPCO and combined per share data on an unaudited pro forma basis
assuming that the combining companies were merged at inception and assuming that
1.665 shares of Williams common stock were issued in exchange for each share of
MAPCO common stock outstanding. This data should be read in conjunction with the
selected historical audited and unaudited financial data and the historical
audited and unaudited financial statements of Williams and MAPCO and the notes
thereto, which are incorporated herein by reference. The selected pro forma
combined financial information of Williams and MAPCO is derived from the
unaudited pro forma condensed combined financial statements and should be read
in conjunction with such unaudited pro forma statements and notes thereto
included elsewhere in this Joint Proxy Statement/Prospectus. All per share data
reflect the two-for-one Williams common stock split effected December 29, 1997.
The unaudited pro forma information is presented for illustrative purposes only
and is not necessarily indicative of the combined financial position or results
of operations of future periods or the operating results that actually would
have been realized had Williams and MAPCO been a single entity during the
periods presented.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------- -----------------------
1997 1996 1996 1995 1994
------ ----- ------ ----- ----
<S> <C> <C> <C> <C> <C>
WILLIAMS COMMON STOCK:
Historical Per Common and Common-Equivalent Share:
Income from continuing operations:
Primary......................................... $ .83 $ .77 $ 1.09 $ .93 $.51
Fully-diluted................................... .82 .76 1.07 .92 .51
Cash dividends..................................... .39 .34 .47 .36 .28
Book Value at period end........................... 10.63 10.35
Pro Forma Combined Per Williams Common and Common-
Equivalent Share:
Income from continuing operations:
Primary......................................... $ .90 $ .80 $ 1.15 $ .86 $.51
Fully-diluted................................... .89 .79 1.14 .86 .51
Cash dividends..................................... .36 .32 .43 .35 .29
Book value at period end........................... 9.74 9.35
MAPCO COMMON STOCK:
Historical Per Common and Common-Equivalent Share:
Income from continuing operations:
Primary......................................... $ 1.91 $1.52 $ 2.26 $1.08 $.83
Fully-diluted................................... 1.91 1.52 2.26 1.08 .83
Cash dividends..................................... .45 .38 .525 .50 .50
Book value at period end........................... 12.00 10.86
Pro Forma Combined Per Equivalent MAPCO Common and
Common-Equivalent Share(1):
Income from continuing operations:
Primary......................................... $ 1.50 $1.33 $ 1.91 $1.43 $.85
Fully-diluted................................... 1.48 1.32 1.90 1.43 .85
Cash dividends..................................... .60 .53 .72 .58 .48
Book value at period end........................... 16.22 15.57
</TABLE>
- ---------------
(1) Equivalent pro forma per share amounts were calculated by multiplying the
corresponding pro forma combined per share amount for Williams by the 1.665
exchange-ratio.
13
<PAGE> 20
COMPARATIVE MARKET PRICE INFORMATION
Williams. Williams common stock is listed on the NYSE and the Pacific
Exchange under the symbol "WMB." The following table shows the high and low
share prices of Williams common stock on the NYSE and the cash dividends paid or
declared per share for the periods presented, based on published financial
sources. All amounts have been adjusted to reflect the two-for-one common stock
split effected December 29, 1997 and the three-for-two common stock split
effected December 30, 1996.
<TABLE>
<CAPTION>
PRICE PER SHARE
OF WILLIAMS
COMMON STOCK
-----------------
HIGH LOW DIVIDEND
---- ---- --------
<S> <C> <C> <C>
Year ended December 31:
1998
First Quarter (through January 26)............................. $29 11/16 $ 26 1/4 $ --
1997
First Quarter.................................................. $23 11/16 $ 18 1/16 $ .13
Second Quarter................................................. 23 11/16 19 3/8 .13
Third Quarter.................................................. 25 1/4 21 3/16 .13
Fourth Quarter................................................. 28 11/16 22 7/8 .15
1996
First Quarter.................................................. $17 $ 14 1/4 $.1135
Second Quarter................................................. 17 17/24 15 7/12 .1135
Third Quarter.................................................. 17 17/24 15 1/4 .1135
Fourth Quarter................................................. 19 1/6 16 1/4 .13
</TABLE>
MAPCO. MAPCO common stock is listed on the NYSE, the Chicago Stock
Exchange and the Pacific Exchange under the symbol "MDA." The following table
shows the high and low share prices of MAPCO common stock on the NYSE and the
cash dividends paid or declared per share for the periods presented, based on
published financial sources. Where necessary, the share prices have been
restated to reflect a two-for-one stock split effected in the form of a stock
dividend from shares held as treasury stock which occurred in 1996.
<TABLE>
<CAPTION>
PRICE PER SHARE
OF MAPCO
COMMON STOCK
----------------
HIGH LOW DIVIDEND
---- --- -------
<S> <C> <C> <C>
Year ended December 31:
1998
First Quarter (through January 26)............................. $48 1/8 $431/4 $ --
1997
First Quarter.................................................. $34 1/4 $31 $ .15
Second Quarter................................................. 32 1/8 287/8 .15
Third Quarter.................................................. 32 15/16 291/3 .15
Fourth Quarter................................................. 46 13/16 315/8 .15
1996
First Quarter.................................................. $28 11/16 $2611/16 $ .125
Second Quarter................................................. 29 5/8 277/8 .125
Third Quarter.................................................. 29 13/16 2615/16 .125
Fourth Quarter................................................. 34 3/4 293/4 .15
</TABLE>
14
<PAGE> 21
INTRODUCTION
Throughout this document the term "Merger" refers to the merger of TML
Acquisition Corp. ("Sub"), a Delaware corporation and a wholly-owned subsidiary
of The Williams Companies, Inc. ("Williams") with and into MAPCO Inc. ("MAPCO"),
with MAPCO being the surviving corporation and becoming a wholly-owned
subsidiary of Williams. The term "Merger Agreement" refers to the Agreement and
Plan of Merger, dated as of November 23, 1997, and amended as of January 25,
1998, among Williams, Sub and MAPCO, a copy of which is included at the back of
this Joint Proxy Statement/Prospectus as Appendix A.
MAPCO is furnishing this Joint Proxy Statement/Prospectus to holders of
shares of the common stock, par value $1.00 per share, of MAPCO ("MAPCO Common
Stock") in connection with the solicitation of proxies by the Board of Directors
of MAPCO (the "MAPCO Board") for use at MAPCO's special meeting of stockholders
to be held on February 25, 1998 (the "MAPCO Special Meeting"), and at any
postponements or adjournments thereof. At the MAPCO Special Meeting, the
stockholders of MAPCO will be asked to vote upon a proposal to approve and adopt
the Merger Agreement, and the transactions contemplated thereby. The Merger
Agreement provides for the merger of Sub with and into MAPCO (the "Merger"),
with MAPCO continuing as the surviving corporation (the "Surviving Corporation")
and becoming a wholly-owned subsidiary of Williams.
Williams is furnishing this Joint Proxy Statement/Prospectus to holders of
shares of the common stock, par value $1.00 per share, of Williams ("Williams
Common Stock") in connection with the solicitation of proxies by the Board of
Directors of Williams (the "Williams Board") for use at Williams' special
meeting of stockholders (the "Williams Special Meeting") to be held on February
25, 1998, and at postponements or any adjournment thereof. At the Williams
Special Meeting, the stockholders of Williams will be asked to vote upon
proposals to (i) amend its Restated Certificate of Incorporation, as amended
(the "Williams Certificate"), to increase the authorized number of shares of
Williams Common Stock from 480,000,000 to 960,000,000 shares (the "Charter
Amendment Proposal") in order to provide sufficient shares of Williams Common
Stock for issuance in connection with the Merger and the other transactions
contemplated by the Merger Agreement and to enable future issuances of Williams
Common Stock as deemed necessary by the Williams Board for other corporate
purposes and (ii) approve the issuance of Williams Common Stock to holders of
MAPCO Common Stock or options in exchange for their shares of MAPCO Common Stock
or options pursuant to the Merger and the other transactions contemplated by the
Merger Agreement (the "Share Issuance Proposal").
This Joint Proxy Statement/Prospectus also constitutes a prospectus of
Williams, which is a part of the Registration Statement on Form S-4 (the
"Registration Statement") filed by Williams with the SEC under the Securities
Act of 1933, as amended (the "Securities Act"), in order to register under the
Securities Act the shares of Williams Common Stock to be issued in the Merger.
In November 1997, the Williams Board declared a two-for-one stock split,
distributed on December 29, 1997, in the form of a stock dividend (the "Stock
Dividend"). All figures with respect to shares of Williams Common Stock
contained in this Joint Proxy Statement/Prospectus have been adjusted to give
effect to the Stock Dividend, unless otherwise stated.
THE PROPOSED MERGER
The Merger Agreement provides, among other things, that each share of MAPCO
Common Stock issued and outstanding as of the effective time of the Merger (the
"Effective Time"), other than shares held by MAPCO or its wholly-owned
subsidiaries, and each associated preferred stock purchase right (the "MAPCO
Rights") issued in accordance with the Rights Agreement, dated as of May 29,
1996, between MAPCO and Harris Trust Company of New York, as rights agent (the
"MAPCO Rights Agreement"), will be converted, without any action on the part of
the holder thereof, into the right to receive 1.665 shares (after giving effect
to the Stock Dividend which resulted in the exchange ratio being increased from
0.8325 to the current 1.665) (the "Exchange Ratio") of Williams Common Stock and
.555 associated preferred stock purchase rights (the "Williams Rights") issued
in accordance with the Rights Agreement, dated as of February 6, 1996, between
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Williams and First Chicago Trust Company of New York, as rights agent (the
"Williams Rights Agreement"), with cash being paid in lieu of fractional shares.
It is a condition to closing of the Merger that the shares of Williams
Common Stock issuable to MAPCO stockholders in the Merger shall have been
approved for listing on the New York Stock Exchange (the "NYSE") and the Pacific
Stock Exchange (the "PSE"), subject to official notice of issuance.
BACKGROUND OF THE MERGER
On October 15, 1997, Keith E. Bailey, the Chairman of the Board, President
and Chief Executive Officer of Williams, met with James E. Barnes, the Chairman
of the Board, President and Chief Executive Officer of MAPCO, to discuss the
potential for a business combination involving MAPCO and Williams. The
discussions were preliminary at that time and both companies decided to explore
further a possible transaction assuming that appropriate terms could be
determined. Prior to this meeting, Williams had conducted internal studies of a
combination with MAPCO and, among other things, the likelihood that MAPCO could
create a platform for capital investments to achieve Williams' growth
objectives. In addition, MAPCO and its financial advisor, Morgan Stanley & Co.
Incorporated ("Morgan Stanley"), were exploring strategic alternatives for MAPCO
including potential business combinations, strategic alliances, joint venture
arrangements and internal restructuring alternatives. Following the October 15
meeting, MAPCO informed Morgan Stanley of the substance of the meeting and began
working with Morgan Stanley to evaluate the financial aspects of a business
combination with Williams. During this period, MAPCO was also in discussions
with another company and conducting a due diligence investigation with respect
to a possible strategic alliance between MAPCO and that company involving a
portion of MAPCO's business.
On October 27, 1997, MAPCO and Williams entered into a confidentiality
agreement, which provided for a mutual exchange of certain confidential
information regarding Williams and MAPCO. The confidentiality agreement also
contained customary "standstill" provisions. Following the execution of the
confidentiality agreement, representatives of Williams and MAPCO commenced their
respective due diligence reviews.
On November 5, 1997, at a special meeting of the MAPCO Board, Mr. Barnes
and other members of MAPCO's senior management and Morgan Stanley discussed the
advantages and disadvantages of the various strategic options being considered
(including continuing the MAPCO business in its present configuration or
pursuing other strategic alliances, joint venture arrangements and internal
restructuring alternatives). Mr. Barnes also reported to the MAPCO Board the
substance of his conversations with Mr. Bailey, and Morgan Stanley gave a brief
overview of Williams' businesses. Following these discussions, the MAPCO Board
determined that MAPCO's senior management should continue to explore all of
MAPCO's alternatives, including a potential business combination with Williams.
Following this meeting, various officers of MAPCO and Williams, including
their respective chief executive officers, chief financial officers and general
counsels, as well as their respective legal and financial advisors, conducted
due diligence reviews and entered into extensive discussions at numerous
meetings with respect to the form, accounting treatment and appropriate exchange
ratio for a potential business combination. In addition, MAPCO's senior
management continued to explore the potential alternatives available to MAPCO.
In mid-November, 1997, representatives of MAPCO and Williams began
negotiating the terms and provisions of the Merger. The parties agreed that the
Merger should be structured as a tax-free reorganization that would be accounted
for as a pooling of interests. The parties also discussed the various consents
that would be required in order to consummate the Merger, including necessary
consents relating to MAPCO's agreements with Texaco Exploration and Production,
Inc. ("Texaco"), a subsidiary of Texaco, Inc., relating to Discovery Gas
Transmission LLC ("Discovery"). In addition, Williams proposed that MAPCO's
outstanding employee stock options be exchanged in the Merger for shares of
Williams Common Stock based on the fair value of such options (the "Stock Option
Exchange").
On November 19 and 20, 1997, at regularly scheduled meetings, the Williams
Board reviewed the proposed terms of the Merger.
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On November 22, 1997, the compensation committee of the MAPCO Board (the
"MAPCO Compensation Committee") reviewed with MAPCO's legal advisors the terms
and provisions of certain non-competition agreements (the "Non-Competition
Agreements") proposed to be entered into between MAPCO and seven members of
MAPCO's management which were necessary to induce Williams to sign the Merger
Agreement, as well as certain other compensation matters. See "-- Interests of
Certain Persons in the Merger." In addition, the MAPCO Compensation Committee
reviewed the proposed terms of the Stock Option Exchange. The MAPCO Compensation
Committee (with one member absent) unanimously determined to approve the Stock
Option Exchange, determining it to be of equivalent value to the fair value of
the underlying options to acquire shares of MAPCO Common Stock (the "MAPCO Stock
Options"), and recommended that the MAPCO Board approve the Non-Competition
Agreements, subject, in each case, to the MAPCO Board's approval of the Merger
Agreement.
Immediately following the meeting of the MAPCO Compensation Committee on
November 22, 1997, the MAPCO Board held a special meeting to consider the
Merger. Members of MAPCO's senior management updated the MAPCO Board regarding
developments that had occurred since its last meeting and outlined the remaining
unresolved issues in the negotiations with Williams. MAPCO's senior management
also briefed the MAPCO Board on the results of their due diligence investigation
of Williams, discussed governmental and third-party consents that would be
necessary to consummate the Merger and, with MAPCO's accounting advisors,
discussed the criteria required for the transaction to be accounted for as a
pooling of interests.
The MAPCO Board then reviewed with outside counsel the terms of the
proposed Merger Agreement and related legal issues and reviewed a financial
presentation by Morgan Stanley that outlined the potential effects of the Merger
and the relative advantages and disadvantages of a business combination with
Williams. At this meeting, Morgan Stanley advised the MAPCO Board that, subject
to certain assumptions with respect to unresolved issues, the Exchange Ratio was
fair to MAPCO stockholders from a financial point of view. The MAPCO Board also
considered the recommendations of the MAPCO Compensation Committee with respect
to certain compensation matters, including adoption of the Non-Competition
Agreements. The MAPCO Board took no action to approve any of the items under
consideration at this meeting. During the meeting, the MAPCO Board expressed its
views with respect to the appropriate resolution of the remaining unresolved
issues with Williams.
Following the meeting of the MAPCO Board on November 22, 1997,
representatives of MAPCO and Williams discussed the remaining unresolved issues
relating to the Merger Agreement. In light of the guidance provided by the MAPCO
Board, the legal and financial advisors proceeded to finalize the terms of the
Merger Agreement.
On November 23, 1997, at a special meeting, the Williams Board considered
the developments that had occurred since the November 20, 1997 meeting of the
Williams Board, and reviewed with outside counsel the revisions that had been
made to the definitive Merger Agreement. At such meeting, Smith Barney Inc.
("Smith Barney") rendered to the Williams Board a written opinion dated November
23, 1997 to the effect that, as of the date of such opinion and based upon and
subject to certain matters stated therein, the Exchange Ratio was fair to
Williams from a financial point of view, and reviewed with the Williams Board
the financial analyses performed by Smith Barney in connection with such
opinion. See "-- Opinion of Financial Advisor to Williams." Following further
discussions by the Williams Board and senior management, the Williams Board
unanimously approved the Merger Agreement and the Merger.
On November 23, 1997, the MAPCO Board resumed its special meeting,
considered the developments that had occurred since November 22, 1997, and
reviewed with outside counsel the revisions that had been made to the Merger
Agreement. Morgan Stanley described and delivered its written opinion that the
Exchange Ratio was fair to MAPCO stockholders from a financial point of view.
See "-- Opinion of Financial Advisor to MAPCO." Following further discussions by
the MAPCO Board and senior management, the MAPCO Board unanimously approved
(with one director absent) the Merger Agreement, the Merger, the Non-Competition
Agreements, the Stock Option Exchange and an amendment to the MAPCO Rights
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Agreement, which would allow consummation of the Merger without triggering the
provisions of the MAPCO Rights Agreement.
MAPCO and Williams executed the Merger Agreement on November 23, 1997, and
publicly announced the Merger on Monday, November 24, 1997.
MAPCO and Williams amended the Merger Agreement as of January 25, 1998 to
clarify certain technical matters.
MAPCO'S RATIONALE FOR THE MERGER; RECOMMENDATION OF THE MAPCO BOARD
In reaching its determination to approve the Merger and the Merger
Agreement, the MAPCO Board considered a number of factors, including those
listed below. In light of the wide variety of factors considered by the MAPCO
Board and the complexity of those matters, the MAPCO Board did not consider it
practical to attempt, and it did not attempt, to quantify or otherwise assign
relative weights to the specific factors it considered in reaching its
determination. After evaluating all such factors, the MAPCO Board reached its
conclusion based on its judgment in light of all such factors. The following are
the material factors considered by the MAPCO Board in reaching its conclusion,
certain of which factors contained both positive and negative elements:
- the financial condition, results of operations, cash flows and dividends
of each of MAPCO and Williams, on a historical basis, before giving
effect to the Merger;
- strategic alternatives (including continuing the MAPCO business in its
present configuration or pursuing other strategic alliances, joint
venture arrangements and internal restructuring alternatives) none of
which the MAPCO Board believed to be as favorable to the holders of MAPCO
Common Stock as the Merger;
- the judgment, advice and analyses of its management with respect to the
strategic, financial and operational benefits of the Merger;
- the critical mass that would be achieved by combining MAPCO and Williams,
and the potential benefits of such critical mass in the capital intensive
pipeline business;
- the fact that Williams had already made significant investments in
marketing, which would accrue to the benefit of MAPCO stockholders;
- the complementary nature of the geographical areas serviced by Williams
and MAPCO;
- the potential for cost and commercial synergies for the combined
enterprise as a result of the Merger, as well as the management
challenges associated with successfully integrating the businesses,
cultures and managements of two major corporations;
- the diversification of MAPCO's business as a result of the Merger and the
reduction in the risk to MAPCO stockholders inherent in such
diversification;
- the opinion of Morgan Stanley that the Exchange Ratio was fair to MAPCO
stockholders from a financial point of view and the financial analyses
conducted by Morgan Stanley in reaching its opinion, as described under
"Opinion of Financial Advisor to MAPCO";
- the treatment of the Merger as a "tax free" reorganization for federal
income tax purposes;
- historical market prices and trading information with respect to the
Williams Common Stock;
- the Exchange Ratio agreed to by Williams, which, based on the closing
price of the MAPCO and Williams Common Stock on November 21, 1997,
represented a 21 percent premium over the current market price of MAPCO
Common Stock;
- the terms and conditions of the Merger Agreement, including the
provisions of the Merger Agreement that permit MAPCO to terminate the
Merger Agreement under certain circumstances in order to enter into an
agreement for another acquisition proposal that the MAPCO Board
determines, in good faith, is more favorable to MAPCO stockholders,
subject to the payment of certain termination fees;
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- the interests of MAPCO management in the Merger; and
- the likelihood that the Merger would be completed.
THE MAPCO BOARD HAS UNANIMOUSLY APPROVED (WITH ONE DIRECTOR ABSENT) THE
MERGER AGREEMENT, HAS DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF
MAPCO AND ITS STOCKHOLDERS AND RECOMMENDS THAT MAPCO STOCKHOLDERS VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
WILLIAMS' RATIONALE FOR THE MERGER; RECOMMENDATION OF THE WILLIAMS BOARD
Williams believes that the acquisition of MAPCO will increase Williams'
earnings while strengthening its balance sheet and increasing its capacity to
generate capital for future growth. Williams further believes that MAPCO's
businesses complement those of Williams and should provide a growth rate
comparable to Williams' energy services segment, while doubling its current
scale. In addition, Williams expects the future earnings contribution from
energy services to exceed that of Williams' regulated natural gas pipelines over
a rapid enough time frame to provide an income bridge while the earnings
capability of Williams' communications business matures in the coming years.
In reaching its conclusions to enter into the Merger Agreement, the
Williams Board considered a number of factors, including those listed below. In
light of the wide variety of factors considered by the Williams Board and the
complexity of those matters, the Williams Board did not consider it practical to
attempt, and it did not attempt, to quantify or otherwise assign relative
weights to the specified factors it considered in reaching its determination.
After evaluating all such factors, the Williams Board reached its conclusion
based on its judgment in light of all such factors. The following are the
material factors considered by the Williams Board in reaching its conclusion,
certain of which factors contained both positive and negative elements:
- Williams' and MAPCO's businesses, assets and the current conditions and
trends in their respective markets;
- Williams' and MAPCO's comparative financial condition and results of
operations, both on a historical basis and on a prospective basis without
giving effect to the Merger;
- current market conditions and historical market prices and trading
information with respect to the MAPCO Common Stock;
- the critical mass that would be achieved by combining Williams and MAPCO
and the potential benefits therefrom in the capital intensive pipeline
business;
- the complementary nature of the geographical areas serviced by Williams
and MAPCO;
- the potential synergies for the combined companies as well as the
management challenges associated with successfully integrating the
businesses, cultures and managements of two major companies;
- the proposed terms and structure of the Merger; and
- a comparison of recent acquisition transactions within the natural gas
pipeline and the natural gas marketing business and selected acquisition
transactions generally.
THE WILLIAMS BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, HAS
DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF WILLIAMS AND ITS
STOCKHOLDERS AND RECOMMENDS THAT WILLIAMS STOCKHOLDERS VOTE FOR BOTH THE CHARTER
AMENDMENT PROPOSAL AND THE SHARE ISSUANCE PROPOSAL. UNLESS THESE PROPOSALS ARE
APPROVED, THE MERGER CANNOT BE COMPLETED.
OPINION OF FINANCIAL ADVISOR TO MAPCO
Morgan Stanley was retained by MAPCO to act as its financial advisor in
connection with the Merger based on Morgan Stanley's qualifications, experience
and expertise. On November 22, 1997, Morgan Stanley
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rendered to the MAPCO Board an oral opinion, and rendered a written opinion on
November 23, 1997, to the effect that, as of November 23, 1997, and based on and
subject to certain matters stated therein, the Exchange Ratio was fair from a
financial point of view to the holders of the MAPCO Common Stock.
THE FULL TEXT OF MORGAN STANLEY'S WRITTEN OPINION DATED NOVEMBER 23, 1997,
WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN, IS ATTACHED AS APPENDIX B TO THIS JOINT PROXY
STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. HOLDERS OF MAPCO
COMMON STOCK ARE URGED TO READ, AND SHOULD READ, THIS OPINION CAREFULLY IN ITS
ENTIRETY. MORGAN STANLEY'S OPINION ADDRESSES ONLY THE FAIRNESS OF THE EXCHANGE
RATIO FROM A FINANCIAL POINT OF VIEW TO THE HOLDERS OF MAPCO COMMON STOCK, AND
IT DOES NOT ADDRESS ANY OTHER ASPECTS OF THE MERGER NOR DOES IT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE
MAPCO SPECIAL MEETING. THE SUMMARY OF THE OPINION OF MORGAN STANLEY SET FORTH IN
THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE FULL TEXT OF SUCH OPINION.
In arriving at its opinion, Morgan Stanley: (i) reviewed certain publicly
available financial statements and other information of MAPCO and Williams; (ii)
reviewed certain internal financial statements and other financial and operating
data concerning MAPCO and Williams prepared by their respective managements;
(iii) analyzed certain financial projections of MAPCO and Williams prepared by
their respective managements; (iv) discussed the past and current operations and
financial condition and the prospects of MAPCO and Williams with senior
executives of MAPCO and Williams, respectively; (v) reviewed the reported prices
and trading activity for the MAPCO Common Stock and the Williams Common Stock;
(vi) compared the financial performance of MAPCO and Williams and the prices and
trading activity of the MAPCO Common Stock and the Williams Common Stock with
that of certain other comparable publicly traded companies and their securities;
(vii) reviewed the financial terms, to the extent publicly available, of certain
comparable acquisition transactions; (viii) reviewed the pro forma financial
impact of the Merger on Williams; (ix) reviewed and discussed with the
management of MAPCO their estimates of the strategic, operational and financial
benefits anticipated from the Merger; (x) participated in discussions and
negotiations among representatives of MAPCO and Williams and their respective
financial and legal advisors; (xi) reviewed the draft Merger Agreement and
certain related documents; and (xii) performed such other analyses and
examinations and considered such other factors as Morgan Stanley deemed
appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon, without
independent verification, the accuracy and completeness of the information
reviewed by Morgan Stanley for the purposes of its opinion. With respect to the
financial projections, including information relating to certain strategic,
financial and operational benefits anticipated from the Merger, Morgan Stanley
assumed that they were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the future financial performance
of MAPCO and Williams. In addition, Morgan Stanley assumed that the Merger will
be consummated in accordance with the terms set forth in the Merger Agreement,
including, among other things, that the Merger will be accounted for as a
"pooling of interest" business combination in accordance with U.S. Generally
Accepted Accounting Principles ("GAAP") and will be treated as a tax-free
reorganization and/or exchange, each pursuant to the Internal Revenue Code of
1986, as amended (the "Code"). Morgan Stanley did not make any independent
valuation or appraisal of the assets or liabilities of MAPCO, nor was it
furnished with any such appraisals. Morgan Stanley's opinion is necessarily
based on economic, market and other conditions as in effect on, and the
information made available to it as of, the date of its opinion.
In arriving at its opinion, Morgan Stanley was not authorized to solicit,
and did not solicit, interest from any party with respect to the acquisition of
MAPCO or any of its assets.
The following is a brief summary of certain analyses performed by Morgan
Stanley and reviewed with the MAPCO Board on November 22, 1997 in connection
with Morgan Stanley's presentation and opinion to the MAPCO Board on such date:
Common Stock Performance. Morgan Stanley's analysis of the MAPCO Common
Stock and Williams Common Stock performance consisted of a historical analysis
of closing prices and trading volumes from November 17, 1995 to November 19,
1997 and compared such performance to that of certain publicly traded companies
including (i) the S&P 500 Index, (ii) a gas gatherer and processor ("GG&P")
company index
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(the "GG&P Index") which consisted of K N Energy, Inc., NGC Corp., Tejas Gas
Corporation and Western Gas Resources, Inc., (iii) a transmission company index
(the "Transmission Index") which was comprised of El Paso Natural Gas Company,
Enron Corp., Sonat Inc. and Williams, (iv) a refining & marketing ("R&M")
company index (the "R&M Index") which consisted of Sun Company, Inc., Tosco
Corporation, Ultramar Diamond Shamrock Corporation and Valero Energy
Corporation, and (v) an energy company index (the "Energy Index") which
consisted of The Coastal Corporation, Enron Corp., El Paso Natural Gas Company,
K N Energy, Inc., NGC Corporation, Sonat Inc., Tejas Gas Corporation and Western
Gas Resources, Inc. Morgan Stanley noted that for the period from November 17,
1995 to November 19, 1997, the MAPCO Common Stock underperformed the S&P 500
Index, the GG&P Index, the Transmission Index and the R&M Index, and the
Williams Common Stock outperformed the S&P 500 Index and the Energy Index. In
the twelve months ended November 20, 1997, the MAPCO Common Stock closed at a
high of $34.75 per share and a low of $28.25 per share and the Williams Common
Stock closed at a high of $55.69 per share and a low of $36.13 per share (before
giving effect to the Stock Dividend).
Comparable Publicly Traded Company Analysis. As part of its analysis,
Morgan Stanley compared certain financial information of MAPCO with that of a
group of publicly traded transmission, gas gathering and processing and refining
and marketing companies, including The Coastal Corporation, El Paso Natural Gas
Company, Enron Corp., The Columbia Gas System, Inc., Consolidated Natural Gas
Company, Sonat Inc., Equitable Resources, Inc., NGC Corporation, K N Energy,
Inc. and Western Gas Resources, Inc. (collectively, the "NGL Comparables") and
Crown Central Petroleum Corporation, Ultramar Diamond Shamrock Corporation,
Valero Energy Corporation, Ashland Inc. and Sun Company, Inc. (collectively, the
"R&M Comparables"). Morgan Stanley also compared certain financial information
of Williams with that of a group of publicly traded transmission and
telecommunication companies, including The Coastal Corporation, El Paso Natural
Gas Company, Enron Corp., The Columbia Gas System, Inc., Consolidated Natural
Gas Company, Sonat Inc. and Equitable Resources (collectively, the "Energy
Comparables") and Norstan, Inc., IXC Communications, Inc., Qwest Communications
International Inc., Teleport Communications Group Inc., ICG Communications, Inc,
Intermedia Communications Inc. and WinStar Communications, Inc. (collectively,
the "Telecom Comparables"). Such financial information included aggregate value
to forecasted 1998 earnings before interest, taxes, depreciation and
amortization ("EBITDA") multiple, price to forecasted 1998 earnings multiple,
price to forecasted 1998 operating cash flow multiple, aggregate value to
forecasted 1997 earnings before interest and taxes ("EBIT") multiple, aggregate
value to forecasted 1998 revenues multiple and aggregate value to forecasted
1998 net fiber miles multiple. Morgan Stanley noted that, based on a compilation
of earnings projections by securities research analysts, as of November 19,
1997, the NGL Comparables, R&M Comparables and Energy Comparables traded in a
range of (i) 8.0 to 9.0 times, 5.5 to 6.5 times and 7.5 to 9.0 times projected
1998 EBITDA, respectively, (ii) 15.0 to 17.0 times, 11.0 to 14.0 times and 14.0
to 17.0 times projected 1998 earnings, respectively, (iii) 7.0 to 8.0 times, 5.5
to 6.5 times and 6.5 to 7.5 times projected 1998 operating cash flow,
respectively. Based on a compilation of earnings projections by securities
research analysts as of November 19, 1997, the Telecom Comparables traded in a
range of 13.0 to 16.0 times projected 1997 EBIT, 19.0 to 22.0 times projected
1997 earnings, 15.5 to 17.5 times projected 1998 earnings, 2.6 to 5.3 times
projected 1998 revenues and 6.1 to 9.5 times projected 1998 net fiber miles.
Based on this analysis, Morgan Stanley calculated per share values for MAPCO
ranging from $28.00 to $34.00 and for Williams ranging from $44.00 to $58.00
(before giving effect to the Stock Dividend).
No company utilized in the publicly traded comparable company analysis is
identical to either MAPCO or Williams. Accordingly, an analysis of the results
of the foregoing necessarily involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the public trading value of
companies to which they are being compared. Morgan Stanley made judgments and
assumptions with regard to industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of either MAPCO or Williams, such as industry growth, the impact of
competition on MAPCO and Williams and the industry generally and the absence of
any material adverse change in the financial conditions and prospects of MAPCO
and Williams or the industry or in the financial markets in general.
Mathematical analysis (such as determining the mean or median) is not, in
itself, a meaningful method of using publicly traded comparable company data.
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Trading Ratio Analysis. Morgan Stanley also reviewed the ratio of MAPCO
Common Stock to Williams Common Stock trading prices over varying intervals of
time over the last two years. Morgan Stanley observed that (without giving
effect to the Stock Dividend) the average of the ratios of closing stock prices
of MAPCO Common Stock and Williams Common Stock for the various periods ending
November 20, 1997 were 0.807x for the previous two years, 0.737x for the
previous year, 0.691x for the previous 6 months and 0.662x for the previous 3
months (the above referenced numbers do not give effect to the Stock Dividend).
Morgan Stanley also observed that the implied exchange ratio based on the
closing price of MAPCO Common Stock and Williams Common Stock on November 20,
1997 of $34.38 and $54.81, respectively, was approximately 0.627x.
Discounted Cash Flow Analysis. Morgan Stanley performed discounted cash
flow analyses of MAPCO and Williams based on certain financial projections
provided by the respective managements of each company for the period 1997
through 2000. Unlevered free cash flows of each company were calculated as net
income available to common stockholders plus the aggregate of preferred stock
dividends, depreciation and amortization, deferred taxes, and other non-cash
expenses and after-tax net interest expense less the sum of capital expenditures
and investments in non-cash working capital. Morgan Stanley calculated the
terminal value by applying a range of multiples to EBITDA in fiscal 2000 and the
cash flow streams and terminal values were then discounted to the present using
a range of discount rates representing an estimated range of the weighted
average cost of capital for each of MAPCO and Williams. Based on this analysis,
Morgan Stanley calculated median per share values for MAPCO ranging from $35.00
to $51.00 and for Williams ranging from $51.00 to $71.00 (before giving effect
to the Stock Dividend).
Analysis of Selected Precedent Transactions. Using publicly available
information, Morgan Stanley reviewed the following proposed or completed
acquisitions in the natural gas transmission, gas gathering and processing and
refining and marketing industries: PanEnergy Corp. and Duke Power Company, NorAm
Energy Corp. and Houston Industries Incorporated, Tenneco Energy and El Paso
Natural Gas Company, ENSERCH Corporation and Texas Utilities Company, Transco
Energy and Williams, USX-Delhi and Koch Industries, Tejas Gas Corporation and
Shell Oil Company, TPC Corporation and PacifiCorp Holdings, Inc., Valero Energy
Corporation and Pacific Gas and Electric Company, Transok, Inc. and Tejas Gas
Corporation, Hadson Corporation and Louisville Gas and Electric Company
(collectively, the "NGL Precedent Transactions") and Total Petroleum N.A. and
Ultramar Diamond Shamrock Corporation, Basis Petroleum, Inc. and Valero Energy
Corporation, Diamond Shamrock Inc. and Ultramar Corporation, Circle K
Corporation and Tosco Corp., and National Convenience Stores and Diamond
Shamrock Inc (collectively, the "R&M Precedent Transactions"). Morgan Stanley
compared certain financial and market statistics of the NGL Precedent
Transactions and R&M Precedent Transactions. The aggregate value to projected
1997 EBITDA multiple ranged from 9.0 to 12.0 times for the NGL Precedent
Transactions and 6.0 to 10.0 times for the R&M Precedent Transactions, the price
to projected 1997 earnings multiple ranged from 21.0 to 27.0 times for the R&M
Precedent Transactions, and the price to projected 1997 operating cash flow
ranged from 9.0 to 11.0 times for the NGL Precedent Transactions and 6.0 to 8.0
times for the R&M Precedent Transactions. Based on this analysis, Morgan Stanley
calculated per share values for MAPCO ranging from $32.00 to $45.00.
No transaction utilized in precedent transaction analysis is identical to
the Merger in both timing and size, and, accordingly, an analysis of the results
of the foregoing necessarily involves complex considerations and judgments
concerning differences in financial and operating characteristics of MAPCO and
other factors that would affect the acquisition value of the companies to which
it is being compared. In evaluating the precedent transactions, Morgan Stanley
made judgments and assumptions with regard to industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of MAPCO, such as industry growth, the impact of
competition on MAPCO and the industry generally and the absence of any material
adverse change in the financial conditions and prospects of MAPCO or the
industry or in the financial markets in general.
Pro Forma Analysis of the Merger. Morgan Stanley analyzed the pro forma
impact of the Merger on Williams' earnings per share ("EPS") for the fiscal
years ended 1998 through 2000. The analysis was performed utilizing standalone
earnings estimated for the fiscal years ending 1998 through 2000 for MAPCO
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and Williams based on certain financial projections prepared by the respective
managements of each company, taking into account the cost savings expected to be
derived from the Merger as estimated by MAPCO. Based on such analysis, the
Merger would be accretive to Williams stockholders for the period 1998 through
2000 on an EPS basis.
Summary Contribution Analysis. Morgan Stanley analyzed the pro forma
contribution of each of MAPCO and Williams to the combined company. Such
analysis included, among other things, relative contribution of revenues,
EBITDA, net income, discounted cash flow value and market value at or over
various time periods. In particular, such analysis showed that based on certain
financial projections prepared by the respective managements of each company,
MAPCO would contribute (i) approximately 44.6%, 45.2% and 46.3% of the projected
1997, 1998 and 1999 revenues, respectively, (ii) approximately 17.6%, 18.8% and
21.4% of the projected 1997, 1998 and 1999 EBITDA, respectively, (iii)
approximately 22.5%, 23.4% and 25.5% of the projected 1997, 1998 and 1999 net
income, respectively, (iv) between approximately 18.7% to 21.1% of the DCF
value, (v) 17.3% of the one-year historical trading analysis of closing prices
and (vi) 18.1% of the market value based on the 15-day average trading prices as
of November 20, 1997.
Pro Forma Ownership. Morgan Stanley compared the aggregate percentage
share ownership of the combined company assuming the Merger was consummated on
November 23, 1997 at the proposed Exchange Ratio. Based on this analysis, the
holders of MAPCO Common Stock would own 24% of the combined company and the
holders of Williams Common Stock would own 76% of the combined company.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results of its analyses
as a whole and did not attribute any particular weight to any analysis or factor
considered by it. Morgan Stanley believes that its analyses must be considered
as a whole and that selecting portions of its analyses, without considering all
analyses, would create an incomplete view of the process underlying its opinion.
In addition, Morgan Stanley may have deemed various assumptions more or less
probable than other assumptions, so that the ranges of valuations resulting for
any particular analysis described above should not be taken to be Morgan
Stanley's view of the actual value of MAPCO or Williams.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of MAPCO and Williams. The
analyses performed by Morgan Stanley are not necessarily indicative of actual
value, which may be significantly more or less favorable than suggested by such
analyses. Such analyses were prepared solely as part of Morgan Stanley's
analysis of the fairness of the Exchange Ratio, from a financial point of view,
to the holders of MAPCO Common Stock and were provided to the MAPCO Board in
connection with the delivery of Morgan Stanley's written opinion dated November
23, 1997. The analyses do not purport to be appraisals or to reflect the prices
at which MAPCO and Williams might actually be sold. In addition, as described
above, Morgan Stanley's opinion and presentation to the MAPCO Board was one of
many factors taken into consideration by the MAPCO Board in making its
determination to approve the Merger. Consequently, the Morgan Stanley analyses
described above should not be viewed as determinative of the opinion of the
MAPCO Board or the view of the management of Williams with respect to the value
of Williams and MAPCO or of whether the MAPCO Board or the management of
Williams would have been willing to agree to a different exchange ratio.
Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking business, is
regularly engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwriting, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuation for corporate and other purposes. In the ordinary course of its
trading, brokerage and financing activities, Morgan Stanley or its affiliates
may at any time hold long or short positions, and may trade or otherwise effect
transactions for their own account or for the accounts of customers, in debt or
equity securities or senior loans of MAPCO and Williams. In the past, Morgan
Stanley has provided financial advisory and financing services to MAPCO and
Williams, for which services Morgan Stanley has received fees.
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Morgan Stanley was retained by MAPCO to act as its financial advisor with
respect to the Merger. Pursuant to a letter agreement, dated November 1, 1997,
between MAPCO and Morgan Stanley, Morgan Stanley is entitled to standard and
customary fees. MAPCO has also agreed to reimburse Morgan Stanley for the
expense of its counsel, and to indemnify Morgan Stanley and its affiliates
against certain liabilities and expenses, including liabilities under federal
securities laws.
OPINION OF FINANCIAL ADVISOR TO WILLIAMS
Smith Barney was retained by Williams to act as its financial advisor in
connection with the Merger based on Smith Barney's qualifications, experience
and expertise. In connection with such engagement, Williams requested that Smith
Barney evaluate the fairness, from a financial point of view, to Williams of the
consideration to be paid by Williams in the Merger. On November 23, 1997, at a
meeting of the Williams Board held to evaluate the proposed Merger, Smith Barney
delivered an oral opinion (which opinion was subsequently confirmed by delivery
of a written opinion dated November 23, 1997) to the effect that, as of November
23, 1997 and based upon and subject to certain matters stated therein, the
Exchange Ratio was fair, from a financial point of view, to Williams.
In arriving at its opinion, Smith Barney reviewed the Merger Agreement and
held discussions with certain senior officers, directors and other
representatives and advisors of Williams and certain senior officers and other
representatives and advisors of MAPCO concerning the businesses, operations and
prospects of Williams and MAPCO. Smith Barney examined certain publicly
available business and financial information relating to Williams and MAPCO as
well as certain financial forecasts and other information and data for Williams
and MAPCO which were provided to or otherwise discussed with Smith Barney by the
respective managements of Williams and MAPCO, including information relating to
certain strategic implications and operational benefits anticipated to result
from the Merger. Smith Barney reviewed the financial terms of the Merger as set
forth in the Merger Agreement in relation to, among other things: current and
historical market prices and trading volumes of Williams Common Stock and MAPCO
Common Stock; the historical and projected earnings and other operating data of
Williams and MAPCO; and the capitalization and financial condition of Williams
and MAPCO. Smith Barney also considered, to the extent publicly available, the
financial terms of certain other similar transactions recently effected that
Smith Barney considered relevant in evaluating the Merger and analyzed certain
financial, stock market and other publicly available information relating to the
businesses of other companies whose operations Smith Barney considered relevant
in evaluating those of Williams and MAPCO. Smith Barney also evaluated the
potential pro forma financial impact of the Merger on Williams. In addition to
the foregoing, Smith Barney conducted such other analyses and examinations and
considered such other financial, economic and market criteria as Smith Barney
deemed appropriate in arriving at its opinion. Smith Barney noted that its
opinion was necessarily based upon information available, and financial, stock
market and other conditions and circumstances existing and disclosed to Smith
Barney as of the date of its opinion.
