1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 28, 2001
REGISTRATION NO. 333-63202
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE WILLIAMS COMPANIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4922 73-0569878
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION NUMBER) IDENTIFICATION NO.)
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ONE WILLIAMS CENTER
TULSA, OKLAHOMA 74172
(918) 573-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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WILLIAM G. VON GLAHN, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
THE WILLIAMS COMPANIES, INC.
ONE WILLIAMS CENTER
TULSA, OKLAHOMA 74172
TELEPHONE: (918) 573-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
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COPIES TO:
MORRIS J. KRAMER, ESQ. EUGENE A. LANG, JR., ESQ. THOMAS A. COLE, ESQ.
RICHARD J. GROSSMAN, ESQ. BARRETT RESOURCES CORPORATION PAUL L. CHOI, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP TOWER 3, SUITE 1000 MICHAEL A. GORDON, ESQ.
FOUR TIMES SQUARE 1515 ARAPAHOE STREET SIDLEY AUSTIN BROWN & WOOD
NEW YORK, NY 10036 DENVER, COLORADO 80202 BANK ONE PLAZA
TELEPHONE: (212) 735-3000 TELEPHONE: (303) 572-3900 10 SOUTH DEARBORN STREET
CHICAGO, ILLINOIS 60603
TELEPHONE: (312) 853-7000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement is declared effective and all the
conditions to the proposed merger of a subsidiary of the Registrant with Barrett
Resources Corporation have been satisfied or waived.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED(1) BE REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) FEE(3)
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Common stock, par value $1.00 per share..... 31,612,690 $63.07 $1,128,360,142 $282,090
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(1) This Registration Statement registers 31,612,690 shares of common stock, par
value $1.00 per share, of The Williams Companies, Inc. (including the
associated preferred stock purchase rights). The number of shares to be
registered is based upon an approximate maximum of 17,890,600 shares of
common stock, par value $0.01 per share, of Barrett Resources Corporation
(including the associated preferred stock purchase rights), including shares
of Barrett Resources common stock issuable upon exercise of Barrett
Resources employee stock options and other equity awards, or otherwise
expected to be issued on or before the closing date of the merger,
multiplied by the exchange ratio of 1.767 shares of Williams common stock.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and Rule 457(f)(1) of the Securities Act of 1933, as
amended. The registration fee of $282,090 was computed pursuant to Rules
457(c) and 457(f) under the Securities Act based on $63.07, the average of
the high and low sales prices per share of Barrett Resources common stock on
June 14, 2001 on the New York Stock Exchange.
(3) Calculated by multiplying 0.00025 by the proposed maximum aggregate offering
price.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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2
THE INFORMATION IN THIS PROSPECTUS IS INCOMPLETE AND MAY CHANGE. WE MAY NOT
ISSUE THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED.
PRELIMINARY COPY - SUBJECT TO COMPLETION, DATED JUNE 28, 2001
[BARRETT LETTERHEAD]
July 2, 2001
Dear Fellow Barrett Resources Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders of
Barrett Resources Corporation scheduled for Thursday, August 2, 2001, at the
Westin Hotel -- Tabor Center, 1672 Lawrence Street, Denver, Colorado at 9:00
a.m. Denver time.
At the special meeting, you will be asked to approve our merger with a
subsidiary of The Williams Companies, Inc. pursuant to our merger agreement with
Williams dated as of May 7, 2001. The company resulting from the merger will be
a wholly owned subsidiary of Williams. If the merger agreement is approved and
the merger becomes effective, each outstanding share of Barrett Resources common
stock you own (including the associated preferred stock purchase rights) will be
converted into 1.767 shares of Williams common stock (including the associated
preferred stock purchase rights). Williams common stock trades principally on
the New York Stock Exchange under the symbol "WMB."
In order to complete the merger, we need the approval of the Barrett
Resources stockholders. This requires the affirmative vote of holders of a
majority of the outstanding shares of Barrett Resources common stock. A
subsidiary of Williams currently owns 16,730,502 shares of Barrett Resources
common stock, or approximately 50% of the voting power of the outstanding
shares. These shares were acquired in a tender offer that a subsidiary of
Williams completed on June 11, 2001 under the terms of the merger agreement.
Williams and its subsidiary agreed in the merger agreement to vote these shares
in favor of the merger. As a result of Williams' beneficial ownership of
approximately 50% of the outstanding shares of Barrett Resources common stock,
Williams effectively has the voting power to approve and adopt the merger
agreement and the merger.
Your board of directors has unanimously determined that the merger is
advisable and fair to, and in the best interests of, Barrett Resources
stockholders and has unanimously approved the merger agreement and the merger.
Your board of directors unanimously recommends that you vote FOR approval and
adoption of the merger agreement and the merger.
The accompanying notice and proxy statement/prospectus explain the matters
to be acted upon at the special meeting. This document is also a prospectus for
the Williams common stock that will be issued if the merger is completed. You
should read these materials carefully. PLEASE PAY PARTICULAR ATTENTION TO THE
DISCUSSION OF "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF RISKS
RELATED TO THE MERGER AND THE WILLIAMS COMMON STOCK YOU WOULD RECEIVE IN THE
MERGER. If you have any questions prior to the special meeting or need further
assistance, please call Innisfree M&A Incorporated, the information agent for
the merger, at (888) 750-5834 (banks and brokers may call collect at (212)
750-5833).
HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF BARRETT RESOURCES COMMON
STOCK MUST APPROVE THE MERGER PROPOSAL. FAILURE TO VOTE IS EQUIVALENT TO A VOTE
AGAINST THE MERGER. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, YOU
SHOULD FILL OUT, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED, POSTAGE-PAID ENVELOPE TO ENSURE THAT YOUR SHARES WILL BE REPRESENTED
AT THE SPECIAL MEETING AND VOTED IN ACCORDANCE WITH YOUR WISHES.
Sincerely,
/s/ Peter A. Dea
Peter A. Dea
Chairman of the Board and Chief Executive
Officer
This document "incorporates by reference" important business and financial
information that is not included in this document. Incorporation by reference
means that by referring you to information contained in other documents filed by
Barrett Resources or Williams with the Securities and Exchange Commission that
information is deemed to be disclosed in this proxy statement/prospectus. You
may obtain this information without charge from Barrett Resources or Williams by
written or oral request as described under "Where You Can Find More Information"
on page 78. TO OBTAIN TIMELY DELIVERY OF THE INFORMATION, PLEASE MAKE YOUR
REQUEST NO LATER THAN JULY 20, 2001.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities to be issued in the
merger or passed upon the adequacy or accuracy of this proxy statement/
prospectus. Any representation to the contrary is a criminal offense.
The date of this document is July 2, 2001 and it is first being mailed to
Barrett Resources stockholders on or about July 3, 2001.
1515 Arapahoe Street - Tower 3, Suite 1000 - Denver, Colorado 80202 - phone
303.572.3900 - fax 303.629.8255
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BARRETT RESOURCES CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 2, 2001
To the Holders of Common Stock of Barrett Resources Corporation:
A Special Meeting of Stockholders of Barrett Resources Corporation will be
held at the Westin Hotel -- Tabor Center, 1672 Lawrence Street, Denver, Colorado
on Thursday, August 2, 2001, commencing at 9:00 a.m. Denver time, for the
following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of May 7, 2001, among Barrett
Resources Corporation, The Williams Companies, Inc. and Resources
Acquisition Corp., a wholly owned subsidiary of Williams, and the merger
provided for therein; and
2. To transact any other business as may properly come before the
special meeting or any adjournments or postponements of the special
meeting.
Upon completion of the merger, the Barrett Resources board of directors
will be reconstituted as described in the accompanying proxy
statement/prospectus.
Only stockholders of record at the close of business on July 2, 2001 are
entitled to notice of, and to vote at, the special meeting or any adjournments
or postponements of the special meeting. A list of record holders will be
available for examination by any Barrett Resources stockholder for any purpose
related to the special meeting at the offices of Barrett Resources in Denver,
Colorado during normal business hours for a period of ten days prior to the date
of the special meeting.
Your board of directors unanimously recommends that stockholders vote FOR
approval and adoption of the merger agreement and the merger.
Holders of a majority of the outstanding shares of Barrett Resources common
stock must approve the merger proposal. Failure to vote is equivalent to a vote
against the merger proposal. Whether or not you plan to attend the special
meeting, you are urged to fill out, date and sign the enclosed proxy and return
it promptly so that your vote can be recorded. If you are present at the special
meeting and desire to do so, you may revoke your proxy and vote in person.
By Order of the Board of Directors,
/s/ EUGENE A. LANG, JR.
Eugene A. Lang, Jr.
Executive Vice President - General
Counsel and Secretary
Dated: July 2, 2001
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN YOUR
PROXY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING IN PERSON.
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TABLE OF CONTENTS
PAGE
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Questions and Answers About the Merger...................... iii
Summary..................................................... 1
Selected Historical Financial Information of Barrett
Resources................................................. 5
Selected Historical Financial Information of Williams....... 6
Comparative per Share and Dividend Data (unaudited)......... 7
Selected Pro Forma Combined Financial Data of Williams and
Barrett Resources (unaudited)............................. 9
Comparative Market Price Data............................... 10
Risk Factors................................................ 11
Risk Factors Relating to the Merger....................... 11
Risk Factors Relating to Williams......................... 12
Forward-Looking Statements in this Document May Prove
Inaccurate............................................. 15
The Special Meeting of Barrett Resources Stockholders....... 16
Date, Time, Place and Purpose............................. 16
The Record Date for Voting................................ 16
Quorum.................................................... 16
Required Vote............................................. 16
Voting and Revocation of Proxies.......................... 16
Solicitation of Proxies and Expenses...................... 17
Other Matters............................................. 17
The Merger.................................................. 18
Background of the Merger.................................. 18
Recommendation of the Barrett Resources Board............. 22
Reasons for the Merger.................................... 23
Opinions of Barrett Resources' Financial Advisors......... 25
Interests of Directors and Executive Officers of Barrett
Resources in the Merger................................ 39
Effects of Inability to Complete the Merger............... 41
Regulatory Filings and Approvals.......................... 42
Barrett Resources By-laws................................. 42
Barrett Resources Rights Agreement........................ 42
Accounting Treatment...................................... 43
No Appraisal Rights....................................... 44
Restrictions on Sales of Williams Common Stock by
Affiliates of Barrett Resources........................ 44
Stock Exchange Listings................................... 44
Certain Projections......................................... 44
The Merger Agreement........................................ 48
The Tender Offer.......................................... 48
The Merger................................................ 48
Consideration to be Received in the Merger................ 48
Effective Time of the Merger.............................. 49
Exchange Procedures....................................... 49
Barrett Resources Stock Options........................... 50
Certificate of Incorporation and By-laws of the Surviving
Corporation............................................ 50
Management of Barrett Resources after the Tender Offer and
before the Merger...................................... 51
Representations and Warranties............................ 51
Covenants Relating to Conduct of Business................. 52
Other Covenants........................................... 54
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PAGE
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Employee Benefits......................................... 55
Indemnification and Insurance............................. 55
No Solicitation; Acquisition Proposals.................... 55
Recommendation of the Barrett Resources Board............. 56
Conditions to the Merger.................................. 56
Termination of the Merger Agreement....................... 57
Fees and Expenses......................................... 57
Amendments; Extension; Waiver............................. 57
Material United States Federal Income Tax Consequences...... 58
Information About Barrett Resources......................... 61
Stockholders of Barrett Resources........................... 62
Information About The Williams Companies.................... 64
Description of Williams Common Stock........................ 65
Dividends................................................. 65
Voting Rights............................................. 65
Rights upon Liquidation................................... 66
Rights Agreement.......................................... 66
Comparison of Stockholder Rights............................ 68
Legal Matters............................................... 77
Experts..................................................... 77
Other Matters............................................... 77
Stockholder Proposals....................................... 77
Where You Can Find More Information......................... 78
Annex A -- Agreement and Plan of Merger..................... A-1
Annex B -- Fairness Opinion of Goldman, Sachs & Co. ........ B-1
Annex C -- Fairness Opinion of Petrie Parkman & Co.,
Inc. ..................................................... C-1
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6
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT AM I BEING ASKED TO VOTE ON?
A: You are being asked to vote to approve and adopt the merger agreement entered
into by Barrett Resources Corporation, The Williams Companies, Inc. and
Resources Acquisition Corp., a wholly owned subsidiary of Williams. Barrett
Resources and Williams have agreed to a merger in which Barrett Resources
will merge with Resources Acquisition. The surviving company resulting from
the merger will continue as a wholly owned subsidiary of Williams. The merger
is the second step of a two-step transaction in which Williams will acquire
all of the outstanding shares of Barrett Resources common stock. On June 11,
2001, Resources Acquisition completed the first step of the transaction by
purchasing 16,730,502 shares of Barrett Resources common stock, or
approximately 50% of the outstanding shares, in a tender offer.
Q: WHAT WOULD I RECEIVE IN THE MERGER?
A: As a result of the merger, each outstanding share of Barrett Resources common
stock, including the associated preferred stock purchase rights, would be
converted into 1.767 shares of Williams common stock, including the
associated preferred stock purchase rights.
Q: DOES THE BARRETT RESOURCES BOARD SUPPORT THE MERGER?
A: Yes. The Barrett Resources board has unanimously determined that the merger
is advisable and fair to, and in the best interests of, Barrett Resources
stockholders and recommends that Barrett Resources stockholders vote for
approval and adoption of the merger agreement and the merger.
Q: WHY IS THE BARRETT RESOURCES BOARD PROPOSING THE MERGER?
A: Your Barrett Resources board believes the combination of Williams and Barrett
Resources is in the best interests of Barrett Resources stockholders and
provides an opportunity for you to receive stock in Williams, a leading
diversified energy company with strong financial resources and long-term
prospects for future growth and earnings.
Q: WHEN AND WHERE IS THE SPECIAL MEETING OF STOCKHOLDERS?
A: The special meeting will take place at the Westin Hotel -- Tabor Center, 1672
Lawrence Street, Denver, Colorado on Thursday, August 2, 2001, commencing at
9:00 a.m. Denver time.
Q: WHO CAN VOTE AT THE BARRETT RESOURCES SPECIAL MEETING OF STOCKHOLDERS?
A: You can vote at the special meeting if you owned shares of Barrett Resources
common stock at the close of business on Monday, July 2, 2001. As of the
close of business on that day, shares of Barrett Resources
common stock were outstanding.
Q: WHAT VOTE IS REQUIRED TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE
MERGER?
A: Approval and adoption of the merger agreement and the merger requires the
affirmative vote of the holders of a majority of the shares of Barrett
Resources common stock outstanding on the record date. Stockholders will have
one vote for each share of Barrett Resources common stock owned by them.
Q: DOES THE MERGER REQUIRE THE APPROVAL OF WILLIAMS STOCKHOLDERS?
A: No. The merger does not require the approval of Williams stockholders.
Q: HAVE ANY STOCKHOLDERS OF BARRETT RESOURCES AGREED TO VOTE IN FAVOR OF THE
MERGER?
A: Yes. In the merger agreement, Williams agreed to vote the shares of Barrett
Resources common stock purchased in the tender offer in favor of the merger
agreement and the merger. Williams, through Resources Acquisition, its wholly
owned subsidiary, purchased in the tender offer 16,730,502 shares of Barrett
Resources common stock which is approximately 50% of the
shares of Barrett Resources common stock outstanding on July 2, 2001. As a
result of Williams' beneficial ownership of 16,730,502 shares of Barrett
Resources common stock, Williams effectively has the voting power to approve
and adopt the merger agreement and the merger.
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7
Q: WHAT IS THE VALUE OF THE SHARES OF WILLIAMS COMMON STOCK I WOULD RECEIVE IN
THE MERGER?
A: Based on the closing market price of Williams common stock on Friday, May 4,
2001, the last full trading day before the date when the two companies
publicly announced the merger agreement, each share of Barrett Resources
common stock would be exchanged for shares of Williams common stock with a
value equal to $73.63 per share. Based on the closing market price of
Williams common stock on June 29, 2001, the most recent date for which we
were able to obtain market price information before the printing of this
document, each share of Barrett Resources common stock would be exchanged for
shares of Williams common stock with a value equal to $ per share.
Q: WILL THE NUMBER OF SHARES OF WILLIAMS COMMON STOCK I AM ENTITLED TO RECEIVE
IN THE MERGER BE ADJUSTED AS THE MARKET VALUE OF WILLIAMS COMMON STOCK
CHANGES?
A: No. The number of shares of Williams common stock to be issued for each share
of Barrett Resources common stock is fixed at 1.767 and will not be adjusted
for changes in the market value of these shares. As a result, the market
value of the shares you receive in the merger will not be known at the time
you vote on the merger and will increase or decrease with the market price of
shares of Williams common stock.
Q: WILL I RECEIVE DIVIDENDS ON MY WILLIAMS SHARES AFTER THE MERGER?
A: Williams currently pays quarterly cash dividends of $.15 per share on its
common stock and expects to continue this policy after the merger. However,
future dividends will depend on Williams' results of operations, financial
condition, cash requirements, future prospects and other factors.
Q: WHERE DO SHARES OF WILLIAMS COMMON STOCK TRADE?
A: Williams common stock is listed and traded on the New York Stock Exchange and
the Pacific Exchange under the symbol "WMB."
Q: WILL BARRETT RESOURCES SHARES CONTINUE TO BE TRADED ON THE NEW YORK STOCK
EXCHANGE AFTER THE MERGER IS COMPLETED?
A: No. If the merger is completed, Barrett Resources shares will no longer be
listed for trading on the New York Stock Exchange.
Q: WHEN WILL THE MERGER BE COMPLETED?
A: We expect to complete the merger shortly following the special meeting.
Because the merger is subject to the approval of Barrett Resources
stockholders, as well as the satisfaction of other conditions, we cannot
predict the exact timing of completion.
Q: WILL I RECEIVE FRACTIONAL SHARES OF WILLIAMS COMMON STOCK IN CONNECTION WITH
THE MERGER?
A: No. If you otherwise would be entitled to a fractional share of Williams
common stock, you will instead receive cash in an amount equal to the value
of the fractional share.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
document, please fill out, date and sign your proxy card. Then, please mail
your signed proxy card in the enclosed, postage-prepaid return envelope as
soon as possible so that your shares may be represented at the Barrett
Resources special meeting.
Q: WHAT HAPPENS IF I DO NOT VOTE?
A: Because the affirmative vote of the holders of a majority of the shares of
Barrett Resources common stock outstanding on the record date is required to
approve and adopt the merger agreement and the merger, unless you vote in
person, a failure to return your proxy card will have the same effect as
voting against the merger proposal. However, as described above, Williams
effectively has the voting power to approve and adopt the merger agreement
and the merger.
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8
Q: MAY I VOTE IN PERSON?
A: Yes. You may attend the special meeting and vote your shares in person,
instead of signing and returning your proxy card.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, BANK OR OTHER FIDUCIARY,
HOW CAN I VOTE MY SHARES?
A: You should instruct your broker, bank or other fiduciary how to vote your
shares, following the procedure provided by that person. Your broker, bank or
other fiduciary will not be able to vote your shares without instructions
from you.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You may change your vote at any time before your proxy card is voted at
the special meeting. You can change your vote in one of three ways:
- send a written notice stating that you would like to revoke your
proxy;
- complete and submit a new proxy card dated after your initial proxy
card; or
- attend the special meeting and vote in person.
If you have instructed a broker to vote your shares, you must follow
directions received from your broker to change those instructions.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, you will receive written instructions for
exchanging your shares of Barrett Resources common stock for shares of
Williams common stock. You will also receive a cash payment for any
fractional shares.
Q: AM I ENTITLED TO APPRAISAL RIGHTS?
A: No. Barrett Resources stockholders are not entitled to appraisal rights in
connection with the merger.
Q: WHO CAN ANSWER ANY QUESTIONS I MAY HAVE?
A: If you would like additional copies, without charge, of this document or if
you have questions about the merger, including questions about the procedures
for voting your shares, you should contact Innisfree M&A Incorporated, the
information agent for the merger, at (888) 750-5834 (banks and brokers may
call collect at (212) 750-5833).
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9
SUMMARY
This summary highlights selected information described in greater detail
elsewhere in this document. It does not contain all of the information that may
be important to you. To understand the merger fully and for a complete
description of the legal terms of the merger, you should read carefully this
entire document and the documents to which we have referred you. See "Where You
Can Find More Information" on page 78. We encourage you to read carefully the
merger agreement, which is attached as Annex A to this document, because it is
the legal document that governs the merger.
THE COMPANIES (PAGES 61-67)
THE WILLIAMS COMPANIES, INC.
One Williams Center
Tulsa, Oklahoma 74172
(918) 573-2000
The Williams Companies, Inc. is a leading company in the energy sector.
Williams and its subsidiaries are principally dedicated to energy-related
activities, including transportation and storage of natural gas and related
activities; exploration and production of oil and natural gas; natural gas
gathering, processing and treating activities; natural gas liquids;
transportation of petroleum products and related terminal services; light
hydrocarbon/olefin transportation; ethylene production; production and marketing
of ethanol and bio-products; refining of petroleum products; retail marketing;
and marketing and trading of energy and energy related commodities.
BARRETT RESOURCES CORPORATION
1515 Arapahoe Street
Tower 3, Suite 1000
Denver, Colorado 80202
(303) 572-3900
Barrett Resources Corporation is an independent oil and natural gas
exploration and production company that is also involved in natural gas
gathering, marketing and trading activities. Barrett Resources' core areas of
activity are in the Rocky Mountain Region of Colorado, Wyoming and Utah, the
Mid-Continent area of Kansas and Oklahoma and the Gulf of Mexico region of
offshore Texas and Louisiana.
THE SPECIAL MEETING OF BARRETT RESOURCES STOCKHOLDERS (PAGES 16-17)
Date, Time, Place and Purpose (page 16)
The special meeting of Barrett Resources stockholders will be held at the
Westin Hotel-Tabor Center, 1672 Lawrence Street, Denver, Colorado, at 9:00 a.m.
Denver time on Thursday, August 2, 2001. At the Barrett Resources special
meeting, Barrett Resources stockholders will be asked to approve and adopt the
merger agreement and the merger.
The Record Date for Voting (page 16)
Only holders of record of shares of Barrett Resources common stock at the
close of business on July 2, 2001 are entitled to notice of, and to vote at, the
special meeting. Each share will be entitled to one vote. At the close of
business on that day, there were shares outstanding.
Quorum (page 16)
The presence, in person or by proxy, of the holders of a majority of the
shares of Barrett Resources common stock entitled to vote is necessary to
constitute a quorum.
Required Vote (page 16)
The merger proposal must be approved by the affirmative vote of holders of
a majority of the outstanding shares of Barrett Resources common stock.
As of the record date, directors and executive officers of Barrett
Resources beneficially owned 1,681,146 shares (or approximately 5%) of Barrett
Resources common stock (excluding shares held by Williams which may be
attributed to the four representatives of Williams on the Barrett Resources
board).
As of the record date, Williams and its subsidiaries beneficially owned
16,730,502 shares (or approximately 50%) of Barrett Resources common stock.
These shares were acquired in a tender offer that was completed on June 11, 2001
under the merger agreement. Williams has agreed to vote these shares in favor of
approval of the merger proposal. Williams effectively has sufficient voting
power to constitute a quorum at the special meeting and to approve the merger
proposal.
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10
Voting and Revocation of Proxies (pages 16-17)
All properly executed proxies that are received prior to the Barrett
Resources special meeting and not revoked will be voted in the manner specified
in the proxy. If you properly execute and return a proxy and do not specify
otherwise, the shares represented by your proxy will be voted FOR approval of
the merger proposal.
If you have given a proxy, you may still revoke it at any time before it is
voted by:
- sending a written notice to Barrett Resources stating that you would like
to revoke your proxy;
- completing and submitting a new proxy card dated after your initial proxy
card; or
- attending the special meeting and voting in person.
If your shares are held in an account at a brokerage firm or bank, you must
instruct the brokerage firm or bank how to vote your shares. If you have
instructed a broker to vote your shares, you must follow directions received
from your broker to change those instructions.
THE MERGER (PAGES 18-44)
The merger agreement provides that Barrett Resources will merge with a
direct or indirect wholly owned subsidiary of Williams. The company resulting
from the merger will be a direct or indirect wholly owned subsidiary of
Williams.
Background and Reasons for the Merger (pages 18-25)
For a description of the events leading to the approval and recommendation
of the merger by the Barrett Resources board of directors, you should refer to
"The Merger -- Background of the Merger" and "-- Reasons for the Merger."
What You Will Receive in the Merger
(page 48)
In the merger, for each share of Barrett Resources common stock you own,
you will receive 1.767 shares of Williams common stock. No adjustment will be
made to the number of shares of Williams common stock you receive for each share
of Barrett Resources common stock in the merger as a result of any increase or
decrease in the market price of these shares.
Williams will not issue fractional shares in the merger. You will receive a
cash payment for the value of the remaining fraction of a share of Williams
common stock to which you would otherwise be entitled.
No interest will be paid with respect to either the cash paid in lieu of
fractional shares of Williams common stock or any dividends or distributions
declared or paid on the shares of Williams common stock issued in the merger.
Recommendation of the Barrett Resources Board of Directors (pages 22-23)
The Barrett Resources board has unanimously determined that the merger
agreement and the merger are advisable and fair to, and in the best interests
of, Barrett Resources stockholders and has unanimously approved the merger
agreement and the merger. The Barrett Resources board unanimously recommends
that Barrett Resources stockholders vote FOR adoption and approval of the merger
agreement and the merger.
Opinions of Financial Advisors (pages 25-39)
In connection with the tender offer and the merger, the Barrett Resources
board received the opinions dated May 7, 2001 of its financial advisors,
Goldman, Sachs & Co. and Petrie Parkman & Co., Inc., that, as of that date and
based upon and subject to the various assumptions and qualifications described
in the opinions, the consideration to be received by the Barrett Resources
stockholders in the tender offer and the merger, taken together as a unitary
transaction, was fair from a financial point of view to the Barrett Resources
stockholders. You are urged to read the full text of these opinions, which are
attached as Annexes B and C to this document.
Interests of Certain Persons in the Merger (pages 39-41)
The directors (excluding the four director representatives of Williams) and
executive officers of Barrett Resources have interests in the merger that are
different from, and/or are in addition to, the interests of Barrett Resources
stockholders. These interests include the receipt of severance and other
benefits, the honoring by Williams of existing Bar-
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rett Resources benefit plans and agreements and the right to continued
indemnification and insurance coverage by Williams for a period of time after
the merger.
No Solicitation; Acquisition Proposals
(pages 55-56)
Barrett Resources has agreed that it will not, directly or indirectly
through its representatives:
- solicit or knowingly facilitate the submission of any alternative
acquisition proposal for Barrett Resources;
- enter into any agreement with respect to any alternative acquisition
proposal;
- have any discussions or negotiations with, or provide any confidential
information to, any person relating to any alternative acquisition
proposal; or
- enter into any letter of intent or agreement relating to any alternative
acquisition proposal.
Under the merger agreement, an alternative acquisition proposal is any
proposal or offer which relates to a merger or other business combination
involving Barrett Resources or any issuance or acquisition of, or offer to
purchase, 20% or more of the outstanding shares of Barrett Resources common
stock, or of a substantial portion of the business or assets of Barrett
Resources outside the ordinary course of business.
Barrett Resources must notify Williams of any alternative acquisition
proposal within 24 hours of receiving such a proposal and must keep Williams
informed of the status of any acquisition proposal.
Conditions to the Merger (page 56)
The obligations of each of Williams and Barrett Resources to complete the
merger are subject to the satisfaction of the following conditions:
- approval of the merger proposal by Barrett Resources stockholders;
- the absence of any injunction or legal restraint blocking the merger; and
- the approval for listing on the New York Stock Exchange of the shares of
Williams common stock to be issued in the merger.
Regulatory Approvals (page 42)
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, we could
not complete the merger until we furnished certain information and documentary
material for review by the Federal Trade Commission and the Antitrust Division
of the Department of Justice and we satisfied the required waiting period.
Williams and Barrett Resources filed a Hart-Scott-Rodino Premerger Notification
and Report Form on May 16 and May 18, 2001, respectively. The Federal Trade
Commission granted early termination of the waiting period for the merger under
the Hart-Scott-Rodino Act on May 30, 2001.
Termination of the Merger Agreement
(page 57)
Williams and Barrett Resources can jointly agree to terminate the merger
agreement at any time before completing the merger. In addition, either company
can terminate the merger agreement if:
- any condition contained in the merger agreement becomes incapable of
being satisfied; or
- a law or court order permanently prohibits the merger.
Barrett Resources can also terminate the merger agreement if Williams (or
its subsidiary) materially breaches its representations, warranties or covenants
under the merger agreement after notice and an opportunity to cure the breach
within 10 days of the notice.
Williams can also terminate the merger agreement if Barrett Resources
materially breaches its representations, warranties or covenants under the
merger agreement after notice and an opportunity to cure the breach within 10
days of the notice.
Fees and Expenses (page 57)
Whether or not the merger is completed, Barrett Resources and Williams will
pay their own fees and expenses, except that Williams will reimburse Barrett
Resources for its reasonable out-of-pocket expenses up to $15 million if the
merger agreement is terminated by Barrett Resources as a result of material
breach by Williams of a representation, warranty or covenant contained in the
merger agreement that cannot be cured within 10 days of written notice of that
breach.
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MATERIAL TAX CONSEQUENCES (PAGES 58-60)
In general, if you did not sell any of your Barrett Resources shares to
Resources Acquisition Corp., the subsidiary of Williams that made the tender
offer, and you exchange all of your shares of Barrett Resources common stock for
Williams common stock in the merger of Barrett Resources with and into Resources
Acquisition Corp. (the "forward merger"), you will not recognize any gain or
loss on the exchange except with respect to any cash you receive in lieu of a
fractional share of Williams common stock. If you sold some of your shares to
Williams in the tender offer and exchange the rest of your shares for Williams
common stock in the forward merger, you will recognize gain (but not loss) equal
to the lesser of (1) the amount of cash you received in the tender offer and (2)
an amount equal to the excess, if any, of (a) the sum of the amount of cash you
received in the tender offer and the fair market value of the Williams common
stock you receive in the forward merger over (b) the tax basis of your Barrett
Resources shares.
If certain conditions relating to the U.S. federal income tax treatment of
the tender offer and the forward merger are not met, then a direct or indirect
wholly owned subsidiary of Williams may, at Williams' reasonable discretion, be
merged with and into Barrett Resources (the "reverse merger"). In this case,
instead of the tax consequences described in the preceding paragraph, you will
recognize all of your gain or loss on the disposition of your shares in the
tender offer and/or the reverse merger.
We encourage you to consult your own tax advisor about the effect the
merger will have on you. See "Material United States Federal Income Tax
Consequences."
ACCOUNTING TREATMENT OF THE MERGER (PAGE 43)
Williams will account for the merger using the purchase method of
accounting in accordance with accounting principles generally accepted in the
United States. Purchase accounting requires that the purchase price and costs of
the acquisition be allocated to all of the assets acquired and liabilities
assumed, based on their relative fair values.
STOCK EXCHANGE LISTINGS (PAGE 44)
Barrett Resources common stock currently is registered under the Securities
Exchange Act of 1934 and is listed for trading on the New York Stock Exchange.
If the merger is completed, Barrett Resources common stock will be delisted from
the New York Stock Exchange and will be deregistered under the Securities
Exchange Act of 1934.
Williams common stock trades on the New York Stock Exchange and the Pacific
Exchange and will continue to do so following the merger.
NO APPRAISAL RIGHTS (PAGE 44)
Barrett Resources stockholders are not entitled to appraisal rights in
connection with the merger.
COMPARISON OF STOCKHOLDER RIGHTS (PAGES 68-76)
The rights of stockholders of both companies are governed by Delaware law.
However, there are differences in the rights of Barrett Resources stockholders
and the rights of Williams stockholders as a result of the provisions of the
certificate of incorporation, by-laws and other corporate documents of each
company. See "Comparison of Stockholder Rights."
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SELECTED HISTORICAL FINANCIAL INFORMATION OF BARRETT RESOURCES
The following table sets forth selected consolidated financial information
of Barrett Resources as of and for each of the periods indicated. This
information is only a summary and you should read it together with the
historical financial statements and related notes contained in the annual report
and other information that Barrett Resources has filed with the SEC and
incorporated by reference in this document. See "Where You Can Find More
Information" on pages 78-80.
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
----------------- -------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
------- ------- -------- -------- ------- ------- -------
(UNAUDITED)
STATEMENT OF INCOME DATA
(IN MILLIONS, EXCEPT PER SHARE
AMOUNTS):
Revenues, including trading activities,
net.................................... $ 168.4 $ 69.4 $ 287.6 $ 233.8 $ 226.7 $ 215.8 $ 157.8
Income (loss) from continuing
operations............................. 57.0 7.8 27.7 20.8 (93.7) 29.3 29.5
Diluted earnings (loss) per share:
Income (loss) from continuing
operations.......................... 1.67 .24 .83 .64 (2.95) .92 1.02
Weighted-average number of shares used
in computation...................... 34.2 32.9 33.3 32.8 31.8 31.9 28.8
Cash dividends per common share.......... -- -- -- -- -- -- --
AS OF AS OF DECEMBER 31,
MARCH 31, --------------------------------------------
2001 2000 1999 1998 1997 1996
----------- -------- ------ ------ ------ ------
(UNAUDITED)
BALANCE SHEET DATA (IN MILLIONS):
Total assets........................................ $1,162.8 $1,253.8 $884.3 $838.9 $872.7 $576.9
Long-term debt...................................... 295.0 406.3 355.3 334.1 266.4 70.0
Stockholders' equity................................ 400.5 415.8 363.6 333.3 412.4 377.7
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SELECTED HISTORICAL FINANCIAL INFORMATION OF WILLIAMS
The following table sets forth selected consolidated financial information
of Williams as of and for each of the periods indicated. As a result of the
March 30, 2001 approval of its tax-free spinoff of Williams Communications
Group, Inc., Williams filed a current report on Form 8-K with the SEC on May 22,
2001 restating its financial statements and related notes for the three years
ended December 31, 2000 to reflect Williams Communications Group as discontinued
operations. The following information is only a summary and you should read it
together with the historical financial statements and related notes contained in
Exhibit 99(b) of Williams' current report on Form 8-K filed with the SEC on May
22, 2001, Williams' quarterly report on Form 10-Q for the quarter ended March
31, 2001 and other information that Williams has filed with the SEC and
incorporated by reference in this document. See "Where You Can Find More
Information" on pages 78-80.
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
STATEMENT OF INCOME DATA (IN MILLIONS,
EXCEPT PER SHARE AMOUNTS):
Revenues.............................. $3,088.0 $1,899.3 $9,586.2 $6,603.0 $5,667.5 $6,810.7 $6,140.7
Income from continuing operations..... 378.3 138.9 965.4 354.9 249.1 441.2 503.3
Loss from discontinued operations..... (179.1) (39.2) (441.1) (198.7) (122.0) (10.7) (30.7)
Extraordinary gain (loss)............. -- -- -- 65.2 (4.8) (79.1) --
Diluted earnings (loss) per share:
Income from continuing operations... .78 .31 2.15 .79 .56 1.02 1.16
Loss from discontinued operations... (.37) (.09) (.98) (.44) (.28) (.03) (.07)
Extraordinary gain (loss)........... -- -- -- .15 (.01) (.18) --
Weighted-average number of shares
used in computation.............. 483.3 448.1 449.3 446.9 431.8 430.2 432.0
Cash dividends per common share....... .15 .15 .60 .60 .60 .54 .47
AS OF AS OF DECEMBER 31,
MARCH 31, ---------------------------------------------------------
2001 2000 1999 1998 1997 1996
----------- --------- --------- --------- --------- ---------
(UNAUDITED)
BALANCE SHEET DATA (IN MILLIONS):
Total assets............................. $36,492.6 $34,915.6 $21,781.1 $17,969.0 $15,845.8 $14,443.2
Long-term debt........................... 6,851.7 6,830.5 7,240.2 6,363.1 5,255.8 4,983.6
Williams obligated mandatorily redeemable
preferred securities of Trust.......... 193.6 189.9 175.5 -- -- --
Stockholders' equity..................... 7,065.1 5,892.0 5,585.2 4,257.4 4,237.8 4,036.9
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COMPARATIVE PER SHARE AND DIVIDEND DATA
(UNAUDITED)
The table below contains selected historical and pro forma per share data
for Williams and selected historical and pro forma equivalent per share data for
Barrett Resources. The preliminary data set forth below give effect to the
merger using the purchase method of accounting, and you should read the data set
forth below together with the selected historical audited and unaudited
financial data and the historical audited and unaudited financial statements and
related notes contained in the annual reports and other information Williams and
Barrett Resources have filed with the SEC and incorporated by reference into
this document. The unaudited pro forma financial data are presented for
illustrative purposes only and are not necessarily indicative of the combined
financial position or results of operations of future periods or the operating
results that actually would have been realized had Williams and Barrett
Resources been a single entity during the periods presented. As a result of the
April 2001 spinoff of Williams Communications Group, Inc., the historical and
pro forma financial information of Williams presented below reflects Williams
Communications Group as discontinued operations. See "Where You Can Find More
Information" on pages 78-80.
AS OF
MARCH 31, 2001 AS OF
OR FOR THE DECEMBER 31, 2000
THREE MONTHS OR FOR THE YEAR
THEN ENDED THEN ENDED
-------------- -----------------
WILLIAMS COMMON STOCK:
Historical per Common Share:
Income from continuing operations:
Basic.................................................. $ .79 $ 2.17
Diluted................................................ .78 2.15
Cash dividends............................................ .15 .60
Book value at period end.................................. 14.59 13.26
Pro Forma Combined per Williams Common Share:
Income from continuing operations:
Basic.................................................. .81 1.90
Diluted................................................ .80 1.88
Cash dividends............................................ .14 .56
Book value at period end.................................. 16.16 15.04
BARRETT RESOURCES COMMON STOCK:
Historical per Common Share:
Income from continuing operations:
Basic.................................................. 1.70 .84
Diluted................................................ 1.67 .83
Cash dividends............................................ -- --
Book value at period end.................................. 11.97 12.45
Pro Forma Combined per Equivalent Barrett Common Share(1):
Income from continuing operations:
Basic.................................................. 1.43 3.36
Diluted................................................ 1.41 3.32
Cash dividends............................................ .25 .99
Book value at period end.................................. 28.55 26.58
---------------
(1) Equivalent pro forma per share amounts for the Barrett Resources common
shares were calculated by multiplying the corresponding pro forma combined
per share amount for Williams by the 1.767 exchange ratio.
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DIVIDEND DATA
Williams currently pays quarterly cash dividends on its common stock and
expects to continue this policy after the merger. Williams has declared a
quarterly dividend of $.15 per share of common stock during the last three
years. However, future dividends will depend on Williams' results of operations,
financial condition, cash requirements, future prospects and other factors.
Barrett Resources has never declared or paid cash dividends on its common
stock.
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SELECTED PRO FORMA COMBINED FINANCIAL DATA OF
WILLIAMS AND BARRETT RESOURCES
(UNAUDITED)
The table below contains selected unaudited pro forma combined financial
information for Williams and Barrett Resources on a preliminary purchase
accounting basis (to be finalized upon the completion of the merger) to
illustrate the estimated effects of the merger for balance sheet and income
statement purposes. The unaudited combined income statement data is prepared for
the three months ended March 31, 2001, and for the year ended December 31, 2000,
and illustrates the effects of the merger as if it had occurred at the beginning
of the respective periods. The unaudited pro forma combined balance sheet data
is prepared as of March 31, 2001, and illustrates the effects of the merger as
if it had occurred on that date.
We have provided this unaudited pro forma combined financial data for
informational purposes only. This data is not necessarily indicative of the
operating results or financial position that would have been achieved had the
merger been effective at the date or during the periods presented or the
operating results that may be obtained in the future.
AT MARCH 31, 2001
OR FOR THE AT DECEMBER 31,
THREE MONTHS 2000 OR FOR THE
THEN ENDED YEAR THEN ENDED
----------------- ---------------
INCOME STATEMENT DATA (IN MILLIONS):
Total revenues.............................................. $ 3,256.4 $9,873.8
Income from continuing operations........................... 412.4 901.1
PER SHARE DATA:
Income from continuing operations:
Basic..................................................... .81 1.90
Diluted................................................... .80 1.88
Cash dividends.............................................. .14 .56
Book value at period end.................................... 16.16 15.04
BALANCE SHEET DATA (IN MILLIONS):
Total assets................................................ 40,537.7
Long-term debt.............................................. 8,409.3
Stockholders' equity........................................ 8,300.7
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COMPARATIVE MARKET PRICE DATA
Williams common stock and Barrett Resources common stock are both traded
principally on the New York Stock Exchange (the "NYSE") under the symbols "WMB"
and "BRR," respectively. This table sets forth, for the periods indicated, the
range of high and low per share sales prices for Williams common stock and
Barrett Resources common stock as reported on the NYSE.
WILLIAMS BARRETT RESOURCES
COMMON STOCK COMMON STOCK
---------------- ------------------
LOW HIGH LOW HIGH
------ ------ ------- -------
Fiscal Year 1998
First quarter......................................... $26.25 $34.88 $24.06 $34.94
Second quarter........................................ 28.81 35.75 31.06 39.37
Third quarter......................................... 20.00 36.94 18.87 38.00
Fourth quarter........................................ 24.88 31.88 16.69 28.94
Fiscal Year 1999
First quarter......................................... 29.50 40.50 15.44 28.00
Second quarter........................................ 39.00 53.13 24.31 39.81
Third quarter......................................... 35.81 45.25 32.25 41.25
Fourth quarter........................................ 28.06 36.69 23.06 37.31
Fiscal Year 2000
First quarter......................................... 30.31 48.69 19.19 34.31
Second quarter........................................ 35.50 44.50 27.31 41.63
Third quarter......................................... 39.98 47.63 26.69 39.19
Fourth quarter........................................ 31.81 44.06 35.63 59.81
Fiscal Year 2001
First quarter......................................... 32.63 46.44 42.75 63.00
Second quarter (through June 29, 2001)................ [ ] [ ] [ ] [ ]
The following table sets forth the closing sales price of Williams common
stock and Barrett Resources common stock, as reported on the NYSE, and the
estimated equivalent pro forma price of Barrett Resources common stock on May 4,
2001, the last full trading day before the public announcement of the execution
of the merger agreement, and on June 29, 2001, the most recent date for which we
were able to obtain market price data before the printing of this document. The
equivalent pro forma price of Barrett Resources common stock is also presented
below for each date. The equivalent pro forma price for each date was determined
by multiplying the per share price of Williams common stock on that date by the
exchange ratio of 1.767. This amount represents the consideration that Barrett
Resources stockholders would receive for each share of Barrett Resources common
stock they own if the merger were completed on that date. There can be no
assurance what the market price of the Williams common stock will be on the
merger date. You should obtain current market quotations for the Williams common
stock and Barrett Resources common stock.
BARRETT BARRETT
WILLIAMS RESOURCES RESOURCES
COMMON COMMON EQUIVALENT
STOCK STOCK PRO FORMA
-------- --------- ----------
Closing Price on May 4, 2001................................ $41.67 $67.30 $73.63
Closing Price on June 29, 2001.............................. [ ] [ ] [ ]
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RISK FACTORS
In addition to the other information contained in or incorporated by
reference into this document, you should carefully consider the following risk
factors in deciding whether to vote for the merger.
RISK FACTORS RELATING TO THE MERGER
The market value of the shares of Williams common stock that Barrett Resources
stockholders would receive in the merger will vary.
The exchange ratio of 1.767 shares of Williams common stock per share of
Barrett Resources common stock you would receive in the merger is a fixed ratio
that will not be adjusted as a result of any increase or decrease in the market
price of either shares of Williams common stock or Barrett Resources common
stock. As a result of the fixed ratio, the market value of the shares of
Williams common stock you would receive per Barrett Resources share will vary as
the market price of the Williams common stock fluctuates. The market price of
shares of Williams common stock at the time you receive them following the
completion of the merger may be higher or lower than the price of these shares
on the date of the merger agreement, this document, the special meeting to be
held to vote on the merger proposal or the completion of the merger. Various
factors may affect the market price of shares of Williams common stock,
including:
- changes in the business, operations or prospects of Barrett Resources or
Williams;
- market assessments of the benefits of the merger and of the likelihood
that the merger will be completed; and
- general market, industry and economic conditions.
To a large extent, these factors are beyond the control of Williams and
Barrett Resources.
Williams and Barrett Resources may not be able to successfully integrate their
operations and may not realize anticipated benefits of the merger.
The merger involves integration of two large companies that previously have
operated independently. As a result, the merger will present challenges to
management, including the integration of the operations, systems, technologies
and personnel of the two companies, and special risks, including possible
unanticipated liabilities, unanticipated costs, diversion of management's
attention, operational interruptions and the loss of key employees, customers or
suppliers. The difficulties Williams management encounters in the transition and
integration processes could have an adverse effect on the revenues, levels of
expenses and operating results of the combined company. As a result, the
anticipated benefits of the merger may not be realized.
Failure to complete the merger could negatively affect Barrett Resources' share
price and future business and operations.
If the merger is not completed for any reason, Barrett Resources may be
subject to a number of material risks, including the following:
- the price of shares of Barrett Resources common stock may decline to the
extent that the current market price of the shares reflects a market
assumption that the merger will be completed; and
- material costs related to the merger, such as financial advisor, legal
and accounting fees, must be paid even if the merger is not completed.
Further, if the merger is not completed, Williams will control the
16,730,502 shares purchased by its subsidiary in the tender offer. Under the
merger agreement, Williams is entitled to representation on the Barrett
Resources board in the same proportion as the number of shares then beneficially
owned by it bears to the total number of shares outstanding, rounded up to the
nearest whole number. Upon the completion of the tender offer, pursuant to the
terms of the merger agreement, three of the incumbent Barrett Resources
directors resigned, the size of the board was expanded to eight and four
designees of Williams were appointed as directors (joining the four remaining
incumbent directors on the Barrett Resources board). As a result of its
ownership of such shares and its representation on the Barrett Resources board,
Williams may be able to influence and potentially control decisions of the
Barrett Resources board.
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Under the merger agreement, Barrett Resources may not solicit or negotiate any
alternative acquisition proposals.
Because the tender offer has been completed, under the merger agreement the
Barrett Resources board does not have the right under any circumstances to
negotiate an alternative acquisition proposal, withdraw or adversely modify its
recommendation of the merger as a result of the receipt of an alternative
acquisition proposal or terminate the agreement in connection with an
alternative acquisition proposal.
No assurance can be given that the Internal Revenue Service would not challenge
the treatment of the "forward merger" as a "reorganization," and if the merger
is effected as a "reverse merger," the reverse merger will be a fully taxable
transaction for you.
If the merger is effected as a "forward merger" of Barrett Resources with
and into Williams' subsidiary that purchased shares in the tender offer, no
assurance can be given that the Internal Revenue Service (the "IRS") would not
challenge the treatment of the forward merger as a "reorganization" for U.S.
federal income tax purposes. Moreover, if certain conditions relating to the
U.S. federal income tax treatment of the tender offer and the proposed forward
merger are not met, then a direct or indirect wholly owned subsidiary of
Williams may, at Williams' reasonable discretion, be merged with and into
Barrett Resources in a "reverse merger." If the IRS successfully challenged the
treatment of the forward merger as a "reorganization" or if the merger were
effected as a reverse merger, you would recognize all of your gain or loss on
the disposition of your shares in the tender offer and/or the merger. We
encourage you to consult your own tax advisor about the effect the merger will
have on you. See "Material United States Federal Income Tax Consequences."
RISK FACTORS RELATING TO WILLIAMS
Power pricing regulations in California and the Western United States may
adversely affect Williams' profitability.
The prices that Williams currently charges for electric power in California
markets have been challenged in various proceedings, including before the
Federal Energy Regulatory Commission, or the "FERC." In December 2000, the FERC
issued an order which provided that, for the period between October 2, 2000 and
December 31, 2002, it may order refunds from Williams and other similarly
situated companies if the FERC finds that the wholesale markets in California
are unable to produce competitive, just and reasonable prices, or that market
power or other individual seller conduct is exercised to produce an unjust and
unreasonable rate. Beginning on March 9, 2001, the FERC issued a series of
orders directing Williams and other similarly situated companies to provide
refunds for any prices charged in excess of FERC established proxy prices in
January, February, March and April 2001 or to provide justification for the
prices charged during those months. According to the FERC, Williams' total
potential refund liability for January through April 2001 is approximately $30
million. Williams has filed justification for its prices with the FERC and
calculated its refund liability under the methodology used by the FERC to
compute refund amounts at approximately $11 million. However, in its FERC
filings, Williams continues its objections to refunds in any amount. No
assurances can be given that the FERC will not seek refunds of additional
amounts.
In an order issued June 19, 2001, the FERC ordered all sellers and buyers
in wholesale power markets administered by the California Independent System
Operator, as well as representatives of the State of California, to participate
in a settlement conference before a FERC administrative law judge. Among other
purposes, the settlement discussions are aimed at resolving sellers' claims for
unpaid invoices, and buyers' claims for refunds of alleged overcharges, for past
periods. The settlement discussions began on June 25, 2001, and are currently
scheduled to continue for not more than 15 days. If a settlement is not reached,
the claims will be resolved by the FERC after receiving a recommendation from
the administrative law judge overseeing the discussions. At this time, Williams
does not believe that this proceeding will result in a material adverse effect
on its results of operations or its financial condition. However, there can be
no assurance that this proceeding will not have such an adverse effect.
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Certain entities have also asked the FERC to revoke Williams' authority to
sell power from California-based generating units at market-based rates, to
limit Williams to cost-based rates for future sales from such units, and to
order refunds of excessive rates, with interest, back to May 1, 2000, and
possibly earlier. Although Williams believes these requests are ill-founded and
will be rejected by the FERC, there can be no assurance of such action.
In an order issued June 19, 2001, the FERC has implemented a price
mitigation and market monitoring plan for wholesale power sales by all suppliers
of electricity, including Williams, in spot markets for a region that includes
California and ten other western states (the "Western Systems Coordinating
Council," or "WSCC"). In general, the plan, which will be in effect from June
20, 2001 through September 30, 2002, establishes a market clearing price for
spot sales in all hours of the day that is based on the bid of the highest-cost
gas-fired California generating unit that is needed to serve the California
Independent System Operator's load. When generation operating reserves fall
below 7% in California (a "reserve deficiency period"), absent cost based
justification for a higher price, the maximum price that Williams may charge for
wholesale spot sales in the WSCC is the market clearing price. When generation
operating reserves rise to 7% or above in California, absent cost based
justification for a higher price, Williams' maximum price will be limited to 85%
of the highest hourly price that was in effect during the most recent reserve
deficiency period. At this time, Williams does not believe that this price
mitigation plan will result in a material adverse effect on its results of
operations or its financial condition. However, there can be no assurance that
this plan will not have such an adverse impact.
