<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934
TRANSCO ENERGY COMPANY
(NAME OF SUBJECT COMPANY)
THE WILLIAMS COMPANIES, INC.
(BIDDER)
COMMON STOCK, PAR VALUE $0.50 PER SHARE
(INCLUDING THE ATTACHED COMMON SHARE PURCHASE RIGHTS)
(TITLE OF CLASS OF SECURITIES)
89353210
(CUSIP NUMBER OF CLASS OF SECURITIES)
J. FURMAN LEWIS
SENIOR VICE PRESIDENT AND
GENERAL COUNSEL
THE WILLIAMS COMPANIES, INC.
ONE WILLIAMS CENTER
TULSA, OKLAHOMA 74172
(918) 588-2000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND
COMMUNICATIONS ON BEHALF OF BIDDERS)
WITH A COPY TO:
RANDALL H. DOUD, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 735-3000
CALCULATION OF FILING FEE
Transaction valuation* Amount of filing fee**
$430,500,000 $86,100
--------------------- ---------------------
* For purposes of calculating the filing fee only. This calculation assumes
the purchase of 24,600,000 shares of Common Stock, par value $0.50 per
share, of Transco Energy Company, together with the attached Common Share
Purchase Rights, at $17.50 net per share in cash.
** The amount of the filing fee, calculated in accordance with Rule 0-11(d) of
the Securities Exchange Act of 1934, as amended, equals 1/50th of one
percent of the aggregate cash value offered by The Williams Companies, Inc.
for such number of shares.
Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount Previously Paid: Not applicable. Filing Party: Not applicable.
Form or Registration No.: Not applicable. Date Filed: Not applicable.
<PAGE>
CUSIP NO. 89353210
14D-1
- --------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
THE WILLIAMS COMPANIES, INC. (73-0569878)
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
BK, WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(e) or 2(f)
[ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7,500,000 Shares issuable upon the terms and subject to the conditions
provided for in a Stock Option Agreement dated as of December 12, 1994
- --------------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
[ ]
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
15.5%, BASED ON SHARES REPORTED TO BE OUTSTANDING AND
ASSUMING EXERCISE IN FULL OF OPTION UNDER STOCK OPTION
AGREEMENT
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
2
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ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Transco Energy Company, a Delaware
corporation (the "Company"). The address of the Company's principal executive
offices is 2800 Post Oak Boulevard, Houston, Texas 77056.
(b) This Tender Offer Statement on Schedule 14D-1 relates to the offer by The
Williams Companies, Inc. (the "Purchaser"), a Delaware corporation, to purchase
up to 24,600,000 shares of Common Stock, par value $0.50 per share (the "Common
Stock"), of the Company, together with the attached common share purchase
rights, upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated December 16, 1994 (the "Offer to Purchase"), and in the related
Letter of Transmittal (which, together with any amendments or supplements
thereto, constitute the "Offer"), at a purchase price of $17.50 per share, net
to the tendering stockholder in cash. At December 9, 1994, 40,927,847 shares of
Common Stock were outstanding, according to the Company. The information set
forth in the Introduction of the Offer to Purchase annexed hereto as Exhibit
(a)(1) is incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d); (g) This Statement is being filed by the Purchaser. The information
set forth in Section 8 ("Certain Information Concerning the Purchaser and Sub")
of the Offer to Purchase and Schedule I thereto is incorporated herein by
reference.
(e) and (f) During the last five years, neither the Purchaser, nor, to the
best knowledge of the Purchaser, any of the persons listed on Schedule I to the
Offer to Purchase, (i) has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) was a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction as a
result of which any such person was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, Federal or State securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Introduction, Section 8 ("Certain
Information Concerning the Purchaser and Sub"), Section 10 ("Background of the
Offer; Contacts with the Company; the Merger Agreement and the Stock Option
Agreement; Other Matters") and Section 11 ("Purpose of the Offer; Plans for the
Company after the Offer and the Merger") of the Offer to Purchase is
incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 9 ("Source and Amount of Funds")
of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Introduction and Sections 10
("Background of the Offer; Contacts with the Company; the Merger Agreement and
the Stock Option Agreement; Other Matters") and
3
<PAGE>
11 ("Purpose of the Offer; Plans for the Company after the Offer and the
Merger") of the Offer to Purchase is incorporated herein by reference.
(f)-(g) The information set forth in Section 13 ("Effect of the Offer on the
Market for the Shares; Exchange Listing and Exchange Act Registration") of the
Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) The information set forth in the Introduction and Section 8 ("Certain
Information Concerning the Purchaser and Sub") of the Offer to Purchase is
incorporated herein by reference.
(b) The information set forth in the Introduction and Section 8 ("Certain
Information Concerning the Purchaser and Sub") of the Offer to Purchase is
incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction and Sections 8 ("Certain
Information Concerning the Purchaser and Sub"), 10 ("Background of the Offer;
Contacts with the Company; the Merger Agreement and the Stock Option Agreement;
Other Matters") and 11 ("Purpose of the Offer; Plans for the Company after the
Offer and the Merger") of the Offer to Purchase is incorporated herein by
reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 16 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 8 ("Certain Information Concerning the
Purchaser and Sub") of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) Not applicable.
(b)-(c) The information set forth in the Introduction and Sections 11
("Purpose of the Offer; Plans for the Company after the Offer and the Merger")
and 15 ("Certain Legal Matters; Regulatory Approvals") of the Offer to Purchase
is incorporated herein by reference.
(d) The information set forth in Sections 13 ("Effect of the Offer on the
Market for Shares; Exchange Listing and Exchange Act Registration") and 15
("Certain Legal Matters; Regulatory Approvals") of the Offer to Purchase is
incorporated herein by reference.
(e) The information set forth in Section 15 ("Certain Legal Matters;
Regulatory Approvals") of the Offer to Purchase is incorporated herein by
reference.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively, is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated December 16, 1994.
4
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(2) Letter of Transmittal.
(3) Notice of Guaranteed Delivery.
(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(7) Text of Press Release, dated December 12, 1994, issued by The Williams
Companies, Inc. and Transco Energy Company.
(8) Text of Press Release, dated December 16, 1994, issued by The Williams
Companies, Inc.
(9) Form of tombstone advertisement, dated December 16, 1994.
(b) Commitment Letter, dated December 9, 1994, among The Williams Companies,
Inc., Citibank, N.A., Chemical Bank, Bank of America National Trust and Savings
Association and Canadian Imperial Bank of Commerce.
(c) (1) 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.
(2) Stock Option Agreement, dated as of December 12, 1994, by and between The
Williams Companies, Inc. and Transco Energy Company.
(3) Confidentiality Agreement, dated October 10, 1994 between Transco Energy
Company and The Williams Companies, Inc.
(d) Not applicable.
(e) Not applicable.
(f) None.
(g) (1) Complaint in Alpern v. Transco Energy Company, et al. (Del. Ch.)
(C.A. No. 13918).
(2) Complaint in Weiss et al. v. Des Barres, et al. (Del. Ch.) (C.A. No.
13923).
(3) Complaint in Steiner v. Des Barres, et al. (Del. Ch.) (C.A. No. 13920).
(4) Complaint in Miller v. Des Barres, et al. (Del. Ch.) (C.A. No. 13922).
(5) Complaint in Rand et al. v. Des Barres, et al. (Del. Ch.) (C.A. No.
13925).
(6) Complaint in De Cesare v. Des Barres, et al. (Del. Ch.) (C.A. No. 13926).
5
<PAGE>
SIGNATURE
After due 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.
Dated: December 16, 1994
The Williams Companies, Inc.
By: /s/ J. Furman Lewis
----------------------------------
Name: J. Furman Lewis
Title: Senior Vice President
and General Counsel
6
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER PAGE
- ------ ----
(a)(1) Offer to Purchase, dated December 16, 1994.
(2) Letter of Transmittal.
(3) Notice of Guaranteed Delivery.
(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(7) Text of Press Release, dated December 12, 1994, issued by The
Williams Companies, Inc. and Transco Energy Company.
(8) Text of Press Release, dated December 16, 1994, issued by The
Williams Companies, Inc.
(9) Form of tombstone advertisement, dated December 16, 1994.
(b) Commitment Letter, dated December 9, 1994, among The Williams
Companies, Inc., Citibank, N.A., Chemical Bank, Bank of America
National Trust and Savings Association and Canadian Imperial Bank
of Commerce.
(c)(1) 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.
(2) Stock Option Agreement, dated as of December 12, 1994, by and
between The Williams Companies, Inc. and Transco Energy Company.
(3) Confidentiality Agreement, dated October 10, 1994 between Transco
Energy Company and The Williams Companies, Inc.
(d) Not applicable.
(e) Not applicable.
(f) None.
(g)(1) Complaint in Alpern v. Transco Energy Company, et al. (Del. Ch.)
(C.A. No. 13918).
(2) Complaint in Weiss et al. v. Des Barres, et al. (Del. Ch.) (C.A.
No. 13923).
(3) Complaint in Steiner v. Des Barres, et al. (Del. Ch.) (C.A. No.
13920).
(4) Complaint in Miller v. Des Barres, et al. (Del. Ch.) (C.A. No.
13922).
(5) Complaint in Rand et al. v. Des Barres, et al. (Del. Ch.) (C.A.
No. 13925).
(6) Complaint in De Cesare v. Des Barres, et al. (Del. Ch.) (C.A. No.
13926).
<PAGE>
OFFER TO PURCHASE FOR CASH
UP TO 24,600,000 SHARES OF COMMON STOCK
(INCLUDING THE ATTACHED RIGHTS)
OF
TRANSCO ENERGY COMPANY
AT
$17.50 NET PER SHARE IN CASH
BY
THE WILLIAMS COMPANIES, INC.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JANUARY 17, 1995, UNLESS THE
OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, AT LEAST 20,900,000
SHARES (REPRESENTING APPROXIMATELY 51% OF THE PRESENTLY OUTSTANDING
SHARES) BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION
OF THE OFFER. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS
CONTAINED IN THIS OFFER TO PURCHASE. SEE SECTION 14.
THE BOARD OF DIRECTORS OF TRANSCO ENERGY COMPANY HAS UNANIMOUSLY (WITH
ONE DIRECTOR ABSENT) DETERMINED THAT THE OFFER AND THE MERGER, TAKEN
TOGETHER, ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF
THE COMPANY, AND RECOMMENDS THAT HOLDERS OF SHARES OF COMMON STOCK ACCEPT
THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
shares of Common Stock, par value $0.50 per share (the "Shares"), of Transco
Energy Company and the attached Company Rights (as hereinafter defined, and,
unless the context otherwise requires, deemed to be included in all references
to "Shares") should either (i) complete and sign the Letter of Transmittal (or
a facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver it together with the certificate(s)
representing tendered Shares, and any other required documents, to the
Depositary or tender such Shares pursuant to the procedures for book-entry
transfer set forth in Section 3 or (ii) request such stockholder's broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. A stockholder whose Shares are registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
must contact such broker, dealer, commercial bank, trust company or other
nominee if such stockholder desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedures for book-entry transfer described in this Offer to Purchase
on a timely basis, may tender such Shares by following the procedures for
guaranteed delivery set forth in Section 3.
Questions and requests for assistance, or for additional copies of this Offer
to Purchase, the Letter of Transmittal or other tender offer materials, may be
directed to the Information Agent or the Dealer Manager at their respective
addresses and telephone numbers set forth on the back cover of this Offer to
Purchase. Holders of Shares may also contact brokers, dealers, commercial banks
and trust companies for assistance concerning the Offer.
----------------
The Dealer Manager for the Offer is:
SMITH BARNEY INC.
December 16, 1994
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION.............................................................. 3
THE TENDER OFFER
1. Terms of the Offer; Proration......................................... 6
2. Acceptance for Payment and Payment for Shares......................... 8
3. Procedures for Tendering Shares....................................... 9
4. Withdrawal Rights..................................................... 11
5. Certain Federal Income Tax Consequences............................... 12
6. Price Range of Shares; Dividends...................................... 13
7. Certain Information Concerning the Company............................ 14
8. Certain Information Concerning the Purchaser and Sub.................. 16
9. Source and Amount of Funds............................................ 19
10. Background of the Offer; Contacts with the Company; the Merger Agree-
ment and the Stock Option Agreement, Other Matters...................... 20
11. Purpose of the Offer; Plans for the Company after the Offer and the
Merger................................................................... 32
12. Dividends and Distributions........................................... 33
13. Effect of the Offer on the Market for the Shares; Exchange Listing and
Exchange Act Registration................................................ 34
14. Certain Conditions of the Offer....................................... 34
15. Certain Legal Matters; Regulatory Approvals........................... 36
16. Fees and Expenses..................................................... 38
17. Miscellaneous......................................................... 39
Schedule I -- Information Concerning the Directors and Executive Officers
of the Purchaser......................................................... I-1
</TABLE>
2
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To the Holders of Shares of Common Stock of
Transco Energy Company:
INTRODUCTION
The Williams Companies, Inc. (the "Purchaser"), a Delaware corporation,
hereby offers to purchase up to 24,600,000 shares of Common Stock, par value
$0.50 per share (the "Shares"), of Transco Energy Company, a Delaware
corporation (the "Company"), together with the attached common share purchase
rights (the "Company Rights," and, unless the context otherwise requires,
deemed to be included in all references to "Shares"), at a price of $17.50 per
Share, net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which, as amended from time to time, together
constitute the "Offer"). The Company has agreed in the Merger Agreement (as
hereinafter defined), subject to the terms of the Merger Agreement, to effect a
redemption of the Company Rights for $.05 per Company Right immediately prior
to the Purchaser's acceptance for payment of Shares pursuant to the Offer, and
that the redemption price in respect of Company Rights attached to Shares
purchased pursuant to the Offer will be paid to and retained by the Purchaser.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares pursuant to the
Offer. The Purchaser will pay all charges and expenses of Smith Barney Inc., as
Dealer Manager (in such capacity, the "Dealer Manager"), Chemical Bank, as
Depositary (the "Depositary"), and Morrow & Co., as Information Agent (the
"Information Agent"), incurred in connection with the Offer. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") HAS UNANIMOUSLY
DETERMINED (WITH ONE DIRECTOR ABSENT) THAT THE OFFER AND THE MERGER, TAKEN
TOGETHER, ARE FAIR TO AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE
COMPANY AND RECOMMENDS THAT SUCH HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER
THEIR SHARES PURSUANT TO THE OFFER.
The Company has advised the Purchaser that Merrill Lynch, Pierce, Fenner, &
Smith Incorporated ("Merrill Lynch") has delivered to the Company Board its
opinion that, as of the date of the opinion, 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 copy of the opinion of
Merrill Lynch, which sets forth the procedures followed, the factors considered
and the assumptions made by Merrill Lynch, is contained in the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"),
which is being mailed to stockholders herewith.
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 ALSO SUBJECT TO THE EXPIRATION OR
TERMINATION OF THE APPLICABLE WAITING PERIODS UNDER THE HSR ACT (AS HEREINAFTER
DEFINED) AND TO OTHER TERMS AND CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE.
SEE SECTION 14.
The Minimum Condition requires that at least 20,900,000 Shares be validly
tendered and not withdrawn before the expiration of the Offer. According to the
Company, as of December 9, 1994, there were 40,927,847 Shares outstanding
(including 216,900 Shares of restricted stock) and 3,321,628 Shares reserved
for issuance upon exercise of then outstanding options to acquire Shares or in
respect of outstanding restricted stock or deferred stock units under the
Company's stock option plans. In addition, according to the Company, as of the
same date, there were 2,979,900 shares of the Company's $4.75 series Cumulative
Convertible Preferred Stock, stated value $50 per share (the "Company $4.75
Preferred Stock"), and 2,500,000 shares of the Company's $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
Stock, the "Company Preferred Stock"). According to the Company, each share of
Company $4.75 Preferred Stock is currently convertible into .894 of a Share,
and each share of Company $3.50 Preferred Stock is currently convertible into
2.5 Shares.
3
<PAGE>
The Purchaser and the Company are filing with the Federal Trade Commission
(the "FTC") and the Antitrust Division of the Department of Justice (the
"Antitrust Division") Premerger Notification and Report Forms under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
with respect to the Offer and the Stock Option Agreement (as hereinafter
defined). The waiting period under the HSR Act applicable to the Purchaser's
acquisition of Shares will expire at 11:59 p.m., New York City time, on the
fifteenth day following such filings, unless the waiting period is earlier
terminated by the FTC and the Antitrust Division or extended by a request from
the FTC or the Antitrust Division for additional information or documentary
material prior to the expiration of the waiting period. See Section 15 for
additional information regarding the HSR Act and other antitrust
considerations.
Certain other conditions to consummation of the Offer are described in
Section 14. The Purchaser expressly reserves the right in its sole discretion
to waive any one or more of the conditions to the Offer, other than the Minimum
Condition. See Section 14.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated as
of December 12, 1994 (the "Merger Agreement"), by and among the Purchaser, WC
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the
Purchaser ("Sub"), and the Company. The Merger Agreement provides, among other
things, that, as soon as practicable after the purchase of Shares pursuant to
the Offer, the approval of the Merger (as hereinafter defined) by the
stockholders of the Company, and the satisfaction of the other conditions set
forth in the Merger Agreement and described herein, Sub will be merged with and
into the Company (the "Merger") in accordance with the relevant provisions of
the General Corporation Law of the State of Delaware ("Delaware Law").
Following consummation of the Merger, the Company will continue as the
surviving corporation (the "Surviving Corporation") and a wholly-owned
subsidiary of the Purchaser.
At the effective time of the Merger (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 Common Stock,
par value $1.00 per share, of the Purchaser (the "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. See
Sections 10 and 11.
In addition, also at the Effective Time, each issued and outstanding share of
Company $4.75 Preferred Stock and each issued and outstanding share of Company
$3.50 Preferred Stock (in each 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 preferred stock of the Purchaser which, in the case of the Company
$4.75 Preferred Stock, will be designated the Purchaser's $4.75 Series
Cumulative Convertible Preferred Stock (the "Purchaser $4.75 Preferred Stock")
and, in the case of the Company $3.50 Preferred Stock, will be designated the
Purchaser's $3.50 Series Cumulative Convertible Preferred Stock (the "Purchaser
$3.50 Preferred Stock" and, together with the Purchaser $4.75 Preferred Stock,
collectively the
4
<PAGE>
"Purchaser New Preferred Stock"). The Purchaser $4.75 Preferred Stock will be
initially convertible into .5588 of a share of Purchaser Common Stock and the
Purchaser $3.50 Preferred Stock will be initially convertible into 1.5625
shares of Purchaser Common Stock. Each will have the designation, preferences
and rights set forth for such stock in the Merger Agreement.
THE OFFER DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OF THE PURCHASER. SUCH AN OFFER MAY BE MADE ONLY PURSUANT
TO A PROSPECTUS.
Pursuant to the Merger Agreement and subject to compliance with applicable
law and the receipt of any third party consents which may be necessary, the
Purchaser has reserved the right to acquire shares of Purchaser Common Stock
and of its existing preferred stock pursuant to its previously announced open
market purchase programs. See Section 10. In addition, although the Purchaser
has made no final determination in this regard, and subject to the receipt of
any third party consents which may be necessary, the Purchaser expects that it
will cause to be redeemed all of the shares of Purchaser $4.75 Preferred Stock
to be issued in the Merger prior to the end of 1995.
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including the approval and adoption of the Merger Agreement
by the requisite vote of the stockholders of the Company. See Section 11. A
proxy or information statement (which will also constitute a prospectus for the
securities of the Purchaser issuable in the Merger as to which delivery of a
prospectus is required) containing detailed information concerning the Merger
will be furnished to holders of Shares in connection with a special meeting of
stockholders to be called by the Company to vote on the Merger. The Purchaser
will vote all Shares acquired pursuant to the Offer in favor of the Merger.
Under the Company's Second Restated Certificate of Incorporation and Delaware
Law, the affirmative vote of the holders of a majority of the outstanding
Shares is required to approve and adopt the Merger Agreement and the Merger. It
is expected that, if the Purchaser acquires 20,900,000 Shares, the minimum
number of Shares to be purchased in the Offer, it will own a majority of the
outstanding Shares and, accordingly, will have sufficient voting power to
approve and adopt the Merger Agreement and the Merger without the vote of any
other stockholder of the Company.
Simultaneously with entering into the Merger Agreement, the Purchaser and the
Company entered into a Stock Option Agreement dated as of December 12, 1994
(the "Stock Option Agreement"), pursuant to which the Company granted to the
Purchaser an option to purchase, upon the terms and subject to the conditions
set forth therein, up to 7,500,000 previously unissued Shares at a price of
$17.50 per Share. Under the terms of the Stock Option Agreement, the Company
has the right, upon exercise of such option by the Purchaser, to deliver an
amount in cash (not in excess of $2.00 per option Share) in lieu of the
delivery of Shares. Based on the 40,927,847 Shares represented by the Company
to be outstanding at December 9, 1994, the Purchaser beneficially owns
approximately 15.5% of the Shares that would be outstanding assuming an
exercise in full by the Purchaser of the Stock Option Agreement and a delivery
of the related Shares by the Company thereunder. See Section 10.
The Offer is not being made to (nor will tenders be accepted from) the
holders of shares of Company Preferred Stock. Accordingly, holders of shares of
Company Preferred Stock desiring to tender Shares issuable upon conversion
thereof must convert such shares into Shares in accordance with the terms
thereof and then tender the Shares issued upon such conversion pursuant to the
Offer. There can be no assurance that Shares issued upon such conversion will
be received in time to allow the holders thereof to tender such Shares pursuant
to the Offer. Based on the current conversion rates, the equivalent conversion
price for each share of Company $3.50 Preferred Stock is $20.00 and the
equivalent conversion price for each share of Company $4.75 Preferred Stock is
$55.93, each of which exceeds the Offer Price of $17.50. Neither the Purchaser
nor the Company is making any recommendation that holders of shares of Company
Preferred Stock so convert their shares.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
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THE TENDER OFFER
1. TERMS OF THE OFFER; PRORATION. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any extension or amendment), the Purchaser will accept
for payment and pay for up to 24,600,000 Shares validly tendered prior to the
Expiration Date (as hereinafter defined) and not withdrawn in accordance with
Section 4. The term "Expiration Date" means 12:00 Midnight, New York City time,
on Tuesday, January 17, 1995, unless and until the Purchaser, in its sole
discretion (but subject to the terms and conditions of the Merger Agreement),
shall have extended the period of time during which the Offer is open, in which
event the term "Expiration Date" shall mean the latest time and date at which
the Offer, as so extended by the Purchaser, shall expire.
Consummation of the Offer is conditioned upon, among other things,
satisfaction of the Minimum Condition and the expiration or termination of the
applicable waiting period under the HSR Act. If such conditions are not
satisfied or any or all of the other events set forth in Section 14 shall have
occurred or shall be determined by the Purchaser to have occurred prior to the
Expiration Date, the Purchaser reserves the right (but subject to the terms and
conditions of the Merger Agreement) to (i) decline to purchase any or all of
the Shares tendered and terminate the Offer, and return all tendered Shares to
tendering stockholders, (ii) waive or reduce the Minimum Condition or waive in
whole or in part any or all of the other conditions and, subject to complying
with applicable rules and regulations of the Securities and Exchange Commission
(the "Commission"), purchase all Shares validly tendered, or (iii) extend the
Offer and, subject to the right of stockholders to withdraw Shares until the
Expiration Date, retain the Shares which have been tendered during the period
or periods for which the Offer is extended. See Sections 10 and 14.
Upon the terms and subject to the conditions of the Offer, if more than
24,600,000 Shares are validly tendered and not withdrawn prior to the
Expiration Date, the Purchaser will, upon the terms and subject to the
conditions of the Offer, purchase 24,600,000 Shares on a pro rata basis (with
adjustments to avoid purchases of fractional Shares) based upon the number of
Shares validly tendered and not withdrawn prior to the Expiration Date.
Because of the difficulty of determining the precise number of Shares
properly tendered and not withdrawn, if proration is required, the Purchaser
does not expect to be able to announce the final proration factor until
approximately seven New York Stock Exchange, Inc. (the "NYSE") trading days
after the Expiration Date. Preliminary results of proration will be announced
by press release as promptly as practicable after the Expiration Date.
Stockholders may obtain such preliminary information from the Information Agent
and may be able to obtain such information from their brokers. The Purchaser
will not pay for any Shares accepted for payment pursuant to the Offer until
the final proration factor is known.
The Purchaser expressly reserves the right, in its sole discretion (but
subject to the terms and conditions of the Merger Agreement), at any time and
from time to time, to extend for any reason the period of time during which the
Offer is open, including the occurrence of any of the events specified in
Section 14, by giving oral or written notice of such extension to the
Depositary. During any such extension, all Shares previously tendered and not
withdrawn will remain subject to the Offer, subject to the rights of a
tendering stockholder to withdraw its Shares. Pursuant to the terms of the
Merger Agreement, and subject to the proration and other terms of the Offer and
the Merger Agreement and the satisfaction of all the conditions referred to in
Section 14, the Purchaser has agreed to accept for payment and pay for all
Shares validly tendered and not withdrawn pursuant to the Offer as soon as
practicable after the Expiration Date. See Sections 4 and 10.