In rendering its opinion, Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information and data publicly available or furnished to or otherwise
reviewed by or discussed with Smith Barney. With respect to financial forecasts
and other information and data provided to or otherwise reviewed by or discussed
with Smith Barney, the managements of Williams and MAPCO advised Smith Barney
that such forecasts and other information and data were reasonably prepared
reflecting the best currently available estimates and judgments of the
respective managements of Williams and MAPCO as to the future financial
performance of Williams and MAPCO and the strategic implications and operational
benefits (including the amount, timing and achievability thereof) anticipated to
result from the Merger. Smith Barney assumed, with the consent of the Williams
Board, that the Merger will be treated as a pooling of interests in accordance
with generally accepted accounting principles and as a tax-free reorganization
for federal income tax purposes. The opinion of Smith Barney, as set forth
therein, relates to the relative values of Williams and MAPCO. Smith Barney did
not express any opinion as to what the value of the Williams Common Stock
actually will be when issued to MAPCO stockholders pursuant to the Merger or the
price at which the Williams Common Stock will trade subsequent to the Merger.
Smith Barney did not make and was not provided with an independent evaluation or
appraisal of the
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assets or liabilities (contingent or otherwise) of Williams or MAPCO nor did
Smith Barney make any physical inspection of the properties or assets of
Williams or MAPCO. Smith Barney was not requested to consider, and Smith
Barney's opinion does not address, the relative merits of the Merger as compared
to any alternative business strategies that might exist for Williams or the
effect of any other transaction in which Williams might engage. Although Smith
Barney evaluated the Exchange Ratio from a financial point of view, Smith Barney
was not asked to and did not recommend the specific consideration payable in the
Merger, which was determined through negotiation between Williams and MAPCO. No
other limitations were imposed by Williams on Smith Barney with respect to the
investigations made or procedures followed by Smith Barney in rendering its
opinion.
THE FULL TEXT OF THE WRITTEN OPINION OF SMITH BARNEY DATED NOVEMBER 23,
1997, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS
ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO AS APPENDIX C AND SHOULD BE READ
CAREFULLY IN ITS ENTIRETY. THE OPINION OF SMITH BARNEY IS DIRECTED TO THE
WILLIAMS BOARD AND RELATES ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO FROM A
FINANCIAL POINT OF VIEW TO WILLIAMS, DOES NOT ADDRESS ANY OTHER ASPECT OF THE
MERGER OR RELATED TRANSACTIONS AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE WILLIAMS SPECIAL
MEETING. THE SUMMARY OF THE OPINION OF SMITH BARNEY SET FORTH IN THIS JOINT
PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF SUCH OPINION.
In preparing its opinion, Smith Barney performed a variety of financial and
comparative analyses, including those described below. The summary of such
analyses does not purport to be a complete description of the analyses
underlying Smith Barney's opinion. The preparation of a fairness opinion is a
complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. Accordingly, Smith Barney
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and factors, without considering all analyses and
factors, could create a misleading or incomplete view of the processes
underlying such analyses and opinion. In its analyses, Smith Barney made
numerous assumptions with respect to Williams, MAPCO, industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of Williams and MAPCO. The estimates
contained in such analyses and the valuation ranges resulting from any
particular analysis are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or less
favorable than those suggested by such analyses. In addition, analyses relating
to the value of businesses or securities do not purport to be appraisals or to
reflect the prices at which businesses or securities actually may be sold.
Accordingly, such analyses and estimates are inherently subject to substantial
uncertainty. Smith Barney's opinion and analyses were only one of many factors
considered by the Williams Board in its evaluation of the Merger and should not
be viewed as determinative of the views of the Board of Directors or management
of Williams with respect to the Exchange Ratio or the proposed Merger. The
analyses of Smith Barney described below were prepared prior to the Stock
Dividend distributed on December 29, 1997 and, accordingly, per share and
exchange ratio data set forth in such analyses have not been adjusted to reflect
such Stock Dividend.
The following is a summary of the material financial analyses performed by
Smith Barney in connection with its opinion dated November 23, 1997:
Selected Company Analysis. Using publicly available information, Smith
Barney analyzed, among other things, the market values and trading multiples of
MAPCO and 25 selected publicly traded companies in the energy industry,
consisting of (i) three natural gas liquids companies: Aquila Gas Pipeline
Corporation, K N Energy, Inc. and Western Gas Resources, Inc. (the "NGL
Companies"), (ii) five diversified natural gas companies: The Coastal
Corporation, Enron Corp., Occidental Petroleum Corp., Sonat Inc. and Williams
(the "DNG Companies"), (iii) six propane marketing companies: AmeriGas Partners,
L.P., Cornerstone Propane Partners, L.P., Ferrellgas Partners, L.P., Heritage
Propane Partners, L.P., National Propane Partners, L.P. and Suburban Propane
Partners, L.P. (the "PM Companies"), (iv) nine refining companies, consisting of
five large capitalization refining and marketing companies: Ashland Inc., Sun
Company, Tosco Corporation, Ultramar Diamond Shamrock Corporation and Valero
Energy Corporation (the "Large Cap R&M Companies"), and four small
capitalization refining and marketing companies: Crown Central Petroleum
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Corporation, Giant Industries, Inc., Holly Corporation and Tesoro Petroleum
Corporation (the "Small Cap R&M Companies" and, together with the Large Cap R&M
Companies, the "R&M Companies"), and (v) two retail marketing companies: Casey's
General Stores Inc. and The Southland Corporation (the "RM Companies" and,
together with the NGL Companies, the DNG Companies, the PM Companies and the R&M
Companies, the "Selected Companies"). Smith Barney compared market values as
multiples of, among other things, estimated calendar 1997 and 1998 net income
and cash flow, and adjusted market values (equity market value, plus total debt,
the book value of preferred stock and minority interests, less cash and cash
equivalents) as a multiple of, among other things, estimated calendar 1997 and
1998 EBITDA. Net income estimates for the Selected Companies (excluding
Williams) were based on estimates of selected investment banking firms, net
income estimates for MAPCO were based on internal estimates of the managements
of MAPCO and Williams, and net income estimates for Williams were based on
internal estimates of the management of Williams. All multiples were based on
closing stock prices as of November 18, 1997. The ranges of multiples (excluding
outliers) of estimated calendar 1997 and 1998 net income, cash flow, and EBITDA
of the NGL Companies were as follows: (i) estimated calendar 1997 and 1998 net
income: 13.9x to 46.9x (with a mean of 26.6x and a median of 19.2x) and 11.7x to
27.8x (with a mean of 18.8x and a median of 16.9x), respectively; (ii) estimated
calendar 1997 and 1998 cash flow: 6.3x to 10.0x (with a mean of 8.0x and a
median of 7.7x) and 5.8x to 9.3x (with a mean of 7.4x and a median of 6.9x),
respectively; and (iii) estimated calendar 1997 and 1998 EBITDA: 7.4x to 10.5x
(with a mean of 9.3x and a median of 10.1x) and 6.7x to 9.8x (with a mean of
8.5x and a median of 9.0x), respectively. The ranges of multiples (excluding
outliers) of estimated calendar 1997 and 1998 net income, cash flow and EBITDA
of the DNG Companies were as follows: (i) estimated calendar 1997 and 1998 net
income: 15.7x to 24.7x (with a mean of 18.8x and a median of 17.6x) and 15.1x to
21.2x (with a mean of 16.9x and a median of 15.9x), respectively; (ii) estimated
calendar 1997 and 1998 cash flow: 5.8x to 9.7x (with a mean of 7.7x and a median
of 7.2x) and 5.8x to 9.1x (with a mean of 7.3x and a median of 6.9x),
respectively; and (iii) estimated calendar 1997 and 1998 EBITDA: 6.6x to 9.9x
(with a mean of 8.5x and a median of 8.1x) and 6.6x to 9.4x (with a mean of 8.1x
and a median of 7.6x), respectively. The ranges of multiples (excluding
outliers) of estimated calendar 1997 and 1998 net income, cash flow and EBITDA
of the PM Companies were as follows: (i) estimated calendar 1997 and 1998 net
income: 15.4x to 31.3x (with a mean of 24.0x and a median of 24.9x) and 13.3x to
21.2x (with a mean of 18.7x and a median of 19.3x), respectively; (ii) estimated
calendar 1997 and 1998 cash flow: 8.0x to 11.6x (with a mean of 9.9x and a
median of 10.1x) and 7.5x to 10.9x (with a mean of 8.9x and a median of 8.7x),
respectively; and (iii) estimated calendar 1997 and 1998 EBITDA: 9.2x to 11.7x
(with a mean of 10.8x and a median of 11.0x) and 8.8x to 11.2x (with a mean of
10.1x and a median of 10.1x), respectively. The ranges of multiples (excluding
outliers) of estimated calendar 1997 and 1998 net income, cash flow and EBITDA
of the Large Cap R&M Companies were as follows: (i) estimated calendar 1997 and
1998 net income: 13.1x to 20.4x (with a mean of 15.5x and a median of 15.0x) and
11.2x to 13.7x (with a mean of 12.6x and a median of 13.4x), respectively; (ii)
estimated calendar 1997 and 1998 cash flow: 4.5x to 8.6x (with a mean of 6.7x
and a median of 6.7x) and 5.5x to 7.0x (with a mean of 6.2x and a median of
6.2x), respectively; and (iii) estimated calendar 1997 and 1998 EBITDA: 5.3x to
8.3x (with a mean of 6.8x and a median of 6.7x) and 5.6x to 6.7x (with a mean of
6.1x and a median of 6.1x), respectively. The ranges of multiples (excluding
outliers) of estimated calendar 1997 and 1998 net income, cash flow and EBITDA
of the Small Cap R&M Companies were as follows: (i) estimated calendar 1997 and
1998 net income: 10.0x to 17.1x (with a mean of 13.2x and a median of 12.9x) and
7.4x to 12.6x (with a mean of 9.7x and a median of 9.3x), respectively; (ii)
estimated calendar 1997 and 1998 cash flow: 4.5x to 5.9x (with a mean of 5.4x
and a median of 5.6x) and 4.0x to 5.3x (with a mean of 4.9x and a median of
5.0x), respectively; and (iii) estimated calendar 1997 and 1998 EBITDA: 3.3x to
5.9x (with a mean of 4.9x and a median of 5.1x) and 3.2x to 4.8x (with a mean of
4.1x and a median of 4.3x), respectively. The ranges of multiples (excluding
outliers) of estimated calendar 1997 and 1998 net income, cash flow and EBITDA
of the RM Companies were as follows: (i) estimated calendar 1997 and 1998 net
income: 12.5x to 19.5x (with a mean of 16.0x and a median of 16.0x) and 10.2x to
17.3x (with a mean of 13.8x and a median of 13.8x), respectively; (ii) estimated
calendar 1997 and 1998 cash flow: 3.6x to 10.6x (with a mean of 7.1x and a
median of 7.1x) and 3.2x to 8.6x (with a mean of 5.9x and a median of 5.9x),
respectively; and (iii) estimated calendar 1997 and 1998 EBITDA: 7.5x to 8.9x
(with a mean of 8.2x and a median of 8.2x) and 6.7x to 7.4x (with a mean of 7.1x
and a median of 7.1x), respectively. Based on the closing stock price of
Williams Common Stock on November 20, 1997, the
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Exchange Ratio equated to implied multiples for MAPCO of (i) estimated calendar
1997 and 1998 net income of 27.4x and 25.9x, respectively (before giving effect
to certain cost savings and other potential synergies anticipated by the
management of Williams to result from the Merger), and 18.3x and 17.6x,
respectively (after giving effect to certain cost savings and other potential
synergies anticipated by the management of Williams to result from the Merger);
(ii) estimated calendar 1997 and 1998 cash flow of 13.7x and 11.7x, respectively
(before giving effect to certain cost savings and other potential synergies
anticipated by the management of Williams to result from the Merger), and 11.0x
and 9.6x, respectively (after giving effect to certain cost savings and other
potential synergies anticipated by the management of Williams to result from the
Merger); and (iii) estimated calendar 1997 and 1998 EBITDA of 11.8x and 10.6x,
respectively (before giving effect to certain cost savings and other potential
synergies anticipated by the management of Williams to result from the Merger),
and 9.3x and 8.6x, respectively (after giving effect to certain cost savings and
other potential synergies anticipated by the management of Williams to result
from the Merger).
Selected Merger and Acquisition Transactions Analysis. Using publicly
available information, Smith Barney analyzed the purchase price and implied
transaction multiples paid or proposed to be paid in 21 selected transactions in
the energy industry (acquiror/target): (i) six transactions involving natural
gas liquids companies: Koch Industries Inc./USX Delhi Group, Tejas Gas
Corp./Transok Inc. (Central and South West Corporation), El Paso Natural Gas
Company/Cornerstone Natural Gas, Inc., Panhandle Eastern Corporation/Associated
Natural Gas Corporation, Natural Gas Clearinghouse/Trident NGL, and Equitable
Pipeline Co. (Equitable Resources Inc.)/Louisiana Intrastate Gas Corp. (Arkla
Inc.) (the "NGL Transactions"); (ii) four transactions involving diversified
natural gas companies: Duke Power Company/PanEnergy Corp., Houston Industries,
Inc./NorAm Energy Corp., El Paso Energy Corp./Tenneco, Inc., and
Williams/Transco Energy Company (the "DNG Transactions"); (iii) four
transactions involving propane marketing companies: Northwestern Public Service
Co./Empire Energy Corporation, Northwestern Public Service Co./Synergy Group
Incorporated, Ferrellgas Partners, L.P./Vision Energy Resources, Inc., and
AmeriGas Partners, L.P./ Petrolane, Inc. (the "PM Transactions"); (iv) four
transactions involving refining companies: Ultramar Diamond Shamrock
Corporation/TOTAL Petroleum Limited, Valero Energy Corporation/Basis Petroleum,
Inc., Tosco Corporation/Unocal Oil Company of California, and Ultramar
Corporation/Diamond Shamrock, Inc. (the "Refining Transactions"); and (v) three
transactions involving retail marketing companies: Tosco Corporation/The Circle
K Corporation, Diamond Shamrock, Inc./National Convenience Stores, Inc., and E-Z
Serve Corporation/Sunshine-Jr. Stores, Inc. (the "RM Transactions" and, together
with the NGL Transactions, the DNG Transactions, the PM Transactions and the
Refining Transactions, the "Selected Transactions"). Smith Barney compared the
purchase prices in such transactions as multiples of, among other things, latest
12 months net income and cash flow, and transaction values as a multiple of,
among other things, latest 12 months EBITDA. All multiples for the Selected
Transactions were based on information available at the time of announcement of
the transaction. The ranges of multiples (excluding outliers) of latest 12
months net income, cash flow and EBITDA of the NGL Transactions were 6.4x to
29.7x (with a mean of 21.0x and a median of 24.0x), 3.1x to 21.8x (with a mean
of 10.7x and a median of 9.7x) and 9.7x to 17.5x (with a mean of 12.4x and a
median of 11.2x), respectively. The ranges of multiples (excluding outliers) of
latest 12 months net income, cash flow and EBITDA for the DNG Transactions were
18.9x to 25.4x (with a mean of 22.1x and a median of 21.9x), 8.2x to 10.6x (with
a mean of 9.4x and a median of 9.4x) and 6.2x to 9.8x (with a mean of 7.9x and a
median of 7.7x), respectively. The ranges of multiples (excluding outliers) of
latest 12 months net income, cash flow and EBITDA for the PM Transactions were
32.4x to 32.4x (with a mean of 32.4x and a median of 32.4x), 4.0x to 12.7x (with
a mean of 9.3x and a median of 11.3x) and 9.1x to 12.4x (with a mean of 11.0x
and a median of 11.6x), respectively. The ranges of multiples (excluding
outliers) of latest 12 months net income, cash flow and EBITDA for the Refining
Transactions were 28.5x to 28.5x (with a mean of 28.5x and a median of 28.5x),
7.0x to 8.1x (with a mean of 7.5x and a median of 7.4x) and 7.0x to 11.2x (with
a mean of 9.0x and a median of 8.8x), respectively. The ranges of multiples
(excluding outliers) of latest 12 months net income, cash flow and EBITDA for
the RM Transactions were 16.7x to 24.6x (with a mean of 20.4x and a median of
20.0x), 5.4x to 7.9x (with a mean of 6.7x and a median of 6.7x) and 5.6x to 7.6x
(with a mean of 6.6x and a median of 6.6x), respectively. Based on the closing
stock price of Williams Common Stock on November 20, 1997, the Exchange Ratio
equated to implied multiples for MAPCO of (i) estimated
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calendar 1997 net income of 27.4x (before giving effect to certain cost savings
and other potential synergies anticipated by the management of Williams to
result from the Merger) and 18.3x (after giving effect to certain cost savings
and other potential synergies anticipated by the management of Williams to
result from the Merger); (ii) estimated calendar 1997 cash flow of 13.7x (before
giving effect to certain cost savings and other potential synergies anticipated
by the management of Williams to result from the Merger) and 11.0x (after giving
effect to certain cost savings and other potential synergies anticipated by the
management of Williams to result from the Merger); and (iii) estimated calendar
1997 EBITDA of 11.8x (before giving effect to certain cost savings and other
potential synergies anticipated by the management of Williams to result from the
Merger) and 9.3x (after giving effect to certain cost savings and other
potential synergies anticipated by the management of Williams to result from the
Merger).
No company, transaction or business used in the "Selected Company Analysis"
or "Selected Merger and Acquisition Transactions Analysis" as a comparison is
identical to Williams, MAPCO or the Merger. Accordingly, an analysis of the
results of the foregoing is not entirely mathematical; rather, it involves
complex considerations and judgments concerning differences in financial and
operating characteristics and other factors that could affect the acquisition,
public trading or other values of the Selected Companies, Selected Transactions
or the business segment, company or transaction to which they are being
compared.
Discounted Cash Flow Analysis. Smith Barney performed a discounted cash
flow analysis of the projected free cash flow of MAPCO for fiscal years 1998
through 2002, based on internal estimates of the management of Williams. The
stand-alone discounted cash flow analysis of MAPCO was determined by (i) adding
(x) the present value of projected free cash flows over the five-year period
from 1998 to 2002 and (y) the present value of the estimated terminal value of
MAPCO in year 2002 and (ii) subtracting the current net debt of MAPCO. The range
of estimated terminal values for MAPCO at the end of the five-year period was
calculated by applying terminal value multiples ranging from 8.0x to 10.0x to
the projected 2002 EBITDA of MAPCO. The cash flows and terminal values of MAPCO
were discounted to present value using discount rates ranging from 10% to 12%.
Utilizing such terminal multiples and discount rates, this analysis resulted in
an equity reference range for MAPCO of approximately $37.23 to $53.02 per share
(before giving effect to certain cost savings and other potential synergies
anticipated by the management of Williams to result from the Merger) and
approximately $46.37 to $64.86 per share (after giving effect to certain cost
savings and other potential synergies anticipated by the management of Williams
to result from the Merger), as compared to the equity value implied by the
Exchange Ratio of approximately $45.63 per share based on a closing stock price
of Williams Common Stock on November 20, 1997.
Pro Forma Merger Analysis. Smith Barney analyzed certain pro forma effects
resulting from the Merger, including, among other things, the impact of the
Merger on the projected EPS of Williams for the fiscal years ended 1998 through
2000, based on internal estimates of the management of Williams. The results of
the pro forma merger analysis suggested that the Merger could be accretive to
the EPS of Williams in each of the fiscal years analyzed, assuming certain cost
savings and other potential synergies anticipated by the management of Williams
to result from the Merger were achieved. The actual results achieved by the
combined company may vary from projected results and the variations may be
material.
Contribution Analysis. Smith Barney analyzed the respective contributions
of Williams and MAPCO to the estimated revenue, EBITDA, EBIT and net income of
the combined company for calendar years 1997, 1998 and 1999, based on internal
estimates of the management of Williams, before giving effect to certain cost
savings and other potential synergies anticipated by the management of Williams
to result from the Merger. This analysis indicated that (i) in calendar year
1997, Williams would contribute approximately 49.3% of revenues, 81.9% of
EBITDA, 80.4% of EBIT and 76.5% of net income, and MAPCO would contribute
approximately 50.7% of revenues, 18.1% of EBITDA, 19.6% of EBIT and 23.5% of net
income, of the combined company, (ii) in calendar year 1998, Williams would
contribute approximately 50.9% of revenues, 82.8% of EBITDA, 81.1% of EBIT and
77.6% of net income, and MAPCO would contribute approximately 49.1% of revenues,
17.2% of EBITDA, 18.9% of EBIT and 22.4% of net income, of the combined company,
and (iii) in calendar year 1999, Williams would contribute approximately 48.4%
of revenue, 81.4% of EBITDA, 79.8% of EBIT and 78.7% of net income, and MAPCO
would contribute approximately 51.6% of revenues, 18.6% of EBITDA, 20.2% of EBIT
and 21.3% of net income, of the combined company. Based on
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the Exchange Ratio, current stockholders of Williams and MAPCO would own
approximately 77.4% and 22.6%, respectively, of the equity value of the combined
company upon consummation of the Merger, and Williams and MAPCO would constitute
approximately 80.5% and 19.5%, respectively, of the enterprise value of the
combined company.
Exchange Ratio Analysis. Smith Barney compared the Exchange Ratio with the
historical ratio of the daily closing prices of Williams Common Stock and MAPCO
Common Stock during the 12-month period November 18, 1996 to November 18, 1997.
The average exchange ratios of the daily closing prices of one share of Williams
Common Stock to one share of MAPCO Common Stock during the 12 months, three
months and one month prior to November 18, 1997 were 0.7388, 0.6614 and 0.6475,
respectively, as compared to the Exchange Ratio.
Premium Analysis. Smith Barney analyzed the implied premium payable in the
Merger and the premiums paid in 39 transactions having transaction values
between $2.0 billion and $5.0 billion. The range of premiums paid in such
transactions based on the closing stock price of the acquired company one day
prior, one week prior and four weeks prior to public announcement of the
transaction were approximately (1.0)% to 113.5% (with a mean of 35.7% and a
median of 31.9%), (2.2)% to 115.1% (with a mean of 39.2% and a median of 35.7%)
and (1.3)% to 109.0% (with a mean of 44.4% and a median of 43.8%), respectively,
as compared to the implied premium payable in the Merger of approximately 32.7%
based on the closing stock price of Williams Common Stock on November 20, 1997.
Other Factors and Comparative Analyses. In rendering its opinion, Smith
Barney considered certain other factors and conducted certain other comparative
analyses, including, among other things, a review of (i) historical and
projected financial results of Williams and MAPCO; (ii) the history of trading
prices and volume for Williams Common Stock and MAPCO Common Stock and the
relationship between historical movements of such common stock and historical
movements in the common stock of the Selected Companies; (iii) selected
published analysts' reports on MAPCO, including analysts' estimates as to the
earnings growth potential of MAPCO; and (iv) the pro forma ownership of the
combined company.
Pursuant to the terms of Smith Barney's engagement, Williams has agreed to
pay Smith Barney standard and customary fees. Williams has also agreed to
reimburse Smith Barney for reasonable travel and other out-of-pocket expenses
incurred by Smith Barney in performing its services, including the reasonable
fees and expenses of its legal counsel, and to indemnify Smith Barney and
related persons against certain liabilities, including liabilities under the
federal securities laws, arising out of Smith Barney's engagement.
Smith Barney has advised Williams that, in the ordinary course of business,
Smith Barney and its affiliates may actively trade or hold the securities of
Williams and MAPCO for their own account or for the account of customers and,
accordingly, may at any time hold a long or short position in such securities.
In addition, Smith Barney and its affiliates (including Travelers Group Inc. and
its affiliates) may maintain relationships with Williams and MAPCO.
Smith Barney is an internationally recognized investment banking firm and
was selected by Williams based on its experience, expertise and familiarity with
Williams and its business. Smith Barney regularly engages in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwriting, competitive bids, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO MAPCO STOCKHOLDERS
The following is a discussion of the material federal income tax
consequences of the Merger that are generally applicable under existing United
States Federal income tax law. The discussion is based upon the Code, Treasury
regulations, judicial authority, published positions of the Internal Revenue
Service (the "IRS") and other applicable authorities, all as in effect on the
date hereof and all of which is subject to change, possibly retroactively. This
discussion assumes that MAPCO stockholders hold MAPCO Common Stock as a capital
asset as of the Effective Time of the Merger. This discussion does not address
all aspects of Federal income taxation that may be material or relevant to
particular stockholders in light of their own
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personal circumstances, such as stockholders who acquired MAPCO Common Stock
pursuant to the exercise of an employee stock option or otherwise as
compensation or stockholders who are subject to special treatment under the
Federal income tax laws (for example, financial institutions, insurance
companies, tax-exempt organizations, broker-dealers and foreign persons). This
discussion also does not address any aspect of state, local or foreign tax law.
No ruling has been or will be sought from the IRS regarding any tax matter
relating to the Merger. Thus, no assurance can be given that the IRS will not
take a position contrary to any of the tax aspects described below. MAPCO
STOCKHOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE FEDERAL
INCOME AND OTHER TAX CONSEQUENCES OF THE MERGER AS WELL AS THE EFFECTS OF STATE,
LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
The obligation of MAPCO to consummate the Merger is conditioned upon the
receipt by MAPCO of an opinion from Debevoise & Plimpton, and the obligation of
Williams to consummate the Merger is conditioned upon the receipt by Williams of
an opinion from Jones, Day, Reavis & Pogue, in each case to the effect that, on
the basis of certain facts, representations by management of the companies and
assumptions set forth in such opinions, the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code and Williams, Sub and MAPCO will each be a party to that reorganization
within the meaning of Section 368(b) of the Code.
Assuming that the Merger qualifies for such treatment, in the opinion of
each of Debevoise & Plimpton and Jones, Day, Reavis & Pogue, subject to the
assumptions and limitations described in the preceding paragraphs: (i) no gain
or loss will be recognized by Williams, Sub or MAPCO as a result of the Merger;
(ii) no gain or loss will be recognized by a MAPCO stockholder who receives
Williams Common Stock in exchange solely for MAPCO Common Stock (except as
described below with respect to cash that is received in lieu of fractional
shares); (iii) the aggregate tax basis of Williams Common Stock received by a
MAPCO stockholder will be the same as the aggregate tax basis of the MAPCO
Common Stock surrendered in exchange therefor pursuant to the Merger (adjusted
with respect to fractional shares); and (iv) the holding period of Williams
Common Stock will include the holding period of the MAPCO Common Stock
surrendered in exchange therefor pursuant to the Merger.
A MAPCO stockholder who receives cash in lieu of fractional shares will be
treated as having received such fractional shares pursuant to the Merger and
then as having exchanged such fractional shares for cash in a transaction
generally giving rise to capital gain or loss. The amount of any capital gain or
loss attributable to such deemed exchange of fractional shares will be equal to
the difference between the cash received in lieu of fractional shares and the
ratable portion of the tax basis of the MAPCO Common Stock surrendered that is
allocated to such fractional shares. Such gain or loss for individuals and other
noncorporate taxpayers who held MAPCO Common Stock at the Effective Time of the
Merger for (i) one year or less will be treated as short-term capital gain or
loss and taxed at ordinary income tax rates, (ii) more than one year but 18
months or less will be treated as mid-term capital gain or loss and taxed at a
maximum rate of 28 percent and (iii) more than 18 months will be treated as
long-term capital gain or loss and taxed at a maximum rate of 20 percent.
If the IRS successfully asserted that the Merger failed to qualify as a
reorganization within the meaning of Section 368(a) of the Code, (A) a holder of
MAPCO Common Stock would recognize capital gain or loss on the exchange of its
MAPCO Common Stock for Williams Common Stock (and any cash in lieu of fractional
shares of Williams Common Stock) pursuant to the Merger in an amount equal to
the difference between (i) the fair market value, at the Effective Time, of
Williams Common Stock (and any such cash) received pursuant to the Merger and
(ii) such stockholder's tax basis in the MAPCO Common Stock surrendered in
exchange therefor and (B) no gain or loss would be recognized by Williams, Sub
or MAPCO.
ACCOUNTING TREATMENT
Williams and MAPCO expect that the Merger will be accounted for using the
pooling of interests method of accounting. The pooling of interests method of
accounting assumes that the combining companies were merged from inception and
the historical financial statements for the periods prior to consummation of
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the Merger are restated as though the companies had been combined from
inception. Certain expenses incurred to effect the Merger must be treated by
Williams as current charges against income.
The unaudited pro forma financial information contained in this Joint Proxy
Statement/Prospectus has been prepared using the pooling of interests accounting
method to account for the Merger. See "SUMMARY -- Selected Pro Forma Combined
Financial Data of Williams and MAPCO" and "UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS."
REGULATORY AND THIRD-PARTY APPROVALS
U.S. Antitrust Filing. Under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and the rules and regulations
promulgated thereunder, certain transactions, including the Merger, may not be
consummated unless certain waiting period requirements have expired or been
terminated. On December 5, 1997, Williams and MAPCO filed Premerger Notification
and Report Forms pursuant to the HSR Act with the Antitrust Division of the
United States Department of Justice (the "DOJ") and the Federal Trade Commission
(the "FTC"). On January 2, 1998, the FTC issued a request for documents and
other additional information (a "second request") to Williams and MAPCO. Under
the HSR Act, the Merger may not be consummated until 20 days after Williams and
MAPCO have substantially complied with the second request (unless this period is
shortened pursuant to a grant of early termination). Williams and MAPCO are in
the process of preparing responses to the second request. At any time before or
after the Effective Time, the FTC, the DOJ or others could take action under the
antitrust laws with respect to the Merger, including seeking to enjoin the
consummation of the Merger, to rescind the Merger, or to require the divestiture
of certain assets of Williams or MAPCO. There can be no assurance that a
challenge to the Merger on antitrust grounds will not be made or, if such a
challenge is made, that it would not be successful.
Other Regulatory Approvals. MAPCO and Williams are not aware of any other
notifications or consents that need to be obtained, pursuant to applicable
antitrust and other laws and regulations, from the regulatory authorities and
organizations of other countries. However, if such notifications or consents
need to be obtained for any reason, and if the approval of the Merger by any of
the aforementioned authorities is subject to compliance with certain conditions,
there can be no assurance that the parties will be able to satisfy or comply
with such conditions or be able to cause their respective subsidiaries to
satisfy or comply with any such conditions or that compliance or non-compliance
will not have adverse consequences for the combined company after consummation
of the Merger. The parties believe that the proposed Merger is compatible with
such regulatory requirements. Nevertheless, there can be no assurance that a
challenge to the proposed transaction on the grounds that the proposed Merger is
not compatible with the competition or other laws or regulations of a certain
jurisdiction will not be made or, if a challenge is made, what the result will
be.
Under the Merger Agreement, Williams and MAPCO have agreed to use their
reasonable best efforts to obtain all necessary actions or nonactions, waivers,
consents and approvals from any governmental authority necessary, proper or
advisable to consummate and make effective the Merger. While Williams and MAPCO
believe that they will receive the requisite regulatory approvals for the
Merger, there can be no assurance regarding the timing of such approvals or the
ability of the companies to obtain such approvals on satisfactory terms or
otherwise. It is a condition to the parties' respective obligations to
consummate the Merger that the waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired and that all other consents, approvals and actions of, filings with
and notices to, a governmental authority required to consummate the Merger, the
failure of which to be obtained or taken, is reasonably expected to have a
material adverse effect on MAPCO, as the surviving corporation in the Merger,
and its subsidiaries, taken as a whole, be made or obtained. See "THE MERGER
AGREEMENT -- Conditions to the Consummation of the Merger."
Third-Party Approvals. MAPCO is a party to a number of credit facilities,
indentures and other similar agreements. Consummation of the Merger may require
the consent of, or waiver from, the other parties to certain of such agreements
and may constitute a default resulting in termination, cancellation or
acceleration thereunder if such consents or waivers are not obtained. In
particular, the Merger Agreement provides that Williams' obligation to effect
the Merger is subject to it being satisfied that Texaco shall have irrevocably
waived its right to require the disposition of MAPCO's indirect membership
interest in Discovery by reason of
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the transactions contemplated by the Merger Agreement (the "Discovery Waiver").
The Discovery Waiver has been obtained and accordingly this condition has been
satisfied. Pursuant to the Merger Agreement, Williams and MAPCO have agreed to
use their reasonable best efforts to obtain all other consents, approvals and
waivers from third parties necessary in connection with the consummation of the
Merger, although the consummation of the Merger is not conditioned upon
obtaining any such third-party consent, approval or waiver. MAPCO and Williams
do not believe that the failure to obtain such consents, approvals or waivers
would have a material adverse effect on MAPCO or Williams.
NO APPRAISAL RIGHTS
Under applicable state law, neither MAPCO stockholders nor Williams
stockholders are entitled to dissenters' appraisal rights.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the MAPCO Board, MAPCO stockholders
should be aware that, as described below, certain members of MAPCO's management
and the MAPCO Board may have interests in the Merger that are different from, or
in addition to, the interests of MAPCO stockholders generally, and that these
interests may create potential conflicts of interest.
In order to assure that, following consummation of the Merger, Messrs.
Barnes, Robert G. Sachse, Philip W. Baxter, David W. Bowman, Jack D. Maynard,
Douglas H. Rinke and Peter Fasullo, each of whom is a party to an employment
continuation agreement (as described in greater detail below), could not engage
in certain competitive activities that could damage the business of either MAPCO
or the combined companies, MAPCO entered into the Non-Competition Agreements
with each such officer. Those agreements, which vary as to their duration based
on the officer's position with MAPCO and the extent of the damage that could be
caused by such officer's competition, generally preclude the officer from
competing with all segments (in the case of Mr. Barnes and two other executive
officers) or specified aspects of MAPCO's business for a specified period of
time (three years, in the case of Mr. Barnes) in the geographic area in which
MAPCO conducts its business at the Effective Time. If the Effective Time occurs
prior to September 30, 1998, the Non-Competition Agreements also extend to the
business of Williams at the Effective Time. The amounts paid to each affected
officer under the Non-Competition Agreements ($17,380,000 in the case of Mr.
Barnes and approximately $33 million in the aggregate) also varied based on
these factors. The Non-Competition Agreements also preclude each affected
officer from soliciting and/or hiring any employee of MAPCO or soliciting the
business of any customer of MAPCO, or otherwise interfering with the
relationship between MAPCO and any such customer during the period the
restrictions apply. The affected officers have also agreed as part of the
Non-Competition Agreements not to disclose certain confidential and other
business-related information pertaining to MAPCO's business.
The Non-Competition Agreements are subject to Delaware law, and the parties
have agreed that the Delaware courts will have exclusive jurisdiction over the
subject matter thereof and each officer has consented to the personal
jurisdiction of such courts. The Non-Competition Agreements provide MAPCO and
the surviving corporation the right to injunctive relief in the event of any
breach of the covenants and an affirmative right of rescission of the
Non-Competition Agreements in the event that any such officer challenges the
enforceability of such Non-Competition Agreements as a matter of law (as opposed
to the application of the covenants contained in such Non-Competition Agreements
to a particular set of facts). The Non-Competition Agreements are currently
effective and will apply regardless of whether the Merger is consummated.
Therefore, the payments made in respect thereof are not contingent on the
consummation of the Merger, and each of the officers will be entitled to retain
the payments made in respect thereof even if the Merger is not approved by
stockholders or is otherwise not consummated.
Additionally, the approval of the Merger Agreement by MAPCO stockholders
will result in each outstanding MAPCO Stock Option (including each unvested
MAPCO Stock Option) being converted into a right to receive a certain number of
shares of Williams Common Stock in the Stock Option Exchange. Each of MAPCO's
executive officers (including Mr. Barnes) holds MAPCO Stock Options that would
not otherwise be exercisable and each such officer and each director holds MAPCO
Stock Options that will be exchanged for Williams Common Stock as a result of
the Merger pursuant to the Stock Option Exchange.
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MAPCO also accelerated the time at which certain payments would be made to
employees in respect of accrued obligations to such employees. For example,
MAPCO terminated its Supplemental Executive Retirement Plan and an individual
arrangement for Mr. Barnes, and its Long Term Investment Savings Plan, and paid
the amounts due thereunder to eligible participants. None of these actions
increased the amounts otherwise payable to affected employees under the terms of
the applicable compensation plan or program.
In addition, MAPCO has had in effect for a number of years certain
employment continuation agreements with Messrs. Barnes, Sachse, Baxter, Bowman,
Maynard, Rinke and Fasullo. Each of these agreements is intended to assure the
affected officer of continued employment for a period of three years following
any event that constitutes a change in control for purposes of such agreements.
The approval by stockholders of the Merger will constitute a change in control
for purposes of such agreements. These agreements also provide that, if an
affected officer's employment is involuntarily or constructively terminated by
MAPCO or any successor in interest within the three-year period following a
change in control, such officer will receive a lump sum severance payment equal
to a specified multiple (one and one-half times in the case of Mr. Barnes) of
the sum of the individual's base salary and the highest annual bonus payable to
him in the three years preceding the change in control. In connection with the
Merger, certain of the officers agreed to reduce the specified multiple payable
upon involuntary or constructive termination. These lump sum severance payments
would be approximately $3.6 million in the case of Mr. Barnes, and approximately
$13 million in the aggregate. These agreements also provide for the continuation
of certain employee benefits, such as medical coverage, for a period
corresponding to the period for which severance is payable. These agreements
also provide that in the event that any payment made thereunder or under any
other plan or agreement with MAPCO results in the officer being subject to the
excise tax payable under Section 4999 of the Code, MAPCO shall make additional
payments to such officer so that the officer receives the same net-after tax
amount that he would have received had no excise tax been payable by such
officer.
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of Williams Common Stock to be issued to MAPCO stockholders in
the Merger have been registered under the Securities Act. These shares may be
traded freely and without restriction by those stockholders not deemed to be
"affiliates" of MAPCO or Williams as that term is defined under the Securities
Act. An affiliate of MAPCO or Williams, as defined by the rules promulgated
under the Securities Act, is a person who directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, MAPCO or Williams. Any subsequent transfer of Williams Common Stock by an
affiliate of MAPCO must be permitted by the resale provisions of Rule 145
promulgated under the Securities Act (or Rule 144 promulgated under the
Securities Act, in the case of such persons who become affiliates of Williams)
or as otherwise permitted under the Securities Act. These restrictions are
expected to apply to the directors and executive officers of MAPCO or Williams
(as well as to certain other related individuals or entities).
SEC guidelines regarding qualifying for the pooling of interests method of
accounting also limit sales of shares of the acquiring company and acquired
company by affiliates of either company in a business combination such as the
Merger. These guidelines indicate that the pooling of interests method of
accounting will generally not be challenged on the basis of sales by such
affiliates if these persons do not dispose of any of the shares of the
corporation they own or any shares of the corporation they receive in connection
with a merger during the period beginning 30 days prior to the merger and ending
when financial results covering at least 30 days of post-merger operations of
the combined entity have been published (the "Pooling Restriction Period").
In connection with its entering into the Merger Agreement, MAPCO has
delivered to Williams for each of its affiliates, an agreement that such person
will not dispose of (i) any Williams Common Stock in violation of the Securities
Act or the rules and regulations promulgated thereunder or (ii) any Williams
Common Stock or MAPCO Common Stock during the Pooling Restriction Period, except
pursuant to an effective registration statement under the Securities Act, in
conformity with the volume and other limitations of Rule 145 of the Securities
Act or in a transaction that is not required to be registered under the
Securities Act.
Williams has agreed in the Merger Agreement to use its reasonable best
efforts to publish financial results covering the first full month of
post-Merger combined operations on the earliest possible date after the end of
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the first month after the Effective Time, in which there is at least 30 days of
post-Merger combined operations, which month may be the month in which the
Effective Time occurs.
LITIGATION
Williams is not involved in any litigation or arbitration proceedings
which, if determined adversely to Williams, would have a material adverse effect
on Williams or its operations.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Williams and MAPCO have each made forward-looking statements in this
document (and in certain documents that are incorporated by reference in this
Joint Proxy Statement/Prospectus) that are subject to risks and uncertainties.
These statements are based on the beliefs and assumptions of the respective
company's management, and on information currently available to such management.
Forward-looking statements include the information concerning possible or
assumed future results of operations of Williams and MAPCO (including with
respect to cost savings and operational efficiencies expected to be realized
from the Merger) set forth under "SUMMARY" -- "Selected Financial Data," "THE
PROPOSED MERGER -- Background of the Merger," "-- Williams' Rationale for the
Merger; Recommendation of the Williams Board of Directors" and "-- MAPCO's
Rationale for the Merger; Recommendation of the MAPCO Board of Directors" and
"UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS," and statements
preceded by, followed by or that include the words "believes," "expects,"
"anticipates," "intends," "plans," "estimates" or similar expressions.
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. The future results and stockholder values
of Williams and MAPCO may differ materially from those expressed in these
forward-looking statements. Many of the factors that will determine these
results and values are beyond Williams' and MAPCO's ability to control or
predict. Stockholders are cautioned not to put undue reliance on any
forward-looking statements. In addition, Williams and MAPCO do not have any
intention or obligation to update forward-looking statements after they
distribute this Joint Proxy Statement/Prospectus, even if new information,
future events or other circumstances have made them incorrect or misleading. For
those statements, Williams and MAPCO claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995.
Stockholders of Williams and MAPCO should understand that the following
important factors, in addition to those discussed elsewhere in the documents
that are incorporated by reference into this Joint Proxy Statement/Prospectus,
could affect the future results of the combined companies following the Merger,
and could cause results to differ materially from those expressed in such
forward-looking statements: (i) the effect of economic conditions and interest
rates on a national, regional or international basis; (ii) the ability of
Williams to successfully integrate operations, the compatibility of the
operating systems of the combining companies, the degree to which existing
administrative and back-office functions and costs are complementary or
redundant and the timing of implementation of changes in operations to effect
cost savings; (iii) the financial resources of, and products available to,
competitors; (iv) changes in laws and regulations, including changes in
accounting standards; (v) changes in the securities markets; (vi) the
determination of the number, job classification and location of employee
positions to be eliminated as a result of the Merger; (vii) the timing of the
implementation of changes in operations to effect cost savings; (viii)
opportunities that may be presented to and pursued by Williams following the
Merger; (ix) completion of construction projects within cost and timing plans;
and (x) the capacity of constructed assets to function as designed. In addition,
future utilization of pipeline capacity will depend on energy prices,
competition from other pipelines and alternate fuels, the general level of
natural gas and petroleum product demand and weather conditions, among other
things. Further, gas prices which directly impact transportation and gathering
and processing throughout and operating profits may fluctuate in unpredictable
ways as may corn prices, which directly affect Williams' ethanol business. It is
also not possible to predict which of many possible future products and service
offerings will be important to maintaining a competitive position in the
communications business or what expenditures will be required to develop and
provide such products and services.