Credit exposure in California may adversely affect Williams' profitability.
Through a long-term contractual relationship with affiliates of AES Corp.,
Williams has marketing rights to nearly 4,000 megawatts of generation capacity
in the Los Angeles basin. Williams sells much of this capacity on a forward
basis through contracts with various counterparties. The remainder of its
available capacity is sold in the spot and short-term markets primarily through
the California Independent System Operator. In the past year, tight supply and
increased demand has resulted in higher wholesale power prices to California
utilities. At the same time, two of the three major utilities have been
operating under a retail rate freeze. As a result, there has been significant
underrecovery of costs by the utilities, one of which, Pacific Gas & Electric,
has filed for bankruptcy protection. In addition, Southern California Edison has
engaged in talks with the State of California regarding various arrangements
that could prevent its bankruptcy. At this time, Williams does not believe that
its credit exposure to the California utilities would result in a material
adverse effect on its results of operations or financial condition. However,
there can be no assurance that Williams' credit exposure will not have such an
adverse impact.
Class action lawsuits and federal and state initiatives, investigations and
proceedings relating to Williams' activities in California may adversely affect
Williams' profitability.
A number of federal and state initiatives addressing the issues of the
California electric power industry are ongoing and may result in restructuring
of various markets in California and elsewhere. Allegations have also been made
that the wholesale price increase resulted from the exercise of market power and
collusion of the power generators and sellers, including Williams. These
allegations have resulted in multiple state and federal investigations as well
as the filing of class action lawsuits in which Williams is a named defendant.
In May 2001, the Department of Justice commenced an antitrust investigation
relating to an agreement between a subsidiary of Williams and AES Southland
alleging that the agreement limits the expansion of electric generating capacity
at or near the AES Southland plants that are subject to a long-term tolling
agreement between Williams and AES. In connection with that investigation, the
Department of Justice issued a Civil Investigative Demand to Williams requesting
answers to certain interrogatories and the production of documents. Williams is
cooperating with the investigation. Most of these initiatives, investigations
and proceedings are in their preliminary stages and their likely outcome cannot
be predicted. There can be no assurance that these initiatives, investigations
and proceedings will not have a material adverse effect on Williams' results of
operations or financial condition, nor can there be any assurance that
additional initiatives, investigations or proceedings will not arise with
respect to Williams' activities in the electric power industry.
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The success of Williams' oil and gas exploration and production businesses is
dependent on factors which cannot be predicted with certainty.
Actual oil and gas reserves will likely vary from Williams' current
estimates of proved reserves of oil and gas, and those variances may be
material. The process of estimating oil, gas and coal reserves is complex,
requiring significant decisions and assumptions in the evaluation of available
geological, geophysical, engineering and economic data for each reservoir or
deposit. As a result, these estimates are inherently imprecise. See "Certain
Projections." The performance of Williams' oil and gas exploration and
production businesses is also dependent upon a number of other factors, most of
which Williams cannot control, including:
- fluctuations in crude oil and natural gas prices;
- the results of future drilling activity;
- risks incident to operations of oil and natural gas wells; and
- future drilling, production and development costs, including drilling rig
rates.
Each of these factors may negatively impact Williams' future profitability.
Williams' business will be impacted by the level of activity in the oil and gas
industry, which is significantly affected by volatile oil and gas prices.
Williams' business is impacted by the level of activity in oil and gas
exploration, development and production in markets worldwide. Oil and gas
prices, market expectations of potential changes in these prices and a variety
of political and economic factors (both domestic and international)
significantly affect this level of activity. Oil and gas prices are extremely
volatile and are affected by numerous factors, including:
- worldwide demand for oil and gas;
- the ability of the Organization of Petroleum Exporting Countries,
commonly called "OPEC," to set and maintain production levels and prices;
- the level of production in non-OPEC countries; and
- the policies of various governments regarding exploration and development
of their oil and gas reserves.
Williams' operations are subject to operational hazards, uninsured risks and
environmental risks.
Williams' exploration, production, transportation, gathering, refining and
processing operations are subject to the inherent risks normally associated with
those operations, including explosions, spills and leaks, pollution, release of
toxic substances, fires and other hazards, each of which could result in damage
to or destruction of Williams' facilities or damage to persons and property. If
any of these events were to occur, Williams could suffer substantial losses.
Although Williams maintains insurance against these types of risks to the extent
and in amounts that it believes are reasonable, its financial condition and
operations could be adversely affected if a significant event occurs that is not
fully covered by insurance.
Williams' current and former operations also involve management of
regulated materials and are subject to various environmental laws and
regulations. Certain of Williams' subsidiaries have been identified as
potentially responsible parties at hazardous materials disposal sites under the
federal environmental laws and have incurred, or are alleged to have incurred,
various other hazardous materials removal and remediation obligations under
environmental laws. It is not possible for Williams to estimate reliably the
amount and timing of future expenditures related to environmental matters.
Williams may be subject to liabilities pertaining to its spun-off
telecommunications business unit.
In April 2001, Williams spun off Williams Communications Group, Inc., its
telecommunications unit, which was subject to certain lawsuits and settlement
negotiations, including claims for damages, indemnification for royalties and
other contractual claims by third parties. Further, the unit was subject to a
purported class action brought on behalf of all landowners on whose property the
plaintiffs have alleged that Williams' former telecommunications unit installed
fiber-optic cable without the permission of the landowner. Another potential
purported class action may challenge the unit's railroad or pipeline rights of
way. Williams cannot be certain that this purported class action and other
purported class actions against its former telecommunica-
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tions unit, if successfully brought against Williams, will not have a
significant adverse impact on Williams' business. However, in connection with
the spinoff, the telecommunications unit agreed to indemnify Williams for all
liabilities arising out of Williams Communications' businesses, operations or
assets, which should reduce the ultimate impact on Williams.
In addition, Williams is providing indirect credit support for $1.4 billion
of Williams Communications' structured notes through a commitment to issue
Williams equity in the event of a Williams Communications default, or to the
extent Williams Communications' refinancing or remarketing of certain structured
notes prior to March 2004 produces proceeds of less than $1.4 billion. The
ability of Williams Communications to make payments on the notes is dependent on
its ability to raise additional capital and its subsidiaries' ability to
dividend cash to Williams Communications. Williams Communications, however, is
obligated to reimburse Williams for any payment Williams may be required to make
in connection with these notes.
Williams depends on payments from its subsidiaries.
Williams is a holding company and conducts substantially all of its
operations through subsidiaries, which will include Barrett Resources if the
merger is completed. Williams performs management, legal, financial, tax,
consulting, administrative, and other services for its subsidiaries. Williams'
principal sources of cash are from external financings, dividends and advances
from its subsidiaries, investments, payments by subsidiaries for services
rendered and interest payments from subsidiaries on cash advances. The amount of
dividends available to Williams from subsidiaries largely depends upon each
subsidiary's earnings and operating capital requirements. The terms of some of
its subsidiaries' borrowing arrangements limit the transfer of funds to
Williams. In addition, the ability of Williams' subsidiaries to make any
payments to Williams will depend on the subsidiaries' earnings, business and tax
considerations and legal restrictions.
FORWARD-LOOKING STATEMENTS IN THIS DOCUMENT MAY PROVE INACCURATE
This document contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Williams and Barrett Resources
each make forward-looking statements in this document and in other documents
filed with the Securities and Exchange Commission to which this document refers.
These statements may include statements regarding the period following
completion of the merger. For each of these forward-looking statements, Williams
and Barrett Resources claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995.
Words such as "anticipate," "estimate," "expect," "project," "intend,"
"plan," "believe" and similar words and terms identify forward-looking
statements. All forward-looking statements are management's present expectations
of future events and are subject to a number of factors and uncertainties that
could cause actual results to differ materially. These factors and uncertainties
include risks related to the businesses of Williams and Barrett Resources, as
well as the factors relating to the merger discussed under "Risk Factors."
Statements in this document that contemplate the completion of the merger are
subject to risks that the conditions to the merger will not be satisfied, or
that the merger agreement will be terminated, and that, as a result, the merger
will not be completed.
Stockholders should not place undue reliance on the forward-looking
statements, which speak only as of the date of this document or the date of the
document incorporated by reference in this document. Neither Williams nor
Barrett Resources is under any obligation, and each expressly disclaims any
obligation, to update or alter any forward-looking statements.
For additional information about risks and uncertainties that could cause
actual results to differ materially from those described in the forward-looking
statements, please see the annual report on Form 10-K that Williams has filed
with the SEC for its fiscal year ended December 31, 2000 and the annual report
on Form 10-K that Barrett Resources has filed with the SEC for its fiscal year
ended December 31, 2000, each of which is incorporated by reference in this
document.
The cautionary statements set forth above also apply to all subsequent
forward-looking statements attributable to Williams or Barrett Resources or any
person acting on their behalf relating to the matters described in this
document.
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THE SPECIAL MEETING OF BARRETT RESOURCES STOCKHOLDERS
DATE, TIME, PLACE AND PURPOSE
The special meeting of Barrett Resources stockholders will be held on
Thursday, August 2, 2001, at the Westin Hotel - Tabor Center, 1672 Lawrence
Street, Denver, Colorado commencing at 9:00 a.m. Denver time. Barrett Resources
is sending this proxy statement/prospectus to you in connection with the
solicitation of proxies by the Barrett Resources board of directors for use at
the Barrett Resources special meeting and any adjournments or postponements of
the special meeting. The purpose of the special meeting is to consider and vote
upon a proposal to approve and adopt the merger agreement and the merger, and to
transact such other business as may properly come before the special meeting or
any adjournments or postponements of the special meeting.
THE RECORD DATE FOR VOTING
Only holders of record of Barrett Resources common stock at the close of
business on the record date, July 2, 2001, are entitled to notice of, and to
vote at, the special meeting. At the close of business on the record date, there
were holders of record of Barrett Resources common stock and
shares of Barrett Resources common stock issued and outstanding.
Each share of Barrett Resources common stock entitles the holder thereof to one
vote on each matter submitted for stockholder approval.
QUORUM
The presence, in person or by proxy, at the special meeting of the holders
of a majority of the shares of Barrett Resources common stock entitled to vote
is necessary to constitute a quorum. If a quorum is not present, a majority in
interest of the stockholders present, in person or by proxy, is entitled to
adjourn the meeting.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the outstanding shares
of Barrett Resources common stock is required to approve and adopt the merger
agreement and the merger.
As of the record date of the special meeting, Williams and its subsidiaries
owned 16,730,502 of the outstanding shares of Barrett Resources common stock,
which comprised approximately 50% of the shares entitled to vote. As a result of
Williams' beneficial ownership of Barrett Resources shares, Williams effectively
has the voting power to approve and adopt the merger agreement and the merger.
Williams has agreed to vote all shares of Barrett Resources common stock owned
by it or its affiliates in favor of the merger proposal.
VOTING AND REVOCATION OF PROXIES
All shares of Barrett Resources common stock represented by properly
executed proxies received before or at the special meeting will, unless the
proxies are revoked, be voted in the manner specified in those proxies. If no
voting instructions are indicated on a properly executed proxy card, the shares
will be voted FOR approval of the merger proposal. You are urged to mark the box
on the proxy card to indicate how to vote your shares.
If you return an executed proxy card but mark the "ABSTAIN" box regarding
the merger proposal, the Barrett Resources common stock represented by your
proxy will be considered present at the special meeting for purposes of
determining a quorum. However, an abstention will have the same effect as a vote
against the merger proposal.
If your shares are held in an account at a brokerage firm or bank, you must
instruct such firm or bank how to vote your shares. If an executed proxy card is
returned by a broker or bank holding shares which indicates that the broker or
bank does not have discretionary authority to vote at the special meeting, the
shares will be considered present at the meeting for purposes of determining the
presence of a quorum, but will have the
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same effect as a vote against the merger proposal. Your broker or bank will vote
your shares only if you provide instructions on how to vote by following the
information provided to you by your broker. In addition, failures to respond and
broker non-votes will have the same effect as a vote against the merger
proposal.
A stockholder may revoke his or her proxy at any time before it is voted
by:
- notifying in writing the Corporate Secretary of Barrett Resources
Corporation at 1515 Arapahoe Street, Tower 3, Suite 1000, Denver,
Colorado 80202;
- submitting a subsequently dated proxy; or
- appearing in person and voting at the special meeting.
SOLICITATION OF PROXIES AND EXPENSES
In addition to solicitation by mail, the directors, officers, employees and
agents of Barrett Resources may solicit proxies from Barrett Resources
stockholders by personal interview, telephone, telegram or otherwise. Barrett
Resources will bear the costs of the solicitation of proxies from its
stockholders. Arrangements will also be made with brokerage firms and other
custodians, nominees and fiduciaries who are record holders of Barrett Resources
common stock for the forwarding of solicitation materials to the beneficial
owners of Barrett Resources common stock. Barrett Resources will reimburse these
brokers, custodians, nominees and fiduciaries for the reasonable out-of-pocket
expenses they incur in connection with the forwarding of solicitation materials.
Innisfree M&A Incorporated will also assist in the solicitation of proxies from
Barrett Resources stockholders. In connection with its solicitation of proxies
from Barrett Resources stockholders, as well as certain services that it
provided to Barrett Resources in connection with the Shell tender offer,
Innisfree will be paid a fee of approximately $325,000 plus reasonable
out-of-pocket expenses. For a discussion of the Shell tender offer, see "The
Merger -- Background of the Merger."
OTHER MATTERS
No matters other than those mentioned above are expected to be brought
before the special meeting. If, however, other matters are presented, the
persons named as proxies will vote in accordance with their judgment with
respect to those matters, unless authority to do so is withheld in the proxy.
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THE MERGER
BACKGROUND OF THE MERGER
As a part of ongoing business development activities, for several months
prior to mid-March 2001, a strategic team within Williams evaluated several
natural gas exploration and production companies as possible acquisition
candidates to complement Williams' other business activities. Barrett Resources
was one of the potential acquisition candidates identified in that process.
On March 1, 2001, Shell Oil Company delivered an unsolicited letter to
Barrett Resources proposing to acquire Barrett Resources for $55.00 per share in
cash. In the letter, Shell indicated that if Barrett Resources was unwilling to
engage in negotiations with Shell by the end of business on March 5, 2001, Shell
was prepared to commence an unsolicited tender offer for the shares. At a
special meeting held on March 3, 2001, the Barrett Resources board met to
consider the Shell proposal. On March 5, Barrett Resources delivered a letter to
Shell informing Shell that the Shell proposal would be considered at the
regularly scheduled meetings of Barrett Resources' board on March 7 and 8, 2001.
Prior to the commencement of the Barrett Resources board meeting on March
7, 2001, Shell issued a press release publicly disclosing the Shell proposal to
acquire Barrett Resources for $55.00 per share in cash. On the same date, Shell
filed suit against Barrett Resources in Delaware Chancery Court seeking an order
that certain provisions of Barrett Resources' by-laws were invalid.
At meetings held on March 3, 7 and 8, 2001, the Barrett Resources board
carefully considered Barrett Resources' business, financial condition and
prospects, the terms and conditions of the Shell proposal and other matters,
including discussions with and presentations by its financial and legal
advisors. On March 8, 2001, the Barrett Resources board decided to reject the
Shell proposal. However, in light of the Shell proposal and the Barrett
Resources board's assessment of the relevant industry conditions and the
feasibility of remaining independent, the Barrett Resources board also
determined to take all necessary steps to maximize stockholder value. In that
regard, the Barrett Resources board authorized the management of Barrett
Resources, assisted by Barrett Resources' financial advisors, to pursue
strategic alternatives, including seeking proposals from a number of qualified
parties.
Following the March 8, 2001 board meeting, Barrett Resources immediately
began a process for seeking business combination proposals from qualified
parties and began organizing a "data room" of confidential, nonpublic
information about Barrett Resources, its business and future prospects to assist
parties in conducting due diligence reviews. The company's financial advisors,
Goldman, Sachs & Co. and Petrie Parkman & Co., Inc., contacted approximately 45
parties worldwide on behalf of Barrett Resources, including Shell and Williams,
to gauge their interest in participating in Barrett Resources' process. In
addition to the invitation extended by Barrett Resources' financial advisors,
Mr. C. Robert Buford, a director of Barrett Resources and an acquaintance of Mr.
Keith Bailey, the Chairman, President and Chief Executive Officer of Williams,
contacted Mr. Bailey to invite Williams to enter into Barrett Resources'
process.
Of the parties contacted, 12 entered into confidentiality agreements with
Barrett Resources and were invited to review the confidential information about
Barrett Resources in the data room. In addition to the nondisclosure obligations
set forth in the confidentiality agreements, each such agreement contained
"standstill" restrictions that lapsed on May 11, 2001. Of the 12 parties that
executed confidentiality agreements, nine visited the data room from March 20
through April 20, 2001. Shell declined Barrett Resources' invitation to sign the
confidentiality agreement and visit the data room.
On March 12, 2001, Shell and SRM Acquisition Company, a wholly owned
subsidiary of Shell, commenced a cash tender offer for all outstanding Barrett
Resources shares at $55.00 per share. Also on March 12, 2001, Shell filed with
the SEC preliminary consent solicitation materials, pursuant to which Shell
stated it would seek written consents from Barrett Resources stockholders to
remove all of Barrett Resources' directors without cause and replace them with
three nominees selected by Shell. On that same date, Shell amended its complaint
against Barrett Resources in Delaware Chancery Court and commenced litigation
against Barrett Resources in the United States District Court for the District
of Delaware.
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Several other suits were filed against Barrett Resources and the Barrett
Resources board in the Delaware Chancery Court on behalf of purported classes of
Barrett Resources stockholders. Although containing slightly different
allegations, all of the complaints allege that the Barrett Resources board
violated its fiduciary duties to stockholders. The various actions ask the Court
to order the Barrett Resources board to evaluate Barrett Resources' net worth,
to inform itself about the Shell tender offer and to conduct an auction for
Barrett Resources. Some of the complaints also challenge the Barrett Resources
rights agreement and the two recently-repealed provisions of the Barrett
Resources by-laws that were also challenged in Shell's suit in the Delaware
Chancery Court. In addition to the injunctions, the actions request payment of
alleged damages and plaintiffs' attorneys' fees. In addition, two suits were
filed against Barrett Resources in the District Court for the City and County of
Denver, Colorado on behalf of purported classes of Barrett Resources
stockholders, alleging that the Barrett Resources board would violate its
fiduciary duties to Barrett Resources stockholders if it were to allow Barrett
Resources to complete the Shell tender offer. The suits ask the Court to enjoin
the Barrett Resources board from agreeing to the Shell tender offer and to
require the Barrett Resources board to implement a fair process in order to sell
Barrett Resources in a way that would maximize value for Barrett Resources
stockholders.
Over the next two weeks, the Barrett Resources board held a number of
special meetings to, among other matters, evaluate the Shell offer, review the
status of Barrett Resources' solicitation of proposals from other parties and
provide direction to Barrett Resources management and advisors. On March 14,
2001, at one of these meetings, the Barrett Resources board amended Barrett
Resources' by-laws to delete the two provisions that were the subject of the
Shell Delaware Chancery Court complaint.
Commencing in mid-March 2001 and continuing through May 2, 2001, Williams
and its representatives visited Barrett Resources' data room and conducted a due
diligence review of the business and financial condition of Barrett Resources.
Mr. Bailey and other representatives of Williams held several discussions with
representatives of Barrett Resources (including Mr. Buford) about Williams'
interest in Barrett Resources and Barrett Resources' strategic fit with
Williams. Similar reviews and discussions were taking place during this period
with other parties which had signed confidentiality agreements.
On March 22, 2001, the Barrett Resources board held a special meeting at
which it again reviewed the Shell tender offer and its terms and conditions with
Barrett Resources' financial and legal advisors. Goldman Sachs and Petrie
Parkman each rendered an opinion that, as of the date of such opinion, the Shell
tender offer price was inadequate to Barrett Resources stockholders (other than
Shell and its affiliates). Based upon a number of factors, including such
opinions of Goldman Sachs and Petrie Parkman, Barrett Resources' current
business (including its exploration and production activities and reserves),
financial performance and future prospects, and the Barrett Resources board's
belief that its previously initiated process of seeking strategic alternatives
was reasonably likely to yield a superior transaction, the Barrett Resources
board unanimously concluded that the Shell tender offer was inadequate and
recommended that Barrett Resources stockholders not tender their shares pursuant
to the Shell tender offer.
On April 9, 2001, following a formal request by Shell, the Barrett
Resources board established a record date of April 19, 2001 for the Shell
consent solicitation.
On or about April 11, 2001, Barrett Resources sent to each party who signed
a confidentiality agreement and visited the data room a detailed instruction
letter for submitting binding proposals to acquire or merge with Barrett
Resources and two forms of merger agreements (one for cash proposals and one for
stock proposals). The letter indicated that each party's proposal was due on May
2, 2001 along with any comments and revisions that each party may require to the
relevant form of merger agreement.
Throughout the month of April 2001, the Barrett Resources board held
numerous meetings with Barrett Resources management and financial and legal
advisors to remain informed about the Shell tender offer and the status of
Barrett Resources' process for soliciting other proposals and to provide
direction to Barrett Resources management and advisors.
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On April 24, 2001, Barrett Resources reported that based on, among other
things, recent regulatory developments and ongoing drilling activities, Barrett
Resources' total proved oil and gas reserves were 2.1 trillion cubic feet of gas
equivalents as of April 30, 2001, an increase of 53.0% from December 31, 2000.
On April 26, 2001, Shell announced that it was increasing the price offered
in the Shell tender offer from $55.00 to $60.00 per share and extending the
deadline for tendering shares to May 9, 2001. On April 30, 2001, the Barrett
Resources board held a special meeting to review the revised Shell tender offer
with Barrett Resources' financial and legal advisors. At this meeting, the
Barrett Resources board again carefully considered Barrett Resources' business,
financial condition and prospects, the terms and conditions of the revised Shell
tender offer and other matters, including the progress of Barrett Resources'
process for seeking other business combination proposals and the fact that
Goldman Sachs and Petrie Parkman each rendered an opinion that, as of the date
of such opinion, the revised Shell tender offer price was inadequate to Barrett
Resources stockholders (other than Shell and its affiliates). After further
analysis and discussions, the Barrett Resources board unanimously rejected the
revised Shell tender offer, concluding that it was inadequate and not in the
best interests of Barrett Resources stockholders. The Barrett Resources board
recommended that stockholders not tender their shares pursuant to the revised
Shell tender offer.
On April 30, 2001, in response to Shell's request that Barrett Resources
consider the revised Shell tender offer on an equal basis with any other offers,
Barrett Resources delivered to Shell a letter which again urged Shell to
participate in the process by submitting its "best and final" offer by 12:00
noon, on Wednesday, May 2, 2001, the deadline which Barrett Resources had
established for other interested parties participating in the process. Barrett
Resources also furnished Shell's financial advisors with the two forms of merger
agreement it had furnished to other potential bidders and advised Shell of the
"ground rules" which were also applicable to other parties. The company publicly
disclosed this invitation to Shell as well as the May 2, 2001 deadline.
On May 1, 2001, the Williams board of directors, together with Williams'
financial advisors, held a telephonic meeting for the purpose of considering the
authorization of an acquisition proposal for Barrett Resources. At the beginning
of the telephonic meeting, outside individuals were mistakenly connected by a
conference call vendor. Before this error was discovered, officers of Williams
stated that the board meeting had been called to consider Williams' potential
proposal to acquire Barrett Resources. As a result of this unintentional,
inadvertent disclosure, Williams filed a Form 8-K disclosing this event on May
1, 2001.
On May 2, 2001, three parties (Williams, Company A and Company B) delivered
proposals to acquire all of the outstanding shares of Barrett Resources common
stock. Williams submitted a proposal at a price equivalent to $71.00 per share
that provided for the purchase of one-half of the shares pursuant to a cash
tender offer followed by a merger in which each remaining share would be
exchanged for shares of Williams common stock at a fixed exchange ratio to be
determined based on the average closing prices of Williams common stock for the
ten consecutive days preceding the execution of a merger agreement. In its offer
letter, Williams stated that, in the alternative, it would be willing to
complete the transaction entirely in stock. Williams' proposal also included its
right to receive a termination fee equal to approximately 3.0% of Barrett
Resources' equity value and an unspecified limit on the amount of expenses that
would be reimbursed upon certain termination events. Company A submitted an
all-cash offer but at a lower dollar value than the Williams proposal. Company
B's proposal included a slightly higher dollar value than the Williams proposal
and allowed for the transaction to be structured as all-cash or as a combination
of cash and stock, at Barrett Resources' option. However, Company B proposed a
significantly higher termination fee and an unlimited reimbursement of expenses
upon certain termination events. In addition to these proposals, a fourth party
submitted a bid for only a portion of Barrett Resources' assets.
Shell announced, on May 2, 2001, that it would maintain the revised Shell
tender offer price at $60.00 per share and that it was prepared to negotiate all
terms of its proposal, including price. Shell also announced that it was
submitting a merger agreement to Barrett Resources' financial advisors and that
such merger agreement did not include a "breakup fee." On that same day, Shell
delivered to Barrett Resources comments to the cash form of merger agreement and
a letter to Barrett Resources, stating that it would not submit another bid at
that time other than its announced tender offer price of $60.00 per share, which
was significantly lower than the other proposals received. Shell's letter also
stated that its tender offer was not to be construed as its "best
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and final" offer and that Shell was willing to discuss the terms of an
acquisition, including price, at any time with Barrett Resources.
At a special meeting held on the afternoon of May 2, 2001, the Barrett
Resources board, along with its financial and legal advisors, reviewed each of
the proposals Barrett Resources had received. The Barrett Resources board met on
the evening of May 3, 2001, and again on the morning of May 4, 2001, to continue
its review of each of the offers. After careful analysis and lengthy
discussions, on May 4, 2001, the Barrett Resources board determined to continue
discussions with both Williams and Company B to determine if the price and other
terms of either proposal could be improved. Company A and Shell were notified
that they had not been selected to continue in the process.
On the afternoon of May 4, 2001, Barrett Resources' financial advisors
contacted Williams and Company B and informed each of them that it was one of
two final bidders still in the process. Each party was requested to submit an
amended proposal, if any, by 2:00 p.m. (Denver time) on Saturday, May 5, 2001.
Barrett Resources also provided to Williams and Company B a revised form of
merger agreement and related schedules. The revised merger agreement reflected
Barrett Resources' response to the comments each of the remaining bidders had
provided to Barrett Resources on May 2, 2001 as part of their original
proposals. With respect to Williams, Barrett Resources' financial advisors also
requested, among other things, that Williams consider providing more certainty
as to value with respect to the stock portion of its proposal. Barrett
Resources' legal advisors also proposed a maximum of $15 million of expense
reimbursements in the event of certain events of termination of the merger
agreement. With respect to Company B, Barrett Resources' financial advisors
requested, among other things, that Company B significantly reduce its
termination fee and limit reimbursement of expenses to $15 million.
On the afternoon of Saturday, May 5, 2001, both Williams and Company B
responded in writing to Barrett Resources' request for improved offers. Williams
advised Barrett Resources that it was increasing the value of its proposal to
$73.00 per share, while maintaining the structure and other terms set forth in
its initial proposal and accepting Barrett Resources' proposed maximum expense
reimbursement amount of $15 million. Company B did not change its originally
proposed price and, while it reduced its requested termination fee, the
termination fee was still higher than the one proposed by Williams, and Company
B proposed a higher maximum expense reimbursement compared to Williams. The
total amount of the termination fee and maximum expense reimbursement that
Company B sought was substantially higher than the comparable amount from
Williams. Each party also responded to the revised merger agreement and related
schedules.
As a result of the responses received, the Williams proposal, based on
Williams' closing stock price on Friday, May 4, 2001, offered an implied value
of $73.32 per share of Barrett Resources common stock, which was higher than the
all-cash proposal from Company B. In addition, Williams agreed to a termination
fee of 3.0% of equity value plus up to $15 million of expenses, or an aggregate
of $90.5 million or approximately 3.7% of equity value, and made certain
concessions in its merger agreement. By contrast, Company B's cash transaction
proposal had a lower price per share, relative to the Williams proposal, and
included a higher termination fee as well as a higher expense reimbursement
amount.
The Barrett Resources board considered the revised proposals at a meeting
held on the evening of Saturday, May 5, 2001. Following a careful consideration
of the proposals, and after discussion with its financial and legal advisors,
the Barrett Resources board decided to commence further negotiations solely with
Williams. During the evening of May 5, 2001, Barrett Resources' financial
advisors informed Williams that it was the prevailing bidder. Barrett Resources'
financial advisors also informed Company B that Barrett Resources would be
negotiating a transaction with another party.
On Sunday morning, May 6, 2001, representatives of Barrett Resources, along
with its financial and legal advisors, traveled to Williams' headquarters in
Tulsa, Oklahoma to conduct an on-site due diligence review of Williams to
supplement its prior review of publicly-available information. At the same time,
Barrett Resources and its legal advisors continued to negotiate the merger
agreement with representatives of Williams and its legal counsel. Williams
continued its ongoing due diligence review of Barrett Resources during this
time. In the late afternoon of May 6, 2001, the Barrett Resources board met to
review the progress of the due diligence
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review and the negotiation of the merger agreement. Following the meeting, the
board authorized Barrett Resources management to proceed with final negotiations
of the merger agreement with Williams.
On the evening of May 6, 2001, the Board of Directors of Williams held a
telephonic meeting at which the merger agreement and the transactions
contemplated thereby were approved. At such meeting, Merrill Lynch & Co.,
financial advisor to Williams, rendered an oral opinion (which was subsequently
confirmed in writing) that as of the date of the opinion the consideration to be
paid in the tender offer and merger, taken together, was fair from a financial
point of view to Williams.
The negotiations with respect to the merger agreement took place throughout
the evening of May 6 and the early morning of May 7, 2001. On the morning of May
7, 2001, the Barrett Resources board met and reviewed, among other things,
Barrett Resources' business, industry conditions, the results of the process for
soliciting proposals, the terms and conditions of the merger agreement and its
receipt of written opinions, each dated May 7, 2001, from Goldman Sachs and
Petrie Parkman. At the meeting, Goldman Sachs and Petrie Parkman rendered
opinions that, as of that date and based upon and subject to the various
assumptions and qualifications described in the opinions, the consideration to
be received by the holders of shares in the tender offer and the merger, taken
together as a unitary transaction, was fair from a financial point of view to
such holders. Based on the foregoing, the board unanimously approved the merger
agreement and the transactions contemplated thereby, including the tender offer
and the merger. See "-- Reasons for the Merger" below. The merger agreement was
then executed by the parties. Shortly after the signing, Williams and Barrett
Resources issued separate press releases announcing the transaction.
Also on May 7, 2001, Shell publicly announced that it was withdrawing the
revised Shell offer and terminating its efforts to acquire Barrett Resources.
On May 14, 2001, Williams commenced the tender offer for 16,730,502 shares
of Barrett Resources common stock.
On May 18, 2001, a stipulation and order dismissing without prejudice
Shell's action in the United States District Court for the District of Delaware
was entered. On May 23, 2001, a stipulation and order dismissing without
prejudice Shell's action in the Delaware Chancery Court was entered. The
shareholder suits filed in the Delaware Chancery Court and the District Court
for the City and County of Denver, Colorado remain outstanding.
On May 30, 2001, the Federal Trade Commission granted early termination of
the waiting period for the tender offer and the merger under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976.
On June 11, 2001, Williams entered into a bridge loan facility to fund the
purchase of the shares of Barrett Resources common stock accepted in the tender
offer, pay related fees and expenses, and refinance certain debt of Barrett
Resources if Williams is required or chooses to do so. The credit agreement
related to the bridge loan facility was filed as an exhibit to Williams' Current
Report on Form 8-K filed with the SEC on June 13, 2001.
The tender offer was completed as of midnight on June 11, 2001. Pursuant to
the tender offer, Williams' subsidiary purchased 16,730,502 shares of Barrett
Resources common stock, or approximately 50% of the outstanding shares, at the
price of $73.00 net in cash per share.
On June 12, 2001, Barrett Resources received the consent of its lenders to
the completion of the tender offer and the merger without repayment of the
amounts owed under Barrett Resources' revolving credit agreement.
RECOMMENDATION OF THE BARRETT RESOURCES BOARD
The Barrett Resources board has unanimously determined that the merger
agreement and the merger are advisable and fair to, and in the best interests
of, Barrett Resources stockholders and has unanimously approved the merger
agreement and the merger. The Barrett Resources board unanimously recommends
that Barrett Resources stockholders vote FOR adoption and approval of the merger
agreement and the merger.
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In considering the recommendation of the Barrett Resources board with
respect to the merger proposal, you should be aware that certain directors and
executive officers of Barrett Resources have arrangements that cause them to
have certain interests in the merger that are different from, or are in addition
to, the interests of Barrett Resources stockholders generally. See "-- Interests
of Directors and Executive Officers of Barrett Resources in the Merger."
REASONS FOR THE MERGER
Barrett Resources and Williams believe that the merger represents an
opportunity to enhance value for you and other Barrett Resources stockholders,
who would receive shares in a leading diversified energy company with strong
financial resources and long-term prospects for future growth and earnings.
In reaching its conclusion to approve the transactions contemplated by the
merger agreement, the Barrett Resources board, with the assistance of its
financial and legal advisors, took into account numerous factors, including, but
not limited to, the following:
- The Barrett Resources board's familiarity with the business, financial
condition, prospects and current business strategy of Barrett Resources
(including its production and exploration activities and reserves). In
this regard, the Barrett Resources board particularly considered:
- the historical results, financial condition, results of operations,
cash flows, earnings, assets and reserve reports of Barrett Resources;
- Barrett Resources' future prospects (including future exploration and
production plans); and
- the current near-term and long-term outlook for the market for natural
gas, including conditions in the commodities market and the long-term
outlook for increased gas demand in light of the current and projected
tight markets for electricity.
- The $73.00 per share cash consideration proposed by Williams for the
tender offer, the 1.767 exchange ratio (which, based on the closing price
of Williams common stock on the NYSE on May 4, 2001 (the last trading day
before the execution of the merger agreement), had an indicated value of
$73.63 per share) proposed by Williams for the merger, the resulting
implied value of the tender offer and the merger of $73.32 per share and
the implied premium over the current and historical price of the shares
as compared to the premiums and valuations found in other transactions.
The board of directors considered that the exchange ratio of 1.767 shares
of Williams common stock per share of Barrett Resources common stock in
the merger is a fixed ratio that will not be adjusted for any increase or
decrease in the price of either shares of Williams common stock or shares
of Barrett Resources common stock, and, as a result, the value of the
shares of Williams common stock to be issued in the merger would
fluctuate in value.
- The potential strategic alternatives available to Barrett Resources
(including remaining independent) and the viability and risks associated
with each alternative.
- The results of an extensive and highly visible process for seeking
business combination proposals, pursuant to which the Barrett Resources
financial advisors contacted approximately 45 potential parties, 12 of
whom entered into confidentiality agreements and nine of whom visited the
Barrett Resources due diligence "data room," which contained confidential
information about Barrett Resources, its business and future prospects.
The Barrett Resources board reviewed carefully the proposals received on
the publicly announced May 2, 2001 deadline and the results of further
negotiations with the two parties presenting the highest proposals. The
Barrett Resources board noted that the Williams proposal, based on the
closing price of Williams common stock on May 4, 2001 (the last trading
day before the execution of the merger agreement), offered the highest
value of any proposal that it received, although the Barrett Resources
board was aware that the Williams common stock price might be adversely
affected, at least temporarily, by the announcement of the execution of
the merger agreement.
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- The terms and conditions of the proposed combination of Barrett Resources
and Williams, including
- the ability of the Barrett Resources board, prior to the completion of
the tender offer, to consider and negotiate unsolicited third party
takeover proposals, if such proposals are reasonably expected to be
superior to the tender offer and merger and subject to certain
determinations regarding the Barrett Resources board's fiduciary
duties;
- the right of Barrett Resources prior to completion of the tender offer
to terminate and accept a superior proposal, subject to the
satisfaction of certain conditions and the payment of a termination
fee and expenses to Williams; and
- the size and structure of the termination fee and expenses payable to
Williams as compared to the amounts proposed by other parties in the
bidding process.
- The Barrett Resources board's review of public disclosures by and about
the business, financial condition, prospects and current business
strategy of Williams, the due diligence review by Barrett Resources
management and Barrett Resources' financial and legal advisors of
Williams and Williams' recent historical stock price performance.
- The fact that the merger will present an opportunity for Barrett
Resources stockholders to participate in a significantly larger and more
diversified company and, as stockholders of the combined business, to
benefit from any future growth of the combined business.
- The proposed structure of the merger, which, assuming receipt of an
appropriate tax opinion as to the tax-free nature of the merger, is
designed to permit holders of the shares of Barrett Resources common
stock that were not purchased in the tender offer to exchange such shares
for shares of Williams common stock in a tax-free manner for U.S. federal
income tax purposes, except to the extent of cash received in lieu of
fractional Williams shares, and the circumstances under which such tax
opinion might not be obtained.
- The opinion of Goldman Sachs delivered to the Barrett Resources board on
May 7, 2001, that, as of that date, and based upon and subject to the
various qualifications and assumptions described in its opinion, the
consideration to be received by the holders of shares of Barrett
Resources common stock in the tender offer and the merger, taken as a
unitary transaction, was fair from a financial point of view to the
holders of such shares receiving such consideration. The full text of the
written fairness opinion of Goldman Sachs, dated May 7, 2001, which sets
forth the procedures followed, the matters reviewed and the assumptions
made in connection with the opinion, is attached as Annex B to this proxy
statement/prospectus and is incorporated herein by reference. Barrett
Resources stockholders are urged to read the Goldman Sachs opinion in its
entirety.
- The opinion of Petrie Parkman, dated May 7, 2001, that, as of that date
and on the basis of and subject to the assumptions and qualifications set
forth in the opinion, the consideration to be received by the holders of
shares of Barrett Resources common stock (other than Williams and Barrett
Resources) in the tender offer and the merger, taken together, was fair
from a financial point of view to such holders. A copy of Petrie
Parkman's opinion, dated May 7, 2001, which sets forth the procedures
followed, matters reviewed and assumptions made by Petrie Parkman, is
attached as Annex C to this proxy statement/prospectus and is
incorporated herein by reference. Barrett Resources stockholders are
urged to read the Petrie Parkman opinion in its entirety.
- The belief of the Barrett Resources board, based in part on the factors
described above, that the interests of its stockholders would be best
served by completion of the tender offer and the merger.
In light of the foregoing, the Barrett Resources board unanimously
concluded that the merger agreement, the tender offer and the merger are
advisable and fair to, and in the best interests of, Barrett Resources
stockholders.
The foregoing discussion of the information and factors considered by the
Barrett Resources board is not intended to be exhaustive but addresses the
material information and factors considered by the board in its
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consideration of the tender offer and the merger. In view of the variety of
factors and the amount of information considered, the Barrett Resources board
did not find it practicable to provide specific assessments of, quantify or
otherwise assign any relative weights to, the specific factors considered in
determining to recommend that stockholders accept the tender offer and approve
the merger. Such determination was made after consideration of all the factors
taken as a whole and at numerous meetings. In addition, individual members of
the Barrett Resources board may have given differing weights to different
factors.
OPINIONS OF BARRETT RESOURCES' FINANCIAL ADVISORS
In connection with the tender offer and the merger, the Barrett Resources
board received the opinions of Goldman Sachs and Petrie Parkman as to whether
the consideration to be received by the holders of Barrett Resources common
stock (other than Williams and Barrett Resources) in the tender offer and the
merger, taken together as a unitary transaction, was fair from a financial point
of view to such holders as of the date of those opinions. The full text of the
fairness opinion of Goldman Sachs dated May 7, 2001 and the fairness opinion of
Petrie Parkman also dated May 7, 2001 are attached to this document as Annex B
and Annex C, respectively. You are encouraged to read these opinions carefully
in their entirety for a description of the assumptions made, matters considered
and limitations on the review undertaken.
Opinion of Goldman Sachs
On May 7, 2001, Goldman Sachs & Co. delivered its written opinion to the
Barrett Resources board of directors that as of the date of such opinion and
based upon and subject to the various qualifications and assumptions described
in such opinion, the consideration to be received by the holders of shares of
Barrett Resources common stock in the tender offer and the merger, taken as a
unitary transaction, was fair from a financial point of view to the holders of
shares of Barrett Resources common stock receiving such consideration.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS, DATED MAY 7, 2001,
WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED AS ANNEX B AND IS
INCORPORATED BY REFERENCE IN THIS DOCUMENT. YOU ARE URGED TO, AND SHOULD, READ
THE GOLDMAN SACHS OPINION IN ITS ENTIRETY. GOLDMAN SACHS PROVIDED ITS OPINION
FOR THE INFORMATION AND ASSISTANCE OF THE BARRETT RESOURCES BOARD IN CONNECTION
WITH ITS CONSIDERATION OF THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT.
THE GOLDMAN SACHS OPINION IS NOT A RECOMMENDATION AS TO HOW ANY BARRETT
RESOURCES STOCKHOLDER SHOULD VOTE WITH RESPECT TO THE MERGER.
In connection with its opinion, Goldman Sachs reviewed, among other things:
- the merger agreement;
- annual reports to stockholders and annual reports on Form 10-K of Barrett
Resources and Williams for the five years ended December 31, 2000;
- certain interim reports to stockholders and quarterly reports on Form
10-Q of Barrett Resources and Williams;
- other communications from Barrett Resources and Williams to their
respective stockholders; and
- internal financial analyses and forecasts for Barrett Resources prepared
by its management.
Goldman Sachs also held discussions with the senior management of each of
Barrett Resources and Williams regarding their assessment of the past and
current business operations and financial condition and the future prospects of
their respective companies. In addition, Goldman Sachs:
- reviewed the reported price and trading activity for shares of Barrett
Resources common stock and shares of Williams common stock;
- compared financial and stock market information for Barrett Resources and
Williams with similar information for certain other companies that have
publicly traded securities;
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- reviewed the financial terms of certain recent business combinations in
the upstream oil and gas industry specifically and in other industries
generally; and
- performed other studies and analyses that Goldman Sachs considered
appropriate.
It should be noted that Williams did not make available to Goldman Sachs
Williams' projections of future financial performance. Accordingly, Goldman
Sachs' review of those matters was limited to discussions with Williams'
management of certain research analyst estimates for Williams.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial, accounting and other information discussed with or reviewed by it and
assumed such accuracy and completeness for purposes of rendering its opinion. In
addition, Goldman Sachs did not make an independent evaluation or appraisal of
the assets and liabilities of Barrett Resources or Williams or any of their
respective subsidiaries and was not furnished with any such evaluation or
appraisal. With respect to oil and gas reserve information, Goldman Sachs is not
an expert in the evaluation of oil and gas properties and has, with the Barrett
Resources board's consent, relied without independent verification solely upon
internal estimates prepared by Barrett Resources management as well as audited
proved reserve information prepared by Ryder Scott Company and Netherland,
Sewell & Associates, both independent engineering firms, that was provided to
Goldman Sachs by Barrett Resources management. The Goldman Sachs opinion does
not address the relative merits of the transactions contemplated by the merger
agreement as compared to any alternative business transaction that might be
available to Barrett Resources.
The following are summaries of the material financial analyses used by
Goldman Sachs in connection with providing its opinion to the Barrett Resources
board on May 7, 2001. Some of the summaries of the financial analyses include
information presented in tabular format. In order to more fully understand each
financial analysis used by Goldman Sachs, each table must be read together with
the full text of the related summary. The tables alone are not a complete
description of Goldman Sachs' financial analyses.
Implied Value and Sensitivity Analysis. Goldman Sachs calculated the
sensitivity of the merger consideration to the average closing prices for shares
of Williams common stock for the periods referenced in the table below. In
addition, Goldman Sachs calculated the implied per share value of the
consideration to be received by the holders of Barrett Resources common stock in
the tender offer and the merger (assuming that 50% of such shares are tendered
in exchange for cash in the tender offer and 50% of such shares are exchanged in
the merger) based on the closing price of Williams common stock as of May 4,
2001, the last full trading day before the date of the announcement of the
execution of the merger agreement, as well as based on average closing prices of
Williams common stock for the periods referenced in the table below:
SENSITIVITY OF THE MERGER CONSIDERATION
30 DAY AVERAGE 60 DAY AVERAGE 90 DAY AVERAGE
MAY 4, 2001 TO MAY 4, 2001 TO MAY 4, 2001 TO MAY 4, 2001
----------- -------------- -------------- --------------
Exchange Ratio....................... 1.767x 1.767x 1.767x 1.767x
Williams Common Stock Price.......... $41.67 $41.84 $42.46 $40.98
Stock Consideration per Share........ $36.82 $36.97 $37.51 $36.21
Cash Consideration per Share......... $36.50 $36.50 $36.50 $36.50
------ ------ ------ ------
Implied Consideration per Share...... $73.32 $73.47 $74.01 $72.71
Selected Companies Analysis. Goldman Sachs reviewed and compared selected
financial information, ratios and public market multiples for Barrett Resources
to corresponding financial information, ratios and public market multiples for
the following six publicly traded oil and gas companies:
- Cabot Oil & Gas Corporation;
- Cross Timbers Oil Company;
- Devon Energy Corporation;
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- Forest Oil Corporation;
- Newfield Exploration Company; and
- Tom Brown, Inc.
The six selected companies were chosen because they are publicly traded
companies with operations that for purposes of this analysis may be considered
similar to certain operations of Barrett Resources. Goldman Sachs calculated and
compared various financial multiples and ratios based on the most recent
publicly available information. The multiples and ratios for each of the six
selected companies were calculated using closing per share prices as of May 4,
2001, and the multiples and ratios for Barrett Resources were calculated using
the $73.32 implied per share value of the consideration to be received by the
holders of Barrett Resources common stock in the tender offer and the merger
(assuming that 50% of such shares are tendered in exchange for cash in the
tender offer and 50% of such shares are exchanged in the merger) based on the
closing price of Williams common stock as of May 4, 2001. Goldman Sachs'
analyses of the selected companies compared the following to the results for
Barrett Resources:
- closing share price on May 4, 2001 as a percentage of 52-week high share
price;
- price as a multiple of estimated discretionary cash flow ("DCF") for 2001
and 2002;
- price as a multiple of estimated earnings per share for 2001 and 2002;
and
- total enterprise value, which is the market value of common equity plus
preferred stock plus minority interest plus total debt less cash, as a
multiple of 2000 earnings before interest, taxes, depreciation,
amortization and exploration expense ("EBITDAX").
The results of these analyses are summarized as follows:
SELECTED PUBLICLY TRADED OIL AND GAS COMPANIES
BARRETT RESOURCES
RANGE MEAN MEDIAN AT WILLIAMS OFFER
------------ ----- ------ -----------------
May 4, 2001 share price as a percentage of 52-week
high share price................................. 65%- 85% 79% 81% --
Price as a multiple of estimated 2001 DCF.......... 2.9x- 4.4x 3.6x 3.5x 8.1x
Price as a multiple of estimated 2002 DCF.......... 3.0x- 5.9x 4.3x 4.3x 7.5x
Price as a multiple of estimated 2001 earnings per
share............................................ 7.5x- 11.4x 8.7x 8.1x 16.7x
Price as a multiple of estimated 2002 earnings per
share............................................ 8.6x- 17.6x 12.3x 12.6x 21.6x
Total enterprise value as a multiple of 2000
EBITDAX.......................................... 4.0x- 7.1x 5.5x 5.4x 11.2x
Goldman Sachs also compared the following for the selected companies:
- total enterprise value per thousand cubic feet of natural gas equivalent
(Mcfe) of proved reserves;
- total enterprise value plus the present value of future development costs
per Mcfe of proved reserves;
- percentage of proved gas reserves;
- percentage of proved developed reserves; and
- proved reserves to production ratio.
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The results of these analyses are summarized as follows:
SELECTED PUBLICLY TRADED OIL AND GAS COMPANIES
BARRETT RESOURCES BARRETT RESOURCES
AT WILLIAMS AT WILLIAMS
OFFER WITH OFFER WITH
RESERVES AS OF RESERVES AS OF
RANGE MEAN MEDIAN DECEMBER 31, 2000 APRIL 24, 2001
------------- ------ ------ ----------------- -----------------
Total enterprise value per Mcfe of
proved reserves................. $1.05- $2.81 $1.59 $1.42 $2.11 $1.39
Total enterprise value plus future
development costs per Mcfe of
proved reserves................. $1.23- $3.00 $1.71 $1.51 $2.22 $1.66
% proved gas reserves............. 53%- 95% 76% 78% 96% 96%
% proved developed reserves....... 68%- 82% 77% 77% 58% 36%
Proved reserves to production
ratio........................... 4.9x- 14.0x 9.2x 8.8x 11.7x 17.7x
Present Value of Implied Barrett Resources Future Stock Price
Analysis. Goldman Sachs performed an analysis to determine the present value as
of March 31, 2001 of the implied future price of Barrett Resources common stock,
calculated using the February 2001 and the subsequently updated March 2001
financial forecasts prepared by Barrett Resources management, a discount rate of
10% and two different future oil and gas price assumptions: Goldman Sachs
research price assumptions and the implied forward prices based on the New York
Mercantile Exchange forward strip as of April 20, 2001. The following table
presents the ranges of present values indicated by the analysis for Barrett
Resources' implied future stock price at different DCF multiples based on the
February 2001 financial forecast prepared by Barrett Resources management:
RANGE OF IMPLIED PRESENT VALUES FOR BARRETT RESOURCES FUTURE STOCK PRICES
GOLDMAN SACHS RESEARCH PRICE ASSUMPTIONS:
MULTIPLE OF 5.0X MULTIPLE OF 6.0X MULTIPLE OF 7.0X MULTIPLE OF 8.0X
---------------- ---------------- ---------------- ----------------
$31.56 - $38.85 $37.87 - $43.02 $44.18 - $50.19 $50.49 - $57.36
NEW YORK MERCANTILE EXCHANGE PRICE ASSUMPTIONS:
MULTIPLE OF 5.0X MULTIPLE OF 6.0X MULTIPLE OF 7.0X MULTIPLE OF 8.0X
---------------- ---------------- ---------------- ----------------
$39.30 - $46.68 $47.16 - $56.02 $55.02 - $65.35 $62.88 - $74.69
The following table presents the ranges of present values indicated by the
analysis for Barrett Resources' implied future stock price at different DCF
multiples based on the March 2001 updated financial forecast prepared by Barrett
Resources management:
RANGE OF IMPLIED PRESENT VALUES FOR BARRETT RESOURCES FUTURE STOCK PRICES
GOLDMAN SACHS RESEARCH PRICE ASSUMPTIONS:
MULTIPLE OF 5.0X MULTIPLE OF 6.0X MULTIPLE OF 7.0X MULTIPLE OF 8.0X
---------------- ---------------- ---------------- ----------------
$36.70 - $61.81 $44.04 - $74.18 $51.38 - $86.54 $58.72 - $98.90
NEW YORK MERCANTILE EXCHANGE PRICE ASSUMPTIONS:
MULTIPLE OF 5.0X MULTIPLE OF 6.0X MULTIPLE OF 7.0X MULTIPLE OF 8.0X
---------------- ---------------- ---------------- ----------------
$45.90 - $75.92 $55.08 - $91.10 $64.26 - $106.28 $73.44 - $121.47
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Discounted Cash Flow Analysis. Goldman Sachs performed a discounted cash
flow analysis of Barrett Resources based on the February 2001 and the updated
March 2001 financial forecasts prepared by Barrett Resources management using
two different future oil and gas price assumptions: Goldman Sachs research price
assumptions and the implied forward prices based on the New York Mercantile
Exchange forward strip as of April 20, 2001. The discounted cash flow analysis
was performed by calculating the annual free cash flows for 2001 through 2005
and a terminal value for Barrett Resources as of December 31, 2005 and
discounting the results back to December 31, 2000. Assuming a range of discount
rates of 8% to 12%, and trailing 12-months earnings before interest, tax,
depreciation and amortization ("EBITDA") exit multiples of 5.0x to 9.0x, the
discounted cash flow analysis based on the February 2001 financial forecast
prepared by Barrett Resources management suggested a range of values of $31.08
to $71.83 per share of Barrett Resources common stock based on Goldman Sachs
research price assumptions and a range of values of $48.22 to $100.65 per share
of Barrett Resources common stock based on the implied forward prices based on
the New York Mercantile Exchange forward strip as of April 20, 2001. In
addition, assuming the same range of discount rates and the same trailing
12-months EBITDA exit multiples described in the previous sentence, the
discounted cash flow analysis based on the updated March 2001 financial forecast
prepared by Barrett Resources management suggested a range of values of $72.06
to $151.47 per share of Barrett Resources common stock based on Goldman Sachs
research price assumptions and a range of values of $100.01 to $200.83 per share
of Barrett Resources common stock based on the implied forward prices based on
the New York Mercantile Exchange forward strip as of April 20, 2001.