Subject to the applicable regulations of the Commission, the Purchaser also
expressly reserves the right, in its sole discretion (but subject to the terms
and conditions of the Merger Agreement), at any time and from time to time, to
(i) increase the price per Share payable pursuant to the Offer, (ii) increase
on one occasion the number of Shares 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
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in the number of Shares sought at a time when the average closing sale prices
on the NYSE for shares of Purchaser Common Stock for the ten trading days
immediately preceding the date of public notice of the increase exceeds $28.00
may only be made with the consent of the Company, (iii) to terminate the Offer
and not accept for payment any Shares if any of the conditions referred to in
Section 14 has not been satisfied or upon the occurrence of any of the events
specified in Section 14 or (iv) to waive any condition (other than the Minimum
Condition) or otherwise amend the Offer in any respect by giving oral or
written notice of such delay, termination, waiver or amendment to the
Depositary and by making a public announcement thereof. Subject to the terms of
the Merger Agreement, the Purchaser has agreed, if such conditions have not
been satisfied as of the then applicable expiration date of the Offer, that the
Purchaser will extend the Offer from time to time until the earlier of the
consummation of the Offer or March 16, 1995. See Section 10.
The Merger Agreement provides 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 paragraph) 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 Shares. The Purchaser acknowledges that (i)
Rule 14e-1(c) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Purchaser to pay the consideration offered or
return the Shares tendered promptly after the termination or withdrawal of the
Offer, and (ii) the Purchaser may not delay acceptance for payment of, or
payment for, any Shares upon the occurrence of any of the events specified in
Section 14 without extending the period of time during which the Offer is open.
Any such extension, delay, termination, waiver or amendment will be followed
as promptly as practicable by public announcement thereof, such announcement in
the case of an extension to be made no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
Subject to applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under
the Exchange Act, which require that material changes be promptly disseminated
to stockholders in a manner reasonably designed to inform them of such changes)
and without limiting the manner in which the Purchaser may choose to make any
public announcement, the Purchaser shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a press release to the Dow Jones News Service.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, the Purchaser will extend the Offer to the extent required by Rules 14d-
4(c), 14d-6(d) and 14e-1 under the Exchange Act. Subject to the conditions
described above, the Purchaser reserves the right (but subject to the terms and
conditions of the Merger Agreement) to accept for payment more than 24,600,000
Shares pursuant to the Offer. The Purchaser has no present intention of
exercising such right.
Subject to the terms and conditions of the Merger Agreement, if, prior to the
Expiration Date, the Purchaser should decide to increase or decrease the number
of Shares being sought or to increase or decrease the consideration being
offered in the Offer, such increase or decrease in the number of Shares being
sought or such increase or decrease in the consideration being offered will be
applicable to all stockholders whose Shares are accepted for payment pursuant
to the Offer and, if at the time notice of any such increase or decrease in the
number of Shares being sought or such increase or decrease in the consideration
being offered is first published, sent or given to holders of such Shares, the
Offer is scheduled to expire at any time earlier than the period ending on the
tenth business day from and including the date that such notice is first so
published, sent or given, the Offer will be extended at least until the
expiration of such ten business day period. For purposes of the Offer a
"business day" means any day other than a Saturday, Sunday or federal holiday
and consists of the time period from 12:01 a.m. through 12:00 Midnight, New
York City time.
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The Company has provided the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of Transmittal
will be mailed to record holders of Shares whose names appear on the Company's
stockholder list and will be furnished, for subsequent transmittal to
beneficial owners of Shares, to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject
to the conditions of the Offer (including, if the Offer is extended or amended,
the terms and conditions of any such extension or amendment), the Purchaser
will purchase, by accepting for payment, and will pay for, up to 24,600,000
Shares validly tendered prior to the Expiration Date (and not properly
withdrawn in accordance with Section 4) as soon as practicable after the later
to occur of (i) the Expiration Date and (ii) the satisfaction or waiver of the
conditions set forth in Section 14. Any determination concerning the
satisfaction of such terms and conditions shall be within the reasonable
discretion of the Purchaser. See Section 14. Subject to the applicable rules of
the Commission, the Purchaser expressly reserves the right (but subject to the
terms and conditions of the Merger Agreement) to delay acceptance for payment
of, or payment for, Shares pending receipt of any regulatory approval specified
in Section 15 or in order to comply in whole or in part with any applicable
law.
In all cases, payment for Shares purchased pursuant to the Offer will be made
only after timely receipt by the Depositary of (i) the certificates evidencing
such Shares (the "Share Certificates") or timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Shares, if such procedure is
available, into the Depositary's account at The Depository Trust Company, the
Midwest Securities Trust Company or the Philadelphia Depository Trust Company
(each a "Book-Entry Transfer Facility" and, collectively, the "Book-Entry
Transfer Facilities") pursuant to the procedure set forth in Section 3, (ii)
the Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, or an Agent's Message (as defined below) and (iii) any other
documents required by the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
Payment for the Shares accepted for payment pursuant to the Offer will be
delayed in the event of proration due to the difficulty of determining the
number of Shares validly tendered and not withdrawn. See Section 1.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment (and thereby purchased) tendered Shares validly tendered and not
properly withdrawn if, as and when the Purchaser gives oral or written notice
to the Depositary of the Purchaser's acceptance of such Shares for payment.
Payment for Shares accepted pursuant to the Offer will be made by deposit of
the aggregate purchase price therefor with the Depositary, which will act as
agent for tendering stockholders for the purpose of receiving payment from the
Purchaser and transmitting payment to such tendering stockholders. Under no
circumstances will interest on the purchase price for Shares be paid by the
Purchaser by reason of any delay in making such payment. Upon the deposit of
funds with the Depositary for the purpose of making payments to tendering
stockholders, the Purchaser's obligation to make such payment shall be
satisfied and tendering stockholders must thereafter look solely to the
Depositary for payment of amounts owed to them by reason of the acceptance for
payment of Shares pursuant to the Offer. The Purchaser will pay any stock
transfer taxes incident to the transfer to it of validly tendered Shares,
except as otherwise provided in Instruction 6 of the Letter of Transmittal, as
well as any charges and expenses of the Depositary, the Dealer Manager and the
Information Agent.
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If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer (including proration due to tenders of
Shares pursuant to the Offer in excess of the maximum number of shares to be
purchased pursuant to the Offer), or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing
unpurchased Shares will be returned, without expense to the tendering
stockholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the
procedure set forth in Section 3, such Shares will be credited to an account
maintained at such Book-Entry Transfer Facility), as promptly as practicable
following the expiration or termination of the Offer.
3. PROCEDURES FOR TENDERING SHARES.
Valid Tender of Shares. In order for Shares to be validly tendered pursuant
to the Offer, the Letter of Transmittal or a facsimile thereof, properly
completed and duly executed, with any required signature guarantees, or an
Agent's Message in connection with a book-entry delivery of Shares, and any
other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover page of this Offer to Purchase prior to
the Expiration Date and either (i) the Share Certificates evidencing tendered
Shares must be received by the Depositary along with the Letter of Transmittal,
or (ii) Shares must be tendered pursuant to the procedure for book-entry
transfer described below and a Book-Entry Confirmation must be received by the
Depositary, in each case prior to the Expiration Date, or (iii) the tendering
stockholder must comply with the guaranteed delivery procedures described
below.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Book-Entry Transfer. The Depositary will establish an account with respect to
the Shares at each Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in any of the Book-Entry Transfer
Facilities' systems may make book-entry delivery of Shares by causing a Book-
Entry Transfer Facility to transfer such Shares into the Depositary's account
at a Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures for transfer. However, although delivery of Shares may be
effected through book-entry transfer at a Book-Entry Transfer Facility, the
Letter of Transmittal or facsimile thereof, with any required signature
guarantees, or an Agent's Message in connection with a book-entry delivery of
Shares, and any other required documents, must, in any case, be transmitted to
and received by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a member firm of a registered national securities exchange, a
member of the National Association of Securities Dealers, Inc. ("NASD") or a
commercial bank or trust company having an office or correspondent in the
United States (each of the foregoing being referred to as an "Eligible
Institution"), except in cases where Shares are tendered (i) by a registered
holder of Shares who has not completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on
the Letter of Transmittal, or (ii) for the account of an Eligible Institution.
See Instruction 1 of the Letter of Transmittal.
If a Share Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a Share
Certificate not accepted for payment or not tendered is to be returned, to a
person other than the registered holder(s), then the Share Certificate must be
endorsed or
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accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear on the Share Certificate, with the
signature(s) on such Share Certificate or stock powers guaranteed as described
above. See Instructions 1 and 5 of the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the
Depositary prior to the Expiration Date or the procedure for book-entry
transfer cannot be completed on a timely basis, such Shares may nevertheless be
tendered if all the following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser herewith, is
received by the Depositary as provided below prior to the Expiration Date;
and
(iii) in the case of a guarantee of Shares, the Share Certificates for
all tendered Shares, in proper form for transfer, or a Book-Entry
Confirmation, together with a properly completed and duly executed Letter
of Transmittal (or manually signed facsimile thereof) with any required
signature guarantee (or, in the case of a book-entry transfer, an Agent's
Message) and any other documents required by such Letter of Transmittal,
are received by the Depositary within five NYSE trading days after the date
of execution of the Notice of Guaranteed Delivery.
Any Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares purchased
pursuant to the Offer will, in all cases, be made only after timely receipt by
the Depositary of (i) the Share Certificates evidencing such Shares, or a Book-
Entry Confirmation of the delivery of such Shares, if available, (ii) a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) (or, in the case of a book-entry transfer, an Agent's
Message) and (iii) any other documents required by the Letter of Transmittal.
Backup Federal Withholding Tax. Unless an exemption applies under the
applicable law and regulations concerning "backup withholding" of federal
income tax, the Depositary will be required to withhold, and will withhold, 31%
of the gross proceeds otherwise payable to a stockholder or other payee with
respect to Shares purchased pursuant to the Offer if the stockholder does not
provide such stockholder's taxpayer identification number (social security
number or employer identification number) and certify that such number is
correct. Each tendering stockholder should complete and sign the main signature
form and the Substitute Form W-9 included as part of the Letter of Transmittal,
so as to provide the information and certification necessary to avoid backup
withholding, unless an applicable exemption exists and is proved in a manner
satisfactory to the Purchaser and the Depositary. See Instruction 10 of the
Letter of Transmittal.
Appointment as Proxy. By executing a Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of the Purchaser
as such stockholder's attorneys-in-fact and proxies, in the manner set forth in
the Letter of Transmittal, each with full power of substitution, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser (and any and all non-cash
dividends, distributions, rights, other Shares, or other securities issued or
issuable in respect of such Shares on or after the date of this Offer to
Purchase). All such proxies shall be considered coupled with an interest in the
tendered Shares. This appointment will be effective if, when, and only to the
extent that, the Purchaser accepts such Shares for payment pursuant to the
Offer. Upon such acceptance for payment, all prior proxies given by such
stockholder with respect to such Shares
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and other securities will, without further action, be revoked, and no
subsequent proxies may be given. The designees of the Purchaser will, with
respect to the Shares and other securities for which the appointment is
effective, be empowered to exercise all voting and other rights of such
stockholder as they in their sole discretion may deem proper at any annual,
special, adjourned or postponed meeting of the Company's stockholders, by
written consent or otherwise, and the Purchaser reserves the right to require
that, in order for Shares or other securities to be deemed validly tendered,
immediately upon the Purchaser's acceptance for payment of such Shares the
Purchaser must be able to exercise full voting rights with respect to such
Shares. See Section 15.
Treatment of Company Rights. By executing a Letter of Transmittal as set
forth above, a tendering stockholder confirms such stockholder's agreement that
the amount paid by the Company in redemption of the Company Rights attached to
Shares of such stockholders acquired pursuant to the Offer will be paid to and
retained by the Purchaser. Amounts paid in redemption of Company Rights
attached to other Shares are not affected by the foregoing and will be paid to
holders of Company Rights in accordance with the terms of the Company's Rights
Agreement, dated as of January 13, 1986, as amended (the "Company Rights
Agreement").
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Shares pursuant to any of the procedures described above will be
determined by the Purchaser, in its sole discretion, whose determination will
be final and binding on all parties. The Purchaser reserves the absolute right
to reject any or all tenders of any Shares determined by it not to be in proper
form or if the acceptance for payment of, or payment for, such Shares may, in
the opinion of the Purchaser's counsel, be unlawful. The Purchaser also
reserves the absolute right, in its sole discretion, to waive any of the
conditions of the Offer or any defect or irregularity in any tender with
respect to Shares of any particular stockholder, whether or not similar defects
or irregularities are waived in the case of other stockholders. No tender of
Shares will be deemed to have been validly made until all defects and
irregularities have been cured or waived.
The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be
final and binding. None of the Purchaser, the Dealer Manager, the Depositary,
the Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or will incur any
liability for failure to give any such notification.
The Purchaser's acceptance for payment of Shares tendered pursuant to the
Offer will constitute a binding agreement between the tendering stockholder and
the Purchaser upon the terms and subject to the conditions of the Offer,
including such stockholder's agreement that such tender has been made in
compliance with Rule 14e-4 promulgated under the Exchange Act which requires in
substance that a tendering stockholder own all Shares tendered pursuant to the
Offer.
4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4, tenders
of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant
to the Offer may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by the Purchaser pursuant to the Offer,
may also be withdrawn at any time after February 13, 1995.
If the Purchaser extends the Offer, is delayed in its acceptance for payment
of Shares or is unable to accept Shares for payment pursuant to the Offer for
any reason, then, without prejudice to the Purchaser's rights under the Offer,
the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent that
tendering stockholders are entitled to withdrawal rights as described in this
Section 4. Any such delay will be by an extension of the Offer to the extent
required by law.
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For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder, if different from that of the person who tendered such
Shares. If Share Certificates evidencing Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the release
of such Share Certificates, the serial numbers shown on such Share Certificates
must be submitted to the Depositary and the signature(s) on the notice of
withdrawal must be guaranteed by an Eligible Institution, unless such Shares
have been tendered for the account of an Eligible Institution. If Shares have
been tendered pursuant to the procedure for book-entry transfer as set forth in
Section 3, any notice of withdrawal must also specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of the
Purchaser, the Dealer Manager, the Depositary, the Information Agent or any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification.
Any Shares properly withdrawn will thereafter be deemed to not have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following discussion is a
summary of the material federal income tax consequences of the Offer and the
Merger to holders of Shares who hold the Shares as capital assets. The
discussion set forth below is for general information only and may not apply to
particular categories of holders of Shares subject to special treatment under
the Internal Revenue Code of 1986, as amended (the "Code").
Consequences of the Offer and the Proposed Merger Generally. The Offer and
the Merger will be taxable transactions for federal income tax purposes and may
be taxable transactions for foreign, state and local income and other tax
purposes as well. This will be the case whether a holder of Shares participates
only in the Offer or only in the Merger or partly in both transactions.
In general, a stockholder of the Company who, pursuant to the Offer,
exchanges Shares for cash will recognize capital gain or loss on the date of
acceptance of Shares for payment in an amount equal to the difference between
the amount of cash received (exclusive of cash attributable to the redemption
price for Company Rights, as described below) and the stockholder's tax basis
in the Shares accepted. The gain or loss will be long-term capital gain or loss
if, as of such date, the holder thereof has held such Shares for more than one
year.
In general, a stockholder of the Company who, pursuant to the Merger,
exchanges Shares for Purchaser Common Stock (which includes attached Purchaser
Rights) and cash (if any) will recognize capital gain or loss at the Effective
Time in an amount equal to the difference between the fair market value of the
Purchaser Common Stock (which includes attached Purchaser Rights) and cash (if
any) received and the stockholder's tax basis in the Shares surrendered. The
gain or loss will be long-term capital gain or loss if, as of such time, the
holder thereof has held such Shares for more than one year.
The Company's redemption of the Company Rights will be a dividend taxable as
ordinary income (to the extent of the Company's current or accumulated earnings
and profits) to all holders of Shares, and the assignment of such redemption
proceeds by a tendering stockholder to the Purchaser pursuant to the Offer will
constitute an offset to the amount realized by the tendering stockholder
pursuant to the Offer for federal income tax purposes.
12
<PAGE>
Withholding. Unless a stockholder complies with certain reporting and/or
certification procedures or is an exempt recipient under applicable provisions
of the Code and Treasury Regulations, such stockholder may be subject to
withholding tax of 31% with respect to payments received pursuant to the Offer
and the Merger. Stockholders should consult their brokers to ensure compliance
with such procedures. Foreign stockholders should consult with their own tax
advisors regarding withholding taxes in general.
THE ABOVE DISCUSSION MAY NOT APPLY TO PARTICULAR CATEGORIES OF HOLDERS OF
SHARES SUBJECT TO SPECIAL TREATMENT UNDER THE CODE, SUCH AS FOREIGN HOLDERS,
QUALIFIED EMPLOYEE BENEFIT PLANS AND HOLDERS WHOSE SHARE WERE ACQUIRED PURSUANT
TO THE EXERCISE OF AN EMPLOYEE STOCK OPTION OR OTHERWISE AS COMPENSATION.
STOCKHOLDERS OF THE COMPANY ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO
DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE OFFER AND THE MERGER, INCLUDING
ANY STATE, LOCAL OR OTHER TAX CONSEQUENCES OF THE OFFER AND THE MERGER.
Real Estate Transfer Taxes. The New York State Real Property Transfer Gains
Tax, the New York State Real Estate Transfer Tax and the New York City Real
Property Transfer Tax (collectively, the "Real Estate Transfer Taxes") are
imposed on the transfer or acquisition, directly or indirectly, of controlling
interests in an entity which owns interests in real property located in New
York State or New York City, as the case may be. The Offer and the Merger may
result in the taxable transfer of controlling interests in entities which own
New York State or New York City real property for purposes of the Real Estate
Transfer Taxes. Although any Real Estate Transfer Taxes could be imposed
directly on the stockholders of the Company, the Purchaser and the Company will
complete and file any necessary tax returns, and, as provided in the Merger
Agreement, the Purchaser will pay all Real Estate Transfer Taxes that are
imposed as a result of the Offer and the Merger. Upon receipt of the
consideration for either the Offer or the Merger, each stockholder of the
Company will be deemed to have agreed to be bound by the Real Estate Transfer
Tax returns filed by the Purchaser and the Company.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and principally
traded on the NYSE and quoted under the symbol "E". The following table sets
forth, for the quarters indicated, the high and low sales prices per Share on
the NYSE and the amount of cash dividends per Share, all as reported by the Dow
Jones News Service.
<TABLE>
<CAPTION>
MARKET PRICE
-------------------------------
HIGH LOW DIVIDENDS
---- --- ---------
<S> <C> <C> <C>
FISCAL YEAR ENDED DECEMBER 31, 1992:
First Quarter........................................ $20 5/8 $11 $ 0.15
Second Quarter....................................... 15 3/8 9 1/2 0.15
Third Quarter........................................ 17 7/8 13 7/8 0.15
Fourth Quarter....................................... 16 1/4 12 0.15
FISCAL YEAR ENDED DECEMBER 31, 1993:
First Quarter........................................ 17 13 0.15
Second Quarter....................................... 16 7/8 13 7/8 0.15
Third Quarter........................................ 17 7/8 15 3/4 0.15
Fourth Quarter....................................... 18 13 7/8 0.15
FISCAL YEAR ENDED DECEMBER 31, 1994:
First Quarter........................................ 16 7/8 14 1/8 0.15
Second Quarter....................................... 16 1/2 14 0.15
Third Quarter........................................ 16 1/4 14 1/2 0.15
Fourth Quarter (through December 15, 1994) .......... 16 1/2 11 3/4 0.15
</TABLE>
On December 9, 1994, the last full trading day prior to the announcement of
the execution of the Merger Agreement and the Purchaser's intention to commence
the Offer, the reported closing price per Share on the NYSE was $12 5/8. On
December 15, 1994, the last full trading day prior to the commencement of the
Offer, the reported closing price per Share on the NYSE was $16 1/4.
13
<PAGE>
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning the
Company contained in this Offer to Purchase, including financial information,
has been furnished by the Company or has been taken from or based upon publicly
available documents and records on file with the Commission and other public
sources. Neither the Purchaser nor the Dealer Manager assumes any
responsibility for the accuracy or completeness of the information concerning
the Company contained in such documents and records or for any failure by the
Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to the
Purchaser or the Dealer Manager.
General. The Company is a Delaware corporation and its principal executive
offices are located at 2800 Post Oak Boulevard, Houston, Texas 77056.
The Company is engaged primarily in the natural gas pipeline and the natural
gas marketing businesses. The Company also has investments in coal mining and
marketing operations, natural gas liquids processing, natural gas gathering and
a nonoperating interest in a coalbed methane project in Alabama. The Company's
pipeline business is conducted through Transcontinental Gas Pipe Line
Corporation ("TGPL") and Texas Gas Transmission Corporation ("TXG"). These
companies, which are regulated by the Federal Energy Regulatory Commission (the
"FERC"), principally transport natural gas from the Gulf of Mexico and the Gulf
Coast regions to markets in the eastern half of the United States through their
respective 10,500 and 6,050 mile interstate pipeline systems. The Company's
natural gas marketing business is conducted through Transco Gas Marketing
Company ("TGMC"). TGMC, through agency agreements, manages all jurisdictional
sales of TGPL and Texas Gas, except for the sale of gas purchased by Texas Gas
under certain contracts, which is auctioned monthly. Jurisdictional sales are
sales made to local distribution customers located, in the case of TGPL, in the
eastern United States and, in the case of Texas Gas, in the midwestern United
States. TGMC also manages all non-jurisdiction sales of Transco Energy
Marketing Company ("TEMCO") and TXG Gas Marketing Company ("TXG Marketing").
TEMCO buys, arranges transportation for, and sells natural gas, primarily in
the eastern and midwestern United States and Gulf Coast region. TXG Marketing
markets natural gas, primarily to customers in the midwestern United States.
The Company's coal business is conducted through Transco Coal Company ("TCC").
TCC is engaged in the surface and deep mining, preparation and marketing of
various grades of bituminous steam coal. In addition, TCC purchases minimal
amounts of coal from independent producers for resale to customers.
Certain Historical Financial Information. Set forth below is certain selected
historical consolidated financial information relating to the Company and its
subsidiaries which has been excerpted or derived from the audited consolidated
financial information of the Company and the unaudited interim consolidated
financial information of the Company. More comprehensive financial information
is included in the Company's 1993 Annual Report on Form 10-K, the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1994,
and other documents filed by the Company with the Commission. The financial
information that follows is qualified in its entirety by reference to such
reports and other documents, including the financial statements, related notes
and management's discussion and analysis contained therein. Such reports and
other documents may be inspected and copies may be obtained from the offices of
the Commission or the NYSE in the manner set forth below.
14
<PAGE>
TRANSCO ENERGY COMPANY
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- -----------------
1993 1992 1991 1994 1993
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues............ $2,921.9 $2,692.3 $2,714.8 $2,134.7 $2,134.6
Operating income (loss)....... 146.3 183.7 (63.2) 206.1 136.1
Income (loss) from continuing
operations................... (35.4) (52.0) (162.7) 38.8 (12.1)
Income (loss) from discontin-
ued operations............... 31.5 2.6 (4.7) -- 31.5
Net income (loss)............. (3.9) (49.3) (167.4) 38.8 19.4
Common Stock Equity in Net In-
come (loss).................. (29.0) (75.1) (193.1) 21.6 0.1
PER SHARE INFORMATION:
Earnings (loss) per Share of
Common Stock and Common Stock
Equivalents.................. (0.74) (2.35) (6.58) 0.53 --
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT SEPTEMBER 30,
1993 1994
--------------- ----------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets................................... $4,080.5 $3,825.2
Total debt, including current portion.......... 1,946.1 1,937.6
Preferred stock, net of issue expense (1)...... 340.6 337.1
Common stockholders' equity.................... 391.3 404.3
</TABLE>
- --------
(1) Includes redeemable preferred stock of TGPL of $75.2 million and $71.8
million at December 31 and September 30, respectively, and Company
Preferred Stock of $265.4 million and $265.3 million at December 31 and
September 30, respectively.
Certain Projected Financial Information. In the course of its discussions
with the Purchaser described in Section 10, the Company provided the Purchaser
and its financial advisors with certain business and financial information
which the Purchaser and the Company believe was not publicly available. Such
information included, among other things, certain financial projections for
1994 through 1998 prepared by management of the Company as a long range plan,
a selected summary of which is set forth below. The Company does not as a
matter of course publicly disclose internal projections as to future revenues,
earnings or financial condition.
The projections do not give effect to the Offer or the Merger and were
predicated on certain assumptions, including the following: (i) increases over
the period in total rate bases for TGPL and TXG from $1.51 billion and $525
million, respectively, for 1994 to $1.68 billion and $540 million,
respectively, for 1998; (ii) a FERC-allowed rate of return for TGPL of 14.81%
for 1994, 14.62% for 1995 and 14.25% for 1996 through 1998 and for TXG of
13.9% for 1994 and 14.25% for 1995 through 1998; (iii) a long-term borrowing
rate of 9% for 1994 through 1997 and 9.5% for 1998; (iv) a prime interest rate
of 7.5% in 1994 and 7.75% from 1995 through 1998; (v) an increase over the
period in nominal crude oil prices and Gulf Coast spot gas prices from $18.00
per barrel and $2.10 per dekatherm respectively, for 1994 to $21.50 per barrel
and $2.45 per dekatherm, respectively, for 1998; (vi) public offerings of
Shares of $150 million at $15.00 per Share and of $170 million at $17.00 per
Share in 1995 and 1997, respectively, with the proceeds being used to retire
debt; and (vii) capital expenditures and investments of $228 million in 1994,
$251 million in 1995, $234 million in 1996, $230 million in 1997 and $209
million in 1998 to be used, among other things, to maintain the existing
pipelines and fund certain pipeline expansion in the Southeast, the Northeast
and the Gulf Coast.