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INFORMATION CONCERNING THE WILLIAMS SPECIAL MEETING
PURPOSE, TIME AND PLACE
This Joint Proxy Statement/Prospectus is being furnished to stockholders of
Williams in connection with the solicitation of proxies by the Williams Board
from holders of Williams Common Stock for use at the Williams Special Meeting to
be held on February 26, 1998, at 10:00 a.m., local time, at the Adam's Mark
Hotel, 100 East 2nd Street, Tulsa, Oklahoma, and at any postponements or
adjournment thereof. At the Williams Special Meeting, holders of Williams Common
Stock will be asked to consider and vote upon (i) the Charter Amendment
Proposal, in order to provide sufficient shares of Williams Common Stock for
issuance in connection with the Merger and the other transactions contemplated
by the Merger Agreement and for other proper corporate purposes, (ii) the Share
Issuance Proposal, in order to authorize the issuance of Williams Common Stock
in the Merger, and (iii) such other matters as may properly come before the
Williams Special Meeting (approval of the Charter Amendment Proposal and the
Share Issuance Proposal being hereafter referred to as the "Williams Stockholder
Approval").
RECORD DATE; QUORUM; VOTE REQUIRED
The Williams Board has fixed the close of business on January 26, 1998 as
the record date for determining the holders of Williams Common Stock entitled to
notice of, and to vote at, the Williams Special Meeting (the "Williams Record
Date"). Only holders of record of Williams Common Stock at the close of business
on the Williams Record Date will be entitled to notice of, and to vote at, the
Williams Special Meeting.
Based on the most recently available information prior to the date of
mailing of this Joint Proxy Statement/Prospectus, Williams estimates that, at
the close of business on the Williams Record Date, 320,433,362 shares of
Williams Common Stock were issued and outstanding and entitled to vote at the
Williams Special Meeting and were held by approximately 12,254 holders of
record. Holders of record of Williams Common Stock are entitled to one vote per
share on any matter that may properly come before the Williams Special Meeting.
Votes may be cast at the Williams Special Meeting in person or by proxy. See
"-- Proxies."
The presence at the Williams Special Meeting, either in person or by proxy,
of the holders of a majority of the outstanding Williams Common Stock entitled
to vote is necessary to constitute a quorum of the Williams Common Stock in
order to transact business at the Williams Special Meeting. Abstentions and
broker non-votes (i.e., shares held by brokers in street name that are not voted
at the Williams Special Meeting due to the absence of specific instructions from
the beneficial owners thereof) are counted for the purpose of determining the
presence of a quorum for the transaction of business. In the event that
sufficient shares of Williams Common Stock are not present at the Williams
Special Meeting, such meeting will be adjourned or postponed in order to solicit
additional proxies.
The affirmative vote of the holders of a majority of the outstanding shares
of Williams Common Stock is required to approve the Charter Amendment Proposal.
Under applicable Delaware law, in determining whether the Charter Amendment
Proposal has received the requisite number of affirmative votes, abstentions and
broker non-votes will be counted and have the same effect as a vote against the
proposal.
The affirmative vote by a majority of the votes cast is required to approve
the Share Issuance Proposal. For this purpose, the holders of at least a
majority in interest of all outstanding shares of Williams Common Stock must
vote on the proposal. Under applicable Delaware law, in determining whether the
Share Issuance Proposal has received the requisite number of affirmative votes,
abstentions will be counted in tabulating the votes cast and, therefore, will
have the same effect as a vote against the Share Issuance Proposal. Broker non-
votes will not be counted in tabulating the votes cast. Consequently, while
broker non-votes do not have the effect of a vote against the Share Issuance
Proposal, they can negatively affect the vote on such proposal if their failure
to be counted results in less than a majority of all outstanding shares of
Williams Common Stock being voted on such proposal.
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In order for Williams to proceed with the Merger, both the Charter
Amendment Proposal and the Share Issuance Proposal must be adopted by the
holders of Williams Common Stock as described above. After giving effect to the
Stock Dividend, Williams will not have sufficient authorized shares to effect
the Merger unless the amendment of the Williams Certificate pursuant to the
Charter Amendment Proposal is approved by Williams' stockholders and filed with
the Secretary of State of Delaware. See "DESCRIPTION OF CAPITAL STOCK OF
WILLIAMS FOLLOWING THE MERGER -- Williams Proposal to Increase Authorized Number
of Shares of Williams Common Stock." Moreover, the Merger Agreement requires
that the shares of Williams Common Stock to be issued to MAPCO stockholders must
be listed on the NYSE. NYSE listing policies require prior stockholder approval
of issuances of common stock which would constitute more than 20 percent of the
outstanding shares of common stock on a post transaction basis. Former MAPCO
stockholders are expected to hold approximately 23 percent of the outstanding
shares of Williams Common Stock after giving effect to the Merger.
Except as described above, the Williams stockholders are not required to
approve, and will not be asked to approve, any aspect of the Merger, including
the Merger Agreement.
As of the close of business on the Williams Record Date, Williams'
directors and executive officers may be deemed to be the beneficial owners of
approximately 3,883,800 outstanding shares (excluding shares underlying stock
options) of Williams Common Stock (representing approximately 1.21 percent of
the voting power of the Williams Common Stock). It is expected that such
directors and executive officers of Williams and their affiliates will vote for
approval of the Charter Amendment Proposal and the Share Issuance Proposal.
Williams knows of no matters to be presented at the Williams Special
Meeting, other than those included in the notice to the Williams stockholders.
Should any other matter requiring a vote of stockholders arise, including a
question of adjourning the meeting, the persons named in the respective proxies
will vote thereon according to their best judgment in what they consider the
best interests of Williams. The enclosed proxies confer discretionary authority
to take action with respect to any additional matters which may come before the
meeting.
THE WILLIAMS BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, HAS DETERMINED
THAT THE MERGER IS IN THE BEST INTERESTS OF WILLIAMS AND ITS STOCKHOLDERS AND
RECOMMENDS THAT WILLIAMS STOCKHOLDERS VOTE FOR BOTH THE CHARTER AMENDMENT
PROPOSAL AND THE SHARE ISSUANCE PROPOSAL. UNLESS THESE PROPOSALS ARE APPROVED,
THE MERGER CANNOT BE COMPLETED.
PROXIES
Shares of Williams Common Stock represented by properly executed proxies
received in time for the Williams Special Meeting will be voted at the Williams
Special Meeting in the manner specified on such proxies. Proxies that are
properly executed but that do not contain voting instructions will be voted FOR
the Charter Amendment Proposal and FOR the Share Issuance Proposal. It is not
expected that any matter other than approval of such proposals will be brought
before the Williams Special Meeting; however, if other matters are properly
presented, the persons named in such proxy will have authority to vote in
accordance with their judgment on any other such matter, including without
limitation, any proposal to adjourn or postpone the meeting or otherwise
concerning the conduct of the meeting.
The grant of a proxy on the enclosed Williams proxy card does not preclude
a stockholder from voting in person at the Williams Special Meeting. A
stockholder may revoke a proxy at any time prior to its exercise by (i)
delivering, prior to the Williams Special Meeting, to the Secretary of Williams,
a written notice of revocation bearing a later date or time than the proxy; (ii)
delivering to the Secretary of Williams a duly executed proxy bearing a later
date or time than the revoked proxy; or (iii) attending the Williams Special
Meeting and voting in person. Attendance at the Williams Special Meeting will
not by itself constitute revocation of a proxy. Williams will not adjourn the
Williams Special Meeting for a period of time long enough to require the setting
of a new record date for such meeting. If an adjournment occurs, it will have no
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effect on the ability of Williams' stockholders of record as of the Williams
Record Date to exercise their voting rights or to revoke any previously
delivered proxies.
Williams will bear the cost of solicitation of proxies from its
stockholders. In addition to solicitation by mail, the directors, officers and
employees of Williams and its subsidiaries may solicit proxies from stockholders
of Williams by telephone, other electronic means or in person. Arrangements will
also be made with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of solicitation material to the beneficial owners
of Williams Common Stock held of record by such persons, and Williams will
reimburse such custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses in connection therewith.
Williams has retained Morrow & Co. ("Morrow") to assist Williams in the
solicitation of proxies from stockholders in connection with the Williams
Special Meeting. Morrow will receive a fee which Williams expects will not
exceed $12,000 as compensation for its services and reimbursement of its
out-of-pocket expenses in connection therewith. Williams has agreed to indemnify
Morrow against certain liabilities arising out of or in connection with its
engagement.
WHETHER OR NOT YOU ARE ABLE TO ATTEND THE WILLIAMS SPECIAL MEETING, YOUR VOTE BY
PROXY IS VERY IMPORTANT. WILLIAMS STOCKHOLDERS ARE ENCOURAGED TO MARK, SIGN AND
DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
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INFORMATION CONCERNING THE MAPCO SPECIAL MEETING
PURPOSE, TIME AND PLACE
This Joint Proxy Statement/Prospectus is being furnished to stockholders of
MAPCO in connection with the solicitation of proxies by the MAPCO Board from
holders of MAPCO Common Stock for use at the MAPCO Special Meeting to be held on
February 26, 1998, at 10:00 a.m., local time, at 1800 South Baltimore Avenue,
Tulsa, Oklahoma, and at any postponements or adjournments thereof. At the MAPCO
Special Meeting, holders of MAPCO Common Stock will be asked to consider and
vote upon (i) a proposal to approve and adopt the Merger Agreement and the
transactions contemplated by the Merger Agreement, including the Merger (the
"MAPCO Stockholder Approval"); and (ii) such other matters as may properly come
before the MAPCO Special Meeting.
RECORD DATE; QUORUM; VOTE REQUIRED
The MAPCO Board has fixed the close of business on January 26, 1998 as the
record date for determining the holders of MAPCO Common Stock entitled to notice
of, and to vote at, the MAPCO Special Meeting (the "MAPCO Record Date"). Only
holders of record of MAPCO Common Stock at the close of business on the MAPCO
Record Date will be entitled to notice of, and to vote at, the MAPCO Special
Meeting.
Based on the most recently available information prior to the date of
mailing of this Joint Proxy Statement/Prospectus, MAPCO estimates that, at the
close of business on the MAPCO Record Date, 55,607,188 shares of MAPCO Common
Stock were issued and outstanding and were held by approximately 6,424 holders
of record. Holders of record of MAPCO Common Stock are entitled to one vote per
share on any matter that may properly come before the MAPCO Special Meeting.
Votes may be cast at the MAPCO Special Meeting in person or by proxy. See
"-- Proxies."
The presence at the MAPCO Special Meeting, either in person or by proxy, of
the holders of a majority of the outstanding MAPCO Common Stock entitled to vote
is necessary to constitute a quorum of the MAPCO Common Stock in order to
transact business at the MAPCO Special Meeting. Abstentions and broker non-votes
(i.e., shares held by brokers in street name that are not voted at the MAPCO
Special Meeting due to the absence of specific instructions from the beneficial
owners thereof) are counted for the purpose of determining the presence of a
quorum for the transaction of business. In the event that sufficient shares of
MAPCO Common Stock are not present at the MAPCO Special Meeting, such meeting
will be adjourned or postponed in order to solicit additional proxies.
The affirmative vote of the holders of a majority of the outstanding shares
of MAPCO Common Stock is required to approve and adopt the Merger Agreement.
Under applicable Delaware law, in determining whether the proposal to approve
and adopt the Merger Agreement has received the requisite number of affirmative
votes, abstentions and broker non-votes will have the same effect as a vote
against the proposal.
As of the close of business on the MAPCO Record Date, MAPCO's directors and
executive officers may be deemed to be the beneficial owners of approximately
830,231 outstanding shares (excluding shares underlying stock options) of MAPCO
Common Stock (representing approximately 1.49% percent of the voting power of
the MAPCO Common Stock). It is expected that such executive officers and
directors of MAPCO will vote for approval of the Merger Agreement.
MAPCO knows of no matters to be presented at the MAPCO Special Meeting,
other than those included in the notice to MAPCO stockholders. Should any other
matter requiring a vote of stockholders arise, including a question of
adjourning the meeting, the persons named in the respective proxies will vote
thereon according to their best judgment in what they consider the best
interests of MAPCO. The enclosed proxies confer discretionary authority to take
action with respect to any additional matters which may come before the meeting.
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THE MAPCO BOARD HAS UNANIMOUSLY APPROVED (WITH ONE DIRECTOR ABSENT) THE MERGER
AGREEMENT, HAS DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF MAPCO AND
ITS STOCKHOLDERS AND RECOMMENDS THAT MAPCO STOCKHOLDERS VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
PROXIES
Shares of MAPCO Common Stock represented by properly executed proxies
received in time for the MAPCO Special Meeting will be voted at the MAPCO
Special Meeting in the manner specified on such proxies. Proxies that are
properly executed but that do not contain voting instructions will be voted FOR
approval of the Merger Agreement. It is not expected that any matter other than
approval of the Merger Agreement will be brought before the MAPCO Special
Meeting; however, if other matters are properly presented, the persons named in
such proxy will have authority to vote in accordance with their judgment on any
other such matter, including without limitation, any proposal to adjourn or
postpone the meeting or otherwise concerning the conduct of the meeting.
The grant of a proxy on the enclosed MAPCO proxy card does not preclude a
stockholder from voting in person at the MAPCO Special Meeting. A stockholder
may revoke a proxy at any time prior to its exercise by (i) delivering, prior to
the MAPCO Special Meeting, to Harris Trust Company of New York, a written notice
of revocation bearing a later date or time than the proxy; (ii) delivering to
the Secretary of MAPCO a duly executed proxy bearing a later date or time than
the revoked proxy; or (iii) attending the MAPCO Special Meeting and voting in
person. Attendance at the MAPCO Special Meeting will not by itself constitute
revocation of a proxy. MAPCO will not adjourn the MAPCO Special Meeting for a
period of time long enough to require the setting of a new record date for such
meeting. If an adjournment occurs, it will have no effect on the ability of
MAPCO stockholders of record as of the MAPCO Record Date to exercise their
voting rights or to revoke any previously delivered proxies.
MAPCO will bear the cost of solicitation of proxies from its stockholders.
In addition to solicitation by mail, the directors, officers and employees of
MAPCO and its subsidiaries may solicit proxies from stockholders of MAPCO by
telephone, other electronic means or in person. Arrangements will also be made
with brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of stock held of
record by such persons, and MAPCO will reimburse such custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses in connection therewith.
In addition, MAPCO has retained D.F. King & Co., Inc. ("D.F. King") to
assist MAPCO in the solicitation of proxies from stockholders in connection with
the MAPCO Special Meeting. D.F. King will receive a fee which MAPCO expects will
not exceed $15,000 as compensation for its services and reimbursement of its
out-of-pocket expenses in connection therewith. MAPCO has agreed to indemnify
D.F. King against certain liabilities arising out of or in connection with its
engagement.
MAPCO stockholders should not send in any stock certificates with their
proxy cards. A transmittal form with instructions for the surrender of stock
certificates will be mailed by Williams to former MAPCO stockholders as soon as
practicable after the consummation of the Merger.
WHETHER OR NOT YOU ARE ABLE TO ATTEND THE MAPCO SPECIAL MEETING YOUR VOTE BY
PROXY IS VERY IMPORTANT. MAPCO STOCKHOLDERS ARE ENCOURAGED TO MARK, SIGN AND
DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
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THE MERGER AGREEMENT
GENERAL
The Merger Agreement contemplates the merger of Sub with and into MAPCO,
with MAPCO continuing as the Surviving Corporation and becoming a wholly-owned
subsidiary of Williams. The following is a description of the material terms of
the Merger Agreement and is qualified in its entirety by reference to the Merger
Agreement, a copy of which is attached as Appendix A to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference. Capitalized terms
in this section have the meanings assigned to them in the Merger Agreement. All
stockholders of MAPCO and Williams are urged to read carefully the Merger
Agreement in its entirety.
CLOSING; EFFECTIVE TIME
The closing of the Merger (the "Closing") will take place at 10:00 a.m. on
the closing date, which will be no later than the second day after satisfaction
or waiver of the conditions set forth in the Merger Agreement, unless another
time or date is agreed to by Williams and MAPCO (the "Closing Date"). The
Closing will be held at such location in Tulsa, Oklahoma, as is agreed to by the
parties.
Subject to the provisions of the Merger Agreement, as soon as practicable
on the Closing Date, the parties will consummate the Merger by filing a
Certificate of Merger or other appropriate documents with the Secretary of State
of Delaware. The Merger will become effective at such time as the Certificate of
Merger is duly filed with the Secretary of State of Delaware, or at such
subsequent date or time as Williams and MAPCO may agree and specify in the
Certificate of Merger.
SURVIVING CORPORATION CERTIFICATE OF INCORPORATION
Pursuant to the Merger Agreement, the Certificate of Incorporation of MAPCO
(the "MAPCO Certificate") will be amended to read in its entirety like the
certificate of incorporation of Sub, except that it will indicate that the name
of the Surviving Corporation is MAPCO Inc., and, as so amended, will be the
amended Certificate of Incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
SURVIVING CORPORATION BY-LAWS
Pursuant to the Merger Agreement, the By-Laws of Sub, as in effect
immediately prior to the Effective Time, will become the By-Laws of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law.
DIRECTORS AND OFFICERS
The directors and officers of Sub will become the directors and officers of
the Surviving Corporation.
CONSIDERATION TO BE RECEIVED IN THE MERGER
Conversion of MAPCO Common Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of MAPCO
Common Stock, each issued and outstanding share of MAPCO Common Stock (other
than shares to be canceled as described below) and each associated MAPCO Right,
will be converted into the right to receive 1.665 validly issued, fully paid and
nonassessable shares of Williams Common Stock and .555 Williams Rights.
Each share of MAPCO Common Stock owned by MAPCO as treasury stock will be
automatically cancelled and retired at the Effective Time and will cease to
exist, and no Williams Common Stock or other consideration will be delivered in
exchange therefor.
As of the Effective Time, shares of MAPCO Common Stock will no longer be
outstanding and will automatically be canceled and retired and will cease to
exist, and each holder of a stock certificate
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representing shares of MAPCO Common Stock will cease to have any rights with
respect thereto, except the right to receive Williams Common Stock in accordance
with the Exchange Ratio and any associated dividends or other distributions as
described below, and any cash in lieu of fractional shares of Williams Common
Stock to be issued or paid in consideration therefor, upon surrender of such
certificate in accordance with the terms of the Merger Agreement.
EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
At or prior to the Effective Time, Williams will deposit, or cause to be
deposited, with First Chicago Trust Company of New York (the "Exchange Agent"),
for the benefit of the holders of MAPCO Common Stock, certificates representing
Williams Common Stock (and cash in lieu of fractional shares, if applicable) to
be issued in the Merger.
As soon as is practicable after the Effective Time, the Exchange Agent will
mail a form of transmittal letter to the holders of certificates representing
shares of MAPCO Common Stock. The form of transmittal letter will contain
instructions with respect to the surrender of such certificates in exchange for
shares of Williams Common Stock (and cash in lieu of fractional shares of
Williams Common Stock, if applicable).
MAPCO STOCK CERTIFICATES SHOULD NOT BE RETURNED WITH THE ENCLOSED PROXY
CARD AND SHOULD NOT BE FORWARDED TO THE EXCHANGE AGENT EXCEPT WITH A TRANSMITTAL
FORM WHICH WILL BE PROVIDED TO MAPCO STOCKHOLDERS FOLLOWING THE EFFECTIVE TIME.
No dividends or other distributions declared with respect to Williams
Common Stock with a record date after the Effective Time will be paid to the
holder of any certificate representing shares of MAPCO Common Stock until such
certificate has been surrendered for exchange. Holders of certificates
representing shares of MAPCO Common Stock will be paid the amount of dividends
or other distributions with a record date after the Effective Time upon
surrender of such certificates, without any interest thereon.
No certificates or scrip representing fractional shares of Williams Common
Stock will be issued upon the surrender for exchange of stock certificates for
MAPCO Common Stock and such fractional share interests will not entitle the
owner thereof to vote or to any rights of a stockholder of Williams. As promptly
as practicable following the Effective Time, the Exchange Agent will determine
the excess of (A) the number of whole shares of Williams Common Stock delivered
to the Exchange Agent by Williams pursuant to the Merger Agreement over (B) the
aggregate number of whole shares of Williams Common Stock to be distributed to
former holders of MAPCO Common Stock pursuant to the Merger Agreement (such
excess being herein called the "Excess Shares"). Following the Effective Time,
the Exchange Agent will sell the Excess Shares at then-prevailing prices on the
NYSE. The Exchange Agent will determine the portion of the proceeds from the
sale of such Excess Shares to which each former holder of MAPCO Common Stock is
entitled, if any, by multiplying the amount of the aggregate net proceeds by a
fraction, the numerator of which is the amount of the fractional share interest
to which such former holder of MAPCO Common Stock is entitled (after taking into
account all shares of MAPCO Common Stock held of record at the Effective Time by
such holder) and the denominator of which is the aggregate amount of fractional
share interests to which all former holders of MAPCO Common Stock are entitled.
Notwithstanding the foregoing, Williams may elect at its option, exercised prior
to the Effective Time, in lieu of the issuance and sale of Excess Shares and the
making of the payments herein above contemplated, to pay each former holder of
MAPCO Common Stock an amount in cash equal to the product obtained by
multiplying (A) the fractional share interest to which such former holder (after
taking into account all shares of MAPCO Common Stock held of record at the
Effective Time by such holder) would otherwise be entitled by (B) the closing
price of the Williams Common Stock as reported on the NYSE Composite Transaction
Tape (as reported in The Wall Street Journal, or, if not reported therein, any
other authoritative source) on the Closing Date.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains certain customary mutual representations and
warranties by each of Williams and MAPCO relating to, among other things, (i)
corporate organization, structure and power;
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(ii) subsidiaries; (iii) capitalization; (iv) authorization, execution,
delivery, performance and enforceability of, required consents, approvals,
orders and authorizations of governmental authorities relating to, and
noncontravention of certain agreements as a result of, the Merger Agreement; (v)
documents filed with the SEC, the accuracy of information contained therein and
the absence of undisclosed liabilities; (vi) the accuracy of information
supplied by each in connection with the Registration Statement; (vii) absence of
material changes or events with respect to each since January 1, 1997; (viii)
compliance with applicable laws and the status of threatened or pending
litigation; (ix) matters relating to the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"); (x) tax matters; (xi) required stockholder votes
in connection with the Merger Agreement; (xii) treatment of the Merger as a
pooling of interests for accounting purposes; (xiii) engagement of and payment
of fees to brokers, investment bankers, finders and financial advisors in
connection with the Merger Agreement; and (xiv) ownership by Williams of MAPCO
Common Stock and ownership by MAPCO of Williams Common Stock.
The Merger Agreement contains certain additional representations and
warranties by MAPCO relating to: (i) certain material contracts; (ii) the fact
that the execution and delivery of the Merger Agreement and the consummation of
the transactions contemplated thereby will not enable or require the MAPCO
Rights to be exercised or distributed; (iii) satisfaction of the requirements of
Delaware's takeover statute and the inapplicability of other state takeover
statutes in connection with the Merger; (iv) environmental matters; (v)
derivative transactions; (vi) the maintenance of the condition of assets; (vii)
absence of changes in benefit plans and (vii) the receipt of a fairness opinion
in relation to the Merger.
CONDUCT OF BUSINESS
Pursuant to the Merger Agreement, MAPCO has agreed that, except for certain
exceptions, as otherwise expressly contemplated by the Merger Agreement or as
consented to by Williams in writing, such consent not to be unreasonably
withheld or delayed, during the period from the date of the Merger Agreement to
the Effective Time, MAPCO will, and will cause its subsidiaries to, carry on
their respective businesses in the ordinary course consistent with past practice
and in compliance in all material respects with all applicable laws and
regulations and, to the extent consistent therewith, to use reasonable efforts
to preserve intact their respective current business organizations, use
reasonable efforts to keep available the services of their current officers and
other employees and use reasonable efforts to preserve their relationships with
those persons having business dealings with MAPCO or any of its subsidiaries.
Without limiting the generality of the foregoing (but subject to the above
exceptions), during the period from the date of the Merger Agreement to the
Effective Time, MAPCO has agreed that it will not, and will not permit any of
its subsidiaries (except as specifically set forth in the Merger Agreement or in
MAPCO's disclosure schedule thereto) to:
(i) other than dividends and distributions by a direct or indirect
wholly owned subsidiary of MAPCO to its parent, or regularly scheduled
dividends by a subsidiary that is partially owned by MAPCO or any of its
subsidiaries, provided that MAPCO or any such subsidiary receives or is to
receive its proportionate share thereof, (a) declare, set aside, or pay any
dividends on, or make any other distributions in respect of, or enter into
any agreement with respect to the voting of, any of MAPCO's capital stock
(except for quarterly cash dividends on MAPCO Common Stock at a rate not in
excess of the amount per share paid in MAPCO's last dividend paid before
November 23, 1997); (b) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of, or in substitution for, shares of its capital stock, except
for issuances of MAPCO Common Stock upon the exercise of MAPCO Stock
Options under employee incentive or benefit plans, programs or arrangements
and non-employee director plans currently maintained by MAPCO ("MAPCO Stock
Plans") that are, in each case, outstanding as of the date of the Merger
Agreement in accordance with their present terms; or (c) purchase, redeem
or otherwise acquire any shares of capital stock of MAPCO or its
subsidiaries or any other securities thereof or any rights, warrants, or
options to acquire any such shares or other securities other than pursuant
to equity put rights of MAPCO and for withholding under MAPCO benefits
plans;
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(ii) issue, deliver, sell, pledge or otherwise encumber or subject to
any lien any shares of its capital stock, any other voting securities or
any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities
(other than the issuance of MAPCO Common Stock upon the exercise of MAPCO
Stock Options, in each case, outstanding as of the date of the Merger
Agreement in accordance with their present terms);
(iii) in the case of MAPCO or any of its significant subsidiaries,
amend their certificates of incorporation, by-laws or other comparable
organizational documents or amend the MAPCO Rights Agreement;
(iv) acquire any business (whether by merger, consolidation, purchase
of assets or otherwise) or acquire any equity interest in any person not an
affiliate (whether through a purchase of stock, establishment of a joint
venture or otherwise) which, together with all such acquisitions, involves
the payment of consideration having a value in excess of $100 million;
(v) sell, lease, joint venture, license, mortgage or otherwise
encumber or subject to any lien or otherwise dispose of any of its
properties or assets that are material in relation to MAPCO and its
subsidiaries taken as a whole (including securitizations), other than the
sale of inventory in the ordinary course of business and except in
connection with borrowings under existing credit facilities or lines of
credit in accordance with the terms of such facilities or lines as of the
date of the Merger Agreement;
(vi) except for borrowings under existing credit facilities or lines
of credit, incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise become responsible
for the obligations of any person; or make any loans, advances or capital
contributions to any person other than its wholly owned subsidiaries,
except in the ordinary course of business consistent with past practice or
except as attributable to the execution of the Merger Agreement and the
transactions contemplated thereby;
(vii) change its methods of accounting (or underlying assumptions) in
effect at December 31, 1996, except as required by changes in generally
accepted accounting principles or law or regulation or as discussed in the
documents filed with the SEC, or change any of its methods of reporting
income and deductions for federal income tax purposes from those employed
in the preparation of the federal income tax returns for the taxable year
ending December 31, 1996, except as required by changes in law or
regulation;
(viii) fail to observe certain policies, practices or procedures
relating to physical and derivative trading transactions;
(ix) create, renew, amend, terminate or cancel, or take any other
action that could reasonably be expected to result in the creation,
renewal, amendment, termination or cancellation of any material contracts
in a manner which would reasonably be expected to be materially adverse to
MAPCO;
(x) enter into any new capital commitments or increase any existing
capital commitments in an aggregate amount in excess of $15 million;
provided, however, that in no event will MAPCO enter into capital
expenditure commitments with respect to three projects identified in the
Disclosure Schedule to the Merger Agreement without having first consulted
with Williams as to such capital expenditures;
(xi) (A) grant MAPCO Stock Options, (B) grant to any current or former
director, executive officer or other key employee any increase in
compensation, bonus or other benefits (other than increases in base salary
in the ordinary course of business consistent with past practice or arising
due to a promotion or other change in status and consistent with generally
applicable compensation practices), (C) grant to any such current or former
director, executive officer or other employee any increase in severance or
termination pay, (D) amend or adopt any employment, deferred compensation,
consulting, severance, termination or indemnification agreement with any
such current or former director, executive officer or employee, or (E)
amend, adopt or terminate any MAPCO benefit plan, except as may be required
to retain qualification of any such plan under Section 401(a) of the Code;
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(xii) except (A) pursuant to agreements or arrangements in effect on
the date the Merger Agreement was executed, or (B) for dividends paid in
accordance with clause (i) above, pay, loan or advance any amount to, or
sell, transfer or lease any properties or assets (real, personal or mixed,
tangible or intangible) to, or purchase any properties or assets or enter
into any agreement or arrangement with, any of its officers or directors or
any affiliate or the immediate family members or associates of any of its
officers or directors, other than payment of compensation at current
salary, incentive compensation, bonuses and properly authorized business
expenses in the ordinary course of business, in each case, consistent with
past practice; or
(xiii) authorize, or commit or agree to take, any of the foregoing
actions.
Pursuant to the Merger Agreement, Williams has agreed that it will not, and
will not permit any of its subsidiaries (except as specifically set forth in the
Merger Agreement or on Williams' disclosure schedule thereto) to:
(i) other than dividends and distributions by a direct or indirect
wholly owned subsidiary of Williams to its parent, or regularly scheduled
dividends by a subsidiary that is partially owned by Williams or any of its
subsidiaries, provided that Williams or any such subsidiary receives or is
to receive its proportionate share thereof, (x) declare, set aside or pay
any dividends on, make any other distributions in respect of, or enter into
any agreement with respect to the voting of, any of its capital stock
(except for regular quarterly cash dividends on Williams Common Stock at a
rate per share not in excess of $.15, and regular dividend payments on
certain preferred stock of Williams, in accordance with the terms of such
preferred stock), (y) split, combine or reclassify any of its capital stock
or any other voting securities (or any securities convertible into, or any
rights, warrants or options to acquire any such shares, voting securities
or convertible securities) or issue or authorize the issuance of any other
securities in respect of any thereof, in lieu of any thereof or in
substitution for any thereof (other than (A) issuances of Williams Common
Stock upon the exercise of employee or director stock options, deferred or
restricted stock awards or other rights to purchase or receive Williams
Common Stock granted under Williams' stock-based plans (the "Williams Stock
Options") that are, in each case, (1) outstanding as of the date of the
execution of the Merger Agreement in accordance with their present terms,
or (2) issued in accordance with the terms of any Williams benefit plan in
a manner generally consistent with past practices, (B) issuances of
Williams Common Stock upon conversion of Williams' $3.50 Cumulative
Convertible Preferred Stock (the "Williams Convertible Preferred Stock")
and Williams' 6% Convertible Subordinated Debentures, Due 2005 (the
"Williams Convertible Debentures" and, together with the Williams
Convertible Preferred Stock, the "Williams Convertible Securities"), (C)
issuances of Williams Common Stock upon exercise of warrants of Williams or
(D) issuances of Williams Common Stock pursuant to the Stock Dividend or
(z) purchase, redeem or otherwise acquire for greater than fair value any
shares of capital stock of Williams or any of its subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities, except in accordance with the terms of existing
obligations of Williams or any of its subsidiaries;
(ii) issue, deliver or sell any shares of its capital stock, any other
voting securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities, other than (A) issuances of Williams Common Stock
permitted under the terms of the Merger Agreement, (B) issuances of
securities for fair value, (C) issuances of securities in connection with
the acquisition of businesses in the energy or communications industries,
or (D) issuances of Williams Common Stock in an amount aggregating not more
than 5 percent of the number of presently outstanding shares of Williams
Common Stock in connection with acquisitions of businesses in industries
other than the energy or communications industries;
(iii) in the case of Williams or any of its significant subsidiaries,
amend their certificates of incorporation, by-laws or other comparable
organizational documents or the Williams Rights Agreement, in each case in
a manner adverse to MAPCO; or
(iv) authorize, commit or agree to take, any of the foregoing actions.
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NO SOLICITATION
The Merger Agreement provides that MAPCO will not, nor will it permit any
of its subsidiaries to, nor will it authorize or permit any of its officers,
directors or employees or any investment banker, financial adviser, attorney,
accountant or other representative retained by it or any of its subsidiaries to,
directly or indirectly through another person, (i) solicit, initiate or
encourage (including by way of furnishing nonpublic information), or take any
other action designed to facilitate, any inquiries or the making of any Takeover
Proposal (as defined below) or (ii) participate in any substantive discussions
or negotiations regarding any Takeover Proposal; provided, however, that if and
to the extent that, at any time prior to the adoption of the Merger Agreement by
MAPCO stockholders at the MAPCO Special Meeting, the MAPCO Board determines in
good faith, after consultation with outside counsel, that its failure to do so
could reasonably be expected to result in a breach of its fiduciary duties to
its stockholders under applicable law, MAPCO may, in response to any Takeover
Proposal which was not solicited by it and which did not otherwise result from a
breach of this provision of the Merger Agreement, (a) furnish information with
respect to MAPCO and its subsidiaries to any person making a Takeover Proposal
pursuant to a customary confidentiality agreement (as determined by MAPCO based
on the advice of its outside counsel) and (b) participate in negotiations
regarding such Takeover Proposal. For purposes of the Merger Agreement, a
"Takeover Proposal" means (1) any inquiry, proposal or offer from any person
relating to any direct or indirect acquisition or purchase of a business that
constitutes 30 percent or more of the net revenues, net income or assets of
MAPCO and its subsidiaries, taken as a whole, or 30 percent or more of any class
of equity securities of MAPCO, (2) any tender offer or exchange offer that if
consummated would result in any person beneficially owning 30 percent or more of
any class of any equity securities of MAPCO or (3) any merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving MAPCO (or any subsidiary of MAPCO whose business
constitutes 30 percent or more of the net revenues, net income or the assets of
MAPCO and its subsidiaries, taken as a whole), other than the transactions
contemplated by the Merger Agreement.
The Merger Agreement also provides that, except as expressly permitted
thereby, neither the MAPCO Board, nor any committee thereof, will (i) withdraw
or modify, or propose publicly to withdraw or modify, in a manner adverse to
Williams, the approval or recommendation by the MAPCO Board or such committee of
the Merger or the Merger Agreement, (ii) approve or recommend or propose
publicly to approve or recommend any Takeover Proposal or (iii) cause MAPCO to
enter into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement related to any Takeover Proposal (an "Acquisition
Agreement"). Notwithstanding the foregoing, in the event that prior to the
adoption of the Merger Agreement by MAPCO stockholders at the MAPCO Special
Meeting, the MAPCO Board, to the extent that it determines in good faith, after
consultation with outside counsel, that, in light of a Superior Proposal (as
defined below) its failure to do so could reasonably be expected to result in a
breach of its fiduciary duties to the MAPCO stockholders under applicable law,
may terminate the Merger Agreement, solely in order to enter into an Acquisition
Agreement with respect to any Superior Proposal, but only at a time that is
after the third business day following Williams' receipt of written notice
advising Williams that the MAPCO Board is prepared to accept a Superior Proposal
specifying the material terms and conditions of such Superior Proposal and
identifying the person making such Superior Proposal. For purposes of the Merger
Agreement, a "Superior Proposal" means any proposal with respect to a
transaction which the MAPCO Board determines in its good faith judgment, based
on the advice of an investment banking firm of national reputation and after
consultation with outside counsel, to be more favorable to MAPCO stockholders
than the Merger. Under certain circumstances, MAPCO must pay Williams up to $75
million in termination fees. See "-- Termination" and "-- Termination Fees."
DIRECTORS OF WILLIAMS
The Merger Agreement provides that promptly after the Effective Time,
Williams shall use all reasonable efforts to cause two persons mutually agreed
upon by Williams and MAPCO to be elected to the Williams Board.
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MAPCO STOCK-BASED AWARDS
Pursuant to the Merger Agreement, after the MAPCO Stockholder Approval but
prior to the Effective Time of the Merger, each outstanding MAPCO Stock Option
will be deemed exercisable and converted into a right to receive that number of
shares of Williams Common Stock determined below. For each holder, the value of
each MAPCO Stock Option (the "Adjusted Fair Value") shall equal 102 percent of
the excess of (i) the closing price of a share of Williams Common Stock on the
date on which the MAPCO Stockholder Approval is obtained (the "Closing Value"),
multiplied by the Exchange Ratio, over (ii) the per share exercise price of each
such MAPCO Stock Option. The number of shares of Williams Common Stock issuable
to each such holder (the "Settlement Shares") shall be equal to the quotient of
(A) the Adjusted Fair Value divided by (B) the Closing Value, and shall
represent the fair settlement value of all rights thereunder. See "THE PROPOSED
MERGER -- Interests of Certain Persons in the Merger."
Williams has agreed to establish a mechanism whereby each holder of MAPCO
Stock Options permitted to sell Settlement Shares without registration under the
Securities Act can convert a portion of the Settlement Shares to cash through
open market sales of such Settlement Shares to be effected by a broker selected
by Williams, to the extent necessary to satisfy the minimum withholding tax
obligation with respect to such holder; provided, however, that, if Williams'
and MAPCO's accountants conclude that it will not prevent the transactions
contemplated by the Merger Agreement from being eligible to qualify as a pooling
of interests, such mechanism shall also be made available to such holders for
any Settlement Shares in excess of the number of shares necessary to satisfy
such tax withholding. Williams has agreed to, at least 10 days prior to the
Effective Time, identify the person to whom such holders may direct sales orders
and Williams has agreed to deliver (or cause the Exchange Agent to deliver) the
aggregate number of shares of Williams Common Stock subject to all such sales
orders received prior to the Effective Time to the broker as soon as practicable
thereafter, but no later than five business days after the Effective Time. Each
holder will be responsible for the payment of commissions related to such sales,
which shall be deducted from the proceeds of such sales.
MAPCO EMPLOYEE BENEFIT PLANS
Pursuant to the Merger Agreement, except as set forth in the third sentence
of this paragraph, from and for a period of at least one year after the
Effective Time, Williams has agreed to provide or cause the Surviving
Corporation to provide each employee of MAPCO and its subsidiaries (the "MAPCO
Employees") and any former employee of MAPCO or its subsidiaries entitled to
receive benefits under a MAPCO benefit plan (the "MAPCO Benefit Plans") at the
Effective Time (the "Former MAPCO Employees") either: (i) substantially similar
benefits to those provided under the applicable MAPCO Benefits Plans; or (ii)
the same benefits Williams provides to its similarly situated employees or
former employees; or (iii) benefits which meet the requirements of clause (i)
for a portion of the one year period and which meet the requirements of clause
(ii) for the remainder of such one year period. For purposes of eligibility to
participate and vest in its Benefit Plans, Williams has agreed to recognize
service with MAPCO and its subsidiaries prior to the Effective Time. From and
for a period of at least one year after the Effective Time, Williams has agreed
to maintain or cause the Surviving Corporation to maintain MAPCO's Pension Plan
(the "MAPCO Pension Plan") with benefit accruals no less favorable than those on
the date of the Merger Agreement. Each MAPCO Employee shall be eligible to
participate in the MAPCO Pension Plan in accordance with its terms.
Notwithstanding the foregoing, the Merger Agreement provides that nothing shall
prohibit Williams or the Surviving Corporation from merging or consolidating the
MAPCO Pension Plan with any other defined benefit plan maintained by Williams or
the Surviving Corporation. The Merger Agreement further provides that, on and
after the Effective Time, Williams or the Surviving Corporation may cause the
MAPCO Benefit Plans to provide that MAPCO Employees and Former MAPCO Employees
shall no longer participate in any of the MAPCO Benefit Plans; provided,
however, that Williams has agreed to honor or assume, or cause the Surviving
Corporation to honor or assume, the obligation of MAPCO under each MAPCO Benefit
Plan (including, without limitation, plans for the benefit of directors of
MAPCO) with respect to vested benefits at the Effective Time. On and for a
period of one year after the Effective Time, MAPCO Employees will be eligible
for severance benefits under a schedule agreed to by MAPCO and Williams and set
forth in the Disclosure Schedule to the Merger Agreement. For purposes of
determining the amount of benefits to be paid to a MAPCO Employee from the
severance plan, years of service with MAPCO, and its subsidiaries, Williams and
the Surviving Corporation will be counted.
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CONDITIONS TO THE CONSUMMATION OF THE MERGER
Each party's obligation to effect the Merger is subject to the satisfaction
or waiver on or prior to the Closing Date of the following conditions:
(i) obtaining MAPCO Stockholder Approval (See "INFORMATION CONCERNING
THE MAPCO SPECIAL MEETING -- Record Date; Quorum; Vote Required") and
Williams Stockholder Approval (See "INFORMATION CONCERNING THE WILLIAMS
SPECIAL MEETING -- Record Date; Quorum; Vote Required)";
(ii) the waiting period (and any extension thereof) applicable to the
Merger under the HSR Act having expired or been terminated;
(iii) other than the filing with the Secretary of State of Delaware
described under "-- Closing; Effective Time" and filings pursuant to the
HSR Act, all consents, approvals and actions of, filings with and notices
to any federal, state, local or foreign government, any court,
administrative, regulatory or other governmental agency, commission or
authority or any nongovernmental self-regulatory agency, commission or
authority (a "Governmental Entity") required of MAPCO, Williams or any of
their subsidiaries to consummate the Merger and the other transactions
contemplated thereby, the failure of which to be obtained or taken is
reasonably expected to have a material adverse effect on Williams and its
prospective subsidiaries, taken as a whole, having been obtained or made;
(iv) no judgment, order, decree, statute, law, ordinance, rule or
regulation enacted, entered, promulgated, enforced or issued by any court
or other Governmental Entity of competent jurisdiction or other legal
restraint or prohibition (collectively, "Restraints") being in effect (a)
preventing the consummation of the Merger, or (b) which otherwise is
reasonably likely to have a material adverse effect on MAPCO or Williams,
as applicable; provided, however, that each of the parties shall have used
its reasonable best efforts to defend any lawsuits or other legal
proceedings, whether judicial or administrative, challenging the Merger
Agreement or the consummation of the transactions contemplated therein,
including seeking to have any stay or temporary restraining order entered
by any court or other Governmental Entity or any Restraint vacated or
reversed;
(v) the Registration Statement having become effective under the
Securities Act prior to the mailing of this Joint Proxy
Statement/Prospectus by MAPCO and Williams to their respective stockholders
and not being the subject of any stop order entered by the SEC or any SEC
proceedings seeking a stop order;
(vi) the shares of Williams Common Stock issuable to MAPCO
stockholders pursuant to the Merger having been approved for listing on the
NYSE and the PSE, subject to official notice of issuance; and
(vii) Williams and MAPCO each having received letters, dated as of the
Closing Date, from their independent accountants stating that no conditions
exist that would preclude MAPCO and Williams, respectively, from being a
party to a business combination to be accounted for as a pooling of
interests.