Barrett Resources Net Asset Value Calculation. Goldman Sachs analyzed the
present value of future production for proved, probable and possible reserves
based on Barrett Resources management's assumptions as to production, land grant
development and minerals using a discount rate of 10%. The resulting value for
probable and possible reserves was risk adjusted at a factor of 10% and 25%.
Goldman Sachs used two different future oil and gas price assumptions in
connection with this analysis: Goldman Sachs research price assumptions and the
implied forward prices based on the New York Mercantile Exchange forward strip
as of April 20, 2001. The results of these analyses suggested a range of values
of $61.48 to $73.08 per share of Barrett Resources common stock based on Goldman
Sachs research price assumptions and a range of values of $92.75 to $110.47 per
share of Barrett Resources common stock based on the implied forward prices
based on the New York Mercantile Exchange forward strip as of April 20, 2001.
Selected Transactions Analysis. Goldman Sachs analyzed certain information
relating to 14 selected North American upstream corporate transactions in the
oil and gas exploration and production industry since 1999 involving gas
reserves greater than 50%. As part of this analysis, Goldman Sachs calculated
and compared the following to the implied value of the consideration to be
received by the holders of Barrett Resources common stock in the tender offer
and the merger (assuming that 50% of such shares are tendered in exchange for
cash in the tender offer and 50% of such shares are exchanged in the merger)
based on the closing price of Williams common stock as of May 4, 2001:
- the premium to market price one day and 30 days prior to the announcement
of each transaction;
- consideration to be paid per Mcfe of proved reserves; and
- enterprise value as a multiple of last twelve months ("LTM") EBITDA.
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The following table summarizes the results of the selected transactions
analysis:
SELECTED TRANSACTIONS ANALYSIS
BARRETT
RESOURCES AT
WILLIAMS
RANGE MEAN MEDIAN OFFER
-------------- ----- ------ ------------
Premium to market price 1 day prior to
announcement date........................... (3.6)% - 29.9% 12.8% 13.7% 60.7%(a)
Premium to market price 30 days prior to
announcement date........................... 0.8% - 73.8% 30.4% 27.6% 53.5%(a)
Consideration for reserves to be paid per Mcfe
of proved reserves.......................... $0.68 - $2.16 $1.33 $1.17 $1.23
Enterprise value as a multiple of LTM
EBITDA...................................... 4.4x - 39.2x 11.0x 9.0x 9.2x
---------------
(a) 1-day premium based on closing price as of March 6, 2001 (the day before
Shell Oil Company publicly announced its unsolicited tender offer to acquire
Barrett Resources); 30-day premium based on closing price as of January 23,
2001 (30 trading days ended March 6, 2001).
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly comparable to
Barrett Resources or Williams or the transactions contemplated by the merger
agreement.
The analyses were prepared solely for purposes of providing an opinion to
the Barrett Resources board as to the fairness from a financial point of view of
the consideration to be received by the holders of shares of Barrett Resources
common stock in the tender offer and the merger, taken as a unitary transaction.
The analyses do not purport to be appraisals or necessarily reflect the prices
at which businesses or securities actually may be sold. Analyses based upon
forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties or
their respective advisors, none of Barrett Resources, Williams, Goldman Sachs or
any other person assumes responsibility if future results are materially
different from those forecast.
As described above, Goldman Sachs' opinion to the Barrett Resources board
was one of many factors taken into consideration by the Barrett Resources board
in making its determination to approve the merger agreement and the transactions
contemplated by the merger agreement. The foregoing summary does not purport to
be a complete description of the analyses performed by Goldman Sachs.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes.
Goldman Sachs is familiar with Barrett Resources, having provided certain
investment banking services to Barrett Resources from time to time, including
having acted as a managing underwriter of a public offering in February 1997 of
Barrett Resources' 7.55% Senior Notes due 2007, and having acted as its
financial advisor in connection with, and having participated in certain of the
negotiations leading to, the merger agreement. Goldman Sachs has also provided
certain investment banking services to Williams from time to time, including
having acted as a managing underwriter of a public offering of 33,000,000 shares
of Williams common stock in January 2001, and may provide investment banking
services to Williams in the future.
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Goldman Sachs provides a full range of financial advisory and securities
services and, in the course of its normal trading activities, may from time to
time effect transactions and hold securities, including derivative securities,
of Barrett Resources or Williams for its own account and for the accounts of
customers.
Pursuant to a letter agreement dated March 3, 2001, Barrett Resources
engaged Goldman Sachs to act as one of its financial advisors in connection with
the Shell tender offer, the Williams tender offer and the merger and certain
other possible transactions. Pursuant to the terms of such letter agreement,
Barrett Resources has agreed to pay Goldman Sachs:
(1) a fee of $500,000 payable on March 3, 2001;
(2) a fee equal to 0.55% of the aggregate value of any transaction up
to $55.00 per share of Barrett Resources common stock, and if holders
receive more than $55.00 per share in any such transaction, a fee equal to
the fee payable assuming the holder receives $55.00 per share plus 1.5% of
the amount per share received by such holder in excess of $55.00 per share
multiplied by the fully diluted number of shares of Barrett Resources
common stock outstanding, if:
- at least 15% of outstanding stock of Barrett Resources is acquired
by a third party;
- all or substantially all of the assets of Barrett Resources are
sold; or
- a recapitalization transaction involving Barrett Resources occurs;
and
(3) $2 million on each of four successive quarterly dates if certain
transactions involving Barrett Resources have not then occurred.
The amount paid under paragraph (1) above is creditable against the amount
payable under paragraphs (2) and (3) above. In addition, the amount paid under
paragraph (2) above is creditable against the amount payable under paragraph (3)
above.
Barrett Resources has also agreed to reimburse Goldman Sachs for reasonable
out-of-pocket expenses, including attorneys' fees, and to indemnify Goldman
Sachs against certain liabilities, including certain liabilities under the
federal securities laws.
Opinion of Petrie Parkman
Barrett Resources engaged Petrie Parkman & Co., Inc. as one of its
financial advisors on March 7, 2001 in connection with a possible merger or
business combination involving Barrett Resources. On May 7, 2001, Petrie Parkman
rendered to the Barrett Resources board of directors its written opinion that,
as of that date and based upon and subject to the assumptions and qualifications
described in such opinion, the consideration described in the merger agreement
to be received by the holders of Barrett Resources common stock (other than
Williams and Barrett Resources) in the tender offer and the merger, taken
together, was fair from a financial point of view to such holders.
THE FULL TEXT OF PETRIE PARKMAN'S OPINION, DATED MAY 7, 2001, WHICH
CONTAINS A DESCRIPTION OF THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS
CONSIDERED AND LIMITS OF THE SCOPE OF REVIEW UNDERTAKEN BY PETRIE PARKMAN IN
RENDERING ITS OPINION, IS ATTACHED AS ANNEX C TO THIS PROXY STATEMENT/PROSPECTUS
AND IS INCORPORATED BY REFERENCE IN THIS DOCUMENT. THE SUMMARY OF THE PETRIE
PARKMAN OPINION SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF THE OPINION. BARRETT RESOURCES STOCKHOLDERS ARE ENCOURAGED TO, AND
SHOULD, READ THE PETRIE PARKMAN OPINION CAREFULLY.
PETRIE PARKMAN'S OPINION WAS PROVIDED TO THE BARRETT RESOURCES BOARD OF
DIRECTORS FOR ITS USE AND BENEFIT AND ADDRESSES ONLY THE FAIRNESS FROM A
FINANCIAL POINT OF VIEW OF THE CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF
BARRETT RESOURCES COMMON STOCK. PETRIE PARKMAN'S OPINION DOES NOT ADDRESS THE
MERITS OF THE UNDERLYING DECISION BY BARRETT RESOURCES TO ENGAGE IN THE MERGER
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW THAT
STOCKHOLDER SHOULD VOTE AT THE SPECIAL MEETING. PETRIE PARKMAN'S OPINION AND ITS
PRESENTATION TO THE BARRETT RESOURCES BOARD OF DIRECTORS ON MAY 7, 2001 WERE
AMONG MANY FACTORS TAKEN INTO CONSIDERATION BY THE BARRETT RESOURCES BOARD OF
DIRECTORS IN MAKING ITS DETERMINATION TO APPROVE AND RECOMMEND THE TENDER OFFER
AND THE MERGER.
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In arriving at its opinion, Petrie Parkman, among other things:
- reviewed certain publicly available business and financial information
relating to Barrett Resources, including (i) its Annual Reports on Form
10-K and related audited financial statements for the fiscal years ended
December 31, 1998, December 31, 1999 and December 31, 2000 and (ii) a
press release issued by Barrett Resources on April 30, 2001 disclosing
its financial results for the fiscal quarter ended March 31, 2001;
- reviewed certain publicly available business and financial information
relating to Williams, including its Annual Reports on Form 10-K and
related audited financial statements for the fiscal years ended December
31, 1998, December 31, 1999 and December 31, 2000;
- reviewed (i) a draft dated May 3, 2001 of Williams' Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 2001 and (ii) a draft
dated May 5, 2001 of the pro forma balance sheet of Williams after giving
effect to the spinoff of Williams Communications Group, Inc.;
- reviewed certain estimates of the Barrett Resources' oil and gas
reserves, including (i) estimates of proved reserves prepared by the
Barrett Resources management, the majority of which were reviewed by the
independent engineering firms of Netherland Sewell & Associates, Inc. or
Ryder Scott Company as of December 31, 2000, (ii) estimates of additional
proved reserves in the Piceance Basin prepared by the Barrett Resources
management and reviewed by Ryder Scott Company as of March 31, 2001, a
portion of which were subject to the receipt of regulatory approval that
was subsequently obtained, (iii) estimates of proved reserves in certain
coalbed methane properties in the Powder River Basin prepared by Barrett
Resources management and reviewed by Netherland Sewell as of April 1,
2001, (iv) estimates of additional proved reserves prepared by Barrett
Resources management as of April 1, 2001 and (v) estimates of non-proved
reserves prepared by Barrett Resources management as of January 1, 2001;
- analyzed certain historical and projected financial and operating data of
Barrett Resources prepared by the management and staff of Barrett
Resources;
- reviewed certain historical financial and operating data of Williams
prepared by the management and staff of Williams;
- discussed the current operations and prospects of Barrett Resources and
Williams with the management and staff of Barrett Resources and Williams,
respectively;
- reviewed the historical market prices and trading history of the
outstanding shares of Barrett Resources common stock and the outstanding
shares of Williams common stock;
- compared recent stock market capitalization indicators for Barrett
Resources with recent stock market capitalization indicators for certain
other publicly-traded independent energy companies;
- compared the financial terms of the tender offer and the merger with the
financial terms of other transactions that Petrie Parkman deemed to be
relevant;
- participated in certain discussions among representatives of Barrett
Resources and Williams and their respective legal and other financial
advisors;
- reviewed a draft dated May 6, 2001 of the merger agreement; and
- reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as Petrie
Parkman deemed necessary or appropriate.
In preparing its opinion, Petrie Parkman assumed and relied upon, without
assuming any responsibility for or independently verifying, the accuracy and
completeness of any information supplied or otherwise made available to Petrie
Parkman by Barrett Resources and Williams. Petrie Parkman further relied upon
the assurances of the representatives of the management of Barrett Resources and
Williams that they were unaware of any facts that would make the information
provided to Petrie Parkman incomplete or misleading in any material respect.
With respect to projected financial and operating data, Petrie Parkman assumed
that the
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data had been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management and staff of Barrett
Resources relating to the future financial and operational performance of
Barrett Resources. With respect to the estimates of oil and gas reserves, Petrie
Parkman assumed that they had been reasonably prepared on bases reflecting the
best available estimates and judgments of the management and staff of Barrett
Resources (and its engineering consultants) relating to the oil and gas
properties of Barrett Resources. Petrie Parkman did not make an independent
evaluation or appraisal of the assets or liabilities of either Barrett Resources
or Williams nor, except for the estimates of oil and gas reserves referred to
above, was Petrie Parkman furnished with any such evaluations or appraisals. In
addition, Petrie Parkman did not assume any obligation to conduct, and did not
conduct, any physical inspection of the properties or facilities of Barrett
Resources or Williams.
Petrie Parkman was not asked to consider, and its opinion does not address,
the price at which Williams common stock will trade following the announcement
or consummation of the tender offer and the merger.
Petrie Parkman's opinion was rendered on the basis of conditions in the
securities markets and the oil and gas markets prevailing as of the date of its
opinion and the condition and prospects, financial and otherwise, of Barrett
Resources and Williams as they had been represented to Petrie Parkman as of the
date of its opinion or as they were reflected in the materials and discussions
described above.
The following is a summary of the analyses performed by Petrie Parkman in
connection with the preparation of its opinion dated May 7, 2001 and presented
to the Barrett Resources board of directors on that date.
This summary includes information presented in tabular format. In order to
fully understand these financial analyses, the tables must be read together with
the text accompanying each summary. The tables alone do not constitute a
complete description of these financial analyses. Considering the data set forth
in the tables without considering the full narrative description of these
analyses, including the methodologies and assumptions underlying these analyses,
could create a misleading or incomplete view of the financial analyses performed
by Petrie Parkman.
Historical Stock Trading Ratio Analysis. Petrie Parkman analyzed the
historical ratios of the closing prices of Barrett Resources common stock
divided by corresponding closing prices of Williams common stock for the period
from May 4, 1998 to May 4, 2001. Petrie Parkman noted the proposed merger
exchange ratio of 1.767 was above the average historical trading ratio of 0.968
during such period.
Implied Premium Analysis. Petrie Parkman calculated the premiums implied
by comparing the $73.32 per share of Barrett Resources common stock in blended
value offered by Williams (based on the closing price of Williams common stock
on May 4, 2001) to the average historical trading price of Barrett Resources
common stock for specified periods between May 4, 1998 and May 4, 2001 and
derived the following results:
BARRETT
RESOURCES
AVERAGE $73.32 OFFER
PERIOD PRICE PREMIUM
------ --------- ------------
Last Price (5/4/01)......................................... $67.30 8.9%
Day Prior to Shell Offer (3/6/01)........................... $45.62 60.7%
1 week...................................................... $65.73 11.5%
4 weeks..................................................... $61.86 18.5%
3 months.................................................... $56.81 29.1%
6 months.................................................... $51.47 42.5%
1 year...................................................... $43.19 69.7%
3 years..................................................... $33.68 117.7%
High Price.................................................. $67.30 8.9%
Low Price................................................... $15.50 373.0%
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Discounted Cash Flow Analysis. Petrie Parkman conducted a discounted cash
flow analysis for the purpose of determining the equity reference value range
per share of Barrett Resources common stock. Petrie Parkman calculated the net
present value of estimates of future after-tax cash flows for Barrett Resources'
oil and gas reserve assets based on the proved, probable and possible reserve
estimates referred to above and for its non-reserve assets utilizing information
provided by Barrett Resources. Petrie Parkman mechanically adjusted the proved
reserve information and probable and possible estimates to be as of March 31,
2001.
Petrie Parkman evaluated five scenarios in which the principal variables
were oil and gas prices. The five pricing scenarios, Pricing Case I, Pricing
Case II, Pricing Case III, Strip Pricing Case Escalated and the Strip Pricing
Case Flat, were based on benchmarks for spot sales of West Texas Intermediate
crude oil and for spot sales of Henry Hub gas. The Strip Pricing Cases were
based upon the publicly available average of oil and gas futures contract prices
quoted on the New York Mercantile Exchange. Benchmark prices for Pricing Cases
I, II and III were projected to be $18.00, $20.00 and $22.00 per barrel for oil
and $3.50, $4.00 and $4.50 per million British thermal units for gas,
respectively, as of May 7, 2001 and were escalated annually starting in 2002 at
the rate of 3%. The Strip Pricing Case Escalated and the Strip Pricing Case Flat
for the fiscal year ended 2001 reflected actual prices from March 31, 2001
through May 4, 2001 blended with the current strip prices through the end of the
year. The Strip Pricing Escalated Case was escalated annually following 2005 for
oil at the rate of 3% and following 2004 for gas at the rate of 3%. Adjustments
were made to the benchmarks based on the historical relationship between the
benchmarks and Barrett Resources' realized prices.
Applying various after-tax discount rates, ranging from 10.0% to 35.0%
depending on reserve category, to the after-tax cash flows, assuming a
carry-over of Barrett Resources' existing tax positions, deducting long-term
debt of $295.0 million and adding net working capital of $20.9 million, the
discounted cash flow analysis indicated equity reference value ranges that were
divided by the diluted number of shares of Barrett Resources common stock
outstanding to derive the following equity value ranges per share of Barrett
Resources common stock:
STRIP PRICING STRIP PRICING
PRICING CASE I PRICING CASE II PRICING CASE III (ESCALATED) (FLAT)
--------------- --------------- ---------------- --------------- ---------------
Equity Reference
Value Range per
Common Share....... $34.67 - $47.75 $44.68 - $61.01 $54.75 - $74.52 $46.56 - $62.74 $41.05 - $53.57
Petrie Parkman noted the Williams' implied offer price of $73.32 per share
of Barrett Resources common stock was within or in excess of the equity
reference value ranges implied by Petrie Parkman's discounted cash flow
analysis.
Property Acquisition Analysis. Petrie Parkman reviewed selected publicly
available information related to 96 announced oil and gas property acquisition
transactions and proprietary information related to six oil and gas property
acquisition transactions announced between January 1997 and May 2001 in the
Rocky Mountains, Gulf of Mexico and Mid Continent. Petrie Parkman calculated
purchase price multiples of equivalent reserves for the acquired assets in each
transaction and selected appropriate benchmark multiples to Barrett Resources'
corresponding proved reserve figures to yield asset reference value ranges for
Barrett Resources' proved reserves. For purposes of this analysis, an
equivalency ratio of one barrel of oil to six thousand cubic feet of gas
("Mcfe") was used to compare quantities of oil with quantities of gas. Based on
a review of the purchase price multiple of equivalent reserves, Petrie Parkman
determined benchmark ranges of purchase prices to Barrett Resources'
corresponding proved reserve figures in order to yield enterprise reference
value ranges for Barrett Resources' proved reserves. The number of transactions
per region, the
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maximum, mean, median and minimum implied multiples in these transactions, and
the appropriate benchmark multiples for equivalent proved reserves were as
follows:
ROCKY GULF OF MID
MOUNTAIN MEXICO CONTINENT
------------- ------------- -------------
Number of Transactions.......................... 41 26 35
Purchase Price of Reserves/Proved Reserves
($/Mcfe)
Maximum....................................... $1.39 $2.20 $1.42
Mean.......................................... $0.75 $1.11 $0.78
Median........................................ $0.74 $1.02 $0.78
Minimum....................................... $0.30 $0.71 $0.21
Benchmark Multiples ($/Mcfe).................... $0.80 - $1.05 $1.25 - $1.75 $0.80 - $1.00
In addition to Barrett Resources' proved reserves, Petrie Parkman valued
Barrett Resources' probable and possible reserves based on $0.05 to $0.075 per
Mcfe. Following adjustments for Barrett Resources' non-reserve assets, Petrie
Parkman determined an enterprise reference value range of $1,912.3 million to
$2,582.2 million. After deducting long-term debt of $295.0 million from the
enterprise reference value range and adding net working capital of $20.9 million
to the enterprise reference value range and dividing by the diluted number of
shares of Barrett Resources common stock outstanding, the resulting equity
reference value range per share of Barrett Resources common stock was $47.39 to
$66.77.
Petrie Parkman noted the Williams implied offer price of $73.32 per share
of Barrett Resources common stock was in excess of the equity reference value
ranges implied by Petrie Parkman's property acquisition analysis.
Company Acquisition Analysis. In addition, Petrie Parkman reviewed
selected publicly available information on the following 13 company acquisition
transactions and offers for control involving companies in the oil and gas
exploration and production industry that were announced between April 2000 and
March 2001:
ACQUIRER OR BIDDER FOR CONTROL TARGET DATE OF ANNOUNCEMENT
------------------------------ ------ --------------------
Pure Resources, Inc. Hallwood Energy Corporation March 30, 2001
Vintage Petroleum, Inc. Genesis Exploration Ltd. March 28, 2001
Anadarko Petroleum Corporation Berkley Petroleum Corporation February 12, 2001
Calpine Corporation Encal Energy Ltd. February 8, 2001
AEC Oil and Gas (USA) Inc. Ballard Petroleum, LLC January 18, 2001
USX-Marathon Group Pennaco Energy, Inc. December 22, 2000
Pogo Producing Company North Central Oil Corporation November 20, 2000
Stone Energy Corporation Basin Exploration Inc. October 30, 2000
Forest Oil Corporation Forcenergy Inc. July 10, 2000
Devon Energy Corporation Santa Fe Snyder Corporation May 26, 2000
Hunt Oil Company Newport Petroleum Corporation May 15, 2000
Anderson Exploration Ltd. Ulster Petroleum Ltd. April 17, 2000
Anadarko Petroleum Corporation Union Pacific Resources Group Inc. April 3, 2000
Using publicly available information, Petrie Parkman calculated purchase
price of equity multiples of discretionary cash flow and total investment, which
Petrie Parkman defined for the purposes of this analysis as purchase price of
equity plus net obligations assumed, multiples of earnings before interest,
taxes, depreciation, depletion and amortization and exploration expense
("EBITDX") for the target company in each transaction. Petrie Parkman also
calculated the implied purchase price of reserves, which Petrie Parkman defined
for the purposes of this analysis as total investment less undeveloped acreage
value and other assets at book value and multiples of equivalent proved reserves
for the target company in each transaction. The
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maximum, mean, median and minimum implied multiples as well as the selected
benchmark ranges in these transactions were as follows:
IMPLIED MULTIPLES IN RECENT TRANSACTIONS
----------------------------------------- BENCHMARK
MINIMUM MEDIAN MEAN MAXIMUM RANGE
-------- ------- ------ -------- -------------
Purchase Price/LTM Discretionary Cash
Flow................................. 3.3x 5.3x 7.8x 33.7x 6.0-8.5x
Purchase Price/Current Year's Estimated
Discretionary Cash Flow.............. 2.8x 4.1x 5.3x 15.7x 4.5-6.5x
Total Investment/LTM EBITDX............ 5.0x 7.0x 9.6x 38.2x 7.0-9.0x
Total Investment/Current Year's
Estimated EBITDX..................... 4.1x 5.2x 6.6x 17.6x 5.5-6.5x
Implied Purchase Price of Reserves/
Equivalent Proved Reserves
($/Mcfe)............................. $1.11 $1.35 $1.46 $2.43 $ 1.50-$1.75
Petrie Parkman applied the benchmark multiples to Barrett Resources'
historical and current year estimated discretionary cash flow and EBITDX and
equivalent proved reserves to determine enterprise reference value ranges.
Petrie Parkman also performed a premium analysis, which compared the offer
price per target company share with the target company's share price for the
periods of one day, 30 days and 60 days prior to the public announcement of the
offer. The maximum, mean, median, and minimum premiums, which Petrie Parkman
defined for the purposes of this analysis as excess of offer price over target
company's price stated as a percentage above the target company's share price,
as well as the benchmark ranges selected by Petrie Parkman for these periods
were as follows:
IMPLIED PREMIUMS IN RECENT TRANSACTIONS
BENCHMARK
MAXIMUM MEAN MEDIAN MINIMUM RANGE
------- ---- ------ ------- -----------
One Day Prior..................... 66.9% 21.4% 20.8% (2.9%) 15.0 - 25.0%
30 Days Prior..................... 76.0% 35.6% 32.2% 0.0% 20.0 - 30.0%
60 Days Prior..................... 61.9% 38.5% 34.5% 8.3% 30.0 - 40.0%
Petrie Parkman applied these premium benchmarks to the corresponding stock
prices of Barrett Resources for the periods of one day, 30 days and 60 days
prior to the public announcement of Shell Oil Company's offer of $55.00 per
share on March 6, 2001. Petrie Parkman determined from the enterprise reference
value ranges implied by these multiples a composite enterprise reference value
range of $2,200.0 million to $2,500.0 million. After deducting long-term debt of
$295.0 million and net working capital including current unrealized losses on
market-to-market transactions of $60.9 million from the composite enterprise
reference value range and dividing by the diluted number of shares of Barrett
Resources common stock outstanding, the resulting composite equity reference
value range per share of Barrett Resources common stock was $53.34 to $62.02.
Petrie Parkman noted the William's implied offer price of $73.32 per share
of Barrett Resources common stock was in excess of the equity reference value
ranges implied by Petrie Parkman's capital acquisition analysis.
Capital Market Comparison. Using publicly available information, Petrie
Parkman calculated market capitalization multiples of historical and projected
discretionary cash flow for selected publicly traded companies with operating
and financial characteristics comparable to Barrett Resources. Petrie Parkman
also calculated enterprise value multiples of historical operating cash flow,
historical and projected EBITDX and proved reserves for those companies.
Multiples of projected discretionary cash flow and EBITDX were based upon
projected discretionary cash flow and EBITDX published by equity research
analysts. Petrie Parkman defined market capitalization for purposes of this
analysis as market value of common equity as of May 4, 2001. Petrie Parkman
obtained the enterprise value of each company by adding the sum of its long-term
and
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short-term debt to the sum of the market value of its common equity, the market
value of its preferred stock (or, if not publicly traded, liquidation or book
value) and the book value of its minority interest in other companies and
subtracting net working capital.
Petrie Parkman determined that the following companies were relevant to an
evaluation of Barrett Resources based upon Petrie Parkman's view of the
comparability of the operating and financial characteristics of these companies
to those of Barrett Resources:
- Cabot Oil and Gas Corporation
- Cross Timbers Oil Company
- Devon Energy Corporation
- EOG Resources, Inc.
- Evergreen Resources, Inc.
- Tom Brown Inc.
The minimum, median, mean and maximum multiples for the six companies are
set forth below. The table also includes benchmark multiple ranges selected by
Petrie Parkman based on a review of the comparable company multiples.
COMPARABLE COMPANY MULTIPLES
---------------------------------- BENCHMARK
MEASURE MINIMUM MEDIAN MEAN MAXIMUM RANGE
------- ------- ------ ----- ------- -------------
Market Capitalization/LTM discretionary
cash flow................................ 4.3x 6.2x 8.7x 23.7x 6.0x- 7.0x
Market Capitalization/2001 estimated
discretionary cash flow.................. 4.1x 4.8x 5.5x 9.6x 5.0x- 6.0x
Enterprise Value/LTM operating cash flow... 4.1x 6.1x 8.1x 21.2x 6.0x- 7.0x
Enterprise Value/LTM EBITDX................ 4.3x 6.7x 8.9x 23.5x 7.0x- 8.0x
Enterprise Value/2001 estimated EBITDX..... 3.5x 5.4x 6.1x 11.3x 5.5x- 6.5x
Enterprise Value/Proved Reserves
($/Mcfe)................................. $1.06 $1.45 $1.45 $1.83 $1.50- $1.80
From the enterprise reference value ranges implied by applying the
benchmark multiples to Barrett Resources' LTM and 2001 estimated discretionary
cash flow, LTM and 2001 estimated EBITDX, LTM operating cash flow and proved
reserves, Petrie Parkman determined a composite enterprise reference value range
under this method of $2,000.0 million to $2,300.0 million. After deducting
long-term debt of $406.3 million as of December 31, 2001 from the composite
enterprise reference value range and adding net working capital of $18.4 million
as of December 31, 2001 to the composite enterprise reference value range and
dividing by the diluted number of shares of Barrett Resources common stock
outstanding, the composite equity reference value range per share of Barrett
Resources common stock was $46.63 to $55.31.
Petrie Parkman noted the Williams' implied offer price of $73.32 per share
of Barrett Resources common stock was in excess of the equity reference value
ranges implied by Petrie Parkman's capital market comparison analysis.
Going Concern Analysis. Petrie Parkman projected the potential financial
performance of Barrett Resources, without giving effect to the tender offer or
the merger, for the five year period beginning on January 1, 2001 using Pricing
Cases I, II, III and the Strip Pricing Escalated Case, each as described under
"Discounted Cash Flow Analysis." Petrie Parkman prepared these projections using
financial, operating and reserve projections prepared and/or provided by Barrett
Resources management and staff and certain assumptions based upon discussions
with Barrett Resources management regarding Barrett Resources' potential future
operating and financial performance.
For each pricing case, Petrie Parkman analyzed two cases of operating
projections: unproved production and reserve additions were estimated at 50% of
company plan (the "Company Plan 50% P(s) Case") and unproved production and
reserve additions were estimated at 75% of company plan ( the "Company Plan 75%
P(s) Case"). In each case, the principle variable was the risk factor applied to
Barrett Resources' projections of future exploitation and exploration success.
In the Company Plan 50% P(s) Case, Barrett Resources projections of future
production were risked 50% while keeping Barrett Resources projections of
capital expenditures constant. In the Company Plan 75% P(s) Case, Barrett
Resources projections of future
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production were risked 75% while keeping Barrett Resources projections of
capital expenditures constant. In both cases, free cash flow was used to pay
down debt. Petrie Parkman calculated a range of terminal equity values by
applying terminal multiples of 4.0x, 5.0x and 6.0x to projected 2005
discretionary cash flow and applied after-tax discount rates of 15.0% to 17.5%
to terminal equity values. Throughout its analysis, Petrie Parkman used Barrett
Resources' tax position as of December 31, 2000.
From the equity reference values implied by this analysis, Petrie Parkman
determined a composite equity reference value range per fully-diluted share of
Barrett Resources common stock of $60.00 to $70.00 in the Company Plan 50% P(s)
Case and $70.00 to $80.00 in the Company Plan 75% P(s) Case.
Petrie Parkman noted the Williams' implied offer price of $73.32 per share
of Barrett Resources common stock was in excess of the equity reference value
range implied by the Company Plan 50% P(s) Case and was within the equity
reference value range implied by the Company Plan 75% P(s) Case.
Pro Forma Merger Analysis. Petrie Parkman analyzed the pro forma financial
effects of the merger as of May 4, 2001 and for the fiscal years ended 2001 and
2002 with operating projections based upon research analyst estimates. For
purposes of its analysis, Petrie Parkman used the merger exchange ratio and
assumed the merger would be accounted for using purchase accounting. This
analysis indicated that the merger would be dilutive to Williams' 2001 and 2002
estimated earnings and accretive to Williams' estimated discretionary cash flow
in 2001 and 2002. The analysis also indicated that the merger would result in a
lower total debt to total book capitalization ratio than projected for Williams
on a stand-alone basis as of March 31, 2001.
The description set forth above constitutes a summary of the analyses
employed and factors considered by Petrie Parkman in rendering its opinion to
the Barrett Resources board of directors. Petrie Parkman believes that its
analyses must be considered as a whole and that selecting portions of its
analyses, without considering all analyses and factors, could create an
incomplete view of the process underlying its opinion. The preparation of a
fairness opinion is a complex analytical process involving various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances
and is not necessarily susceptible to partial analysis or summary description.
In arriving at its opinion, Petrie Parkman did not attribute any particular
weight to any analysis considered by it, but rather made qualitative judgments
as to the significance and relevance of each analysis. Any estimates resulting
from the analyses are not necessarily indicative of actual values, which may be
significantly more or less favorable than as set forth in this document.
In addition, analyses based on forecasts of future results are not
necessarily indicative of future results, which may be significantly more or
less favorable than suggested by these analyses. Estimates of reference values
of companies do not purport to be appraisals or necessarily reflect the prices
at which companies may actually be sold. Because the estimates are inherently
subject to uncertainty and based upon numerous factors or events beyond the
control of the parties and Petrie Parkman, Petrie Parkman cannot assure you that
the estimates will prove to be accurate.
No company used in the analyses of other publicly traded companies nor any
transaction used in the analyses of comparable transactions is identical to
Barrett Resources, Williams or the proposed merger. Accordingly, these analyses
must take into account differences in the financial and operating
characteristics of the selected publicly traded companies and differences in the
structure and timing of the selected transactions and other factors that would
affect the public trading values and acquisition values of the companies
considered.
Petrie Parkman, as part of its investment banking business, is continually
engaged in the evaluation of energy-related businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. Barrett Resources selected Petrie
Parkman as its financial advisor because it is an internationally recognized
investment banking firm that has substantial experience in transactions similar
to the proposed merger. Petrie Parkman has in the past provided financial
advisory services to Barrett Resources and has received customary fees for these
services. In the ordinary course of business, Petrie Parkman or its affiliates
may trade in the debt or equity securities of Barrett Resources and Williams for
its account and for the accounts of its customers and, accordingly, may at any
time hold a long or short position in such securities.
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Pursuant to an engagement letter between Petrie Parkman and Barrett
Resources dated as of March 7, 2001, Barrett Resources agreed to pay to Petrie
Parkman (i) an engagement fee of $1,000,000, in cash, payable promptly following
Barrett Resources' execution of the engagement letter, (ii) a financial advisory
fee of $1,000,000, in cash, payable promptly upon substantial completion by
Petrie Parkman of the work deemed sufficient by Petrie Parkman to render an
opinion, regardless of the conclusion reached by Petrie Parkman in the opinion
and (iii) an additional fee of $400,000, in cash, for each $1.00 per share of
value above $55.00 per share received by the shareholders of Barrett Resources
conditioned upon consummation of the merger. In addition, Barrett Resources also
agreed to reimburse Petrie Parkman for its reasonable out-of-pocket expenses
related to its rendering of financial advisory services to Barrett Resources,
including the reasonable fees and expenses of its counsel. Barrett Resources
also agreed to indemnify Petrie Parkman and its affiliates, the respective
directors, officers, partners, agents, employees of Petrie Parkman and its
affiliates and controlling persons for certain expenses, losses, claims, damages
and liabilities related to or arising out of its rendering of services under its
engagement as financial advisor.
INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS OF BARRETT RESOURCES IN THE MERGER
When considering the recommendation of the Barrett Resources board, you
should be aware that the Barrett Resources directors (other than the four
current directors who are representatives of Williams) and officers may have
interests in the merger that are different from or are in addition to your
interests.
Severance Arrangements
Barrett Resources entered into severance protection agreements commencing
in early 1998 with some of its executive officers and employees. Generally, the
agreements provide, among other things, that if, within three years after a
"change-in-control" (as defined in the severance protection agreement), the
employee's employment is terminated by the employee for "good reason" or by
Barrett Resources other than for "cause" or "disability" (as those terms are
defined in the severance protection agreement), the employee will be entitled to
a lump sum cash payment equal to:
- in the case of Peter A. Dea, Joseph N. Jaggers and J. Frank Keller, three
times the employee's annual compensation (based on annual salary and past
annual bonus) in addition to continuation of certain benefits for three
years from the date of termination; and
- in the case of other officers and certain employees, two times the
employee's annual compensation (based on annual salary and past annual
bonus) in addition to continuation of certain benefits for two years from
the date of termination.
As of May 3, 2001, each of the severance protection agreements with
officers was amended to:
- eliminate a provision in the severance protection agreement that would
reduce all severance and other payments and benefits to the employee
(including the acceleration of stock option exercisability) to the extent
necessary to avoid the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended; and
- provide that if any payment to the employee would be subject to such
excise tax, the employee will be entitled to receive a gross-up payment
in an amount such that after payment by the employee of all taxes,
including income and excise taxes, the employee retains an amount of the
gross-up payment equal to the excise tax imposed upon the payments to the
employee.
Assuming that the employment of all of the officers is terminated and such
persons receive all of the severance payments described below, and based on the
tender offer consideration and the merger consideration having a value of $73.00
per share, the estimated pre-tax incremental benefit that may result from the
elimination of the provision described in the first bullet point above may be as
high as $6.9 million in the aggregate, and the estimated cost to Barrett
Resources of the gross-up payments described in the second bullet point above
may be as high as approximately $6.5 million. With respect to Messrs. Dea and
Jaggers, a substantial portion of the incremental benefit from the elimination
of the provision in the first bullet point above results from the retention by
these individuals of the value of the acceleration or cash-out of unvested
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stock options pursuant to the change in control provisions of the option plans.
The effect of any gross-up payment is to put the officer in the same position he
would have been in if no excise tax were applicable to him.
The amendment to the severance protection agreements was approved by the
Barrett Resources board and its compensation committee prior to Barrett
Resources' negotiation with Williams and is not conditioned upon completion of
either the tender offer or the merger. If the employment of Messrs. Dea and
Jaggers, and all other officers who are parties to severance protection
agreements, were to terminate under circumstances entitling them to severance
benefits under their severance protection agreements, in addition to the
gross-up payments and certain continued benefits:
- Mr. Dea would receive an estimated severance payment of $1,875,000;
- Mr. Jaggers would receive an estimated severance payment of $1,425,000;
and
- all other officers would receive, collectively, estimated severance
payments totaling $3,720,500.
Prior to the completion of the merger, Barrett Resources will be permitted
to award bonuses to its employees in an aggregate amount not to exceed
$2,000,000, with such bonuses to be allocated at the direction of Barrett
Resources' Chief Executive Officer with the consent of Williams (not to be
unreasonably withheld or delayed). These bonuses will be paid, upon the earlier
of 90 days following the completion of the merger and 30 days following the
termination of the merger agreement (the "payment date"), to each employee to
whom such a bonus has been awarded and who continues to be employed by Barrett
Resources on the payment date or whose employment terminates prior to the
payment date due to death, disability, termination by Barrett Resources without
cause or termination by the employee with good reason (as those terms are
defined in Barrett Resources' severance protection plan). However, no bonus will
be paid to any employee who has entered into a severance protection agreement
with Barrett Resources and who is entitled to a severance payment under the
severance protection agreement because, prior to the payment date, his
employment was terminated other than for cause or disability or he terminates
his employment for good reason. In addition, Messrs. Dea, Jaggers, Keller and
Lang are not eligible to receive bonuses pursuant to this arrangement.
Employee Benefits
Under the terms of the merger agreement, employees of Barrett Resources and
its subsidiaries immediately prior to the merger:
- will remain employed immediately following the completion of the merger;
- generally will receive credit for co-payments, deductibles, unused
vacation and sick leave; and
- generally will receive service credit for purposes of eligibility and
vesting under each benefit plan and determination of benefits under
certain benefit plans in which they were eligible to participate upon
completion of the tender offer.
Williams will honor all employment agreements, bonus agreements, severance
agreements, severance plans and non-competition agreements with the directors,
officers and employees of Barrett Resources and its subsidiaries. With respect
to welfare plans, Williams generally will waive limitations as to pre-existing
conditions, exclusions and waiting periods applicable to these employees.
Williams will maintain for a period of at least two years following the
completion of the merger, the Barrett Resources' severance policy as in effect
on the date of the merger agreement, or Williams will replace this policy with a
policy providing equal or more favorable compensation. Each employee of Barrett
Resources or any of its subsidiaries whose employment is terminated upon, or
within 18 months following, the completion of the tender offer, other than an
employee who has entered into a severance protection agreement, will receive a
cash payment from Barrett Resources or Williams in the amount of $8,000. This
amount may, in the sole discretion of the employee, be used to obtain
outplacement services to assist in the transition to subsequent employment or
for any other purpose.
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Indemnification and Insurance
Williams will, or will cause the surviving corporation in the merger to,
honor, for a period of not less than six years following the completion of the
merger (or, for matters occurring at or prior to the completion of the merger
that have not been resolved, until those matters are finally resolved), all
rights to indemnification existing in favor of a director, officer, employee or
agent of Barrett Resources or any of its subsidiaries relating to actions or
events through the completion of the merger. The surviving corporation, however,
will not be required to indemnify any person in connection with any proceeding
involving any claim initiated by that indemnified person unless the proceeding
was authorized by the Barrett Resources board, or was brought to enforce
indemnification rights under the merger agreement. In the event that any person
eligible for indemnification becomes involved in any actual or threatened claim
or proceeding after the completion of the merger, Williams will, or will cause
the surviving corporation to, promptly advance to that person his or her
expenses, subject to that person agreeing to reimburse all amounts advanced in
the event of a final determination that the indemnified person is not entitled
to those amounts.
Prior to the completion of the merger, Barrett Resources will have the
right to obtain and pay for a "tail" coverage directors' and officers' liability
insurance policy ("D&O insurance") covering a period of at least six years
following the completion of the merger and providing coverage in amounts and on
terms consistent with Barrett Resources' existing D&O insurance. If Barrett
Resources is unable to obtain this insurance, the surviving corporation will
maintain Barrett Resources' D&O insurance for a period of at least six years
following the completion of the merger. However, the surviving corporation may
substitute policies of similar coverage and amounts containing terms no less
advantageous. Nevertheless, Barrett Resources will not, without Williams'
consent, expend in excess of 300% of the last annual premium paid to procure the
coverage, and neither Williams nor the surviving corporation will be required to
expend in excess of 300% of the last annual premium paid.
EFFECTS OF INABILITY TO COMPLETE THE MERGER
If the proposed merger is completed, stockholders of Barrett Resources who
elected not to tender their shares in the tender offer, or had fewer shares
accepted than tendered in such offer as a result of proration, will have each of
those shares that they continue to hold converted in the merger into 1.767
shares of Williams common stock.
If the merger is not completed, Williams, through a subsidiary, will
control the 16,730,502 shares purchased by it in the tender offer. Under the
merger agreement, the Williams subsidiary will be entitled to representation on
the Barrett Resources board of directors in the same proportion as the number of
shares then beneficially owned by it bears to the total number of shares
outstanding, rounded up to the nearest whole number. Upon completion of the
tender offer, pursuant to the terms of the merger agreement, three of the
incumbent Barrett Resources directors resigned, the size of the Barrett
Resources board was expanded to eight and four designees of Williams were
appointed as directors (joining the four remaining incumbent directors on the
Barrett Resources board). As a result of its ownership of such shares and its
representation on the Barrett Resources board, Williams may be able to influence
and potentially control decisions of the Barrett Resources board.
Williams has reserved the right to acquire, directly or through
subsidiaries, additional shares through private purchases, market transactions,
tender or exchange offers or otherwise on terms and at prices that may be more
or less favorable than those of the tender offer or, subject to any applicable
legal restrictions, to dispose of any or all shares acquired by Williams or its
subsidiaries.
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REGULATORY FILINGS AND APPROVALS
Antitrust
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the tender
offer and the merger could not be completed until the expiration of a 15
calendar-day waiting period following the filing of certain required information
and documentation concerning the tender offer and merger with the Federal Trade
Commission and the Antitrust Division of the Department of Justice. Each of
Williams and Barrett Resources filed a Premerger Notification and Report Form
with the Federal Trade Commission and the Antitrust Division of the Department
of Justice on May 16, 2001 and May 18, 2001, respectively. The Federal Trade
Commission granted early termination of the waiting period for the tender offer
and the merger under the Hart-Scott-Rodino Act on May 30, 2001.
The Federal Trade Commission and the Antitrust Division of the Department
of Justice may scrutinize the legality of the merger under the antitrust laws.
At any time before completion of the merger, the Federal Trade Commission or the
Antitrust Division of the Department of Justice could take any action under the
antitrust laws that either considers necessary or desirable in the public
interest, including seeking to enjoin the merger or the divestiture of
substantial assets of Williams, Barrett Resources or any of their respective
subsidiaries or affiliates. Private parties as well as state attorneys general
also may bring legal actions under the antitrust laws under certain
circumstances.
Based upon an examination of publicly available information relating to the
businesses in which Barrett Resources is engaged, Williams and Barrett Resources
believe that the merger should not violate any applicable antitrust or
competition law. Nevertheless, Williams and Barrett Resources cannot be certain
that a challenge to the merger on antitrust grounds will not be made, or, if a
challenge is made, what the result will be.
State Takeover Laws
Section 203 of the Delaware General Corporation Law ("DGCL") limits the
ability of a Delaware corporation to engage in business combinations with
"interested stockholders" (defined generally as any person that directly or
indirectly beneficially owns 15% or more of the outstanding voting stock of the
subject corporation) for three years following the date such person became an
"interested stockholder," unless, among other things, the board of directors of
the subject corporation has given its prior approval of either the transaction
in which such person became an interested stockholder or the business
combination.
The board of directors of Barrett Resources approved the merger agreement
and the tender offer and the merger, and has taken all appropriate action, so
that neither Williams nor its subsidiary will be an "interested stockholder"
within the meaning of Section 203 of the DGCL by virtue of Williams, its
subsidiary and Barrett Resources entering into the merger agreement and
completing the tender offer and the merger.
BARRETT RESOURCES BY-LAWS
Article IV of the Barrett Resources by-laws restricts certain business
combinations involving "interested persons" (as defined in the by-laws). On May
7, 2001, the Barrett Resources board waived those by-law restrictions by
"independent director approval" (as defined in the by-laws), so that the
restrictions do not and will not apply with respect to or as a result of the
merger agreement, the tender offer or the merger.
BARRETT RESOURCES RIGHTS AGREEMENT
On August 4, 1997, Barrett Resources entered into a rights agreement with
BankBoston, N.A., as rights agent, which currently provides for a dividend of
one preferred stock purchase right for each outstanding share of Barrett
Resources common stock. The rights trade automatically with the shares of common
stock and become exercisable only under the circumstances described below. The
rights are designed to guard against partial tender offers, open market
accumulations and other abusive tactics to gain control of Barrett Resources
without paying all stockholders a control premium. The rights have certain
anti-takeover effects but should not interfere with any acquisition, merger or
other business combination approved by the Barrett Resources board.
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Until a right is exercised, the right does not entitle the holder to
additional rights as a Barrett Resources stockholder, including, without
limitation, the right to vote or to receive dividends. Except as set forth
below, each right, when exercisable, entitles the holder of the right to
purchase from Barrett Resources one one-thousandth of a share of Series A Junior
Participating Preferred Stock at a purchase price of $150.00 per one
one-thousandth of a share, subject to adjustment.
In general, the rights will not be exercisable until the distribution date,
which is the earlier of:
- a public announcement that, without the prior consent of the Barrett
Resources board, a person or group of affiliated or associated persons
has acquired, or gained the right to acquire, beneficial ownership of 15%
or more of the outstanding shares of Barrett Resources common stock (such
person or group of persons referred to below as an "acquiring person");
or
- 10 business days (or a later date determined by the Barrett Resources
board) following the commencement of (or a public announcement of an
intention to make) a tender offer or exchange offer which would result in
any person or group of related persons becoming an acquiring person
without the prior consent of the Barrett Resources board.
In general, if any person becomes an acquiring person, each holder of a
right will have the right, for a 60 day period after the later of the date the
person became an acquiring person and the date of effectiveness of an
appropriate registration statement (or a longer period as set by the Barrett
Resources board), to exercise his or her right for that number of units of one
one-thousandths of a share of preferred stock (or, under certain circumstances,
Barrett Resources common stock or other securities) having an average market
value during a specified time period (immediately before the person became an
acquiring person) of two times the exercise price of the right. All rights that
are or were beneficially owned by the acquiring person will be null and void.
If any person becomes an acquiring person and either:
- Barrett Resources is acquired in a merger or other business combination
transaction; or
- 50% or more of the assets or earning power of Barrett Resources is sold
in a single transaction or a series of transactions
each right becomes exercisable for that number of shares of common stock of the
acquiring company which, at the time of the transaction, would have the market
value of two times the exercise price of the right.
The rights will expire on August 4, 2007, unless redeemed before that time.
At any time prior to the earlier of (a) the close of business on the day that a
person becomes an acquiring person and (b) the expiration of the rights, the
Barrett Resources board may redeem the rights in whole, but not in part, at a
price of $.001 per right.
In connection with the execution of the merger agreement, Barrett Resources
amended its rights agreement on May 7, 2001 to provide that the proposed merger
with the Williams subsidiary will not trigger the exercisability of the rights.
Upon completion of the merger, the rights will be converted along with the
Barrett Resources common stock into Williams common stock and the rights issued
under the Williams rights plan.
The summary of the rights agreement and the rights given above does not
purport to be complete and is qualified in its entirety by the rights agreement,
which is incorporated by reference as Exhibit 1 to Barrett Resources'
registration statement on Form 8-A filed August 11, 1997, as amended, and the
Barrett Resources certificate of incorporation.
ACCOUNTING TREATMENT
Williams will account for the merger using the purchase method of
accounting in accordance with accounting principles generally accepted in the
United States. Purchase accounting requires that the purchase price and costs of
the tender offer and the merger be allocated to all of the assets acquired and
liabilities assumed, based on their relative fair values.
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NO APPRAISAL RIGHTS
Barrett Resources stockholders are not entitled to appraisal rights in
connection with the merger.
