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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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TRANSCO ENERGY COMPANY
(NAME OF SUBJECT COMPANY)
TRANSCO ENERGY COMPANY
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.50 PER SHARE
(AND ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
(TITLE OF CLASS OF SECURITIES)
89353210
(CUSIP NUMBER OF CLASS OF SECURITIES)
DAVID E. VARNER, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
TRANSCO ENERGY COMPANY
P.O. BOX 1396
2800 POST OAK BLVD.
HOUSTON, TEXAS 77251
(713) 439-2388
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
WITH A COPY TO:
ERIC S. ROBINSON, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019
(212) 403-1000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The subject company is Transco Energy Company, a Delaware corporation
("Transco" or the "Company"). The address of the principal executive offices
of the Company is 2800 Post Oak Blvd., Houston, Texas 77056. The title of the
class of equity securities to which this Statement relates is the Company's
common stock, par value $.50 per share (the "Shares"), and the associated
common stock purchase rights (the "Company Rights").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer made by The Williams Companies,
Inc., a Delaware corporation ("Williams" or the "Purchaser"), disclosed in a
Tender Offer Statement on Schedule 14D-1 dated December 16, 1994 (the
"Schedule 14D-1"), to purchase up to 24,600,000 Shares, together with attached
Company Rights, at a price of $17.50 per Share and Company Right, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated December 16, 1994 (the "Offer to Purchase") and the
related Letter of Transmittal (which together constitute the "Offer"). The
Offer is conditioned upon, among other things, at least 20,900,000 Shares
being validly tendered and not withdrawn prior to the expiration of the Offer
(the "Minimum Condition").
The Offer is being made pursuant to the terms of an Agreement and Plan of
Merger, dated as of December 12, 1994 (the "Merger Agreement"), by and among
Williams, WC Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Williams ("Sub"), and the Company. The Merger Agreement
provides, among other things, for the making of the Offer by Williams and
further provides that, upon the terms and subject to the conditions contained
in the Merger Agreement and in accordance with applicable law, Sub will merge
with and into the Company (the "Merger") as soon as practicable after
consummation of the Offer. The Offer and the Merger are referred to
collectively herein as the "Transaction." Following the consummation of the
Merger (the "Effective Time"), the Company will be the surviving corporation
(the "Surviving Corporation") and will be a wholly-owned subsidiary of
Williams.
The Offer to Purchase states that the address of the principal executive
offices of Williams and Sub is One Williams Center, Tulsa, Oklahoma 74172.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person filing
this Statement, are set forth in Item 1 above.
(b) Except as described or incorporated by reference herein, to the
knowledge of the Company, as of the date hereof, there are no material
contracts, agreements, arrangements or understandings, or any actual or
potential conflicts of interest between the Company or its affiliates and (i)
the Company, its directors, executive officers or affiliates or (ii) the
Purchaser, Sub, or their directors, executive officers or affiliates.
(i) CERTAIN ARRANGEMENTS WITH WILLIAMS AND SUB.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which is filed
as an Exhibit to the Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") filed by the Company with the Securities and Exchange
Commission (the "Commission") in connection with the Offer. Such summary is
qualified in its entirety by reference to the Merger Agreement.
The Offer. The Purchaser has agreed in the Merger Agreement to accept Shares
tendered pursuant to the Offer for payment on the earliest expiration date of
the offer on which the Minimum Condition and the other conditions that are
described in Section 14 hereof are satisfied. The Purchaser has also agreed,
if such conditions are not so satisfied as of any expiration date but subject
to its right under the circumstances described below to terminate the Offer
and the Merger Agreement, to extend such expiration date from time to time
until the earlier of the consummation of the Offer and 90 days following
commencement of the Offer.
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Under the Merger Agreement, the Purchaser has expressly reserved the right to
(i) increase the price per Share payable pursuant to the Offer or (ii) increase
on one occasion the number of Shares (and attached Rights) to be purchased in
the Offer; provided, that (x) any increase in the number of Shares to be
purchased which requires an extension of the Offer beyond its then applicable
expiration date in accordance with applicable law must provide for an increase
of at least 4,000,000 Shares and (y) any increase in the number of Shares
sought at a time when the average closing sale prices on the New York Stock
Exchange (the "NYSE") for shares of Common Stock, $1.00 par value, of the
Purchaser ("Purchaser Common Stock") for the ten trading days immediately
preceding the date of public notice of the increase exceeds $28 may only be
made with the consent of the Company. The Purchaser has agreed in the Merger
Agreement that, without the prior written consent of the Company, the Purchaser
will not (i) decrease the price per Share payable pursuant to the Offer, (ii)
decrease or (other than as described in the immediately preceding sentence)
increase the number of Shares to be purchased in the Offer, (iii) change the
form of consideration payable in the Offer, (iv) add to or change the
conditions of the Offer, (v) change or waive the Minimum Condition or (vi) make
any other change in the terms or conditions of the Offer which is adverse to
the holders of the Shares.
Company Board Representation by the Purchaser Following the Offer. The
Company has agreed in the Merger Agreement that, effective upon payment by the
Purchaser for the Shares accepted for payment pursuant to the Offer, the
Purchaser will be entitled to designate two directors to the Board of Directors
of the Company (the "Company Board") and the Company will take all necessary
action to cause the Purchaser's designees to be elected or appointed to the
Company Board including, without limitation, increasing the number of directors
or seeking and accepting resignations of incumbent directors. In such
connection, the Purchaser has agreed that (i) its designees will abstain from
any action taken by the Company to amend or terminate the Merger Agreement or
waive any action by the Purchaser, which actions will be effective with the
approval of a majority of the remaining directors, and (ii) it will not effect
any other changes to the Company Board prior to the Effective Time.
The Merger. The Merger Agreement provides that, upon the terms and subject to
the conditions thereof, at the Effective Time, Sub will be merged with and into
the Company in accordance with the General Corporation Law of the State of
Delaware (the "Delaware Law"). As a result of the Merger, the separate
corporate existence of Sub will cease and the Company will continue as the
Surviving Corporation.
At the Effective Time, in the event that 24,600,000 Shares are purchased
pursuant to the Offer, each Share that is issued and outstanding immediately
prior to the Effective Time (other than Shares held in the treasury of the
Company, Shares owned by the Purchaser or any direct or indirect wholly-owned
subsidiary of the Purchaser ("Retired Shares"), or dissenting Shares
(collectively, "Retired or Dissenting Shares")) will be converted into the
right to receive .625 of a share of Purchaser Common Stock and .3125 attached
preferred stock purchase rights (the "Purchaser Rights"). In the event that
less than 24,600,000 Shares, but at least 20,900,000 Shares, are purchased
pursuant to the Offer, each Share that is issued and outstanding immediately
prior to the Effective Time (other than Retired or Dissenting Shares) will be
converted into the right to receive (i) an amount in cash (the "Per Share Cash
Amount") equal to (x) the excess of (A) the product of (1) $17.50 or such
higher price as may be paid in the Offer (the "Offer Price"), and (2) the
excess of 24,600,000 over the number of Shares purchased pursuant to the Offer,
over (B) the aggregate amount paid in the redemption of Company Rights not
acquired pursuant to the Offer, divided by (y) the number of Shares outstanding
immediately prior to the Effective Time (other than Retired Shares) and (ii)
the fraction of a share of Purchaser Common Stock equal to (A) the product of
(1) .625 and (2) the excess of the Offer Price over the Per Share Cash Amount,
divided by (B) the Offer Price (such fractional amount of a share of Purchaser
Common Stock, the "Conversion Number"), together with a fraction of attached
Purchaser Rights equal to the Conversion Number divided by 2.
In addition, also at the Effective Time, each issued and outstanding share of
the Company's $4.75 Series Cumulative Convertible Preferred Stock ("Company
$4.75 Preferred Stock") and each issued and outstanding share of the Company's
$3.50 Series Cumulative Convertible Preferred Stock ("Company $3.50 Preferred
Stock" and, collectively with the Company $4.75 Preferred Stock, the "Company
Preferred Stock") (in each
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case other than shares that are owned by the Company as treasury stock, or
owned by the Purchaser or any wholly-owned subsidiary of the Purchaser, or, to
the extent appraisal rights are available to such holders, dissenting shares)
will be converted into the right to receive one share of the Purchaser's $4.75
Series Cumulative Convertible Preferred Stock ("Purchaser $4.75 Preferred
Stock") and the Purchaser's $3.50 Series Cumulative Convertible Preferred Stock
("Purchaser $3.50 Preferred Stock" and, collectively with the Purchaser $4.75
Preferred Stock, the "Purchaser New Preferred Stock"), respectively.
Pursuant to the Merger Agreement, the Company shall call and hold a meeting
of its stockholders (the "Stockholders' Meeting") as soon as practicable
following consummation of the Offer for the purpose of considering and taking
action on the Merger Agreement and the transactions contemplated thereby. The
Merger Agreement requires the Company, through the Company Board, to recommend
to its stockholders approval of the Merger and related matters; provided,
however, that nothing contained in the Merger Agreement will require the
Company Board to take any action or refrain from taking any action which the
Board determines in good faith with the advice of counsel could reasonably be
expected to result in a breach of its fiduciary duties under applicable law.
The Purchaser has agreed to cause all Shares acquired by it pursuant to the
Offer or the Stock Option Agreement (as defined below) to be represented at the
Stockholders' Meeting and to be voted in favor of approval and adoption of the
Merger Agreement and the Merger. If the Purchaser holds at least a majority of
the Shares outstanding on the record date for establishing holders of Shares
entitled to vote at the Stockholders' Meeting, the Purchaser will have
sufficient voting power to approve the Merger, even if no other stockholder of
the Company votes in favor of the Merger.
The Merger Agreement provides that the Company and the Purchaser, will each
use its reasonable best efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, in each case consistent with the fiduciary duties
of their respective Boards of Directors as advised by counsel, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by the Merger
Agreement and the Stock Option Agreement, including (i) the prompt preparation
and filing with the Commission of the Purchaser's registration statement on
Form S-4 (the "S-4") and the Company's proxy statement (the "Proxy Statement"),
(ii) such actions as may be required to have the S-4 declared effective under
the Securities Act of 1933, as amended (the "Securities Act") and the Proxy
Statement cleared by the Commission, in each case as promptly as practicable,
and (iii) such actions as may be required to be taken under applicable state
securities or blue sky laws in connection with the issuance of shares of
Purchaser Common Stock (and the attached Purchaser Rights) and Purchaser New
Preferred Stock pursuant to the Merger.
Pursuant to the Merger Agreement, the Purchaser has agreed to use its
reasonable best efforts to list the Purchaser Common Stock (and attached
Purchaser Rights) to be issued in the Merger on the NYSE and the Purchaser
$4.75 Preferred Stock to be issued in the Merger to be listed on the NYSE or
quoted on the NASDAQ National Market System, in each case not later than the
Effective Time.
The Merger Agreement provides that, at the Effective Time, the Second
Restated Certificate of Incorporation of the Company, as amended and restated
substantially in the form set forth in an exhibit to the Merger Agreement, will
be the Certificate of Incorporation of the Surviving Corporation. The Merger
Agreement also provides that the By-laws of Sub, as in effect immediately prior
to the Effective Time, will be the By-laws of the Surviving Corporation until
amended in accordance with applicable law.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including
representations by the Company and the Purchaser as to the absence of certain
changes or events concerning their respective businesses, compliance with law,
litigation and other matters.
Certain Restrictions on Business Pending the Merger. The Company has agreed
that prior to the Effective Time, unless otherwise consented to in writing by
the Purchaser, the Company will, and will cause
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each of its subsidiaries to, conduct its operations only in the ordinary and
usual course of business consistent with past practice and will use all
reasonable efforts, and will cause each of its subsidiaries to use all
reasonable efforts, to preserve intact its present business organization, keep
available the services of its present officers and employees and preserve its
relationships with licensors, licensees, customers, suppliers, employees and
any others having business dealings with it, in each case in all material
respects. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in the Merger Agreement, the Company will not,
and will not permit any of the subsidiaries to, prior to the Effective Time,
without the prior written consent of the Purchaser (which will not be
unreasonably withheld): (i) adopt any amendment to its certificate of
incorporation or by-laws or comparable organizational documents or to the
Company Rights Agreement; (ii) except for issuances of capital stock of the
Company's subsidiaries to the Company or a wholly owned subsidiary of the
Company, issue, reissue, sell or pledge or authorize or propose the issuance,
reissuance, sale or pledge of additional shares of capital stock of any class,
or securities convertible into capital stock of any class, or any rights,
warrants or options to acquire any convertible securities or capital stock,
other than the issuance of Shares (and attached Company Rights) upon the
exercise of stock options or vesting of restricted or deferred stock unit
awards outstanding on December 12, 1994 or upon conversion of shares of
Company Preferred Stock, in each case in accordance with their present terms;
(iii) declare, set aside or pay any dividend or other distribution (whether in
cash, securities or property or any combination thereof) in respect of any
class or series of its capital stock, except that (a) the Company may
continue to pay regular dividends on the Shares and shares of Company
Preferred Stock consistent with past practice, (b) Transcontinental Gas
Pipeline Corporation ("TGPL") may continue to pay regular dividends and make
annual sinking fund payments on its cumulative first preferred stock
consistent with past practice and (c) any wholly-owned subsidiary of the
Company may pay dividends and make distributions to the Company or any of the
Company's wholly-owned subsidiaries; (iv) adjust, split, combine, subdivide,
reclassify or redeem, purchase or otherwise acquire, or propose to redeem or
purchase or otherwise acquire, any shares of its capital stock, other than
pursuant to certain leases or in connection with tax withholding features
under the Company's employee benefits plans; (v) (a) incur, assume or pre-pay
any long-term debt or incur or assume any short-term debt, except that the
Company and its subsidiaries may incur or pre-pay debt in the ordinary course
of business consistent with past practice or the cash forecasts disclosure in
the Merger Agreement under existing lines of credit and may repurchase any of
the Company's 11 1/4% Notes due 1999 (the "Company Notes") in a manner
consistent with the provisions of the Merger Agreement, (b) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person except in
the ordinary course of business consistent with past practice, or (c) make any
loans, advances or capital contributions to, or investments in, any other
person except in the ordinary course of business consistent with past practice
and except for loans, advances, capital contributions or investments between
any wholly owned subsidiary and the Company or another wholly owned
subsidiary; (vi) settle or compromise any suit or claim or threatened suit or
claim relating to the transactions contemplated hereby; (vii) except for (a)
increases in salary, wages and benefits of employees of the Company or its
subsidiaries (other than executive or corporate officers of the Company) in
accordance with past practice, (b) increases in salary, wages and benefits
granted to employees of the Company or its subsidiaries (other than executive
or corporate officers of the Company) in conjunction with promotions or other
changes in job status consistent with past practice or required under existing
agreements, (c) increases in salary, wages and benefits to employees of the
Company pursuant to collective bargaining agreements entered into in the
ordinary course of business consistent with past practice, and (d) the
consummation of the pending merger of the Company's Tran$tock Employee Stock
Ownership Plan ("the Tran$tock Plan") with the Company's Thrift Plan, increase
the compensation or fringe benefits payable or to become payable to its
directors, officers or employees (whether from the Company or any of its
subsidiaries), or pay any benefit not required by any existing plan or
arrangement (including, the granting of, or waiver of performance or other
vesting criteria under, stock options, stock appreciation rights, shares of
restricted stock or deferred stock or performance units) or grant any
severance or termination pay to (except pursuant to existing agreements or
policies), or enter into any employment or severance agreement with, any
director, officer or other key employee of the Company or any of its
subsidiaries or establish, adopt, enter into,
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terminate or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, welfare,
deferred compensation, employment, termination, severance or other employee
benefit plan, agreement, trust, fund, policy or arrangement for the benefit or
welfare of any directors, officers or current or former employees, except to
the extent such termination or amendment is required by applicable law; except
that, in any case, benefits may be paid as they become payable; (viii) except
as set forth in the Merger Agreement, acquire, sell, lease or dispose of any
assets or securities which are material to the Company and its subsidiaries, or
enter into any commitment to do any of the foregoing or enter into any material
commitment or transaction outside the ordinary course of business consistent
with past practice other than transactions between a wholly-owned subsidiary
and the Company or another wholly owned subsidiary, (a) modify, amend or
terminate any contract, (b) waive, release, relinquish or assign any contract
(including any insurance policy) or other right or claim, or (c) cancel or
forgive any indebtedness owed to the Company or its subsidiaries, other than in
each case in a manner in the ordinary course of business consistent with past
practice or which is not material to the business of the Company and its
subsidiaries; (ix) make any tax election not required by law or settle or
compromise any tax liability, in either case that is material to the Company
and its subsidiaries; (x) change any of the accounting principles or practices
used by it except as required by the Commission, the Financial Accounting
Standards Board or the Federal Energy Regulatory Commission ("FERC") under the
Uniform System of Accounts; or (xi) agree in writing or otherwise to take any
of the foregoing actions or any action which would make any representation or
warranty in the Merger Agreement untrue or incorrect in any material respect.
The Purchaser has agreed that it will not, and will not permit any of its
subsidiaries to, prior to the Effective Time, without the prior written consent
of the Company (which will not be unreasonably withheld): (i) adopt any
amendment to its certificate of incorporation or by-laws or comparable
organizational documents; (ii) except for issuances of capital stock of the
Purchaser's subsidiaries to the Purchaser or a wholly owned subsidiary of the
Purchaser and except as set forth in the Merger Agreement, issue, reissue, sell
or pledge or authorize or propose the issuance, reissuance, sale or pledge of
additional shares of capital stock of any class, or securities convertible into
capital stock of any class, or any rights, warrants or options to acquire any
convertible securities or capital stock, other than the issuance of shares of
Purchaser Common Stock upon the exercise of stock options or vesting of
deferred stock awards outstanding on December 12, 1994 in accordance with their
present terms; (iii) declare, set aside or pay any dividend or other
distribution (whether in cash, securities or property or any combination
thereof) in respect of any class or series of its capital stock, except that
(a) the Purchaser may continue to pay regular cash dividends on the Purchaser
Common Stock and any Purchaser preferred stock and (b) any subsidiary of the
Purchaser may pay dividends or make distributions; (iv) other than purchases
pursuant to its existing program to repurchase shares of Purchaser Common Stock
for an aggregate purchase price of up to $800,000,000 and shares of certain
Purchaser preferred stock for an aggregate purchase price of up to $100,000,000
(under which approximately $406.8 million and $6.4 million, respectively, of
purchases had been made as of December 12, 1994) and in connection with the
exercise of options under certain employee benefits plans of the Purchaser,
adjust, split, combine, subdivide, reclassify or redeem, purchase or otherwise
acquire, or propose to redeem or purchase or otherwise acquire, any shares of
its capital stock; (v) except as set forth in the Merger Agreement, acquire,
sell, lease or dispose of any assets or securities which are material to the
Purchaser and its subsidiaries, or enter into any commitment to do any of the
foregoing other than transactions between a wholly owned subsidiary and the
Purchaser or another wholly owned subsidiary; (vi) settle or compromise any
suit or claim or threatened suit or claim relating to the transactions
contemplated hereby; (vii) change any of the accounting principles or practices
used by it except as required by the Commission, the Financial Accounting
Standards Board or the FERC under the Uniform Systems of Accounts; or (viii)
agree in writing or otherwise to take any of the foregoing actions or any
action which would make any representation or warranty in the Merger Agreement
untrue or incorrect in any material respect.
Acquisition Transactions. Under the Merger Agreement, the Company has agreed,
subject to the matters described in the immediately succeeding paragraph, that
it will not, nor will it permit its officers, directors, subsidiaries,
representatives or agents, directly or indirectly, to do any of the following:
(i) negotiate,
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undertake, authorize, propose or enter into, either as the proposed surviving,
merged, acquiring or acquired corporation, any transaction (other than the
Offer and the Merger) involving any disposition or other change of ownership of
a substantial portion of the Company's stock or assets (an "Acquisition
Transaction"); (ii) solicit or initiate the submission of a proposal or offer
in respect of, or engage in negotiations concerning, an Acquisition
Transaction; or (iii) furnish or cause to be furnished to any corporation,
partnership, person or other entity or group (other than the other party and
its representatives) (a "Person") any non-public information concerning the
business, operations, properties or assets of the Company in connection with an
Acquisition Transaction provided, nothing herein will prohibit the Company
Board from taking and disclosing to the Company's stockholders a position with
respect to a tender offer pursuant to Rules 14d-9 and 14e-2 promulgated under
the Exchange Act. The Company has also agreed to inform the Purchaser by
telephone within two business days of its receipt of any proposal or bid
(including the terms thereof and the Person making such proposal or bid) in
respect of any Acquisition Transaction.
Notwithstanding the restriction described in the immediately preceding
paragraph, the Company and its officers, directors, subsidiaries,
representatives and agents may engage in discussions or negotiations with, and
may furnish information to, a third party who, or representatives of a third
party who, makes a written proposal with respect to an Acquisition Transaction
if (i) the Company Board determines in good faith after consultation with its
financial advisors that such proposal may reasonably be expected to result in a
transaction that is financially superior to the transactions contemplated by
the Merger Agreement, or (ii) the Company Board determines in good faith with
advice of outside counsel that failure to do so could reasonably
be expected to result in a breach of its fiduciary duties under applicable law.
If the Company accepts a proposal for or otherwise engages in any Acquisition
Transaction (other than the Offer or the Merger), it will promptly pay to the
Purchaser in reimbursement for the Purchaser's expenses an amount in cash (not
to exceed $15,000,000) equal to the aggregate amount of the Purchaser's
documented out-of-pocket expenses incurred in connection with pursuing the
transactions contemplated by the Merger Agreement as certified in good faith by
the Purchaser and with reasonable detail.
Indemnification of Directors' and Officers' Insurance. The Purchaser and the
Company have agreed in the Merger Agreement that the Certificate of
Incorporation of the Surviving Corporation or any successor by merger will
contain the provisions with respect to indemnification which are set forth in
the form of Third Restated Certificate of Incorporation of the Company included
as an exhibit to the Merger Agreement, which provisions will not be amended,
repealed or otherwise modified for a period of six years after the Effective
Time provided that, in the event any claim is asserted or made within such six-
year period, all rights to indemnification in respect of any such claim will
continue until disposition of any and all such claims. The Merger Agreement
further provides that, for a period of not less than six years after the
Effective Time, the Purchaser will, or will cause the Surviving Corporation to
provide, directors' and officers' liability insurance having substantially the
same terms and conditions and providing at least the same coverage and amounts
as the directors' and officers' liability insurance that is maintained by the
Company at the Effective Time for all directors and officers of the Company and
its subsidiaries who served as such at, or within one year prior to, the
Effective Time. However, the Purchaser will not be required to pay an annual
premium for such insurance in excess of the last annual premium paid by the
Company prior to December 12, 1994 (but in such case will purchase as much
coverage as possible for such amount).
Redemption of Company Rights. Under the Merger Agreement, the Company has
agreed to redeem the Company Rights effective immediately prior to the
Purchaser's acceptance for payment of Shares pursuant to the Offer and will not
otherwise redeem the Company Rights, or amend or terminate the Company Rights
Agreement, unless in each such case the Company Board determines in good faith
with the advice of outside counsel that complying with such covenant could
reasonably be expected to result in a breach of its fiduciary duties under
applicable law. The Company has agreed that the Offer will provide, and require
that tendering stockholders confirm, that the Purchaser will be entitled to
receive and retain the amounts paid in redemption of all Company Rights
attached to Shares acquired pursuant to the Offer.
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Company Benefit Plans. The Merger Agreement provides that, except as
otherwise agreed with individual option holders, at the Effective Time, (i)
each then outstanding option to purchase Shares (a "Company Stock Option")
under the Company's stock incentive plans (the "Company Plans"), whether vested
or unvested, will become fully exercisable and vested, (ii) each Company Stock
Option which is then outstanding will be cancelled and (iii) in consideration
of such cancellation, at the election of the option holder, which may be
allocated to either or both elections, (a) the Company will pay to such holders
of Company Stock Options an amount in respect thereof equal to the product of
(x) the excess, if any, of the Offer Price over the respective exercise price
thereof and (y) the number of Shares subject thereto, respectively, or (b) the
Purchaser will issue an option as described below (a "Replacement Option").
The Replacement Option with respect to each Company Stock Option, the
exercise price for which exceeds $35 per Share, will be an option to acquire,
on the same terms and conditions as were applicable under such Company Stock
Option (except that it will be subject to a vesting period ending on the first
anniversary of the Effective Time), (i) an amount in cash equal to the product
of $10.50 times the number of Shares purchasable under such Company Stock
Option immediately prior to the Effective Time and (ii) the number of shares of
Purchaser Common Stock equal to the product of .25 and the number of Shares
purchasable under such Company Stock Option immediately prior to the Effective
Time. The Purchaser will cause such options to continue to vest and to remain
exercisable following the termination of the option holder's employment with
the Purchaser and its affiliates in accordance with its past practice relative
to the Purchaser's current employees; provided, that with respect to any
employee of the Company or its subsidiaries
at the Effective Time (a "Current Employee") whose employment with the
Purchaser or its affiliates is terminated other than voluntarily by the
employee or involuntarily for cause or as a result of retirement, the Purchaser
will cause such options to continue to vest until the earlier of (i) six months
following such termination and (ii) the end of the term of such option, as in
effect immediately before such termination. All of the foregoing payments and
issuances of shares in connection with such cancellations will be made either
net of applicable withholding taxes or upon payment of required withholding
taxes by the option holders.
The Replacement Option with respect to each Company Stock Option, the
exercise price for which is less than or equal to $35 per Share, will be an
option to acquire, on the same terms and conditions as were applicable under
such Company Stock Option, the same number of shares of Purchaser Common Stock
as the holder of such Company Stock Option would have been entitled to receive
pursuant to the Merger had such holder exercised such option in full
immediately prior to the Effective Time (not taking into account whether or not
such option was in fact exercisable), at a price per share equal to (i) the
aggregate exercise price for the Shares deemed otherwise purchasable pursuant
to such Company Stock Option divided by (ii) the number of full shares of
Purchaser Common Stock deemed purchasable pursuant to such Company Stock
Option. All of the foregoing payments and issuances of shares in connection
with such cancellations will be made either net of applicable withholding taxes
or upon payment of required withholding taxes by the optionholders.
The Merger Agreement provides that the Company Plans will generally terminate
as of the Effective Time and the provisions in any other plan, program or
arrangement, providing for the issuance or grant of any other interest in
respect of the capital stock of the Company or any of its subsidiaries will be
deleted as of the Effective Time. The Merger Agreement also provides that the
Company's other employee benefit plans, programs and policies other than salary
(collectively, the "Employee Benefit Plans") in effect at the date of the
Merger Agreement will, to the extent practicable, remain in effect until
otherwise determined after the Effective Time and, to the extent such Employee
Benefit Plans are not continued, the Purchaser will maintain Employee Benefit
Plans with respect to employees of the Company and its subsidiaries which are
no less favorable, in the aggregate, than the least favorable of: (i) those
Employee Benefit Plans covering employees of the Purchaser from time to time;
(ii) those Employee Benefit Plans of the Company and its Subsidiaries that are
in effect on the date of this Agreement other than the Tran$tock Plan; or (iii)
Employee Benefit Plans that are reasonably competitive with respect to the
industry in which the employer of the affected employees competes; provided,
that in any event, until the first anniversary of the Effective Time, the
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Surviving Corporation will provide Current Employees with Employee Benefit
Plans, other than a nonqualified, unfunded plan maintained primarily to provide
deferred compensation benefits to a select group of "management or highly
compensated employees" within the meaning of Sections 201, 301, and 401 of
ERISA, that are no less favorable in the aggregate than those provided to
Current Employees by the Company and for its Subsidiaries immediately before
the Effective Time. In the case of benefit plans which are continued and under
which the employees' interests are based upon Company Common Stock, such
interests will be based on Purchaser Common Stock in an equitable manner.
In the Merger Agreement the Purchaser has agreed to cause the Surviving
Corporation to (i) honor (a) in accordance with their terms all individual
employment, severance, termination and indemnification agreements which by
their express terms may not be unilaterally amended by the Company or any of
its subsidiaries and (b) without modification all other specified employee
severance plans, policies, employment and severance agreements and
indemnification arrangements of the Company or any of its subsidiaries as such
plans, policies, or agreements were in effect on the date of the Merger
Agreement through the later of (x) December 31, 1995, (y) the termination date
specified in such document or (z) the date agreed to by the Purchaser and the
Company, (ii) waive any limitations regarding pre-existing conditions of
Current Employees and their eligible dependents under any welfare or other
employee benefit plans of the Purchaser and its affiliates in which they
participate after the Effective Time (except to the extent that such
limitations would have applied under the analogous plan of the Company and its
subsidiaries immediately before the Effective Time), (iii) for all purposes
under the post-retirement welfare benefit plans and policies of the
Purchaser and its affiliates, treat Current Employees in the same manner as
similarly situated employees of the Purchaser who were hired by the Purchaser
before January 1, 1992 in accordance with the terms of such plans and policies
as then in effect, as any such plans and policies are modified by the Purchaser
or such affiliates from time to time, and (iv) for all other purposes under all
Employee Benefit Plans applicable to employees of the Company and its
subsidiaries, treat all service with the Company or any of its subsidiaries by
Current Employees before the Closing as service with the Purchaser and its
subsidiaries, except to the extent such treatment would result in duplication
of benefits or would violate applicable law.
The Merger Agreement also provides that, except as otherwise agreed with
individual restricted stockholders, at the Effective Time, each Share which
immediately prior to the Effective Time was subject to restrictions on
transfer, whether vested or unvested, will become fully vested and freely
transferable and will be exchanged for unrestricted shares of Purchaser Common
Stock (with attached Purchaser Rights) pursuant to the Merger Agreement.
Other Matters. In the Merger Agreement, the Company has agreed to declare a
dividend on each share of the Company Preferred Stock to holders of record of
such shares as of the close of the business day next preceding the Effective
Time in an amount equal to the product of (i) a fraction, (x) the numerator of
which equals the number of days between the payment date with respect to the
most recent regular dividend paid by the Company and the Effective Time and (y)
the denominator of which equals 91 and (ii) the amount of the regular quarterly
dividend paid by the Company on the relevant series of Company Preferred Stock.
The Company has also agreed (i) to promptly seek agreement, on terms reasonably
acceptable to the Purchaser, of the banks party to the Company's revolving
credit and letter of credit reimbursement agreements to (a) amend such
agreements to provide that the execution by the Company of the Merger Agreement
and the Stock Option Agreement and the purchase of Shares pursuant to the Offer
or the Stock Option Agreement do not constitute an event permitting the banks
which are parties thereto to accelerate the amounts outstanding under such
agreements or establish cash collateral accounts (the "Bank Consents"), (b)
amend such agreements to permit the consummation of the Merger, and (c) waive
the interest rate increase otherwise applicable by reason of such events, (ii)
to select the latest notice and repurchase dates permitted under the indenture
governing the Company Notes in respect of the "change of control" effected by
consummation of the Offer and (iii) in the event that such repurchase date
occurs prior to the Merger, to cooperate with the Purchaser in arranging
financing on terms reasonably acceptable to the Purchaser to finance any
required repurchase of Company Notes.
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Conditions to the Merger. The obligations of Purchaser and the Company to
consummate the Merger are subject to the satisfaction or, where legally
permissible, waiver of various conditions, including that (i) the Purchaser has
accepted for purchase and paid for Shares pursuant to the Offer; provided, that
this condition will be deemed satisfied with respect to the Company if the
Purchaser fails to purchase Shares pursuant to the Offer in violation of the
terms of the Offer; (ii) the Merger Agreement (insofar as it relates to the
Merger) and the Merger have been approved and adopted by the affirmative vote
of the holders of Shares entitled to cast at least a majority of the total
number of votes entitled to be cast by holders of Shares; (iii) any waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") applicable to the Merger has expired or been
terminated; (iv) the S-4 has become effective under the Securities Act and is
not the subject of any stop order or proceeding seeking a stop order and the
Purchaser has received all material state securities or blue sky permits and
other authorizations necessary to issue the shares of Purchaser Common Stock
(and attached Purchaser Rights) and Purchaser New Preferred Stock pursuant to
the Merger Agreement; (v) no temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger is in effect (each party agreeing to use all
reasonable efforts to have any such order reversed or injunction lifted); (vi)
the Purchaser Common Stock (and the attached Purchaser Rights) to be issued in
the Merger has been approved for listing on the NYSE, subject to official
notice of issuance; and (vii) no action, suit or proceeding by any governmental
entity before any court or governmental or regulatory authority is pending
against the Company, the Purchaser or Sub or any of their subsidiaries
challenging the validity or legality of the transactions contemplated by the
Merger Agreement other than actions, suits or proceedings as to which the
Purchaser had actual knowledge at the time of acceptance for payment of Shares
pursuant to the Offer or which, in the reasonable opinion of counsel to the
party asserting such condition, do not have a substantial likelihood of
resulting in a material adverse judgment.
The obligations of the Purchaser and Sub to effect the Merger and the
transactions contemplated by the Merger Agreement are further subject to the
Company not having failed to perform its material obligations required to be
performed by it under the covenant described above at or prior to the closing
date of the Merger, other than any such failures to perform as to which the
Purchaser had actual knowledge at the time of acceptance for payment of Shares
pursuant to the Offer. The obligation of the Company to effect the Merger is
subject to the Purchaser and Sub not having failed to perform their material
obligations required to be performed by them under the covenant described above
relating to restrictions on business pending the Merger at or prior to the
closing date of the Merger, other than such failures to perform as to which the
Company had actual knowledge at the time of acceptance of Payment for Shares
pursuant to the Offer.
Termination; Fees and Expenses. The Merger Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval of the
Merger Agreement and the Merger by the stockholders of the Company; (i) by
mutual consent of the Purchaser and the Company by action of their respective
Boards of Directors (with any members of the Company Board who may hereafter be
designated by the Purchaser abstaining); (ii) by the Company if (a) the Offer
expires or is terminated without any Shares being purchased thereunder, or (b)
the Purchaser fails to purchase validly tendered Shares in violation of the
terms and conditions of the Offer or the Merger Agreement; (iii) by the
Purchaser if, due to an occurrence which has made it reasonably impracticable
to satisfy any of the conditions of the Offer set forth in Section 14 hereto at
any time prior to the 90th day following the commencement of the Offer, the
Purchaser (a) terminates the Offer or allows the Offer to expire without the
purchase of any Shares thereunder, unless such termination or expiration has
been caused by or resulted from the failure of the Purchaser to perform in any
material respect any of its covenants and agreements contained in the Merger
Agreement or the Offer, or (b) fails to pay for Shares pursuant to the Offer
within 90 days after the date hereof, unless such failure to pay for such
shares is caused by or results from the failure of the Purchaser to perform in
any material respect any of its covenants or agreements contained in the Merger
Agreement or the Offer; (iv) by either the Purchaser or the Company if the
Merger is not consummated before June 30, 1995 despite the good faith effort of
such party to effect such consummation (unless solely by reason of the
conditions relating to the
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absence of certain injunctions, restraining orders or litigation (in which
case, if such litigation, restraining order or litigation was in existence at
the time of consummation of the Offer, such date will be September 30, 1995) or
the failure to so consummate the Merger by such date is due to the action or
failure to act of the party seeking to terminate the Merger Agreement, which
action or failure to act constitutes a breach of the Merger Agreement); (v) by
either the Purchaser or the Company if any court of competent jurisdiction has
issued an injunction permanently restraining, enjoining or otherwise
prohibiting the consummation of the Offer or the Merger, which injunction has
become final and non-appealable; (vi) prior to the expiration of the Offer, by
the Purchaser if the Company rescinds its redemption of the Company Rights and
all other conditions to consummation of the Offer are satisfied, or the Company
Board withdraws, amends or modifies in a manner adverse to the Purchaser its
favorable recommendation of the Offer or the Merger or promulgates any
recommendation with respect to an Acquisition Transaction (including a
determination to take no position) other than a recommendation to reject such
Acquisition Transaction; or (vii) prior to the expiration of the Offer, by the
Company if (a) (x) any of the representations and warranties of the Purchaser
contained in the Merger Agreement were incorrect in any material respect when
made or have since become, and at the time of termination remain, incorrect in
any material respect, or (y) there has been a material breach on the part of
the Purchaser in the covenants of the Purchaser set forth herein, or any
failure on the part of the Purchaser to comply with its material obligations
hereunder, or any other events or circumstances have occurred, such that, in
any such case, the Purchaser could not satisfy on or prior to June 30, 1995,
any of the conditions to the Company's obligations to effect the Merger, or (b)
the Company receives a written offer with respect to an Acquisition Transaction
and the Company Board, after consulting with its outside counsel
and financial advisor, determines in good faith that such Acquisition
Transaction is more favorable to the Company's stockholders than the
transactions contemplated by the Merger Agreement and, not later than the time
of such termination, the Company has paid the expense reimbursement described
above.
In the event of termination of the Merger Agreement by either the Purchaser
or the Company, the Merger Agreement will become void and there will be no
liability or obligation on the part of the Purchaser, Sub or the Company or
their respective officers or directors other than under certain provisions of
the Merger Agreement relating to confidential treatment of non-public
information and the payment of fees and expenses, except to the extent such
termination results from the willful breach by a party of its covenants and
agreements in the Merger Agreement. Under the Merger Agreement, all costs and
expenses, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred by the Purchaser and the Company
will be borne solely and entirely by the party which has incurred such costs
and expenses, other than as described above with respect to reimbursement by
the Company of expenses of the Purchaser under certain circumstances.
Amendment and Waiver. Subject to applicable law, the Merger Agreement may be
amended by action taken by or on behalf of the respective Boards of Directors
of the Purchaser or the Company at any time prior to the Effective Time. After
approval of the Merger by the stockholders of the Company, no amendment which
under applicable law may not be made without the approval of the stockholders
of the Company, may be made without such approval. At any time prior to the
Effective Time, either the Company or the Purchaser may (i) extend the time for
the performance of any of the obligations or other acts of the other party,
(ii) waive any inaccuracies in the representation and warranties of the other
party contained in the Merger Agreement or in any document delivered pursuant
thereto and (iii) waive compliance by the other party with any of the
agreements or conditions contained therein, provided, that any representatives
of the Purchaser on the Company Board will abstain from any such action to be
taken by the Company.
STOCK OPTION AGREEMENT
The following is a summary of the Stock Option Agreement dated as of December
12, 1994, by and between the Company and the Purchaser (the "Stock Option
Agreement"). A copy of the Stock Option Agreement is filed as an Exhibit to the
Schedule l4D-9. Such summary is qualified in its entirety by reference to the
Stock Option Agreement.
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The Option. Pursuant to the Stock Option Agreement, the Company granted to
the Purchaser the option (the "Option") to purchase, upon the terms and subject
to the conditions provided for therein, to 7,500,000 Shares (the "Option
Shares") at an exercise price of $17.50 per share (the "Option Purchase
Price"). If not sooner exercised, the Option will expire fifteen business days
following the termination of the Merger Agreement.
Exercise of the Option. The Purchaser may exercise the Option, in whole or in
part, at any time and from time to time following the occurrence of any of the
following events (each a "Triggering Event"): (i) if the Company accepts a
proposal for or otherwise engages in any Acquisition Transaction other than the
Offer or the Merger; (ii) if the Company Board withdraws, amends or modifies in
a manner adverse to the Purchaser its favorable recommendation of the Offer or
the Merger; or (iii) (a) if any person publicly proposes an Acquisition
Transaction and (b) the Offer has expired in accordance with its terms and the
Merger Agreement and the Minimum Condition fails to be satisfied; provided,
however, that no Triggering Event will occur if the Purchaser is in material
breach of the Merger Agreement. No Triggering Event has occurred as of the date
of this Schedule 14D-9.
In the event that the Purchaser acquires any Option Shares and within one
year following the date of purchase disposes of such shares (other than to a
wholly owned subsidiary of the Purchaser) through a sale, exchange, transfer,
merger or otherwise, for an amount per share which exceeds the Option Purchase
Price by more than $2.00 (the "Option Cap"), the Purchaser will promptly return
to the Company the amount of such excess and thereby effect an upward
adjustment to the Option Purchase Price. The Purchaser will not
sell or otherwise dispose of Option Shares except in compliance with the
Securities Act and any applicable state securities law.
All payments made by the Purchaser to the Company in connection with the
Option may be made, at the option of the Purchaser, either (a) by wire transfer
or (b) by a certified or bank check or checks, in each case in immediately
available funds.
Cancellation Rights. At any time the Option is exercisable, the Purchaser
will have the right, upon prior written notice (a "Purchaser Cash-out Notice")
to the Company specifying the date of the closing (the "Cancellation Closing")
thereof (which date will not be earlier than ten business days nor later than
twenty business days after the receipt by the Company of such Purchaser Cash-
out Notice), to cause the Company to pay to the Purchaser, in consideration for
the cancellation of all or that part of the Option to be cancelled, an
aggregate cash cancellation price (the "Cancellation Price") equal to the
product of (i) the number of Shares as to which the Option is to be cancelled,
multiplied by (ii) the excess (but in no event more than the Option Cap) of (x)
the Applicable Price (as defined below) over (y) the Option Purchase Price.
At any time after the Company receives an Exercise Notice pursuant to the
Stock Option Agreement, the Company will have the right, upon prior written
notice (a "Company Cash-out Notice" and, together with any Purchaser Cash-out
Notice, a "Cash-out Notice") to the Purchaser not later than two business days
prior to the applicable closing, specifying the date of the Cancellation
Closing thereof (which will not be earlier than five business days nor later
than fifteen business days after the receipt by the Purchaser of the applicable
Company Cash-out Notice), to pay to the Purchaser in consideration for the
cancellation of all or that part of the Option subject to such Exercise Notice,
in lieu of delivering Option Shares, the Cancellation Price with respect to the
Option Shares subject to such Exercise Notice.
The "Applicable Price" will mean the average of the high and low sales prices
(but in no event less than $17.50) of the Shares as quoted on the NYSE, or if
not so quoted on the NYSE, then the average of the high and low sales prices on
the principal national securities exchange is which the Shares are then listed,
and if not so listed on any national securities exchange, then the average of
the high and low bid prices per Share as quoted on the National Association of
Securities Dealers, Inc. Automated Quotation System, on the day prior to the
date of the applicable Purchaser Cash-out Notice or the applicable Exercise
Notice, as the case may be (the "Measurement Date"); provided, however, that if
any person has entered into an agreement with the
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Company for an Acquisition Transaction, or an Acquisition Transaction has
otherwise been proposed, prior to the delivery of the applicable Cash-out Price
shall mean the average consideration proposed to be payable per outstanding
Share pursuant to such Acquisition Transaction (or, if there is more than one
such Acquisition Transaction, pursuant to the Acquisition Transaction which
yields the greater average consideration) valued as of the Measurement Date
(with any non-marketable securities included in such consideration being valued
at the fair market value per share of such securities with such fair market
value to be determined in good faith by an independent investment banking firm
selected by the Company and the Purchaser).
(ii) ARRANGEMENTS BETWEEN THE COMPANY AND CERTAIN OF ITS DIRECTORS AND
EXECUTIVE OFFICERS.
Certain contracts, agreements, arrangements and understandings between the
Company or its affiliates and certain of its executive officers, directors and
affiliates are described in the Company's Proxy Statement dated April 1, 1994
(the "1994 Proxy Statement"). A copy of such portions of the 1994 Proxy
Statement is attached hereto as Exhibit 1 and is incorporated herein by
reference.
On December 11, 1994, the Board of Directors established the Senior Executive
Special Bonus and Retention Plan (the "Senior Executive Plan"), under which the
participants will receive bonuses if the Offer or another Extraordinary
Transaction (as defined in the Senior Executive Plan) involving the Company
occurs on or before December 31, 1995. The bonuses payable under the Senior
Executive Plan consist of (i) a cash bonus (the "Transaction Bonus") upon the
consummation of the Extraordinary Transaction, and (ii) a retention bonus (the
"Retention Bonus") in an amount equal to the Transaction Bonus, also payable in
cash, on the later of December 31, 1995 or the sixth-month anniversary of the
consummation of the Extraordinary Transaction. An individual participant will
be eligible to receive the Transaction Bonus only if he is employed by the
Company on the date the Extraordinary Transaction is consummated, or his
employment is previously terminated by the Company in anticipation of, or at
the request of a party intending to consummate, the Extraordinary Transaction.
An individual participant will be eligible to receive the Retention Bonus only
if (i) he is employed by the Company on the date the Retention Bonus becomes
payable, (ii) his employment is terminated by the Company before the
Extraordinary Transaction in anticipation of, or at the request of a party
intending to consummate, the Extraordinary Transaction, or (iii) his employment
is terminated before the Retention Bonus becomes payable by the participant for
"good reason" or by the Company without "cause" (as defined in the
participant's Termination Agreement with the Company). The participants in the
program, and the aggregate amount of the combined Transaction Bonus and
Retention Bonus that each of them is eligible to receive under the Senior
Executive Plan are as follows: John P. DesBarres, Chairman, President and Chief
Executive Officer--$2,062,500; Robert W. Best, Senior Vice President, Natural
Gas--$1,375,000; Larry J. Dagley, Senior Vice President and Chief Financial
Officer--$1,375,000; and David E. Varner, Senior Vice President, General
Counsel and Secretary--$687,500. Pursuant to such participants' Termination
Agreements, the Company indemnifies the participants against golden parachute
excise taxes payable by them, which would include any such excise taxes payable
from bonuses under the Senior Executive Plan. The foregoing description of the
Senior Executive Plan is qualified in its entirety by reference to the Senior
Executive Plan, a copy of which is filed as a exhibit hereto and is
incorporated herein by reference.
The Board also approved amendments to the Termination Agreements of Messrs.
DesBarres, Dagley, Stephen R. Springer, President and Chief Operating Officer
of Transco Gas Marketing Company, and Varner and the Severance Agreement of Mr.
Best (collectively, the "Termination Agreements"). The amendment for Mr.
DesBarres provides that his bonus following a change of control (including the
consummation of the Offer) must equal at least 50 percent of his base salary,
eliminates the requirement for mitigation following a termination of his
employment, and makes certain changes to conform his agreement to the
Termination Agreements covering the other executives named above. The
amendments for the other executives named above provide that the portion of the
severance benefits representing base salary through the third anniversary of
the change of control will be paid in a lump sum without reduction to present
value following the termination of the executive's employment. The Board also
approved a Termination Agreement for Nicholas J. Neuhausel, Senior Vice
President, Human Resources and Administration, who had not previously been a
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party to such an agreement. Mr. Neuhausel's Termination Agreement has the same
provisions as the Agreements of Messrs. Best, Dagley, Springer and Varner,
except that (i) his cash severance will include salary and bonus for the period
through the third anniversary of the date of the termination of his employment
by the Company without "cause" or by him for "good reason" and (ii) his total
payments under the Termination Agreement will be limited to an amount such that
none of such payments will be "excess parachute payments" for tax purposes. The
foregoing description of the amendments to the Termination Agreements is
qualified in its entirety by reference to the copy of such amendments which are
filed as exhibits hereto and are incorporated herein by reference.
In addition, the Board adopted the Selected Employee Retention Plan (the
"Retention Plan"), under which participants would receive a bonus, with a
maximum aggregate amount for all participants of $600,000, upon the earlier of
(i) the 90th day following the Merger or other change of control of the
Company, or (ii) the date the participant's employment is actually or
constructively terminated by the successor company in the change of control.
The participants in the Retention Plan will be those officers and employees of
the Company and its subsidiaries (other than participants in the Senior
Executive Plan) who are designated by the Chief Executive Officer of the
Company as part of the change of control transition team, who are considered
key employees during the transition period.
The Board also approved an amendment to the Key Management Employee Severance
Pay Plan, which provides for one year's severance pay to certain officers of
the Company and its subsidiaries who are not parties to Termination Agreements
or severance agreements with the Company. The Amendment provides that the plan
may not be amended or terminated before the later of December 31, 1995 or the
first anniversary of a change of control (including the consummation of the
Offer).
The Company, Williams and each of Messrs. DesBarres, Dagley, Jay W. Elston
(Vice President and Associate General Counsel), Neuhausel, Springer and Varner
entered into agreements dated as of December 11, 1994 providing that such
executives agree to eliminate their rights under their Severance Agreements
upon any termination of their employment following a change of control in which
they receive benefits under their Termination Agreements (including inter alia,
their right to extend vesting and exercisability of stock options for three
years and to accelerate full vesting of restricted stock units) except that,
(i) in the case of Messrs. DesBarres, Dagley, Elston, Springer and Varner, to
the extent that they would receive less than one year's salary as severance
under their respective Termination Agreement, they will continue to receive the
balance of one year as severance under their Severance Agreement, and (ii) in
the case of Messrs. Dagley, Elston, Neuhausel, Springer and Varner, they will
continue to receive certain tax, financial counselling and outplacement
benefits provided under their Severance Agreements.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
At several meetings between October 1991 and July 1992, as a result of the
Company's weak financial condition and highly leveraged capital structure, the
Board of Directors of Transco considered, with the advice of management and the
Company's financial advisors, whether Transco should continue to implement its
business plan as an independent company or seek strategic alternatives
including a possible sale or merger of the Company. In July 1992, the Board of
Directors authorized Transco's management and its financial advisors to contact
four companies, which were viewed as capable of acquiring the Company, on a
confidential basis to explore their interest in a potential acquisition of
Transco. Two of the companies that were contacted, including Williams,
requested additional business and financial information about Transco and
entered into confidentiality agreements with respect to non-public information
that was furnished to them. The effort was terminated when none of the four
companies ultimately expressed interest in pursuing a transaction with Transco.
On September 9, 1994, Keith E. Bailey, Chairman, President and Chief
Executive Officer of Williams, at a social occasion with John P. DesBarres,
Chairman, President and Chief Executive Officer of Transco, made a passing
comment about the possibility of their considering a business combination of
their respective
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companies, to which Mr. DesBarres did not respond. On September 22-23, 1994,
the Company's Board of Directors reviewed the Company's preliminary long-range
plan and discussed several strategic alternatives, including a master limited
partnership involving the Company's Texas Gas subsidiary, a public offering of
common stock, an acquisition for common stock, as well as the possibility of a
strategic merger. At an informal meeting on September 30, 1994, Mr. Bailey
advised Mr. DesBarres of Williams' interest in considering a business
combination with Trasco and sought to determine Transco's interest in pursuing
such discussions. Mr. DesBarres advised Mr. Bailey that Transco would be
willing to consider pursuing discussions with Williams.
On October 10, 1994, Williams and Transco executed a mutual confidentiality
agreement, pursuant to which they agreed to maintain the confidentiality of
non-public information that was received from the other party. Over the next
two months, each company's management and advisors conducted due diligence
investigations of the other party.
At a meeting between Messrs. Bailey and DesBarres on November 23, 1994, Mr.
Bailey proposed that Williams acquire 51% of the outstanding Shares for $17 per
Share in cash, with the remaining Shares acquired in a merger for (i) .55 of a
share of Purchaser Common Stock and (ii) a contingent value right which would
pay additional cash consideration of up to a maximum of $2 per right if
Purchaser Common Stock did not reach specified trading levels during any twenty
consecutive trading days during a 12-18 month period. Mr. Bailey also indicated
that Williams would require a stock option and certain termination fees to be
paid by Transco in connection with any transaction. Mr. Bailey also indicated
that he would like Mr. DesBarres to become President and a Director of Williams
following the transaction. Mr. DesBarres responded that he wanted to defer any
discussions about his future employment until after any Transaction was finally
agreed upon, and that in any event he needed to consider personal and career
issues before making any decision.
On November 26, 1994 Mr. DesBarres, after consulting with the Company's
financial advisor, advised Mr. Bailey that the proposed consideration was
inadequate and that he was postponing the more extensive due diligence
investigations that had been planned to commence on November 27, 1994 until the
financial terms were more fully negotiated. After further discussions during
the following week between Messrs. Bailey and DesBarres and their respective
financial advisors, Williams increased its proposal on December 2, 1994 to
$17.50 per share in cash for up to 55% of the outstanding shares and .6 of a
share of Purchaser Common Stock for each remaining Share acquired in the
merger. Williams rejected proposals by Transco's financial advisor for an
adjustable exchange ratio in the merger within a range or "collar". Williams
also continued to demand as part of its proposal that Transco grant Williams a
stock option at $17.50 per Share for approximately 18% of the outstanding
shares with a $5 per share cap on its value and an additional termination fee
of $15 million. While Mr. DesBarres, after informal consultations with other
Board members, advised Mr. Bailey that the proposal would require additional
improvement, he agreed to let the due diligence investigation commence. Later
that day, following further discussions with Mr. DesBarres and based upon the
relative prices of the Shares and the Purchaser Common Stock on December 2,
1994, Mr. Bailey agreed to increase the exchange ratio to .625 assuming that
negotiations were successfully completed. Williams' counsel delivered drafts of
the merger and stock option agreements to representatives of the Company on
December 3, 1994.
Over the next few days, the parties continued to negotiate the proposal and
Williams agreed to increase the percentage of Shares acquired for cash to
approximately 60%. In addition, Williams replaced its demand for a $15 million
termination fee with a provision for Transco to reimburse Williams for its
actual expenses (up to a maximum of $15 million) upon the occurrence of certain
events, including if Transco terminates the Merger Agreement to accept a
competing bid to acquire the Company. On December 8, 1994, the Company Board
reviewed the proposal with its financial advisor and authorized management to
negotiate definitive terms and bring it before the Board.
Representatives of Williams and Transco continued to negotiate the agreements
over the next three days. On December 11, 1994, Williams agreed to reduce the
cap on the value of its option to $2 per option Share and agreed to Transco's
request for the right to cancel the option following any exercise by Williams
for a
14
<PAGE>
cash payment not to exceed such cap. On December 11, 1994, the Boards of
Directors of Williams and Transco approved the Merger Agreement and the Stock
Option Agreement. On December 12, 1994, the Merger Agreement and the Stock
Option Agreement were executed and the parties issued a joint press release
with respect thereto.
Recommendation of the Board. On December 8 and 11, 1994, the Board of
Directors of Transco met to consider the proposed business combination with
Williams. At the meeting on December 11, the Board of Directors, by a unanimous
vote of those directors present (with Mr. Bailar absent), approved the Merger
Agreement and the Stock Option Agreement, determined that the Offer and the
Merger, taken together, are fair to and in the best interest of the Company's
stockholders and recommended that holders of Shares accept the Offer, tender
their Shares pursuant to the Offer and approve the Merger and the Merger
Agreement.
A copy of a letter to stockholders communicating the Board's determination
and recommendation is attached hereto as Exhibit 4 and incorporated herein by
reference.
(b) REASONS FOR THE BOARD'S RECOMMENDATION.
Prior to reaching its conclusions, the Board received presentations from, and
reviewed the transactions contemplated by the Merger Agreement with, the
Company's management and financial advisor. In reaching its conclusions, the
Board considered a number of factors, including, but not limited to, the
following:
(i) The Company's business, its current financial condition and results
of operations and its future prospects, including the effects of recent
regulatory developments on the Company's natural gas pipeline business. The
Company Board considered the significant amounts of capital that will be
required to maintain and expand the Company's operations and the
constraints that the Company's high leverage imposes on the Company's
ability to raise such funds as an independent concern. The Company Board
also considered the Company's efforts over the preceding three years to
alleviate the Company's weak financial situation due to its highly
leveraged capital structure, certain under-performing assets outside its
core businesses and several regulatory and legal contingencies. The Company
Board also reviewed the Company's long-range financial plans under several
scenarios to consider the alternative of Transco remaining an independent
public company, including the risks and uncertainties in meeting the
assumptions underlying such scenarios and the range of expected future
earnings and stock trading prices which may be expected if such performance
levels were achieved.
(ii) Presentations by the Company's management and Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") to the Company Board at
meetings held on December 8 and 11, 1994, as to various financial and other
considerations deemed relevant to the Company Board's evaluation of the
Transaction, including, among other things, (1) a review of the Company's
and Williams' historical financial condition and results of operations, (2)
a review of the Company's and Williams' projected financial performance
under their respective business plans, (3) a review of the historical and
recent market prices for the Shares and the Purchaser Common Stock,
including an analysis of Williams' recent repurchase program in which it
repurchased an aggregate of approximately 13.8 million shares of Purchaser
Common Stock during the period August 29, 1994 through November 30, 1994,
(4) a comparison of the Company with selected comparable public companies
on the basis of certain financial and market data, (5) a comparison of
selected comparable acquisition transactions, (6) a discounted cash flow
analysis of the Company and its subsidiaries, (7) a comparison of the
premium to the Company's stock price compared to other large transactions
over the last four years as well as to recent transactions involving energy
companies, and (8) estimated pro forma financial information for a combined
Williams/Transco entity.
(iii) The oral opinion of Merrill Lynch delivered at the meeting on
December 11, 1994 and subsequently delivered to the Company Board in
writing, that as of such date, the consideration to be received by the
stockholders of the Company (other than the Purchaser and its affiliates)
pursuant to the Offer and the Merger, taken as a whole, is fair to such
stockholders from a financial point of view. A
15
<PAGE>
copy of the opinion of Merrill Lynch, setting forth the assumptions made,
the matters considered, and the limitations on the review undertaken, is
attached as Exhibit 5 hereto and is incorporated herein by reference. The
Company Board was aware in this connection that Merrill Lynch becomes
entitled to the fees described in Item 5 in connection with its engagement
by the Company upon execution and consummation of the Merger Agreement.