In addition, each party's obligation to effect the Merger is subject to the
satisfaction or waiver of the following additional conditions:
(i) the representations and warranties of the other party to the
Merger Agreement set forth in the Merger Agreement being true and correct
as of the date of the Merger Agreement and as of the Closing Date as though
made on and as of the Closing Date (except to the extent expressly made as
of an earlier date, in which case as of such date), except where the
failure of such representations and warranties to be so true and correct
(without giving effect to any limitation as to "materiality," "material
adverse change" or "material adverse effect," as such terms are defined
below), does not have, and would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on such other
party;
(ii) the other party to the Merger Agreement having performed all
obligations required to be performed by it under the Merger Agreement on or
prior to the Closing Date in all material respects, it
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being agreed that a failure of MAPCO to make certain payments to certain of
its executives as required by the Merger Agreement shall be deemed to be a
material breach with the effect that Williams shall not be obligated to
complete the Merger;
(iii) there having been no material adverse change relating to either
party at any time after the date of the Merger Agreement; and
(iv) Williams and MAPCO having received from their respective legal
counsel, Jones, Day, Reavis & Pogue and Debevoise & Plimpton, on the
Closing Date, opinions dated as of such date to the effect that the Merger
will constitute a "reorganization" within the meaning of Section 368(a) of
the Code and that Williams, MAPCO and Sub will each be a party to such
reorganization within the meaning of Section 368(b) of the Code. See "THE
PROPOSED MERGER -- Federal Income Tax Consequences of the Merger."
Williams' obligation to effect the Merger is also subject to it being
satisfied in its sole discretion that the Discovery Waiver shall have been
obtained by MAPCO.
Subject to certain limited exceptions specified in the Merger Agreement, a
"material adverse change" or "material adverse effect" means, when used in
connection with Williams or MAPCO, any change, effect, event, occurrence or
state of facts that is, or would reasonably be expected to be, materially
adverse to the business, financial condition or results of operations of
Williams or MAPCO and their respective subsidiaries taken as a whole, other than
changes relating to the U.S. economy or securities markets in general, to the
Merger Agreement or the announcement thereof, to the natural resources industry
in general, to the resignation of officers or employees of Williams or MAPCO, or
to changes in GAAP.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time and (except as described under "-- No Solicitation") whether before or
after the MAPCO Stockholder Approval or the Williams Stockholder Approval:
(i) by mutual written consent of Williams and MAPCO;
(ii) by either Williams or MAPCO:
(a) if the Merger has not been consummated by June 30, 1998;
provided that such right to terminate the Merger Agreement will not be
available to any party whose failure to perform any of its obligations
under the Merger Agreement has resulted in the failure of the Merger to
be consummated by such date; provided, however, that the Merger
Agreement may be extended not more than 60 days by either party by
written notice to the other party if the Merger has not been consummated
as a direct result of the conditions described in clauses (ii) or (iii)
of the first paragraph under "-- Conditions to the Consummation of the
Merger" failing to have been satisfied and the extending party
reasonably believes that the relevant approvals will be obtained during
such extension period;
(b) if the MAPCO Stockholder Approval has not been obtained at the
MAPCO Special Meeting or at any adjournment or postponement thereof;
(c) if the Williams Stockholder Approval shall not have been
obtained at the Williams Special Meeting or at any adjournment or
postponement thereof; or
(d) if any Restraints having the effects set forth in clause (iv)
of the first paragraph under "-- Conditions to the Consummation of the
Merger" are in effect and have become final and nonappealable;
(iii) by Williams, on the one hand, or MAPCO, on the other hand, if
the other party has breached or failed to perform in any material respect
any of its representations, warranties, covenants, or other agreements
contained in the Merger Agreement, which breach or failure to perform would
give rise to the failure of those conditions to the Merger described in
clauses (i) and (ii) of the second paragraph under
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"-- Conditions to the Consummation of the Merger," and which breach is
incapable of being cured by the party in breach, or is not cured within 30
days of written notice thereof (provided that the other party is not also
in breach);
(iv) by MAPCO, in accordance with the second sentence of the second
paragraph under "-- No Solicitation;"
(v) by Williams if (i) the MAPCO Board or any committee thereof shall
have withdrawn or modified its approval or recommendation of the Merger or
the Merger Agreement, or approved or recommended any Takeover Proposal or
(ii) the MAPCO Board shall have resolved to do any of the foregoing; or
(vi) by Williams if MAPCO or any of its officers, directors,
representatives or agents shall take any of the actions proscribed under
"-- No Solicitation" (but for the exceptions therein allowing certain
actions to be taken pursuant to the proviso to the first sentence of the
first paragraph and the second sentence of the second paragraph) in a
manner that would result in a material breach thereof.
TERMINATION FEES
The Merger Agreement provides that:
(i) if MAPCO terminates the Merger Agreement pursuant to paragraph
(iv) under "-- Termination" or, after November 23, 1997 but prior to any
termination of the Merger Agreement, MAPCO or the MAPCO Board takes any
action to make the MAPCO Rights Agreement inapplicable (through termination
or otherwise) to any person other than Williams, Sub or another wholly
owned subsidiary of Williams, then MAPCO shall pay Williams $75 million
concurrently with such termination;
(ii) if (A) a Pre-Termination Takeover Proposal Event (as defined
below) occurs and thereafter the Merger Agreement is terminated by (a)
either MAPCO or Williams because the MAPCO stockholders do not approve the
Merger, (b) Williams for the reasons set forth in clauses (v) and (vi)
under "-- Termination" above, or (c) MAPCO for the reasons set forth in
clause (ii)(b) under "-- Termination" above and (B) prior to the date that
is 12 months after the date of such termination MAPCO enters into an
Acquisition Agreement, then MAPCO shall (1) promptly, but in no event later
than two business days after the date such Acquisition Agreement is entered
into, pay Williams $25 million, and (2) promptly, but in no event later
than two business days after the date the transactions set forth in such
Acquisition Agreement (or any other Acquisition Agreement entered into
within 12 months after November 23, 1997) are consummated, pay Williams an
additional $50 million;
(iii) if the Merger is terminated under the circumstances contemplated
by clause (ii) immediately above, MAPCO shall promptly pay upon Williams'
request all reasonable out-of-pocket expenses incurred by Williams in
connection with the Merger Agreement and the transactions contemplated
thereby (such expenses not to exceed $7.5 million in the aggregate), which
shall be credited against any termination fee payable pursuant to such
clause (ii); and
(iv) In the event that the Merger Agreement is terminated pursuant to
clause (ii)(c) under "-- Termination" above, (A) if the Share Issuance
Proposal is approved but the Charter Amendment Proposal is not approved,
Williams shall promptly, but in no event later than five business days
after the date of such termination, pay MAPCO a fee equal to $75 million,
by wire transfer of same day funds or (B) if the Share Issuance Proposal is
not approved, Williams shall promptly pay upon MAPCO's request all
reasonable out-of-pocket expenses incurred by MAPCO in connection with the
Merger Agreement and the transactions contemplated thereby (such expenses
not to exceed $7.5 million in the aggregate).
Under the Merger Agreement, a "Pre-Termination Takeover Proposal Event" is
deemed to have occurred if a Takeover Proposal shall have been made public or if
any person shall have publicly announced an intention (whether or not
conditional) to make a Takeover Proposal and shall not have withdrawn such
proposal at the time of the action giving rise to termination.
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The Merger Agreement further provides that if MAPCO or Williams, as the
case may be, should fail to pay an amount due to be paid by it pursuant to
paragraphs (i), (ii), (iii) or (iv) above, and, in order to obtain such payment,
the other party commences a suit which results in a judgment against the
defaulting party, then the defaulting party will pay the costs and expenses
(including attorneys' fees and expenses) in connection with such suit.
EXPENSES
Subject to the provisions set out in "Termination Fees" above, whether or
not the Merger is consummated, all fees and expenses incurred in connection with
the Merger, the Merger Agreement and the transactions contemplated thereby will
be paid by the party incurring such fees or expenses.
AMENDMENT AND WAIVER
The Merger Agreement may be amended by the parties thereto at any time
before or after the Williams Stockholder Approval and the MAPCO Stockholder
Approval; provided, however, that, after any such approvals, there will not be
made any amendment that by law requires further approval by Williams or MAPCO
without the further approval of such stockholders. The Merger Agreement may not
be amended except by an instrument in writing signed on behalf of all of the
parties.
At any time prior to the Effective Time, a party may (i) extend the time
for the performance of any of the obligations or other acts of the other
parties, (ii) waive any inaccuracies in the representations and warranties of
the other parties contained in the Merger Agreement or in any document delivered
pursuant to the Merger Agreement or (iii) subject to the proviso of the first
sentence of the immediately preceding paragraph, waive compliance by the other
parties with any of the agreements or conditions contained in the Merger
Agreement. Any agreement on the part of a party to any such extension or waiver
will be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to the Merger Agreement to assert any of
its rights under the Merger Agreement or otherwise will not constitute a waiver
of such rights.
GOVERNING LAW
The Merger Agreement is governed by the laws of the State of Delaware.
COMPARISON OF RIGHTS OF STOCKHOLDERS OF WILLIAMS AND MAPCO
The rights of MAPCO stockholders are currently governed by the Delaware
General Corporation Law (the "DGCL") and the Restated Certificate of
Incorporation and the By-Laws of MAPCO (the "MAPCO Certificate" and the "MAPCO
By-Laws," respectively). The rights of Williams stockholders are currently
governed by the DGCL and the Williams Certificate and the By-Laws of Williams
(the "Williams By-Laws"). In accordance with the Merger Agreement, at the
Effective Time, each issued and outstanding share of MAPCO Common Stock (other
than treasury shares) will be converted into the right to receive 1.665 shares
of Williams Common Stock and .555 associated preferred stock purchase rights.
Accordingly, upon consummation of the Merger, the rights of Williams
stockholders and MAPCO stockholders who become stockholders of Williams in the
Merger will be governed by the DGCL, the Williams Certificate and the Williams
By-Laws. The following are summaries of the material differences between the
current rights of MAPCO stockholders and the rights of Williams stockholders.
The following discussion is not intended to be complete and is qualified by
reference to the MAPCO Certificate, the MAPCO By-Laws, the Williams Certificate
and the Williams By-Laws. Copies of these documents are exhibits to Williams'
and MAPCO's Annual Reports on Form 10-K, which are incorporated by reference
herein and will be sent to stockholders of Williams and MAPCO, respectively,
upon request.
Unless otherwise set forth herein, the material rights of MAPCO
stockholders and Williams stockholders are identical.
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AUTHORIZED CAPITAL
The authorized capital stock of MAPCO consists of 115,000,000 shares of a
MAPCO Common Stock, of which MAPCO estimates there were 55,607,188 shares
outstanding as of the MAPCO Record Date, and 1,000,000 authorized shares of
MAPCO Preferred Stock, of which 175,000 shares are designated as MAPCO Series A
Junior Participating Preferred Stock, which are reserved for issuance in
connection with the MAPCO Rights Agreement. The authorized capital stock of
Williams consists of 480,000,000 shares of Williams Common Stock and 30,000,000
shares of preferred stock, par value $1.00 per share (the "Williams Preferred
Stock"), of which 2,500,000 shares have been designated as $3.50 Cumulative
Convertible Preferred Stock (the "Williams $3.50 Preferred Stock") and 1,600,000
shares have been designated as Series A Junior Participating Preferred Stock,
which are reserved for issuance under the Williams Rights Agreement. As of the
Williams Record Date, Williams estimates there were 320,433,362 shares of
Williams Common Stock outstanding and 2,497,472 shares of Williams $3.50
Preferred Stock issued and outstanding.
In the fourth quarter of 1997, both Williams and MAPCO took action to
terminate their previously authorized common stock repurchase programs.
BOARD OF DIRECTORS
MAPCO. Pursuant to the MAPCO Certificate, the number of directors of MAPCO
will not be less than three nor more than twelve, with the precise number to be
nine unless otherwise fixed from time to time by the MAPCO Board. The current
number of MAPCO directors is eleven. The MAPCO Certificate and MAPCO By-Laws
provide for the MAPCO Board to be divided into three classes, each of which is
to be composed as nearly as possible of one-third of the directors. The MAPCO
directors are elected for three-year terms by a plurality of the votes of the
shares present or represented by proxy at the annual stockholders meeting. A
quorum at any meeting of the MAPCO Board consists of a majority of the total
number of directors, and a majority of the quorum present is required to approve
any action of the MAPCO Board.
Williams. Pursuant to the Williams Certificate, the number of directors of
Williams will not be less than five nor more than seventeen, with the precise
number to be fixed from time to time by the Williams Board. The current number
of Williams directors is twelve. The Williams Certificate and Williams By-Laws
provide for the Williams Board to be divided into three classes, each of which
is to be composed as nearly as possible of one-third of the directors. The
Williams directors are elected for three-year terms by a plurality of the votes
of the shares present or represented by proxy at the annual stockholders
meeting. A quorum at any meeting of the Williams Board consists of a majority of
the total number of Williams directors, and majority of the quorum present is
required to approve any action of the Williams Board.
COMMITTEES OF THE BOARD OF DIRECTORS
MAPCO. Pursuant to the MAPCO By-Laws, the MAPCO Board shall, by a majority
vote of all of the MAPCO directors, designate an Executive Committee. The MAPCO
Board may appoint such other committees as it deems desirable. The MAPCO Board
currently has an Executive Committee, an Audit Committee, a Compensation
Committee, a Governance Committee and a Finance Committee.
Williams. Pursuant to the Williams By-Laws, the Williams Board may
designate one or more committees. The Williams Board currently has an Executive
Committee, an Audit Committee, a Nominating Committee and a Compensation
Committee.
NEWLY CREATED DIRECTORSHIPS AND VACANCIES
MAPCO. Pursuant to the MAPCO By-Laws, newly created directorships and
vacancies on the MAPCO Board may be filled by a majority of MAPCO directors then
in office, though less than a quorum, unless so filled by election by the
stockholders at a meeting called for the purpose by notice given prior to such
action by the directors.
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Williams. Pursuant to the Williams By-Laws, vacancies and newly created
directorships resulting from an increase in the number of Williams directors may
be filled by a majority of the directors then in office, even if less than a
quorum, or a sole remaining director.
REMOVAL OF DIRECTORS
MAPCO. Neither the MAPCO Certificate nor the MAPCO By-Laws includes a
provision setting forth the procedure for the removal of directors. Under the
DGCL, any director or the entire board of directors of a corporation whose board
is classified may be removed only for cause by the affirmative vote of holders
of a majority of shares then entitled to vote at an election of directors.
Williams. The Williams Certificate provides that a Williams director may
be removed only for cause and by the affirmative vote of the holders of 75
percent of the voting power of all shares of Williams outstanding stock entitled
to vote for such director's election.
OFFICERS
MAPCO. Pursuant to the MAPCO By-Laws, the MAPCO Board shall elect a
Chairman (to be designated as MAPCO's chief executive officer), a President, one
or more Executive Vice Presidents, Senior Vice Presidents and Vice Presidents, a
Secretary, a Treasurer, a Controller, and such other officers as may be
appointed by the MAPCO Board. Under the MAPCO By-Laws, an officer may be removed
at any time by the affirmative vote of a majority of the MAPCO Board.
Williams. Pursuant to the Williams By-Laws, Williams' officers shall
include a President, a Secretary, a Treasurer, and at the discretion of the
Board may include a Chairman of the Board, one or more Vice Presidents and such
other officers as may be elected or appointed by the Williams Board. Officers
may be removed at any time by a majority of the Williams Board.
SPECIAL MEETINGS OF STOCKHOLDERS
MAPCO. Pursuant to the MAPCO By-Laws, a special meeting of MAPCO
stockholders may be called by resolution of the MAPCO Board or by the Chairman
of the Board.
Williams. Pursuant to the Williams By-Laws, a special meeting of Williams'
stockholders may be called by either the Chairman of the Board, if one has been
elected, or the President, and shall be called by either such officer or the
Secretary at the request in writing of (i) a majority of the Board of Directors,
or (ii) the stockholders owning of record at least a majority in number of the
issued and outstanding shares of stock of Williams entitled to vote.
QUORUM AT STOCKHOLDER MEETINGS
MAPCO. Pursuant to the MAPCO By-Laws, the holders of a majority of the
issued and outstanding stock entitled to vote thereat, present in person or by
proxy, shall constitute a quorum at all stockholder meetings.
Williams. Pursuant to the Williams By-Laws, the holders of a majority of
the shares issued and outstanding and entitled to vote, present in person or by
proxy, shall generally constitute a quorum at all stockholder meetings.
STOCKHOLDER ACTION BY WRITTEN CONSENT
MAPCO. Pursuant to the MAPCO By-Laws, stockholders may take any action
without a meeting, without prior notice and without a vote, upon the written
consent of stockholders having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted.
Williams. Pursuant to the Williams Certificate, stockholders may take any
action, except election of directors, which may be taken at any annual or
special meeting of stockholders without a meeting if written
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<PAGE> 59
consents are signed by the holders of outstanding stock having at least a
majority of the voting power, provided, that if any greater proportion of voting
power is required for such action at a meeting, then such greater proportion of
written consents shall be required.
ADVANCE NOTICE OF STOCKHOLDER-PROPOSED BUSINESS OR DIRECTOR NOMINATIONS AT
ANNUAL MEETINGS
MAPCO. Pursuant to the MAPCO By-Laws, in order for business to be properly
brought before an annual meeting by a stockholder, the stockholder must have
given timely notice thereof in writing to the Secretary of MAPCO. To be timely,
a stockholder's notice must be delivered to or mailed and received at the
principal executive offices of MAPCO not less than 60 days nor more than 90 days
prior to the meeting; provided, however, that in the event that less than 70
days' notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so received
not later than the close of business on the tenth day following the date on
which such notice of the date of the annual meeting was mailed or such public
disclosure was made. A stockholder's notice to the Secretary must set forth as
to each matter the stockholder proposes to bring before the annual meeting: (i)
a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and address, as they appear on MAPCO's books, of the stockholder
proposing such business, (iii) the class and number of shares of MAPCO which are
beneficially owned by the stockholder, and (iv) any material interest of the
stockholder in such business.
In addition, the MAPCO By-Laws provide that for a stockholder to properly
nominate a director at a meeting of stockholders, the stockholder must be
entitled to vote for the election of directors at such meeting and must have
given notice thereof in writing to the Nominating Committee (now called the
Governance Committee) of the MAPCO Board in care of the Secretary of MAPCO. To
be timely, a stockholder's notice must meet the deadlines set forth above with
respect to stockholder-sponsored business. To be in proper written form, such
stockholder's notice must contain: (a) as to each person whom the stockholder
proposes to nominate for election or re-election as a director, (i) the name,
age, business address and, if known, residence address of each such nominee,
(ii) the principal occupation or employment of each such nominee, (iii) the
number of shares of stock of MAPCO which are beneficially owned by each such
nominee, and (iv) all information relating to such person that is required to be
disclosed in solicitations of proxies for election, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended, including without limitation, such person's written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected, and (b) as to the stockholder giving the notice (i) the name and
address, as they appear on MAPCO's books, of such stockholder and (ii) the class
and number of shares of MAPCO which are beneficially owned by such stockholder.
Williams. Pursuant to the Williams By-Laws, written notice of the annual
meeting of stockholders stating the place, date and hour of the meeting shall be
given to each stockholder entitled to vote at such meeting not less than ten nor
more than sixty days.
In order for a stockholder proposal to be considered at a Williams annual
meeting of stockholders, such proposal must be received by Williams no later
than the date established by Williams each year consistent with SEC proxy rules.
See "SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS" below. Nothing in the Williams
Certificate or the Williams By-Laws prohibit a stockholder from nominating an
individual for election to the Williams Board.
AMENDMENT OF GOVERNING DOCUMENTS
MAPCO. The MAPCO Certificate is silent as to the right to amend, alter,
change or repeal (collectively, an "Amendment") any provision of the MAPCO
Certificate as permitted by the DGCL (except with respect to (i) provisions
relating to the management of the business and conduct of the affairs of MAPCO
and the powers of MAPCO, its directors and stockholders, the Amendment of which
requires the affirmative vote of the holders of 75 percent of all shares of the
outstanding stock of MAPCO entitled to vote thereon and (ii) provisions relating
to merger, consolidation or sale of all or substantially all assets of MAPCO,
the Amendment of which requires the affirmative vote of the holders of 75
percent of all classes of
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stock of MAPCO entitled to vote in elections of directors, voting as a single
class). Under the DGCL, an amendment to a corporation's certificate of
incorporation requires the recommendation of a corporation's board of directors,
the approval of a majority of all shares entitled to vote thereon unless a
higher vote is required in the corporation's certificate of incorporation (such
as described above with respect to amendments pertaining to the management of
the business and conduct of the affairs of MAPCO and the powers of MAPCO, its
directors and stockholders and the merger, consolidation or sale of all or
substantially all assets of MAPCO voting together as a single class), and the
approval of a majority of the outstanding stock of each class entitled to vote
thereon. The MAPCO By-Laws may be amended or repealed by the MAPCO Board at any
regular meeting, or at any special meeting if the proposed Amendment is
contained in the notice of such meeting. Such Amendment or repeal shall require
the affirmative vote of the holders of record of a majority of the shares of the
outstanding capital stock of MAPCO, or of a majority of the MAPCO Board, as the
case may be, unless provisions of the MAPCO Certificate provide for greater than
a majority vote.
Williams. Pursuant to the Williams Certificate, the Williams Certificate
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of (i) the Series A Junior Participating
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of a majority or more of the outstanding shares of Series A Junior
Participating Preferred Stock, voting separately as a class, or (ii) the
Williams $3.50 Preferred Stock so as to affect them adversely, without the
affirmative vote of the holders of at least 66 2/3 percent of the Williams $3.50
Preferred Stock then outstanding. Under the DGCL, an amendment to a
corporation's certificate of incorporation requires the recommendation of a
corporation's board of directors, the approval of a majority of all shares
entitled to vote thereon unless a higher vote is required in the corporation's
certificate of incorporation (which is required by the Williams Certificate with
respect to provisions relating to the management of the business and conduct of
the affairs of Williams and the powers of Williams, its directors and
stockholders (75 percent of the voting power of all shares of the outstanding
stock of Williams generally entitled to vote in the election of directors) and
provisions relating to merger, consolidation or sale of all or substantially all
assets of Williams (75 percent of the voting power of all shares of outstanding
stock of Williams generally entitled to vote in elections of directors, voting
as a single class)), and the approval of a majority of the outstanding stock of
each class entitled to vote thereon. Pursuant to the Williams Certificate, the
Williams Board shall have power to make, alter, amend, change, add to or repeal
the Williams By-Laws by an affirmative vote of the number of directors which
shall constitute, under the terms of the Williams By-Laws, the action of the
Williams Board. Pursuant to the Williams By-Laws, the Williams directors may
exercise such power of amendment at any meeting; provided that no amendment
changing the place named in the Williams By-Laws for the annual election of
directors shall be made within sixty days next before the day on which any such
election is to be held.
RIGHTS AGREEMENTS
MAPCO. Pursuant to the MAPCO Rights Agreement, there are .5 MAPCO Rights
associated with each outstanding share of MAPCO Common Stock. Each MAPCO Right
entitles the registered holder to purchase one two-hundredth of a share of MAPCO
Series A Junior Participating Preferred Stock, without par value. The MAPCO
Rights have certain anti-takeover effects. The MAPCO Rights will cause
substantial dilution to a person or group that attempts to acquire control of
MAPCO in a manner which causes the MAPCO Rights to become exercisable unless the
offer is approved by the MAPCO Board as fair and in the best interests of MAPCO.
MAPCO has executed an amendment to the MAPCO Rights Agreement exempting the
Merger and the related acquisition of shares of MAPCO Common Stock by Williams
from the potential dilution effects of the MAPCO Rights Agreement.
Williams. Pursuant to the Williams Rights Agreement, each outstanding
share of Williams Common Stock has one-third of a Williams Right attached. Each
Williams Right represents the right to purchase one two-hundredth of a share of
Williams Series A Junior Participating Preferred Stock. The Williams Rights have
certain anti-takeover effects. The Williams Rights will cause substantial
dilution to a person or group that attempts to acquire control of Williams in a
manner which causes the Williams Rights to become exercisable unless the offer
is approved by the Williams Board as in the best long-term interests of
Williams.
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<PAGE> 61
DESCRIPTION OF CAPITAL STOCK OF WILLIAMS FOLLOWING THE MERGER
The following description of the material terms of the authorized capital
stock of Williams does not purport to be complete and is qualified in its
entirety by reference to the Williams' Certificate and Williams' By-laws. For
information as to how to obtain the Williams' Certificate and Williams' By-Laws,
see "WHERE YOU CAN FIND MORE INFORMATION."
The authorized capital stock of Williams consists of 480,000,000 shares of
Williams Common Stock and 30,000,000 shares of Williams Preferred Stock. As of
the Williams Record Date, Williams estimates there were 320,433,362 shares of
Williams Common Stock outstanding, 109,036,924 shares of Williams Common Stock
reserved for issuance, 2,497,472 shares of Williams $3.50 Preferred Stock issued
and outstanding, and 1,600,000 shares of Williams Preferred Stock designated as
Series A Junior Participating Preferred Stock, which are reserved for issuance
under the Williams Rights Agreement. Based upon the number of shares of Williams
Common Stock and MAPCO Common Stock issued and outstanding on the Williams
Record Date and giving effect to the shares of Williams Common Stock to be
issued pursuant to the Merger and the other transactions contemplated by the
Merger Agreement, there would be approximately 417,304,383 shares of Williams
Common Stock outstanding immediately following consummation of the Merger.
WILLIAMS COMMON STOCK
Holders of Williams Common Stock are entitled to dividends as declared by
the Williams Board. Debt instruments of certain subsidiaries of Williams limit
the amount of dividend payments to Williams which may adversely impact the funds
available to Williams to pay dividends on the Williams Common Shares.
Subject to the rights of the holders of any outstanding shares of Williams
Preferred Stock, holders of Williams Common Stock are entitled to cast one vote
for each share held of record on all matters. Voting securities do not have
cumulative voting rights. This means that the holders of more than 50 percent of
the voting power of all securities outstanding voting for the election of
directors can elect 100 percent of the directors if they choose to do so; and in
such event, the holders of the remaining voting power will not be able to elect
any person or persons to the Williams Board.
Holders of Williams Common Stock are entitled to one vote per share for the
election of directors and for all other matters to be voted on by the
stockholders of Williams. Subject to the rights of holders of shares of Williams
Preferred Stock, holders of shares of Williams Common Stock have equal rights to
participate in dividends when declared and, in the event of liquidation, in the
net assets of Williams available for distribution to stockholders. Williams may
not declare any dividends on the Williams Common Stock unless full preferential
amounts to which holders of Williams Preferred Stock are entitled have been paid
or declared and set apart for payment upon all outstanding shares of Williams
Preferred Stock.
The holders of shares of Williams Common Stock do not have preemptive
rights or preferential rights of subscription for any shares of Williams Common
Stock or other securities of Williams. Outstanding shares of Williams Common
Stock are, and shares to be issued pursuant to the Merger will be, validly
issued, fully paid and nonassessable.
Williams Common Stock is listed on the NYSE and the PSE. Application will
be made to list the shares of Williams Common Stock to be issued pursuant to the
Merger and the other transactions contemplated by the Merger Agreement on the
NYSE and the PSE.
First Chicago Trust Company of New York is the Transfer Agent and Registrar
for the Williams Common Stock.
Each share of Williams Common Stock has one-third of a Williams Right
attached unless and until the Williams Rights are redeemed.
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<PAGE> 62
WILLIAMS $3.50 PREFERRED STOCK
The holders of the Williams $3.50 Preferred Stock will have no preemptive
rights with respect to any Williams Common Stock or any other securities of
Williams convertible into or carrying rights or options to purchase any such
shares.
Ranking. The Williams $3.50 Preferred Stock ranks senior to the Williams
Common Stock with respect to dividends and the distribution of assets upon
liquidation, dissolution or winding up.
Dividends. Holders of Williams $3.50 Preferred Stock are entitled to
receive, when and as declared by the Williams Board, out of the assets of
Williams legally available for payment, an annual cash dividend of $3.50 per
share, payable in quarterly installments on February 1, May 1, August 1 and
November 1 of each year.
Unless full cumulative dividends on the Williams $3.50 Preferred Stock and
any stock ranking on parity with the Williams $3.50 Preferred Stock as to
dividends or upon liquidation ("Parity Stock") have been paid or funds have been
set apart for payment thereon through the current dividend period with respect
to the Williams $3.50 Preferred Stock and any Parity Stock, Williams may not (i)
declare or pay any dividend or distribution on any junior stock of Williams or
(ii) redeem or set apart funds for the purchase or redemption of any junior
stock.
Redemption. Shares of Williams $3.50 Preferred Stock are not redeemable
prior to November 1, 1999. On and after such date Williams $3.50 Preferred Stock
will be redeemable, at the option of Williams, in whole or in part, at any time
or from time to time, with not less than 30 nor more than 60 days' notice, at
the redemption prices set forth below per share if redeemed during the 12 month
period beginning November 1 of the year indicated below; plus in each case an
amount equal to accrued and unpaid dividends on the Williams $3.50 Preferred
Stock, to the redemption date.
<TABLE>
<CAPTION>
REDEMPTION PRICE PER SHARE YEAR
--------------------------------- -------------------
<S> <C>
$51.40........................... 1999
$51.05........................... 2000
$50.70........................... 2001
$50.35........................... 2002
$50.00........................... 2003 and thereafter
</TABLE>
Liquidation Preference. Holders of Williams $3.50 Preferred Stock are
entitled to a liquidation preference of $50.00 per share plus an amount equal to
all dividends accumulated and unpaid as of the date of final distribution. There
are no provisions in either the Williams Certificate or the Certificate of
Designation for the $3.50 Preferred Stock (the "Certificate of Designation")
which purport to restrict Williams' surplus by reason of the excess of the
liquidation preference of the Williams $3.50 Preferred Stock over its par value.
Although there are no authorities specifically addressing the issue, Williams
believes that under applicable law (i) there should be no restriction upon its
surplus available for the payment of dividends on any of its outstanding capital
stock solely by reason of the fact that the liquidation preference of the
Williams $3.50 Preferred Stock exceeds the par value of such stock and (ii) no
remedy should be available to the holders of the Williams $3.50 Preferred Stock
before or after payment of any dividend solely because such dividend would
reduce Williams' surplus to an amount less than the amount of such excess,
assuming the payment of such dividend is in accordance with the DGCL, the
Williams Certificate and the Certificate of Designation.
Voting Rights. The holders of shares of Williams $3.50 Preferred Stock
have no voting rights, other than any voting rights to which they may be
entitled under the laws of the State of Delaware, unless dividends payable on
the Williams Preferred Stock shall have been in arrears and unpaid in an
aggregate amount equal to or exceeding the amount of dividends payable thereon
for six quarterly periods. In such case, the number of directors of Williams
will be increased by two and the holders of Williams Preferred Stock will have
the right to elect two additional directors to the Williams Board at a special
meeting of the holders of Williams Preferred Stock or at any annual meeting of
Williams stockholders and at each subsequent annual meeting until all such
dividends have been paid in full.
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<PAGE> 63
Convertibility. Each share of Williams $3.50 Preferred Stock is
convertible at the option of the holder thereof into 4.6875 shares of Williams
Common Stock, subject to certain anti-dilution adjustments.
Change of Control. In the event of any change in control of Williams, each
holder of Williams $3.50 Preferred Stock shall have the right, at the holder's
option, to require Williams to redeem any or all of such holder's shares of
Williams $3.50 Preferred Stock unless such change in control shall have been
duly approved by the Continuing Directors (as such term is defined in the
Certificate of Designation).
WILLIAMS RIGHTS
Williams Rights are evidenced by certificates for shares of Williams Common
Stock and will automatically trade with such Williams Common Stock unless and
until they become exercisable or are redeemed. If and when the Williams Rights
become exercisable, Williams Rights certificates will be distributed and the
Williams Rights will become separately tradeable.
Each Williams Right entitles the holder thereof to purchase from Williams
one two-hundredth of a share of Williams Series A Junior Participating Preferred
Stock for a price of $140 subject to adjustments. The Williams Rights become
exercisable after the tenth day following the date (the "Stock Acquisition
Date") on which a public announcement is made that any person (an "Acquiring
Person") has acquired beneficial ownership of 15 percent or more of the shares
of Williams Common Stock or 10 business days following the commencement of (or a
public announcement of an intention to make) a tender or exchange offer if, upon
consummation thereof, the person or group proposing such offer would be
beneficial owner of 15 percent or more of the shares of Williams Common Stock.
The Williams Rights expire on the earlier of (i) February 6, 2006 or (ii) the
date on which the Williams Rights are redeemed. Williams is entitled to redeem
in whole, but not in part, the Williams Rights at any time until 30 days
following the Stock Acquisition Date, at a redemption price of $.01 per Williams
Right.
In the event that, at any time following the Stock Acquisition Date,
Williams is acquired in a merger or other business combination transaction or 50
percent or more of its assets or earning power is sold, provision shall be made
so that each holder of a Williams Right will thereafter have the right to
receive, upon the exercise thereof at the then current Purchase Price (as
defined in the Williams Rights Agreement) of the Williams Right, common stock of
the acquiring entity which has a value of two times the Purchase Price of the
Williams Right. Following the occurrence of any of the events described above in
this paragraph, any Williams Rights that are or were beneficially owned by an
Acquiring Person or affiliates or associates of any Acquiring Person will
immediately become null and void.
The Williams Rights do not entitle their holders to vote or to receive
dividends.
STOCK EXCHANGE MATTERS
It is a condition to the consummation of the Merger that the shares of
Williams Common Stock that will be issued in connection with the Merger and the
other transactions contemplated by the Merger Agreement be authorized for
listing on the NYSE and the PSE, subject to official notice of issuance. If the
Merger is consummated, MAPCO Common Stock will cease to be listed on the NYSE.
WILLIAMS PROPOSAL TO INCREASE AUTHORIZED
NUMBER OF SHARES OF WILLIAMS COMMON STOCK
The Williams Board has unanimously adopted a resolution proposing and
declaring advisable the Charter Amendment Proposal which would increase the
authorized number of shares of Williams Common Stock from 480,000,000 shares to
960,000,000 shares. This increase is necessary to complete the Merger and the
other transactions contemplated by the Merger Agreement. The number of
authorized shares of Williams Preferred Stock would remain unchanged. The
proposed increase in the authorized Williams Common Stock
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would be accomplished by amending the first paragraph of Article FOURTH of the
Williams Certificate to read as follows:
FOURTH: The total number of shares of capital stock which the Company
shall have authority to issue is 990,000,000 shares, consisting of
960,000,000 shares of Common Stock, par value $1.00 per share (the "Common
Stock"), and 30,000,000 shares of Preferred Stock, par value $1.00 per
share (the "Preferred Stock").
In November 1997, the Williams Board declared the Stock Dividend. In
connection with the distribution of the Stock Dividend, Williams issued or
reserved for issuance under the terms of convertible securities, warrants and
under the terms of various stock-based benefit plans 218,355,017 new shares of
Williams Common Stock, thereby reducing the number of authorized shares of
Williams Common Stock available for future issuance from 261,644,983 shares to
43,289,966 shares. If the Charter Amendment Proposal is approved, the number of
shares of Williams Common Stock available for future issuance will depend upon
the actual number of shares of Williams Common Stock issued in the Merger and
pursuant to the other transactions contemplated by the Merger Agreement and is
estimated to be approximately 426 million. AS PREVIOUSLY DESCRIBED HEREIN, THE
MERGER CANNOT BE COMPLETED WITHOUT WILLIAMS STOCKHOLDER APPROVAL OF THE CHARTER
AMENDMENT PROPOSAL. ALSO AS PREVIOUSLY DESCRIBED HEREIN, IF THE SHARE ISSUANCE
PROPOSAL IS APPROVED AND THE CHARTER AMENDMENT PROPOSAL IS NOT APPROVED,
WILLIAMS WILL BE REQUIRED TO PAY MAPCO A $75 MILLION TERMINATION FEE.
Other than as previously described herein relating to the Merger Agreement,
Williams has no present plans, understandings or agreements for the issuance or
use of the proposed additional shares of Williams Common Stock. However, the
Williams Board believes the proposed increase in the number of available shares
is important to provide needed financial flexibility to issue additional shares
without the expense and delay associated with calling a special meeting of
stockholders for such purpose. An expanded capital base will provide Williams
with additional shares for possible equity financings, opportunities for
expanding Williams' business through investments and acquisitions, stock splits
or stock dividends, executive and employee stock plans and for other purposes.
Authorized but unissued shares of the Williams Common Stock may be issued
at such times, for such purposes and for such consideration as the Williams
Board may determine to be appropriate. Such action can be taken without further
authorization from the stockholders unless otherwise required by applicable laws
or the rules of a stock exchange on which the Williams Common Stock may be
listed. The NYSE, on which the Williams Common Stock is currently listed,
requires stockholder approval as a prerequisite to listing shares in certain
instances, including acquisitions where the potential issuance of stock could
result in an increase in the number of shares of common stock outstanding by 20
percent or more. The additional shares of Williams Common Stock to be authorized
will have the same status as presently authorized Williams Common Stock and
approval of the Charter Amendment Proposal will not have any immediate effect on
the rights of existing stockholders. Holders of Williams Common Stock do not
have preemptive purchase rights with respect to any newly issued shares. To the
extent that the additional authorized shares are issued in the future, they
would decrease the existing stockholders' relative percentage ownership in
Williams.
The proposed increase in authorized shares is not intended to impede a
change in control of Williams, and Williams is not aware of any current efforts
to acquire control of Williams. However, it is possible that the additional
shares could be issued as a means of preventing or discouraging an unsolicited
change in control of Williams. The issuance of additional shares could be used
to dilute the ownership of anyone seeking to gain control of Williams or could
be placed with an entity opposed to change in control. Management has no present
intention to propose any anti-takeover measures in future proxy solicitations.
The affirmative vote of the holders of a majority of the outstanding shares
of Williams Common Stock is required to approve the Charter Amendment Proposal.
The Williams Board recommends a vote FOR the Charter Amendment Proposal.
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EXPERTS
The consolidated financial statements and schedule of Williams appearing in
Williams' Annual Report on Form 10-K for the year ended December 31, 1996, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon, included therein and incorporated herein by reference. Such
consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements and related financial statement
schedules of MAPCO and its subsidiaries incorporated in this Joint Proxy
Statement/Prospectus by reference from MAPCO's Annual Report on Form 10-K for
the year ended December 31, 1996 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated herein by
reference (which report expresses an unqualified opinion and includes an
explanatory paragraph referring to litigation in which MAPCO is a defendant
relating to an LPG explosion in April 1992), and have been so incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Williams Common
Stock to be issued pursuant to the Merger and the federal income tax
consequences of the Merger will be passed upon for Williams by Jones, Day,
Reavis & Pogue, Williams' outside legal counsel. Certain legal matters with
respect to the federal income tax consequences of the Merger will be passed upon
for MAPCO by Debevoise & Plimpton, MAPCO's outside legal counsel.
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS
Due to the contemplated consummation of the Merger, MAPCO does not
currently expect to hold a 1998 Annual Meeting of Stockholders because,
following the Merger, MAPCO will not be a publicly traded company. In the event
that the Merger is not consummated and such a meeting is held, to be eligible
for inclusion in MAPCO's proxy statement and form of proxy relating to that
meeting, proposals of stockholders intended to be presented at such meeting must
be received by MAPCO within 60 to 90 days before the annual meeting. In the
event that the date of the meeting is publicly disclosed with less than 70 days
prior to such meeting, however, stockholder proposals to be timely must be
received not later than the tenth day following such public disclosure.
Stockholder proposals intended to be presented at the Williams' 1998 Annual
Meeting of Stockholders, should have been received by Williams by December 1,
1997. Proposals received after that date may be excluded from Williams' proxy
materials.
WHERE YOU CAN FIND MORE INFORMATION
Williams and MAPCO file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information that the companies file at the SEC's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Williams and MAPCO public filings are also available to
the public from commercial document retrieval services and at the Internet World
Wide Web site maintained by the SEC at "http://www.sec.gov." Reports, proxy
statements and other information concerning Williams and MAPCO also may be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
Williams has filed a Registration Statement to register with the SEC the
shares of Williams Common Stock to be issued in the Merger and the other
transactions contemplated by the Merger Agreement. This Joint Proxy
Statement/Prospectus is a part of the Registration Statement and constitutes a
prospectus of Williams and a proxy statement of Williams for the Williams
Special Meeting, as well as a proxy statement of MAPCO for the MAPCO Special
Meeting.
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As allowed by SEC rules, this Joint Proxy Statement/Prospectus does not
contain all the information that stockholders can find in the Registration
Statement or the exhibits to the Registration Statement.
The SEC allows Williams and MAPCO to "incorporate by reference" information
into this Joint Proxy Statement/Prospectus, which means that the companies can
disclose important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is deemed to
be part of this Joint Proxy Statement/Prospectus, except for any information
superseded by information contained directly in the Joint Proxy
Statement/Prospectus. This Joint Proxy Statement/Prospectus incorporates by
reference the documents set forth below that Williams and MAPCO have previously
filed with the SEC. These documents contain important information about the
companies and their financial condition.
<TABLE>
<CAPTION>
WILLIAMS SEC FILINGS (FILE NO. 1-4174) PERIOD
- --------------------------------------------- ---------------------------------------------
<S> <C>
Annual Report on Form 10-K................... Year ended December 31, 1996
Quarterly Reports on Form 10-Q............... Quarters ended March 31, 1997, June 30, 1997
and September 30, 1997
Current Reports on Form 8-K.................. Dated January 2, 1997, September 8, 1997,
September 19, 1997, October 28, 1997 and
November 23, 1997
Registration Statement on Form 8-A........... Dated February 6, 1996
MAPCO SEC FILINGS (FILE NO. 1-5254) PERIOD
- --------------------------------------------- ---------------------------------------------
Annual Report on Form 10-K................... Year ended December 31, 1996
Quarterly Reports on Form 10-Q............... Quarters ended March 31, 1997, June 30, 1997
and September 30, 1997
Current Report on Form 8-K................... Dated November 23, 1997
</TABLE>
Williams and MAPCO incorporate by reference additional documents that
either Williams or MAPCO may file with the SEC between the date of this Joint
Proxy Statement/Prospectus and the dates of the respective Special Meetings.
These include periodic reports, such as Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy
statements.
Williams has supplied all information contained or incorporated by
reference in this Joint Proxy Statement/Prospectus relating to Williams, and
MAPCO has supplied all such information relating to MAPCO.