RESTRICTIONS ON SALES OF WILLIAMS COMMON STOCK BY AFFILIATES OF BARRETT
RESOURCES
The shares of Williams common stock to be received by Barrett Resources
stockholders in the merger will be registered under the Securities Act of 1933
and, except as described in this paragraph, will be freely tradable without
restriction. The shares of Williams common stock to be issued in the merger and
received by persons who may be considered to be "affiliates" (as that term is
defined in Rule 144 under the Securities Act) of Barrett Resources before the
merger may be resold by them only in transactions permitted by the resale
provisions of Rule 145 under the Securities Act or as otherwise permitted under
the Securities Act. Persons who may be considered affiliates of Barrett
Resources under the Securities Act include individuals or entities that control,
are controlled by, or are under common control with, Barrett Resources and
include its officers and directors. The merger agreement requires Barrett
Resources to use its reasonable efforts to cause all persons who may be
considered to be affiliates of Barrett Resources to execute and deliver to
Williams an affiliate agreement. The affiliate agreements provide that these
persons will not sell, transfer or otherwise dispose of any shares of Williams
common stock except in compliance with the Securities Act and the rules and
regulations promulgated under the Securities Act, including Rule 145.
STOCK EXCHANGE LISTINGS
Barrett Resources common stock is currently registered under the Securities
Exchange Act of 1934 and is listed for trading on the NYSE. If the merger is
completed, Barrett Resources common stock will be delisted from the NYSE and
will be deregistered under the Exchange Act.
Williams common stock trades on the NYSE and the Pacific Exchange and will
continue to do so following the merger. The shares of Williams common stock you
would receive in the merger will be listed on the NYSE and the Pacific Exchange.
CERTAIN PROJECTIONS
In the course of Williams' due diligence review of Barrett Resources,
Barrett Resources provided to Williams a Five-Year Strategic Projection as part
of Barrett Resources' March 2001 plan detailing Barrett Resources' forecasts for
certain operational and financial items. The projections were based on numerous
assumptions and management estimates. The projections also assumed a reserve
development scenario contained in an internal reserve report which included
Barrett Resources' estimates of proved and unproved oil and gas reserves. The
actual results may vary materially from the projections. Certain information
derived from the projections has been set forth below for the limited purpose of
giving stockholders access to certain projections and other information provided
by Barrett Resources management to Williams in connection with its due diligence
review of Barrett Resources. In addition, in connection with Williams' due
diligence review of Barrett Resources, Barrett Resources also provided Williams
access in its data room to a set of projections prepared by Barrett Resources in
February 2001, which projections were less optimistic than the projections
included in the projections described below.
THE PROJECTED FINANCIAL, OIL AND GAS RESERVE AND OTHER INFORMATION SET
FORTH BELOW NECESSARILY REFLECTS NUMEROUS ASSUMPTIONS WITH RESPECT TO GENERAL
BUSINESS AND ECONOMIC CONDITIONS AND OTHER MATTERS, INCLUDING ESTIMATES OF
FUTURE PRICES AND OIL AND GAS RESERVES, MANY OF WHICH ARE INHERENTLY UNCERTAIN
OR BEYOND BARRETT RESOURCES' OR WILLIAMS' CONTROL, AND DOES NOT TAKE INTO
ACCOUNT ANY CHANGES IN BARRETT RESOURCES' OPERATIONS OR CAPITAL STRUCTURE WHICH
MAY RESULT FROM THE TENDER OFFER AND THE MERGER. IT IS NOT POSSIBLE TO PREDICT
WHETHER THE ASSUMPTIONS MADE IN PREPARING THE PROJECTIONS WILL BE VALID, AND
ACTUAL PRICES, OIL AND GAS RESERVE AMOUNTS AND RESULTS MAY PROVE TO BE MATERI-
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ALLY HIGHER OR LOWER THAN THOSE CONTAINED IN THE PROJECTIONS. THE INCLUSION OF
INFORMATION FROM THE PROJECTIONS SHOULD NOT BE REGARDED AS AN INDICATION THAT
WILLIAMS OR BARRETT RESOURCES CONSIDERED THAT INFORMATION A RELIABLE PREDICTOR
OF FUTURE EVENTS, AND THIS INFORMATION SHOULD NOT BE RELIED ON AS SUCH BY
BARRETT RESOURCES STOCKHOLDERS. NONE OF BARRETT RESOURCES, WILLIAMS OR ANY OF
THEIR RESPECTIVE REPRESENTATIVES ASSUMES ANY RESPONSIBILITY FOR THE VALIDITY,
REASONABLENESS, ACCURACY OR COMPLETENESS OF THE PROJECTIONS, AND BARRETT
RESOURCES HAS MADE NO REPRESENTATIONS OR WARRANTIES TO WILLIAMS REGARDING SUCH
INFORMATION.
Financial Projections
BARRETT RESOURCES CORPORATION
SELECTED INCOME STATEMENT INFORMATION
2001 2002 2003 2004 2005
-------- -------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
Revenue......................... $420,890 $657,847 $1,012,964 $1,285,639 $1,541,345
Production costs................ 231,846 317,075 446,187 569,970 686,634
Operating profit................ 189,044 340,773 566,776 715,669 854,711
Net income before taxes......... 208,361 315,479 551,683 708,794 855,211
Net income...................... 129,184 195,597 342,044 439,452 530,231
SELECTED BALANCE SHEET INFORMATION
2001 2002 2003 2004 2005
---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
ASSETS
Current assets................... $ 388,157 $ 393,023 $ 401,289 $ 565,288 $1,087,212
Property and equipment net....... 1,037,083 1,303,675 1,534,218 1,627,375 1,639,533
Other assets..................... 4,547 4,547 4,547 4,547 4,547
---------- ---------- ---------- ---------- ----------
Total assets........... $1,429,787 $1,701,245 $1,940,054 $2,197,210 $2,731,293
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities.............. $ 331,568 $ 326,494 $ 326,494 $ 326,494 $ 326,495
Long-term debt................... 405,000 405,000 210,000 -- --
Deferred income taxes payable.... 116,777 217,711 309,477 337,181 341,032
Other long-term liabilities...... 31,446 11,446 11,446 11,446 11,446
Total stockholders' equity....... 544,997 740,593 1,082,637 1,522,089 2,052,320
---------- ---------- ---------- ---------- ----------
Total liabilities and
stockholders'
equity............... $1,429,787 $1,701,245 $1,940,054 $2,197,210 $2,731,293
PROJECTED SELECTED ITEMS
2001 2002 2003 2004 2005
---- ---- ----- ----- -----
Production (Bcfe).................................... 129 188 257 326 393
Reserve additions (Bcfe)............................. 381 1138 703 713 787
Capital investment ($ millions)...................... 273 413 417 327 285
Production taxes (% of revenue)...................... 9.0% 9.6% 9.6% 9.9% 10.0%
Total revenue ($ millions)........................... 421 658 1,013 1,286 1,541
EBITDA ($ millions).................................. 294 488 753 950 1,128
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Financial Assumptions
In preparing the projections, Barrett Resources made numerous assumptions,
including, without limitation, those assumptions set forth in the following
table. These assumptions were based upon Barrett Resources management's
forecasts and estimates of future conditions. In addition to estimating items
such as oil and gas prices, costs, tax rates and depletion, depreciation and
amortization, Barrett Resources management also relied on production estimates
based on development drilling at higher rates than that currently taking place,
as well as other projects that Williams may or may not choose to pursue. It is
not possible to predict whether these assumptions made in preparing the
projections will be valid, and actual items assumed may prove to be materially
different than those contained in these assumptions.
CERTAIN FINANCIAL ASSUMPTIONS
2001 2002 2003 2004 2005
------ ------ ------ ------ ------
NYMEX gas price per Mcf........................... $ 4.50 $ 4.50 $ 4.50 $ 4.50 $ 4.50
Realized gas sales price per Mcf.................. $ 3.22 $ 3.46 $ 3.93 $ 3.94 $ 3.92
Realized oil sales price per Bbl.................. $24.00 $24.00 $24.00 $24.00 $24.00
Average lease operating expenses per Mcfe
(including transportation & gathering).......... $ 0.48 $ 0.47 $ 0.45 $ 0.47 $ 0.49
Average production tax rate....................... 9.00% 9.60% 9.60% 9.90% 10.00%
Average total production costs per Mcf............ $ 0.83 $ 0.84 $ 0.84 $ 0.86 $ 0.89
Depletion, depreciation & amortization rate per
Mcfe............................................ $ 0.82 $ 0.78 $ 0.72 $ 0.72 $ 0.70
Oil and Gas Reserve Information
As part of the due diligence process, Barrett Resources provided Williams
with certain information related to its "booked/proved" oil and gas reserves, as
well as certain estimates of "unbooked/unproved" reserves. These items are
described below. Barrett Resources indicated in information provided during the
due diligence process that it had booked/proved oil and gas reserves of 1,372
Bcfe and 8,008 Bcfe in unbooked/unproved reserves. Of the 8,008 Bcfe of
unbooked/unproved reserves, approximately 5,385 Bcfe of the unbooked/unproved
reserves were attributable to the Piceance and Powder River Basins, and
approximately 1,629 Bcfe of the unbooked/unproved reserves were attributable to
exploration activities. On April 24, 2001 and subsequent to Williams' receipt of
the foregoing reserve estimates, Barrett Resources issued a press release
announcing that, after a review by independent reservoir engineers, the estimate
of Barrett Resources' proved oil and gas reserves had been raised from 1,372
Bcfe to approximately 2,100 Bcfe; no further information was provided to
Williams by Barrett Resources regarding how and to what extent the booking of
these additional proved reserves would affect the estimates of unbooked/unproved
reserves. According to Barrett Resources, the estimates of "unbooked/unproved"
reserves that Barrett Resources provided to Williams were attributable to
Barrett Resources' belief in the potential for significant growth in its natural
gas reserves and production due to, among other things, its large acreage
position in the Piceance Basin (134,000 net acres) and the Powder River Basin
(476,000 net acres), geological and reservoir engineering data, increases in
production and its exploration activities.
Proved reserves are the estimated quantities of crude oil, natural gas and
natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions. Proved reserves are limited to
those quantities of oil and gas which can be expected, with little doubt, to be
recoverable commercially at current prices and costs, under existing regulatory
practices and with existing conventional equipment and operating methods.
Estimates of unbooked/unproved reserves are based upon analysis of geological
and engineering data which does not demonstrate such reserves to be proved under
existing economic and operating conditions, but indicates where such analysis
suggests some likelihood of their existence and future recovery. ESTIMATES OF
UNPROVED RESERVES ARE HIGHLY SPECULATIVE AND SHOULD NOT BE REGARDED AS AN
INDICATION THAT WILLIAMS OR BARRETT RESOURCES CONSIDERS THOSE
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ESTIMATES A RELIABLE PREDICTOR OF FUTURE PROVED RESERVES, AND THIS INFORMATION
SHOULD NOT BE RELIED ON AS SUCH. IN ADDITION, IT MAY NOT BE ECONOMICAL TO
RECOVER UNBOOKED/UNPROVED RESERVES IF THERE IS A DECLINE IN THE MARKET PRICE FOR
OIL AND GAS. THE ABILITY TO PRODUCE UNBOOKED/UNPROVED RESERVES IS ALSO HIGHLY
DEPENDENT ON GOVERNMENTAL REGULATIONS RELATING TO DRILLING OF OIL AND GAS WELLS.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Certain matters discussed above under "Certain Projections," including
without limitation, the projections and reserve information, are forward-looking
statements that involve risks and uncertainties. This information has been
included in this document for the limited purpose of giving Barrett Resources
stockholders access to projections and other information prepared by Barrett
Resources management that were made available to Williams. The projections were
based on assumptions concerning Barrett Resources' operations and business
prospects in 2001 through 2005, including the assumption that Barrett Resources
would continue to operate under the same ownership structure as existed at the
time the projections were prepared. The projections were also based on other
revenue, expense and operating assumptions. Information of this type is based on
estimates and assumptions that are inherently subject to significant economic
and competitive uncertainties and contingencies, all of which are also difficult
to predict and many of which are beyond Barrett Resources' and Williams'
control. These uncertainties and contingencies include, but are not limited to,
the following factors: changes in the economic conditions in the markets in
which Barrett Resources operates, including fluctuations in demand, seasonally
and otherwise; greater than anticipated competition or price pressures; changes
in market prices for gas and oil; new or alternative product offerings; better
or worse than expected customer consumption resulting in the need to expand
operations and make capital investments; the availability of resources to
recover gas and oil reserves and the impact of investments required to enter new
markets or remain competitive in established markets. Accordingly, there can be
no assurance that the projected results would be realized or that actual results
would not be significantly higher or lower than those set forth above. In
addition, the projections and other forward-looking information were not
prepared with a view to public disclosure or compliance with the published
guidelines of the SEC or the guidelines established by the American Institute of
Certified Public Accountants regarding projections and forecasts, and are
included in this proxy statement/prospectus only because such information was
made available to Williams in the due diligence process by Barrett Resources.
Neither Williams' nor Barrett Resources' independent accountants or independent
reservoir engineers have examined, compiled or applied any agreed upon
procedures to this information, and, accordingly, do not express an opinion or
any form of assurance with respect thereto and assume no responsibility for this
information. Neither Williams nor Barrett Resources intends to provide any
updated information with respect to the projections, reserve information or any
forward-looking statements. See "Risk Factors" for additional information.
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THE MERGER AGREEMENT
We believe this summary describes all material terms of the merger
agreement. However, because the merger agreement is the primary legal document
that governs the merger, we recommend that you read carefully the complete text
of the merger agreement for its precise legal terms and other information that
may be important to you. The merger agreement is included as Annex A to this
document and is incorporated by reference in this document.
THE TENDER OFFER
The merger agreement contemplated a tender offer by Williams for 16,730,502
shares of Barrett Resources common stock and prescribed the conditions to the
completion of the tender offer. Pursuant to the tender offer, Resources
Acquisition Corp., a wholly owned subsidiary of Williams, purchased 16,730,502
shares of Barrett Resources common stock, or approximately 50% of the
outstanding shares, at the price of $73.00 net, in cash, per share. The tender
offer was completed as of midnight on June 11, 2001.
THE MERGER
If all the conditions to the merger are satisfied or waived in accordance
with the merger agreement, Barrett Resources will merge with and into Resources
Acquisition (the "forward merger"). The company resulting from this forward
merger will be a wholly owned subsidiary of Williams. The forward merger will
have the effects specified by the merger agreement and the Delaware General
Corporation Law.
If certain conditions relating to the U.S. federal income tax treatment of
the tender offer and the forward merger are not satisfied, then, at Williams'
reasonable discretion, instead of the forward merger described above, a direct
or indirect subsidiary of Williams may merge with and into Barrett Resources
(the "reverse merger"). The company resulting from this reverse merger will be a
direct or indirect wholly owned subsidiary of Williams. The reverse merger will
have the effects specified by the merger agreement and the Delaware General
Corporation Law.
THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE MERGER ARE
MATERIALLY DIFFERENT FROM THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE
FORWARD MERGER. FOR A DESCRIPTION OF THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF
THE FORWARD MERGER AND THE REVERSE MERGER, AND HOW THEY DIFFER, SEE "MATERIAL
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES."
CONSIDERATION TO BE RECEIVED IN THE MERGER
On the date the merger is completed, each share of Barrett Resources common
stock (including the associated preferred stock purchase rights) you own will be
converted into the right to receive 1.767 shares of Williams common stock
(together with the associated preferred stock purchase rights). All Barrett
Resources shares will be cancelled and retired and each holder of a certificate
representing Barrett Resources shares will no longer have any rights with
respect to those shares, except the right to receive the merger consideration
described above. Each share of Barrett Resources common stock held in Barrett
Resources' treasury or by Williams or its subsidiaries (other than shares held
by Resources Acquisition, in the event of the reverse merger) will be cancelled
and retired without any payment.
Williams will not issue fractional shares of its common stock in the
merger. Instead, for any fractional share of Williams common stock that
otherwise would have been issued to you, you will receive cash in an amount
equal to the value of such fractional share. Such value will be calculated by
multiplying the fraction of a share of Williams common stock to which you would
otherwise be entitled by the closing price per share of Williams common stock on
the NYSE on the closing date of the merger.
No interest will be paid with respect to cash paid in lieu of fractional
shares of Williams common stock or any dividends or distributions declared or
paid on shares of Williams common stock issued in the merger.
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EFFECTIVE TIME OF THE MERGER
Barrett Resources and Williams agreed to file a certificate of merger with
the Secretary of State of the State of Delaware as soon as practicable after the
satisfaction or waiver of the conditions to the merger contained in the merger
agreement. The merger will become effective upon the filing of the certificate
of merger unless we agree to specify a later time in the certificate of merger.
Barrett Resources and Williams expect to complete the merger shortly after the
special meeting.
EXCHANGE PROCEDURES
After the effective time of the merger, EquiServe Trust Company, N.A., as
the exchange agent, will mail to each person who held shares of Barrett
Resources common stock at the effective time of the merger a letter of
transmittal. This letter will include instructions for the exchange of Barrett
Resources stock certificates for Williams stock certificates. After surrendering
a Barrett Resources stock certificate together with the letter of transmittal
(or transferring the holder's Barrett Resources common stock to the account of
the exchange agent using the "book-entry" procedures described in the letter of
transmittal), and any other documents the exchange agent reasonably requires,
the holder of a Barrett Resources stock certificate will be entitled to receive
a Williams stock certificate (or a book-entry credit of such Williams common
stock to the holder's brokerage account). BARRETT RESOURCES STOCKHOLDERS SHOULD
NOT SEND IN THEIR BARRETT RESOURCES COMMON STOCK CERTIFICATES UNTIL THEY RECEIVE
A LETTER OF TRANSMITTAL.
In addition to a certificate representing Williams common stock (or a
book-entry credit of such stock to the holder's brokerage account), the holder
of a surrendered Barrett Resources stock certificate will receive the amount of
cash to which the holder is entitled, including:
- at the time of surrender of the certificate (or book-entry transfer),
cash paid instead of fractional shares;
- at the time of surrender of the certificate (or book-entry transfer), any
dividends or other distributions on the shares of Williams common stock
that have a record date after the effective time of the merger, and a
payment date before or on the date the holder surrenders the certificate
(or makes a book-entry transfer), less any withholding taxes; and
- at the appropriate payment date, any dividends or other distributions on
the shares of Williams common stock that have a record date after the
effective time of the merger but prior to the date the holder surrenders
the certificate (or makes a book-entry transfer), and a payment date
after the date the holder surrenders the certificate (or makes a
book-entry transfer), less any withholding taxes.
However, no cash will be paid to any holder of a Barrett Resources common
stock certificate until that holder surrenders the certificate (or makes a
book-entry transfer).
After the merger, there will be no transfers on the transfer books of
Barrett Resources of shares of Barrett Resources common stock that were
outstanding immediately before the merger. Any Williams stock certificate and
any cash deposited by Williams with the exchange agent that remains unclaimed by
former Barrett Resources stockholders 12 months after the merger will be
delivered to Williams.
None of Williams, Barrett Resources or the exchange agent will be liable to
any holder of a certificate previously representing shares of Barrett Resources
common stock for any amount delivered to a public official under any applicable
abandoned property, escheat or similar law.
No interest will be paid or accrued on any cash payable instead of
fractional shares, as unpaid dividends and distributions with respect to
unexchanged shares or otherwise as merger consideration.
If your Barrett Resources stock certificates have been lost, stolen or
destroyed, you will only be entitled to obtain shares of Williams common stock
by providing an affidavit and, if required by Williams, by posting a bond in a
reasonable amount determined by Williams as indemnity against any claims related
to your Barrett Resources stock certificate.
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YOU SHOULD NOT SEND YOUR BARRETT RESOURCES STOCK CERTIFICATES TO THE
EXCHANGE AGENT UNTIL YOU HAVE RECEIVED TRANSMITTAL MATERIALS FROM THE EXCHANGE
AGENT. DO NOT RETURN BARRETT RESOURCES SHARE CERTIFICATES WITH THE ENCLOSED
PROXY.
BARRETT RESOURCES STOCK OPTIONS
Subject to certain exceptions described below, each option to buy shares of
Barrett Resources common stock that was outstanding immediately prior to the
completion of the tender offer vested and became fully exercisable at that time,
as provided in the merger agreement. At the time of the completion of the tender
offer (or, with respect to options held by persons who are subject to the
reporting requirements of Section 16(a) of the Securities Exchange Act of 1934,
at the completion of the merger), each of these options was (or will be, as the
case may be) adjusted to represent an option to buy the number of shares of
Barrett Resources common stock (rounded down to the nearest whole share) equal
to the number of shares of Barrett Resources common stock subject to that option
multiplied by 0.5. The exercise price of these adjusted options is (or will be,
as the case may be) equal to the exercise price immediately prior to the
completion of the tender offer.
Promptly following the completion of the tender offer (or, with respect to
options held by persons who are subject to the reporting requirements of Section
16(a) of the Securities Exchange Act of 1934, promptly following the completion
of the merger), Williams paid (or will pay, as the case may be) to holders of
Barrett Resources options, for each option held, an amount in cash (rounded up
to the nearest cent) equal to the product of (1) $73.00 minus the exercise price
per share immediately prior to the completion of the tender offer and (2) the
number of shares subject to that option multiplied by 0.5 (rounded up to the
nearest full share).
Upon completion of the merger, each Barrett Resources stock option, as
adjusted as described above, will be converted into an option to purchase that
number of shares of Williams common stock (rounded to the nearest whole share,
or if there is not a nearest share, the next greater whole share) equal to the
number of shares of Barrett Resources common stock subject to that adjusted
stock option multiplied by the exchange ratio of 1.767. The exercise price will
be adjusted to equal the exercise price of the adjusted stock option immediately
before the completion of the merger, divided by 1.767 (and will be rounded up to
the nearest tenth of a cent). Upon completion of the merger, Williams will
assume the obligations of Barrett Resources under the Barrett Resources option
plans, and the other terms of these options will continue to apply in accordance
with the terms of the plans under which they were issued. Barrett Resources and
Williams also agreed to take all actions so that these converted options will
qualify following the merger as incentive stock options as defined in Section
422 of the Internal Revenue Code ("ISOs") to the extent permitted by that
Section and to the extent these options so qualified before the effective time
of the merger. In addition, Williams has agreed to file a registration statement
on Form S-8 or other applicable form under the Securities Act of 1933 to
register the shares issuable upon the exercise of these converted options.
To the extent possible, and notwithstanding the foregoing, any unvested
ISOs outstanding on the date the tender offer was completed that did not become
exercisable upon completion of the tender offer pursuant to the terms of the
applicable option plan under which the ISOs were granted will be converted into
the right to receive cash in full upon completion of the merger and the other
options held by the holder of any such ISOs will be adjusted so that the total
amount of cash paid to such option holder in respect of all of his or her
Barrett Resources options (including in respect of his or her unvested ISOs) is
not increased because of the treatment of unvested ISOs as described above.
CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING CORPORATION
The certificate of incorporation and the by-laws of Resources Acquisition
Corp., the Williams subsidiary that will merge with Barrett Resources, that are
in effect immediately before the merger is completed will become the certificate
of incorporation and the by-laws of the surviving corporation, except that the
certificate of incorporation will provide that the name of the surviving
corporation will initially be "Barrett Resources Corporation" and the
certificate of incorporation and the by-laws will each contain indemnification
provisions
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consistent with the obligations described under "The Merger -- Interests of
Directors and Executive Officers of Barrett Resources in the
Merger -- Indemnification and Insurance," below.
MANAGEMENT OF BARRETT RESOURCES AFTER THE TENDER OFFER AND BEFORE THE MERGER
As provided in the merger agreement, following the completion of the tender
offer Williams designated four directors to the board of directors of Barrett
Resources. However, until the merger is completed, the Barrett Resources board
will include at least two directors who are not officers of Barrett Resources or
Williams. If there are less than two such independent directors, the remaining
independent director will appoint an additional independent director. If no
independent director remains on the Barrett Resources board, the other directors
will designate two directors who will not be officers of Williams, Barrett
Resources or any of their subsidiaries.
Following the appointment of Williams' designees to the Barrett Resources
board and prior to the completion of the merger, the affirmative vote of a
majority of the independent directors of the Barrett Resources board is required
for:
- any amendment or waiver of any term or condition of the merger agreement
or organizational documents of Barrett Resources; and
- any termination of the merger agreement by Barrett Resources, any
extension by Barrett Resources of the time for the performance of any of
the obligations or other acts of Williams or waiver or assertion of any
of Barrett Resources' rights under the merger agreement, and any other
consent or action by Barrett Resources' board with respect to the merger
agreement.
Williams' designees will continue to represent at least one-half of the
members of the Barrett Resources board until the completion of the merger.
REPRESENTATIONS AND WARRANTIES
In the merger agreement, Barrett Resources has made representations and
warranties relating to, among other things:
- corporate matters, including due organization and good standing;
- subsidiaries;
- capital structure and securities;
- authorization, execution, delivery and enforceability of the merger
agreement;
- absence of conflicts with organizational documents or other obligations;
- governmental filings;
- absence of non-competition agreements;
- SEC filings;
- absence of material adverse changes;
- accuracy of information supplied;
- compliance with applicable laws and regulations;
- taxes;
- liabilities;
- litigation matters;
- employee benefits;
- state takeover laws and related matters;
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- brokers' and finders' fees with respect to the tender offer and the
merger;
- voting requirements;
- contracts and debt instruments;
- title to properties;
- intellectual property;
- environmental matters;
- condition of assets; and
- derivative transactions.
In the merger agreement, Williams has made representations and warranties
relating to, among other things:
- corporate matters, including due organization and good standing;
- subsidiaries;
- capital structure and securities;
- authorization, execution, delivery and enforceability of the merger
agreement;
- absence of conflicts with organizational documents or other obligations;
- SEC filings;
- the absence of material adverse changes;
- accuracy of information supplied;
- compliance with applicable laws and regulations;
- shares to be issued in the merger;
- tax treatment of the merger;
- liabilities;
- interim operations of Resources Acquisition Corp.;
- litigation matters;
- credit exposure in California; and
- brokers' and finders' fees with respect to the tender offer and the
merger.
Many of the representations and warranties made by Barrett Resources and
Williams are qualified by a materiality threshold specified in the merger
agreement.
COVENANTS RELATING TO CONDUCT OF BUSINESS
Barrett Resources and Williams have each agreed to, in all material
respects, conduct their businesses in the ordinary course as currently conducted
until the completion of the merger (or, in the case of Barrett Resources, until
Williams' designees constitute a majority of the directors on the Barrett
Resources board).
In addition, except as permitted by the merger agreement, Barrett Resources
will not, and will not permit any of its subsidiaries to, take specified actions
listed in the merger agreement, including the following actions (subject to
certain exceptions), without the written consent of Williams (not to be
unreasonably withheld or delayed):
- declare, set aside or pay any dividend other than dividends by its
subsidiaries;
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- split, combine or reclassify any outstanding shares;
- issue, sell, pledge or encumber any shares of its capital stock or any
securities convertible into shares of its capital stock;
- purchase or redeem any shares of its capital stock or any securities
convertible into shares of its capital stock;
- amend its organizational documents;
- make any investments, acquisitions or capital expenditures above
specified amounts;
- sell, lease or encumber any assets with a value above specified amounts;
- increase the compensation or benefits payable to any director, officer or
employee in excess of specified amounts, or modify any benefit plan,
except as may be required by the terms of the plan, the terms of the
merger agreement or applicable law;
- make any material change in its method of accounting;
- make any material tax election or enter into any settlement or compromise
of any material tax liability;
- mortgage or encumber properties or assets, or license any intellectual
property, other than in the ordinary course or in accordance with
existing contracts;
- subject to specified exceptions, pay or discharge liabilities other than
in the ordinary course;
- subject to specified exceptions, incur or guarantee any debt or issue or
guarantee debt securities, or enter into "keep well" or similar
agreements; or
- authorize or enter into an agreement to do any of the foregoing.
Except as permitted by the merger agreement, prior to the completion of the
merger Williams will not, and will not permit any of its subsidiaries to, take
specified actions listed in the merger agreement, including the following
actions, without the written consent of Barrett Resources (not to be
unreasonably withheld or delayed):
- amend Williams' charter in a manner that changes any material term or
provision of the Williams common stock;
- materially amend Resources Acquisition Corp.'s charter;
- engage in any material repurchase at a premium, recapitalization,
restructuring or reorganization with respect to Williams' capital stock;
- acquire any person or any business or division of any person, or
otherwise acquire any assets, unless such transaction would not:
- impose any material delay in the receipt of, or materially increase
the risk of not receiving, any approvals of any governmental entity
necessary to complete the tender offer or the merger;
- materially increase the risk of any governmental entity entering an
order prohibiting the completion of the merger; or
- increase the risk of not being able to remove any such order on appeal
or otherwise; or
- enter into any contract or agreement to do any of the foregoing.
Until the completion of the merger, Resources Acquisition Corp. will not
engage in any activity of any nature except as provided in or contemplated by
the merger agreement.
Williams has agreed to vote all shares of Barrett Resources common stock
held by it or its subsidiaries, including Resources Acquisition Corp., and
including shares purchased in the tender offer, in favor of approval and
adoption of the merger agreement and the merger.
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OTHER COVENANTS
Special Meeting and Board Recommendation
Barrett Resources agreed to:
- call and hold a special meeting of its stockholders for the purpose of
voting on the approval and adoption of the merger agreement and the
merger;
- use its reasonable best efforts to solicit proxies in favor of the merger
agreement and the merger; and
- take all other actions reasonably necessary or advisable to secure the
approval of the merger agreement and the merger by Barrett Resources
stockholders.
Barrett Resources agreed that the Barrett Resources board would, subject to
its fiduciary duties under applicable law, include its recommendation of the
merger and the merger agreement in this proxy statement/prospectus.
Tax-Free Merger
Barrett Resources and Williams have each agreed to use commercially
reasonable best efforts to cause the tender offer and the forward merger to
qualify as a "reorganization" for U.S. federal income tax purposes and not to
take any action reasonably likely to cause such transactions not to qualify as
such a "reorganization."
Standstill Agreements
Barrett Resources agreed to enforce and not terminate, modify or waive any
standstill provision of any confidentiality or standstill agreement between
Barrett Resources and other parties entered into prior to the date of the merger
agreement in connection with the process conducted by Barrett Resources to
solicit acquisition proposals.
Rights Plan
Barrett Resources agreed not to, without the prior written consent of
Williams, amend or make any determination under the Barrett Resources rights
agreement, except as expressly required by the merger agreement or in order to
delay the occurrence of a distribution date (as defined in the Barrett Resources
rights agreement) in response to the public announcement of an alternative
acquisition proposal.
Bank Debt
Barrett Resources has agreed to use its reasonable best efforts to seek the
consent of its bank lenders and the issuers of letters of credit to Barrett
Resources to permit the completion of the transactions contemplated by the
merger agreement without requiring repayment of this debt or replacement of
these letters of credit. The consent of such lenders was received on June 12,
2001.
Notice of Certain Matters
Williams and Barrett Resources have agreed to notify each other promptly of
any notices or communications received from any governmental entity in
connection with the transactions contemplated by the merger agreement and of
certain other events.
Access
Upon reasonable notice and subject to the confidentiality agreement between
Barrett Resources and Williams, Barrett Resources and Williams each agreed to
afford to the other party and its representatives reasonable access, during
normal business hours, to its properties, books, contracts, commitments, records
and representatives.
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Public Announcements
Except as may be required by applicable law or a listing agreement with a
securities exchange, Barrett Resources and Williams agreed to consult with each
other regarding the timing and content of any press release and public
statements with respect to the merger agreement.
Antitrust Filings
Williams and Barrett Resources agreed to:
- promptly make or cause to be made the filings required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and any other
antitrust laws with respect to the tender offer and the merger;
- comply at the earliest practicable date with any request under the
Hart-Scott-Rodino Act or such other antitrust laws for additional
information; and
- cooperate with each other in connection with any such filing and in
connection with resolving any investigation or other inquiry of any
governmental entity under any antitrust laws with respect to any such
filing, the tender offer or the merger.
Williams and Barrett Resources filed Premerger Notification and Report
Forms under the Hart-Scott-Rodino Act on May 16, 2001 and May 18, 2001,
respectively. The Federal Trade Commission granted early termination of the
waiting period under the Hart-Scott-Rodino Act on May 30, 2001.
Directors and Executive Officers of Barrett Resources
The directors of Resources Acquisition Corp. immediately prior to the
completion of the merger will initially be the directors of the surviving
corporation and the executive officers of Barrett Resources immediately prior to
the completion of the merger will initially be the officers of the surviving
corporation.
Barrett Resources Principal Offices
Williams currently anticipates that the Barrett Resources principal offices
in Denver, Colorado will serve as the Rocky Mountain principal offices for
Williams' oil and gas exploration operations after the merger.
EMPLOYEE BENEFITS
For a description of the treatment of employee benefits matters under the
merger agreement, see "The Merger -- Interests of Executive Officers and
Directors of Barrett Resources in the Merger -- Severance Arrangements" and
"-- Employee Benefits."
INDEMNIFICATION AND INSURANCE
For a description of the treatment of indemnification and insurance under
the merger agreement, see "The Merger -- Interests of Executive Officers and
Directors of Barrett Resources in the Merger -- Indemnification and Insurance."
NO SOLICITATION; ACQUISITION PROPOSALS
Until the merger is completed or the merger agreement is terminated,
Barrett Resources has agreed that it will not, directly or indirectly through
its representatives:
- solicit or knowingly facilitate the submission of any alternative
acquisition proposal;
- enter into any agreement with respect to any alternative acquisition
proposal;
- have any discussions or negotiations with, or provide any confidential
information to, any person relating to any alternative acquisition
proposal; or
- enter into any letter of intent or agreement relating to any alternative
acquisition proposal.
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Under the merger agreement, an alternative acquisition proposal is:
- any proposal or offer which relates to a merger or other business
combination involving Barrett Resources; or
- any issuance or acquisition of, or offer to purchase, 20% or more of the
outstanding shares of Barrett Resources common stock, or of a substantial
portion of the business or assets of Barrett Resources outside the
ordinary course of business.
In addition, the merger agreement requires Barrett Resources to:
- immediately terminate all existing discussions or negotiations with any
third parties relating to any alternative proposal;
- notify Williams of any alternative acquisition proposal within
twenty-four hours of receiving that proposal; and
- keep Williams informed of the status of any alternative acquisition
proposal.
Prior to the completion of the tender offer, Barrett Resources was
permitted to engage in discussions or negotiations with respect to unsolicited
third-party acquisition proposals under specified circumstances.
Notwithstanding the foregoing, under the merger agreement, Barrett
Resources may take and disclose to its stockholders a position as required by
Rule 14d-9 or Rule 14e-2(a) under the Securities Exchange Act of 1934.
RECOMMENDATION OF THE BARRETT RESOURCES BOARD
The Barrett Resources board is prohibited under the merger agreement from
doing any of the following (each of which is referred to as a "subsequent
determination"):
- withdrawing or adversely modifying its recommendation of the merger
proposal;
- approving or recommending an alternative acquisition proposal; or
- causing Barrett Resources to enter into any agreement relating to an
alternative acquisition proposal.
Prior to the completion of the tender offer, the Barrett Resources board
was permitted to make a subsequent determination if it determined in good faith,
after it received a superior proposal (as defined in the merger agreement) and
advice from outside counsel, that the failure to make such a subsequent
determination would result in a breach by the board of its fiduciary duties to
Barrett Resources stockholders under applicable law.
CONDITIONS TO THE MERGER
The obligations of each of Williams and Barrett Resources to complete the
merger are subject to the satisfaction of, among others, the following
conditions:
- approval of the merger proposal by Barrett Resources stockholders;
- the absence of any injunction or legal restraint blocking the merger; and
- the approval for listing on the NYSE of the shares of Williams common
stock to be issued in the merger.
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TERMINATION OF THE MERGER AGREEMENT
Barrett Resources and Williams can jointly agree to terminate the merger
agreement at any time before completing the merger. In addition, either Barrett
Resources or Williams can terminate the merger agreement if:
- any condition contained in the merger agreement becomes incapable of
being satisfied; or
- a law or court order permanently prohibits the merger.
Barrett Resources can also terminate the merger agreement if Williams (or
its subsidiary) materially breaches its representations, warranties or covenants
under the merger agreement after notice and an opportunity to cure the breach
for 10 days after receipt of the notice.
Williams can terminate the merger agreement if Barrett Resources materially
breaches its representations, warranties or covenants under the merger agreement
after notice and an opportunity to cure the breach for 10 days after receipt of
the notice. Williams can also terminate the merger agreement if Barrett
Resources breaches its covenant not to make a subsequent determination after the
completion of the tender offer.
FEES AND EXPENSES
Whether or not the merger is completed, Barrett Resources and Williams will
pay their own fees and expenses, except that Williams will reimburse Barrett
Resources for its reasonable out-of-pocket expenses up to $15 million if the
merger agreement is terminated by Barrett Resources as a result of a material
breach by Williams of a representation, warranty or covenant that cannot be
cured within 10 days of written notice of that breach.
AMENDMENTS; EXTENSION; WAIVER
Upon agreement by Barrett Resources (as approved by a majority of its
independent directors -- see "Management of Barrett Resources after the Tender
Offer and before the Merger") and Williams, the merger agreement may be amended
at any time prior to the merger. To the extent required by applicable law, after
Barrett Resources stockholders have approved and adopted the merger agreement
and the merger, Barrett Resources and Williams may amend the merger agreement
only with the further approval of those stockholders.
At any time before the merger is completed, we may, to the extent legally
allowed:
- extend the time for the performance of any of the obligations or other
acts of the parties to the merger agreement;
- waive any inaccuracies in the representations and warranties contained in
the merger agreement or in any document delivered in accordance with the
merger agreement; and
- waive compliance with any of the agreements or conditions contained in
the merger agreement.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material United States federal income tax
consequences of the tender offer and the merger applicable to a person that
exchanges some or all of its Barrett Resources common stock for Williams common
stock pursuant to the merger. This discussion is based upon the Internal Revenue
Code of 1986, as amended (the "Code"), Treasury Regulations, judicial
authorities, published positions of the Internal Revenue Service (the "IRS") and
other applicable authorities, all as in effect on the date of this document and
all of which are subject to change or differing interpretations (possibly with
retroactive effect). This discussion is limited to United States persons that
hold their shares of Barrett Resources common stock as capital assets for United
States federal income tax purposes (generally, assets held for investment). This
discussion does not address all of the tax consequences that may be relevant to
a particular holder of shares or to a holder of shares that is subject to
special treatment under United States federal income tax laws. No assurance can
be given that the IRS would not assert, or that a court would not sustain, a
position contrary to any of the tax aspects set forth below. HOLDERS OF SHARES
OF BARRETT RESOURCES COMMON STOCK MUST CONSULT THEIR OWN TAX ADVISORS AS TO THE
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE TENDER OFFER AND THE
MERGER, AS WELL AS THE EFFECTS OF STATE, LOCAL AND NON-UNITED STATES TAX LAWS.
Williams expects that the tender offer and the merger will be treated as a
single integrated transaction for United States federal income tax purposes. If
the tender offer and the merger are so treated and assuming that the merger is
effected as a merger of Barrett Resources with and into the Williams subsidiary
(the "forward merger"), then the tender offer and the forward merger will be
treated as a "reorganization" within the meaning of Section 368(a) of the Code.
As such a "reorganization," the United States federal income tax consequences of
the tender offer and the forward merger can be generally summarized as follows:
Exchange of Shares Solely for Williams Common Stock. A holder of
shares of Barrett Resources common stock that exchanges all of its shares
for shares of Williams common stock pursuant to the forward merger will not
recognize any gain or loss except with respect to cash received in lieu of
a fractional share of Williams common stock (as described below).
Exchange of Shares for Cash and Williams Common Stock. A holder of
shares of Barrett Resources common stock that had some of its shares
accepted for tender in the tender offer and exchanges some of its shares
for shares of Williams common stock pursuant to the forward merger will
recognize gain (but not loss) in an amount equal to the lesser of (1) the
amount of cash received pursuant to the tender offer and (2) an amount
equal to the excess, if any, of (a) the sum of the amount of cash received
pursuant to the tender offer and the fair market value of the Williams
common stock received pursuant to the forward merger over (b) the holder's
tax basis in its shares of Barrett Resources common stock. The gain
recognized will be capital gain unless the receipt of cash by the holder
has the effect of a distribution of a dividend, in which case such gain
will be treated as ordinary dividend income to the extent of the holder's
ratable share of accumulated earnings and profits as calculated for United
States federal income tax purposes. For purposes of determining whether the
receipt of cash by the holder has the effect of a distribution of a
dividend, a holder will be treated as if the holder first exchanged all of
its shares of Barrett Resources common stock solely for shares of Williams
common stock and then Williams immediately redeemed a portion of such stock
for the cash that such holder actually received pursuant to the tender
offer. The IRS has indicated in rulings that any reduction in the interest
of a minority stockholder that owns a small number of shares in a publicly
and widely held corporation and that exercises no control over corporate
affairs would receive capital gain (as opposed to dividend) treatment. In
determining whether the receipt of cash has the effect of a distribution of
a dividend, certain constructive ownership rules must be taken into
account. Holders that sold some of their shares of Barrett Resources common
stock for cash pursuant to the tender offer and exchange some of their
shares of Barrett Resources common stock for shares of Williams common
stock pursuant to the forward merger must consult their own tax advisors as
to the character of any gain recognized.
Tax Basis for Williams Common Stock. A holder of shares of Barrett
Resources common stock will have an aggregate tax basis in Williams common
stock received pursuant to the forward merger equal to the holder's
aggregate tax basis in its shares of Barrett Resources common stock
surrendered pursuant
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to the tender offer and the forward merger, (1) reduced by (a) the portion
of the holder's tax basis in its shares of Barrett Resources common stock
surrendered in the forward merger that is allocable to a fractional share
of Williams common stock for which cash is received and (b) the amount of
cash, if any, received by the holder pursuant to the tender offer, and (2)
increased by the amount of gain (including any portion of such gain that is
treated as a dividend as described above), if any, recognized by the holder
in the tender offer (but not by gain recognized upon the receipt of cash in
lieu of a fractional share of Williams common stock pursuant to the forward
merger).
Holding Period for Williams Common Stock. The holding period for
Williams common stock received by a holder of shares of Barrett Resources
common stock pursuant to the forward merger will include the holding period
for the shares of Barrett Resources common stock surrendered in the tender
offer and the forward merger.
Cash Received in Lieu of a Fractional Share of Williams Common
Stock. If a holder of shares of Barrett Resources common stock receives
cash in lieu of a fractional share of Williams common stock in the forward
merger, the holder will generally recognize capital gain or loss equal to
the difference between the amount of cash received in lieu of the
fractional share and the portion of the holder's tax basis in its shares of
Barrett Resources common stock surrendered in the forward merger that is
allocable to the fractional share. The capital gain or loss will be
long-term capital gain or loss if the holder's holding period for the
portion of the shares deemed exchanged for the fractional share is more
than one year at the effective time of the forward merger.
Treatment of the Entities. No gain or loss will be recognized by
Williams, its subsidiary or Barrett Resources as a result of the tender
offer or the merger.
Under the merger agreement, Williams has agreed to use its reasonable best
efforts to obtain an opinion of Skadden, Arps, Slate, Meagher & Flom, LLP (which
includes its affiliated law practice entities) or another nationally recognized
United States federal income tax counsel or "Big Five" accounting firm that,
based on the facts and customary representations and assumptions, the tender
offer and the forward merger will be treated as a "reorganization" within the
meaning of Section 368(a) of the Code. Williams expects to be able to obtain the
tax opinion if:
- as expected, the proposed forward merger occurs in the ordinary course
after completion of the tender offer;
- Williams and Barrett Resources are able to deliver customary
representations to such counsel or "Big Five" accounting firm;
- there is no adverse change in United States federal income tax law; and
- at the effective time of the forward merger, the aggregate fair market
value of the Williams common stock delivered as consideration pursuant to
the forward merger is greater than 40% of the sum of (1) the aggregate
fair market value of such Williams common stock and (2) the aggregate
amount of cash paid pursuant to the tender offer and the forward merger.
The tax opinion is not a condition to completing the tender offer or the
merger. If Williams obtains the tax opinion, then the merger will be effected as
a forward merger (and the United States federal income tax consequences will be
as summarized above). An opinion of counsel or "Big Five" accounting firm is not
binding on the IRS or any court. If Williams is not able to obtain the tax
opinion, then Williams may, at its reasonable discretion, change the merger in
form from a forward merger to a merger of the Williams subsidiary (or another
direct or indirect wholly owned subsidiary of Williams) with and into Barrett
Resources (the "reverse merger"), which, as summarized below, will be a fully
taxable transaction for all holders of shares of Barrett Resources common stock
(but not for Williams, its subsidiary or Barrett Resources). It is anticipated
that Williams will exercise its discretion to change the merger to a reverse
merger from a forward merger if Williams is unable to obtain the tax opinion.
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In the event of the reverse merger, the tax consequences to holders of
shares of Barrett Resources common stock would differ materially from those
summarized above and would be as follows:
- Each holder of shares of Barrett Resources common stock that had any of
its tendered shares accepted for tender in the tender offer will
recognize capital gain or loss in an amount equal to the difference
between the amount of cash received and the holder's tax basis in such
shares. The capital gain or loss will be long-term capital gain or loss
if the holder had held such shares for more than one year at the time
such shares were sold in the tender offer.
- Each holder of shares of Barrett Resources common stock that exchanges
any of its shares for Williams common stock pursuant to the reverse
merger will recognize capital gain or loss in an amount equal to the
difference between the fair market value of the Williams common stock
received pursuant to the reverse merger (including any cash received in
lieu of a fractional share of Williams common stock) and the holder's tax
basis in such shares. The capital gain or loss will be long-term capital
gain or loss if the holder has held the shares surrendered in the reverse
merger for more than one year at the time of completion of the reverse
merger.
The determination by counsel or a "Big Five" accounting firm as to whether
the tender offer and the proposed forward merger will be treated as a
"reorganization" within the meaning of Section 368(a) of the Code will depend
upon the facts and law existing at the effective time of the proposed forward
merger. It is possible that Williams will not be able to obtain the tax opinion.
THUS, NO ASSURANCE CAN BE GIVEN THAT THE FORM OF THE MERGER WILL BE A FORWARD
MERGER AS OPPOSED TO A FULLY TAXABLE REVERSE MERGER.
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INFORMATION ABOUT BARRETT RESOURCES
Barrett Resources Corporation is an independent oil and natural gas
exploration and production company that is also involved in natural gas
gathering, marketing and trading activities. Its corporate offices are located
at 1515 Arapahoe Street, Tower 3, Suite 1000, Denver, Colorado 80202, telephone
number (303) 572-3900.
Barrett Resources' core areas of activity are in the Rocky Mountain Region
of Colorado, Wyoming and Utah, the Mid-Continent area of Kansas and Oklahoma and
the Gulf of Mexico region of offshore Texas and Louisiana. At December 31, 2000,
Barrett Resources' estimated proved reserves were 1.372 trillion cubic feet of
natural gas equivalent ("Tcfe") (96% natural gas and 4% crude oil) with an
implied reserve life of 11.6 years based on 2000 total production of 117.6
billion cubic feet of natural gas equivalent. Barrett Resources' net daily
production averaged 321 million cubic feet of natural gas equivalent for the
year ended December 31, 2000. On April 24, 2001, Barrett Resources issued a
press release announcing that, after a review by independent reservoir
engineers, the estimated proved reserves had been raised to 2.1 Tcfe, with an
implied reserve life of 17.9 years based on 2000 annual production.
Barrett Resources concentrates its activities in core areas in which it has
accumulated detailed geologic knowledge and developed significant technical
expertise. Barrett Resources continues to build on its interests in the Piceance
Basin in northwestern Colorado, the Wind River Basin in central Wyoming, the
Powder River Basin of northeastern Wyoming and the Uinta Basin of northern Utah.
In October 2000, Barrett Resources acquired a new coal bed methane property in
the Raton Basin of south central Colorado. Barrett Resources also has
significant interests in the Hugoton Embayment in southwestern Kansas, the
Niobrara Play in northeastern Colorado, and the Anadarko Basin in Oklahoma. At
December 31, 2000, these principal areas represented approximately 97% of
Barrett Resources' estimated proved reserves.
As of December 31, 2000, Barrett Resources owned an interest in 4,284
wells, of which 3,441 were producing. Of these producing wells, 2,680 were
operated by Barrett Resources. These operated wells contributed approximately
91% of Barrett Resources' oil and natural gas production for the year ended
December 31, 2000. The company also owns and operates a natural gas gathering
system, a 27-mile pipeline and a natural gas processing plant in the Piceance
Basin.
Barrett Resources markets all of its own oil and natural gas production
from wells that it operates. In addition, Barrett Resources engages in natural
gas trading activities, which involve purchasing natural gas from third parties
and selling natural gas to other parties at prices and volumes that management
anticipates will result in profits to Barrett Resources.
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STOCKHOLDERS OF BARRETT RESOURCES
On July 2, 2001, there were [33,479,127] shares of Barrett Resources common
stock outstanding. The following table sets forth certain information regarding
the beneficial ownership of Barrett Resources common stock according to
information furnished to Barrett Resources as of July 2, 2001, by (1) each of
Barrett Resources directors and executive officers, (2) each of Barrett
Resources "named executive officers" within the meaning of Item 402(a)(3) of
Regulation S-K (consisting of Messrs. Dea, Jaggers, Reed, Keller and Lang), (3)
all directors and executive officers of Barrett Resources as a group (16
persons), and (4) each other person known by Barrett Resources to be a
beneficial owner of more than 5% of the outstanding Barrett Resources common
stock. Beneficial ownership for each individual listed below does not include
shares that were purchased from each such individual by Williams and its
subsidiary in the tender offer. Note that Mr. Reed's beneficial ownership of
shares of such common stock is not set forth in the following table because he
resigned from Barrett Resources on January 4, 2001.
PERCENT OF CLASS
AMOUNT/NATURE OF BENEFICIALLY
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OWNED
------------------------ -------------------- ----------------
Keith E. Bailey........................................... 0(1) *
C. Robert Buford.......................................... 644,866(2) 1.9%
Derrill Cody.............................................. 30,165(3) *
Peter A. Dea.............................................. 313,810(4) *
Bryan K. Guderian......................................... 0(1) *
Ralph A. Hill............................................. 0(1) *
Joseph N. Jaggers......................................... 148,402(4) *
J. Frank Keller........................................... 134,536(4) *
Eugene A. Lang, Jr. ...................................... 135,208(4) *
Stephen J. Malcolm........................................ 0(1) *
Philippe S.E. Schreiber................................... 33,147(3) *
All Directors and Executive Officers as a Group (16
Persons)................................................ 1,681,146(1)(5) 5.0%
The Williams Companies, Inc.,
through Resources Acquisition Corp. .................... 16,730,502 50.0%
One Williams Center
Tulsa, OK 74172
* Less than 1% of the Barrett Resources common stock outstanding.