(iv) Williams' obligation to consummate the Offer and the Merger is
subject to a limited number of conditions, including the fact that the
Offer is not conditioned on financing or the closing of the $2.5 billion
sale of the network services portion of its telecommunications business,
and that Williams has agreed in the Merger Agreement that, in the event it
is unable to consummate the Offer at any scheduled expiration thereof due
to the failure of certain conditions, it will continue to extend the Offer
for up to 90 days following commencement of the Offer;
(v) The Company Board recognized that Williams had required as a
condition to its holding the discussions and negotiations with the Company
that led to the Merger Agreement that the Company and its representatives
not solicit possible acquisition interest from third parties and that no
such solicitation had been undertaken. In determining that this was an
appropriate course, the Company Board considered (1) the uncertainties and
potential adverse impact that a "public" auction of the Company could have
on the business, employees and prospects of the Company, including its
relationships with third parties, (2) the fact that Williams had advised
that it would withdraw as a potential acquiror of the Company and pursue
other business strategies if such a process were undertaken, and that the
Company Board was informed that Williams' actions in negotiations involving
other companies indicated that Williams' statement should be considered
accurate, (3) the lack of interest in an acquisition of the Company by any
of the potential qualified acquirors that had previously been solicited by
the Company in the third quarter of 1992 and (4) the terms of the Merger
Agreement described below which permit the Company to terminate the Merger
Agreement to allow the Company to enter into any alternative transaction
which the Company Board determines is more favorable to the Company's
stockholders than the transactions contemplated by the Merger Agreement
(provided that upon such termination the Company reimburses the Purchaser
for up to $15 million in out-of-pocket expenses and pays any amounts that
could become payable upon the Purchaser's exercise of the Stock Option
Agreement). The Company Board also took into account the view of management
and Merrill Lynch that, based on among other things Transco's large size
and high leverage, the market's limited interest generally in regulated gas
pipeline companies, antitrust considerations and an analysis of the
theoretical alternative bidders, it was unlikely that a third party bidder
would be prepared to pay a higher price for the Shares than the
consideration offered in the Offer and the Merger, particularly without
assuming greater risks of non-consummation than apply to the Offer and the
Merger.
(vi) The Company may be required to pay Williams amounts pursuant to the
Option Agreement and the reimbursement of expenses pursuant to the Merger
Agreement upon the occurrence of certain events, including if the Company
terminates the Merger Agreement to accept a proposal that is more favorable
to the Company's stockholders than the Offer and the Merger. The Company
Board noted that, under the terms of the Merger Agreement, while the
Company is prohibited from soliciting acquisition proposals from third
parties, the Company is free to engage in discussions or negotiations with,
and may furnish non-public information to, a third party who makes a
written acquisition proposal if either (1) the Company Board determines in
good faith with the advice of its financial advisors that such proposal may
reasonably be expected to result in a transaction that is financially
superior to the transactions contemplated by this Agreement, or (2) the
Company Board determines in good faith with the advice of outside counsel
that failure to do so could reasonably be expected to result in a breach of
the Company Board's fiduciary duties under applicable law. The Company
Board also noted the terms of the Option Agreement, including the $2 cap
per option share (which would only be fully payable generally if and to the
extent that an alternative transaction provided at least $19.50 per share
to the Company's common stockholders), the limited circumstances under
which the Option becomes exercisable and the right of the Company to cancel
the Option following Williams' exercise for a cash
16
<PAGE>
payment (not in excess of the cap) which could avoid any impediment to
another transaction that might arise from Williams owning approximately 15%
of the outstanding Shares following exercise of the Option. In addition,
the Merger Agreement provided that the expense reimbursement would be
limited to documented, out-of-pocket expenses, which may be significantly
below the maximum limitation of $15 million. In this regard, the Company
Board also recognized that the Option Agreement and the provisions of the
Merger Agreement relating to reimbursement of expenses and solicitation of
acquisition proposals were insisted upon by Williams as a condition to
entering into the Merger Agreement and making the Offer and had been
substantially modified in the Company's favor over the course of the
negotiations. The Company Board considered the possible effect of the
Option Agreement and these provisions of the Merger Agreement on third
parties who might be interested in exploring an acquisition of the Company
and concluded, based in part on Merrill Lynch's advice, that the Option
Agreement and expense reimbursement provisions should not significantly
deter a bona fide interested third party from making a proposal for the
Company and are reasonable in light of the benefits of the Offer and the
Merger;
(vii) The exchange ratio in the Merger is fixed at .625 of a share of
Purchaser Common Stock for each Share without a "collar" in which the
number of shares of Purchaser Common Stock would increase or decrease as
the trading price of Purchaser Common Stock changed in the market and the
effect on the combined value to be received in the Transaction based on
different trading prices for Purchaser Common Stock. The Company Board
noted that Williams had rejected each effort by the Company's management
and financial advisor to include a collar. The Company Board also
considered that the effect of a collar is not only to reduce the risk of a
decline in the trading price of Purchaser Common Stock, but also to reduce
the benefit the Company's stockholders would otherwise receive as a result
of any increase in the trading price of Purchaser Common Stock;
(viii) The outstanding two series of Company Preferred Stock is being
exchanged in the Merger for two new series of Purchaser New Preferred Stock
having substantially equivalent terms. In particular, the Company Board
noted that the conversion rate of each series of Purchaser New Preferred
Stock into Purchaser Common Stock is equal to the product of (a) the
conversion rate of the corresponding series of Company Preferred Stock into
Shares multiplied by (b) the exchange ratio in the Merger of .625. The
Company Board also considered that the Purchaser agreed to use its
reasonable best efforts to cause the Purchaser $4.75 Preferred Stock to be
listed on the NYSE or quoted on the NASDAQ National Market System. The
Company Board also recognized that the holders of Purchaser New Preferred
Stock would have the benefit of having a security issued by a company with
a higher credit rating than that of the Company.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Merrill Lynch was retained, pursuant to a letter agreement dated October 5,
1994, as financial advisor to the Board of Directors with respect to any
proposed Business Combination (as defined in the letter agreement), including a
merger of the Company, sale of 50% or more of the Company's outstanding voting
securities or a similar transaction. Pursuant to the terms of such letter
agreement, the Company agreed to pay Merrill Lynch a fee of $500,000 contingent
and payable in cash upon any public announcement of (a) an agreement between
the Company and another party relating to a Business Combination or (b) a
tender offer or exchange offer for 50% or more of the outstanding voting
securities of the Company. Pursuant to the terms of the letter agreement, if,
during the period Merrill Lynch is retained by the Company or within 12 months
thereafter, (a) a Business Combination is consummated or (b) the Company enters
into an agreement which subsequently results in a Business Combination, the
Company has agreed to pay Merrill Lynch an additional fee in an amount equal to
0.4% of the aggregate "purchase price" paid in such Business Combination,
payable in cash upon the closing of such Business Combination or, in the case
of a tender offer or exchange offer, upon the first purchase or exchange of
shares pursuant to such tender offer or exchange offer, as the case may be,
against which the $500,000 fee described above is credited. Pursuant to the
letter agreement, Merrill Lynch will be entitled to a fee at the consummation
of the Offer as if all outstanding Shares on a fully diluted basis were
acquired at such time at the price paid in the Offer. In addition, the
letter agreement defines "purchase price" to include the amount of indebtedness
and preferred
17
<PAGE>
stock of the Company or any subsidiary which is assumed or acquired by the
acquiror or retired or redeemed in connection therewith. Under the letter
agreement, Merrill Lynch will be entitled to a fee of approximately $12
million, against which the $500,000 fee previously payable will be credited. In
addition, the Company has agreed to reimburse Merrill Lynch for its reasonable
out-of-pocket expenses (including reasonable fees and disbursements of its
legal counsel) and has agreed to indemnify Merrill Lynch and its affiliates and
their directors, officers, employees, agents and controlling persons thereof,
against certain liabilities.
Merrill Lynch has, in the past, provided financial advisory and financing
services to the Company and has received fees for the rendering of such
services. In the ordinary course of business, Merrill Lynch engages in trading
the securities of the Company and the Purchaser for its own account and for the
accounts of its customers and, accordingly, may at any time hold a long or
short position in such securities.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or agreed to compensate any person to make
solicitations or recommendations to stockholders of the Company concerning the
Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Other than as described above, during the past sixty days no other
transaction in the Shares has been effected by the Company or any subsidiary
or, to the best of the Company's knowledge, by any executive officer, director,
affiliate or subsidiary of the Company other than Shares that may have been
allocated to participants under The Tran$tock Employee Stock Ownership Plan,
purchases of an aggregate of 14.199 Shares by Mr. Neuhausel through regular
biweekly payroll deductions in Transco Energy Company Thrift Plan and other
than purchases and sales in the ordinary course in open market transactions by
the Thrift Plan.
(b) To the best knowledge of the Company, its executive officers, directors,
affiliates and subsidiaries currently intend to tender pursuant to the Offer
all Shares held of record or beneficially owned by them (other than Shares
issuable upon exercise of options and Shares, if any, which if tendered could
cause such persons to incur liability under the provisions of Section 16(b) of
the Securities Exchange Act of 1934) except that some directors and officers
are considering holding their Shares to exchange them for Purchaser Common
Stock in the Merger, subject to market conditions and other factors.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) There are presently no negotiations being undertaken or underway by the
Company in response to the Offer which relate to or would result in:
(i) an extraordinary transaction much as a merger or reorganization
involving the Company or any subsidiary of the Company, other than the
Merger;
(ii) a purchase, sale or transfer of a material amount of assets by the
Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company, other than the Offer; or
(iv) any material change in the present capitalization or dividend policy
of the Company, other than as described in Item 8(b) below.
(b) There are presently no transactions, board resolutions, agreements in
principle or signed contracts in response to the Offer, other than as described
in or incorporated by reference into Item 3(b), which relate to or would result
in one or more of the matters referred to in Item 7(a)(1), (2), (3) or (4).
18
<PAGE>
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) Section 203 of the DGCL.
As a Delaware corporation, the Company is subject to Section 203 ("Section
203") of the Delaware Law. Section 203 would prevent an "Interested
Stockholder" (defined as a person beneficially owning 15% or more of a
corporation's voting stock) from engaging in a "Business Combination" (as
defined in Section 203) with a Delaware corporation for three years following
the date such person became an Interested Stockholder unless: (i) before such
person became an Interested Stockholder, the board of directors of the
corporation approved the transaction in which the Interested Stockholder became
an Interested Stockholder or approved the Business Combination, (ii) upon
consummation of the transaction which resulted in the Interested Stockholder
becoming an Interested Stockholder, the Interested Stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding stock held by directors who are also officers
and employee stock ownership plans that do not provide for confidential voting
by plan participants), or (iii) following the transaction in which such person
became an Interested Stockholder, the Business Combination is (x) approved by
the board of directors of the corporation and (y) authorized at a meeting of
stockholders by the affirmative vote of the holders of 66 2/3% of the
outstanding voting stock of the corporation not owned by the Interested
Stockholder. In accordance with the provisions of Section 203, the Company
Board has approved the transactions contemplated by the Merger Agreement and
the Stock Option Agreement, thereby exempting such transactions from such
provisions.
(b) Article Eighth of the Company's Restated Certificate of Incorporation.
Under Article Eighth of the Company's Second Restated Certificate of
Incorporation, certain extraordinary transactions require the prior approval of
at least eighty percent of the directors then in office or the vote of at least
eighty percent of the outstanding stock of the Company entitled to vote thereon
or compliance with specified procedural requirements. In accordance with
Article Eighth, the Company Board by a vote of not less than 80% of the
directors then in office approved the transactions contemplated by the Merger
Agreement and the Stock Option Agreement, thereby exempting such transactions
from such provisions.
(c) Redemption by Holders of Company and Subsidiary Preferred Stock.
The Certificates of Designation, Preferences and Rights of the Company's
$4.75 Preferred Stock and $3.50 Preferred Stock provide that in the event (i)
any person is or becomes the owner of 30% or more of the outstanding common
stock of the Company or (ii) individuals who constitute the Continuing
Directors (as defined therein) cease for any reason to constitute at least a
majority of the Company Board (each a "Change of Control"), each holder of such
preferred stock shall have the right, at the holder's option, to require the
Company to redeem all or any number of such holder's shares, unless such Change
of Control has been approved by the Continuing Directors prior to or within 21
days after the date on which such Change in Control shall have occurred. At its
meeting on December 11, 1994, the Company Board approved the transactions
contemplated by the Merger Agreement and the Stock Option Agreement such that
the redemption rights will not be triggered by such transactions.
The Certificate of Designation, Preferences and Rights of TGPL's Cumulative
Preferred Stock, $8.75 Series provides that in the event (x) (i) any person is
or becomes the owner of 30% or more of the outstanding common stock or (ii)
individuals who constitute the Continuing Directors (as defined therein) cease
for any reason to constitute at least a majority of the Board (each a "Change
of Control") and (y) the prevailing credit ratings of TGPL's senior debt
securities is reduced below investment grade on any date within 90 days
following a Change in Control as a result thereof, each holder of such
preferred stock shall have the right, at the holder's option, to require TGPL
to redeem all or any number of such holder's shares of such preferred stock,
unless such Change of Control has been approved by the Continuing Directors
prior to or within 21 days after the date on which such Change in Control shall
have occurred. At its meeting on December 11, 1994, the Company Board approved
the transactions contemplated by the Merger Agreement and the Stock
19
<PAGE>
Option Agreement and the Board of Directors of TGPL will act by written consent
to approve such transactions, such that the redemption rights will not be
triggered by such transactions.
(d) The Rights Agreement.
At its meeting on December 11, 1994, the Company Board approved the deferral
of the Distribution Date, as defined in the Rights Agreement, with the effect
that none of the transactions contemplated by the Merger Agreement or the Stock
Option Agreement will result in a Distribution Date, other than an exercise of
the Stock Option Agreement following which the Purchaser beneficially owns 20%
or more of the outstanding Shares. In addition, pursuant to the Merger
Agreement, the Company has agreed to redeem all outstanding Company Rights
prior to Williams' acceptance for payment of Shares pursuant to the Offer, at a
redemption price of $.05 per Company Right and will not otherwise redeem the
Company Rights or amend or terminate the Company Rights Agreement, unless in
each such case the Board determines in good faith with the advice of outside
counsel that complying with any such covenants could reasonably be expected to
result in a breach of its fiduciary duties under applicable law. The Company
agreed in the Merger Agreement that the Offer will provide, and require that
tendering stockholders confirm, that the Purchaser will be entitled to receive
and retain the amounts paid in redemption of all Company Rights attached to
Shares acquired pursuant to the Offer.
(e) Certain Litigation.
The Company, certain of its directors, and Williams have been named as
defendants in six purported class actions commenced in the Court of Chancery in
and for New Castle County, Delaware. Each of the actions purports to be brought
as a class action on behalf of all public stockholders of the Company. The
actions are captioned as follows: Alpern v. Transco Energy Company, et al.
(C.A. No. 13918); Weiss et al. v. DesBarres, et al., (C.A. No. 13923); Steiner
v. DesBarres, et al., (C.A. No. 13920); Miller v. DesBarres, et al., (C.A. No.
13922); Rand et al. v. DesBarres, et al. (C.A. No. 13925); and DeCesare v.
DesBarres, et al. (C.A. No. 13926).
The complaint in each of the six lawsuits alleges that the directors of the
Company breached their fiduciary duties to the shareholders in considering and
approving the proposed Transaction with Williams, and that Williams aided and
abetted such breaches. In particular, some or all of the complaints allege that
the directors agreed to sell the Company at an inadequate price and without
proper information concerning the intrinsic value of the Company and its
shares; that the directors breached their duties by agreeing to an allegedly
coercive tender offer and by agreeing to the Option Agreement; and that the
directors should not have agreed to the Transaction without holding an auction
for sale of control of the Company. As relief, each of the complaints seeks,
among other things, an injunction against consummation of the Transaction and
damages in an unspecified amount.
The Company believes that the lawsuits are without merit, and intends to
vigorously defend the actions.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
(1) The Company's Proxy Statement dated April 1, 1994
(2) Agreement and Plan of Merger dated as of December 12, 1994 by and among
The Williams Companies, Inc., WC Acquisition Corp. and Transco Energy Company
(3) Stock Option Agreement dated as of December 12, 1994 by and between The
Williams Companies, Inc. and Transco Energy Company
(4) Letter to the Company's stockholders dated December 16, 1994*
- --------
* Included in copies mailed to stockholders.
20
<PAGE>
(5) Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated dated
December 11, 1994*
(6) Press Release dated December 12, 1994
(7) Termination Agreement, dated as of December 11, 1994, between Transco
Energy Company and Nicholas J. Neuhausel.
(8) Amendment, dated December 11, 1994, to the Termination Agreement between
Transco Energy Company and Larry J. Dagley dated as of March 25, 1992.
(9) Amendment, dated December 11, 1994, to the Termination Agreement between
Transco Energy Company and Stephen R. Springer dated as of March 25, 1992.
(10) Amendment, dated December 11, 1994, to the Termination Agreement between
Transco Energy Company and David E. Varner dated as of March 25, 1992.
(11) Amendment, dated December 11, 1994, to the Termination Agreement between
Transco Energy Company and John P. DesBarres dated as of October 31, 1991.
(12) Amendment, dated December 11, 1994, to the Severance Agreement between
Transco Energy Company and Robert W. Best dated as of March 25, 1992.
(13) Senior Executive Special Bonus and Retention Plan.
(14) Agreement, dated December 11, 1994, between Transco Energy Company, The
Williams Companies, Inc. and Larry J. Dagley.
(15) Agreement, dated December 11, 1994, between Transco Energy Company, The
Williams Companies, Inc. and David E. Varner.
(16) Agreement, dated December 11, 1994, between Transco Energy Company, The
Williams Companies, Inc. and Nicholas J. Neuhausel.
(17) Agreement, dated December 11, 1994, between Transco Energy Company, The
Williams Companies, Inc. and Steven R. Springer.
(18) Agreement, dated December 11, 1994, between Transco Energy Company, The
Williams Companies, Inc. and Jay W. Elston.
(19) Agreement, dated December 11, 1994, between Transco Energy Company, The
Williams Companies, Inc. and John P. DesBarrres.
(20) Alpern v. Transco Energy Company, et al., (Del. Ch.) (C.A. No. 13918).
(21) Weiss et al. v. DesBarres, et al., (Del. Ch.) (C.A. No. 13923).
(22) Steiner v. DesBarres, et al., (Del. Ch.) (C.A. No. 13920).
(23) Miller v. DesBarres, et al., (Del. Ch.) (C.A. No. 13922).
(24) Rand et al. v. DesBarres, et al. (C.A. No. 13925).
(25) DeCesare v. DesBarres, et al., (C.A. No. 13926).
21
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
TRANSCO ENERGY COMPANY
/s/ David E. Varner
By: _________________________________
Name: David E. Varner
Title: Senior Vice President,
General Counsel and
Secretary
Date: December 16, 1994
22
<PAGE>
The following Exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBITS PAGE NO.
------- -------- --------
<C> <S> <C>
(1) The Company's Proxy Statement dated April 1, 1994
(2) Agreement and Plan of Merger dated as of December 12, 1994
by and among The Williams Companies, Inc., WC Acquisition
Corp. and Transco Energy Company
(3) Stock Option Agreement dated as of December 12, 1994 by and
between The Williams Companies, Inc. and Transco Energy
Company
(4) Letter to the Company's stockholders dated December 16,
1994*
(5) Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated dated December 11, 1994*
(6) Press Release dated December 12, 1994
(7) Termination Agreement, dated as of December 11, 1994,
between Transco Energy Company and Nicholas J. Neuhausel.
(8) Amendment, dated December 11, 1994, to the Termination
Agreement between Transco Energy Company and Larry J.
Dagley dated as of March 25, 1992.
(9) Amendment, dated December 11, 1994, to the Termination
Agreement between Transco Energy Company and Stephen R.
Springer dated as of March 25, 1992.
(10) Amendment, dated December 11, 1994, to the Termination
Agreement between Transco Energy Company and David E.
Varner dated as of March 25, 1992.
(11) Amendment, dated December 11, 1994, to the Termination
Agreement between Transco Energy Company and John P.
DesBarres dated as of October 31, 1991.
(12) Amendment, dated December 11, 1994, to the Severance
Agreement between Transco Energy Company and Robert W. Best
dated as of March 25, 1992.
(13) Senior Executive Special Bonus and Retention Plan.
(14) Agreement, dated December 11, 1994, between Transco Energy
Company, The Williams Companies, Inc. and Larry J. Dagley.
(15) Agreement, dated December 11, 1994, between Transco Energy
Company, The Williams Companies, Inc. and David E. Varner.
(16) Agreement, dated December 11, 1994, between Transco Energy
Company, The Williams Companies, Inc. and Nicholas
Neuhausel.
(17) Agreement, dated December 11, 1994, between Transco Energy
Company, The Williams Companies, Inc. and Steven R.
Springer.
(18) Agreement, dated December 11, 1994, between Transco Energy
Company, The Williams Companies, Inc. and Jay W. Elston.
(19) Agreement, dated December 11, 1994, between Transco Energy
Company, The Williams Companies, Inc. and John P.
DesBarrres.
(20) Alpern v. Transco Energy Company, et al., (Del. Ch.) (C.A.
No. 13918).
(21) Weiss et al. v. DesBarres, et al., (Del. Ch.) (C.A. No.
13923).
(22) Steiner v. DesBarres, et al., (Del. Ch.) (C.A. No. 13920).
(23) Miller v. DesBarres, et al., (Del. Ch.) (C.A. No. 13922).
(24) Rand et al. v. DesBarres, et al. (C.A. No. 13925).
(25) DeCesare v. DesBarres, et al., (C.A. No. 13926).
</TABLE>
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* Included in copies mailed to stockholders.
<PAGE>
PROXY STATEMENT
This Proxy Statement is furnished to stockholders of Transco Energy
Company ("Transco" or the "Company") in connection with the solicitation by the
Board of Directors of proxies and voting instructions to be used at the 1994
Annual Meeting of Stockholders to be held on May 17, 1994, or any adjournment(s)
or postponement(s) thereof. The approximate date of mailing this Proxy Statement
and the accompanying proxy card is April 1, 1994.
Stockholders are requested to indicate their vote on the accompanying
proxy card on the following proposals:
<PAGE>
COMPENSATION OF DIRECTORS
The Company compensates each director of the Company for his services
as a director in an amount approved from time to time by the entire Board of
Directors based upon the recommendation of the Compensation Committee. The
Compensation Committee makes its recommendations based on the advice of an
outside compensation consultant and external comparative data. Each director
who was not an officer or employee of the Company in 1993 received as
compensation an annual retainer of $22,000. All directors received meeting fees
of $1,000 for each board meeting of the Company they attended. Additionally,
each director who was not an officer or employee of the Company was paid $1,000
for each committee meeting attended, except for the Chairman of each of the
Audit, Compensation and Nominating Committees, who received $1,500 for each
committee meeting attended. Each director who was not an officer or employee of
the Company was granted in 1993, pursuant to the Company's 1991 Incentive Plan,
a stock option with respect to 1,000 shares of Common Stock of the Company with
an exercise price equal to the market price of the Common Stock on the date of
grant. Such options become exercisable on the first anniversary of the date of
grant. For additional information with respect to certain changes to the 1991
Incentive Plan which will increase the compensation paid to non-employee
directors, see Proposal 3 below.
PROPOSAL 2: APPROVAL OF AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors
has unanimously approved and requests you to vote FOR the appointment of Arthur
Andersen & Co. as the Company's Independent auditors to serve until the next
annual meeting of stockholders. Proxies will be so voted unless stockholders
specify otherwise in their proxies. For a description of the number of
affirmative votes required to approve this proposal and the treatment of broker
non-votes and abstentions see "Outstanding Voting Stock" below.
Arthur Andersen & Co. will have representatives present at the meeting
who will have the opportunity to make a statement if they desire to do so and
will be available to respond to appropriate questions.
PROPOSAL 3: APPROVAL OF AMENDED AND
RESTATED 1991 INCENTIVE STOCK PLAN
The Board of Directors believes that the future success of the Company
and its subsidiaries is dependent upon
-2-
<PAGE>
the quality and continuity of the Board of Directors and management, and the
compensation programs have been important in attracting and retaining
individuals of superior ability and in motivating their efforts on behalf of the
Company.
Thus, to keep pace with competitive trends and to support further the
achievement of key strategic objectives, the Board of Directors has adopted,
subject to the approval of the stockholders of the Company, an Amended and
Restated 1991 Incentive Stock Plan (the "Plan") which will increase the
aggregate number of shares subject to the Plan and make certain other changes
discussed below. Subject to certain limitations, the additional shares will be
available for grants of stock options, stock appreciation rights ("SARs"),
awards of Restricted Stock, Restricted Stock Units and distributions in payment
of a new feature of the Plan, Deferred Stock Units. The full text of the
Amended and Restated 1991 Incentive Stock Plan is attached as Exhibit A and the
following discussion is qualified by reference to such Plan.
The purpose of the Plan continues to be to advance the interests of
the Company by providing incentive awards and stock ownership opportunities to
key employees, including officers and directors who are employees, and to a
limited extent, non-employee directors, all who contribute significantly to the
performance of the Company and its affiliates. The Company believes that stock
ownership opportunities for key employees and directors are especially important
to the Company and its stockholders because stock ownership aligns the interests
of such persons with that of the Company's stockholders.
Description of Amendments to the Plan
The following are the major changes made to the Plan:
. Adds 2 million shares, making the total shares available for
awards under the Plan 3.25 million.
. Limits the aggregate number of shares available under the Plan
that may be subject to awards of Restricted Stock and distributed
in payment of Restricted Stock Units and Deferred Stock Units to
35% of the total shares available (i.e. 1,137,500 shares).
. Limits the total number of stock options that may be granted to
any individual during a five-year period under the Plan to
500,000 shares.
-3-
<PAGE>
. Provides the Plan Committee (currently the Compensation Committee
of the Board of Directors) with the flexibility to grant Stock
Appreciation Rights (SARs) independent of or in conjunction with
stock options.
. Adds Deferred Stock Units as a new feature of the Plan which will
be available for outright grants by the Plan Committee as well as
be available to employees, with the consent of the Plan
Committee, to defer receipt of incentive compensation, Restricted
Stock and/or Restricted Stock Unit awards until retirement or
termination.
. Adds a feature which would provide that each Director of the
Company, who is not also an employee of the Company, be granted
500 Deferred Stock Units, effective as of the date of each annual
meeting at which he is elected or continues to serve as a
Director, commencing with the 1994 Annual Meeting. Also, adds a
feature which would provide that the initial grant at the 1994
Annual Meeting include an additional grant of 2,500 Deferred
Stock Units in recognition of past service on the Board of
Directors. Deferred Stock Units would vest after completion of
five years of service on the Board of Directors.
. Eliminates the Performance Unit and Equity Award features of the
Plan as a result of the addition of the Deferred Stock Unit
feature.
. Modifies the provisions in the Plan with regard to change in
control to (i) expand the definition of "Change in Control" to
include certain mergers, and (ii) delete section 10 of the Plan
which dealt with the effects of a merger of similar transactions
on outstanding awards.
. Eliminates the provision permitting the granting of options or
SARs upon the surrender of an option or SAR.
. Substitutes the concept of "affiliates" for "subsidiaries",
permitting the Plan Committee to make grants or awards to
employees of affiliates, which is a controlled entity approved by
-4-
<PAGE>
the Plan Committee in which the Company owns 20% or more of the
voting power.
. Makes certain other definitional and clarifying changes,
including adding the word "stock" to the name of the Plan.
To the extent that executive officers and the member of the Board of
Directors of the Company are entitled or may be eligible to receive grants and
awards under the Plan, such persons may be said to have an interest in the Plan.
Tax Consequences
The Company has been advised that, based on the present provisions of
the Internal Revenue Code and regulations promulgated thereunder, the federal
income tax consequences of the granting, vesting and exercise of awards under
the Plan will generally be as described below. This discussion does not address
the impact of state and local taxes or the federal alternative minimum tax, nor
is it intended as tax advance to any individual.
Nonqualified Options. An optionee will not generally recognize any
taxable income, and the Company will not be allowed a tax deduction, upon the
granting of a nonqualified stock option ("NQO"). Upon the exercise of an NQO,
the optionee realizes ordinary income in an amount equal to the excess, if any,
of the fair market value of the shares acquired at the time the Option is
exercised over the exercise price for such shares. At that time, subject to the
limitations of Internal Revenue Code Section 162(m), discussed in the
"Compensation Committee Report on Executive Compensation" below, the Company
will be allowed a tax deduction equal to the amount of ordinary taxable income
recognized by the optionee, if applicable withholding requirements are
satisfied.
Incentive Stock Options. An optionee will not generally recognize any
taxable income, and the Company will not be allowed a tax deduction, upon the
granting of an incentive stock option ("ISO"). Upon the exercise of an ISO the
optionee will not realize ordinary taxable income and the Company will be
allowed a tax deduction, as long as the optionee is an employee of the Company
(or of an 80-percent-owned subsidiary of the Company) from the time of the grant
through the date three months before the ISO was exercised. (The foregoing
requirement is waived with respect to exercise by the estate of an ISO holder
who dies while employed, or within three months
-5-
<PAGE>
after the termination of his or her employment, and the three-month period is
extended to one year in the case of a termination because of total and permanent
disability.) If the foregoing requirement is not met, the exercise of an ISO is
treated in the same manner as the exercise of an NQO (see above). The basis for
the shares so acquired equals the exercise price, and the holding period for the
share begins on the date after the date of shares are received. Generally, upon
the deposition of shares acquired through the exercise of an ISO, the optionee
will recognize long-term capital gain or loss to the extent the amount realized
on the sale of such shares is greater than or less than the exercise price, as
long as the disposition is not a "disqualifying disposition."
A "disqualifying disposition" generally occurs if shares acquired upon
exercise of an ISO are disposed of by the optionee prior to the expiration of
two years from the date of grant of the Option or within one year of the date of
transfer of shares to the optionee. (However, disposition by the estate of a
deceased employee is not considered a disqualifying disposition even if it
occurs prior to the expiration of the required holding periods.) Upon a
disqualifying disposition, the optionee realizes ordinary taxable income (and
the Company will be allowed a tax deduction, if applicable withholding
requirements are satisfied and subject to the limitations of Internal Revenue
Code Section 162(m), discussed in the "Compensation Committee Report on
Executive Compensation" below) in an amount equal to the excess, if any, of (A)
the lesser of (i) the fair market value of the shares of the date the ISO is
exercised, or (ii) the amount realized on such disqualifying disposition over
(B) the exercise price. The excess, if any, of the amount realized upon such
disqualifying disposition over the fair market value of the shares on the date
of exercise will be taxed as long-term or short-term capital gain depending on
the holding period involved. Long-term capital gain treatment is applicable if
the shares were held for more than one year.
Stock Appreciation Rights. Generally, a participant will not
recognize any taxable income, and the Company will not be allowed a tax
deduction, upon the granting of the SAR. Upon exercise of an SAR, the holder
generally will realize ordinary taxable income in an amount equal to the sum of
any cash received and the fair market value of any Common Stock received. The
Company will be allowed a tax deduction equal to the amount of ordinary income
recognized by the holder, if applicable withholding requirements are satisfied,
and subject to the limitations of Internal Revenue Code Section 162(m),
discussed in the "Compensation Committee Report on Executive Compensation"
below.
-6-
<PAGE>
Restricted Stock and Restricted Stock Units. Generally, a participant
will not recognize any taxable income, and the Company will not be allowed a tax
deduction, upon the grant of Restricted Stock or Restricted Stock Units. Upon
the lapsing of restrictions on Restricted Stock, the holder will recognize
ordinary income equal to the fair market value of the shares on the date of such
lapse. Upon the delivery of shares of stock as a result of the vesting of
Restricted Stock Units, the holder will recognize ordinary income equal to the
fair market value of such shares on date of delivery. In either case, the
Company will be entitled to a deduction in an amount equal to the income
recognized by the holder, if applicable withholding requirements are satisfied,
and subject to the limitations of Internal Revenue Code Section 162(m),
discussed in the "Compensation Committee Report on Executive Compensation"
below. Notwithstanding the foregoing, both the holder's recognition of income
and the Company's tax deduction will be deferred if the holder makes a timely
election to convert such Restricted Stock or Restricted Stock Units into
Deferred Stock Units (see below).
Deferred Stock Units. Generally, a participant will not recognize any
taxable income, and the Company will not be allowed a tax deduction, upon the
granting or vesting of Deferred Stock Units or upon the crediting of deemed
dividends or Deferred Stock Units. Moreover, a participant who makes a timely
election to convert cash incentive compensation, Restricted Stock or Restricted
Stock Units into Deferred Stock Units will not be taxed upon (and the Company
will not be entitled to a deduction with respect to such compensation,
Restricted Stock or Restricted Stock Units until such Deferred Stock Units are
paid. Upon the payment of Deferred Stock Units by delivery of shares of stock
and cash in lieu of fractional shares with respect to Deferred Stock Units, the
holder will recognize ordinary income equal to the fair market value of such
shares on the date of delivery plus the amount of such cash. The Company will
be entitled to a deduction in an amount equal to the income recognized by the
holder, if applicable withholding requirements are satisfied, and subject to the
limitations of Internal Revenue Code Section 162(m), discussed in the
"Compensation Committee Report on Executive Compensation" below.
Change in Control. Notwithstanding the foregoing, the accelerated
vesting or payment of awards under the Plan in connection with a change in
control of the Company could result in the imposition upon holders of the excise
tax on "excess parachute payments" and a corresponding denial of the Company's
tax deduction.
-7-
<PAGE>
Amended and Restated 1991
Incentive Stock Plan: New Plan Benefits
Grants and awards under the Plan which may be made to Company executive
officers and other employees are not presently determinable. If the
stockholders approve the Plan, such grants and awards will be made at the
discretion of the compensation committee in accordance with its compensation
policies, which are discussed in the "Compensation Committee Report on Executive
Compensation" below. The following table sets forth the amounts of Deferred
Stock Units that will be granted annually to Non-Executive Directors as a group
under the Plan and the estimated value thereof:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
New Plan Benefits
Amended and Restated 1991 Incentive Stock Plan
Dollar Number
Group Value($)(1) of Units(2)
- ----- ----------- -----------
<S> <C> <C>
Non-Executive Director Group
(6 persons) ......................................... $254,250 18,000
- --------------------------------------------------------------------------------
</TABLE>
(1) Based on the closing price per share of the Company's Common Stock of
$14.125 on December 31, 1993.
(2) The initial grant at the 1994 Annual Meeting includes 15,000 Deferred Stock
Units (2,500 per Director) with a total dollar value of $211,875 which will
be granted in recognition of past service on the Board of Directors. Each
non-executive director would be granted 500 Deferred Stock Units effective
as of the date of each annual meeting at which he is elected or continues
to serve as a director. Value is determined as described in footnote 1.
The Board of Directors believes that the Plan plays an important role in
enabling the Company to secure and retain competent persons in key employee
positions and it is the opinion of the Board of Directors that the amendments
set forth in the Plan are necessary to allow the Compensation Committee to
continue to implement its performance-based compensation program outlined in
further detail in the "Compensation Committee Report on Executive Compensation"
below. The Board of Directors of the Company has unanimously approved and
requests you to vote FOR approval of Proposal 3. Proxies will be so voted
unless stockholders specify otherwise in their proxies. For a description of
the number of affirmative votes required to approve this proposal and the
treatment of broker non-votes and abstentions see "Outstanding Voting Stock"
below.
The table below discloses the annual and long-term compensation
awarded or paid to or earned by (i) the Chief Executive Officer, (ii) the four
other most highly compensated
-8-
<PAGE>
executive officers of the Company who were serving as executive officers at
December 31, 1993, and (iii) one additional individual for whom disclosure would
have been provided pursuant to (ii) above but for the fact that the individual
was not serving as an executive officer of the Company at December 31, 1993
((i), (ii) and (iii) above collectively referred to herein as the "Named
Executive Officers") and individually referred to as a "Named Executive
Officer") for services rendered to the Company in all capacities for the fiscal
years ended December 31, 1993, 1992 and 1991.
-9-
<PAGE>
<TABLE>
<CAPTION>
Transco Energy Company Summary Compensation Table
-------------------------------------------------
Long Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
------------------------------------------- ---------------------- -----------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securities
Other Restricted Underlying
Annual Stock Options LTIP
Name and Compensation(1) Award(s) /SARs Payouts All Other
Principal Position Year Salary($) Bonus($) ($) ($)(2) (#) ($) Compensation($)
- ---------------------- ------ ----------- -------------- -------------- ---------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John P. Des Barres, 1993 $513,000(3) $ 275,000 $100,662(4) $ 0 0 $ 0 $ 0
Chairman of the 1992 $486,667(3) $ 200,000 $383,620(4)(5) $ 0 0 $ 0 $ 0
Board, President 1991 $112,500 $ 605,625(6) (7) $1,273,628 93,800 $ 0 (7)
and Chief Exec-
utive Officer
Robert W. Best, 1993 $315,000 $ 136,900 $ 11,050(4) $ 0 0 $20,439(8) $ 70,182(9)
Senior Vice 1992 $307,438 $ 90,000 $182,602(10) $ 144,375 12,600 $ 0 $ 47,530(9)
President- 1991 $270,838 $ 0 (7) $ 0 28,300 $ 0 (7)
Natural Gas
Larry J. Dagley, 1993 $213,523 $ 101,800 $ 26,211(4) $ 0 20,000 $10,311(8) $ 0
Senior Vice 1992 $193,750 $ 64,000 $ 17,461(4) $ 82,688 0 $ 8,114(11) $ 0
President, 1991 $175,000 $ 0 (7) $ 0 17,250 $20,049(11) (7)
Chief Financial
Officer and
Controller
Thomas W. Spencer 1993 $184,000 $ 70,000 $ 21,265(4) $ 0 0 $10,311(8) $ 11,328(12)
Senior Vice 1992 $179,500 $ 46,000 $ 16,707(4) $ 0 0 $ 8,314(11) $ 0
President 1991 $175,000 $ 0 (7) $ 0 17,250 $19,465(11) (7)
David E. Varner, 1993 $240,000 $ 83,400 $ 28,349(4) $ 0 0 $16,159(8) $ 0
Senior Vice 1992 $237,500 $ 60,000 $ 23,161(4) $ 0 0 $13,737(11) $ 0
President 1991 $235,000 $ 0 (7) $ 0 23,600 $33,007(11) (7)
General
Counsel and
Secretary
Robert M. Christe 1993 $180,445 $1,288,880(13) $147,513(4) $ 0 0 $ 0 $241,324(14)
former President 1992 $208,750 $ 991,250(15) $ 28,866(4) $ 70,000 20,000 $ 0 $ 0
Transco 1991 $200,000 $ 248,400 (7) $ 0 0 $ 0 (7)
Energy Ventures
Company
- -----------------
</TABLE>
(1) Excludes perquisites and other personal benefits, securities and property
paid to or earned by a Named Executive Officer, the aggregate amount of
which is the lesser of $50,000 or 10% of the annual salary and bonus
reported for such person in columns (c) and (d).
-10-
<PAGE>
(2) As of the close of business on December 31, 1993, Mr. DesBarres held 20,000
shares of Restricted Stock with a value of $282,500. On January 1, 1995,
10,000 of such shares will vest and the remaining 10,000 shares will vest
on January 1, 1996, assuming Mr. DesBarres is an employee of the Company on
the vesting dates. To effect certain cost savings to the benefit of the
Company, on December 14, 1993, the Compensation Committee approved the
accelerated vesting of 26,592 shares of Restricted Stock from January 1,
1994 to December 31, 1998. As of the close of business on December 31,
1993, Messrs. Best and Dagley held 8,250 and 4,725 shares of Restricted
Stock, with a value of $116,531 and $66,741, respectively. Such Restricted
Stock shares vest at a rate of 2,750 and 1,575, respectively, annually on
each March 24, in 1994, 1995 and 1996, assuming the holder is an employee
of the Company on the vesting dates. The Company has elected to report
performance-based Restricted Stock in column (h) upon the vesting thereof.
As of the close of business on December 31, 1993, Messrs. Best, Dagley,
DesBarres, Spencer and Varner held 14,800, 7,250, 30,350, 6,900, and 10,600
shares of performance-based Restricted Stock and 7,400, 3,625, 15,175,
3,450 and 5,300 corresponding Restricted Stock Units, respectively. The
value of this Restricted Stock for Messrs. Best, Dagley, DesBarres, Spencer
and Varner as of December 31, 1993 (excluding the 1991 grants, the payment
of which is reported in column (h) and discussed in footnote 8 below) was
$209,050, $102,406, $428,694, $94,463 and $149,725, respectively. This
Restricted Stock is subject to performance-based vesting conditions.
During the restriction period, all of the aforementioned shares of
Restricted Stock are entitled to receive dividends payable to stockholders.
All Restricted Stock values in this footnote are calculated based upon the
closing price of Transco's Common Stock on December 31, 1993.
(3) Includes director's fees of $13,000 in 1993 and $20,000 in 1992.
(4) Includes (i) except for Mr. Best, the value (as of the date of allocation)
of shares of the Company's Common Stock allocated pursuant to the Company's
TRAN$TOCK Plan and accruals under the Company's Benefit Restoration Plan
(an Internal Revenue Code Section 4.15 Excess Plan) related to TRAN$TOCK
allocations which would have been made under the TRAN$TOCK Plan but for
certain limitations imposed under the Internal Revenue Code, and (ii)
except for Mr. Chiste, dividends on performance-based Restricted Stock
(i.e., Restricted Stock that vests only if the Company achieves certain
performance goals).
(5) Also includes moving and relocation expenses including tax gross-up
($257,033) and other perquisites and personal benefits ($25,075).
(6) Represents a one-time bonus payment of $150,000 and a one-time additional
payment of $455,625 which the Company agreed to pay in connection with Mr.
DesBarres' agreement to accept employment with the Company. Such amounts
were intended to replace bonus awards forfeited by Mr. DesBarres upon
termination of his employment with his former employer.
(7) In order to facilitate the transition to the Securities and Exchange
Commission's revised proxy disclosure requirements, registrants have been
permitted a transition period for disclosure of the amounts reported in
columns (e) and (i). Accordingly, these columns do not include information
for fiscal years ended before December 15, 1992.
(8) Represents cash value of Restricted Stock which vested pursuant to grants
under the Company's 1983 Incentive Plan. This Restricted Stock was issued
in 1991 and vesting was subject to certain performance criteria under which
all or a portion would be earned upon attainment by the Company during a
performance period beginning January 1, 1991 and ending on December 31,
1993, of certain performance goals.
(9) Includes (i) a matching contribution under the Texas Gas Thrift Plan
($10,262 for 1992 and $10,013 for 1993), (ii) a related accrual ($3,562 for
1993) under the Texas Gas Express Benefit Plan (an Internal Revenue Code
Section 415 Excess Plan), and (iii) amounts accrued to provide a retirement
benefit ($35,888 for 1992 and $55,047 for 1993) and to provide a death
benefit ($1,380 for 1992 and $1,560 for 1993) under the Texas Gas Salary
Continuation Plan.
-11-
<PAGE>
(10) Includes moving and relocation expenses including tax gross-up ($156,236),
other perquisites and personal benefits ($19,555) and dividends on
performance-based Restricted Stock (i.e., Restricted Stock that vests only
if the Company achieves certain performance goals).
(11) Represents cash payment for Performance Units earned pursuant to grants
under the Company's 1983 Incentive Plan. When these Performance Units were
granted in 1989 and 1988, the performance criteria under which all or a
portion would be earned required that the Company and certain subsidiaries
achieve certain performance goals. In 1990, the performance criteria was
revised to condition the vesting of all or a portion of the awards upon the
attainment of certain performance goals solely by the Company.
(12) Represents a lump sum payment pursuant to an agreement with the Company in
connection with Mr. Spencer's retirement from the Company on January 1,
1994.
(13) Includes certain performance-based incentive payments reflecting the value
received on the sale by the Company, in September 1993, of Transco Energy
Ventures Company.
(14) Includes $215,000 of severance pay and $26,324 in executive supplemental
retirement benefits paid to Mr. Chiste in connection with his termination
as a result of the sale, in September 1993, of Transco Energy Ventures
Company.
(15) Includes amounts paid in cash and amounts deferred pursuant to a provision
of the TEVCO Incentive Plan which limits salary and bonus paid to any
participant in any year to a percentage of the salary and bonus of the
Company's Chief Executive Officer for such year.
-12-
<PAGE>
- --------------------------------------------------------------------------------
Options Granted in Last Fiscal Year
Shown below is further information on the stock options reflected in column (g)
of the Summary Compensation Table, granted pursuant to the Company's 1991
Incentive Plan during the fiscal year ended December 31, 1993 to the named
Executive Officers.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Option Grants In Last Fiscal Year
Individual Grants
% of Total
Options
Granted to
Options Employees Exercise or
Granted in Fiscal Base Price Expiration Grant Date
Name (#) Year ($/Share) Date Value(2)
- ------------------- --------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
John P. DesBarres.... 0 n/a n/a n/a n/a
Robert W. Best....... 0 n/a n/a n/a n/a
Larry J. Dagley...... 20,000(1) 6.67% $16.25 7/19/2003 $10,700
Thomas W. Spencer.... 0 n/a n/a n/a n/a
David E. Varner...... 0 n/a n/a n/a n/a
Robert M. Chiste..... 0 n/a n/a n/a n/a
- ----------------------------------------------------------------------------------
</TABLE>
(1) These options vest at a rate of 25% annually, expire ten years after the
date of grant and, if held for more than 6 months, may be accelerated
automatically upon a change in control of the Company, or if approved by
the Compensation Committee, upon the occurrence of certain other events
such as retirement. The exercise price is equal to the market value of the
Company's Common Stock on the date of grant. The stock options contain a
tax withholding feature which permits the optionee, with the consent of the
Compensation Committee to surrender shares for the payment of any taxes due
in connection with the exercise of the option.
(2) The estimated present value of stock options is based on the Black-Scholes
Model, a mathematical formula that calculates a theoretical option value
based on certain assumptions. The assumptions used in calculating the
values that appear in this column are as follows: a volatility factor of
.3277 for the 12 months preceding date of grant, a risk-free rate of return
of 6.14%, yield on U.S. Treasury zero-coupon bond expiring in May 2004, and
a dividend yield of 3.69%, based on the annual dividend rate as of the date
of grant. The actual value, if any, that a named Executive Officer may
realize will depend on the spread between the option price and the market
price on the date the option is exercised. Therefore, there can be no
assurance that the value estimated by the Black-Scholes model will be
predictive of the actual value realized by the Named Executive Officer on
the date the option is exercised.
--------------------------------------------------------------------------
-13-
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values.
None of the Named Executive Officers exercised any stock options during fiscal
year 1993. Shown below is information with respect to the unexercised options
to purchase the Company's Common Stock granted under the Company's 1991
Incentive Plan or 1983 Incentive Plan to the Named Executive Officers and held
by them at December 31, 1993.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Aggregated Option Exercised in Last Fiscal Year
and Fiscal Year-End Option Values
Number of Securities
Underlying Value of Unexercised
Unexercised Options at In-the-Money/(1)/Options
Fiscal Year-End (#) at Fiscal Year-End ($)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
- --------------------------- ------------- ---------------
<S> <C> <C>
John P. DesBarres.......... 46,900/46,900 $ 0/$0
Robert W. Best............. 36,175/27,826 $ 0/$0
Larry J. Dagley............ 30,170/31,214 $ 0/$0
Thomas W. Spencer.......... 30,573/11,214 $ 0/$0
David E. Varner............ 44,800/15,600 $ 0/$0
Robert M. Chiste........... 34,627/ 0 $2,500/$0
- --------------------------------------------------------------------------------
</TABLE>
(1) A stock option is considered to be "in-the-money" if the market price of
the related stock is higher than the exercise price of the option. The
Transco Common Stock price at December 31, 1993 was $14.125 per share.
- --------------------------------------------------------------------------------
Long Term Incentive Plans Awards in Last Fiscal Year.
Shown below is information with respect to long-term incentive awards
made to the Named Executive Officers in the fiscal year ended December 31, 1993
under the Company's 1991 Incentive Plan.
- --------------------------------------------------------------------------------
-14-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Long-Term Incentive Plan
Awards in Last Fiscal Year
Number of Performance or Estimated Future Payouts Under
Shares, Units Other Period Until Non-Stock Price-Based Plans
or Other Maturation or ------------------------------
Name Rights(#) Payout Threshold(#) Target(#) Maximum(#)
- ---- ------------- ------------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
John P. DesBarres...................... 18,350(1) 1/4/93 to 12/31/95 3,120 18,350 27,525
9,175(2)
Robert W. Best......................... 9,250(1) 1/4/93 to 12/31/95 1,573 9,250 13,875
4,625(2)
Larry J. Dagley........................ 4,450(1) 1/4/93 to 12/31/95 757 4,450 6,675
2,225(2)
Thomas W. Spencer...................... 4,100(1)(3) 1/4/93 to 12/31/95 697 4,100 6,150
2,050(2)(3)
David E. Varner........................ 6,200(1) 1/4/93 to 12/31/95 1,054 6,200 9,300
3,100(2)
Robert M. Chiste....................... N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents performance-based Restricted Stock granted pursuant to the 1991
Incentive Plan. A grantee of such Restricted Stock is the record owner
thereof during the restriction period and has all rights of a stockholder
including the right to vote and to receive dividends; provided, however,
that such grantee does not have the right to transfer such Restricted Stock
until the restrictions relating thereto are removed by the Compensation
Committee upon the achievement by the Company of certain performance goals.
The performance criterion for these awards is based upon the Company's
total shareholder return relative to a peer group of other companies. See
"Compensation Committee Report on Executive Compensation" below.
(2) Represents the grant of Restricted Stock Units which are issued in
conjunction with the Restricted Stock presented immediately above. A
Restricted Stock Unit represents one share of Common Stock to be issued to
the grantee in the future upon the determination by the Compensation
Committee that the Company has achieved specified performance goals in
excess of the goals set for a corresponding grant of Restricted Stock. All
awards of Restricted Stock and Restricted Stock Units presented above are
accompanied by tax withholding rights.
(3) This award was forfeited by Mr. Spencer in connection with his retirement
on January 1, 1994.
- --------------------------------------------------------------------------------
-15-
<PAGE>
Transco Energy Company Retirement Plan and Supplemental Benefit Plan Pension
Table
The following table shows the estimated annual benefits that would be
payable upon normal retirement under the Transco Retirement Plan and, if
applicable, the Transco Supplemental Benefit Plan, to employees in various
earnings classifications with representative years of service, assuming in each
case that the employee elected a single life annuity as the form of benefit
payment. Benefits listed in the table are not subject to a deduction for offsets
for social security or other offset amounts. The Transco Supplemental Benefit
Plan provides benefits to participating executives that cannot be paid under the
Transco Retirement Plan because of limitations imposed by the Internal Revenue
Code on benefits payable under a qualified plan.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PENSION PLAN TABLE
Years of Service
------------------------------------------------
Remuneration(1) 15 20 25 30 35
- --------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 200,000 ..... $ 50,796 $ 67,728 $ 84,660 $101,592 $118,624
$ 400,000 ..... $103,302 $137,728 $172,161 $206,593 $241,025
$ 600,000 ..... $155,796 $207,729 $259,662 $311,594 $363,526
$ 800,000 ..... $208,291 $277,728 $347,160 $416,592 $486,024
$1,000,000 ..... $260,796 $347,728 $434,652 $521,593 $608,525
- -----------------------------------------------------------------------------
</TABLE>
(1) The covered compensation upon which final average earnings are computed
under the Transco Retirement Plan is the base compensation of the
participant, excluding bonuses, commissions, per diem, premium pay or any
other extra compensation, reimbursement for business expenses, group life
insurance premiums, overtime pay, or any benefits under the Transco
Retirement Plan or any other benefit plan with the exception of Internal
Revenue Code Section 401(k) contributions made under the Transco Thrift
Plan and salary reduction contributions made under the Company's Internal
Revenue Code Section 125 cafeteria plan and is subject to the Internal
Revenue Code limitation described above. This base compensation is set
forth in column (c) of the Summary Compensation Table. Final average
earnings are computed by averaging covered compensation over the highest
three consecutive years out of the final five years prior to retirement.
Under the Transco Supplemental Benefit Plan, the covered compensation
includes all covered compensation under the Transco Retirement Plan,
without regard to the Internal Revenue Code limitation described above,
plus annual incentive compensation. This annual incentive compensation is
set forth in Column (d) of the Summary Compensation Table except for Mr.
Chiste whose bonuses under the TEVCO Incentive Plan have not come
-16-
<PAGE>
within the definition of incentive compensation as defined in the Transco
Supplemental Benefit Plan.
- --------------------------------------------------------------------------------
The current years of service with the Company for the Named Executive
Officers as of December 31, 1993 are: Mr. DesBarres 2.33 years, Mr. Dagley
8.42 years, Mr. Spencer 41.92 years, Mr. Varner 11.67 years and Mr. Chiste 7.67
years, respectively. Mr. Best does not participate in this plan. Mr. DesBarres
has also entered into a Supplemental Retirement Agreement which credits him with
an additional 28 years of service for the purposes of calculating his retirement
benefit. Mr. DesBarres will vest in this benefit upon his death or disability,
if he is an employee of the Company on September 30, 1994 or if his employment
is terminated prior to such date by the Company other than for "Cause," as
defined, or if Mr. DesBarres terminates his employment for "Good Reason," as
defined. Any amount received under this agreement is required to be reduced by
any amount Mr. DesBarres receives under any other employer's retirement plan.
This agreement was entered into by the Company and Mr. DesBarres in connection
with his acceptance of employment with the Company and is intended to replace a
similar benefit which he had been provided by his previous employer.
Texas Gas Retirement Plan and Supplemental Benefit Plan Pension Table
The following table shows estimated annual benefits that would be
payable on normal retirement under the Texas Gas Retirement Plan and, if
applicable, the Texas Gas Supplemental Benefit Plan to participants in such
plans in various earnings classifications, with representative years of service,
assuming in each case that the employee elected a 5-year certain and life
thereafter annuity as the form of benefit payment. Benefits listed in the table
are not subject to a deduction for offsets for social security or other offset
amounts. The Texas Gas Supplemental Benefit Plan provides benefits to
participating executives that cannot be paid under the Retirement Plan because
of certain limitations imposed by the Internal Revenue Code on the benefits
payable under a qualified plan.
-17-
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
PENSION PLAN TABLE
Years of Service
------------------------------------------------
Remuneration(1) 15 20 25 30 35
- --------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 200,000 $ 48,180 $ 64,240 $ 80,300 $ 96,360 $112,420
$ 400,000 $ 96,930 $129,240 $161,550 $193,860 $226,170
$ 600,000 $145,680 $194,240 $242,800 $291,360 $339,920
$ 800,000 $194,430 $259,240 $324,050 $388,860 $453,670
$1,000,000 $243,180 $324,240 $405,300 $486,360 $567,420
- --------------------------------------------------------------------------------
</TABLE>
(1) The covered compensation upon which final average earnings are computed
under the Texas Gas Retirement Plan and the Texas Gas Supplemental Benefit
Plan is the base compensation of the participant, excluding overtime,
bonuses, commissions, payments under an employee benefit plan, or other
special compensation without regard to the Internal Revenue Code limitation
described above. This base compensation is set forth in column (c) of the
Summary Compensation Table.
- --------------------------------------------------------------------------------
Mr. Best, whose years of service at December 31, 1993 were 19.25
years, is the only Named Executive Officer who participates in the Texas Gas
Retirement Plan or the Texas Gas Supplemental Benefit Plan.
-18-
<PAGE>
Termination and Severance Agreements
The Company has entered into a Termination Agreement with Mr.
DesBarres. This Agreement provides that if a "change in control," as defined,
occurs and Mr. DesBarres' employment with the Company terminates within five
years after the change in control and prior to his 65th birthday, the Company
will pay him, as a termination payment, a lump sum equal to his annual salary,
estimated bonus amounts and the value of certain benefits under the Company's
benefit plans and programs which would have accrued during a period of up to
five years after the change in control, subject to certain adjustments and
offsets, including an offset relating to salary earned with a subsequent
employer. Mr. DesBarres has also entered into a Severance Agreement which
provides benefits similar to the Termination Agreement for the period from the
date of termination and ending September 1996, but is not conditioned upon the
occurrence of a change in control of the Company. The Severance Agreement
terminates in September 1996, unless extended by mutual agreement.
Mr. Best has entered into a Severance Agreement with provisions
similar to those described for Mr. DesBarres above, except that the Severance
Agreement provides, upon termination of employment by the Company, for the
payment by the Company of a lump sum equal to Mr. Best's annual base salary,
estimated bonus amounts and the value of certain benefits under the Company's
employee benefit plans and programs which would have accrued during a period of
up to three years after termination, subject to certain adjustments and offsets,
including an offset relating to salary earned with a subsequent employer.
Messrs. Dagley, Spencer and Varner have entered into Severance
Agreements with provisions similar to those described above for Mr. Best, except
that the Agreements provide for the payment by the Company of benefits which
would have accrued during a one-year period after termination and the payment of
the annual base salary amount is to be paid in semi-monthly installments for
twelve months.