TRANSCO ENERGY COMPANY
SUMMARY OF LONG TERM PLAN
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDING DECEMBER 31,
----------------------------------
1994 1995 1996 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Operating Income............................ $296.7 $308.8 $322.6 $338.7 $368.0
Common Stock Equity in Net Income........... $ 40.5 $ 42.1 $ 50.9 $ 66.7 $104.3
Earnings per Share of Common Stock and Com-
mon Stock Equivalents...................... $ 1.00 $ 0.92 $ 1.00 $ 1.19 $ 1.71
Cash Flow from Operating Activities......... $ 84.7 $304.8 $300.9 $325.2 $361.4
</TABLE>
15
<PAGE>
In addition, such projections contemplated year-end debt-to-capital ratios of
73.3% for 1994, 68.4% for 1995, 68.6% for 1996, 61.4% for 1997 and 58.7% for
1998.
THE ESTIMATES AND ASSUMPTIONS UNDERLYING SUCH PROJECTIONS ARE INHERENTLY
SUBJECT TO SIGNIFICANT ECONOMIC AND COMPETITIVE UNCERTAINTIES BEYOND THE
COMPANY'S CONTROL AND WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR
COMPLYING WITH PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES
ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS. FOR
THESE REASONS, AS WELL AS THE BASES ON WHICH SUCH PROJECTIONS WERE COMPILED,
THERE CAN BE NO ASSURANCE THAT SUCH PROJECTIONS WILL BE REALIZED, OR THAT
ACTUAL RESULTS WILL NOT BE HIGHER OR LOWER THAN THOSE ESTIMATED. THE INCLUSION
OF SUCH PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT THE
COMPANY, THE PURCHASER OR ANY OTHER PERSON WHO RECEIVED SUCH INFORMATION
CONSIDERS IT AN ACCURATE PREDICTION OF FUTURE EVENTS.
Other Information. The Company is subject to the information and reporting
requirements of the Exchange Act and is required to file periodic reports and
other information with the Commission relating to its business, financial
condition and other matters. Information, as of particular dates, concerning
the Company's directors and officers, their remuneration, stock options granted
to them, the principal holders of the Company's securities, any material
interests of such persons in transactions with the Company and other matters is
required to be disclosed in proxy statements distributed to the Company's
stockholders and filed with the Commission. These reports, proxy statements and
other information should be available for inspection at the public reference
facilities of the Commission located in Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and also should be available for inspection and
copying at prescribed rates at the following regional offices of the
Commission: Seven World Trade Center, New York, New York 10048; and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of this material
may also be obtained by mail, upon payment of the Commission's customary fees,
from the Commission's principal office at 450 Fifth Street, N.W., Washington,
D.C. 20549. Reports, proxy statements and other information concerning the
Company should also be available for inspection at the offices of the NYSE, 20
Broad Street, New York, New York 10005. Except as otherwise noted in this Offer
to Purchase, all of the information with respect to the Company and its
affiliates set forth in this Offer to Purchase has been derived from publicly
available information.
8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND SUB.
The Purchaser. The Purchaser is a Delaware corporation. The principal
executive offices of the Purchaser are located at One Williams Center, Tulsa,
Oklahoma 74172.
The Purchaser, through subsidiaries, is engaged in the transportation and
sale of natural gas and related activities, natural gas gathering and
processing operations, the transportation of petroleum products and the long
distance digital telecommunications business. The Purchaser's natural gas
subsidiaries own and operate: (i) two interstate natural gas pipeline systems
and have a 50 percent interest in a third; (ii) a common carrier petroleum
products pipeline system; and (iii) natural gas gathering and processing
facilities. The Purchaser's telecommunications subsidiary operates a nationwide
digital fiber optic and microwave telecommunications system and offers data,
voice and video-related products and services and customer premises equipment
nationwide. In the third quarter of 1994, the Purchaser signed a definitive
agreement to sell the network services portion of its telecommunications
business (the "WNS Sale") to LDDS Communications, Inc. for $2.5 billion in
cash. The WNS Sale is expected to close in early 1995. The Purchaser also has
investments in the equity of certain other companies.
The Purchaser's interstate pipeline group consists of Northwest Pipeline
Corporation ("Northwest Pipeline") and Williams Natural Gas Company ("Williams
Natural Gas"), owners and operators of interstate natural gas pipeline systems,
and the Purchaser's 50 percent interest in Kern River Gas Transmission Company
("Kern River"). Northwest Pipeline owns and operates an interstate natural gas
pipeline system, including facilities for mainline transmission and gas
storage. The system extends from the San Juan Basin in northwestern New Mexico
and southwestern Colorado through Colorado, Utah, Wyoming, Idaho, Oregon
16
<PAGE>
and Washington to a point on the Canadian border near Sumas, Washington. At
December 31, 1993, Northwest Pipeline's system, having aggregate mainline
deliverability of approximately 2.5 Bcf (or billion cubic feet) of gas per day,
was composed of approximately 3,900 miles of mainline and branch transmission
pipelines, and 42 mainline compressor stations with a combined capacity of
approximately 290,000 horsepower. Williams Natural Gas is an interstate natural
gas transmission company which owns and operates a natural gas pipeline system
located in Colorado, Kansas, Missouri, Nebraska, Oklahoma, Texas and Wyoming.
The system serves customers in seven states, including major metropolitan areas
of Kansas and Missouri, its chief market areas. At December 31, 1993, the
Williams Natural Gas system, having a mainline delivery capacity of
approximately 2.2 Bcf of gas per day, was composed of approximately 6,200 miles
of mainline and branch transmission and storage pipeline and 51 compressor
stations having rated capacity totaling approximately 273,000 horsepower.
Williams Natural Gas also operates nine underground storage fields with an
aggregate certificated working gas storage capacity of 40 Bcf and an aggregate
delivery capacity of 1.2 Bcf of gas per day. Kern River is an interstate
natural gas transmission company which owns and operates a natural gas pipeline
system extending from Wyoming through Utah and Nevada to California. Kern River
is jointly owned and operated by Williams Western Pipeline Company, a
subsidiary of the Purchaser, and a subsidiary of an unaffiliated company. The
Kern River transmission system, which commenced operations in February 1992
following completion of construction, delivers natural gas primarily to
enhanced oil-recovery fields in southern California. The system also transports
natural gas for utilities, municipalities and industries in California, Nevada
and Utah.
Williams Pipe Line Company, a wholly owned subsidiary of the Purchaser,
operates a petroleum products pipeline system which covers an eleven-state area
extending from Oklahoma in the south to North Dakota and Minnesota in the north
and Illinois in the east. The system is operated as a common carrier offering
transportation and terminalling services on a nondiscriminatory basis under
published tariffs. The system transports crude oil and products, including
gasolines, distillates, aviation fuels and LP-gases.
Williams Field Services Group, Inc., through subsidiaries, owns and/or
operates both regulated and nonregulated natural gas gathering and processing
facilities, markets natural gas and owns and operates natural gas leasehold
properties.
The Purchaser is subject to the information and reporting requirements of the
Exchange Act and is required to file reports and other information with the
Commission relating to its business, financial condition and other matters.
Information, as of particular dates, concerning the Purchaser's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Purchaser's securities, any material interests of such persons
in transactions with the Purchaser and other matters is required to be
disclosed in proxy statements distributed to the Purchaser's stockholders and
filed with the Commission. These reports, proxy statements and other
information should be available for inspection and copies may be obtained in
the same manner as set forth for the Company in Section 7. The Purchaser Common
Stock is listed on the NYSE, and reports, proxy statements and other
information concerning the Purchaser should also be available for inspection at
the offices of the NYSE, 20 Broad Street, New York, New York 10005.
Set forth below are certain selected consolidated financial data with respect
to the Purchaser and its subsidiaries for Purchaser's last three fiscal years,
excerpted or derived from audited financial statements presented in the
Purchaser's 1993 Annual Report on Form 10-K and from the unaudited financial
statements contained in the Purchaser's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1994, in each case filed by the Purchaser
with the Commission. More comprehensive financial information is included in
such reports and other documents filed by the Purchaser with the Commission.
The financial information summary set forth below is qualified in its entirety
by reference to those reports and other documents which have been filed with
the Commission, which are incorporated herein by reference, and all the
financial information, related notes and management's discussion and analysis
contained therein.
The consolidated financial data set forth below with respect to results of
operations has been restated to present WilTel's network services' operating
results as discontinued operations. The WNS Sale, subject to various federal
and state agency approvals, is expected to close in early 1995 and is expected
to yield an estimated after-tax gain of at least $950 million.
17
<PAGE>
THE WILLIAMS COMPANIES, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
-------------------------- -------------------
1993 1992 1991 1994 1993
-------- -------- -------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues.................. $1,793.4 $1,983.5 $1,704.5 $ 1,273.8 $ 1,373.0
Income from continuing opera-
tions.......................... 185.4 103.1 69.7 130.7 150.2
Income from discontinued opera-
tions.......................... 46.4 25.2 40.3 51.7 29.5
Net income...................... 231.8 138.2 110.0 171.3 179.7
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------- -------------------
1993 1992 1991 1994 1993
------- ------- ------- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
EARNINGS PER COMMON SHARE
INFORMATION (FULLY
DILUTED):
Income from continuing
operations.............. $ 1.71 $ .97 $ .69 $1.19 $1.39
Income from discontinued
operations.............. .45 .28 .48 .49 .29
Extraordinary credit
(loss).................. -- .11 -- (.11) --
Net income............... 2.16 1.36 1.17 1.57 1.68
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
CASH DIVIDENDS PER COMMON SHARE:
First Quarter.......................................... $ .21 $ .19 $ .19
Second Quarter......................................... .21 .19 .19
Third Quarter.......................................... .21 .19 .19
Fourth Quarter......................................... .21 .21 .19
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT SEPTEMBER 30,
--------------- -----------------
1993 1992 1994 1993
------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Property, plant and equipment--net............ $ 3,679 $ 3,527 $ 3,049 $ 3,579
Total assets.................................. 5,020 4,982 4,907 4,937
Total current liabilities..................... 733 978 739 661
Total stockholders' equity.................... 1,724 1,518 1,748 1,687
Total liabilities and stockholders' equity.... 5,020 4,982 4,907 4,937
</TABLE>
The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of the Purchaser are set forth in Schedule I hereto.
Except as set forth in this Offer to Purchase, none of the Purchaser, or, to
the best knowledge of the Purchaser, any of the persons listed in Schedule I
hereto, or any associate or majority-owned subsidiary of such persons,
beneficially owns any equity security of the Company, and none of the
Purchaser, or, to the best knowledge of the Purchaser, any of the other persons
referred to above, or any of the respective directors, executive officers or
subsidiaries of any of the foregoing, has effected any transaction in any
equity security of the Company during the past 60 days. The Purchaser has been
advised that Mr. Brian O'Neill, President of Williams Natural Gas Company and
North West Pipeline Corporation, beneficially owns 4,342 Shares, all of which
Mr. O'Neill acquired more than 60 days prior to the date of this Offer to
Purchase and as to which he has sole dispositive and voting power.
18
<PAGE>
Except for the Merger Agreement and the Stock Option Agreement and as
otherwise set forth in this Offer to Purchase, none of the Purchaser, or, to
the best knowledge of the Purchaser, any of the persons listed in Schedule I
hereto has any contract, arrangement, understanding or relationship with any
other person with respect to any securities of the Company, including, without
limitation, any contract, arrangement, understanding or relationship concerning
the transfer or the voting of any securities of the Company, joint ventures,
loan or option arrangements, puts or calls, guaranties of loans, guaranties
against loss or the giving or withholding of proxies. Except as set forth in
this Offer to Purchase, none of the Purchaser, or, to the best knowledge of the
Purchaser, any of the persons listed in Schedule I hereto has had any
transactions with the Company, or any of its executive officers, directors or
affiliates that would require reporting under the rules of the Commission.
Except as set forth in this Offer to Purchase, there have been no contacts,
negotiations or transactions between the Purchaser and its subsidiaries, or, to
the best knowledge of the Purchaser, any of the persons listed in Schedule I
hereto, on the one hand, and the Company or its executive officers, directors
or affiliates, on the other hand, concerning a merger, consolidation or
acquisition, tender offer or other acquisition of securities, election of
directors, or a sale or other transfer of a material amount of assets.
Sub. Sub is a newly incorporated Delaware corporation organized in connection
with the Merger and has not carried on any activities other than in connection
with the Merger. Sub's principal offices are located at One Williams Center,
Tulsa, Oklahoma 74172. Until immediately prior to the Effective Time it is not
expected that Sub will have any significant assets or liabilities or engage in
activities other than those incident to its formation and capitalization and
the transactions contemplated by the Merger. Due to the fact that Sub is newly
formed and has minimal assets and capitalization, no meaningful financial
information regarding Sub is available.
9. SOURCE AND AMOUNT OF FUNDS. The Purchaser estimates that the total amount
of funds required to acquire the Shares pursuant to the Offer and the Merger
and to pay related fees and expenses will be approximately $460 million. See
Section 16.
The Purchaser plans to obtain the necessary funds from the proceeds of the
WNS Sale. See Section 8. However, since the completion of the WNS Sale could be
following consummation of the Offer, the Purchaser obtained commitments on
December 9, 1994, from Citibank, N.A. ("Citibank"), Bank of America National
Trust and Savings Association, Chemical Bank and Canadian Imperial Bank of
Commerce to implement a Senior Revolving Credit Facility (the "Purchaser Credit
Facility") for up to $1,200,000,000 to finance the acquisition of the Company,
refinance existing debt of the Purchaser, pay transaction costs and provide
working capital for the Purchaser. The term of the Purchaser Credit Facility
will extend to December 31, 1995.
The Purchaser Credit Facility will provide for interest payable at the
Applicable Margin above Citibank's Base Rate or, at the Purchaser's option,
Citibank's Eurodollar Rate. Citibank's "Base Rate" is a fluctuating interest
rate equal to the highest from time to time of (i) the rate of interest
announced publicly by Citibank in New York as its base rate, (ii) 1/2 of 1% per
annum above the latest three-week moving average of secondary market morning
offering rates for three-month certificates of deposit of major U.S. money
market banks, as determined weekly by Citibank and adjusted for the cost of
reserves and estimated insurance assessments from the Federal Deposit Insurance
Corporation, and (iii) a rate equal to 1/2 of 1% per annum above the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers, as determined for
any day by Citibank. The "Applicable Margin" means 0% per annum for Base Rate
borrowings and a 0.625% per annum for Eurodollar Rate borrowings based on the
Purchaser's current public debt rating.
All net cash proceeds from the WNS Sale (after payment of amounts then
payable under the U.S. $400,000,000 Credit Agreement dated as of September 2,
1994, between WTG Holdings, Inc., a subsidiary of the Purchaser, and Citibank)
will be applied to the permanent reduction of the Purchaser Credit Facility. No
final decisions have been made concerning the method the Purchaser will employ
to repay such indebtedness
19
<PAGE>
if the WNS Sale is not completed. Such decisions when made will be based on
the Purchaser's review from time to time of the advisability of particular
actions, as well as on prevailing interest rates and financial and other
economic conditions.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY; THE MERGER AGREEMENT
AND THE STOCK OPTION AGREEMENT; OTHER MATTERS
BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY
In July 1992, the Purchaser was contacted by representatives of the Company
to explore the Purchaser's interest in a potential acquisition of the Company.
The Purchaser requested additional business and financial information about
the Company and entered into a confidentiality agreement with respect to the
non-public information that was furnished to it. Following preliminary
discussions, the Purchaser determined not to pursue a transaction with the
Company at that time.
On September 9, 1994, Keith E. Bailey, Chairman, President and Chief
Executive Officer of the Purchaser, at a social occasion with John P.
DesBarres, Chairman, President and Chief Executive Officer of the Company,
made a passing comment about the possibility of their considering a business
combination of their respective companies, the Company to which Mr. DesBarres
did not respond. At an informal meeting on September 30, 1994, Mr. Bailey
advised Mr. DesBarres of the Purchaser's interest in considering a business
coordinate with the Company and sought to determine the Company's interest in
pursuing such discussions. Mr. DesBarres advised Mr. Bailey that the Company
would be willing to consider pursuing discussions with the Purchaser.
On October 10, 1994, the Purchaser and the Company 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 the Purchaser acquire 51% of the Shares for $17.00 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 $2.00 per right if the
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 the Purchaser would require a stock option and certain
termination fees to be paid by the Company in connection with any transaction.
Mr. Bailey also indicated that he would like Mr. DesBarres to become President
and a Director of the Purchaser 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, the Purchaser 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. The Purchaser rejected proposals by the Company's
financial advisors for an adjustable exchange ratio in the merger within a
range or "collar". The Purchaser also continued to demand as part of its
proposal that the Company grant the Purchaser 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 a separate 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
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December 2, 1994, Mr. Bailey agreed to increase the exchange ratio to .625
assuming that negotiations were successfully completed. The Purchaser's
counsel delivered drafts of the agreements to representatives of the Company
on December 3, 1994.
Over the next few days, the parties continued to negotiate the proposal and
the Purchaser agreed to increase the percentage of Shares acquired for cash to
approximately 60%. In addition, the Purchaser replaced its demand for a $15
million termination fee with a provision for the Company to reimburse the
Purchaser for its actual expenses (up to a maximum of $15 million) upon the
occurrence of certain events, including if the Company terminates the Merger
Agreement to accept a competing bid to acquire the Company.
Representatives of the Purchaser and the Company continued to negotiate the
agreements over the next three days. On December 11, 1994, the Purchaser
agreed to reduce the cap on the value of its option to $2 per option Share and
agreed to the Company's request for the right to cancel the option following
any exercise by the Purchaser for a cash payment not to exceed such cap. On
December 11, 1994, the Boards of Directors of the Purchaser and the Company
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.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which is filed
as an Exhibit to the Tender Offer Statement on Schedule 14D-1 (the "Schedule
14D-1") filed by the Purchaser with 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.
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
NYSE for shares of 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 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.
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<PAGE>
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 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.
Upon consummation of the Merger each issued and then outstanding Share (other
than Retired or Dissenting Shares) will be converted into the right to receive
the Per Share Cash Amount, if any, and a fraction of a share of Purchaser
Common Stock equal to the Conversion Number, together with a number 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
Company $4.75 Preferred Stock and each issued and outstanding share of Company
$3.50 Preferred Stock (in each 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 Purchaser $4.75 Preferred Stock or Purchaser $3.50 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 its Board of Directors, 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 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 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 (as hereinafter defined) 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.
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<PAGE>
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 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) 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
23
<PAGE>
(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, 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 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
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<PAGE>
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, 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 and 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
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<PAGE>
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.
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
26
<PAGE>
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 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 Parent 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
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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.
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 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 relating to restrictions on
business pending the Merger 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
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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 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.
THE STOCK OPTION AGREEMENT
The following is a summary of the Stock Option Agreement. A copy of the Stock
Option Agreement is filed as an Exhibit to the Schedule l4D-1. 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. 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 Offer to Purchase.
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 NASDAQ, 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 Company for
an Acquisition Transaction, or an Acquisition
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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 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).
OTHER MATTERS
Section 203 of the Delaware Law. 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 such person became an
Interested Stockholder or approved the Business Combination, (ii) upon
consummation of the transaction which resulted in such person 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.
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 80%
of the directors then in office or the vote of at least 80% 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
of Directors 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.
Redemption by Holders of Company and Subsidiary Preferred Stock. The
Certificates of Designation, Preferences and Rights of the Company $4.75
Preferred Stock and the Company $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 Company 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
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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 has occurred. At its
meeting on December 11, 1994, the Company Board approved the transactions
contemplated by the Merger Agreement and the Stock 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.
The Company 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 the Purchaser's 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 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 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.
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY AFTER THE OFFER AND THE
MERGER.
Purpose of the Offer. The purpose of the Offer and the Merger is for the
Purchaser to acquire control of, and ultimately the entire equity interest in,
the Company. The purpose of the Merger is for the Purchaser to acquire all
Shares not purchased pursuant to the Offer. Upon consummation of the Merger,
the separate corporate existence of Sub shall cease, and the Company will
continue as the surviving corporation and a wholly-owned subsidiary of the
Purchaser. The Offer is being made pursuant to the Merger Agreement.
Under Delaware Law, the approval of the Board and the affirmative vote of the
holders of a majority of the outstanding Shares is required to approve and
adopt the Merger Agreement and the transactions contemplated thereby, including
the Merger. The Company Board has unanimously (with one director absent)
approved and adopted the Merger Agreement and the transactions contemplated
thereby. Thus, the only remaining required corporate action of the Company is
the approval and adoption of the Merger Agreement and the transactions
contemplated thereby by the affirmative vote of the holders of a majority of
the Shares. Accordingly, if the Minimum Condition is satisfied, the Purchaser
expects that it will have sufficient voting power to cause the approval and
adoption of the Merger Agreement and the transactions contemplated thereby
without the affirmative vote of any other stockholder of the Company.
In the Merger Agreement, the Company has agreed to convene a meeting of its
stockholders as promptly 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 Purchaser has agreed that all Shares
acquired by it pursuant to the Offer or the Stock Option Agreement will be
voted in favor of the Merger Agreement and the transactions contemplated
thereby.
Appraisal Rights and Other Matters. No appraisal rights are available to
holders of Shares in connection with the Offer and no appraisal rights will be
available to holders of Shares in the Merger unless a portion of the
consideration to be paid in the Merger is cash. See Section 10. The Commission
has adopted Rule 13e-3 under the Exchange Act which is applicable to certain
"going private" transactions and which may under certain circumstances be
applicable to the Merger following the purchase of Shares pursuant to the Offer
or the Stock Option Agreement. Rule 13e-3 requires, among other things, that
certain financial information concerning the Company and certain information
relating to the fairness of the proposed transaction and the
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consideration offered to minority stockholders in such transaction be filed
with the Commission and disclosed to stockholders prior to consummation of the
transaction.
Plans for the Company. The Purchaser presently intends to maintain and expand
the existing business of the Company and to promptly pursue new business
opportunities made available as a result of the Merger. Due to its highly
leveraged capital structure, the Company has been unable to take full advantage
of numerous growth opportunities in its fast-growing markets which would enable
it to maintain and enhance its natural competitive edge. The Purchaser expects
to be able to finance, on reasonable terms, the capital investment necessary to
exploit these opportunities, as well as additional opportunities to access the
abundant and long-lived natural gas supplies connected to some of the
Purchaser's existing natural gas pipeline assets. The Purchaser also
anticipates that the Company or the Purchaser or both, through their respective
subsidiaries, will promptly expand non-regulated activities in the geographical
areas served by the Company's pipeline subsidiaries. It is expected that the
capital structures of the Company and its natural gas pipeline subsidiaries
will be restructured as soon as reasonably practicable so as, among other
things, to eliminate or modify some or all of the more onerous restrictions in
their financing agreements. One result of this capital restructuring is
expected to be somewhat greater ratemaking flexibility for the natural gas
pipeline subsidiaries, as well as an overall lower cost of capital. The
Purchaser intends to aggressively continue the Company's program of disposing
of non-core assets.
The Merger Agreement provides that the officers of the Company will continue
to be the officers of the Surviving Corporation. While the Purchaser has no
firm plans to immediately replace the management of the Company or its
subsidiaries, it is expected that a realignment of functions resulting, among
other things, from the Company's becoming a wholly-owned subsidiary of the
Purchaser will occur following the Merger in order to realize operating
efficiencies and savings in general and administrative costs.
12. DIVIDENDS AND DISTRIBUTIONS. Except as contemplated by the Merger
Agreement (including, without limitation, the making of the Offer) and the
Stock Option Agreement, the Company has agreed that neither it nor any of its
subsidiaries will, between the date of the Merger Agreement and the Effective
Time, directly do any of the following without the prior written consent of the
Purchaser, which consent will not be unreasonably withheld: (a) 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 the date of the Merger
Agreement or upon conversion of Company Preferred Stock, in each case in
accordance with their present terms; (b) 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 Shares
and shares of 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;
or (c) 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 specified
transactions or in connection with tax withholding features under certain of
the Company's employee incentive compensation.
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE LISTING AND
EXCHANGE ACT REGISTRATION. The purchase of Shares pursuant to the Offer will
reduce the number of Shares that might otherwise trade publicly and could
reduce the number of holders of Shares, which could adversely affect the
liquidity and market value of the remaining Shares held by the public.