(1) Messrs. Bailey, Guderian, Hill and Malcolm are the representatives of
Williams on the Barrett Resources board. Messrs. Bailey, Guderian, Hill and
Malcolm each disclaims beneficial ownership of the 16,730,502 shares held by
Williams' wholly owned subsidiary, Resources Acquisition Corp.
(2) C. Robert Buford is considered a beneficial owner of the 523,210 shares of
which Zenith Drilling Corporation is the record owner. Mr. Buford owns
approximately 89 percent of the outstanding common stock of Zenith. The
number of shares indicated for Mr. Buford also includes 10,000 shares that
are owned by Aguilla Corporation, which is owned by Mr. Buford's wife and
adult children. Mr. Buford disclaims beneficial ownership of the shares held
by Aguilla Corporation pursuant to Rule 16a-1(a)(4) under the Exchange Act.
The number of shares indicated also includes 30,000 shares underlying stock
options that currently are exercisable.
(3) The number of shares indicated includes the following number of shares
underlying options that currently are exercisable: Derrill Cody, 23,900 and
Philippe S.E. Schreiber, 30,000.
(4) The number of shares indicated includes the following number of shares
underlying options that currently are exercisable or that may become
exercisable within 60 days following July 2, 2001: [Peter A. Dea,
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301,076; Joseph N. Jaggers, 148,364; J. Frank Keller, 113,980; and Eugene A.
Lang, Jr., 126,797. The number of shares indicated does not include the
following number of shares underlying unvested incentive stock options, all
of which will be converted into cash upon completion of the merger: Peter A.
Dea, 6,130; Joseph N. Jaggers, 1,636; J. Frank Keller, 8,483; and Eugene A.
Lang, Jr., 10,071.]
(5) The number of shares indicated includes [774,117] shares underlying options
held by the directors and named executive officers in the aggregate, and an
additional [227,472] shares underlying options held by other executive
officers, that currently are exercisable or that may become exercisable
within 60 days following July 2, 2001. The number of shares indicated does
not include [65,886] shares underlying unvested incentive stock options held
by executive officers, all of which will be converted into cash upon the
completion of the merger.
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INFORMATION ABOUT THE WILLIAMS COMPANIES
Williams, together with its subsidiaries, is a leading company in the
energy sector. Through Williams Gas Pipeline Company, LLC and Williams Energy
Services, LLC and their subsidiaries, Williams engages in the following types of
energy-related activities:
- transportation and storage of natural gas and related activities through
operation and ownership of five wholly owned interstate natural gas
pipelines and several pipeline joint ventures;
- exploration and production of oil and gas through ownership of 1.2 Tcfe
of proved natural gas reserves primarily located in Colorado, New Mexico
and Wyoming;
- natural gas gathering, processing and treating activities through
ownership and operation of approximately 11,300 miles of gathering lines,
11 natural gas treating plants and 17 natural gas processing plants
(three of which are partially owned) located in the United States and
Canada;
- natural gas liquids transportation through ownership and operation of
approximately 14,300 miles of natural gas liquids pipeline (4,568 miles
of which are partially owned);
- transportation of petroleum products and related terminal services
through ownership or operation of approximately 9,170 miles of petroleum
products pipeline and 78 petroleum products terminals (some of which are
partially owned);
- light hydrocarbon/olefin transportation through 300 miles of pipeline in
Southern Louisiana;
- ethylene production through a 5/12 interest in a 1.2 billion pound per
year facility in Geismar, Louisiana;
- production and marketing of ethanol and bio-products through operation
and ownership of two ethanol plants (one of which is partially owned) and
ownership of minority interests or investments in four other plants;
- refining of petroleum products through operation and ownership of two
refineries;
- retail marketing primarily through 50 travel centers; and
- energy commodity marketing and trading.
Williams also directly invests in energy projects primarily in Canada,
South America and Lithuania and continues to explore and develop additional
projects for international investments. In addition, Williams invests in energy
and infrastructure development funds in Asia and Latin America.
Williams is a holding company headquartered in Tulsa, Oklahoma. Williams
was originally incorporated under the laws of the State of Nevada in 1949 and
was reincorporated under the laws of the State of Delaware in 1987. Williams
maintains its principal executive offices at One Williams Center, Tulsa,
Oklahoma 74172, telephone number (918) 573-2000.
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DESCRIPTION OF WILLIAMS COMMON STOCK
As of the date of this document, Williams is authorized to issue up to 960
million shares of common stock. As of June 22, 2001, Williams had issued
484,815,930 shares of common stock. In addition, at June 22, 2001, options to
purchase 25,387,130 shares of common stock were outstanding under various stock
and compensation incentive plans.
The outstanding shares of Williams' common stock are fully paid and
nonassessable. The holders of Williams' common stock are not entitled to
preemptive or redemption rights. Shares of Williams' common stock are not
convertible into shares of any other class of capital stock. EquiServe Trust
Company, N.A. is the transfer agent and registrar for Williams common stock.
Williams currently has the following provisions in its charter or by-laws
which could be considered to be "anti-takeover" provisions:
- an article in its charter providing for a classified board of directors
divided into three classes, one of which is elected for a three-year term
at each annual meeting of stockholders;
- an article in its charter providing that directors cannot be removed
except for cause and by the affirmative vote of three-fourths of the
outstanding shares of common stock;
- an article in its charter requiring the affirmative vote of three-fourths
of the outstanding shares of common stock for certain merger and asset
sale transactions with holders of more than five percent of the voting
power of Williams; and
- a by-law requiring stockholders to provide prior notice for nominations
for election to the board of directors or for proposing matters which can
be acted upon at stockholders meetings.
Williams is a Delaware corporation and is subject to Section 203 of the
Delaware General Corporation Law. In general, Section 203 prevents an interested
stockholder (defined generally as a person owning 15% or more of Williams'
outstanding voting stock) from engaging in a business combination with Williams
for three years following the date that person became an interested stockholder
unless:
- before that person became an interested stockholder, the board of
directors of Williams approved the transaction in which the interested
stockholder became an interested stockholder or approved the business
combination;
- upon completion of the transaction that resulted in the interested
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of Williams
outstanding at the time the transaction commenced (excluding stock held
by persons who are both directors and officers of Williams or by certain
employee stock plans); or
- on or following the date on which that person became an interested
stockholder, the business combination is approved by Williams' board of
directors and authorized at a meeting of stockholders by the affirmative
vote of the holders of a least 66 2/3% of the outstanding voting stock of
Williams (excluding shares held by the interested stockholder).
A business combination includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder.
DIVIDENDS
The holders of Williams' common stock are entitled to receive dividends
when, as, and if declared by the board of directors of Williams, out of funds
legally available for their payment subject to the rights of holders of any
outstanding preferred stock. See "Comparative Per Share and Dividend Data."
VOTING RIGHTS
The holders of Williams' common stock are entitled to one vote per share on
all matters submitted to a vote of stockholders.
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RIGHTS UPON LIQUIDATION
In the event of Williams' voluntary or involuntary liquidation,
dissolution, or winding up, the holders of Williams' common stock will be
entitled to share equally in any assets available for distribution after the
payment in full of all debts and distributions and after the holders of all
series of outstanding preferred stock have received their liquidation
preferences in full.
RIGHTS AGREEMENT
On February 6, 1996, Williams entered into a rights agreement with The
First Chicago Trust Company of New York, as rights agent, which currently
provides for a dividend of one-third of a preferred stock purchase right for
each outstanding share of Williams' common stock. The rights trade automatically
with shares of common stock and become exercisable only under the circumstances
described below. The rights are designed to protect the interests of Williams
and its stockholders against coercive takeover tactics. The purpose of the
rights is to encourage potential acquirers to negotiate with the board of
directors of Williams prior to attempting a takeover and to provide the board
with leverage in negotiating on behalf of all stockholders the terms of any
proposed takeover. The rights may have anti-takeover effects. The rights should
not, however, interfere with any merger or other business combination approved
by the board of directors of Williams.
Until a right is exercised, the right does not entitle the holder to
additional rights as a Williams' stockholder, including, without limitation, the
right to vote or to receive dividends. Upon becoming exercisable, each right
entitles its holder to purchase from Williams one two-hundredth of a share of
Series A Junior Participating Preferred Stock at an exercise or purchase price
of $140.00 per right, subject to adjustment.
In general, the rights will not be exercisable until the distribution date,
which is the earlier of:
- the close of business of the 10th business day after a public
announcement that a person (other than Williams and certain other
specified persons) has acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of the outstanding shares of Williams
common stock (which person is referred to in the rights agreement as an
"acquiring person");
- the close of business of the 10th business day after the commencement of
a tender offer or exchange offer by any person (other than Williams and
certain other specified persons) for 15% or more of the outstanding
shares of Williams common stock; or
- the close of business of the 10th business day after the board of
directors of Williams determines that any person or group has become an
"adverse person" under the rights agreement, which means that such person
or group has become the beneficial owner of an amount of common stock
which the board of directors determines to be substantial (which amount
will not be less than 10% of the shares outstanding) and at least a
majority of the board, excluding the directors who are officers of
Williams, has determined that the substantial beneficial ownership by
such person or group is:
- intended to cause Williams to repurchase the common stock beneficially
owned by such person or group or to put pressure on Williams to take
action or enter into a transaction intended to provide such person or
group with short-term financial gain under circumstances where the
board determines that the best long-term interests of Williams and its
stockholders would not be served by such action or transaction; or
- causing or is reasonably likely to cause a material adverse impact on
Williams' business or prospects.
In the event that an acquiring person acquires beneficial ownership of 15%
or more of Williams' outstanding common stock or the board of directors of
Williams determines that any person or group has become an adverse person, each
holder of a right will have the right to exercise and receive common stock
having a value equal to two times the exercise price of the right. The exercise
price is the purchase price times the number of shares of common stock
associated with each right. Any rights that are at any time beneficially owned
by an acquiring person will be null and void and any holder of such right will
be unable to exercise or transfer the right.
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In the event that someone becomes an acquiring person and either
- Williams is involved in a merger or other business combination in which
Williams is not the surviving corporation;
- Williams is involved in a merger or other business combination in which
Williams is the surviving corporation but all or a part of its common
stock is changed or exchanged; or
- 50% or more of Williams' assets, cash flow or earning power is sold or
transferred,
then each right becomes exercisable and each right will entitle its holder to
receive common stock of the acquiring person having a value equal to two times
the exercise price of the right.
The rights will expire at the close of business on February 6, 2006, unless
redeemed before that time. At any time prior to the earlier of (a) 10 days
following the stock acquisition date, as defined in the rights agreement, and
(b) the expiration date, the board of directors of Williams may redeem the
rights in whole, but not in part, at a price of $.01 per right. Prior to the
distribution date, Williams may amend the rights agreement in any respect
without the approval of the rights holders. However, after the distribution
date, the rights agreement may not be amended in any way that would adversely
affect the holders of rights (other than any acquiring person) or cause the
rights to again become redeemable. The Series A Junior Participating Preferred
Stock ranks junior to all other series of Williams' preferred stock as to the
payment of dividends and the distribution of assets unless the terms of the
series specify otherwise.
You should refer to the applicable provisions of the rights agreement,
which is incorporated by reference as Exhibit 4 to Williams' Current Report on
Form 8-K filed January 24, 1996.
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COMPARISON OF STOCKHOLDER RIGHTS
Each of Barrett Resources and Williams is organized under the laws of the
State of Delaware. As a result, any differences in the rights of holders of
Williams common stock and Barrett Resources common stock arise primarily from
differences in the companies' respective certificates of incorporation, by-laws
and stockholder rights agreements.
Upon completion of the merger, holders of Barrett Resources common stock
will become holders of Williams common stock and the associated preferred stock
purchase rights and their rights as stockholders will be governed by:
- Delaware law;
- the Williams certificate of incorporation;
- the Williams by-laws; and
- the Williams rights agreement.
The following summary does not purport to be a complete statement of the
rights of holders of Williams common stock under the Williams certificate of
incorporation, by-laws and rights agreement, the rights of the holders of
Barrett Resources common stock under the Barrett Resources certificate of
incorporation, by-laws or rights agreement or a complete description of the
specific provisions referred to in this summary. This summary contains a list of
the material differences between the rights of holders of Williams common stock
and the rights of holders of Barrett Resources common stock, but is not meant to
be relied upon as an exhaustive list or a detailed description of the provisions
discussed and is qualified in its entirety by reference to the governing
corporate instruments of Williams and Barrett Resources, to which the holders of
Barrett Resources common stock are referred. Copies of such governing corporate
instruments of Barrett Resources and Williams are available, without charge, to
any person, including any beneficial owner to whom this prospectus is delivered,
by following the instructions listed under "Where You Can Find More
Information."
BARRETT RESOURCES WILLIAMS
----------------- --------
Authorized Capital Stock: The Barrett Resources certificate The Williams certificate of
of incorporation authorizes the incorporation authorizes the
issuance of up to 45 million issuance of up to 960 million
shares of Barrett Resources shares of common stock, par value
common stock, par value $.01 per $1.00 per share, and 30 million
share, and 1 million shares of shares of preferred stock, par
Barrett Resources preferred value $1.00 per share, of which
stock, par value $.001 per share, 1.6 million are designated as
of which 75,000 are designated as Williams Series A Junior
Barrett Resources Series A Junior Participating Preferred Stock
Participating Preferred Stock pursuant to the Williams rights
pursuant to the Barrett Re- agreement.
sources rights agreement.
Voting Rights: Each holder of Barrett Resources Each holder of Williams common
common stock has one vote for stock has one vote for each share
each share held. There is no held. There is no cumulative
cumulative voting. voting.
Classification of the Board of Direc- The board is not divided into The board is divided into three
tors: classes. classes as nearly equal as
possible, with each class serving
for staggered three-year terms.
Number of Directors: The board currently consists of The board currently consists of
eight directors. This number may fourteen directors. This number
be changed by the affirmative may be changed by the affirmative
vote of a majority of the board. vote of a majority of the board.
However, the number of the However, the number of directors
Barrett Resources directors may may not be less than five nor
not be less than three nor more more than seventeen.
than thirteen.
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BARRETT RESOURCES WILLIAMS
----------------- --------
Removal of Directors: Directors may be removed, with or Directors may be removed from
without cause, by the holders of office only for cause, and only
a majority of the shares of by the affirmative vote of
capital stock then entitled to holders of at least 75% of the
vote at a meeting of shares of outstanding stock
stockholders. generally entitled to vote in the
election of directors, voting
together as a single class.
Vacancies: Vacancies on the board or newly Vacancies on the board or newly
created directorships may be created directorships may be
filled by the affirmative vote of filled by a majority of the
the majority of the directors directors then in office, even if
then in office, even if less than less than a quorum, or by a sole
a quorum, or by a sole remaining remaining director.
director.
Limitation of Director Liability: The Barrett Resources certificate The Williams certificate of
of incorporation limits the incorporation limits the
liability of directors to the liability of directors to the
fullest extent permitted by fullest extent permitted by Dela-
Delaware law. ware law.
Indemnification of Directors and Of- The Barrett Resources bylaws The Williams bylaws require
ficers: require Barrett Resources to Williams to indemnify its
indemnify its directors, directors, officers, employees
officers, employees and agents to and agents to the fullest extent
the fullest extent permitted by permitted by Delaware law.
Delaware law.
Special Meetings of Stockholders: Special meetings of stockholders Subject to the terms of any
may be called only by the series of preferred stock,
president or by the board of special meetings of stockholders
directors of Barrett Resources. may be called by the chairman of
the board or the president.
Special meetings of stockholders
may also be called at the request
in writing of:
- a majority of the board; or
- stockholders owning at least a
majority of the issued and
outstanding shares of stock
entitled to vote.
The written request must state
the purpose(s) of the special
meeting.
Nominations of Directors and Pro- Stockholders of record who give Stockholders of record who give
posals by Stockholders: proper notice may nominate proper notice may nominate
individuals for election to the individuals for election to the
board of directors at any meeting board of directors at any annual
called for the purpose of elect- meeting or any special meeting
ing directors, and they may also called for the purpose of
make proposals to be brought at electing directors, and they may
any annual meeting. In order to also make proposals to be brought
be acted upon, a stockholder must at any annual meeting. In order
give timely notice of any to be acted upon, a stockholder
nomination or proposal in writing must give timely notice of any
to the Secretary of Barrett nomination or proposal in writing
Resources. to the Secretary of Williams.
To be timely, nominations of In the case of an annual meeting,
directors and proposals by to be timely, this notice must be
stockholders must be made by delivered to or mailed and
written notice in proper form received not less than 90 days
delivered to Barrett Resources nor more than 120 days prior to
not less than 90 days nor more the anniversary date of the
than 130 days prior to (1) the preceding
anniversary date of the
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BARRETT RESOURCES WILLIAMS
----------------- --------
previous year's annual meeting, annual meeting. However, if the
in the case of an annual meeting annual meeting is more than 30
or (2) the date of the meeting, days before or more than 30 days
in the case of any special after such anniversary date, a
meeting of stockholders at which stockholder must furnish notice
directors are to be elected. of a proposal not later than the
close of business of the 10th day
However, if (1) an annual meeting following the mailing or the
is scheduled to be held on a date public disclosure of the notice
more than 30 days prior to, or of the meeting date.
delayed by more than 60 days
after, the anniversary date of In the case of a special meeting
the previous year's annual called for the purpose of
meeting or (2) in the case of electing directors, a stockholder
special meetings, less than 100 must furnish notice of a
days notice of the meeting is nomination not later than the
given to stockholders, then close of business of the 10th day
notice by the stockholder must be following the mailing or the
delivered to Barrett Resources no public disclosure of the notice
later than 90 days prior to the of the special meeting date.
meeting or 10 days following the
date on which notice of the date
of the meeting was mailed or
public disclosure of the date of
the meeting was first made by
Barrett Resources.
Stockholder Action by Written Con- Any action which may be taken at Any action which may be taken by
sent: a meeting of stockholders may stockholders at a meeting, except
also be taken by the written for election of directors, may be
consent of holders of stock taken by the written consent of
having the minimum number of stockholders holding at least a
votes necessary to authorize the majority of the voting power.
action at a meeting of However, if a proportion greater
stockholders at which all shares than a majority is required for
entitled to vote were present and such action at a meeting, then
voted. such greater proportion of
written consents is required.
Amendments to Certificate of Generally, Barrett Resources Generally, except as otherwise
Incorporation: reserves the right to amend, set forth in the certificate of
change or repeal any provision in incorporation, any amendment of
its certificate of incor- any provision in the Williams
poration in the manner prescribed certificate of incorporation must
by Delaware law, and all rights be approved by a majority of the
conferred upon stockholders by outstanding stock entitled to
the Barrett Resources corporate vote on the proposed amendment.
documents are granted subject to However, if the amendment relates
this reservation. to:
- the size of the board;
- the classification of the
board;
- the removal of directors;
- the filling of vacancies on the
board;
- the inspection of books and
records by stockholders;
- the limitation of director
liability;
- the powers of the board of
directors;
- stockholder action by written
consent;
- special meetings of
stockholders;
- certain amendments to the
certificate of incorporation; and
- business combinations
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BARRETT RESOURCES WILLIAMS
----------------- --------
then such amendment must be ap-
proved by 75% of the outstanding
stock generally entitled to vote
in the election of directors.
Amendments to By-laws: Both the stockholders and the Generally, both the stockholders
board of directors may amend the and the board may amend the
by-laws as follows: by-laws, except that:
The stockholders may amend the - the stockholders may limit the
by-laws only: power of the board to amend any
by-law made by the
- at an annual stockholder stockholders; and
meeting if written notice
containing the proposed - no amendment of the by-law
amendment is provided to the stating the place for the annual
secretary and all the directors election of directors may be
of the corporation no more than made within 60 days before the
seven days after the day scheduled for such
corporation gives notice of the election.
meeting of stockholders at
which the proposal is to be
considered (in addition to the
requirements of the advance
notice provision for stock-
holder proposals set forth
above); or
- by written consent of the
stockholders in the manner
described above.
The board of directors may amend
the by-laws only if written
notice containing the proposed
amendment is provided to all the
directors at least 30 days prior
to the meeting of directors at
which the proposal is to be
considered unless (1) the
proposal is approved by at least
75% of all directors, and (2) 80%
of the "independent directors."
As used in the by-laws,
"independent directors" are
directors who (1) are not
"interested persons" or employees
of Barrett Resources or its
subsidiaries and (2) are not
affiliates of any "interested
person" which is proposing or has
proposed a business combination
with Barrett Resources in the
prior two-year period.
As used in the by-laws, an
"interested person" is a person
or entity beneficially owning
more than 15% of the voting stock
of Barrett Resources.
Notwithstanding the foregoing,
any amendment of the by-law
provision relating to amendments
to the by-laws, the number and
tenure of directors, or to the
business combination by-law de-
scribed below requires (in
addition to any other vote or
approval required by
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BARRETT RESOURCES WILLIAMS
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law, the by-laws or the
certificate of incorporation)
either:
- the affirmative vote of at
least 75% of all the directors,
including at least two-thirds
of the "independent di-
rectors"; or
- the affirmative vote: (1) of at
least 66% of the outstanding
shares of each class of voting
stock and (2) of at least a
majority of the outstanding
shares of each class of voting
stock, not including shares
owned by "interested persons".
Subject to repeal or change by
the stockholders, the Barrett
Resources' board of directors may
also adopt emergency by-laws in
accordance with the provisions of
Delaware law.
Business Combinations with Generally, once a person or Generally, the affirmative vote
Interested Stockholders: entity becomes an "interested of the holders of 75% of the
person", such "interested person" outstanding stock generally
may not become the beneficial entitled to vote in the election
owner of any additional shares of of directors, voting together as
Barrett Resources' voting stock, a single class, is required:
except as part of a merger, con-
solidation, business combination - for the adoption of any
or similar transaction (a agreement for the merger or
"business combination") entered consolidation of Williams with
into in accordance with the or into any other cor-
certificate of incorporation. poration; and
Also, after a person has become - to authorize any sale or lease
an "interested person": of all or any substantial part of
Williams' assets to, or any
- there may be no reduction in sale or lease to Williams or
the annual rate of dividends paid any of its subsidiaries of
on the common stock (except as assets of any other entity or
necessary to reflect any person having a total market
subdivision of the common value in excess of $6 million
stock); in exchange for securities of
Williams
- there must be an increase in
such annual rate of dividends as if, in either case, such other
necessary to reflect any corporation, entity or person
reclassification (including any beneficially owns more than 5% of
reverse stock split), re- the voting power of all shares of
capitalization, reorganization outstanding Williams stock. This
or any similar transaction that affirmative vote will be in
has the effect of reducing the addition to the vote of the
number of shares of outstanding holders of Williams stock
common stock; otherwise required by law or any
agreement between Williams and
- neither the "interested person" any national securities exchange.
nor its affiliates may receive
the benefit, directly or The requirements described above
indirectly (except propor- do not apply to a transaction
tionately as a stockholder of where:
Barrett Resources), of any
loans, advances, guarantees, - the Williams board of directors
pledges or other financial has approved the terms of such
transac-
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BARRETT RESOURCES WILLIAMS
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assistance or any tax credits tion with any other corporation
or other tax advantages prior to the time that such
provided by Barrett Resources, other corporation became a
whether in anticipation of, or beneficial owner of more than
in connection with, a business 5% of all shares of out-
combination, or otherwise. standing stock of Williams; or
The requirements described above - Williams beneficially owns a
may be waived by the affirmative majority of the outstanding
vote of two-thirds of the shares of all classes of stock
"independent directors" when at entitled to vote in the
least two-thirds of such elections of directors of such
directors were "independent other corporation.
directors" before the "interested
person" became an "interested
person".
If a majority of the "independent
directors" believes that a person
(1) is an "interested person" or
(2) holds of record voting stock
beneficially owned by an
"interested person," then such
majority of the "independent
directors" may demand that such
"interested person" provide
Barrett Resources with
information about such beneficial
ownership of voting stock and
other relevant information.
On May 7, 2001, the Barrett
Resources board unanimously
waived the restrictions described
in this section so that such
provisions do not apply to the
merger agreement with Williams
and the proposed merger
transaction.
Constituencies Provision: The Barrett Resources corporate Under the Williams certificate of
documents do not contain a incorporation, when considering a
provision on this matter. business combination, the board
may, in considering the best
interests of the company and its
stockholders, consider the
effects of any such transaction
upon the employees, customers and
suppliers of the company, and
upon communities and states and
other political entities in which
offices, plants or other
facilities of the company or any
of its subsidiaries are located.
Dividends: Delaware law confers on the board The holders of Williams common
the right to declare dividends, stock are entitled to receive
subject to the requirements of dividends when, as, and if
such law. declared by the board of
directors of Williams, out of
funds legally available for their
payment subject to the rights of
holders of any outstanding
preferred stock.
Right of Inspection: The corporate documents of The Williams board of directors
Barrett Resources do not contain may from time to time determine
a provision on this matter. whether, to what extent, at what
times and places the accounts,
books and paper of the
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BARRETT RESOURCES WILLIAMS
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company shall be open to the
inspection of the holders of
common stock. No such holder has
the right to inspect any account,
book or document of the com-
pany, except as and to the extent
expressly provided by law or
authorized by resolution of the
board of directors.
Rights Agreement: Barrett Resources maintains a Williams maintains a stockholder
stockholder rights plan under rights plan under which each
which each outstanding share of outstanding share of Williams
Barrett Resources common stock common stock includes one-third
includes one associated preferred of an associated preferred stock
stock purchase right. The rights purchase right. The rights are
are currently evidenced by the currently evidenced by the Wil-
Barrett Resources common stock liams common stock certificates.
certificates.
When they become exercisable,
When they become exercisable, each right may be exercised to
each right may be exercised to purchase, at a price of $140 per
purchase, at a price of $150 per share, subject to adjustment, one
share, subject to adjustment, one two-hundredth of a share of
one-thousandth of a share of Williams Series A Junior
Barrett Resources Series A Junior Participating Preferred Stock,
Participating Preferred Stock, par value $1.00 per share.
par value $.01 per share.
In general, the rights will not
The rights become exercisable be exercisable until the
when an entity, person or group distribution date, which is the
of affiliated persons has become earlier of:
an "acquiring person".
- the close of business of the
Under the rights plan, an entity, 10th business day after a public
person or group becomes an announcement that a person
"acquiring person" when such (other than Williams and
entity, person or group, without certain other specified
the prior consent of the Barrett persons) has acquired, or
Resources board: obtained the right to acquire,
beneficial ownership of 15% or
- has acquired (or obtained the more of the outstanding shares
right to acquire) 15% or more of of Williams common stock (which
the outstanding shares of person is referred to in the
Barrett Resources common stock; rights agreement as an
"acquiring person");
- has commenced a tender offer or
exchange offer which would - the close of business of the
result in such person or group 10th business day after the
having beneficial ownership of commencement of a tender offer
15% or more of the outstanding or exchange offer by any person
shares of Barrett Resources (other than Williams and
common stock. certain other specified per-
sons) for 15% or more of the
Upon exercise, each holder of a outstanding shares of Williams
right, other than the acquiring common stock; or
person, would have a right to
receive that number of units of - the close of business of the
one one-thousandths of a share of 10th business day after the board
preferred stock (or, under of directors of Williams
certain circumstances, common determines that any person or
stock or other securities) having group has become an "adverse
an average market value during a person" under the rights agree-
specified period of time equal to ment, which means that such
two times the exercise price of person or group has become the
the right. beneficial owner of an amount
of common
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BARRETT RESOURCES WILLIAMS
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stock which the board of
In the event Barrett Resources is directors determines to be
acquired in a merger or business substantial (which amount will
combination transaction or 50% or not be less than 10% of the
more of Barrett Resources' assets shares outstanding) and at
or earning power is sold, each least a majority of the board,
holder of a right, other than the excluding the directors who are
"acquiring person," would have officers of Williams, has
the right to receive, upon determined that the sub-
exercise, that number of shares stantial beneficial ownership
of common stock of the acquiring by such person or group is (1)
corporation which, at the time of intended to cause Williams to
such transaction, would have a repurchase the common stock
market value of two times the beneficially owned by such
exercise price of the right. person or group or to put pres-
sure on Williams to take action
Until a right is exercised, the or enter into a transaction
right does not entitle the holder intended to provide such person
to additional rights as a Barrett or group with short-term
Resources stockholder, in- financial gain under cir-
cluding, without limitation, the cumstances where the board
right to vote or to receive determines that the best
dividends. long-term interests of Williams
and its stockholders would not
In connection with Barrett be served by such action or
Resources' execution of the transaction; or (2) causing or
merger agreement with Williams, is reasonably likely to cause a
the Barrett Resources rights material adverse impact on Wil-
agreement was amended on May 7, liams' business or prospects.
2001 to provide that the proposed
merger will not trigger the Upon exercise, each holder of a
exercisability of the Barrett right, other than the "acquiring
Resources rights. person" and/or the "adverse
person", would have the right to
In the proposed merger, the receive Williams common stock
rights would be converted along having a value equal to two times
with the Barrett Resources common the exercise price of the right.
stock into Williams common stock
and the rights issued under the In the event that an acquiring
Williams rights plan. If the person acquires beneficial
proposed merger is not com- ownership of 15% or more of
pleted, the Barrett Resources Williams' outstanding common
rights are to expire on August 4, stock or the board of directors
2007, unless earlier redeemed by of Williams determines that any
Barrett Resources at a price of person or group has become an
$.001 per right. adverse person, each holder of a
right will have the right to
The summary of the rights exercise and receive common stock
agreement and the rights given having a value equal to two times
above does not purport to be the exercise price of the right.
complete and is qualified and its The exercise price is the
entirety by the rights agree- purchase price times the number
ment, which is incorporated by of shares of common stock
reference as Exhibit 1 to Barrett associated with each right. Any
Resources registration statement rights that are at any time
on Form 8-A filed August 11, beneficially owned by an
1997, as amended, and the Barrett acquiring person will be null and
Resources certificate of in- void and any holder of such right
corporation. will be unable to exercise or
transfer the right.
In the event that someone becomes
an acquiring person and either:
- Williams is involved in a
merger or other business
combination in which
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BARRETT RESOURCES WILLIAMS
----------------- --------
Williams is not the surviving
corporation;
- Williams is involved in a
merger or other business
combination in which Williams
is the surviving corporation
but all or a part of its common
stock is changed or exchanged;
or
- 50% or more of Williams'
assets, cash flow or earning
power is sold or transferred,
then
each right becomes exercisable
and each right will entitle its
holder to receive common stock of
the acquiring person having a
value equal to two times the
exercise price of the right.
The rights will expire at the
close of business on February 6,
2006, unless redeemed before that
time.
At any time prior to the earlier
of (a) 10 days following the
stock acquisition date, as
defined in the rights agree-
ment, and (b) the expiration
date, the board of directors of
Williams may redeem the rights in
whole, but not in part, at a
price of $.01 per right.
Prior to the distribution date,
Williams may amend the rights
agreement in any respect without
the approval of the rights
holders. However, after the dis-
tribution date, the rights
agreement may not be amended in
any way that would adversely
affect the holders of rights
(other than any acquiring per-
son) or cause the rights to again
become redeemable.
The Series A Junior Participating
Preferred Stock ranks junior to
all other series of Williams
preferred stock as to the payment
of dividends and the dis-
tribution of assets unless the
terms of the series specify
otherwise.
The summary of the rights
agreement and the rights given
above does not purport to be
complete and is qualified in its
entirety by the rights agreement,
which is incorporated by
reference as Exhibit 4 to
Williams' Current Report on Form
8-K filed January 24, 1996.
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85
LEGAL MATTERS
The validity of the Williams common stock to be issued in connection with
the merger will be passed upon by William G. von Glahn, Esq., Senior Vice
President and General Counsel of Williams. Mr. von Glahn is the beneficial
holder of 380,071 shares of Williams common stock (including 246,713 shares
subject to stock options exercisable within 60 days, deferred stock awards and
Williams' 401(k) retirement plan) and is a participant in Williams' stock option
plan and various other employee benefit plans offered to employees of Williams.
Skadden, Arps, Slate, Meagher & Flom LLP, counsel for Williams, will pass
upon certain federal income tax consequences of the merger.
EXPERTS
Ernst & Young LLP, independent auditors, have audited Williams'
consolidated financial statements and schedules as of December 31, 2000 and 1999
and for each of the three years in the period ended December 31, 2000, as set
forth in Williams' Current Report on Form 8-K filed May 22, 2001, as set forth
in Ernst & Young LLP's report, which is incorporated by reference in the proxy
statement of Barrett Resources, which is referred to and made part of this
prospectus and registration statement. Williams' consolidated financial
statements and schedules are incorporated by reference in reliance on Ernst &
Young LLP's report, given on the authority of such firm as experts in accounting
and auditing.
The financial statements of Barrett Resources incorporated by reference in
this proxy statement/ prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto and are included in this proxy statement/prospectus in reliance upon the
authority of Arthur Andersen LLP as experts in giving said reports.
OTHER MATTERS
Neither Williams nor Barrett Resources currently intends to bring before
Barrett Resources' special meeting any matters other than those specified in the
notice of the special meeting and neither party has knowledge of any other
matters that may be brought up by other persons. However, if any other matters
properly come before Barrett Resources' special meeting or any adjournment or
postponement of such special meeting, and are voted upon, the enclosed proxies
will be deemed to confer discretionary authority on the persons named as proxies
to vote the shares represented by those proxies as to those other matters. Those
persons named as Barrett Resources proxies intend to vote with respect to other
matters, if any, in accordance with the recommendation of the management of
Barrett Resources.
STOCKHOLDER PROPOSALS
Barrett Resources will hold an annual meeting of stockholders in 2001 only
if the merger is not completed. Stockholder proposals would have been eligible
for inclusion in the proxy statement and form of proxy for Barrett Resources'
2001 annual meeting pursuant to Rule 14a-8 under the Exchange Act if such
proposals were received by Barrett Resources by November 23, 2000.
Notwithstanding the foregoing, because Barrett Resources will not hold its
annual meeting on or prior to July 4, 2001, the deadline for such proposals will
be a reasonable time period before Barrett Resources begins to print and
distribute proxy materials in connection with its 2001 annual meeting. Notices
of stockholder proposals in connection with such annual meeting will be
considered timely, for purposes of Rule 14a-4(c) under the Exchange Act and
Barrett Resources' By-laws, if such notices are received not later than the
close of business on the tenth (10th) day following the day on which notice of
the date of the annual meeting is mailed or public disclosure of the date of the
annual meeting is made. Such stockholder's notice to the secretary must include
as to each matter the stockholder proposes to bring before the annual meeting:
- a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting,
77
86
- the name and record address of the stockholder proposing such business,
- the class or series and number of shares of capital stock of Barrett
Resources which are beneficially owned by the stockholder,
- a description of all arrangements or understandings between such
stockholder and any other person or persons (including their names) in
connection with the proposal of such business by such stockholder and any
material interest of such stockholder in such business,
- the names and addresses of other stockholders known by the stockholder
proposing such business to support such business, and the class or series
and number of shares of capital stock of Barrett Resources which are
beneficially owned by such stockholders, and
- a representation that such stockholder intends to appear in person or by
proxy at the annual meeting to bring such business before the meeting.
Any such proposal or notice should be directed to the attention of the
Corporate Secretary, Barrett Resources Corporation, 1515 Arapahoe Street, Tower
3, Suite 1000, Denver, Colorado 80202.
WHERE YOU CAN FIND MORE INFORMATION
As required by law, Barrett Resources and Williams file annual, quarterly
and special reports, proxy statements and other information with the SEC. You
may read and copy this information at the following office of the SEC:
Public Reference Room
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. You may obtain copies of this information by mail from the
public reference section of the SEC, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. You may also access some of this
information at the web site maintained by the SEC at http://www.sec.gov. The
common stock of Barrett Resources and Williams is listed on the New York Stock
Exchange, and the periodic reports and other information filed by the companies
with the SEC can be inspected at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
Williams has filed a registration statement on Form S-4 under the
Securities Act of 1933 to register the shares of Williams common stock to be
issued in the merger. This document is part of the registration statement on
Form S-4 and constitutes a prospectus of Williams as well as being a proxy
statement of Barrett Resources for its special meeting.
The SEC permits Barrett Resources and Williams to "incorporate by
reference" information into this document. This means that Barrett Resources and
Williams can disclose important information to you by referring you to another
document filed separately with the SEC. The information incorporated by
reference is deemed to be part of this document, and later information filed
with the SEC will update and supersede the information in this document.
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87
This document incorporates by reference the following documents set forth
below that Barrett Resources and Williams have previously filed with the SEC.
BARRETT RESOURCES SEC FILINGS (FILE NO. 1-13446) PERIOD/DATE
------------------------------------------------ -----------
Annual Report on Form 10-K Fiscal year ended December 31, 2000
Quarterly Report on Form 10-Q and the related Amended Fiscal quarter ended March 31, 2001
Quarterly Report on Form 10-Q/A, filed May 16, 2001
Registration Statement on Form 8-A, describing the Filed August 11, 1997
rights agreement
Registration Statement on Form 8-A/A1, describing the Filed March 17, 1999
first amendment to the rights agreement
Registration Statement on Form 8-A/A2, describing the Filed May 7, 2001
second amendment to the rights agreement
Current Report on Form 8-K, describing the merger Filed May 7, 2001
agreement
Current Report on Form 8-K, regarding the completion Filed June 15, 2001
of the tender offer
WILLIAMS SEC FILINGS (FILE NO. 1-4174) PERIOD/DATE
-------------------------------------- -----------
Annual Report on Form 10-K Fiscal year ended December 31, 2000
Quarterly Report on Form 10-Q Fiscal quarter ended March 31, 2001
Proxy Statement Filed March 26, 2001
Current Report on Form 8-K (description of the rights
agreement) Filed January 24, 1996
Current Report on Form 8-K Filed January 5, 2001
Current Report on Form 8-K Filed January 31, 2001
Current Report on Form 8-K Filed February 8, 2001
Current Report on Form 8-K Filed March 16, 2001
Current Report on Form 8-K Filed March 19, 2001
Current Report on Form 8-K Filed April 2, 2001
Current Report on Form 8-K Filed April 12, 2001
Current Report on Form 8-K Filed April 27, 2001
Current Report on Form 8-K Filed May 1, 2001
Current Report on Form 8-K Filed May 3, 2001
Current Report on Form 8-K Filed May 7, 2001
Current Report on Form 8-K (restatement of financial
statements included in the Annual Report on Form 10-K
for the year ended December 31, 2000 to reflect
Williams Communications Group, Inc. as discontinued
operations due to the tax-free spinoff of Williams
Communications Group, Inc.) Filed May 22, 2001
Current Report on Form 8-K (regarding the completion
of the tender offer and the bridge loan facility) Filed June 13, 2001
Barrett Resources and Williams also incorporate by reference into this
document each document that they may file with the SEC from the date of this
document to the date of the Barrett Resources special meeting. These include
periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form
10-Q and Current Reports on Form 8-K, as well as proxy statements.
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88
Documents specifically incorporated into this document by reference are
available without charge, excluding all exhibits unless an exhibit has been
specifically incorporated by reference into this document. You may obtain
documents incorporated into this document by reference by requesting them in
writing or by telephone from the appropriate company at the following addresses:
Barrett Resources Corporation The Williams Companies
1515 Arapahoe Street One Williams Center
Tower 3, Suite 1000 Tulsa, Oklahoma 74172
Denver, Colorado 80202 Attention: Corporate Secretary
Attention: Corporate Secretary (918) 573-2000
(303) 572-3900
In order to obtain timely delivery of this information, you should request
it no later than July 20, 2001.
Any information contained in an incorporated document will be deemed to be
modified or superseded for purposes of this document to the extent that
information contained in this document or in any other subsequently filed
incorporated document modifies or supersedes such information. Any information
that is modified or superseded will not be deemed, except as modified or
superseded, to constitute a part of this document.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS DOCUMENT IN DETERMINING HOW TO VOTE. NEITHER WILLIAMS NOR
BARRETT RESOURCES HAS AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT FROM WHAT IS CONTAINED IN THIS DOCUMENT. THIS DOCUMENT IS DATED JULY 2
, 2001. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS DOCUMENT IS
ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND NEITHER THE MAILING OF THIS
DOCUMENT TO STOCKHOLDERS NOR THE ISSUANCE OF SHARES OF WILLIAMS COMMON STOCK IN
THE MERGER SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
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89
ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
THE WILLIAMS COMPANIES, INC.,
RESOURCES ACQUISITION CORP.
AND
BARRETT RESOURCES CORPORATION
DATED AS OF MAY 7, 2001
90
TABLE OF CONTENTS
ARTICLE I
THE OFFER
Section 1.1 The Offer................................................... A-2
Section 1.2 Company Actions............................................. A-3
ARTICLE II
THE MERGER
Section 2.1 The Merger.................................................. A-4
Section 2.2 Closing..................................................... A-4
Section 2.3 Effective Time.............................................. A-4
Section 2.4 Effects of the Merger....................................... A-4
Section 2.5 Certificate of Incorporation and Bylaws; Officers and
Directors................................................... A-4
Section 2.6 Principal Offices of the Company............................ A-5
ARTICLE III
EFFECT OF THE MERGER ON THE STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 3.1 Effect on Stock............................................. A-5
Section 3.2 Exchange of Certificates.................................... A-5
Section 3.3 Tax Consequences............................................ A-7
Section 3.4 Adjustment of Exchange Ratio................................ A-7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1 Organization................................................ A-7
Section 4.2 Subsidiaries................................................ A-8
Section 4.3 Capital Structure........................................... A-8
Section 4.4 Authority................................................... A-9
Section 4.5 Consents and Approvals; No Violations....................... A-9
Section 4.6 SEC Documents and Other Reports............................. A-10
Section 4.7 Absence of Material Adverse Change.......................... A-10
Section 4.8 Information Supplied........................................ A-11
Section 4.9 Compliance with Laws........................................ A-11
Section 4.10 Tax Matters................................................. A-11
Section 4.11 Liabilities................................................. A-12
Section 4.12 Litigation.................................................. A-12
Section 4.13 Benefit Plans............................................... A-12
Section 4.14 State Takeover Statutes; Bylaws Provision; Rights
Agreement................................................... A-13
Section 4.15 Brokers..................................................... A-13
Section 4.16 Voting Requirements......................................... A-13
Section 4.17 Environmental Matters....................................... A-13
Section 4.18 Contracts; Debt Instruments................................. A-14
A-i
91
Section 4.19 Title to Properties....................................................................... A-15
Section 4.20 Intellectual Property..................................................................... A-15
Section 4.21 Condition of Assets....................................................................... A-15
Section 4.22 Derivative Transactions................................................................... A-16
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Section 5.1 Organization.............................................................................. A-16
Section 5.2 Capital Structure......................................................................... A-16
Section 5.3 Authority................................................................................. A-17
Section 5.4 Consents and Approvals; No Violations..................................................... A-17
Section 5.5 SEC Documents and Other Reports........................................................... A-17
Section 5.6 Absence of Material Adverse Change........................................................ A-18
Section 5.7 Information Supplied...................................................................... A-18
Section 5.8 Compliance with Laws...................................................................... A-18
Section 5.9 Parent Shares............................................................................. A-19
Section 5.10 Reorganization............................................................................ A-19
Section 5.11 Liabilities............................................................................... A-19
Section 5.12 Interim Operations of Sub................................................................. A-19
Section 5.13 Litigation................................................................................ A-19
Section 5.14 California Exposure....................................................................... A-19
Section 5.15 Brokers................................................................................... A-19
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 6.1 Conduct of Business Pending the Merger.................................................... A-20
Section 6.2 No Solicitation; Acquisition Proposals.................................................... A-22
Section 6.3 Third Party Standstill Agreements......................................................... A-23
Section 6.4 Disclosure of Certain Matters; Delivery of Certain Filings................................ A-23
Section 6.5 Conduct of Business of Sub Pending the Merger............................................. A-24
Section 6.6 Modifications to Recommendations.......................................................... A-24
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Employee Benefits......................................................................... A-24
Section 7.2 Options................................................................................... A-25
Section 7.3 Shareholder Approval; Preparation of Form S-4 and Proxy Statement/Prospectus.............. A-26
Section 7.4 Access to Information..................................................................... A-27
Section 7.5 Fees and Expenses......................................................................... A-28
Section 7.6 Public Announcements...................................................................... A-29
Section 7.7 Transfer Taxes............................................................................ A-29
Section 7.8 State Takeover Laws....................................................................... A-29
Section 7.9 Indemnification; Directors and Officers Insurance......................................... A-29
A-ii
92
Section 7.10 Board of Directors.......................................... A-30
Section 7.11 HSR Act Filings; Reasonable Best Efforts.................... A-31
Section 7.12 Stay Bonuses; Severance..................................... A-32
Section 7.13 Section 16 Matters.......................................... A-32
Section 7.14 Tax Treatment............................................... A-32
Section 7.15 Affiliate Letters........................................... A-33
Section 7.16 Litigation.................................................. A-33
Section 7.17 Rights Agreement............................................ A-33
Section 7.18 Bank Debt................................................... A-33
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 Conditions to Each Party's Obligation to Effect the
Merger...................................................... A-33
ARTICLE IX
TERMINATION AND AMENDMENT
Section 9.1 Termination................................................. A-34
Section 9.2 Effect of Termination....................................... A-35
Section 9.3 Amendment................................................... A-35
Section 9.4 Extension; Waiver........................................... A-35
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival of Representations and Warranties and
Agreements.................................................. A-35
Section 10.2 Notices..................................................... A-35
Section 10.3 Interpretation; Definitions................................. A-36
Section 10.4 Counterparts................................................ A-41
Section 10.5 Entire Agreement; No Third-Party Beneficiaries.............. A-41
Section 10.6 Governing Law............................................... A-41
Section 10.7 Assignment.................................................. A-41
Section 10.8 Severability................................................ A-41
Section 10.9 Enforcement of this Agreement............................... A-42
Section 10.10 Obligations of Subsidiaries................................. A-42
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 7, 2001 (this "Agreement")
among The Williams Companies, Inc., a Delaware corporation ("Parent"), Resources
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Sub"), and Barrett Resources Corporation, a Delaware corporation (the
"Company") (Sub and the Company being hereinafter collectively referred to as
the "Constituent Corporations"). Except as otherwise set forth herein,
capitalized (and certain other) terms used herein shall have the meanings set
forth in Section 10.3.
W I T N E S S E T H :
WHEREAS, the Board of Directors of the Company has, in light of and subject
to the terms and conditions set forth herein, determined that a business
combination between Parent and the Company is fair to the Company's stockholders
and in the best interests of such stockholders;
WHEREAS, it is intended that the acquisition be accomplished by Sub
commencing a cash tender offer for 16,730,502 outstanding shares of Common
Stock, par value $0.01 per share, of the Company ("Company Common Stock"),
together with the associated Company Rights, upon the terms and subject to the
conditions set forth in this Agreement (the shares of Company Common Stock
subject to the Offer, together with the associated Company Rights, are
hereinafter referred to as the "Shares") in an amount of $73.00 per Share (the
"Offer Consideration") to be followed by a merger of the Company with and into
Sub (the "Forward Merger");
WHEREAS, subsequent to the purchase by Sub of Shares in the Offer, each
Share (other than Shares held directly or indirectly by Parent or the Company,
which Shares shall be cancelled) would be converted into the right to receive
1.767 (the "Exchange Ratio") duly authorized, validly issued, fully paid and
non-assessable shares of common stock, par value $1.00 (the "Parent Common
Stock" and, together with associated Parent Rights, the "Parent Shares") of
Parent (the "Merger Consideration");
WHEREAS, if the Tax Opinion Standard (as defined herein) has not been met,
the parties desire to permit an alternate merger structure providing for the
merger of Sub (or other direct or indirect wholly-owned subsidiary of Parent, as
determined by Parent in its sole discretion) with and into the Company (the
"Reverse Merger"), and the surviving corporation shall thereby become a direct
or indirect wholly-owned subsidiary of Parent;
WHEREAS, the Board of Directors of the Company has adopted resolutions
approving the Offer, this Agreement and the Merger (as defined herein),
determining that this Agreement is advisable and that the Offer and the Merger
are fair to, and in the best interests of, the Company's stockholders and
recommending that the Company's stockholders accept the Offer, tender their
Shares into the Offer and adopt this Agreement;
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have each approved the Merger, upon the terms and subject to the conditions set
forth in this Agreement;
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved and adopted this Agreement and the transactions contemplated
hereby;
WHEREAS, for Federal income tax purposes, it is intended that the Offer and
the Forward Merger shall be treated as an integrated transaction (together, the
"Transaction") and shall qualify as a "reorganization" within the meaning of
Section 368(a) of the Code and the United States Treasury Regulations; and
WHEREAS, Parent, Sub and the Company each desires to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
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NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Sub and the Company hereby agree as follows:
ARTICLE I
THE OFFER
Section 1.1 The Offer. (a) Provided that this Agreement shall not have
been terminated in accordance with Section 9.1 and subject to the provisions of
this Agreement, including the conditions to the Offer set forth in Exhibit A
hereto, as promptly as practicable after the date of the public announcement by
Parent and the Company of this Agreement, Sub shall, and Parent shall cause Sub
to, commence, within the meaning of Rule 14d-2 under the Exchange Act, the
Offer. The obligation of Sub to, and of Parent to cause Sub to, commence the
Offer and accept for payment, and pay for, any Shares tendered pursuant to the
Offer shall be subject only to the conditions set forth in Exhibit A (the "Offer
Conditions") (any one or more of which may be waived in whole or in part by Sub
in its sole discretion, provided that, without the prior written consent of the
Company, Sub shall not waive the Minimum Condition (as defined in Exhibit A)).
Sub expressly reserves the right to modify the terms of the Offer, except that,
without the prior written consent of the Company, Sub shall not (i) reduce the
number of Shares sought in the Offer, (ii) decrease the price per Share, (iii)
impose any conditions to the Offer in addition to the Offer Conditions or modify
the Offer Conditions in a manner adverse to the holders of Shares (other than to
waive any Offer Conditions to the extent permitted by this Agreement), (iv)
except as provided in (b) below, extend the Offer, (v) change the form of
consideration payable in the Offer (other than by adding consideration) or (vi)
make any other change or modification in any of the terms of the Offer in any
manner that is adverse to the holders of Shares.