Messrs. Dagley, Spencer and Varner have also entered into Termination
Agreements with provisions similar to those described above for Mr. DesBarres,
except that each shall be entitled to receive, upon termination within three
years after a change in control, a lump sum amount equal to the sum of annual
base salary, estimated bonus amounts and the value of certain benefits under the
Company's employee benefit plans and programs which would have accrued during a
period of up to three years after the change in control, subject to certain
-19-
<PAGE>
adjustments and offsets, including an offset relating to salary earned with a
subsequent employer.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors
is comprised of three directors who are neither officers nor employees of the
Company. The principal functions of the Committee are set forth above under the
heading "Committees of the Board." The Committee has submitted the following
report to stockholders on executive compensation:
Compensation Philosophy
In 1993, the recommendations of the Company's outside executive
compensation consultant were reviewed and the Committee readopted an executive
compensation philosophy, relative to the Company's executive officers, that is
comprised of the following key principles:
. Compensation is to be motivational and reinforce the execution of
business strategy and the achievement of key financial and
operating objectives, and ultimately the enhancement of
stockholder value. To this end, the compensation program has been
focused on shifting the balance from fixed pay to variable pay
which is contingent on Company performance, with Company
executives having the opportunity to receive above average total
compensation if the Company's performance is above average and
below average total compensation if the Company's performance is
below average, when compared to its industry peers.
. Levels of compensation are to be structured to reflect the level
of job responsibility, individual performance and industry peer
comparisons.
. Executive compensation is to be competitive, so as to support the
Company's ability to attract and retain qualified executives and
be reasonably flexible to allow the Company to be responsive to
changing business conditions.
. An important goal of the program is to increase stock ownership
by Company executives, thus aligning the interests of executives
with those of stockholders.
-20-
<PAGE>
The Committee is in the process of reviewing the effect on the
Company's compensation program of new Internal Revenue Code Section 162(m),
which disallows tax deductions for certain executive compensation in excess of
$1 million per year per individual, unless it qualifies for an exception for
"performance-based compensation." The Amended and Restated 1991 Incentive Stock
Plan (the "Plan"), for which stockholder approval is being requested pursuant to
Proposal 3, includes certain provisions, including a limitation on the number of
stock options that can be granted to any individual in a given five-year period,
that are intended to help ensure that options under the Plan qualify for this
exception. Moreover, to help ensure that all Restricted Stock and Restricted
Stock Units awarded pursuant to the Plan during 1994 are also eligible for the
exception, such awards are contingent upon the achievement of objective
performance goals, and stockholder approval of such performance goals. The
Committee expects that the Company will seek such approval at the 1995 Annual
Meeting of Stockholders. Because the regulations proposed by the Internal
Revenue Service relating to Section 162(m) are not final, it is not certain that
all awards under the Plan will qualify for the exception. Moreover, the
Committee may make awards and provide for other compensation that may not be
fully deductible under Section 162(m), if it determines that such actions would
be in the best interests of the Company.
Peer Companies and Comparative Data
The Company uses an industry peer group to serve as a benchmark for
competitive pay levels and compensation practices for executive officers. The
formal industry peer group consists of ten companies (including Transco) which
are engaged primarily in the natural gas transmission business. These industry
peers (the "Industry Peer Group") are the same companies for which cumulative
total return is tracked in the Performance Graph contained in this Proxy
Statement. The composition of this group is reviewed periodically by the
Committee to ensure its appropriateness. The Committee also reviews
compensation data from a wider group of companies in the natural gas industry
because these additional companies compete with the Company in the employment
market for executives.
Executive Compensation Committee
Base Salary. Base salaries are administered within salary grades and
ranges assigned to each executive that were determined through the use of a
nationally recognized formal job evaluation program. Salary ranges represent
the competitive base salary practice for similar positions in the natural
-21-
<PAGE>
gas industry, including the Industry Peer Group, and are focused around the
fiftieth percentile. In establishing salary levels against this range, the
Committee primarily considers salary and bonus levels of its competitors.
However, in establishing the salary level of the Chief Executive Officer, the
entire compensation package of the Chief Executive Officer is considered.
Committee decisions to adjust base salary generally take into consideration the
executive's individual performance, tenure, and position within the salary
range, as well as external comparative data.
In September 1993, the Committee, with the assistance of its outside
compensation consultant, reviewed the salary range for the Chief Executive
Officer position established by the Company through its formal job evaluation
system and an analysis of comparative company data. The Committee determined
that Mr. DesBarres' total compensation package was reasonably competitive as
compared to chief executive officers of the Industry Peer Group, given the
companies' relative size and performance. Consequently, the Committee decided
no major changes in Mr. DesBarres' base salary were necessary based on the
competitive data.
Annual Incentives. Annual Incentives are administered under the
Transco Incentive Compensation Plan (the "Incentive Compensation Plan"). All
key employees, including the Named Executive Officers, participate in the
Incentive Compensation Plan Target awards under the Incentive Compensation Plan
are established at the beginning of each fiscal year and are expressed as a
percentage of base salary. These target awards are based upon the Committee's
assessment of the executive officer's job responsibilities and expected future
contributions as well as external comparative data. Performance goals are
determined by the Committee at the beginning of each fiscal year and are based
upon the Company's financial and operating plan approved by the Board of
Directors. After the close of each year, the Committee determines the
achievement by the Company and its major subsidiary units of their respective
performance goals and, in its sole discretion, approves general funding of the
Incentive Compensation Plan if, in its opinion, Company performance warrants.
The Committee then further reviews the individual performance of the executive
officers and determines individual awards based on each individual executive's
performance.
Because Transco Energy Ventures Company ("TEVCO") was focused on
developing new ventures and emerging technologies, annual incentives for Mr.
Chiste and other TEVCO executives were also administered under the TEVCO
Incentive Plan, which was designed to reward the value-building entrepreneurial
goals
-22-
<PAGE>
pivotal to the success of start-up businesses. The TEVCO Plan was developed
with the help of an outside executive compensation consultant and was sharply
focused on the achievement of specific stated goals relating to asset
appreciation. As a result of his participation in the TEVCO Plan, Mr. Chiste
participated in the Incentive Compensation Plan on a significantly reduced
basis. Amounts paid to Mr. Chiste in 1993 included certain performance-based
incentive payments, including payments under the TEVCO Plan, reflecting the
value received on the sale by the Company, in September 1993, of TEVCO. As a
result of and concurrent with the sale, Mr. Chiste terminated his employment
with the Company.
In evaluating the performance and granting of incentive awards for
1993 for the Company's Named Executive Officers, including the Chief Executive
Officer, the Committee placed great emphasis on the strong operating performance
of the Company's gas pipeline businesses. Gas pipeline operating performance
was given more weight in the Committee's final analysis than any other factor.
The Committee also considered other factors, including the Company's overall
achievement of its performance objectives and the Company's success in resolving
a number of its remaining contingency items, completing the sale of Transco
Energy Ventures Company, renegotiating existing revolving credit facilities and
exchanging a new series of preferred stock for the Company's 9.25% Cumulative
Convertible Preferred Stock. In January 1994, Mr. DesBarres was granted an
annual incentive of $275,000 under the provisions of the Incentive Compensation
Plan in recognition of the Company's performance and his contribution during
1993. Under his leadership, the Company achieved or exceeded many of its
financial and strategic objectives and as a result, the amount of Mr. DesBarres'
final award was more than the target incentive award established for the Chief
Executive Officer at the beginning of the year. However, Mr. DesBarres' total
cash compensation was appropriately positioned as compared to the Industry Peer
Group, in keeping with the Committee's general compensation philosophy.
Long-term Incentives. Long-term incentives are administered by the
Committee under the 1983 Incentive Plan and the 1991 Incentive Plan, both of
which have been approved by stockholders. The 1983 Plan terminated as to future
grants on December 31, 1993. Since 1990, the Committee has placed greater
emphasis on the use of stock-based long-term incentive compensation and
conditioning the vesting of such awards on the achievement of financial returns
to stockholders. The granting of stock options and performance-based Restricted
Stock is designed to better align the interests of the Company's executive
officers with those of its stockholders.
-23-
<PAGE>
A. Stock Options
Stock option grants are made to the executive group periodically at
100% of fair market value on the date of the grant. Such stock options have a
ten-year term and vest at a rate of 25% annually. The number of options granted
is based upon grant guidelines recommended by an outside executive compensation
consultant and are designed to be competitive at the median in accordance with
general industry practice. These guidelines set forth a target range of stock
options to be granted to each executive position within the Company. The
Committee periodically reviews the number of stock options held by each
executive officer and makes additional grants, if appropriate, due to factors
such as the executive's expected future contributions, the assumption of
additional job responsibilities and/or the Committee's assessment of an
executive's individual performance. In 1991, the Committee granted certain of
the Named Executive Officers, including the Chief Executive Officer, stock
options designed to be equivalent to what they would have received over a three-
year period under the Company's normal practice. As a result, certain Named
Executive Officers, including the Chief Executive Officer, were not granted
stock options in 1992 or 1993.
B. Restricted Stock
Performance-based Restricted Stock is granted annually to the
executive group and is earned or forfeited three years later based upon Company
performance. These shares are issued in conjunction with a grant of Restricted
Stock Units which entitles the grantee to be issued additional shares of stock
in the event the Company exceeds the performance criterion on which the vesting
of the corresponding grant of Restricted Stock is based. The number of
Restricted Stock Units granted equals 50% of the number of Restricted Stock
shares granted. Restricted Stock shares are issued in the name of the executive
officer and are held in escrow until the achievement of the performance
criterion. During the restriction period, the executive is entitled to receive
dividends and to vote the Restricted Stock shares. The performance criterion is
based solely on the Company's ranking with respect to total shareholder return
(stock appreciation plus dividends) relative to the Industry Peer Group during
the three-year performance period. For example, if, at the end of the
performance period, the Company's total shareholder return as compared to the
Industry Peer Group ranks (a) number one, the executive would vest in 100% of
his Restricted Stock shares and would be issued one share of Common Stock for
each Restricted Stock Unit held, (b) number four, the executive would vest in
-24-
<PAGE>
100% of his Restricted Stock shares and receive no award related to the
Restricted Stock Units, or (c) number ten, the executive would receive no award,
forfeiting all of his or her Restricted Stock shares and Restricted Stock Units.
The size of each Restricted Stock and Restricted Stock Unit award granted to
each executive officer is based upon grant guidelines recommended by an outside
executive compensation consultant and the Committee's assessment of such
executive's past accomplishments, the executive's expected future contributions
to the Company's long-term success and external comparative data. Generally,
the amount of an executive's grant of performance-based Restricted Stock
approximates the number of shares of Common Stock having a market value on the
first day of the Performance Period equal to a percentage of the executive's
base salary. The Committee determines the percentage after having reviewed
recommendations of the consultant. This percentage ranges from thirty to fifty
percent of salary.
In accordance with the Company's annual grant program, in January
1993, Mr. DesBarres was granted 18,350 shares of performance-based Restricted
Stock and 9,175 corresponding Restricted Stock Units for the Performance Period
beginning on January 4, 1993 and ending on December 31, 1995. The amount of the
grant approximated fifty percent of Mr. DesBarres' base salary based upon the
price of the Company's Common Stock on the first day of the Performance Period.
Conclusion
The Committee, acting on behalf of the Board of Directors and, by
extension, the stockholders, is responsible for overseeing the compensation
program for the Company's executive officers and other key employees. The
program currently in place is structured in a manner which is competitive,
motivational and is designed to align the executive's interests with those of
the Company's stockholders. The program emphasizes increased performance-based
compensation, stock price growth (both absolutely and relative to the Industry
Peer Group) and greater ownership of the Company's stock by executives. The
Committee believes it is in the stockholders' interest to compensate the
executives above average when their performance meets or exceeds high standards
set by the Committee in terms of the Company's own performance and relative to
the Industry Peer Group, so long as there is a comparable downside risk to
compensation when performance falls short of high standards. The Committee
believes the Company's current executive compensation program meets these
requirements and is deserving of stockholder support.
-25-
<PAGE>
The Committee has reviewed, and has had its outside executive
compensation consultant review, the Amended and Restated 1991 Incentive Stock
Plan outlined in Proposal 3 in this Proxy Statement. Based upon that review,
the Committee has unanimously approved and urges stockholders to vote FOR
Proposal 3, approval of the Amended and Restated 1991 Incentive Stock Plan. The
Committee believes that the proposed changes to the Plan will facilitate the
Committee's achievement of its compensation goals consistent with the philosophy
outlined in this report.
Respectfully submitted:
J. David Grissom, Chairman
Gordon F. Ahalt
Frederick H. Schultz
March 9, 1994
-26-
<PAGE>
Security Ownership of Directors and Management
The following sets forth, as to the Common Stock of the Company, the
number of such securities held by each Director, each of the Named Executive
Officers and the Directors and executive officers of the Company as a group.
None of the Company's Directors and executive officers own any of the Company's
Cumulative Convertible Preferred Stock, $3.50 Series.
-27-
<PAGE>
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial
Ownership Percent
as of of
Name March 23, 1994 Class
---- -------------- --------
Directors
<S> <C> <C>
Gordon F. Ahalt........................ 10,000/(1)/ *
Benjamin F. Bailar..................... 10,000/(1)/ *
John P. DesBarres...................... 200,756/(2)/ *
Robert W. Fri.......................... 9,102/(1)/ *
J. David Grissom....................... 10,000/(1)/ *
William H. Luers....................... 9,300/(1)/ *
Frederick H. Schultz................... 9,000/(1)/ *
<CAPTION>
Named Executive Officers
<S> <C> <C>
Robert W. Best......................... 99,092/(3)/ *
Larry J. Dagley........................ 86,733/(4)/ *
Thomas W. Spencer...................... 50,038/(5)/ *
David E. Varner........................ 86,156/(6)/ *
Robert M. Chiste....................... 45,529/(7)/ *
- ---------
Directors and executive officers as a
group (14 persons)................... 566,839/(8)/ 1.39%
- --------------------------------------------------------------------------------
</TABLE>
(1) Includes 9,000 shares covered by outstanding options granted under the
Company's 1983 Incentive Plan or 1991 Incentive Plan which are currently
exercisable or are exercisable within 60 days from the record date, March
23, 1994.
(2) Includes 67,750 shares of Restricted Stock granted under the Company's 1991
Incentive Plan over which Mr. DesBarres has voting power, but does not have
investment power; 2,060 shares held in the Company's TRAN$TOCK Plan over
which Mr. DesBarres has voting power but does not have investment power;
and 46,900 shares covered by outstanding options granted under the
Company's 1991 Incentive Plan which are currently exercisable or are
exercisable within 60 days of March 23, 1994. Mr. DesBarres is also Chief
Executive Officer of the Company.
(3) Includes 31,850 shares of Restricted Stock over which Mr. Best has voting
power but does not have investment power and 43,600 shares covered by
outstanding options which are currently exercisable or are exercisable
within 60 days of March 23, 1994.
(4) Includes 17,575 shares of Restricted Stock over which Mr. Dagley has voting
power but does not have investment power; 5,983 shares held in the
Company's TRAN$TOCK Plan over which Mr. Dagley has voting power but does
not have investment power; and 32,758 shares covered by outstanding
-28-
<PAGE>
options which are currently exercisable or are exercisable within 60 days
of March 23, 1994.
(5) Includes 4,916 shares held in the Company's TRAN$TOCK Plan over which Mr.
Spencer has voting power but does not have investment power; and 41,787
shares covered by outstanding options which are currently exercisable. Mr.
Spencer retired from the Company on January 1,1994.
(6) Includes 16,450 shares of Restricted Stock over which Mr. Varner has voting
power but does not have investment power; 6,961 shares held in the
Company's TRAN$TOCK Plan over which Mr. Varner has voting power but does
not have investment power; and 48,650 shares covered by outstanding options
which are currently exercisable or are exercisable within 60 days of March
23, 1994.
(7) Includes 6,152 shares held in the Company's TRAN$TOCK Plan over which Mr.
Chiste has voting power but does not have investment power; and 34,627
shares covered by outstanding options which are currently exercisable. Mr.
Chiste terminated his employment with the Company in September 1993 as a
result of the sale of Transco Energy Ventures Company.
(8) Includes 137,825 shares of Restricted Stock over which the executive
officers including the Named Executive Officers have voting power but not
investment power; 15,004 shares held in the Company's TRAN$TOCK Plan over
which the executive officers have voting power but not investment power;
and 230,283 shares owned by directors and executive officers covered by
outstanding options which are currently exercisable or are exercisable
within 60 days of March 23, 1994. Stock held by Messrs. Chiste and
Spencer, who are no longer with the Company, is excluded from this total.
* Represents less than 1% of the Class of Common Stock.
- --------------------------------------------------------------------------------
-29-
<PAGE>
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Dated as of December 12, 1994
by and among
THE WILLIAMS COMPANIES, INC.,
WC ACQUISITION CORP.
and
TRANSCO ENERGY COMPANY
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
ARTICLE I
THE TENDER OFFER.................. 3
Section 1.1 The Offer............................ 3
Section 1.2 Company Action....................... 6
ARTICLE II
THE MERGER..................... 9
Section 2.1 Effective Time of the Merger......... 9
Section 2.2 Closing............................. 10
Section 2.3 Effects of the Merger................ 10
Section 2.4 Certificate of Incorporation and
By-Laws.............................. 11
Section 2.5 Directors............................ 11
Section 2.6 Officers............................. 11
ARTICLE III
CONVERSION OF SECURITIES; DISSENTING SHARES.... 12
Section 3.1 Conversion of Capital Stock.......... 12
Section 3.2 Exchange of Certificates and Cash.... 17
Section 3.3 Dissenting Shares.................... 24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY... 26
Section 4.1 Organization......................... 26
Section 4.2 Capitalization....................... 27
Section 4.3 Authority............................ 32
Section 4.4 Consents and Approvals; No Viola-
tions................................ 34
Section 4.5 SEC Reports and Financial Statements. 37
Section 4.6 Information in Disclosure Documents
and Registration Statement........... 39
Section 4.7 Litigation........................... 41
Section 4.8 No Material Adverse Change; Material
Agreements........................... 42
Section 4.9 Taxes................................ 44
Section 4.10 Opinion of Financial Advisor......... 47
Section 4.11 Company Rights Agreement............. 47
Section 4.12 DGCL Section 203..................... 48
Section 4.13 Change in Control Provisions......... 48
Section 4.14 Vote Required........................ 49
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.. 49
Section 5.1 Organization......................... 50
Section 5.2 Capitalization....................... 51
Section 5.3 Authority............................ 55
Section 5.4 Consents and Approvals; No Viola-
tions................................ 56
Section 5.5 SEC Reports and Financial Statements. 59
Section 5.6 Information in Disclosure Documents
and Registration Statement........... 61
Section 5.7 Litigation........................... 63
Section 5.8 No Material Adverse Change; Material
Agreements........................... 63
Section 5.9 Taxes................................ 65
Section 5.10 Parent Not an Interested Stockholder
or an Acquiring Person............... 66
Section 5.11 Interim Operations of Sub............ 67
Section 5.12 Financing............................ 67
Section 5.13 Purchase of Option Shares............ 67
ARTICLE VI
COVENANTS..................... 67
Section 6.1 Conduct of Business of the Company... 67
Section 6.2 Conduct of Business of Parent........ 73
Section 6.3 Reasonable Best Efforts.............. 76
Section 6.4 Letter of the Company's Accountants.. 77
Section 6.5 Letter of Parent's Accountants....... 78
Section 6.6 Access to Information................ 78
Section 6.7 Company Stockholders Meeting......... 79
Section 6.8 Stock Exchange Listing............... 80
Section 6.9 Company Plans........................ 80
Section 6.10 Other Employee Benefit Plans......... 84
Section 6.11 Exclusivity.......................... 88
Section 6.12 Fees and Expenses.................... 90
Section 6.13 Brokers or Finders................... 91
Section 6.14 Company Rights Agreement............. 92
Section 6.15 Rule 145............................. 92
Section 6.16 Notification of Certain Matters...... 93
Section 6.17 Interim Company Preferred Stock
Dividend............................. 93
Section 6.18 Company Debt Agreements.............. 94
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page(s)
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<S> <C>
ARTICLE VII
CONDITIONS..................... 95
Section 7.1 Conditions to Each Party's Obligation
To Effect the Merger................. 95
Section 7.2 Conditions of Obligations of Parent
and Sub.............................. 97
Section 7.3 Conditions of Obligations of the
Company.............................. 97
ARTICLE VIII
TERMINATION AND AMENDMENT............. 98
Section 8.1 Termination.......................... 98
Section 8.2 Effect of Termination................ 101
ARTICLE IX
MISCELLANEOUS................... 102
Section 9.1 Nonsurvival of Representations and
Warranties........................... 102
Section 9.2 Amendment............................ 102
Section 9.3 Extension; Waiver.................... 103
Section 9.4 Notices.............................. 103
Section 9.5 Interpretation....................... 105
Section 9.6 Counterparts......................... 105
Section 9.7 Entire Agreement; No Third Party
Beneficiaries........................ 106
Section 9.8 Governing Law........................ 106
Section 9.9 Specific Performance................. 107
Section 9.10 Publicity............................ 107
Section 9.11 Assignment........................... 107
Section 9.12 Validity............................. 108
Section 9.13 Taxes................................ 108
</TABLE>
iii
<PAGE>
SCHEDULE OF DEFINED TERMS
-------------------------
<TABLE>
<CAPTION>
Defined Term Section
- ------------ -------
<S> <C>
Acquisition Transaction 6.11(a)
Agreement Preamble
Certificate of Merger 2.1
Certificates 3.2(b)
Certificates of Designation 3.1(c)
Closing 2.2
Closing Date 2.2
Code 3.2(h)
Common Stock Merger Consideration 3.2(b)
Company Preamble
Company $3.50 Preferred Stock 3.1(c)
Company $4.75 Preferred Stock 3.1(c)
Company Common Stock Preamble
Company Disclosure Schedule 4.2
Company Notes 6.1(e)
Company Plans 4.2
Company Preferred Stock 3.1(c)
Company Rights 4.2
Company Rights Agreement 4.2
Company SEC Documents 4.5
Company Stock Option 6.9(b)
Confidentiality Agreement 6.6
Conversion Number 3.1(d)
Corpus Christi Lease 4.2
Current Employees 6.10(a)
DGCL 2.1
Dissenting Shares 3.3
Effective Time 2.1
Exchange Act 1.2(a)
Exchange Agent 3.2(a)
Exchange Fund 3.2(a)
Governmental Entity 4.4(a)
HSR Act 4.4(a)
IRS 4.9(a)
Material Company Subsidiary 4.1(b)
Material Parent Subsidiary 5.1(b)
Merger Preamble
Merger Consideration 3.2(b)
NYSE 1.1(a)
Offer Preamble
Offer Documents 1.1(b)
Offer to Purchase 1.1(a)
Parent Preamble
Parent $3.50 Preferred Stock 3.1(c)
Parent $4.75 Preferred Stock 3.1(c)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Parent Common Stock 3.1(d)
Parent Disclosure Schedule 5.9
Parent New Preferred stock 3.1(c)
Parent Plans 5.2
Parent Preferred Stock 5.2
Parent Rights 5.2
Parent Rights Agreement 5.2
Parent SEC Documents 5.5
Per Share Amount Preamble
Per Share Cash Amount 3.1(d)
Person 6.11(a)
Preferred Stock Merger Consideration 3.2(b)
Proxy Statement 4.6(c)
Replacement Option 6.9(c)
S-4 4.6(b)
SAS 6.4
Schedule 14D-1 1.1(b)
Schedule 14D-9 1.2(a)
SEC 1.1(b)
Securities Act 4.4(a)
Stock Option Agreement Preamble
Sub Preamble
Subsidiary 3.1(b)
Subsidiary Preferred Stock 4.2
Surviving Corporation Preamble
Tax Return 4.9(b)
Taxes 4.9(b)
TIA 4.4(a)
Voting Debt 4.2
</TABLE>
2
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of December 12, 1994 (this
"Agreement"), by and among The Williams Companies, Inc., a Delaware corporation
("Parent"), WC Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), and Transco Energy Company, a Delaware corporation
(the "Company").
WHEREAS, the respective Boards of Directors of Parent and the Company
have determined that the acquisition of the Company by Parent would be
advantageous and beneficial to their respective corporations and stockholders,
and that such transaction is consistent with and in furtherance of such
entities' respective long-term business strategies;
WHEREAS, in furtherance thereof, it is proposed that Parent will make
a cash tender (the "Offer") to acquire up to 24,600,000 shares of the Company's
common stock, par value $.50 per share (the "Company Common Stock"), together
with attached Company Rights (as defined in Section 4.2), for $17.50 per share
of Company Common Stock (and attached Right) (such amount, or any greater amount
per share pursuant to the Offer, being
<PAGE>
hereinafter referred to as the "Per Share Amount"), net to the seller in cash,
in accordance with the terms and subject to the conditions provided herein and
in the Offer Documents (as defined in Section 1.1(b));
WHEREAS, it is proposed that, following consummation of the Offer,
there be a merger of Sub with and into the Company (the "Merger") with the
Company surviving as a subsidiary of Parent (the "Surviving Corporation"); and
WHEREAS, as a condition to the willingness of Parent to enter into
this Agreement, Parent has required that the Company agree, and in order to
induce Parent to enter into this Agreement, the Company has entered into
concurrently with the execution of this Agreement a Stock Option Agreement (the
"Stock Option Agreement") providing for a grant of an option to Parent to
purchase, at a per share price of $17.50 per share and otherwise upon the terms
and conditions provided for therein, up to 7,500,000 shares of Company Common
Stock.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
2
<PAGE>
ARTICLE I
THE TENDER OFFER
Section 1.1 The Offer.
---------
(a) Provided that this Agreement has not been terminated in
accordance with Section 8.1, Parent will commence the Offer as promptly as
practicable after the date hereof, but in no event later than December 16, 1994.
The obligation of Parent to accept for payment any shares of Company Common
Stock (and attached Company Rights) tendered pursuant to the Offer will be only
subject to the satisfaction of the conditions set forth in Annex I hereto.
Parent expressly reserves the right to (i) increase the Per Share Amount or (ii)
increase on one occasion the number of shares of Company Common Stock (and
attached Company Rights) to be purchased in the Offer; provided, that (x) any
--------
increase in the number of shares to be purchased which requires an extension of
the Offer beyond its then applicable expiration date in accordance with
applicable law must provide for an increase of at least 4,000,000 shares and (y)
any increase in the number of shares sought at a time when the average closing
sale prices on the New York Stock Exchange (the "NYSE") for shares of Parent
Common Stock (as defined in Section 3.1(d)) for the ten trading days immediately
preceding the date of public notice of the increase
3
<PAGE>
exceeds $28.00 may only be made with the consent of the Company. Without the
prior written consent of the Company, Parent will not (i) decrease the Per Share
Amount, (ii) decrease or (other than as permitted by the immediately preceding
sentence) increase the number of shares of Company Common Stock to be purchased
in the Offer, (iii) change the form of consideration payable in the Offer, (iv)
add to or change the conditions to the Offer set forth in Annex I hereto, (v)
change or waive the Minimum Condition (as defined in Annex I hereto) or (vi)
make any other change in the terms or conditions of the Offer which is adverse
to the holders of shares of Company Common Stock. The conditions set forth in
Annex I are for the benefit of Parent, and may be asserted by Parent or, subject
to the immediately preceding sentence, may be waived by Parent, in whole or in
part, at any time and from time to time in its discretion. The Offer will be
made by means of an offer to purchase (the "Offer to Purchase") containing the
terms set forth in this Agreement and only the conditions set forth in Annex I
hereto. Subject to the terms of the Offer and this Agreement and the
satisfaction of all the conditions of the Offer set forth in Annex I hereto as
of any expiration date, Parent will accept for payment and pay for all shares of
Company Common Stock (and attached Company Rights) validly ten-
4
<PAGE>
dered and not withdrawn pursuant to the Offer as soon as practicable after such
expiration date of the Offer. Subject to Section 8.1, if the conditions set
forth in Annex I hereto are not satisfied or, to the extent permitted by this
Agreement, waived by Parent, as of the date the Offer would otherwise have
expired, Parent will extend the Offer from time to time until the earlier of the
consummation of the Offer or the date which is 90 days from the commencement of
the Offer.
(b) On the date of commencement of the Offer, Parent will file with
the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on
Schedule 14D-1 (together with all amendments and supplements thereto, the
"Schedule 14D-1") with respect to the Offer. The Schedule 14D-1 will contain
(including as an exhibit) or will incorporate by reference the Offer to Purchase
(or portions thereof) and forms of the related letter of transmittal and summary
advertisement (which Schedule 14D-1, Offer to Purchase and other documents,
together with any supplements or amendments thereto, are referred to herein
collectively as the "Offer Documents"). Parent will disseminate the Offer to
Purchase, related Letter of Transmittal and other related Offer Documents to
holders of shares of the Company Common Stock. Each of Parent and the Company
will promptly correct any information
5
<PAGE>
provided by it for use in the Offer Documents that becomes false or misleading
in any material respect and Parent will take all steps necessary to cause the
Schedule 14D-1 as so corrected to be filed with the SEC and the other Offer
Documents as so corrected to be disseminated to holders of shares of Company
Common Stock, in each case as and to the extent required by applicable law.
Parent will provide the Company and its counsel in writing with any comments
Parent or its counsel may receive from the SEC or its staff with respect to the
Offer Documents promptly after the receipt of such comments. Parent and its
counsel will provide the Company and its counsel with a reasonable opportunity
to participate in all communications with the SEC and its staff, including any
meetings and telephone conferences relating to the Offer Documents, the Offer,
the Merger or this Agreement.
Section 1.2 Company Action.
--------------
(a) The Company hereby consents to the Offer. The Company will file
with the SEC, as promptly as practicable after the filing by Parent of the
Schedule 14D-1, a Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") reflecting the recommendation of the Company's Board of
Directors that holders of shares of Company Common Stock tender their shares
pursuant to
6
<PAGE>
the Offer and will disseminate the Schedule 14D-9 as required by Rule 14d-9
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), subject to the fiduciary duties of the Board of Directors of the Company
under applicable laws as advised by counsel. Each of the Company and Parent
will promptly correct any information provided by it for use in the Schedule
14D-9 that becomes false or misleading in any material respect, and the Company
will further take all steps necessary to cause the Schedule 14D-9 as so
corrected to be filed with the SEC and disseminated to holders of shares of
Company Common Stock, in each case as and to the extent required by applicable
law. The Company will provide Parent and its counsel in writing with any
comments the Company or its counsel may receive from the SEC or its staff with
respect to the Schedule 14D-9 promptly after the receipt of such comments. The
Company and its counsel will provide Parent and its counsel with a reasonable
opportunity to participate in all communications with the SEC and its staff,
including any meetings and telephone conferences relating to the Schedule 14D-9,
the Merger or this Agreement.
(b) The Company will (i) promptly furnish Parent with mailing labels
containing the names and addresses of all record holders of shares of Company
7
<PAGE>
Common Stock as of a recent date and of those persons becoming record holders
after such date, together with copies of all security position listings and
computer files and all other information in the Company's control regarding the
beneficial owners of shares of Company Common Stock that Parent may reasonably
request and (ii) furnish to Parent such other assistance as Parent or its agents
may reasonably request in communicating the Offer to holders of shares of
Company Common Stock.
(c) Subject to the requirements of law, and except for such steps as
are necessary to disseminate the Offer Documents, Parent will, and will cause
each of its subsidiaries to, hold in confidence the information contained in any
of such labels and lists, use such information only in connection with the Offer
and, if this Agreement is terminated, deliver to the Company all copies of, and
extracts or summaries from, such information then in their possession.
(d) Effective upon payment by Parent for all shares of Company Common
Stock accepted for payment pursuant to the Offer, Parent will be entitled to
designate two directors on the Company's Board of Directors, and the Company
will take all action necessary to cause Parent's designees to be elected or
appointed to the Company's Board of Directors, including, without limita-
8
<PAGE>
tion, increasing the number of directors or seeking and accepting resignations
of incumbent directors. Such designees will abstain from any action proposed to
be taken by the Company to amend or terminate this Agreement or waive any action
by Parent, which actions will be effective with the approval of a majority of
the remaining directors. Parent agrees not to effect any other changes in the
Board of Directors of the Company prior to the Effective Time.
ARTICLE II
THE MERGER
Section 2.1 Effective Time of the Merger. Upon the terms and subject
----------------------------
to the conditions hereof, a certificate of merger (the "Certificate of Merger")
and the Certificates of Designation (as defined in Section 3.1(c)) will be duly
prepared, executed and acknowledged by the Surviving Corporation and thereafter
delivered to the Secretary of State of the State of Delaware, for filing as
provided in the Delaware General Corporation Law (the "DGCL"), as soon as
practicable on the Closing Date (as defined in Section 2.2). The Merger will
become effective upon the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware (the "Effective Time").
9
<PAGE>
Section 2.2 Closing. Unless this Agreement is terminated and the
-------
transactions contemplated herein abandoned pursuant to Section 8.1 and assuming
the satisfaction or waiver of the conditions set forth in Article VII, the
closing of the Merger (the "Closing") will take place at 10:00 a.m. on a date to
be specified by the parties, which will be no later than the second business day
following the date of the meeting of the Company's stockholders called for the
purpose of voting on matters with respect to this Agreement (the "Closing
Date"), at the offices of Skadden, Arps, Slate, Meagher & Flom, 919 Third
Avenue, New York, New York 10022, unless another date or place is agreed to in
writing by the parties hereto.
Section 2.3 Effects of the Merger. The Merger will have the effects
---------------------
set forth in the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises of the Company and Sub will vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Sub shall
become the debts, liabilities and duties of the Surviving Corporation.
10
<PAGE>
Section 2.4 Certificate of Incorporation and By-Laws.
----------------------------------------
(a) The Restated Certificate of Incorporation of the Company in
effect at the Effective Time will be the Restated Certificate of Incorporation
of the Surviving Corporation, as amended and restated substantially in the form
set forth in Exhibit 2.4 hereto, until amended in accordance with applicable
law.
(b) The By-Laws of Sub in effect at the Effective Time will be the
By-Laws of the Surviving Corporation until amended in accordance with applicable
law.
Section 2.5 Directors. The directors of Sub at the Effective Time
---------
will be the initial directors of the Surviving Corporation, each to hold office
from the Effective Time in accordance with the Restated Certificate of
Incorporation and By-Laws of the Surviving Corporation and until his or her
successor is duly elected and qualified.
Section 2.6 Officers. The officers of the Company at the Effective
--------
Time will be the initial officers of the Surviving Corporation, each to hold
office from the Effective Time in accordance with the Restated Certificate of
Incorporation and By-Laws of the Surviving Corporation and until his or her
successor is duly ap-
11
<PAGE>
pointed and qualified.
ARTICLE III
CONVERSION OF SECURITIES; DISSENTING SHARES
Section 3.1 Conversion of 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 capital stock of the Company or the holder of any capital stock of
Sub:
(a) Each issued and outstanding share of the capital stock, par value
$.0l per share, of Sub will be converted into and become one fully paid and
nonassessable share of Common Stock, par value $.0l per share, of the Surviving
Corporation.
(b) All shares of capital stock of the Company that are owned by the
Company as treasury stock and any shares of Company Common Stock or Company
Preferred Stock owned by Parent, Sub or any other wholly owned Subsidiary (as
hereinafter defined) of Parent will be cancelled and retired and will cease to
exist and no stock of Parent or other consideration will be delivered in
exchange therefor. As used in this Agreement, the word "Subsidiary" means, with
respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which (i) such party or any other
12
<PAGE>
Subsidiary of such party is a general partner (excluding partnerships, the
general partnership interests of which held by such party or any Subsidiary of
such party do not have a majority of the voting interest in such partnership) or
(ii) at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party, by any
one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries. References to a wholly owned subsidiary of an entity include a
subsidiary all of the common equity of which is owned directly or through
"wholly owned" subsidiaries by such entity.
(c) Subject to Section 3.2(e), each issued and outstanding share of
the $4.75 series Cumulative Convertible Preferred Stock, stated value $50 per
share (the "Company $4.75 Preferred Stock"), of the Company (other than shares
to be cancelled in accordance with Section 3.1(b) and Dissenting Shares (as
defined in Section 3.3)) and each issued and outstanding share of the $3.50
series Cumulative Convertible Preferred Stock, stated value $50 per share (the
"Company $3.50 Preferred Stock" and, together with the Company $4.75 Preferred
13
<PAGE>
Stock, the "Company Preferred Stock"), of the Company (other than shares to be
cancelled in accordance with Section 3.1(b) and Dissenting Shares) will be
converted into the right to receive (in accordance with Section 3.2(b)) one
share of preferred stock of Parent which, in the case of the Company $4.75
Preferred Stock, will be designated Parent's $4.75 Series Cumulative Convertible
Preferred Stock (the "Parent $4.75 Preferred Stock") and be convertible
initially into .5588 of a share of Parent Common Stock and otherwise have the
designation, preferences and rights set forth in the Form of Certificate of
Designation, Preferences and Rights of Parent $4.75 Preferred Stock attached
hereto as Exhibit 3.2(c)-1 (the "$4.75 Certificate of Designation") and, in the
case of the Company $3.50 Preferred Stock, will be designated Parent's $3.50
Series Cumulative Convertible Preferred Stock (the "Parent $3.50 Preferred
Stock" and, together with the Parent $4.75 Preferred Stock, collectively the
"Parent New Preferred Stock") and be initially convertible into 1.5625 shares of
Parent Common Stock and otherwise have the designation, preferences and rights
set forth in the Form of Certificate of Designation, Preferences and Rights of
Parent $3.50 Preferred Stock attached hereto as Exhibit 3.2(c)-2 (together with
the $4.75 Certificate of Designation, the "Certificates of Designa-
14
<PAGE>
tion"). All shares of Company Preferred Stock, when converted in accordance
with this Section 3.1(c), will no longer be outstanding and will automatically
be cancelled and retired and will cease to exist, and each holder of a
certificate representing any such shares will cease to have any rights with
respect thereto, except the right to receive the shares of Parent Preferred
Stock and any cash or other property to be issued or paid in consideration
therefor upon the surrender of such certificate in accordance with Section 3.2,
without interest, and the right to receive any dividend which such holder is
entitled to be paid pursuant to Section 6.17.
(d) Subject to Section 3.2(e), each issued and outstanding share of
Company Common Stock (other than shares to be cancelled in accordance with
Section 3.1(b) and Dissenting Shares) will be converted into the right to
receive (in accordance with Section 3.2(b)) (i) an amount in cash (the "Per
Share Cash Amount"), equal to (x) the excess, if any, of (A) the product of (1)
the Per Share Amount and (2) the excess, if any, of 24,600,000 over the number
of shares of Company Common Stock purchased pursuant to the Offer, over (B) the
aggregate amount paid in the redemption of Company Rights not acquired pursuant
to the Offer, divided by (y) the number of shares of Company Common Stock
outstanding
15
<PAGE>
immediately prior to the Effective Time (other than shares to be cancelled in
accordance with Section 3.1(b)) and (ii) (x) if the Per Share Cash Amount is
$0.00, .625 of a share of Common Stock, $1.00 par value per share (the "Parent
Common Stock"), of Parent or (y) if the Per Share Cash Amount exceeds $0.00, the
fraction of a share of Parent Common Stock equal to (A) the product of (1) .625
and (2) the excess of the Per Share Amount over the Per Share Cash Amount,
divided by (B) the Per Share Amount (such fractional amount of a share of Parent
Common Stock under clause (ii)(x) or (ii)(y), as the case may be, the
"Conversion Number"), in each case together with a number of attached Parent
Rights (as defined in Section 5.2)) equal to the Conversion Number divided by 2.
In the event that between the date of this Agreement and the Effective Time the
outstanding shares of Company Common Stock or Parent Common Stock are changed
into a different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares, the Conversion Number (and number of attached Parent
Rights), the conversion rates applicable to the shares of Parent New Preferred
Stock issuable in the Merger, and the amount of cash payable in respect of
fractional shares pursuant to Section 3.2(e) will be
16
<PAGE>
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
All shares of Company Common Stock, when converted in accordance with this
Section 3.1(d), will no longer be outstanding and will automatically be
cancelled and retired and will cease to exist, and each holder of a certificate
representing any such shares will cease to have any rights with respect thereto,
except the right to receive any Per Share Cash Amount, the shares of Parent
Common Stock (and attached Parent Rights) and any cash or other property to be
issued or paid in consideration therefor upon the surrender of such certificate
in accordance with Section 3.2, without interest.
Section 3.2 Exchange of Certificates and Cash.
---------------------------------
(a) Promptly following the Effective Time, Parent will deposit, or
will cause to be so deposited, with First Chicago Trust Company of New York or
another bank or trust company designated by Parent and reasonably acceptable to
the Company (the "Exchange Agent") for the benefit of the holders of shares of
Company Common Stock and Company Preferred Stock (other than any Dissenting
Shares), any Per Share Cash Amount for such shares and certificates evidencing
the shares of Parent Common Stock and Parent New Preferred Stock pay-
17
<PAGE>
able or issuable pursuant to Section 3.1 in exchange for outstanding shares of
Company Common Stock and Company Preferred Stock, as the case may be (such
certificates, together with any cash or other dividends or distributions
declared or made, and any other cash or other property paid or issued through
redemption, merger or otherwise, with respect thereto, being hereinafter
collectively referred to as the "Exchange Fund"). Subject to Section 3.2(g),
the Exchange Agent will deliver any Per Share Cash Amount and the shares of
Parent Common Stock (and attached Parent Rights) and Parent New Preferred Stock
to holders of shares of Company Common Stock and Company Preferred Stock, as the
case may be (other than any Dissenting Shares), in accordance with Section
3.2(b) and the Exchange Fund will not be used for any other purpose. Except as
contemplated by Section 3.2(c), any interest, dividends or other income earned
on the investment of cash or other property held in the Exchange Fund will be
for the account of Parent.
(b) As soon as practicable after the Effective Time, Parent will
cause the Exchange Agent to 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 or Company Preferred Stock (the
"Certificates") whose
18
<PAGE>
shares were converted pursuant to Section 3.1 (i) a letter of transmittal (which
will be in such form and have such provisions as Parent and the Company may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for any Per Share Cash Amount and certificates
representing shares of Parent Common Stock (and attached Parent Rights) or
Parent New Preferred Stock, as the case may be. Upon surrender of a Certificate
for cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by Parent and Sub, together with such letter of transmittal, duly
executed, the holder of such Certificate will be entitled to receive in exchange
therefor (x) any Per Share Cash Amount payable in respect of such Certificate,
(y) a certificate representing that number of whole shares of Parent Common
Stock (and attached Parent Rights) or Parent New Preferred Stock, as the case
may be, which such holder has the right to receive pursuant to the provisions of
this Article III, and (z) cash in lieu of fractional shares of Parent Common
Stock (and attached Parent Rights) to which such holder is entitled pursuant to
Section 3.2(e) (any Per Share Cash Amount, the shares of Parent Common Stock
(and attached Parent Rights) and cash described in clauses (x), (y) and (z)
above being collectively referred to
19
<PAGE>
herein as the "Common Stock Merger Consideration", the shares of Parent New
Preferred Stock described in clause (y) above being collectively referred to
herein as the "Preferred Stock Merger Consideration" and the Common Stock Merger
Consideration and the Preferred Stock Merger Consideration being collectively
referred to herein as the "Merger Consideration") and the Certificate so
surrendered will forthwith be cancelled. In the event of a transfer of
ownership of Company Common Stock or Company Preferred Stock which is not
registered in the transfer records of the Company, any Per Share Cash Amount and
the certificates representing the proper number of shares of Parent Common Stock
(and attached Parent Rights) or Parent New Preferred Stock may be paid or issued
to a transferee if the Certificate representing such Company Common Stock or
Company Preferred Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer, together with evidence
that any applicable stock transfer taxes have been paid and the payment of any
required transfer taxes. Until surrendered as contemplated by this Section 3.2,
each Certificate will be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the relevant Merger
Consideration.
20
<PAGE>
(c) No dividends or other distributions declared or made, or any
other cash or other property paid or issued through redemption, merger or
otherwise, after the Effective Time with respect to shares of Parent Common
Stock or Parent New Preferred Stock with a record date after the Effective Time
will be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock or Parent New Preferred Stock which such holder is
entitled to receive upon the surrender thereof in accordance with this Section
3.2. Subject to the effect of applicable laws, following surrender of any such
Certificate, there will be paid to the record holder of the certificates
representing whole shares of Parent Common Stock or Parent New Preferred Stock
issued in exchange therefor, without interest, (i) the amount of dividends or
other distributions, or other cash or property paid or issued through
redemption, merger or otherwise, with a record date after the Effective Time
theretofore paid or issued with respect to such whole shares of Parent Common
Stock or Parent New Preferred Stock, and (ii) at the appropriate payment date,
the amount of dividends or other distributions, or other cash or property paid
or issued through redemption, merger or otherwise, with a record date after the
Effective Time but prior to such surrender and a payment date
21
<PAGE>
subsequent to surrender payable with respect to such whole shares of Parent
Common Stock or Parent New Preferred Stock.
(d) The Merger Consideration paid as provided above, together with
any dividends, other distributions or other property paid pursuant to Section
3.2(c), will be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock or Company Preferred Stock, as
the case may be, and there will be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of Company
Common Stock or Company Preferred Stock which were outstanding immediately prior
to the Effective Time. If, after the Effective Time, Certificates are presented
to the Surviving Corporation for any reason, they will be cancelled and
exchanged as provided in this Article III.
(e) No certificate or scrip representing fractional shares of Parent
Common Stock will be issued upon the surrender for exchange of Certificates, and
such fractional share interests will not entitle the owner thereof to vote or to
any rights of a stockholder of Parent. In lieu of the issuance of any
fractional shares of Parent Common Stock pursuant to Section 3.1(d), a cash
adjustment will be paid to any holder of Company Common
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<PAGE>
Stock in respect of any such fractional shares that would otherwise be issuable
to such holder in an amount equal to (i) the product of (x) the fraction of a
share of Parent Common Stock to which such holder would otherwise be entitled to
receive pursuant to Section 3.1(d) (after taking into account all shares of
Company Common Stock then held of record by such holder) and (y) the Per Share
Amount, divided by (ii) .625.
(f) Neither Parent nor the Company will be liable to any holder of
shares of Company Common Stock, Company Preferred Stock, Parent Common Stock (or
attached Parent Rights) or Parent New Preferred Stock for any such shares (or
dividends or distributions with respect thereto) or cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
(g) Any portion of the Exchange Fund that remains undistributed to
the holders of shares of Company Common Stock and Company Preferred Stock for
one year after the Effective Time will be delivered to Parent, upon demand, and
any holders of shares of Company Common Stock and Company Preferred Stock who
have not theretofore complied with this Article III will thereafter look only to
Parent for the Merger Consideration and any unpaid dividends and distributions
payable pursuant to
23
<PAGE>
Section 3.2(c) to which they are entitled pursuant to this Article III.
(h) Parent or the Exchange Agent will be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of shares of Company Common Stock or Company Preferred Stock such
amounts as Parent or the Exchange Agent is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended (the "Code"), or any provision of state, local or foreign tax law.
To the extent that amounts are so withheld by Parent or the Exchange Agent, such
withheld amounts will be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Company Common Stock or Company
Preferred Stock in respect of which such deduction and withholding was made by
Parent or the Exchange Agent.
Section 3.3 Dissenting Shares. If required by the DGCL but only to
-----------------
the extent required thereby, shares of Company Common Stock and Company
Preferred Stock which are issued and outstanding immediately prior to the
Effective Time and which are held by holders of such shares of Company Common
Stock and Company Preferred Stock, as the case may be, who have properly
exercised appraisal rights with respect thereto in accordance with
24
<PAGE>
Section 262 of the DGCL (the "Dissenting Shares") will not be converted into or
be exchangeable for the right to receive the relevant Merger Consideration, and
holders of such shares of Company Common Stock and Company Preferred Stock will
be entitled to receive payment of the appraised value of such shares of Company
Common Stock and Company Preferred Stock, as the case may be, in accordance with
the provisions of such Section 262 unless and until such holders fail to perfect
or effectively withdraw or lose their rights to appraisal and payment under the
DGCL. If, after the Effective Time, any such holder fails to perfect or
effectively withdraws or loses such right, such shares of Company Common or
Company Preferred Stock will thereupon be treated as if they had been converted
into and to have become exchangeable for, at the Effective Time, the right to
receive the Merger Consideration and any unpaid dividends and distributions
payable pursuant to Section 3.2(c) to which the holder of such shares of Company
Common Stock or Company Preferred Stock is entitled, without any interest
thereon. The Company will give Parent prompt notice of any demands received by
the Company for appraisal of shares of Company Common Stock or Company Preferred
Stock and, prior to the Effective Time, Parent will have the right to
participate in all negotiations and proceedings with respect to such de-
25
<PAGE>
mands. Prior to the Effective Time, the Company will not, except with the prior
written consent of Parent, make any payment with respect to, or settle or offer
to settle, any such demands.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 4.1 Organization.
------------
(a) Each of the Company and each Material Company Subsidiary (as
defined below) is a corporation or other legal entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted, except where the failure to be so organized, existing or
in good standing or to have such power and authority would not, individually or
in the aggregate, have a material adverse effect on the Company and its
Subsidiaries. As used in this Agreement, any reference to any event, change or
effect being material or having a material adverse effect on or with respect to
an entity (or such entity and its subsidiaries) means such event,
26
<PAGE>
change or effect which is materially adverse to the business, assets, results of
operations or financial condition of such entity (or, if with respect to such
entity and its subsidiaries, such group of entities taken as a whole). The
Company and each Material Company Subsidiary is duly qualified or licensed to do
business and in good standing in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except where the failure to be so
duly qualified or licensed and in good standing would not, individually or in
the aggregate, have a material adverse effect on the Company and its
Subsidiaries.
(b) Each of Transcontinental Gas Pipe Line Corporation ("TGPL"),
Texas Gas Transmission Corporation, Transco Gas Marketing Company, Transco Coal
Company and Transco Gas Company is referred to herein as a "Material Company
Subsidiary."
(c) The Company has heretofore made available to Parent a complete
and correct copy of the charter and by-laws or comparable organizational
documents, each as amended to date, of the Company and each Material Company
Subsidiary. Such charters, by-laws and comparable organizational documents are
in full force and effect. Neither the Company nor any Material Company
27
<PAGE>
Subsidiary is in violation of any provision of its charter, by-laws or
comparable organizational documents, except for such violations that would not,
individually or in the aggregate, have a material adverse effect on the Company
and its Subsidiaries.
Section 4.2 Capitalization. As of the date of this Agreement, the
--------------
authorized capital stock of the Company consists of (i) 150,000,000 shares of
Company Common Stock of which, as of December 9, 1994, 40,927,847 shares
(including 216,900 shares of restricted stock) were issued and outstanding and
514,444 shares were held in treasury, (ii) 15,000,000 shares of Cumulative
Preferred Stock, without par value, of which, as of December 9, 1994, 2,979,900
shares of Company $4.75 Preferred Stock were issued and outstanding, 2,500,000
shares of Company $3.50 Preferred Stock were issued and outstanding, 4,848,484
shares of the Company's Cumulative Convertible Preferred Stock, 9.25% Series
were authorized but none outstanding all such shares ever outstanding having
been repurchased by the Company, and none of which shares were held in treasury,
and (iii) 2,000,000 shares of Cumulative Second Preferred Stock, without par
value, of which no shares are issued and outstanding. As of December 9, 1994,
56,850,563 shares of Company Common Stock were reserved for issuance in
accordance with the
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Rights Agreement, dated as of January 13, 1986, by and between the Company and
First Chicago Trust Company, as amended most recently as of January 24, 1991
(collectively, the "Company Rights Agreement"), pursuant to which the Company
has issued rights (the "Company Rights") to purchase shares of Company Common
Stock. Also as of December 9, 1994, the Company had reserved for issuance (i)
2,664,031 shares of Company Common Stock for conversion of Company $4.75
Preferred Stock at a conversion ratio of .894 of a share of Company Common Stock
for each share of Company $4.75 Preferred Stock, (ii) 6,295,000 shares of
Company Common Stock for conversion of Company $3.50 Preferred Stock at a
conversion ratio of 2.5 shares of Company Common Stock for each share of Company
$3.50 Preferred Stock, (iii) 3,321,628 shares of Company Common Stock upon
exercise of then outstanding options or in respect of outstanding restricted
stock or restricted or deferred stock units under the Company's stock option
plans (the "Company Plans"), (iv) 1,077,906 shares of Company Common Stock in
respect of future grants of options, restricted stock or restricted or deferred
stock units which may be made pursuant to the Company Plans, and (v) as of
December 11, 1994, 7,500,000 shares of Company Common Stock issuable upon
exercise by Parent of the Stock Option Agreement. Since December 9, 1994, the
29
<PAGE>
Company has not issued any shares of its capital stock, except for issuances of
Company Common Stock upon the exercise of options or vesting of restricted stock
or deferred stock unit awards granted under the Company Plans which were
outstanding on December 9, 1994 and upon conversion of shares of Company
Preferred Stock, and has not repurchased, redeemed or otherwise retired any
shares of its capital stock other than (i) pursuant to Section 14.07 of the
Lease Agreement, dated September 1, 1993, between Corpus Christi Transmission
Company, a general partnership, and Corpus Christi Industrial Pipeline Company,
a general partnership, as lessor, and Corpus Christi Natural Gas Company, as
lessee (the "Corpus Christi Lease"), or (ii) in connection with tax withholding
features under the Company Plans. All the outstanding shares of the Company's
capital stock are, and all shares which may be issued pursuant to the Company
Plans, upon conversion of Company Preferred Stock or upon exercise of the Stock
Option Agreement will be, when issued and paid for in accordance with the
respective terms thereof, duly authorized, validly issued, fully paid and
nonassessable and not subject to any preemptive rights of third parties in
respect thereto. As of the date of this Agreement, no bonds, debentures, notes
or other indebtedness having the right to vote under ordi-
30
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nary circumstances (or convertible into securities having such right to vote)
("Voting Debt") of the Company or any of its Subsidiaries are issued or
outstanding. Except as set forth above and on Section 4.2 of the Disclosure
Schedule delivered by the Company to Parent pursuant to this Agreement (the
"Company Disclosure Schedule"), as of the date of this Agreement, there are no
existing options, warrants, calls, subscriptions or other rights or other
agreements or commitments of any character relating to the issued or unissued
capital stock or Voting Debt of the Company or any of its Subsidiaries or
obligating the Company or any of its Subsidiaries to issue, transfer or sell or
cause to be issued, transferred or sold any shares of capital stock or Voting
Debt of, or other equity interests in, the Company or of any of its Subsidiaries
or securities convertible into or exchangeable for such shares or equity
interests or obligating the Company or any of its Subsidiaries to grant, extend
or enter into any such option, warrant, call, subscription or such other right,
agreement or commitment. As of the date of this Agreement, there are no
outstanding contractual obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its Subsidiaries, other than (i) pursuant to the Stock Option
Agreement,
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(ii) pursuant to the Corpus Christi Lease, (iii) in connection with tax
withholding features under the Company Plans, (iv) forfeitures of restricted
stock in accordance with its terms, and (v) in connection with the "change of
control" put provisions of the Company Preferred Stock and the preferred stock
of TGPL (the "Subsidiary Preferred Stock"). Each of the outstanding shares of
capital stock of each of the Company's Subsidiaries is duly authorized, validly
issued, fully paid, nonassessable and free of any preemptive rights in respect
thereto, and, except as set forth on Section 4.2 of the Company Disclosure
Schedule, such shares are owned by the Company or by a Subsidiary of the Company
free and clear of any lien, claim, option, charge, security interest, limitation
on voting rights and encumbrance of any kind, except as would not have a
material adverse effect on the Company and its Subsidiaries.
Section 4.3 Authority. The Company has the requisite corporate power
---------
and authority to execute and deliver this Agreement and the Stock Option
Agreement and to consummate the transactions contemplated hereby and thereby,
subject to, with respect to the Merger, the approval and adoption of this
Agreement and the Merger by the affirmative vote of the holders of Company
Common Stock entitled to cast at least a majority of the total
32
<PAGE>
number of votes entitled to be cast by holders of Company Common Stock. The
execution, delivery and performance of this Agreement and the Stock Option
Agreement by the Company and the consummation by the Company of the Merger and
of the other transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of the Company and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or the Stock Option Agreement or to consummate the
transactions so contemplated, other than, with respect to the Merger, the
approval and adoption of this Agreement and the Merger by the affirmative vote
of the holders of Company Common Stock entitled to cast at least a majority of
the total number of votes entitled to be cast by holders of Company Common
Stock, and the filing and recordation of the Certificate of Merger with the
Secretary of State of the State of Delaware. Each of this Agreement and the
Stock Option Agreement has been duly executed and delivered by the Company and,
assuming this Agreement and the Stock Option Agreement, as the case may be,
constitutes a valid and binding obligation of Parent and Sub, as the case may
be, constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
33
<PAGE>
Section 4.4 Consents and Approvals; No Violations.
-------------------------------------
(a) Except as set forth on Section 4.4 of the Company Disclosure
Schedule and except for filings, permits, authorizations, notices, consents and
approvals as may be required under, and other applicable requirements of, the
Exchange Act, the Securities Act of 1933, as amended (the "Securities Act"), the
Trust Indenture Act of 1939, as amended (the "TIA"), the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the DGCL,
certain state takeover statutes, state securities or blue sky laws, and state
environmental laws, neither the execution, delivery or performance of this
Agreement or the Stock Option Agreement by the Company nor the consummation by
the Company of the transactions contemplated hereby or thereby and compliance by
the Company with any of the provisions hereof or thereof will (i) conflict with
or result in any breach of any provisions of the certificate of incorporation or
by-laws or comparable organizational documents of the Company or any Material
Company Subsidiary, (ii) require any filing with, or permit, authorization,
consent or approval of, any court, arbitral tribunal, administrative agency or
commission or other governmental or other regulatory authority or agency (a
"Governmental
34
<PAGE>
Entity") (except where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings would not prevent consummation of
the Offer or the Merger in any material respect and would not, individually or
in the aggregate, have a material adverse effect on the Company and its
Subsidiaries, (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, or result
in the creation of any lien or other encumbrance on any property or asset of the
Company or any of its Subsidiaries pursuant to, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or any of its Subsidiaries
or by which any property or asset of the Company or any of its Subsidiaries is
bound or affected, except, in the case of clauses (iii) and (iv), for
violations, breaches, defaults or other occurrences which would not prevent
consummation of the Offer or the Merger in any material
35
<PAGE>
respect and would not, individually or in the aggregate, have a material adverse
effect on the Company and its Subsidiaries.