If you are a stockholder, Williams or MAPCO may have sent you some of the
documents incorporated by reference, but you can obtain any of them through
MAPCO or Williams, as the case may be, or the SEC or the SEC's Internet World
Wide Web site described above. Documents incorporated by reference are available
from the companies without charge, excluding all exhibits unless specifically
incorporated by reference as exhibits in this Joint Proxy Statement/Prospectus.
Stockholders may obtain documents incorporated by reference in this Joint Proxy
Statement/Prospectus by requesting them in writing or by telephone from the
appropriate company at the following addresses:
The Williams Companies, Inc.
One Williams Center
Tulsa, Oklahoma 74172
(918) 588-2000
MAPCO Inc.
1800 South Baltimore Avenue
Tulsa, Oklahoma 74119
(918) 581-1800
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If you would like to request documents from either company, please do so by
February 19, 1998 to receive them before the Williams and MAPCO Special
Meetings. If you request any incorporated documents, they will be mailed to you
by first-class mail, or other equally prompt means, within one business day of
receipt of your request.
You should rely only on the information contained or incorporated by
reference in this Joint Proxy Statement/Prospectus to vote your shares at the
Williams and MAPCO Special Meetings. MAPCO and Williams have not authorized
anyone to provide you with information that is different from what is contained
in this Joint Proxy Statement/Prospectus. This Joint Proxy Statement/Prospectus
is dated January 27, 1998. You should not assume that the information contained
in the Joint Proxy Statement/Prospectus is accurate as of any date other than
that date, and neither the mailing of this Joint Proxy Statement/Prospectus to
stockholders nor the issuance of Williams Common Stock in the Merger shall
create any implication to the contrary.
61
<PAGE> 68
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The Merger Agreement provides that each share of MAPCO Common Stock and the
associated MAPCO Rights will be exchanged for 1.665 shares of Williams Common
Stock and .555 Williams Rights. MAPCO had 55.4 million shares of MAPCO Common
Stock outstanding and 7.7 million stock options outstanding as of December 31,
1997, including 3.7 million stock options which were issued in 1997. The Merger,
which is expected to be completed in the first quarter of 1998, is expected to
be accounted for under the pooling of interests method and, accordingly,
Williams' historical consolidated financial statements will be restated to
include the financial position and results of MAPCO. The Merger is subject to
customary closing conditions, including regulatory approvals and Williams and
MAPCO stockholder approval.
The following unaudited pro forma condensed combined financial statements
give effect to the proposed merger of Williams and MAPCO on a pooling of
interests basis. The pooling of interests method of accounting assumes that the
combining companies were merged from inception and the historical financial
statements for the periods prior to consummation of the Merger are restated as
though the companies had been combined from inception. The pro forma condensed
combined balance sheet assumes that the Merger took place on the balance sheet
date and combines the September 30, 1997 balance sheets of Williams and MAPCO.
The pro forma condensed combined statements of income for the nine months ended
September 30, 1997 and 1996 and for the years ended December 31, 1996, 1995 and
1994 include Williams' and MAPCO's results of operations for the periods then
ended giving effect to the Merger as if the companies had been combined from
their inception.
These pro forma condensed combined financial statements should be read in
conjunction with the accompanying notes, the historical financial statements and
notes of Williams and the historical financial statements and notes of MAPCO
which are incorporated herein by reference. The pro forma adjustments are based
upon available information and assumptions that management of Williams, through
consultation with management of MAPCO, believes are reasonable. The pro forma
combined condensed financial statements do not purport to represent the
financial position or results of operations which would have occurred had the
Merger been consummated on the dates indicated or Williams' financial position
or results of operations for any future date or period.
62
<PAGE> 69
THE WILLIAMS COMPANIES, INC. AND MAPCO INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
WILLIAMS MAPCO ADJUSTMENTS PRO FORMA
--------- -------- ---------- ---------
(MILLIONS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 94.0 $ 44.5 $ -- $ 138.5
Receivables.................................. 1,000.7 322.4 (2.1)(c) 1,321.0
Other........................................ 795.2 200.6 -- 995.8
--------- -------- ------ ---------
Total current assets...................... 1,889.9 567.5 (2.1) 2,455.3
Investments.................................... 274.4 -- -- 274.4
Property, plant and equipment.................. 12,009.6 2,271.2 -- 14,280.8
Less accumulated depreciation and depletion.... (2,149.0) (824.3) -- (2,973.3)
--------- -------- ------ ---------
9,860.6 1,446.9 -- 11,307.5
Goodwill and other intangible assets -- net.... 437.0 149.3 32.6(e) 618.9
Other assets and deferred charges.............. 791.8 184.9 -- 976.7
--------- -------- ------ ---------
Total assets......................... $13,253.7 $2,348.6 $ 30.5 $15,632.8
========= ======== ====== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable................................ $ 1,082.9 $ -- $ -- $ 1,082.9
Accounts payable and accrued liabilities..... 1,860.5 494.4 (2.1)(c) 2,411.3
58.5(e)
Long-term debt due within one year........... 114.5 53.0 -- 167.5
--------- -------- ------ ---------
Total current liabilities................. 3,057.9 547.4 56.4 3,661.7
Long-term debt................................. 4,043.6 763.0 -- 4,806.6
Deferred income taxes.......................... 1,659.7 272.3 -- 1,932.0
Other liabilities.............................. 964.0 108.5 (18.4)(d) 1,054.1
Stockholders' equity:
Preferred stock.............................. 142.5 -- -- 142.5
Common stock................................. 161.7 63.2 161.7(a) 419.5
32.9(b)
Capital in excess of par value............... 1,091.8 100.9 (161.7)(a) 762.7
(286.7)(b)
18.4(d)
Retained earnings............................ 2,193.5 800.4 (25.9)(e) 2,968.0
Unamortized deferred compensation............ (2.4) -- -- (2.4)
--------- -------- ------ ---------
3,587.1 964.5 (261.3) 4,290.3
Treasury stock................................. (58.6) (253.8) 253.8(b) (58.6)
Loan to ESOP................................... -- (53.2) -- (53.2)
Cumulative foreign exchange translation
adjustment................................... -- (.1) -- (.1)
--------- -------- ------ ---------
Total stockholders' equity................ 3,528.5 657.4 (7.5) 4,178.4
--------- -------- ------ ---------
Total liabilities and stockholders'
equity............................. $13,253.7 $2,348.6 $ 30.5 $15,632.8
========= ======== ====== =========
</TABLE>
See the accompanying Notes to Pro Forma Condensed Combined Financial Statements.
63
<PAGE> 70
THE WILLIAMS COMPANIES, INC. AND MAPCO INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
WILLIAMS MAPCO ADJUSTMENTS PRO FORMA
--------- --------- ------------ ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues.................................. $ 3,143.0 $ 2,767.6 $(12.1)(c) $ 5,898.5
Costs and operating expenses.............. (1,911.7) (2,554.7) 12.1(c) (4,454.3)
Selling, general and administrative
expenses................................ (583.3) (66.8) -- (650.1)
Investing income.......................... 11.8 3.8 -- 15.6
Interest expense, net..................... (291.2) (38.0) -- (329.2)
Gain on sales of assets................... 44.5 66.0 -- 110.5
Other expense, net........................ (.5) (2.6) -- (3.1)
--------- --------- ------ ---------
Income from continuing operations before
income taxes............................ 412.6 175.3 -- 587.9
Provisions for income taxes............... 133.6 69.8 -- 203.4
--------- --------- ------ ---------
Income from continuing operations......... 279.0 105.5 -- 384.5
Preferred stock dividends................. 7.6 -- -- 7.6
--------- --------- ------ ---------
Income from continuing operations
applicable to common stock.............. $ 271.4 $ 105.5 $ -- $ 376.9
========= ========= ====== =========
Weighted average common and common-
equivalent shares (Note 4):
Primary................................. 325.1 55.3 417.2
========= ========= =========
Fully diluted........................... 337.3 55.4 429.6
========= ========= =========
Earnings per common and common-equivalent
share from continuing operations (Note
4):
Primary................................. $ .83 $ 1.91 $ .90
========= ========= =========
Fully diluted........................... $ .82 $ 1.91 $ .89
========= ========= =========
Cash dividends per share (Note 4)......... $ .39 $ .45 $ .36
========= ========= =========
</TABLE>
See the accompanying Notes to Pro Forma Condensed Combined Financial Statements.
64
<PAGE> 71
THE WILLIAMS COMPANIES, INC. AND MAPCO INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
WILLIAMS MAPCO ADJUSTMENTS PRO FORMA
--------- --------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues..................................... $ 2,573.4 $ 2,321.7 $ (34.2)(c) $ 4,860.9
Costs and operating expenses................. (1,502.6) (2,106.1) 34.2(c) (3,574.5)
Selling, general and administrative
expenses................................... (445.2) (49.4) -- (494.6)
Investing income............................. 14.7 1.4 -- 16.1
Interest expense, net........................ (261.1) (44.7) -- (305.8)
Gain on sales of assets...................... -- 20.8 -- 20.8
Other expense, net........................... (.2) (.9) -- (1.1)
--------- --------- ------ ---------
Income from continuing operations before
income taxes............................... 379.0 142.8 -- 521.8
Provision for income taxes................... 122.7 54.9 -- 177.6
--------- --------- ------ ---------
Income from continuing operations............ 256.3 87.9 -- 344.2
Preferred stock dividends.................... 7.8 -- -- 7.8
--------- --------- ------ ---------
Income from continuing operations applicable
to common stock............................ $ 248.5 $ 87.9 $ -- $ 336.4
========= ========= ====== =========
Weighted average common and common-equivalent
shares (Note 4):
Primary.................................... 324.3 57.9 420.7
========= ========= =========
Fully diluted.............................. 336.4 58.0 432.9
========= ========= =========
Earnings per common and common-equivalent
share from continuing operations (Note 4):
Primary.................................... $ .77 $ 1.52 $ .80
========= ========= =========
Fully diluted.............................. $ .76 $ 1.52 $ .79
========= ========= =========
Cash dividends per share (Note 4)............ $ .34 $ .38 $ .32
========= ========= =========
</TABLE>
See the accompanying Notes to Pro Forma Condensed Combined Financial Statements.
65
<PAGE> 72
THE WILLIAMS COMPANIES, INC. AND MAPCO INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
WILLIAMS MAPCO ADJUSTMENTS PRO FORMA
--------- --------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues..................................... $ 3,531.2 $ 3,353.1 $ (41.4)(c) $ 6,842.9
Costs and operating expenses................. (2,064.1) (3,038.3) 41.4(c) (5,061.0)
Selling, general and administrative
expenses................................... (626.9) (70.4) -- (697.3)
Investing income............................. 18.8 2.5 -- 21.3
Interest expense, net........................ (353.0) (56.9) -- (409.9)
Gain on sales of assets...................... 15.7 20.8 -- 36.5
Other income, net............................ 23.7 2.2 -- 25.9
--------- --------- ----------- ---------
Income from continuing operations before
income taxes............................... 545.4 213.0 -- 758.4
Provision for income taxes................... 183.1 82.8 -- 265.9
--------- --------- ----------- ---------
Income from continuing operations............ 362.3 130.2 -- 492.5
Preferred stock dividends.................... 10.4 -- -- 10.4
--------- --------- ----------- ---------
Income from continuing operations applicable
to common stock............................ $ 351.9 $ 130.2 $ -- $ 482.1
======== ======== ========= ========
Weighted average common and common-equivalent
shares (Note 4):
Primary.................................... 324.2 57.6 420.1
======== ======== ========
Fully diluted.............................. 336.4 57.7 432.5
======== ======== ========
Earnings per common and common-equivalent
share from continuing operations (Note 4):
Primary.................................... $ 1.09 $ 2.26 $ 1.15
======== ======== ========
Fully diluted.............................. $ 1.07 $ 2.26 $ 1.14
======== ======== ========
Cash dividends per share (Note 4)............ $ .47 $ .525 $ .43
======== ======== ========
</TABLE>
See the accompanying Notes to Pro Forma Condensed Combined Financial Statements.
66
<PAGE> 73
THE WILLIAMS COMPANIES, INC. AND MAPCO INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
WILLIAMS MAPCO ADJUSTMENTS PRO FORMA
--------- --------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues..................................... $ 2,855.7 $ 2,856.6 $ (57.3)(c) $ 5,655.0
Costs and operating expenses................. (1,700.7) (2,618.9) 57.3(c) (4,262.3)
Selling, general and administrative
expenses................................... (526.5) (63.4) -- (589.9)
Investing income............................. 93.9 1.9 -- 95.8
Interest expense, net........................ (263.4) (58.0) -- (321.4)
Loss on sales of assets...................... (12.6) -- -- (12.6)
Write-off of project costs................... (41.4) -- -- (41.4)
Reorganization charges....................... -- (10.3) -- (10.3)
Other expense, net........................... (3.6) (4.3) -- (7.9)
--------- --------- ------ ---------
Income from continuing operations before
income taxes............................... 401.4 103.6 -- 505.0
Provision for income taxes................... 102.0 39.4 -- 141.4
--------- --------- ------ ---------
Income from continuing operations............ 299.4 64.2 -- 363.6
Preferred stock dividends.................... 15.3 -- -- 15.3
--------- --------- ------ ---------
Income from continuing operations applicable
to common stock............................ $ 284.1 $ 64.2 $ -- $ 348.3
========= ========= ====== =========
Weighted average common and common-equivalent
shares (Note 4):
Primary.................................... 306.1 59.6 405.4
========= ========= =========
Fully diluted.............................. 314.6 59.6 413.8
========= ========= =========
Earnings per common and common-equivalent
share from continuing operations (Note 4):
Primary.................................... $ .93 $ 1.08 $ .86
========= ========= =========
Fully diluted.............................. $ .92 $ 1.08 $ .86
========= ========= =========
Cash dividends per share (Note 4)............ $ .36 $ .50 $ .35
========= ========= =========
</TABLE>
See the accompanying Notes to Pro Forma Condensed Combined Financial Statements.
67
<PAGE> 74
THE WILLIAMS COMPANIES, INC. AND MAPCO INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
WILLIAMS MAPCO ADJUSTMENTS PRO FORMA
--------- --------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues..................................... $ 1,751.1 $ 2,633.8 $ (27.0)(c) $ 4,357.9
Costs and operating expenses................. (1,187.7) (2,440.0) 27.0(c) (3,600.7)
Selling, general and administrative
expenses................................... (257.2) (59.6) -- (316.8)
Investing income............................. 49.6 4.5 -- 54.1
Interest expense, net........................ (139.8) (53.0) -- (192.8)
Gain on sales of assets...................... 22.7 -- -- 22.7
Other income (expense), net.................. 7.9 (6.4) -- 1.5
--------- --------- ------ ---------
Income from continuing operations before
income taxes............................... 246.6 79.3 -- 325.9
Provision for income taxes................... 81.7 29.1 -- 110.8
--------- --------- ------ ---------
Income from continuing operations............ 164.9 50.2 -- 215.1
Preferred stock dividends.................... 8.8 -- -- 8.8
--------- --------- ------ ---------
Income from continuing operations applicable
to common stock............................ $ 156.1 $ 50.2 $ -- $ 206.3
========= ========= ====== =========
Weighted average common and common-equivalent
shares (Note 4):
Primary.................................... 307.4 60.2 407.6
========= ========= =========
Fully diluted.............................. 307.5 60.2 407.7
========= ========= =========
Earnings per common and common-equivalent
share from continuing operations (Note 4):
Primary.................................... $ .51 $ .83 $ .51
========= ========= =========
Fully diluted.............................. $ .51 $ .83 $ .51
========= ========= =========
Cash dividends per share (Note 4)............ $ .28 $ .50 $ .29
========= ========= =========
</TABLE>
See the accompanying Notes to Pro Forma Condensed Combined Financial Statements.
68
<PAGE> 75
THE WILLIAMS COMPANIES, INC. AND MAPCO INC.
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. MERGER
Pursuant to the terms of the Merger Agreement, when the Merger becomes
effective, each outstanding share of MAPCO Common Stock will be exchanged for
1.665 shares of Williams Common Stock. This exchange ratio reflects the Williams
two-for-one common stock split effective December 29, 1997. The transaction will
be accounted for as a pooling of interests.
The pro forma combined condensed balance sheet assumes that the Merger took
place on the balance sheet date and combines the September 30, 1997 balance
sheets of Williams and MAPCO. The pro forma combined condensed statements of
income for the nine months ended September 30, 1997 and 1996, and for the years
ended December 31, 1996, 1995 and 1994 include Williams' and MAPCO's results of
operations for the periods then ended.
2. MERGER COSTS
Transaction and severance costs directly attributable to the Merger to be
incurred during the twelve-month period subsequent to the Merger are $18.2
million and $12.9 million ($7.7 million after-tax), respectively.
Non-competition agreements attributable to the Merger totaled $32.6 million, of
which $15.9 million ($9.5 million after-tax) will be recognized during the
twelve-month period subsequent to the Merger.
These non-recurring costs have been reflected on the pro forma condensed
combined balance sheet as if they had been incurred as of September 30, 1997.
The pro forma condensed combined income statements for the nine months ended
September 30, 1997 and 1996, and the years ended December 31, 1996, 1995 and
1994 do not include any of these Merger related costs.
3. PRO FORMA ADJUSTMENTS
The pro forma adjustments in the accompanying unaudited pro forma condensed
combined financial statements are listed below. No adjustments have been made in
these pro forma financial statements to conform the accounting policies of the
combining companies. The nature and extent of such adjustments, if any, are not
expected to be significant. Certain reclassifications have been made to make
classifications for similar items consistent between the companies.
(a) To adjust common stock and paid in capital to reflect the Williams
two-for-one common stock split effective December 29, 1997.
(b) To adjust the capital accounts to reflect the issuance of 96.1
million shares of Williams Common Stock (par value $1.00 per share) in
exchange for all the outstanding shares of MAPCO Common Stock and MAPCO
stocks options, and the cancellation of MAPCO treasury stock.
(c) To eliminate intercompany transactions and balances between
Williams and MAPCO.
(d) To reflect the expiration of MAPCO equity put options that are
expected to expire prior to the merger and are expected to be out of the
money. These options have been more than $11.38 per share out of the money
since the announcement of the proposed Merger.
(e) To give effect to estimated direct non-recurring costs related to
the Merger as if they had been incurred as of September 30, 1997 (see Note
2).
69
<PAGE> 76
THE WILLIAMS COMPANIES, INC. AND MAPCO INC.
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. WEIGHTED AVERAGE SHARES AND PER SHARE AMOUNTS
Earnings per common and common-equivalent share from continuing operations
for Williams and MAPCO are based on the historical weighted average number of
common and common-equivalent shares outstanding for each company during the
period. With respect to the pro forma earnings per share computation, shares
have been adjusted to the equivalent shares of Williams for each period.
Williams historical weighted average shares and per share amounts for all
periods presented have been restated to reflect the two-for-one common stock
split effective December 29, 1997.
Pro forma dividends per share are calculated by totaling the actual
dividends paid by Williams and MAPCO and dividing the result by the total of the
pro forma average shares outstanding for each period presented. The pro forma
dividends per share do not purport to represent the dividend rate for any future
date or period. It is the current intention of the Williams Board of Directors
to declare quarterly cash dividends following the Merger initially in the amount
of $.15 per share of Williams Common Stock.
5. TREASURY SHARES
For pooling of interest purposes, Williams has no tainted treasury shares
as all were cured by stock option exercise and a purchase business combination.
Of MAPCO's treasury shares, approximately 3.7 million shares remain tainted at
December 15, 1997, which represents approximately 7% of the shares issuable
pursuant to the Merger.
70
<PAGE> 77
APPENDIX A
AGREEMENT AND PLAN OF MERGER*
AMONG
THE WILLIAMS COMPANIES, INC.,
TML ACQUISITION CORP.
AND
MAPCO INC.
DATED AS OF NOVEMBER 23, 1997
- ---------------
* As restated to give effect to an amendment dated as of January 25, 1998.
A-1
<PAGE> 78
ARTICLE I THE MERGER
<TABLE>
<S> <C> <C>
Section 1.1 The Merger................................................................ A-5
Section 1.2 Closing................................................................... A-5
Section 1.3 Effective Time............................................................ A-5
Section 1.4 Effects of the Merger..................................................... A-6
Section 1.5 Certificate of Incorporation and By-laws of the Surviving Corporation..... A-6
Section 1.6 Directors and Officers.................................................... A-6
</TABLE>
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
<TABLE>
<S> <C> <C>
Section 2.1 Effect on Capital Stock................................................... A-6
(a) Cancellation of Treasury Stock............................... A-6
(b) Conversion of Company Common Stock............................ A-6
(c) Conversion of Common Stock of Sub............................ A-7
Section 2.2 Exchange of Certificates.................................................. A-7
(a) Exchange Agent............................................... A-7
(b) Exchange Procedures........................................... A-7
(c) Distributions with Respect to Unexchanged Shares............. A-7
(d) No Further Ownership Rights in Company Common Stock........... A-8
(e) No Fractional Shares......................................... A-8
(f) Termination of Exchange Fund................................. A-9
(g) No Liability................................................. A-9
(h) Investment of Exchange Fund................................... A-9
(i) Lost Certificates............................................ A-9
Section 2.3 Certain Adjustments....................................................... A-9
</TABLE>
ARTICLE III REPRESENTATIONS AND WARRANTIES
<TABLE>
<S> <C> <C>
Section 3.1 Disclosure Schedules...................................................... A-10
Section 3.2 Representations and Warranties of the Company............................. A-10
(a) Organization, Standing and Corporate Power................... A-10
(b) Subsidiaries.................................................. A-10
(c) Capital Structure............................................ A-10
(d) Authority; Noncontravention................................... A-11
(e) SEC Documents; Undisclosed Liabilities....................... A-12
(f) Information Supplied......................................... A-13
(g) Absence of Certain Changes or Events......................... A-13
(h) Compliance with Applicable Laws; Litigation................... A-13
(i) Absence of Changes in Benefit Plans.......................... A-14
(j) ERISA Compliance............................................. A-14
(k) Taxes......................................................... A-16
(l) Voting Requirements.......................................... A-16
(m) State Takeover Statutes....................................... A-16
(n) Accounting Matters............................................ A-16
(o) Brokers...................................................... A-16
(p) Ownership of Parent Capital Stock............................. A-17
(q) Certain Contracts............................................ A-17
(r) Company Rights Agreement..................................... A-17
</TABLE>
A-2
<PAGE> 79
<TABLE>
<S> <C> <C>
(s) Environmental Liability...................................... A-17
(t) Derivative Transactions...................................... A-18
(u) Condition of Assets........................................... A-18
(v) Fairness Opinion............................................. A-18
Section 3.3 Representations and Warranties of Parent.................................. A-18
(a) Organization, Standing and Corporate Power................... A-18
(b) Subsidiaries.................................................. A-19
(c) Capital Structure............................................ A-19
(d) Authority; Noncontravention................................... A-20
(e) SEC Documents; Undisclosed Liabilities....................... A-21
(f) Information Supplied......................................... A-21
(g) Absence of Certain Changes or Events......................... A-21
(h) Compliance with Applicable Laws; Litigation................... A-22
(i) Taxes........................................................ A-22
(j) Accounting Matters........................................... A-22
(k) Brokers....................................................... A-22
(l) Ownership of Company Capital Stock........................... A-22
(m) Voting Requirements........................................... A-23
(n) Parent Benefit Plans.......................................... A-23
(o) ERISA Compliance............................................. A-23
</TABLE>
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS
<TABLE>
<S> <C> <C>
Section 4.1
(a) Conduct of Business by the Company........................... A-23
(b) Conduct of Business by Parent................................. A-25
(c) Certain Payments............................................. A-26
(d) Other Actions................................................. A-26
(e) Advice of Changes............................................ A-26
Section 4.2 No Solicitation by the Company............................................ A-27
</TABLE>
ARTICLE V ADDITIONAL AGREEMENTS
<TABLE>
<S> <C> <C>
Section 5.1 Preparation of the Form S-4 and the Proxy Statement; Stockholders A-28
Meetings..................................................................
Section 5.2 Letters of the Company's Accountants...................................... A-29
Section 5.3 Letters of Parent's Accountants........................................... A-29
Section 5.4 Access to Information; Confidentiality.................................... A-29
Section 5.5 Reasonable Best Efforts................................................... A-29
Section 5.6 Company Stock Options, Incentive and Benefit Plans........................ A-30
Section 5.7 Indemnification, Exculpation and Insurance................................ A-31
Section 5.8 Fees and Expenses......................................................... A-32
Section 5.9 Public Announcements...................................................... A-33
Section 5.10 Affiliates................................................................ A-33
Section 5.11 Stock Exchange Listings................................................... A-33
Section 5.12 Stockholder Litigation.................................................... A-33
Section 5.13 Tax Treatment............................................................. A-33
Section 5.14 Pooling of Interests...................................................... A-34
Section 5.15 Conveyance Taxes.......................................................... A-34
Section 5.16 Certain Contracts......................................................... A-34
Section 5.17 Directors of Parent....................................................... A-34
Section 5.18 Parent 1990 Stock Plan.................................................... A-34
</TABLE>
A-3
<PAGE> 80
ARTICLE VI CONDITIONS PRECEDENT
<TABLE>
<S> <C> <C>
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger................ A-34
(a) Stockholder Approval......................................... A-34
(b) HSR Act....................................................... A-34
(c) Governmental and Regulatory Approvals........................ A-34
(d) No Injunctions or Restraints.................................. A-34
(e) Form S-4..................................................... A-35
(f) NYSE and PSE Listings........................................ A-35
(g) Pooling Letters.............................................. A-35
Section 6.2.. Conditions to Obligations of Parent....................................... A-35
(a) Representations and Warranties............................... A-35
(b) Performance of Obligations of the Company..................... A-35
(c) Discovery Project............................................ A-35
(d) No Material Adverse Change.................................... A-35
(e) Tax Opinion.................................................. A-35
Section 6.3.. Conditions to Obligations of the Company.................................. A-35
(a) Representations and Warranties............................... A-35
(b) Performance of Obligations of Parent.......................... A-36
(c) No Material Adverse Change................................... A-36
(d) Tax Opinion................................................... A-36
</TABLE>
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER
<TABLE>
<S> <C> <C>
Section 7.1 Termination............................................................... A-36
Section 7.2 Effect of Termination..................................................... A-37
Section 7.3 Amendment................................................................. A-37
Section 7.4 Extension; Waiver......................................................... A-37
</TABLE>
ARTICLE VIII GENERAL PROVISIONS
<TABLE>
<S> <C> <C>
Section 8.1 Nonsurvival of Representations and Warranties............................. A-37
Section 8.2 Notices................................................................... A-37
Section 8.3 Definitions............................................................... A-38
Section 8.4 Interpretation............................................................ A-39
Section 8.5 Counterparts.............................................................. A-39
Section 8.6 Entire Agreement; No Third-Party Beneficiaries............................ A-39
Section 8.7 Governing Law............................................................. A-39
Section 8.8 Assignment................................................................ A-39
Section 8.9 Consent to Jurisdiction................................................... A-39
Section 8.10 Severability.............................................................. A-39
Section 8.11 Enforcement............................................................... A-40
</TABLE>
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AGREEMENT AND PLAN OF MERGER, dated as of November 23, 1997, by and among
THE WILLIAMS COMPANIES, INC., a Delaware corporation ("Parent"), TML ACQUISITION
CORP., a Delaware corporation ("Sub"), and MAPCO Inc., a Delaware corporation
(the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have each approved the merger of Sub with and into the Company (the "Merger"),
upon the terms and subject to the conditions set forth in this Agreement,
whereby each issued and outstanding share of common stock, par value $1.00 per
share, of the Company (the "Company Common Stock") and each associated preferred
stock purchase right (a "Company Right") issued pursuant to the Rights
Agreement, dated May 29, 1996, between the Company and Harris Trust Company of
New York, as Rights Agent (the "Company Rights Agreement") (references to the
Company Common Stock shall be deemed to include the associated Company Rights),
other than shares owned by the Company, will be converted into the right to
receive the Merger Consideration (as defined in Section 2.1(b));
WHEREAS, the Board of Directors of Parent has also approved an amendment to
its Restated Certificate of Incorporation providing for an increase in its
authorized number of shares of Parent Common Stock (as defined in Section
2.1(b)) (the "Charter Amendment Proposal") in order to provide sufficient
authorized shares of Parent Common Stock (as defined in Section 2.1(b))for
issuance in connection with the Merger and the other transactions contemplated
by this Agreement, after giving effect to the declared stock dividend of one
share for each share of Parent Common Stock outstanding to be paid on December
29, 1997 (the "Stock Dividend");
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have each determined that the Merger and the other transactions contemplated
hereby are consistent with, and in furtherance of, their respective business
strategies and goals and are in the best interests of their respective
stockholders;
WHEREAS, the parties desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and also to prescribe
various conditions to the Merger;
WHEREAS, for federal income tax purposes, it is intended that the Merger
will qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for financial accounting purposes, it is intended that the Merger
will be accounted for as a pooling of interests transaction under United States
generally accepted accounting principles ("GAAP").
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law (the "DGCL"), Sub shall be merged with and into the Company at the Effective
Time (as defined in Section 1.3). Following the Effective Time, the Company
shall be the surviving corporation (the "Surviving Corporation") and become a
wholly owned subsidiary of Parent and shall succeed to and assume all the rights
and obligations of Sub in accordance with the DGCL.
Section 1.2 Closing. Subject to the satisfaction or waiver of all the
conditions to closing contained in Article VI hereof, the closing of the Merger
(the "Closing") will take place at 10:00 a.m. on a date to be specified by the
parties (the "Closing Date"), which shall be no later than the second day after
satisfaction or waiver of the conditions set forth in Article VI, unless another
time or date is agreed to by the parties hereto. The Closing will be held at
such location in Tulsa, Oklahoma as is agreed to by the parties hereto.
Section 1.3 Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on the Closing Date, the parties shall cause the Merger
to be consummated by filing a certificate of merger or other
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appropriate documents (in any such case, the "Certificate of Merger") executed
in accordance with the relevant provisions of the DGCL and shall make all other
filings or recordings required under the DGCL. The Merger shall become effective
at such time as the Certificate of Merger is duly filed with the Secretary of
State of Delaware, or at such subsequent date or time as Sub and the Company
shall agree and specify in the Certificate of Merger (the time the Merger
becomes effective being hereinafter referred to as the "Effective Time").
Section 1.4 Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL.
Section 1.5 Certificate of Incorporation and By-laws of the Surviving
Corporation. The certificate of incorporation of the Company shall be amended
as of the Effective Time to read in its entirety like the certificate of
incorporation of Sub except that Article First of such certificate of
incorporation shall read in its entirety as follows: "The name of the
Corporation is MAPCO Inc." and, as amended, such certificate of incorporation
shall be the certificate of incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law. The
by-laws of Sub, as in effect immediately prior to the Effective Time, shall
become the by-laws of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
Section 1.6 Directors and Officers. The directors and officers of Sub
shall, from and after the Effective Time, become the directors and officers,
respectively, of the Surviving Corporation until their successors shall have
been duly elected or appointed or qualified or until their earlier death,
resignation or removal in accordance with the certificate of incorporation and
the by-laws of the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
Section 2.1 Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Company Common Stock:
(a) Cancellation of Treasury Stock. Each share of Company Common
Stock that is owned directly or indirectly by the Company shall
automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(b) Conversion of Company Common Stock. Subject to Section 2.2(e),
each issued and outstanding share of Company Common Stock (other than
shares to be canceled in accordance with Section 2.1(a)) shall be converted
into the right to receive (i) .8325 (the "Exchange Ratio") validly issued,
fully paid and nonassessable shares of common stock, par value $1.00 per
share (the "Parent Common Stock"), of Parent, and (ii) one associated
preferred stock purchase right (a "Parent Right") issued in accordance with
the Rights Agreement dated as of February 6, 1996, between Parent and First
Chicago Trust Company of New York, as Rights Agent (the "Parent Rights
Agreement"), for each share of Parent Common Stock so received; provided,
that, if the Stock Dividend shall have been paid prior to the Closing, the
Exchange Ratio shall be 1.665. References to the Parent Common Stock
issuable in the Merger shall be deemed to include the associated Parent
Rights. The consideration to be issued to holders of Company Common Stock
is referred to herein as the "Merger Consideration." Subject to Section
2.1(a), as of the Effective Time, all such shares of Company Common Stock
shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock shall cease to have
any rights with respect thereto, except the right to receive the Merger
Consideration and any cash in lieu of fractional shares of Parent Common
Stock to be issued or paid in consideration therefor upon surrender of such
certificate in accordance with Section 2.2 and any dividends or
distributions to which such holder is entitled pursuant to Section 2.2(c),
in each case without interest.
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(c) Conversion of Common Stock of Sub. Each issued and outstanding
share of common stock, par value $.01 per share, of Sub shall be converted
into one validly issued, fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation.
Section 2.2 Exchange of Certificates. (a) Exchange Agent. As of the
Effective Time, Parent shall enter into an agreement with such bank or trust
company as may be designated by Parent and reasonably satisfactory to the
Company (the "Exchange Agent"), which shall provide that Parent shall deposit
with the Exchange Agent as of the Effective Time, for the benefit of the holders
of shares of Company Common Stock, for exchange in accordance with this Article
II, through the Exchange Agent, certificates representing the shares of Parent
Common Stock (such shares of Parent Common Stock, together with any dividends or
distributions with respect thereto with a record date after the Effective Time,
any Excess Shares (as defined in Section 2.2(e)) and any cash (including cash
proceeds from the sale of the Excess Shares) payable in lieu of any fractional
shares of Parent Common Stock being hereinafter referred to as the "Exchange
Fund") issuable pursuant to Section 2.1(b) in exchange for outstanding shares of
Company Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Certificates")
whose shares were converted into the right to receive the Merger Consideration
pursuant to Section 2.1(b), (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as the Company and Parent
may reasonably specify) and (ii) instructions for use in surrendering the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate representing that number of whole
shares of Parent Common Stock which such holder has the right to receive
pursuant to the provisions of this Article II, dividends or other distributions
on such shares of Parent Common Stock which such holder has the right to receive
pursuant to Section 2.2(c), and cash in lieu of any fractional share of Parent
Common Stock pursuant to Section 2.2(e), and the Certificate so surrendered
shall forthwith be canceled. In the event of a surrender of a Certificate
representing shares of Company Common Stock which are not registered in the
transfer records of the Company under the name of the person surrendering such
Certificate, a certificate representing the proper number of shares of Parent
Common Stock may be issued to a person other than the person in whose name the
Certificate so surrendered is registered if such Certificate shall be properly
endorsed or otherwise be in proper form for transfer and the person requesting
such issuance shall pay any transfer or other taxes required by reason of the
issuance of shares of Parent Common Stock to a person other than the registered
holder of such Certificate or establish to the satisfaction of Parent that such
tax has been paid or is not applicable. Until surrendered as contemplated by
this Section 2.2, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
Merger Consideration which the holder thereof has the right to receive in
respect of such Certificate pursuant to the provisions of this Article II,
dividends or other distributions in respect of such Merger Consideration which
such holder has the right to receive pursuant to Section 2.2(c), and cash in
lieu of any fractional share of Parent Common Stock pursuant to Section 2.2(e).
No interest shall be paid or will accrue on any cash payable to holders of
Certificates pursuant to the provisions of this Article II.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Parent Common Stock issuable hereunder in respect
thereof, and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 2.2(e), and all such dividends, other
distributions and cash in lieu of fractional shares of Parent Common Stock shall
be paid by Parent to the Exchange Agent and shall be included in the Exchange
Fund, in each case until the surrender of such Certificate in accordance with
this Article II, subject to Section 2.2(f). Subject to the effect of applicable
escheat or similar laws, following surrender of any such Certificate there shall
be paid to the holder of the certificate representing whole shares of Parent
Common Stock issued in
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exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock and the amount of any cash payable in lieu of a fractional share of
Parent Common Stock to which such holder is entitled pursuant to Section 2.2(e)
and (ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time and with a payment
date subsequent to such surrender payable with respect to such whole shares of
Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms of this Article II (including any cash paid pursuant
to this Article II) shall be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to the shares of Company Common Stock
theretofore represented by such Certificates, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the Effective Time which may have been declared or
made by the Company on such shares of Company Common Stock which remain unpaid
at the Effective Time, and there shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the shares of
Company Common Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation or the Exchange Agent for any reason other than exchange as provided
in this Article II, they shall be canceled and exchanged as provided in this
Article II, except as otherwise provided by law.
(e) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution of Parent shall relate to
such fractional share interests and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of Parent.
(ii) As promptly as practicable following the Effective Time, the Exchange
Agent shall determine the excess of (A) the number of whole shares of Parent
Common Stock delivered to the Exchange Agent by Parent pursuant to Section
2.2(a) over (B) the aggregate number of whole shares of Parent Common Stock to
be distributed to former holders of Company Common Stock pursuant to Section
2.2(b) (such excess being herein called the "Excess Shares"). Following the
Effective Time, the Exchange Agent shall, on behalf of the former stockholders
of the Company, sell the Excess Shares at then-prevailing prices on the New York
Stock Exchange, Inc. (the "NYSE"), all in the manner provided in Section
2.2(e)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent shall be executed
on the NYSE through one or more member firms of the NYSE and shall be executed
in round lots to the extent practicable. The Exchange Agent shall use reasonable
efforts to complete the sale of the Excess Shares as promptly following the
Effective Time as, in the Exchange Agent's sole judgment, is practicable
consistent with obtaining the best execution of such sales in light of
prevailing market conditions. Until the proceeds of such sale or sales have been
distributed to the holders of Certificates formerly representing Company Common
Stock, the Exchange Agent shall hold such proceeds in trust for such holders
(the "Common Shares Trust"). The Surviving Corporation shall pay all
commissions, transfer taxes and other out-of-pocket transaction costs, including
the expenses and compensation of the Exchange Agent, incurred in connection with
such sale of the Excess Shares. The Exchange Agent shall determine the portion
of the Common Shares Trust to which each former holder of Company Common Stock
is entitled, if any, by multiplying the amount of the aggregate net proceeds
comprising the Common Shares Trust by a fraction, the numerator of which is the
amount of the fractional share interest to which such former holder of Company
Common Stock is entitled (after taking into account all shares of Company Common
Stock held of record at the Effective Time by such holder) and the denominator
of which is the aggregate amount of fractional share interests to which all
former holders of Company Common Stock are entitled.
(iv) Notwithstanding the provisions of Sections 2.2(e)(ii) and (iii), the
Surviving Corporation may elect at its option, exercised prior to the Effective
Time, in lieu of the issuance and sale of Excess Shares and the making of the
payments hereinabove contemplated, to pay each former holder of Company Common
Stock an amount in cash equal to the product obtained by multiplying (A) the
fractional share interest to which such former holder (after taking into account
all shares of Company Common Stock held of record at
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the Effective Time by such holder) would otherwise be entitled by (B) the
closing price of the Parent Common Stock as reported on the NYSE Composite
Transaction Tape (as reported in The Wall Street Journal, or, if not reported
therein, any other authoritative source) on the Closing Date, and, in such case,
all references herein to the cash proceeds of the sale of the Excess Shares and
similar references shall be deemed to mean and refer to the payments calculated
as set forth in this Section 2.2(e)(iv).
(v) As soon as practicable after the determination of the amount of cash,
if any, to be paid to holders of Certificates formerly representing Company
Common Stock with respect to any fractional share interests, the Exchange Agent
shall make available such amounts to such holders of Certificates formerly
representing Company Common Stock subject to and in accordance with the terms of
Section 2.2(b).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of the Certificates for six months after
the Effective Time shall be delivered to Parent, upon demand, and any holders of
the Certificates who have not theretofore complied with this Article II shall
thereafter look only to Parent for payment of their claim for Merger
Consideration, any dividends or distributions with respect to Parent Common
Stock and any cash in lieu of fractional shares of Parent Common Stock.
(g) No Liability. None of Parent, Sub, the Company, the Surviving
Corporation or the Exchange Agent shall be liable to any person in respect of
any shares of Parent Common Stock, any dividends or distributions with respect
thereto, any cash in lieu of fractional shares of Parent Common Stock or any
cash from the Exchange Fund, in each case delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by Parent (provided that such cash
shall be invested only in high quality short-term instruments with low risk of
loss of principal), on a daily basis. Any interest and other income resulting
from such investments shall be paid to Parent. If, as a result of any loss
resulting from such investments, the amount of cash remaining in the Exchange
Fund is insufficient to pay the full amount to which holders of certificates
formerly representing Company Common Stock are entitled, Parent shall, promptly
upon demand by the Exchange Agent, deposit additional cash into the Exchange
Fund in an amount sufficient to satisfy its obligations to such holders.
(i) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and the posting by such person
of a bond in such reasonable amount as Parent may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent shall issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration, any unpaid dividends and distributions on
shares of Parent Common Stock deliverable in respect thereof and any cash in
lieu of fractional shares of Parent Common Stock, in each case pursuant to this
Agreement.
Section 2.3 Certain Adjustments. If after the date hereof and on or prior
to the Closing Date the outstanding shares of Parent Common Stock shall be
changed into a different number of shares by reason of any reclassification,
recapitalization, split-up, combination or exchange of shares, or any dividend
payable in stock or other securities shall be declared thereon with a record
date within such period, or any similar event shall occur (any such action, an
"Adjustment Event"), the Exchange Ratio shall be adjusted accordingly to provide
to the holders of Company Common Stock the same economic effect as contemplated
by this Agreement prior to such reclassification, recapitalization, split-up,
combination, exchange or dividend or similar event, it being agreed that no
adjustment shall be made pursuant to this Section 2.3 for the Stock Dividend.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Disclosure Schedules. Prior to the execution of this
Agreement, the Company has delivered to Parent a schedule (the "Company
Disclosure Schedule") and Parent has delivered to the Company a schedule (the
"Parent Disclosure Schedule" and, together, the "Disclosure Schedules") each
setting forth, among other things, certain items or exceptions relating to any
or all of their respective representations and warranties; provided, however,
that notwithstanding anything in this Agreement to the contrary, the mere
inclusion of an item in a Disclosure Schedule shall not be deemed an admission
by the disclosing party that such item represents a material exception or fact,
event or circumstance or that such item constitutes or is reasonably likely to
result in a material adverse effect or material adverse change (each as defined
in Section 8.3).