(b) The Offer shall initially be scheduled to expire 20 business days
following the commencement thereof. Parent and Sub agree that Sub will not
terminate the Offer between scheduled expiration dates (except in the event that
this Agreement is terminated pursuant to Section 9.1) and that, in the event
that Sub would otherwise be entitled to terminate the Offer at any scheduled
expiration date thereof due to the failure of one or more of the Offer
Conditions, unless this Agreement shall have been terminated pursuant to Section
9.1, Sub shall, and Parent shall cause Sub to, extend the Offer for such period
or periods as shall be determined by Sub until such date as the Offer Conditions
have been satisfied or such later date as required by applicable law; provided,
however, that nothing herein shall require Sub to extend the Offer beyond the
Outside Date. Notwithstanding the foregoing, Sub may, without the consent of the
Company, (i) extend the Offer, if at the scheduled or extended expiration date
of the Offer any of the Offer Conditions shall not be satisfied or waived, until
such time as such conditions are satisfied or waived and (ii) extend the Offer
for any period required by any rule, regulation, interpretation or position of
the SEC or the staff thereof applicable to the Offer or as might be required by
the NYSE. Sub shall not provide for a subsequent offering period in accordance
with Rule 14d-11 under the Exchange Act. Subject to the terms and conditions of
the Offer and this Agreement, Sub shall, and Parent shall cause Sub to, accept
and pay for 16,730,502 Shares validly tendered and not withdrawn pursuant to the
Offer that Sub is permitted to accept and exchange for under applicable law, as
soon as practicable after the expiration of the Offer, and in any event in
compliance with the obligations respecting prompt payment pursuant to Rule
14e-1(c) under the Exchange Act; provided, however, that no such payment shall
be made until after Parent and Sub shall have calculated how cash should be
prorated if more than 16,730,502 Shares are validly tendered and not withdrawn
pursuant to the Offer. If this Agreement is terminated by either Parent or Sub
or by the Company, Sub shall, and Parent shall cause Sub to, promptly terminate
the Offer.
(c) On the date of commencement of the Offer, Parent and Sub shall file
with the SEC a Tender Offer Statement on Schedule TO (together with all
supplements and amendments thereto, the "Schedule TO") with respect to the Offer
and a related letter of transmittal, and Parent and Sub shall cause the Offer
Documents to be disseminated to holders of Shares as and to the extent required
by applicable federal securities laws. Parent and Sub agree that they shall
cause the Schedule TO, the Offer to Purchase and all amendments or supplements
thereto (which together constitute the "Offer Documents") to comply in all
material respects with the Exchange Act and the rules and regulations thereunder
and other applicable laws. Parent, Sub and the Company each agrees promptly to
correct any information provided by it for use in the
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Offer Documents if and to the extent that such information shall have become
false or misleading in any material respect, and Parent and Sub further agree to
take all steps necessary to cause the Offer Documents as so corrected to be
filed with the SEC and the other Offer Documents as so corrected to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. The Company and its counsel shall be given
reasonable opportunity to review and comment upon the Offer Documents prior to
their filing with the SEC or dissemination to the Company's stockholders. Parent
and Sub agree to provide the Company and its counsel any comments Parent, Sub or
their counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments and to cooperate with the
Company and its counsel in responding to such comments.
(d) Parent shall provide or cause to be provided to Sub on a timely basis
all funds necessary to accept for payment, and pay for, any Shares accepted for
payment that are validly tendered and not withdrawn pursuant to the Offer and
that Sub is permitted to accept for payment pursuant to the terms and conditions
of the Offer and under applicable law.
Section 1.2 Company Actions. (a) The Company hereby approves of and
consents to the Offer and represents and warrants that the Board of Directors of
the Company, at a meeting duly called and held, duly adopted resolutions by
unanimous vote (i) determining that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, are advisable and are
fair to and in the best interest of the Company's stockholders, (ii) approving
this Agreement and the transactions contemplated hereby, including the Offer and
the Merger, which approval constitutes approval under Section 203 of the DGCL
such that the Offer, the Merger and this Agreement and the other transactions
contemplated hereby are not and shall not be subject to any restriction of
Section 203 of the DGCL, (iii) waiving the application of Article IV of the
Company's bylaws with respect to this Agreement, the Offer and the Merger
pursuant to Section 7 thereof and (iv) resolving to recommend acceptance of the
Offer and to recommend that stockholders of the Company tender their Shares
pursuant to the Offer and to recommend approval and adoption of this Agreement
and the Merger by the Company's stockholders at the Company Stockholders Meeting
(as defined herein) (the recommendations referred to in this clause (iv) are
collectively referred to in this Agreement as the "Recommendations"). The
Company represents and warrants that its Board of Directors has received the
opinion, each dated May 7, 2001, of each of Goldman, Sachs & Co. ("Goldman
Sachs") and Petrie Parkman & Co., Inc. ("Petrie Parkman") that, as of such date
and on the basis of and subject to the matters described therein, the Offer
Consideration and the Merger Consideration, taken together, was fair to the
Company's stockholders (other than Parent and the Company) from a financial
point of view.
(b) On the date the Offer Documents are filed with the SEC, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 with respect to the Offer (such Schedule 14D-9, as amended from time to
time, the "Schedule 14D-9") containing the Recommendations (subject to the right
of the Board of Directors of the Company to make a Subsequent Determination in
accordance with Section 6.6 and shall cause the Schedule 14D-9 to be
disseminated to the Company's stockholders as and to the extent required by
applicable federal securities laws. Each of the Company, Parent and Sub agrees
promptly to correct any information provided by it for use in the Schedule 14D-9
if and to the extent that such information shall have become false or misleading
in any material respect, and the Company further agrees to take all steps
necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule
14D-9 as so amended or supplemented to be filed with the SEC and disseminated to
the Company's stockholders, in each case as and to the extent required by
applicable federal securities laws. Parent and its counsel shall be given
reasonable opportunity to review and comment upon the Schedule 14D-9 prior to
its filing with the SEC or dissemination to the Company's stockholders. The
Company agrees to provide Parent and its counsel 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 and to cooperate with Parent, Sub
and their counsel in responding to such comments.
(c) In connection with the Offer and the Merger, the Company shall cause
its transfer agent to furnish Sub promptly with mailing labels containing the
names and addresses of the record holders of Shares as of a recent date and of
those persons becoming record holders subsequent to such date, together with
copies of all lists of stockholders, security position listings and computer
files and all other information in the Company's
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possession or control regarding the beneficial owners of Shares and any
securities convertible into Shares, and shall furnish to Sub such information
and assistance (including updated lists of stockholders, security position
listings and computer files) as Parent or Sub may reasonably request in
communicating the Offer to the Company's stockholders. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Merger, Parent and Sub and their affiliates, associates and agents shall
hold in confidence the information contained in any such labels, listings and
files, will use such information only in connection with the Offer and the
Merger and, if this Agreement shall be terminated, will promptly, upon request,
deliver, and will use reasonable efforts to cause their affiliates, associates
and agents to deliver, to the Company all copies of such information then in
their possession or control.
ARTICLE II
THE MERGER
Section 2.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the DGCL, the Forward Merger shall be effected
and the Company shall be merged with and into Sub at the Effective Time;
provided, however, that if Parent does not obtain a written opinion of Tax
Counsel (as defined herein) that satisfies the Tax Opinion Standard (as defined
herein), then in Parent's reasonable discretion the Reverse Merger may be
effected, and the surviving corporation shall thereby become a direct or
indirect wholly-owned subsidiary of Parent. Following the Effective Time, if the
Forward Merger is effected, then the separate existence of the Company shall
cease and Sub shall continue as the surviving corporation or, if the Reverse
Merger is effected, then the separate existence of Sub shall cease and the
Company shall continue as the surviving corporation. The surviving corporation
of the Forward Merger or the Reverse Merger, as the case may be, shall be herein
referred as the "Surviving Corporation" and the Forward Merger and Reverse
Merger shall collectively be referred to as the "Merger." The Surviving
Corporation shall succeed to and assume all the rights and obligations of Sub
and the Company in accordance with the DGCL.
Section 2.2 Closing. The closing of the Merger will take place at 10:00
a.m. on a date mutually agreed to by Parent and the Company, which shall be no
later than the second business day after satisfaction or waiver of the
conditions set forth in Article VIII (the "Closing Date"), at the offices of
Sidley Austin Brown & Wood, Bank One Plaza, 10 South Dearborn Street, Chicago,
Illinois 60603, unless another date, time or place is agreed to in writing by
the parties hereto.
Section 2.3 Effective Time. The Merger shall become effective when a
Certificate of Merger (the "Certificate of Merger"), executed in accordance with
the relevant provisions of the DGCL, is duly filed with the Secretary of State
of the State of Delaware, or at such other time as Sub and the Company shall
agree should be specified in the Certificate of Merger. When used in this
Agreement, the term "Effective Time" shall mean the later of the date and time
at which the Certificate of Merger is duly filed with the Secretary of State of
the State of Delaware or such later time established by the Certificate of
Merger. The filing of the Certificate of Merger shall be made as soon as
practicable after the satisfaction or waiver of the conditions to the Merger set
forth in Article VIII.
Section 2.4 Effects of the Merger. The Merger shall have the effects set
forth in the DGCL.
Section 2.5 Certificate of Incorporation and Bylaws; Officers and
Directors. (a) At the Effective Time, the Certificate of Incorporation of Sub,
as in effect immediately prior to the Effective Time, shall be the Restated
Certificate of Incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law; provided, however,
that the Certificate of Incorporation shall provide that the Surviving
Corporation shall initially be named "Barrett Resources Corporation" and shall
contain indemnification provisions consistent with the obligations set forth in
Section 7.9(a).
(b) The Bylaws of Sub, as in effect immediately prior to the Effective
Time, shall be the Bylaws of the Surviving Corporation until thereafter changed
or amended as provided by the Certificate of Incorporation of the Surviving
Corporation or by applicable law; provided that the Bylaws of the Surviving
Corporation shall contain indemnification provisions consistent with the
obligations set forth in Section 7.9(a).
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(c) The directors of Sub immediately prior to the Effective Time shall be
the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
(d) The officers of the Company immediately prior to the Effective Time
shall be the officers of the Surviving Corporation until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
Section 2.6 Principal Offices of the Company. Parent currently
anticipates that the Company's current principal offices in Denver, Colorado
will serve as the Rocky Mountain principal offices for Parent's oil and gas
exploration operations after the consummation of the Merger.
ARTICLE III
EFFECT OF THE MERGER ON THE STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 3.1 Effect on Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of any of Sub, the Company or the
holders of any securities of the Constituent Corporations:
(a) Capital Stock of Sub. In the event of a Forward Merger, each
issued and outstanding share of capital stock of Sub shall remain as one
validly issued, fully paid and nonassessable share of Common Stock, no par
value, of the Surviving Corporation. Notwithstanding the foregoing, in the
event of a Reverse Merger, then each issued and outstanding share of
capital stock of Sub shall be converted into and become one validly issued,
fully paid and non-assessable share of Common Stock of the Surviving
Corporation.
(b) Treasury Stock and Parent Owned Stock. Each Share that is owned
by the Company, Parent, Sub (except for Shares that are owned by Sub, in
the event of a Reverse Merger) or any other Subsidiary of Parent shall
automatically be cancelled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(c) Conversion of Shares. Each Share issued and outstanding (other
than Shares to be cancelled in accordance with Section 3.1(b) and other
than Shares owned by Sub in the event of a Reverse Merger), shall be
converted into the right to receive a number of duly authorized, validly
issued, fully paid and non-assessable Parent Shares equal to the Exchange
Ratio (the "Merger Consideration"). As of the Effective Time, all such
Shares, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired, and each holder of a certificate
representing any such Shares shall cease to have any rights with respect
thereto, except the right to receive any dividends or distributions in
accordance with Section 3.2(c), certificates representing the Parent Shares
into which such Shares are converted and any cash, without interest, in
lieu of fractional shares to be issued or paid in consideration therefor
upon the surrender of such certificate in accordance with Section 3.2(d).
(d) Notwithstanding anything expressed or implied to the contrary in
this Agreement, appropriate modifications shall be made to the provisions
of this Agreement (including, without limitation, this Section 3.1) in the
event of a Reverse Merger involving a direct or indirect wholly-owned
subsidiary of Parent (other than Sub).
Section 3.2 Exchange of Certificates. (a) At the Effective Time, Parent
shall deposit, or shall cause to be deposited, with a banking or other financial
institution mutually acceptable to Parent and the Company (the "Exchange
Agent"), for the benefit of the holders of Shares, for exchange in accordance
with this Article III, certificates representing the Parent Shares to be issued
in connection with the Merger and cash in lieu of fractional shares (such cash
and certificates for Parent Shares, together with any dividends or distributions
with respect thereto (relating to record dates for such dividends or
distributions after the Effective Time), being hereinafter referred to as the
"Exchange Fund") to be issued pursuant to Section 3.1 and paid pursuant to this
Section 3.2 in exchange for outstanding Shares.
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(b) Exchange Procedure. As soon as practicable after the Effective Time,
the Surviving Corporation shall cause the Exchange Agent to mail to each holder
of record of a certificate or certificates that immediately prior to the
Effective Time represented Shares (the "Certificates"), (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in a form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the consideration
contemplated by Section 3.1 and this Section 3.2, including cash in lieu of
fractional shares. Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with such letter of transmittal, duly executed, and
such other documents as may reasonably be required by the Exchange Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor (x)
a certificate representing that number of whole Parent Shares and (y) a check
representing the amount of cash in lieu of fractional shares, if any, and unpaid
dividends and distributions with respect to the Parent Shares as provided for in
Section 3.2(c), if any, that such holder has the right to receive in respect of
the Certificate surrendered pursuant to the provisions of this Article III,
after giving effect to any required withholding tax, and the Shares represented
by the Certificate so surrendered shall forthwith be canceled. No interest will
be paid or accrued on the cash payable to holders of Shares. In the event of a
transfer of ownership of Shares that is not registered in the transfer records
of the Company, a certificate representing the proper number of Parent Shares,
together with a check for the cash to be paid pursuant to this Section 3.2 may
be issued to such a transferee if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the transferee shall pay any
transfer or other taxes required by reason of the payment to a person other than
the registered holder of such Certificate or establish to the satisfaction of
the Surviving Corporation that such tax has been paid or is not applicable.
Parent or the Exchange Agent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
Shares such amounts as Parent or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the Code or under 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 shall be treated
for all purposes of this Agreement as having been paid to the holder of the
Shares in respect of which such deduction and withholding was made by Parent or
the Exchange Agent.
(c) Dividends. Notwithstanding any other provisions of this Agreement, no
dividends or other distributions declared with a record date after the Effective
Time on Parent Shares shall be paid with respect to any Shares represented by a
Certificate until such Certificate is surrendered for exchange as provided
herein. Following surrender of any such Certificate, there shall be paid to the
holder of the certificates representing whole Parent Shares issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective Time
theretofore payable with respect to such whole Parent Shares and not paid, less
the amount of any withholding taxes which may be required thereon, and (ii) at
the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to surrender and a payment
date subsequent to surrender payable with respect to such whole Parent Shares,
less the amount of any withholding taxes which may be required thereon. Parent
will provide the Exchange Agent with the cash necessary to make the payments
contemplated by this Section 3.2(c).
(d) No Fractional Securities. No fractional Parent Shares shall be issued
pursuant hereto. In lieu of the issuance of any fractional share of Parent
Shares, cash adjustments will be paid to holders in respect of any fractional
share of Parent Shares that would otherwise be issuable, and the amount of such
cash adjustment shall be equal to the product obtained by multiplying such
stockholder's fractional share of Parent Shares that would otherwise be issuable
to such holder by the closing price per share of Parent Shares on the NYSE on
the Closing Date as reported by The Wall Street Journal (or, if not reported
thereby, any other authoritative source).
(e) No Further Ownership Rights in Shares. All Parent Shares issued upon
the surrender for exchange of Certificates in accordance with the terms of this
Article III (including any cash paid pursuant to this Section 3.2) shall be
deemed to have been issued in full satisfaction of all rights pertaining to the
Shares theretofore represented by such Certificates. At the Effective Time, the
stock transfer books of the Company
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shall be closed, and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the Shares that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation or the Exchange
Agent for any reason, they shall be cancelled and exchanged as provided in this
Article III.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
(including the proceeds of any investments thereof and any Parent Shares) which
remains undistributed to the holders of Shares for twelve months after the
Effective Time shall be delivered to Parent, upon demand, and any holders of
Shares who have not theretofore complied with this Article III and the
instructions set forth in the letter of transmittal mailed to such holders after
the Effective Time shall thereafter look only to the Surviving Corporation
(subject to abandoned property, escheat or other similar laws) for payment of
their Parent Shares, cash and unpaid dividends and distributions on Parent
Shares deliverable in respect of each Share such stockholder holds as determined
pursuant to this Agreement, in each case, without any interest thereon.
(g) No Liability. None of Parent, Sub, the Company or the Exchange Agent
shall be liable to any person in respect of any amount properly delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(h) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such Person of a bond in such reasonable amount as Parent may direct
as indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed Certificate the applicable Merger Consideration with respect thereto
and, if applicable, any unpaid dividends and distributions on shares of Parent
Shares deliverable in respect thereof and any cash in lieu of fractional shares,
in each case pursuant to this Agreement.
Section 3.3 Tax Consequences. It is intended by the parties hereto that
the Transaction shall constitute a "reorganization" within the meaning of
Section 368(a) of the Code and the United States Treasury Regulations
thereunder.
Section 3.4 Adjustment of Exchange Ratio. In the event that Parent
changes or establishes a record date for changing the number of Parent Shares
issued and outstanding as a result of a stock split, stock dividend,
recapitalization, subdivision, reclassification, combination or similar
transaction with respect to the outstanding Parent Shares and the record date
therefor shall be prior to the Effective Time, the Exchange Ratio applicable to
the Merger and any other calculations based on or relating to Parent Shares
shall be appropriately adjusted to reflect such stock split, stock dividend,
recapitalization, subdivision, reclassification, combination or similar
transaction.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Each exception set forth in the Company Letter (as defined herein) to the
representations and warranties in this Article IV and each other response to
this Agreement set forth in the Company Letter is identified by reference to, or
has been grouped under a heading referring to, a specific individual Section of
this Agreement and relates only to such Section, except to the extent that one
section of the Company Letter specifically refers to or reasonably relates to
another section thereof. Except as set forth in the Company Letter, the Company
represents and warrants to Parent and Sub as follows:
Section 4.1 Organization. The Company and each of its Significant
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has requisite power and
authority to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority would not reasonably be expected to have a Material Adverse Effect
on the Company. The Company and each of its Significant Subsidiaries is duly
qualified or licensed to do business and in good standing in each jurisdiction
in which the nature of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary, except in
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such jurisdictions where the failure to be so duly qualified or licensed and in
good standing (individually or in the aggregate) would not reasonably be
expected to have a Material Adverse Effect on the Company or prevent or
materially delay the consummation of the Offer and/or the Merger. The Company
has made available to Parent complete and correct copies of its certificate of
incorporation and bylaws and the certificate of incorporation and bylaws (or
similar organizational documents) of each of its Significant Subsidiaries, in
each case as amended through the Closing Date.
Section 4.2 Subsidiaries. Item 4.2 of the disclosure letter delivered by
the Company to Parent and Sub prior to the execution of this Agreement (the
"Company Letter") lists each Subsidiary of the Company and its respective
jurisdiction of incorporation and indicates whether such Subsidiary is a
Significant Subsidiary. All of the outstanding shares of capital stock or
ownership interest of each such Subsidiary of the Company that is a corporation
have been validly issued and are fully paid and nonassessable. Except as set
forth in Item 4.2 of the Company Letter, all of the outstanding shares of
capital stock or ownership interest of each Subsidiary of the Company are owned
by the Company, by one or more Subsidiaries of the Company or by the Company and
one or more Subsidiaries of the Company, free and clear of all Liens (including
any restriction on the right to vote, sell or otherwise dispose of such capital
stock). Except as set forth in Item 4.2 of the Company Letter and except for the
capital stock of its Subsidiaries, the Company does not own, directly or
indirectly, any capital stock or other ownership interest in any Person.
Section 4.3 Capital Structure. (a) The authorized capital stock of the
Company consists of 45,000,000 shares of Company Common Stock and 1,000,000
Preferred Shares, par value $.001 per share (the "Company Preferred Stock") of
which 75,000 shares have been designated as Series A Junior Participating
Preferred Stock (the "Company Series A Preferred Shares"). At the close of
business on May 3, 2001, (i) 33,461,004 shares of Company Common Stock were
issued and outstanding, all of which were validly issued, fully paid and
nonassessable and free of preemptive rights, (ii) 4,999 shares of Company Common
Stock were held by the Company in its treasury, (iii) 2,302,073 shares of
Company Common Stock were reserved for issuance pursuant to outstanding options
to purchase Company Common Stock (the "Company Stock Options") granted under the
Company's 2000 Stock Option Plan, 1999 Stock Option Plan, 1997 Stock Option
Plan, 1994 Stock Option Plan, Plains Petroleum Company 1992 Stock Option Plan,
1990 Barrett Resources Corporation Nondiscretionary Stock Option Plan, Plains
Petroleum Company 1989 Stock Option Plan and Plains Petroleum Company 1985 Stock
Option Plan for Non-Employee Directors (together, and each as amended, the
"Company Stock Plans") and (iv) no shares of Company Preferred Stock were issued
and outstanding. As of the date of this Agreement, except for (i) the rights to
purchase Company Series A Preferred Shares (the "Company Rights") issued
pursuant to the Rights Agreement dated as of August 5, 1997, as amended pursuant
to the Amendment to Rights Agreement dated as of February 25, 1999 and May 7,
2001 (as amended, the "Company Rights Agreement") between the Company and
BankBoston, N.A., as Rights Agent (the "Company Rights Agent") or (ii) as set
forth above, no Shares were issued, reserved for issuance or outstanding and
there are not any phantom stock or other contractual rights the value of which
is determined in whole or in part by the value of any capital stock of the
Company ("Stock Equivalents"). There are no outstanding stock appreciation
rights with respect to the capital stock of the Company. Each outstanding Share
is, and each Share which may be issued pursuant to the Company Stock Plans will
be, when issued, duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights. There are no outstanding bonds,
debentures, notes or other indebtedness of the Company having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matter on which the Company's stockholders may vote. Except as set forth
above or in Item 4.3 of the Company Letter, as of the date of this Agreement,
there are no securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the Company or any
of its Significant Subsidiaries is a party or by which any of them is bound
obligating the Company or any of its Significant Subsidiaries to issue, deliver
or sell or create, or cause to be issued, delivered or sold or created,
additional shares of capital stock or other voting securities or Stock
Equivalents of the Company or of any of its Significant Subsidiaries or
obligating the Company or any of its Significant Subsidiaries to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are no outstanding
rights, commitments, agreements, or undertakings of any kind obligating the
Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares of
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capital stock or other voting securities of the Company or any of its
Subsidiaries or any securities of the type described in the two immediately
preceding sentences.
(b) The Company has delivered or made available to Parent complete and
correct copies of the Company Stock Plans and all forms of Company Stock
Options. Item 4.3 of the Company Letter sets forth a complete and accurate list
of all Company Stock Options outstanding as of the date of this Agreement and
the exercise price of each outstanding Company Stock Option.
Section 4.4 Authority. The Company has the requisite corporate power and
authority to execute and deliver this Agreement and, subject to adoption by the
Company's stockholders of this Agreement with respect to the Merger (if required
by applicable law), to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the Merger and of the other transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company, subject to adoption by the Company's stockholders of
this Agreement (if required by applicable law). This Agreement has been duly
executed and delivered by the Company and (assuming the valid authorization,
execution and delivery of this Agreement by Parent and Sub) constitutes the
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.
Section 4.5 Consents and Approvals; No Violations. Except as set forth in
Item 4.5 of the Company Letter, (a) The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated by this Agreement
and compliance with the provisions of this Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any Lien upon any of the properties or assets of the Company
or any of its Subsidiaries under, (i) the certificate of incorporation or bylaws
of the Company or the comparable charter or organizational documents of any of
its Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to the Company or any of its Subsidiaries or their
respective properties or assets or (iii) subject to the governmental filings and
other matters referred to in clause (b) of this Section 4.5, any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or any of its Subsidiaries or their respective properties or assets,
other than, in the case of clauses (ii) and (iii), any such conflicts,
violations, defaults, rights, losses or Liens that individually or in the
aggregate could not reasonably be expected to (x) have a Material Adverse Effect
on the Company, (y) materially impair the Company's ability to perform its
obligations under this Agreement or (z) prevent or materially delay the
consummation of the transactions contemplated by this Agreement.
(b) No consent by a Governmental Entity is required by or with respect to
the Company or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated by this Agreement, except for (i) the filing of a
premerger notification and report form by the Company under the HSR Act and any
applicable filings under similar foreign antitrust or competition laws and
regulations, (ii) the filing with the SEC of (A) the Schedule 14D-9, (B) a proxy
statement relating to the Company Stockholders Meeting (as amended or
supplemented from time to time, the "Proxy Statement"), and (C) such reports,
schedules, forms and statements under the Exchange Act and the Securities Act,
as may be required in connection with this Agreement and the transactions
contemplated hereby, (iii) such filings as may be required under state
securities or "blue sky" laws, (iv) the filing of the Certificate of Merger with
the Delaware Secretary of State and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business,
and (v) such other consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to be made or obtained
individually or in the aggregate could not reasonably be expected to (x) have a
Material Adverse Effect on the Company, (y) impair the Company's ability to
perform its obligations under this Agreement or (z) prevent or materially delay
the consummation of the transactions contemplated by this Agreement.
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(c) Except as otherwise disclosed in Item 4.5(c) of the Company Letter,
neither the Company nor any of its Subsidiaries is a party to or subject to any
material agreement, contract, policy, license, Permit, document, instrument,
arrangement or commitment that provides for an express non-competition covenant
with any Person or in any geographic area and which limits in any material
respect the ability of the Company to compete in its current business line.
Section 4.6 SEC Documents and Other Reports. The Company has filed with
the SEC all required reports, schedules, forms, statements and other documents
required to be filed by it since April 1, 1998 under the Securities Act or the
Exchange Act (the "Company SEC Documents"). As of their respective filing dates,
the Company SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, each
as in effect on the date so filed, and at the time filed with the SEC none of
the Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
Company SEC Documents comply as of their respective dates in all material
respects with the then applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP (except in the case of the unaudited statements, as
permitted by Form 10-Q under the Exchange Act) applied on a consistent basis
during the periods involved (except as may be indicated therein or in the notes
thereto) and fairly present in all material respects the consolidated financial
position of the Company and its consolidated Subsidiaries as at the dates
thereof and the consolidated results of their operations and their consolidated
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments and to any other adjustments
described therein not material in amount).
Section 4.7 Absence of Material Adverse Change. Except as disclosed in
Item 4.7 of the Company Letter or in the documents filed by the Company with the
SEC and publicly available prior to the date of this Agreement (the "Company
Filed SEC Documents"), since December 31, 2000 the Company and its Subsidiaries
have conducted their respective businesses in all material respects only in the
ordinary course consistent with past practice and there has not been (i) any
Material Adverse Change with respect to the Company, (ii) any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to its capital stock or any redemption, purchase
or other acquisition of any of its capital stock, (iii) any split, combination
or reclassification of any of its capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock, (iv) any change in
accounting methods, principles or practices by the Company, except insofar as
may have been required by a change in GAAP, (v) except in the ordinary course of
business or as required under plans or agreements in effect prior to January 1,
2001, (A) any granting by the Company or any of its Subsidiaries to any current
or former director, officer or employee of the Company or any of its
Subsidiaries of any increase in compensation, (B) any granting by the Company or
any of its Subsidiaries to any such director, officer or employee of any
increase in severance or termination pay (including the acceleration in the
exercisability of options to purchase, the re-pricing of options to purchase, or
in the vesting of, Company Common Stock (or other property)), in excess of 10%
of the potential amount payable under plans in effect as of December 31, 2000,
or (C) any entry by the Company or any of its Subsidiaries into any material
employment, deferred compensation, severance or termination agreement with any
such current or former director, officer, or employee; (vi) any damage,
destruction or loss, whether or not covered by insurance, that has had or could
reasonably be expected to have a Material Adverse Effect on the Company, (vii)
any amendment of any material term of any outstanding security of the Company or
any of its Subsidiaries, (viii) any incurrence, assumption or guarantee by the
Company or any of its Subsidiaries of any indebtedness for borrowed money other
than in the ordinary course of business consistent with past practice in the
amount of more than $10 million in the aggregate through the date of this
Agreement, (ix) any creation or assumption by the Company or any of its
Subsidiaries of any material Lien on any asset other than in the ordinary course
of business consistent with past practice, (x) any making of any loan, advance
or capital contributions to or investment in any Person other than (A) loans,
advances or capital contributions to or investments in wholly-owned Subsidiaries
or entities that became wholly-owned Subsidiaries made in the ordinary course of
business consistent with past practice, (B) loans or advances made to employees
in the
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ordinary course of business consistent with past practice and (C) investments
made in the ordinary course of business consistent with past practice, (xi) any
material labor strike or dispute, other than routine individual grievances, or
any material activity or proceeding by a labor union or representative thereof
to organize any employees of the Company or any of its Subsidiaries, which
employees were not subject to a collective bargaining agreement at December 31,
2000, or any lockouts, strikes, slowdowns, work stoppages or threats thereof by
or with respect to such employees, or (xii) any agreement by the Company or any
of its Subsidiaries to perform any action described in clauses (i) through (xi)
above.
Section 4.8 Information Supplied. None of the information supplied or to
be supplied by the Company specifically for inclusion or incorporation by
reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
information to be filed by the Company in connection with the Offer pursuant to
Rule 14f-1 promulgated under the Exchange Act (the "Information Statement") or
(iv) the Proxy Statement, will, in the case of the Offer Documents, the Schedule
14D-9 and the Information Statement, at the respective times the Offer
Documents, the Schedule 14D-9 and the Information Statement are filed with the
SEC or first published, sent or given to the Company's stockholders, or, in the
case of the Proxy Statement, at the time the Proxy Statement is first mailed to
the Company's stockholders or at the time of the Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not misleading
or necessary to correct any statement in any earlier communication with respect
to the solicitation of proxies for the Stockholders Meeting which has become
false or misleading. The Schedule 14D-9, the Information Statement and the Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act, except that no representation or warranty is made by the
Company with respect to statements made or incorporated by reference therein
based on information supplied by Parent or Sub specifically for inclusion or
incorporation by reference therein.
Section 4.9 Compliance with Laws. The Company and its Subsidiaries have
been, and are, in compliance in all material respects with all applicable
statutes, laws, ordinances, regulations, rules, judgments, decrees or orders of
any Governmental Entity, except for any non-compliance that could not reasonably
be expected to have a Material Adverse Effect on the Company, and neither the
Company nor any of its Subsidiaries has received any notice from any
Governmental Entity or any other Person that either the Company or any of its
Subsidiaries is in violation of, or has violated, any applicable statutes, laws,
ordinances, regulations, rules, judgments, decrees or orders, except for
violations that could not reasonably be expected to have a Material Adverse
Effect on the Company. Each of the Company and its Subsidiaries has in effect
all Federal, state, local and foreign governmental Permits necessary for it to
own, lease or operate its properties and assets and to carry on its business as
now conducted, and there has occurred no default under any such Permit, except
for the absence of Permits and for defaults under Permits which absence or
defaults, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on the Company.
Section 4.10 Tax Matters. Except as set forth in Item 4.10 of the Company
Letter, (i) the Company and each of its Subsidiaries has timely filed (after
taking into account any extensions to file) all Tax Returns required to be filed
by them either on a separate or combined or consolidated basis, except where the
failure to timely file a Tax Return (other than a Federal or state income Tax
Return) would not reasonably be expected to have a Material Adverse Effect on
the Company; (ii) all such Tax Returns are complete and accurate, except where
the failure to be complete or accurate would not reasonably be expected to have
a Material Adverse Effect on the Company; (iii) each of the Company and its
Subsidiaries has paid or caused to be paid all Taxes as shown as due on such Tax
Returns and all material Taxes for which no return was filed, except where the
failure to do so would not reasonably be expected to have a Material Adverse
Effect on the Company; (iv) no deficiencies for any Taxes have been asserted in
writing, proposed in writing or assessed in writing against the Company or any
of its Subsidiaries that have not been paid or otherwise settled or are not
otherwise being challenged under appropriate procedures, except for deficiencies
the assertion, proposing or assessment of which would not reasonably be expected
to have a Material Adverse Effect on the Company; and (v) no written requests
for waivers of the time to assess any material Taxes of the Company or its
Subsidiaries are pending. Neither the Company nor any of its Subsidiaries has
taken or agreed to take any
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action or knows of any fact, circumstance, plan or intention that is or would be
reasonably likely to prevent the Transaction from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code.
Section 4.11 Liabilities. Except as set forth in the Company Filed SEC
Documents, neither the Company nor any of its Subsidiaries has any liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) required by GAAP to be set forth on a consolidated balance sheet of
the Company and its Subsidiaries or in the notes thereto, other than liabilities
and obligations incurred in the ordinary course of business since December 31,
2000 and liabilities which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company.
Section 4.12 Litigation. Except as disclosed in Item 4.12 of the Company
Letter or in the Company Filed SEC Documents, there is no suit, action,
proceeding or investigation pending or, to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries that could reasonably
be expected to (i) have a Material Adverse Effect on the Company, (ii)
materially impair the ability of the Company to perform its obligations under
this Agreement or (iii) prevent or materially delay the consummation of the
Offer and/or the Merger; nor is there any outstanding judgment, order, writ,
injunction, rule or decree of any Governmental Entity or arbitrator outstanding
against the Company or any of its Subsidiaries having any such effect.
Section 4.13 Benefit Plans. (a) Except as disclosed in the Company Filed
SEC Documents or Item 4.13(a) of the Company Letter or as required by law,
neither the Company nor any of its Subsidiaries has adopted or amended in any
material respect any Benefit Plan since the date of the most recent audited
financial statements included in the Company Filed SEC Documents. Except as
disclosed in Item 4.13(a) of the Company Letter or in the Company Filed SEC
Documents, there exist no material employment, consulting, severance or
termination agreements between the Company or any of its Subsidiaries and any
current or former officer, director, employee or consultant of the Company or
any of its Subsidiaries. The Company has made available to Parent a copy of each
Benefit Plan, including, without limitation, each Severance Protection
Agreement.
(b) Except as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company, each ERISA Benefit Plan maintained by the Company
or any of its Subsidiaries has been maintained and operated in compliance with
its terms, the applicable requirements of applicable law, including the Code and
ERISA, and each ERISA Benefit Plan intended to be "qualified" within the meaning
of Section 401(a) of the Code has received a favorable determination letter from
the IRS. Except as disclosed in Item 4.13(b) of the Company Letter, none of the
Company, its Subsidiaries or any other person or entity that together with the
Company is treated as a single employer under Section 414 of the Code (each, an
"ERISA Affiliate") has at any time during the five-year period preceding the
date hereof contributed to any ERISA Benefit Plan that is a "multiemployer plan"
(as defined in Section 3(37) of ERISA) or maintained any ERISA Benefit Plan that
is subject to Title IV of ERISA or Section 412 of the Code.
(c) Except as disclosed in Item 4.13(c) of the Company Letter, as of the
date of this Agreement there is no pending dispute, arbitration, claim, suit or
grievance involving a Benefit Plan (other than routine claims for benefits
payable under any such Benefit Plan) that would reasonably be expected to have a
Material Adverse Effect on the Company.
(d) No liability under Title IV or Section 302 of ERISA has been incurred
by the Company or any ERISA Affiliate that has not been satisfied in full, and
no condition exists that presents a material risk to the Company or any ERISA
Affiliate of incurring any such liability, other than any such liability that
would not have a Material Adverse Effect on the Company. Insofar as the
representation made in this Section 4.13(d) applies to Sections 4064, 4069 or
4204 of Title IV of ERISA, it is made with respect to any employee benefit plan,
program, agreement or arrangement subject to Title IV of ERISA to which the
Company or any ERISA Affiliate made, or was required to make, contributions
during the five-year period ending on the last day of the most recent plan year
ending prior to the Closing Date.
(e) Except as disclosed in Item 4.13(e) of the Company Letter, no Benefit
Plan provides medical, surgical, hospitalization or death benefits (whether or
not insured) for employees or former employees of the
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Company or any of its Subsidiaries for periods extending beyond their retirement
or other termination of service, other than (i) coverage mandated by applicable
law, (ii) death benefits under any "pension plan," (iii) benefits the full cost
of which is borne by the current or former employee (or his or her beneficiary)
or (iv) exceptions which would not have a Material Adverse Effect on the
Company.
(f) Item 4.13(f) of the Company Letter sets forth the Company's good faith
estimate of the payments that may be made under the Benefit Plans that could
constitute "excess parachute payments" within the meaning of Section 280G of the
Code.
Section 4.14 State Takeover Statutes; Bylaws Provision; Rights
Agreement. The action of the Board of Directors of the Company in approving the
Offer (including the purchase of Shares pursuant to the Offer), the Merger, this
Agreement and the transactions contemplated by this Agreement is sufficient to
render inapplicable to the Offer, the Merger and this Agreement the provisions
of (i) Section 203 of the DGCL and (ii) Article IV of the Bylaws. The Company
has made available to Parent a complete and correct copy of the Company Rights
Agreement, including all current and proposed amendments and exhibits thereto.
The Board of Directors of the Company has taken all action necessary to amend
the Company Rights Agreement (subject only to the execution of such amendment by
the Company Rights Agent, which execution the Company shall cause to take place
within 48 hours of the date hereof) to provide that: (i) a Distribution Date (as
defined in the Company Rights Agreement) shall not occur, the Company Rights
shall not separate (to the extent the Company Rights Agreement otherwise
provides for such separation) or become exercisable and neither Parent nor Sub
shall become an Acquiring Person (as defined in the Company Rights Agreement) as
a result of the execution or delivery of this Agreement by Parent or Sub, the
public announcement of such execution and delivery or, provided that this
Agreement shall not have been terminated in accordance with Section 9.1 and
subject to the terms of this Agreement, the public announcement or the
commencement of the Offer or the consummation of the Offer and (ii) the Company
Rights shall cease to be exercisable and the Company Rights Agreement shall
terminate after the consummation of the Offer in accordance with the terms
thereof and the terms and conditions hereof, including the acceptance for
payment of, and the payment for all Shares tendered pursuant to the Offer. To
the Knowledge of the Company, no other "fair price," "moratorium," "control
share acquisition," or other anti-takeover statute or similar statute or
regulation, applies or purports to apply this Agreement, or the Offer, the
Merger or the other transactions contemplated by this Agreement.
Section 4.15 Brokers. No broker, investment banker, financial advisor or
other person, other than Goldman, Sachs and Petrie Parkman, the fees and
expenses of which will be paid by the Company (and are reflected in an agreement
between Goldman, Sachs and the Company and an agreement between Petrie Parkman
and the Company, complete copies of which have been furnished to Parent), is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company or any of its
Subsidiaries. If the transactions contemplated by this Agreement are
consummated, no such engagement letter obligates the Company to continue to use
the services or pay fees or expenses in connection with any future transaction.
Section 4.16 Voting Requirements. Approval of the Merger requires the
affirmative vote of a majority of the outstanding Shares (the "Company
Stockholder Approval"). The Company Stockholder Approval is the only vote of the
holders of the Company's capital stock necessary to approve and adopt this
Agreement and the transactions contemplated hereby.
Section 4.17 Environmental Matters.
Except as disclosed in Item 4.17 of the Company Letter:
(a) The Company and each of its Subsidiaries has been and is in
material compliance with all applicable Environmental Laws, including, but
not limited to, possessing all permits, authorizations, licenses,
exemptions and other governmental authorizations required for its
operations under applicable Environmental Laws, except for such
non-compliance that could not reasonably be expected to have a Material
Adverse Effect on the Company.
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(b) There is no pending or, to the Knowledge of the Company,
threatened written claim, lawsuit, or administrative proceeding against the
Company or each of its Subsidiaries, under or pursuant to any Environmental
Law, that could reasonably be expected to have a Material Adverse Effect on
the Company. Neither the Company nor any of its Subsidiaries has received
written notice from any Person, including, but not limited to, any
Governmental Entity, alleging that the Company or any of its Subsidiaries
has been or is in violation or potentially in violation of any applicable
Environmental Law or otherwise may be liable under any applicable
Environmental Law, which violation or liability is unresolved and could
reasonably be expected to have a Material Adverse Effect on the Company.
Neither the Company nor any of its Subsidiaries has received any written
request for information from any Person, including but not limited to any
Governmental Entity, related to liability under or compliance with any
applicable Environmental Law, except for such matters as would not, if they
matured into a claim against the Company or any of its Subsidiaries, have a
Material Adverse Effect on the Company.
(c) With respect to the real property that is currently owned, leased
or operated by the Company or any of its Subsidiaries, there have been no
spills, discharges or releases (as such term is defined by the
Comprehensive Environmental Response, Compensation and Liability Act, 42,
U.S.C. 9601, et seq.) of Hazardous Substances or any other contaminant or
pollutant on or underneath any of such real property that could reasonably
be expected to have a Material Adverse Effect on the Company.
(d) With respect to real property that was formerly owned, leased or
operated by the Company or any of its Subsidiaries or any of their
predecessors in interest, to the Knowledge of the Company, there were no
spills, discharges or releases (as such term is defined by the
Comprehensive Environmental Response, Compensation and Liability Act, 42,
U.S.C. 9601, et seq.) of Hazardous Substances or any other contaminant or
pollutant on or underneath any of such real property during or prior to the
Company's or any of its Subsidiaries' ownership or operation of such real
property that could reasonably be expected to result in a Material Adverse
Effect on the Company.
(e) Except as disclosed on Item 4.17(e) of the Company Letter, neither
the Company nor any of its Subsidiaries has entered into any written
agreement or incurred any material legal or monetary obligation that may
require them to pay to, reimburse, guarantee, pledge, defend, indemnify or
hold harmless any Person from or against any liabilities or costs arising
out of or related to the generation, manufacture, use, transportation or
disposal of Hazardous Substances, or otherwise arising in connection with
or under Environmental Laws, other than in each case exceptions which would
not reasonably be expected to have a Material Adverse Effect on the
Company.
(f) To the Knowledge of the Company, neither the Company nor any of
its Subsidiaries has disposed or arranged for the disposal of Hazardous
Substances (or any waste or substance containing Hazardous Substances) at
any location that is: (i) listed on the Federal National Priorities List
("NPL") or identified on the CERCLIS, each established pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, 42,
U.S.C. 9601, et seq.; (ii) listed on any state list of hazardous waste
sites that is analogous to the NPL or CERCLIS; or (iii) has been subject to
environmental investigation or remediation, other than, in each case,
exceptions which would not reasonably be expected to have a Material
Adverse Effect on the Company.
Section 4.18 Contracts; Debt Instruments. (a) Item 4.18(a) of the Company
Letter and the Company's Annual Report on Form 10-K for the year ended December
31, 2000 (the "2000 10-K") together set forth a true and complete list of (i)
all material agreements to which the Company or any of its Subsidiaries is a
party; (ii) all agreements relating to the incurring of indebtedness (including
sale and leaseback and capitalized lease transactions and other similar
financing transactions) providing for payment or repayment in excess of $10
million; (iii) the exhibits contained or incorporated by reference in the 2000
10-K contain or incorporate by reference all of the contracts required to be
included therein; (iv) all agreements requiring capital expenditures in excess
of $5 million individually (other than agreements relating to the drilling,
completion and connection of wells in the ordinary course of business (including
all related service contracts) and agreements relating to joint operation,
development and exploration entered into in the ordinary course of business);
and (v) any non-competition agreements or any other agreements or obligations
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which purport to limit in any material respect the manner in which, or the
localities in which, all or any substantial portion of the business of the
Company and its Subsidiaries, taken as a whole, is conducted (the agreements,
contracts and obligations specified above, collectively the "Company
Contracts"). All Company Contracts are valid and in full force and effect on the
date hereof except to the extent they have previously expired in accordance with
their terms or if the failure to be in full force and effect, individually and
in the aggregate, would not have a Material Adverse Effect on the Company.
Neither the Company nor any of its Subsidiaries has violated any provision of,
or committed or failed to perform any act which with or without notice, lapse of
time or both would constitute a default under the provisions of, any Company
Contract that could reasonably be expected to have a Material Adverse Effect on
the Company.
(b) Except as described in Item 4.18(b) of the Company Letter or in the
Company SEC Documents, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not (i) result in any
material payment (including severance, unemployment compensation, tax gross-up,
bonus or otherwise) becoming due to any current or former director, officer,
employee or independent contractor of the Company or any of its Subsidiaries,
from the Company or any of its Subsidiaries under any Company Stock Plan,
Benefit Plan, agreement or otherwise, (ii) materially increase any benefits
otherwise payable under any Company Stock Plan, Benefit Plan, agreement or
otherwise or (iii) result in the acceleration of the time of payment, exercise
or vesting of any such material benefits.
Section 4.19 Title to Properties. Except as set forth in Item 4.19 of the
Company Letter:
(a) Each of the Company and its Subsidiaries has good and marketable
title to, or valid leasehold interests in, all its properties and assets,
free and clear of all Liens, except for defects in title, easements,
restrictive covenants and similar encumbrances or impediments that, in the
aggregate, do not and could not reasonably be expected to have a Material
Adverse Effect on the Company.
(b) Each of the Company and its Subsidiaries has complied in all
material respects with the terms of all material leases to which it is a
party and under which it is in occupancy, and all such leases are in full
force and effect, except for such non-compliance that could not reasonably
be expected to have a Material Adverse Effect on the Company. To the
Knowledge of the Company, each of the Company and each of its Subsidiaries
enjoys peaceful and undisturbed possession under all such leases, except
for such noncompliance that could not reasonably be expected to have a
Material Adverse Effect on the Company.
Section 4.20 Intellectual Property. (a) As used in this Agreement,
"Company Intellectual Property" means all of the following which are necessary
to conduct the business of the Company and its Subsidiaries as presently
conducted: (i) trademarks, trade dress, service marks, copyrights, logos, trade
names, corporate names and all registrations and applications to register the
same; (ii) patents and pending patent applications; (iii) all computer software
programs, databases and compilations; and (iv) all material licenses and
agreements to which the Company or any of its Subsidiaries is a party which
relate to any of the foregoing.
(b) Except as disclosed in Item 4.20(b) of the Company Letter, the Company
or its Subsidiaries owns or has the right to use all Company Intellectual
Property necessary to conduct the Company's business as presently conducted,
except as would not, individually or in the aggregate, be expected to have a
Material Adverse Effect on the Company.
(c) Except as disclosed in Item 4.20(b) of the Company Letter, to the
Knowledge of the Company, the conduct of the Company's and its Subsidiaries'
business or the use of the Company Intellectual Property does not infringe,
violate, misappropriate or misuse any intellectual property rights or any other
proprietary right of any Person or give rise to any obligations to any Person as
a result of co-authorship, except in each case for exceptions which would not,
individually or in the aggregate, be expected to have a Material Adverse Effect
on the Company.
Section 4.21 Condition of Assets. All of the material property, plant and
equipment of the Company and its Subsidiaries, has in all material respects been
maintained in reasonable operating condition and repair, ordinary wear and tear
excepted, and is in all material respects, sufficient to permit the Company and
its Subsidiaries to conduct their operations in the ordinary course of business
in a manner consistent with their past practices.
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Section 4.22 Derivative Transactions.
(a) Except as set forth in Section 4.22(a) of the Company Letter, neither
the Company nor its Subsidiaries has entered into any material Derivative
Transactions (as defined below) since December 31, 2000 that have a continuing
financial liability or obligation. All Derivative Transactions entered into by
the Company or any of its Subsidiaries that are currently open were entered into
in material compliance with applicable rules, regulations and policies of all
regulatory authorities.
(b) For purposes of this Section 4.22, "Derivative Transactions" means
derivative transactions within the coverage of FAS 133, including any swap
transaction, option, warrant, forward purchase or sale transaction, futures
transaction, cap transaction, floor transaction or collar transaction relating
to one or more currencies, commodities, bonds, equity securities, loans,
interest rates, credit-related events or conditions or any indexes, or any other
similar transaction (including any option with respect to any of these
transactions) or combination of any of these transactions, including
collateralized mortgage obligations or other similar instruments or any debt or
equity instruments evidencing or embedding any such types of transactions, and
any related credit support, collateral, transportation or other similar
arrangements or agreements related to such transactions.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
Section 5.1 Organization. Parent and each of its Significant Subsidiaries
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has requisite power and authority to carry
on its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power and authority
would not reasonably be expected to have a Material Adverse Effect on Parent.
Parent and each of its Significant Subsidiaries is duly qualified or licensed to
do business and in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, except in such jurisdictions where the failure to be so
duly qualified or licensed and in good standing would not reasonably be expected
to have a Material Adverse Effect on Parent or prevent or materially delay the
consummation of the Offer and/or the Merger. Parent has delivered to the Company
complete and correct copies of its Certificate of Incorporation and Bylaws and
has made available to the Company the charter and bylaws (or similar
organizational documents) of each of its Significant Subsidiaries.
Section 5.2 Capital Structure. Except as set forth in Item 5.2 of the
Parent Letter, the authorized capital stock of Parent consists of 960,000,000
shares of common stock (the "Parent Shares") and 30,000,000 shares of preferred
stock. At the close of business on March 23, 2001, (i) 484,040,320 Parent Shares
were issued and outstanding, all of which were validly issued, fully paid and
nonassessable and free of preemptive rights and (ii) 6,311,910 Parent Shares
were held by Parent in its treasury. As of the close of business on April 24,
2001, there were 25,554,954 Parent Shares reserved for issuance pursuant to
outstanding options to purchase Parent Shares (the "Parent Stock Options")
granted under Parent's 1996 Stock Plan, its Stock Plan for Non-Officer
Employees, its 1996 Stock Plan for Non-Employee Directors, and the Williams
International Stock Plan (the "Parent Stock Incentive Plans"), and, as of the
close of business on February 28, 2001, there were 15,122,521 Parent Shares
reserved for the grant of additional awards under Parent Stock Incentive Plans.
The numbers of shares of capital stock and options described in the immediately
preceding sentences have not materially changed as of the date of this
Agreement, except for adjustments made in connection with the April 23, 2001
spin-off of Williams Communications Group, Inc. from Parent. As of the date of
this Agreement, except as set forth above, no Parent Shares were issued,
reserved for issuance or outstanding and there are not any phantom stock or
other contractual rights the value of which is determined in whole or in part by
the value of any capital stock of Parent ("Parent Stock Equivalents"). There are
no outstanding stock appreciation rights with respect to the capital stock of
Parent. Each outstanding Parent Share is, and each Parent Share which may be
issued pursuant to Parent Stock Plans will be, when issued, duly authorized,
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validly issued, fully paid and nonassessable and not subject to preemptive
rights. There are no outstanding bonds, debentures, notes or other indebtedness
of Parent having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matter on which Parent's
stockholders may vote. Except as set forth above or in Item 5.3 of the Parent
Letter, as of the date of this Agreement, there are no securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which Parent or any of its Significant Subsidiaries is a party or
by which any of them is bound obligating Parent or any of its Significant
Subsidiaries to issue, deliver or sell or create, or cause to be issued,
delivered or sold or created, additional shares of capital stock or other voting
securities or Parent Stock Equivalents of Parent or of any of its Significant
Subsidiaries or obligating Parent or any of its Significant Subsidiaries to
issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking.