(b) Except as disclosed in the Company SEC Documents (as defined in
Section 4.5) filed prior to the date of this Agreement or as set forth on
Section 4.4 of the Company Disclosure Schedule, to the best knowledge of the
Company, neither the Company nor any of its Subsidiaries is in default under or
in violation of (i) any order, writ, injunction, decree, statute, rule or
regulation of any Governmental Entity applicable to the Company or any of its
Subsidiaries or by which any of them or any of their properties or assets may be
bound or (ii) any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound or affected, except in each case for any such defaults or
violations which would not have a material adverse effect on the Company and its
Subsidiaries.
(c) To the best knowledge of the Company, except as disclosed in the
Company SEC Documents filed prior to the date of this Agreement or as set forth
on Section 4.4 of the Company Disclosure Schedule, the
36
<PAGE>
Company and its Subsidiaries are in compliance with all applicable statutes,
ordinances, rules and regulations of any Governmental Entity relating to
environmental matters, and the Company is not aware of circumstances, which
establish a likely basis for a contingent liability, or a likely basis for the
assertion of any such liability, relating to any environmental matters against
the Company or any of its Subsidiaries, including the discharge, disposal,
treatment, storage, accumulation, transport, release, potential release,
leakage, spillage or other actions by the Company or any of its Subsidiaries or
any third party for whom the Company or any of its Subsidiaries is responsible
with respect to hazardous waste, toxic substances, hazardous substances or other
pollutants or contaminants, except for any such failures to comply or
circumstances which have not had and since December 31, 1993 would not have a
material adverse effect on the Company and its Subsidiaries.
Section 4.5 SEC Reports and Financial Statements. Since January 1,
------------------------------------
1991, the Company has filed with the SEC all forms, reports and documents
required to be filed by it under the Exchange Act or the Securities Act, and has
heretofore made available to Parent true and complete copies of all such forms,
reports and documents (as they have been amended since the time of their fil-
37
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ing, collectively, the "Company SEC Documents"). The Company SEC Documents,
including without limitation any financial statements or schedules included
therein, at the time filed, and any forms, reports or other documents filed by
the Company with the SEC after the date of this Agreement, (a) did not at the
time they were filed, or will not at the time they are filed, contain any untrue
statement of a material fact or omit 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 and (b) complied or
will be prepared in compliance in all material respects with the applicable
requirements of the Exchange Act or the Securities Act, as the case may be. The
financial statements of the Company included in the Company SEC Documents comply
as to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto or, in the case of the unaudited
statements, to normal audit adjustments) and fairly present (subject, in the
case of the unaudited statements, to normal audit adjustments)
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<PAGE>
the consolidated financial position of the Company and its consolidated
Subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended. Except as reflected,
reserved against or otherwise disclosed in the financial statements of the
Company included in the Company SEC Documents or as otherwise disclosed in the
Company SEC Documents, in each case filed prior to the date of this Agreement,
or as set forth on Section 4.5 of the Company Disclosure Schedule, to the best
knowledge of the Company, as of the date hereof, neither the Company nor any of
its Subsidiaries had any liabilities or obligations (absolute, accrued, fixed,
contingent or otherwise) material to the Company and its Subsidiaries, other
than liabilities incurred in the ordinary course of business consistent with
past practice.
Section 4.6 Information in Disclosure Documents and Registration
----------------------------------------------------
Statement.
- ---------
(a) Neither the Schedule 14D-9 nor any of the information
supplied by the Company and any of its Subsidiaries specifically for inclusion
in the Offer Documents will, at the respective times the Schedule 14D-9 or the
Offer Documents are filed with the SEC or are first published, sent or given to
stockholders, as the case may be, contain any untrue statement of a material
39
<PAGE>
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 there was made, not misleading. The Schedule 14D-9 will comply as
to form in all material respects with the applicable requirements of the
Exchange Act and the applicable rules and regulations thereunder.
(b) None of the information supplied or to be supplied by the
Company from time to time in writing specifically for inclusion or incorporation
by reference in the registration statement on Form S-4 to be filed with the SEC
by Parent in connection with the issuance of shares of Parent Common Stock (and
attached Parent Rights) and, if required, Parent New Preferred Stock in the
Merger or to holders of Company Stock Options (as defined in Section 6.10(b))
(the "S-4") will, at the time it becomes effective under the Securities Act and
at the Effective Time, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(c) The proxy or information statement relating to the meeting
of the Company's stockholders to be held in connection with the Merger (as it
may be
40
<PAGE>
amended from time to time, the "Proxy Statement") will not, at the date mailed
to the Company's stockholders and at the time of the meeting of stockholders to
be held in connection with the Merger, 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, when filed with the SEC by the Company, comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder.
(d) Notwithstanding the foregoing, the Company makes no
representation with respect to statements made in any of the foregoing documents
based on information supplied by Parent or Sub specifically for inclusion
therein.
Section 4.7 Litigation. Except as disclosed in the Company SEC
----------
Documents filed prior to the date of this Agreement or in Section 4.7 of the
Company Disclosure Schedule, there is as of the date hereof no suit, claim,
action, proceeding or investigation pending or, to the best knowledge of the
Company, threatened, against the Company or any of its Subsidiaries before any
Governmental Entity which, individually or in the aggregate,
41
<PAGE>
would have a material adverse effect on the Company and its Subsidiaries or a
material adverse effect on the ability of the Company to consummate the
transactions contemplated by this Agreement or by the Stock Option Agreement.
Except as disclosed in the Company SEC Documents filed prior to the date of this
Agreement, neither the Company nor any of its Subsidiaries is subject to any
outstanding order, writ, injunction or decree which, individually or in the
aggregate, would have a material adverse effect on the Company and its
Subsidiaries or a material adverse effect on the ability of the Company to
consummate the transactions contemplated hereby or by the Stock Option
Agreement.
Section 4.8 No Material Adverse Change; Material Agreements. Except
-----------------------------------------------
as disclosed in the Company SEC Documents filed prior to the date of this
Agreement or as set forth on Section 4.8 of the Company Disclosure Schedule, (i)
since December 31, 1993, there has not been any action which would be prohibited
under Section 6.1 were it to occur after the date of this Agreement or any
material adverse change in the assets, business, results of operations or
financial condition of the Company and its Subsidiaries, other than changes
arising from general economic or industry conditions, and (ii) as of the date of
this Agreement, neither the Company nor any of its
42
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Subsidiaries has become a party to any agreement or amendment to an existing
agreement which would be required to be filed by the Company as an exhibit to
its next Annual Report on Form l0-K. Except as set forth on Section 4.8 of the
Company Disclosure Schedule, the transactions contemplated by this Agreement or
the Stock Option Agreement or both will not constitute a "change of control"
under, require the consent from or the giving of notice to a third party
pursuant to, or accelerate vesting or repurchase rights under the terms,
conditions or provisions of any (i) note, bond, mortgage, indenture, license,
lease, contract, agreement or other instrument or obligation to which the
Company or any of its Subsidiaries is a party or by which any of them or any of
their properties or assets may be bound, except where the adverse consequences
resulting from such change of control or where the failure to obtain such
consents or provide such notices would not, individually or in the aggregate,
have a material adverse effect on the Company and its Subsidiaries; provided,
however, that the foregoing exception will not be applicable to any (i) note,
bond, mortgage, indenture, contract, agreement or other instrument or obligation
relating to indebtedness for borrowed money of the Company or any of its
Subsidiaries with an outstanding principal amount of less than
43
<PAGE>
$5,000,000 or (ii) employment, compensation, termination or severance agreement,
or other instrument or obligation of the Company or any of its Subsidiaries.
The total amounts payable to the executives identified on Section 4.8 of the
Company Disclosure Schedule, as a result of the transactions contemplated by
this Agreement and/or any subsequent employment termination (excluding any cash-
out or acceleration of options and restricted stock but including any "gross-up"
payments with respect thereto), based on compensation data applicable as of the
date hereof, calculated assuming effective tax rates of 39.6%, and including,
without limitation, amounts payable pursuant to Termination Agreements,
Severance Agreements and the Senior Executive Special Bonus and Retention Plan
and any "gross-up" payments, will not exceed the amount set forth on such
schedule.
Section 4.9 Taxes.
-----
(a) The Company and each of its Subsidiaries has duly filed all
federal, state, local and foreign income Tax Returns (as defined in Section
4.9(b)) required to be filed by it, and all other material Tax Returns required
to be filed by it, and all other material Tax Returns required to be filed by it
except in the case of such other Tax Returns where the failure to so file will
not have a material adverse effect on the
44
<PAGE>
Company and its Subsidiaries, and except as set forth in Section 4.9 of the
Company Disclosure Schedule the Company, in all material respects, has duly paid
or caused to be paid all Taxes (as defined in Section 4.9(b)) shown to be due on
such Tax Returns in respect of the periods covered by such returns and has made
adequate provision in the Company's financial statements for payment of all
Taxes anticipated to be payable in respect of all taxable periods or portions
thereof ending on or before the date hereof. Section 4.9 of the Company
Disclosure Schedule lists the periods through which the Tax Returns required to
be filed by the Company have been examined by the Internal Revenue Service (the
"IRS") or other appropriate taxing authority, or the period during which any
assessments may be made by the IRS or other appropriate taxing authority has
expired. Except as set forth on Section 4.9 of the Company Disclosure Schedule,
all material deficiencies and assessments asserted as a result of such
examinations or other audits by federal, state, local or foreign taxing
authorities have been paid, fully settled or adequately provided for in the
Company's financial statements, and no issue or claim has been asserted in
writing for Taxes by any taxing authority for any prior period, the adverse
determination of which would result in a deficiency which would have a material
adverse
45
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effect on the Company and its Subsidiaries, other than those heretofore paid or
provided for in the Company's Financial statements. Except as set forth on
Section 4.9 of the Company Disclosure Schedule, there are no outstanding
agreements or waivers extending the statutory period of limitation applicable to
any Tax Return of the Company or its Subsidiaries. Neither the Company nor any
of its Subsidiaries has filed a consent pursuant to Section 341(f) of the Code
or agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section 341(f)(2) of the Code)
owned by the Company or any of its Subsidiaries. Except as set forth on Section
4.9 of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party to any agreement, contract or arrangement that could
result, separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code. Except as set forth
on Section 4.9 of the Company Disclosure Schedule, neither the Company nor any
of its Subsidiaries (i) has been a member of a group filing consolidated returns
for federal income tax purposes, or (ii) is a party to a tax sharing or tax
indemnity agreement or any other agreement of a similar nature that remains in
effect.
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(b) For purposes of this Agreement, the term "Taxes" means all
taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, transfer, license,
payroll, withholding, capital stock and franchise taxes, imposed by the United
States or any state, local or foreign government or subdivision or agency
thereof, including any interest, penalties or additions thereto. For purposes of
this Agreement, the term "Tax Return" means any report, return or other
information or document required to be supplied to a taxing authority in
connection with Taxes.
Section 4.10 Opinion of Financial Advisor. The Company has received
----------------------------
the opinion of Merrill Lynch & Co., its financial advisor, to the effect that,
as of December 11, 1994, the consideration to be received in the Offer and the
Merger, taken as a whole, by the Company's stockholders is fair to the Company's
stockholders from a financial point of view.
Section 4.11 Company Rights Agreement. Assuming the accuracy of the
------------------------
representation contained in Section 5.10 (without giving effect to the knowledge
qualification thereof), none of the transactions contemplated in this Agreement
or the Stock Option Agreement or both will result in a "Distribution Date" as
defined in
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the Company Rights Agreement, other than an exercise of the Stock Option
Agreement following which Parent beneficially owns 20% or more of the
outstanding shares of Company Common Stock.
Section 4.12 DGCL Section 203. Assuming the accuracy of Parent's
----------------
representation contained in Section 5.10 (without giving effect to the knowledge
qualification thereof), the Board of Directors of the Company has approved the
transaction to be effected in accordance with this Agreement and the Stock
Option Agreement, which will result in Parent becoming an "interested
stockholder" within the meaning of paragraph (a)(1) of Section 203 of the DGCL.
Section 4.13 Change in Control Provisions. Other than as set forth
----------------------------
on Section 4.13 of the Company Disclosure Schedule, the Board of Directors of
the Company has taken all actions necessary to render inoperative to the Offer,
the Merger and the other transactions contemplated by this Agreement and the
Stock Option Agreement the redemption rights afforded to the holders of the
Company Preferred Stock and the Subsidiary Preferred Stock or to the holders of
or trustees under indentures relating to indebtedness of the Company or any of
its subsidiaries in the event of a "change in control" as defined in the
respective Certificates of Designa-
48
<PAGE>
tions, Preferences and Rights governing the Company Preferred Stock and the
Subsidiary Preferred Stock or in the related indentures or other debt
agreements, as the case may be.
Section 4.14 Vote Required. The affirmative vote of the holders of a
-------------
majority of the outstanding shares of Company Common Stock entitled to vote with
respect to the Merger is the only vote of the holders of any class or series of
the Company's capital stock necessary to approve the Merger and the transactions
contemplated hereby or by the Stock Option Agreement. Assuming the accuracy of
Parent's representations contained in Section 5.10 (without giving effect to the
knowledge qualification thereof), the Board of Directors of the Company has
taken all action necessary to render inoperative to the Offer, the Merger and
the other transactions contemplated by this Agreement and by the Stock Option
Agreement the voting requirements of Article EIGHTH of the Company's Restated
Certificate of Incorporation.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
49
<PAGE>
Section 5.1 Organization.
------------
(a) Each of Parent and each Material Parent Subsidiary (as
defined below) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted, except where the failure to
be so organized, existing or in good standing or to have such power and
authority would not, individually or in the aggregate, have a material adverse
effect on Parent and its Subsidiaries taken as a whole. Parent and each Material
Parent Subsidiary is duly qualified or licensed to do business and in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing would not, individually or in the aggregate, have
a material adverse effect on Parent and its Subsidiaries.
(b) Each of Northwest Pipeline Corporation, Williams Natural Gas
Company, Williams Field Services Group, Inc., Williams Pipe Line Company and
WilTel
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Communications Systems, Inc. is referred to herein as a "Material Parent
Subsidiary."
(c) Parent has heretofore made available to the Company a
complete and correct copy of the charter and by-laws or comparable
organizational documents, each as amended to date, of Parent and each Material
Parent Subsidiary. Such charters, by-laws and comparable organizational
documents are in full force and effect. Neither Parent nor any Material Parent
Subsidiary is in violation of any provision of its charter, by-laws or
comparable organizational documents, except for such violations that would not,
individually or in the aggregate, have a material adverse effect on Parent and
its Subsidiaries.
Section 5.2 Capitalization. As of the date of this Agreement, the
--------------
authorized capital stock of Parent consists of (i) 240,000,000 shares of Parent
Common Stock of which, as of September 30, 1994, 100,904,625 shares were issued
and outstanding (excluding 3,442,189 shares then held by WTG Holdings, Inc., a
wholly-owned subsidiary of Parent), and (ii) 30,000,000 shares of preferred
stock, $1.00 per share (the "Parent Preferred Stock", which term, as the context
requires, includes the Parent New Preferred stock), of Parent of which, as of
September 30, 1994, 4,000,000 shares of Parent's $2.21 Cumulative
51
<PAGE>
Preferred Stock were issued and outstanding. As of September 30, 1994, 400,000
shares of Parent Preferred Stock were reserved for issuance in accordance with
the Amended and Restated Rights Agreement, dated as of July 12, 1988, by and
between Parent and First Chicago Trust Company of New York (collectively, the
"Parent Rights Agreement"), pursuant to which Parent has issued rights (the
"Parent Rights") to purchase shares of Parent Preferred Stock, with each share
of Parent Common Stock having one-half attached Parent Right. Also as of
September 30, 1994, Parent had reserved for issuance (i) 2,838,491 shares of
Parent Common Stock upon exercise of then outstanding options or in respect of
then outstanding deferred stock awards under Parent's employee benefit plans
(the "Parent Plans"), (ii) 3,208,171 shares of Parent Common Stock in respect of
future purchases or awards under the Parent Plans, and (iii) shares of Parent
capital stock (which could include shares of Parent Common Stock, Parent
Preferred Stock or both) with an initial offering price not to exceed
$400,000,000. Since September 30, 1994, Parent has not issued any shares of its
capital stock, except for issuances of Parent Common Stock under the Parent
Plans, and Parent and its Subsidiaries have not repurchased, redeemed or
otherwise retired any shares of its capital stock, other than 406,112
52
<PAGE>
shares of Parent Common Stock and 258,800 shares of Parent Preferred Stock
acquired by Parent and 9,941,788 shares of Parent Common Stock acquired by WTG
Holdings, Inc. (in each case as of November 30, 1994) in the open market. No
shares of Parent Common Stock or Parent Preferred Stock have been acquired by
Parent or its subsidiaries during the period commencing December 1, 1994 through
the date hereof. All the outstanding shares of Parent's capital stock are, and
all shares of Parent Common Stock and Parent New Preferred Stock which are to be
issued pursuant to the Merger will be, when issued in exchange for shares of
Company Common Stock and Company Preferred Stock in accordance with the
respective terms thereof and the provisions of this Agreement, duly authorized,
validly issued, fully paid and nonassessable and not subject to any preemptive
rights of third parties in respect thereto. Parent has reserved and will keep
available for issuance a number of authorized but unissued shares of Parent
Common Stock and Parent New Preferred Stock equal to the maximum number of
shares of Parent Common Stock and Parent New Preferred Stock that may become
issuable pursuant to the Merger and, following the Merger, upon conversion of
the shares of Parent New Preferred Stock into Parent Common Stock, in each case
in accordance with conversion rates as in effect as of the
53
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date hereof. As of the date of this Agreement, no Voting Debt of Parent or any
of its Subsidiaries is issued or outstanding. As of the date of this Agreement,
except as indicated herein, there are no existing options, warrants, calls,
subscriptions or other rights or other agreements or commitments of any
character relating to the issued or unissued capital stock or Voting Debt of
Parent or any of its Subsidiaries or obligating Parent or any of its
Subsidiaries to issue, transfer or sell or cause to be issued, transferred or
sold any shares of capital stock or Voting Debt of, or other equity interests
in, Parent or of any of its Subsidiaries or securities convertible into or
exchangeable for such shares or equity interests or obligating Parent or any of
its Subsidiaries to grant, extend or enter into any such option, warrant, call,
subscription or other right, agreement or commitment. As of the date of this
Agreement, there are no outstanding contractual obligations of Parent or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of Parent or any of its Subsidiaries. Each of the outstanding
shares of capital stock of each of the Parent's Subsidiaries is duly authorized,
validly issued, fully paid and nonassessable, and such shares as are owned by
Parent or by a Subsidiary of Parent are free and clear of
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any lien, claim, option, charge, security interest, limitation on voting rights
and encumbrance of any kind, except as would not have a material adverse effect
on Parent and its Subsidiaries. As of the date of this Agreement, the authorized
capital stock of Sub consists of 100 shares of Common Stock, par value $.0l per
share, all of which are validly issued, fully paid and nonassessable and are
owned by Parent.
Section 5.3 Authority. Parent and Sub each have the requisite
---------
corporate power and authority to execute and deliver this Agreement and the
Stock Option Agreement and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance of this Agreement and the
Stock Option Agreement by each of Parent and Sub and the consummation by Sub of
the Merger and by Parent and Sub of the other transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of Parent and Sub and no other corporate proceedings on the part of Parent
or Sub (including stockholder action) are necessary to authorize this Agreement
or the Stock Option Agreement or to consummate the transactions so contemplated,
other than the filing and recordation of the Certificate of Merger and
Certificates of Designation, Preferences and Rights with respect to the Parent
New
55
<PAGE>
Preferred Stock with the Secretary of State of the State of Delaware. Each of
this Agreement and the Stock Option Agreement has been duly executed and
delivered by each of Parent and Sub and, assuming each of this Agreement and the
Stock Option Agreement, as the case may be, constitutes a valid and binding
obligation of the Company, constitutes a valid and binding obligation of each of
Parent and Sub, enforceable against them in accordance with its terms.
Section 5.4 Consents and Approvals; No Violations.
-------------------------------------
(a) Except for filings, permits, authorizations, notices,
consents and approvals as may be required under, and other applicable
requirements of, the Exchange Act, the Securities Act, the TIA, the HSR Act, the
DGCL, certain state takeover statutes, state securities or blue sky laws, and
state environmental laws, neither the execution, delivery or performance of this
Agreement by Parent and Sub nor the consummation by Parent and Sub of the
transactions contemplated hereby nor compliance by Parent and Sub with any of
the provisions hereof will (i) conflict with or result in any breach of any
provision of the respective certificates of incorporation or by-laws or
comparable organizational documents of Parent or any Material Parent Subsidiary,
56
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(ii) require any filing with, or permit, authorization, consent or approval of,
any Governmental Entity (except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings would not prevent
consummation of the Merger in any material respect and would not, individually
or in the aggregate, have a material adverse effect on Parent and its
Subsidiaries), (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, or result
in the creation of any lien or other encumbrance on any property or asset of
Parent or any of its Subsidiaries pursuant to, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, lease, contract,
agreement or other instrument or obligation to which Parent or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Parent or any of its Subsidiaries or
by which any property or asset of Parent or any of its Subsidiaries is bound or
affected, except, in the case of clauses (iii) and (iv), for violations,
breaches, defaults or other occurrences which would not prevent
57
<PAGE>
consummation of the Merger in any material respect and would not, individually
or in the aggregate, have a material adverse effect on Parent and its
Subsidiaries.
(b) Except as disclosed in the Parent SEC Documents (as defined
in Section 5.5) filed prior to the date of this Agreement, to the best knowledge
of Parent, neither Parent nor any Material Parent Subsidiary is in default under
or in violation of (i) any order, writ, injunction, decree, statute, rule or
regulation of any Governmental Entity applicable to Parent or any of its
Subsidiaries or by which any of them or any of their properties or assets may be
bound or (ii) any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which Parent or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound or affected, except in each case for any such defaults or
violations which have not had and are not likely to have a material adverse
effect on Parent and its Subsidiaries.
(c) To the best knowledge of Parent, except as disclosed in the
Parent SEC Documents filed prior to the date of this Agreement, Parent and its
Subsidiaries are in compliance with all applicable statutes, ordinances, rules
and regulations of any Governmental Entity relating to environmental matters,
and Parent is
58
<PAGE>
not aware of circumstances which establish a likely basis for a contingent
liability, or a likely basis for the assertion of any such liability, relating
to any environmental matters, against Parent or any of its Subsidiaries
including the discharge, disposal, treatment, storage, accumulation, transport,
release, potential release, leakage, spillage or other actions by Parent or any
of its Subsidiaries or any third party for whom Parent or any of its
Subsidiaries is responsible with respect to hazardous waste, toxic substances,
hazardous substances or other pollutants or contaminants, except for any such
failures to comply or circumstances which have not had since December 31, 1993
and would not have a material adverse effect on Parent and its Subsidiaries.
Section 5.5 SEC Reports and Financial Statements. Since January 1,
------------------------------------
1991, Parent has filed with the SEC all forms, reports and other documents
required to be filed by it under the Exchange Act or the Securities Act and has
heretofore made available to the Company true and complete copies of all such
forms, reports and documents (as they have been amended since the time of their
filing, collectively, the "Parent SEC Documents"). The Parent SEC Documents,
including without limitation any financial statements or schedules included
therein, at the time filed, and any forms, reports or other documents
59
<PAGE>
filed by Parent with the SEC after the date of this Agreement, (a) did not at
the time they were filed, or will not at the time they are filed, contain any
untrue statement of a material fact or omit 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 and (b) complied
or will be prepared in compliance in all material respects with the applicable
requirements of the Exchange Act or the Securities Act, as the case may be. The
financial statements of Parent included in the SEC Documents comply as to form
in all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto or, in the case of the unaudited
statements, to normal audit adjustments) and fairly present (subject, in the
case of the unaudited statements, to normal audit adjustments) the consolidated
financial position of Parent and its consolidated Subsidiaries as at the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended. Except as reflected, reserved against or
60
<PAGE>
otherwise disclosed in the financial statements of Parent included in the Parent
SEC Documents or as otherwise disclosed in the Parent SEC Documents, in each
case filed prior to the date of this Agreement, to the best knowledge of Parent,
as of the date hereof, neither Parent nor any of its Subsidiaries had any
liabilities or obligations (absolute, accrued, fixed, contingent or otherwise)
material to Parent and its Subsidiaries, other than liabilities incurred in the
ordinary course of business consistent with past practice.
Section 5.6 Information in Disclosure Documents and Registration
----------------------------------------------------
Statement.
- ---------
(a) None of the Offer Documents nor any of the information
supplied by Parent or any of its Subsidiaries specifically for inclusion in the
Schedule 14D-9 will, at the respective times the Offer Documents (including any
amendments or supplements thereto) or the Schedule 14D-9 are filed with the SEC
or are first published, sent or given to stockholders, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements included therein, in light of the
circumstances under which they were made, not misleading. The Offer Documents
will comply as to form in all material respects with the applicable requirements
of the
61
<PAGE>
Exchange Act and the applicable rules and regulations thereunder.
(b) The S-4 will not, at the time it becomes effective under the
Securities Act and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The S-4 will, when filed with the SEC by
Parent, comply as to form in all material respects with the provisions of the
Securities Act and the rules and regulations thereunder.
(c) None of the information supplied by Parent or Sub from time
to time in writing specifically for inclusion or incorporation by reference in
the Proxy Statement will, at the date mailed to the Company's stockholders and
at the time of the meeting of stockholders to be held in connection with the
Merger, 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.
(d) Notwithstanding the foregoing, Parent and Sub make no
representation with respect to statements made in any of the foregoing documents
based on infor-
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mation supplied by the Company specifically for inclusion therein.
Section 5.7 Litigation. Except as disclosed in the Parent SEC
----------
Documents filed prior to the date of this Agreement, there is as of the date
hereof no suit, claim, action, proceeding or investigation pending or, to the
best knowledge of Parent, threatened, against Parent or any of its Subsidiaries
before any Governmental Entity which, individually or in the aggregate, would
have a material adverse effect on Parent and its Subsidiaries or a material
adverse effect on the ability of Parent or Sub to consummate the transactions
contemplated by this Agreement. Except as disclosed in the Parent SEC Documents
filed prior to the date of this Agreement, neither Parent nor any of its
Subsidiaries is subject to any outstanding order, writ, injunction or decree
which, individually or in the aggregate, would have a material adverse effect on
Parent and its Subsidiaries or a material adverse effect on the ability of
Parent or Sub to consummate the transactions contemplated hereby.
Section 5.8 No Material Adverse Change; Material Agreements. Except
-----------------------------------------------
as disclosed in the Parent SEC Documents filed prior to the date of this
Agreement, (i) since December 31, 1993, there has not been any action which
would be prohibited under Section 6.2 were it to
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<PAGE>
occur after the date of this Agreement or any material adverse change in the
assets, business, results of operations or financial condition of Parent and its
Subsidiaries, other than changes arising from general economic or industry
conditions, and (ii) as of the date of this Agreement, neither Parent nor any of
its Subsidiaries has become a party to any agreement or amendment to an existing
agreement which would be required to be filed by Parent as an exhibit to its
next Annual Report on Form 10-K. The transactions contemplated by this
Agreement will not constitute a "change of control" under, require the consent
from or the giving of notice to a third party pursuant to, or accelerate vesting
or repurchase rights under the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, lease, contract, agreement or other
instrument or obligation to which Parent or any of its Subsidiaries is a party
or by which any of them or any of their properties or assets may be bound,
except where the adverse consequences resulting from such change of control or
where the failure to obtain such consents or provide such notices would not,
individually or in the aggregate, have a material adverse effect on Parent and
its Subsidiaries; provided, however, that the foregoing exception will not be
applicable to any (i) note, bond, mortgage, indenture, contract, agree-
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ment or other instrument or obligation relating to indebtedness for borrowed
money of Parent or any of its Subsidiaries with an outstanding principal amount
of less than $5,000,000 or (ii) employment, compensation, termination or
severance agreement, contract or other obligation of Parent or any of its
Subsidiaries.
Section 5.9 Taxes. Parent and each of its Subsidiaries has duly
-----
filed all federal, state, local and foreign income Tax Returns required to be
filed by it, and all other material Tax Returns required to be filed by it,
except in the case of such other Tax Returns where the failure to file will not
have a material adverse effect on Parent and its Subsidiaries, and Parent, in
all material respects, has duly paid or caused to be paid all Taxes shown to be
due on such Tax Returns in respect of the periods covered by such returns and
has made adequate provision in Parent's financial statements for payment of all
Taxes anticipated to be payable in respect of all taxable periods or portions
thereof ending on or before the date hereof. Section 5.9 of the Disclosure
Schedule delivered by Parent to the Company pursuant to this Agreement (the
"Parent Disclosure Schedule") lists the taxable periods through which the income
Tax Returns required to be filed by Parent have been examined by the IRS or
other appropriate tax authority, or the period
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<PAGE>
during which any assessments may be made by the IRS or other tax authority has
expired. All material deficiencies and assessments asserted as a result of such
examinations or other audits by federal, state, local or foreign taxing
authorities have been paid, fully settled or adequately provided for in Parent's
financial statements and no issue or claim has been asserted in writing for
Taxes by any taxing authority for any prior period, the adverse determination of
which would result in a deficiency which would have a material adverse effect on
Parent and its Subsidiaries, other than those heretofore paid or provided for in
Parent's financial statements. Except as set forth on Section 5.9 of the Parent
Disclosure Schedule, there are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any income Tax Return of Parent
or its Subsidiaries.
Section 5.10 Parent Not an Interested Stockholder or an Acquiring
----------------------------------------------------
Person. As of the date of this Agreement, neither Parent nor, to the best
- ------
knowledge of Parent, any of its affiliates is an "Interested Stockholder" as
such term is defined in Section 203 of the DGCL, or an "Acquiring Person" as
such term is defined in the Company Rights Agreement.
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Section 5.11 Interim Operations of Sub. Sub was formed solely for
-------------------------
the purpose of engaging in the transactions contemplated hereby, has engaged in
no other business activities and has conducted its operations only as
contemplated hereby.
Section 5.12 Financing. Parent and Sub have, or will obtain on a
---------
timely basis, all of the funds necessary to consummate the Offer and the Merger.
Section 5.13 Purchase of Option Shares. The Purchaser will acquire
-------------------------
any shares of Company Common Stock pursuant to the Stock Option Agreement for
its own account and not with a view to distribution thereof.
ARTICLE VI
COVENANTS
Section 6.1 Conduct of Business of the Company. Except as
----------------------------------
contemplated by this Agreement or with the prior written consent of Parent,
which consent is hereby given with respect to actions described in Section 6.1
of the Company Disclosure Schedule, during the period from the date of this
Agreement to the Effective Time, the Company will, and will cause each of its
Subsidiaries to, conduct its operations only in the ordinary and usual course of
business consistent with past practice and will use all reasonable efforts, and
will cause each of its
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<PAGE>
Subsidiaries to use all reasonable efforts, to preserve intact its present
business organization, keep available the services of its present officers and
employees and preserve its relationships with licensors, licensees, customers,
suppliers, employees and any others having business dealings with it, in each
case in all material respects. Without limiting the generality of the
foregoing, and except as otherwise expressly provided in this Agreement, the
Company will not, and will not permit any of the Subsidiaries to, prior to the
Effective Time, without the prior written consent of Parent, not to be
unreasonably withheld:
(a) adopt any amendment to its certificate of incorporation or
by-laws or comparable organizational documents or to the Company Rights
Agreement;
(b) except for issuances of capital stock of the Company's
Subsidiaries to the Company or a wholly-owned Subsidiary of the Company, issue,
reissue, sell or pledge or authorize or propose the issuance, reissuance, sale
or pledge of additional shares of capital stock of any class, or securities
convertible into capital stock of any class, or any rights, warrants or options
to acquire any convertible securities or capital stock, other than the issuance
of shares of Company Common Stock (and attached Company Rights) upon the
exercise of stock
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<PAGE>
options or vesting of restricted or deferred stock unit awards outstanding on
the date of this Agreement or upon conversion of Company Preferred Stock, in
each case in accordance with their present terms;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, securities or property or any combination thereof) in respect
of any class or series of its capital stock, except that (i) the Company may
continue to pay regular dividends on the Company Common Stock and Company
Preferred Stock consistent with past practice, (ii) TGPL may continue to pay
regular dividends and make annual sinking fund payments on its cumulative first
preferred stock consistent with past practice and (iii) any wholly owned
Subsidiary of the Company may pay dividends and make distributions to the
Company or any of the Company's wholly owned Subsidiaries;
(d) adjust, split, combine, subdivide, reclassify or redeem,
purchase or otherwise acquire, or propose to redeem or purchase or otherwise
acquire, any shares of its capital stock, other than pursuant to the Corpus
Christi Lease or in connection with tax withholding features under the Company
Plans;
69
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(e) (i) incur, assume or pre-pay any long-term debt or incur or
assume any short-term debt, except that the Company and its Subsidiaries may
incur or pre-pay debt in the ordinary course of business consistent with past
practice or the cash forecasts disclosure on Schedule 6.1 of the Company
Disclosure Schedule under existing lines of credit and may repurchase any of the
Company's 11 1/4% Notes due 1999 (the "Company Notes") in a manner consistent
with the provisions of Section 6.18, (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person except in the ordinary course
of business consistent with past practice, or (iii) make any loans, advances or
capital contributions to, or investments in, any other person except in the
ordinary course of business consistent with past practice and except for loans,
advances, capital contributions or investments between any wholly owned
Subsidiary and the Company or another wholly owned Subsidiary;
(f) settle or compromise any suit or claim or threatened suit or
claim relating to the transactions contemplated hereby;
(g) except for (i) increases in salary, wages and benefits of
employees of the Company or its
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Subsidiaries (other than executive or corporate officers of the Company) in
accordance with past practice, (ii) increases in salary, wages and benefits
granted to employees of the Company or its Subsidiaries (other than executive or
corporate officers of the Company) in conjunction with promotions or other
changes in job status consistent with past practice or required under existing
agreements, (iii) increases in salary, wages and benefits to employees of the
Company pursuant to collective bargaining agreements entered into in the
ordinary course of business consistent with past practice, and (iv) the
consummation of the pending merger of the Company's Tran$tock Employee Stock
Ownership Plan with the Company's Thrift Plan, increase the compensation or
fringe benefits payable or to become payable to its directors, officers or
employees (whether from the Company or any of its Subsidiaries), or pay any
benefit not required by any existing plan or arrangement (including, the
granting of, or waiver of performance or other vesting criteria under, stock
options, stock appreciation rights, shares of restricted stock or deferred stock
or performance units) or grant any severance or termination pay to (except
pursuant to existing agreements or policies), or enter into any employment or
severance agreement with, any director, officer or other key employee of
71
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the Company or any of its Subsidiaries or establish, adopt, enter into,
terminate or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, welfare,
deferred compensation, employment, termination, severance or other employee
benefit plan, agreement, trust, fund, policy or arrangement for the benefit or
welfare of any directors, officers or current or former employees, except to the
extent such termination or amendment is required by applicable law; provided,
however, that nothing herein will be deemed to prohibit the payment of benefits
as they become payable;
(h) except as set forth in Section 6.1 of the Company Disclosure
Schedule, acquire, sell, lease or dispose of any assets or securities which are
material to the Company and its Subsidiaries, or enter into any commitment to do
any of the foregoing or enter into any material commitment or transaction
outside the ordinary course of business consistent with past practice other than
transactions between a wholly owned Subsidiary and the Company or another wholly
owned Subsidiary;
(i) (i) modify, amend or terminate any contract, (ii) waive,
release, relinquish or assign any contract (including any insurance policy) or
other right or claim, or (iii) cancel or forgive any indebtedness
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owed to the Company or its Subsidiaries, other than in each case in a manner in
the ordinary course of business consistent with past practice or which is not
material to the business of the Company and its Subsidiaries;
(j) make any tax election not required by law or settle or compromise
any tax liability, in either case that is material to the Company and its
Subsidiaries;
(k) change any of the accounting principles or practices used by it
except as required by the SEC, the Financial Accounting Standards Board or the
Federal Energy Regulatory Commission under the Uniform System of Accounts; or
(l) agree in writing or otherwise to take any of the foregoing
actions or any action which would make any representation or warranty in this
Agreement untrue or incorrect in any material respect.
Section 6.2 Conduct of Business of Parent. Except as contemplated by
-----------------------------
this Agreement, Parent will not, and will not permit any of its Subsidiaries to,
prior to the Effective Time, without the prior written consent of the Company,
not to be unreasonably withheld:
(a) adopt any amendment to its certificate of incorporation or by-laws
or comparable organizational documents;
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(b) except for issuances of capital stock of Parent's Subsidiaries to
Parent or a wholly-owned Subsidiary of Parent and except as set forth on Section
6.2 of the Parent Disclosure Schedule, issue, reissue, sell or pledge or
authorize or propose the issuance, reissuance, sale or pledge of additional
shares of capital stock of any class, or securities convertible into capital
stock of any class, or any rights, warrants or options to acquire any
convertible securities or capital stock, other than the issuance of shares of
Parent Common Stock upon the exercise of stock options or vesting of deferred
stock awards outstanding on the date of this Agreement in accordance with their
present terms;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, securities or property or any combination thereof) in respect
of any class or series of its capital stock, except that (i) Parent may continue
to pay regular cash dividends on the Parent Common Stock and the Parent
Preferred Stock and (ii) any Subsidiary of Parent may pay dividends or make
distributions;
(d) other than purchases pursuant to its existing program to
repurchase shares of Parent Common Stock for an aggregate purchase price of up
to $800,000,000 and shares of Parent Preferred Stock for an
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aggregate purchase price of up to $100,000,000 (under which approximately $406.8
million and $6.4 million, respectively, of purchases have been made as of the
date hereof) and in connection with the exercise of options under the Parent
Plans, adjust, split, combine, subdivide, reclassify or redeem, purchase or
otherwise acquire, or propose to redeem or purchase or otherwise acquire, any
shares of its capital stock;
(e) except as set forth on Section 6.2 of the Parent Disclosure
Schedule, acquire, sell, lease or dispose of any assets or securities which are
material to Parent and its Subsidiaries, or enter into any commitment to do any
of the foregoing other than transactions between a wholly owned Subsidiary and
Parent or another wholly owned Subsidiary;
(f) settle or compromise any suit or claim or threatened suit or
claim relating to the transactions contemplated hereby;
(g) change any of the accounting principles or practices used by it
except as required by the SEC, the Financial Accounting Standards Board or the
Federal Energy Regulatory Commission under the Uniform Systems of Accounts; or
(h) agree in writing or otherwise to take any of the foregoing
actions or any action which would
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make any representation or warranty in this Agreement untrue or incorrect in any
material respect.
Section 6.3 Reasonable Best Efforts. Subject to the terms and
-----------------------
conditions of this Agreement, each of the parties hereto will use its reasonable
best efforts to take, or cause to be taken, all actions, and to do, or cause to
be done, in each case consistent with the fiduciary duties of their respective
Boards of Directors as advised by counsel, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement or the Stock Option Agreement,
including (i) the prompt preparation and filing with the SEC of the S-4 and the
Proxy Statement, (ii) such actions as may be required to have the S-4 declared
effective under the Securities Act and the Proxy Statement cleared by the SEC,
in each case as promptly as practicable, including by consulting with each other
as to, and responding promptly to, any SEC comments with respect thereto, and
(iii) such actions as may be required to be taken under applicable state
securities or blue sky laws in connection with the issuance of shares of Parent
Common Stock (and the attached Parent Rights) and Parent New Preferred Stock
contemplated hereby. Each party will promptly consult with the other with
respect to, provide any neces-
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sary information with respect to and provide the other (or its counsel) copies
of, all filings made by such party with any Governmental Entity in connection
with this Agreement and the transactions contemplated hereby. In addition, if
at any time prior to the Effective Time any event or circumstance relating to
either the Company or Parent or any of their respective Subsidiaries, or any of
their respective officers or directors, should be discovered by the Company or
Parent, as the case may be, and which should be set forth in an amendment or
supplement to the S-4 or the Proxy Statement, the discovering party will
promptly inform the other party of such event or circumstance.
Section 6.4 Letter of the Company's Accountants. Following receipt
-----------------------------------
by Arthur Andersen LLP, the Company's independent auditors, of an appropriate
request from Parent pursuant to Statement on Auditing Standards ("SAS") No. 72,
the Company will use its reasonable best efforts to cause to be delivered to
Parent a letter of Arthur Andersen LLP, dated a date within two business days
before the date on which the S-4 will become effective and addressed to Parent,
in form and substance reasonably satisfactory to Parent and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements
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similar to the S-4, which letter will be brought down to the Effective Time.
Section 6.5 Letter of Parent's Accountants. Following receipt by
------------------------------
Ernst & Young, LLP, Parent's independent auditors, of an appropriate request
from the Company pursuant to SAS No. 72, Parent will use its reasonable best
efforts to cause to be delivered to the Company a letter of Ernst & Young, LLP.,
dated a date within two business days before the date on which the S-4 will
become effective and addressed to the Company, in form and substance reasonably
satisfactory to the Company and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the S-4, which letter will be brought down to the
Effective Time.
Section 6.6 Access to Information. Upon reasonable notice, the
---------------------
Company and Parent will each (and will cause each of their respective
Subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives of the other, access, during normal business hours during
the period prior to the Effective Time, to all its properties, facilities,
books, contracts, commitments and records and other information as reasonably
requested by such party and, during such period, each of the Company and Parent
will (and will
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cause each of their respective Subsidiaries to) furnish promptly to the other
(a) a copy of each report, schedule, registration statement and other document
filed or received by it during such period pursuant to the requirements of
United States federal securities laws or regulations, and (b) all other
information concerning its business, properties and personnel as such other
party may reasonably request. The parties will hold any such information which
is nonpublic in confidence in accordance with the terms of the Confidentiality
Agreement, dated October 10, 1994, between Parent and the Company (the
"Confidentiality Agreement"), and in the event of termination of this Agreement
for any reason each party will promptly comply with the terms of the
Confidentiality Agreement.
Section 6.7 Company Stockholders Meeting. The Company will call a
----------------------------
meeting of its stockholders for the purpose of voting upon this Agreement
(insofar as it relates to the Merger), the Merger and related matters and use
its reasonable best efforts to hold such meeting as soon as practicable
following consummation of the Offer. The Company will, through its Board of
Directors, recommend to its stockholders approval of such matters; provided,
however, that nothing contained in this Section 6.7 will require the Board of
Directors of the Company to
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take any action or refrain from taking any action which the Board determines in
good faith with advice of counsel could reasonably be expected to result in a
breach of its fiduciary duties under applicable law. Parent agrees to cause all
shares of Company Common Stock acquired by it pursuant to the Offer or pursuant
to the Stock Option Agreement or both to be represented at such meeting of the
Company's stockholders and to be voted at such meeting in favor of the approval
and adoption of this Agreement (insofar as it relates to the Merger) and the
Merger and the other transactions contemplated hereby.
Section 6.8 Stock Exchange Listing. Parent will use its reasonable
----------------------
best efforts to cause (a) the Parent Common Stock (and attached Parent Rights)
to be issued in the Merger to be approved for listing on the NYSE and (b) the
Parent $4.75 Preferred Stock to be issued in the Merger to be approved for
listing on the NYSE or for trading on the NASDAQ National Market System, in each
such case not later than the Effective Time, subject to official notice of
issuance.
Section 6.9 Company Plans.
-------------
(a) On or prior to the Effective Time, the Company and its Board of
Directors (or a committee thereof) will take all action necessary to implement
the provisions contained in Sections 6.9(b) and 6.9(c).
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(b) Except as otherwise agreed with individual option holders, at the
Effective Time, (i) each then outstanding option to purchase shares of Company
Common Stock (a "Company Stock Option") under the Company Plans, whether vested
or unvested, will become fully exercisable and vested, (ii) each Company Stock
Option which is then outstanding will be cancelled and (iii) in consideration of
such cancellation, at the election of the option holder, which may be allocated
to either or both elections, (x) the Company will pay to such holders of Company
Stock Options an amount in respect thereof equal to the product of (A) the
excess, if any, of the Per Share Amount over the respective exercise price
thereof and (B) the number of shares of Company Common Stock subject thereto,
respectively, or (y) Parent will issue an option described in Section 6.9(c) or
6.9(d), as applicable (a "Replacement Option").
(c) The Replacement Option with respect to each Company Stock Option,
the exercise price for which exceeds $35 per share, will be an option to
acquire, on the same terms and conditions as were applicable under such Company
Stock Option (except that it will be subject to a vesting period ending on the
first anniversary of the Effective Time), (A) an amount in cash equal to the
product of $10.50 times the number of shares
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of Company Common Stock purchasable under such Company Stock Option immediately
prior to the Effective Time and (B) the number of shares of Parent Common Stock
equal to the product of .25 and the number of shares of Company Common Stock
purchasable under such Company Stock Option immediately prior to the Effective
Time. Parent will cause such options to continue to vest and to remain
exercisable following the termination of the option holder's employment with
Parent and its affiliates in accordance with its past practice relative to
Parent's current employees; provided, that with respect to any Current Employee
--------
whose employment with Parent or its affiliates is terminated other than
voluntarily by the employee or involuntarily for cause or as a result of
retirement, Parent will cause such options to continue to vest until the earlier
of (i) six months following such termination and (ii) the end of the term of
such Option, as in effect immediately before such termination. All of the
foregoing payments and issuances of shares in connection with such cancellations
will be made either net of applicable withholding taxes or upon payment of
required withholding taxes by the option holders.
(d) The Replacement Option with respect to each Company Stock Option,
the exercise price for which is less than or equal to $35 per share, will be an
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option to acquire, on the same terms and conditions as were applicable under
such Company Stock Option, the same number of shares of Parent Common Stock as
the holder of such Company Stock Option would have been entitled to receive
pursuant to the Merger had such holder exercised such option in full immediately
prior to the Effective Time (not taking into account whether or not such option
was in fact exercisable), at a price per share equal to (A) the aggregate
exercise price for the shares of Company Common Stock deemed otherwise
purchasable pursuant to such Company Stock Option divided by (B) the number of
full shares of Parent Common Stock deemed purchasable pursuant to such Company
Stock Option. All of the foregoing payments and issuances of shares in
connection with such cancellations will be made either net of applicable
withholding taxes or upon payment of required withholding taxes by the
optionholders.
(e) Except as provided herein or as otherwise agreed to by the
parties, and to the extent permitted by the Company Plans, (i) the Company Plans
will terminate as of the Effective Time and the provisions in any other plan,
program or arrangement, providing for the issuance or grant of any other
interest in respect of the capital stock of the Company or any of its
Subsidiaries will be deleted as of the Effective Time and
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(ii) the Company will use all reasonable efforts to ensure that following the
Effective Time no holder of Company Stock Options or any participant in the
Company Plans or any other plans, programs or arrangements will have any right
thereunder to acquire any equity securities of the Company, the Surviving
Corporation or any Subsidiary thereof.
(f) The Company will use reasonable efforts to obtain an agreement
substantially in the form attached to Section 6.9(f) of the Company Disclosure
Schedule on or prior to the date of commencement of the Offer with the employee
identified on such Schedule.
Section 6.10 Other Employee Benefit Plans.
----------------------------
(a) Except as otherwise contemplated by this Agreement, the employee
benefit plans (as defined in Section 3(3) of ERISA) and other employee plans,
programs and policies other than salary (collectively, the "Employee Benefit
Plans") of the Company and its Subsidiaries in effect at the date of this
Agreement will, to the extent practicable, remain in effect until otherwise
determined after the Effective Time and, to the extent such Employee Benefit
Plans are not continued, Parent will maintain Employee Benefit Plans with
respect to employees of the Company and its Subsidiaries which are no less
favorable, in the aggregate, than the least favor-
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able of: (i) those Employee Benefit Plans covering employees of Parent from
time to time; (ii) those Employee Benefit Plans of the Company and its
Subsidiaries that are in effect on the date of this Agreement other than the
Tran$tock Plan; or (iii) Employee Benefit Plans that are reasonably competitive
with respect to the industry in which the employer of the affected employees
competes; provided, that in any event, until the first anniversary of the
--------
Effective Time, the Surviving Corporation will provide individuals who are
employees of the Company and its Subsidiaries as of the Effective Time ("Current
Employees") with Employee Benefit Plans, other than a nonqualified, unfunded
plan maintained primarily to provide deferred compensation benefits to a select
group of "management or highly compensated employees" within the meaning of
Sections 201, 301, and 401 of ERISA, that are no less favorable in the aggregate
than those provided to Current Employees by the Company and for its Subsidiaries
immediately before the Closing Date. In the case of benefit plans which are
continued and under which the employees' interests are based upon Company Common
Stock, such interests will be based on Parent Common Stock in an equitable
manner.
(b) Without limiting the generality of Section 6.10(a), Parent will
cause the Surviving Corpora-
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tion to (i) honor (A) in accordance with their terms all individual employment,
severance, termination and indemnification agreements which by their express
terms may not be unilaterally amended by the Company or any of its Subsidiaries
and (B) without modification all other employee severance plans, policies,
employment and severance agreements and indemnification arrangements of the
Company or any of its Subsidiaries that are set forth in Section 6.10(b)(i) of
the Company Disclosure Schedule as such plans, policies, or agreements are in
effect on the date of this Agreement through the later of (1) December 31, 1995,
(2) the termination date specified in such document or (3) the date specified in
Section 6.10(b)(i) of the Company Disclosure Schedule, (ii) waive any
limitations regarding pre-existing conditions of Current Employees and their
eligible dependents under any welfare or other employee benefit plans of Parent
and its affiliates in which they participate after the Effective Time (except to
the extent that such limitations would have applied under the analogous plan of
the Company and its subsidiaries immediately before the Effective Time), (iii)
for all purposes under the post-retirement welfare benefit plans and policies of
Parent and its affiliates, treat Current Employees in the same manner as
similarly situated employees of Parent who were hired by Parent
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before January 1, 1992 in accordance with the terms of such plans and policies
as then in effect, as any such plans and policies are modified by Parent or such
affiliates from time to time, and (iv) for all other purposes under all Employee
Benefit Plans applicable to employees of the Company and its subsidiaries, treat
all service with the Company or any of its subsidiaries by Current Employees
before the Closing as service with Parent and its Subsidiaries, except to the
extent such treatment would result in duplication of benefits or would violate
applicable law.
(c) Except as otherwise agreed with individual restricted
stockholders, at the Effective Time, each share of Company Common Stock which
immediately prior to the Effective Time was subject to restrictions on transfer,
whether vested or unvested, will become fully vested and freely transferable and
will be exchanged for unrestricted shares of Parent Common Stock (with attached
Parent Rights) pursuant to Section 3.1(d).
(d) Parent will cause the Surviving Corporation or its successor by
merger to continue in full force and effect for a period of not less than six
years from the Effective Time the indemnification provisions contained in
Article Eighth of the Third Restated Certificate of Incorporation attached as
Exhibit 2.4
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hereto provided that, in the event any claim is asserted or made within such
six-year period, all rights to indemnification in respect of any such claim will
continue until disposition of any and all such claims. For a period of six
years after the Effective Time, Parent will, or will cause the Company to,
provide directors' and officers' liability insurance having substantially the
same terms and conditions and providing at least the same coverage and amounts
as the directors' and officers' liability insurance maintained by the Company at
the Effective Time for all directors and officers of the Company and its
Subsidiaries, who served as such at or within one year prior to the Effective
Time, provided that Parent will not be required to pay an annual premium for
such insurance in excess of the last annual premium paid prior to the date
hereof (but in such case will purchase as much coverage as possible for such
amount).
Section 6.11 Exclusivity.
-----------
(a) Except as provided in Section 6.11(b), until the earlier of the
termination of this Agreement pursuant to Section 8.1 or the purchase of shares
of Company Common Stock pursuant to the Offer, the Company will not, nor will it
permit its officers, directors, Subsidiaries, representatives or agents,
directly or indirectly, to, do any of the following: (i) nego-
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tiate, undertake, authorize, propose or enter into, either as the proposed
surviving, merged, acquiring or acquired corporation, any transaction (other
than the Offer and the Merger) involving any disposition or other change of
ownership of a substantial portion of the Company's stock or assets (an
"Acquisition Transaction"); (ii) solicit or initiate the submission of a
proposal or offer in respect of, or engage in negotiations concerning, an
Acquisition Transaction; or (iii) furnish or cause to be furnished to any
corporation, partnership, person or other entity or group (other than the other
party and its representatives) (a "Person") any non-public information
concerning the business, operations, properties or assets of the Company in
connection with an Acquisition Transaction; provided, nothing herein will
--------
prohibit the Company's Board of Directors from taking and disclosing to the
Company's stockholders a position with respect to a tender offer pursuant to
Rules 14d-9 and 14e-2 promulgated under the Exchange Act. The Company will
inform Parent by telephone within two business days of its receipt of any
proposal or bid (including the terms thereof and the Person making such proposal
or bid) in respect of any Acquisition Transaction.
(b) Notwithstanding anything else contained in this Section 6.11, the
Company and its offi-
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cers, directors, subsidiaries, representatives and agents may engage in
discussions or negotiations with, and may furnish information to, a third party
who, or representatives of a third party who, makes a written proposal with
respect to an Acquisition Transaction if (i) the Company's Board of Directors
determines in good faith after consultation with its financial advisors that
such proposal may reasonably be expected to result in a transaction that is
financially superior to the transactions contemplated by this Agreement, or (ii)
the Board of Directors of the Company determines in good faith with advice of
outside counsel that failure to do so could reasonably be expected to result in
a breach of its fiduciary duties under applicable law. If the Company accepts a
proposal for or otherwise engages in any Acquisition Transaction (other than the
Offer or the Merger), it will promptly pay to Parent in reimbursement for
Parent's expenses an amount in cash (not to exceed $15,000,000) equal to the
aggregate amount of Parent's documented out-of-pocket expenses incurred in
connection with pursuing the transactions contemplated by this Agreement as
certified in good faith by Parent and with reasonable detail.
Section 6.12 Fees and Expenses. Whether or not the Merger is
-----------------
consummated, all costs and expenses in-
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curred in connection with this Agreement and the transactions contemplated
hereby will be paid by the party incurring such expenses.
Section 6.13 Brokers or Finders. Each of Parent and the Company
------------------
represents, as to itself, its Subsidiaries and its affiliates, that no agent,
broker, investment banker, financial advisor or other firm or person is or will
be entitled to any brokers' or finder's fee or any other commission or similar
fee in connection with any of the transactions contemplated by this Agreement or
the Stock Option Agreement except Merrill Lynch & Co., whose fees and expenses
will be paid by the Company in accordance with the Company's agreement with such
firm, a copy of which has been provided to Parent, and Smith Barney Inc., whose
fees and expenses will be paid by Parent in accordance with Parent's agreement
with such firm, a copy of which has been provided to the Company, and each of
Parent and the Company will indemnify and hold the other harmless from and
against any and all claims, liabilities or obligations with respect to any other
brokers' or finders' fees, commissions or expenses asserted by any person on the
basis of any act or statement alleged to have been made by such party or its
Subsidiary or affiliate.
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Section 6.14 Company Rights Agreement. The Company will redeem the
------------------------
Company Rights effective immediately prior to Parent's acceptance for payment of
shares of Company Common Stock pursuant to the Offer and will not otherwise
redeem the Company Rights, or amend or terminate the Company Rights Agreement,
unless in each such case the Board determines in good faith with the advice of
outside counsel that complying with any such covenant could reasonably be
expected to result in a breach of its fiduciary duties under applicable law. The
Company agrees that the Offer will provide, and require that tendering
stockholders confirm, that Parent will be entitled to receive and retain the
amounts paid in redemption of all Company Rights attached to shares of Company
Common Stock acquired pursuant to the Offer.
Section 6.15 Rule 145. The Company will use its reasonable best
--------
efforts to cause all persons who, at the time of the meeting of the Company's
stockholders to approve the Merger, may be deemed to be affiliates of the
Company as that term is used in Rule 145 under the Securities Act and who will
become the beneficial owners of Parent Common Stock (and attached Parent Rights)
and Parent New Preferred Stock pursuant to the Merger to execute "affiliates'
letters" in customary form prior to the Effective Time. Parent and the
Surviving Corporation
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will use their reasonable efforts to comply with the provisions of Rule 144(c)
under the Securities Act in order that such affiliates may resell such Parent
Common Stock (and attached Parent Rights) and Parent New Preferred Stock
pursuant to Rule 145(d) under the Securities Act.