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According to the NYSE's published guidelines, the NYSE would consider
delisting the Shares if, among other things, the number of record holders of at
least 100 Shares should fall below 1,200, the number of publicly held Shares
(exclusive of holdings of officers, directors and their families and other
concentrated holdings of 10% or more ("NYSE Excluded Holdings")) should fall
below 600,000 or the aggregate market value of publicly held Shares (exclusive
of NYSE Excluded Holdings) should fall below $5,000,000. If, as a result of the
purchase of Shares pursuant to the Offer, the Stock Option Agreement or
otherwise, the Shares no longer meet the requirements of the NYSE for continued
listing and the listing of the Shares is discontinued, the market for the
Shares could be adversely affected.
If the NYSE were to delist the Shares, it is possible that the Shares would
continue to trade on another securities exchange or in the over-the-counter
market and that price or other quotations would be reported by such exchange or
through the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or other sources. The extent of the public market therefor
and the availability of such quotations would depend, however, upon such
factors as the number of stockholders and/or the aggregate market value of such
securities remaining at such time, the interest in maintaining a market in the
Shares on the part of securities firms, the possible termination of
registration under the Exchange Act as described below, and other factors. The
Purchaser cannot predict whether the reduction in the number of Shares that
might otherwise trade publicly would have an adverse or beneficial effect on
the market price for or marketability of the Shares or whether it would cause
future market prices to be greater or less than the price paid to a holder of
the Shares pursuant to the Offer.
The Shares are currently "margin securities", as such term is defined under
the rules of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), which has the effect, among other things, of allowing brokers
to extend credit on the collateral of such securities. Depending upon factors
similar to those described above regarding listing and market quotations,
following the Offer it is possible that the Shares might no longer constitute
"margin securities" for purposes of the margin regulations of the Federal
Reserve Board, in which event such Shares could no longer be used as collateral
for loans made by brokers.
The Shares are currently registered under the Exchange Act. Such registration
may be terminated upon application of the Company to the Commission if the
Shares are not listed on a national securities exchange and there are fewer
than 300 record holders of the Shares. The termination of registration of the
Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to holders of Shares and to the
Commission and would make certain provisions of the Exchange Act, such as the
short-swing profit recovery provisions of Section 16(b), the requirement of
furnishing a proxy statement in connection with stockholders' meetings pursuant
to Section 14(a), and the requirements of Rule 13e-3 under the Exchange Act
with respect to "going private" transactions, no longer applicable to the
Shares. In addition, "affiliates" of the Company and persons holding
"restricted securities" of the Company may be deprived of the ability to
dispose of such securities pursuant to Rule 144 promulgated under the
Securities Act of 1933.
If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be "margin securities" or be eligible for NASDAQ
reporting.
14. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of
the Offer, the Purchaser will not be required to accept for payment or, subject
to applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act, to pay for any Shares tendered pursuant to the Offer,
and may, subject to the provisions of Section 1.1 of the Merger Agreement,
terminate the Offer or postpone the acceptance for payment of, Shares tendered,
if as of the expiration of the Offer (as the Offer may have been
34
<PAGE>
extended pursuant to Section 1.1 of the Merger Agreement) (i) the Minimum
Condition shall not have been satisfied, (ii) the waiting period under the HSR
Act applicable to the Offer and the Merger have not expired or been terminated
or (iii) at any time on or after December 12, 1994 and prior to the time of
payment for such Shares any one or more of the events listed in the paragraphs
below have occurred and be continuing:
(a) there has been any action taken, or any statute, rule, regulation,
judgment, order or injunction promulgated, enacted, entered or deemed
applicable to the Offer or the Merger, by any state or United States
federal governmental authority or by any domestic court that (i) makes the
acceptance for payment of or payment for Shares illegal or otherwise
prohibiting consummation of the Offer or the Merger, (ii) renders the
Purchaser unable to accept for payment, pay for or purchase the Shares,
(iii) imposes material limitations on the ability of the Purchaser to
acquire or hold, transfer or dispose of, or effectively to exercise any of
its material rights of ownership of, the Shares, including, without
limitation, the right to vote the Shares purchased by it on all matters
properly presented to the stockholders of the Company, (iv) as a result of
the Offer or the Merger, requires the Purchaser, the Company, or any of
their respective subsidiaries or affiliates to dispose of or hold separate
all or any material portion of their respective businesses, assets or
properties or imposing any material limitations on the ability of any such
entities to conduct their respective businesses and own such assets and
properties, or (v) as a result of the Offer or the Merger, imposes any
limitations on the ability of the Purchaser or any of its subsidiaries
effectively to control in any material respect the business or operations
of the Company or any of its subsidiaries;
(b) there has been instituted or are pending any action, proceeding or
counterclaim by or before any U.S. federal or state court or governmental,
administrative or regulatory agency or authority, or any other person, in
each case that has a substantial likelihood of success, seeking to restrain
or prohibit the making of the Offer or the Merger, seeking to obtain any
damages material to the Purchaser and its subsidiaries taken as a whole as
a result thereof or seeking to prohibit the ownership by the Purchaser or
any of its subsidiaries of the Shares or of any material portion of their
businesses or assets, or to compel the Purchaser, the Company or any of
their affiliates to dispose of or hold separate all or a material portion
of any of their business or assets, in each case as a result of the Offer
or the Merger;
(c) there has occurred (i) any general suspension of, or limitation on
prices for, trading in securities on the NYSE, (ii) a decline of at least
25% in either the Dow Jones Average of Industrial Stocks or the Standard &
Poor's 500 Index from December 12, 1994, (iii) the declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (iv) any limitation by any governmental authority on, or any other
event which could reasonably be expected to have a material adverse effect
on, the extension of credit by banks or other lending institutions, which
limitation or other event is reasonably likely to materially affect the
ability of the Purchaser to pay for the Shares, or (v) in the case of any
of the foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof;
(d) any material adverse change has occurred since December 12, 1994 in
the business, assets, results of operation or financial condition of the
Company and its subsidiaries taken as a whole, other than changes arising
from general economic or industry conditions, or a failure by the banks
which are parties to the Company's revolving credit and letter of credit
reimbursement agreements to have provided the Bank Consents;
(e) the Company has breached or failed to perform in any material respect
any of its material obligations under the Merger Agreement, including
without limitation a failure to cause the Company Rights to be redeemed as
provided for therein;
(f) the representations and warranties of the Company contained in the
Merger Agreement were not true and correct in all material respects when
made or have since ceased to be true and correct in all material respects
and remain incorrect at the expiration date of the Offer;
(g) the Merger Agreement has been terminated in accordance with its
terms; and
(h) the Purchaser and the Company have agreed that the Purchaser will
amend or terminate the Offer;
35
<PAGE>
which, in the reasonable judgment of the Purchaser with respect to each and
every matter referred to above and regardless of the circumstances (including
any action or inaction by the Purchaser) giving rise to any such condition,
makes it inadvisable to proceed with the Offer or with such acceptance for
payment or such payment.
The foregoing conditions are for the benefit of the Purchaser and, except or
as otherwise provided in the Merger Agreement, may be waived by the Purchaser
in whole or in part at any time and from time to time in its reasonable
discretion. The failure by the Purchaser at any time to exercise any of the
foregoing rights will not be deemed a waiver of any right and each right will
be deemed an ongoing right which may be asserted by the Purchaser at any time
and from time to time.
15. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
General. Based upon its examination of publicly available information with
respect to the Company and the review of certain information furnished by the
Company to the Purchaser and discussions of representatives of the Purchaser
with representatives of the Company during the Purchaser's investigation of the
Company, the Purchaser is not aware of any license or other regulatory permit
that appears to be material to the business of the Company and its
subsidiaries, taken as a whole, which might be adversely affected by the
acquisition of Shares by the Purchaser pursuant to the Offer or the Stock
Option Agreement or the Merger or, except as set forth below, of any approval
or other action by any domestic (federal or state) or foreign governmental,
administrative or regulatory authority or agency which would be required prior
to the acquisition of Shares by the Purchaser pursuant to the Offer or the
Stock Option Agreement or prior to the Merger. Should any such approval or
other action be required, it is the Purchaser's present intention to seek such
approval or action. The Purchaser does not currently intend, however, to delay
the purchase of Shares tendered pursuant to the Offer pending the outcome of
any such action or the receipt of any such approval. There can be no assurance
that any such approval or other action, if needed, would be obtained without
substantial conditions or that adverse consequences might not result to the
business of the Company or the Purchaser or that certain parts of the
businesses of the Company or the Purchaser might not have to be disposed of or
held separate or other substantial conditions complied with in order to obtain
such approval or other action or in the event that such approval was not
obtained or such other action was not taken. The Purchaser's obligation under
the Offer to accept for payment and pay for Shares is subject to certain
conditions, including conditions relating to the legal matters discussed in
this Section 15. See Section 14.
Antitrust Compliance. Under the HSR Act and the rules that have been
promulgated thereunder by the FTC, certain acquisition transactions may not be
consummated unless certain information has been furnished to the Antitrust
Division and the FTC and certain waiting period requirements have been
satisfied. Pursuant to such requirements, the Purchaser and the Company are
making the initial filings under the HSR Act and the waiting period thereunder
will expire at 11:59 p.m., New York City time, on the fifteenth day following
such filings, unless earlier terminated. Prior to such time, the Antitrust
Division or the FTC may extend the waiting period by requesting additional
information or documentary material relevant to the acquisitions. If such a
request is made, the waiting period will be extended until 11:59 p.m., New York
City time, on the tenth day after substantial compliance by the Purchaser with
such request.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares
by the Purchaser pursuant to the Offer. At any time before or after the
purchase of Shares pursuant to the Offer by the Purchaser, the FTC or the
Antitrust Division could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
purchase of Shares pursuant to the Offer or seeking the divestiture of Shares
purchased by the Purchaser or the divestiture of substantial assets of the
Purchaser and the Company or their respective subsidiaries. Private parties and
state attorneys general may also bring legal action under federal or state
antitrust laws under certain circumstances. Based upon an examination of
information available to the Purchaser relating to the businesses in which the
Purchaser and the Company and their respective subsidiaries are engaged, the
Purchaser believes that the Offer will not violate the antitrust laws.
Nevertheless, there can be no assurance that a challenge to the Offer on
antitrust grounds will not be made or, if such a challenge is made, what the
result would be. See Section 14.
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<PAGE>
State Takeover Statutes. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of the Delaware Law prevents an
"interested stockholder" (generally a person who owns or has the right to
acquire 15% or more of a corporation's outstanding voting stock, or an
affiliate or associate thereof) from engaging in a "business combination"
(defined to include mergers and certain other transactions) with a Delaware
corporation for a period of three years following the date such person became
an interested stockholder unless, among other things, prior to such date the
board of directors of the corporation approved either the business combination
or the transaction in which the interested stockholder became an interested
stockholder. On December 11, 1994, prior to the execution of the Merger
Agreement and the Stock Option Agreement, the Company Board by the unanimous
vote of all directors present at a meeting held on such date, approved the
Merger Agreement and the Stock Option Agreement and determined that the Offer
and the Merger, taken together, are fair to, and in the best interests of, the
stockholders of the Company. Accordingly, Section 203 is inapplicable to the
Offer and the Merger.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In 1982, in Edgar v. MITE Corp., the Supreme
Court of the United States invalidated on constitutional grounds the Illinois
Business Takeover Statute, which, as a matter of state securities law, made
takeovers of corporations meeting certain requirements more difficult. However,
in 1987 in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that
the State of Indiana may, as a matter of corporate law, and, in particular,
with respect to those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of
a target corporation without the prior approval of the remaining stockholders.
The state law before the Supreme Court was by its terms applicable only to
corporations that had a substantial number of stockholders in the state and
were incorporated there.
The Company, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. The Purchaser does not know whether any of these laws will, by their
terms, apply to the Offer and has not complied with any such laws. Should any
person seek to apply any state takeover law, the Purchaser will take such
action as then appears desirable, which may include challenging the validity or
applicability of any such statute in appropriate court proceedings. In the
event it is asserted that one or more state takeover laws is applicable to the
Offer and the Merger, and an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer, the Purchaser might be
required to file certain information with, or receive approvals from, the
relevant state authorities. In addition, if enjoined, the Purchaser might be
unable to accept for payment any Shares tendered pursuant to the Offer, or be
delayed in continuing or consummating the Offer. In such case, the Purchaser
may not be obligated to accept for payment any Shares tendered. See Section 14.
Federal Reserve Board Regulations. Federal Reserve Board Regulations G, T, U
and X (the "Margin Regulations") promulgated by the Federal Reserve Board place
restrictions on the amount of credit that may be extended for the purpose of
purchasing margin stock (including the Shares) if such credit is secured
directly or indirectly by margin stock. The Purchaser believes that the
financing of the acquisition of the Shares will be in compliance with the
Margin Regulations. A challenge to the financing arrangements in respect of the
Offer alleging a violation of the Margin Regulations could, if adversely
determined, impair the Purchaser's ability to obtain financing for the Offer
and the Merger.
New Jersey Industrial Site Recovery Act. The New Jersey Industrial Site
Recovery Act ("ISRA"), P.L. 1993 c.139, requires that a "Negative Declaration"
or a "Remedial Action Workplan" be filed with and approved by the New Jersey
Department of Environmental Protection ("NJDEP") as a precondition to the
"transfer" of an "industrial establishment." Prerequisites for the approval of
a Negative Declaration or Remedial Action Workplan include the filing of
detailed information about environmental conditions at the "industrial
establishment." In certain cases, the NJDEP may require (i) soil and ground
water sampling, (ii) submission and implementation of a Remedial Action
Workplan for any contamination above a certain
37
<PAGE>
threshold level at the "industrial establishments," and (iii) a financial
guarantee, such as a remediation trust fund, environmental insurance policy,
line of credit, or self-guarantee, of the implementation of the Remedial Action
Workplan. The NJDEP, in circumstances deemed appropriate, has in the past
entered into "Remediation Agreements" with the owner or operator of an
"industrial establishment" subject to ISRA pursuant to which consummation of a
"transfer" of such "industrial establishment" was allowed prior to full
compliance with the requirements of ISRA, provided that the owner or operator
(i) agrees to a schedule for compliance and (ii) gives the NJDEP a financial
guarantee of such compliance.
The Purchaser has been advised that the consummation of the Offer may
constitute a "transfer" as defined by ISRA. If the consummation of the Offer is
a covered "transfer" and if any of the Company's facilities in the State of New
Jersey are "industrial establishments" as defined by ISRA, the requirements of
ISRA would be applicable. If the Company determines that the consummation of
the Offer will trigger ISRA with respect to one or more of its facilities, the
Company intends to make timely filings in accordance with the requirements of
the law.
Certain Litigation. On December 12, 1994, two purported class actions were
filed in the Delaware Court of Chancery captioned, Steiner v. DesBarres, et
al., Del. Ch., C.A. No. 13920 in which the Company, the Purchaser and eight
directors of the Company were named as defendants, and Alpern v. Transco Energy
Co., et al., Del. Ch., C.A. No. 13918 in which the Purchaser and seven
directors of the Company were named as defendants. On December 13, 1994, two
additional purported class actions were filed, captioned, Miller v. DesBarres
et al., Del. Ch., C.A. No. 13922 and Weiss v. DesBarres, et al., Del. Ch., C.A.
No. 13923, in which the Company and seven directors of the Company were named
as defendants. On December 14, 1994, two additional purported class actions
were filed in the Delaware Court of Chancery captioned, DeCesare v. DesBarres,
et al., Del. Ch. C.A. No. 13926 in which the Company, the Purchaser and eight
directors were named as defendants and Rand, et al. v. DesBarres et al., Del.
Ch. C.A. No. 13925, in which the Company and seven directors were named as
defendants. Among other things, all of the complaints allege: that the
directors of the Company breached their fiduciary duties in connection the
Merger Agreement, including the Option granted under the Stock Option
Agreement. The complaints further allege that the Purchaser has aided and
abetted the Company directors' alleged breaches of fiduciary duty. The
complaints seek, among other relief, an injunction against the Offer and the
Merger.
The Purchaser believes that the lawsuits are without merit, and intends to
vigorously defend the actions.
16. FEES AND EXPENSES. Except as set forth below, the Purchaser will not pay
any fees or commissions to any broker, dealer or other person for soliciting
tenders of Shares pursuant to the Offer.
Smith Barney Inc. ("Smith Barney") is acting as the Dealer Manager in
connection with the Offer and as financial advisor to the Purchaser in
connection with its effort to acquire the Company. The Purchaser has agreed to
pay Smith Barney for its services the following fees: (i) a merger agreement
execution fee of $1,125,000, payable upon execution of the Merger Agreement;
(ii) a dealer manager fee of $1,125,000, payable at such time as the Purchaser
accepts for payment and purchases in excess of 50% of the outstanding Shares;
and (iii) a transaction fee of $4,500,000 (against which the prior fees, to the
extent previously paid, will be credited), payable promptly upon consummation
of certain specified transactions concerning the Company, including the
purchase of at least 50% of the outstanding Shares pursuant to the Offer. The
Purchaser has also agreed to reimburse Smith Barney for its reasonable out-of-
pocket expenses (including the reasonable fees and expenses of its legal
counsel) incurred in connection with its engagement, and to indemnify Smith
Barney and certain related persons against certain liabilities and expenses in
connection with its engagement, including certain liabilities under the federal
securities laws. Smith Barney has rendered various investment banking and other
advisory services to the Purchaser and its affiliates in the past and is
expected to continue to render such services, for which it has received and
will continue to receive customary compensation from the Purchaser and its
affiliates. In the ordinary course of business, Smith Barney may actively trade
the equity and debt securities of the Purchaser and the Company for its own
account or for the account of customers and, accordingly, may at any time hold
a long or short position in such securities.
38
<PAGE>
The Purchaser has retained Morrow & Co. to act as the Information Agent in
connection with the Offer. The Information Agent may contact holders of Shares
by mail, telephone, facsimile, telegraph and personal interviews and may
request brokers, dealers and other nominee stockholders to forward materials
relating to the Offer to beneficial owners of Shares. The Information Agent
will receive reasonable and customary compensation for its services, will be
reimbursed for certain reasonable out-of-pocket expenses and will be
indemnified against certain liabilities and expenses in connection therewith,
including certain liabilities under the federal securities laws.
In addition, Chemical Bank has been retained as the Depositary. The
Depositary has not been retained to make solicitations or recommendations in
its role as Depositary. The Depositary will receive reasonable and customary
compensation for its services, will be reimbursed for certain reasonable out-
of-pocket expenses and will be indemnified against certain liabilities and
expenses in connection therewith, including certain liabilities under the
federal securities laws. Brokers, dealers, commercial banks and trust companies
will be reimbursed by the Purchaser for customary mailing and handling expenses
incurred by them in forwarding offering material to their customers.
17. MISCELLANEOUS. The Purchaser is not aware of any jurisdiction where the
making of the Offer is prohibited by any administrative or judicial action
pursuant to any valid state statute. If the Purchaser becomes aware of any
valid state statute prohibiting the making of the Offer or the acceptance of
the Shares pursuant thereto, Purchaser will make a good faith effort to comply
with such state statute. If, after such good faith effort, the Purchaser cannot
comply with any such state statute, the Offer will not be made to (nor will
tenders be accepted from or on behalf of) the holders of Shares in such state.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed to
be made on behalf of the Purchaser by the Dealer Manager or one or more
registered brokers or dealers which are licensed under the laws of such
jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER NOT CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
The Purchaser has filed with the Commission the Schedule 14D-1, together with
exhibits, pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, furnishing certain additional information with respect to the
Offer, and may file amendments thereto. The Schedule 14D-1 and any amendments
thereto, including exhibits, may be inspected at, and copies may be obtained
from, the same places and in the same manner as set forth in Section 7 (except
that they will not be available at the regional offices of the Commission).
The Williams Companies, Inc.
December 16, 1994
39
<PAGE>
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS
AND EXECUTIVE OFFICERS OF THE PURCHASER
1. Executive Officers of the Purchaser. The names, ages, positions and
election dates of the executive officers of the Purchaser are set forth below.
Unless otherwise indicated, the current business address for each individual
listed below is One Williams Center, Tulsa, Oklahoma 74172. Each such person is
a citizen of the United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME AND AGE EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
------------ -------------------------------------------
<S> <C>
Keith E. Bailey (52).......... May 1994-Present, Chairman of the Board; January
1994-Present, Chief Executive Officer; 1992-
Present, President; Director and Executive Vice
President for more than last five years.
John C. Bumgarner, Jr. (52)... Senior Vice President--Corporate Development and
Planning for more than last five years.
James R. Herbster (53)........ 1992-Present, Senior Vice President--
Administration; 1990-1992, Vice President and
General Manager--Williams Information Services;
Vice President--Operations--Williams Western
Group for more than last five years.
J. Furman Lewis (60).......... Senior Vice President and General Counsel for
more than last five years.
Jack D. McCarthy (51)......... 1992-Present, Senior Vice President--Finance
(Chief Financial Officer); Vice President and
Treasurer for more than last five years.
Gary R. Belitz (45)........... 1992-Present, Controller (Principal Accounting
Officer); Assistant Controller for more than
last five years.
Stephen L. Cropper (44)....... President--Williams Pipe Line, for more than
last five years; 1993-Present, President--
Williams Energy Ventures.
Lloyd A. Hightower (60)....... 1993-Present, President--Williams Field
Services; Senior Vice President and General
Manager--Williams Western Group for more than
last five years.
Howard E. Janzen (40)......... December 1, 1994-Present, Chairman of the
Board--Vyvx; 1993--December 1, 1994, Senior Vice
President and General Manager--Williams Natural
Gas; Vice President--Operations--Williams Pipe
Line for more than last five years.
Brian E. O'Neill (59)......... President--Williams Natural Gas for more than
last five years; January 1994-Present,
President--Northwest Pipeline Corporation.
Roy A. Wilkens (51)........... President--Williams Telecommunications Group for
more than last five years.
</TABLE>
I-1
<PAGE>
2. Directors of the Purchaser. The names, ages, positions and election dates
of the directors of the Purchaser (other than directors who are also executive
officers of the Purchaser) are set forth below together with a current business
address for each. Each such person is a citizen of the United States.
<TABLE>
<CAPTION>
HELD
OFFICE
NAME AGE POSITIONS AND OFFICE HELD SINCE
---- --- ------------------------- ------
<S> <C> <C> <C>
Harold W. Andersen...... 71 Mr. Andersen is contributing editor and a 1988
2822 Woodmen Tower director and former Chairman and Chief
Omaha, NE 68102 Executive Officer of The Omaha World-Herald
Company. Mr. Andersen is also a director of
Avenor, Inc. and American Business
Information.
Ralph E. Bailey......... 70 Retired Chairman and Chief Executive 1988
695 E. Main Street Officer of Conoco, Inc., Mr. Bailey is
Stamford, CT 06901 currently Chairman of United Meridian
Corporation, a publicly traded independent
oil and gas exploration and production
company, and Chairman and Chief Executive
Officer of American Bailey Corporation, a
private holding company with interests in
manufacturing and mining, and has been for
more than five years. Mr. Bailey is also a
director of General Signal Corporation and
The Rowan Companies, Inc.
Glenn A. Cox............ 65 Mr. Cox was President and Chief Operating 1992
401 S.E. Dewey Officer of Phillips Petroleum Company, a
Suite 318 company engaged in the exploration,
Bartlesville, OK 74003 production, refining and marketing of
petroleum and in the manufacture and
distribution of a wide variety of
chemicals, until his retirement in 1991.
Mr. Cox is also a director of BOK Financial
Corporation, Helmerich & Payne, Inc. and
Union Texas Petroleum Holdings, Inc.
Thomas H. Cruikshank.... 63 Mr. Cruikshank is Chairman of the Board and 1990
3600 Lincoln Plaza Chief Executive Officer of Halliburton
500 N. Akard St. Company, a diversified oil field services,
Dallas, TX 75201 engineering and construction company. He
has been an executive of Halliburton for
more than five years. Mr. Cruikshank is
also a director of The Goodyear Tire &
Rubber Company.
Ervin S. Duggan......... 55 Mr. Duggan is the President and Chief 1994
1320 Braddock Place Executive Officer of Public Broadcasting
6th Floor Service, the network and program
Alexandria, VA 22314- distribution company of America's 346
1698 public television stations. A former
journalist and White House aide, he was a
Federal Communications Commissioner from
1990 until February 1994. From 1981 to
1990, Mr. Duggan managed Ervin S. Duggan
Associates, a provider of communications
and consulting services to large corporate
clients.
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
HELD
OFFICE
NAME AGE POSITIONS AND OFFICE HELD SINCE
---- --- ------------------------- ------
<S> <C> <C> <C>
Robert J. LaFortune..... 67 Mr. LaFortune is, and has been for more 1978
427 S. Boston than five years, an investor and an oil and
Suite 2104 gas operator. Mr. LaFortune is also a
Tulsa, OK 74103 director of BOK Financial Corporation.
James C. Lewis.......... 62 Mr. Lewis is Chairman of the Board of 1978
1751 E. 71st Street Optimus Corporation, Tulsa, Oklahoma, an
Tulsa, OK 74136 investment company, and has been for more
than five years. Mr. Lewis is also a
director of CFT, Inc.
Jack A. MacAllister..... 67 Mr. MacAllister is Chairman Emeritus of 1994
9785 Maroon Circle U S WEST, Inc., a telecommunications
Suite 332 company. Mr. MacAllister retired as
Englewood, CO 80112 Chairman of the Board of U S WEST in 1992.