Section 3.2 Representations and Warranties of the Company. Subject to
Section 3.1 and except as disclosed in Company SEC Documents (as defined in
Section 3.2(e)) filed prior to the date hereof (the "Company Filed SEC
Documents") or as set forth on the Company Disclosure Schedule (it being
acknowledged that any items disclosed in any subsection in the Company
Disclosure Schedule shall be deemed disclosed in, and only in, any other
subsections thereof in which the disclosure of such items would reasonably be
considered responsive) (regardless of whether the relevant subsections of this
Agreement refer to the Company Disclosure Schedule or the Company Filed SEC
Documents), the Company represents and warrants to Parent as follows:
(a) Organization, Standing and Corporate Power. (i) Each of the
Company and its subsidiaries (as defined in Section 8.3) is a corporation
or other legal entity duly organized, validly existing and in good standing
(with respect to jurisdictions which recognize such concept) under the laws
of the jurisdiction in which it is organized and has the requisite
corporate or other power, as the case may be, and authority to carry on its
business as now being conducted, except, as to subsidiaries, for those
jurisdictions where the failure to be duly organized, validly existing and
in good standing individually or in the aggregate would not have a material
adverse effect on the Company. Each of the Company and its subsidiaries is
duly qualified or licensed to do business and is in good standing (with
respect to jurisdictions which recognize such concept) in each jurisdiction
in which the nature of its business or the ownership, leasing or operation
of its properties makes such qualification or licensing necessary, except
for those jurisdictions where the failure to be so qualified or licensed or
to be in good standing individually or in the aggregate would not have a
material adverse effect on the Company.
(ii) The Company has made available to Parent prior to the execution
of this Agreement complete and correct copies of its certificate of
incorporation and by-laws, as amended to date.
(b) Subsidiaries. (i) Exhibit 21 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 includes all the
subsidiaries of the Company which as of the date of this Agreement are
Significant Subsidiaries (as defined in Rule 1-02 of Regulation S-X of the
Securities and Exchange Commission (the "SEC")). All the outstanding shares
of capital stock of, or other equity interests in, each such Significant
Subsidiary have been validly issued and are fully paid and nonassessable;
are owned directly or indirectly by the Company, free and clear of all
pledges, claims, liens, charges, encumbrances and security interests
securing indebtedness or similar obligations (collectively, "Liens"); and
are free of any other restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests that would
prevent the operation by the Surviving Corporation of such Significant
Subsidiary's business as currently conducted.
(ii) The Company has made available to Parent prior to the execution
of this Agreement complete and correct copies of the certificates of
incorporation and by-laws or similar organizational documents of each of
its Significant Subsidiaries, as amended to date.
(c) Capital Structure. The authorized capital stock of the Company
consists of 115,000,000 shares of Company Common Stock and 1,000,000 shares
of preferred stock, without par value, of the Company (the "Company
Authorized Preferred Stock"), of which 175,000 shares have been designated
as
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Series A Junior Participating Preferred Stock, par value $1.00 per share
(the "Company Junior Preferred Stock"). At the close of business on
November 20, 1997: (i) 54,883,087 shares of Company Common Stock were
issued and outstanding; (ii) 8,405,267 shares of Company Common Stock were
issued and held by the Company in its treasury; (iii) 175,000 shares of
Company Junior Preferred Stock were reserved for issuance pursuant to the
Rights Agreement; (iv) 13,065,951 shares of Company Common Stock were
reserved for issuance pursuant the stock-based plans identified in the
Company Filed SEC Documents (such plans, collectively, the "Company Stock
Plans"), of which (A) 8,678,216 shares are subject to issuance pursuant to
outstanding employee or director stock options granted under the Company
Stock Plans (the "Company Stock Options"), (B) up to 55,000 shares are
subject to purchase under the Company's 1997 Employee Stock Purchase Plan
(the "ESPP") based on employee elections made through the date hereof, (C)
no other shares are issuable pursuant to existing grants, and (v) other
than as set forth above, no other shares of Company Authorized Preferred
Stock have been designated or issued. All outstanding shares of capital
stock of the Company are, and all shares thereof which may be issued will
be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. Except as set forth in
this Section 3.2(c) and except for changes since November 20, 1997
resulting from the issuance of shares of Company Common Stock pursuant to
the Company Stock Options or as permitted by Section 4.1(a), (x) there are
not issued, reserved for issuance or outstanding (A) any shares of capital
stock or other voting securities of the Company, (B) any securities of the
Company or any Company subsidiary convertible into or exchangeable or
exercisable for shares of capital stock or voting securities of the
Company, (C) any warrants, calls, options or other rights to acquire from
the Company or any Company subsidiary, and any obligation of the Company or
any Company subsidiary to issue, any capital stock, voting securities or
securities convertible into or exchangeable or exercisable for capital
stock or voting securities of the Company, and (y) there are no outstanding
obligations of the Company or any Company subsidiary to repurchase, redeem
or otherwise acquire any such securities or to issue, deliver or sell, or
cause to be issued, delivered or sold, any such securities other than the
not more than 500,000 equity put rights of the Company identified on
Section 3.2(c) of the Company Disclosure Schedule (the "Equity Put
Rights"). There are no outstanding (A) securities of the Company or any
Company subsidiary convertible into or exchangeable or exercisable for
shares of capital stock or other voting securities in any Company
subsidiary, (B) warrants, calls, options or other rights to acquire from
the Company or any Company subsidiary, and any obligation of the Company or
any Company subsidiary to issue, any capital stock, voting securities or
other ownership interests in, or any securities convertible into or
exchangeable or exercisable for any capital stock, voting securities or
ownership interests in, any Company subsidiary or (C) obligations of the
Company or any Company subsidiary to repurchase, redeem or otherwise
acquire any such outstanding securities of Company subsidiaries or to
issue, deliver or sell, or cause to be issued, delivered or sold, any such
securities. Neither the Company nor any Company subsidiary is a party to
any agreement restricting the transfer of, relating to the voting of,
requiring registration of, or granting any preemptive or, except as
provided by the terms of Company Stock Options and the Company Rights,
antidilutive rights with respect to, any securities of the type referred to
in the two preceding sentences. The Company has delivered to Parent prior
to the execution of this Agreement a complete and correct copy of the
Company Rights Agreement.
(d) Authority; Noncontravention. The Company has all requisite
corporate power and authority to enter into this Agreement and, subject, in
the case of the Merger, to the Company Stockholder Approval (as defined in
Section 3.2(1)), to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on
the part of the Company, subject, in the case of the Merger, to the Company
Stockholder Approval. This Agreement has been duly executed and delivered
by the Company and, assuming the due authorization, execution and delivery
by Parent and Sub, constitutes the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
reorganization, insolvency and similar laws affecting creditors' rights
generally and by general principles of equity (whether considered at law or
in
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equity). The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with,
or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a benefit under,
or result in the creation of any Lien upon any of the properties or assets
of the Company or any of its subsidiaries under, (i) the certificate of
incorporation or by-laws of the Company or the comparable organizational
documents of any of its Significant Subsidiaries, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license or similar authorization
applicable to the Company or any of its subsidiaries or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, injunction,
order, decree, statute, law, ordinance, rule or regulation applicable to
the Company or any of its subsidiaries or their respective properties or
assets, other than, in the case of clauses (ii) and (iii), any such
conflicts, violations, defaults, rights, losses or Liens that individually
or in the aggregate would not (x) have a material adverse effect on the
Company or (y) materially impair the ability of the Company to perform its
obligations under this Agreement or prevent the consummation of the
transactions contemplated hereby. No consent, approval, order or
authorization of, action by or in respect of, or registration, declaration
or filing with, any federal, state, local or foreign government, any court,
administrative, regulatory or other governmental agency, commission or
authority or any nongovernmental self-regulatory agency, commission or
authority (a "Governmental Entity") is required by or with respect to the
Company or any of its subsidiaries in connection with the execution and
delivery of this Agreement by the Company or the consummation by the
Company of the transactions contemplated by this Agreement, except for (1)
the filing of a pre-merger notification and report form by the Company
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"); (2) the filing with the SEC of (A) a joint proxy
statement/prospectus relating to the Company Stockholders Meeting (as
defined in Section 5.1(b)) and the Parent Stockholders Meeting (as defined
in Section 5.1(c)) (such proxy statement, as amended or supplemented from
time to time, the "Proxy Statement"), and (B) such reports under Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement and
the transactions contemplated by this Agreement; (3) the filing of the
Certificate of Merger with the Secretary of State of Delaware; (4) such
filings with Governmental Entities to satisfy (A) the applicable
requirements of the laws of states in which the Company and its
subsidiaries are qualified or licensed to do business or state securities
or "blue sky" laws or (B) any filing required by foreign Governmental
Entities; and (5) such consents, approvals, orders or authorizations the
failure of which to be made or obtained individually or in the aggregate
would not (x) have a material adverse effect on the Company or (y)
materially impair the ability of the Company to perform its obligations
under this Agreement or prevent the consummation of the transactions
contemplated hereby.
(e) SEC Documents; Undisclosed Liabilities. Since January 1, 1995,
the Company has filed with the SEC all required reports, schedules, forms,
statements and other documents (including exhibits and all other
information incorporated therein) required to be filed with the SEC (such
documents being referred to herein as the "Company SEC Documents"). As of
their respective dates, the Company SEC Documents complied in all material
respects with the requirements of the Securities Act of 1933, as amended
(the "Securities Act"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to such
Company SEC Documents, and no Company SEC Document when filed (as amended
and restated and as supplemented by subsequently filed Company SEC
Documents) contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company
included in Company SEC Documents complied as to form, as of their
respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly
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present the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal recurring year-end
audit adjustments). Except (i) as reflected in such financial statements or
in the notes thereto or (ii) for liabilities incurred in connection with
this Agreement or the transactions contemplated hereby, neither the Company
nor any of its subsidiaries has any liabilities or obligations of any
nature which, individually or in the aggregate, would have a material
adverse effect on the Company.
(f) Information Supplied. None of the information supplied or to be
supplied by the Company specifically for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 to be filed with
the SEC by Parent in connection with the issuance of Parent Common Stock in
the Merger or in respect of Company Stock Options pursuant to Section 5.6
(the "Form S-4") will, at the time the Form S-4 becomes effective under the
Securities Act, 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 (ii) the Proxy Statement will, at
the date it is first mailed to the Company's or Parent's stockholders or at
the time of the Company Stockholders Meeting or the Parent Stockholders
Meeting, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading. The Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act and the rules
and regulations thereunder, except that no representation or warranty is
made by the Company with respect to statements made or incorporated by
reference therein based on information supplied by Parent specifically for
inclusion or incorporation by reference in the Proxy Statement.
(g) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby and except as permitted by Section 4.1(a), since January 1, 1997,
the Company and its subsidiaries have conducted their business only in the
ordinary course, and there has not been (i) any material adverse change in
the Company, including, but not limited to, any material adverse change
arising from or relating to fraudulent or unauthorized activity, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of the Company's
capital stock, other than regular quarterly cash dividends on the Company
Common Stock in amounts not in excess of the quarterly dividend most
recently paid on the Company Common Stock prior to the date of this
Agreement, (iii) any split, combination or reclassification of any of the
Company's capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in
substitution for shares of the Company's capital stock, except for
issuances of Company Common Stock upon the exercise of Company Stock
Options awarded prior to the date hereof in accordance with their present
terms, (iv)(A) any granting by the Company or any of its subsidiaries to
any current or former director, officer or other employee of the Company or
its subsidiaries of any Company Stock Options or any increase in
compensation, bonus or other benefits, (B) any granting by the Company or
any of its subsidiaries to any such current or former director, executive
officer or employee of any increase in severance or termination pay, or (C)
any entry by the Company or any of its subsidiaries into, or any amendment
of, any employment, deferred compensation, consulting, severance,
termination or indemnification agreement with any such current or former
director, executive officer or employee, (v) except insofar as may have
been required by a change in GAAP or law or regulation, any material change
in accounting methods, principles or practices by the Company affecting its
assets, liabilities or business, (vi) any material tax election by the
Company or any of its Significant Subsidiaries or any settlement or
compromise of any material income tax liability by the Company or any of
its Significant Subsidiaries, or (vii) any new capital commitment or
increase in existing capital commitments, in excess of $15,000,000,
individually or in the aggregate.
(h) Compliance with Applicable Laws; Litigation. (i) The Company and
its subsidiaries hold all material permits, licenses, variances,
exemptions, orders, registrations and approvals of all Governmental
Entities which are necessary for the lawful operation of the businesses of
the Company and its
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subsidiaries (the "Company Permits"), and are not in material default under
the Company Permits or under applicable statutes, laws, ordinances, rules
and regulations, except where the failure to hold such Company Permits or
to comply with such statutes, laws, ordinances, rules or regulations or
Company Permits would not, individually or in the aggregate, have a
material adverse effect on the Company.
(ii) As of the date of this Agreement, no action, demand, requirement
or investigation by any Governmental Entity and no suit, action or
proceeding by any person, in each case with respect to the Company or any
of its subsidiaries or any of their respective properties, is pending or,
to the knowledge (as defined in Section 8.3) of the Company, threatened,
other than, in each case, those the outcome of which individually or in the
aggregate would not have a material adverse effect on the Company or
materially impair the ability of the Company to perform its obligations
under this Agreement or prevent the consummation of the transactions
contemplated by this Agreement.
(iii) Neither the Company nor any of its subsidiaries is subject to
any outstanding order, injunction or decree or is a party to any written
agreement, consent agreement or memorandum of understanding with, or is a
party to any commitment letter or similar undertaking to, or is subject to
any order or directive by, or is a recipient of any supervisory letter from
or has adopted any resolutions at the request of any Governmental Entity
that restricts the conduct of its business or that in any manner relates to
its management or its business and which would have a material adverse
effect on the Company (each, a "Regulatory Agreement"), and neither the
Company nor any of its subsidiaries has been advised since January 1, 1996
by any Governmental Entity that it is considering issuing or requesting any
such Regulatory Agreement or (B) has knowledge of any pending or threatened
regulatory investigation.
(i) Absence of Changes in Benefit Plans. (i) The Company has provided
to Parent a true and complete list of (i) all severance and employment
agreements of the Company or its subsidiaries with any current or former
employee, officer, agent, independent contractor, or director, (ii) all
severance programs, policies and practices of each of the Company and each
of its subsidiaries, and (iii) all plans or arrangements of the Company and
each of its subsidiaries relating to its current or former employees,
officers, agents, independent contractors, or directors which contain
change in control provisions, including in all cases any and all amendments
entered on or prior to the date hereof, and (iv) all Company Benefit Plans.
For purposes of this Agreement, "Company Benefit Plan" shall mean
collective bargaining agreement, employment agreement, consulting
agreement, severance agreement or any bonus, pension, post-retirement
benefit, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock option, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization, medical,
dental or other plan, arrangement or understanding providing benefits to
any current or former employee, officer, agent, independent contractor, or
director of the Company or any of its subsidiaries. Since January 1, 1997,
there has not been any adoption or amendment in any respect by the Company
or any of its subsidiaries of any Company Benefit Plan, nor has there been
any change in any actuarial or other assumptions used to calculate funding
obligations with respect to any Company Benefit Plan, or any change in the
manner in which contributions to any Company Benefit Plan are made or the
basis on which such contributions are determined which, individually or in
the aggregate, would result in a material increase in the Company's or its
subsidiaries' liabilities thereunder.
(ii) All of the Company Stock Options have been granted in compliance
with all of the terms and provisions of the Company Stock Benefit Plans,
any awards made thereunder and all applicable law. The Company has taken
all action necessary to preclude (i) any increase in the rate of payroll
deduction contributions that may be made after the close of business on
November 21, 1997 under the ESPP, (ii) any lump sum contribution under the
ESPP, and (iii) any contribution under the ESPP after December 31, 1997.
(j) ERISA Compliance. (i) With respect to Company Benefit Plans, no
event has occurred and there exists no condition or set of circumstances,
in connection with which the Company or any of its subsidiaries could be
subject to any liability under the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), the Code or any other applicable law that
individually or in the aggregate would have a material adverse effect on
the Company or any of its subsidiaries.
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(ii) Each Company Benefit Plan has been administered substantially in
accordance with its terms and all the Company Benefit Plans have been
operated, and are in material compliance with the applicable provisions of
ERISA, the Code and all other applicable laws and the terms of all
applicable collective bargaining agreements. The Internal Revenue Service
("IRS") has issued a favorable determination letter with respect to the
qualification of each qualified Company Benefit Plan and related trust, and
the IRS has not taken any action to revoke any such letter.
(iii) Neither the Company nor any trade or business, whether or not
incorporated (an "ERISA Affiliate"), which together with the Company would
be deemed a "single employer" within the meaning of Section 4001(b) of
ERISA, has incurred any unsatisfied liability under Title IV of ERISA in
connection with any Company Benefit Plan and no condition exists that
presents a risk to the Company or any ERISA Affiliate of incurring any such
liability (other than liability for premiums to the Pension Benefit
Guaranty Corporation arising in the ordinary course). No Company Benefit
Plan has incurred an "accumulated funding deficiency" (within the meaning
of Section 302 of ERISA or Section 412 of the Code) whether or not waived.
(iv) Except as set forth in Section 3.3(j) of the Company Disclosure
Schedule, no Company Benefit Plan (a) is subject to Title IV of ERISA; (b)
is a "multiemployer plan" within the meaning of Section 3(37) of ERISA; (c)
is a "multiple employer plan" within the meaning of Section 413(c) of the
Code; or (d) is or at any time was funded through a "welfare benefit fund"
within the meaning of Section 419(e) of the Code and no benefits under a
Company Benefit Plan are or at any time have been provided through a
voluntary employees' beneficiary association within the meaning of Section
501(c)(9) of the Code or a supplemental unemployment benefit plan within
the meaning of Section 501(c)(17) of the Code.
(v) Except as set forth in Section 3.2(j) of the Company Disclosure
Schedule and except for the Company's Post-Retirement Medical Benefit Plan,
no Company Benefit Plan provides medical benefits (whether or not insured),
with respect to current or former employees after retirement or other
termination of service (other than (x) coverage mandated by applicable law
or (y) benefits the full cost of which is borne by the current or former
employee).
(vi) Except for the Company's Post-Retirement Medical Benefit Plan,
each Company Benefit Plan which is a welfare benefit plan as defined in
Section 3(1) of ERISA (including any such plan covering former employees of
the Company or any subsidiary of the Company) and each Company Benefit Plan
which is a pension benefit plan as defined in Section 3(2) of ERISA
(including any such plan covering former employees of the Company or any
subsidiary of the Company) may be amended or terminated by the Company or
such subsidiary at any time.
(vii) Except as set forth in Section 3.2(j) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is a party to any
collective bargaining or other labor union contract applicable to persons
employed by the Company or any of its subsidiaries and no collective
bargaining agreement is being negotiated by the Company or any of its
subsidiaries. There is no labor dispute, strike or work stoppage against
the Company or any of its subsidiaries pending or, to the knowledge of the
Company, threatened which may interfere with the respective business
activities of the Company or any of its subsidiaries.
(viii) All amounts payable under Company Benefit Plans are deductible
for federal income tax purposes. The consummation of the transactions
contemplated by this Agreement will not, either alone or in combination
with another event undertaken by the Company or any of its subsidiaries
prior to the date hereof, (A) entitle any current or former employee,
agent, independent contractor or officer of the Company or any ERISA
Affiliate to severance pay, unemployment compensation or any other payment,
except as expressly provided in this Agreement, (B) accelerate the time of
payment or vesting, or increase the amount of compensation due any such
employee, officer, agent or independent contractor (C) constitute a "change
in control" under any Company Benefit Plan, and the Company and its board
of directors have taken all required actions to effect the foregoing.
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(ix) There is no pending or threatened assessment, complaint,
proceeding, or investigation of any kind in any court or government agency
with respect to any Company Benefit Plan (other than routine claims for
benefits).
(k) Taxes. (i) Each of the Company and its subsidiaries has timely
filed (or has had filed on its behalf) all material tax returns and reports
required to be filed by it and all such returns and reports are believed to
be complete and correct in all material respects, or requests for
extensions to file such returns or reports have been timely filed, granted
and have not expired. The Company and each of its subsidiaries has timely
paid (or the Company has paid on its behalf) all taxes (as defined herein)
shown as due on such returns, and the most recent financial statements
contained in Company Filed SEC Documents reflect an adequate reserve in
accordance with GAAP for all taxes payable by the Company and its
subsidiaries for all taxable periods and portions thereof accrued through
the date of such financial statements.
(ii) No deficiencies for any taxes with respect to which the Company
or any of its subsidiaries has received a notice in writing have been
proposed, asserted or assessed against the Company or any of its
subsidiaries that are not adequately reserved for. The federal income tax
returns of the Company and each of its subsidiaries consolidated in such
returns for tax years through 1989 have closed by virtue of the applicable
statute of limitations.
(iii) Neither the Company nor any of its subsidiaries has taken any
action or knows of any fact, agreement, plan or other circumstance that is
likely to prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
(iv) As used in this Agreement, "taxes" shall include all (x) federal,
state, local or foreign income, property, sales, excise and other taxes or
similar governmental charges, including any interest, penalties or
additions with respect thereto, (y) liabilities for the payment of any
amounts of the type described in (x) as a result of being a member of an
affiliated, consolidated, combined or unitary group, and (z) liabilities
for the payment of any amounts as a result of being party to any tax
sharing agreement or as a result of any express or implied obligation to
indemnify any other person with respect to the payment of any amounts of
the type described in clause (x) or (y).
(l) Voting Requirements. Assuming the accuracy of Parent's
representation and warranty contained in Section 3.3(l) (without giving
effect to the knowledge qualification thereof), the affirmative vote at the
Company Stockholders Meeting (the "Company Stockholder Approval") of the
holders of the majority of the outstanding shares of Company Common Stock
to adopt this Agreement is the only vote of the holders of any class or
series of the Company's capital stock necessary to approve and adopt this
Agreement and the transactions contemplated hereby, including the Merger.
(m) State Takeover Statutes. The Board of Directors of the Company
has approved this Agreement and the transactions contemplated hereby and,
assuming the accuracy of Parent's representation and warranty contained in
Section 3.3(l) (without giving effect to the knowledge qualification
thereof), such approval constitutes approval of the Merger and the other
transactions contemplated hereby by the Company Board of Directors under
the provisions of Section 203 of the DGCL such that Section 203 of the DGCL
does not apply to this Agreement and the transactions contemplated hereby.
To the knowledge of the Company, no other state takeover statute is
applicable to the Merger or the other transactions contemplated hereby.
(n) Accounting Matters. The Company has disclosed to its independent
public accountants all actions taken by it or its subsidiaries that it
believes would impact the accounting of the business combination to be
effected by the Merger as a pooling of interests. The Company, based on
advice from its independent public accountants, believes that the Merger
will qualify for "pooling of interests" accounting.
(o) Brokers. Other than Morgan Stanley & Co. Incorporated, a complete
and accurate copy of the engagement letter of which has been provided to
Parent, no broker, investment banker, financial advisor or other person is
entitled to any broker's, financial advisor's or other finder's fee or
commission in
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connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
(p) Ownership of Parent Capital Stock. Except for shares owned by
Company Benefit Plans, as of the date hereof, neither the Company nor, to
its knowledge, any of its affiliates, (i) beneficially owns (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, or (ii) is
party to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of, in each case, shares of capital
stock of Parent or securities exercisable for or convertible into shares of
capital stock of Parent.
(q) Certain Contracts. Except for agreements entered into after the
date hereof as permitted pursuant to Section 4.1(a), neither the Company
nor any of its subsidiaries is a party to or bound by (i) any agreement
relating to the incurring of indebtedness (including sale and leaseback and
capitalized lease transactions and other similar financing transactions)
providing for payment or repayment in excess of $20,000,000, (ii) in the
aggregate, any agreements relating to capital commitments in excess of
$15,000,000, (iii) any agreement involving annual payments in excess of
$5,000,000 with "change of control" or "event risk" provisions relating to
the Company, (iv) any "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC), or (v) any non-competition
agreement or any other agreement or obligation which purports to limit in
any material respect the manner in which, or the localities in which, all
or any substantial portion of the business of the Company and its
subsidiaries, taken as a whole, is or is presently expected to be conducted
(the agreements, contracts and obligations specified above, collectively
the "Company Material Contracts").
(r) Company Rights Agreement. The Company has taken all action
(including, if required, amending or terminating the Company Rights
Agreement) so that the entering into of this Agreement and the consummation
of the transactions contemplated hereby do not and will not enable or
require the Company Rights to be exercised or distributed.
(s) Environmental Liability. There are no legal, administrative,
arbitral or other proceedings, claims, actions, causes of action, private
environmental investigations or remediation activities or governmental
investigations of any nature seeking to impose on the Company or any of its
subsidiaries, or that could be expected to result in the imposition on the
Company or any of its subsidiaries of, any liability or obligation arising
under applicable common law standards relating to pollution or protection
of the environment, human health or safety, or under any local, state or
federal environmental statute, regulation, ordinance, decree, judgment or
order relating to pollution or protection of the environment including,
without limitation, the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended (collectively, the "Environmental
Laws"), pending or, to the knowledge of the Company, threatened, against
the Company or any of its subsidiaries, with such exceptions as would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the Company. Each of the Company and each of its
subsidiaries is, and each former subsidiary of the Company was, for so long
as such subsidiary was a subsidiary of the Company, in compliance with all
Environmental Laws and has or at such time had all permits required under
Environmental Laws, with such exceptions as would not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on
the Company and there is no reasonable basis for any proceeding, claim,
action or governmental investigation under any Environmental Law that would
impose any liability or obligation on the Company or its subsidiaries based
on any failure to have, obtain or comply with such permits, with such
exceptions as would not individually or in the aggregate reasonably be
expected to have a material adverse effect on the Company. Neither the
Company nor any of its subsidiaries is subject to any agreement (including
any indemnification agreement), order, judgment, decree, letter or
memorandum by or with any court, governmental authority, regulatory agency
or third party imposing any material liability or obligation pursuant to or
under any Environmental Law that would, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the Company.
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(t) Derivative Transactions. (i) All Derivative Transactions (as
defined below) entered into by the Company or any of its subsidiaries that
are currently open were entered into in material compliance with applicable
rules, regulations and policies of any regulatory authority.
(ii) For purposes of this Section 3.2(t), "Derivative Transactions"
means derivative transactions within the coverage of FASB 80, including any
swap transaction, option, warrant, forward purchase or sale transaction,
futures transaction, cap transaction, floor transaction or collar
transaction relating to one or more currencies, commodities, bonds, equity
securities, loans, interest rates, credit-related events or conditions or
any indexes, or any other similar transaction (including any option with
respect to any of these transactions) or combination of any of these
transactions, including collateralized mortgage obligations or other
similar instruments or any debt or equity instruments evidencing or
embedding any such types of transactions, and any related credit support,
collateral, transportation or other similar arrangements or agreements
related to such transactions.
(iii) The Company believes that it and its subsidiaries and their
respective businesses employ investment, commodities, risk management and
other policies, practices and procedures which are prudent and reasonable
in the context of such businesses; provided, however, that the Company
makes no representations or warranties regarding the policies, practices or
procedures described in Section 3.2(t) of the Parent Disclosure Schedule,
and provided, further, that the representation made in this sentence shall
not be applicable to its employment of such policies, practices and
procedures. The Company believes that it has adequate systems for
maintaining and monitoring compliance with the covenants described in
Section 4.1(a)(viii).
(u) Condition of Assets. All of the material property, plant and
equipment of the Company and its subsidiaries (the "Company PP&E"), has in
all material respects been maintained in reasonable operating condition and
repair, ordinary wear and tear excepted, and is in all material respects,
sufficient to permit the Company and its subsidiaries to conduct their
operations in the ordinary course of business in a manner consistent with
their past practices in all material respects.
(v) Fairness Opinion. The Board of Directors of the Company has
received the opinion of Morgan Stanley & Co. Incorporated, the company's
financial advisor, to the effect that the Exchange Ratio is fair to the
holders of the Company Common Stock (other than Parent and its affiliates)
from a financial point of view.
Section 3.3 Representations and Warranties of Parent and Sub. Subject to
Section 3.1 and except as disclosed in the Parent SEC Documents (as defined in
Section 3.3(e)) filed prior to the date hereof (the "Parent Filed SEC
Documents") or as set forth on the Parent Disclosure Schedule (it being
acknowledged that any items disclosed in any subsection in the Parent Disclosure
Schedule shall be also deemed disclosed in, and only in, any other subsections
thereof in which the disclosure of such item would reasonably be considered
responsive) (regardless of whether the relevant subsection of this Agreement
refers to the Parent Disclosure Schedule or the Parent SEC Filed Documents),
Parent and Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. (i) Each of Parent
and its subsidiaries (including Sub) is a corporation or other legal entity
duly organized, validly existing and in good standing (with respect to
jurisdictions which recognize such concept) under the laws of the
jurisdiction in which it is organized and has the requisite corporate or
other power, as the case may be, and authority to carry on its business as
now being conducted, except, as to subsidiaries, for those jurisdictions
where the failure to be duly organized, validly existing and in good
standing individually or in the aggregate would not have a material adverse
effect on Parent. Each of Parent and its subsidiaries is duly qualified or
licensed to do business and is in good standing (with respect to
jurisdictions which recognize such concept) in each jurisdiction in which
the nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, except for
those jurisdictions where the failure to be so qualified or licensed or to
be in good standing individually or in the aggregate would not have a
material adverse effect on Parent.
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(ii) Parent has made available to the Company prior to the execution
of this Agreement complete and correct copies of its Restated Certificate
of Incorporation and By-laws, as amended to date.
(iii) Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement and is engaged in no business
other than incidental to its creation and the transactions contemplated by
this Agreement.
(b) Subsidiaries. (i) Exhibit 21 to Parent's Annual Report on Form
10-K for the fiscal year ended December 31, 1996 includes all the
subsidiaries of Parent which as of the date of this Agreement are
Significant Subsidiaries. All the outstanding shares of capital stock of,
or other equity interests in, each such Significant Subsidiary have been
validly issued and are fully paid and nonassessable; are owned directly or
indirectly by Parent, free and clear of all Liens; and are free of any
other restriction on the right to vote, sell or otherwise dispose of such
capital stock or other ownership interests that would prevent the operation
by Parent of such Significant Subsidiary's business as currently conducted.
(ii) Parent has made available to the Company prior to the execution
of this Agreement complete and correct copies of the certificates of
incorporation and by-laws or similar organizational documents of each of
its Significant Subsidiaries, as amended to date.
(c) Capital Structure. The authorized capital stock of Parent
consists of 480,000,000 shares of Parent Common Stock and 30,000,000 shares
of preferred stock, par value $1.00 per share, of Parent (the "Parent
Authorized Preferred Stock"), of which 2,500,000 shares have been
designated as $3.50 Cumulative Convertible Preferred Stock (the "Parent
Convertible Preferred Stock") and 1,200,000 shares have been designated as
Series A Junior Participating Preferred Stock (the "Parent Junior Preferred
Stock"). At the close of business on November 20, 1997, and without giving
effect to adjustments that will be required in connection with the Stock
Split: (i) 159,915,778 shares of Parent Common Stock were issued and
outstanding; (ii) 3,707,685 shares of Parent Common Stock were issued and
held by Parent in its treasury or by subsidiaries of Parent; (iii)
2,499,372 shares of Parent Convertible Preferred Stock were issued and
outstanding; (iv) no shares of Parent Junior Preferred Stock were issued
and outstanding; (v) 5,859,052 shares of Parent Common Stock were reserved
for issuance upon conversion of the Parent Convertible Preferred Stock;
(vi) 13,995,990 shares of Parent Common Stock were reserved for issuance
upon conversion of Parent's 6% Convertible Subordinated Debentures, Due
2005 (the "Parent Convertible Debentures" and, together with the Parent
Convertible Preferred Stock, the "Parent Convertible Securities"); (vii)
11,305,720 shares of Parent Common Stock reserved for issuance upon
exercise of warrants (the "Parent Warrants"); (viii) 23,570,792 shares were
reserved for issuance pursuant to the stock-based plans identified in
Section 3.3(c) of the Parent Disclosure Schedule (such plans, collectively,
the "Parent Stock Plans"), of which 12,912,597 shares are subject to
outstanding employee or director stock options, deferred stock awards or
other rights to purchase or receive Parent Common Stock granted under the
Parent Stock Plans (collectively, "Parent Stock Options"); and (viii) other
than as set forth above, no other shares of Parent Authorized Preferred
Stock have been designated or issued. All outstanding shares of capital
stock of Parent are, and all shares thereof which may be issued pursuant to
this Agreement or otherwise will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
Except as set forth in this Section 3.3(c), except for the declaration by
Parent's Board of the Stock Dividend and except for changes since November
20, 1997 resulting from the issuance of shares of Parent Common Stock
pursuant to the Parent Stock Plans, upon exercise of Parent Employee Stock
Options or Parent Warrants or upon conversion of Parent Convertible
Securities and other rights referred to in this Section 3.3(c), (x) there
are not issued, reserved for issuance or outstanding (A) any shares of
capital stock or other voting securities of Parent, (B) any securities of
Parent or any Parent subsidiary convertible into or exchangeable or
exercisable for shares of capital stock or voting securities of Parent, (C)
any warrants, calls, options or other rights to acquire from Parent or any
Parent subsidiary, and any obligation of Parent or any Parent subsidiary to
issue, any capital stock, voting securities or securities convertible into
or exchangeable or exercisable for capital stock or voting securities of
Parent, and (y) there are no outstanding obligations of Parent or any
Parent subsidiary to repurchase, redeem or otherwise acquire any such
securities or to issue, deliver or sell, or cause to be issued, delivered
or sold,
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any such securities. As of the date hereof, there are no outstanding (A)
securities of Parent or any Parent subsidiary convertible into or
exchangeable or exercisable for shares of capital stock or other voting
securities in any Parent subsidiary, (B) warrants, calls, options or other
rights to acquire from Parent or any Parent subsidiary, and any obligation
of Parent or any Parent subsidiary to issue, any capital stock, voting
securities or other ownership interests in, or any securities convertible
into or exchangeable or exercisable for any capital stock, voting
securities or ownership interests in, any Parent subsidiary or (C)
obligations of Parent or any Parent subsidiary to repurchase, redeem or
otherwise acquire any such outstanding securities of Parent subsidiaries or
to issue, deliver or sell, or cause to be issued, delivered or sold, any
such securities. Neither Parent nor any Parent subsidiary is a party to any
agreement restricting the transfer of, relating to the voting of, requiring
registration of, or granting any preemptive or, except as provided by the
terms of the Parent Rights, Parent Stock Plans, the Parent Stock Options,
the Parent Warrants and the Parent Convertible Securities, antidilutive
rights with respect to, any securities of the type referred to in the two
preceding sentences.
(d) Authority; Noncontravention. Parent and Sub each has all
requisite corporate power and authority to enter into this Agreement and,
subject to the Parent Stockholder Approval, to consummate the transactions
contemplated by this Agreement. The execution and delivery of this
Agreement by each of Parent and Sub and the consummation by each of Parent
and Sub of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of Parent and Sub,
subject to the Parent Stockholder Approval. This Agreement has been duly
executed and delivered by each of Parent and Sub and, assuming the due
authorization, execution and delivery by the Company, constitutes the
legal, valid and binding obligation of each of Parent and Sub, enforceable
against each of Parent and Sub in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency and similar laws affecting creditors' rights generally and by
general principles of equity (whether considered at law or in equity). The
execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration
of any obligation or loss of a benefit under, or result in the creation of
any Lien upon any of the properties or assets of Parent or any of its
subsidiaries (including Sub) under, (i) the Restated Certificate of
Incorporation, as amended, or By-laws of Parent or the comparable
organizational documents of any of its Significant Subsidiaries (including
Sub), (ii) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise,
license or similar authorization applicable to Parent or any of its
subsidiaries (including Sub) or their respective properties or assets or
(iii) subject to the governmental filings and other matters referred to in
the following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or any of its
subsidiaries (including Sub) or their respective properties or assets,
other than, in the case of clauses (ii) and (iii), any such conflicts,
violations, defaults, rights, losses or Liens that individually or in the
aggregate would not (x) have a material adverse effect on Parent or (y)
materially impair the ability of Parent to perform its obligations under
this Agreement or prevent consummation of any of the transactions
contemplated hereby. No consent, approval, order or authorization of,
action by, or in respect of, or registration, declaration or filing with,
any Governmental Entity is required by or with respect to Parent or any of
its subsidiaries (including Sub) in connection with the execution and
delivery of this Agreement by each of Parent or Sub or the consummation by
Parent and Sub of the transactions contemplated by this Agreement, except
for (1) the filing of a premerger notification and report form by Parent
under the HSR Act; (2) the filing with the SEC of (A) the Form S-4 and the
Proxy Statement or (B) such reports under Section 13(a) or 15(d) of the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated by this Agreement; (3) the filing of the
Certificate of Merger with the Secretary of State of Delaware; (4) such
filings with Governmental Entities to satisfy (A) the applicable
requirements of the laws of states in which Parent and its subsidiaries are
qualified or licensed to do business or state securities or "blue sky" laws
or (B) any filings required by foreign governmental entities; (5) such
filings with and approvals of the NYSE and the Pacific Stock Exchange (the
"PSE") to permit the shares of Parent
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Common Stock to be issued in the Merger or in respect of the Company Stock
Plans pursuant to Section 5.6 to be listed on the NYSE and the PSE; and (6)
such consents, approvals, orders or authorizations the failure of which to
be made or obtained individually or in the aggregate would not (x) have a
material adverse effect on Parent or (y) materially impair the ability of
Parent to perform its obligations under this Agreement or prevent the
consummation of any of the transactions contemplated hereby.
(e) SEC Documents; Undisclosed Liabilities. Since January 1, 1995,
Parent has filed with the SEC all reports, schedules, forms, statements and
other documents (including exhibits and all other information incorporated
therein) required to be filed with the SEC (the "Parent SEC Documents"). As
of their respective dates, the Parent SEC Documents complied in all
material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Parent SEC Documents, and none of
the Parent SEC Documents when filed (as amended and restated and as
supplemented by subsequently filed Parent SEC Documents) contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Parent included in the Parent SEC
Documents complied as to form, as of their respective dates of filing with
the SEC, in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present the consolidated financial position
of Parent and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal
recurring year-end audit adjustments). Except (i) as reflected in such
financial statements or in the notes thereto or (ii) for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, neither Parent nor any of its subsidiaries has any liabilities or
obligations of any nature which, individually or in the aggregate, would
have a material adverse effect on Parent.
(f) Information Supplied. None of the information supplied or to be
supplied by Parent specifically for inclusion or incorporation by reference
in (i) the Form S-4 will, at the time the Form S-4 becomes effective under
the Securities Act, 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 (ii) the Proxy Statement
will, at the date it is first mailed to the Company's or Parent's
stockholders or at the time of the Company Stockholders Meeting or the
Parent Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Form S-4 and
the Proxy Statement will comply as to form in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules
and regulations thereunder, except that no representation or warranty is
made by Parent with respect to statements made or incorporated by reference
therein based on information supplied by the Company specifically for
inclusion or incorporation by reference in the Form S-4 or the Proxy
Statement.
(g) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby and except as permitted by Section 4.1(b), since January 1, 1997,
Parent and its subsidiaries have conducted their business only in the
ordinary course, and there has not been (i) any material adverse change in
Parent, including, but not limited to, any material adverse change arising
from or relating to fraudulent or unauthorized activity, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of Parent's
capital stock, other than regular quarterly cash dividends on the Parent
Common Stock and dividends payable on Parent's preferred stock in
accordance with their terms, (iii)) except insofar as may have been
required by a change in GAAP or law or regulation, any material change in
accounting methods, principles or practices by Parent affecting its assets,
liabilities or business
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or (iv) any material tax election by Parent or any of its Significant
Subsidiaries or any settlement or compromise of any material income tax
liability by Parent or any of its Significant Subsidiaries.
(h) Compliance with Applicable Laws; Litigation. (i) Parent and its
subsidiaries hold all material permits, licenses, variances, exemptions,
orders, registrations and approvals of all Governmental Entities which are
necessary for the lawful operation of the businesses of Parent and its
subsidiaries (the "Parent Permits"), and are not in material default under
the Parent Permits or under applicable statutes, laws, ordinances, rules
and regulations, except where the failure to hold such Parent Permits or to
comply with such statutes, laws, ordinances, rules or regulations or Parent
Permits would not, individually or in the aggregate, have a material
adverse effect on Parent.
(ii) As of the date of this Agreement, no action, demand, requirement
or investigation by any Governmental Entity and no suit, action or
proceeding by any person, in each case with respect to Parent or any of its
subsidiaries or any of their respective properties, is pending or, to the
knowledge of Parent, threatened, other than, in each case, those the
outcome of which individually or in the aggregate would not have a material
adverse effect on Parent or materially impair the ability of Parent to
perform its obligations under this Agreement or prevent the consummation of
the transactions contemplated by this Agreement.
(i) Taxes. (i) Each of Parent and its subsidiaries has filed (or has
had filed on its behalf) all material tax returns and reports required to
be filed by it and all such returns and reports are believed to be complete
and correct in all material respects, or requests for extensions to file
such returns or reports have been timely filed, granted and have not
expired. Parent and each of its subsidiaries has paid (or Parent has paid
on its behalf) all taxes shown as due on such returns, and the most recent
financial statements contained in the Parent Filed SEC Documents reflect an
adequate reserve in accordance with GAAP for all taxes payable by Parent
and its subsidiaries for all taxable periods and portions thereof accrued
through the date of such financial statements.
(ii) No deficiencies for any taxes with respect to which Parent or any
of its subsidiaries has received a notice in writing have been proposed,
asserted or assessed against Parent or any of its subsidiaries that are not
adequately reserved for. The federal income tax returns of Parent and each
of its subsidiaries consolidated in such returns for tax years through 1991
have closed by virtue of the applicable statute of limitations, except as
set forth on Schedule 3.3(i).
(iii) Neither Parent nor any of its subsidiaries has taken any action
or knows of any fact, agreement, plan or other circumstance that is likely
to prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
(j) Accounting Matters. Parent has disclosed to its independent
public accountants all actions taken by it or its subsidiaries that it
believes would impact the accounting of the business combination to be
effected by the Merger as a pooling of interests. Parent, based on advice
from its independent public accountants, believes that the Merger will
qualify for "pooling of interest" accounting.
(k) Brokers. Other than Smith Barney Inc., no broker, investment
banker, financial advisor or other person is entitled to any broker's,
finder's, financial advisor's or other finder's fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent.
(l) Ownership of Company Capital Stock. Except for shares owned by
Parent's employee benefit plans or as otherwise disclosed in the Parent SEC
Documents, as of the date hereof, neither Parent nor, to its knowledge
without independent investigation, any of its affiliates, (i) beneficially
owns (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, or (ii) is party to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of, in each
case, shares of capital stock of the Company or securities exercisable or
exchangeable for or convertible into shares of capital stock of the
Company.