Section 6.16 Notification of Certain Matters. The Company will give
-------------------------------
prompt notice to Parent, and Parent will give prompt notice to the Company, of
(a) the occurrence, or non-occurrence, of any event the occurrence, or non-
occurrence, of which would be likely to cause (i) any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
or (ii) any covenant, condition or agreement contained in this Agreement not to
be complied with or satisfied in any material respect and (b) any failure of the
Company or Parent, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder in any
material respect; provided, however, that the delivery of any notice pursuant to
this Section 6.16 will not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
Section 6.17 Interim Company Preferred Stock Dividend. The Company
----------------------------------------
will declare a dividend on each
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share of the Company Preferred Stock to holders of record of such shares as of
the close of the business day next preceding the Effective Time in an amount
equal to the product of (i) a fraction, (x) the numerator of which equals the
number of days between the payment date with respect to the most recent regular
dividend paid by the Company and the Effective Time and (y) the denominator of
which equals 91 and (ii) the amount of the regular quarterly dividend paid by
the Company on the relevant series of Company Preferred Stock.
Section 6.18 Company Debt Agreements. The Company will (a) promptly
-----------------------
seek agreement, on terms reasonably acceptable to Parent, of the banks party to
the Company's revolving credit and letter of credit reimbursement agreements to
(i) amend such agreements to provide that the execution by the Company of this
Agreement and the Stock Option Agreement and the purchase of shares of Company
Common Stock pursuant to the Offer or the Stock Option Agreement do not
constitute an event permitting the banks which are parties thereto to accelerate
the amounts outstanding under such agreements or establish cash collateral
accounts, (ii) amend such agreements to permit the consummation of the Merger,
and (iii) waive the interest rate increase otherwise applicable by reason of
such events, (b) select the latest
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notice and repurchase dates permitted under the indenture governing the Company
Notes in respect of the "change of control" effected by consummation of the
Offer and (c) in the event that such repurchase date occurs prior to the Merger,
cooperate with Parent in arranging financing on terms reasonably acceptable to
Parent to finance any required repurchase of Company Notes.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligation To Effect the
---------------------------------------------------
Merger. The respective obligations of the parties to effect the Merger will be
- ------
subject to the satisfaction, on or prior to the Closing Date, of the following
conditions:
(a) Offer. Parent has accepted for purchase and paid for shares of
Company Common Stock pursuant to the Offer; provided, that this condition will
be deemed satisfied with respect to Parent if Parent will have failed to
purchase shares of Company Common Stock pursuant to the Offer in violation of
the terms of the Offer.
(b) Stockholder Approval. This Agreement (insofar as it relates to
the Merger) and the Merger have been approved and adopted by the affirmative
vote of the
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holders of Company Common Stock entitled to cast at least a majority of the
total number of votes entitled to be cast by holders of Company Common Stock.
(c) HSR Approval. Any waiting period under the HSR Act applicable to
the Merger has expired or been terminated.
(d) Registration Statement. The S-4 has become effective under the
Securities Act and is not the subject of any stop order or proceeding seeking a
stop order. Parent has received all material state securities or blue sky
permits and other authorizations necessary to issue the shares of Parent Common
Stock (and attached Parent Rights) and Parent New Preferred Stock pursuant to
this Agreement.
(e) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger is in effect (each party agreeing to use all
reasonable efforts to have any such order reversed or injunction lifted).
(f) Listing Matters. The Parent Common Stock (and the attached
Parent Rights) has been approved for listing on the NYSE, subject to official
notice of issuance.
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(g) No Action. No action, suit or proceeding by any Governmental
Entity before any court or governmental or regulatory authority is pending
against the Company, Parent or Sub or any of their Subsidiaries challenging the
validity or legality of the transactions contemplated by this Agreement other
than actions, suits or proceedings as to which Parent had actual knowledge at
the time of acceptance for payment of shares of Company Common Stock pursuant to
the Offer or which, in the reasonable opinion of counsel to the party asserting
such condition, do not have a substantial likelihood of resulting in a material
adverse judgment.
Section 7.2 Conditions of Obligations of Parent and Sub. The
-------------------------------------------
obligations of Parent and Sub to effect the Merger are further subject to the
Company not having failed to perform its material obligations required to be
performed by it under Section 6.1 at or prior to the Closing Date, other than
any such failures to perform as to which Parent had actual knowledge at the time
of acceptance for payment of shares of Company Common Stock pursuant to the
Offer.
Section 7.3 Conditions of Obligations of the Company. The obligation
----------------------------------------
of the Company to effect the Merger is further subject to Parent and Sub not
having failed to perform their material obligations required to
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be performed by them under Section 6.2 at or prior to the Closing Date, other
than any such failures to perform as to which the Company had actual knowledge
at the time of acceptance of payment for shares of Company Common Stock pursuant
to the Offer.
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.1 Termination. This Agreement may be terminated at any
-----------
time prior to the Effective Time, whether before or after approval of the
matters presented in connection with the Merger by the stockholders of the
Company:
(a) by mutual consent of Parent and the Company by action of their
respective Boards of Directors (with any members of the Board of Directors of
the Company who may hereafter be designated by Parent abstaining);
(b) by the Company if (i) Parent fails to commence the Offer as
provided in Section 1.1, (ii) the Offer expires or is terminated without any
shares of Company Common Stock being purchased thereunder, or (iii) Parent fails
to purchase validly tendered shares of Company Common Stock in violation of the
terms and conditions of the Offer or this Agreement;
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(c) by Parent if, due to an occurrence which has made it reasonably
impracticable to satisfy any of the conditions of the Offer set forth in Annex I
hereto at any time prior to the 90th day following the commencement of the
Offer, Parent (i) terminates the Offer or allows the Offer to expire without the
purchase of any shares of Company Common Stock thereunder, unless such
termination or expiration has been caused by or resulted from the failure of
Parent to perform in any material respect any of its covenants and agreements
contained in this Agreement or the Offer, or (ii) fails to pay for shares of
Company Common Stock pursuant to the Offer within 90 days after the date hereof,
unless such failure to pay for such shares is caused by or results from the
failure of Parent to perform in any material respect any of its covenants or
agreements contained in this Agreement or the Offer;
(d) by either Parent or the Company if the Merger is not consummated
before June 30, 1995 despite the good faith effort of such party to effect such
consummation (unless solely by reason of the conditions provided for in Section
7.1(e), and 7.1(g) (in which case such date will be September 30, 1995) or the
failure to so consummate the Merger by such date is due to the action or failure
to act of the party seeking to termi-
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nate this Agreement, which action or failure to act constitutes a breach of this
Agreement);
(e) by either Parent or the Company if any court of competent
jurisdiction has issued an injunction permanently restraining, enjoining or
otherwise prohibiting the consummation of the Offer or the Merger, which
injunction has become final and non-appealable;
(f) prior to the expiration of the Offer, by Parent if the Company
rescinds its redemption of the Company Rights and all other conditions to
consummation of the Offer are satisfied, or the Board of Directors of the
Company withdraws, amends or modifies in a manner adverse to Parent its
favorable recommendation of the Offer or the Merger or promulgates any
recommendation with respect to an Acquisition Transaction (including a
determination to take no position) other than a recommendation to reject such
Acquisition Transaction; or
(g) prior to the expiration of the Offer, by the Company if (i) (A)
any of the representations and warranties of Parent contained in this Agreement
were incorrect in any material respect when made or have since become, and at
the time of termination remain, incorrect in any material respect, or (B) there
has been a material breach on the part of Parent in the covenants of Parent set
forth herein, or any failure on the part of Parent to
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comply with its material obligations hereunder, or any other events or
circumstances have occurred, such that, in any such case, Parent could not
satisfy on or prior to June 30, 1995, any of the conditions to the Closing set
forth in Sections 7.1 or 7.3, or (ii) the Company receives a written offer with
respect to an Acquisition Transaction and the Board of Directors of the Company,
after consulting with its outside counsel and financial advisor, determines in
good faith that such Acquisition Transaction is more favorable to the Company's
stockholders than the transactions contemplated by this Agreement and, not later
than the time of such termination, the Company has paid the expense
reimbursement required by Section 6.11(b).
Section 8.2 Effect of Termination. In the event of a termination of
---------------------
this Agreement by either the Company or Parent as provided in Section 8.1, this
Agreement will forthwith become void and there will be no liability or
obligation on the part of Parent, Sub or the Company or their respective
officers or directors, other than (a)(i) the provisions of the last sentence of
Section 6.11(b), which will survive for a period of one year from the date of
any such termination if and only if (A) Parent has not received the payment
pursuant to Section 6.11(b) and (B) such termination of this Agreement is
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pursuant to Section 8.1(b)(ii) by reason of the Minimum Condition having failed
to be satisfied, Section 8.1(c) by reason of the failure to satisfy the
conditions set forth in paragraph (e) or (f) of Annex I hereto, Section 8.1(f)
or Section 8.1(g)(ii), (ii) Sections 6.12 and 6.13, and (iii) the last sentence
of Section 6.6, and (b) to the extent that such termination results from the
willful breach by a party hereto of any of its covenants or agreements set forth
in this Agreement.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Nonsurvival of Representations and Warranties. None of
---------------------------------------------
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement will survive the Effective Time.
Section 9.2 Amendment. This Agreement may be amended by the parties
---------
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of the Company, but, after any such approval, no
amendment will be made which by law requires further approval by such
stockholders without such further approval. This Agree-
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ment may not be amended except by an instrument in writing signed on behalf of
each of the parties hereto.
Section 9.3 Extension; Waiver. At any time prior to the Effective
-----------------
Time, the parties hereto, by action taken or authorized by the respective Boards
of Directors, may to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained here. Any agreement on the
part of a party hereto to any such extension or waiver will be valid only if set
forth in a written instrument signed on behalf of such.party.
Section 9.4 Notices. All notices and other communications hereunder
-------
will be in writing and will be deemed given if delivered personally, telecopied
(which is confirmed) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as is specified by like notice):
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(a) if to Parent or Sub, to
The Williams Companies, Inc.
One Williams Center
Tulsa, Oklahoma 74172
Attention: Chief Executive Officer
Telecopy No.: (918) 588-2334
with a copy to
J. Furman Lewis
Senior Vice President
and General Counsel
One Williams Center
Tulsa, Oklahoma 74172
Telecopy No.: (918) 588-2334
and
Randall H. Doud
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telecopy No.: (212) 735-2000
and
(b) if to the Company, to
Transco Energy Company
2800 Post Oak Boulevard, 21st Floor
Houston, Texas 77056
Attention: Chief Executive Officer
Telecopy No.: (713) 439-4269
with a copy to
David E. Varner
Transco Energy Company
2800 Post Oak Boulevard
Houston, Texas 77056
Telecopy No: (713) 439-4269
and
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Eric S. Robinson
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019-6118
Telecopy No.: (212) 403-2000
Section 9.5 Interpretation. When a reference is made in this
--------------
Agreement to Sections, such reference will be to a Section of this Agreement
unless otherwise indicated. The headings contained in this Agreement are for
reference purposes only and will 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 will be deemed to be followed by the
words "without limitation." The phrases "the date of this Agreement," "the date
hereof" and terms of similar import, unless the context otherwise requires, will
be deemed to refer to December 12, 1994. References to "debt" in Sections
6.1(e) will not include accrued expenses or trade payables.
Section 9.6 Counterparts. This Agreement may be executed in two or
------------
more counterparts, all of which will be considered one and the same agreement
and will become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
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Section 9.7 Entire Agreement; No Third Party Beneficiaries. This
----------------------------------------------
Agreement (including the documents and the instruments referred to herein), the
Stock Option Agreement and the Confidentiality Agreement (a) constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and thereof, and (b) other than Sections 3.2 and 6.10(d), are not intended to
confer upon any person other than the parties hereto and thereto any rights or
remedies hereunder or thereunder.
Section 9.8 Governing Law. This Agreement will be governed and
-------------
construed in accordance with the laws of the State of Delaware applicable to
contracts made, executed, delivered and performed wholly within the State of
Delaware, without regard to any applicable conflicts of law. The Company,
Parent and Subsidiary hereby (w) submit to the jurisdiction of any State and
Federal courts sitting in Delaware with respect to matters arising out of or
relating hereto, (x) agree that all claims with respect to such matters may be
heard and determined in an action or proceeding in such Delaware State or
Federal court and no other court, (y) waive the defense of an inconvenient
forum, and (z) agree that a final judgment in any such action or proceeding will
be conclu-
106
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sive and may be enforced in other jurisdictions by suit on the judgment or in
any other manner provided by law.
Section 9.9 Specific Performance. The parties hereto agree that if
--------------------
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached, irreparable damage would occur,
no adequate remedy at law would exist and damages would be difficult to
determine, and that the parties will be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or equity.
Section 9.10 Publicity. Except as otherwise required by law or the
---------
rules of the NYSE, for so long as this Agreement is in effect, neither the
Company nor Parent will, or will permit any of its Subsidiaries to, issue or
cause the publication of any press release or other public announcement with
respect to the transactions contemplated by this Agreement without having
consulted with the other party.
Section 9.11 Assignment. Neither this Agreement nor any of the
----------
rights, interests or obligations hereunder will be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any or all
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rights, interests and obligations hereunder to any direct or indirect wholly
owned Subsidiary of Parent incorporated under the laws of the State of Delaware.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.
Section 9.12 Validity. The invalidity or unenforceability of any
--------
provision of this Agreement or the Stock Option Agreement will not affect the
validity or enforceability of any other provisions hereof or thereof, which will
remain in full force and effect.
Section 9.13 Taxes. Any liability arising out of the New York State
-----
Real Property Gains Tax and any other tax imposed by any domestic or foreign
taxing authority with respect to the property of the Company due with respect to
the Offer or the Merger will be borne by Parent and expressly will not be a
liability of the stockholders of the Company.
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<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
as of the date first written above.
THE WILLIAMS COMPANIES, INC.
By: /s/ Keith E. Bailey
--------------------------------
Name: Keith E. Bailey
Title: Chairman, President &
Chief Executive Officer
WC ACQUISITION CORP.
By: /s/ J. Furman Lewis
--------------------------------
Name: J. Furman Lewis
Title: Vice President, Assistant
Secretary and Assistant
Treasurer
TRANSCO ENERGY COMPANY
By: /s/ John P. DesBarres
--------------------------------
Name: John P. DesBarres
Title: Chairman of the Board,
President and Chief
Executive Officer
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<PAGE>
Exhibit 2.4
THIRD RESTATED CERTIFICATE OF INCORPORATION
OF
TRANSCO ENERGY COMPANY
Transco Energy Company, a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Transco Energy Company, and the
name under which the corporation was originally incorporated is Transco
Companies, Inc.
2. The date of filing of its original Certificate of Incorporation
with the Secretary of State of the State of Delaware was June 18, 1973. A
Restated Certificate of Incorporation was filed with the Secretary of State of
the State of Delaware on June 13, 1980. A Second Restated Certificate of
Incorporation was filed with the Secretary of State of the State of Delaware on
August 3, 1983.
3. This Third Restated Certificate of Incorporation was duly adopted
in accordance with Sections 242 and 245 of the General Corporation Law of the
State of Delaware (the "GCL").
4. The text of the Second Restated Certificate of Incorporation as
amended, restated or supplemented heretofore and as hereby amended is hereby
restated to read as herein set forth in full:
FIRST: The name of the Corporation is Transco Energy Company
-----
(hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in
------
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
<PAGE>
THIRD: The purpose of the Corporation is to engage in any lawful act
-----
or activity for which a corporation may be organized under the GCL.
FOURTH: The total number of shares of stock which the Corporation
------
shall have authority to issue is 100 shares of Common Stock, each having a par
value of $0.01.
FIFTH: The following provisions are inserted for the management of
-----
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the stockholders to
make, alter, amend, change, add to or repeal the By-Laws of the
Corporation.
(3) The number of directors of the Corporation shall be as from time
to time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless
the By-Laws so provide.
(4) No director shall be personally liable to the Corporation or any
of its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) pursuant to Section 174 of the GCL or (iv) for any
transaction from which the director derived an improper personal benefit.
Any repeal or modification of this Article FIFTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modifi-
2
<PAGE>
cation with respect to acts or omissions occurring prior to such repeal or
modification.
(5) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL, this Restated Certificate of Incorporation, and any
By-Laws adopted by the stockholders; provided, however, that no By-Laws
hereafter adopted by the stockholders shall invalidate any prior act of the
directors which would have been valid if such By-Laws had not been adopted.
SIXTH: Meetings of stockholders may be held within or without the
-----
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
SEVENTH: The Corporation reserves the right to amend, alter, change
-------
or repeal any provision contained in this Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
EIGHTH: The following indemnification and other provisions shall be
------
in effect:
(1) Subject to Section 3 of this Article EIGHTH, the Corporation
shall 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 such person 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
3
<PAGE>
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person 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 the conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
such person 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 reasonable cause to believe that the conduct was unlawful.
(2) Subject to Section 3 of this Article EIGHTH, the Corporation
shall 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 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) actually and reasonably incurred in
connection with the defense or settlement of such action or suit if such
person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Corporation; except
that no indemnification shall be made in respect to 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 of the
State of Delaware 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
4
<PAGE>
expenses which the Court of Chancery of the State of Delaware or such other
court shall deem proper.
(3) Any indemnification under this Article EIGHTH (unless ordered by
a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the Director,
officer, employee or agent is proper in the circumstances because such
person has met the applicable standard of conduct set forth in Section 1 or
Section 2 of this Article EIGHTH, as the case may be. Such determination
shall be made (i) by the Board of Directors by a majority vote of a quorum
consisting of Directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested Directors so directs, by independent
legal counsel in a written opinion, or (iii) by the stockholders. To the
extent, however, that a Director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding described above, or in defense of any claim,
issue or matter therein, such person shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred in connection
therewith, without the necessity of authorization in the specific case.
(4) For purposes of any determination under Section 3 of this Article
EIGHTH, a person shall be deemed to have acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe such person's
conduct was unlawful, if such person's action is based on the records or
books of account of the Corporation or another enterprise, or on
information supplied to such person by the officers of the Corporation or
another enterprise in the course of their duties, or on the advice of legal
counsel for the Corporation or another enterprise or on information or
records given or reports made to the Corporation or another enterprise by
an independent certified public accountant by an appraiser or other expert
selected with reasonable care by the
5
<PAGE>
Corporation or another enterprise. The term "another enterprise" as used
in this Section 4 shall mean any other corporation or any partnership,
joint venture, trust or other enterprise of which such person is or was
serving at the request of the Corporation as a director, officer, employee
or agent. The provisions of this Section 4 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth in Section
1 or 2 of this Article EIGHTH, as the case may be.
(5) Notwithstanding any contrary determination in the specific case
under Section 3 of this Article EIGHTH, and notwithstanding the absence of
any determination thereunder, any Director, officer, employee or agent may
apply to any court of competent jurisdiction in the State of Delaware for
indemnification to the extent otherwise permissible under Sections 1 and 2
of this Article EIGHTH. The basis of such indemnification by a court shall
be a determination by such court that indemnification of the Director,
officer, employee or agent is proper in the circumstances because such
person has met the applicable standards of conduct set forth in Sections 1
and 2 of this Article EIGHTH, as the case may be. Notice of any
application for indemnification pursuant to this Section 5 shall be given
to the Corporation promptly upon the filing of such application.
(6) Expenses by an officer or Director incurred in defending a civil
or criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the Director or officer to
repay such amount if it shall ultimately be determined that such person is
not entitled to be indemnified by the Corporation as authorized in this
Article EIGHTH.
Such expenses incurred by other employees and agents shall be so paid
upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
6
<PAGE>
(7) The indemnification and advancement of expenses provided by or
granted pursuant to this Article EIGHTH shall not be deemed exclusive of
any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any By-law, agreement, contract, vote of
stockholders or disinterested Directors or otherwise, both as to action in
such person's official capacity and as to action in another capacity while
holding such office, it being the policy of the Corporation that
indemnification of the persons specified in Sections 1 and 2 of this
Article EIGHTH shall be made to the fullest extent permitted by law. The
provisions of this Article EIGHTH shall not be deemed to preclude the
indemnification of any person who is not specified in Sections 1 or 2 of
this Article EIGHTH but whom the Corporation has the power or obligation to
indemnify under the provisions of the General Corporation Law of the State
of Delaware or otherwise.
(8) The Corporation may purchase and maintain insurance on behalf of
any person who 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 any liability asserted
against such person and incurred by such person in any such capacity, or
arising out of such person's status as such, whether or not the Corporation
would have the power or the obligation to indemnify such person against
such liability under the provisions of this Article EIGHTH.
(9) A. For purposes of this Article EIGHTH, reference to "the
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its directors,
officers, employees or agents so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
7
<PAGE>
venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article EIGHTH with respect to the resulting or
surviving corporation as such person would have with respect to such
constituent corporation if its separate existence had continued.
B. For purposes of this Article EIGHTH, references to "other
enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to an
employee benefit plan; and references to "serving at the request of the
Corporation" shall include any service as a Director, officer, employee or
agent of the Corporation which imposes duties on, or involves services by,
such Director, officer, employee or agent with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in
good faith and in a manner such person reasonably believed to be in the
interests of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this Article EIGHTH.
(10) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article EIGHTH shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
Director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
IN WITNESS WHEREOF, Transco Energy Corporation has caused this Third
Restated Certificate of Incorporation to be signed by its ____________ and its
____________ and has caused its corporate seal to be hereunto affixed, this ____
day of _________, 1995.
TRANSCO ENERGY COMPANY
By
----------------------------
Attest:
------------------------
8
<PAGE>
EXHIBIT 3.2(c)-1
FORM OF CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS
OF THE
CUMULATIVE CONVERTIBLE
PREFERRED STOCK, $4.75 SERIES
($1 Par Value)
OF
THE WILLIAMS COMPANIES, INC.
____________________________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
____________________________
The undersigned DOES HEREBY CERTIFY that the following resolution was
duly adopted on _________ __, 1995, by the Board of Directors (the "Board") of
The Williams Companies, Inc., a Delaware corporation (hereinafter called the
"Corporation"), in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware:
RESOLVED that pursuant to authority expressly granted to and
vested in the Board by provisions of the Restated Certificate of
Incorporation of the Corporation (the "Certificate of Incorporation"), the
issuance of a series of Preferred Stock, par value $1 per share (the
"Preferred Stock"), which shall consist of up to 2,990,000 of the _________
shares of Preferred Stock which the Corporation now has authority to issue,
be, and the same hereby is, authorized, and the powers, designations,
preferences and relative, participating, optional or other special
<PAGE>
rights, and the qualifications, limitations or restrictions thereof, of
the shares of such series (in addition to the powers, designations,
preferences and relative, participating, optional or other special rights,
and the qualifications, limitations or restrictions thereof, set forth in
the Certificate of Incorporation which may be applicable to the Preferred
Stock) are fixed as follows:
(i) The designation of such series of the Preferred Stock authorized
by this resolution shall be the $4.75 Cumulative Convertible Preferred Stock
(the "$4.75 Preferred Stock"). The total number of shares of the $4.75
Preferred Stock shall be 2,990,000.
(ii) Holders of shares of $4.75 Preferred Stock will be entitled to
receive, when and as declared by the Board out of assets of the Corporation
legally available for payment, an annual cash dividend of $4.75 per share,
payable in quarterly installments on February 1, May 1, August 1 and November 1,
commencing [the first such date following the Effective Time] (each a "dividend
payment date"). Dividends on the $4.75 Preferred Stock will be cumulative from
the date of initial issuance of shares of $4.75 Preferred Stock. Dividends will
be payable to holders of record as they appear on the stock books of the
Corporation on such record dates, not more than 60 days nor less than 10 days
preceding the payment dates thereof, as shall be fixed by the Board. When
dividends are not paid in full upon the $4.75 Preferred Stock and any other
Parity Preferred Stock (as defined in paragraph (ix)), all dividends declared
upon shares of Parity Preferred Stock will be declared pro rata so that in all
cases the amount of dividends declared per share on the $4.75 Preferred Stock
and such other Parity Preferred Stock shall bear to each other the same ratio
that accumulated and unpaid dividends per share on the shares of $4.75 Preferred
Stock and such other Parity Preferred Stock bear to each other. Except as set
forth in the preceding sentence, unless full cumulative dividends on the $4.75
Preferred Stock have been paid, no dividends (other than in Common Stock of the
Corporation) may be paid or declared and set aside for payment or other
distribution made upon the Common Stock or on any other stock of the Corporation
ranking junior to or on a
2
<PAGE>
parity with the $4.75 Preferred Stock as to dividends, nor may any Common Stock
or any other stock of the Corporation ranking junior to or on a parity with the
$4.75 Preferred Stock as to dividends be redeemed, purchased or otherwise
acquired for any consideration (or any payment made to or available for a
sinking fund for the redemption of any shares of such stock; provided, however,
-------- -------
that any moneys theretofore deposited in any sinking fund with respect to any
Preferred Stock of the Corporation in compliance with the provisions of such
sinking fund may thereafter be applied to the purchase or redemption of such
Preferred Stock in accordance with the terms of such sinking fund regardless of
whether at the time of such application full cumulative dividends upon shares of
the $4.75 Preferred Stock outstanding to the last dividend payment date shall
have been paid or declared and set apart for payment) by the Corporation (except
by conversion into or exchange for stock of the Corporation ranking junior to
the $4.75 Preferred Stock as to dividends). Dividends payable on the $4.75
Preferred Stock for any period less than the full dividend period will be
computed on the basis of a 360-day year consisting of twelve 30-day months.
(iii) The shares of $4.75 Preferred Stock shall rank prior to the
shares of Common Stock and of any other class of stock of the Corporation
ranking junior to the $4.75 Preferred Stock upon liquidation, so that in the
event of any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the holders of the $4.75 Preferred Stock shall be
entitled to receive out of the assets of the Corporation available for
distribution to its stockholders, whether from capital, surplus or earnings,
before any distribution is made to holders of shares of Common Stock or any
other such junior stock, (A) in the case of an involuntary liquidation,
dissolution or winding up, an amount equal to $50 per share or (B) in the case
of a voluntary liquidation, dissolution or winding up, the then applicable
Redemption Price (as defined in paragraph (iv) below) (as the case may be, the
"Liquidation Preference" of a share of $4.75 Preferred Stock), in each case plus
an amount equal to all dividends (whether or not earned or declared) accumulated
and unpaid on the shares of $4.75 Preferred Stock to the date of final
distribution. After payment of the full amount of the Liquidation Preference
and such dividends, the holders of shares of
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<PAGE>
$4.75 Preferred Stock will not be entitled to any further participation in any
distribution of assets by the Corporation. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation, or
proceeds thereof, distributable among the holders of shares of Parity Preferred
Stock shall be insufficient to pay in full the preferential amount aforesaid,
then such assets, or the proceeds thereof, shall be distributable among such
holders ratably in accordance with the respective amounts which would be payable
on such shares if all amounts payable thereon were payable in full. For the
purposes hereof, neither a consolidation or merger of the Corporation with or
into any other corporation, nor a merger of any other corporation with or into
the Corporation, nor a sale or transfer of all or any part of the Corporation's
assets for cash or securities shall be considered a liquidation, dissolution or
winding up of the Corporation.
(iv) The $4.75 Preferred Stock will be redeemable, in whole at any
time or from time to time in part at the option of the Corporation, upon not
less than 30 nor more than 60 days' notice, at the following redemption prices
(the "Redemption Prices") per share if redeemed during the twelve-month period
ending November 1 of the year indicated below; plus, in each case, all dividends
accrued and unpaid on the $4.75 Preferred Stock up to the date fixed for
redemption:
Redemption
Price
Year Per Share
---- ---------
1995 $ 50.475
After 1995 50.000
In the event that the Corporation determines to redeem fewer than
all of the outstanding shares of the $4.75 Preferred Stock, the shares to be
redeemed shall be determined by lot or a substantially equivalent method.
If a notice of redemption has been given pursuant to this paragraph
(iv) and if, on or before the date fixed for redemption, the funds necessary for
such redemption shall have been set aside by the Corporation, separate and apart
from its other funds, in trust for the pro rata benefit of the holders of the
shares so called
4
<PAGE>
for redemption, then, notwithstanding that any certificates for such shares have
not been surrendered for cancellation, on the redemption date dividends shall
cease to accrue on the shares of $4.75 Preferred Stock to be redeemed, and at
the close of business on the redemption date the holders of such shares shall
cease to be stockholders with respect to such shares and shall have no interest
in or claims against the Corporation by virtue thereof and shall have no voting
or other rights with respect to such shares, except the right to receive the
moneys payable upon such redemption, without interest thereon, upon surrender
(and endorsement, if required by the Corporation) of their certificates, and the
shares evidenced thereby shall no longer be outstanding. Subject to applicable
escheat laws, any moneys so set aside by the Corporation and unclaimed at the
end of two years from the redemption date shall revert to the general funds of
the Corporation, after which reversion the holders of such shares so called for
redemption shall look only to the general funds of the Corporation for the
payment of the amounts payable upon such redemption. Any interest accrued on
funds so deposited shall be paid to the Corporation from time to time.
(v) The holders of shares of $4.75 Preferred Stock shall have no
voting rights whatsoever, except for any voting rights to which they may be
entitled under the laws of the State of Delaware, and except as follows:
(I) If and whenever at any time or times dividends payable on
the $4.75 Preferred Stock or on any other 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, then the holders of the Preferred Stock shall have, in
addition to the other voting rights set forth herein, the exclusive
right, voting separately as a class, to elect two directors of the
Corporation, such directors to be in addition to the number of
directors constituting the Board immediately prior to the accrual of
such right, the remaining directors to be elected by the other class
or classes of stock entitled to vote therefor at each meeting of
stockholders held for the purpose of electing directors. Such voting
right shall
5
<PAGE>
continue until such time as all cumulative dividends accumulated on
all the Preferred Stock having cumulative dividends shall have been
paid in full and until any noncumulative dividends payable on all the
Preferred Stock having noncumulative dividends shall have been paid
regularly for at least one year, at which time such voting right of
the holders of the Preferred Stock shall terminate, subject to
revesting at such time as there shall occur each and every subsequent
event of default of the character indicated above.
Whenever such voting right shall have vested, such right may be
exercised initially either at a special meeting of the holders of the
Preferred Stock, called as hereinafter provided, or at any annual
meeting of stockholders held for the purpose of electing directors,
and thereafter at each successive annual meeting.
At such time when such voting right shall have vested in the
holders of the Preferred Stock, and if such right shall not already
have been initially exercised, a proper officer of the Corporation
shall, upon the written request of the holders of record of 10 percent
in number of shares of the Preferred Stock then outstanding, addressed
to the Secretary of the Corporation, call a special meeting of the
holders of the Preferred Stock and of any other class or classes of
stock having voting power with respect thereto for the purpose of
electing directors. Such meeting shall be held at the earliest
practicable date upon the notice required for annual meetings of
stockholders at the place for holding of annual meetings of
stockholders of the Corporation, or, if none, at a place designated by
the Secretary of the Corporation. If such meeting shall not be called
by the proper officers of the Corporation within 30 days after the
personal service of such written request upon the Secretary of the
Corporation, or within 30 days after mailing the same within the
United States of America, by registered mail,
6
<PAGE>
addressed to the Secretary of the Corporation at its principal office
(such mailing to be evidenced by the registry receipt issued by the
postal authorities), then the holders of record of 10 percent in
number of shares of the Preferred Stock then outstanding may designate
in writing one of their number to call such meeting at the expense of
the Corporation, and such meeting may be called by such person so
designated upon the notice required for annual meetings of
stockholders and shall be held at the same place as is elsewhere
provided for in this subparagraph (I). Any holder of the Preferred
Stock shall have access to the stock books of the Corporation for the
purpose of causing a meeting of stockholders to be called pursuant to
the provisions of this paragraph. Notwithstanding the provisions of
this paragraph, however, no such special meeting shall be called
during a period within 90 days immediately preceding the date fixed
for the next annual meeting of stockholders.
At any meeting held for the purpose of electing directors at
which the holders of the Preferred Stock shall have the right to elect
directors as provided herein, the presence in person or by proxy of
the holders of 33-1/3 percent of the then outstanding shares of the
Preferred Stock shall be required and be sufficient to constitute a
quorum of the Preferred Stock for the election of directors by the
Preferred Stock. At any such meeting or adjournment thereof (A) the
absence of a quorum of the holders of the Preferred Stock shall not
prevent the election of directors other than those to be elected by
the holders of the Preferred Stock and the absence of a quorum or
quorums of the holders of other classes of capital stock entitled to
elect such other directors shall not prevent the election of directors
to be elected by the holders of the Preferred Stock and (B) in the
absence of a quorum of the holders of any class of stock entitled to
vote for the election of directors, a majority of the holders present
in person or by proxy of such class shall have the power to
7
<PAGE>
adjourn the meeting for the election of directors which the holders of
such class are entitled to elect, from time to time, without notice
other than announcement at the meeting, until a quorum shall be
present.
The directors elected pursuant to this subparagraph (I) shall
serve until the next annual meeting or until their respective
successors shall be elected and shall qualify; provided, however, that
-------- -------
when the right of the holders of the Preferred Stock to elect
directors as herein provided shall terminate, the terms of office of
all persons so elected by the holders of the Preferred Stock shall
terminate, and the number of directors of the Corporation shall
thereupon be such number as may be provided in the By-laws of the
Corporation irrespective of any increase made pursuant to this
subparagraph (I).
So long as any shares of $4.75 Preferred Stock are outstanding,
the By-laws of the Corporation shall contain provisions ensuring that
the number of directors of the Corporation shall at all times be such
that the exercise, by the holders of shares of $4.75 Preferred Stock
and the holders of other Preferred Stock, of the right to elect
directors under the circumstances provided in this subparagraph (I)
will not contravene any provisions of the Corporation's Certificate of
Incorporation or By-laws.
(II) So long as any shares of the $4.75 Preferred Stock remain
outstanding, the Corporation will not, either directly or indirectly
or through merger or consolidation with any other corporation, without
the affirmative vote at a meeting or the written consent with or
without a meeting of the holders of at least 66-2/3 percent in number
of shares of the $4.75 Preferred Stock then outstanding, (A) create
any class or classes of stock ranking prior to or on a parity with the
$4.75 Preferred Stock either as to dividends or upon liquidation or
increase the authorized
8
<PAGE>
number of shares of any class or classes of stock ranking prior to or
on a parity with the $4.75 Preferred Stock either as to dividends or
upon liquidation, or create or authorize any obligation or security
convertible into shares of stock of any class ranking prior to or on a
parity with the Preferred Stock either as to dividends or upon
liquidation, but may, without such consent, create or authorize
obligations or securities convertible into shares of Preferred Stock
or (B) amend, alter or repeal any of the provisions of the Certificate
of Incorporation (including this resolution) so as to affect adversely
the preferences, special rights or powers of the $4.75 Preferred Stock
or of the holders thereof.
(vi) Except as provided in paragraph (v)(II), no consent of the
holders of the $4.75 Preferred Stock shall be required for (a) the creation of
any indebtedness of any kind of the Corporation, (b) the creation, or increase
or decrease in the amount, of any class or series of stock of the Corporation
not ranking prior to or on a parity with the $4.75 Preferred Stock or (c) any
increase or decrease in the amount of authorized Common Stock or any increase,
decrease or change in the par value thereof or in any other terms thereof.
(vii) Subject to the provisions of paragraph (iv) hereof, the Board
reserves the right by subsequent amendment of this resolution from time to time
to increase or decrease the number of shares which constitute the $4.75
Preferred Stock (but not below the number of shares thereof then outstanding)
and in other respects to amend this resolution within the limitations provided
by law, this resolution and the Certificate of Incorporation.
(viii) At the option of the holder thereof and upon surrender thereof
for conversion to the Corporation at the office of the Transfer Agent of the
Corporation's Common Stock in the Borough of Manhattan, the City of New York or
in the City of Tulsa, each share of $4.75 Preferred Stock will be convertible
(or if such share is called or surrendered for redemption, then in respect of
such share to and including, but not after, the redemption date) into fully paid
and nonassessable shares
9
<PAGE>
of Common Stock at the initial conversion rate of .5588 of a share of Common
Stock for each share of $4.75 Preferred Stock, the conversion rate being subject
to adjustment as hereinafter provided:
(I) In case the Corporation shall (A) pay a dividend in shares
of its capital stock, (B) subdivide its outstanding shares of Common
Stock into a greater number of shares, (C) combine its outstanding
shares of Common Stock into a smaller number of shares, or (D) issue
by reclassification of its shares of Common Stock any shares of its
capital stock, the conversion rate in effect immediately prior thereto
shall be adjusted so that the holder of a share of $4.75 Preferred
Stock surrendered for conversion after the record date fixing
stockholders to be affected by such event shall be entitled to receive
upon conversion the number of such shares of Common Stock which he
would have been entitled to receive after the happening of such event
had such share of $4.75 Preferred Stock been converted immediately
prior to such record date. Such adjustment shall be made whenever any
of such events shall happen, but shall also be effective retroactively
as to shares of $4.75 Preferred Stock converted between such record
date and the date of the happening of any such event.
(II) In case the Corporation shall issue rights or warrants to
all holders of its Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the
Current Market Price Per Share (as defined in subparagraph (IV) below)
of Common Stock at the record date mentioned below, the number of
shares of Common Stock into which each share of $4.75 Preferred Stock
shall thereafter be convertible shall be determined by multiplying the
number of shares of Common Stock into which such share of $4.75
Preferred Stock was theretofore convertible by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants plus
the number of
10
<PAGE>
additional shares of Common Stock offered for subscription or
purchase, and the denominator of which shall be the number of the
shares of Common Stock outstanding on the date of issuance of such
rights or warrants plus the number of shares which the aggregate
offering price of the total number of shares so offered would purchase
at such Current Market Price Per Share. Such adjustment shall be made
whenever such rights or warrants are issued, but shall also be
effected retroactively as to shares of $4.75 Preferred Stock converted
between the record date for the determination of stockholders entitled
to receive such rights or warrants and the date such rights or
warrants are issued.
(III) In case the Corporation shall distribute to all holders of
its Common Stock evidences of its indebtedness or assets (excluding
any cash dividend or distribution made out of current or retained
earnings) or rights to subscribe other than as set forth in
subparagraph (II) above, then in each such case the number of shares
of Common Stock into which each share of $4.75 Preferred Stock shall
thereafter be convertible shall be determined by multiplying the
number of shares of Common Stock into which such share was theretofore
convertible by a fraction, the numerator of which shall be the Current
Market Price Per Share of the Common Stock on the record date fixed by
the Board for such distribution, and the denominator of which shall be
such Current Market Price Per Share of the Common Stock less the then
fair market value (as determined by the Board, whose determination
shall be conclusive) of the portion of the assets, evidences of
indebtedness or subscription rights so distributed applicable to one
share of the Common Stock. Such adjustment shall be made whenever any
such distribution is made, but shall also be effective retroactively
as to shares of $4.75 Preferred Stock converted between the record
date for the determination of stockholders entitled to receive such
11
<PAGE>
distribution and the date such distribution is made.
(IV) For the purpose of any computation under subparagraphs (II)
and (III) above and (VI) below, the "Current Market Price Per Share"
of Common Stock at any date shall be deemed to be the average of the
daily closing prices for the 15 consecutive trading days commencing 20
trading days before the day in question. The closing price for each
day shall be reported on the New York Stock Exchange-Composite
Transactions Tape or as reported by any successor central market
system.
(V) No adjustment in the conversion rate shall be required
unless such adjustment would require an increase or decrease of at
least 1% in such rate; provided, however, that any adjustments which
by reason of this subparagraph (V) are not required to be made shall
be carried forward and taken into account in any subsequent
adjustment. All calculations under this paragraph (viii) shall be
made to the nearest one-hundredth of a share.
(VI) No fractional shares or scrip representing fractional shares
of Common Stock shall be issued upon the conversion of any share of
$4.75 Preferred Stock. If the conversion thereof results in a
fraction, an amount equal to such fraction multiplied by the Current
Market Price Per Share of Common Stock (as defined in subparagraph
(IV) above) as of the conversion date shall be paid to such holder in
cash by the Corporation.
(VII) In case the Corporation shall enter into any
consolidation, merger or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in each such case
each share of $4.75 Preferred Stock remaining outstanding at the time
of consummation of such transaction shall thereafter be convertible
into the kind and
12
<PAGE>
amount of such stock or securities, cash and/or other property
receivable upon consummation of such transaction by a holder of the
number of shares of Common Stock into which such shares of $4.75
Preferred Stock might have been converted immediately prior to
consummation of such transaction, assuming in each case that such
holder of Common Stock failed to exercise rights of election, if any,
as to the kind or amount of securities, cash or other property
receivable upon consummation of such transaction (provided that if the
kind or amount of securities, cash or other property receivable upon
consummation of such transaction is not the same for each non-electing
share, then the kind and amount of securities, cash or other property
receivable upon consummation of such transaction for each non-electing
share shall be deemed to be the kind and amount as receivable per
share by a plurality of the non-electing shares).
(VIII) In the event of any Change in Control (as hereinafter
defined) of the Corporation, each holder of $4.75 Preferred Stock
shall have the right, at the holder's option, to require the
Corporation to redeem all or any number of such holder's shares of
$4.75 Preferred Stock during the period (the "Exercise Period")
beginning on the 30th day and ending on the 90th day after the date of
such Change in Control at the Redemption Price, plus accrued and
unpaid dividends to the date fixed for redemption; provided, however,
that such redemption right shall not be applicable in the case of any
Change in Control of the Corporation which shall have been duly
approved by the Continuing Directors (as hereinafter defined) during
the period (the "Approval Period") prior to or within 21 days after
the date on which such Change in Control shall have occurred. As used
herein, (a) "Acquiring Person" means any Person who is or becomes the
Beneficial Owner, directly or indirectly, of 10% or more of the
outstanding Common Stock, (b) "Beneficial Owner" has the meaning
ascribed to such term in Rule 13d-3 adopted pursuant to
13
<PAGE>
the Securities Exchange Act of 1934, as amended, (c) a "Change in
Control" of the Corporation shall be deemed to have occurred at such
time as (i) any Person is or becomes the Beneficial Owner, directly or
indirectly, of 30% or more of the outstanding Common Stock or (ii)
individuals who constitute the Continuing Directors cease for any
reason to constitute at least a majority of the Board, (d) "Continuing
Director" means any member of the Board who is not affiliated with an
Acquiring Person and who was a member of the Board immediately prior
to the time that the Acquiring Person became an Acquiring Person and
any successor to a Continuing Director who is not affiliated with the
Acquiring Person and is recommended to succeed a Continuing Director
by a majority of Continuing Directors who are then members of the
Board, and (e) "Person" means any individual, corporation,
partnership, limited partnership, association, joint-stock company,
trust, unincorporated organization, syndicate or group (as such terms
are used in Section 13d-3 adopted pursuant to the Securities Exchange
Act of 1934, as amended) or government or political subdivision
thereof.
On or before the seventh day after the termination of the
Approval Period, the Corporation shall mail to all holders of record
of the $4.75 Preferred Stock as of the last day of the Approval
Period, at their respective addresses as the same shall appear on the
books of the Corporation as of such date, a notice disclosing (i) the
Change in Control, (ii) whether or not the Continuing Directors have
approved the Change in Control, and (iii) if the Continuing Directors
have not approved the Change in Control, the respective dates on which
the Exercise Period commences and ends, the redemption price per share
of the $4.75 Preferred Stock applicable hereunder and the procedure
which the holder must follow to exercise the redemption right provided
above. The Corporation shall cause a copy of such notice to be
published in a newspaper of general circulation in the Borough of
Manhattan, New
14
<PAGE>
York. To exercise such redemption right, a holder of the $4.75
Preferred Stock must deliver during the Exercise Period written notice
to the Corporation (or an agent designated by the Corporation for such
purpose) of the holder's exercise of such redemption right, and, to be
valid, any such notice of exercise must be accompanied by each
certificate evidencing shares of the $4.75 Preferred Stock with
respect to which the redemption right is being exercised, duly
endorsed for transfer. On or prior to the seventh day after the close
of the Exercise Period, the Corporation shall accept for payment all
shares of $4.75 Preferred Stock properly surrendered to the
Corporation (or an agent designated by the Corporation for such
purpose) during the Exercise Period for redemption in connection with
the valid exercise of such redemption right and shall cause payment to
be made in cash for such shares of $4.75 Preferred Stock.
(ix) For the purposes of this resolution, any stock of any class or
classes of the Corporation shall be deemed to rank:
(a) prior to shares of the $4.75 Preferred Stock, either as to
dividends or upon liquidation, if the holders of stock of such class or classes
shall be entitled by the terms thereof to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the case may be,
in preference or priority to the holders of shares of the $4.75 Preferred Stock;
(b) on a parity with shares of the $4.75 Preferred Stock,
either as to dividends or upon liquidation, whether or not the dividend rates,
dividend payment dates or redemption or liquidation prices per share thereof be
different from those of the $4.75 Preferred Stock, if the holders of stock of
such class or classes shall be entitled by the terms thereof to the receipt of
dividends or of amounts distributable upon liquidation, dissolution or winding
up, as the case may be, in proportion to their respective dividend rates or
liquidation prices, without preference or priority of one over the other as
between the holders of such stock and
15
<PAGE>
the holders of shares of $4.75 Preferred Stock (the term "Parity Preferred
Stock" being used to refer to any stock on a parity with the shares of $4.75
Preferred Stock, either as to dividends or upon liquidation as the context may
require); and
(c) junior to shares of the $4.75 Preferred Stock, either as to
dividends or upon liquidation, if such class shall be Common Stock or if the
holders of the $4.75 Preferred Stock shall be entitled to the receipt of
dividends or of amounts distributable upon liquidation, dissolution or winding
up, as the case may be, in preference or priority to the holders of stock of
such class or classes.
(x) The $4.75 Preferred Stock shall rank on a parity with the $2.21
Cumulative Preferred Stock, par value $1 per share, of the Corporation and the
Cumulative Convertible Preferred Stock, $3.50 Series, par value $1 per share, of
the Corporation, in each case as to dividends and upon liquidation. The $4.75
Preferred Stock shall rank prior to the Series A Junior Participating Preferred
Stock, par value $1 per share, and all other shares of capital stock of the
Corporation outstanding at the time of issuance of the $4.75 Preferred Stock.
IN WITNESS WHEREOF, The Williams Companies, Inc. has caused this
Certificate to be made under the seal of the Corporation and signed by
________________, _____________________, and attested by ____________,
___________, this _____ day of ___________, 1995.
THE WILLIAMS COMPANIES, INC.
[SEAL]
Attest: By:
-----------------------------------------
- --------------------------------
16
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EXHIBIT 3.2(c)-2
FORM OF CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS
OF THE
CUMULATIVE CONVERTIBLE
PREFERRED STOCK, $3.50 SERIES
($1 Par Value)
OF
THE WILLIAMS COMPANIES, INC.
----------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
----------------------------
The undersigned DOES HEREBY CERTIFY that the following resolution was
duly adopted on _________ __, 1995, by the Board of Directors (the "Board") of
The Williams Companies, Inc., a Delaware corporation (hereinafter called the
"Corporation"), in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware:
RESOLVED that pursuant to authority expressly granted to and
vested in the Board by provisions of the Restated Certificate of
Incorporation of the Corporation (the "Certificate of Incorporation"), the
issuance of a series of Preferred Stock, par value $1 per share (the
"Preferred Stock"), which shall consist of up to 2,500,000 of the _________
shares of Preferred Stock which the Corporation now has authority to issue,
be, and the same hereby is, authorized, and the powers, designations,
preferences and relative, participating, optional or other special rights,
and the qualifications, limitations or
<PAGE>
restrictions thereof, of the shares of such series (in addition to the
powers, designations, preferences and relative, participating, optional or
other special rights, and the qualifications, limitations or restrictions
thereof, set forth in the Certificate of Incorporation which may be
applicable to the Preferred Stock) are fixed as follows:
(i) The designation of such series of the Preferred Stock authorized
by this resolution shall be the $3.50 Cumulative Convertible Preferred Stock
(the "$3.50 Preferred Stock"). The total number of shares of the $3.50
Preferred Stock shall be 2,500,000.
(ii) Holders of shares of $3.50 Preferred Stock will be entitled to
receive, when and as declared by the Board out of assets of the Corporation
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,
commencing [the first such date following the Effective Time] (each a "dividend
payment date"). Dividends on the $3.50 Preferred Stock will be cumulative from
the date of initial issuance of shares of $3.50 Preferred Stock. Dividends will
be payable to holders of record as they appear on the stock books of the
Corporation on such record dates, not more than 60 days nor less than 10 days
preceding the payment dates thereof, as shall be fixed by the Board. When
dividends are not paid in full upon the $3.50 Preferred Stock and any other
Parity Preferred Stock (as defined in paragraph (ix)), all dividends declared
upon shares of Parity Preferred Stock will be declared pro rata so that in all
cases the amount of dividends declared per share on the $3.50 Preferred Stock
and such other Parity Preferred Stock shall bear to each other the same ratio
that accumulated and unpaid dividends per share on the shares of $3.50 Preferred
Stock and such other Parity Preferred Stock bear to each other. Except as set
forth in the preceding sentence, unless full cumulative dividends on the $3.50
Preferred Stock have been paid, no dividends (other than in Common Stock of the
Corporation) may be paid or declared and set aside for payment or other
distribution made upon the Common Stock or on any other stock of the Corporation
ranking junior to or on a parity with the $3.50 Preferred Stock as to dividends,
2
<PAGE>
nor may any Common Stock or any other stock of the Corporation ranking junior to
or on a parity with the $3.50 Preferred Stock as to dividends be redeemed,
purchased or otherwise acquired for any consideration (or any payment made to
or available for a sinking fund for the redemption of any shares of such stock;
provided, however, that any moneys theretofore deposited in any sinking fund
- -------- -------
with respect to any Preferred Stock of the Corporation in compliance with the
provisions of such sinking fund may thereafter be applied to the purchase or
redemption of such Preferred Stock in accordance with the terms of such sinking
fund regardless of whether at the time of such application full cumulative
dividends upon shares of the $3.50 Preferred Stock outstanding to the last
dividend payment date shall have been paid or declared and set apart for
payment) by the Corporation (except by conversion into or exchange for stock of
the Corporation ranking junior to the $3.50 Preferred Stock as to dividends).
Dividends payable on the $3.50 Preferred Stock for any period less than the full
dividend period will be computed on the basis of a 360-day year consisting of
twelve 30-day months.
(iii) The shares of $3.50 Preferred Stock shall rank prior to the
shares of Common Stock and of any other class of stock of the Corporation
ranking junior to the $3.50 Preferred Stock upon liquidation, so that in the
event of any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the holders of the $3.50 Preferred Stock shall be
entitled to receive out of the assets of the Corporation available for
distribution to its stockholders, whether from capital, surplus or earnings,
before any distribution is made to holders of shares of Common Stock or any
other such junior stock, an amount equal to $50 per share (the "Liquidation
Preference" of a share of $3.50 Preferred Stock) plus an amount equal to all
dividends (whether or not earned or declared) accumulated and unpaid on the
shares of $3.50 Preferred Stock to the date of final distribution. After
payment of the full amount of the Liquidation Preference and such dividends, the
holders of shares of $3.50 Preferred Stock will not be entitled to any further
participation in any distribution of assets by the Corporation. If, upon any
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation, or proceeds thereof, distributable among the holders of shares of
Parity Preferred Stock
3
<PAGE>
shall be insufficient to pay in full the preferential amount aforesaid, then
such assets, or the proceeds thereof, shall be distributable among such holders
ratably in accordance with the respective amounts which would be payable on such
shares if all amounts payable thereon were payable in full. For the purposes
hereof, neither a consolidation or merger of the Corporation with or into any
other corporation, nor a merger of any other corporation with or into the
Corporation, nor a sale or transfer of all or any part of the Corporation's
assets for cash or securities shall be considered a liquidation, dissolution or
winding up of the Corporation.
(iv) The shares of the $3.50 Preferred Stock will not be redeemable
prior to November 1, 1999. On and after November 1, 1999, the $3.50 Preferred
Stock will be redeemable, in whole at any time or from time to time in part at
the option of the Corporation, upon not less than 30 nor more than 60 days'
notice, at the following redemption prices (the "Redemption Prices") per share
if redeemed during the twelve-month period beginning November 1 of the year
indicated below; plus, in each case, all dividends accrued and unpaid on the
$3.50 Preferred Stock up to the date fixed for redemption:
<TABLE>
<CAPTION>
Redemption
Price
Year Per Share
---- ---------
<S> <C>
1999............................... $51.40
2000............................... 51.05
2001............................... 50.70
2002............................... 50.35
2003 and thereafter................ 50.00
</TABLE>
In the event that the Corporation determines to redeem fewer than all
of the outstanding shares of the $3.50 Preferred Stock, the shares to be
redeemed shall be determined by lot or a substantially equivalent method.
If a notice of redemption has been given pursuant to this paragraph
(iv) and if, on or before the date fixed for redemption, the funds necessary for
such redemption shall have been set aside by the Corporation, separate and apart
from its other funds, in trust for the pro rata benefit of the holders of the
shares so called
4
<PAGE>
for redemption, then, notwithstanding that any certificates for such shares have
not been surrendered for cancellation, on the redemption date dividends shall
cease to accrue on the shares of $3.50 Preferred Stock to be redeemed, and at
the close of business on the redemption date the holders of such shares shall
cease to be stockholders with respect to such shares and shall have no interest
in or claims against the Corporation by virtue thereof and shall have no voting
or other rights with respect to such shares, except the right to receive the
moneys payable upon such redemption, without interest thereon, upon surrender
(and endorsement, if required by the Corporation) of their certificates, and the
shares evidenced thereby shall no longer be outstanding. Subject to applicable
escheat laws, any moneys so set aside by the Corporation and unclaimed at the
end of two years from the redemption date shall revert to the general funds of
the Corporation, after which reversion the holders of such shares so called for
redemption shall look only to the general funds of the Corporation for the
payment of the amounts payable upon such redemption. Any interest accrued on
funds so deposited shall be paid to the Corporation from time to time.
(v) The holders of shares of $3.50 Preferred Stock shall have no
voting rights whatsoever, except for any voting rights to which they may be
entitled under the laws of the State of Delaware, and except as follows:
(I) If and whenever at any time or times dividends payable on the
$3.50 Preferred Stock or on any other 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, then
the holders of the Preferred Stock shall have, in addition to the
other voting rights set forth herein, the exclusive right, voting
separately as a class, to elect two directors of the Corporation, such
directors to be in addition to the number of directors constituting
the Board immediately prior to the accrual of such right, the
remaining directors to be elected by the other class or classes of
stock entitled to vote therefor at each meeting of stockholders held
for the purpose of electing directors. Such voting right shall
5
<PAGE>
continue until such time as all cumulative dividends accumulated on
all the Preferred Stock having cumulative dividends shall have been
paid in full and until any noncumulative dividends payable on all the
Preferred Stock having noncumulative dividends shall have been paid
regularly for at least one year, at which time such voting right of
the holders of the Preferred Stock shall terminate, subject to
revesting at such time as there shall occur each and every subsequent
event of default of the character indicated above.
Whenever such voting right shall have vested, such right may be
exercised initially either at a special meeting of the holders of the
Preferred Stock, called as hereinafter provided, or at any annual
meeting of stockholders held for the purpose of electing directors,
and thereafter at each successive annual meeting.
At such time when such voting right shall have vested in the
holders of the Preferred Stock, and if such right shall not already
have been initially exercised, a proper officer of the Corporation
shall, upon the written request of the holders of record of 10 percent
in number of shares of the Preferred Stock then outstanding, addressed
to the Secretary of the Corporation, call a special meeting of the
holders of the Preferred Stock and of any other class or classes of
stock having voting power with respect thereto for the purpose of
electing directors. Such meeting shall be held at the earliest
practicable date upon the notice required for annual meetings of
stockholders at the place for holding of annual meetings of
stockholders of the Corporation, or, if none, at a place designated by
the Secretary of the Corporation. If such meeting shall not be called
by the proper officers of the Corporation within 30 days after the
personal service of such written request upon the Secretary of the
Corporation, or within 30 days after mailing the same within the
United States of America, by registered mail,
6
<PAGE>
addressed to the Secretary of the Corporation at its principal office
(such mailing to be evidenced by the registry receipt issued by the
postal authorities), then the holders of record of 10 percent in
number of shares of the Preferred Stock then outstanding may designate
in writing one of their number to call such meeting at the expense of
the Corporation, and such meeting may be called by such person so
designated upon the notice required for annual meetings of
stockholders and shall be held at the same place as is elsewhere
provided for in this subparagraph (I). Any holder of the Preferred
Stock shall have access to the stock books of the Corporation for the
purpose of causing a meeting of stockholders to be called pursuant to
the provisions of this paragraph. Notwithstanding the provisions of
this paragraph, however, no such special meeting shall be called
during a period within 90 days immediately preceding the date fixed
for the next annual meeting of stockholders.
At any meeting held for the purpose of electing directors at
which the holders of the Preferred Stock shall have the right to elect
directors as provided herein, the presence in person or by proxy of
the holders of 33-1/3 percent of the then outstanding shares of the
Preferred Stock shall be required and be sufficient to constitute a
quorum of the Preferred Stock for the election of directors by the
Preferred Stock. At any such meeting or adjournment thereof (A) the
absence of a quorum of the holders of the Preferred Stock shall not
prevent the election of directors other than those to be elected by
the holders of the Preferred Stock and the absence of a quorum or
quorums of the holders of other classes of capital stock entitled to
elect such other directors shall not prevent the election of directors
to be elected by the holders of the Preferred Stock and (B) in the
absence of a quorum of the holders of any class of stock entitled to
vote for the election of directors, a majority of the holders present
in person or by proxy of such class shall have the power to
7
<PAGE>
adjourn the meeting for the election of directors which the holders of
such class are entitled to elect, from time to time, without notice
other than announcement at the meeting, until a quorum shall be
present.