He served as the Chief Executive Officer of
U S WEST from 1982 to 1990. Mr. MacAllister
is also a director of TELUS Corporation/AGT
Limited.
James A. McClure........ 70 Mr. McClure is President of McClure, Gerard 1991
P. O. Box 2720 & Neuenschwander, Inc., a Washington, D.C.,
Boise, ID 83701 based government relations consulting firm,
and is of counsel to the law firm of
Givens, Pursley & Huntley, Boise, Idaho. He
was a U.S. Senator from Idaho from 1973 to
1990. Mr. McClure is also a director of
Boise Cascade Corporation and Coeur d'Alene
Mines Corporation.
Peter C. Meinig......... 55 Mr. Meinig is Chairman of ElectroCom 1993
5810 E. Skelly Dr. Automation, Inc., an Arlington, Texas,
Suite 1000 based company engaged in the design,
Tulsa, OK 74135 manufacture and integration of high-speed
automated document processing systems and
has been for more than five years. Mr.
Meinig is also President and Chief
Executive Officer of HM International,
Inc., a privately owned diversified
manufacturing and management company.
Kay A. Orr.............. 55 Mrs. Orr served as Governor of Nebraska 1991
1610 Brent Blvd. from 1987 to 1991. Mrs. Orr is also a
Lincoln, NE 68506 director of ServiceMaster, a company that
provides services to homeowners.
Gordon R. Parker........ 59 Mr. Parker is Chairman of the Board of 1987
1700 Lincoln Street Newmont Mining Corporation, a company
Suite 2800 engaged in the exploration for, and the
Denver, CO 80203 operation and management of, precious metal
properties. He has been an executive of
Newmont for more than five years. Mr.
Parker is also Chairman and a director of
Newmont Gold Company.
Joseph H. Williams...... 61 Mr. Williams served as Chairman of the 1969
One Williams Center Board of the Purchaser from 1979 to May 19,
Tulsa, OK 74172 1994, and Chief Executive Officer from 1979
through 1993. Mr. Williams is also a
director of Prudential Insurance Company
and Flint Industries, Inc.
</TABLE>
I-3
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for the
Shares and any other required documents should be sent by each stockholder of
the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary as follows:
The Depositary for the Offer is:
CHEMICAL BANK
Facsimile Transmission:
(212) 629-8015
(212) 629-8016
By Hand/Overnight (For Eligible Institutions Only) By Mail:
Courier:
Chemical Bank Chemical Bank
55 Water Street Confirm by Telephone Reorganization
Room 234--2nd Floor (212) 946-7137 Department
New York, New York P.O. Box 3085
10041-0199 GPO Station
Attention: New York, New York
Reorganization 10116-3085
Department
Any questions or requests for assistance or additional copies of the Offer to
Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at their respective
telephone numbers and locations listed below. You may also contact your broker,
dealer, commercial bank or trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
MORROW & CO., INC.
909 Third Avenue 14755 Preston Road, Suite 725
New York, NY 10022 Dallas, TX 75240
(212) 754-8000 (214) 788-0977
Banks & Brokers Call Toll Free 1-800-662-5200
All Others Call Toll Free 1-800-566-9058
The Dealer Manager for the Offer is:
SMITH BARNEY INC.
1345 Avenue of the Americas
New York, New York 10105
(212) 698-3612
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
TRANSCO ENERGY COMPANY
AT
$17.50 NET PER SHARE
PURSUANT TO THE OFFER TO PURCHASE DATED DECEMBER 16, 1994
BY
THE WILLIAMS COMPANIES, INC.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JANUARY 17, 1995, UNLESS THE OFFER
IS EXTENDED
THE DEPOSITARY FOR THE OFFER IS:
CHEMICAL BANK
Facsimile Transmission:
(212) 629-8015
(212) 629-8016
By Hand/Overnight (For Eligible Institutions Only) By Mail:
Courier:
Chemical Bank Chemical Bank
55 Water Street Confirm by Telephone Reorganization
Room 234--2nd Floor (212) 946-7137 Department
New York, New York P.O. Box 3085
10041-0199 GPO Station
New York, New York
10116-3085
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used either if certificates evidencing
Shares (as defined below) are to be forwarded herewith or, unless an Agent's
Message (as defined in the Offer to Purchase) is utilized, if delivery of
Shares is to be made by book-entry transfer to the account maintained by the
Depositary at The Depository Trust Company, the Midwest Securities Trust
Company or the Philadelphia Depository Trust Company (each, a "Book-Entry
Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities")
pursuant to the procedures set forth in Section 3 of the Offer to Purchase.
Stockholders whose certificates evidencing Shares are not immediately available
or who cannot deliver confirmation of the book-entry transfer of their Shares
into the Depositary's account at a Book-Entry Transfer Facility ("Book-Entry
Confirmation") and all other documents required hereby to the Depositary on or
prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase)
must tender their Shares according to the guaranteed delivery procedures set
forth in Section 3 of the Offer to Purchase. See Instruction 2. Delivery of
documents to a Book-Entry Transfer Facility does not constitute delivery to the
Depositary.
1
<PAGE>
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-
ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
Check Box of Book-Entry Transfer Facility:
[_] The Depository Trust Company
[_] Midwest Securities Trust Company
[_] Philadelphia Depository Trust Company
Account Number
Transaction Code Number
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Owner(s):
Date of Execution of Notice of Guaranteed Delivery:
Name of Institution that Guaranteed Delivery:
If Delivered by Book-Entry Transfer, Check Box of Book-Entry Transfer
Facility:
[_] The Depository Trust Company
[_] Midwest Securities Trust Company
[_] Philadelphia Depository Trust Company
Account Number
Transaction Code Number
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES TENDERED
- ---------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE(S) TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ---------------------------------------------------------------------------------------------------
TOTAL NUMBER OF NUMBER OF
CERTIFICATE SHARES REPRESENTED SHARES
NUMBER(S)* BY CERTIFICATE(S) TENDERED**
--------------------------------------------------
<S> <C> <C> <C>
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
TOTAL SHARES
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares being
delivered to the Depositary are being tendered. See Instruction 4.
The names and addresses of the registered holders should be printed, if not
already printed above, exactly as they appear on the certificates representing
Shares tendered hereby. The certificates and number of Shares that the
undersigned wishes to tender should be indicated in the appropriate boxes.
2
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS.
Ladies and Gentlemen:
The undersigned hereby tenders to The Williams Companies, Inc. (the
"Purchaser"), a Delaware corporation, the above described shares of common
stock, par value $.50 per share (the "Shares"), of Transco Energy Company, a
Delaware corporation (the "Company"), and attached common share purchase rights
(the "Company Rights" and, unless the context otherwise requires, deemed to be
included in all references to "Shares") pursuant to the Purchaser's offer to
purchase up to 24,600,000 Shares at a price of $17.50 per Share, net to the
seller in cash without interest upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated December 16, 1994 (the "Offer to
Purchase"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which, together with any amendments or supplements thereto,
constitute the "Offer"). The Offer is being made pursuant to an Agreement and
Plan of Merger (the "Merger Agreement"), dated as of December 12, 1994, between
the Purchaser, WC Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of the Purchaser and the Company. The Purchaser reserves the right
to transfer or assign in whole or from time to time in part, to one or more of
its affiliates the right to purchase Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of the Shares tendered
herewith in accordance with the terms and subject to the conditions of the
Offer, the undersigned hereby sells, assigns, and transfers to, or upon the
order of, the Purchaser all right, title and interest in and to all the Shares
that are being tendered hereby (and any and all other Shares or other
securities issued or issuable in respect thereof on or after December 12, 1994)
and irrevocably constitutes and appoints the Depositary the true and lawful
agent and attorney-in-fact of the undersigned with respect to such Shares (and
any such other Shares or securities) with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to (a) deliver certificates for such Shares (and any such other
Shares or securities), or transfer ownership of such Shares (and any such other
Shares or securities) on the account books maintained by a Book-Entry Transfer
Facility, together in either such case with all accompanying evidences of
transfer and authenticity, to or upon the order of the Purchaser upon receipt
by the Depositary, as the undersigned's agent, of the purchase price (adjusted,
if appropriate, as provided in the Offer to Purchase), (b) present such Shares
(and any such other Shares or securities) for transfer on the books of the
Company and (c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares (and any other such Shares or securities),
all in accordance with the terms of the Offer.
If, on or after December 12, 1994, the Company should declare or pay, other
than as specifically permitted under the Merger Agreement, any cash or stock
dividend or other distribution on or issue any rights with respect to the
Shares, payable or distributable to stockholders of record on a date before the
transfer to the name of the Purchaser or its nominee or transferee on the
Company's stock transfer records of the Shares accepted for payment pursuant to
the Offer, then, subject to the provisions of Section 14 of the Offer to
Purchase, (i) the purchase price per Share payable by the Purchaser pursuant to
the Offer will be reduced by the amount of any such cash dividend or cash
distribution and (ii) the whole of any such non-cash dividend, distribution or
right will be received and held by the tendering stockholder for the account of
the Purchaser and shall be required to be promptly remitted and transferred by
each tendering stockholder to the Depositary for the account of the Purchaser,
accompanied by appropriate documentation of transfer. Pending such remittance,
the Purchaser will be entitled to all rights and privileges as owner of any
such non-cash dividend, distribution or right and may withhold the entire
purchase price or deduct from the purchase price the amount of value thereof,
as determined by the Purchaser in its sole discretion.
By executing this Letter of Transmittal, the undersigned hereby confirms the
undersigned's agreement that the amount paid by the Company in redemption of
the Company Rights attached to Shares of such stockholder acquired pursuant to
the Offer will be paid to and retained by the Purchaser.
3
<PAGE>
The undersigned hereby irrevocably appoints J. Furman Lewis and David Higbee
and each of them or any other designees of the Purchaser, the attorneys-in-fact
and proxies of the undersigned, each with full power of substitution to the
full extent of such stockholder's rights with respect to tendered Shares (and
any and all other Shares or securities or rights issued or issuable in respect
thereof on or after December 12, 1994), to vote in such manner as each such
attorney and proxy or his substitute shall in his sole discretion deem proper,
and otherwise act (including without limitation pursuant to written consent)
with respect to all the Shares tendered hereby which have been accepted for
payment by the Purchaser prior to the time of such vote or action, which the
undersigned is entitled to vote at any meeting of stockholders (whether annual
or special and whether or not an adjourned meeting) of the Company, or
otherwise. This proxy is coupled with an interest in the Company and in the
Shares and is irrevocable and is granted in consideration of, and is effective
when, if and to the extent that the Purchaser accepts such Shares for payment
pursuant to the Offer. Such acceptance for payment shall revoke, without
further action, all prior proxies granted by the undersigned at any time with
respect to such Shares (and any such other Shares or other securities) and no
subsequent proxies will be given (and if given will be deemed not to be
effective) with respect thereto by the undersigned. The undersigned
acknowledges that in order for Shares to be deemed validly tendered,
immediately upon the acceptance for payment of such Shares, the Purchaser or
the Purchaser's designee must be able to exercise full voting and other rights
of a record and beneficial holder with respect to such Shares.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any and all other Shares or other securities issued or issuable in
respect thereof on or after December 12, 1994), that the undersigned own(s) the
Shares tendered hereby within the meaning of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that such
tender of shares complies with Rule 14e-4 under the Exchange Act, and that,
when the same are accepted for payment by the Purchaser, the Purchaser will
acquire good, marketable and unencumbered title thereto, free and clear of all
liens, restrictions, charges and encumbrances and the same will not be subject
to any adverse claim. The undersigned, upon request, will execute and deliver
any additional documents deemed by the Depositary or the Purchaser to be
necessary or desirable to complete or confirm the sale, assignment and transfer
of the Shares tendered hereby (and any and all such other Shares or other
securities).
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and any obligation of the undersigned hereunder
shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and personal and legal representatives
of the undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable provided that Shares tendered pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date.
The undersigned understands that tenders of Shares pursuant to any one of the
procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions of the Offer.
The undersigned recognizes that under certain circumstances set forth in the
Offer to Purchase, Purchaser may not be required to accept for payment any of
the Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or any certificates for
Shares not tendered or accepted for payment in the name(s) of the undersigned.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price and/or return any certificates for
Shares not tendered or accepted for payment (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature. In the event that both the Special Delivery Instructions and the
Special Payment Instructions are completed, please issue the check for the
purchase price and/or any certificates for Shares not tendered or accepted for
payment in the name of, and deliver such check and/or return such certificates
to the person or persons so indicated. Stockholders delivering Shares by book-
entry transfer may request that
4
<PAGE>
any Shares not accepted for payment be returned by crediting such account
maintained at a Book-Entry Transfer Facility as such stockholder may designate
by making an appropriate entry under "Special Payment Instructions." The
undersigned recognizes that the Purchaser has no obligation pursuant to the
Special Payment Instructions to transfer any Shares from the name of the
registered holder thereof if the Purchaser does not accept for payment any of
the Shares so tendered.
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6, AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certif- To be completed ONLY if certif-
icates for Shares not tendered icates for Shares not tendered
or not purchased and/or the or not purchased and/or the
check for the purchase price of check for the purchase price of
Shares purchased are to be is- Shares purchased are to be sent
sued in the name of someone to someone other than the under-
other than the undersigned, or signed, or to the undersigned at
if Shares delivered by book-en- an address other than that shown
try transfer which are not pur- above.
chased are to be returned by
credit to an account maintained
at a Book-Entry Transfer Facil-
ity other than that designated
above.
Issue check and/or certificates Mail check and/or certificates
to: to:
Name ____________________________ Name_____________________________
(PLEASE PRINT) (PLEASE PRINT)
Address _________________________ Address _________________________
_________________________________ _________________________________
(ZIP CODE) (ZIP CODE)
_________________________________
(TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NUMBER)
(ALSO COMPLETE SUBSTITUTE FORM
W-9 BELOW)
[_] Credit unpurchased Shares
delivered by book-entry
transfer to the Book-Entry
Transfer Facility account set
forth below.
Check appropriate box:
[_] The Depository Trust Company
[_] Midwest Securities Trust
Company
[_] Philadelphia Depository
Trust Company
_________________________________
(ACCOUNT NUMBER)
5
<PAGE>
SIGN HERE
(COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
.............................................................
.............................................................
SIGNATURE(S) OF HOLDER(S) OF SHARES
Dated: ......................................................
(Must be signed by registered holder(s) exactly as name(s)
appear(s) on stock certificate(s) or on a security position
listing or by person(s) authorized to become registered
holder(s) by certificates and documents transmitted
herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, agents,
officers of corporations or others acting in a fiduciary or
representative capacity, please provide the following
information. See Instruction 5.)
Name(s)......................................................
........................................................
(PLEASE PRINT)
Capacity (full title)........................................
Address......................................................
........................................................
(INCLUDE ZIP CODE)
Area Code and Telephone Number...............................
Tax Identification or
Social Security No...........................................
(COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature.........................................
Name.........................................................
(PLEASE PRINT)
Title........................................................
Name of Firm.................................................
Address......................................................
(INCLUDE ZIP CODE)
Area Code and Telephone Number...............................
Dated: ......................................................
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder of the Shares (which term, for purposes of this document,
shall include any participant in a Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of Shares) tendered
herewith, unless such holder has completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on
the reverse hereof, or (ii) if such Shares are tendered for the account of a
member firm of a registered national securities exchange, a member of the
National Association of Securities Dealers, Inc. or a commercial bank or trust
company having an office or correspondent in the United States (each of the
foregoing being referred to as an "Eligible Institution"). In all other cases,
all signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Certificates. This Letter of
Transmittal is to be completed by stockholders either if certificates are to be
forwarded herewith or if tenders of Shares are to be made pursuant to the
procedures for delivery by book-entry transfer set forth in Section 3 of the
Offer to Purchase. Certificates for all physically tendered Shares, or any
Book-Entry Confirmation of Shares, as the case may be, as well as a properly
completed and duly executed Letter of Transmittal (or manually signed facsimile
thereof), with any required signature guarantees, and any other documents
required by this Letter of Transmittal, or an Agent's Message (as defined
below), in connection with a book-entry transfer, must be transmitted to and
received by the Depositary at one of its addresses set forth herein prior to
the Expiration Date (as defined in Section 1 of the Offer to Purchase). If a
stockholder's certificates for Shares are not immediately available or time
will not permit all required documents to reach the Depositary prior to the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, such stockholder's Shares may nevertheless be tendered by
properly completing and duly executing the Notice of Guaranteed Delivery
pursuant to the guaranteed delivery procedure set forth in Section 3 of the
Offer to Purchase. Pursuant to such procedure, (i) such tender must be made by
or through an Eligible Institution, (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by the
Purchaser, must be received by the Depositary prior to the Expiration Date, and
(iii) in the case of a guarantee of Shares, the certificates for all tendered
Shares, in proper form for transfer, or a Book-Entry Confirmation, together
with a properly completed and duly executed Letter of Transmittal (or manually
signed facsimile thereof) with any required signature guarantee (or, in the
case of a book-entry transfer, an Agent's Message) and any other documents
required by such Letter of Transmittal, are received by the Depositary within
five New York Stock Exchange, Inc. trading days after the date of execution of
the Notice of Guaranteed Delivery. The term "Agent's Message" means a message,
transmitted by a Book-Entry Transfer Facility to, and received by, the
Depositary and forming a part of a Book-Entry Confirmation, which states that
such Book-Entry Transfer Facility has received an express acknowledgement from
the participant in such Book-Entry Transfer Facility tendering the Shares, that
such participant has received and agrees to be bound by the terms of the Letter
of Transmittal and that the Purchaser may enforce such agreement against the
participant.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE CERTIFICATE FOR
SHARES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-
ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED
BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. EXCEPT AS OTHERWISE PROVIDED IN
THIS INSTRUCTION 2, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY
RECEIVED BY THE DEPOSITARY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution
of this Letter of Transmittal (or a manually signed facsimile thereof), waive
any right to receive any notice of the acceptance of their Shares for payment.
7
<PAGE>
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
signed schedule attached hereto.
4. Partial Tenders. (Not applicable to stockholders who tender by book-entry
transfer.) If fewer than all the Shares evidenced by any certificate submitted
are to be tendered, fill in the number of Shares which are to be tendered in
the box entitled "Description of Shares Tendered." In such case, new
certificate(s) for the remainder of the Shares that were evidenced by your old
certificate(s) will be sent to you, unless otherwise provided in the
appropriate box on this Letter of Transmittal, as soon as practicable after the
Expiration Date. All Shares represented by certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face of the certificate(s) without alteration, enlargement or
any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory
to the Purchaser of such person's authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsement of certificates or
separate stock powers are required unless payment or certificates for Shares
not tendered or purchased are to be issued to a person other than the
registered owner(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the registered
owner(s) of the Shares listed, the certificates must be endorsed or accompanied
by appropriate stock powers, in either case signed exactly as the name(s) of
the registered holder(s) appear on the certificates. Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
6. Stock Transfer Taxes. Except as set forth in this Instruction 6, the
Purchaser will pay or cause to be paid any stock transfer taxes with respect to
the transfer and sale of purchased Shares to it or its order pursuant to the
Offer. If payment of the purchase price is to be made, or if certificates for
Shares not tendered or purchased are to be registered in the name of, any
person other than the registered holder, or if tendered certificates are
registered in the name of any person other than the person(s) signing this
Letter of Transmittal, the amount of any stock transfer taxes (whether imposed
on the registered holder or such person) payable on account of the transfer to
such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes or exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. Special Payment and Delivery Instructions. If a check and/or certificates
for unpurchased Shares are to be issued in the name of a person other than the
signer of this Letter of Transmittal or if a check is to be sent and/or such
certificates are to be returned to someone other than the signer of this Letter
of Transmittal or to an address other than that shown above, the appropriate
boxes on this Letter of Transmittal should be completed. Stockholders tendering
Shares by book-entry transfer may request that Shares not
8
<PAGE>
purchased be credited to such account maintained at a Book-Entry Transfer
Facility as such stockholder may designate hereon. If no such instructions are
given, such Shares not purchased will be returned by crediting the account at
the Book-Entry Transfer Facility designated above.
8. Requests for Assistance or Additional Copies. Requests for assistance may
be directed to the Dealer Manager or the Information Agent at the addresses set
forth below. Additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
obtained from the Dealer Manager or the Information Agent at the address set
forth below or from your broker, dealer, commercial bank or trust company.
9. Waiver of Conditions. The conditions of the Offer may be waived, in whole
or in part, by the Purchaser, in its sole discretion, at any time and from time
to time, in the case of any Shares tendered.
10. 31% Backup Withholding; Substitute Form W-9. Under federal income tax
laws, a stockholder whose tendered Shares are accepted for payment is required
to provide the Depositary with such stockholder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below and certify under
penalties of perjury that such number is correct and that such stockholder is
not subject to backup withholding. If the Depositary is not provided with the
correct TIN and certifications are not provided, the Internal Revenue Service
may subject the stockholder or other payee to a $50 penalty. In addition,
payments that are made to such stockholder or other payee with respect to
Shares purchased pursuant to the Offer may be subject to 31% backup
withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the stockholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any such payments made to the stockholder or other payee. Backup withholding is
not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
To prevent backup withholding on payments that are made to a stockholder with
respect to Shares purchased pursuant to the Offer, the stockholder is required
to notify the Depositary of such stockholder's correct TIN by completing a
Substitute Form W-9 certifying (a) that the TIN provided on Substitute Form W-9
is correct (or that such stockholder is awaiting a TIN), and (b) that (i) such
stockholder has not been notified by the Internal Revenue Service that such
stockholder is subject to backup withholding as a result of a failure to report
all interest or dividends or (ii) the Internal Revenue Service has notified
such stockholder that such stockholder is no longer subject to backup
withholding.
The stockholder is required to give the Depositary the social security number
or employee identification number of the record holder of the Shares tendered
hereby. If the Shares are in more than one name or are not in the name of the
actual owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidance on which
number to report. The tendering stockholder may write "applied for" on the box
in Part I of the Substitute Form W-9 if the tendering stockholder has not been
issued a TIN and has applied for a TIN or intends to apply for a TIN in the
near future. If "applied for" is written in the box in Part I, the stockholder
or other payee must also complete the Certification of the form in order to
avoid backup withholding. Notwithstanding that the
9
<PAGE>
tendering stockholder writes "applied for" in the box in Part I and completes
the Certification, the Depositary will retain 31% of all payments made prior to
the time a properly certified TIN is provided to the Depositary. The Depositary
will refund any amounts so retained if the Depositary receives a properly
certified TIN from the tendering stockholder within 60 days after the date of
the original Substitute Form W-9 (and such tendering stockholder was not
subject to backup withholding during that period).
11. Lost, Destroyed or Stolen Certificates. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary. The stockholder will then be instructed as to
the steps that must be taken in order to replace the certificate(s). This
Letter of Transmittal and related documents cannot be processed until the
procedures for replacing lost or destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF), PROPERLY
COMPLETED AND DULY EXECUTED, TOGETHER WITH CERTIFICATES OR CONFIRMATION OF
BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF
GUARANTEED DELIVERY, MUST BE RECEIVED BY THE DEPOSITARY AT ONE OF ITS ADDRESSES
SET FORTH HEREIN PRIOR TO THE EXPIRATION DATE.
10
<PAGE>
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(SEE INSTRUCTION 10)
PAYER'S NAME: CHEMICAL BANK
- --------------------------------------------------------------------------------
SUBSTITUTE PART I--PLEASE PROVIDE YOUR Social Security
FORM W-9 TIN IN THE BOX AT RIGHT AND Number OR Employer
DEPARTMENT OF THE CERTIFY BY SIGNING AND Identification Number
TREASURY INTERNAL DATING BELOW.
REVENUE SERVICE ---------------------
(If awaiting TIN
write "Applied For")
-----------------------------------------------------
PAYER'S REQUEST FOR PART II--For Payees exempt from backup
TAXPAYER IDENTIFICATION withholding, see the enclosed Guidelines for
NUMBER (TIN) Certification of Taxpayer Identification Number on
Substitute Form W-9 and complete as instructed
therein.
- --------------------------------------------------------------------------------
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Num-
ber (or a Taxpayer Identification Number has not been issued to me) and
either (a) I have mailed or delivered an application to receive a Tax-
payer Identification Number to the appropriate Internal Revenue Service
("IRS") or Social Security Administration office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do
not provide a Taxpayer Identification Number within sixty (60) days, 31%
of all reportable payments made to me thereafter will be withheld until
I provide a number, and
(2) I am not subject to backup withholding either because (a) I am exempt
from backup withholding, (b) I have not been notified by the IRS that I
am subject to backup withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding be-
cause of underreporting interest or dividends on your tax return. Howev-
er, if after being notified by the IRS that you were subject to backup
withholding you received another notification from the IRS that you are
no longer subject to backup withholding, do not cross out item (2). (Also
see instructions in the enclosed Guidelines.)
- --------------------------------------------------------------------------------
SIGNATURE __________________________________ DATE __________________________
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
Questions and requests for assistance or additional copies of the Offer to
Purchase, the Letter of Transmittal and other tender offer materials may be
directed to the Information Agent or the Dealer Manager as set forth below:
The Information Agent for the Offer is:
MORROW & CO., INC.