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(m) Voting Requirements. The affirmative vote at the Parent
Stockholders Meeting (the "Parent Stockholder Approval") (i) of the holders
of the majority of the outstanding shares of Parent Common Stock to approve
the Charter Amendment Proposal and (ii) of the holders of a majority of the
shares of Parent Common Stock present at the Parent Stockholders Meeting
and entitled to vote to approve the issuance of shares of Parent Common
Stock issuable pursuant to the Merger or in respect of Company Stock
Options as provided for in Section 5.6 are the only votes of the holders of
any class or series of Parent's capital stock necessary to approve the
transactions contemplated by this Agreement.
(n) Parent Benefit Plans. (i) Parent has provided to the Company a
true and complete list of each Parent Benefit Plan relating to Parent's
current employees or officers. For purposes of this Agreement, "Parent
Benefit Plan" shall mean any plan described in Section 3(3) of ERISA
providing benefits to any current employee or officer of Parent or any of
its wholly owned subsidiaries.
(ii) No Parent Stock Options will become exercisable as a result of
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for options outstanding under
Parent's 1996 Stock Plan on not more than 190,000 shares of Parent Common
Stock.
(iii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not, either alone
or in combination with another event undertaken by Parent or any of its
subsidiaries prior to the date hereof, (A) entitle any current or former
employee, agent, independent contractor or officer of Parent or any ERISA
Parent Affiliate to severance pay, unemployment compensation or any other
payment, except as expressly provided in this Agreement, (B) accelerate the
time of payment or vesting, or increase the amount of compensation due any
such employee, officer, agent or independent contractor, or (C) constitute
a "change in control" under any Parent Benefit Plan, and Parent and its
board of directors have taken all required actions to effect the foregoing.
(o) ERISA Compliance. (i) With respect to Parent Benefit Plans, no
event has occurred and, to the knowledge of Parent, there exists no
condition or set of circumstances in connection with which Parent could be
subject to any liability under ERISA, the Code or any other applicable law
that individually or in the aggregate would have a material adverse effect
on Parent.
(ii) To the knowledge of Parent, all the Parent Benefit Plans have
been operated in accordance with, and are in material compliance with, the
applicable provisions of ERISA, the Code and all other applicable laws.
(iii) Neither Parent nor any trade or business, whether or not
incorporated (an "ERISA Parent Affiliate"), which together with Parent
would be deemed a "single employer" within the meaning of Section 4001(b)
of ERISA, has incurred any unsatisfied liability under Title IV of ERISA in
connection with any Parent Benefit Plan and currently no condition exists
that presents a risk to Parent or any ERISA Parent Affiliate of incurring
any such liability (other than liability for premiums to the Pension
Benefit Guaranty Corporation arising in the ordinary course). No Parent
Benefit Plan has incurred an "accumulated funding deficiency" (within the
meaning of Section 302 of ERISA or Section 412 of the Code) whether or not
waived.
(iv) The Parent Benefit Plans which are administered by Parent or by a
ERISA Parent Affiliate have been operated in substantial compliance with
plan documents.
(v) There is no labor dispute, strike or work stoppage against Parent
or any of its subsidiaries pending or, to the knowledge of Parent,
threatened which may interfere with the respective business activities of
Parent or any of its subsidiaries.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1(a) Conduct of Business by the Company. Except as set forth in
Section 4.1(a) of the Company Disclosure Schedule or the Company Filed SEC
Documents, as otherwise expressly contemplated
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by this Agreement or as consented to by Parent in writing, such consent not to
be unreasonably withheld or delayed, during the period from the date of this
Agreement to the Effective Time, the Company shall, and shall cause its
subsidiaries to, carry on their respective businesses in the ordinary course
consistent with past practice and in compliance in all material respects with
all applicable laws and regulations and, to the extent consistent therewith, use
reasonable efforts to preserve intact their current business organizations, use
reasonable efforts to keep available the services of their current officers and
other employees and use reasonable efforts to preserve their relationships with
those persons having business dealings with them . Without limiting the
generality of the foregoing (but subject to the above exceptions), during the
period from the date of this Agreement to the Effective Time, the Company shall
not, and shall not permit any of its subsidiaries to:
(i) other than dividends and distributions by a direct or indirect
wholly owned subsidiary of the Company to its parent, or regularly
scheduled dividends by a subsidiary that is partially owned by the Company
or any of its subsidiaries, provided that the Company or any such
subsidiary receives or is to receive its proportionate share thereof, (x)
declare, set aside or pay any dividends on, make any other distributions in
respect of, or enter into any agreement with respect to the voting of, any
of its capital stock (except for regular quarterly cash dividends on
Company Common Stock at a rate not in excess of the amount per share paid
in the Company's last dividend paid before the date hereof), (y) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, except for issuances of
Company Common Stock upon the exercise of Company Stock Options that are,
in each case, outstanding as of the date hereof in accordance with their
present terms, or (z) purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities other than pursuant to Equity Put Rights
disclosed in Section 3.2(c) and for withholding under Company Benefit
Plans;
(ii) issue, deliver, sell, pledge or otherwise encumber or subject to
any Lien any shares of its capital stock, any other voting securities or
any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities
(other than the issuance of Company Common Stock upon the exercise of
Company Stock Options that are, in each case, outstanding as of the date
hereof in accordance with their present terms);
(iii) in the case of the Company or any of its Significant
Subsidiaries, amend its certificate of incorporation, by-laws or other
comparable organizational documents or amend the Company Rights Agreement;
(iv) acquire any business (whether by merger, consolidation, purchase
of assets or otherwise) or acquire any equity interest in any person not an
affiliate (whether through a purchase of stock, establishment of a joint
venture or otherwise) which, together with all such acquisitions, involves
the payment of consideration having a value in excess of $100,000,000;
(v) sell, lease, joint venture, license, mortgage or otherwise
encumber or subject to any Lien or otherwise dispose of any of its
properties or assets that is material in relation to the Company and its
subsidiaries, taken as a whole (including securitizations), other than the
sale of inventory in the ordinary course of business and except in
connection with borrowings under existing credit facilities or lines of
credit in accordance with the terms of such facilities or lines as of the
date hereof;
(vi) except for borrowings under existing credit facilities or lines
of credit, incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise become responsible
for the obligations of any person, or make any loans, advances or capital
contributions to, any person other than its wholly owned subsidiaries,
except in the ordinary course of business consistent with past practice or
except as attributable to the execution of this Agreement and the
transactions contemplated hereby;
(vii) change its methods of accounting (or underlying assumptions) in
effect at December 31, 1996, except as required by changes in GAAP or law
or regulation or as discussed in the Company Filed SEC
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Documents, or change any of its methods of reporting income and deductions
for federal income tax purposes from those employed in the preparation of
the federal income tax returns of the Company for the taxable years ending
December 31, 1996, except as required by changes in law or regulation;
(viii) fail to observe the provisions set forth in Section 3.2(t) of
the Parent Disclosure Schedule;
(ix) create, renew, amend, terminate or cancel, or take any other
action that could reasonably be expected to result in the creation,
renewal, amendment, termination or cancellation of any Company Material
Contract in a manner which would be reasonably be expected to be materially
adverse to the Company;
(x) enter into any new capital commitments or increase any existing
capital commitments in an aggregate amount in excess of $15,000,000;
provided, however, that in no event will the Company enter into capital
expenditure commitments with respect to the three matters identified by an
asterisk on the attachment described in Item 15 of Section 3.2(g) of the
Company Disclosure Schedule without having first consulted with Parent as
to such capital expenditures;
(xi) (A) grant Company Stock Options, (B) grant to any current or
former director, executive officer or other key employee of the Company or
its subsidiaries any increase in compensation, bonus or other benefits
(other than increases in base salary in the ordinary course of business
consistent with past practice or arising due to a promotion or other change
in status and consistent with generally applicable compensation practices),
(C) grant to any such current or former director, executive officer or
other employee any increase in severance or termination pay, (D) amend or
adopt any employment, deferred compensation, consulting, severance,
termination or indemnification agreement with any such current or former
director, executive officer or employee, or (E) amend, adopt or terminate
any Company Benefit Plan, except as may be required to retain qualification
of any such plan under Section 401(a) of the Code;
(xii) except (A) pursuant to agreements or arrangements in effect on
the date hereof which have been disclosed in Section 4.1(a) of the Company
Disclosure Schedule, or (B) for dividends paid in accordance with Section
4.1(a)(i), pay, loan or advance any amount to, or sell, transfer or lease
any properties or assets (real, personal or mixed, tangible or intangible)
to, or purchase any properties or assets, or enter into any agreement or
arrangement with, any of its officers or directors or any affiliate or the
immediate family members or associates of any of its officers or directors,
other than payment of compensation at current salary, incentive
compensation and bonuses and other than properly authorized business
expenses in the ordinary course of business, in each case consistent with
past practice; or
(xiii) authorize, or commit or agree to take, any of the foregoing
actions; provided, that the limitations set forth in this Section 4.1(a)
(other than Section 4.1(a)(iii)) shall not apply to any transaction between
the Company and any wholly owned subsidiary or between any wholly owned
subsidiaries of the Company.
(b) Conduct of Business by Parent. Except as set forth in the Parent
Disclosure Schedule or the Parent SEC Filed Documents, as otherwise expressly
contemplated by this Agreement or as consented to by the Company in writing,
such consent not to be unreasonably withheld or delayed, during the period from
the date of this Agreement to the Effective Time, Parent shall not, and shall
not permit any of its subsidiaries to:
(i) other than dividends and distributions by a direct or indirect
wholly owned subsidiary of the Company to its parent, or regularly
scheduled dividends by a subsidiary that is partially owned by Parent or
any of its subsidiaries, provided that Parent or any such subsidiary
receives or is to receive its proportionate share thereof, (x) declare, set
aside or pay any dividends on, make any other distributions in respect of,
or enter into any agreement with respect to the voting of, any of its
capital stock (except for regular quarterly cash dividends on Parent Common
Stock at a rate per share not in excess of $.30, in the case of any
dividend to be paid with a record date on or prior to the date of
completion of the Stock Dividend, or $.15, in the case of any dividend with
a record date thereafter, and regular dividend payments on the Parent
Authorized Preferred Stock, including any preferred stock issued in
accordance with Section 4.1(b)(ii), in each case in accordance with its
terms), (y) split, combine or reclassify any of
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its capital stock or any other voting securities (or any securities
convertible into, or any rights, warrants or options to acquire any such
shares, voting securities or convertible securities) or issue or authorize
the issuance of any other securities in respect of any thereof, in lieu of
any thereof or in substitution for any thereof (other than (A) issuances of
Parent Common Stock upon the exercise of Parent Stock Options that are, in
each case, (1) outstanding as of the date hereof in accordance with their
present terms, or (2) issued in accordance with the terms of any Parent
Benefit Plan in a manner generally consistent with past practices, (B)
issuances of Parent Common Stock upon conversion of Parent Convertible
Securities, (C) issuances of Parent Common Stock upon exercise of Parent
Warrants or (D) issuances of Parent Common Stock pursuant to the Stock
Dividend) or (z) purchase, redeem or otherwise acquire for greater than
fair value any shares of capital stock of Parent or any of its subsidiaries
or any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities, except in accordance with the
terms of existing obligations of Parent or any of its subsidiaries;
(ii) issue, deliver or sell any shares of its capital stock, any other
voting securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities (other than (A) issuances of Parent Common Stock
permitted pursuant to Section 4.2(b)(i), (B) issuances of securities for
fair value, (C) issuances of securities in connection with the acquisition
of businesses in the energy or communications industries, or (D) issuances
of Parent Common Stock in an amount aggregating not more than 5% of the
number of presently outstanding shares of Parent Common Stock in connection
with acquisitions of businesses in industries other than the energy or
communications industries);
(iii) in the case of Parent or any of its Significant Subsidiaries,
amend its certificate of incorporation, by-laws or other comparable
organizational documents or the Parent Rights Agreement, in each case in a
manner adverse to the Company; or
(iv) authorize, or commit or agree to take, any of the foregoing
actions;
provided, that the limitations set forth in this Section 4.1(b) (other than
Section 4.2(b)(iii)) shall not apply to any transaction between Parent and any
wholly owned subsidiary or between any wholly owned subsidiaries of Parent.
(c) Certain Payments. Before December 31, 1997, the Company shall pay to
each executive identified on Section 4.1(c) of the Company Disclosure Schedule
the payments provided for in the agreements and plans identified in such Section
in the amounts and on or before the dates indicated, and shall obtain receipts
from each such executive for such payments.
(d) Other Actions. Except as required by law or as permitted by this
Agreement, the Company and Parent shall not, and shall not permit any of their
respective subsidiaries to, voluntarily take any action that would, or that
could reasonably be expected to, result in (i) any of the representations and
warranties of such party set forth in this Agreement that are qualified as to
materiality becoming untrue at the Effective Time, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect at the Effective Time, or (iii) any of the conditions to the
Merger set forth in Article VI not being satisfied.
(e) Advice of Changes. The Company and Parent shall promptly advise the
other party orally and in writing to the extent it has knowledge of (i) any
representation or warranty made by it contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it to comply in any
material respect with or satisfy in any material respect any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement, (iii)
any actual or, to the knowledge of the Company, threatened disputes involving an
amount in excess of $15,000,000 with any customer, supplier, joint carrier or
service provider, and (iv) any change or event having, or which, insofar as can
reasonably be foreseen, could reasonably be expected to have, a material adverse
effect on such party or on the truth of their respective representations and
warranties or the ability of the conditions set forth in Article VI to be
satisfied; provided, however, that no such notification shall affect the
representations,
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warranties, covenants or agreements of the parties (or remedies with respect
thereto) or the conditions to the obligations of the parties under this
Agreement; and provided, further, that no such notice shall be deemed an
admission by the disclosing party that such item represents a material exception
or fact, event or circumstance or that such item constitutes or is reasonably
likely to result in a material adverse effect or material adverse change.
Section 4.2 No Solicitation by the Company. (a) The Company shall not,
nor shall it permit any of its subsidiaries to, nor shall it authorize or permit
any of its directors, officers or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it or any of
its subsidiaries to, directly or indirectly through another person, (i) solicit,
initiate or encourage (including by way of furnishing nonpublic information), or
take any other action designed to facilitate, any inquiries or the making of any
proposal which constitutes a Company Takeover Proposal (as defined below) or
(ii) participate in any substantive discussions or negotiations regarding any
Company Takeover Proposal; provided, however, that if and to the extent that, at
any time prior to the time of the adoption of this Agreement by the Company's
stockholders at the Company Stockholder Meeting, the Board of Directors of the
Company determines in good faith, after consultation with outside counsel, that
its failure to do so could reasonably be expected to result in a breach of its
fiduciary duties to the Company's stockholders under applicable law, the Company
may, in response to any Company Takeover Proposal which was not solicited by it
and which did not otherwise result from a breach of this Section 4.2(a), (x)
furnish information with respect to the Company and its subsidiaries to any
person making a Company Takeover Proposal pursuant to a customary
confidentiality agreement (as determined by the Company based on the advice of
its outside counsel) and (y) participate in discussions or negotiations
regarding such Company Takeover Proposal. For purposes of this Agreement,
"Company Takeover Proposal" means any inquiry, proposal or offer from any person
relating to any direct or indirect acquisition or purchase of a business that
constitutes 30% or more of the net revenues, net income or assets of the Company
and its subsidiaries, taken as a whole, or 30% or more of any class of equity
securities of the Company, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 30% or more of any
class of any equity securities of the Company, or any merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company (or any Company subsidiary whose business
constitutes 30% or more of the net revenues, net income or assets of the Company
and its subsidiaries, taken as a whole), other than the transactions
contemplated by this Agreement.
(b) Except as expressly permitted by this Section 4.2, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or modify,
or propose publicly to withdraw or modify, in a manner adverse to Parent, the
approval or recommendation by such Board of Directors or such committee of the
Merger or this Agreement, (ii) approve or recommend, or propose publicly to
approve or recommend, any Company Takeover Proposal, or (iii) cause the Company
to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, a "Company Acquisition Agreement")
related to any Company Takeover Proposal. Notwithstanding the foregoing, in the
event that prior to the adoption of this Agreement by the Company's stockholders
at the Company Stockholder Meeting, the Board of Directors of the Company, to
the extent that it determines in good faith, after consultation with outside
counsel, that in light of a Company Superior Proposal its failure to do so could
reasonably be expected to result in a breach of fiduciary duties to the
Company's stockholders under applicable law, may terminate this Agreement solely
in order to concurrently enter into a Company Acquisition Agreement with respect
to any Company Superior Proposal, but only at a time that is after the third
business day following Parent's receipt of written notice advising Parent that
the Board of Directors of the Company is prepared to accept a Company Superior
Proposal, specifying the material terms and conditions of such Company Superior
Proposal and identifying the person making such Company Superior Proposal, all
of which information will be kept confidential by Parent in accordance with the
terms of the Confidentiality Agreement. For purposes of this Agreement, a
"Company Superior Proposal" means any proposal with respect to a transaction
which the Board of Directors of the Company determines in its good faith
judgment, based on the advice of a investment banking firm of national
reputation and after consultation with outside counsel, to be more favorable to
the Company's stockholders than the Merger.
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(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 4.2, the Company shall promptly advise Parent orally
and in writing of any request for information or of any Company Takeover
Proposal, the material terms and conditions of such request or Company Takeover
Proposal and the identity of the person making such request or Company Takeover
Proposal. The Company will keep Parent reasonably informed of the status and
details (including amendments or proposed amendments) of any such request or
Company Takeover Proposal.
(d) Nothing contained in this Section 4.2 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders (including any withdrawal or modification of the Board's
position with respect to this Agreement or the Merger) if, in the good faith
judgment of the Board of Directors of the Company, after consultation with
outside counsel, failure to so disclose could reasonably be expected to result
in a breach of its fiduciary duties to the Company's stockholders under
applicable law; provided, however, that, neither the Company nor its Board of
Directors nor any committee thereof shall, except in connection with a
termination permitted by Section 4.2(b), withdraw or modify, or propose publicly
to withdraw or modify, its position with respect to this Agreement or the Merger
or approve or recommend, or propose publicly to approve or recommend, a Company
Takeover Proposal.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Preparation of the Form S-4 and the Proxy Statement;
Stockholders Meetings. (a) As soon as practicable following the date of this
Agreement, the Company and Parent shall prepare and file with the SEC the Proxy
Statement and Parent shall prepare and file with the SEC the Form S-4, in which
the Proxy Statement will be included as a prospectus. Each of the Company and
Parent shall use reasonable best efforts to have the Form S-4 declared effective
under the Securities Act as promptly as practicable after such filing. The
Company and Parent will use all their respective reasonable efforts to cause the
Proxy Statement to be mailed to the holders of Company Common Stock and the
Parent Common Stock as promptly as practicable after the Form S-4 is declared
effective under the Securities Act. Parent shall also take any action (other
than qualifying to do business in any jurisdiction in which it is not now so
qualified or to file a general consent to service of process) required to be
taken under any applicable state securities laws in connection with the issuance
of the Parent Common Stock in the Merger and in respect of Company Options
pursuant Section 5.6 and the Company shall furnish all information concerning
the Company and the holders of Company Common Stock as may be reasonably
requested in connection with any such action. No filing of, or amendment or
supplement to, the Form S-4 or the Proxy Statement will be made by Parent or the
Company without providing the other with the opportunity to review and comment
thereon. Parent will advise the Company, promptly after it receives notice
thereof, of the time when the Form S-4 has become effective or any supplement or
amendment has been filed, the issuance of any stop order, the suspension of the
qualification of the Parent Common Stock issuable in connection with the Merger
for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Proxy Statement or the Form S-4 or comments thereon and
responses thereto or requests by the SEC for additional information. If at any
time prior to the Effective Time any information relating to the Company or
Parent, or any of their respective affiliates, officers or directors, should be
discovered by the Company or Parent which should be set forth in an amendment or
supplement to any of the Form S-4 or the Proxy Statement, so that any of such
documents would not include any misstatement of a material fact or omit to state
any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other parties hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the stockholders of the Company and Parent.
(b) The Company shall, as promptly as reasonably practicable after the date
hereof duly call, give notice of, convene and hold a meeting of its stockholders
(the "Company Stockholders Meeting") in accordance with the DGCL for the purpose
of obtaining the Company Stockholder Approval and, subject to its rights
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under Section 4.2(b), shall, through its Board of Directors, recommend to its
stockholders the approval and adoption of this Agreement, the Merger and the
other transactions contemplated hereby.
(c) Parent shall, as promptly as reasonably practicable after the date
hereof give notice of, convene and hold a meeting of its stockholders (the
"Parent Stockholders Meeting") in accordance with the DGCL and the requirements
of the NYSE for the purpose of obtaining the Parent Stockholder Approval and
shall, through its Board of Directors, recommend to its stockholders the
approval and adoption of the Charter Amendment Proposal and the issuance of
shares of Parent Common Stock pursuant to the Merger or in respect of Company
Stock Options pursuant to Section 5.6.
Section 5.2 Letters of the Company's Accountants. (a) The Company shall
use reasonable best efforts to cause to be delivered to Parent two letters from
the Company's independent accountants, one dated as of the date on which the
Form S-4 shall become effective and one dated as of the Closing Date, each
addressed to Parent, in form and substance reasonably satisfactory to Parent and
customary in scope and substance for comfort letters delivered by independent
public accountants in connection with registration statements similar to the
Form S-4.
(b) The Company shall use reasonable best efforts to cause to be delivered
to Parent and Parent's independent accountants two letters from the Company's
independent accountants addressed to Parent and the Company, one dated as of the
date the Form S-4 is declared effective and one dated as of the Closing Date, in
each case stating that no conditions exist that would preclude the Company from
being a party to a business combination to be accounted for as a pooling of
interests.
Section 5.3 Letters of Parent's Accountants. (a) Parent shall use
reasonable best efforts to cause to be delivered to the Company two letters from
Parent's independent accountants, one dated as of the date on which the Form S-4
shall become effective and one dated as of the Closing Date, each addressed to
the Company, in form and substance reasonably satisfactory to the Company and
customary in scope and substance for comfort letters delivered by independent
public accountants in connection with registration statements similar to the
Form S-4.
(b) Parent shall use reasonable best efforts to cause to be delivered to
the Company and the Company's independent accountants two letters from Parent's
independent accountants addressed to the Company and Parent, one dated as of the
date the Form S-4 is declared effective and one dated as of the Closing Date, in
each case stating that no conditions exist that would preclude the Parent from
being a party to a business combination to be accounted for as a pooling of
interests.
Section 5.4 Access to Information; Confidentiality. Subject to the
Confidentiality Agreement, dated October 27, 1997, between Parent and the
Company (the "Confidentiality Agreement"), and subject to the restrictions
contained in confidentiality agreements to which such party is subject and
applicable law, each of the Company and Parent shall, and shall cause each of
its respective subsidiaries to, afford to the other party and to the officers,
employees, accountants, counsel, financial advisors and other representatives of
such other party, reasonable access during normal business hours during the
period prior to the Effective Time to all their respective properties, books,
contracts, commitments, personnel, reports and records and, during such period,
each of the Company and Parent shall, and shall cause each of its respective
subsidiaries to, furnish promptly to the other party (a) a copy of each report,
schedule, registration statement and other document filed by it during such
period pursuant to the requirements of federal or state securities laws and (b)
all other information concerning its business, properties and personnel as such
other party may reasonably request. No review pursuant to this Section 5.4 shall
affect any representation or warranty given by the other party hereto. Each of
the Company and Parent will hold, and will cause its respective officers,
employees, accountants, counsel, financial advisors and other representatives
and affiliates to hold, any nonpublic information in accordance with the terms
of the Confidentiality Agreement.
Section 5.5 Reasonable Best Efforts. (a) Upon the terms and subject to
the conditions set forth in this Agreement, each of the parties agrees to use
its reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable,
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the Merger and the other transactions contemplated by this Agreement, including
(i) the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings and the taking of all steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated by this Agreement, including
seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity or any Restraint (as defined in Section 6.1(d))
vacated or reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement. Nothing set forth in this
Section 5.5(a) will limit or affect actions permitted to be taken pursuant to
Section 4.2.
(b) In connection with and without limiting the foregoing, the Company and
Parent shall use reasonable best efforts (i) to take all action necessary to
ensure that no state takeover statute or similar statute or regulation is or
becomes applicable to this Agreement or the Merger or any of the other
transactions contemplated hereby or thereby and (ii) if any state takeover
statute or similar statute or regulation becomes applicable to this Agreement or
the Merger or any other transaction contemplated hereby or thereby, to take all
action necessary to ensure that the Merger and the other transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise to minimize the effect of
such statute or regulation on the Merger and the other transactions contemplated
by this Agreement.
(c) Each of the Company and Parent shall cooperate with each other in
obtaining opinions of Debevoise & Plimpton and Jones, Day, Reavis & Pogue, each
dated as of the Effective Time, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code. In connection
therewith, each of Parent, Sub and the Company shall deliver to such counsel
customary representation letters in form and substance reasonably satisfactory
to such counsel and the Company shall use all reasonable efforts to obtain any
representation letters from appropriate stockholders and shall deliver any such
letters obtained to Debevoise & Plimpton and Jones, Day, Reavis & Pogue (the
representation letters referred to in this sentence are collectively referred to
as the "Tax Certificates").
Section 5.6 Company Stock Options, Incentive and Benefit Plans. (a) After
the Company Stockholder Approval, but prior to the Effective Time, each
outstanding Company Stock Option will be deemed exercisable and converted into a
right to receive that number of shares of Parent Common Stock determined below.
For each holder, the value of each Company Stock Option (the "Adjusted Fair
Value") shall equal 102% of the excess of (i) the closing price of a share of
Parent Common Stock on the date on which the Company Stockholder Approval is
obtained (the "Closing Value"), multiplied by the Exchange Ratio, over (ii) the
per share exercise price of each such Company Stock Option. The number of shares
of Parent Common Stock issuable to each such holder (the "Settlement Shares")
shall be equal to the quotient of the (A) Adjusted Fair Value divided by (B) the
Closing Value, and shall represent the fair settlement value of all rights
thereunder.
(b) Parent shall establish a mechanism whereby each holder of Company Stock
Options permitted to sell Settlement Shares without registration under the
Securities Act can convert a portion of the Settlement Shares to cash through
open market sales of such Settlement Shares to be effected by a broker selected
by Parent, to the extent necessary to satisfy the minimum withholding tax
obligation with respect to such holder; provided, however, that, if Parent's and
the Company's accountants conclude that it will not prevent the transactions
contemplated by this Agreement from being eligible to qualify as a pooling of
interests, such mechanism shall also be made available to such holders for any
Settlement Shares in excess of the number of shares necessary to satisfy such
tax withholding. Parent shall, at least 10 days prior to the Effective Time,
identify the person to whom such holders may direct sales orders and Parent
shall deliver (or cause the Exchange Agent to deliver) the aggregate number of
shares of Parent Common Stock subject to all such sales orders received prior to
the Effective Time to the broker as soon as practicable thereafter, but no later
than five
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business days after the Effective Time. Each holder shall be responsible for the
payment of commissions related to such sales, which shall be deducted from the
proceeds of such sales.
(c) Except as set forth in the third sentence of this Section 5.6(c), from
and for a period of at least one year after the Effective Time, Parent shall or
shall cause the Surviving Corporation to provide each employee of the Company
and its subsidiaries (the "Company Employees") and any former employee of the
Company or its subsidiaries entitled to receive benefits under a Company Benefit
Plan at the Effective Time (the "Former Company Employees") either: (i)
substantially similar benefits to those provided under the applicable Company
Benefits Plans; or (ii) the same benefits Parent provides to its similarly
situated employees or former employees; or (iii) benefits which meet the
requirements of Section 5.6(c)(i) for a portion of the one year period and which
meet the requirements of Section 5.6(c)(ii) for the remainder of such one year
period. For purposes of eligibility to participate and vesting in its benefit
plans, Parent shall recognize service with the Company and its subsidiaries
prior to the Effective Time. From and for a period at least one year after the
Effective Time, Parent shall or shall cause the Surviving Corporation to
maintain the Company's Retirement Plan (the "Company Retirement Plan") with
benefit accruals no less favorable than those on the date hereof. Each Company
Employee shall be eligible to participate in the Company Retirement Plan in
accordance with its terms. Notwithstanding the foregoing, provisions of this
Section 5.6(c), nothing contained herein shall prohibit Parent or the Surviving
Corporation from merging or consolidating the Company Retirement Plan with any
other defined benefit plan maintained by Parent or the Surviving Corporation. On
and after the Effective Time, Parent or the Surviving Corporation may cause the
Company Benefit Plans to provide that Company Employees and Former Company
Employees shall no longer participate in any of the Company Benefit Plans;
provided, however, that Parent shall or shall cause the Surviving Corporation to
honor or assume the obligation of the Company under each Company Benefit Plan
(including, without limitation, plans for the benefit of directors of the
Company) with respect to vested benefits at the Effective Time. On and for a
period of one year after the Effective Time, Company Employees shall be eligible
for severance benefits as provided in Section 5.6(c) of the Company Disclosure
Schedule. For purposes of determining the amount of benefits to be paid to a
Company Employee from the severance plan, years of service with the Company, the
Company's subsidiaries, Parent and the Surviving Corporation shall be counted.
Except as set forth in this Section 5.6(c), nothing in this Section 5.6(c) shall
prohibit Parent or the Surviving Corporation from amending, modifying or
terminating any employee benefit plan of Parent or the Surviving Corporation.
Section 5.7 Indemnification, Exculpation and Insurance. (a) Parent and
Sub agree that all rights to indemnification and exculpation from liabilities
for acts or omissions occurring at or prior to the Effective Time now existing
in favor of the current or former directors, officers, employees or agents of
the Company and its subsidiaries as provided in their respective certificates of
incorporation or by-laws (or comparable organizational documents) and any
indemnification agreements or arrangements of the Company the existence of which
does not cause a breach of this Agreement shall be assumed by Parent, shall
survive the Merger and shall continue in full force and effect, without
amendment, for six years after the Effective Time; provided, however, that all
rights to indemnification in respect of any claim asserted or made within such
period shall continue until the final disposition of such claim. Parent shall
pay any expenses of any indemnified person under this Section 5.7 in advance of
the final disposition of any action, proceeding or claim relating to any such
act or omission to the fullest extent permitted under the DGCL upon receipt from
the applicable indemnified person to whom advances are to be advanced of any
undertaking to repay such advances required under the DGCL. Parent shall
cooperate in the defense of any such matter. In addition, from and after the
Effective Time, directors or officers of the Company who become directors or
officers of Parent will be entitled to the same indemnity rights and protections
as are afforded to other directors and officers of Parent.
(b) In the event that either of the Surviving Corporation or Parent or any
of its successors or assigns (i) consolidates with or merges into any other
person and is not the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially all of
its properties and assets to any person, then, and in each such case, proper
provision will be made so that the successors and assigns of Parent or the
Surviving Corporation, as applicable, will assume the obligations thereof set
forth in this Section 5.7.
(c) The provisions of this Section 5.7 (i) are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her heirs
and his or her representatives and (ii) are in addition to, and not in
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substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
(d) For six years after the Effective Time, Parent or the Surviving
Corporation shall maintain in effect the Company's current directors' and
officers' liability insurance covering acts or omissions occurring prior to the
Effective Time with respect to those persons who are currently covered by the
Company's directors' and officers' liability insurance policy on terms with
respect to such coverage and amount no less favorable in the aggregate to the
Company's directors and officers currently covered by such insurance than those
of such policy in effect on the date hereof; provided that Parent may substitute
therefor policies of Parent or its subsidiaries containing terms with respect to
coverage and amount no less favorable to such directors or officers; provided,
further, that in no event shall Parent or the Surviving Corporation be required
to pay aggregate premiums for insurance for the benefit of persons currently
covered by the Company's officers' and directors' insurance policy under this
Section 5.7(d) in excess of 200% of the aggregate premiums paid by the Company
in 1997 on an annualized basis for such purpose.
(e) Parent shall cause the Surviving Corporation or any successor thereto
to comply with its obligations under this Section 5.7.
Section 5.8 Fees and Expenses. (a) Except as provided in this Section
5.8, all fees and expenses incurred in connection with the Merger, this
Agreement, and the transactions contemplated by this Agreement shall be paid by
the party incurring such fees or expenses, whether or not the Merger is
consummated.
(b)(i) In the event that this Agreement is terminated by the Company
pursuant to Section 7.1(e) or, after the date hereof but prior to any
termination of this Agreement, the Company or its Board of Directors shall have
taken any action to make the Company Rights Agreement inapplicable (through
termination or otherwise) to any person other than Parent, Sub or another wholly
owned subsidiary of Parent, then, concurrently with any such termination, the
Company shall pay Parent a fee equal to $75 million by wire transfer of same day
funds.
(ii) In the event that (A) a Pre-Termination Takeover Proposal Event (as
defined below) shall occur and thereafter this Agreement is terminated by either
Parent or the Company pursuant to Section 7.1(b)(ii), by Parent pursuant to
Section 7.1(f) or 7.1(g) or by the Company pursuant to Section 7.1(b)(i) and (B)
prior to the date that is 12 months after the date of such termination the
Company enters into a Company Acquisition Agreement, then the Company shall (1)
promptly, but in no event later than two business days after the date such
Company Acquisition Agreement is entered into, pay Parent a fee equal to $25
million by wire transfer of same day funds, and (2) promptly, but in no event
later than two business days after the date the transactions set forth in such
Company Acquisition Agreement (or any other Company Acquisition Agreement
entered into within 12 months after the date of this Agreement) are consummated,
pay Parent an additional fee equal to $50 million by wire transfer of same day
funds.
(iii) In the event that this Agreement is terminated under the
circumstances contemplated by Section 5.8(b)(ii), the Company shall promptly pay
upon Parent's request all reasonable out-of-pocket expenses incurred by Parent
in connection with this Agreement and the transactions contemplated hereby (such
expenses not to exceed $7,500,000 in the aggregate), which shall be credited
against any termination fee payable pursuant to Section 5.8(b)(ii).
(iv) In the event that this Agreement is terminated pursuant to Section
7.1(b)(iii), (A) if the affirmative vote described in Section 3.3(m)(ii) shall
have been obtained but the affirmative vote described in Section 3.3(m)(i) shall
not have been obtained, Parent shall promptly, but in no event later than five
business days after the date of such termination, pay the Company a fee equal to
$75 million, by wire transfer of same day funds or (B) if the affirmative vote
described in Section 3.3(m)(ii) shall not have been obtained, Parent shall
promptly pay upon the Company's request all reasonable out-of-pocket expenses
incurred by the Company in connection with this Agreement and the transactions
contemplated hereby (such expenses not to exceed $7,500,000 in the aggregate).
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(v) For purposes of this Section 5.8(b), a "Pre-Termination Takeover
Proposal Event" shall be deemed to occur if a Company Takeover Proposal shall
have been made public or any person shall have publicly announced an intention
(whether or not conditional) to make a Company Takeover Proposal and shall have
not withdrawn such Company Takeover Proposal at the time of the action giving
rise to the termination of this Agreement.
(vi) The parties acknowledge that the agreements contained in this Section
5.8(b) are an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, the other parties would not enter into this
Agreement. Accordingly, if the Company or Parent, as the case may be, fails
promptly to pay the amount due to be paid by it pursuant to this Section 5.8(b),
and, in order to obtain such payment, the other party commences a suit which
results in a judgment against the defaulting party for any of the fees set forth
in this Section 5.8(b), the defaulting party shall pay to the non-defaulting
party its costs and expenses (including attorneys' fees and expenses) in
connection with such suit.
Section 5.9 Public Announcements. Parent and the Company will consult
with each other before issuing, and provide each other the opportunity to
review, comment upon and concur with and use reasonable efforts to agree on, any
press release or other public statements with respect to the transactions
contemplated by this Agreement, including the Merger, and shall not issue any
such press release or make any such public statement prior to such consultation,
except as either party may determine is required by applicable law or court
process or by obligations pursuant to any listing agreement with any national
securities exchange. The parties agree that the initial press release to be
issued with respect to the transactions contemplated by this Agreement shall be
in the form heretofore agreed to by the parties.
Section 5.10 Affiliates. (a) Concurrently with the execution of this
Agreement (or with respect to relevant persons who are not available on the date
hereof, as soon as practicable after the date hereof), the Company shall deliver
to Parent a written agreement substantially in the form attached as Exhibit A
hereto of all of the persons who are "affiliates" of the Company for purposes of
Rule 145 under the Securities Act or for purposes of qualifying the Merger for
pooling of interests accounting treatment under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations, all of whom are, as
of the date of this Agreement, identified in Section 5.10 of the Company
Disclosure Schedule. Section 5.10 of the Company Disclosure Schedule shall be
updated by the Company as necessary to reflect changes from the date hereof and
the Company shall use all reasonable efforts to cause each person added to such
schedule after the date hereof to deliver a similar agreement. Parent shall
cause all persons who are affiliates of Parent for purposes of qualifying the
Merger for pooling of interests accounting treatment under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations to comply
with the fourth paragraph of Exhibit A hereto.
(b) Parent shall use its reasonable best efforts to publish on the earliest
possible date after the end of the first month after the Effective Time in which
there are at least 30 days of post-Merger combined operations (which month may
be the month in which the Effective Time occurs), combined sales and net income
figures as contemplated by and in accordance with the terms of SEC Accounting
Series Release No. 135 (the time such results are published, the "Permitted
Sales Time"). This Section 5.10(b) is intended to be for the benefit of
affiliates of the Company.
Section 5.11 Stock Exchange Listings. Parent shall use reasonable best
efforts to cause the Parent Common Stock issuable under pursuant to the Merger
or in respect of Company Stock Options pursuant to Section 5.6 to be approved
for listing on the NYSE and PSE, in each case subject to official notice of
issuance, as promptly as practicable after the date hereof, and in any event
prior to the Closing Date.
Section 5.12 Stockholder Litigation. Each of the Company and Parent shall
give the other the reasonable opportunity to participate in the defense of any
stockholder litigation against the Company or Parent, as applicable, and its
directors relating to the transactions contemplated by this Agreement.
Section 5.13 Tax Treatment. Each of Parent and the Company shall use
reasonable best efforts to cause the Merger to qualify as a reorganization under
the provisions of Section 368 of the Code and to obtain
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the opinion of counsel referred to in Section 6.2(f) and 6.3(d) and each of the
Company and Parent agrees that it shall take no action that would cause such tax
treatment not to be obtained.
Section 5.14 Pooling of Interests. Each of the Company and Parent shall
use reasonable best efforts to cause the transactions contemplated by this
Agreement, including the Merger, to be accounted for as a pooling of interests
under Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations, and such accounting treatment to be accepted by Parent's
accountants and by the SEC, and each of the Company and Parent agrees that it
shall take no action that would cause such accounting treatment not to be
obtained.
Section 5.15 Conveyance Taxes. Parent and the Company shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees or any similar taxes which become payable
in connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time. Parent shall
pay, and the Company shall pay, without deduction or withholding from any amount
payable to the holders of Company Common Stock, any such taxes or fees imposed
by any Governmental Entity, which become payable in connection with the
transactions contemplated by this Agreement, on behalf of their respective
stockholders.
Section 5.16 Certain Contracts. Parent shall, and shall cause the
Surviving Corporation to, expressly assume the obligations of the Company or any
subsidiary thereof under contracts, indentures, guarantees, securities, leases
and other instruments thereof in accordance with their respective terms, as and
to the extent necessary to avoid any breach, penalty, termination, default,
payment or prepayment that would otherwise result from the execution of this
Agreement or the consummation of the transactions contemplated hereby.
Section 5.17 Directors of Parent. Parent agrees that promptly after the
Effective Time, Parent shall use all reasonable efforts to cause two persons
mutually agreed upon to be appointed to the Board of Directors of Parent.
Section 5.18. Parent 1990 Stock Plan. Prior to the Effective Time, Parent
shall have obtained from each holder of an outstanding Parent Stock Option or
grant of restricted stock, deferred stock or phantom stock any necessary written
waiver of any right of such holder to a cash settlement of such Parent Stock
Options or grants which may arise by reason of any of the transactions
contemplated by this Agreement.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver by each of Parent and the Company on or prior to
the Closing Date of the following conditions:
(a) Stockholder Approval. The Company Stockholder Approval and the
Parent Stockholder Approval shall have been obtained.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or
shall have expired.
(c) Governmental and Regulatory Approvals. Other than the filing
provided for under Section 1.3 and filings pursuant to the HSR Act (which
are addressed in Section 6.1(b)), all consents, approvals and actions of,
filings with and notices to any Governmental Entity required of the
Company, Parent or any of their subsidiaries to consummate the Merger and
the other transactions contemplated hereby shall have been obtained or
made, the failure of which to be obtained or taken is reasonably expected
to have a material adverse effect on Parent and its prospective
subsidiaries, taken as a whole.
(d) No Injunctions or Restraints. No judgment, order, decree,
statute, law, ordinance, rule or regulation, entered, enacted, promulgated,
enforced or issued by any court or other Governmental Entity
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of competent jurisdiction or other legal restraint or prohibition
(collectively, "Restraints") shall be in effect (i) preventing the
consummation of the Merger, or (ii) which otherwise is reasonably likely to
have a material adverse effect on the Company or Parent, as applicable;
provided, however, the party relying upon this condition shall have
complied with Section 5.5(a)(iii).
(e) Form S-4. The Form S-4 shall have become effective under the
Securities Act prior to the mailing of the Proxy Statement by the Company
and Parent to their respective stockholders and no stop order or
proceedings seeking a stop order shall have been entered or be pending by
the SEC.
(f) NYSE and PSE Listings. The shares of Parent Common Stock issuable
to the Company's stockholders pursuant to the Merger or in respect of
Company Stock Options pursuant to Section 5.6 shall have been approved for
listing on the NYSE and the PSE, subject to official notice of issuance.
(g) Pooling Letters. Parent and the Company shall have received the
letters as to treatment of the Merger as a pooling of interests
contemplated by Sections 5.2(b) and 5.3(b).
Section 6.2 Conditions to Obligations of Parent. The obligation of Parent
to effect the Merger is further subject to satisfaction or waiver of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth herein shall be true and correct both
when made and at and as of the Closing Date, as if made at and as of such
time (except to the extent expressly made as of an earlier date, in which
case as of such date), except where the failure of such representations and
warranties to be so true and correct (without giving effect to any
limitation as to "materiality", "material adverse effect" or "material
adverse change" set forth therein) does not have, and would not reasonable
be expected to have, individually or in the aggregate, a material adverse
effect on the Company.