The directors elected pursuant to this subparagraph (I) shall
serve until the next annual meeting or until their respective
successors shall be elected and shall qualify; provided, however, that
-------- -------
when the right of the holders of the Preferred Stock to elect
directors as herein provided shall terminate, the terms of office of
all persons so elected by the holders of the Preferred Stock shall
terminate, and the number of directors of the Corporation shall
thereupon be such number as may be provided in the By-laws of the
Corporation irrespective of any increase made pursuant to this
subparagraph (I).
So long as any shares of $3.50 Preferred Stock are outstanding,
the By-laws of the Corporation shall contain provisions ensuring that
the number of directors of the Corporation shall at all times be such
that the exercise, by the holders of shares of $3.50 Preferred Stock
and the holders of other Preferred Stock, of the right to elect
directors under the circumstances provided in this subparagraph (I)
will not contravene any provisions of the Corporation's Certificate of
Incorporation or By-laws.
(II) So long as any shares of the $3.50 Preferred Stock remain
outstanding, the Corporation will not, either directly or indirectly
or through merger or consolidation with any other corporation, without
the affirmative vote at a meeting or the written consent with or
without a meeting of the holders of at least 66-2/3 percent in number
of shares of the $3.50 Preferred Stock then outstanding, (A) create
any class or classes of stock ranking prior to or on a parity with the
$3.50 Preferred Stock either as to dividends or upon liquidation or
increase the authorized
8
<PAGE>
number of shares of any class or classes of stock ranking prior to or
on a parity with the $3.50 Preferred Stock either as to dividends or
upon liquidation, or create or authorize any obligation or security
convertible into shares of stock of any class ranking prior to or on a
parity with the Preferred Stock either as to dividends or upon
liquidation, but may, without such consent, create or authorize
obligations or securities convertible into shares of Preferred Stock,
or (B) amend, alter or repeal any of the provisions of the Certificate
of Incorporation (including this resolution) so as to affect adversely
the preferences, special rights or powers of the $3.50 Preferred Stock
or of the holders thereof.
(vi) Except as provided in paragraph (v)(II), no consent of the
holders of the $3.50 Preferred Stock shall be required for (a) the creation of
any indebtedness of any kind of the Corporation, (b) the creation, or increase
or decrease in the amount, of any class or series of stock of the Corporation
not ranking prior to or on a parity with to the $3.50 Preferred Stock as to
dividends or upon liquidation or (c) any increase or decrease in the amount of
authorized Common Stock or any increase, decrease or change in the par value
thereof or in any other terms thereof.
(vii) Subject to the provisions of paragraph (iv) hereof, the Board
reserves the right by subsequent amendment of this resolution from time to time
to increase or decrease the number of shares which constitute the $3.50
Preferred Stock (but not below the number of shares thereof then outstanding)
and in other respects to amend this resolution within the limitations provided
by law, this resolution and the Certificate of Incorporation.
(viii) At the option of the holder thereof and upon surrender thereof
for conversion to the Corporation at the office of the Transfer Agent of the
Corporation's Common Stock in the Borough of Manhattan, the City of New York or
in the City of Tulsa, each share of $3.50 Preferred Stock will be convertible
(or if such share is called or surrendered for redemption, then in respect of
such share to and including, but not after,
9
<PAGE>
the redemption date) into fully paid and nonassessable shares of Common Stock at
the initial conversion rate of 1.5625 shares of Common Stock for each share of
$3.50 Preferred Stock, the conversion rate being subject to adjustment as
hereinafter provided:
(I) In case the Corporation shall (A) pay a dividend in
shares of its capital stock, (B) subdivide its outstanding shares
of Common Stock into a greater number of shares, (C) combine its
outstanding shares of Common Stock into a smaller number of
shares, or (D) issue by reclassification of its shares of Common
Stock any shares of its capital stock, the conversion rate in
effect immediately prior thereto shall be adjusted so that the
holder of a share of $3.50 Preferred Stock surrendered for
conversion after the record date fixing stockholders to be
affected by such event shall be entitled to receive upon
conversion the number of such shares of Common Stock which he
would have been entitled to receive after the happening of such
event had such share of $3.50 Preferred Stock been converted
immediately prior to such record date. Such adjustment shall be
made whenever any of such events shall happen, but shall also be
effective retroactively as to shares of $3.50 Preferred Stock
converted between such record date and the date of the happening
of any such event.
(II) In case the Corporation shall issue rights or warrants
to all holders of its Common Stock entitling them to subscribe
for or purchase shares of Common Stock at a price per share less
than the Current Market Price Per Share (as defined in
subparagraph (IV) below) of Common Stock at the record date
mentioned below, the number of shares of Common Stock into which
each share of $3.50 Preferred Stock shall thereafter be
convertible shall be determined by multiplying the number of
shares of Common Stock into which such
10
<PAGE>
share of $3.50 Preferred Stock was theretofore convertible by a
fraction, the numerator of which shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights
or warrants plus the number of additional shares of Common Stock
offered for subscription or purchase, and the denominator of
which shall be the number of the shares of Common Stock
outstanding on the date of issuance of such rights or warrants
plus the number of shares which the aggregate offering price of
the total number of shares so offered would purchase at such
Current Market Price Per Share. Such adjustment shall be made
whenever such rights or warrants are issued, but shall also be
effected retroactively as to shares of $3.50 Preferred Stock
converted between the record date for the determination of
stockholders entitled to receive such rights or warrants and the
date such rights or warrants are issued.
(III) In case the Corporation shall distribute to all
holders of its Common Stock evidences of its indebtedness or
assets (excluding any cash dividend or distribution made out of
current or retained earnings) or rights to subscribe other than
as set forth in subparagraph (II) above, then in each such case
the number of shares of Common Stock into which each share of
$3.50 Preferred Stock shall thereafter be convertible shall be
determined by multiplying the number of shares of Common Stock
into which such share was theretofore convertible by a fraction,
the numerator of which shall be the Current Market Price Per
Share of the Common Stock on the record date fixed by the Board
for such distribution, and the denominator of which shall be such
Current Market Price Per Share of the Common Stock less the then
fair market value (as determined by the Board, whose
determination shall be conclusive) of the
11
<PAGE>
portion of the assets, evidences of indebtedness or subscription
rights so distributed applicable to one share of the Common
Stock. Such adjustment shall be made whenever any such
distribution is made, but shall also be effective retroactively
as to shares of $3.50 Preferred Stock converted between the
record date for the determination of stockholders entitled to
receive such distribution and the date such distribution is made.
(IV) For the purpose of any computation under subparagraphs
(II) and (III) above and (VI) below, the "Current Market Price
Per Share of Common Stock at any date shall be deemed to be the
average of the daily closing prices for the 15 consecutive
trading days commencing 20 trading days before the day in
question. The closing price for each day shall be reported on
the New York Stock Exchange-Composite Transactions Tape or as
reported by any successor central market system.
(V) No adjustment in the conversion rate shall be required
unless such adjustment would require an increase or decrease of
at least 1% in such rate; provided, however, that any adjustments
which by reason of this subparagraph (V) are not required to be
made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this paragraph
(viii) shall be made to the nearest one-hundredth of a share.
(VI) No fractional shares or scrip representing fractional
shares of Common Stock shall be issued upon the conversion of any
share of $3.50 Preferred Stock. If the conversion thereof
results in a fraction, an amount equal to such fraction
multiplied by the Current Market Price Per
12
<PAGE>
Share of Common Stock (as defined in subparagraph (IV) above) as
of the conversion date shall be paid to such holder in cash by
the Corporation.
(VII) In case the Corporation shall enter into any
consolidation, merger or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in each such
case each share of $3.50 Preferred Stock remaining outstanding at
the time of consummation of such transaction shall thereafter be
convertible into the kind and amount of such stock or securities,
cash and/or other property receivable upon consummation of such
transaction by a holder of the number of shares of Common Stock
into which such shares of $3.50 Preferred Stock might have been
converted immediately prior to consummation of such transaction,
assuming in each case that such holder of Common Stock failed to
exercise rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon consummation
of such transaction (provided that if the kind or amount of
securities, cash or other property receivable upon consummation
of such transaction is not the same for each non-electing share,
then the kind and amount of securities, cash or other property
receivable upon consummation of such transaction for each non-
electing share shall be deemed to be the kind and amount as
receivable per share by a plurality of the non-electing shares).
(VIII) In the event of any Change in Control (as
hereinafter defined) of the Corporation, each holder of $3.50
Preferred Stock shall have the right, at the holder's option, to
require the Corporation to redeem all or any number of such
holder's shares of $3.50 Preferred
13
<PAGE>
Stock during the period (the "Exercise Period") beginning on the
30th day and ending on the 90th day after the date of such Change
in Control at the Redemption Price, plus accrued and unpaid
dividends to the date fixed for redemption; provided, however,
that such redemption right shall not be applicable in the case of
any Change in Control of the Corporation which shall have been
duly approved by the Continuing Directors (as hereinafter
defined) during the period (the "Approval Period") prior to or
within 21 days after the date on which such Change in Control
shall have occurred. As used herein, (a) "Acquiring Person"
means any Person who is or becomes the Beneficial Owner, directly
or indirectly, of 10% or more of the outstanding Common Stock,
(b) "Beneficial Owner" has the meaning ascribed to such term in
Rule 13d-3 adopted pursuant to the Securities Exchange Act of
1934, as amended, (c) a "Change in Control" of the Corporation
shall be deemed to have occurred at such time as (i) any Person
is or becomes the Beneficial Owner, directly or indirectly, of
30% or more of the outstanding Common Stock or (ii) individuals
who constitute the Continuing Directors cease for any reason to
constitute at least a majority of the Board, (d) "Continuing
Director" means any member of the Board who is not affiliated
with an Acquiring Person and who was a member of the Board
immediately prior to the time that the Acquiring Person became an
Acquiring Person and any successor to a Continuing Director who
is not affiliated with the Acquiring Person and is recommended to
succeed a Continuing Director by a majority of Continuing
Directors who are then members of the Board, and (e) "Person"
means any individual, corporation, partnership, limited
partnership, association, joint-stock company, trust,
unincorporated organization, syndicate or group (as such
14
<PAGE>
terms are used in Section 13d-3 adopted pursuant to the
Securities Exchange Act of 1934, as amended) or government or
political subdivision thereof.
On or before the seventh day after the termination of the
Approval Period, the Corporation shall mail to all holders of
record of the $3.50 Preferred Stock as of the last day of the
Approval Period, at their respective addresses as the same shall
appear on the books of the Corporation as of such date, a notice
disclosing (i) the Change in Control, (ii) whether or not the
Continuing Directors have approved the Change in Control, and
(iii) if the Continuing Directors have not approved the Change in
Control, the respective dates on which the Exercise Period
commences and ends, the redemption price per share of the $3.50
Preferred Stock applicable hereunder and the procedure which the
holder must follow to exercise the redemption right provided
above. The Corporation shall cause a copy of such notice to be
published in a newspaper of general circulation in the Borough of
Manhattan, New York. To exercise such redemption right, a holder
of the $3.50 Preferred Stock must deliver during the Exercise
Period written notice to the Corporation (or an agent designated
by the Corporation for such purpose) of the holder's exercise of
such redemption right, and, to be valid, any such notice of
exercise must be accompanied by each certificate evidencing
shares of the $3.50 Preferred Stock with respect to which the
redemption right is being exercised, duly endorsed for transfer.
On or prior to the seventh day after the close of the Exercise
Period, the Corporation shall accept for payment all shares of
$3.50 Preferred Stock properly surrendered to the Corporation (or
an agent designated by the Corporation for such purpose) during
the Exercise Period for redemption in
15
<PAGE>
connection with the valid exercise of such redemption right and
shall cause payment to be made in cash for such shares of $3.50
Preferred Stock.
(ix) For the purposes of this resolution, any stock of any class or
classes of the Corporation shall be deemed to rank:
(a) prior to shares of the $3.50 Preferred Stock, either as to
dividends or upon liquidation, if the holders of stock of such class or classes
shall be entitled by the terms thereof to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the case may be,
in preference or priority to the holders of shares of the $3.50 Preferred Stock;
(b) on a parity with shares of the $3.50 Preferred Stock, either as to
dividends or upon liquidation, whether or not the dividend rates, dividend
payment dates or redemption or liquidation prices per share thereof be different
from those of the $3.50 Preferred Stock, if the holders of stock of such class
or classes shall be entitled by the terms thereof to the receipt of dividends or
of amounts distributable upon liquidation, dissolution or winding up, as the
case may be, in proportion to their respective dividend rates or liquidation
prices, without preference or priority of one over the other as between the
holders of such stock and the holders of shares of $3.50 Preferred Stock (the
term "Parity Preferred Stock" being used to refer to any stock on a parity with
the shares of $3.50 Preferred Stock, either as to dividends or upon liquidation
as the context may require); and
(c) junior to shares of the $3.50 Preferred Stock, either as to
dividends or upon liquidation, if such class shall be Common Stock or if the
holders of the $3.50 Preferred Stock shall be entitled to the receipt of
dividends or of amounts distributable upon liquidation, dissolution or winding
up, as the case may be, in preference or priority to the holders of stock of
such class or classes.
(x) The $3.50 Preferred Stock shall rank on a parity with the $2.21
Cumulative Preferred Stock, par
16
<PAGE>
value $1 per share, of the Corporation and the Cumulative Convertible Preferred
Stock, $4.75 Series, par value $1 per share, of the Corporation, in each case as
to dividends and upon liquidation. The $3.50 Preferred Stock shall rank prior
to the Series A Junior Participating Preferred Stock, par value $1 per share,
and all other shares of capital stock of the Corporation outstanding at the time
of issuance of the $3.50 Preferred Stock.
IN WITNESS WHEREOF, The Williams Companies, Inc. has caused this
Certificate to be made under the seal of the Corporation and signed by
________________, _____________________, and attested by ____________,
___________, this _____ day of ___________, 1995.
THE WILLIAMS COMPANIES, INC.
[SEAL]
Attest: By:
--------------------------------
- ------------------------------
17
<PAGE>
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December 12, 1994 (this
"Agreement"), by and between The Williams Companies, Inc., a Delaware
corporation ("Parent"), and Transco Energy Company, a Delaware corporation (the
"Company").
WHEREAS, Parent, WC Acquisition Corp. (the "Purchaser") and the
Company propose to enter into an Agreement and Plan of Merger, dated as of the
date hereof (the "Merger Agreement"), which provides, among other things, that
Parent, on the terms and subject to the conditions thereof, will make a cash
tender offer (the "Offer") to acquire up to 24,600,000 shares of the Company's
common stock, par value $0.50 per share (the "Common Stock"), together with the
attached Company Rights (as defined in the Merger Agreement), and thereafter the
Purchaser will be merged with and into the Company (the "Merger"); and
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Parent and the Purchaser have required that the Company agree, and
the Company has agreed, to grant to Parent an option to purchase from the
<PAGE>
Company up to 7,500,000 shares of Common Stock upon the terms and subject to the
conditions hereof.
NOW, THEREFORE, to induce Parent and the Purchaser to enter into the
Merger Agreement, and in consideration of the mutual covenants and agreements
set forth therein and herein, the parties hereto agree as follows:
1. Grant of Option. The Company hereby grants to Parent an
---------------
irrevocable option (the "Option") to purchase up to 7,500,000 shares of Common
Stock (the "Option Shares") in the manner set forth below at a price of $17.50
per share (the "Purchase Price").
2. Exercise of Option.
------------------
(a) The Option may be exercised by Parent, in whole or in part, at
any time or from time to time following the occurrence of a Triggering Event (as
defined below) and prior to the fifteenth business day after termination of the
Merger Agreement (the "Expiration Date") provided that Parent or the Purchaser
are not in material breach of the Merger Agreement.
(b) In order to exercise the Option, Parent must send a written
notice (an "Exercise Notice") to the Company specifying the number of Option
Shares it will purchase and a date not earlier than five business days nor later
than fifteen business days from the date
2
<PAGE>
such notice is given for the closing of such purchase (an "Option Closing").
Upon receipt of an Exercise Notice, the Company will, subject to Section 5
hereof, be obligated to deliver Option Shares in accordance with Section 3 of
this Agreement, and Parent will be obligated to deliver the Purchase Price, on
the later of the date specified in the Exercise Notice or the first business day
thereafter on which the following conditions are satisfied: (a) no preliminary
or permanent injunction or other order against the delivery of the Option Shares
issued by any federal or state court of competent jurisdiction in the United
States is in effect; and (b) any applicable waiting period under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the
rules and regulations promulgated thereunder have expired or been terminated.
Each Option Closing will be held at the offices of Skadden, Arps, Slate, Meagher
& Flom, 919 Third Avenue, New York, New York 10022 on the date specified in the
Exercise Notice, unless another date or place is agreed to in writing by the
parties hereto.
(c) The term "Triggering Event" will mean the occurrence of any of
the following events: (i) the Company accepts a proposal for or otherwise
engages in
3
<PAGE>
any Acquisition Transaction (as defined in the Merger Agreement) other than the
Offer or the Merger; (ii) the Board of Directors of the Company withdraws,
amends or modifies in a manner adverse to Parent its favorable recommendation of
the Offer or the Merger; or (iii) (x) any person publicly proposes an
Acquisition Transaction and (y) the Offer has expired in accordance with its
terms and the Merger Agreement and the Minimum Condition (as defined in the
Merger Agreement) fails to be satisfied; provided, however, that no Triggering
Event will occur if Parent or the Purchaser are in material breach of the Merger
Agreement.
3. Payment of Purchase Price and Delivery of Certificates. At each
------------------------------------------------------
Option Closing (a) against delivery of the Option Shares to be purchased free
and clear of all liens, claims, charges and encumbrances of any kind or nature
whatsoever, Parent will pay to the Company, by a certified or bank check payable
in immediately available funds to the Company or, at the Company's election, by
wire transfer of immediately available funds to an account specified by the
Company, an amount in cash equal to the product of the Purchase Price times the
number of the Option Shares purchased at such Option Closing, and (b) the
Company will deliver to Parent a
4
<PAGE>
certificate or certificates representing the number of Option Shares so
purchased in the denominations and in the name designated by Parent in its
Exercise Notice. In the event that Parent acquires any Option Shares and within
one year following the date of purchase disposes of such shares (other than to a
wholly-owned subsidiary of Parent) through a sale, exchange, transfer, merger or
otherwise, for an amount per share which exceeds the Purchase Price by more than
$2.00 (the "Option Cap"), Parent will promptly return to the Company the amount
of such excess and thereby effect an upward adjustment to the Purchase Price.
Parent will not sell or otherwise dispose of Option Shares except in compliance
with the Securities Act and any applicable state securities law.
4. Registration Rights. The Company will use its reasonable best
-------------------
efforts to effect, as promptly as possible after the request of Parent within
one year after the first Option Closing, the registration under the Securities
Act of 1933 (the "Securities Act") and any applicable states securities laws of
any part or all of the Option Shares, unless in the written opinion of counsel
to the Company, which opinion must reasonably be satisfactory to Parent,
registration under the Securities Act is not required for the sale and
distribution of such
5
<PAGE>
Option Shares at such time; provided, however, that Parent and its Affiliates
(as defined herein) will not be entitled to more than an aggregate of two
effective registration statements hereunder. The registration effected under
this Section 4 will be effected at the Company's expense except for underwriting
commissions and the fees and expenses of counsel to Parent. In the event of an
underwritten public offering, the Company will provide to the underwriters such
documentation (including certificates, opinions of counsel and "comfort" letters
from auditors) as are customary in connection with such offerings and as such
underwriters may reasonably require. In connection with the registrations under
this Section 4, the parties will indemnify each other in the customary manner
and, in the case of an underwritten offering, the Company will indemnify Parent
and the underwriters, in the manner and to the extent as is customary in such
underwritten offerings. The term "Affiliate" will have the meaning ascribed to
it in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as in effect on the date hereof (the term "registrant" in said
Rule 12b-2 meaning in this case the Company).
5. Cancellation Rights.
-------------------
6
<PAGE>
(a) Parent's Cancellation Right. At any time the Option is
---------------------------
exercisable, Parent will have the right, upon prior written notice (a "Parent
Cash-out Notice") to the Company specifying the date of the closing (the
"Cancellation Closing") thereof (which date will not be earlier than ten
business days nor later than twenty business days after the receipt by the
Company of such Parent Cash-out Notice), to cause the Company to pay to Parent
in consideration for the cancellation of all or that part of the Option to be
cancelled, an aggregate cash cancellation price (the "Cancellation Price") equal
to the product of (i) the number of shares of Common Stock as to which the
Option is to be cancelled, multiplied by (ii) the excess (but in no event more
than the Option Cap) of (x) the Applicable Price (as defined below) over (y) the
Purchase Price.
(b) Company's Cancellation Right. At any time after the Company
----------------------------
receives an Exercise Notice pursuant to Section 2(b), the Company will have the
right, upon prior written notice (a "Company Cash-out Notice" and, together with
any Parent Cash-out Notice, a "Cash-out Notice") to Parent not later than two
business days prior to the applicable Option Closing, specifying the date of the
Cancellation Closing thereof (which will not
7
<PAGE>
be earlier than five business days nor later than fifteen business days after
the receipt by Parent of the applicable Company Cash-out Notice), to pay to
Parent in consideration for the cancellation of all or that part of the Option
subject to such Exercise Notice, in lieu of delivering Option Shares, the
Cancellation Price with respect to the Option Shares subject to such Exercise
Notice.
(c) Cancellation Closing. At any Cancellation Closing, the Company
--------------------
will pay to Parent the Cancellation Price for the number of Option Shares as to
which the Option is to be cancelled, by certified or bank check payable in
immediately available funds or, at Parent's election, by wire transfer of
immediately available funds to an account specified by Parent in exchange for
the cancellation of such portion of the Option. The closing will be held at the
offices of Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, New York, New
York 10022 on the date specified in the applicable Cash-out Notice, unless
another date or place is agreed to in writing by the parties hereto.
(d) Definition. The "Applicable Price" will mean the average of the
----------
high and low sales prices (but in no event less than the Purchase Price) of the
shares of Common Stock as quoted on the New York Stock
8
<PAGE>
Exchange (the "NYSE"), or if not so quoted on the NYSE, then the average of the
high and low sales prices on the principal national securities exchange on which
such shares are listed, or if not so listed on any national securities exchange,
then the average of the high and low bid prices per share of Common Stock as
quoted on the National Association of Securities Dealers Automated Quotations
System, on the day prior to the date of the applicable Parent Cash-out Notice or
the applicable Exercise Notice, as the case may be (the "Measurement Date");
provided, however, that if any person has entered into an agreement with the
Company for an Acquisition Transaction, or an Acquisition Transaction has
otherwise been proposed, prior to the delivery of the applicable Cash-out
Notice, the Applicable Price shall mean the average consideration proposed to be
payable per outstanding share of Common Stock pursuant to such Acquisition
Transaction (or, if there is more than one such Acquisition Transaction,
pursuant to the Acquisition Transaction which yields the greater average
consideration) valued as of the Measurement Date (with any non-marketable
securities included in such consideration being valued at the fair market value
per share of such securities with such fair market value to be determined
9
<PAGE>
in good faith by an independent investment banking firm selected by the Company
and Parent).
6. Anti-Dilution Adjustments. In the event of any change in the
-------------------------
number of issued and outstanding shares of Common Stock by reason of any stock
dividend, split-up, combination, recapitalization, merger or similar change in
the corporate or capital structure of the Company which would have the effect of
diluting the rights of Parent hereunder, the number and kind of Option Shares
subject to the Option, the Option Cap per share (but not the aggregate dollar
amount thereof) and the Purchase Price will be appropriately adjusted.
7. Filings and Consents. Parent and the Company each will use its
--------------------
reasonable best efforts to make all filings with, and to obtain consents of, all
third parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement.
8. Costs. Other than as provided in Section 4 of this Agreement,
-----
each party hereto will pay its own expenses incurred in connection with this
Agreement.
9. Parties in Interest; Assignment. No party to this Agreement may
-------------------------------
assign any of its rights or obligations under this Agreement without the prior
written
10
<PAGE>
consent of the other parties hereto, except that the rights and obligations of
Parent hereunder may be assigned by Parent to any direct or indirect wholly-
owned subsidiary of Parent, but no such transfer will relieve Parent of its
obligations hereunder if such transferee does not perform such obligations.
10. Amendments. This Agreement may not be modified, amended, altered
----------
or supplemented except upon the execution and delivery of a written agreement
executed by all of the parties hereto.
11. Notices. All notices, requests, claims, demands and other
-------
communications hereunder will be in writing and will be given (and will be
deemed to have been duly given if so given) in the manner provided in the Merger
Agreement for notices, or to such other address as any party may have furnished
to the others in writing in accordance herewith, except that notices of changes
of address will only be effective upon receipt.
12. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which will be deemed to be an original, but all of which
together shall constitute one and the same document.
13. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of
11
<PAGE>
the State of Delaware applicable to contracts made and to be performed in that
State. The Company and Parent (w) hereby submit to the jurisdiction of any
Delaware State and Federal courts sitting in Delaware with respect to matters
arising out of or relating hereto, (x) agree that all claims with respect to
matters may be heard and determined in an action or proceeding in such Delaware
State or Federal court and in no other court, (y) waive the defense of an
inconvenient forum, and (z) agree that a final judgment in any such action or
proceeding will be conclusive and may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by law.
14. Rights of Assignees; Third Party Beneficiaries. This Agreement
----------------------------------------------
will be binding upon, inure to the benefit of, and be enforceable by, the
successors and permitted assigns of the parties hereto. Nothing expressed or
referred to in this Agreement is intended or will be construed to give any
person other than the parties to this Agreement or their respective successors
or assigns any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision contained herein.
12
<PAGE>
15. Severability of Provisions. If any term, provision, covenant or
--------------------------
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement will remain in full force and
effect and will in no way be affected, impaired or invalidated.
16. Further Assurances. The Company and Parent will execute and
------------------
deliver all such further documents and instruments and take all such further
action as may be necessary in order to consummate the transactions contemplated
hereby.
17. Effect of Headings. The descriptive headings contained herein
------------------
are for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
13
<PAGE>
IN WITNESS WHEREOF, Parent and the Company have caused this Agreement
to be duly executed on the day and year first above written.
THE WILLIAMS COMPANIES, INC.
By:
---------------------------
TRANSCO ENERGY COMPANY
By:
----------------------------
14
<PAGE>
[LETTERHEAD TO COME]
December 16, 1994
Dear Transco Stockholders:
We are pleased to inform you that Transco Energy Company has entered into an
agreement with The Williams Companies, Inc. ("Williams") under which Williams
is commencing a tender offer to purchase up to 24,600,000 shares, or
approximately 60%, of Transco common stock and associated common stock purchase
rights at a price of $17.50 in cash per share and right. The tender offer is
conditioned upon, among other things, a minimum of 51% of Transco's common
stock being validly tendered in the Williams offer and not withdrawn. Under the
agreement, the tender offer will be followed by a merger of a newly-formed
subsidiary of Williams into Transco in which each share of Transco common stock
not purchased in the tender offer will be converted into the right to receive
.625 shares of Williams common stock (or a combination of Williams common stock
and cash if fewer than 24,600,000 Transco shares (subject to a minimum of
20,900,000 Transco shares) are purchased in the tender offer).
We believe this transaction represents an exciting strategic combination. It
will create the nation's second largest natural gas pipeline system that serves
markets from the East Coast to the West Coast and accesses virtually every
major supply area. Williams' strong balance sheet opens the door for capital
expansions on Transcontinental Gas Pipe Line Corporation's ("TGPL") and Texas
Gas Transmission Corporation's ("Texas Gas") systems. It also provides TGPL and
Texas Gas customers with access to Mid-Continent gas supplies in the gas-rich
Anadarko and Arkoma Basins.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE WILLIAMS TENDER OFFER AND THE
MERGER, TAKEN TOGETHER, ARE FAIR TO AND IN THE BEST INTERESTS OF TRANSCO AND
ITS STOCKHOLDERS AND RECOMMENDS THAT TRANSCO COMMON STOCKHOLDERS TENDER THEIR
SHARES PURSUANT TO THE WILLIAMS OFFER.
In arriving at its decision, the Board of Directors gave careful
consideration to a number of factors described in the attached Schedule 14D-9
that is being filed today with the Securities and Exchange Commission. Among
other things, the Board considered the opinion of Merrill Lynch, Pierce, Fenner
& Smith Incorporated, its financial advisor, that, as of the date of the
opinion, the consideration to be received by Transco's stockholders (other than
Williams and its affiliates) pursuant to the tender offer and the merger, taken
as a whole, is fair to such stockholders from a financial point of view.
Accompanying this letter, in addition to the attached Schedule 14D-9 relating
to the tender offer, are Williams' Offer to Purchase, dated December 16, 1994,
and a related Letter of Transmittal. These documents set forth the terms and
conditions of Williams tender offer and the merger and should be reviewed
carefully by stockholders.
On behalf of the Board of Directors,
/s/ John P. DesBarres
John P. DesBarres
Chairman of the Board, President and
Chief Executive Officer
<PAGE>
[Letterhead of Merrill Lynch, Pierce, Fenner & Smith Incorporated]
December 11, 1994
Board of Directors
Transco Energy Company
2800 Post Oak Blvd., 21st Floor
Houston, Texas 77056
Ladies and Gentlemen:
Transco Energy Company (the "Company"), The Williams Companies, Inc. (the
"Acquiror") and WC Acquisition Corp., a wholly owned subsidiary of the Acquiror
(the "Acquisition Sub"), propose to enter into an Agreement and Plan of Merger
(the "Agreement") pursuant to which the Acquiror will make a tender offer (the
"Offer") for up to 60% of the outstanding shares of the Company's common stock,
par value $0.50 per share (the "Shares"), and attached Company Rights, at $17.50
per Share (and attached Company Right), net to the seller in cash, subject to
certain conditions, including the Minimum Condition that at least 51% of the
outstanding Shares have been validly tendered and not withdrawn. The Offer is
expected to commence on December 16, 1994. The Agreement also provides that,
following consummation of the Offer, Acquisition Sub will be merged with and
into the Company in a transaction (the "Merger") in which (i) each remaining
Share will be converted into the right to receive the Conversion Number of
shares of common stock, $1.00 par value, of the Acquiror (the "Acquiror
Shares"), together with one-half of the Conversion Number of an attached Parent
Right, and cash, if any, in the amount of the Per Share Cash Amount, (ii) each
outstanding share of Cumulative Convertible Preferred Stock, $4.75 Series, of
the Company (the "Company $4.75 Preferred Stock") will be converted into one
share of $4.75 Series Cumulative Convertible Preferred Stock of Acquiror (the
"Acquiror $4.75 Preferred Stock") initially convertible into 0.5588 of an
Acquiror Share and (iii) each outstanding share of Cumulative Convertible
Preferred Stock, $3.50 Series, of the Company (the "Company $3.50 Preferred
Stock" and, together with the Company $4.75 Preferred Stock, the "Company
Preferred Stock") will be converted into one share of $3.50 Series Cumulative
Convertible Preferred Stock of Acquiror (the "Acquiror $3.50 Preferred Stock")
initially convertible into 1.5625 Acquiror Shares. In connection with the Offer
and the Merger, the Company also proposes to enter into a Stock Option Agreement
(the "Stock Option Agreement") with the Acquiror pursuant to which the Company
will grant Acquiror an option to purchase up to 7,500,000 Shares at an exercise
price of $ 17.50 per Share, representing approximately 15.5% of the total Shares
outstanding (assuming issuance of such 7,500,000 Shares), with respect to which
the
<PAGE>
Company may, upon exercise thereof, elect to cancel the option in lieu of
delivering Shares by making a cash payment to the Acquiror in an amount not to
exceed $2.00 per option Share. Capitalized terms used herein without definition
are defined in the Agreement and are used herein with the meanings ascribed to
such terms in the Agreement.
You have asked us whether, in our opinion, the proposed consideration to be
received by the holders of the Shares and the Company Preferred Stock other than
the Acquiror and its affiliates in the Offer and the Merger, taken as a whole,
is fair to such stockholders from a financial point of view as of the date
hereof.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Company's Annual Reports, Forms 10-K and related
financial information for the five fiscal years ended December 31,
1993, the Company's Forms 10-Q and the related unaudited financial
information for the quarterly periods ending March 31, 1994, June 30,
1994 and September 30, 1994, and the Company's Forms 8-K dated
September 23, 1992, July 6, 1993, July 14, 1993, October 25, 1993 and
April 7, 1994;
(2) Reviewed the Acquiror's Annual Reports, Forms 10-K and related
financial information for the five fiscal years ended December 31,
1993, the Acquiror's Forms 10-Q and the related unaudited financial
information for the quarterly periods ending March 31, 1994, June 30,
1994 and September 30, 1994, and the Acquiror's Form 8-K dated August
22, 1994;
(3) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of the
Company and the Acquiror, furnished to us by the Company and the
Acquiror, respectively;
(4) Conducted discussions with members of senior management of the Company
and the Acquiror concerning their respective businesses, assets,
liabilities and prospects;
(5) Reviewed the historical market prices and trading activity for the
Shares and compared them with that of certain publicly traded
companies which we deemed to be reasonably similar to the Company, and
reviewed certain market prices and trading activity for the Company
Preferred Stock;
2
<PAGE>
(6) Reviewed the historical market prices and trading activity for the
Acquiror Shares and compared them with that of certain publicly traded
companies which we deemed to be reasonably similar to the Acquiror,
and reviewed the Acquiror's stock repurchase program and its effect on
the historical market prices and trading activity for the Acquiror
Shares;
(7) Compared the results of operations of the Company and the Acquiror
with that of certain companies which we deemed to be reasonably
similar to the Company and the Acquiror, respectively;
(8) Compared the proposed financial terms of the transactions contemplated
by the Agreement with the financial terms of certain other mergers and
acquisitions which we deemed to be relevant;
(9) Reviewed a draft of the Agreement dated December 11, 1994, including
the forms of Certificate of Designation, Preferences and Rights of the
Acquiror $4.75 Preferred Stock and the Acquiror $3.50 Preferred Stock
attached as exhibits thereto;
(10) Reviewed a draft of the Stock Option Agreement dated December 11,
1994; and
(11) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary, including our assessment of general economic, market
and monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness
of all information supplied or otherwise made available to us by the Company and
the Acquiror, and we have not independently verified such information or
undertaken an independent appraisal of the assets of the Company or the
Acquiror. With respect to the financial forecasts furnished by the Company and
the Acquiror, we have assumed that they have been reasonably prepared and
reflect the best currently available estimates and judgment of the Company's or
the Acquiror's management as to the expected future financial performance of the
Company or the Acquiror, as the case may be. We have also assumed that the
final forms of the Agreement and the Stock Option Agreement will not differ in
any material respect from the draft forms of Agreement and Stock Option
Agreement reviewed by us.
In connection with the transactions contemplated by the Agreement, we have
not been requested by the Company or the Board of Directors to solicit, nor have
we solicited, third-party indications of interest for the acquisition of all or
any part of the Company.
3
<PAGE>
We have, in the past, provided financial advisory and financing services to
the Company and have received fees for the rendering of such services. In the
ordinary course of business, we engage in trading the securities of the Company
and the Acquiror for our own account and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in such securities.
On the basis of, and subject to, the foregoing, we are of the opinion that,
as of the date hereof, the proposed consideration to be received by the holders
of the Shares and the Company Preferred Stock other than the Acquiror and its
affiliates pursuant to the Offer and the Merger, taken as a whole, is fair to
such stockholders from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/Richard K. Gordon
--------------------------------
Richard K. Gordon
Vice Chairman
Investment Banking Group
Merrill Lynch & Co.
4
<PAGE>
NEWS NR94-92
- --------------------------------------------------------------------------------
Media Inquiries: Katherine K. Putnam
(713)439-2455
Analyst Inquiries: Molly E. Ladd
(713)439-2592
THE WILLIAMS COMPANIES AND TRANSCO ANNOUNCE MERGER AGREEMENT
HOUSTON (Dec. 12, 1994) -- The Williams Companies, Inc. and Transco Energy
Company announced today that they have entered into a merger agreement. Under
the agreement, Williams will make a cash tender offer to acquire up to 24.6
million shares, or 60 percent, of Transco's common stock and related common
stock purchase rights for $17.50 per share and right. The cash tender offer will
be followed by a stock merger in which shares of Transco common stock not
purchased in the tender offer will be exchanged for 0.625 shares of Williams'
common stock. The merger agreement has been approved by Williams' board of
directors and by Transco's board of directors.
The total value of the cash tender offer and merger, including the exchange of
new series of Williams convertible preferred stock for Transco's two outstanding
series of convertible preferred stock and including Transco's outstanding
indebtedness is estimated at $3.0 billion. At $17.50 per Transco common share,
the cash tender offer represents a 38.6 percent premium to the closing price of
Transco's common stock on Friday Dec. 9, 1994.
Under the agreement, Williams will begin the cash tender offer on Friday, Dec.
16, which will expire at midnight, Eastern Standard Time, On Jan. 17, 1995,
unless extended by Williams. The tender offer will be conditioned on, among
other things, the tender of no fewer than 20,900,000 shares, or 51 percent of
Transco's common stock, expiration of Hart-Scott-Rodino Act waiting period, and
other customary conditions. Following completion of the tender offer, a newly
formed subsidiary of Williams will be merged into Transco, with Transco
continuing as a wholly owned subsidiary of The Williams Companies.
-more-
- --------------------------------------------------------------------------------
<PAGE>
-2-
In the merger, outstanding shares of Transco $4.75 Cumulative Convertible
Preferred Stock would be converted into the right to receive an equal number of
shares of a new series of Williams $4.75 Cumulative Convertible Preferred Stock
convertible into .5588 Williams common shares and otherwise having substantially
equivalent rights. Also in the merger, Transco $3.50 Cumulative Convertible
Preferred Stock would be converted into the right to receive an equal number of
shares of a new series of Williams $3.50 Cumulative Convertible Preferred Stock
convertible into 1.5625 Williams common shares and otherwise having
substantially equivalent rights.
In the event that more than 24.6 million shares are validly tendered, and not
withdrawn, and shares are accepted for payment by Williams, shares purchased
will be subject to proration in accordance with applicable law. As part of the
transaction, Williams and Transco have entered into a stock option agreement
providing for a grant of an option to Williams to purchase following the
occurrence of specified events, at $17.50 per share, up to 7.5 million
additional shares of Transco common stock. If Williams exercises the stock
option, Transco has the right, in lien of delivering Transco common shares, to
cancel the option for a cash payment not to exceed $2 per option share. Transco
has also agreed under certain circumstances to reimburse Williams for its
expenses, subject to a maximum limitation.
Merrill Lynch & Co. represented Transco in the transaction. Smith Barney, Inc.
represented Williams in the transaction and will act as dealer manager in the
cash tender offer. No soliciting dealer fees will be paid. Neither this news
release nor the offer constitutes an offer to sell or a solicitation of an offer
to buy any securities. Any offer may only be made by means of a prospectus.
Transco, listed on the New York Stock Exchange under the symbol E, owns and
operates TGPL, Texas Gas and Transco Gas Marketing Company (TGMC). Transco also
has investments in other energy assets.
<PAGE>
-3-
TGPL, headquartered in Houston, owns and operates 10,500 miles of pipeline
extending from the Gulf of Mexico through the South and along the Eastern
Seaboard to New York City. Its primary customers are natural gas and electric
utility companies in the East and Northeast.
Texas Gas, headquartered in Owensboro, Ky., owns and operates 6,100 miles of
pipeline extending from the Louisiana Gulf Coast up the Mississippi River Valley
to Indiana and Ohio. In addition to serving markets in this area, Texas Gas also
serves the Northeast through connections with other pipelines.
TGMC buys, sells and arranges transportation for natural gas primarily in the
eastern and midwestern United States and Gulf Coast region, processes natural
gas and sells natural gas liquids.
Williams, listed on the NYSE under the symbol WMB, owns and operates: Northwest
Pipeline Corporation, a 3,900-mile interstate natural gas pipeline system
serving the Pacific Northwest; Williams Natural Gas Company, a 6,200-mile
interstate natural gas pipeline serving the heart of the U.S.; Williams Pipe
Line Company, an 8,800-mile interstate petroleum products pipeline system
serving 11 central U.S. states; Williams Field Services Group, which gathers and
processes natural gas, primarily in the western U.S.; Williams Energy Ventures,
which provides a broad range of financial and information-based services to the
energy industry and develops new investment opportunities; WilTel, a national
telecommunications company that specializes in serving businesses; and 50
percent interest in Kern River Gas Transmission Company, a 930-mile interstate
natural gas pipeline system linking southwestern Wyoming with southern
California.
###
At Williams, contact: Media Inquiries: Jim Gipson (918) 588-2111
Analyst Inquiries: Linda Lawson (918) 588-2087
<PAGE>
[MAP APPEARS HERE]
<PAGE>
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT, made and entered into effective as of December
11, 1994 (the "Agreement"), is by and between TRANSCO ENERGY COMPANY, a Delaware
corporation (the "Company"), and NICHOLAS J. NEUHAUSEL (the "Employee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Employee has rendered outstanding service to the Company and
Employee's experience and knowledge of the affairs of the Company, and his
reputation and contacts are extremely valuable to the Company; and
WHEREAS, in recognition of Employee's service to the Company and as an
inducement to Employee to continue in the employ of the Company, the Company has
offered Employee, among other things, this Agreement, and Employee has accepted
the Company's offer;
NOW, THEREFORE, for and in consideration of the premises and mutual
covenants and agreements herein contained, the Company and Employee hereby agree
as follows:
1. Term. This Agreement shall commence on the date hereof and shall
----
continue until December 31, 1996; provided, however, that commencing on January
1, 1994 and on each January 1st thereafter, the term of this Agreement shall
automatically be extended for one additional year unless at least 90 days prior
to such January 1st date, the Company shall have given written notice to
Employee of the Company's election that this Agreement shall terminate on the
December 31 next following the January 1st in respect of which such notice is
given; and provided further, that this Agreement shall automatically terminate
in all events on the earlier of Employee's death or 65th birthday if it has not
been earlier terminated as provided above. Notwithstanding the foregoing
however, termination of this Agreement after a Change in Control (as defined
below in Section 8) shall not alter or impair the rights of Employee arising
hereunder as a consequence of such Change in Control.
2. Termination of Employment Following a Change in Control. If a Change
-------------------------------------------------------
in Control occurs while Employee is employed by the Company, Employee shall be
entitled to the benefits specified in Section 3(iii) and 4 hereof if during the
Agreement Period (as defined below) Employee's employment is terminated (whether
before or after the termination of the
<PAGE>
Agreement as provided in Section 1), unless such termination is (a) due to
Employee's death, (b) by the Company for Cause or Employee's Disability or (c)
by Employee for other than Good Reason and without the consent of the Company's
Board of Directors, in which event Employee shall not be entitled to any
benefits under this Agreement except as specified in Sections 3(i) and 3(ii)
hereof. For purposes of this Agreement, the "Agreement Period" shall mean the
period of time beginning with the Change in Control and ending on the earlier to
occur of Employee's 65th birthday or the third anniversary of such Change in
Control. If the Employee's employment with the Company terminates prior to the
date on which a Change in Control occurs, and if it is reasonably demonstrated
by the Employee (i) that such termination of employment by the Company was at
the request of a third party who has taken steps reasonably calculated to effect
a Change in Control (a "Third Party") or otherwise arose in connection with or
anticipation of a Change in Control or (ii) that such termination of employment
by the Employee was under circumstances which would have constituted Good Reason
if the circumstances arose after a Change in Control and either such
circumstances were created at the request of a Third Party or such circumstances
arose in connection with or anticipation of a Change in Control, then for all
purposes of this Agreement the Change in Control shall be deemed to have
occurred, and thus the Agreement Period shall be deemed to have commenced, on
the date immediately prior to the date of such termination of employment.
(i) Disability. If, as a result of Employee's incapacity due to
physical or mental illness, Employee shall have been absent from Employee's
duties with the Company on a full-time basis for 150 consecutive calendar days,
and within 30 days after written Notice of Termination (as defined hereinafter)
Employee shall not have returned to the full-time performance of Employee's
duties, the Company may terminate Employee's employment for "Disability";
provided, however, a termination of Employee's employment for Disability for
purposes of this Agreement shall not alter or impair Employee's rights as a
"disabled employee" under any of the Company's employee benefit plans.
(ii) Cause. The Company may terminate Employee's employment for
Cause. For the purposes of this Agreement, the Company shall have "Cause" to
terminate Employee's employment hereunder only upon (A) the willful and
continued failure by Employee to perform substantially Employee's duties with
the Company, other than any such failure resulting from Employee's incapacity
due to physical or mental illness, which failure continues unabated after a
-2-
<PAGE>
demand for substantial performance is delivered to Employee by the Company's
Board of Directors that specifically identified the manner in which such Board
of Directors believes that Employee has not substantially performed Employee's
duties or (B) Employee willfully engages in gross misconduct materially and
demonstrably injurious to the Company. For purposes of this paragraph, an act
or failure to act on Employee's part shall be considered "willful" if done or
omitted to be done by Employee otherwise than in good faith and without
reasonable belief that Employee's action or omission was in the best interest of
the Company. Notwithstanding the foregoing, Employee shall not be deemed to
have been terminated by the Company for Cause unless and until the Company shall
have delivered to Employee a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Company's Board of Directors, at a meeting of the Company's Board of Directors
called and held for the purpose (after reasonable notice to Employee and an
opportunity for Employee, together with Employee's counsel, to be heard before
the Company's Board of Directors), finding that in the good faith opinion of the
Company's Board of Directors Employee was guilty of conduct set forth in clauses
(A) or (B) of the first sentence of this subsection (ii) and specifying the
particulars thereof in reasonable detail.
(iii) Good Reason. Employee may terminate Employee's employment for
Good Reason. For purposes of this Agreement "Good Reason" shall mean any of the
following:
(A) Employee is assigned any duties inconsistent with Employee's
positions, duties, responsibilities and status with the Company immediately
prior to a Change in Control, or Employee's reporting responsibilities, titles
or offices are changed from those in effect immediately prior to such Change in
Control, or Employee is removed from or is not re-elected or appointed to any of
such responsibilities, titles, offices or positions, except in each case in
connection with the termination of Employee's employment for Cause, or
Disability, or as a result of Employee's death, or by Employee for other than
Good Reason and excluding an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by Employee;
(3) Employee's annual rate of base salary is reduced from that
in effect immediately prior to a Change in Control or as the same may be
increased from
-3-
<PAGE>
time to time thereafter (such annual rate of base salary, as so increased (if
applicable) but prior to such reduction is referred to hereinafter as the "Base
Salary";
(C) the Company fails to continue the Company's Incentive Compensation
Plan as the same may be modified from time to time, but substantially in the
form in effect as of the date of this Agreement (the "Incentive Compensation
Plan"), or fails to continue Employee as a participant in the Incentive
Compensation Plan, or reduces Employee's annual grant guideline of his Base
Salary ("Incentive Percentage") under the Incentive Compensation Plan from that
in effect immediately prior to a Change in Control or as increased thereafter
with respect to Employee;
(D) the Company's principal executive offices are relocated to a location
outside the greater Houston area, or the Company requires Employee to relocate
anywhere other than the location of the Company's principal executive offices
except for required travel on the Company's business to an extent substantially
consistent with Employee's past business travel obligations to the Company, or,
in the event Employee consents to any such relocation of the Company's principal
executive offices, the Company fails to pay or reimburse Employee for all
reasonable moving expenses incurred by Employee relating to a change of
Employee's principal residence in connection with such relocation and to
indemnify Employee against any loss (defined as the difference between the
actual sale price of such residence and the fair market value of such residence
as determined by a member of the Society of Real Estate Appraisers designated by
Employee and reasonably satisfactory to the Company) realized on the sale of
Employee's principal residence in connection with any such change of residence;
(E) the Company fails to continue in effect any benefit or compensation
plan, including, but not limited to, the Company's 1991 Incentive Plan,
retirement plan, supplemental retirement plan, thrift plan, life insurance plan,
health and accident plan, sick leave policy and/or disability plan, in which
Employee is participating immediately prior to a Change in Control (provided,
however, a failure to continue the Tran$tock plan after all shares in the
suspense account thereunder have been released shall not be a failure to
continue a plan
-4-
<PAGE>
for purposes of this subparagraph (E)), or plans providing Employee with
substantially similar benefits, the Company takes any action that would
adversely affect Employee's participation in or reduce Employee's benefits under
any of such plans or deprive Employee of any fringe benefit enjoyed by Employee
immediately prior to a Change in Control (excluding any such action by the
Company which is required by law), or the Company fails to provide Employee with
the number of paid vacation days to which Employee is then entitled in
accordance with the Company's normal vacation policy in effect immediately prior
to a Change in Control;
(F) the Company fails to obtain the assumption of the obligation to
perform this Agreement by any successor as contemplated in Section 6 hereof;
(G) any purported termination of Employee's employment by the Company that
is not effected pursuant to a Notice of Termination satisfying the requirements
of subparagraph (iv) below and, if applicable, the procedures described in
subparagraph (ii) above; and for purposes of this Agreement, no such purported
termination shall be effective;
(H) the amendment, modification or repeal of any provision of the Articles
of Incorporation or Bylaws of the Company that was in effect immediately prior
to such Change of Control, if such amendment, modification or repeal would
materially adversely affect Employee's rights to indemnification by the Company;
or
(I) the Company shall violate or breach any obligation of the Company in
effect immediately prior to such Change of Control, regardless whether such
obligation be set forth in the Bylaws of the Company and/or in a separate
agreement entered into between the Company and Employee, to indemnify Employee
against any claim, loss, expense or liability sustained or incurred by Employee
by reason, in whole or in part, of the fact that Employee is or was an officer
or director of the Company.
(iv) Notice of Termination. Any termination by the Company pursuant to
subparagraphs (i) or (ii) above or by Employee pursuant to subparagraph (iii)
above shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice that shall indicate the specific termination provision in this Agreement
relied upon and
-5-
<PAGE>
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Employee's employment under the provision so
indicated.
(v) Date of Termination. "Date of Termination" shall mean (A) if
Employee is terminated for Disability, 30 days after Notice of Termination is
given, provided that Employee shall not have returned to the performance of
Employee's duties on a full-time basis during such 30-day period, (B) if
Employee's employment is terminated pursuant to subparagraph (iii) above, the
date specified in the Notice of Termination and (C) if Employee's employment is
terminated for any other reason, the date on which a Notice of Termination is
given.
3. Compensation During Disability or Upon Termination.
--------------------------------------------------
(i) If during the Agreement Period Employee fails to perform
Employee's normal duties as a result of incapacity due to physical or mental
illness, Employee shall continue during the period of disability to receive
Employee's full Base Salary at the rate then in effect and any awards, deferred
and non-deferred, payable during such period of disability under the Incentive
Compensation Plan, less any amounts paid to Employee during such period of
disability pursuant to the Company's sick-leave program until Employee's
employment is terminated for Disability pursuant to Section 2(i) hereof. This
Section 3(i) shall not reduce or impair Employee's rights to terminate his
employment for Good Reason or with the consent of the Board of Directors of the
Company as otherwise provided herein.
(ii) If during the Agreement Period Employee's employment shall be
terminated for Cause, the Company shall pay Employee Employee's earned but
unpaid Base Salary through the Date of Termination at the rate in effect at the
time of Notice of Termination is given and the Company shall have no further
obligations to Employee under this Agreement, except those arising hereunder
prior to the Date of Termination.
(iii) If during the Agreement Period the Company shall terminate
Employee other than pursuant to Section 2(i) or 2(ii) hereof, or if during the
Agreement Period Employee shall terminate Employee's employment either for Good
Reason or with the consent of the Board of Directors of the Company, then,
subject to Section 4, the Company shall pay to Employee, in a single lump sum by
certified or bank cashier's check, the aggregate sum of the following amounts
specified in subparagraphs (A) through (F) below, and shall provide
-6-
<PAGE>
Employee the continued welfare benefits as provided in subparagraph (G) below:
(A) Employee's Base Salary for the period from the Date of
Termination through the third anniversary of the Date of Termination (such
period being the "Employment Period"), without reducing such amount to
present value;
(B) the sum of (x) an amount equal to the product of (i) the amount
determined under subparagraph (A) above and (ii) Employee's Incentive
Percentage under the Incentive Compensation Plan and (y) an amount equal to
the product of (i) Employee's Base Salary, (ii) Employee's Incentive
Percentage under the Incentive Compensation Plan and (iii) the quotient
obtained by dividing (I) the number of days in the current plan year under
the Incentive Compensation Plan which have elapsed on the Date of
Termination by (II) 365;
(C) an amount equal to that portion of Employee's Base Salary
earned, and vacation pay vested for the prior year and accrued for the
current year, in each case, to the Date of Termination but not paid, and
all other amounts previously deferred by Employee or earned but not paid as
of such date under all Company incentive or pay plans or programs;
(D) an amount equal to the product of (a) the value of all
outstanding Performance Units previously awarded Employee, with the value
of such Performance Units being determined on the basis that (i) all
Performance Periods relating to such Performance Units ended on the Date of
Termination and (ii) all performance objectives, including individual
percentages, if any, for all such Performance Periods were 100% achieved
and (b) a fraction, the numerator of which is equal to the number of days
that have elapsed during the applicable Performance Period as of the Date
of Termination and the denominator of which is equal to the total number of
days in such applicable Performance Period;
(E) an amount equal to the sum of (i) the product of (x) the sum of
(I) three and (II) the number of full months in the current plan year
which have elapsed on the Date of Termination divided by 12 and (y) the
employer-derived benefits allocated to Employee under the Company's
qualified and non-qualified individual and account balance plans, programs
or arrangements (collectively, the "DC Plans"), including, without
limitation, the Thrift Plan, Tran$tock and Benefits
-7-
<PAGE>
Restoration Plan (or any successor DC Plans in effect on the Date of
Termination), for the plan year ending immediately prior to or with the
Date of Termination, determined, if necessary, on the assumptions the
Employee was a participant in each such DC Plan for the entire period of
such prior plan year, was eligible for the maximum matching contributions
and otherwise participated to the maximum extent permitted under each such
DC Plan, and (ii) the amount of any employer-derived benefits allocated to
Employee under such DC Plans that are forfeited by Employee upon the Date
of Termination pursuant to the terms of such DC Plans;
(F) an amount equal to the difference between the present value on
the Date of Termination of (i) the retirement benefit that would have been
payable to Employee for his life under the Company's qualified and
nonqualified defined benefit plans, programs or arrangements (collectively,
the "DB Plans"), including, without limitation, the Retirement Plan and
Supplemental Retirement Agreement (or any successor DB Plans in effect on
the Date of Termination) in the form of a Normal Retirement Annuity (as
such terms are defined in the Company's Retirement Plan) beginning at age
65, had Employee been a fully vested participant under each such DB Plan
and remained a covered participant through the end of the Employment Period
and received his Base Salary and full Incentive Compensation under the
Incentive Compensation Plan for such period calculated using the Incentive
Percentage, and (ii) Employee's vested benefit (payable in the form of a
Normal Retirement Annuity beginning at age 65) accrued as of such Date
under the DB Plans; the determination of such present value amounts shall
be based on the methods and assumptions, including interest rate, set forth
in the Retirement Plan and in effect as of the Change in Control (or if
more favorable to the Employee, at any time thereafter) or, if none are set
forth therein, utilized thereunder by such plan's actuary in the most
recent valuation report for said plan; and
(G) the Company shall at all times maintain in full force and
effect for the continued benefit of Employee and his eligible dependents
during the Employment Period all group life, accidental death and
dismemberment, long-term disability and medical insurance benefits
available to Employee and his eligible dependents by virtue of being an
employee of the Company as of the Date of Termination, provided that
Employee's continued participation is possible under the general
-8-
<PAGE>
terms and provisions of such plans and programs (or any successor thereto),
and provided further, that Employee pays the regular active employee
contribution, if any, required by such programs in excess of the allowance
therefor under the Company's Beneflex Plan (or any successor thereto). In
the event that participation by Employee in any such plan or program after
the Date of Termination is barred pursuant to the terms thereof, the
Company shall obtain comparable coverage under individual policies with
Employee paying an amount of the premium in excess of the allowance
therefor under the Company's Beneflex Plan (or any successor thereto) not
greater than that which he would have paid under the Company's group
program for active employees and in any event at the end of the Employment
Period (except as provided below with respect to COBRA benefits, if elected
by Employee), the Company shall arrange to make available to Employee and
his eligible dependents comparable insurance coverage by enabling Employee
to convert his coverage under the group plans or programs to an individual
policy for the benefit of Employee and his eligible dependents, or to
assume any individual policies, with Employee paying the full premiums
after the end of the Employment Period; provided, however, if Employee
retires on the Date of Termination, Employee's participation shall continue
in such group plans and programs to the extent such group plans and
programs provide benefits for retirees; provided further, however, nothing
in this subparagraph (G) shall operate to reduce, or be construed as
reducing, Employee's (or a beneficiary's) group health plan continuation
rights under COBRA in any manner and upon the end of the Employment Period
Employee (or his beneficiary(ies)) will be entitled to elect COBRA
continuation coverage for the full 18-, 29- or 36-month period, whichever
may be applicable, and at the end of such COBRA continuation period, if
elected, the Company shall arrange to make available to Employee and his
eligible dependents comparable health insurance coverage by enabling
Employee to convert his coverage under the group plans or programs to an
individual policy for the benefit of Employee and his eligible dependents,
or to assume any individual policies, with Employee paying the full
premiums after the end of the COBRA continuation period. Notwithstanding
anything therein to the contrary, in the event Employee is taxable on any
health benefits received under a Company plan, the Company provided
coverage for Employee or his dependents under any such health plan or the
Company-paid premium for coverage under an individual policy obtained by
the Company, the
-9-
<PAGE>
Company shall "gross-up" the payments hereunder to Employee in the same
manner as provided in Section 4 below with respect to excess parachute
payments so that Employee's "net" benefit received under this subparagraph
(G) is not diminished by any such taxes that are imposed with respect to
the same or the Company's gross-up hereunder with respect to such taxes. In
the event Employee becomes covered by another employer's group plan or
programs during the Employment Period, the Company's plans or programs
shall be liable for benefits only to the extent such benefits are not
covered by the subsequent employer's plans or programs.