As of the date of this Agreement, there are no outstanding contractual
obligations of Parent or any of its Significant Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of Parent or any of its
Significant Subsidiaries.
Section 5.3 Authority. Each of Parent and Sub has requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by each of Parent and Sub and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate and stockholder action on the part of each of Parent and Sub. This
Agreement has been duly executed and delivered by each of Parent and Sub and
(assuming the valid authorization, execution and delivery of this Agreement by
the Company) constitutes the valid and binding obligation of each of Parent and
Sub enforceable against it in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity.
Section 5.4 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the Securities Act, the HSR
Act, the DGCL, the laws of other states in which Parent is qualified to do or is
doing business, state takeover laws and foreign and supranational laws relating
to antitrust and anticompetition clearances, and except as may be required in
connection with the Taxes described in Section 7.7, neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will conflict with or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any Lien upon, any of the
properties or assets of Parent or any of its Subsidiaries, (i) the certificate
of incorporation or bylaws of Parent or the comparable charter or organizational
documents of any of Parent's Significant Subsidiaries, (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 reasonably be expected to have a
Material Adverse Effect on Parent or prevent or materially delay the
consummation of the Offer and/or the Merger), (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, any of the terms, conditions or provisions of 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
(iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent, Sub, any of its Significant Subsidiaries or any of their
properties or assets, except in the case of clauses (iii) or (iv) for
violations, breaches or defaults that would not reasonably be expected to have a
Material Adverse Effect on Parent or prevent or materially delay the
consummation of the Offer and/or the Merger.
Section 5.5 SEC Documents and Other Reports. Parent has filed with the
SEC all documents required to be filed by it since April 1, 1998 under the
Securities Act or the Exchange Act (the "Parent SEC Documents"). As of their
respective filing dates, the Parent SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, each as in effect on the
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date so filed, and at the time filed with the SEC none of the Parent SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of Parent included in the Parent SEC
Documents comply as of their respective dates in all material respects with the
then applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with GAAP
(except in the case of the unaudited statements, as permitted by Form 10-Q under
the Exchange Act) applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto) and fairly present
the consolidated financial position of Parent and its consolidated Subsidiaries
as at the dates thereof and the consolidated results of their operations and
their consolidated cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein).
Section 5.6 Absence of Material Adverse Change. Except as disclosed in
Item 5.7 of the Parent Letter or in the documents filed by Parent with SEC and
publicly available prior to the date of the Agreement (the "Parent Filed SEC
Documents"), since December 31, 2000 Parent and its Subsidiaries have conducted
their respective businesses in all material respects only in the ordinary course
consistent with past practice, and there has not been (i) any Material Adverse
Change with respect to Parent, (ii) except for (a) ordinary quarterly dividends
paid or payable to stockholders of Parent and (b) the distribution of shares of
Williams Communications Group to holders of Parent Shares, any declaration,
setting aside or payment of any dividend or other distribution with respect to
its capital stock or any redemption, purchase or other acquisition of any of its
capital stock, (iii) any split, combination or reclassification of any of its
capital stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (iv) any change in accounting methods, principles or practices
by Parent materially affecting its assets, liabilities or business, except
insofar as may have been required by a change in generally accepted accounting
principles.
Section 5.7 Information Supplied. None of the information supplied or to
be supplied by Parent or Sub specifically for inclusion or incorporation by
reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
Information Statement, (iv) the Proxy Statement or (v) the Form S-4 will, in the
case of the Offer Documents, the Schedule 14D-9 and the Information Statement,
at the respective times the Offer Documents, the Schedule 14D-9 and the
Information Statement are filed with the SEC or first published, sent or given
to the Company's stockholders, 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 or, in the case of the Form S-4, at the time it
becomes effective under the Securities Act, or, in the case of the Proxy
Statement, if any, at the time the Proxy Statement is first mailed to the
Company's stockholders or at the time of the Stockholders Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they are made, not
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Stockholders Meeting which
has become false or misleading, except that no representation or warranty is
made by Parent or Sub in connection with any of the foregoing with respect to
statements made or incorporated by reference therein based on information
supplied by the Company or any of its representatives specifically for inclusion
or incorporation by reference therein. The Offer Documents will comply as to
form in all material respects with the requirements of the Exchange Act, except
that no representation or warranty is made by Parent or Sub in connection with
any of the foregoing with respect to statements made or incorporated by
reference therein based on information supplied by the Company or any of its
representatives specifically for inclusion or incorporation by reference
therein.
Section 5.8 Compliance with Laws. Parent and its Subsidiaries have been
and are, in compliance in all material respects with all applicable statutes,
laws, ordinances, regulations, rules, judgments, decrees or orders of any
Governmental Entity, except for any non-compliance that could not reasonably be
expected to have a Material Adverse Effect on Parent, and neither Parent nor any
of its Subsidiaries has received any notice from any Governmental Entity or any
other Person that either Parent or any of its Subsidiaries is in violation of,
or
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has violated, any applicable statutes, laws, ordinances, regulations, rules,
judgments, decrees or orders, except for violation that could not reasonably be
expected to have a Material Adverse Effect on Parent. Each of Parent and its
Subsidiaries has in effect all Federal, state, local and foreign governmental
Permits necessary for it to own, lease or operate properties and assets and to
carry on its business as now conducted, and there has occurred no default under
any such Permit, except for the absence of Permits and for defaults under
Permits which absence or defaults, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on Parent.
Section 5.9 Parent Shares. All of the Parent Shares issuable in exchange
for Shares in the Merger in accordance with this Agreement will be, when so
issued, duly authorized, validly issued, fully paid and non-assessable and free
of preemptive rights. The issuance of such Parent Shares will be registered
under the Securities Act and registered or exempt from registration under
applicable state securities laws.
Section 5.10 Reorganization. Neither Parent nor any of its Subsidiaries
has taken or agreed to take any action or knows of any fact, circumstance, plan
or intention that is or would be reasonably likely to prevent the Transaction
from qualifying as a "reorganization" within the meaning of Section 368(a) of
the Code.
Section 5.11 Liabilities. Except as set forth in the Parent Filed SEC
Documents, neither Parent nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be set forth on a consolidated balance sheet of Parent and
its Subsidiaries or in the notes thereto, other than liabilities and obligations
incurred in the ordinary course of business since December 31, 2000 and
liabilities which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Parent.
Section 5.12 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 5.13 Litigation. Except as disclosed in Item 5.13 of the Parent
Letter or in the Parent Filed SEC Documents, there is no suit, action,
proceeding or investigation pending against Parent or any of its Subsidiaries
that would reasonably be expected to have a Material Adverse Effect on Parent or
prevent or materially delay the consummation of the Offer and/or the Merger.
Except as disclosed in Item 5.13 of the Parent Letter or in the Parent Filed SEC
Documents, neither Parent nor any of its Subsidiaries is subject to any
outstanding judgment, order, writ, injunction or decree that would reasonably be
expected to have a Material Adverse Effect on Parent or prevent or materially
delay the consummation of the Offer and/or the Merger.
Section 5.14 California Exposure. Based on the facts and circumstances
known to Parent on the date of this Agreement, Parent believes that the reserves
reflected in its most recent financial statements are adequate in all material
respects in relation to Parent's credit, regulatory or litigation exposure
arising from the sale of natural gas or electricity in the State of California.
Section 5.15 Brokers. No broker, investment banker, financial advisor or
other person, other than Merrill Lynch & Co., the fees and expenses of which
will be paid by Parent, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or Sub.
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ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 6.1 Conduct of Business Pending the Merger.
(a) Conduct of Business by the Company Pending the Merger. During the
period from the date of this Agreement until the earlier of the Effective Time
or such time as Parent's designees shall constitute a majority of the Board of
Directors of the Company, the Company shall, and shall cause each of its
Subsidiaries to, in all material respects, except as contemplated by this
Agreement, carry on its business in the ordinary course as currently conducted.
Without limiting the generality of the foregoing, and except as otherwise
contemplated by this Agreement (including, without limitation, as permitted or
required by Section 7.9 or Section 7.11), during such period, the Company shall
not, and shall not permit any of its Subsidiaries to, without the prior written
consent of Parent (which consent shall not be unreasonably withheld or delayed):
(i) (A) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, except for dividends
by a Subsidiary of the Company to its parent or (B) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for
shares of its capital stock;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities, other than (i) the
issuance of Shares upon exercise of Company Stock Options outstanding on
the date hereof or (ii) purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its Subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(iii) amend its Restated Certificate of Incorporation or Bylaws or
other similar organizational documents;
(iv) except as disclosed in Item 6.1(a) of the Company Letter,
acquire, or agree to acquire, in a single transaction or in a series of
related transactions, any business or assets, other than transactions that
are in the ordinary course of business, or which involve assets having a
purchase price not in excess of $5 million individually or $10 million in
the aggregate;
(v) make or agree to make any new capital expenditure other than
expenditures approved by the Board of Directors of the Company and within
the Company's capital budget for fiscal 2001, a true, complete and correct
copy of which has been provided to Parent; provided, however, that no
individual capital expenditure by the Company pursuant to a single
authority for expenditure may exceed $2.5 million;
(vi) except as disclosed in Item 6.1(a) of the Company Letter, sell,
lease, license, encumber or otherwise dispose of, or agree to sell, lease,
license, encumber or otherwise dispose of, any of its assets, other than
transactions that are in the ordinary course of business or which involve
assets having a current value not in excess of $1 million individually or
$5 million in the aggregate;
(vii) except as disclosed in Item 6.1(a) of the Company Letter: (i)
increase the salary or wages payable or to become payable to its directors,
officers or employees, except for increases required under employment
agreements existing on the date hereof, and except for increases for
officers and employees not in excess of 10% of such person's salary or
wages as in effect at the date of this Agreement; or (ii) enter into,
modify or amend any employment or severance agreement with, or establish,
adopt, enter into or amend any bonus, profit sharing, thrift, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination or severance plan or agreement or material policy or
arrangement for the benefit of, any director, officer or employee, except
as may be required by the terms of any such plan, agreement, policy or
arrangement or to comply with applicable law or as contemplated by this
Agreement;
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(viii) except as may be required as a result of a change in law or in
generally accepted accounting principles, make any material change in its
method of accounting;
(ix) make any material Tax election (unless required by law) or enter
into any settlement or compromise of any material Tax liability that, in
either case, could reasonably be expected to have a Material Adverse Effect
on the Company;
(x) (i) mortgage or otherwise encumber or subject to any Lien the
Company's or its Subsidiaries', properties or assets, except in the
ordinary course of business consistent with past practice or pursuant to
existing contracts or commitments, or (ii) except in the ordinary course of
business consistent with past practice or pursuant to existing contracts or
commitments, license any of the Company's Intellectual Property;
(xi) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction, in the ordinary course of
business consistent with past practice and in accordance with their terms,
or (i) liabilities reflected or reserved against in, or contemplated by,
the most recent consolidated financial statements (or the notes thereto) of
the Company included in the Company SEC Documents, (ii) liabilities
incurred in the ordinary course of business consistent with past practice,
or (iii) other liabilities or obligations not to exceed in the aggregate
$2,500,000;
(xii) (i) incur any Indebtedness or guarantee any such Indebtedness of
another Person, issue or sell any debt securities or warrants or other
rights to acquire any debt securities of the Company or any of its
Subsidiaries, guarantee any debt securities of another Person, enter into
any "Keep Well" or other agreement to maintain any financial statement
condition of another Person or enter into any arrangement having the
economic effect of any of the foregoing, except for borrowings incurred in
the ordinary course of business (or to refund existing or maturing
indebtedness) consistent with past practice and except for intercompany
indebtedness between the Company and any of its wholly-owned Subsidiaries
or between such Subsidiaries and except for Indebtedness, guarantees and
similar commitments which do not exceed $10 million in the aggregate, or
(ii) make any loans, advances or capital contributions to, or investments
in, any other Person, except in the ordinary course of business or pursuant
to an agreement existing on the date hereof or loans, advances, capital
contributions or investments which do not exceed $10 million in the
aggregate; or
(xiii) enter into or authorize any contract, agreement or binding
commitment to do any of the foregoing.
(b) Conduct of Business by the Parent Pending the Merger. During the period
from the date of this Agreement until the Effective Time, Parent shall, and
shall cause each of its Subsidiaries to, in all material respects, except as
contemplated by this Agreement, carry on its business in the ordinary course as
currently conducted. Without limiting the generality of the foregoing, and
except as otherwise contemplated by this Agreement, during such period, Parent
shall not, and shall not permit any of its Subsidiaries to, without the prior
written consent of the Company (which consent shall not be unreasonably withheld
or delayed):
(i) make any change in or amendment to Parent's Certificate of
Incorporation that changes any material term or provision of the Parent
Shares;
(ii) make any material change in or amendment to Sub's Certificate of
Incorporation;
(iii) engage in any material repurchase at a premium,
recapitalization, restructuring or reorganization with respect to Parent's
capital stock, including, without limitation, by way of any extraordinary
dividend on, or other extraordinary distributions with respect to, Parent's
capital stock;
(iv) acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of or equity in, or by any other manner,
any person or any business or division thereof, or otherwise acquire any
assets, unless such acquisition or the entering into of a definitive
agreement relating to or the consummation of such transaction would not (A)
impose any material delay in the obtaining of, or materially increase the
risk of not obtaining, any authorizations, consents, orders, declarations
or
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approvals of any Governmental Entity necessary to consummate the Offer, the
Merger or the expiration or termination of any applicable waiting period,
(B) materially increase the risk of any Governmental Entity entering an
order prohibiting the consummation of the Offer or the Merger or (C)
increase the risk of not being able to remove any such order on appeal or
otherwise; or
(v) enter into any contract or agreement to do any of the foregoing.
Section 6.2 No Solicitation; Acquisition Proposals. (a) From the date of
this Agreement until the Effective Time or, if earlier, the termination of this
Agreement in accordance with its terms, (1) the Company shall, and the Company
shall cause its and its Subsidiaries' respective Representatives to, immediately
cease and terminate any existing solicitation, initiation, knowing
encouragement, discussion or negotiation with any Third Party conducted
heretofore by the Company, its Subsidiaries or their respective Representatives
with respect to any Acquisition Proposal and (2) the Company shall not, and the
Company shall cause its and its Subsidiaries' respective Representatives not to,
directly or indirectly, (i) solicit, initiate or knowingly encourage (including
by way of furnishing non-public information), or knowingly take any other action
to facilitate, any inquiries or the making or submission of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal;
(ii) enter into any agreement with respect to any Acquisition Proposal or enter
into any agreement requiring the Company to abandon, terminate or fail to
consummate the acquisition of Shares pursuant to the Offer or the Merger; (iii)
participate or engage in any discussions or negotiations with, or disclose or
provide any non-public information or data relating to the Company or its
Subsidiaries to any Third Party relating to an Acquisition Proposal (except as
required by legal process), or knowingly facilitate any effort or attempt to
make or implement an Acquisition Proposal or accept an Acquisition Proposal; or
(iv) enter into any letter of intent, agreement or similar document relating to
any Acquisition Proposal.
(b) Notwithstanding the restrictions set forth in Section 6.2(a), if, at
any time prior to the acquisition of Shares pursuant to the Offer, (1) the
Company has received an unsolicited bona fide written proposal from a Third
Party relating to an Acquisition Proposal (under circumstances in which the
Company has complied in all material respects with its obligations under Section
6.2(a)) and (2) the Board of Directors of the Company concludes in good faith
(after consultation with a financial advisor of nationally recognized reputation
and after receiving the advice of its outside counsel) (i) that such Acquisition
Proposal may reasonably constitute a Superior Proposal and (ii) that the failure
to provide such information or participate in such negotiations or discussions
would result in a breach by the Board of Directors of the Company of its
fiduciary duties to the Company's stockholders under applicable law, the Company
may, subject to its giving Parent 24 hours prior written notice of the identity
of such Third Party and, to the extent known, the terms and conditions of such
Acquisition Proposal and of the Company's intention to furnish nonpublic
information to, or enter into discussions or negotiations with, such Third
Party, (x) furnish information with respect to the Company and its Subsidiaries
to any Third Party pursuant to a customary confidentiality agreement containing
terms not materially less restrictive than the terms of the Confidentiality
Agreement dated March 9, 2001, entered into between the Company and Parent, as
the same may be amended, supplemented or modified (the "Confidentiality
Agreement"), provided that a copy of all such information is delivered
simultaneously to Parent if it has not previously been so furnished to Parent,
and (y) participate in discussions or negotiations regarding such proposal or
take any of the actions described in Section 6.2(a)(2)(i) through (iv).
(c) The Company shall within 24 hours notify and advise Parent orally and
in writing of any Acquisition Proposal and the terms and conditions of such
Acquisition Proposal. The Company shall inform Parent on a prompt and current
basis of the status of any discussions regarding, or relating to, any
Acquisition Proposal with a Third Party (including amendments and proposed
amendments) and, as promptly as practicable, of any change in the price,
structure or form of the consideration or material terms of and conditions
regarding the Acquisition Proposal. In fulfilling its obligations under this
paragraph (c) of this Section 6.2, the Company shall provide promptly to Parent
copies of all material written correspondence or material written documents
furnished to the Company or its Representatives by or on behalf of such Third
Party.
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(d) The Company agrees that it will promptly inform its and its
Subsidiaries' respective Representatives of the obligations undertaken in this
Section 6.2.
(e) Nothing contained in this Agreement shall prohibit the Company from
taking and disclosing to its stockholders a position as required by Rule 14d-9
or Rule 14e-2(a) promulgated under the Exchange Act.
(f) For purposes of this Agreement,
"Acquisition Proposal" means any inquiry, offer, proposal, indication
of interest, signed agreement or completed action, as the case may be, by
any Third Party which relates to a transaction or series of transactions
(including any merger, consolidation, recapitalization, liquidation or
other direct or indirect business combination) involving the Company or the
issuance or acquisition of 20% or more of the outstanding Shares or any
tender or exchange offer that if consummated would result in any Person,
together with all affiliates thereof, Beneficially Owning 20% or more of
the outstanding Shares, or the acquisition, license, purchase or other
disposition of a substantial portion of the business or assets of the
Company outside the ordinary course of business; and
"Superior Proposal" means any bona fide written Acquisition Proposal
(provided that for the purposes of this definition, the applicable
percentages in the definition of Acquisition Proposal shall be fifty
percent (50%) as opposed to twenty percent (20%)), on its most recently
amended or modified terms, if amended or modified, which the Board of
Directors of the Company determines in its good faith judgment (after
receipt of the advice of a financial advisor of nationally recognized
reputation and receiving advice of its outside counsel), taking into
account, among other things, all legal, financial, regulatory and other
aspects of the proposal and the Third Party making the proposal (i) would,
if consummated, result in a transaction that is more favorable to the
Company's stockholders (in their capacities as stockholders), from a
financial point of view, than the transactions contemplated by this
Agreement and (ii) is reasonably capable of being completed.
Section 6.3 Third Party Standstill Agreements. During the period from the
date of this Agreement through the Effective Time, the Company shall enforce and
shall not terminate, amend, modify or waive any standstill provision of any
confidentiality or standstill agreement between the Company and other parties
entered into prior to the date hereof in connection with the process conducted
by the Company to solicit acquisition proposals for the Company.
Section 6.4 Disclosure of Certain Matters; Delivery of Certain
Filings. (a) The Company shall give prompt notice to Parent, and Parent or Sub
shall give prompt notice to the Company, of (i) any representation or warranty
made by it contained in this Agreement becoming untrue or inaccurate in any
material respect and (ii) the failure by it to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
(b) The Company shall give prompt notice to Parent, and Parent or Sub shall
give prompt notice to the Company, of: (i) any material notice or other
communication from any Person alleging that the consent of such Person is or may
be required in connection with the transactions contemplated by this Agreement;
(ii) any material notice or other communication from any Governmental Entity in
connection with the transactions contemplated by this Agreement; and (iii) any
actions, suits, claims, investigations or proceedings commenced or, to the best
of its knowledge threatened against, relating to or involving or otherwise
affecting it or any of its Subsidiaries which, if pending on the date of this
Agreement would have been required to have been disclosed pursuant to Article IV
or Article V or which relate to the consummation of the transactions
contemplated by this Agreement.
(c) The Company shall promptly advise Parent orally and in writing if there
occurs, to the Knowledge of the Company, any change or event which results in
the executive officers of the Company having a good faith belief that such
change or event has resulted in or is reasonably likely to result in a Material
Adverse Effect on the Company. Parent shall promptly advise the Company orally
and in writing if there occurs, to the Knowledge of Parent, any change or event
which results in the executive officers of Parent having a good faith
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belief that such change or event has resulted in or is reasonably likely to
result in a Material Adverse Effect on Parent. The Company shall provide to
Parent, and Parent shall provide to the Company, copies of all filings made by
the Company or Parent, as the case may be, with any Governmental Entity in
connection with this Agreement and the transactions contemplated hereby.
Section 6.5 Conduct of Business of Sub Pending the Merger. During the
period from the date of this Agreement through the Effective Time, Sub shall not
engage in any activity of any nature except as provided in or contemplated by
this Agreement.
Section 6.6 Modifications to Recommendations. Except as expressly
permitted by this Section 6.6, neither the Board of Directors of the Company nor
any committee thereof shall (i) withdraw, qualify, modify or amend, in a manner
adverse to Parent, the Recommendations or make any public statement, filing or
release inconsistent with such Recommendations (provided, however, that
following the Board of Directors' consideration and evaluation of an Acquisition
Proposal, it is understood that for the purposes hereof, if the Company adopts a
neutral position or no position with respect to the Acquisition Proposal, it
shall be considered an adverse modification of the Recommendations), (ii)
approve or recommend, or propose publicly to approve or recommend, any
Acquisition Proposal or (iii) cause the Company to enter into any acquisition
agreement or other similar agreement related to any Acquisition Proposal (each,
a "Subsequent Determination"), provided that if prior to the consummation of the
Offer the Board of Directors of the Company determines in good faith (after it
has received a Superior Proposal and after receipt of advice from outside
counsel) that the failure to make a Subsequent Determination would result in a
breach by the Board of Directors of the Company of its fiduciary duties to the
Company's stockholders under applicable law, the Board of Directors of the
Company may (subject to this and the following sentences) inform the Company's
stockholders that it no longer believes that the Offer and the Merger and the
other transactions contemplated hereby are advisable, but only at a time that is
72 hours following delivery by the Company to Parent of a written notice (a
"Subsequent Determination Notice") (i) advising Parent that the Board of
Directors of the Company has received a Superior Proposal, (ii) specifying the
terms and conditions of such Superior Proposal, including the amount per share
the Company's stockholders will receive per Share (valuing any non-cash
consideration at what the Board of Directors of the Company determines in good
faith, after consultation with its independent financial advisor, to be the fair
value of the non-cash consideration) and including a copy thereof with all
accompanying documentation, (iii) identifying the person making such Superior
Proposal and (iv) stating that the Company intends to make a Subsequent
Determination. After providing such notice, the Company shall provide a
reasonable opportunity to Parent to make such adjustments in the terms and
conditions of this Agreement as would enable the Company to proceed with its
Recommendations to its stockholders without a Subsequent Determination;
provided, however, that any such adjustment to this Agreement shall be at the
discretion of Parent at the time.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Employee Benefits. (a) Parent shall take all necessary action
so that each person who is an employee of the Company or any of its Subsidiaries
immediately prior to the consummation of the Merger (including each such person
who is on vacation, temporary layoff, approved leave of absence, sick leave or
short- or long-term disability) (a "Retained Employee") shall remain an employee
of the Company or the Surviving Corporation or a Subsidiary of the Company or of
the Surviving Corporation, as the case may be, immediately following the
consummation of the Merger. Parent shall take all necessary action so that each
Retained Employee shall after the consummation of the Offer continue to be
credited with the unused vacation and sick leave credited to such employee
through the consummation of the Offer under the applicable vacation and sick
leave policies of the Company and its Subsidiaries, and Parent shall permit or
cause the Company, the Surviving Corporation and their Subsidiaries to permit
such employees to use such vacation and sick leave. Parent shall take all
necessary action so that, for purposes of eligibility and vesting service under
each employee benefit plan and determination of benefits under each paid time
off, vacation, severance, short-term disability and service award plans
maintained by Parent or any of its Subsidiaries in
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which employees or former employees of the Company and its Subsidiaries become
eligible to participate upon or after the consummation of the Offer, each such
person shall be given credit for all service with the Company and its
Subsidiaries (or all service credited by the Company or its Subsidiaries) to the
same extent as if rendered to Parent or any of its Subsidiaries.
(b) Except as otherwise provided in this Section, Section 7.2 or Section
7.12, nothing in this Agreement shall be interpreted as limiting the power of
the Surviving Corporation to amend or terminate any particular Benefit Plan or
any other particular employee benefit plan, program, agreement or policy or as
requiring the Surviving Corporation to offer to continue (other than as required
by its terms) any written employment contract, subject to the terms and
conditions of the applicable plan, program, agreement or policies.
(c) Parent shall honor or cause to be honored by the Company, the Surviving
Corporation and their Subsidiaries all employment agreements, bonus agreements,
severance agreements, severance plans and non-competition agreements with the
persons who are directors, officers and employees of the Company and its
Subsidiaries (it being understood that nothing herein shall be deemed to mean
that the Company, the Surviving Corporation and their Subsidiaries shall not be
required to honor any of their obligations under any such agreement).
(d) Parent shall, or shall cause the Company and the Surviving Corporation
to, (i) waive all limitations as to preexisting conditions, exclusions and
waiting periods with respect to participation and coverage requirements
applicable to the Retained Employees and former employees of the Company and its
Subsidiaries under any welfare or fringe benefit plan in which such employees
and former employees may be eligible to participate after the consummation of
the Offer, other than limitations or waiting periods that are in effect with
respect to such employees and that have not been satisfied under the
corresponding welfare or fringe benefit plan maintained by the Company for the
Retained Employees and former employees prior to the consummation of the Offer,
and (ii) provide each Retained Employee and former employee with credit under
any welfare plans in which such employee or former employee becomes eligible to
participate after the consummation of the Offer for any co-payments and
deductibles paid by such Retained Employee or former employee for the then
current plan year under the corresponding welfare plans maintained by the
Company prior to the consummation of the Offer.
Section 7.2 Options.
(a) Except as set forth in Section 7.2(f), each Company Stock Option that
is outstanding immediately prior to the date the Offer is consummated (the
"Offer Consummation Date") pursuant to any Company Stock Plan shall vest and
become immediately exercisable at the time of the consummation of the Offer. On
the Offer Consummation Date with respect to Company Stock Options held by
persons who are not subject to the reporting requirements of Section 16(a) of
the Exchange Act, and at the Effective Time with respect to Company Stock
Options held by persons who are subject to the reporting requirements of Section
16(a) of the Exchange Act, each Company Stock Option shall be adjusted to
represent an option to purchase the number of shares of Company Common Stock (a
"Company Adjusted Option") (rounded down to the nearest full share) determined
by multiplying (i) the number of shares of Company Common Stock subject to such
Company Stock Option immediately prior to the Offer Consummation Date with
respect to Company Stock Options held by persons who are not subject to the
reporting requirements of Section 16(a) of the Exchange Act and immediately
prior to the Effective Time with respect to Company Stock Options held by
persons who are subject to the reporting requirements of Section 16(a) of the
Exchange Act, by (ii) 0.5, at an exercise price per share of Company Common
Stock equal to the exercise price per share of Company Common Stock immediately
prior to the Offer Consummation Date. In addition, promptly following the Offer
Consummation Date with respect to holders of Company Stock Options who are not
subject to the reporting requirements of Section 16(a) of the Exchange Act, and
promptly following the Effective Time with respect to holders of Company Stock
Options who are subject to the reporting requirements of Section 16(a) of the
Exchange Act, Parent shall pay to the holder of each Company Stock Option an
amount of cash (rounded up to the nearest cent) equal to the product of (A) (x)
$73.00 minus (y) the exercise price per share of Company Common Stock
immediately prior to the Offer Consummation Date and (B) the number of shares of
Company Common Stock subject to such option multiplied by 0.5 (rounded up to the
nearest full share). Each
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Company Adjusted Option shall be exercisable upon the same terms and conditions
as under the applicable Company Stock Plan and the applicable option agreement
issued thereunder, except as otherwise provided in this Section 7.2.
(b) At the Effective Time, each Company Adjusted Option shall be assumed by
Parent and become and represent an option to purchase the number of Parent
Shares (a "Parent Substitute Option") (rounded to the nearest full share, or if
there shall not be a nearest share, the next greater full share) determined by
multiplying (i) the number of shares of Company Common Stock subject to such
Company Adjusted Option immediately prior to the Effective Time by (ii) 1.767,
at an exercise price per Parent Share (rounded up to the nearest tenth of a
cent) equal to (A) the exercise price per share of Company Common Stock
immediately prior to the Effective Time divided by 1.767. Parent shall pay cash
to holders of Parent Substitute Options in lieu of issuing fractional Parent
Shares upon the exercise of Parent Substitute Options. Each Company Adjusted
Option so converted shall be exercisable upon the same terms and conditions as
under the applicable Company Stock Plan and the applicable option agreement
issued thereunder, except as otherwise provided in this Section 7.2. Parent
shall (i) on or prior to the Effective Time, reserve for issuance the number of
Parent Shares that will become subject to Parent Substitute Options pursuant to
this Section 7.2(b), (ii) from and after the Effective Time, upon exercise of
the Parent Substitute Options in accordance with the terms thereof, make
available for issuance all Parent Shares covered thereby, (iii) at the Effective
Time, assume the Company Stock Plans, with the result that all obligations of
the Company under the Company Stock Plans, including with respect to Company
Adjusted Options outstanding at the Effective Time, shall be obligations of
Parent following the Effective Time, and (iv) as promptly as practicable after
the Effective Time, issue to each holder of an outstanding Company Adjusted
Option a document evidencing the foregoing assumption by Parent.
(c) The parties shall take all actions so that the Company Adjusted Options
converted by Parent qualify following the Effective Time as incentive stock
options as defined in Section 422 of the Code to the extent permitted under
Section 422 of the Code and to the extent the Company Adjusted Options qualified
as incentive stock options prior to the Effective Time; provided, however, that
nothing in this Section 7.2(c) shall prevent the acceleration of the vesting or
exercisability of any Company Stock Option, as provided in Section 7.2(a).
(d) Parent shall, as promptly as practicable but in any event no later than
three days after the Effective Time, file a registration statement on Form S-8
or other applicable form under the Securities Act, covering the Parent Shares
issuable upon the exercise of Parent Substitute Options created upon the
assumption by Parent of Company Adjusted Options under Section 7.2(b), and will
maintain the effectiveness of such registration, and the current status of the
prospectus contained therein, until the exercise or expiration of such Parent
Substitute Options.
(e) The parties will cooperate to take all reasonable steps necessary to
give effect to this Section 7.2.
(f) Notwithstanding the terms of Section 7.2(a), to the extent an option
holder holds any unexercisable incentive stock options ("Unvested ISO") on the
Offer Consummation Date that do not become exercisable upon the consummation of
the Offer pursuant to the terms of the Company Stock Plan(s) under which such
Unvested ISOs were granted, then, to the extent possible, each such Unvested ISO
shall be converted into the right to receive cash in full and the other options
held by such option holder shall be appropriately adjusted such that the
aggregate amount of cash payable to such option holder pursuant to Section
7.2(a) and this Section 7.2(f) does not exceed the amount that would otherwise
be payable pursuant to Section 7.2(a).
Section 7.3 Shareholder Approval; Preparation of Form S-4 and Proxy
Statement/Prospectus. (a) Parent and the Company shall, as soon as practicable
following the acceptance of Shares pursuant to the Offer, prepare and the
Company shall file with the SEC the Proxy Statement and Parent and the Company
shall prepare and Parent shall file with the SEC a registration statement on
Form S-4 (the "Form S-4") for the offer and sale of the Parent Shares pursuant
to the Merger and in which the Proxy Statement will be included as a prospectus.
Each of the Company and Parent shall use all reasonable efforts to have the Form
S-4 declared effective under the Securities Act as promptly as practicable after
such filing. The Company will use all reasonable efforts to cause the Proxy
Statement to be mailed to the Company's
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stockholders as promptly as practicable after the Form S-4 is declared effective
under the Securities Act. Parent shall also take any action (other than
qualifying to do business in any jurisdiction in which it is not now so
qualified or to file a general consent to service of process) required to be
taken under any applicable state securities laws in connection with the issuance
of Parent Shares in the Merger and the Company shall furnish all information
concerning the Company and the holders of capital stock of the Company as may be
reasonably requested in connection with any such action and the preparation,
filing and distribution of the Proxy Statement. No filing of, or amendment or
supplement to, or correspondence to the SEC or its staff with respect to, the
Form S-4 will be made by Parent, or the Proxy Statement will be made by the
Company, without providing the other party a reasonable opportunity to review
and comment thereon. Parent will advise the Company, promptly after it receives
notice thereof, of the time when the Form S-4 has become effective or any
supplement or amendment has been filed, the issuance of any stop order, the
suspension of the qualification of the Parent Shares issuable in connection with
the Merger for offering or sale in any jurisdiction, or any request by the SEC
for amendment of the Form S-4 or comments thereon and responses thereto or
requests by the SEC for additional information. The Company will advise Parent,
promptly after it receives notice thereof, of any request by the SEC for the
amendment of the Proxy Statement or comments thereon and responses thereto or
requests by the SEC for additional information. If at any time prior to the
Effective Time any information relating to the Company or Parent, or any of
their respective affiliates, officers or directors, should be discovered by the
Company or Parent which should be set forth in an amendment or supplement to
either of the Form S-4 or the Proxy Statement, so that any of such documents
would not include any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other parties hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the stockholders of the Company.
(b) The Company shall establish, prior to or as soon as practicable
following the date upon which the Form S-4 becomes effective, a record date
(which shall be prior to or as soon as practicable following the date upon which
the Form S-4 becomes effective) for, duly call, give notice of, convene and hold
a meeting of its stockholders (the "Company Stockholders Meeting") for the
purpose of considering and taking action upon this Agreement and the Merger and
(with the consent of Parent) such other matters as may in the reasonable
judgment of the Company be appropriate for consideration at the Company
Stockholders Meeting. Once the Company Stockholders Meeting has been called and
noticed, the Company shall not postpone or adjourn the Company Stockholders
Meeting (other than for the absence of a quorum) without the consent of Parent.
Subject to its fiduciary duties under applicable law, the Board of Directors of
the Company shall include the Recommendations in the Form S-4 and the Proxy
Statement as such Recommendations pertain to the Merger and this Agreement. The
Company shall use its reasonable best efforts to solicit from stockholders of
the Company proxies for use at the Company Stockholders Meeting and in favor of
this Agreement and the Merger and shall take all other actions reasonably
necessary or advisable to secure the vote or consent of stockholders required by
the DGCL to effect the Merger.
(c) Parent agrees to cause all Shares owned by Parent or any Subsidiary of
Parent to be voted in favor of the Merger.
Section 7.4 Access to Information. Upon reasonable notice and subject to
the terms of the Confidentiality Agreement, each of Company and Parent shall,
and shall cause each of its respective Subsidiaries to, afford to the other
party, and its respective Representatives all reasonable access, during normal
business hours during the period prior to the Effective Time, to all their
respective properties, books, contracts, commitments, records and
Representatives, during such period, each of Company and Parent shall (and shall
cause each of its respective Subsidiaries to) make available to the other party
(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 the
Federal or state securities laws or the Federal tax laws and (b) all other
information concerning its business, properties and personnel as the other party
may reasonably request. In the event of a termination of this Agreement for any
reason, each party shall promptly return or destroy, or cause to be returned or
destroyed, all nonpublic information so obtained from the other party or any of
its Subsidiaries.
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Section 7.5 Fees and Expenses. (a) If the Offer has not been accepted,
the Company agrees to pay Parent a fee equal to $75.5 million as a result of the
occurrence of any of the events set forth below (a "Trigger Event"):
(i) the Company shall have received an Acquisition Proposal (other
than the cash tender offer by SRM Acquisition Corp (an affiliate of Shell
Oil Company), pursuant to its Offer to Purchase dated March 12, 2001, as
amended to the date of this Agreement, at a purchase price of $60 per Share
(the "Shell Tender Offer"), it being understood that the Company shall be
deemed to have received an Acquisition Proposal (x) if SRM Acquisition Corp
amends its tender offer by increasing its tender offer price above $60 per
Share (including cash, securities or any combination thereof offered for
Shares) after the date of the Agreement, or (y) if an Acquisition Proposal
other than the Shell Tender Offer is made by any other affiliate of Shell
Oil Company) after the date of this Agreement (but prior to the termination
hereof), and at any time prior to, or within 12 months after, the
termination of this Agreement (unless this Agreement is terminated pursuant
to Section 9.1(a), Section 9.1(b)(iv) or Section 9.1(e)), the Company shall
have entered into, or shall have publicly announced its intention to enter
into, an agreement or an agreement in principle with respect to any
Acquisition Proposal;
(ii) the Company has provided Parent with a Subsequent Determination
Notice or the Board of Directors of the Company (or any committee thereof)
(A) shall have made a Subsequent Determination, (B) shall include in the
Schedule 14D-9 its Recommendations with modification or qualification in a
manner adverse to Parent, or (C) shall have resolved to, or publicly
announced an intention to, take any of the actions as specified in this
Section 7.5(a)(ii); or
(iii) (A) as of the final expiration date of the Offer, all conditions
to the consummation of the Offer shall have been met or waived except for
satisfaction of the Minimum Condition, (B) there shall have been made
subsequent to the date of this Agreement (but before such expiration date
of the Offer) an Acquisition Proposal (other than the cash tender offer by
SRM Acquisition Corp (an affiliate of Shell Oil Company), pursuant to the
Shell Tender Offer, it being understood that the Company shall be deemed to
have received an Acquisition Proposal (x) if SRM Acquisition Corp amends
its tender offer by increasing its tender offer price above $60 per Share
(including cash, securities or any combination thereof offered for Shares)
after the date of the Agreement, or (y) if an Acquisition Proposal other
than the Shell Tender Offer is made by any other affiliate of Shell Oil
Company) and (C) at any time prior to, or within 12 months after, the
expiration or termination of the Offer, the Company shall have entered
into, or shall have publicly announced its intention to enter into, an
agreement or agreements in principle with respect to any Acquisition
Proposal.
Any fee due under Section 7.5(a) shall be payable by wire transfer of same
day funds on (A) the date of termination of this Agreement if this Agreement is
terminated by the Company pursuant to Section 9.1(d), (B) the date which is the
third business date following the date of the termination of this Agreement if
this Agreement is terminated by Parent pursuant to Section 9.1(c) and (C) any
fee due under clause (i) or (iii) above shall not be payable until the Company
shall have entered into, or shall have publicly announced its intention to enter
into an agreement or agreement in principle with respect to any Acquisition
Proposal.
(b) Except as set forth in this Section 7.5, all fees and expenses incurred
in connection with the Offer and the Merger, this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such fees or
expenses, whether or not the Offer or the Merger is consummated; provided, that
if this Agreement is terminated as a result of the occurrence of a Trigger
Event, in addition to any amounts paid or payable by the Company to Parent
pursuant to Section 7.5(a), the Company shall assume and pay, or reimburse
Parent for, all out-of-pocket fees payable and expenses reasonably incurred by
Parent (including the fees and expenses of its counsel) in connection with this
Agreement and the transactions contemplated hereby, up to a maximum of $15
million.
(c) If the Company shall have breached or failed to perform in any material
respect any of its representations, warranties, covenants or other agreements
contained in this Agreement, which breach or failure to perform (A) would give
rise to the failure of a condition set forth in subclause (c) or (d) of clause
(3) of Exhibit A, and (B) is incapable of being or has not been cured by the
Company prior to or on
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the earlier of (x) the date which is 10 calendar days immediately following
written notice by Parent to the Company of such breach or failure to perform and
(y) the expiration or termination of the Offer in accordance with the terms of
this Agreement, the Company shall assume and pay, or reimburse Parent for, all
out-of-pocket fees payable and expenses reasonably incurred by Parent (including
the fees and expenses of its counsel) in connection with this Agreement and the
transactions contemplated hereby, up to a maximum of $15 million.
(d) If the Company has terminated this Agreement pursuant to Section 9.1(e)
and such breach of a representation, warranty, covenant or other agreement
contained in this Agreement is incapable of being or has not been cured by
Parent prior to or on the date which is 10 calendar days immediately following
written notice by the Company to Parent of such breach or failure to perform,
Parent shall reimburse the Company for all out-of-pocket fees payable and
expenses reasonably incurred by the Company (including the fees and expenses of
its counsel) in connection with this Agreement and the transactions contemplated
hereby, up to a maximum of $15 million.
(e) Parent and the Company agree that the agreements contained in Sections
7.5(a) and 7.5(b) hereof are an integral part of the transactions contemplated
by this Agreement and constitute liquidated damages and not a penalty.
Section 7.6 Public Announcements. Parent and the Company will consult
with each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by applicable law, or by
obligations pursuant to any listing agreement with any national securities
exchange.
Section 7.7 Transfer Taxes. The Company and Parent shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees and any similar taxes which become payable in
connection with the transactions contemplated by this Agreement (together with
any related interest, penalties or additions to tax, "Transfer Taxes"). All
Transfer Taxes shall be paid by the Company (without any reimbursement
whatsoever by Parent, its Subsidiaries or other affiliates) and expressly shall
not be a liability of any holder of Company Common Stock.
Section 7.8 State Takeover Laws. If any "fair price" or "control share
acquisition" statute or other similar statute or regulation shall become
applicable to the transactions contemplated hereby, Parent and the Company and
their respective Boards of Directors shall use reasonable efforts to grant such
approvals and take such actions as are necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to minimize the effects of any such
statute or regulation on the transactions contemplated hereby.
Section 7.9 Indemnification; Directors and Officers Insurance. (a) Parent
shall, or shall cause the Surviving Corporation to, honor for a period of not
less than six years from the Effective Time (or, in the case of matters
occurring at or prior to the Effective Time that have not been resolved prior to
the sixth anniversary of the Effective Time, until such matters are finally
resolved), all rights to indemnification or exculpation, existing in favor of a
director, officer, employee or agent (an "Indemnified Person") of the Company or
any of its Subsidiaries (including, without limitation, rights relating to
advancement of expenses and indemnification rights to which such persons are
entitled because they are serving as a director, officer, agent or employee of
another entity at the request of the Company or any of its Subsidiaries), as
provided in the Restated Certificate of Incorporation of the Company, the Bylaws
of the Company, in each case, as in effect on the date of this Agreement, and
relating to actions or events through the Effective Time; provided, however,
that the Surviving Corporation shall not be required to indemnify any
Indemnified Person in connection with any proceeding (or portion thereof) to the
extent involving any claim initiated by such Indemnified Person unless the
initiation of such proceeding (or portion thereof) was authorized by the Board
of Directors of the Company or unless such proceeding is brought by an
Indemnified Person to enforce rights under this Section 7.9; provided further
that any determination required to be made with respect to whether an
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Indemnified Person's conduct complies with the standards set forth under the
DGCL, the Restated Certificate of Incorporation of the Company, the Bylaws of
the Company, as the case may be, shall be made by independent legal counsel
selected by such Indemnified Person and reasonably acceptable to Parent; and
provided further that nothing in this Section 7.9 shall impair any rights of any
Indemnified Person. Without limiting the generality of the preceding sentence,
in the event that any Indemnified Person becomes involved in any actual or
threatened action, suit, claim, proceeding or investigation after the Effective
Time, Parent shall, or shall cause the Surviving Corporation to, promptly
advance to such Indemnified Person his or her legal and other expenses
(including the cost of any investigation and preparation incurred in connection
therewith), subject to the providing by such Indemnified Person of an
undertaking to reimburse all amounts so advanced in the event of a
non-appealable determination of a court of competent jurisdiction that such
Indemnified Person is not entitled thereto.
(b) Prior to the Effective Time and subject to the proviso in the following
sentence relating to the cost thereof, the Company shall have the right to
obtain and pay for in full a "tail" coverage directors' and officers' liability
insurance policy ("D&O Insurance") covering a period of not less than six years
after the Effective Time and providing coverage in amounts and on terms
consistent with the Company's existing D&O Insurance. In the event the Company
is unable to obtain such insurance, Parent shall cause the Surviving Corporation
to maintain the Company's D&O Insurance for a period of not less than six years
after the Effective Time; provided, that the Surviving Corporation may
substitute therefor policies of substantially similar coverage and amounts
containing terms no less advantageous to such former directors or officers;
provided further that if the existing D&O Insurance expires or is cancelled
during such period, Parent or the Surviving Corporation shall use its best
efforts to obtain substantially similar D&O Insurance; and provided further that
the Company shall not, without Parent's consent, expend an amount in excess of
300% of the last annual premium paid prior to the date hereof to procure the
above described "tail" coverage and neither Parent nor the Surviving Corporation
shall be required to expend, in order to maintain or procure an annual D&O
Insurance policy, in lieu of a tail policy, an amount in excess of 300% of the
last annual premium paid prior to the date hereof, but in such case shall
purchase as much coverage as possible for such amount.
(c) The provisions of this Section 7.9 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Person, his or her heirs and
his or her personal representatives and shall be binding on all successors and
assigns of Parent, the Company and the Surviving Corporation.
Section 7.10 Board of Directors. Promptly after such time as Sub
purchases Shares pursuant to the Offer (but subject to the satisfaction of the
Minimum Condition), Sub shall be entitled, to the fullest extent permitted by
law, to designate at its option up to that number of directors, rounded to the
nearest whole number, of the Company's Board of Directors, subject to compliance
with Section 14(f) of the Exchange Act, as will make the percentage of the
Company's directors designated by Sub equal to the aggregate voting power of the
shares of Common Stock held by Parent or any of its Subsidiaries; provided,
however, that in the event that Sub's designees are elected to the Board of
Directors of the Company, until the Effective Time, such Board of Directors
shall have at least two directors who are directors on the date of this
Agreement and who are not officers of the Company (the "Independent Directors");
and provided, further that, in such event, if the number of Independent
Directors shall be reduced below two for any reason whatsoever, the remaining
Independent Directors shall, to the fullest extent permitted by law, designate a
person to fill such vacancy who shall be deemed to be an Independent Director
for purposes of this Agreement or, if no Independent Directors then remain, the
other directors shall designate two persons to fill such vacancies who shall not
be officers or affiliates of the Company or any of its Subsidiaries, or officers
or affiliates of Parent or any of its Subsidiaries, and such persons shall be
deemed to be Independent Directors for purposes of this Agreement. Following the
election or appointment of Sub's designees pursuant to this Section 7.10 and
prior to the Effective Time, (A) any amendment, or waiver of any term or
condition, of this Agreement or the Restated Certificate of Incorporation or
Bylaws of the Company and (B) any termination of this Agreement by the Company,
any extension by the Company of the time for the performance of any of the
obligations or other acts of Sub or waiver or assertion of any of the Company's
rights hereunder, and any other consent or action by the Board of Directors with
respect to this Agreement, will require the concurrence of a majority of the
Independent Directors and no other action by the Company, including any action
by any other director of the Company,
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shall be required for purposes of this Agreement. To the fullest extent
permitted by applicable law, the Company shall take all actions requested by
Parent which are reasonably necessary to effect the election of any such
designee, including mailing to its stockholders the Information Statement
containing the information required by Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder, and the Company agrees to make such mailing
with the mailing of the Schedule 14D-9 (provided that Sub shall have provided to
the Company on a timely basis all information required to be included in the
Information Statement with respect to Sub's designees). Parent and Sub will be
solely responsible for any information with respect to either of them and their
nominees, officers, directors and affiliates required by Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder. In connection with the
foregoing, the Company will promptly, at the option of Parent, to the fullest
extent permitted by law, either increase the size of the Company's Board of
Directors and/or obtain the resignation of such number of its current directors
as is necessary to enable Sub's designees to be elected or appointed to the
Company's Board of Directors as provided above.
Section 7.11 HSR Act Filings; Reasonable Best Efforts. (a) Each of Parent
and the Company shall (i) promptly make or cause to be made the filings required
of such party or any of its Subsidiaries under the HSR Act and any other
Antitrust Laws with respect to the Offer, the Merger and the other transactions
contemplated by this Agreement, (ii) comply at the earliest practicable date
with any request under the HSR Act or such other Antitrust Laws for additional
information, documents, or other material received by such party or any of its
Subsidiaries from the Federal Trade Commission or the Department of Justice or
any other Governmental Entity in respect of such filings, the Offer, the Merger
or such other transactions, and (iii) cooperate with the other party in
connection with any such filing and in connection with resolving any
investigation or other inquiry of any such agency or other Governmental Entity
under any Antitrust Laws with respect to any such filing, the Offer, the Merger
or such other transactions. Each of Parent and the Company shall promptly inform
the other of any communication with, and any proposed understanding,
undertaking, or agreement with, any Governmental Entity regarding any such
filings, the Offer, the Merger or such other transactions.
(b) Each of Parent and the Company shall use all reasonable best efforts to
resolve such objections, if any, as may be asserted by any Governmental Entity
with respect to the Offer, the Merger or any other transactions provided for in
this Agreement under the Antitrust Laws. In connection therewith, if any
administrative or judicial action or proceeding is instituted (or threatened to
be instituted) challenging the Offer, the Merger or any other transactions
provided for in this Agreement as violative of any Antitrust Law, each of Parent
and the Company shall cooperate and use all reasonable best efforts vigorously
to contest and resist any such action or proceeding and to have vacated, lifted,
reversed, or overturned any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent, that is in effect and that prohibits,
prevents, or restricts consummation of the Offer, the Merger or any such other
transactions. Each of Parent and the Company shall use all reasonable best
efforts to take such action as may be required to cause the expiration of the
notice periods under the HSR Act or other Antitrust Laws with respect to the
Offer, the Merger and such other transactions as promptly as possible after the
execution of this Agreement.
(c) Each of the parties agrees to use all reasonable best efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Offer, the Merger, and the other transactions contemplated by
this Agreement, including (i) the obtaining of all other necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and the
making of all other necessary registrations and filings (including other filings
with Governmental Entities, if any), (ii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iii) the preparation of the
Form S-4, the Offer Documents, the Schedule 14D-9 and the Proxy Statement, and
(iv) the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the purposes
of, this Agreement, in each case subject to the Company Board of Directors'
fiduciary duties under applicable law.