(b) Performance of Obligations of the Company. The Company shall have
performed all obligations required to be performed by it under this
Agreement at or prior to the Closing Date in all material respects, it
being agreed that a failure to comply with the provisions of Section 4.1(c)
in any respect shall be deemed to be a material breach with the effect that
Parent shall not be obligated to complete the Merger.
(c) Discovery Project. Parent shall be satisfied in its sole
discretion that Texaco Exploration and Productions Inc. shall have
irrevocably waived its right to require the disposition of the Company's
indirect membership interest in Discovery Gas Transmission LLC by reason of
the transactions contemplated by this Agreement.
(d) No Material Adverse Change. At any time after the date of this
Agreement there shall not have been a material adverse change relating to
the Company.
(e) Tax Opinion. Parent shall have received from Jones, Day, Reavis &
Pogue an opinion to the effect that the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code, and
Parent, Sub and the Company will each be a party to such reorganization
within the meaning of Section 368(b) of the Code. In rendering such
opinion, counsel may require delivery of and rely upon the Tax
Certificates.
Section 6.3 Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger is further subject to satisfaction or waiver of
the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent set forth herein shall be true and correct both when
made and at and as of the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case
as of such date), except where the failure of such representations and
warranties to be so true and correct (without giving effect to any
limitation as to "materiality", "material adverse effect" or "material
adverse change" set forth therein) does not have, and would not reasonably
be expected to have, individually or in the aggregate, a material adverse
effect on Parent.
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(b) Performance of Obligations of Parent. Parent shall have performed
all obligations required to be performed by it under this Agreement at or
prior to the Closing Date in all material respects.
(c) No Material Adverse Change. At any time after the date of this
Agreement there shall not have been a material adverse change relating to
Parent.
(d) Tax Opinion. The Company shall have received from Debevoise &
Plimpton an opinion to the effect that the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code, and
Parent, Sub and the Company will each be a party to such reorganization
within the meaning of Section 368(b) of the Code. In rendering such
opinion, counsel may require delivery of any rely upon the Tax
Certificates.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, and (except as otherwise provided in Section
4.2(b)) whether before or after the Company Stockholder Approval or the Parent
Stockholder Approval:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by June 30, 1998;
provided, however, that the right to terminate this Agreement pursuant
to this Section 7.1(b)(i) shall not be available to any party whose
failure to perform any of its obligations under this Agreement results
in the failure of the Merger to be consummated by such time; provided,
however, that this Agreement may be extended not more than 60 days by
either party by written notice to the other party if the Merger shall
not have been consummated as a direct result of the condition set forth
in Section 6.1(b) or 6.1(c) failing to have been satisfied and the
extending party reasonably believes that the relevant approvals will be
obtained during such extension period;
(ii) if the Company Stockholder Approval shall not have been
obtained at the Company Stockholders Meeting duly convened therefor or
at any adjournment or postponement thereof;
(iii) if the Parent Stockholder Approval shall not have been
obtained at the Parent Stockholders Meeting duly convened therefor or at
any adjournment or postponement thereof;
(iv) if any Restraint having any of the effects set forth in
Section 6.1(d) shall be in effect and shall have become final and
nonappealable;
(c) by Parent, if the Company shall have breached or failed to perform
in any material respect any of its representations, warranties, covenants
or other agreements contained in this Agreement, which breach or failure to
perform (A) would give rise to the failure of a condition set forth in
Section 6.2(a) or (b), and (B) is incapable of being cured by the Company
or is not cured within 30 days of written notice thereof (a "Company
Material Breach") (provided that Parent is not then in Parent Material
Breach (as defined in Section 7.1(d)) of any representation, warranty,
covenant or other agreement contained in this Agreement;
(d) by the Company, if Parent shall have breached or failed to perform
in any material respect any of its representations, warranties, covenants
or other agreements contained in this Agreement, which breach or failure to
perform (A) would give rise to the failure of a condition set forth in
Section 6.3(a) or (b), and (B) is incapable of being cured by Parent or is
not cured within 30 days of written notice thereof (a "Parent Material
Breach") (provided that the Company is not then in Company Material Breach
of any representation, warranty, covenant or other agreement contained in
this Agreement;
(e) by the Company in accordance with Section 4.2(b);
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(f) by Parent if (i) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified its approval or
recommendation of the Merger or this Agreement, or approved or recommended
any Company Takeover Proposal or (ii) the Board of Directors of the Company
shall have resolved to do any of the foregoing; or
(g) by Parent if the Company or any of its officers, directors,
representatives or agents shall take any of the actions proscribed by
Section 4.2 (but for the exceptions therein allowing certain actions to be
taken pursuant to the proviso to the first sentence of Section 4.2(a), the
second sentence of Section 4.2(b) or Section 4.2(d)) in a manner that would
result in a material breach thereof.
Section 7.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent or the Company, other than the provisions of
Section 3.2(o), Section 3.3(k), the last sentence of Section 5.4, Section 5.8,
this Section 7.2 and Article VIII, which provisions survive such termination,
and except to the extent that such termination results from the willful and
material breach by a party of any of its representations, warranties, covenants
or agreements set forth in this Agreement.
Section 7.3 Amendment. This Agreement may be amended by the parties at
any time before or after the Company Stockholder Approval or the Parent
Stockholder Approval; provided, however, that after any such approval, there
shall not be made any amendment that by law requires further approval by the
stockholders of the Company or Parent without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of all of the parties.
Section 7.4 Extension; Waiver. At any time prior to the Effective Time, a
party may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 7.3, waive compliance by the other party with any of the
agreements or conditions contained in this Agreement. Any agreement on the part
of a party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
Section 8.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to
The Williams Companies, Inc.
One Williams Center
Tulsa, Oklahoma 74172
Telecopy No.: 918/588-5942
Attention: William G. von Glahn, Esq.
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with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue, 30th Floor
New York, New York 10022
Telecopy No.: (212) 755-7306
Attention: Jere R. Thomson, Esq.
(b) if to the Company, to
MAPCO Inc.
1800 S. Baltimore Avenue
P.O. Box 645
Tulsa, Oklahoma 74101-0645
Telecopy No.: 918/599-3696
Attention: David Bowman, Esq.
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopy No.: 212/909-6836
Attention: Franci J. Blassberg, Esq.
Section 8.3 Definitions. For purposes of this Agreement:
(a) except as otherwise provided for in this Agreement, an "affiliate"
of any person means another person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common
control with, such first person, where "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management policies of a person, whether through the ownership of
voting securities, by contract, as trustee or executor, or otherwise;
(b) "material adverse change" or "material adverse effect" means, when
used in connection with the Company or Parent, any change, effect, event,
occurrence or state of facts that is, or would reasonably be expected to
be, materially adverse to the business, financial condition or results of
operations of such party and its subsidiaries taken as a whole, other than
any change, effect, event or occurrence constituting or relating to any of
the following:
(i) the United States economy or securities markets in general;
(ii) this Agreement or the transactions contemplated hereby or the
announcement thereof;
(iii) the natural resources industry in general, and not
specifically relating to Parent or the Company or their respective
subsidiaries;
(iv) the resignation of officers or employees of the Company or
Parent or their respective subsidiaries; and
(v) changes in GAAP;
(c) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity;
(d) a "subsidiary" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board
of Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly
or indirectly by such first person;
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(e) "belief" of any person which is not an individual means the actual
belief of such person's executive officers; and
(f) "knowledge" of any person which is not an individual means the
actual knowledge of such person's executive officers.
Section 8.4 Interpretation. When a reference is made in this Agreement to
an Article, Section or Exhibit, such reference shall be to an Article or Section
of, or an Exhibit to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". 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. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns.
Section 8.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 8.6 Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including the documents and instruments referred to herein) and the
Confidentiality Agreements (a) constitute the entire agreement, and supersede
all prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter of this Agreement and (b) except for
the provisions of Article II, Sections 5.6, 5.7 and 5.10(b), are not intended to
confer upon any person other than the parties any rights or remedies.
Section 8.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflict of
laws thereof.
Section 8.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties; provided, however, that Sub may
assign its rights and obligations, in whole or in part, under this Agreement to
any other wholly owned subsidiary of Parent. Any assignment in violation of the
preceding sentence shall be void. Subject to the preceding two sentences, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
Section 8.9 Consent to Jurisdiction. Each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any federal court
located in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
and (c) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
federal court sitting in the State of Delaware or a Delaware state court.
Section 8.10 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other
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provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
Section 8.11 Enforcement. The parties agree that irreparable damage would
occur and that the parties would not have any adequate remedy at law in the
event that 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 of this Agreement in any federal court located in the
State of Delaware or in Delaware state court, this being in addition to any
other remedy to which they are entitled at law or in equity.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
THE WILLIAMS COMPANIES, INC.
By /s/ KEITH E. BAILEY
------------------------------------
Title: Chairman of the Board and
Chief Executive Officer
TML ACQUISITION CORP.
By /s/ KEITH E. BAILEY
------------------------------------
Title: President
MAPCO INC.
By /s/ JAMES E. BARNES
------------------------------------
Title: Chairman and Chief Executive
Officer
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APPENDIX B
[MORGAN STANLEY LETTERHEAD]
November 23, 1997
Board of Directors
MAPCO Inc.
180 South Baltimore Avenue
Tulsa, OK 74119
Members of the Board of Directors:
We understand that MAPCO Inc. ("MAPCO" or the "Company"), The Williams
Companies, Inc. ("Williams"), and TML Acquisition Corp., a wholly owned
subsidiary of Williams ("Acquisition Sub") propose to enter into an Agreement
and Plan of Merger, substantially in the form of the agreement dated as of
November 23, 1997 (the "Merger Agreement"), which provides, among other things,
for the merger (the "Merger") of Acquisition Sub with and into MAPCO. Pursuant
to the Merger, MAPCO will become a wholly owned subsidiary of Williams and each
issued and outstanding share of common stock, par value $1.00 per share, of
MAPCO (the "Company Common Stock"), other than shares owned by the Company or as
to which dissenters' rights have been perfected, will be converted into the
right to receive 0.8325 shares (the "Exchange Ratio") of common stock, par value
$1.00 per share, of Williams (the "Williams Common Stock"). The terms and
conditions of the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to
the Merger Agreement is fair from a financial point of view to the holders of
the Company Common Stock.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company and Williams, respectively;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning the Company and Williams prepared
by their respective managements;
(iii) analyzed certain financial projections of the Company and
Williams prepared by their respective managements;
(iv) discussed the past and current operations and financial condition
and the prospects of the Company and Williams with senior executives of the
Company and Williams, respectively;
(v) reviewed the reported prices and trading activity for the Company
Common Stock and the Williams Common Stock;
(vi) compared the financial performance of the Company and Williams
and the prices and trading activity of the Company Common Stock and the
Williams Common Stock with that of certain other comparable publicly-traded
companies and their securities;
(vii) reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions;
(viii) reviewed the pro forma financial impact of the Merger on
Williams;
(ix) reviewed and discussed with the management of the Company their
estimates of the strategic, operational and financial benefits anticipated
from the Merger;
(x) participated in discussions and negotiations among representatives
of the Company and Williams and their respective financial and legal
advisors;
(xi) reviewed the draft Merger Agreement and certain related
documents; and
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(xii) performed such other analyses and examinations and considered
such other factors as we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, including information
relating to certain strategic, financial and operational benefits anticipated
from the Merger, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
future financial performance of the Company and Williams. In addition, we have
assumed that the Merger will be consummated in accordance with the terms set
forth in the Merger Agreement, including, among other things, that the Merger
will be accounted for as a "pooling of interest" business combination in
accordance with U.S. Generally Accepted Accounting Principles and will be
treated as a tax-free reorganization and/or exchange, each pursuant to the
Internal Revenue Code of 1986. We have not made any independent valuation or
appraisal of the assets or liabilities of the Company, nor have we been
furnished with any such appraisals. Our opinion is necessarily based on
economic, market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition of the Company
or any of its assets.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for the Company and Williams and have
received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of the Company only and may not be used for any other purpose without
our prior written consent, except that this opinion may be included in the
entirety in any filing made by the Company with the Securities and Exchange
Commission with respect to the Merger. In addition, we express no opinion or
recommendation as to how the shareholders of the Company should vote at the
shareholders' meeting held in connection with the Merger.
Based on the foregoing, we are of the opinion on the date hereof that the
Exchange Ratio pursuant to the Merger Agreement is fair from a financial point
of view to the holders of the Company Common Stock.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Stephen R. Munger
------------------------------------
Stephen R. Munger
Managing Director
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APPENDIX C
[LETTERHEAD OF SMITH BARNEY INC.]
November 23, 1997
The Board of Directors
The Williams Companies, Inc.
One Williams Center
Tulsa, Oklahoma 74172
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to The Williams Companies, Inc. ("Williams") of the consideration to be
paid by Williams pursuant to the terms and subject to the conditions set forth
in the Agreement and Plan of Merger, dated as of November 23, 1997 (the "Merger
Agreement"), by and among Williams, TML Acquisition Corp., a wholly owned
subsidiary of Williams ("Sub"), and MAPCO Inc. ("MAPCO"). As more fully
described in the Merger Agreement, (i) Sub will be merged with and into MAPCO
(the "Merger") and (ii) each outstanding share of the common stock, par value
$1.00 per share, of MAPCO (the "MAPCO Common Stock") will be converted into the
right to receive 0.8325 (the "Exchange Ratio") of a share of the common stock,
par value $1.00 per share, of Williams (the "Williams Common Stock").
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of Williams and certain senior officers and other representatives
and advisors of MAPCO concerning the businesses, operations and prospects of
Williams and MAPCO. We examined certain publicly available business and
financial information relating to Williams and MAPCO as well as certain
financial forecasts and other information and data for Williams and MAPCO which
were provided to or otherwise discussed with us by the respective managements of
Williams and MAPCO, including information relating to certain strategic
implications and operational benefits anticipated to result from the Merger. We
reviewed the financial terms of the Merger as set forth in the Merger Agreement
in relation to, among other things: current and historical market prices and
trading volumes of Williams Common Stock and MAPCO Common Stock; the historical
and projected earnings and other operating data of Williams and MAPCO; and the
capitalization and financial condition of Williams and MAPCO. We considered, to
the extent publicly available, the financial terms of certain other similar
transactions recently effected which we considered relevant in evaluating the
Merger and analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations we
considered relevant in evaluating those of Williams and MAPCO. We also evaluated
the potential pro forma financial impact of the Merger on Williams. In addition
to the foregoing, we conducted such other analyses and examinations and
considered such other financial, economic and market criteria as we deemed
appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to financial forecasts and other information
and data provided to or otherwise reviewed by or discussed with us, we have been
advised by the managements of Williams and MAPCO that such forecasts and other
information and data were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the respective managements of
Williams and MAPCO as to the future financial performance of Williams and MAPCO
and the strategic implications and operational benefits (including the amount,
timing and achievability thereof) anticipated to result from the Merger. We have
assumed, with your consent, that the Merger will be treated as a pooling of
interests in accordance with generally accepted accounting principles and as a
tax-free reorganization for federal income tax purposes. Our
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The Board of Directors
The Williams Companies, Inc.
November 23, 1997
Page 2
opinion, as set forth herein, relates to the relative values of Williams and
MAPCO. We are not expressing any opinion as to what the value of the Williams
Common Stock actually will be when issued to MAPCO stockholders pursuant to the
Merger or the price at which the Williams Common Stock will trade subsequent to
the Merger. We have not made or been provided with an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of Williams or
MAPCO nor have we made any physical inspection of the properties or assets of
Williams or MAPCO. We were not requested to consider, and our opinion does not
address, the relative merits of the Merger as compared to any alternative
business strategies that might exist for Williams or the effect of any other
transaction in which Williams might engage. Our opinion is necessarily based
upon information available to us, and financial, stock market and other
conditions and circumstances existing and disclosed to us, as of the date
hereof.
Smith Barney has been engaged to render financial advisory services to Williams
in connection with the Merger and will receive a fee for such services upon the
delivery of this opinion. We have in the past provided investment banking
services to Williams unrelated to the proposed Merger, for which services we
have received compensation. In the ordinary course of our business, we and our
affiliates may actively trade or hold the securities of Williams and MAPCO for
our own account or for the account of our customers and, accordingly, may at any
time hold a long or short position in such securities. In addition, we and our
affiliates (including Travelers Group Inc. and its affiliates) may maintain
relationships with Williams and MAPCO.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of Williams in its evaluation of the
proposed Merger, and our opinion is not intended to be and does not constitute a
recommendation to any stockholder as to how such stockholder should vote on any
matter relating to the proposed Merger. Our opinion may not be published or
otherwise used or referred to, nor shall any public reference to Smith Barney be
made, without our prior written consent.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the Exchange Ratio is fair, from a
financial point of view, to Williams.
Very truly yours,
SMITH BARNEY INC.
C-2
<PAGE> 121
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection (a) of Section 145 of the Delaware General Corporation Law
("DGCL") empowers a corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or Agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or Agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 145 further provides that to the extent a present or future
director or officer of a corporation has been successful on the merits or
otherwise in the defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; that
indemnification provided for by Section 145 shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director, employee or Agent and shall inure to the benefit of such person's
heirs, executors and administrators; and empowers the corporation to purchase
and maintain insurance on behalf of a director or officer of the corporation
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liabilities under Section
145. Section Seven of Article VIII of Williams' By-Laws provides that Williams
shall indemnify its directors and officers to the fullest extent permitted by
the DGCL.
Williams also provides liability insurance for its directors and officers
which provides for coverage against loss from claims made against directors and
officers in their capacity as such, including, subject to certain exceptions,
liabilities under the federal securities laws. In certain employment agreements,
Williams or its subsidiaries have also agreed to indemnify certain officers
against loss from claims made against such officers in connection with the
performance of their duties under their employment agreements. Such
indemnification is generally to the same extent as provided in the Williams
By-laws.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
of omissions not in good faith or which involve intentional misconduct or a
knowing violation of
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<PAGE> 122
law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which
the director derived an improper personal benefit.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. See Exhibit Index.
(b) Financial Statement Schedules. Not Applicable.
(c) Report, Opinion or Appraisal. See Exhibits 5.1, 8.1 and 8.2 in Exhibit
Index.
ITEM 22. UNDERTAKINGS
The undersigned Williams hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the Joint Proxy Statement/Prospectus any facts or
events arising after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the SEC pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
Registration Statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) above do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by Williams with or furnished
to the SEC pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Williams hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the Williams
Annual Report pursuant to Section 13(a) or Section 15(d) of the Exchange Act
(and, where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Williams
pursuant to the provisions described under Item 20, or otherwise, Williams has
been advised that, in the opinion of the SEC, such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Williams of expenses incurred or paid by
a director, officer or controlling person of Williams in the successful defense
of any action, suit or proceeding) is asserted by
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<PAGE> 123
such director, officer or controlling person in connection with the securities
being registered, Williams will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Williams hereby undertakes as follows: that prior to any public reoffering
of the securities registered hereunder through use of a prospectus which is a
part of this Registration Statement, by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c), the issuer undertakes that
such reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons who may be
deemed underwriters, in addition to the information called for by the other
items of the applicable form.
Williams undertakes that every prospectus: (i) that is filed pursuant to
the immediately preceding paragraph, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offering therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Williams hereby undertakes to respond to requests for information that is
incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or
13 of this Form, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding to
the request.
Williams hereby undertakes to supply by means of a post-effective amendment
all information concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in the Registration
Statement when it became effective.
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<PAGE> 124
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Williams
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, this 26(th) day of January, 1998.
THE WILLIAMS COMPANIES, INC.
(Registrant)
By: /s/ DAVID M. HIGBEE
------------------------------------
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on this 26(th) day of January, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
/s/ KEITH E. BAILEY* Chairman of the Board, President and Chief
- --------------------------------------------- Executive Officer (Principal Executive
Keith E. Bailey Officer) and Director
/s/ JACK D. MCCARTHY* Senior Vice President-Finance (Principal
- --------------------------------------------- Financial Officer)
Jack D. McCarthy
/s/ GARY R. BELITZ* Controller (Principal Accounting Officer)
- ---------------------------------------------
Gary R. Belitz
/s/ GLENN A. COX* Director
- ---------------------------------------------
Glenn A. Cox
/s/ THOMAS H. CRUIKSHANK* Director
- ---------------------------------------------
Thomas H. Cruikshank
Director
- ---------------------------------------------
William E. Green
/s/ PATRICIA L. HIGGINS* Director
- ---------------------------------------------
Patricia L. Higgins
/s/ W.R. HOWELL* Director
- ---------------------------------------------
W.R. Howell
/s/ ROBERT J. LAFORTUNE* Director
- ---------------------------------------------
Robert J. LaFortune
/s/ JAMES C. LEWIS* Director
- ---------------------------------------------
James C. Lewis
/s/ JACK A. MACALLISTER* Director
- ---------------------------------------------
Jack A. MacAllister
/s/ PETER C. MEINIG* Director
- ---------------------------------------------
Peter C. Meinig
/s/ KAY A. ORR* Director
- ---------------------------------------------
Kay A. Orr
</TABLE>
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<PAGE> 125
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
/s/ GORDON R. PARKER* Director
- ---------------------------------------------
Gordon R. Parker
/s/ JOSEPH H. WILLIAMS* Director
- ---------------------------------------------
Joseph H. Williams
*By: /s/ DAVID M. HIGBEE
- ---------------------------------------------
Attorney-in-fact
</TABLE>
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<PAGE> 126
EXHIBIT INDEX
Exhibits required by Item 601 of Regulation S-K:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ -------------------------------------------------------------------------------------------
<C> <C> <S>
2.1 -- Agreement and Plan of Merger, dated as of November 23, 1997 and as amended as of
January 25, 1998, among The Williams Companies, Inc., MAPCO Inc. and TML Acquisition Corp.
included as Appendix A to the Joint Proxy Statement/Prospectus included as part of this
Registration Statement.
3.1 -- Restated Certificate of Incorporation of The Williams Companies, Inc. (incorporated by
reference to Exhibit 4(a) to Williams' Registration Statement on Form 8-B, filed August 20,
1987), Certificate of Amendment to the Restated Certificate of Incorporation, dated May 20,
1994 (incorporated by reference to Exhibit 3(d) to Williams' Annual Report on Form 10-K for
the year ended December 31, 1994), Certificate of Amendment of Restated Certificate of
Incorporation dated May 16, 1997 (incorporated by reference to Exhibit 4.3 to Williams'
Registration Statement on Form S-8, filed November 21, 1997), Certificate of Designation
with respect to the $3.50 Cumulative Convertible Preferred Stock (incorporated by reference
to Exhibit 3.1(c) to the Prospectus and Information Statement to Amendment No. 2 to
Williams' Registration Statement on Form S-4, filed March 30, 1995), Certificate of
Increase of Authorized Number of Shares of Series A Junior Participating Preferred Stock
(incorporated by reference to Exhibit 3(f) to Williams' Annual Report on Form 10-K for the
year ended December 31, 1995).
3.2 -- By-laws of The Williams Companies, Inc. (incorporated by reference to Exhibit 3 to
Williams' Form 10-Q for the quarter ended September 30, 1993).
3.3 -- Rights Agreement, dated as of February 6, 1996, between The Williams Companies, Inc. and
First Chicago Trust Company of New York (incorporated by reference to Exhibit 4 to
Williams' Current Report on Form 8-K filed January 24, 1996).
4 -- See Exhibits 3.1, 3.2 and 3.3 for provisions of the Restated Certificate of Incorporation,
By-Laws and Rights Agreement of The Williams Companies, Inc. defining the rights of holders
of common stock and associated preferred stock purchase rights of The Williams Companies,
Inc.
*5.1 -- Opinion of Jones, Day, Reavis & Pogue as to the legality of the shares being issued
(including consent).
*8.1 -- Opinion of Jones, Day, Reavis & Pogue regarding the federal income tax consequences of the
Merger to Williams stockholders (including consent).
*8.2 -- Opinion of Debevoise & Plimpton regarding the federal income tax consequences of the Merger
to MAPCO stockholders (including consent).
*23.1 -- Consent of Jones, Day, Reavis & Pogue (included in Exhibits 5.1 and 8.1).
*23.2 -- Consent of Debevoise & Plimpton (included in Exhibit 8.2).
*23.3 -- Consent of Deloitte & Touche LLP relating to the audited financial statements of MAPCO,
Inc. and its subsidiaries.
*23.4 -- Consent of Ernst & Young LLP relating to the audited financial statements of The Williams
Companies, Inc.
*24 -- Power of Attorney together with certified resolution.
*99.1 -- Form of proxy card to be used in soliciting holders of MAPCO Common Stock.
*99.2 -- Form of proxy card to be used in soliciting holders of Williams Common Stock.
*99.3 -- Consent of Morgan Stanley & Co. Incorporated.
*99.4 -- Consent of Smith Barney Inc.
</TABLE>
- ---------------
*Filed herewith.
<PAGE> 1
Exhibit 5.1
[Letterhead of Jones Day Reavis & Pogue]
January 27, 1998
The Williams Companies Inc.
One Williams Center
Tulsa, Oklahoma 74172
Re: Shares of Common Stock, par value $1.00 per share, of The
Williams Companies Inc. Issued in Connection with the Merger
of the TML Acquisition Corp. into MAPCO Inc.
------------------------------------------------------------
Gentlemen:
We have acted as counsel for The Williams Companies Inc., a
Delaware corporation (the "Company"), in connection with the Agreement and
Plan of Merger, dated as of November 23, 1997, and amended as of January 25,
1998 (the "Merger Agreement"), among the Company, MAPCO Inc., a Delaware
corporation ("MAPCO"), and TML Acquisition Corp., a Delaware corporation
("Sub"), pursuant to which Sub will be merged with and into MAPCO (the
"Merger"). In connection with the Merger Agreement, the Company has filed with
the Securities and Exchange Commission, pursuant to the Securities Act of 1933
(the "Securities Act"), a Registration Statement on Form S-4 (the "Registration
Statement") relating to shares of common stock, par value $1.00 per share, of
the Company to be issued in connection with the Merger (the "Shares").
In our capacity as counsel to the Company, we have examined
such documents, records and matters of law as we have deemed necessary for
purposes of this opinion, and based thereon we are of the opinion that, when
the Shares have been duly authorized, issued and delivered pursuant to the
Merger Agreement as provided therein, the Shares will be validly issued, fully
paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5
to the Registration Statement and to the reference to us under the caption
"Legal Matters" in the prospectus constituting a part of such Registration
Statement. In giving such consent, we do not thereby admit that we are within
the category of persons whose consent is required under Section 7 of the
Securities Act or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ Jones Day Reavis & Pogue
<PAGE> 1
[Letterhead of Jones Day Reavis & Pogue]
Exhibit 8.1
January 27, 1998
The Williams Companies, Inc.
One Williams Center
Tulsa, Oklahoma 74172
Ladies and Gentlemen:
In Connection with the Joint Proxy Statement/Prospectus on Form S-4,
dated January 27, 1998 (the "Joint Proxy Statement/Prospectus"), relating to the
merger of a subsidiary of The Williams Companies, Inc. ("Williams") with and
into MAPCO Inc.("MAPCO"), you have requested our opinion with respect to the
matters set forth below.
In formulating our opinion, we have relied, without independent
investigation, upon the completeness and accuracy of the statements of fact and
representations set forth or described in the Joint Proxy Statement/Prospectus,
including all appendices and attachments thereto, and have assumed that the
Merger will be consummated in the manner contemplated by and in accordance
with the terms set forth in the Joint Proxy Statement/Prospectus.
Based upon the statements of fact, representations, and assumptions set
forth above, we are of the opinion that the section of the Joint Proxy
Statement/Prospectus entitled "Certain Federal Income Tax Consequences of the
Merger to MAPCO Stockholders" accurately summarizes the material federal income
tax consequences of the Merger to holders of MAPCO Common Stock.
We hereby consent to the filing of this opinion as an exhibit to the
Joint Proxy Statement/Prospectus. In giving such consent, we do not thereby
admit that we are within the category of persons whose consent is required
under Section 7 of the Securities Act or the rules and regulations promulgated
thereunder.
Very truly yours,
/s/ Jones, Day, Reavis & Pogue
<PAGE> 1
EXHIBIT 8.2
[DEBEVOISE & PLIMPTON LETTERHEAD]
January 27, 1998
MAPCO Inc.
1800 South Baltimore Avenue
Tulsa, Oklahoma 74101-0645
Agreement and Plan of Merger Among
MAPCO Inc., The Williams Companies, Inc.
and TML Acquisition Corp.
Ladies and Gentlemen:
We have acted as special counsel to MAPCO Inc., a Delaware corporation
("MAPCO"), in connection with the proposed merger (the "Merger") of TML
Acquisition Corp., a Delaware corporation ("Merger Sub") and a wholly owned
subsidiary of The Williams Companies, Inc., a Delaware corporation ("Williams"),
with and into MAPCO, pursuant to the Agreement and Plan of Merger among MAPCO,
Merger Sub and Williams dated as of November 23, 1997 and as amended as of
January 25, 1998 (the "Merger Agreement").
In so acting, we have participated in the preparation of the Merger
Agreement and the preparation and filing with the Securities and Exchange
Commission of a Joint Proxy Statement/Prospectus of MAPCO and Williams relating
to the proposed Merger and to the shares of common stock, par value $1.00 per
share, of Williams to be issued to MAPCO shareholders in the Merger pursuant to
the Merger Agreement (the "Proxy Statement"). We have also examined and relied
upon the representations and warranties as to factual matters set forth in the
documents referred to above, and the originals, or copies certified or
otherwise identified to our satisfaction, of such records, documents,
certificates or other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion set forth below. We have not,
however, undertaken any independent investigation of any factual matter set
forth in any of the foregoing.
Subject to the foregoing and to the qualifications and limitations set
forth herein, and assuming that the Merger is consummated in accordance with
the Merger Agreement and as described in the Proxy Statement, we hereby confirm
our opinion set forth in the Proxy Statement under the heading "THE PROPOSED
MERGER -- Certain Federal Income Tax Consequences of the Merger".
This opinion is limited solely to the federal law of the United States as
in effect on the date hereof and the relevant facts that exist as of the date
hereof. No assurance can be given that the law or facts will not change, and we
have not undertaken to advise you or any other person with respect to any event
subsequent to the date hereof.
We hereby consent to the filing of this opinion as an exhibit to the Proxy
Statement and to the use of our name under the captions "THE PROPOSED MERGER --
Certain Federal Income Tax Consequences of the Merger" and "LEGAL MATTERS" in
the Proxy Statement. In giving such consent, we do not thereby concede that we
are within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933 or the Rules and Regulations of the Securities and
Exchange Commission thereunder.
We are members of the Bar of the State of New York, and we do not
express any opinion herein concerning any law other than the federal law of the
United States.
Very truly yours,
/s/ Debevoise & Plimpton
Debevoise & Plimpton
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
The Williams Companies, Inc. on Form S-4 of our report dated January 27, 1997
(which report expresses an unqualified opinion and includes an explanatory
paragraph referring to litigation in which MAPCO is a defendant relating to an
LPG explosion in April 1992), appearing in the Annual Report on Form 10-K of
MAPCO Inc. for the year ended December 31, 1996 and to the references to us
under the headings "Selected Financial Data" and "Experts" in the Joint Proxy
Statement/Prospectus, which is part of this Registration Statement.
Deloitte & Touche LLP
Tulsa, Oklahoma
January 26, 1998
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Joint Proxy Statement/Prospectus
of The Williams Companies, Inc. for the registration of its shares of common
stock and to the incorporation by reference therein of our report dated February
10, 1997, with respect to the consolidated financial statements and schedule of
The Williams Companies, Inc. included in its Annual Report (Form 10-K) for the
year ended December 31, 1996, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Tulsa, Oklahoma
January 26, 1998
<PAGE> 1
EXHIBIT 24
THE WILLIAMS COMPANIES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each of the undersigned individuals, in
their capacity as a director or officer, or both, as hereinafter set forth below
their signature, of THE WILLIAMS COMPANIES, INC., a Delaware corporation
("Williams"), does hereby constitute and appoint WILLIAM C. VON GLAHN, DAVID M.
HIGBEE and SHAWNA L. BARNARD their true and lawful attorneys and each of them
(with full power to act without the others) their true and lawful attorneys for
them and in their name and in their capacity as a director or officer, or both,
of Williams, as hereinafter set forth below their signature, to sign a
registration statement on Form S-4 for the registration under the Securities Act
of 1933, as amended, of shares of Common Stock of Williams issuable pursuant to
the terms and provisions of the Agreement and Plan of Merger, dated as of
November 23, 1997, among The Williams Companies, Inc., TML Acquisition
Corporation and MAPCO Inc., together with associated Preferred Stock purchase
rights, and any and all amendments and post-effective amendments to said
registration statement and any and all instruments necessary or incidental in
connection therewith; and
THAT the undersigned Williams does hereby constitute and appoint WILLIAM G.
VON GLAHN, DAVID M. HIGBEE and SHAWNA L. BARNARD its true and lawful attorneys
and each of them (with full power to act without the others) its true and lawful
attorney for it and in its name and on its behalf to sign said registration
statement and any and all amendments and post-effective amendments thereto and
any and all instruments necessary or incidental in connection therewith.
Each of said attorneys shall have full power of substitution and
resubstitution, and said attorneys or any of them or any substitute appointed by
any of them hereunder shall have full power and authority to do and perform in
the name and on behalf of each of the undersigned, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises, as fully
to all intents and purposes as each of the undersigned might or could do in
person, the undersigned hereby ratifying and approving the acts of said
attorneys or any of them or of any such substitute pursuant hereto.
IN WITNESS WHEREOF, the undersigned have executed this instrument, all as
of the 13th day of January, 1998.
<TABLE>
<S> <C>
/s/ KEITH E. BAILEY /s/ JACK D. MCCARTHY
- ------------------------------------------ ------------------------------------------
Keith E. Bailey Jack D. McCarthy
Chairman of the Board, Senior Vice President
President and (Principal Financial Officer)
Chief Executive Officer
(Principal Executive Officer)
</TABLE>
/s/ GARY R. BELITZ
---------------------------------------------------
Gary R. Belitz
Controller
(Principal Accounting Officer)
<PAGE> 2
<TABLE>
<S> <C>
/s/ GLENN A. COX /s/ THOMAS H. CRUIKSHANK
- ------------------------------------------ ------------------------------------------
Glenn A. Cox Thomas H. Cruikshank
Director Director
/s/ PATRICIA L. HIGGINS /s/ W. R. HOWELL
- ------------------------------------------ ------------------------------------------
Patricia L. Higgins W. R. Howell
Director Director
/s/ ROBERT J. LAFORTUNE /s/ JAMES C. LEWIS
- ------------------------------------------ ------------------------------------------
Robert J. LaFortune James C. Lewis
Director Director
/s/ JACK A. MACALLISTER /s/ PETER C. MEINIG
- ------------------------------------------ ------------------------------------------
Jack A. MacAllister Peter C. Meinig
Director Director
/s/ KAY A. ORR /s/ GORDON R. PARKER
- ------------------------------------------ ------------------------------------------
Kay A. Orr Gordon R. Parker
Director Director
</TABLE>
/s/ JOSEPH H. WILLIAMS
---------------------------------------------------
Joseph H. Williams
Director
THE WILLIAMS COMPANIES, INC.
By /s/ WILLIAM G. VON GLAHN
------------------------------------
William G. von Glahn
Senior Vice President
ATTEST:
/s/ DAVID M. HIGBEE
- -----------------------------------
David M. Higbee
Secretary
<PAGE> 3
[THE WILLIAMS COMPANIES, INC. LETTERHEAD]
I, the undersigned, DAVID M. HIGBEE, Secretary of THE WILLIAMS COMPANIES,
INC., a Delaware company (hereinafter called the "Company"), do hereby certify
that at a meeting of the Board of Directors of the Company, duly convened and
held on November 23, 1997, at which a quorum of said Board was present and
acting throughout, the following resolution was duly adopted:
RESOLVED that the form of power of attorney submitted to this meeting
for use in connection with the execution and filing for and on behalf of
the Company of a Registration Statement on Form S-4, and any amendments or
supplements thereto is hereby approved and the Chairman of the Board, the
President or any Vice President of the Company be, and hereby is,
authorized to execute said power of attorney in the form so presented by,
for and on behalf of the Company.
I further certify that the foregoing resolution has not been modified,
revoked or rescinded and is in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of THE
WILLIAMS COMPANIES, INC., this 20th day of January, 1998.
/s/ DAVID M. HIGBEE
--------------------------------------
David M. Higbee
Secretary
[CORPORATE SEAL]
<PAGE> 1
PROXY Exhibit 99.1
MAPCO INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF MAPCO INC. FOR THE SPECIAL MEETING ON FEBRUARY 26, 1998
The undersigned hereby constitutes and appoints James E. Barnes, David
W. Bowman and James N. Cundiff, and each of them, his true and lawful Agent and
proxy with full power of substitution to represent, and to vote the shares of
the undersigned at the Special Meeting of Stockholders of MAPCO Inc. to be held
at 1800 South Baltimore Avenue, Tulsa, Oklahoma, on Thursday, February 26, 1998
at 10:00 a.m. and at any adjournments or postponements thereof on all matters
coming before said meeting.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted FOR the stated proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE STATED PROPOSAL
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING
AND THE JOINT PROXY STATEMENT/PROSPECTUS RELATING TO THE SPECIAL MEETING.
IMPORTANT -- PLEASE SIGN ON OTHER SIDE.
<PAGE> 2
<TABLE>
<CAPTION>
MAPCO INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
<S> <C> <C> <C>
1. To approve and adopt the Agreement and Plan of Merger (the "Merger For Against Abstain
Agreement"), dated as of November 23, 1997, among The Williams Companies
Inc. ("Williams"), TML Acquisition Corp. ("Sub") and MAPCO Inc.("MAPCO"), [ ] [ ] [ ]
pursuant to which Sub will be merged with and into MAPCO with MAPCO being the
surviving corporation in the merger (the "Merger") and becoming a wholly
owned subsidiary of Williams. Approval of this proposal will also constitute
approval of the transactions contemplated by the Merger Agreement, including
the Merger.
2. In their discretion, to vote upon all matters incident to the conduct of the
Special Meeting and such other matters as may properly come before the
Special Meeting or any adjournments thereof.
Dated: 1998
-----------------------------
---------------------------------------
Signature
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Signature if held jointly
Note: Please sign this proxy exactly as name
appears herein. If shares are held by joint
tenants, both should sign. Attorneys-in-fact,
executors, administrators, trustees, guardians,
corporation officers or others signing in a
representative capacity should indicate the
capacity in which they are signing.
</TABLE>
PLEASE SIGN, DATE, AND MAIL THIS PROXY PROMPTLY IN THE RETURN ENVELOPE whether
or not you expect to attend the Special Meeting. You may nevertheless vote in
person if you do attend.
-- FOLD AND DETACH HERE --
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY FORM PROMPTLY
USING THE ENCLOSED ENVELOPE
<PAGE> 1
PROXY EXHIBIT 99.2
THE WILLIAMS COMPANIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE SPECIAL MEETING OF STOCKHOLDERS ON FEBRUARY 26, 1998
The undersigned stockholder of The Williams Companies, Inc. hereby appoints
KEITH E. BAILEY, JACK D. McCARTHY and WILLIAM G. VON GLAHN, jointly and
severally with full power of substitution, as proxies to represent and to vote
all of the shares of Common Stock the undersigned is entitled to vote at the
Special Meeting of Stockholders of The Williams Companies, Inc. (the "Company")
to be held at the Adam's Mark Hotel, 100 East 2nd Street, Tulsa, Oklahoma, on
Thursday, February 26, 1998 at 10:00 a.m., and at any and all adjournments
thereof, on all matters coming before said meeting.
(change of address/comments)
______________________________________
______________________________________
______________________________________
(If you have written in the above
space, please mark the corresponding
box on the reverse side of this card.)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXY CANNOT BE
VOTED UNLESS YOU SIGN, DATE AND RETURN THIS CARD.
_____________
SEE REVERSE
SIDE
_____________
<PAGE> 2
[X] PLEASE MARK YOUR
VOTES AS THIS
EXAMPLE.
This proxy, when properly executed, will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR proposals 1 and 2.
1. To approve the amendment of the Company's Restated Certificate of
Incorporation, as amended, to increase the authorized number of shares of
Common Stock.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. To approve the issuance of shares of Common Stock in exchange for shares of
common stock and options of MAPCO Inc. pursuant to the Merger and the other
transactions contemplated by the Merger Agreement.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In the discretion of one or more of said proxies to vote upon any other
business as may properly come before the Special Meeting or any adjournments
thereof.
Change of address, [ ]
see reverse side
The signer hereby revokes all proxies heretofore given by the signer to vote at
said meeting or any adjournments thereof.
SIGNATURE(S) DATE
-------------------------------------- ------------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
<PAGE> 1
Exhibit 99.3
[MORGAN STANLEY LETTERHEAD]
CONSENT OF
MORGAN STANLEY & CO. INCORPORATED
January 26, 1998
MAPCO Inc.
180 South Baltimore Avenue
Tulsa, OK 74119
Dear Sirs:
We hereby consent to the inclusion in the Registration Statement of The Williams
Companies, Inc. ("Williams") on Form S-4, with respect to the shares of Common
Stock, par value $1.00 per share of Williams, of our opinion letter appearing as
Appendix B to the Joint Proxy Statement/Prospectus which is part of the
Registration Statement, and to the references of our firm name therein. In
giving such consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations adopted by the Securities and Exchange
Commission thereunder, nor do we admit that we are experts with respect to any
part of the Registration Statement within the meaning of the term "experts" as
used in the Securities Act of 1933, as amended, or the rules and regulations of
the Securities and Exchange Commission thereunder.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Laura Chenoweth
------------------------------
Laura Chenoweth
Vice President
<PAGE> 1
Exhibit 99.4
[LETTERHEAD OF SMITH BARNEY INC.]
The Board of Directors
The Williams Companies, Inc.
One Williams Center
Tulsa, Oklahoma 74172
Members of the Board:
We hereby consent to the inclusion of our opinion letter to the
Board of Directors of The Williams Companies, Inc. ("Williams") as Appendix C
to the Joint Proxy Statement/Prospectus of Williams and MAPCO Inc. ("MAPCO")
relating to the proposed merger transaction involving Williams and MAPCO and
references thereto in such Joint Proxy Statement/Prospectus under the captions
"SUMARY-Opinions of financial advisors" and " THE PROPOSED MERGER-Opinion of
Financial Advisors to Williams." In giving such consent, we do not admit that
we come within the category of persons whose consent is required under, and we
do not admit that we are "experts" for purposes of, the Securities Act of 1993,
as amended, and the rules and regulations promulgated thereunder.
By: /s/ Smith Barney Inc.
---------------------
SMITH BARNEY INC.
January 27, 1998