4. Cut-Back of Parachute Payments. (i) Notwithstanding any other
------------------------------
provisions of this Agreement, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the Employee
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise) (a "Payment") would be nondeductible by the
Company for Federal income tax purposes because of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), then the aggregate present value
of amounts payable or distributable to or for the benefit of the Employee
pursuant to this Agreement (such payments or distributions pursuant to this
Agreement are hereinafter referred to as ""Agreement Payments") shall be reduced
(but not below zero) to the Reduced Amount. The "Reduced Amount" shall be an
amount expressed in present value that maximizes the aggregate present value of
Plan Payments without causing any Payment to be nondeductible by the Company
because of Section 280G of the Code. For purposes of this Section 4, present
value shall be determined in accordance with Section 280G(d)(4) of the Code.
(ii) All determinations required to be made under this Section 4,
including without limitation the assumptions to be utilized in applying the
requirements of this Section 4, shall be made by an independent public
accounting firm with a national reputation that is selected by Employee (the
"Accounting Firm") which shall provide detailed supporting calculations both to
the Company and to Employee within 15 business days after the receipt of notice
from Employee that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the change
in control of the Company, Employee shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the
-10-
<PAGE>
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any such determination by the Accounting Firm
shall be binding upon the Company and the Employee. The Employee shall determine
which and how much of this Agreement Payments (or, at the election of the
Employee, other Payments) shall be eliminated or reduced consistent with the
requirements of this Section 4, provided that, if the Employee does not make
such determination within ten business days of the receipt of the calculations
made by the Accounting Firm, the Company shall elect which and how much of the
Plan Payments shall be eliminated or reduced consistent with the requirements of
this Section 4 and shall notify the Employee promptly of such election. Within
five business days thereafter, the Company shall pay to or distribute to or for
the benefit of the Employee such amounts as are then due to the Employee under
this Agreement.
(iii) As a result of the uncertainty in the application of Section
280G of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Plan Payments will have been made by the Company
that should not have been made ("Overpayment") or that additional Plan Payments
that will have not been made by the Company could have been made
("Underpayment"), in each case, consistent with the calculations required to be
made hereunder. In the event that the Accounting Firm determines that an
Overpayment has been made, any such Overpayment shall be treated for all
purposes as a loan to the Employee, which the Employee shall repay to the
Company together with interest at the applicable Federal rate provided for in
Section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Employee to the Company (or if paid by the Employee to the
Company shall be returned to the Employee) if and to the extent such payment
would not reduce the amount which is subject to taxation under Section 4999 of
the Code. In the event that the Accounting Firm determines that an Underpayment
has occurred, any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Employee together with interest at the applicable Federal
rate provided for in Section 7872(f)(2) of the Code.
5. Disputes and Expenses. If any contest or dispute (including,
---------------------
without limitation, in accordance with Section 19) shall arise under this
Agreement involving termination of Employee's employment with the Company or
involving the validity or enforceability of, or liability under, any provision
of this Agreement, then (regardless of the outcome thereof, unless it shall be
determined by a court of competent jurisdiction in a final, non-appealable
decision
-11-
<PAGE>
that Employee's employment was properly terminated for Cause within the meaning
of and in accordance with Section 2(ii) hereof), the Company shall reimburse
Employee, on a current basis, for all legal fees and expenses, if any, incurred
by Employee in connection with such contest or dispute, together with interest
in an amount equal to the base rate of Citibank, N.A., from time to time in
effect but in no event higher than the maximum legal rate permissible under
applicable law, such interest to accrue from the date such payment(s) become due
through the date of payment thereof.
6. Successors; Binding Agreement.
-----------------------------
(i) The Company will require any successor, whether direct
or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all of the business and/or assets of the Company, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent as the Company would have been required if no such succession had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle Employee to compensation from the Company in the same amount and
on the same terms as Employee would be entitled hereunder if Employee terminated
Employee's employment for Good Reason, except that for purposes of implementing
the foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid that executes and delivers the agreement provided for in
this Section 6 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
(ii) This Agreement shall inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Employee should die while any amounts would still be payable to Employee
hereunder if Employee had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
Employee's beneficiary.
7. Notice. For the purpose of this Agreement, notices and all other
------
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered or five days after deposit in the United
States mail, registered and return receipt requested, postage
-12-
<PAGE>
prepaid, addressed to the respective addresses set forth on the last page of
this Agreement, provided that all notices to the Company shall be directed to
the office of corporate secretary of the Company, with a copy to the Secretary
of the Company, or to such other address as either party shall have furnished to
the other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
8. Change in Control. For purposes of this Agreement, a Change in
-----------------
Control shall be deemed to have occurred upon, and shall mean:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) (a "Person"), of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 25% or more of either (i) the then outstanding shares of Common
Stock of the Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that the
following acquisitions shall not constitute a Change in Control: (w) any
acquisition directly from the Company (excluding an acquisition by virtue
of the exercise of a conversion privilege), (x) any acquisition by the
Company, (y) any acquisition by any employee benefit plan(s) (or related
trust(s)) sponsored or maintained by the Company or any corporation
controlled by the Company or (z) any acquisition by any corporation
pursuant to a reorganization, merger or consolidation, if, immediately
following such reorganization, merger or consolidation, the conditions
described in clauses (i), (ii) and (iii) of subsection (c) of this Section
8 are satisfied;
(b) Individuals who, as of the date hereof, constitute the
Company's Board of Directors (the "Incumbent Board"), cease for any reason
to constitute at least a majority of the Company's Board of Directors;
provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for
this purpose,
-13-
<PAGE>
any such individual whose initial assumption of office occurs as a result
of either (i) an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act),
or an actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Company's Board of Directors or (ii) a
plan or agreement to replace a majority of the members of the Company's
Board of Directors then comprising the Incumbent Board; or
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case unless, immediately
following such reorganization, merger or consolidation, (i) more than 60%
of, respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation
(including, without limitation, a corporation which as a result of such
transaction owns the Company through one or more subsidiaries) and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or consolidation, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding the Company, any employee
benefit plan(s) (or related trust(s)) of the Company and/or its
subsidiaries or such corporation resulting from such reorganization, merger
or consolidation and any Person beneficially owning, immediately prior to
such reorganization, merger or consolidation, directly or indirectly, 25%
or more of the Outstanding Company Common Stock or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization, merger
or consolidation or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors and (iii) at least a majority of the members of the
board of directors of the corporation
-14-
<PAGE>
resulting from such reorganization, merger or consolidation were members
of the Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger or consolidation.
(d) Approval by the stockholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company, other
than to a corporation, with respect to which immediately following such
sale or other disposition, (A) more than 60% of, respectively, the then
outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to
such sale or other disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding the Company and any employee benefit plan (or related trust) of
the Company and/or its subsidiaries or such corporation and any Person
beneficially owning, immediately prior to such sale or other disposition,
directly or indirectly, 25% or more of the Outstanding Company Common Stock
or Outstanding Company Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 25% or more of, respectively, the then
outstanding shares of common stock of such corporation or the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and (C) at least a
majority of the members of the board of directors of such corporation were
members of the Incumbent Board at the time of the execution of the initial
agreement or action of the Company's Board of Directors providing for such
sale or other disposition of assets of the Company.
9. Employment with Subsidiaries. Employment with the Company for
----------------------------
purposes of this Agreement includes employment with any corporation in which the
Company has a direct or indirect ownership interest of fifty percent (50%) or
more of the total combined voting power of all outstanding classes of stock, it
being understood that for purposes of Section
-15-
<PAGE>
2(iii)(A) hereof, "Good Reason" shall be construed to refer to each of the
Employee's positions, duties, responsibilities (reporting and other), status,
titles and offices with the Company and each of its subsidiaries.
10. Acceleration of Incentive Plan Awards. The Company and Employee
-------------------------------------
hereby agree that notwithstanding the terms of any award agreement to the
contrary, immediately upon a Change in Control all Options, SARs, Restricted
Stock (but not Restricted Stock Units or contingent shares), and other awards
(except Performance Units) (collectively, "Awards") granted to Employee pursuant
to the Transco Energy Company 1983 Incentive Plan, the Transco Energy Company
1991 Incentive Plan, or any successor or similar incentive award plan that are
outstanding and not fully vested, earned and/or payable pursuant to the terms of
the applicable award agreement or plan will vest in full and be immediately
exercisable by and/or payable to Employee, and any other restrictions on such
awards, including, without limitation, requirements concerning the achievement
of specific goals shall terminate; provided, however, that any such awards that
on the date of the Change in Control have been held for less than six months by
Employee shall vest in full, be earned and/or payable, as the case may be, as of
the date that they have been held for six months and any other restrictions on
such Awards shall lapse as of such date. This Section 10 shall be deemed to be
an amendment to each award agreement now existing or hereafter entered into
between the Company and Employee with respect to such plans, but a provision in
this Section 10 shall be given effect only to the extent such provision is not
contrary to or prohibited by the terms of the applicable plan.
11. Termination of Employment Before Change in Control. If, after a
--------------------------------------------------
public announcement by any Person of an intention to effectuate a Change in
Control and prior to the earlier of (i) the abandonment by such Person of such
intention to effectuate a Change in Control and (ii) the date a Change in
Control is effected by such Person, Employee terminates his employment without
the consent of the Board of Directors of the Company, then during the three-year
period following his termination of employment, Employee shall not, without the
written consent of the Board, directly or indirectly participate in the
management, or act as a consultant for or become an employee, of any business
that engages in substantial, direct competition with any material business
activity conducted by the Company or any of its subsidiaries at the time of
Employee's termination of employment with the Company. An abandonment of an
intention to effectuate a Change in Control shall be deemed to have occurred on
the
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<PAGE>
earliest to occur of the following dates, assuming no Change in Control has been
then effected: (i) the date of abandonment, (ii) the date of a public
announcement of abandonment, (iii) the date the Company's Board of Directors
determines that such intention has been abandoned and (iv) the date of the first
anniversary of the public announcement of an intention to effectuate a Change in
Control. If any restriction contained in this Section 11 is held to be
unenforceable by an arbitrator pursuant to Section 19 hereof, the arbitrator
shall be free to enforce a lesser restriction in its place, and the remaining
restrictions contained in this Section 11 shall remain fully in effect, and
shall be enforceable independently of each other.
12. Miscellaneous. No provisions of this Agreement may be modified,
-------------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by Employee and by the Chief Executive Officer or other
authorized officer of the Company. No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any condition or
provisions of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.
13. Validity. The interpretation, construction and performance of
--------
this Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of Texas without regard to the principle of conflicts
of laws. The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, each of which shall remain in full force and effect.
14. Amendment and Restatement of Prior Termination Agreement. The
--------------------------------------------------------
Company and Employee hereby agree that concurrently with the execution and
delivery of this Agreement, this Agreement shall operate and be construed as an
amendment and restatement of that certain Termination Agreement, dated May 12,
1988, as amended December 13, 1989, between the Company and Employee (the "Prior
Agreement"), and effective with such delivery the terms and provisions of the
Prior Agreement shall be superseded by the terms and provisions of this
Agreement.
15. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
-17-
<PAGE>
16. Certification of Amounts. The Company shall furnish Employee
------------------------
with a written certification from the Company's independent certified public
accountants as to the accuracy of all computations, including the facts, methods
and assumptions associated with such computation, made or required to be made in
determining the amount of any payment hereunder.
17. Descriptive Headings. Descriptive headings are for convenience
--------------------
only and shall not control or affect the meaning or construction of any
provision of this Agreement.
18. Corporate Approval. This Agreement has been approved by the
------------------
Company's Board of Directors, and has been duly executed and delivered by
Employee and on behalf of the Company by its duly authorized representative.
19. Arbitration. Any dispute or controversy arising out of or in
-----------
connection with this Agreement as to the existence, construction, validity,
interpretation or meaning, performance, non-performance, enforcement, operation,
breach, continuance or termination thereof shall be submitted to arbitration
pursuant to the following procedure:
(a) Either party may demand such arbitration in writing after
the controversy arises, which demand shall include the name of the
arbitrator appointed by the party demanding arbitration, together with a
statement of the matter in controversy.
(b) Within 15 days after such demand, the other party shall
name an arbitrator, or in default thereof, such arbitrator shall be named
by the Arbitration Committee of the American Arbitration Association, and
the two arbitrators so selected shall name a third arbitrator within 15
days or, in lieu of such agreement on a third arbitrator by the two
arbitrators so appointed, a third arbitrator shall be appointed by the
Arbitration Committee of the American Arbitration Association.
(c) The Company shall bear all arbitration costs and expenses.
(d) The arbitration hearing shall be held at a site in Houston,
Texas, to be agreed to by a majority of the arbitrators on 10 days' written
notice to the parties.
-18-
<PAGE>
(e) The arbitration hearing shall be concluded within 10 days
unless otherwise ordered by a majority of the arbitrators, and the award
thereon shall be made within 10 days after the close of the submission of
evidence. An award rendered by a majority of the arbitrators appointed
pursuant to this Agreement shall be final and binding on all parties to the
proceeding during the period of this Agreement, and judgment on such award
may be entered by either party in the highest court, state or federal,
having jurisdiction; provided, however, that Employee shall be entitled to
specific performance of Employee's right to be paid during the pendency of
any dispute or controversy arising under or in connection with this
Agreement.
The parties stipulate that the provisions hereof shall be a complete
defense to any suit, action or proceeding instituted in any federal, state, or
local court or before any administrative tribunal with respect to any
controversy or dispute arising during the period of this Agreement and which is
arbitrable as herein set forth. The arbitration provisions hereof shall, with
respect to such controversy or dispute, survive the termination of this
Agreement.
Notwithstanding the pendency of any dispute or controversy pursuant to
this Section 19, the Company will continue to pay Employee Employee's full
compensation in effect when the notice giving rise to the dispute was given and
continue Employee as a participant in all compensation, benefit and insurance
plans in which Employee was participating when the notice giving rise to the
dispute was given, until the dispute is finally resolved. Amounts paid under
this Section 19 are in addition to all other amounts due under this Agreement
and shall not be offset against or reduce any other amounts due under this
Agreement.
IN WITNESS WHEREOF, the Company and Employee have entered into this
Agreement as of the day and year first above written.
TRANSCO ENERGY COMPANY
By: /s/ John P. DesBarres
----------------------------
Name:
--------------------------
Title:
-------------------------
-19-
<PAGE>
NICHOLAS J. NEUHAUSEL
/s/ Nicholas J. Neuhausel
-----------------------------------
Addresses:
If to the Company:
Transco Energy Company
2800 Post Oak Boulevard
Houston, Texas 77056
Attention: General Counsel
If to the Employee:
-20-
<PAGE>
AMENDMENT
TO
TERMINATION AGREEMENT
THIS AMENDMENT to the Termination Agreement between TRANSCO ENERGY COMPANY,
a Delaware corporation (the "Company") and LARRY J. DAGLEY (the "Employee")
dated as of March 25, 1992 (the "Termination Agreement") made and entered into
effective as of December 11, 1994
W I T N E S S E T H:
- - - - - - - - - -
THAT WHEREAS, the Employee and the Company desire to amend the Termination
Agreement on the terms and conditions set forth below;
NOW, THEREFORE, for and in consideration of the premises and mutual
covenants and agreements herein contained, the Termination Agreement is hereby
amended as follows:
1. Paragraph 3(iii)(A) of the Termination Agreement is amended to read in
its entirety as follows:
Employee's Base Salary for the period from the Date of Termination through
the last day of the Agreement Period (such period being the "Employment
Period"), without reducing such amount to present value;
2. Clause (i)(y) of paragraph 3(iii)(E) of the Termination Agreement is
amended to read in its entirety as follows:
<PAGE>
the employer-derived benefits allocated to Employee under the Company's
qualified and non-qualified individual and account balance plans, programs
or arrangements (collectively, the "DC Plans"), including, without
limitation, the Thrift Plan, Tran$tock and Benefits Restoration Plan (or
any successor DC Plans in effect on the Date of Termination), for the plan
year ending immediately prior to or with the Date of Termination,
determined, if necessary, on the assumptions the Employee was a participant
in each such DC Plan for the entire period of such prior plan year, was
eligible for the maximum matching contributions and otherwise participated
to the maximum extent permitted under each such DC Plan, and
3. Paragraph 5 of the Termination Agreement is amended by deleting
subparagraphs (i) and (ii) and the reference to "(iii)" and changing the heading
of such paragraph 5 to "Disputes and Expenses."
4. Except as specifically provided above, the Termination Agreement shall
remain in effect in accordance with its terms as in effect immediately before
the effectiveness of this Amendment.
- 2 -
<PAGE>
IN WITNESS WHEREOF, the Company and Employee have entered into this
Amendment as of the day and year first above written.
TRANSCO ENERGY COMPANY
By: /s/ John P. DesBarres
------------------------
Name: John P. DesBarres
Title: Chief Executive
Officer
/s/ Larry J. Dagley
----------------------------
LARRY J. DAGLEY
- 3 -
<PAGE>
AMENDMENT
TO
TERMINATION AGREEMENT
THIS AMENDMENT to the Termination Agreement between TRANSCO ENERGY COMPANY,
a Delaware corporation (the "Company") and STEPHEN R. SPRINGER (the "Employee")
dated as of March 25, 1992 (the "Termination Agreement") made and entered into
effective as of December 11, 1994
W I T N E S S E T H:
- - - - - - - - - -
THAT WHEREAS, the Employee and the Company desire to amend the Termination
Agreement on the terms and conditions set forth below;
NOW, THEREFORE, for and in consideration of the premises and mutual
covenants and agreements herein contained, the Termination Agreement is hereby
amended as follows:
1. Paragraph 3(iii)(A) of the Termination Agreement is amended to read in
its entirety as follows:
Employee's Base Salary for the period from the Date of Termination through
the last day of the Agreement Period (such period being the "Employment
Period"), without reducing such amount to present value;
2. Clause (i)(y) of paragraph 3(iii)(E) of the Termination Agreement is
amended to read in its entirety as follows:
<PAGE>
the employer-derived benefits allocated to Employee under the Company's
qualified and non-qualified individual and account balance plans, programs
or arrangements (collectively, the "DC Plans"), including, without
limitation, the Thrift Plan, Tran$tock and Benefits Restoration Plan (or
any successor DC Plans in effect on the Date of Termination), for the plan
year ending immediately prior to or with the Date of Termination,
determined, if necessary, on the assumptions the Employee was a participant
in each such DC Plan for the entire period of such prior plan year, was
eligible for the maximum matching contributions and otherwise participated
to the maximum extent permitted under each such DC Plan, and
3. Paragraph 5 of the Termination Agreement is amended by deleting
subparagraphs (i) and (ii) and the reference to "(iii)" and changing the heading
of such paragraph 5 to "Disputes and Expenses."
4. Except as specifically provided above, the Termination Agreement shall
remain in effect in accordance with its terms as in effect immediately before
the effectiveness of this Amendment.
- 2 -
<PAGE>
IN WITNESS WHEREOF, the Company and Employee have entered into this
Amendment as of the day and year first above written.
TRANSCO ENERGY COMPANY
By: /s/ John P. DesBarres
------------------------
Name: John P. DesBarres
Title: Chief Executive
Officer
/s/ Stephen R. Springer
----------------------------
STEPHEN R. SPRINGER
- 3 -
<PAGE>
AMENDMENT
TO
TERMINATION AGREEMENT
THIS AMENDMENT to the Termination Agreement between TRANSCO ENERGY CO., a
Delaware corporation (the "Company") and DAVID E. VARNER (the "Employee") dated
as of March 25, 1992 (the "Termination Agreement") made and entered into
effective as of December 11, 1994
W I T N E S S E T H:
- - - - - - - - - -
THAT WHEREAS, the Employee and the Company desire to amend the Termination
Agreement on the terms and conditions set forth below;
NOW, THEREFORE, for and in consideration of the premises and mutual
covenants and agreements herein contained, the Termination Agreement is hereby
amended as follows:
1. Paragraph 3(iii)(A) of the Termination Agreement is amended to read in
its entirety as follows:
a lump sum amount equal to the aggregate amount of Base Salary that would
have been paid Employee, if such Base Salary had continued to be paid for
the period beginning immediately following the Date of Termination and
ending on the last day of the Agreement Period (such deemed period being
the "Employment Period"), without reducing such amount to present value;
<PAGE>
2. Clause (i)(y) of paragraph 3(iii)(E) of the Termination Agreement is
amended to read in its entirety as follows:
the employer-derived benefits allocated to Employee under the Company's
qualified and non-qualified individual and account balance plans, programs
or arrangements (collectively, the "DC Plans"), including, without
limitation, the Thrift Plan and Benefits Restoration Plan (or any successor
DC Plans in effect on the Date of Termination), for the plan year ending
immediately prior to or with the Date of Termination, determined, if
necessary, on the assumptions the Employee was a participant in each such
DC Plan for the entire period of such prior plan year, was eligible for the
maximum matching contributions and otherwise participated to the maximum
extent permitted under each such DC Plan, and
3. Paragraph 5 of the Termination Agreement is amended by deleting
subparagraphs (i) and (ii) and the reference to "(iii)" and changing the heading
of such paragraph 5 to "Disputes and Expenses."
4. Except as specifically provided above, the Termination Agreement shall
remain in effect in accordance with its terms as in effect immediately before
the effectiveness of this Amendment.
- 2 -
<PAGE>
IN WITNESS WHEREOF, the Company and Employee have entered into this
Amendment as of the day and year first above written.
TRANSCO ENERGY CO.
By: /s/ John P. DesBarres
------------------------
Name: John P. DesBarres
Title: Chief Executive
Officer
/s/ David E. Varner
----------------------------
DAVID E. VARNER
- 3 -
<PAGE>
SECOND AMENDMENT
TO
TERMINATION AGREEMENT
THIS SECOND AMENDMENT to the Termination Agreement between TRANSCO ENERGY
COMPANY, a Delaware corporation (the "Company") and JOHN P. DesBARRES (the
"Employee") dated as of October 31, 1991, as amended (the "Termination
Agreement") made and entered into effective as of December 11, 1994
W I T N E S S E T H:
- - - - - - - - - -
THAT WHEREAS, the Employee and the Company desire to amend the Termination
Agreement on the terms and conditions set forth below;
NOW, THEREFORE, for and in consideration of the premises and mutual
covenants and agreements herein contained, the Termination Agreement is hereby
amended as follows:
1. Paragraph 4(iii)(C) of the Termination Agreement is hereby amended by
deleting the words "prior to 1994" in the final parenthetical phrase thereof.
2. Paragraph 4(iii) of the Termination Agreement is amended by adding at
the end thereof the following additional paragraphs:
(H) the amendment, modification or repeal of any provision of the
Articles of Incorporation or Bylaws of the Company that was in effect
immediately prior to such Change in Control, if such amendment,
modification or repeal would materially adversely affect
<PAGE>
Employee's rights to indemnification by the Company; or
(I) the Company shall violate or breach any obligation of the Company
in effect immediately prior to such Change in Control, regardless whether
such obligation be set forth in the Bylaws of the Company and/or in a
separate agreement entered into between the Company and Employee, to
indemnify Employee against any claim, loss, expense or liability sustained
or incurred by Employee by reason, in whole or in part, of the fact that
Employee is or was an officer or director of the Company.
3. Paragraph 5(iii)(E) of the Termination Agreement is amended to read in
its entirety as follows:
an amount equal to the sum of (i) the product of (x) the sum of (I) the
Employment Period (expressed in years and fractional parts thereof in
calendar months, rounded up to the next full month) and (II) the number of
full months in the current plan year which have elapsed on the Date of
Termination divided by 12 and (y) the employer-derived benefits allocated
to Employee under the Company's qualified and nonqualified individual
account balance plans, programs, or arrangements (collectively, the "DC
Plans"), including, without limitation, the Thrift Plan, Tran$tock and
Benefits Restoration Plan (or any successor DC Plans in effect on the Date
of Termination or new DC Plans established or adopted after the Date of
Termination), for the plan year ending immediately prior to or with the
Date of Termination, determined, if necessary, on the assumptions that
Employee was a participant in each such DC Plan for the entire period of
such prior plan year, was eligible for the maximum matching contributions
and otherwise participated to the maximum extent permitted under each such
DC Plan, and (ii) the amount of any employer-derived benefits allocated to
Employee under such DC Plans that are forfeited by Employee upon the Date
of Termination pursuant to the terms of such DC Plans;
- 2 -
<PAGE>
4. Clause (ii) of paragraph 5(iii)(F) of the Termination Agreement (as
amended by the First Amendment to the Termination Agreement) is hereby amended
by inserting after the phrase "set forth in the Retirement Plan" and before the
phrase "or, if none are set forth" the following additional language: "and in
effect as of the Change in Control (or, if more favorable to Employee, at any
time thereafter)".
5. Paragraph 6 of the Termination Agreement is amended to read in its
entirety as follows:
The Company and the Employee hereby agree that notwithstanding the terms of
any award agreement to the contrary, immediately upon a Change of Control
all Options, SARs, Restricted Stock (but not Restricted Stock Units or
contingent shares), and other awards (except Performance Units)
(collectively, "Awards") granted to Employee pursuant to the Transco Energy
Company 1983 Incentive Plan, the Transco Energy Company 1991 Incentive
Plan, or any successor or similar incentive award plan that are outstanding
and not fully vested, earned and/or payable pursuant to the terms of the
applicable aware agreement or plan will vest in full and be immediately
exercisable by and/or payable to Employee, and any other restrictions on
such awards, including, without limitation, requirements concerning the
achievement of specific goals shall terminate; provided, however, that any
such Awards that on the date of the Change of Control have been held for
less than six months by Employee shall vest in full, be earned and/or
payable, as the case may be, as of the date that they would have been held
for six months and any other restrictions on such Awards shall lapse as of
such date. This Section 6 shall be deemed to be an amendment to each award
agreement now existing or hereafter entered into between the Company and
Employee with respect to such plans, but a
- 3 -
<PAGE>
provision in this Section 10 shall be given effect only to the extent such
provision is not contrary to or prohibited by the terms of the applicable
plan.
6. Paragraph 8 of the Termination Agreement is amended by deleting
subparagraphs (i) and (ii) and the reference to "(iii)" and changing the heading
of such paragraph 8 to "Disputes and Expenses."
7. Except as specifically provided above, the Termination Agreement shall
remain in effect in accordance with its terms as in effect immediately before
the effectiveness of this Amendment.
IN WITNESS WHEREOF, the Company and Employee have entered into this
Amendment as of the day and year first above written.
TRANSCO ENERGY COMPANY
By: /s/ David E. Varner
------------------------
Name: David E. Varner
Title: Senior Vice President,
General Counsel and Secretary
/s/ John P. DesBarres
----------------------------
John P. DesBarres
- 4 -
<PAGE>
AMENDMENT
TO
SEVERANCE AGREEMENT
THIS AMENDMENT to the Severance Agreement between TRANSCO ENERGY COMPANY, a
Delaware corporation (the "Company") and ROBERT W. BEST (the "Employee") dated
as of March 25, 1992 (the "Severance Agreement") made and entered into effective
as of December 11, 1994
W I T N E S S E T H:
- - - - - - - - - -
THAT WHEREAS, the Employee and the Company desire to amend the Severance
Agreement on the terms and conditions set forth below;
NOW, THEREFORE, for and in consideration of the premises and mutual
covenants and agreements herein contained, the Severance Agreement is hereby
amended as follows:
1. Paragraph 3(iii)(A) of the Severance Agreement is amended to read in
its entirety as follows:
Employee's Base Salary for the period from the Date of Termination through
the last day of the Agreement Period (such period being the "Employment
Period"), without reducing such amount to present value;
2. Clause (i)(y) of paragraph 3(iii)(E) of the Severance Agreement is
amended to read in its entirety as follows:
<PAGE>
the employer-derived benefits allocated to Employee under the Company's
qualified and non-qualified individual and account balance plans, programs
or arrangements (collectively, the "DC Plans"), including, without
limitation, the Thrift Plan, Tran$tock and Benefits Restoration Plan (or
any successor DC Plans in effect on the Date of Termination), for the plan
year ending immediately prior to or with the Date of Termination,
determined, if necessary, on the assumptions the Employee was a participant
in each such DC Plan for the entire period of such prior plan year, was
eligible for the maximum matching contributions and otherwise participated
to the maximum extent permitted under each such DC Plan, and
3. Paragraph 5 of the Severance Agreement is amended by deleting
subparagraphs (i) and (ii) and the reference to "(iii)" and changing the heading
of such paragraph 5 to "Disputes and Expenses."
4. Except as specifically provided above, the Severance Agreement shall
remain in effect in accordance with its terms as in effect immediately before
the effectiveness of this Amendment.
- 2 -
<PAGE>
IN WITNESS WHEREOF, the Company and Employee have entered into this
Amendment as of the day and year first above written.
TRANSCO ENERGY COMPANY
By: /s/ John P. DesBarres
------------------------
Name: John P. DesBarres
Title: Chief Executive
Officer
/s/ Robert W. Best
----------------------------
ROBERT W. BEST
- 3 -
<PAGE>
WLR&K DRAFT
12/10/94
PRIVILEGED AND CONFIDENTIAL
TRANSCO ENERGY COMPANY
SENIOR EXECUTIVE SPECIAL BONUS AND RETENTION PLAN
I. Purposes. The Board of Directors (the "Board") of Transco Energy
--------
Company (the "Company") has determined that it is in the best interests of the
Company and its stockholders to explore the possibility of accomplishing an
Extraordinary Transaction (as defined below) of the Company, and in that
connection that the Participants (as defined below), who are the Company's key
executives, remain in the Company's employ during the period in which the Board
is exploring potential transactions, be provided with additional incentive to
develop the most desirable alternatives for the Company and its stockholders and
receive a special bonus for their efforts in developing an Extraordinary
Transaction and putting the Company in a position where its stockholders may
receive the benefits of any such Extraordinary Transaction.
Further, the Board has determined that it is in the best interests of the
Company and its stockholders, if an Extraordinary Transaction of the Company is
accomplished, to act to assure that the Participants remain in the Company's
employ during a period after any such Extraordinary Transaction in order to
enable the other party to the Extraordinary Transaction (the "Other Party") to
effect a prompt and successful integration of the Company's and the Other
Party's business.
<PAGE>
The Board believes that this will enable an Other Party to provide the most
attractive Extraordinary Transaction which may be obtained for the Company's
stockholders. Therefore, in order to accomplish these objectives, the Board has
caused the Company to adopt this Senior Executive Special Bonus and Retention
Plan (the "Plan").
II. Eligibility. The "Participants" shall be the individuals set forth in
-----------
Schedule A hereto. Each of the Participants shall receive a cash bonus (the
"Bonus") upon the consummation of an Extraordinary Transaction (as defined
below), if the conditions set forth below are satisfied. Further, each of the
Participants shall receive a cash retention bonus (the "Retention Bonus") upon
the date which, except as set forth below, is six months following consummation
of an Extraordinary Transaction (or, if later, December 31, 1995), if the
conditions set forth below are satisfied.
III. Conditions to Payments.
----------------------
A. Bonuses shall be payable under this Plan only if an Extraordinary
Transaction occurs. An "Extraordinary Transaction" shall mean (i) an
acquisition by any person, entity or group (including the Company) of more than
50% of the Company's common stock (the "Stock") or of the combined voting power
of the Company's then outstanding voting securities entitled to vote generally
in the election of directors, (ii) the
- 2 -
<PAGE>
consummation of a merger, consolidation or reorganization involving the Company,
(iii) a sale of all or substantially all of the Company's assets, or (iv) any
other transaction or series of transactions that the Board designates as an
Extraordinary Transaction for purposes of this Plan; provided, that a
--------
transaction described in clause (ii) or (iii) shall not constitute an
Extraordinary Transaction if, immediately after such transaction, more than 80
percent of the then-outstanding shares of common stock of the surviving
corporation or the purchaser of the Company's assets (the "Successor Company")
and more than 80 percent of the combined voting power of the then-outstanding
voting securities of the Successor Company entitled to vote generally in the
election of directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the beneficial
owners, immediately before the transaction, of the then-outstanding shares of
common stock of the Company and the then-outstanding voting securities of the
Company entitled to vote generally in the election of directors. An individual
Participant shall receive a Bonus only if such Participant is an employee of the
Company on the date of consummation of the Extraordinary Transaction (the
"Transaction Date"), or if his employment is previously terminated by the
Company in anticipation of an Extraordinary Transaction or at the request of a
party intending to consummate an Extraordinary Transaction.
- 3 -
<PAGE>
B. An individual Participant shall receive a Retention Bonus only if an
Extraordinary Transaction occurs and such Participant is an employee of the
Company or of an affiliate thereof on the later of the date six months following
the consummation of the Extraordinary Transaction or December 31, 1995 (the
"Retention Date"), or if his employment is terminated (1) prior to an
Extraordinary Transaction by the Company in anticipation of an Extraordinary
Transaction or at the request of a party intending to consummate an
Extraordinary Transaction or (2) prior to the Retention Date by the Participant
for Good Reason (as defined in the Participant's Termination Agreement) or by
the Company for any reason other than Cause (as defined in the Participant's
Termination Agreement). Notwithstanding the foregoing, if an Other Party
(including its affiliates) consummates an Extraordinary Transaction described in
clause (ii) of the second sentence of Section III.A. (a "Second Step
Transaction") within four months after consummating an Extraordinary Transaction
described in clause (i) of such sentence, the Retention Date shall be the later
of the date six months following consummation of the Second Step Transaction or
December 31, 1995.
IV. Amount of Bonuses. Each Participant who is to receive a Bonus shall
-----------------
be paid a lump sum cash payment equal to the percentage of $2,750,000 that is
set forth opposite his
- 4 -
<PAGE>
name on Schedule A hereto. In addition, each Participant who is to receive a
Retention Bonus shall be paid a lump sum cash payment equal to the percentage of
$2,750,000 that is set forth opposite his name on Schedule A hereto.
V. Payment of Bonuses.
------------------
A. Any Bonuses that become payable under this Plan shall be paid on the
Transaction Date.
B. Any Retention Bonuses that become payable under this Plan shall be paid
on the Retention Date or, if sooner, the date of termination of the
Participant's employment with the Company under the circumstances described in
the first sentence of Section III. B. hereof.
VI. Miscellaneous. A. Nothing in the adoption of this Plan shall
-------------
confer on any Participant the right to continued employment with the Company or
any of its affiliates, or affect in any way the right of the Company or any of
its affiliates to terminate his employment at any time or change his
responsibilities or affect in any way the rights of a Participant under any
other plan or agreement with the Company, including, without limitation, any
Participant's Termination Agreement or any Participant's rights under the
Company's Incentive Compensation Plan.
- 5 -
<PAGE>
B. All amounts payable hereunder shall be subject to applicable federal,
state and local tax withholding.
C. Questions of construction and interpretation of this Plan shall be
conclusively determined by the Board or any duly authorized committee thereof.
D. The Board may amend this Plan at any time, except as provided in the
next sentence. The Plan may not be amended in any manner adverse to
Participants or in any manner (i) on or after the Transaction Date or (ii) in
anticipation of an Extraordinary Transaction or at the request of a party
intending to consummate an Extraordinary Transaction.
E. This Plan is unfunded, and the rights of the Participants to receive
payments hereunder shall be rights as general creditors of the Company.
F. This Plan shall terminate by its terms at midnight on December 31,
1995, unless an Extraordinary Transaction has previously taken place or the
Board extends the Plan.
December 11, 1994
- 6 -
<PAGE>
SCHEDULE A
Participant Percentage
----------- ----------
John DesBarres 37.5%
Robert Best 25%
Larry Dagley 25%
David Varner 12.5%
----
Total 100%
- 7 -
<PAGE>
AGREEMENT
THIS AGREEMENT is made and entered into as of the 11th day of December,
1994 by and between Transco Energy Company, a Delaware corporation (the
"Company"), the Successor, as defined herein below, and Larry J. Dagley (the
"Executive").
W I T N E S S E T H:
WHEREAS, Executive and the Company entered into a Severance Agreement on
March 17, 1993, amended as of December 11, 1994 (the "Severance Agreement");
WHEREAS, Executive and the Company entered into a Termination Agreement on
March 25, 1992, amended as of December 11, 1994 (the "Termination Agreement");
WHEREAS, the Company and The Williams Companies, Inc., (the "Successor")
have entered into an agreement concerning the acquisition of the Company (the
"Merger Agreement"); and
WHEREAS, the Company and Executive desire to clarify the terms of the
Severance Agreement and the Termination Agreement.
NOW, THEREFORE, for and in consideration of the promises and mutual
covenants and agreements herein contained, the Company, the Successor and
Executive hereby agree, as follows:
1. Notwithstanding any provision in the Termination Agreement, the
Severance Agreement, or any other agreement or arrangement (whether written or
unwritten), following any termination of Executive's employment after any
"change in control", as defined in any such agreement, resulting from any of the
transactions contemplated by the Merger Agreement, the Executive shall receive
only the payments and benefits, if any, to which he is entitled under the terms
of the Termination Agreement, and no payments or benefits shall be provided
under the Severance Agreement if any payments are made under the Termination
Agreement; provided, however, that anything in this Agreement to the contrary
notwithstanding, in the event that the period from the Date of Termination (as
defined in the Termination Agreement) until the last day of the Agreement Period
(as defined in the Termination Agreement) is less than one year, the Executive
shall also be entitled to receive under the Severance Agreement the excess, if
any, of the amount payable pursuant to Section 3(ii)(A) of the Severance
Agreement over the amount payable to Section 3(iii)(A) of the Termination
Agreement and provided further that the benefits payable
<PAGE>
pursuant to Sections 3(ii)(E), 3(ii)(F) and 3(ii)(G) of the Severance Agreement
shall remain applicable and payable notwithstanding the provisions of this
Agreement.
2. No provision of this Agreement may be amended, modified, altered, or
waived unless such amendment, modification, alteration or waiver is agreed to in
writing signed by the Executive and, in the case of the Company and Successor,
an authorized officer of the Company and Successor. No waiver by any of the
parties hereto at the time of any breach by any of the other parties hereto of,
or compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time.
3. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Company, the Successor and Executive have entered
into this Agreement as of the day and year first above written.
TRANSCO ENERGY COMPANY
By: /s/ Nicholas J. Neuhausel
---------------------------
Name: Nicholas J. Neuhausel
-------------------------
Address: 2800 Post Oak Blvd.
----------------------
Houston, Texas 77056
----------------------
Attention: SVP Human Resources
--------------------
and Administration
--------------------
-2-
<PAGE>
EXECUTIVE
By: /s/ Larry J. Dagley
--------------------------
Name: Larry J. Dagley
Address: 2800 Post Oak Blvd.
---------------------
Houston, Texas 77251
---------------------
Attention:
-------------------
SUCCESSOR
By: /s/
--------------------------
Name:
------------------------
Address:
---------------------
---------------------
Attention:-------------------
-3-
<PAGE>
AGREEMENT
THIS AGREEMENT is made and entered into as of the 11th day of December,
1994 by and between Transco Energy Company, a Delaware corporation (the
"Company"), the Successor, as defined herein below, and David E. Varner (the
"Executive").
W I T N E S S E T H:
WHEREAS, Executive and the Company entered into a Severance Agreement on
March 17, 1993, amended as of December 11, 1994 (the "Severance Agreement");
WHEREAS, Executive and the Company entered into a Termination Agreement on
March 25, 1992, amended as of December 11, 1994 (the "Termination Agreement");
WHEREAS, the Company and The Williams Companies, Inc., (the "Successor")
have entered into an agreement concerning the acquisition of the Company (the
"Merger Agreement"); and
WHEREAS, the Company and Executive desire to clarify the terms of the
Severance Agreement and the Termination Agreement.
NOW, THEREFORE, for and in consideration of the promises and mutual
covenants and agreements herein contained, the Company, the Successor and
Executive hereby agree, as follows:
1. Notwithstanding any provision in the Termination Agreement, the
Severance Agreement, or any other agreement or arrangement (whether written or
unwritten), following any termination of Executive's employment after any
"change in control", as defined in any such agreement, resulting from any of the
transactions contemplated by the Merger Agreement, the Executive shall receive
only the payments and benefits, if any, to which he is entitled under the terms
of the Termination Agreement, and no payments or benefits shall be provided
under the Severance Agreement if any payments are made under the Termination
Agreement; provided, however, that anything in this Agreement to the contrary
notwithstanding, in the event that the period from the Date of Termination (as
defined in the Termination Agreement) until the last day of the Agreement Period
(as defined in the Termination Agreement) is less than one year, the Executive
shall also be entitled to receive under the Severance Agreement the excess, if
any, of the amount payable pursuant to Section 3(ii)(A) of the Severance
Agreement over the amount payable to Section 3(iii)(A) of the Termination
Agreement and provided further that the benefits payable pursuant to Sections
3(ii)(E), 3(ii)(F) and 3(ii)(G) of the
<PAGE>
Severance Agreement shall remain applicable and payable notwithstanding the
provisions of this Agreement.
2. No provision of this Agreement may be amended, modified, altered, or
waived unless such amendment, modification, alteration or waiver is agreed to in
writing signed by the Executive and, in the case of the Company and Successor,
an authorized officer of the Company and Successor. No waiver by any of the
parties hereto at the time of any breach by any of the other parties hereto of,
or compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time.
3. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Company, the Successor and Executive have entered
into this Agreement as of the day and year first above written.
TRANSCO ENERGY COMPANY
By: /s/ Nicholas J. Neuhausel
---------------------------
Name: Nicholas J. Neuhausel
-------------------------
Address: 2800 Post Oak Blvd.
----------------------
Houston, Texas 77056
----------------------
Attention: SVP Human Resources
--------------------
and Administration
--------------------
-2-
<PAGE>
EXECUTIVE
By: /s/ David E. Varner
--------------------------
Name: David E. Varner
Address: 13415 Perthshire
---------------------
Houston, TX 77079
---------------------
Attention:
-------------------
SUCCESSOR
By: /s/
--------------------------
Name:------------------------
Address:
---------------------
---------------------
Attention:
-------------------
-3-
<PAGE>
AGREEMENT
THIS AGREEMENT is made and entered into as of the 11th day of December,
1994 by and between Transco Energy Company, a Delaware corporation (the
"Company"), the Successor, as defined herein below, and Nicholas Neuhausel (the
"Executive").
W I T N E S S E T H:
WHEREAS, Executive and the Company entered into a Severance Agreement on
June 15, 1993, amended as of December 11, 1994 (the "Severance Agreement");
WHEREAS, Executive and the Company entered into a Termination Agreement on
December 11, 1994 (the "Termination Agreement");
WHEREAS, the Company and The Williams Companies, Inc., (the "Successor")
have entered into an agreement concerning the acquisition of the Company (the
"Merger Agreement"); and
WHEREAS, the Company and Executive desire to clarify the terms of the
Severance Agreement and the Termination Agreement.
NOW, THEREFORE, for and in consideration of the promises and mutual
covenants and agreements herein contained, the Company, the Successor and
Executive hereby agree, as follows:
1. Notwithstanding any provision in the Termination Agreement, the
Severance Agreement, or any other agreement or arrangement (whether written or
unwritten), following any termination of Executive's employment after any
"change in control", as defined in any such agreement, resulting from any of the
transactions contemplated by the Merger Agreement, the Executive shall receive
only the payments and benefits, if any, to which he is entitled under the terms
of the Termination Agreement, and no payments or benefits shall be provided
under the Severance Agreement if any payments are made under the Termination
Agreement; provided, however, that anything in this Agreement to the contrary
notwithstanding, the benefits payable pursuant to Sections 3(ii)(E), 3(ii)(F)
and 3(ii)(G) of the Severance Agreement shall remain applicable and payable
notwithstanding the provisions of this Agreement.
2. No provision of this Agreement may be amended, modified, altered, or
waived unless such amendment, modification, alteration or waiver is agreed to in
writing signed by the Executive and, in the case of the Company and Successor,
an authorized officer of the Company and Successor. No waiver by
<PAGE>
any of the parties hereto at the time of any breach by any of the other parties
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
3. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Company, the Successor and Executive have entered
into this Agreement as of the day and year first above written.
TRANSCO ENERGY COMPANY
By: /s/ David E. Varner
--------------------------
Name: David E. Varner
------------------------
Address: 2800 Post Oak Blvd.
---------------------
Houston, Texas 77056
---------------------
Attention: Senior Vice President,
----------------------
General Counsel and
----------------------
Secretary
----------------------
-2-
<PAGE>
EXECUTIVE
By: /s/ Nicholas Neuhausel
--------------------------
Name: Nicholas Neuhausel
Address: 312 Knox St.
---------------------
Houston, Texas 77007
---------------------
Attention:
-------------------
SUCCESSOR
By: /s/
--------------------------
Name:
------------------------
Address:
---------------------
---------------------
Attention:
-------------------
-3-
<PAGE>
AGREEMENT
THIS AGREEMENT is made and entered into as of the 11th day of December,
1994 by and between Transco Energy Company, a Delaware corporation (the
"Company"), the Successor, as defined herein below, and Steven R. Springer (the
"Executive").
W I T N E S S E T H:
WHEREAS, Executive and the Company entered into a Severance Agreement on
December 15, 1992, amended as of December 11, 1994 (the "Severance Agreement");
WHEREAS, Executive and the Company entered into a Termination Agreement on
December 15, 1992, amended as of December 11, 1994 (the "Termination
Agreement");
WHEREAS, the Company and The Williams Companies, Inc., (the "Successor")
have entered into an agreement concerning the acquisition of the Company (the
"Merger Agreement"); and
WHEREAS, the Company and Executive desire to clarify the terms of the
Severance Agreement and the Termination Agreement.
NOW, THEREFORE, for and in consideration of the promises and mutual
covenants and agreements herein contained, the Company, the Successor and
Executive hereby agree, as follows:
1. Notwithstanding any provision in the Termination Agreement, the
Severance Agreement, or any other agreement or arrangement (whether written or
unwritten), following any termination of Executive's employment after any
"change in control", as defined in any such agreement, resulting from any of the
transactions contemplated by the Merger Agreement, the Executive shall receive
only the payments and benefits, if any, to which he is entitled under the terms
of the Termination Agreement, and no payments or benefits shall be provided
under the Severance Agreement if any payments are made under the Termination
Agreement; provided, however, that anything in this Agreement to the contrary
notwithstanding, in the event that the period from the Date of Termination (as
defined in the Termination Agreement) until the last day of the Agreement Period
(as defined in the Termination Agreement) is less than one year, the Executive
shall also be entitled to receive under the Severance Agreement the excess, if
any, of the amount payable pursuant to Section 3(ii)(A) of the Severance
Agreement over the amount payable to Section 3(iii)(A) of the Termination
Agreement and provided further that the benefits payable pursuant to Sections
3(ii)(E), 3(ii)(F) and 3(ii)(G) of the
<PAGE>
Severance Agreement shall remain applicable and payable notwithstanding the
provisions of this Agreement.
2. No provision of this Agreement may be amended, modified, altered, or
waived unless such amendment, modification, alteration or waiver is agreed to in
writing signed by the Executive and, in the case of the Company and Successor,
an authorized officer of the Company and Successor. No waiver by any of the
parties hereto at the time of any breach by any of the other parties hereto of,
or compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time.
3. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Company, the Successor and Executive have entered
into this Agreement as of the day and year first above written.
TRANSCO ENERGY COMPANY
By: /s/ Nicholas J. Neuhausel
---------------------------
Name: Nicholas J. Neuhausel
-------------------------
Address: 2800 Post Oak Blvd.
----------------------
Houston, Texas 77056
----------------------
Attention: SVP Human Resources
--------------------
and Administration
--------------------
-2-
<PAGE>
EXECUTIVE
By: /s/ Steven R. Springer
--------------------------
Name: Steven R. Springer
Address: 9302 Shaeylo Circle
---------------------
Houston, TX 77063
---------------------
Attention:
-------------------
SUCCESSOR
By: /s/
--------------------------
Name:
------------------------
Address:
---------------------
---------------------
Attention:
-------------------
-3-
<PAGE>
AGREEMENT
THIS AGREEMENT is made and entered into as of the 11th day of December,
1994 by and between Transco Energy Company, a Delaware corporation (the
"Company"), the Successor, as defined herein below, and Jay W. Elston (the
"Executive").
W I T N E S S E T H:
WHEREAS, Executive and the Company entered into a Severance Agreement on
May 19, 1993, amended as of December 11, 1994 (the "Severance Agreement");
WHEREAS, Executive and the Company entered into a Termination Agreement on
March 25, 1992, amended as of December 11, 1994 (the "Termination Agreement");
WHEREAS, the Company and The Williams Companies, Inc., (the "Successor")
have entered into an agreement concerning the acquisition of the Company (the
"Merger Agreement"); and
WHEREAS, the Company and Executive desire to clarify the terms of the
Severance Agreement and the Termination Agreement.
NOW, THEREFORE, for and in consideration of the promises and mutual
covenants and agreements herein contained, the Company, the Successor and
Executive hereby agree, as follows:
1. Notwithstanding any provision in the Termination Agreement, the
Severance Agreement, or any other agreement or arrangement (whether written or
unwritten), following any termination of Executive's employment after any
"change in control", as defined in any such agreement, resulting from any of the
transactions contemplated by the Merger Agreement, the Executive shall receive
only the payments and benefits, if any, to which he is entitled under the terms
of the Termination Agreement, and no payments or benefits shall be provided
under the Severance Agreement if any payments are made under the Termination
Agreement; provided, however, that anything in this Agreement to the contrary
notwithstanding, in the event that the period from the Date of Termination (as
defined in the Termination Agreement) until the last day of the Agreement Period
(as defined in the Termination Agreement) is less than one year, the Executive
shall also be entitled to receive under the Severance Agreement the excess, if
any, of the amount payable pursuant to Section 3(ii)(A) of the Severance
Agreement over the amount payable to Section 3(iii)(A) of the Termination
Agreement and provided further that the benefits payable pursuant to Sections
3(ii)(E), 3(ii)(F) and 3(ii)(G) of the
<PAGE>
Severance Agreement shall remain applicable and payable notwithstanding the
provisions of this Agreement.
2. No provision of this Agreement may be amended, modified, altered, or
waived unless such amendment, modification, alteration or waiver is agreed to in
writing signed by the Executive and, in the case of the Company and Successor,
an authorized officer of the Company and Successor. No waiver by any of the
parties hereto at the time of any breach by any of the other parties hereto of,
or compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time.
3. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Company, the Successor and Executive have entered
into this Agreement as of the day and year first above written.
TRANSCO ENERGY COMPANY
By: /s/ Nicholas J. Neuhausel
---------------------------
Name: Nicholas J. Neuhausel
-------------------------
Address: 2800 Post Oak Blvd.
----------------------
Houston, Texas 77056
----------------------
Attention: SVP Human Resources
--------------------
and Administration
--------------------
-2-
<PAGE>
EXECUTIVE
By: /s/ Jay W. Elston
--------------------------
Name: Jay W. Elston
Address:
---------------------
---------------------
Attention:
-------------------
SUCCESSOR
By: /s/
--------------------------
Name:
------------------------
Address:
---------------------
---------------------
Attention:
-------------------
-3-
<PAGE>
AGREEMENT
THIS AGREEMENT is made and entered into as of the 11th day of December,
1994 by and between Transco Energy Company, a Delaware corporation (the
"Company"), the Successor, as defined herein below, and John P. DesBarres (the
"Executive").
W I T N E S S E T H:
WHEREAS, Executive and the Company entered into a Severance Agreement on
September 14, 1991, amended as of October 31, 1991, effective as of September
14, 1991, amended as of December 11, 1994 (the "Severance Agreement");
WHEREAS, Executive and the Company entered into a Termination Agreement on
October 31, 1991, amended as of October 31, 1991, effective as of September 14,
1991, amended as of December 11, 1994 (the "Termination Agreement");
WHEREAS, the Company and The Williams Companies, Inc., (the "Successor")
have entered into an agreement concerning the acquisition of the Company (the
"Merger Agreement"); and
WHEREAS, the Company and Executive desire to clarify the terms of the
Severance Agreement and the Termination Agreement.
NOW, THEREFORE, for and in consideration of the promises and mutual
covenants and agreements herein contained, the Company, the Successor and
Executive hereby agree, as follows:
1. Notwithstanding any provision in the Termination Agreement, the
Severance Agreement, or any other agreement or arrangement (whether written or
unwritten), following any termination of Executive's employment after any
"change in control", as defined in any such agreement, resulting from any of the
transactions contemplated by the Merger Agreement, the Executive shall receive
only the payments and benefits, if any, to which he is entitled under the terms
of the Termination Agreement, and no payments or benefits shall be provided
under the Severance Agreement if any payments are made under the Termination
Agreement; provided, however, that anything in this Agreement to the contrary
notwithstanding, in the event that the period from the Date of Termination (as
defined in the Termination Agreement) until the last day of the Agreement Period
(as defined in the Termination Agreement) is less than one year, the Executive
shall also be entitled to receive under the Severance Agreement the excess, if
any, of the amount
<PAGE>
payable pursuant to Section 3(iii)(A) of the Severance Agreement over the amount
payable to Section 5(iii)(A) of the Termination Agreement.
2. No provision of this Agreement may be amended, modified, altered, or
waived unless such amendment, modification, alteration or waiver is agreed to in
writing signed by the Executive and, in the case of the Company and Successor,
an authorized officer of the Company and Successor. No waiver by any of the
parties hereto at the time of any breach by any of the other parties hereto of,
or compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time.
3. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Company, the Successor and Executive have entered
into this Agreement as of the day and year first above written.
TRANSCO ENERGY COMPANY
By: /s/ Nicholas J. Neuhausel
---------------------------
Name: Nicholas J. Neuhausel
-------------------------
Address: 2800 Post Oak Blvd.
----------------------
Houston, Texas 77056
----------------------
Attention: SVP Human Resources
--------------------
and Administration
--------------------
-2-
<PAGE>
EXECUTIVE
By: /s/ John P. DesBarres
--------------------------
Name: John P. DesBarres
Address:
---------------------
---------------------
Attention:
-------------------
SUCCESSOR
By: /s/
--------------------------
Name:
------------------------
Address:
---------------------
---------------------
Attention:
-------------------
-3-
<PAGE>
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- -------------------------------------X
WILL ALPERN, :
:
Plaintiff, :
:
v. : Civil Action No. 13918
: -----
TRANSCO ENERGY COMPANY, JOHN P. :
DESBARRES, ROBERT W. FRI, J. DAVID :
GRISSOM, BENJAMIN F. BAILAR, :
GORDON F. AHALT, FREDERICK H. :
SCHULTZ, WILLIAM H. LUERS, and :
WILLIAMS COMPANIES INC., :
:
Defendants. :
- -------------------------------------X
COMPLAINT
---------
Plaintiff, by and through his attorneys, alleges as follows:
THE PARTIES
-----------
1. Plaintiff brings this action as a class action on behalf of himself and
all other shareholders of Transco Energy Company ("Transco") who are similarly
situated to enjoin any and all efforts by the defendants to be acquired by
Williams Companies Inc. ("Williams") by means of a coercive front-end loaded
two-step tender offer/merger, to which Transco's directors have agreed in breach
of their fiduciary duties. Plaintiff further brings this action to enjoin any
and all efforts by defendants to enforce any anti-takeover devices including the
lock-up option granted Williams described below. Plaintiff also seeks to
recover damages from the director defendants for breach of fiduciary duty in
connection with the proposed acquisition of Transco. Defendants' actions
constitute a breach of fiduciary duty to inform themselves, to
<PAGE>
maximize shareholder value, and to protect the interests of the public
shareholders. The director defendants are utilizing their fiduciary positions
of control over Transco to agree to a coercive transaction when they should
protect the public shareholders from such coercion.
2. Plaintiff is the owner of common stock of Transco.
3. Defendant Transco is a Delaware corporation with its principal
executive offices located at 2800 Post Oak Boulevard, P.O. Box 1396, Houston, TX
77251. Transco transports and markets natural gas; develops and owns
independent electric power generation facilities; mines, markets, and transports
coal; explores for oil and natural gas; and produces and sells natural gas
liquids.
4. The following individual defendants (the "director defendants")
constitute the entire Board of Directors of Transco; John P. Desbarres, Robert
W. Fri, J. David Grissom, Benjamin F. Bailer, Gordon F. Ahalt, Frederick H.
Schultz, and William H. Luers.
5. By reason of their relationships and offices, the director defendants
are in a fiduciary relationship with plaintiff and other public shareholders of
Transco and owe to them the highest obligations of good faith and fair dealing.
6. Defendant Williams is a Delaware corporation with subsidiaries that
transport and sell natural gas and petroleum products; operate a digital fiber
optic and microwave telecommunications system; and offer data, voice, and video
related
2
<PAGE>
products and services. Williams is sued as an aider and abettor of the director
defendants' breaches of fiduciary duty described herein.
CLASS ACTION ALLEGATIONS
------------------------
7. Plaintiff brings this action on his own behalf and as a class action
pursuant to Rule 23 of the rules of the Court of Chancery, on behalf of all
common stockholders of Transco (except defendants herein and any person, firm,
trust, corporation or other entity related to or affiliated with any of the
defendants and except for all persons seeking to buy Transco as an entity,
either by friendly or hostile means) who are being threatened with a coercive
tender offer and deprived of the opportunity to maximize the value of their
Transco stock by the wrongful acts of the defendants described herein (the
"Class").