909 Third Avenue 14755 Preston Road-Suite 725
New York, New York 10022 Dallas, Texas 75240
212-754-8000 214-788-0977
Banks and Brokers Call Toll Free 1-800-662-5200
All Others Call Toll Free 1-800-566-9058
The Dealer Manager for the Offer is:
SMITH BARNEY INC.
1345 Avenue of the Americas
New York, New York 10105
(212) 698-3612
11
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
TRANSCO ENERGY COMPANY
TO
THE WILLIAMS COMPANIES, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to accept the Offer (as defined below) if (i) certificates ("Share
Certificates") representing shares of Common Stock, par value $0.50 per share
(the "Shares"), of Transco Energy Company, a Delaware corporation, together
with the attached common share purchase rights (the "Rights"), are not
immediately available, (ii) time will not permit all required documents to
reach Chemical Bank, as Depositary (the "Depositary"), prior to the Expiration
Date (as defined in Section 1 of the Offer to Purchase (as defined below)) or
(iii) the procedure for delivery by book-entry transfer cannot be completed on
a timely basis. Unless the context otherwise requires, all references to
"Shares" shall be deemed to include the attached Rights. This Notice of
Guaranteed Delivery may be delivered by hand or mail or transmitted by telegram
or facsimile transmission to the Depositary. See Section 3 of the Offer to
Purchase.
The Depositary for the Offer is:
CHEMICAL BANK
By Hand/Overnight Courier: Facsimile Transmission: By Mail:
Chemical Bank Chemical Bank
55 Water Street (212) 629-8015 Reorganization Department
Room 234--2nd Floor (212) 629-8016 P.O. Box 3085
New York, New York 10041- (For Eligible GPO Station
0199 Institutions Only)
Attention: Reorganization Confirm by Telephone: New York, New York 10116-
Department (212) 946-7137 3085
----------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION"
UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tenders to The Williams Companies, Inc., a Delaware
corporation, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated December 16, 1994 and the related Letter of Transmittal
(which, together with any amendments or supplements thereto, constitute the
"Offer"), receipt of which is hereby acknowledged, the number of Shares
indicated below pursuant to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase.
Number of Shares: __________________ Signature(s) _______________________
Name(s) of Record Holder(s) ________ ____________________________________
____________________________________ Dated: _____________________________
Please Type or Print
Check ONE box if Shares will be
Address(es) ________________________ tendered by book-entry transfer:
____________________________________ [_] The Depository Trust Company
Zip Code [_] Midwest Securities Trust Company
[_] Philadelphia Depository Trust
Area Code and Tel. No. _____________ Company
Certificate No(s). (if available) Account Number: ____________________
____________________________________
____________________________________
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national securities
exchange or of the National Association of Securities Dealers Inc., or which is
a commercial bank or trust company having an office or correspondent in the
United States, hereby (a) represents that the tender of Shares effected hereby
complies with Rule 14e-4 under the Securities Exchange Act of 1934, as amended,
and (b) guarantees delivery to the Depositary, at one of its addresses set
forth above, of certificates representing the Shares tendered hereby in proper
form for transfer, or confirmation of book-entry transfer of such Shares into
the Depositary's accounts at The Depository Trust Company, the Midwest
Securities Trust Company or the Philadelphia Depository Trust Company, in each
case with delivery of a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), and any other required documents, within
five New York Stock Exchange, Inc. trading days after the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
Name _______________________________ Area Code and Tel. No. _____________
Please Type or Print
Authorized Signature _________________
Name of Firm _______________________
____________________________________ ______________________________________
Title
Address ____________________________ Date _________________________________
____________________________________
Zip Code
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES
SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
OFFER TO PURCHASE FOR CASH
UP TO 24,600,000 SHARES OF COMMON STOCK
(Including the Attached Rights)
OF
TRANSCO ENERGY COMPANY
AT
$17.50 NET PER SHARE
BY
THE WILLIAMS COMPANIES, INC.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JANUARY 17, 1995, UNLESS THE
OFFER IS EXTENDED.
December 16, 1994
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
We have been engaged by The Williams Companies, Inc., a Delaware corporation
(the "Purchaser"), to act as Dealer Manager in connection with the Purchaser's
offer to purchase up to 24,600,000 shares of Common Stock, par value $0.50 per
share (the "Shares"), of Transco Energy Company (the "Company"), and the
attached common share purchase rights (the "Company Rights" and, unless the
context otherwise requires, deemed to be included in all references to
"Shares"), at a purchase price of $17.50 per Share, net to the seller in cash
without interest, 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 with any amendments or
supplements thereto, constitute the "Offer") enclosed herewith.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST
20,900,000 SHARES (REPRESENTING APPROXIMATELY 51% OF THE PRESENTLY OUTSTANDING
SHARES).
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following documents:
1. Offer to Purchase;
2. Letter of Transmittal to be used by holders of Shares in accepting the
Offer and tendering Shares;
3. A letter from the Chairman of the Company and the
Solicitation/Recommendation Statement on Schedule 14D-9 of the Company;
4. A letter which may be sent to your clients for whose account you hold
Shares registered in your name or in the name of your nominees, with
space provided for obtaining such clients' instructions with regard to
the Offer;
5. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available or time will not
permit all required documents to reach the Depositary by the Expiration
Date (as defined in the Offer to Purchase) or if the procedure for book-
entry transfer cannot be completed on a timely basis;
6. Guidelines of the Internal Revenue Service for Certification of Taxpayer
Identification Number on Substitute Form W-9; and
7. Return envelope addressed to the Depositary.
<PAGE>
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will accept for payment and pay for up to
24,600,000 Shares which are validly tendered prior to the Expiration Date and
not theretofore properly withdrawn when, as and if the Purchaser gives oral or
written notice to the Depositary of the Purchaser's acceptance of such Shares
for payment pursuant to the Offer. Payment for Shares purchased pursuant to
the Offer will in all cases be made only after timely receipt by the
Depositary of certificates for such Shares, or timely confirmation of a book-
entry transfer of such Shares into the Depositary's account at The Depository
Trust Company, the Midwest Securities Company or the Philadelphia Depository
Trust Company, pursuant to the procedures described in Section 3 of the Offer
to Purchase, a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) or an Agent's Message in connection with a
book-entry transfer, and all other documents required by the Letter of
Transmittal.
The Purchaser will not pay any fees or commissions to any broker or dealer
or other person (other than the Dealer Manager) in connection with the
solicitation of tenders of Shares pursuant to the Offer. The Purchaser will,
however, upon request, reimburse you for customary mailing and handling
expenses incurred by you in forwarding the enclosed materials to your clients.
The Purchaser will pay or cause to be paid any transfer taxes payable on the
transfer of Shares to it, except as otherwise provided in Instruction 6 of the
enclosed Letter of Transmittal.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JANUARY 17, 1995, UNLESS THE OFFER
IS EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Depositary, and certificates representing the tendered Shares should be
delivered or such Shares should be tendered by book-entry transfer, all in
accordance with the Instructions set forth in the Letter of Transmittal and
the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents prior to the expiration
of the Offer, a tender may be effected by following the guaranteed delivery
procedures specified under Section 3, "Procedure for Tendering Shares" in the
Offer to Purchase.
Any inquiries you may have with respect to the Offer should be addressed to
the Dealer Manager or the Information Agent at their respective addresses and
telephone numbers set forth on the back cover page of the Offer to Purchase.
Additional copies of the enclosed materials may be obtained from the
undersigned by calling (212) 698-3612 or from the Information Agent, Morrow &
Co., Inc., by calling (212) 741-5511, or from brokers, dealers, commercial
banks or trust companies.
Very truly yours,
Smith Barney Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY PERSON AS AN AGENT OF THE PURCHASER, THE DEPOSITARY, THE INFORMATION
AGENT OR THE DEALER MANAGER, OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS
ENCLOSED AND THE STATEMENTS CONTAINED THEREIN.
<PAGE>
OFFER TO PURCHASE FOR CASH
UP TO 24,600,000 SHARES OF COMMON STOCK
(Including the Attached Rights)
OF
TRANSCO ENERGY COMPANY
AT
$17.50 NET PER SHARE
BY
THE WILLIAMS COMPANIES, INC.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JANUARY 17, 1995, UNLESS THE
OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated December 16,
1994 (the "Offer to Purchase") and a Letter of Transmittal (which, together
with any amendments or supplements thereto, constitute the "Offer") relating to
an offer by The Williams Companies, Inc., a Delaware corporation (the
"Purchaser"), to purchase up to 24,600,000 shares of Common Stock, par value
$0.50 per share (the "Shares"), of Transco Energy Company, a Delaware
corporation (the "Company"), and the attached common share purchase rights (the
"Company Rights" and, unless the context otherwise requires, deemed to be
included in all references to "Shares"), at a purchase price of $17.50 per
Share, net to the seller in cash without interest, upon the terms and subject
to the conditions set forth in the Offer. We are the holder of record of the
Shares held by us for your account. A TENDER FOR SUCH SHARES CAN BE MADE ONLY
BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF
TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY
YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to tender any or all of such
Shares held by us for your account, pursuant to the terms and conditions set
forth in the Offer.
Your attention is invited to the following:
1. The tender price is $17.50 per Share, net to the seller in cash
without interest. The redemption amount of $.05 per Company Right to
be paid in redemption of the Company Rights attached to Shares
acquired pursuant to the Offer will be paid to and retained by the
Purchaser.
2. The Offer, proration period and withdrawal rights will expire at
12:00 midnight, New York City time, on Tuesday, January 17, 1995,
unless the Offer is extended.
3. The Offer is being made for up to 24,600,000 Shares. If more than
24,600,000 Shares are validly tendered prior to the Expiration Date
(as defined in the Offer to Purchase) and not withdrawn, the
Purchaser will, upon the terms and subject to the conditions of the
Offer, accept such Shares for payment on a pro rata basis, with
adjustments to avoid purchases of fractional shares, based upon the
number of Shares validly tendered prior to the Expiration Date and
not withdrawn.
4. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the expiration of the
Offer at least 20,900,000 Shares (representing approximately 51% of
the presently outstanding Shares) and the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
having expired or been terminated.
<PAGE>
5. Stockholders who tender Shares will not be obligated to pay
brokerage commissions, solicitation fees or, except as set forth in
Instruction 6 of the Letter of Transmittal, transfer taxes on the
purchase of Shares by the Purchaser pursuant to the Offer.
The Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, the
Purchaser will make a good faith effort to comply with any such state statute.
If, after such good faith effort, the Purchaser cannot comply with any such
state statute, the Offer will not be made to (nor will tenders be accepted from
or on behalf of) the holders of Shares in such state. In any jurisdiction where
the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer will be deemed to be made on behalf of the
Purchaser by the Dealer Manager or one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
If you wish to have us tender any or all of your Shares, please complete,
sign and return to us the form set forth below. An envelope to return your
instructions to us is enclosed. Your instructions to us should be forwarded in
ample time to permit us to submit a tender on your behalf prior to the
expiration of the Offer. If you authorize the tender of your Shares, all such
Shares will be tendered unless otherwise specified on the instruction form set
forth below.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER
TO PURCHASE FOR CASH SHARES OF COMMON STOCK
OF
TRANSCO ENERGY COMPANY
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated December 16, 1994 and the related Letter of Transmittal
(which, together with any amendments or supplements thereto, constitute the
"Offer") relating to the offer by The Williams Companies, Inc., a Delaware
corporation (the "Purchaser"), to purchase up to 24,600,000 shares of Common
Stock, par value $0.50 per share (the "Shares"), of Transco Energy Company, a
Delaware corporation, and the attached common share purchase rights (the
"Company Rights" and deemed to be included in all references to "Shares").
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) held by you
for the account of the undersigned, on the terms and subject to the conditions
set forth in the Offer.
SIGN HERE
NUMBER OF SHARES TO BE TENDERED:*
___________________________________
____________________________ SHARES
___________________________________
Signature(s)
Account Number: _____________________
___________________________________
Dated: ______________________________
___________________________________
Please type or print name(s)
___________________________________
___________________________________
Please type or print address
___________________________________
Area Code and Telephone Number
___________________________________
Taxpayer Identification or Social
Security Number
- --------
* Unless otherwise indicated, it will be assumed that all of your Shares held
by us for your account are to be tendered.
3
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE
FORM W-9
SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE.
Purpose of Form--A person who is required to file an information return with
the IRS must obtain your correct TIN to report income paid to you, real estate
transactions, mortgage interest you paid, the acquisition or abandonment of
secured property, or contributions you made to an IRA. Use Form W-9 to furnish
your correct TIN to the requester (the person asking you to furnish your TIN)
and, when applicable, (1) to certify that the TIN you are furnishing is correct
(or that you are waiting for a number to be issued), (2) to certify that you
are not subject to backup withholding, and (3) to claim exemption from backup
withholding if you are an exempt payee. Furnishing your correct TIN and making
the appropriate certifications will prevent certain payments from being subject
to backup withholding.
Note: If a requester gives you a form other than W-9 to request your TIN, you
must use the requester's form.
How To Obtain a TIN--If you do not have a TIN, apply for one immediately. To
apply, get Form SS-5, Application for a Social Security Card (for individuals),
from your local office of the Social Security Administration, or Form SS-4,
Application for Employer Identification Number (for businesses and all other
entities), from your local IRS office.
To complete Form W-9 if you do not have a TIN, write "Applied for" in the
space for the TIN in Part I, sign and date the form, and give it to the
requester. Generally, you will then have 60 days to obtain a TIN and furnish it
to the requester. If the requester does not receive your TIN within 60 days,
backup withholding, if applicable, will begin and continue until you furnish
your TIN to the requester. For reportable interest or dividend payments, the
payer must exercise one of the following options concerning backup withholding
during this 60-day period. Under option (1), a payer must backup withhold on
any withdrawals you make from your account after 7 business days after the
requester receives this form back from you. Under option (2), the payer must
backup withhold on any reportable interest or dividend payments made to your
account, regardless of whether you make any withdrawals. The backup withholding
under option (2) must begin no later than 7 business days after the requester
receives this form back. Under option (2), the payer is required to refund the
amounts withheld if your certified TIN is received within the 60-day period and
you were not subject to backup withholding during that period.
Note: Writing "Applied for" on the form means that you have already applied
for a TIN OR that you intend to apply for one in the near future.
As soon as you receive your TIN, complete another Form W-9, include your TIN,
sign and date the form, and give it to the requester.
What Is Backup Withholding?--persons making certain payments to you after
1992 are required to withhold and pay to the IRS 31% of such payments under
certain conditions. This is called "backup withholding". Payments that could be
subject to backup withholding include interest, dividends, broker and barter
exchange transactions, rents, royalties, nonemployee compensation, and certain
payments from fishing boat operators, but do not include real estate
transactions.
If you give the requester your correct TIN, make the appropriate
certifications, and report all your taxable interest and dividends on your tax
return, your payments will not be subject to backup withholding. Payments you
receive will be subject to backup withholding if:
1. You do not furnish your TIN to the requester, or
2. The IRS notifies the requester that you furnished an incorrect TIN, or
<PAGE>
3. You are notified by the IRS that you are subject to backup withholding
because you failed to report all your interest and dividends on your tax
return (for reportable interest and dividends only), or
4. You do not certify to the requester that you are not subject to backup
withholding under 3 above (for reportable interest and dividend accounts
opened after 1983 only), or
5. You do not certify your TIN. This applies only to reportable interest,
dividend, broker, or barter exchange accounts opened after 1983, or broker
accounts considered inactive in 1983.
Except as explained in 5 above, other reportable payments are subject to
backup withholding only if 1 or 2 above applies. Certain payees and payments
are exempt from backup withholding and information reporting. See Payees and
Payments Exempt From Backup Withholding, below, and Example Payees and Payments
under Specific Instructions, below, if you are an exempt payee.
Payees and Payments Exempt From Backup Withholding--The following is a list
of payees exempt from backup withholding and for which no information reporting
is required. For interest and dividends, all listed payees are exempt except
item (9). For broker transactions, payees listed in (1) through (13) and a
person registered under the Investment Advisers Act of 1940 who regularly acts
as a broker are exempt. Payments subject to reporting under sections 6041 and
6041A are generally exempt from backup withholding only if made to payees
described in items (1) through (7), except a corporation that provides medical
and health care services or bills and collects payments for such services is
not exempt from backup withholding or information reporting. Only payees
described in items (2) through (6) are exempt from backup withholding for
barter exchange transactions, patronage dividends, and payments by certain
fishing boat operators.
(1) A corporation. (2) An organization exempt from tax under section 501(a),
or an IRA, or a custodial account under section 403(b)(7). (3) The United
States or any of its agencies or instrumentalities. (4) A state, the District
of Columbia, a possession of the United States, or any of their political
subdivisions or instrumentalities. (5) A foreign government or any of its
political subdivisions, agencies, or instrumentalities. (6) An international
organization or any of its agencies or instrumentalities. (7) A foreign central
bank of issue. (8) A dealer in securities or commodities required to register
in the United States or a possession of the United States. (9) A futures
commission merchant registered with the Commodity Futures Trading Commission.
(10) A real estate investment trust. (11) An entity registered at all times
during the tax year under the Investment Company Act of 1940. (12) A common
trust fund operated by a bank under section 584(a). (13) A financial
institution. (14) A middleman known in the investment community as a nominee or
listed in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List. (15) A trust exempt from tax under section 664
or described in section 4947.
Payments of dividend and patronage dividends generally not subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident partner.
. Payments of patronage dividends not paid in money.
. Payments made by certain foreign organizations.
Payments of interest generally not subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you have
not provided your correct TIN to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
2
<PAGE>
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
Mortgage interest paid by you.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044,
6045, 6049, 6050A, and 6050N, and their regulations.
PENALTIES
Failure To Furnish TIN--If you fail to furnish your correct TIN to a
requester, you are subject to a penalty of $50 for each such failure unless
your failure is due to reasonable cause and not to willful neglect.
Civil Penalty for False Information With Respect to Withholding.--If you make
a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
Criminal Penalty for Falsifying Information.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
Misuse of TINs.--If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
SPECIFIC INSTRUCTIONS
Name.--If you are an individual, you must generally provide the name shown on
your social security card. However, if you have changed your last name, for
instance, due to marriage, without informing the Social Security Administration
of the name change, please enter your first name, the last name shown on your
social security card, and your new last name.
If you are a sole proprietor, you must furnish your individual name and
either your SSN or EIN. You may also enter your business name or "doing
business as" name on the business name line. Enter your name(s) as shown on
your social security card and/or as it was used to apply for your EIN on Form
SS-4.
SIGNING THE CERTIFICATION.
1. Interest, Dividend, and Barter Exchange Accounts Opened Before 1984 and
Broker Accounts Considered Active During 1983. You are required to furnish your
correct TIN, but you are not required to sign the certification.
2. Interest, Dividend, Broker, and Barter Exchange Accounts Opened After 1983
and Broker Accounts Considered Inactive During 1983. You must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester, you
must cross out item 2 in the certification before signing the form.
3. Real Estate Transactions. You must sign the certification. You may cross
out item 2 of the certification.
4. Other Payments. You are required to furnish your correct TIN, but you are
not required to sign the certification unless you have been notified of an
incorrect TIN. Other payments include payments made in the course of the
requester's trade or business for rents, royalties, goods (other than bills for
merchandise), medical and health care services, payments to a nonemployee for
services (including attorney and accounting fees), and payments to certain
fishing boat crew members.
5. Mortgage Interest Paid by You, Acquisition or Abandonment of Secured
Property, or IRA Contributions. You are required to furnish your correct TIN,
but you are not required to sign the certification.
3
<PAGE>
6. Exempt Payees and Payments. If you are exempt from backup withholding, you
should complete this form to avoid possible erroneous backup withholding. Enter
your correct TIN in Part I, write "EXEMPT" in the block in Part II, and sign
and date the form. If you are a nonresident alien or foreign entity not subject
to backup withholding, give the requester a complete Form W-8, Certificate of
Foreign Status.
7. TIN "Applied for." Follow the instructions under How To Obtain a TIN, on
page 1, and sign and date this form.
Signature.--For a joint account, only the person whose TIN is shown in Part I
should sign.
Privacy Act Notice.--Section 6109 requires you to furnish your correct TIN to
persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid,
the acquisition or abandonment of secured property, or contributions you made
to an IRA. The IRS uses the numbers for identification purposes and to help
verify the accuracy of your tax return. You must provide your TIN whether or
not you are required to file a tax return. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a TIN to a payer. Certain penalties may also apply.
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
<TABLE>
<S> <C>
For this type of account: Give name and SSN of:
1. Individual The individual
2. Two or more individuals (joint account) The actual owner of the account
or, if combined funds, the first
individual on the account(1)
3. Custodian account of a minor (Uniform Gift
to Minors Act) The minor(2)
4.a. The usual revocable savings trust
(grantor is also trustee) The grantor-trustee(1)
b. So-called trust account that is not a The actual owner(1)
legal or valid trust under state law
5. Sole proprietorship The owner(3)
For this type of account: Give name and EIN of:
6. Sole proprietorship The owner(3)
7. A valid trust, estate, or pension trust Legal entity(4)
8. Corporate The corporation
9. Association, club, religious, charitable, The organization
educational, or other tax-exempt
organization
10. Partnership The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department of The public entity
Agriculture in the name of a public entity
(such as a state or local government,
school district or prison)
</TABLE>
- --------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's SSN.
(3) Show your individual name. You may also enter your business name. You may
use your SSN or EIN.
(4) List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the TIN of the personal representative or trustee
unless the legal entity itself is not designated in the account title).
Note: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
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>
Dec. 16, 1994
Jim Gipson (918) 588-2111 (Media)
Linda Lawson (918) 588-2087 (Investors)
Williams makes SEC filing to purchase up to 60 percent of Transco's stock
TULSA -- The Williams Companies, Inc. today filed with the Securities and
Exchange Commission definitive documents pursuant to which it is making a cash
tender offer to acquire up to 24.6 million shares, or about 60 percent, of
Transco Energy Company's common stock and common stock purchase rights for
$17.50 per share and right.
The tender offer, announced Monday, begins today and runs through midnight,
Eastern time, on Jan. 17, 1995, unless extended by Williams. Williams'
obligation to purchase shares pursuant to the tender offer is subject to, among
other things, the valid tender and non-withdrawal at the expiration date of the
offer at least 20.9 million shares, or approximately 51 percent of Transco's
common stock.
The information agent for the tender offer is Morrow & Co., Inc.,
(800)566-9058. The dealer-manager is Smith Barney Inc. (212)698-3612.
When successful, the tender offer will be followed by the merger of a
subsidiary of Williams with Transco, with Transco ultimately becoming a wholly
owned subsidiary of Williams.
The boards of directors of both companies unanimously approved the
transaction at separate meetings on Dec. 11. The merger could be completed as
soon as the end of the first quarter of 1995.
"The offer documents are being mailed to Transco shareholders, and any
Transco shareholder having questions about the offer or needing assistance is
encouraged to contact Morrow & Co. or Smith Barney," said Keith E. Baily,
chairman, president and chief executive officer of Williams.
Bailey noted there has been considerable discussion in the investment and
natural gas communities about the pending acquisition by Williams, which
operates three interstate natural gas
1
<PAGE>
pipelines, major natural gas gathering and processing facilities and other gas
assets in America's West, of Transco, which operates two major interstate gas
systems east of the Mississippi River that serve the Midwest, South, Southeast
and Northeast.
He also said both companies' initial limited ability to fully discuss
details of why both boards enthusiastically supported the transaction has been
partially eased due to today's filing, but is still somewhat restricted due to
certain laws and regulations.
"I can say that the strategic fit of the gas systems of these two companies
is outstanding," Bailey said. "The combined companies' pipeline systems have
access to the premier natural gas supply areas in North America -- Oklahoma,
Kansas, Texas, the Rockies, the San Juan Basin and western Canada and the Gulf
Coast.
"The combined companies would put most of the vital natural gas markets in
the country -- from California to New York -- within realistic reach of the
longest-lived, lowest-cost gas supplies in America, "he said. "I really see this
as a case of 'one-plus-one equals three' for us, and for producers and
consumers."
The documents filed with the SEC today say that Williams plans to "maintain
and expand" the existing core natural gas businesses of Transco and to "promptly
pursue" new business opportunities made available as a result of the merger,
which include expanding development of market projects in Transco's Northeast
and Southeast market areas.
"Due to Transco's highly leveraged balance sheet, it has been unable over
the past several years to take advantage of numerous opportunities in the
fast-growing markets it serves and to build on its competitive edge," Bailey
said. "This is juxtaposed to Williams' demonstrated track record over the past
several years in the West, where we have committed the talent and capital to
fully and efficiently compete for all of the demand within reach."
He noted that natural gas demand in the area of the country served by
Transco's system is growing significantly faster than the national average.
He said Williams expects to be able to support the capital investment
necessary to aggressively pursue opportunities in the eastern U.S. as well as
"opportunities to provide Transco's markets with access to the long-lived
supplies attached to our existing systems."
Bailey noted it has long been a stated strategic goal of Williams to gain
effective access to the same markets served by Transco.
"We would immediately begin seeking additional investment opportunities
across Transco's service area in both regulated and unregulated areas, and are
very optimistic that we will be able to add substantially to projects already
identified by Transco," he said.