(d) Notwithstanding anything to the contrary in this Section 7.11, (i)
neither Parent nor any of its Subsidiaries shall be required to divest any of
their respective businesses, product lines or assets that could reasonably be
expected to have a Material Adverse Effect on Parent, (ii) neither Parent nor
any of its
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Subsidiaries shall be required to take or agree to take any other action or
agree to any limitation that could reasonably be expected to have a Material
Adverse Effect on Parent, (iii) neither the Company nor its Subsidiaries shall
be required to divest any of their respective businesses, product lines or
assets, or to take or agree to take any other action or agree to any limitation
that could reasonably be expected to have a Material Adverse Effect on the
Company, and (iv) neither Parent nor Sub shall be required to waive any of the
conditions to the Offer set forth in Exhibit A or any of the conditions of to
the Merger set forth in Article VIII.
Section 7.12 Stay Bonuses; Severance. (a) Prior to the Effective Time,
the Company shall be permitted to award bonuses to employees of the Company or
any of its Subsidiaries in an aggregate amount not to exceed $2,000,000, with
such bonuses to be allocated at the direction of its Chief Executive Officer
with the consent of Parent, which consent shall not be unreasonably withheld or
delayed. Such bonuses shall be paid upon the earlier of 90 days following the
Effective Time and 30 days following the date of termination hereof as described
in Article IX (the "Payment Date") to each employee to whom such a bonus has
been awarded and who continues to be employed by the Company (or any successor
or affiliate of the Company) on the Payment Date or whose employment terminates
prior to the Payment Date due to death, Disability, termination by the Company
(or any successor or affiliate of the Company) without Cause, or termination by
the employee with Good Reason (as such capitalized terms are defined in the
Company's Severance Protection Plan); provided, however, that no such bonus
shall be paid to any employee who has entered into a Severance Protection
Agreement with the Company and whose employment terminates prior to the Payment
Date entitling such employee to a severance payment pursuant to Section 3.1(b)
of such Severance Protection Agreement.
(b) Subject to Section 7.1(c), Parent shall maintain or cause the Company
or Surviving Corporation to maintain each of the Company's severance policy as
in effect on the date hereof as set forth in Item 7.12(b) of the Company Letter
or shall replace such policy with a policy providing equal or more favorable
compensation, for a period of at least two years from the Effective Time.
(c) Each employee of the Company or any of its Subsidiaries whose
employment is terminated upon, or within 18 months following, the consummation
of the Offer, other than an employee who has entered into a Severance Protection
Agreement with the Company, shall receive a cash payment from the Company or
Parent in the amount of $8,000 which may, in the sole discretion of such
employee, be used to obtain outplacement services, to assist in the transition
to subsequent employment or for any other purpose.
Section 7.13 Section 16 Matters. Prior to the Effective Time, Parent and
the Company shall take all such steps as may reasonably be required to cause any
dispositions of Shares (including derivative securities with respect to the
Shares) or acquisition of Parent Shares (including derivative securities with
respect to the Parent Shares) resulting from the transactions contemplated by
this Agreement by each individual who is subject to the reporting requirements
of Section 16(a) of the Exchange Act with respect to the Company to be exempt
under Rule 16b-3 promulgated under the Exchange Act, such steps to be taken in
accordance with the No-Action Letter, dated January 12, 1999, issued by the SEC
regarding such matters.
Section 7.14 Tax Treatment. This Agreement is intended to constitute a
"plan of reorganization" with respect to the Offer and the Forward Merger for
United States Federal income tax purposes. From and after the date of this
Agreement, each party hereto shall use its reasonable best efforts to cause the
Offer and the Forward Merger to qualify, and shall not, without the prior
written consent of the other parties hereto, knowingly take any actions or cause
any actions to be taken which could reasonably be expected to prevent the Offer
and the Forward Merger from qualifying as a reorganization under the provisions
of Section 368(a) of the Code. Following the Effective Time, neither the
Surviving Corporation nor Parent nor any of their respective affiliates shall
take any action or cause any action to be taken which could reasonably be
expected to cause the Offer and the Forward Merger to fail to qualify as a
reorganization under Section 368(a) of the Code. Parent shall use its reasonable
best efforts to obtain an opinion of Skadden, Arps, Slate, Meagher & Flom LLP
(which includes its affiliated law practice entities), or another nationally
recognized United States Federal income tax counsel or "Big Five" accounting
firm ("Tax Counsel") (based on the facts and customary representations and
assumptions) that the Transaction will be treated as a "reorganization" within
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the meaning of Section 368(a) of the Code (the "Tax Opinion Standard").
Notwithstanding anything express or implied to the contrary in this Agreement,
but subject to the provisions of this Section 7.14, if such opinion cannot be
obtained, then, in Parent's reasonable discretion, the Reverse Merger shall be
effected instead of the Forward Merger.
Section 7.15 Affiliate Letters. As promptly as practicable, the Company
shall deliver to Parent a letter identifying all persons who are at the time
this Agreement is submitted for adoption by the stockholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use all reasonable efforts to deliver or cause to be delivered
to Parent, prior to the expiration of the Offer, an Affiliate Letter in a
customary form for transactions of this type.
Section 7.16 Litigation. The Company shall give Parent a reasonable
opportunity to participate in the defense of any litigation against the Company
and/or its directors relating to the transactions contemplated by this Agreement
or any other Acquisition Proposal and will not settle or compromise any such
action without the prior written consent of Parent, which consent shall not be
unreasonably withheld or delayed.
Section 7.17 Rights Agreement. Except as expressly required by this
Agreement, the Company shall not, without the prior written consent of Parent,
amend the Rights Agreement or take any other action with respect to, or make any
determination under, the Rights Agreement, including a redemption of the Rights
or any action with respect to the Rights Agreement to facilitate an Acquisition
Proposal; provided, however, that the Company may amend or take appropriate
action under the Rights Agreement to delay the occurrence of a Distribution Date
(as defined in the Rights Agreement) in response to the public announcement of
an Acquisition Proposal.
Section 7.18 Bank Debt. The Company agrees to use its reasonable best
efforts to seek the consent of its bank lenders and the issuers of letters of
credit to the Company to permit the consummation of the transactions
contemplated hereby, including, without limitation, the Offer and the Merger,
without necessity to repay the indebtedness of the Company to such lenders or to
replace such letters of credit.
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) Company Stockholder Approval. The Company Stockholder Approval
shall have been obtained; provided, however, that Parent and Sub shall vote
all of their shares of capital stock of the Company entitled to vote
thereon in favor of the Merger.
(b) No Injunction or Restraint. No statute, rule, regulation,
executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other Governmental Entity preventing the consummation of
the Merger shall be in effect; provided, however, that each of the parties
shall have used their reasonable best efforts to prevent the entry of any
such temporary restraining order, injunction or other order, including,
without limitation, taking such action as is required to comply with
Section 7.11, and to appeal as promptly as possible any injunction or other
order that may be entered.
(c) Purchase of Shares. Sub shall have previously accepted for
payment and paid for Shares pursuant to the Offer; provided, however, that
this condition shall be deemed satisfied if Parent or Sub fails to accept
for payment and pay for Shares pursuant to the Offer in violation of the
terms of this Agreement and/or the Offer.
(d) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
(e) Listing Parent Shares. The Parent Shares to be issued in the
Merger shall have been approved for listing on the NYSE.
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ARTICLE IX
TERMINATION AND AMENDMENT
Section 9.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of this Agreement
and the Merger by the stockholders of the Company or Sub:
(a) by mutual written consent of Parent and the Company
(b) by either of Parent or the Company:
(i) if the Offer shall have expired or been terminated in
accordance with the terms of this Agreement without Parent or Sub having
accepted for payment any Shares pursuant to the Offer, unless the
failure to consummate the Offer is the result of a willful and material
breach of this Agreement by the party seeking to terminate this
Agreement;
(ii) if the Offer shall not have been consummated on or before
August 31, 2001 (the "Outside Date"), unless the failure to consummate
the Offer is the result of a willful and material breach of this
Agreement by the party seeking to terminate this Agreement;
(iii) if the Merger shall not have been consummated as a result of
any condition thereto in Article VIII being incapable of being
satisfied; or
(iv) if any statute, rule, regulation, injunction or decree having
the effects set forth in subclause (a) or (b) of clause (3) of Exhibit A
shall be in effect and shall have become final and nonappealable; or
(c) by Parent, upon the occurrence of the Trigger Event described in
Section 7.5(a)(ii) hereof;
(d) by the Company, if the Company makes a Subsequent Determination in
material compliance with Section 6.2 hereof and pursuant to the provisions
of Section 6.6 hereof, provided the Company has paid or concurrently pays
Parent the sums (including providing Parent with an undertaking confirming
the Company's obligation to reimburse expenses as required by Section 7.5)
required by Section 7.5(a) hereof; or
(e) by the Company (i) if Sub or Parent shall have breached in any
material respect any of their respective covenants, obligations or other
agreements under this Agreement, or (ii) if the representations and
warranties of Parent and Sub set forth in this Agreement that are qualified
as to materiality shall not be true and correct as of the date of the
Agreement and as of the expiration of the date of termination of this
Agreement (except to the extent expressly made as of an earlier date, in
which case as of such date), or any of the representations and warranties
set forth in the Agreement that are not so qualified by materiality shall
not be true and correct in any material respect as of the date of this
Agreement and as of the date of termination of this Agreement (except to
the extent expressly made as of an earlier date, in which case as of such
date); provided that this right of termination shall not be deemed to exist
unless any such breaches of representation or warranty (without regard to
any "Materiality" or "Material Adverse Effect" or similar qualifier or
threshold), individually or in the aggregate, has had or could reasonably
be expected to have, a Material Adverse Effect on the Parent; provided,
further that the breach of the covenant, obligation, agreement,
representation or warranty is incapable of being or has not been cured by
Parent or Sub prior to or on the date which is 10 calendar days immediately
following written notice by the Company to Parent of such breach or failure
to perform.
(f) by Parent (i) if the Company shall have breached in any material
respect any of its covenants, obligations or other agreements under this
Agreement, or (ii) if the representations and warranties of the Company set
forth in this Agreement that are qualified as to materiality shall not be
true and correct as of the date of the Agreement and as of the expiration
of the date of termination of this Agreement (except to the extent
expressly made as of an earlier date, in which case as of such date), or
any of the representations and warranties set forth in the Agreement that
are not so qualified by materiality shall not be true and correct in any
material respect as of the date of this Agreement and as of the date of
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termination of this Agreement (except to the extent expressly made as of an
earlier date, in which case as of such date); provided that this right of
termination shall not be deemed to exist unless any such breaches of
representation or warranty (without regard to any "Materiality" or
"Material Adverse Effect" or similar qualifier or threshold), individually
or in the aggregate, has had or could reasonably be expected to have, a
Material Adverse Effect on the Company; provided, further that the breach
of the covenant, obligation, agreement, representation or warranty is
incapable of being or has not been cured by the Company prior to or on the
date which is 10 calendar days immediately following written notice by
Parent to the Company of such breach or failure to perform.
Section 9.2 Effect of Termination. In the event of a termination of this
Agreement by either the Company or Parent as provided in Section 9.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Sub or the Company or their respective
officers or directors, except with respect to Section 4.15, Section 5.16,
Section 7.5, this Section 9.2 and Article X and the last sentences of each of
Section 1.2(c) and Section 7.4; provided, however, that nothing herein shall
relieve any party for liability for any willful or knowing breach hereof.
Section 9.3 Amendment. Subject to Section 1.1 and Section 7.10, this
Agreement may be amended by the parties hereto at any time before or after
obtaining the Company Stockholder Approval, but if the Company Stockholder
Approval shall have been obtained, thereafter no amendment shall be made which
by law requires further approval by the Company's stockholders without obtaining
such further approval. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
Section 9.4 Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (i) subject to the provisions of
Section 7.10, extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) subject to the provisions of
Section 7.10, waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto or (iii) subject
to the provisions of Section 7.10, waive compliance with any of the agreements
or conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival of Representations and Warranties and
Agreements. None of the representations and warranties in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 10.1 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time of the
Merger.
Section 10.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Parent or Sub, to:
The Williams Companies, Inc.
One Williams Center
Tulsa, Oklahoma 74172
Attn: William G. von Glahn and Rebecca H. Hilborne
Telecopy No.: (918) 573-5942
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with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
Attn: Morris Kramer and Richard Grossman
Telecopy No.: 212-735-2000
(b) if to the Company, to:
Barrett Resources Corporation
1515 Arapahoe Street
Tower 3, Suite 1000
Denver, Colorado 80202
Attn: Eugene A. Lang, Jr.
Telecopy No.: (303) 629-8275
with copies to:
Sidley Austin Brown & Wood
Bank One Plaza
10 South Dearborn Street
Chicago, Illinois 60603
Attn: Thomas A. Cole and Paul L. Choi
Telecopy No.: (312) 853-7036
Section 10.3 Interpretation; Definitions. When a reference is made in
this Agreement to an Article or a Section, such reference shall be to an Article
or a Section of this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation."
As used in this Agreement, the following terms have the meanings specified
or referred to in this Section 10.3 and shall be equally applicable to both the
singular and plural forms. Any agreement referred to below shall mean such
agreement as amended, supplemented or modified from time to time to the extent
permitted by the applicable provisions thereof and by this Agreement.
"Acquisition Proposal" shall have the meaning set forth in Section 6.2(f).
"Agreement" means this Agreement and Plan of Merger, dated as of May 7,
2001, among Parent, Sub and the Company.
"Antitrust Laws" means, collectively, the HSR Act, the Sherman Act, as
amended, the Clayton Act, as amended, the Federal Trade Commission Act, as
amended, and any other Federal, state or foreign statutes, rules, regulations,
orders or decrees that are designed to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade.
"Beneficial Owner" or "Beneficially Owning" shall have the meaning set
forth in Rule 13d-3 promulgated under the Exchange Act.
"Benefit Plan" means any collective bargaining agreement or any bonus,
pension, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement, vacation,
severance, disability, death benefit, hospitalization, medical, employee stock
purchase, stock appreciation, restricted stock or other employee benefit plan,
agreement or arrangement, in each case that is maintained, sponsored,
contributed to or required to be contributed to by the Company or any ERISA
Affiliate for the benefit of providing benefits to any current or former
employee, officer, director or consultant of the Company or any of its
Subsidiaries.
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"Certificate of Merger" shall have the meaning set forth in Section 2.3.
"Certificates" shall have the meaning set forth in Section 3.2(b).
"Closing Date" shall have the meaning set forth in Section 2.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning set forth in the introductory paragraph of
this Agreement.
"Company Common Stock" shall have the meaning set forth in the second
recital provision of this Agreement.
"Company Contracts" shall have the meaning set forth in Section 4.18(a).
"Company Filed SEC Documents" shall have the meaning set forth in Section
4.7.
"Company Intellectual Property" shall have the meaning set forth in Section
4.20.
"Company Letter" shall have the meaning set forth in Section 4.2.
"Company Preferred Stock" shall have the meaning set forth in Section 4.3.
"Company Rights" shall have the meaning set forth in Section 4.3.
"Company Rights Agent" shall have the meaning set forth in Section 4.3.
"Company Rights Agreement" shall have the meaning set forth in Section 4.3.
"Company SEC Documents" shall have the meaning set forth in Section 4.6.
"Company Series A Preferred Shares" shall have the meaning set forth in
Section 4.3.
"Company Stock Options" shall have the meaning set forth in Section 4.3.
"Company Stock Plans" shall have the meaning set forth in Section 4.3.
"Company Stockholder Approval" shall have the meaning set forth in Section
4.16.
"Company Stockholders Meeting" shall have the meaning set forth in Section
6.2(b).
"Confidentiality Agreement" shall have the meaning set forth in Section
7.4.
"Consents" means with respect to a Governmental Entity or Person, any
consent, approval, order or authorization of, or registration, declaration or
filing with or exemption by such Governmental Entity or Person, as the case may
be.
"Constituent Corporations" shall have the meaning set forth in the
introductory paragraph of this Agreement.
"Consummation of the Offer" means the purchase of Shares pursuant to the
Offer.
"Derivative Transactions" shall have the meaning set forth in Section
4.22(b).
"D&O Insurance" shall have the meaning set forth in Section 7.9(b).
"DGCL" means the General Corporation Law of the State of Delaware.
"Effective Time" shall have the meaning set forth in Section 2.3.
"Environmental Laws" shall mean all foreign, Federal, state and local laws,
regulations, rules and ordinances relating to pollution or protection of the
environment or human health and safety, including, without limitation, laws
relating to releases or threatened releases of Hazardous Substances into the
indoor or outdoor environment (including, without limitation, ambient air,
surface water, groundwater, land, surface and subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
Release, transport or handling of Hazardous Substances; all laws and regulations
with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Substances; all laws relating to
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endangered or threatened species of fish, wildlife and plants and the management
or use of natural resources; and common law to the extent it relates to or
applies to exposure to or impact of Hazardous Substances on persons or property.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, together with the rules and regulations promulgated thereunder.
"ERISA Affiliate" shall have the meaning set forth in Section 4.13(b).
"ERISA Benefit Plan" means a U.S. Benefit Plan maintained as of the date of
this Agreement which is also an "employee pension benefit plan" (as defined in
Section 3(2) of ERISA) or which is also an "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.
"Exchange Agent" shall have the meaning set forth in Section 3.2(a).
"Exchange Fund" shall have the meaning set forth in Section 3.2(a).
"Exchange Ratio" shall have the meaning set forth in the third recital
provision of this Agreement (subject to adjustment as contemplated by Section
3.4).
"Expenses" means documented and reasonable out-of-pocket fees and expenses
incurred or paid by or on behalf of Parent in connection with the Offer, the
Merger or the consummation of any of the transactions contemplated by this
Agreement, including all reasonable fees and expenses of law firms, commercial
banks, investment banking firms, accountants, experts and consultants to Parent.
"Form S-4" shall have the meaning set forth in Section 7.3.
"Forward Merger" shall have the meaning set forth in the second recital
provision of this Agreement.
"GAAP" means United States generally accepted accounting principles.
"Goldman, Sachs" shall have the meaning set forth in Section 1.2(a).
"Governmental Entity" means any Federal, state, local or foreign government
or any court, tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency, domestic, foreign or
supranational.
"Hazardous Substances" shall mean (a) any petrochemical or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contain dielectric fluid containing polychlorinated biphenyls, and radon gas;
(b) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"restricted hazardous materials," "extremely hazardous substances," "toxic
substances," "contaminants" or "pollutants" or words of similar meaning and
regulatory effect; or (c) any other chemical, material or substance, exposure to
which is prohibited, limited, or regulated by any applicable Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Indebtedness" shall mean, with respect to any Person, without duplication,
(a) all obligations of such Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, debentures, notes or similar instruments, (c)
all letters of credit issued for the account of such Person (excluding letters
of credit issued for the benefit of suppliers to support accounts payable to
suppliers incurred in the ordinary course of business), (d) all capitalized
lease obligations of such Person, (e) all obligations of such Person under
interest rate or currency swap transactions (valued at the termination value
thereof), and (f) all guarantees and arrangements having the economic effect of
a guarantee of such Person of any indebtedness of any other Person.
"Indemnified Person" shall have the meaning set forth in Section 7.9(a).
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"Independent Directors" shall have the meaning set forth in Section 7.10.
"Information Statement" shall have the meaning set forth in Section 4.8.
"Knowledge" shall mean the actual knowledge of the executive officers of
the Company or the executive officers of Parent, as the case may be.
"Liens" means any pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever.
"Material Adverse Change" or "Material Adverse Effect" means, when used in
connection with the Company or Parent, as the case may be, any change or effect
(or any development that, insofar as can reasonably be foreseen, is likely to
result in any change or effect) that is materially adverse to the business,
properties, assets, condition (financial or otherwise) or results of operations
of the Company and its Subsidiaries taken as a whole, or Parent and its
Subsidiaries taken as a whole, as the case may be, provided, however, that (i)
any adverse change, effect or development that is caused by or results from
conditions affecting the United States economy generally or the economy of any
nation or region in which the Company or Parent, as the case may be, or its
Subsidiaries conducts business that is material to the business of the Company
or Parent, as the case may be, and its Subsidiaries, taken as a whole, shall not
be taken into account in determining whether there has been (or whether there
could reasonably be foreseen) a "Material Adverse Change" or "Material Adverse
Effect" with respect to the Company or Parent, as the case may be, (ii) any
adverse change, effect or development that is caused by or results from
conditions generally affecting the industries (including the oil and gas
industry) in which the Company or Parent, as the case may be, conducts its
business shall not be taken into account in determining whether there has been
(or whether there could be reasonably be foreseen) a "Material Adverse Change"
or "Material Adverse Effect" with respect to the Company or Parent, as the case
may be, and (iii) any adverse change, effect or development that is caused by or
results from the announcement or pendency of this Agreement, the Offer, the
Merger or the transactions contemplated hereby shall not be taken into account
in determining whether there has been (or whether there could reasonably be
foreseen) a "Material Adverse Change" or "Material Adverse Effect" with respect
to the Company or Parent, as the case may be.
"Merger" shall have the meaning set forth in Section 2.1.
"Merger Consideration" shall have the meaning set forth in the third
recital provision of this Agreement.
"Minimum Condition" shall have the meaning set forth in Exhibit A of this
Agreement.
"NYSE" means the New York Stock Exchange, Inc.
"Offer" shall have the meaning set forth in the second recital provision of
this Agreement.
"Offer Conditions" shall have the meaning set forth in Section 1.1(a).
"Offer Consideration" shall have the meaning set forth in the second
recital provision of this Agreement.
"Offer Documents" shall have the meaning set forth in Section 1.1(c).
"Outside Date" shall have the meaning set forth in Section 9.1(b).
"Parent" shall have the meaning set forth in the introductory paragraph of
this Agreement.
"Parent Common Stock" shall have the meaning set forth in the third recital
provision of this Agreement.
"Parent Filed SEC Documents" shall have the meaning set forth in Section
5.7.
"Parent Letter" means the letter from Parent to the Company dated the date
hereof, which letter relates to this Agreement and is designated therein as the
Parent Letter.
"Parent Options" shall have the meaning set forth in Section 7.2(b).
"Parent Rights" means the rights to purchase Series A Junior Participating
Preferred Stock issued pursuant to the Parent Rights Agreement.
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"Parent Rights Agreement" means the Rights Agreement, dated as of February
6, 1996, between Parent and First Chicago Trust Company of New York, as rights
agent, as amended.
"Parent SEC Documents" shall have the meaning set forth in Section 5.6.
"Parent Shares" shall have the meaning set forth in the second recital
provision of this Agreement.
"Parent Stock Equivalents" shall have the meaning set forth in Section 5.3.
"Parent Stock Options" shall have the meaning set forth in Section 5.3.
"Permits" means approvals, authorizations, certificates, filings,
franchises, licenses, notices, permits and rights.
"Person" means an individual, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization or other
entity (including any person as defined in Section 13(d)(3) of the Exchange
Act).
"Petrie Parkman" shall have the meaning set forth in Section 1.2(a).
"Proxy Statement" shall have the meaning set forth in Section 4.5(b).
"Recommendations" shall have the meaning set forth Section 1.2.
"Representative" means with respect to any Person, its officers, directors,
investment bankers, attorneys, accountants, consultants or other agents,
advisors or representatives.
"Retained Employee" shall have the meaning set forth in Section 7.1(a).
"Reverse Merger" shall have the meaning set forth in the fourth recital
provision of this Agreement.
"Rights Agreement" shall mean that certain Rights Agreement between the
Company and BankBoston, N.A. dated August 5, 1997, as amended.
"Schedule 14D-9" shall have the meaning set forth in Section 1.2(b).
"Schedule TO" shall have the meaning set forth in Section 1.1(c).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, together
with the rules and regulations promulgated thereunder.
"Shares" shall have the meaning set forth in the second recital provision
of this Agreement.
"Significant Subsidiary" of any person means a Subsidiary of such person
that would constitute a "significant subsidiary" of such person within the
meaning of Rule 1.02(v) of Regulation S-X as promulgated by the SEC.
"Stock Equivalents" shall have the meaning set forth in Section 4.3.
"Sub" shall have the meaning set forth in the introductory paragraph of
this Agreement.
"Subsequent Determination" shall have the meaning set forth in Section 6.6.
"Subsequent Determination Notice" shall have the meaning set forth in
Section 6.6.
"Subsidiary" or "Subsidiary" of any person means another person, an amount
of the voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person.
"Superior Proposal" shall have the meaning set forth in Section 6.2(f).
"Surviving Corporation" shall have the meaning set forth in Section 2.1.
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"Tax" and "Taxes" means any federal, state, local or foreign net income,
gross income, gross receipts, windfall profit, severance, property, production,
sales, use, license, excise, franchise, employment, payroll, withholding,
alternative or add-on minimum or any other tax, custom, duty, levy, tariff,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, addition to tax or additional amount
imposed by any Governmental Entity.
"Tax Opinion Standard" shall have the meaning set forth in Section 7.14.
"Tax Return" means any return, report or similar statement (including any
related or supporting information) required to be filed with respect to any Tax
including, without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.
"Termination Fee" shall have the meaning set forth in Section 7.5(b).
"Third Party" means any Person (or group of Persons) other than Parent and
its affiliates.
"Transaction" shall have the meaning set forth in the eighth recital
provision of this Agreement.
"Transfer Taxes" shall have the meaning set forth in Section 7.7.
"Treasury Regulations" means the final and temporary (but not proposed)
income tax regulations promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"Trigger Event" shall have the meaning set forth in Section 7.5(a).
Section 10.4 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 10.5 Entire Agreement; No Third-Party Beneficiaries. Except for
the Confidentiality Agreement, this Agreement constitutes the entire agreement
and supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof. This Agreement,
except for the provisions of Section 7.1, Section 7.2, Section 7.9, Section 7.12
and Section 7.13, is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
Section 10.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 10.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns. Notwithstanding the
foregoing, Sub shall have the right, effective upon written notice to the
Company, to transfer or assign, in whole or from time to time in part, to Parent
or to one or more other wholly-owned Subsidiaries of Parent, the right to
purchase Shares tendered pursuant to the Offer, but any such transfer or
assignment shall in no way prejudice the rights of tendering stockholders to
receive payment for their Shares validly tendered and accepted for payment
pursuant to the Offer, adversely affect the ability of the parties to complete
the Transaction or relieve Sub of its obligations hereunder.
Section 10.8 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
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Section 10.9 Enforcement of this Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, such remedy being in addition to any
other remedy to which any party is entitled at law or in equity.
Section 10.10 Obligations of Subsidiaries. Whenever this Agreement
requires any Subsidiary of Parent (including Sub) or of the Company to take any
action, such requirement shall be deemed to include an undertaking on the part
of Parent or the Company, as the case may be, to cause such Subsidiary to take
such action.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized all as of
the date first written above.
THE WILLIAMS COMPANIES, INC.
By: /s/ KEITH E. BAILEY
------------------------------------
Name: Keith E. Bailey
Title: Chairman, President and
Chief Executive Officer
RESOURCES ACQUISITION CORP.
By: /s/ STEVEN J. MALCOLM
------------------------------------
Name: Steven J. Malcolm
Title: President
BARRETT RESOURCES CORPORATION
By: /s/ PETER A. DEA
------------------------------------
Name: Peter A. Dea
Title: Chairman and Chief
Executive Officer
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EXHIBIT A
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, subject to the terms of
the Agreement, Sub shall not be required to accept for payment or pay for,
(subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) under the Exchange Act (relating to Sub's obligation to pay for or
return tendered Shares after the termination or withdrawal of the Offer)) any
Shares tendered, if by the expiration of the Offer (as it may be extended in
accordance with the requirements of Section 1.1), (1) there shall not have been
validly tendered and not withdrawn prior to the expiration of the Offer
16,730,502 shares of Company Common Stock (the "Minimum Condition"), (2) the
applicable waiting period under the HSR Act and any other applicable Antitrust
Laws shall not have expired or been terminated, or (3) at any time on or after
the date of the Agreement and prior to the acceptance for payment of Shares
pursuant to the Offer, any of the following conditions exist:
(a) there shall be instituted or pending any action or proceeding by
any Governmental Entity:
(i) challenging or seeking to make illegal, to delay materially or
otherwise directly or indirectly to restrain or prohibit the making of
the Offer or the Merger, the acceptance for payment of, or the payment
for, some of or all the Shares by Parent or Sub or the consummation by
Parent or Sub of the Merger or seeking to obtain material damages,
(ii) seeking to restrain or prohibit Parent's or Sub's ownership or
operation (or that of their respective Subsidiaries or affiliates) of
all or any material portion of the business or assets of the Company and
its Subsidiaries, taken as a whole, or of Parent and its Subsidiaries,
taken as a whole, or to compel Parent or any of its Subsidiaries or
affiliates to dispose of or hold separate all or any material portion of
the business or assets of the Company and its Subsidiaries, taken as a
whole, or of Parent and its Subsidiaries, taken as a whole,
(iii) seeking to impose material limitations on the ability of
Parent or any of its Subsidiaries effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to
vote any Shares acquired or owned by Parent or any of its Subsidiaries
or affiliates on all matters properly presented to the Company's
stockholders, or
(iv) seeking to require divestiture by Parent or any of its
Subsidiaries of any Shares; or
(b) there shall be any action taken, or any statute, rule, regulation,
injunction, order or decree enacted, enforced, promulgated, issued or
deemed applicable to the Agreement, the Offer or the Merger, by any
Governmental Entity that is reasonably likely, directly or indirectly, to
result in any of the consequences referred to in clauses (i) through (iv)
of paragraph (a) above, subject as aforesaid; or
(c) the Company shall have breached or failed to perform in any
material respect any of its covenants, obligations or agreements under the
Agreement; or
(d) the representations and warranties of the Company set forth in the
Agreement that are qualified as to materiality shall not be true and
correct as of the date of the Agreement and as of the expiration of the
Offer (including any extension thereof) (except to the extent expressly
made as of an earlier date, in which case as of such earlier date), or any
of the representations and warranties set forth in the Agreement that are
not so qualified as to materiality shall not be true and correct in any
material respect as of the date of the Agreement and as of the expiration
of the Offer (except to the extent expressly made as of an earlier date, in
which case as of such earlier date); provided that this condition shall not
be deemed to exist unless any such breaches of representation or warranty
(without regard to any "Materiality" or "Material Adverse Effect" or
similar qualifier or threshold), individually or in the aggregate, has had
or could reasonably be expected to have, a Material Adverse Effect on the
Company; or
(e) this Agreement shall have been terminated in accordance with its
terms; or
A-A-1
136
(f) the Board of Directors of the Company (or any committee thereof)
shall have made a Subsequent Determination;
which, in the good faith judgment of Parent in any such case makes it
inadvisable to proceed with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Parent and Sub and
may, subject to the terms of this Agreement, be waived by Parent and Sub in
their reasonable discretion in whole at any time or in part from time to time.
The failure by Parent or Sub at any time to exercise its rights under any of the
foregoing conditions shall not be deemed a waiver of any such right; the waiver
of any such right with respect to particular facts and circumstances shall not
be deemed a waiver with respect to any other facts and circumstances, and each
such right shall be deemed an ongoing right which may be asserted at any time or
from time to time. Terms used but not defined herein shall have the meaning
assigned to such terms in the Agreement to which this Exhibit A is a part.
A-A-2
137
ANNEX B
--------------------------------------------------------------------------------
Goldman, Sachs & Co. 85 Broad Street New York, New York 10004
Tel: 212-902-1000
(GOLDMAN SACHS LOGO)
--------------------------------------------------------------------------------
PERSONAL AND CONFIDENTIAL
May 7, 2001
Board of Directors
Barrett Resources Corporation
1515 Arapahoe Street
Tower 3, Suite 1000
Denver, CO 80202
Gentlemen:
You have requested our opinion as to the fairness from a financial point of view
to the holders of the outstanding shares of Common Stock, par value $0.01 per
share (the "Shares"), of Barrett Resources Corporation (the "Company") of the
Offer Consideration and the Merger Consideration (as defined below) proposed to
be paid by The Williams Companies, Inc. ("Williams" or "Parent") in the Tender
Offer and the Merger (as defined below), pursuant to the Agreement and Plan of
Merger, dated as of May 7, 2001, among Williams, Resources Acquisition Corp., a
wholly-owned subsidiary of Williams ("Sub"), and the Company (the "Agreement").
The Agreement provides for a tender offer for 16,730,502 Shares (the "Tender
Offer") pursuant to which Sub will pay $73.00 per Share in cash for each Share
accepted (the "Offer Consideration"). The Agreement further provides that
following completion of the Tender Offer, at the Effective Time (as defined in
the Agreement) the Company will be merged with and into Sub (the "Merger") and
each outstanding Share (other than Shares to be cancelled in accordance with
Section 3.1(b) of the Agreement) shall be converted into the right to receive
1.767 shares of common stock, par value $1.00 per share ("Williams Common
Stock"), of Williams (the "Merger Consideration").
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company having provided certain investment banking services to the Company
from time to time, including having acted as managing underwriter of a public
offering of the Company's 7.55% Senior Notes due 2007 in February 1997, and
having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Agreement. We also
have provided certain investment banking services to Williams from time to time,
including having acted as managing underwriter of a public offering of
33,000,000 shares of Williams Common Stock in January 2001, and may provide
investment banking services to Williams in the future. Goldman, Sachs & Co.
provides a full range of financial advisory and securities services and, in the
course of its normal trading activities, may from time to time effect
transactions and hold securities, including derivative securities, of the
Company or Williams for its own account and for the accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company and Williams for the five years ended December 31, 2000; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of the Company and
Williams; certain other communications from the Company and Williams to their
respective stockholders; and certain internal financial analyses and forecasts
for the Company prepared by its manage-
B-1
138
ment. We also have held discussions with members of the senior management of the
Company and Williams regarding their assessment of the past and current business
operations, financial condition and future prospects of their respective
companies. In addition, we have reviewed the reported price and trading activity
for the Shares and the shares of Williams Common Stock, compared certain
financial and stock market information for the Company and Williams with similar
information for certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business combinations in
the upstream oil and gas industry specifically and in other industries generally
and performed such other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial,
accounting and other information discussed with or reviewed by us and have
assumed such accuracy and completeness for purposes of rendering this opinion.
As you are aware, Williams has not made available to us its projection of future
financial performance. As a result, our review of such matters has been limited
to discussions with management of Williams of certain research analyst estimates
for Williams. In addition, we have not made an independent evaluation or
appraisal of the assets and liabilities of the Company or Williams or any of
their subsidiaries and we have not been furnished with any such evaluation or
appraisal. With respect to oil and gas reserve information, we are not experts
in the evaluation of oil and gas properties and, with your consent, have relied
without independent verification solely upon the audited reserve information
prepared by Ryder Scott Company and Netherland, Sewell & Associates, Inc. and
provided to us by the management of the Company, and internal estimates provided
to us by the management of the Company. Our opinion does not address the
relative merits of the transaction contemplated pursuant to the Agreement as
compared to any alternative business transaction that might be available to the
Company. Our advisory services and the opinion expressed herein are provided for
the information and assistance of the Board of Directors of the Company in
connection with its consideration of the transaction contemplated by the
Agreement and such opinion does not constitute a recommendation as to whether or
not any holder of Shares should tender such Shares in connection with the Tender
Offer or how any holder of Shares should vote with respect to the Merger.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the Offer
Consideration and the Merger Consideration to be received by the holders of
Shares in the Tender Offer and the Merger, taken as a unitary transaction, are
fair from a financial point of view to the holders of Shares receiving such
consideration.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
---------------------------------------------------------
(GOLDMAN, SACHS & CO.)
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139
ANNEX C
[PETRIE PARKMAN & CO. LETTERHEAD]
May 7, 2001
Board of Directors
Barrett Resources Corporation
1515 Arapahoe Street
Suite 1000, Tower 3
Denver, CO 80202
Members of the Board:
The Williams Companies, Inc., a Delaware corporation ("Parent"), Resources
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Parent ("Sub"), and Barrett Resources Corporation, a Delaware corporation (the
"Company"), propose to enter into an agreement and plan of merger (the
"Agreement") pursuant to which Sub will make a tender offer (the "Offer") for
16,730,502 shares of Common Stock, par value $0.01 per share, together with the
associated preferred share purchase rights (together, the "Shares"), of the
Company at a purchase price of $73.00 per Share, net to the seller in cash (the
"Offer Consideration"). The Agreement also provides that, following the
consummation of the Offer, the Company will be merged with Sub in a transaction
(the "Merger") in which each remaining Share (other than Shares held directly or
indirectly by Parent or the Company) will be converted into the right to receive
1.767 shares of common stock, par value $1.00, together with the associated
preferred share purchase rights (the "Parent Shares") of Parent (the "Merger
Consideration").
You have requested our opinion as to whether the Offer Consideration and
the Merger Consideration to be received by the holders of Shares (other than
Parent and the Company) in the Offer and the Merger, taken together, is fair
from a financial point of view to such holders.
In arriving at our opinion, we have, among other things:
1. reviewed certain publicly available business and financial
information relating to the Company, including (i) its Annual Reports on
Form 10-K and related audited financial statements for the fiscal years
ended December 31, 1998, December 31, 1999 and December 31, 2000 and (ii) a
press release issued by the Company on April 30, 2001 disclosing its
financial results for the fiscal quarter ended March 31, 2001;
2. reviewed certain publicly available business and financial
information relating to Parent, including its Annual Reports on Form 10-K
and related audited financial statements for the fiscal years ended
December 31, 1998, December 31, 1999 and December 31, 2000;
3. reviewed (i) a draft dated May 3, 2001 of Parent's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 2001 and (ii) a
draft dated May 5, 2001 of the pro forma balance sheet of Parent after
giving effect to the spin-off of Parent's fiber-optic network business;
4. reviewed certain estimates of the Company's oil and gas reserves,
including (i) estimates of proved reserves prepared by the Company's
management, the majority of which were reviewed by the independent
engineering firms of Netherland Sewell & Associates, Inc. or Ryder Scott
Company as of December 31, 2000, (ii) estimates of additional proved
reserves in the Piceance Basin prepared by the Company's management and
reviewed by Ryder Scott Company as of March 31, 2001, a portion of which
were subject to the receipt of regulatory approval that was subsequently
obtained, (iii) estimates of proved reserves in certain coalbed methane
properties in the Powder River Basin prepared by the Company's management
and reviewed by Netherland Sewell as of April 1, 2001, (iv) estimates of
[LETTERHEAD ADDRESS]
C-1
140
additional proved reserves prepared by the Company's management as of April
1, 2001 and (v) estimates of non-proved reserves prepared by the Company's
management as of January 1, 2001;
5. analyzed certain historical and projected financial and operating
data of the Company prepared by the management and staff of the Company;
6. reviewed certain historical financial and operating data of Parent
prepared by the management and staff of Parent;
7. discussed the current operations and prospects of the Company and
Parent with the management and staff of the Company and Parent,
respectively;
8. reviewed the historical market prices and trading history of the
Shares and the Parent Shares;
9. compared recent stock market capitalization indicators for the
Company with recent stock market capitalization indicators for certain
other publicly-traded independent energy companies;
10. compared the financial terms of the Offer and the Merger with the
financial terms of other transactions that we deemed to be relevant;
11. participated in certain discussions among representatives of the
Company and Parent and their respective legal and other financial advisors;
12. reviewed a draft dated May 6, 2001 of the Agreement; and
13. reviewed such other financial studies and analyses and performed
such other investigations and took into account such other matters as we
have deemed necessary or appropriate.
In connection with our opinion, we have assumed and relied upon, without
assuming any responsibility for, or independently verifying, the accuracy and
completeness of any information supplied or otherwise made available to us by
the Company and Parent. We have further relied upon the assurances of
representatives of the management of the Company and Parent that they are
unaware of any facts that would make the information provided to us incomplete
or misleading in any material respect. With respect to projected financial and
operating data, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of the Company relating to the future financial and operational
performance of the Company. With respect to the estimates of oil and gas
reserves, we have assumed that they have been reasonably prepared on bases
reflecting the best available estimates and judgments of the management and
staff of the Company (and its engineering consultants) relating to the oil and
gas properties of the Company. We have not made an independent evaluation or
appraisal of the assets or liabilities of either the Company or Parent, nor,
except for the estimates of oil and gas reserves referred to above, have we been
furnished with any such evaluations or appraisals. In addition, we have not
assumed any obligation to conduct, nor have we conducted, any physical
inspection of the properties or facilities of either the Company or Parent.
Our opinion relates solely to the fairness from a financial point of view
of the Offer Consideration and the Merger Consideration to be received by the
holders of the Shares in the Offer and the Merger. This opinion is for the use
and benefit of the Board of Directors of the Company and does not constitute a
recommendation to any holder of Shares as to whether such holder should tender
Shares pursuant to the Offer or how such holder should vote on the Merger. In
addition, we have not been asked to consider and our opinion does not address
the prices at which the Parent Shares will trade following the announcement or
consummation of the Offer and the Merger. As you are aware, we are acting as
financial advisor to the Company and will receive a fee from the Company for our
services, a substantial portion of which is contingent upon the consummation of
the Offer. In addition, the Company has agreed to indemnify us for certain
liabilities arising out of our engagement. We have, in the past, provided
financial advisory services to the Company and have received customary fees for
such services. In addition, in the ordinary course of business, we or our
affiliates may trade in the debt or equity securities of the Company or Parent
for the accounts of our customers or for our own account and, accordingly, may
at any time hold a long or short position in such securities.
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Our opinion is rendered on the basis of conditions in the securities
markets and the oil and gas markets as they exist and can be evaluated on the
date hereof and the conditions and prospects, financial and otherwise, of the
Company as they have been represented to us as of the date hereof or as they
were reflected in the materials and discussions described above.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Offer Consideration and the Merger Consideration to be received
by the holders of Shares (other than Parent and the Company) in the Offer and
the Merger, taken together, is fair from a financial point of view to such
holders.
Very truly yours,
PETRIE PARKMAN & CO., INC.
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3510-PS-01
143
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Williams, a Delaware corporation, is empowered by Section 145 of the
General Corporation Law of the State of Delaware, subject to the procedures and
limitations stated therein, to indemnify any person against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by them in connection with any threatened, pending, or
completed action, suit, or proceeding in which such person is made party by
reason of their being or having been a director, officer, employee, or agent of
Williams. The statute provides that indemnification pursuant to its provisions
is not exclusive of other rights of indemnification to which a person may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors, or otherwise. The Williams' by-laws provide for indemnification by
Williams of its directors and officers to the fullest extent permitted by the
General Corporation Law of the State of Delaware. In addition, Williams has
entered into indemnity agreements with its directors and certain officers
providing for, among other things, the indemnification of and the advancing of
expenses to such individuals to the fullest extent permitted by law, and to the
extent insurance is maintained, for the continued coverage of such individuals.
Policies of insurance are maintained by Williams under which the directors
and officers of Williams are insured, within the limits and subject to the
limitations of the policies, against certain expenses in connection with the
defense of actions, suits, or proceedings, and certain liabilities which might
be imposed as a result of such actions, suits or proceedings, to which they are
parties by reason of being or having been such directors or officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
NUMBER EXHIBIT
------ -------
2.1 Agreement and Plan of Merger, dated as of May 7, 2001, by
and among Barrett Resources Corporation, The Williams
Companies, Inc. and Resources Acquisition Corp. (included as
Annex A to the Proxy Statement/Prospectus).*
3.1 Restated Certificate of Incorporation of The Williams
Companies, Inc. (incorporated by reference to Exhibit
3(II)(a) to the Williams Form 10-K filed March 12, 2001).
3.2 Certificate of Amendment of Restated Certificate of
Incorporation of The Williams Companies, Inc., dated as of
May 20, 1994. (incorporated by reference to Exhibit 3(II)(a)
to the Williams Form 10-K filed March 12, 2001).
3.3 Certificate of Amendment of Restated Certificate of
Incorporation of The Williams Companies, Inc., dated as of
January 26, 1998. (incorporated by reference to Exhibit
3(II)(a) to the Williams Form 10-K filed March 12, 2001).
3.4 Certificate of Amendment of Restated Certificate of
Incorporation of The Williams Companies, Inc., dated as of
February 26, 1998. (incorporated by reference to Exhibit
3(II)(a) to the Williams Form 10-K filed March 12, 2001).
3.5 Restated By-laws of The Williams Companies, Inc.
(incorporated by reference to Exhibit 99.1 to the Williams
Form 8-K filed January 19, 2000).
5.1 Opinion of William G. von Glahn, Esq., Senior Vice President
and General Counsel of Williams, as to the legality of the
securities being registered.*
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
the United States federal income tax consequences of the
merger.**
23.1 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 8.1).**
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NUMBER EXHIBIT
------ -------
23.2 Consent of Ernst & Young LLP.**
23.3 Consent of Arthur Andersen LLP.**
23.4 Consent of Goldman, Sachs & Co.*
23.5 Consent of Petrie, Parkman & Co., Inc.*
23.6 Consent of William G. von Glahn, Esq. (included in Exhibit
5.1).*
24.1 Power of Attorney authorizing certain persons to sign this
Registration Statement on behalf of certain officers and
directors of the Registrant.***
99.1 Form of Proxy of Barrett Resources Corporation.**
99.2 Form of Notice from U.S. Trust Company, N.A. to Participants
in the Barrett Resources Corporation Retirement Savings
Plan, dated as of July 5, 2001, including the associated
Voting Instruction Form to be used by such Participants.***
99.3 Opinion of Goldman, Sachs & Co. (included as Annex B to the
Proxy Statement/Prospectus).*
99.4 Opinion of Petrie, Parkman & Co., Inc. (included as Annex C
to the Proxy Statement/Prospectus).*
---------------
* Previously filed.
** Previously filed, but amended or updated version being filed herewith.
*** Filed herewith.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) (i) The undersigned registrant hereby undertakes as follows: that prior
to any public re-offering of the securities registered hereunder through use of
a prospectus which is part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such re-offering prospectus will contain the information
called for by the applicable registration form with respect to re-offerings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(ii) The undersigned registrant hereby undertakes that every prospectus:
(A) that is filed pursuant to paragraph (b)(i) immediately preceding or (B) that
purports to meet the requirements of Section 10(a)(3) of the Securities Act of
1933 and is used in connection with an offering of securities subject to Rule
415, will be filed as a part of an amendment to the registration statement and
will not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
undersigned registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against policy as expressed in
the Securities Act of 1933 and is, therefore, unenforceable. In the event that
such a claim for indemnification against such liabilities other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the
II-2
145
registrant in the successful defense of any action, suit or proceeding is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that are incorporated by reference in the Prospectus/Proxy Statement
pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of
receipt of such requests, to send the incorporated documents by first class mail
or other equal prompt means and to arrange or provide for a facility in the US
for the purpose of responding to such requests. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the requests.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning the transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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146
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, on June 28, 2001.
The Williams Companies, Inc.
(Registrant)
By: /s/ SUZANNE H. COSTIN
------------------------------------
Name: Suzanne H. Costin
Title: Corporate Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the following capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
* Chairman of the Board, June 28, 2001
-------------------------------------------------------- President, Chief Executive
Keith E. Bailey Officer (Principal Executive
Officer) and Director
* Senior Vice June 28, 2001
-------------------------------------------------------- President -- Finance
Jack D. McCarthy (Principal Financial
Officer)
* Controller (Principal June 28, 2001
-------------------------------------------------------- Accounting Officer)
Gary R. Belitz
* Director June 28, 2001
--------------------------------------------------------
Hugh M. Chapman
* Director June 28, 2001
--------------------------------------------------------
Glenn A. Cox
* Director June 28, 2001
--------------------------------------------------------
Thomas H. Cruikshank
* Director June 28, 2001
--------------------------------------------------------
William E. Green
* Director June 28, 2001
--------------------------------------------------------
W.R. Howell
II-4
147
SIGNATURE TITLE DATE
--------- ----- ----
* Director June 28, 2001
--------------------------------------------------------
James C. Lewis
* Director June 28, 2001
--------------------------------------------------------
Charles M. Lillis
* Director June 28, 2001
--------------------------------------------------------
George A. Lorch
* Director June 28, 2001
--------------------------------------------------------
Frank T. MacInnis
* Director June 28, 2001
--------------------------------------------------------
Gordon R. Parker
* Director June 28, 2001
--------------------------------------------------------
Janice D. Stoney
* Director June 28, 2001
--------------------------------------------------------
Joseph H. Williams
*By:/s/ Suzanne H. Costin
---------------------------------
Suzanne H. Costin
Attorney-in-Fact
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148
EXHIBIT INDEX
NUMBER DESCRIPTION
------ -----------
2.1 Agreement and Plan of Merger, dated as of May 7, 2001, by
and among Barrett Resources Corporation, The Williams
Companies, Inc. and Resources Acquisition Corp. (included as
Annex A to the Proxy Statement/Prospectus).*
3.1 Restated Certificate of Incorporation of The Williams
Companies, Inc. (incorporated by reference to Exhibit
3(II)(a) to the Williams Form 10-K filed March 12, 2001).
3.2 Certificate of Amendment of Restated Certificate of
Incorporation of The Williams Companies, Inc., dated as of
May 20, 1994. (incorporated by reference to Exhibit 3(II)(a)
to the Williams Form 10-K filed March 12, 2001).
3.3 Certificate of Amendment of Restated Certificate of
Incorporation of The Williams Companies, Inc., dated as of
January 26, 1998. (incorporated by reference to Exhibit
3(II)(a) to the Williams Form 10-K filed March 12, 2001).
3.4 Certificate of Amendment of Restated Certificate of
Incorporation of The Williams Companies, Inc., dated as of
February 26, 1998. (incorporated by reference to Exhibit
3(II)(a) to the Williams Form 10-K filed March 12, 2001).
3.5 Restated By-laws of The Williams Companies, Inc.
(incorporated by reference to Exhibit 99.1 to the Williams
Form 8-K filed January 19, 2000).
5.1 Opinion of William G. von Glahn, Esq., Senior Vice President
and General Counsel of Williams, as to the legality of the
securities being registered.*
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
the United States federal income tax consequences of the
merger.**
23.1 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 8.1).**
23.2 Consent of Ernst & Young LLP.**
23.3 Consent of Arthur Andersen LLP.**
23.4 Consent of Goldman, Sachs & Co.*
23.5 Consent of Petrie, Parkman & Co., Inc.*
23.6 Consent of William G. von Glahn, Esq. (included in Exhibit
5.1).*
24.1 Power of Attorney authorizing certain persons to sign this
Registration Statement on behalf of certain officers and
directors of the Registrant.***
99.1 Form of Proxy of Barrett Resources Corporation.**
99.2 Form of Notice from U.S. Trust Company, N.A. to Participants
in the Barrett Resources Corporation Retirement Savings
Plan, dated as of July 5, 2001, including the associated
Voting Instruction Form to be used by such Participants.***
99.3 Opinion of Goldman, Sachs & Co. (included as Annex B to the
Proxy Statement/Prospectus).*
99.4 Opinion of Petrie, Parkman & Co., Inc. (included as Annex C
to the Proxy Statement/Prospectus).*
---------------
* Previously filed.
**Previously filed, but amended or updated version being filed herewith.
***Filed herewith.