8. This action is properly maintainable as a class action for the
following reasons:
a. The Class is so numerous that joinder of all Class members is
impracticable. There are approximately 15,700 holders of shares of Transco
common stock outstanding. Members of the Class are scattered throughout the
United States. Furthermore, as the damage suffered by individual Class members
may be small, the expense and burden of individual litigation makes it
impossible for the Class members, individually, to redress wrongs done to them.
b. There are questions of law and fact which are common to the
members of the Class and which predominate over any
3
<PAGE>
questions affecting only individual members, including whether the defendants
have breached the fiduciary duties owed by them to plaintiff and members of the
Class by reason of:
(i) their agreement to a coercive two-step merger, which includes
a front-end loaded tender offer and a lock-up provision to prevent Transco
public shareholders from maximizing the value of their holdings;
(ii) engaging in plans and schemes unlawfully to thwart offers and
proposals from third parties; and
(iii) approving and causing Transco to agree to an onerous
"lock-up" provision with Williams.
c. The claims of plaintiff are typical of the claims of the other
members of the Class, and plaintiff has no interests that are adverse or
antagonistic to the interests of the Class.
d. Plaintiff is a member of the Class, has sustained and will sustain
damages, is committed to the vigorous prosecution of this action and has
retained competent counsel experienced in litigation of this nature.
Accordingly, plaintiff is an adequate representative of the Class and will
fairly and adequately protect the interests of the Class. There will be no
difficulty in the management of this case as a class action.
e. The prosecution of separate actions by individual members of the
Class would create a risk of inconsistent or varying adjudications with respect
to individual members of the
4
<PAGE>
Class that would establish incompatible standards of conduct for the party
opposing the Class.
f. Defendants have acted and/or refused to act on grounds generally
applicable to the Class, thereby making appropriate final injunctive relief or
corresponding declaratory relief with respect to the Class as a whole.
g. A class action is superior to the other available methods for
adjudication of this controversy.
SUBSTANTIVE ALLEGATIONS
-----------------------
9. On or about December 12, 1994, defendants announced that Transco had
agreed to be acquired by Williams in a two-step transaction. In the first step,
Williams will make a tender offer for 60% of Transco's common shares at $17.50
cash per share. Once Williams has control of Transco by means of the tender
offer, the second step, "mop up" merger will go forward with the remaining 40%
of Transco's common shares being exchanged for .625 of a share of Williams
common stock for each remaining share of Transco stock. On December 9, 1994, the
last trading day before the announcement of the deal, Williams was trading at
26-7/8 per share. Therefore, .625 of a Williams share had an unaffected market
value of less than $16.80. Consequently, Transco shareholders will be coerced to
tender their shares in order to get the higher cash consideration in the tender
offer for at least 60% of their shares rather than risk receiving the lower
merger consideration for all of their shares in the merger if the coercive
tender offer is successful.
5
<PAGE>
10. The gross unfairness of the merger consideration is clear. During the
last 12 months, Transco has traded as high as 16 7/8 per share, higher than the
offered second-step merger consideration. But because of the coercive nature of
the transaction, Transco shareholders will be forced to tender regardless of
whether they believe the price is unfair and inadequate. By agreeing to this
structure, the director defendants have breached their fiduciary duties owed to
plaintiff and the Class to protect them from such coercive, inadequate
transactions. By proposing and agreeing to this structure, Williams knowingly
participated in the director defendants' breach of fiduciary duties.
11. Also, as part of the transaction, the director defendants have agreed
to a sweetheart "lock-up" deal with Williams, pursuant to which Williams may buy
up to 7.5 million additional Transco common shares at $17.50, representing over
15% of Transco stock. This lock-up option could be used to assure that Williams
gains control of Transco and can complete the second step merger even if the
coercive tender offer is not completely effective. In addition, the lock-up is
designed to discourage other bidders. Indeed, if Williams seeks to exercise the
option, Transco would have to pay $2 per option share, $15 million total, in
cash to cancel the option.
12. If the coercive transaction and lock-up option are permitted to
survive in the face of the director defendants' failure and refusal to pursue
the interests of the public
6
<PAGE>
shareholders, the Company's shareholders who wish to avail themselves of bona
----
fide offers to purchase their shares for fair value or who wish to reject the
- ----
Williams transaction as unfair and inadequate would be deprived of the ability
to do so.
13. By agreeing to the coercive transaction and to the lock-up option, the
director defendants, without shareholder approval, caused a fundamental shift of
power from Transco's shareholders to themselves. These actions permit the
directors to act as the prime negotiators of -- and, in effect, totally to
preclude -- any and all competing offers through their power to use the onerous
---
lock-up option to discourage other bidders.
14. This fundamental shift of control of Transco's destiny from the hands
of its shareholders to the hands of the director defendants results in a
heightened fiduciary duty of the director defendants to consider, in good faith,
any third-party bid, and further requires the director defendants to pursue
third party interest in acquiring Transco and to negotiate in good faith with
bidders on behalf of Transco's shareholders.
15. The director defendants have breached their fiduciary duties by reason
of the acts and transactions complained of herein.
16. The lock-up option was not granted by an informed, disinterested board
motivated to encourage the bidding process and maximize value for the benefit of
the stockholders. The lock-up option was granted by the board to protect the
coercive front-end
7
<PAGE>
loaded buyout, terminating any further opportunity for meaningful third-party
bidding or meaningful stockholder choice.
17. Unless enjoined by this Court, the director defendants will continue
to breach their fiduciary duties owed to plaintiff and the other members of the
Class to the irreparable harm of the Class, as aforesaid.
18. Williams knew or recklessly disregarded the facts set forth herein
concerning the director defendants breaches of fiduciary duty. Nonetheless,
Williams has participated in and advanced those breaches. Consequently, Williams
is liable as an aider and abettor of the breaches of fiduciary duty alleged
herein.
19. Plaintiff and the Class have no adequate remedy at law.
WHEREFORE, plaintiff demands judgment and preliminary and permanent relief,
including injunctive relief, in his favor and in favor of the Class and against
defendants as follows:
A. Declaring that this action is properly maintainable as a class action.
B. Declaring that the director defendants and each of them have committed a
gross abuse of trust and have breached their fiduciary duties to the Class.
C. Granting injunctive relief against the defendants' approval of the
Williams transaction, against the completion of the coercive tender offer,
against the enforcement of the lock-up option, and against any other actions
that might be taken to, or have the effect of, diminishing shareholder value.
8
<PAGE>
D. Requiring the director defendants to fulfill their fiduciary duties to
maximize shareholder values by exploring third-party interest and accepting the
highest offer obtainable for the public shareholders or by permitting the
shareholders to make that decision free from any coercion.
E. Awarding plaintiff and the Class compensatory damages.
F. Awarding plaintiff the costs and disbursements of this action,
including reasonable attorneys' and experts' fees.
G. Granting such other and further relief as this Court may deem just and
proper.
Dated: December 12, 1994 CHIMICLES, JACOBSEN & TIKELLIS
/s/ Carolyn D. Mack
-------------------------------
Pamela S. Tikellis
James C. Strum
Carolyn D. Mack
One Rodney Square
P.O. Box 1035
Wilmington, DE 19899
(302) 656-2500
Attorneys for Plaintiff
OF COUNSEL:
WOLF, HALDENSTEIN, ADLER, FREEMAN & HERZ
270 Madison Avenue
New York, NY 10016
9
<PAGE>
IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ------------------------------------X
:
ABRAM WEISS and ROSE B. WEISS, :
:
Plaintiffs, : Civil Action No. 13923
:
-against- : CLASS ACTION
: COMPLAINT
JOHN P. DESBARRES, WILLIAM H. : ------------
LUERS, FREDERICK H. SCHULTZ, :
GORDON F. AHALT, BENJAMIN F. :
BAILAR, ROBERT W. FRI, DAVID J. :
GRISSOM, TRANSCO ENERGY COMPANY :
and THE WILLIAMS COMPANIES, INC., :
:
Defendants. :
:
- ------------------------------------X
Plaintiffs, by their attorneys, allege upon information and belief (said
information and belief being based, in part, upon the investigation conducted by
and through their undersigned counsel), except with respect to their ownership
of Transco Energy Company ("Transco" or the "Company") common stock, which is
alleged upon their personal knowledge as follows:
THE PARTIES
-----------
1. Plaintiffs are the owners of shares of defendant Transco.
2. Defendant Transco is a corporation organized and existing under the
laws of the State of Delaware. Transco maintains its principal offices at 2800
Post Oak Boulevard, P.O. Box 1396, Houston, Texas. Transco
1
<PAGE>
transports natural gas through its two interstate pipeline systems, 10,500-mile
Transcontinental Gas Pipe Line Corporation and 6,050-mile Texas Gas Transmission
Corporation, to markets in the eastern and midwestern United States,
respectively. Transco also buys, sells and arranges for the transportation of
natural gas throughout the United States and Canada through its marketing
subsidiary, Transco Gas Marketing Company. Transco, through Interstate Coal
Company, also mines coal in eastern Kentucky and Tennessee.
3. Defendant John P. Desbarres is the Chairman of the Board, President
and Chief Executive Officer of Transco.
4. Defendants William H. Luers, Frederick H. Schultz, Gordon F. Ahalt,
Benjamin F. Bailar, Robert W. Fri and David J. Grissom are directors of
Transco.
5. The foregoing individual defendants (collectively referred to herein as
the "Director Defendants") are in a fiduciary relationship with plaintiffs and
the public stockholders of Transco, and owe plaintiffs and the other Transco
public stockholders the highest obligations of good faith, fair dealing, due
care, loyalty and full and candid disclosure.
2
<PAGE>
CLASS ACTION ALLEGATIONS
6. Plaintiffs bring this action on their own behalf and as a class action
on behalf of all shareholders of defendant Transco (except defendants herein
and any person, firm, trust, corporation or other entity related to or
affiliated with any of the defendants) or their successors in interest, who have
been or will be adversely affected by the conduct of defendants alleged herein.
7. This action is properly maintainable as a class action for the
following reasons:
(a) the class of shareholders for whose benefit this action is
brought is so numerous that joinder of all Class members is impracticable. As of
June 30, 1994, there were over 40 million shares of Transco common stock
outstanding, owned by over 15,000 shareholders of record scattered throughout
the United States.
(b) there are questions of law and fact which are common to members
of the class and which include, inter alia, the following:
----- ----
(i) whether the Director Defendants have breached their
fiduciary duties owed by them to plaintiffs and members of the class and/or have
been aided and abetted in such breach;
3
<PAGE>
(ii) whether the Director Defendants have failed to fully disclose
the true value of defendant Transco's assets and earnings power;
(iii) whether the Director Defendants have wrongfully failed and
refused to seek a purchaser of Transco and/or any and all of its various assets
or divisions at the highest possible price; and
(iv) whether plaintiffs and the other members of the Class will be
irreparably damaged by the Individual Defendants' failure to conduct an active
auction of Transco.
8. Plaintiffs are committed to prosecuting this action and have retained
competent counsel experienced in litigation of this nature. The claims of
plaintiffs are typical of the claims of the other members of the Class and
plaintiffs have the same interest as the other members of the Class.
Accordingly, plaintiffs are adequate representatives of the Class and will
fairly and adequately protect the interests of the Class.
SUBSTANTIVE ALLEGATIONS
-----------------------
9. On May 2, 1994 Smith Barney Shearson raised Transco to "buy" from
"outperform."
10. On May 17, 1994, Desbarres stated at
4
<PAGE>
Transco's 46th Annual Meeting that Transco "is well on its way to achieving its
vision of being the premier transporter and marketer in the eastern half of the
United States." He further stated that, "Demand is growing in Transco's markets,
and we are not only keeping pace, but actually outdoing our competition in
meeting customer needs. And I can not think of a better way for our company to
achieve success."
11. On July 20, 1994, Transco announced its second quarter improved
operating income which was the seventh consecutive quarter of improved operating
results.
12. On August 4, 1994, Transco announced organizational changes to better
pursue development of new business and expand the reliance, quality services
provided to its current customers. These changes refined the organization and
increased the value of Transco.
13. On October 26, 1994, Transco announced its third quarter improved
operating income. This was its eighth consecutive quarter of improved operating
results.
14. Transco was on its way to becoming the premier transporter and
marketer of natural gas in the eastern half of the United States before its
public announcement on December 12, 1994.
15. On December 12, 1994, it was publicly
5
<PAGE>
announced that Transco has approved a merger between Transco and The Williams
Companies, Inc. ("Williams"). Under the terms of the merger agreement, Williams
will pay $17.50 cash a share for up to 24.6 million Transco shares or 60% of
Transco common stock and related common stock purchase rights in a first-step
tender offer. The tender offer will be conditioned on, among other things, the
tender of no fewer than 20.9 million shares, or 51% of Transco's common stock.
After the tender offer, a newly formed Williams unit will be merged into
Transco, with Transco continuing as a wholly owned subsidiary of Williams. The
outstanding shares of Transco $4.75 cumulative convertible preferred stock will
be converted into the right to receive an equal number of shares of a new series
of Williams $4.75 cumulative convertible preferred stock convertible into 0.5588
Williams common shares. The Transco $3.50 cumulative convertible preferred stock
will be converted into the right to receive an equal number of shares of a new
series of Williams $3.50 cumulative convertible preferred stock convertible into
1.5625 William common shares and otherwise having substantially equivalent
rights.
16. In addition, Williams and Transco signed a stock option agreement
enabling Williams to buy up to 7.5 million additional Transco common shares at
$17.50 each. If Williams exercises the stock option, Transco has the right to
cancel the option for a cash payment not to exceed $2 per
6
<PAGE>
option share.
17. The total value of the cash tender offer and merger, including the
exchange of new series of Williams convertible preferred stock for Transco's two
outstanding series of convertible preferred stock and including Transco's
outstanding indebtedness, is approximately $3 billion. But because Transco
shareholders do not know the value of the Williams securities to be paid on the
"back-end" (particularly since the defendants have failed to establish a collar
with respect to these securities), they will be coerced into tendering their
shares on the front end of the offer for inadequate cash consideration.
18. Under the circumstances, the Director Defendants are obligated to
explore all alternatives to maximize shareholder value. The Director Defendants
will be in breach of their fiduciary duties owed to Transco's public
shareholders if they fail to fully explore bona fide offers by potential
---- ----
acquirors for the purchase of the Company.
19. The Williams proposal constitutes a change of control of Transco, its
business and affairs.
20. Because of the announcement of the definitive merger agreement and the
structure of the transaction, no fair market check to determine the fair value
of Transco's publicly held shares can be conducted. Moreover, defendants
7
<PAGE>
have set the price for the publicly held shares of Transco without taking
adequate steps to determine the fair value of such securities.
21. The Director Defendants have violated fiduciary and other common law
duties which they owe to plaintiffs and the other members of the Class in that
they are not exercising informed independent business judgment, have acted and
are acting to the detriment of the members of the Class in order to benefit
themselves, and have participated in and substantially and knowingly aided and
abetted the above breaches of fiduciary duty and the plan to effect a change of
control of Transco on unfair and inadequate terms.
22. Because of their positions of control and authority as officers and
directors of Transco, the Director Defendants were able to and did, directly or
indirectly, control the actions of Transco in agreeing to a merger on terms
which are unfair to the shareholders of Transco. In violation of the fiduciary
duties owed Transco's shareholders, the Director Defendants are causing, or are
substantially and knowingly aiding and abetting in, the plan to enable Williams
to acquire Transco to the detriment of plaintiffs and the plaintiff class.
23. Defendant Williams, without which the proposed transaction would not
occur, and with knowledge of
8
<PAGE>
the individual defendants' breach of fiduciary duty, has aided and rendered
substantial assistance to the individual defendants and stands to handsomely
profit from the transaction.
24. Plaintiffs and the Class will suffer irreparable damage unless
defendants are enjoined from breaching their fiduciary duties to maximize
shareholder value.
25. Plaintiffs have no adequate remedy at law.
WHEREFORE, plaintiffs demand judgment as follows:
A. Declaring this to be a proper class action;
B. Ordering defendants to carry out their fiduciary duties to
plaintiffs and the other members of the Class by announcing their intention to:
(i) undertake an appropriate evaluation of alternatives
designed to maximize value for Transco's public stockholders; and,
(ii) adequately ensure that no conflicts of interests exist
between defendants' own interests and their fiduciary obligation to the public
stockholders or, if such conflicts exist, ensure that all such conflicts will be
resolved in the best interests of Transco's public stockholders.
9
<PAGE>
C. Enjoining consummation of the merger agreement;
D. Directing that defendants pay to plaintiffs and the Class all damages
caused to them and account for all profits and any special benefits obtained as
a result of their unlawful conduct;
E. Awarding to plaintiffs the costs and disbursements of this action,
including a reasonable allowance for the fees and expenses of plaintiffs'
attorneys and expert; and
F. Granting such other and further relief as may be just and proper in the
premises.
Dated: December 12, 1994
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By:/s/Joseph A. Rosenthal
------------------------------
First Federal Plaza
Suite 214
Wilmington, Delaware 19899
Telephone: (302) 656-4433
Attorneys for Plaintiffs
OF COUNSEL:
ABBEY & ELLIS
212 East 39th Street
New York, New York 10016
Telephone: (212) 889-3700
BARRACK RODOS & BACINE
3300 Two Commerce Square
2001 Market Street
Philadelphia, Pennsylvania 19103
(215) 963-0600
10
<PAGE>
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- -------------------------------------X
WILLIAM STEINER, :
:
Plaintiff, :
:
- v. - : Civil Action No. 13920
: -----
JOHN P. DesBARRES, GORDON F. AHALT, :
WILLIAM H. LUERS, ROBERT W. FRI, :
FREDERICK H. SCHULTZ, J. DAVID : CLASS ACTION
GRISSOM, BENJAMIN F. BAILAR, : COMPLAINT
PATRICIA L. HIGGINS, TRANSCO ENERGY : ------------
COMPANY and THE WILLIAMS COMPANIES, :
INC., :
Defendants. :
- -------------------------------------X
Plaintiff, by and through his attorneys, alleges as follows on information
and belief, except for paragraph 1 which is alleged on knowledge:
PARTIES
-------
1. Plaintiff William Steiner is the owner of the common stock of Transco
Energy Company ("Transco"), and has owned such stock at all relevant times.
2. Transco is a Delaware corporation based in Houston, Texas. It is a
diversified energy company, owning and operating, through its subsidiaries, a
natural gas pipeline in the United States. This pipeline system joins natural
gas producing regions of the United States to markets in the Northeastern,
Mid-Atlantic and Midwestern states. The Company also markets gas and mines for
coal.
<PAGE>
3. (a) Defendant John P. DesBarres ("DesBarres") is and has been at all
relevant times Chairman, President and Chief Executive Officer of the Company.
(b) Defendants Gordon F. Ahalt, William H. Luers, Robert W. Fri,
Frederick H. Schultz, J. David Grissom, Benjamin F. Bailar, and Patricia L.
Higgins are and have been at all relevant times directors of Transco.
4. Defendant The Williams Companies, Inc. ("Williams") also owns and
operates natural gas and petroleum products pipelines. Williams transports
natural gas through pipelines serving Louisiana and sixteen Western and
Midcontinent states, and transports petroleum products to eleven Midwestern
states. Its principal executive offices are located in Tulsa, Oklahoma.
5. By virtue of the individual defendants' positions as directors and
officers of Transco, said defendants were and are in a fiduciary relationship
with plaintiff and the other public stockholders of the Company, and owe to
plaintiff and the other members of the class the highest obligations of good
faith and fair dealing.
CLASS ACTION ALLEGATIONS
6. Plaintiff brings this action for declaratory, injunctive and other
relief on his own behalf and as a class action, pursuant to Rule 23 of the Rules
of the Court of Chancery on behalf of all common stockholders of Transco
- 2 -
<PAGE>
(except defendants herein and any person, firm, trust, corporation or other
entity related to or affiliated with any of the defendants) or their successors
in interest, who are being deprived of the opportunity to maximize the value of
their Transco shares by the wrongful acts of defendants as described herein.
7. This action is properly maintainable as a class action for the
following reasons:
(a) The Class of stockholders for whose benefit this action is
brought is so numerous that joinder of all Class members is impracticable. There
are approximately 40 million common shares of Transco outstanding, owned by over
thirty thousand stockholders. Members of the Class are scattered throughout the
United States.
(b) There are questions of law and fact which are common to members
of the Class, including whether the individual defendants have breached the
fiduciary duties owed by them to plaintiff and members of the Class by reason of
the acts described herein, and whether Williams aided and abetted the commission
of such breaches.
(c) The claims of plaintiff are typical of the claims of the other
members of the Class and plaintiff has no interests that are adverse or
antagonistic to the interests of the Class.
(d) Plaintiff is committed to the vigorous prosecution of this action
and has retained competent counsel
- 3 -
<PAGE>
experienced in litigation of this nature. Accordingly, plaintiff is an adequate
representative of the Class and will fairly and adequately protect the interests
of the Class.
(e) The prosecution of separate actions by individual members of the Class
would create a risk of inconsistent or varying adjudications with respect to
individual members of the Class and establish incompatible standards of conduct
for the party opposing the Class.
(f) Defendants have acted and are about to act on grounds generally
applicable to the Class, thereby making appropriate final injunctive or
corresponding declaratory relief with respect to the Class as a whole.
FACTUAL BACKGROUND
------------------
8. On December 12, 1994, Transco and Williams announced that they had
reached a definitive merger agreement pursuant to which Williams will acquire
60% of the common stock of Transco through a cash tender offer of $17.50 per
Transco share. The cash tender offer will be followed by a stock merger in which
shares of Transco common stock not purchased in the tender offer will be
exchanged for 0.625 shares of Williams' common stock. The merger agreement has
been approved by both Transco's and Williams' board of directors. The merger
agreement constitutes a "change of control" requiring the individual defendants
to maximize shareholder value.
- 4 -
<PAGE>
9. As part of the transaction, Williams and Transco also entered into a
stock option agreement (the "lock-up option") providing for a grant of an option
to Williams to purchase, at $17.50 per share, up to 7.5 million additional
shares of Transco common stock.
10. As reported by The Value Line Investment Survey, Transco's main
pipeline subsidiary, Transcontinental Gas Pipeline Corp., is performing well,
benefitting from a variety of factors including lower operating costs, reduced
interest expense, and higher allowances on equity. The Company's gas marketing
division's results are also improving, for which the net income has risen
substantially on a year-over-year basis.
11. Expansion programs will play a major role in Transco's earnings growth
over the long haul. Currently, Transco is engaged in several pipeline and
storage projects that will increase the Company's service areas and
transportation capacity. Most of these programs are slated to be in operation by
1996. Finally, Transco's dividend yield is considered above average compared to
its industry peers, and its earnings potential remains strong.
12. By virtue of its due diligence negotiations with Transco and the
merger agreement with the Company, Williams has been privy to material nonpublic
information concerning Transco's business and the desirability and value of
same. Accordingly, Williams has positioned itself to
- 5 -
<PAGE>
purchase the outstanding shares of Transco at an unreasonably low and unfair
price to the detriment of plaintiff and the other public stockholders of the
Company. Such a merger between Transco and Williams would allow Williams,
without paying adequate consideration for Transco shares, to further strengthen
its position in the energy industry.
13. The transaction has been structured as a two-step transaction, the
first step being a tender offer for $17.50 per Transco share in cash, and the
second step being a merger for 0.625 shares of Williams stock per Transco
share. Since Transco shareholders do not know the value of the Williams
securities to be paid on the "back-end" (particularly since the defendants
have failed to establish a collar with respect to these securities), they will
be coerced into tendering their shares on the front end of the offer for
inadequate cash consideration.
14. Because of the announcement of the definitive merger agreement
and the structure of the transaction, no fair market check to determine the fair
value of Transco's publicly held shares can be conducted. Moreover, defendants
have set the price for the publicly held shares of Transco without taking
adequate steps to determine the fair value of such securities.
15. The actions taken by the individual defendants in entering into
the merger agreement and the lock-up option are in gross disregard of the
fiduciary duties owed to
- 6 -
<PAGE>
plaintiff and the other members of the Class, including their obligation to
maximize shareholder value.
16. Defendant Williams, without which the proposed transaction would not
occur, and with knowledge of the individual defendants' breach of fiduciary
duty, has aided and rendered substantial assistance to the individual defendants
and stands to handsomely profit from the transaction.
17. Plaintiff and the other members of the Class will suffer irreparable
injury unless the unlawful transactions complained of herein are enjoined.
18. Plaintiff and the Class have no adequate remedy at law.
WHEREFORE, plaintiff demands judgment and preliminary and permanent relief,
including injunctive relief, in his favor and in favor of the Class and against
defendants as follows:
A. Declaring that this action is properly maintainable as a class action,
and certifying plaintiff as class representative;
B. Declaring that the individual defendants and each of them have
committed a gross abuse of trust and have breached their fiduciary duties to
plaintiff and the other members of the Class;
C. Enjoining the tender offer and the merger;
- 7 -
<PAGE>
D. If the proposed transactions are consummated in whole or in part,
rescinding the same or awarding rescissory damages to plaintiff and the Class;
E. Awarding plaintiff and the Class compensatory damages;
F. Awarding plaintiff the costs and disbursements of this action,
including reasonable attorneys' and experts' fees; and
G. Granting such other and further relief as this Court may deem just and
proper.
Dated: December 12, 1994
ROSENTHAL MONHAIT, GROSS
& GODDESS, P.A.
By: /s/Joseph A. Rosenthal
--------------------------
First Federal Plaza
P.O. Box 1070
Wilmington, DE 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
GOODKIND LABATON RUDOFF
& SUCHAROW LLP
100 Park Avenue
New York, NY 10017
(212) 907-0700
- 8 -
<PAGE>
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- -------------------------------------X
CHARLES MILLER, :
:
Plaintiff, :
:
- against - : C. A. No. 13922
: -----
JOHN P. DESBARRES, WILLIAM H. :
LUERS, FREDERICK H. SCHULTZ, :
GORDON F. AHALT, BENJAMIN F. :
BAILAR, ROBERT W. FRI, J. DAVID : CLASS ACTION COMPLAINT
GRISSOM, TRANSCO ENERGY COMPANY, : ----------------------
and THE WILLIAMS COMPANIES, INC., :
:
Defendants. :
- -------------------------------------X
Plaintiff, by his attorneys, alleges upon personal knowledge as to his own
acts and upon information and belief as to all other matters, as follows:
1. Plaintiff brings this action individually and as a class action on
behalf of all persons, other than defendants, who own the securities of Transco
Energy Company ("Transco" or the "Company") and who are similarly situated (the
"Class"), for injunctive and other relief. Plaintiff seeks, inter alia, to
----- ----
enjoin consummation of a proposed transaction (the "transaction") announced on
December 12, 1994, pursuant to which The Williams Companies, Inc. ("Williams")
will make a cash tender offer to acquire up to 24.6 million shares, or 60%, of
Transco common stock and related common stock purchase rights for $17.50 per
share followed by a merger whereunder each remaining Transco share will be
exchanged for 0.625 shares of Williams common stock.
2. The proposed transaction and the acts of the individual defendants, as
more particularly alleged herein,
<PAGE>
constitute a breach of the individual defendants' fiduciary duties to plaintiff
and the Class, aided and abetted by Williams.
3. The individual defendants' agreement to engage in the transaction was
in breach of their fiduciary duties owed to Transco's stockholders to take all
necessary steps to ensure that the stockholders will receive the maximum value
realizable for their shares in any sale of control of the Company. In the
context of this action, defendants were required to take all reasonable steps to
assure the maximization of stockholder value, including the implementation of a
bidding mechanism to foster a fair auction of the Company to the highest bidder
or the exploration of strategic alternatives that will return greater or
equivalent value to plaintiff and the Class.
Parties
-------
4. Plaintiff is and, at all relevant times, has been the owner of shares
of Transco common stock.
5. Transco is a corporation duly organized and existing under the laws of
the State of Delaware. Transco is a holding company owning all the common shares
of Transcontinental Gas Pipe Line Corp., Texas Gas Transmission Corp., and
several other companies engaged in natural gas transportation and gas related
businesses. Transco maintains its principal executive offices at 2800 Post Oak
Boulevard, Houston, Texas 77251. Transco has approximately 40.9 million shares
of common stock outstanding and approximately 15,700 stockholders of record.
Transco stock trades on the New York Stock Exchange.
2
<PAGE>
6. Defendant John P. DesBarres is Chief Executive Officer, President, and
Chairman of the Board of Directors of Transco. DesBarres' annual compensation
is $888,662.
7. Defendants William H. Luers, Frederick H. Schultz, Gordon F. Ahalt,
Benjamin F. Bailar, Robert W. Fri, and J. David Grissom are directors of
Transco.
8. The defendants named in paragraphs 7 and 8 are hereinafter referred
to as the "Individual Defendants."
9. Because of their positions as officers/directors of the Company, the
Individual Defendants owe fiduciary duties of loyalty and due care to plaintiff
and the other members of the Class.
10. Each defendant herein is sued individually as a conspirator and aider
and abettor, as well as in his capacity as an officer and/or director of the
Company, and the liability of each arises from the fact that he has engaged in
all or part of the unlawful acts, plans, schemes or transactions complained of
herein.
CLASS ACTION ALLEGATIONS
------------------------
11. Plaintiff brings this action in his own behalf and as a class action,
pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of all
stockholders of the Company, except defendants herein and any person, firm,
trust, corporation, or other entity related to or affiliated with any of the
defendants, who are and will be threatened with injury arising from defendants'
actions as is described more fully below.
12. This action is properly maintainable as a class action.
3
<PAGE>
13. The Class is so numerous that joinder of all members is impracticable.
The Company has approximately 15,700 stockholders of record.
14. There are questions of law and fact common to the Class including,
inter alia, whether:
- ----- ----
a. the proposed transaction is grossly unfair to Transco's public
stockholders;
b. defendants have engaged and are continuing to prevent plaintiff
and the Class from receiving the maximum value per share that could be received
in an unfettered market for control of Transco;
c. the individual defendants wrongfully failed or refused to obtain
or attempt to obtain a purchaser for Transco for consideration more valuable
than the transaction contemplates;
d. defendants have breached or aided and abetted the breach of the
fiduciary and other common law duties owed to plaintiff and the members of the
Class; and
e. plaintiff and the other members of the Class would be irreparably
damaged were the transaction complained of herein consummated;
15. Plaintiff is committed to prosecuting the action and has retained
competent counsel experienced in litigation of this nature. Plaintiff's claims
are typical of the claims of the other members of the Class and plaintiff has
the same interests as the other members of the Class. Plaintiff is an adequate
representative of the Class.
16. The prosecution of separate actions by individual members of the Class
would create the risk of inconsistent or
4
<PAGE>
varying adjudications with respect to individual members of the Class which
would establish incompatible standards of conduct for defendants, or
adjudications with respect to individual members of the Class which would as a
practical matter be dispositive of the interest of the other members not parties
to the adjudications or substantially impair or impede their ability to protect
their interest.
17. The defendants have acted, or refused to act, on grounds
generally applicable to, and causing injury to, the Class and, therefore,
preliminary and final injunctive relief on behalf of the Class as a whole is
appropriate.
SUBSTANTIVE ALLEGATIONS
-----------------------
18. By the acts, transactions, and courses of conduct alleged herein,
defendants, individually and as part of a common plan and scheme and/or aiding
and abetting one another are attempting to deprive plaintiff and the Class
unfairly of the full value of their investment in Transco.
19. On December 12, 1994, the Dow Jones News Wire reported that Transco
-------------------
has agreed to be acquired by Williams in a two-step merger transaction valued at
approximately $3 billion, which includes cash and the assumption of $2.3 billion
in debt and preferred stock.
20. Under the terms of the proposed Offer, during the first step of the
two-step transaction, Transco stockholders will receive $17.50 per share of
Transco stock they own. Under the second-step, those shares not tendered will
be exchanged for 0.625 of Williams common stock.
5
<PAGE>
21. Moreover, the outstanding shares of Transco $4.75 cumulative preferred
stock will be converted into the right to receive an equal number of shares of a
new series of Williams $4.75 cumulative preferred stock convertible into 0.5588
Williams common shares.
22. Transco $3.50 cumulative convertible preferred stock will be converted
into the right to receive an equal number of shares of a new series of Williams
$3.50 cumulative convertible preferred stock convertible into 1.5625 Williams
common shares and otherwise having substantially equivalent rights.
23. At the conclusion of the tender offer, Williams will form a new unit
that will merge into Transco, with Transco continuing as a wholly-owned
subsidiary of Williams. Since Transco shareholders do not know the value of the
Williams securities to be paid on the "back-end" (particularly since the
defendants have failed to establish a collar with respect to these securities),
they will be coerced into tendering their shares on the front end of the offer
for inadequate cash consideration.
24. As part of the transaction, Transco signed a lock-up stock option with
Williams, providing Williams the right to purchase up to 7.5 million additional
shares of Transco common stock at $17.50 per share. If, however, Williams
exercises the stock option, Transco has the right to cancel the option for a
cash payment not to exceed $2 per option.
25. Transco also agreed to pay to Williams a termination fee under certain
undisclosed circumstances, presumably which include the receipt or solicitation
of other offers for the Company.
6
<PAGE>
26. Further, in an attempt to prevent others from making a bid for the
Company, Williams will begin its tender for 60% of Transco's shares on Friday,
December 16, 1994.
27. Because of the announcement of the definitive merger agreement and the
structure of the transaction, no fair market check to determine the fair value
of Transco's publicly held shares can be conducted. Moreover, defendants have
set the price for the publicly held shares of Transco without taking adequate
steps to determine the fair value of such securities.
28. Defendants chose to pursue this transaction at a time when Transco is
poised to significantly increase future earnings and when its value is believed
to be far in excess of the consideration offered in the transaction.
29. Indeed, on July 20, 1994, Transco announced improved results for the
second quarter ended June 30, 1994. For the quarter, Transco reported net income
of $2.5 million, or $0.6 per share, compared with $1.4 million, or $0.4 per
share, in the prior year. Transco attributed its improved second quarter results
to improved financial results of Transco Gas Marketing Co. and Transcontinental
Gas Pipe Line Corp. and lower financing costs. Commenting on the improved
quarterly results, defendant DesBarres stated, "We're pleased with our second
quarter results and particularly with the improved results from the gas
marketing segment... These results once again confirm our continuing progress
--------------------------------------------------------
toward improving net income and returning the gas marketing segment to
- ----------------------------------------------------------------------
profitability." [Emphasis added.]
- ---------------
30. On October 26, 1994, Transco reported its results the quarter ended
September 30, 1994. For the quarter, the Company
7
<PAGE>
reported a net loss of $4.6 million, or $0.11 per share, compared to a net loss
of $18.0 million, or $0.46 per share, in the same quarter during the prior year.
Excluding charges in both periods, Transco reported a net loss of $0.1 million,
or less than $0.01 per share, in the third quarter of 1994, compared with a net
loss of $2.3 million, or $0.06 per share, for the 1993 third quarter. Commenting
on the Company's third quarter results, defendant DesBarres stated, "We
attribute Transco's improved results over those of last year's third quarter
primarily to the continued strong performance or Transcontinental Gas Pipe Line
Corporation (TGPL), the improved financial performance of Transco Gas Marketing
Company (TGMC) and lower financing costs."
31. Defendant DesBarres also stated,
Although marketing reported a loss, we're pleased with the continuing
improvement in that business, particularly in view of the weak gas price
environment during the quarter. The pipelines are continuing their solid
performance, despite Texas Gas' lower earnings, which is due, in part, to
the seasonality of the demand revenues under the provisions of our Order
636 services. It is further attributed to an exceptionally strong third
quarter in 1993 that reported a high level of interruptible transportation
volumes on Texas Gas prior to implementation of Order 636. These
-----
results once again confirm our continuing progress toward improved net
----------------------------------------------------------------------
income and returning marketing to profitability this year. [Emphasis
----------------------------------------------------------
added.]
32. Defendants' knowledge and economic power and that of the investing
public is unequal because they are in possession of material non-public
information concerning the Company's assets, businesses, and future prospects.
This disparity makes it inherently unfair for the individual defendants to agree
to
8
<PAGE>
transfer ownership of Transco from its public stockholders to Williams at such
an unfair and grossly inadequate consideration.
33. The consideration to be paid to the public shareholders in the
transaction is grossly unfair, inadequate, and substantially below the fair or
inherent value of the Company. The intrinsic value of the equity of Transco is
materially greater than the consideration being offered, taking into account
Transco's asset value, liquidation value, its expected growth, the strength of
its business, and its revenues and cash flow and earnings power.
34. The individual defendants, in violation of their fiduciary obligations
to maximize stockholder value, have not considered seriously other potential
purchasers of Transco or its stock in a manner designed to obtain the highest
possible price for Transco public stockholders.
35. The proposed Offer is wrongful, unfair, and harmful to Transco public
stockholders, and will deny Class members their right to share proportionately
in the true value of Transco's valuable assets, profitable business, and future
growth in profits and earnings.
36. Defendant Williams, without which the proposed transaction would not
occur, and with knowledge of the individual defendants' breach of fiduciary
duty, has aided and rendered substantial assistance to the individual defendants
and stands to handsomely profit from the transaction.
37. By reason of the foregoing, defendants herein have willfully
participated in unfair dealing toward plaintiff and the other members of the
Class and have engaged in and substantially
9
<PAGE>
assisted and aided and abetted each other in breach of the fiduciary duties
owed to the Class.
38. Unless enjoined by this Court, defendants will continue to breach
their fiduciary duties owed to plaintiff and the Class, and will succeed in
their plan to deprive plaintiff and the Class of their fair proportionate share
of Transco's valuable assets and businesses, all to the irreparable harm of the
Class.
39. Plaintiff and the Class have no adequate remedy or law.
WHEREFORE, plaintiff prays for judgment and relief as follows:
a. declaring that this lawsuit is properly maintainable as a class
action and certifying plaintiff as representative of the Class;
b. declaring that the defendants and each of them have committed or
aided and abetted a gross abuse of fiduciary duties owed to plaintiff and the
other members of the Class;
c. preliminarily and permanently enjoining defendants and all persons
acting under, in concert with, or for them, from proceeding with, consummating
or closing the transaction;
d. in the event the transaction is consummated, rescinding it and
setting it aside;
e. awarding rescissory and/or compensatory damages against
defendants, jointly and severally, in an amount to be determined at trial,
together with prejudgment interest at the maximum rate allowable by law;
10
<PAGE>
f. awarding plaintiff and the Class their costs and disbursements and
reasonable allowances for plaintiff's counsel and experts' fees and expenses;
and
g. granting such other and further relief as may be just and proper.
Dated: December 12, 1994
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: /s/ Joseph A. Rosenthal, Esq.
------------------------------------------
Joseph A. Rosenthal, Esq.
First Federal Plaza, Suite 214
P.O. Box 1070
Wilmington, Delaware 19899
(302) 656-4433
Attorneys for Plaintiff
Of Counsel:
- ----------
WECHSLER SKIRNICK HARWOOD
HALEBIAN & FEFFER
Robert I. Harwood, Esq.
Jeffrey M. Haber, Esq.
555 Madison Avenue
New York, New York 10022
(212) 935-7400
11
<PAGE>
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
+++++++++++++++++++++++++++++++++++++
+
FREDERICK RAND and MIRIAM SARNOFF, +
+
Plaintiffs + Civil Action No. 13925
+
-against- +
+ CLASS ACTION
JOHN P. DESBARRES, WILLIAM H. + COMPLAINT
LUERS, FREDERICK H. SCHULTZ, + ------------
GORDON F. AHALT, BENJAMIN F. +
BAILAR, ROBERT W. FRI, DAVID J. +
GRISSOM, TRANSCO ENERGY COMPANY +
and THE WILLIAMS COMPANIES, INC., +
Defendants. +
+
+++++++++++++++++++++++++++++++++++++
Plaintiffs, by their attorneys, allege upon information and belief
(said information and belief being based, in part, upon the investigation
conducted by and through their undersigned counsel), except with respect to
their ownership of Transco Energy Company ("Transco" or the "Company") common
stock, which is alleged upon their personal knowledge as follows:
THE PARTIES
-----------
1. Plaintiffs are the owners of shares of defendant Transco.
2. Defendant Transco is a corporation organized and existing under
the laws of the State of Delaware. Transco maintains its principal offices at
2800 Post Oak Boulevard,
1
<PAGE>
P.O. Box 1396, Houston, Texas. Transco transports natural gas through its two
interstate pipeline systems, 10,500-mile Transcontinental Gas Pipe Line
Corporation and 6,050-mile Texas Gas Transmission Corporation, to markets in
the eastern and midwestern United States, respectively. Transco also buys, sells
and arranges for the transportation of natural gas throughout the United States
and Canada through its marketing subsidiary, Transco Gas Marketing Company.
Transco, through Interstate Coal Company, also mines coal in eastern Kentucky
and Tennessee.
3. Defendant John P. Desbarres is the Chairman of the Board,
President and Chief Executive Officer of Transco.
4. Defendants William H. Luers, Frederick H. Schultz, Gordon F.
Ahalt, Benjamin F. Bailar, Robert W. Fri and David J. Grissom are directors of
Transco.
5. The foregoing individual defendants (collectively referred to
herein as the "Director Defendants") are in a fiduciary relationship with
plaintiffs and the public stockholders of Transco, and owe plaintiffs and the
other Transco public stockholders the highest obligations of good faith, fair
dealing, due care, loyalty and full and candid disclosure.
2
<PAGE>
CLASS ACTION ALLEGATIONS
------------------------
6. Plaintiffs bring this action on their own behalf and as a class
action on behalf of all shareholders of defendant Transco (except defendants
herein and any person, firm, trust, corporation or other entity related to or
affiliated with any of the defendants) or their successors in interest, who have
been or will be adversely affected by the conduct of defendants alleged herein.
7. This action is properly maintainable as a class action for the
following reasons:
(a) the class of shareholders for whose benefit this action is
brought is so numerous that joinder of all Class members is impracticable. As
of June 30, 1994, there were over 40 million shares of Transco common stock
outstanding, owned by over 15,000 shareholders of record scattered throughout
the United States.
(b) there are questions of law and fact which are common to
members of the class and Which include, inter alia, the following:
----- ----
(i) whether the Director Defendants have breached their
fiduciary duties owed by them to plaintiffs and members of the class and/or have
been aided and abetted in such breach;
3
<PAGE>
(ii) whether the Director Defendants have failed to fully
disclose the true value of defendant Transco's assets and earnings power;
(iii) whether the Director Defendants have wrongfully failed
and refused to seek a purchaser of Transco and/or any and all of its various
assets or divisions at the highest possible price; and
(iv) whether plaintiffs and the other members of the Class
will be irreparably damaged by the Individual Defendants' failure to conduct an
active auction of Transco.
8. Plaintiffs are committed to prosecuting this action and have
retained competent counsel experienced in litigation of this nature. The claims
of plaintiffs are typical of the claims of the other members of the Class and
plaintiffs have the same interest as the other members of the Class.
Accordingly, plaintiffs are adequate representatives of the Class and will
fairly and adequately protect the interests of the Class.
SUBSTANTIVE ALLEGATIONS
-----------------------
9. On May 2, 1994 Smith Barney Shearson raised Transco to "buy" from
"outperform."
4
<PAGE>
10. On May 17, 1994, Desbarres stated at Transco's 46th Annual Meeting
that Transco "is well on its way to achieving its vision of being the premier
transporter and marketer in the eastern half of the United States." He further
stated that, "Demand is growing in Transco's markets, and we are not only
keeping pace, but actually outdoing our competition in meeting customer needs.
And I can not think of a better way for our company to achieve success."
11. On July 20, 1994, Transco announced its second quarter improved
operating income which was the seventh consecutive quarter of improved operating
results.
12. On August 4, 1994, Transco announced organizational changes to
better pursue development of new business and expand the reliance, quality
services provided to its current customers. These changes refined the
organization and increased the value of Transco.
13. On October 26, 1994, Transco announced its third quarter improved
operating income. This was its eighth consecutive quarter of improved operating
results.
14. Transco was on its way to becoming the premier transporter and
marketer of natural gas in the eastern half of the United States before its
public announcement on December 12, 1994.
5
<PAGE>
15. On December 12, 1994, it was publicly announced that Transco had
approved a merger between Transco and The Williams Companies, Inc. ("Williams").
Under the terms of the merger agreement, Williams will pay $17.50 cash a share
for up to 24.6 million Transco shares or 60% of Transco common stock and related
common stock purchase rights in a first-step tender offer. The tender offer will
be conditioned on, among other things, the tender of no fewer than 20.9 million
shares, or 51% of Transco's common stock. After the tender offer, a newly formed
Williams unit will be merged into Transco, with Transco continuing as a wholly
owned subsidiary of Williams. The outstanding shares of Transco $4.75 cumulative
convertible preferred stock will be converted into the right to receive an equal
number of shares of a new series of Williams $4.75 cumulative convertible
preferred stock convertible into 0.5588 Williams common shares. The Transco
$3.50 cumulative convertible preferred stock will be converted into the right to
receive an equal number of shares of a new series of Williams $3.50 cumulative
convertible preferred stock convertible into 1.5625 Williams common shares and
otherwise having substantially equivalent rights.
16. In addition, Williams and Transco signed a stock option agreement
enabling Williams to buy up to 7.5 million additional Transco common shares at
$17.50 each. If Williams exercises the stock option, Transco has the right to
6
<PAGE>
cancel the option for a cash payment not to exceed $2 per option share.
17. The total value of the cash tender offer and merger, including
the exchange of new series of Williams convertible preferred stock for Transco's
two outstanding series of convertible preferred stock and including Transco's
outstanding indebtedness, is approximately $3 billion. But because Transco
shareholders do not know the value of the Williams securities to be paid on the
"back-end" (particularly since the defendants have failed to establish a collar
with respect to these securities), they will be coerced into tendering their
shares on the front end of the offer for inadequate cash consideration.
18. Under the circumstances, the Director Defendants are obligated to
explore all alternatives to maximize shareholder value. The Director Defendants
will be in breach of their fiduciary duties owed to Transco's public
shareholders if they fail to fully explore bona fide offers by potential
---- ----
acquirors for the purchase of the Company.
19. The Williams proposal constitutes a change of control of Transco,
its business and affairs.
20. Because of the announcement of the definitive merger agreement and
the structure of the transaction, no fair market check to determine the fair
value of Transco's publicly
7
<PAGE>
held shares can be conducted. Moreover, defendants have set the price for the
publicly held shares of Transco without taking adequate steps to determine the
fair value of such securities.
21. The Director Defendants have violated fiduciary and other common
law duties which they owe to plaintiffs and the other members of the Class in
that they are not exercising informed independent business judgment, have acted
and are acting to the detriment of the members of the Class in order to benefit
themselves, and have participated in and substantially and knowingly aided and
abetted the above breaches of fiduciary duty and the plan to effect a change of
control of Transco on unfair and inadequate terms.
22. Because of their positions of control and authority as officers
and directors of Transco, the Director Defendants were able to and did, directly
or indirectly, control the actions of Transco in agreeing to a merger on terms
which are unfair to the shareholders of Transco. In violation of the fiduciary
duties owed Transco's shareholders, the Director Defendants are causing, or are
substantially and knowingly aiding and abetting in, the plan to enable Williams
to acquire Transco to the detriment of plaintiffs and the plaintiff class.
23. Defendant Williams, without which the proposed transaction would
not occur, and with knowledge of the
8
<PAGE>
individual defendant's breach of fiduciary duty, has aided and rendered
substantial assistance to the individual defendants and stands to handsomely
profit from the transaction.
24. Plaintiffs and the Class will suffer irreparable damage unless
defendants are enjoined from breaching their fiduciary duties to maximize
shareholder value.
25. Plaintiffs have no adequate remedy at law.
WHEREFORE, plaintiffs demand judgment as follows:
A. Declaring this to be a proper action;
B. Ordering defendants to carry out their fiduciary duties to
plaintiffs and the other members of the Class by announcing their intention to:
(i) undertake an appropriate evaluation of alternatives designed
to maximize value for Transco's public stockholders; and
(ii) adequately ensure that no conflicts of interests exist
between defendants' own interests and their fiduciary obligation to the public
stockholders or, if such conflicts exist, ensure that all such conflicts will be
resolved in the best interests of Transco's public stockholders.
C. Enjoining consummation of the merger agreement;
9
<PAGE>
D. Directing that defendants pay to plaintiffs and the Class all
damages caused to them and account for all profits and any special benefits
obtained as a result of their unlawful conduct;
E. Awarding to plaintiffs the costs and disbursements of this action,
including a reasonable allowance for the fees and expenses of plaintiffs'
attorneys and expert; and
F. Granting such other and further relief as may be just and proper
in the premises.
Dated: December 14, 1994
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By: /s/ Jay Rosenthal
------------------------------
First Federal Plaza
Suite 214
Wilmington, Delaware 19899
Telephone: (302) 656-4433
Attorneys for Plaintiffs
OF COUNSEL:
STULL, STULL & BRODY
6 East 45th Street
New York, NY 10017
LAW OFFICES OF JOSEPH H. WEISS
319 Fifth Avenue
New York, NY 10016
10
<PAGE>
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- -------------------------------------------
NICK DeCESARE, Custodian for NICOLE Civil Action No. 13926
DeCESARE, UGMA-MA,
Plaintiff,
CLASS ACTION
- v. - COMPLAINT
------------
JOHN P. DesBARRES, GORDON F. AHALT,
WILLIAM H. LUERS, ROBERT W. FRI,
FREDERICK H. SCHULTZ, J. DAVID
GRISSOM, BENJAMIN F. BAILAR,
PATRICIA L. HIGGINS, TRANSCO ENERGY
COMPANY and THE WILLIAMS COMPANIES,
INC.,
Defendants.
- -------------------------------------------
Plaintiff, by and through his attorneys, alleges as follows on
information and belief, except for paragraph 1 which is alleged on knowledge:
PARTIES
-------
1. Plaintiff is the owner of the common stock of Transco Energy
Company ("Transco"), and has owned such stock at all relevant times.
2. Transco is a Delaware corporation based in Houston, Texas. It is a
diversified energy company, owning and operating, through its subsidiaries, a
natural gas pipeline in the United States. This pipeline system joins natural
gas producing regions of the United States to markets
<PAGE>
in the Northeastern, Mid-Atlantic and Midwestern states. The Company also
markets gas and mines for coal.
3. (a) Defendant John P. DesBarres ("DesBarres") is and has been at
all relevant times Chairman, President and Chief Executive Officer of the
Company.
(b) Defendants Gordon F. Ahalt, William H. Luers, Robert W. Fri,
Frederick H. Schultz, J. David Grissom, Benjamin F. Bailar, and Patricia L.
Higgins are and have been at all relevant times directors of Transco.
4. Defendant The Williams Companies, Inc. ("Williams") also owns and
operates natural gas and petroleum products pipelines. Williams transports
natural gas through pipelines serving Louisiana and sixteen Western and
Midcontinent states, and transports petroleum products to eleven Midwestern
states. Its principal executive offices are located in Tulsa, Oklahoma.
5. By virtue of the individual defendants' positions as directors and
officers of Transco, said defendants were and are in a fiduciary relationship
with plaintiff and the other public stockholders of the Company, and owe to
plaintiff and the other members of the class the highest obligations of good
faith and fair dealing.
CLASS ACTION ALLEGATIONS
------------------------
6. Plaintiff brings this action for declaratory, injunctive and other
relief on his own behalf and as a class
- 2 -
<PAGE>
action, pursuant to Rule 23 of the Rules of the Court of Chancery on behalf of
all common stockholders of Transco (except defendants herein and any person,
firm, trust, corporation or other entity related to or affiliated with any of
the defendants) or their successors in interest, who are being deprived of the
opportunity to maximize the value of their Transco shares by the wrongful acts
of defendants as described herein.
7. This action is properly maintainable as a class action for the
following reasons:
(a) The Class of stockholders for whose benefit this action is
brought is so numerous that joinder of all Class members is impracticable. There
are approximately 40 million common shares of Transco outstanding, owned by over
thirty thousand stockholders. Members of the Class are scattered throughout the
United States.
(b) There are questions of law and fact which are common to
members of the Class, including whether the individual defendants have breached
the fiduciary duties owed by them to plaintiff and members of the Class by
reason of the acts described herein, and whether Williams aided and abetted the
commission of such breaches.
(c) The claims of the plaintiff are typical of the claims of the
other members of the Class and plaintiff has no interests that are adverse or
antagonistic to the interests of the Class.
- 3 -
<PAGE>
(d) Plaintiff is committed to the vigorous prosecution of this
action and has retained competent counsel experienced in litigation of this
nature. Accordingly, plaintiff is an adequate representative of the Class and
will fairly and adequately protect the interests of the Class.
(e) The prosecution of separate actions by individual members of
the Class would create a risk of inconsistent or varying adjudications with
respect to individual members of the Class and establish incompatible standards
of conduct for the party opposing the Class.
(f) Defendants have acted and are about to act on grounds
generally applicable to the Class, thereby making appropriate final injunctive
or corresponding declaratory relief with respect to the Class as a whole.
FACTUAL BACKGROUND
------------------
8. On December 12, 1994, Transco and Williams announced that they had
reached a definitive merger agreement pursuant to which Williams will acquire
60% of the common stock of Transco through a cash tender offer of $17.50 per
Transco share. The cash tender offer will be followed by a stock merger in
which shares of Transco common stock not purchased in the tender offer will be
exchanged for 0.625 shares of Williams' common stock. The merger agreement has
been approved by both Transco's and Williams' board of directors. The merger
agreement constitutes a "change of
- 4 -
<PAGE>
control" requiring the individual defendants to maximize shareholder value.
9. As part of the transaction, Williams and Transco also entered into
a stock option agreement (the "lock-up option") providing for a grant of an
option to Williams to purchase, at $17.50 per share, up to 7.5 million
additional shares of Transco common stock.
10. As reported by The Value Line Investment Survey, Transco's main
pipeline subsidiary, Transcontinental Gas Pipeline Corp., is performing well,
benefitting from a variety of factors including lower operating costs, reduced
interest expense, and higher allowances on equity. The Company's gas marketing
division's results are also improving, for which the net income has risen
substantially on a year-over-year basis.
11. Expansion programs will play a major role in Transco's earnings
growth over the long haul. Currently, Transco is engaged in several pipeline
and storage projects that will increase the Company's service areas and
transportation capacity. Most of these programs are slated to be in operation
by 1996. Finally, Transco's dividend yield is considered above average compared
to its industry peers, and its earnings potential remains strong.
12. By virtue of its due diligence negotiations with Transco and the
merger agreement with the Company, Williams has been privy to material
nonpublic information
- 5 -
<PAGE>
concerning Transco's business and the desirability and value of same.
Accordingly, Williams has positioned itself to purchase the outstanding shares
of Transco at an unreasonably low and unfair price to the detriment of plaintiff
and the other public stockholders of the Company. Such a merger between Transco
and Williams would allow Williams, without paying adequate consideration for
Transco shares, to further strengthen its position in the energy industry.
13. The transaction has been structured as a two-step transaction, the
first step being a tender offer for $17.50 per Transco share in cash, and the
second step being a merger for 0.625 shares of Williams stock per Transco share.
Since Transco shareholders do not know the value of the Williams securities to
be paid on the "back-end" (particularly since the defendants have failed to
establish a collar with respect to these securities), they will be coerced into
tendering their shares on the front end of the offer for inadequate cash
consideration.
14. Because of the announcement of the definitive merger agreement and
the structure of the transaction, no fair market check to determine the fair
value of Transco's publicly held shares can be conducted. Moreover, defendants
have set the price for the publicly held shares of Transco without taking
adequate steps to determine the fair value of such securities.
- 6 -
<PAGE>
15. The actions taken by the individual defendants in entering into
the merger agreement and the lock-up option are in gross disregard of the
fiduciary duties owed to plaintiff and the other members of the Class, including
their obligation to maximize shareholder value.
16. Defendant Williams, without which the proposed transaction would
not occur, and with knowledge of the individual defendants' breach of fiduciary
duty, has aided and rendered substantial assistance to the individual defendants
and stands to handsomely profit from the transaction.
17. Plaintiff and the other members of the Class will suffer
irreparable injury unless the unlawful transactions complained of herein are
enjoined.
18. Plaintiff and the Class have no adequate remedy at law.
WHEREFORE, plaintiff demands judgment and preliminary and permanent
relief, including injunctive relief, in his favor and in favor of the Class and
against defendants as follows:
A. Declaring that this action is properly maintainable as a class action,
and certifying plaintiff as class representative;
B. Declaring that the individual defendants and each of them have
committed a gross abuse of trust and have breached their fiduciary duties to
plaintiff and the other members of the Class;
- 7 -
<PAGE>
C. Enjoining the tender offer and the merger;
D. If the proposed transactions are consummated in whole or in part,
rescinding the same or awarding rescissory damages to plaintiff and the Class;
E. Awarding plaintiff and the Class compensatory damages;
F. Awarding plaintiff the costs and disbursements of this action,
including reasonable attorneys' and experts' fees; and
G. Granting such other and further relief as this Court may deem just and
proper.
Dated: December 14, 1994
ROSENTHAL MONHAIT, GROSS
& GODDESS, P.A.
By: /s/ Jay Rosenthal
---------------------------
First Federal Plaza
P.O. Box 1070
Wilmington, DE 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
WOLF POPPER ROSS WOLF & JONES
845 Third Avenue
New York, NY 10022
- 8 -