Bailey said much of Williams' earnings growth is linked to the company's
ability to grow
2
<PAGE>
its asset base.
"We believe the capital opportunities resulting from this transaction can
be fully exploited without impacting our existing capital programs, thus
accelerating our rate of capital deployment. Further developing opportunity in
Transco's service area should, in turn, stimulate additional investments across
our existing natural gas businesses.
"To best accomplish our objectives, we will also move to overhaul the
capital structure of Transco and its pipelines as quickly as possible," Bailey
said. "Among the many things we intend to accomplish is to eliminate or modify
some or all of the more onerous restrictions in Transco's financing agreements.
We would expect the cost of financing for the combined company to improve due to
Williams' investment-grade status.
"This should result in rate-making flexibility in Tranco's pipeline
operations," he said.
Bailey also said both companies' possess active marketing, price risk
management and information-based products and services that, when given the
opportunity to compete for new business around an expanded platform of pipeline
systems, "should add an additional element to the value of the transaction."
Although specific decisions have not been made, he said Williams expects to
aggressively continue divesting non-core assets.
The Williams Companies, listed on the New York Stock Exchange under the
symbol WMB, consists of Northwest Pipeline Corporation, Williams Natural Gas
Company, Williams Field Services Group, Williams Pipe Line Company, Williams
Energy Ventures and WilTel.
Transco, listed on the NYSE under the symbol E, consists of
Transcontinental Gas Pipe Line Corporation, Texas Gas Transmission Company,
Transco Gas Marketing Company and other energy assets.
3
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated December
16, 1994 and the related Letter of Transmittal and is being made to all holders
of Shares. The Purchaser is not aware of any state where the making of the Offer
is prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, the
Purchaser will make a good faith effort to comply with such state statute. If,
after such good faith effort, the Purchaser cannot comply with such state
statute, the Offer will not be made to (nor will tenders be accepted from or on
behalf of) holders of Shares in such state. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by Smith Barney Inc. or one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
Up to 24,600,000 Shares of Common Stock
(Including the Attached Rights)
of
Transco Energy Company
at
$17.50 Net Per Share
by
The Williams Companies, Inc.
The Williams Companies, Inc., a Delaware corporation (the "Purchaser"), is
offering to purchase up to 24,600,000 shares of Common Stock, par value $0.50
per share (the "Shares"), of Transco Energy Company, a Delaware corporation (the
"Company"), together with the attached common share purchase rights (the
"Company Rights"), at a price of $17.50 per Share (and attached 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 in the related Letter of Transmittal (together, the "Offer"). The Company
has agreed in the Merger Agreement (as defined below) to effect a redemption of
the Company Rights for $.05 per Company Right immediately prior to the
Purchaser's acceptance for payment of Shares pursuant to the Offer. The
redemption price in respect of Company Rights attached to Shares purchased
pursuant to the Offer will be paid to and retained by the Purchaser. Unless the
context otherwise requires, references herein to "Shares" shall be deemed to
include the attached "Company Rights." Following the Offer, the Purchaser
intends to effect the Merger described below.
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE at 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JANUARY 17, 1995, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
The Offer is conditioned upon, among other things, at least 20,900,000
Shares (representing approximately 51% of the presently outstanding Shares)
being validly tendered and not withdrawn prior to the expiration of the Offer.
The purpose of the Offer is to acquire 24,600,000 Shares as a first step in
acquiring the entire equity interest in the Company. The Offer is being made
pursuant to an Agreement and Plan of Merger, dated as of December 12, 1994 (the
"Merger Agreement"), among the Purchaser, WC Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of the Purchaser ("Sub"), and the
Company. The Merger Agreement provides, among other things, that as soon as
practicable after the purchase of Shares pursuant to the Offer, the approval of
the stockholders of the Company and the satisfaction of certain other
conditions, Sub will be merged with and into the Company (the "Merger").
Following consummation of the Merger, the Company will continue as the surviving
corporation (the "Surviving Corporation") and as a subsidiary of the Purchaser.
At the effective time of the Merger (the "Effective Time"), each Share 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, or dissenting Shares
(collectively, "Retired or Dissenting Shares")) will be converted into the right
to receive .625 shares of Common Stock, par value $1.00 per share, of the
Purchaser (the "Purchaser Common Stock"), including .3125 preferred stock
purchase rights attached thereto (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
amount as may be paid in the Offer (the "Per Share Amount") 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 or Dissenting
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 Per Share Amount over the Per
Share Cash Amount, divided by (B) the Per Share Amount (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. The Offer does not constitute an offer to sell or a solicitation of an offer
to buy any securities of the Purchaser. Such an offer may be made only pursuant
to a prospectus.
The Board of Directors of the Company has unanimously (with one director
absent) determined that the Offer and the Merger, taken together, are fair to,
and in the best interests of, the stockholders of the Company, and recommends
that holders of Shares accept the Offer and tender their Shares pursuant to the
Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when the Purchaser gives oral or written notice to Chemical
Bank (the "Depositary") of the Purchaser's acceptance for payment of such Shares
pursuant to the Offer. Upon the terms and subject to the conditions of the
Offer, payment of Shares accepted for payment pursuant to the Offer will be made
by deposit of the purchase price therefor with the Depositary, which will act as
agent for tendering stockholders for the purpose of receiving payments from the
Purchaser and transmitting such payments to tendering stockholders whose Shares
have been accepted for payment. Under no circumstances will interest on the
purchase price for Shares be paid, regardless of any delay in making such
payment. In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of (i) the certificates evidencing such Shares (the "Share Certificates") or
timely confirmation of a book-entry transfer of such Shares, if such procedure
is available, into the Depositary's account at one of the Book-Entry Transfer
<PAGE>
Facilities (as defined in Section 2 of the Offer to Purchase) pursuant to the
procedure set forth in Section 3 of the Offer to Purchase, (ii) the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message (as defined in Section
2 of the Offer to Purchase) and (iii) any other documents required under the
Letter of Transmittal.
The Purchaser expressly reserves the right, in its sole discretion (but
subject to the terms and conditions of the Merger Agreement), at any time and
from time to time, to extend for any reason the period of time during which the
Offer is open, including the occurrence of any condition specified in Section 14
of the Offer to Purchase, by giving oral or written notice of such extension to
the Depositary. Any such extension will be followed as promptly as practicable
by public announcement thereof, such announcement to be made no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled expiration date of the Offer. During any such extension, all Shares
previously tendered and not withdrawn will remain subject to the Offer, subject
to the rights of a tendering stockholder to withdraw such stockholder's Shares.
If more than 24,600,000 Shares are validly tendered prior to the Expiration
Date (as defined in the Offer to Purchase) and not withdrawn, the Purchaser
will, upon the terms and subject to the conditions of the Offer, accept such
Shares for payment on a pro rata basis, with adjustments to avoid purchases of
fractional Shares, based upon the number of Shares validly tendered prior to the
Expiration Date and not withdrawn.
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to 12:00 Midnight, New York City
time, on Tuesday, January 17, 1995 (or the latest time and date at which the
Offer, if extended by the Purchaser, shall expire) and, unless theretofore
accepted for payment by the Purchaser pursuant to the Offer, may also be
withdrawn at any time after February 13, 1995. For a withdrawal to be effective,
a written, telegraphic or facsimile transmission notice of withdrawal must be
timely received by the Depositary at one of its addresses set forth on the back
cover of the Offer to Purchase. Any such notice of withdrawal must specify the
name of the person who tendered the Shares to be withdrawn, the number of Shares
to be withdrawn and the name of the registered holder of such Shares, if
different from that of the person who tendered such Shares. If Share
Certificates evidencing Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the release of such Share
Certificates, the serial numbers shown on such Share Certificates must be
submitted to the Depositary and the signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution (as defined in Section 3 of the
Offer to Purchase), unless such Shares have been tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in Section 3 of the Offer to Purchase, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares. All
questions as to the form and validity (including the time of receipt) of any
notice of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase and the related Letter of Transmittal
will be mailed to record holders of Shares whose names appear on the Company's
stockholder list and will be furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
The Offer to Purchase and the related Letter of Transmittal contain
important information which should be read before any decision is made with
respect to the Offer.
Questions and requests for assistance or for additional copies of the Offer
to Purchase and the related Letter of Transmittal and other tender offer
materials may be directed to the Information Agent or the Dealer Manager as set
forth below, and copies will be furnished promptly at the Purchaser's expense.
No fees or commissions will be paid to brokers, dealers or other persons (other
than the Information Agent and the Dealer Manager) for soliciting tenders of
Shares pursuant to the Offer.
The Information Agent for the Offer is:
MORROW & CO., INC.
909 Third Avenue 14755 Preston Road-Suite 725
New York, New York 10022 Dallas, Texas 75240
212-754-8000 214-788-0977
Banks and Brokers Call Toll Free: 1-800-662-5200
All Others Call Toll Free: 1-800-566-9058
The Dealer Manager for the Offer is:
Smith Barney Inc.
1345 Avenue of the Americas
New York, New York 10105
(212) 698-3612
December 16, 1994
<PAGE>
CITIBANK, N.A BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
CHEMICAL BANK CANADIAN IMPERIAL BANK
OF COMMERCE
December 9, 1994
The Williams Companies, Inc.
One Williams Center
Tulsa, Oklahoma 74172
Project Green
-------------
Ladies and Gentlemen:
Based on our discussions concerning the proposed acquisition of a publicly-
held Delaware corporation code-named "Green" (the "Company") by The Williams
-------
Companies, Inc., a Delaware corporation ("Williams") (the "Transaction"),
-------- -----------
Citibank, N.A. ("Citibank"), Bank of America National Trust and Savings
--------
Association ("BofA"), Chemical Bank ("Chemical") and Canadian Imperial Bank of
---- --------
Commerce ("CIBC") are pleased to provide you with financing commitments for, and
----
to agree to act as co-administrative agents (the "Administrative Agents") in
---------------------
connection with, the senior debt facility described below and on the attached
Annex (the "Senior Facility").
---------------
As the Administrative Agents understand the transaction, you will, pursuant
to a merger agreement to be entered into with the Company, offer to acquire
through a tender offer (the "Tender Offer") up to 60% of the shares of the
------------
Company's outstanding common stock and attached rights, $0.50 par value (the
"Company Stock") for an amount in cash per share not in excess of the amount
- --------------
previously disclosed to us, but in any event for not fewer than sufficient
shares of Company Stock to enable Williams, voting without any other
shareholders of the Company, to approve a merger of a newly formed subsidiary of
Williams with the Company. As promptly as practicable after the closing of the
Tender Offer, such subsidiary will consummate a merger (the "Merger") with the
------
Company in which the Company will be the surviving corporation (the "Surviving
---------
Corporation"). The aggregate cash portion paid for the Company Stock in the
- -----------
Tender Offer and the Merger shall not exceed 60% of such Stock, with the balance
of such Stock to be payable solely in common stock of Williams.
You have asked that Citibank, BofA, Chemical and CIBC each provide you with
a commitment in the amount of $300,000,000, for aggregate commitments of
$1,200,000,000, representing the entire amount of the Senior Facility.
<PAGE>
2
Subject to the satisfaction of the conditions contained in this Commitment
Letter and your acceptance hereof, Citibank, BofA, Chemical and CIBC each
commits to lend up to $300,000,000 of the financing for the Transaction, on the
terms and conditions referred to herein and in the attached Annex.
Please note, however, that the terms and conditions of these commitments
are not limited to those set forth herein or in the attached Annex. Those
matters that are not covered or made clear herein or in the attached Annex are
subject to mutual agreement of the parties. The terms and conditions of these
commitments may be modified only in writing. In addition, these commitments are
subject to (a) the preparation, execution and delivery of mutually acceptable
loan documentation, including a credit agreement incorporating substantially the
terms and conditions outlined herein and in the attached Annex, (b) the absence
of (i) a material adverse change in the business, condition (financial or
otherwise), operations, performance, properties or prospects of Williams, the
Company or any of their subsidiaries since December 31, 1993, provided that the
--------
non-occurrence of the WilTel Sale (as defined in the attached Annex) shall not,
in and of itself, be deemed to constitute such a material adverse change, and
(ii) any material adverse change in loan syndication or financial or capital
market conditions generally from those currently in effect, and (c) the accuracy
and completeness of all representations that you make to us and all information
that you furnish to us in connection with these commitments. The respective
commitments of Citibank, BofA, Chemical and CIBC set forth in this letter will
terminate on January 31, 1995 or such later date as may be agreed between the
Administrative Agents and the Borrower (provided that in no event shall the
commitments hereunder be extended beyond March 31, 1995), unless the initial
borrowing under the Senior Facility shall have occurred on or before such date.
In addition to the fees described on the attached Annex, you agree to pay
the nonrefundable fees set forth in the fee letter dated the date hereof with
Citibank and Citicorp Securities, Inc., an affiliate of Citibank and the fee
letter dated the date hereof with Citibank, BofA, Chemical and CIBC,
(collectively, the "Fee Letters").
-----------
Upon notice to you from the Arrangers (as defined under the paragraph
"Arrangers" in the attached Annex) of their intention to commence a general
- ----------
syndication of the Senior Facility, the Arrangers will syndicate the financing
for the Transaction to additional Lenders with a corresponding reduction in the
commitments of the Administrative Agents. Citicorp Securities will manage all
aspects of the syndication in consultation with the other Arrangers, including
the timing of all offers to potential Lenders and the acceptance of commitments,
the amounts offered and the compensation provided.
You agree to take all action as the Arrangers may reasonably request to
assist it in forming a syndicate acceptable to them. Your assistance in forming
such a syndicate shall include but not be limited to: (i) making senior
management and representatives of the
<PAGE>
3
Company available to participate in information meetings with potential Lenders
at such times and places as the Arrangers may reasonably request; (ii) using
your best efforts to ensure that the syndication efforts benefit from your
lending relationships; and (iii) providing the Arrangers with all information
reasonably deemed necessary by them to successfully complete the syndication,
including, without limitation, a summary of the operating prospects (including
financial projections) of the Company.
Upon notice to you from the Arrangers of their intention to commence a
general syndication of the Senior Facility, to ensure an orderly and effective
syndication of the Senior Facility, you agree that until the termination of the
syndication (as evidenced by written notification received by you from the
Arrangers), you will not, and will not permit any of your affiliates to,
syndicate or issue, attempt to syndicate or issue, announce or authorize the
announcement of the syndication or issuance of, or engage in discussions
concerning the syndication or issuance of, any debt facility or debt security
(including any renewals thereof) in the commercial bank market, without the
prior written consent of the Arrangers; provided, however, that the foregoing
-------- -------
shall not limit your ability to issue commercial paper, other short-term debt
programs currently in place, equity or public debt securities or incur debt
pursuant to the $100,000,000 production payment financing currently contemplated
with NationsBank, N.A. or in connection with the construction loan contemplated
to be borrowed from the First National Bank of Omaha for purposes of
constructing an ethanol plant.
You agree that no additional agents, co-agents or arrangers will be
appointed, or other titles conferred, without the consent of the Arrangers. You
agree that no Lender will receive any compensation of any kind for its
participation in the Senior Facility, except as expressly provided for in the
Commitment Letter or the Fee Letters.
You agree to indemnify and hold harmless each Administrative Agent, each
Arranger, each Lender (as defined under the paragraph "Lenders" in the attached
-------
Annex) and each of their affiliates and their officers, directors, employees,
agents and advisors (each, an "Indemnified Party") from and against any and all
-----------------
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and expenses of counsel) that may be incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of
or in connection with or by reason of, or in connection with the preparation for
a defense of, any investigation, litigation or proceeding arising out of,
related to or in connection with the Transaction or any similar transaction and
any of the other transactions contemplated thereby or the Senior Facility and
any other financings or any use made or proposed to be made with the proceeds
thereof, whether or not such investigation, litigation or proceeding is brought
by you, your shareholders or creditors or an Indemnified Party or an Indemnified
Party is otherwise a party thereto and whether or not the Transaction is
consummated, except to the extent such claim, damage, loss, liability or expense
is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's
<PAGE>
4
gross negligence or willful misconduct. You also agree that no Indemnified
Party shall have any liability (whether direct or indirect, in contract or tort
or otherwise) to you or your security holders or creditors arising out of,
related to or in connection with the Transaction, except (a) to the extent that
such liability is found in a final non-appealable judgment by a court of
competent jurisdiction to have resulted from such Indemnified Party's gross
negligence or willful misconduct and (b) for direct, as opposed to
consequential, damages for breach of the obligations of the Administrative
Agents hereunder to negotiate in good faith definitive documentation for the
financing for the Transaction on the terms set forth herein and in the attached
Annex.
You should be aware that the Administrative Agents or their respective
affiliates may be providing financing or other services to parties whose
interests may conflict with yours. However, be assured that, consistent with
the longstanding policy of each of the Administrative Agents to hold in
confidence the affairs of their respective customers, the Administrative Agents
will not furnish confidential information obtained from you to any of their
respective other customers. By the same token, the Administrative Agents will
not make available to you confidential information that any of them has obtained
or may obtain from any other customer.
You agree that this Commitment Letter is for your confidential use only and
will not be disclosed by you to any person other than your accountants,
attorneys and other advisors, and then only in connection with the Transaction
and on a confidential basis, except that, following your acceptance hereof, you
may make public disclosure of the existence and amount of the commitments of the
Administrative Agents hereunder, you may file a copy of this Commitment Letter
in any public record in which it is required by law to be filed and you may make
such other public disclosures of the terms and conditions hereof as you are
required by law, in the opinion of your counsel, to make.
In issuing their respective commitments, the Administrative Agents are
relying on the accuracy of the information furnished to them by you or on your
behalf. The obligations of the Administrative Agents under this Commitment
Letter and of any Lender that issues a commitment for the Senior Facility are
made solely for your benefit and may not be relied upon or enforced by any other
person or entity.
This Commitment Letter shall be governed by, and construed in accordance
with, the laws of the State of New York. Delivery of an executed counterpart of
this Commitment Letter by telecopier shall be effective as delivery of a
manually executed counterpart of this Commitment Letter. You and each of the
Administrative Agents hereby irrevocably waive all right to trial by jury in any
action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Commitment Letter, the
transactions contemplated hereby or the actions of any Administrative Agent in
the negotiation, performance or enforcement hereof.
<PAGE>
5
Please evidence your acceptance of the provisions of this Commitment
Letter, the attached Annex and the other matters referred to above by signing
the enclosed copy of this Commitment Letter and returning it to the undersigned
at or before 10:00 A.M. (New York City time) on December 12, 1994, the time at
which the commitments of Citibank, BofA, Chemical and CIBC set forth above (if
not so accepted prior thereto) will expire. By accepting this Commitment
Letter, you agree to pay that portion of the respective fees then payable under
the Fee Letters at or before 5:00 P.M. (New York City time) on December 12,
1994.
Very truly yours,
BANK OF AMERICA NATIONAL
CITIBANK, N.A. TRUST AND SAVINGS ASSOCIATION
By By
------------------------ ---------------------------------
Title: Title:
CANADIAN IMPERIAL BANK
CHEMICAL BANK OF COMMERCE
By By
------------------------ ---------------------------------
Title: Title:
ACCEPTED this day
--------------
of December, 1994
THE WILLIAMS COMPANIES, INC.
By
-----------------------------
Title:
<PAGE>
PRIVILEGED AND
CONFIDENTIAL
==============
ANNEX
-----
Summary of Terms
CAPITALIZED TERMS NOT OTHERWISE DEFINED
HEREIN HAVE THE MEANINGS SET FORTH IN THE
LETTER TO WHICH THIS ANNEX IS ATTACHED
Borrower: The Williams Companies, Inc., a Delaware corporation.
Administrative
Agents: Citibank, Bank of America National Trust and Savings
Association, Chemical Bank and Canadian Imperial Bank of
Commerce.
Arrangers: Citicorp Securities, Inc. and affiliates of the other
Administrative Agents as designated by them.
Lenders: Citibank, N.A. ("Citibank"), the other financial
institutions acting as Administrative Agents and other
financial institutions acceptable to them. Citibank will
manage all aspects of the syndication of the Senior
Facility, including the timing of all offers to potential
Lenders and the acceptance of commitments, the amounts
offered and the compensation provided. If a syndication is
commenced, prior to receipt of notice from the Arrangers
that the syndication of the Senior Facility has been
completed, no Lender may assign any part of its share
thereof to any other potential Lender. Following receipt of
notice from the Arrangers that the syndication of the Senior
Facility has been completed, each Lender may assign all or
any part of its share thereof to one or more other financial
institutions that are Eligible Assignees (to be defined in
the loan documentation), and upon such assignment such
financial institutions shall become Lenders for all purposes
under the loan documentation. The Borrower shall cooperate
with the Arrangers in the syndication of the Senior Facility
and shall provide and cause its
<PAGE>
2
advisors to provide all information reasonably deemed
necessary by the Arrangers to complete a successful
syndication.
Senior Facility: Up to $1,200,000,000 at any time outstanding as a Senior
Revolving Credit Facility, provided, however, that the
Senior Facility shall be automatically and permanently
reduced at closing by the amount of the commitments to
remain outstanding after the closing under the $600,000,000
Credit Agreement dated as of December 23, 1992 among the
Borrower and certain of its subsidiaries, the lenders
parties thereto and Citibank, as agent for such lenders (the
"Existing Agreement").
Purpose: To finance the acquisition of the Company (the
"Transaction"), refinance certain existing debt of the
Borrower, pay transaction costs and provide working capital
for the Borrower.
Availability: In multiple drawings from time to time upon and following
the consummation of the Transaction, in an amount of
$10,000,000 or an integral multiple of $5,000,000 in excess
thereof, on three business days' notice for Eurodollar Rate
borrowings and on same day notice for Base Rate borrowings.
No more than 5 separate borrowings may be outstanding at any
time.
Closing Date: On or before January 31, 1995 or such later date as may be
agreed between the Administrative Agents and the Borrower
(provided that in no event shall the Closing Date occur
later than March 31, 1995).
Amortization: Fully revolving until final maturity at the end of the
earlier to occur of the 364th day after the closing of the
Senior Facility and December 31, 1995.
Optional Commitment
Reduction: The Borrower may, upon at least three business days' notice,
terminate or cancel, in whole or in part, the unused portion
of the Senior Facility; provided, however, that each partial
reduction shall be in an amount of $10,000,000 or an
integral multiple of $5,000,000 in excess thereof.
Optional
Prepayment: The Borrower may, upon at least three business days' notice
and at the end of any applicable interest period, prepay, in
full or in part, the Senior Facility; provided, however,
that each partial
<PAGE>
3
prepayment shall be in an amount of $10,000,000 or an
integral multiple of $5,000,000 in excess thereof.
Mandatory
Prepayment and
Commitment
Reduction: All net cash proceeds from the sale of the stock of Williams
Telecommunications Group, Inc., a wholly owned subsidiary of
the Borrower (the "WilTel Sale") (after payment of amounts
then payable under the U.S.$400,000,000 Credit Agreement
dated as of September 2, 1994 between WTG Holdings, Inc. and
Citibank) or from the sale of assets (other than the sale of
inventory in the ordinary course of business) in any
transaction or series of transactions in an amount exceeding
$25,000,000 shall be applied to the permanent reduction of
the Senior Facility.
Interest: Payable at the Applicable Margin above Citibank's Base Rate
(360 day basis) or, at the Borrower's option, Citibank's
Eurodollar Rate (adjusted for reserves). Interest based on
the Base Rate shall be payable quarterly in arrears.
Interest based on the Eurodollar Rate shall be payable in
arrears at the earlier of the end of the applicable interest
period and quarterly. Eurodollar Rate borrowings shall be
available for 1, 2, 3 or 6 month interest periods.
Citibank's "Base Rate" is a fluctuating interest rate equal
to the highest from time to time of (i) the rate of interest
announced publicly by Citibank in New York as its base rate,
(ii) 1/2 of 1% per annum above the latest three-week moving
average of secondary market morning offering rates for
three-month certificates of deposit of major U.S. money
market banks, as determined weekly by Citibank and adjusted
for the cost of reserves and estimated insurance assessments
from the FDIC and (iii) a rate equal to 1/2 of 1% per annum
above the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as determined for
any day by Citibank.
The "Applicable Margin" means 0% per annum for Base Rate
borrowings and a percentage per annum for Eurodollar Rate
borrowings based on the Borrower's public debt rating as set
forth in the Existing Agreement.
<PAGE>
4
During the continuance of any default under the loan
documentation, the Applicable Margin shall increase by 2%
per annum.
Unused Commitment
Fee: A percentage per annum based on the Borrower's public debt
rating as set forth in the Existing Agreement, to be paid on
the unused portion of each Lender's commitment from the date
of acceptance of such Lender's commitment, payable on (a)
the closing of the Senior Facility and quarterly in arrears
thereafter and (b) the date (whether before or after the
closing) of termination of the commitments.
Conditions
Precedent to
Initial Extension
of Credit: Those customarily found in credit agreements for financings
of this nature and others appropriate in the judgment of the
Administrative Agents for this transaction, including,
without limitation, the following:
(a) The Lenders shall be satisfied with the final terms and
conditions of the Transaction, including, without
limitation, the Tender Offer, and with the proposed
terms and conditions of the Merger; the Lenders shall
be satisfied with all legal and tax aspects of the
Transaction (including, without limitation, the Tender
Offer and the Merger); and all documentation relating
to the Transaction, including, without limitation, the
Tender Offer, the Merger, the offer to purchase the
Company Stock (the "Offer to Purchase"), the merger
agreement to be entered into between Williams and the
Company (the "Merger Agreement"), shall be in form and
substance satisfactory to the Lenders and the price per
share and number of shares to be acquired shall be as
set forth in the Merger Agreement.
(b) The Tender Offer shall have been consummated strictly
in accordance with the terms of the Offer to Purchase
and the Merger Agreement, without any waiver or
amendment not consented to by the Lenders of any term,
provision or condition set forth therein, and in
compliance with all applicable laws, and the Lenders
<PAGE>
5
shall be satisfied in their sole discretion that the
restrictions in Section 203 of the Delaware General
Corporation Law and any supermajority charter
provisions are not applicable to the purchase of the
Company Stock or the Merger or that any conditions to
avoiding the restrictions contained therein have been
satisfied.
(c) The Company's Board of Directors shall have redeemed
the Common Stock Purchase Rights issued pursuant to the
Company's Rights Agreement or the Lenders shall
otherwise be satisfied that such Rights are not
applicable to the Tender Offer or the Merger. The
Company's Board of Directors shall have approved the
Tender Offer and the Merger and recommended that its
shareholders tender their Company Stock pursuant to the
Tender Offer, and such recommendation shall not have
been withdrawn or qualified. The Merger Agreement
shall be in full force and effect and shall not have
been terminated.
(d) All documentation relating to the Senior Facility,
including a credit agreement incorporating
substantially the terms and conditions outlined herein,
shall be in form and substance satisfactory to the
Lenders.
(e) The Borrower shall have used its best efforts to cause
the existing credit facilities of the Borrower and the
Company to be amended to permit the Transaction and the
other transactions contemplated hereby on terms
satisfactory to the Lenders pursuant to documentation
satisfactory in form and substance to the Lenders, and
such existing credit facilities shall have been so
amended or repaid in full and terminated.
(f) The Lenders shall be satisfied with the corporate and
legal structure and capitalization of the Borrower,
including, without limitation, the charter and bylaws
of the Borrower and each agreement or instrument
relating thereto.
<PAGE>
6
(g) There shall have occurred no material adverse change in
the business, condition (financial or otherwise),
operations, performance, properties or prospects of the
Borrower, the Company or any of their subsidiaries,
provided that the non-occurrence of the WilTel Sale
shall not, in and of itself, be deemed to constitute
such a material adverse change, and all information
provided by or on behalf of the Borrower to the Lenders
prior to their commitment (the "Pre-Commitment
Information") shall be true and correct in all material
aspects.
(h) There shall exist no action, suit, investigation,
litigation or proceeding pending or threatened in any
court or before any arbitrator or governmental
instrumentality that (i) would be reasonably likely to
have a material adverse effect on the business,
condition (financial or otherwise), operations,
performance, properties or prospects of the Borrower or
any of its subsidiaries other than the litigation
described in the Pre-Commitment Information (the
"Disclosed Litigation") (it being understood that no
determination has yet been made as to whether such
Disclosed Litigation would be reasonably likely to have
such a material adverse effect) or (ii) purports to
affect the Transaction or the Senior Facility, and
there shall have been no adverse change in the status,
or financial effect on the Borrower or any of its
subsidiaries, of the Disclosed Litigation from that
described in the Pre-Commitment Information).
(i) All governmental and third party consents and approvals
necessary in connection with the Transaction and the
Senior Facility shall have been obtained (without the
imposition of any conditions that are not acceptable to
the Lenders) and shall remain in effect; all applicable
waiting periods shall have expired without any action
being taken by any competent authority; and no law or
regulation shall be applicable in the judgment of the
Lenders that restrains, prevents or imposes materially
adverse conditions upon the Transaction or the Senior
Facility.
<PAGE>
7
(j) All loans made by the Lenders to the Borrower or any of
its affiliates shall be in full compliance with the
Federal Reserve's Margin Regulations.
(k) The Lenders shall be satisfied that the Borrower will
be able to meet its obligations under all employee and
retiree welfare plans, that the Borrower's employee
benefit plans are, in all material respects, funded in
accordance with the minimum statutory requirements,
that no material "reportable event" (as defined in
ERISA, but excluding events for which reporting has
been waived) has occurred as to any such employee
benefit plan and that no termination of, or withdrawal
from, any such employee benefit plan has occurred or is
contemplated that could result in a material liability.
(l) The Lenders shall be satisfied with the amount,
parties, terms and conditions and prospects for
performance of all agreements then in existence for the
WilTel Sale after the closing of the Senior Facility.
(m) The Lenders shall be satisfied that the amount of
committed equity and debt financing shall be sufficient
to meet the financing requirements of the Transaction.
(n) The Lenders shall have received such financial,
business and other information regarding the Company
and its subsidiaries as they shall have requested,
including, without limitation, information as to
possible contingent liabilities, tax matters,
environmental matters, obligations under ERISA and
welfare plans, collective bargaining agreements and
other arrangements with employees, annual financial
statements dated December 31, 1993, interim financial
statements dated the end of the most recent fiscal
quarter for which financial statements are available
(or, in the event the Lenders' due diligence review
reveals material changes since such financial
statements, as of a later date within 45 days of the
closing of the Senior Facility), pro forma financial
statements as to the Borrower and forecasts for the
three years following the closing of the Facility
prepared by management of the Borrower, in a form
satisfactory to
<PAGE>
8
the Lenders, of balance sheets, income statements and
cash flow statements.
(o) The Lenders shall have received (i) satisfactory
opinions of counsel to the Borrower, of counsel to the
Agent and of local counsel to the Lenders as to the
transactions contemplated hereby (including, without
limitation, the tax aspects thereof and compliance with
all applicable securities laws) and (ii) such corporate
resolutions, certificates and other documents as the
Lenders shall reasonably request.
(p) There shall exist no default under any of the loan
documentation, and the representations and warranties
of the Borrower and its subsidiaries therein shall be
true and correct immediately prior to, and after giving
effect to, such extension of credit.
(q) All accrued fees and expenses of the Agent and the
Lenders (including the fees and expenses of counsel to
the Agent) shall have been paid.
Conditions
Precedent to
Subsequent
Extensions of
Credit: There shall exist no default under any of the loan
documentation, and the representations and warranties of the
Borrower and its subsidiaries therein shall be true and
correct immediately prior to, and after giving effect to,
such extension of credit.
Representations and
Warranties: Those customarily found in credit agreements for financings
of this nature and others appropriate in the judgment of the
Administrative Agents for this transaction, including,
without limitation, representations and warranties as to the
solvency of the Borrower and of the Borrower and its
subsidiaries on a consolidated basis and the absence of any
material adverse change in the business, condition
(financial or otherwise), operations, performance,
properties or prospects of the Borrower or any of its
subsidiaries.
<PAGE>
9
Covenants: Those negative, affirmative and financial covenants
customarily found in credit agreements for financings of
this nature and others appropriate in the judgment of the
Administrative Agents for this transaction, including,
without limitation, the following:
(a) Comply with laws (including, without limitation, ERISA
and environmental laws), pay taxes, maintain
appropriate and adequate insurance, preserve corporate
existence, permit inspection of properties, books and
records, keep books in accordance with GAAP and
maintain properties.
(b) Perform obligations under leases, related documents,
material contracts and other agreements.
(c) Conduct all transactions with affiliates on terms
comparable to those contained in the Existing
Agreement.
(d) Financial covenants consisting of tangible net worth of
at least $1.25 Billion at December 31, 1994 and at
least $2.25 Billion at March 31, 1995 and thereafter
and leverage to be determined.
(e) Within 45 days after the end of each fiscal quarter,
furnish quarterly consolidated and consolidating
balance sheets, income statements and statements of
cash flow of the Borrower and its subsidiaries
certified by the Borrower's chief financial officer
(which certification may be subject to year-end audit
adjustments) and certificates as to compliance with the
loan documents. Within 90 days after the end of each
fiscal year, furnish audited financial statements of
the Borrower and its subsidiaries and annual
consolidating financial statements of the Borrower and
its subsidiaries. No later than 30 days after the end
of each fiscal year, furnish the annual business plan
of the Borrower and its subsidiaries and furnish
forecasts prepared by management of the Borrower, in
each case in form and detail satisfactory to the
Lenders, of balance sheets, income statements and cash
flow statements on a monthly basis for the next 12
months and on an annual basis for each of the following
years until the scheduled final maturity of the
<PAGE>
10
Senior Facility. Promptly after request, furnish all
other business and financial information that any
Lender through the Agent may reasonably request.
(f) Not create or permit any liens (with customary
exceptions); not create or permit any debt or
guarantees, other than the Senior Facility, trade debt
and existing debt of the Borrower and its subsidiaries
acceptable to the Lenders and other debt baskets to be
mutually agreed upon; not create or permit lease
obligations beyond limits to be set forth in the loan
documentation; not merge or consolidate with any
person; not dispose of assets, other than the WilTel
Sale, sales of assets in the ordinary course of
business and other exceptions to be mutually agreed
upon; not make investments beyond limits to be set
forth in the loan documentation; not pay any dividends
or make any other distributions to shareholders beyond
limits to be set forth in the loan documentation; and
not make capital expenditures beyond limits to be set
forth in the loan documentation.
(g) Not change the nature of its business, its charter or
bylaws or its accounting policies or reporting
practices.
(h) Not prepay, redeem, purchase, defease or otherwise
satisfy prior to maturity, or make any payment in
violation of any subordination terms of, any debt, with
exceptions to be mutually agreed upon.
(i) Not amend or modify the terms of any debt, any related
documents or any material contracts.
(j) Not agree to give a negative pledge in favor of any
person, other than the Lenders.
(k) Not agree to limit dividends from or debt owing to
subsidiaries, except to the extent already so limited.
(l) Not become a general partner in any partnership, other
than through a special purpose vehicle.
<PAGE>
11
Events of Default: Those customarily found in credit agreements for financings
of this nature and others appropriate in the judgment of the
Administrative Agents for this transaction, including,
without limitation: failure to pay principal or interest or
fees when due; any representation or warranty proving to
have been materially incorrect when made; failure to perform
or observe covenants (with agreed upon grace periods when
customary and appropriate); cross-defaults to other
indebtedness; bankruptcy defaults; material judgment
defaults; impairment of loan documentation; change in
ownership or control; or ERISA defaults.
Expenses: The Borrower shall pay all of the Agent's reasonable due
diligence, syndication (including printing, distribution and
bank meetings), transportation, computer, duplication,
appraisal, audit, insurance, consultant, search, filing and
recording fees and all other reasonable out-of-pocket
expenses incurred by the Agent (including the reasonable
fees and expenses of counsel to the Agent) whether or not
any of the transactions contemplated hereby are consummated,
as well as all reasonable expenses of the Agent in
connection with the administration of the loan
documentation. The Borrower shall also pay the reasonable
expenses of the Lenders in connection with the enforcement
of any of the loan documentation.
Indemnity: The Borrower will indemnify and hold harmless each
Administrative Agent, each Arranger, each Lender and each of
their affiliates and their officers, directors, employees,
agents and advisors (each, an "Indemnified Party") from and
against any and all claims, damages, losses, liabilities and
expenses (including, without limitation, reasonable fees and
expenses of counsel) that may be incurred by or asserted or
awarded against any Indemnified Party, in each case arising
out of or in connection with or by reason of, or in
connection with the preparation for a defense of, any
investigation, litigation or proceeding arising out of,
related to or in connection with the Transaction, whether or
not such investigation, litigation or proceeding is brought
by the Borrower, its shareholders or creditors or an
Indemnified Party or an Indemnified Party is otherwise a
party thereto and whether or not the Transaction is
consummated, except to the extent such claim, damage, loss,
<PAGE>
12
liability or expense is found in a final, non-appealable
judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or
willful misconduct.
Required Lenders: 66-2/3%.
Assignments and
Participations: Assignments must be in a minimum amount of $5,000,000, other
than in the case of an assignment to a Lender or an
assignment of the entirety of a Lender's interest in the
Senior Facility. No participation shall include voting
rights, other than for reductions or postponements of
amounts payable or releases of all or substantially all of
the collateral.
Miscellaneous: Standard yield protection (including compliance with risk-
based capital guidelines, increased costs, payments free and
clear of withholding taxes and interest period breakage
indemnities), eurodollar illegality and similar provisions.
Governing Law: New York.
<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>
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Page(s)
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<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
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<TABLE>
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Page(s)
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<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
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<TABLE>
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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
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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
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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.
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(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
22
<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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<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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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<PAGE>
(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
47
<PAGE>
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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<PAGE>
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
<PAGE>
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
54
<PAGE>
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
<PAGE>
(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
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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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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
65
<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
67
<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
68
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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;
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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
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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.
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(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.
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(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-
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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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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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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
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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
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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
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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
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<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
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<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,
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<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
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<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
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<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
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<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
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<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
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<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
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<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
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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
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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
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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:
-----------------------------------------
- --------------------------------
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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>
CONFIDENTIALITY AGREEMENT
-------------------------
THIS CONFIDENTIALITY AGREEMENT (this "Agreement"), entered into and made
effective on the __ day of October, 1994, is by and between Transco Energy
Company ("Transco") and The Williams Companies, Inc. ("Williams").
W I T N E S S E T H:
WHEREAS, the parties hereto intend to enter into confidential discussions
and may enter into negotiations with regard to the acquisition or combination of
certain stock or assets of Transco and/or Williams pursuant to terms and
conditions mutually agreeable to Transco and Williams (the "Proposed
Transaction");
WHEREAS, it will be necessary for the parties or their Affiliates (as
defined in Section 11)to release certain confidential information to each other
for the sole purpose of enabling the parties to evaluate their interest in
entering into the Proposed Transaction; and
WHEREAS, the parties have entered into this Agreement in order to assure
the confidentiality of all such information and to prevent the disclosure of
same to third parties except as permitted herein and to address certain other
matters.
NOW, THEREFORE, in consideration of the mutual promises and covenants made
herein, and with the intent to be legally bound hereby, Transco and Williams
agree as follows:
1. Confidential Information. The term "Confidential Information" as used
------------------------
in this Agreement shall mean any and all written materials provided by a party
or its Affiliates to the other or ascertained by the other through due diligence
investigation or discussions between employees or agents of the parties or their
Affiliates; such Confidential Information shall include but not be limited to,
all marketing, technical, engineering, operational, economic or financial
knowledge, information or data of any nature whatsoever relating to the future,
present or past business, operations, plans or assets of the party, including
any of its Affiliates, which is disclosed (either directly or through their
agents) by such party or its Affiliates to the other in connection with the
Proposed Transaction; such Confidential Information shall also include any
analyses, compilations, data, studies or other documents prepared by a party or
its Affiliates containing or based on, in whole or in part, Confidential
Information relating to the other party, or reflecting a party's or its
Affiliates' review of, or interest in, the other party or any of its Affiliates;
provided, however, that Confidential Information shall not include the
following:
(a) information which at the time of disclosure by a party or its
Affiliates (the "Disclosing Party") is in the public domain, or
information which later becomes part of the public domain through
no act or omission of the recipient (the "Receiving Party");
(b) information which the Receiving Party can demonstrate was legally
in its possession prior to disclosure by the Disclosing Party;
(c) information received by the Receiving Party from a third party
who, to the best of the Receiving Party's knowledge, did not
acquire such information on a confidential basis either directly
or indirectly from the Disclosing Party.
<PAGE>
-2-
2. Disclosure and Use of Confidential Information. Each party agrees to
----------------------------------------------
keep confidential all Confidential Information relating to the other party, and
shall not, without the other party's prior written consent, disclose to any
third party, firm, corporation or entity such Confidential Information. Each
party shall limit the disclosure of Confidential Information relating to the
other party to only those directors, officers, employees and agents (including
attorneys, accountants, investment bankers ("Financial Advisors") and similar
consultants) of the party or its Affiliates reasonably necessary to evaluate the
Proposed Transaction. In addition, each party shall inform such persons of the
confidential nature of the Confidential Information and direct such persons to
treat such information confidentially and to otherwise comply with the
provisions of this Agreement, and each party shall be responsible for any breach
of this Agreement by any of such persons. To the extent that any such persons
are not employees of the party or its Affiliates, the party shall obtain a
signed writing evidencing the acceptance by such persons of the terms of this
Agreement. Each party shall use Confidential Information relating to the other
party only for the purpose of its internal evaluation of the Proposed
Transaction, and shall not make any other use, in whole or in part, of any such
Confidential Information without the prior written consent of the other.
3. Required Disclosure. In the event that either Transco, Williams or any
-------------------
of their respective Affiliates (as the case may be) are requested or required by
oral questions, interrogatories, requests for information or documents,
subpoena, civil investigative demand or similar process or by law or regulation
(1) to disclose any Confidential Information relating to the other or (2) to
disclose the possibility of any Proposed Transaction or the discussions
pertaining thereto, it is agreed that it will provide prompt notice of such
potential disclosure so than an appropriate protective order may be sought
and/or a waiver of compliance with the provisions of this Agreement may be
granted. If, in the absence of a protective order or the receipt of a waiver
hereunder, Transco, Williams and/or any of their respective Affiliates (as the
case may be) are nonetheless, in the written opinion of their respective
counsel, legally required to disclose Confidential Information relating to the
other or to disclose the possibility of any Proposed Transaction or the
discussions pertaining thereto, then in such event Transco, Williams or the
Affiliates (as the case may be) may disclose such information without liability
hereunder, provided that the other party has been given a reasonable opportunity
to review the text of such disclosure before it is made.
4. Return of Documents. Upon written request from the Disclosing Party or
-------------------
upon termination of the confidential discussions contemplated hereunder, Transco
and Williams shall each return any and all written Confidential Information
relating to the other as well as any other information disclosed to it by the
other party, including all originals, copies, translations, notes, or any other
form of said material. Notwithstanding the foregoing sentence, Transco or
Williams, as the case may be, may in lieu of returning the same to the
Disclosing Party destroy all documents, notes, memoranda, analyses or other
writings prepared by Transco or Williams, as the case may be, which are based on
or refer to any Confidential Information relating to the Disclosing Party and
certify such destruction in writing to the Disclosing Party.
5. Survival of Obligations. The obligations and commitments established
-----------------------
by this Agreement shall remain in full force and effect for three (3) years from
the date of this Agreement or until such time as the parties have entered into
an agreement providing otherwise.
6. Nature of Information. Transco and Williams each hereby accepts the
---------------------
representations of the other party that the other party's Confidential
Information is of a special, unique, unusual, extraordinary, and intellectual
character. Transco and Williams each acknowledges that the Disclosing Party's
interests in such Confidential Information may be irreparably injured by
disclosure of such Confidential Information. Transco and Williams each
acknowledges and agrees that money damages would not be a sufficient remedy for
any breach of this Agreement by it and that in addition to all other remedies
the other party shall be entitled to specific
<PAGE>
-3-
performance and injunctive or other equitable relief as a remedy for any such
breach and each further agrees to waive any requirement for the securing or
posting of any bond in connection with such remedy.
7. Securities Laws. Each party hereby acknowledges that it is aware, and
---------------
that it will advise its directors, officers, employees and agents who are
informed as to the matters which are the subject of this Agreement, that the
United States securities laws prohibit any person who has received from an
issuer material, non-public information from purchasing or selling securities
of such issuer or from communicating such information to any other person while
such information is non-public under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell such securities.
8. Other Transactions Excluded. Each party agrees that until the
---------------------------
expiration of three years from the date of this Agreement, neither it nor any of
its Affiliates (excluding the trustee or any investment advisor of any of
each party's pension plans) shall, directly or indirectly, alone or in concert
with others, without the prior approval of the Board of Directors of the other
party: (a) in any manner acquire, agree to acquire or make any proposal to
acquire, directly or indirectly, any securities or property of the other party
or any of its Affiliates (other than the acquisition of property in the
ordinary course of business), (b) propose to enter into, directly or indirectly,
any merger or business combination involving the other party or any of its
Affiliates, or to purchase, directly or indirectly, all or (other than in the
ordinary course of business) any portion of the assets of the other party or
any of its Affiliates, (c) make, or in any way participate, directly or
indirectly, in any "solicitation" of "proxies" (as such terms are used in the
proxy rules of the Securities and Exchange Commission) to vote, or seek to
advise or influence any person with respect to the voting of any voting
securities of the other party or any of its Affiliates, (d) form, join or in any
way participate in a "group" (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934) with respect to any voting securities of the
other party or any of its Affiliates, (e) otherwise act, alone or in concert
with others, to seek to control or influence the management, Board of Directors
or policies of the other party, (f) disclose any intention, plan or arrangement
inconsistent with the foregoing or, (g) advise, assist or encourage any other
persons in connection with any of the foregoing, including arranging or in any
way participating, directly or indirectly, in the financing of the foregoing.
Each party also agrees during such period not to (i) request the other party (or
its directors, officers, employees or agents), directly or indirectly, to amend
or waive any provision of this Section 8 (including this sentence) or (ii) take
any action which might require the other party to make a public announcement
regarding the possibility of a business combination or merger.
9. Contact by Parties. For a period of three years from the date of this
------------------
Agreement, each party agrees not to initiate or maintain contact (except for
those contacts made in the ordinary course of business) with any director,
officer, employee or agent of the other party or its Affiliates regarding its
business, operations, prospects or finances, except with the express written
permission of the other party. It is understood that each party's Financial
Advisors will arrange for appropriate contacts for due diligence purposes. It is
further understood that all (i) communications regarding the Proposed
Transaction, (ii) requests for additional information, (iii) requests for
facility tours or management meetings, and (iv) disclosures or questions
regarding procedures, will be submitted or directed only to each party's
Financial Advisors. Each party further agrees that for a period of one year from
the date hereof, without the prior written consent of the other party, which
will not be unreasonably withheld, a party will not directly or indirectly
knowingly or intentionally solicit for employment any person who is now employed
by the other party or its Affiliates, it being understood that an advertisement
published in any newspaper, magazine or similar publication soliciting the
employment of persons generally will not be deemed a solicitation prohibited by
this sentence.
<PAGE>
-4-
10. Governing Law. The validity and interpretation of this Agreement and
-------------
the legal relations of the parties to it shall be governed by the laws of the
State of Delaware. In the event that a court of competent jurisdiction
determines that any portion of this Agreement is unreasonable because of its
term or scope, or for any other reason, Transco and Williams agree that such
court may reform such provision so that it is reasonable under the circumstances
and that such provision, as reformed, shall be enforceable. We each hereby
irrevocably and unconditionally consent to submit to the exclusive jurisdiction
of the courts of the State of Delaware for any actions, suits or proceedings
arising out of or relating to this Agreement and we each agree not to commence
any action, suit or proceeding relating hereto except in such courts. We
further agree that service of any process, summons, notice or document by U.S.
registered mail to our respective executive offices will be effective service of
process for any action, suit or proceeding brought in any such court.
11. Affiliate. The term "Affiliate" shall mean any corporation,
---------
partnership, or other entity or association that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, Transco or Williams (as the case may be).
12. No Other Agreement. It is expressly understood that this Agreement is
------------------
not and shall not be construed as any obligation or form of a letter of intent
or agreement to enter into the Proposed Transaction. Neither party may rely on
this Agreement or the negotiations or exchange of Confidential Information or
other documentation between the parties as a commitment to enter into binding
definitive agreements. Each party agrees that unless and until a definitive
agreement between the parties hereto with respect to any Proposed Transaction
has been executed and delivered, neither party will be under any obligation of
any kind whatsoever with respect to a Proposed Transaction except for the
matters specifically provided for in this Agreement.
13. No Representations or Warranties. With respect to any information,
--------------------------------
including but not limited to Confidential Information, which either party
furnishes or otherwise discloses to the other party for the purpose of
evaluating any Proposed Transaction, it is understood and agreed that the party
disclosing such information does not make any representations or warranties as
to the accuracy, completeness or fitness for a particular purpose thereof. It
is further understood and agreed that neither party nor their representatives or
Affiliates shall have any liability or responsibility to the other party or to
any other person or entity resulting from the use of any information so
furnished or otherwise provided.
14. Modification and Waiver. The provisions of this Agreement may be
-----------------------
modified or waived only by a separate writing signed by Transco and Williams
expressly so modifying or waiving the same. No failure or delay by Transco or
Williams in exercising any right, power or privilege hereunder shall operate as
a waiver thereof, nor shall any partial exercise thereof preclude any other or
further exercise thereof or of any other right, power or privilege.
15. Affiliates Bound. Each of Transco or Williams agrees to cause its
----------------
Affiliates to be bound hereby as if each were a party to this Agreement.
16. Severability. If any provision of this Agreement is declared void, or
------------
otherwise unenforceable and cannot be reformed as provided in Section 10 hereof,
such provision shall be deemed to have been severed from this Agreement, which
shall otherwise remain in full force and effect.
<PAGE>
-5-
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement on
the day and year first herein above written.
THE WILLIAMS COMPANIES, INC. TRANSCO ENERGY COMPANY
By: /s/ Keith E. Bailey By: /s/ John P. DesBarres
------------------------------ ------------------------------
Keith E. Bailey John P. DesBarres
Chairman of the Board, President Chairman of the Board, President
and Chief Executive Officer and Chief Executive Officer
<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;
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<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
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